Document:

Exhibit 10.1

 

SERVICES, MANUFACTURING AND SUPPLY
AGREEMENT

 

This SERVICES, MANUFACTURING AND SUPPLY AGREEMENT (the
“Agreement”), dated as of the 7th day of April, 2003 (the “Effective
Date”), by and between EXACT Sciences Corporation (“EXACT”), a Delaware
corporation doing business at 63 Great Road, Maynard, Massachusetts 01754; and
Discovery Labware Inc. (“Discovery”), a wholly owned subsidiary of Becton
Dickinson and Company (“Becton Dickinson”), doing business at 296 Concord Road,
Billerica, MA  01821.

 

WHEREAS, EXACT owns and has developed
proprietary technologies directed to, among other things, the recovery of DNA
from biological samples and in particular for use in the diagnosis of colon
cancer and is producing improvements, enhancements and inventions related to
all of its technologies, including a proprietary device having [CONFIDENTIAL
TREATMENT REQUESTED]/*/ components, that includes a treated
membrane-like material,

 

WHEREAS, Becton Dickinson owns and has
developed proprietary technologies and equipment directed to, among other
things, manufacturing, tooling, molding, packaging, labeling, processes,
equipment, know-how and methods, including but not limited to, molding of
consumables, molds, tooling, core pins and attaching membrane and membrane-like
materials to all types of objects or other materials, and is producing
improvements, enhancements and inventions related to all of these proprietary
technologies; and

 

WHEREAS, EXACT desires to engage the
services of Discovery to use Becton Dickinson’s proprietary technology to
design, develop, use and deliver the tooling to manufacture and produce
[CONFIDENTIAL TREATMENT REQUESTED]/*/ components of EXACT’s proprietary
consumable;

 

WHEREAS, EXACT desires Discovery to use
Becton Dickinson’s proprietary technologies to manufacture and produce the
[CONFIDENTIAL TREATMENT REQUESTED]/*/ components of EXACT’s proprietary
consumable, for Discovery to attach a treated membrane material which is to be
supplied by EXACT, or EXACT’s designee, to one of these components, and for
Discovery to supply to EXACT the completed proprietary consumable in a certain
package and with a certain label, all in accordance with the Hybrigel
Consumable Specifications; and

 

WHEREAS, Discovery is willing to provide
services to EXACT to design, research and develop tooling to manufacture and
produce the [CONFIDENTIAL TREATMENT REQUESTED]/*/ components of EXACT’s
proprietary consumable and to manufacture and produce the [CONFIDENTIAL
TREATMENT REQUESTED]/*/ components of EXACT’s proprietary consumable, to
receive the treated membrane

 

*CONFIDENTIAL TREATMENT
REQUESTED

 

materials from EXACT, to use Becton Dickinson’s proprietary technology
to process and attach the treated membrane material to one of the [CONFIDENTIAL
TREATMENT REQUESTED]/*/ components and to package and label EXACT’s completed
Hybrigel Consumable for supply to EXACT, in accordance with EXACT’s Hybrigel
Consumable Specifications.

 

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

 

ARTICLE
1:  DEFINITIONS.

 

1.1                                 “Act”
shall mean the Food, Drug and Cosmetic Act (21 U.S.C. § § 301 et seq.) and the
regulations promulgated thereunder.

 

1.2                                 “Affiliates”
of a party as used herein shall mean any entity which, at any time during the
Term of this Agreement, directly or indirectly, through one or more
intermediaries, controls such party, is controlled by such party, or is under
common control of such party, (including subsidiaries) and another entity, or
is controlled by an entity that controls such party.

 

1.3                                 “Analyte
Specific Reagent” shall have the meaning ascribed to it by 21 C.F.R. § 809.30 and
864.4020(a), (B - class 1), to include a Class 1 designation.

 

1.4                                 “Discovery”
shall mean Discovery Labware Inc.

 

1.5                                 “Discovery
Bonding” shall mean the specific Discovery proprietary method developed by
Discovery for affixing or attaching the Membrane to the Hybrigel Consumable.

 

1.6                                 “Discovery
Certificate of Conformance” shall mean the certificate of analysis report in
the form attached hereto as Appendix A setting forth the results of the quality
control analyses performed on the Hybrigel Consumables by Discovery to confirm
conformity to the Hybrigel Consumable Specifications.

 

1.7                                 “Discovery
Technology and Equipment” shall mean all technology and equipment relating to
manufacturing processes, techniques and methods, including but not limited to
all molds, tooling, core pins, molding, packaging, labeling and attaching all
types of materials, including but not limited to membrane materials and the
like attached to all types of objects and materials, Discovery Bonding
techniques, practices and methods, and any other intellectual property
belonging to or licensed (other than as pursuant to this Agreement ) by
Discovery or its Affiliates, whether or not patented, in any form, tangible or
intangible, including, without limitation, all manufacturing specifications,
mold specifications,  all ideas,
concepts, know-how, trade secrets, inventions, developments, discoveries, works
of authorship, algorithms, systems, processes, methods, techniques, bonding
methods, and research and technical information. Discovery Technology and
Equipment does not mean or include EXACT Technology or EXACT Tooling.

 

2

*CONFIDENTIAL
TREATMENT REQUESTED

 

1.8                                 “EXACT”
shall mean EXACT Sciences Corporation and its Affiliates, unless the context
indicates otherwise.

 

1.9                                 “EXACT
Certificate of Analysis” means the certificate of performance report in the
form attached hereto as Appendix B setting forth the results of the quality
control analyses performed on the Membranes by Exact or its designee to confirm
conformity to the Membrane Specifications.

 

1.10                           “EXACT
Technology” shall mean the Hybrigel Consumable and technology, the purification
of biological samples using the Hybrigel Consumable, and the diagnosis of
disease using a Hybrigel Consumable, and any other EXACT intellectual property
that was created, developed or otherwise acquired by or on behalf of EXACT as
of the Effective Date of this Agreement, or developed or otherwise acquired by
or on behalf of EXACT subsequent to the Effective Date of this Agreement,
whether or not patented, in any form, tangible or intangible, including,
without limitation, all specifications (including the Specifications in
Appendix D of this Agreement), ideas, designs, concepts, know-how, trade
secrets, inventions, developments, discoveries, works of authorship, formulae,
algorithms, systems, processes, methods, techniques, consumables, research
information, bonding methods, evaluations, studies, analytical results, assays,
data, technical information, and samples. 
EXACT Technology does not mean or include the Discovery Technology and
Equipment (including Discovery Bonding) and the EXACT Tooling.

 

1.11                           “EXACT
Tooling” shall mean the molds and core pins, necessary to manufacture and
produce [CONFIDENTIAL TREATMENT REQUESTED]/*/ components of EXACT’s Hybrigel
Consumable as described in Phase I of the Manufacturing Plan included in
Appendix C.

 

1.12                           “FDA”
means the United States Food and Drug Administration or any successor agency.

 

1.13                           “GMP”
shall mean the current good manufacturing practices and QSRs for Class 1
Analyte Specific Reagents promulgated from time to time by the FDA in
accordance with the Act.

 

1.14                           “HybrigelÔ
Consumable” shall mean the EXACT proprietary HybrigelÔ
Consumable as described in Appendix D of this Agreement.

 

1.15                           “Hybrigel
Consumable Specifications” shall mean the description, physical description and
drawings, dimensions, materials, processes and testing and inspection
information for the HybrigelÔ Consumable as
contained in Appendix D of this Agreement, excluding any Membrane information
or specifications, and any labeling or packaging information or specifications
and excluding any characteristic caused in whole or in part by the failure of
the Membrane to meet the Membrane Specifications.

 

3

*CONFIDENTIAL
TREATMENT REQUESTED

 

1.16                           “Manufacturing
Plan”, shall mean the milestones and parameters as set forth in Appendix C
hereto for the design, development and use of the EXACT Tooling.

 

1.17                           “MDR”
shall mean medical device reporting promulgated by FDA, requiring event
malfunction, serious injury and death to be reported to FDA.

 

1.18                           “Membrane”
shall mean the Hybrigel membrane in the form supplied by EXACT or EXACT’s
designee to Discovery.

 

1.19                           “Membrane
Specifications” shall mean the description, physical description and drawings,
dimensions, materials, processes and testing and inspection information for the
Membranes as contained in Appendix D of this Agreement.

 

1.20                           “QSR”
shall mean the Quality System Regulation as defined in 21 C.F.R. § 820.

 

1.21                           “Party”
or “Parties” shall mean EXACT and/or Discovery, as the context requires.

 

1.22                           “Reporting
Period” means a three (3) month period ending January 31, April 30, July 31 and
October 31 of each calendar year.

 

ARTICLE
2: SERVICES TO PERFORMED AND

EVALUATION OF MEMBRANE

 

2.1                                 EXACT Tooling. 
Discovery shall design, research, develop, and, deliver to EXACT, the
EXACT Tooling.

 

2.2                                 Discovery Point of Contact. 
Discovery’s point of contact at EXACT is David Deems, Vice President of
Product Development.

 

2.3                                 EXACT Point of Contact. 
EXACT’s point of contact at Discovery is Blake S. Perkins, Marketing
Manager, Drug Discovery.

 

2.4                                 Rights to the EXACT Tooling.  Upon
EXACT and Discovery’s validation of the EXACT Tooling, Discovery shall and does
hereby irrevocably grant and assign to EXACT the entire right, title and
interest, in and to the EXACT Tooling. 
Discovery shall hold the EXACT Tooling at its facilities, as requested
by EXACT, and Discovery shall at all times maintain adequate insurance to
protect against risk of loss for the EXACT Tooling at Discovery’s facilities.

 

2.5                                 Discovery agrees to use and operate the EXACT
Tooling solely for the purposes of this Agreement.

 

4

 

2.6           Delivery of the EXACT Tooling at
Termination. In the event that this Agreement is to be terminated or
expire, (i) Discovery shall pack the EXACT Tooling and ship it to an EXACT
designated facility, so long as EXACT has met its payment obligations under
Article 3 hereof.  Discovery shall not
be responsible for the implementation of the EXACT Tooling.  Discovery agrees to provide EXACT with one
(1) full time equivalent (FTE) person(s) for a time period of sixty (60)
consecutive business days, such period not to exceed the day that is four (4)
months from delivery of the EXACT Tooling to the EXACT designated facility, to
support the implementation of the EXACT Tooling per EXACT’s instructions and
with a vendor of EXACT’s choosing.  The
FTE shall work only during regular business hours.  EXACT shall pay Discovery, on a prospective basis each month for
work to be performed in the coming month, for the FTE’s salary and all related
time, material, travel and expenses and shall indemnify and hold harmless
Discovery against any claims of the FTE based upon his or her work with
EXACT.  EXACT shall reimburse Discovery
for the FTE’s salary and all related time, material, travel and expenses, at
rates that are then in effect for Discovery and the FTE.  EXACT covenants that it will provide a safe
working environment for the FTE, whether at its own facility or at that of a
contractor, and that it will ensure that any facilities to which the FTE is
sent will comply with all applicable health and safety and environmental
regulations.  EXACT assumes all risk of
the FTE’s presence at such facility and agrees to indemnify and hold harmless
Discovery, it’s employees, officers and directors and its Affiliates and their
employees, officers and directors from and against any claims, damages, losses
or liability resulting directly or indirectly from the FTE’s presence at such
facility and his or her work at such facility, other than as related to such
FTE’s gross negligence or misconduct. 
In addition, EXACT will maintain insurance adequate to cover any claims
resulting from the FTE’s presence at such facility and his or her work at such
facility.  EXACT agrees to assume full
responsibility for any injury or death caused to the FTE, while the FTE is
working at the EXACT designated facility, other than as related to such FTE’s
gross negligence or misconduct.  EXACT
agrees to provide Discovery’s FTE with all safety and other protections
required by law, including, without limitation, all Occupational Health and
Safety Administration rules and regulations. 
The FTE shall not be required to execute any agreement, waiver or
release which in any way purports to affect the legal rights or obligations of
the FTE.  If the FTE signs such an
agreement, waiver or release, it shall be considered void and have no force and
effect.

 

2.7           [CONFIDENTIAL
TREATMENT REQUESTED]/*/.  EXACT agrees
[CONFIDENTIAL TREATMENT REQUESTED]/*/ any of the life sciences business
entities listed below any [CONFIDENTIAL TREATMENT REQUESTED]/*/, and [CONFIDENTIAL
TREATMENT REQUESTED]/*/ relating to the [CONFIDENTIAL TREATMENT REQUESTED]/*/
during the period from the [CONFIDENTIAL TREATMENT REQUESTED]/*/ through to and
including [CONFIDENTIAL TREATMENT REQUESTED]/*/, unless Discovery is unable to
[CONFIDENTIAL TREATMENT REQUESTED]/*/ as set forth herein, in which case this
Agreement shall become [CONFIDENTIAL TREATMENT REQUESTED]/*/ pursuant to
Section 3.9 below.

 

The
life science business entities are [CONFIDENTIAL TREATMENT REQUESTED]/*/.

 

5

*CONFIDENTIAL
TREATMENT REQUESTED

 

2.8                                 Maintenance of EXACT Tooling. 
EXACT and Discovery agree that Discovery will provide, at no cost to
EXACT, any maintenance that is necessary as a result of normal wear and tear
while in Discovery’s possession, as well as any other repairs that become
necessary as a result of Discovery’s negligence or breach of this Agreement.
Any maintenance and repairs beyond that described above will be at EXACT’s sole
cost and expense.  No repairs or
maintenance, for which EXACT will be bearing the expense, will be conducted
without EXACT’s express prior written authorization.

 

2.9                                 New Tooling.  EXACT agrees that should
modifications to the EXACT Tooling or new tooling (collectively “New Tooling”) be
required in accordance with EXACT’s request, EXACT shall bear all direct costs
and expenses of such New Tooling.  EXACT
may request Discovery to design, manufacture or have manufactured New Tooling
on its behalf.  EXACT and Discovery
agree to negotiate in good faith additional terms relating to the design and
manufacture of New Tooling including the amendment of Section 3.8 to
include provisions that allow for the purchase of Hybrigel Consumables relating
to the New Tooling to [CONFIDENTIAL TREATMENT REQUESTED]/*/ and the
[CONFIDENTIAL TREATMENT REQUESTED]/*/ as appropriate.

 

2.10         [CONFIDENTIAL
TREATMENT REQUESTED]/*/ Additional EXACT Tooling.  Should it become necessary to produce and
use any EXACT Tooling in addition to the one set of molds referred to in
Section 2.4 in order to produce amounts in [CONFIDENTIAL TREATMENT
REQUESTED]/*/ (the “Additional EXACT Tooling”) and satisfy Product Forecasts,
the cost of such Additional EXACT Tooling will be borne by EXACT.  Discovery agrees to use commercially reasonable
efforts to provide EXACT with reasonable notice of the need to produce
Additional EXACT Tooling based on the timing of the receipt of the Product
Forecast for which such Additional EXACT Tooling would be required.  EXACT may request Discovery to manufacture
or have manufactured the Additional EXACT Tooling on its behalf and Discovery
may accept or reject such request.  If
Discovery rejects EXACT’s request, or if Discovery requires payment for the
Additional EXACT Tooling in an amount in excess of 150% of the cost of the
initial EXACT Tooling, then, so long as EXACT has [CONFIDENTIAL TREATMENT
REQUESTED]/*/ EXACT may [CONFIDENTIAL TREATMENT REQUESTED]/*/.

 

2.11                           Possible [CONFIDENTIAL TREATMENT
REQUESTED]/*/ by Discovery.  Discovery
agrees in good faith to [CONFIDENTIAL TREATMENT REQUESTED]/*/ for Discovery of
Discovery [CONFIDENTIAL TREATMENT REQUESTED]/*/ and to consider [CONFIDENTIAL
TREATMENT REQUESTED]/*/ pursuant to which Discovery may [CONFIDENTIAL TREATMENT
REQUESTED]/*/ and to discuss whether such [CONFIDENTIAL TREATMENT
REQUESTED]/*/.  In the event Discovery
determines that it [CONFIDENTIAL TREATMENT REQUESTED]/*/ or other arrangement
with [CONFIDENTIAL TREATMENT REQUESTED]/*/, then Discovery shall so notify
EXACT, and may [CONFIDENTIAL TREATMENT REQUESTED]/*/ for EXACT’S review or
consider any documentation provided by EXACT. 
This Section 2.11, shall not create any [CONFIDENTIAL TREATMENT
REQUESTED]/*/ and is merely intended to serve as an

 

6

*CONFIDENTIAL
TREATMENT REQUESTED

 

expression
of Discovery's current intentions, and under no circumstances will the
[CONFIDENTIAL TREATMENT REQUESTED]/*/.

 

ARTICLE 3:  MANUFACTURE; SUPPLY;
AND DELIVERY.

 

3.1                                 Manufacture of Hybrigel Consumables. 
Upon validation of the EXACT Tooling, Discovery agrees to manufacture,
package and label the Hybrigel Consumable for EXACT in accordance with the
Hybrigel Consumable Specifications and will deliver the Hybrigel Consumables to
a United States address for EXACT or EXACT’s designee in accordance with the
quantities and schedule set forth in any purchase order that has been delivered
and accepted in accordance with the terms of this Agreement.  Except and unless the parties mutually agree
in writing otherwise, EXACT shall deliver to Discovery Membranes meeting the
Membrane Specifications.  EXACT shall
deliver such Membranes to Discovery in the quantity and quality necessary for
Discovery to fulfill its obligations under the Purchase Orders.  Membranes shall be deemed of adequate
quality if they are delivered in accordance with the Certificate of Analysis as
described in Appendix B.  Such Membranes
will be supplied at no cost to Discovery, and solely for the purposes of
carrying out Discovery’s obligations under this Agreement.  EXACT shall provide to Discovery the
Membranes accompanied by an EXACT Certificate of Analysis confirming that the
Membranes meet the Membrane Specifications. 
Discovery may reject any shipment of Membranes that is not accompanied
by such Certificate of Analysis or that it determines does not meet the
representations set forth in the Certificate of Analysis and shall notify EXACT
in writing of the rejection and, and if applicable, the details regarding how
the Membranes fail, in Discovery’s opinion, to meet such representations.  In the event of the failure of EXACT to
deliver, or any material delays in EXACT’s delivery of any Membranes or the
failure of such Membranes to meet the Membrane Specifications, Discovery shall
not be required to deliver the Hybrigel Consumables for which such Membranes
were intended, Discovery shall not be deemed to have breached this Agreement,
and the parties will discuss in good faith an alternative delivery schedule, if
any.  Discovery agrees that it will not
produce the [CONFIDENTIAL TREATMENT REQUESTED]/*/ except in such lots as are
reasonably necessary to meet EXACT’s forecasts.

 

3.2                                 [CONFIDENTIAL
TREATMENT REQUESTED]/*/.  EXACT hereby
agrees that, [CONFIDENTIAL TREATMENT REQUESTED]/*/, EXACT will [CONFIDENTIAL
TREATMENT REQUESTED]/*/, except as specified in sections 3.9 and Article
9.  

 

3.3                                 Supply
of Membranes and Tooling.  Discovery
shall not be responsible for the costs of the Membranes, which shall be
supplied by EXACT or EXACT’s designee without charge to Discovery, or the
costs, if any, of any Additional EXACT Tooling purchased by EXACT or any
modifications thereto under this Agreement.

 

7

*CONFIDENTIAL
TREATMENT REQUESTED

 

3.4                                 Analyte
Specific Reagents.  EXACT shall provide
to Discovery all documents as appropriate and necessary for Discovery to comply
with all applicable governmental laws, requirements and regulations relating to
manufacturing using Analyte Specific Reagents, including without limitation,
compliance with the requirements under 21 C.F.R. § 809.30 and 864.4020 and QSR
requirements under 21 C.F.R. § 820. 
Documents provided by EXACT pursuant to this section, as well as all
label requirements, shall support a Class 1 designation. So long as (i) the
conditions of this section 3.4 are met, and (ii) the components supplied
to Discovery for use in connection with the Hybrigel Consumable meet
Discovery’s supplier qualifications as defined by 21 C.F.R.  § 820 (and meet all current
and future ASR Regulations, as promulgated), Discovery agrees that it will
label the Hybrigel Consumable as an Analyte Specific Reagent.

 

3.5                                 Amendment
of Manufacturing Plan and Specifications. 
The Hybrigel Consumable Specifications and Manufacturing Plan may be
amended by the Parties from time to time; provided, however, that no change to
the Manufacturing Plan or Hybrigel Consumable Specifications shall be effective
or binding upon the Parties unless an amendment incorporating such change has
been executed by the duly authorized representatives of the parties
hereto.  EXACT and Discovery agree that
any such amendment shall include provisions that allow the purchase of Hybrigel
Consumables manufactured in accordance with any changes in the Hybrigel Consumable
Specifications and Manufacturing Plan to [CONFIDENTIAL TREATMENT REQUESTED]/*/
and the [CONFIDENTIAL TREATMENT REQUESTED]/*/ as appropriate.

 

3.6                                 Forecasts.  EXACT’s initial forecast by Reporting Period
of the quantity of the Hybrigel Consumables that EXACT expects to purchase from
Discovery during the first four Reporting Periods after the Effective Date, is
provided in Appendix E.  On or before
the sixtieth (60th) day preceding the first day of each Reporting
Period, subsequent to the first, EXACT shall submit a revised forecast by Reporting
Period for the Hybrigel Consumables for the next consecutive four Reporting
Periods. Discovery shall not be required to [CONFIDENTIAL TREATMENT
REQUESTED]/*/ in any Reporting Period, unless EXACT has [CONFIDENTIAL TREATMENT
REQUESTED]/*/, pursuant to section 3.7 below.  To the extent Discovery cannot [CONFIDENTIAL TREATMENT
REQUESTED]/*/, this Agreement shall [CONFIDENTIAL TREATMENT REQUESTED]/*/, in
accordance with Section 3.7 below.

 

3.7                                 Purchase
Orders and Supply.  On or before the
date that is thirty (30) days prior to the first day of the immediately
upcoming Reporting Period, EXACT shall place orders for the Hybrigel
Consumables by submitting written purchase orders to Discovery in the form
attached hereto as Appendix F and specifying a quantity that is consistent with
the requirements set forth herein (Discovery shall be entitled to reject any
purchase order that is not provided to Discovery in accordance with the
requirements of this Section 3.7). 
The Parties agree to the following purchase order requirements:

 

8

*CONFIDENTIAL
TREATMENT REQUESTED

 

3.7.1  No later than sixty (60) days prior to the
beginning of each Reporting Period, EXACT shall provide Discovery with a
rolling twelve-month forecast describing EXACT’s anticipated Hybrigel
Consumable needs;

 

3.7.2  No later than thirty (30) days prior to each
immediately upcoming Reporting Period, EXACT shall submit purchase orders for
such Reporting Period.  The purchase
orders that are submitted to Discovery shall not contain requests for Hybrigel
Consumable amounts (a) [CONFIDENTIAL TREATMENT REQUESTED]/*/ submitted to
Discovery for the immediately upcoming Reporting Period, or (b) [CONFIDENTIAL
TREATMENT REQUESTED]/*/ in accordance with Paragraphs 3.7.3 or 3.7.4;

 

3.7.3  For Reporting Periods in which EXACT wishes
Discovery to [CONFIDENTIAL TREATMENT REQUESTED]/*/ EXACT, in its rolling
forecast to Discovery, shall [CONFIDENTIAL TREATMENT REQUESTED]/*/ to
Discovery;

 

3.7.4  For Reporting Periods in which EXACT wishes
Discovery to [CONFIDENTIAL TREATMENT REQUESTED]/*/ EXACT, in its rolling
forecast to Discovery, shall [CONFIDENTIAL TREATMENT REQUESTED]/*/ to
Discovery;

 

3.7.5  Discovery will commence delivery of products
ordered pursuant to a purchase order meeting the requirements of this
section 3.7 on the thirtieth (30) day following the beginning of the
applicable Reporting Period. Purchase orders shall be submitted to the
following facsimile number:  800-743-6200,
attention: Discovery Labware, Inc., Manager Customer Service, with a confirmed
receipt, and confirmed by mail to the following address:  Discovery Labware, 2 Oak Park, Bedford,
Massachusetts 01730, Attention:  Customer
Service.

 

Discovery shall be
entitled to reject purchase orders not meeting the requirements of this section
3.7, so long as Discovery provides EXACT with written notice of such rejection
within at least twenty (20) days of receipt of the applicable purchase order
from EXACT. Discovery shall make reasonable business efforts to comply with
unplanned changes in purchase orders but shall not be required to accept orders
that do not meet the guidelines set forth in this section 3.7.

 

3.8                                 [CONFIDENTIAL
TREATMENT REQUESTED]/*/ Provision. 
Except as otherwise provided herein, EXACT agrees to [CONFIDENTIAL
TREATMENT REQUESTED]/*/ and Discovery agrees to [CONFIDENTIAL TREATMENT
REQUESTED]/*/ in accordance with the terms of Section 3.7 [CONFIDENTIAL TREATMENT REQUESTED]/*/ during
the period of time from [CONFIDENTIAL TREATMENT REQUESTED]/*/ through the
earlier of the [CONFIDENTIAL TREATMENT REQUESTED]/*/ or [CONFIDENTIAL TREATMENT
REQUESTED]/*/.  During the period of
time from [CONFIDENTIAL TREATMENT REQUESTED]/*/ through [CONFIDENTIAL TREATMENT REQUESTED]/*/ EXACT agrees to
[CONFIDENTIAL TREATMENT

 

9

*CONFIDENTIAL
TREATMENT REQUESTED

 

REQUESTED]/*/,
which shall be [CONFIDENTIAL TREATMENT REQUESTED]/*/.

 

3.8.1  If EXACT has not [CONFIDENTIAL TREATMENT
REQUESTED]/*/ on or prior to [CONFIDENTIAL TREATMENT REQUESTED]/*/, EXACT shall
[CONFIDENTIAL TREATMENT REQUESTED]/*/ on or prior to [CONFIDENTIAL TREATMENT REQUESTED]/*/ for the purchase of Hybrigel
Consumables in accordance with the terms of this Agreement [CONFIDENTIAL
TREATMENT REQUESTED]/*/ will be [CONFIDENTIAL TREATMENT REQUESTED]/*/ of
Hybrigel Consumables.

 

[CONFIDENTIAL TREATMENT
REQUESTED]/*/  If EXACT has not
[CONFIDENTIAL TREATMENT REQUESTED]/*/ on or prior to the earlier of
[CONFIDENTIAL TREATMENT REQUESTED]/*/ or [CONFIDENTIAL TREATMENT REQUESTED]/*/, EXACT shall, in full
satisfaction of its obligations to Discovery hereunder, immediately
[CONFIDENTIAL TREATMENT REQUESTED]/*/ will be [CONFIDENTIAL TREATMENT
REQUESTED]/*/ relating to Reporting Periods subsequent to [CONFIDENTIAL TREATMENT
REQUESTED]/*/ in the event the Agreement is renewed beyond such date.  EXACT shall [CONFIDENTIAL TREATMENT
REQUESTED]/*/ prior to the earlier of [CONFIDENTIAL TREATMENT REQUESTED]/*/ or
[CONFIDENTIAL TREATMENT REQUESTED]/*/

 

3.8.3  If, other than (i) pursuant to
Section 12.9, (ii) as a result of the failure of, or delay by, EXACT to
deliver Membranes complying with the Specifications or (iii) as a result of
breach of this Agreement on the part of EXACT((i)-(iii) above are collectively
referred to herein as the “Contingencies”), Discovery is unable to deliver to
EXACT for two Reporting Periods in any 12 month period at least [CONFIDENTIAL
TREATMENT REQUESTED]/*/ of EXACT’s requirements for the Hybrigel Consumables in
accordance with the purchase orders delivered to and accepted by Discovery in
accordance with the terms of Section 3.7, EXACT shall no longer be
obligated to [CONFIDENTIAL TREATMENT REQUESTED]/*/

 

3.9                                 [CONFIDENTIAL
TREATMENT REQUESTED]/*/ Provision. 
If, other than as a result of the Contingencies Discovery is unable to
deliver to EXACT for two consecutive Reporting Periods at least [CONFIDENTIAL
TREATMENT REQUESTED]/*/ of EXACT’s requirements for the Hybrigel Consumables in
accordance with the purchase orders delivered to and accepted by Discovery in
accordance with the terms of section 3.7 provided in this Agreement, and
meeting the Hybrigel Consumable Specifications, EXACT will no longer be
obligated to [CONFIDENTIAL TREATMENT REQUESTED]/*/.  If, at any time during the Term of this Agreement and other than
as a result of the Contingencies, Discovery is unable to deliver to EXACT at
least [CONFIDENTIAL TREATMENT REQUESTED]/*/ of the Hybrigel Consumables for a
purchase order that Discovery has accepted in accordance with the terms of
section 3.7 of this Agreement, within 90 days of delivery date set forth
in such purchase order,

 

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*CONFIDENTIAL
TREATMENT REQUESTED

 

EXACT
will no longer be obligated to [CONFIDENTIAL TREATMENT REQUESTED]/*/

 

3.10                           Competitive
Products.  Nothing in this Agreement
shall prohibit Discovery or any of its Affiliates from using Discovery
Technology and Equipment to manufacture or sell any products to third parties
that are competitive to products created hereunder including such products that
may be competitive with the Hybrigel Consumable and the EXACT Tooling or other
products that are sold by EXACT at any time. 
Notwithstanding the foregoing, without the prior written consent of EXACT
during the term of this Agreement, Discovery shall not sell products similar to
the Hybrigel Consumable that have as one or the sole intended use the isolation
of DNA from stool samples.  At no time
may Discovery or its Affiliates use any EXACT Technology, the EXACT Tooling, or
the Hybrigel Consumables except for EXACT’s benefit in carrying out Discovery’s
obligations hereunder.

 

3.11                           Shipment.  Discovery agrees to ship Hybrigel
Consumables at Discovery’s cost by the common carrier and method of shipment
designated in the Manufacturing Plan.  Shipments will be made by the end of the Reporting Period (or
sooner as reasonably specified in the applicable purchase order) to the United
States locations specified in the Manufacturing Plan or as otherwise agreed by
the parties in writing.  Legal title and
risk of loss shall pass from Discovery to EXACT upon receipt of the Hybrigel
Consumables by EXACT or EXACT’s designee from the common carrier.

 

3.12                           Inspection
and Rejection.  Within fifteen (15)
business days of receipt of any shipment, EXACT shall inspect the shipment and
EXACT shall notify Discovery in writing of any rejection of any Hybrigel
Consumables within the shipment that do not substantially meet the Hybrigel
Consumable Specifications.  Hybrigel
Consumables may be rejected only to the extent that EXACT can show that such
failure to meet the Hybrigel Consumable Specifications existed prior to
delivery to EXACT and did not result from EXACT’s negligence or misconduct or
from any failure of the Membrane to meet the Membrane Specifications.  If EXACT does not notify Discovery of
rejection within such fifteen (15) day period, it shall be deemed to have
accepted the shipment of any Hybrigel Consumables not so rejected.  If the Hybrigel Consumable is rejected by
EXACT for non-conformance to the Hybrigel Consumable Specifications, EXACT
shall, if so directed by Discovery, promptly return the rejected Hybrigel
Consumables to Discovery or dispose of the rejected Hybrigel Consumables at the
direction of Discovery, in either case at the expense of Discovery.  If Discovery agrees with EXACT that the
Hybrigel Consumable does not conform to the Hybrigel Consumable Specifications,
Discovery shall have thirty (30) days after receipt of a notice from EXACT
rejecting any Hybrigel Consumables to replace the defective Hybrigel
Consumables.  If Discovery shows that
the Hybrigel Consumables conform to the Hybrigel Consumable Specifications or
that the failure to so conform results from EXACT’s negligence or misconduct,
then EXACT shall accept shipment of the Hybrigel Consumable and EXACT shall 

 

11

*CONFIDENTIAL
TREATMENT REQUESTED

 

reimburse Discovery for
the cost of shipping and storage.  If
EXACT does not agree with Discovery’s showing, then Discovery shall replace the
shipment in dispute and pay the costs of reshipping and storing the disputed
shipment, provided that Discovery may obtain an independent analysis of the
rejected Hybrigel Consumables to determine whether they meet the Hybrigel
Consumable Specifications.  The outcome
of such testing shall determine which party pays the costs of such retesting
and the costs of reshipping and storing the disputed shipment.  If the independent analysis finds the
Hybrigel Consumable conforms to the Hybrigel Consumable Specifications or that
the failure to so conform resulted from EXACT’s negligence or misconduct, then
EXACT shall accept delivery and shall reimburse Discovery for the cost of the
independent analysis and for the cost and shipping and storing of the disputed
shipment and any replacement shipment. 
If the independent analysis finds that the Hybrigel Consumable does not
conform to the Hybrigel Consumable Specifications and that the failure to so
conform does not result from EXACT’s negligence or misconduct, then Discovery
shall bear the cost for the shipping and storing of the disputed shipment.

 

3.13                           Payment.  EXACT  shall pay Discovery the purchase price
provided in Appendix G, as such may be amended from time to time, for each
Hybrigel Consumable supplied to EXACT and accepted by EXACT hereunder.  Discovery may from time to time request an
amendment to Appendix G at any time in order to change prices, such amendments
to only be effective upon mutual written agreement of the Parties.  EXACT shall not unreasonably withhold
consent to any such amendment. 
Discovery and EXACT agree that price increases in line with increases in
Discovery’s actual costs (including without limitation costs resulting from
changes to the labeling) shall be reasonable. 
Discovery shall provide EXACT with information reasonably requested to
support the price changes necessitated by the increase in Discovery’s actual
costs, though it is agreed that a showing of an increase in the market price of
goods and services used by Discovery in the manufacture and supply of the
Hybrigel Consumables shall be sufficient evidence of a corresponding increase
in Discovery’s actual prices.  EXACT
understands and agrees that the purchase prices set forth in Appendix G do not
include sales and other taxes, all of which shall be borne exclusively by
EXACT.  Discovery shall invoice EXACT
for each shipment of Hybrigel Consumables that is not rejected by EXACT, and
payment shall be due from EXACT within thirty (30) days after the date of
the invoice date.  Discovery will
collect applicable sales taxes from EXACT unless EXACT provides Discovery with
appropriate resale certificates.  EXACT
agrees to send payment for the Hybrigel Consumable on such terms to the
following address:

 

 

BD Biosciences

Discovery Labware

P.O. Box 70187

Chicago, IL  60673-0187

 

12

 

Or at such other address
as may be provided by Discovery to EXACT.

 

3.14                           Quarterly
Meetings: Reports. The points of contact shall meet at least quarterly to
discuss performance under this Agreement, schedules of the points of contact
permitting.

 

3.15                           Packaging,
Labeling. Discovery shall package and label the Hybrigel Consumable in
final form for distribution in accordance with the Hybrigel Consumable
Specifications.  EXACT shall provide
Discovery a sample of the label and packaging information and direct how such
label shall appear.

 

3.16                           Technical
Support.  During the term of this
Agreement, Discovery will provide technical assistance to EXACT to assist EXACT
in responding to routine requests from EXACT’s customers for technical
assistance that requires information regarding the materials and manufacturing
of the Hybrigel Consumable. Discovery will respond to EXACT’s requests prior to
the third business day after receipt of such request, provided that a response
may not include a full answer or resolution of a problem and may require
further work beyond such three (3) business day time frame.  Technical assistance shall not involve any Discovery
Technology and Equipment (including Discovery Bonding).  Such technical assistance shall be limited
to matters involving the materials and manufacture of the Hybrigel Consumables
and shall not involve the design, Hybrigel Consumable Specifications, use or
functionality of the Hybrigel Consumables, Membrane or Membrane Specifications,
all of which are the sole responsibility of EXACT.

 

3.17                           Markings.  Discovery shall not be responsible for any
patent and trademark requirements of EXACT, except with respect to labeling in
accordance with EXACT’s instructions.

 

ARTICLE
4:  LICENSE; OWNERSHIP.

 

4.1                                 EXACT
Limited License.  Subject to the
terms and conditions of this Agreement, EXACT hereby grants to Discovery a
non-exclusive, non-transferable, non-sublicensable, royalty-free license to the
EXACT Technology, solely for use in connection with Discovery’s performance of
Discovery’s obligations under this Agreement for EXACT, with the exception that
Discovery may grant a limited non-exclusive, non-transferable,
non-sublicensable, royalty-free license to third party contractors, vendors and
consultants and the like that Discovery deems necessary to contract with in
fulfilling its obligations under this Agreement, with prior written consent of
EXACT, which shall not be unreasonably withheld. Additionally, EXACT hereby
grants to Discovery a non-exclusive, royalty-free license to the use of the
EXACT Tooling solely for the purposes of this Agreement for the term of this
Agreement. Any use of the EXACT Technology

 

13

 

and EXACT Tooling by
Discovery or by Discovery’s contractors, vendors, and/or consultants that is
not solely in connection with Discovery’s performance of Discovery’s
obligations under this Agreement is not licensed hereunder and shall be considered
a material breach of this Agreement by Discovery and such license of EXACT
Technology shall be deemed null and void. 
However, Discovery Technology and Equipment, if improved, modified,
advanced, created, changed or the like, because of the use and knowledge of
EXACT Tooling by Discovery, or a Designee of Discovery, is not considered a
material breach of this Agreement.

 

4.2                                 EXACT
Technology.  Discovery hereby
acknowledges and agrees that it acquires no rights in the EXACT Technology or
EXACT Tooling except as specifically provided in this Agreement, and that, as
between the Parties, EXACT retains all rights, including all intellectual
property rights, in and to the EXACT Technology.  Further, Discovery hereby acknowledges and agrees that EXACT
shall exclusively own all right, title and interest, including all intellectual
property rights, in and to all EXACT Technology, EXACT Tooling and the Hybrigel
Consumable.

 

4.3                                 Discovery
Technology and Equipment.  EXACT
hereby acknowledges and agrees that, except as expressly provided elsewhere in
this Agreement, it shall acquire no rights in the Discovery Technology and
Equipment, including but not limited to, molds, mold technology, methods,
processes and techniques for attaching membranes or membrane like materials to
objects or materials, the methods, processes and techniques for packaging
products and the materials, methods, processes or techniques for labeling
products.  Further, EXACT hereby
acknowledges and agrees that Discovery shall own all right, title and interest,
including all intellectual property rights, in and to all Discovery Technology
and Equipment, except as expressly provided elsewhere in this Agreement.

 

4.4                                 Discovery
Limited License.  In the event this
Agreement is terminated or expires and provided that EXACT has paid to
Discovery all amounts owing hereunder, Discovery agrees to grant to EXACT a
non-exclusive, non-transferable, sublicensable, perpetual, royalty-free license
to Discovery Bonding techniques for affixing or attaching the Membrane to the
Hybrigel Consumable only and, solely for use in connection with EXACT’s
manufacture of the Hybrigel Consumable as described in Appendix D.  EXACT may grant a limited non-exclusive,
non-transferable, non-sublicensable, royalty-free license to Discovery Bonding
techniques, not to exceed ten (10) years in duration, to EXACT’s third party
contractors, vendors and consultants and the like with whom EXACT deems
necessary to contract with in manufacturing the Hybrigel Consumable, as
described in Appendix D, [CONFIDENTIAL TREATMENT REQUESTED]/*/.  EXACT’S grant of a limited non-exclusive,
non-transferable, non-sublicensable, royalty-free license to a third party
described herein must be approved in advance and in writing by Discovery, which
approval shall not be unreasonably withheld, and said third party must sign a
confidentiality agreement approved by the Parties hereto, which protects
Discovery’s know-how or trade secret information relating to Discovery
Bonding.  Any use of Discovery’s Bonding
techniques by EXACT 

 

14

*CONFIDENTIAL
TREATMENT REQUESTED

 

or EXACT’s licensee that
is not solely for the manufacture of the Hybrigel Consumable as described in
Appendix D is not licensed hereunder and shall be considered a material breach
of this Agreement by EXACT.

 

4.5                                 No
Implied License.  Discovery and
EXACT acknowledge that each maintains rights in and to intellectual property
that may be similar to the other’s intellectual property.  Nothing in this Agreement shall be construed
as expressly or impliedly granting either party any right or license under any
patent, patent application, trademark, service mark, or other intellectual
property right now or hereafter owned or controlled of the other Party, except
as expressly set forth in this Agreement.

 

4.6                                 Bonding
Techniques.  Discovery and EXACT
each separately maintains intellectual property rights in certain techniques
for affixing or attaching membrane materials to objects and nothing in this
Agreement shall preclude Discovery or EXACT from continuing to use such
techniques.

 

4.7                                 Other.  Each Party hereto may currently or in the
future may be developing information internally or receiving information from
others that may be similar or competitive to the information received from the
other Party hereto.  Accordingly,
nothing in this Agreement shall be construed as a representation or inference
that any Party hereto will not develop products or processes, for itself or
others, that compete with the products or processes contemplated by the other
Party hereto.

 

ARTICLE
5:  CONFIDENTIAL INFORMATION.

 

5.1                                 Confidential
Information.  In the event the
parties disclose confidential information under this Agreement to the other,
during the term of this Agreement, the parties agree to the following terms and
conditions:

 

(A)                              The
receiving party agrees not to disclose confidential information it receives
from the other party that is in writing and marked confidential (“Confidential
Information”) to anyone not employed by the receiver or an Affiliate of the
receiver without the discloser’s consent. 
Discovery and EXACT acknowledge that the Membrane Specifications and
Hybrigel Consumable Specifications shall be treated as confidential information
without regard to whether such information has been marked as such.

 

(B)                                The
recipient of the Confidential Information shall not be bound by the obligations
of this section of the Agreement unless the discloser provides the recipient
such information reduced to writing and marked as “Confidential” within thirty
(30) days of such disclosure.  In the
event one of the parties orally or visually discloses any information to the
other in any discussion, the recipient shall not be bound by the obligations of
this Agreement unless the discloser provides to the recipient a summary of 

 

15

 

such information reduced
to writing, marked as “Confidential,” within thirty (30) days of such oral or
visual disclosure.

 

5.2                                 Exclusions
to Confidential Information. 
Confidential Information will not include information which (a) was in
the receiving party’s possession without a confidentiality restriction prior to
the disclosure by the disclosing party hereunder, as shown by the receiving
party with contemporaneous written records; (b) at or after the time of
disclosure by the disclosing party becomes generally available to the public
through no act or omission on the receiving party’s part; (c) is developed by
the receiving party independently of and without reference to any Confidential
Information it receives from the disclosing party, as shown by the receiving
party with contemporaneous written records; (d) has come into the possession of
the receiving party without a confidentiality restriction from a third party  or (e) the disclosing party has given
written permission to the receiving party to disclose the Confidential
Information.

 

5.3                                 Treatment
of Confidential Information.  The
receiving party acknowledges the confidential and proprietary nature of the
disclosing party’s Confidential Information and agrees (i) to hold the
disclosing party’s Confidential Information in confidence and to take
precautions to protect such Confidential Information consistent with the
precautions the receiving party employs with respect to its own confidential
materials; (ii) not to divulge any such Confidential Information to any third
person.  The receiving party shall limit
disclosure of Confidential Information received from the disclosing party to
those employees or agents (including third-party contractors engaged by either
party as such party deems advisable in connection with the performance of its
obligations under this Agreement) of the receiving party whose use of or access
to the Confidential Information is necessary to carry out such party’s
obligations under this Agreement, and shall secure from all agents or
contractors having access to the Confidential Information agreements, at least
as protective of the Confidential Information as the provisions of this Article
5, to maintain such information in confidence.

 

5.4                                 Disclosure
Required by Judicial or Governmental Order and Regulatory Filings.  In the event that the receiving party is
ordered to disclose the disclosing party’s Confidential Information pursuant to
a judicial or government request, requirement or order, the receiving party
shall promptly notify the disclosing party. Either party shall be permitted to
disclose Confidential Information if required by law. EXACT acknowledges that
certain specifications and pricing information included in this Agreement are
confidential and agrees as an express condition to Discovery entering into this
Agreement that, if it is ever required to include such information in a U.S.
Securities and Exchange Commission or other public filing or submission, it
will pursue and use its best efforts to obtain confidential treatment of all
information for which Discovery requests such treatment after consultation, and
will file or submit, as permitted by law, only a redacted version publicly.  EXACT shall notify Discovery within ten (10)
days before such disclosure.

 

16

 

5.5                                 Archival
Copy.  Subject to the various
provisions hereof, all written information (including electronic information
only if reduced to print) delivered by the discloser to the recipient pursuant
to this Agreement shall be and remain the discloser’s property, and all such
written information, and copies thereof, shall be promptly returned to the
discloser upon written request of the discloser.  However, the recipient shall be entitled to retain one (1)
archival copy of all such information strictly for legal purposes.

 

5.6                                 Exception
Not Applicable to All Confidential Information.  If a particular portion or aspect of Confidential Information
becomes subject to any of the exceptions set forth in section 5.2, all
other portions or aspects of such information shall remain subject to all of
the provisions of this Agreement.

 

5.7                                 Survival
of This Article.  The provisions of
this Article 5 will survive any termination or expiration of this Agreement.

 

5.8                                 Terms
of Agreement Confidential.  Neither
Party shall disclose to any third party the specific terms of this Agreement
except as may be required by law without first obtaining the prior written
consent of the other Party which shall not be unreasonably withheld, except as
may be required to perform this Agreement as may be required by law.  Notwithstanding the foregoing, with prior
written consent of the other Party, which shall not be unreasonably withheld,
each Party may disclose this Agreement or its content to its professional
advisors, investors, potential investors and prospective permitted assignees,
and each party may disclose this Agreement to third party contractors that it
engages as it deems advisable, provided however, that any such third party has
entered into a written agreement at least as protective of the Confidential
Information as the provisions of this Article 5, to maintain such information
in confidence.

 

5.9                                 Capacity
Information.  Notwithstanding
anything herein to the contrary, and not withstanding whether such information
has been marked “Confidential” or has been provided in the absence of a
confidentiality restriction, any information relating directly or indirectly to
Discovery’s capacity received by EXACT prior to, on or after the Effective
Date, shall be considered Confidential Information.

 

17

 

ARTICLE 6:  REPRESENTATIONS AND WARRANTIES.

 

6.1                                 Discovery
Representations and Warranties. 
Discovery represents and warrants to EXACT that:

 

6.1.1             Discovery is a duly
organized and validly existing corporation under the laws of Delaware, and has
all requisite corporate power and authority to execute, deliver and perform its
obligations under this Agreement and any other agreements contemplated hereby,
and to consummate the transactions contemplated hereby;

 

6.1.2             This Agreement does
not contravene or constitute a default under or violation of any provision of
applicable law binding upon Discovery or any agreement, commitment, instrument
or other arrangement to which Discovery is a Party;

 

6.1.3             Any Hybrigel
Consumables and EXACT Tooling supplied under this Agreement shall be delivered
free and clear of all liens and encumbrances that would arise as a result of
actions taken by Discovery.

 

6.1.4             To the extent
applicable, Discovery’s manufacturing processes shall comply with all United
States governmental laws, requirements, and regulations that relate to Analyte
Specific Reagents as a Contract Manufacturer, as such term is defined by the
FDA in “Guidance for Industry: Instruction for Completion of Medical Consumable
Registration and Listing Forms.”

 

6.1.5             The Hybrigel
Consumables shall comply with the Hybrigel Consumable Specifications at the
time they are delivered to the common carrier and shall be free from material
defects in materials and workmanship; provided, however, that Discovery makes
no representation whatsoever as to the Membrane, inserts (if any), labels and
packaging.

 

6.1.6             Discovery warrants
that all Hybrigel Consumables, apart from the Membrane, shall, at the time of
shipment, (a) not be products that are adulterated or misbranded within the
meaning of the Act; and (b) have been manufactured, packaged, stored and
shipped in conformity with the Specifications and QSR 820 Class 1 medical
Consumables.

 

6.1.7             Discovery does not
represent and warrant that the purchase or use by EXACT of the Hybrigel
Consumable or the EXACT Tooling shall not infringe the patent rights of any
third party.

 

6.1.8             Discovery represents
and warrants that it maintains insurance at levels adequate to protect against
risk of loss and damage to the Hybrigel Consumables and the EXACT Tooling at
Discovery’s facilities.

 

18

 

6.1.9             Discovery represents
and warrants that the one set of molds comprising the EXACT Tooling is
sufficient to produce at least the Minimum Quantity.

 

6.2                                 EXACT
Representations and Warranties. 
EXACT represents and warrants to Discovery that:

 

6.2.1             EXACT is a
corporation duly organized and validly existing under the laws of the State of
Delaware and has all requisite corporate power and authority to execute,
deliver and perform its obligations under this Agreement and any other agreements
contemplated hereby, and to consummate the transactions contemplated hereby;
and

 

6.2.2             This Agreement does
not contravene or constitute a default or violation of any provision of
applicable law binding upon EXACT or any agreement, commitment, or instrument
to which EXACT is a Party.

 

6.2.3             EXACT has filed,
prosecuted or obtained any necessary authorizations or approvals for the
design, manufacture, marketing, sale and use of the Hybrigel Consumables to its
customers, other than any such authorizations or approvals that Discovery shall
obtain as a result of its compliance with section 6.1.5 above, and EXACT
shall, following acceptance of the Hybrigel Consumables, be responsible for
maintaining all such authorizations and approvals.

 

6.2.4             EXACT represents and
warrants that it is under no obligation to any third party that would interfere
with its representations or obligations under this Agreement.

 

6.2.5             EXACT shall comply
with and give all notices required by, all laws, ordinances, rules, regulations
and lawful orders of any public authority bearing on the performance of this
Agreement or the design, manufacture, marketing, sale and use of the Hybrigel
Consumables, provided that in relation to United States governmental laws,
requirements, and regulations that relate to Analyte Specific Reagents, EXACT
shall be able to rely on Discovery’s compliance with section 6.1.6 above.

 

6.2.6             EXACT represents and
warrants that, to its knowledge, the Hybrigel Consumable and the Membrane do
not infringe any claims of any issued patent or other intellectual or
industrial property rights of any third parties.

 

6.2.7             EXACT acknowledges
that the Hybrigel Consumables are subject to the laws and regulations of the
United States, including but not limited to the U.S. Export Administration
Regulations (collectively, “U.S. Laws”).

 

(a)          In
selling, reselling, exporting or reexporting any Hybrigel, EXACT  agrees
to comply fully with all applicable U.S. Laws as 

 

19

 

(b)         well
as all applicable export control laws and regulations of any other foreign
government (collectively, “Export Control Laws”).

 

(c)          EXACT expressly agrees that it shall not directly or
indirectly export, re-export, divert, lease, disclose, or otherwise transfer Hybrigel Consumables  to
any destination, entity or individual restricted or prohibited by Export
Control Laws.

 

(d)         With
respect to the export, re-export,
diversion, sale, lease, disclosure, or other transfer of Hybrigel Consumables,
EXACT is responsible for complying with all applicable Export Control Laws,
including obtaining any necessary export authorizations.

 

(e)          EXACT
attests that the Hybrigel Consumables will not be used directly or indirectly
in the development, production or proliferation of weapons of mass destruction
(nuclear, chemical, or biological) or missile delivery systems, and/or in
terrorist activities.  Further, EXACT
will comply with all applicable U.S. Laws, including Part 744 of the U.S. Export
Administration Regulations, and other government laws and regulations
restricting exports to persons or countries engaging in any of the above
activities.  EXACT shall not knowingly sell Hybrigel Consumables to any party that is
involved in such activities.

 

(f)            EXACT agrees that it will notify its
representatives, agents, distributors, customers and any other person to which it transfers Hybrigel Consumables of the restrictions set forth in
this section 6.2.7, and that it will use best efforts to cause any such
persons to agree to these restrictions.

 

(g)         EXACT understands and agrees that Discovery’s obligation to supply
Hybrigel Consumables to EXACT is subject to Discovery’s receipt of any licenses
or other authorizations required by Export Control Laws.

 

(h)         Upon
Discovery’s request, EXACT will furnish all information and documentation
concerning EXACT, consignees and/or final end-users necessary for Discovery to
obtain any export authorizations required by Export Control Laws.

 

6.3                                 DISCLAIMER:  THE WARRANTIES SET FORTH IN THIS AGREEMENT
ARE IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR IMPLIED.  ALL SUCH OTHER WARRANTIES, INCLUDING,
WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF TITLE, NON-INFRINGEMENT,
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE ARE HEREBY EXPRESSLY
EXCLUDED.  DISCOVERY EXPRESSLY DISCLAIMS
ANY REPRESENTATIONS AND WARRANTIES REGARDING 

 

20

 

THE PERFORMANCE AND
SAFETY AND EFFICACY OF THE HYBRIGEL CONSUMABLES.

 

ARTICLE 7:  LIMITATION OF LIABILITY.

 

7.1                                 CONSEQUENTIAL
DAMAGES.  NEITHER EXACT NOR
DISCOVERY SHALL BE LIABLE TO THE OTHER FOR ANY SPECIAL, INCIDENTAL, INDIRECT,
OR CONSEQUENTIAL DAMAGES, INCLUDING BUT NOT LIMITED TO LOSS OF ACTUAL OR
ANTICIPATED PROFITS OR REVENUES, LOSS BY REASON OF SHUTDOWN, LOSS OF USE, LOSS
OF ACCRUING INTEREST, DELAY OR ANY LOSS OF REPUTATION OR PUBLIC IMAGE WHETHER
SUCH DAMAGES ARISE UNDER THIS AGREEMENT, IN TORT, UNDER STATUTE, IN EQUITY, AT
LAW, OR OTHERWISE.  IN ADDITION,
DISCOVERY SHALL NOT BE LIABLE FOR ANY DAMAGES ARISING FROM CLAIMS OF THIRD
PARTIES FOR INJURY, DEATH OR PROPERTY DAMAGE SUFFERED AS A RESULT OF THE USE OF
THE HYBRIGEL CONSUMABLES OR THE EXACT TOOLING, OR FAILURE OF DISCOVERY TO WARN,
OR TO ADEQUATELY WARN, AGAINST THE DANGERS OF THE HYBRIGEL CONSUMABLES OR EXACT
TOOLING OR FAILURE OF DISCOVERY TO INSTRUCT OR TO ADEQUATELY INSTRUCT, ABOUT
THE SAFE AND PROPER USE OF THE HYBRIGEL CONSUMABLES OR EXACT TOOLING.

 

7.2                                 Limitation
of Liability.  Except for the
parties obligations under Article 8, notwithstanding anything else to the contrary
set forth in any agreement, the maximum liability of Discovery and EXACT under
this Agreement for all claims, whether in connection with a warranty claim, an
indemnity claim, a combination thereof, or otherwise and whether arising under
contract, warranty, tort (including negligence), strict liability, product
liability, a combination thereof, or any other theory of liability or
indemnification shall not exceed, in the aggregate, an amount equal to [CONFIDENTIAL TREATMENT REQUESTED]/*/ means
an amount equal to [CONFIDENTIAL TREATMENT REQUESTED]/*/ during each
calendar year during which the Agreement has been in effect.  Except as provided in Article 8, neither
party shall have any obligation to indemnify the other, regardless of the
theory of liability.

 

ARTICLE 8:  INDEMNIFICATION.

 

[CONFIDENTIAL TREATMENT
REQUESTED]/*/ Infringement Actions. 
Discovery shall indemnify, hold harmless and defend EXACT, its officers,
directors, employees and agents, from any and all suits, actions, damages,
costs, losses, expenses (including settlement awards and reasonable attorneys’
fees) and other liabilities arising from or in connection with [CONFIDENTIAL
TREATMENT REQUESTED]/*/ except to the extent that [CONFIDENTIAL TREATMENT
REQUESTED]/*/.  EXACT shall indemnify, hold
harmless and defend Discovery, its officers, directors, employees and agents,
from and against any and all suits, actions, damages, costs, losses, expenses
(including settlement awards and reasonable attorneys’ fees) and other
liabilities arising from or in connection with [CONFIDENTIAL TREATMENT
REQUESTED]/*/ except to the extent that [CONFIDENTIAL TREATMENT REQUESTED]/*/.

 

21

*CONFIDENTIAL
TREATMENT REQUESTED

 

8.2                                 Further
Indemnification by EXACT.  Subject
to the limitations on liability contained herein, EXACT shall indemnify, defend
and hold harmless Discovery, its officers, directors, employees and agents,
from [CONFIDENTIAL TREATMENT REQUESTED]/*/ in each case except to the extent
that [CONFIDENTIAL TREATMENT REQUESTED]/*/.

 

8.3                                 Further
Indemnification by Discovery. 
Discovery shall indemnify, defend and hold harmless EXACT, its officers,
directors, employees and agents, from [CONFIDENTIAL TREATMENT REQUESTED]/*/
except to the extent [CONFIDENTIAL TREATMENT REQUESTED]/*/.

 

8.4                                 Control
of Defense. In the case of any claim under
Section 8.1 or 8.1 hereof, the indemnified party shall promptly
notify the indemnifying party of any such claim of which the indemnified party
is aware.  The indemnifying party, at
its sole expense, shall maintain control and direction of the defense of any
such claim brought against the indemnified party; provided, however, that the
indemnified party shall have the right to participate in such defense at the
indemnified party’s expense.

 

8.5                                 Discovery’s
Compliance With EXACT’s Instructions. 
Discovery’s obligations under this Article 8 shall not extend to
[CONFIDENTIAL TREATMENT REQUESTED]/*/, or any specific or direct written
instructions from EXACT if such [CONFIDENTIAL TREATMENT REQUESTED]/*/ would
have been avoided but for such compliance.

 

ARTICLE 9:  TERM AND TERMINATION.

 

9.1                                 Term.  This Agreement shall commence on the
[CONFIDENTIAL TREATMENT REQUESTED]/*/ and shall continue until [CONFIDENTIAL
TREATMENT REQUESTED]/*/, unless terminated pursuant to
sections 9.2 or 9.3 hereof, and thereafter this Agreement shall
[CONFIDENTIAL TREATMENT REQUESTED]/*/ upon mutual, written agreement of the
parties on or before on hundred eighty (180) days prior to the expiration of
the then current term.

 

9.2                                 Termination
for Cause.  Subject to the
conditions contained in Section 9.4, either Party may terminate this
Agreement:

 

9.2.1             At any time, if the
other Party breaches any representation or warranty of this Agreement material
to its performance or fails to perform any material obligation hereunder, and
such breach is not remedied within the terms set forth in this Agreement
providing for a remedy or, if no such terms are set forth, within thirty (30)
business days after written notice thereof to the Party in default; or

 

9.2.2             At any time if the
other Party becomes insolvent, or makes an assignment for the benefit of
creditors, or a receiver or similar officer is appointed to take charge of all
or part of such Party’s assets and, as a result thereof, such Party is unable
or unwilling to perform is obligations under this Agreement.

 

22

*CONFIDENTIAL
TREATMENT REQUESTED

 

9.3                                 Termination
without Cause. At any time on or after [CONFIDENTIAL TREATMENT REQUESTED]/*/,
either Party may, at is sole discretion, terminate this Agreement at any time,
upon ninety (90) days’ prior written notice to the other Party, or at any time
upon sixty (60) days’ prior written notice to the other Party in an event of
Force Majeure.

 

9.4                                 Obligations
Upon Expiration or Termination. 
Upon the expiration or termination of this Agreement, the Parties shall
comply with the following:

 

9.4.1             If this Agreement
should terminate or expire as a result of EXACT’s termination without cause or
Discovery’s termination for cause:

 

(a)                                  prior
to EXACT [CONFIDENTIAL TREATMENT REQUESTED]/*/, EXACT shall be obligated to
[CONFIDENTIAL TREATMENT REQUESTED]/*/ pursuant to Section 3.8.2 on or
prior to the date such expiration or termination takes effect, and

 

(b)                                 EXACT
shall be obligated to purchase and Discovery shall be obligated to sell the
number of Hybrigel Consumables that were forecast by EXACT for the period
through the Reporting Period during which such termination shall become
effective (provided that [CONFIDENTIAL TREATMENT REQUESTED]/*/ if appropirate).

 

9.4.2             If this Agreement
shall terminate as a result of Discovery’s termination without cause or EXACT’s
termination for cause:

 

(a)                                  EXACT
shall be under no obligation to [CONFIDENTIAL TREATMENT REQUESTED]/*/ other
than with respect to Hybrigel consumables that have been or are delivered to
EXACT, and

 

(b)                                 Discovery
shall be obligated to sell and EXACT shall be obligated to purchase the number
of Hybrigel Consumables that were forecast by EXACT for the period through the
Reporting Period during which such termination shall become effective,

 

9.4.3.          In addition to the
foregoing, at any time this Agreement shall terminate or expire:

 

(a)                                  Discovery
shall (i) discontinue its performance hereunder (except as provided herein) and
(ii) comply with its obligations, if any, under Section 2.7.

 

23

*CONFIDENTIAL
TREATMENT REQUESTED

 

(b)                                 EXACT
shall (i) pay all amounts then outstanding under this Agreement and (ii) comply
with its obligations, if any, under Section 2.7.

 

9.5                                 Survival.  Sections 1, 2.4, 2.5, 2.6, 2.7, 3.10, 3.11,
4.2, 4.3, 4.4, 4.5, 4.6, 4.7, 5, 6, 7, 8, 9, 10.2, 11.1, 11.2, 11.3, 11.4,
11.5, 11.6, 11.7 and 12 shall survive the termination or expiration of this
Agreement for any reason.

 

ARTICLE 10:  ASSIGNMENT.

 

10.1                           No
Assignment.  Neither Discovery nor
EXACT shall assign its rights or delegate its obligations under, or otherwise
transfer, this Agreement, in whole or in part, other than to an Affiliate,
without the prior written consent of the other party hereto.  The term “assign” shall include the
assignment of any rights or duties under this Agreement, and shall also include
any purported transfer of this Agreement pursuant to a merger or consolidation
of Discovery; the sale, lease or other disposal of all or substantially all of
the assets or business of Discovery; or the liquidation, dissolution,
recapitalization or reorganization of Discovery.  Any purported assignment or delegation in violation of this
provision shall be null and void. Notwithstanding the foregoing, either party
shall have the right to assign this Agreement in connection with a merger,
acquisition or sale of all or substantially all of its stock or assets to which
this Agreement pertains.

 

10.2                           Binding
Upon Successors.  Subject to
section 10.1 hereof, this Agreement shall be binding upon and inure to the
benefit of the successors and assigns of the Parties hereto.

 

ARTICLE 11:  REGULATORY COMPLIANCE

 

11.1                           Registrations.  EXACT shall obtain and maintain all
applicable regulatory approvals, product registrations and requirements for it
to sell Hybrigel Consumables as the Specification Developer as such term is
defined by the FDA in “Guidance For Industry - Instructions For Completion of
Medical Device Registration And Listing Forms”.  Discovery agrees to cooperate with EXACT in any regulatory
registration process to permit EXACT to participate in such process when necessary. Discovery shall
promptly provide to EXACT copies when necessary of all required Hybrigel
Consumable notifications and registrations to regulatory agencies that are its
obligation as the Contract Manufacturer as such term is defined by the FDA in
“Guidance For Industry - Instructions For Completion of Medical Device
Registration And Listing Forms.”

 

24

 

11.2                           Reporting
Obligations.  EXACT and Discovery
shall maintain, all complaint files and other records required to be maintained
by the FDA and other regulatory agencies with respect to Hybrigel
Consumables.  Discovery shall promptly
provide to EXACT copies of all complaints received, resultant investigations
and follow-up communications with respect to the Hybrigel Consumables sold to
EXACT.  EXACT shall promptly provide
Discovery with copies of any complaints relating to Hybrigel Consumables
received by EXACT.  Except as otherwise
required by law, EXACT will be responsible for information about Hybrigel
Consumables required to be submitted to any regulatory agency, including the
reports required under FDA’s MDR rule, 21 CFR Parts 803 and 804, and other
adverse reporting requirements applicable to Hybrigel Consumables. All
potential reports relating to EXACT labeled products, will be reviewed jointly
by EXACT and Discovery and approved by EXACT prior to submission to the FDA or
other regulatory agencies.

 

11.3                           Manufacturing.  Discovery shall comply with all applicable
QSR requirements, including all quality standards applicable to the Hybrigel
Consumables (including ISO 9001 – 2000 and/or ISO 13485 where applicable).  Upon EXACT’s execution of Discovery’s Site
Visit Confidentiality Agreement, attached hereto as Appendix H, EXACT may
inspect Discovery’s facilities and review Discovery’s documentation required
under the QSR and any other documentation necessary for EXACT and Discovery to
comply with United States laws and regulations.  Discovery shall provide access to the portion of Discovery’s
manufacturing operations associated with the manufacture of the Hybrigel Consumable
in order to conduct an inspection, at reasonable times determined by Discovery
and upon reasonable notice by EXACT to Discovery.  Only EXACT employees may conduct an audit under this section.  For the site(s) where Hybrigel Consumables
are manufactured, Discovery must inform EXACT of all audits conducted by the
FDA and other regulatory agencies and provide audit outcomes, correspondence
and corrective actions, if required.

 

11.4                           Samples.  Discovery shall retain samples of each lot
of Hybrigel Consumables for time periods that are in accordance with agreed
EXACT specification.

 

11.5                           Product
Recalls and Field Corrective Actions. 
In the event (i) any government authority issues an order that Hybrigel
Consumables be recalled, (ii) a court of jurisdiction orders such a recall or
(iii) Discovery or EXACT determines that Hybrigel Consumables should be
recalled (including for reason of performance, reliablity or defects) or that a
field corrective action or removal should occur, the parties shall take all appropriate
corrective action.  Discovery and EXACT
will review any recommendation and agree to the appropriateness of the
corrective action prior to its initiation and the notification to the affected
customer(s).  In the event the parties cannot agree on the corrective action,
EXACT may act at its discretion.  EXACT
will provide notice to its customer(s) of the required corrective action for
Hybrigel Consumables.  EXACT shall be
responsible for the

 

25

 

cost of notifying end
users, for the replacement of the defective part, and for determining the
corrective actions to be taken and the costs associated with such actions.  Discovery shall be responsible only for
costs associated with Hybrigel Consumables supplied to EXACT that did not
substantially meet the Hybrigel Consumable Specifications when delivered to the
common carrier and only if such failure to meet the Hybrigel Consumable
Specifications is the direct cause of the recall or field corrective action and
only up the amount received by EXACT in payment for such Hybrigel
Consumables.  Discovery and EXACT shall
fully cooperate with one another and provide all reasonable assistance in
conducting any recall or field corrective action under this section.  EXACT shall maintain records of all sales of
Hybrigel Consumables sufficient to carry out a recall with respect to Hybrigel
Consumables purchased under the Agreement. 
If the recall meets the definition of corrective action and removal, and
constitutes a risk to health, as defined by 21 CFR 806, corrective action shall
be carried out in accordance with regulations including reporting to the FDA
and other applicable regulatory agencies.

 

11.6                           Records.  Discovery shall maintain complete and
accurate written records of all information relating to the manufacture of the
Hybrigel Consumable, and shall retain such records for not less than seven (7)
years after delivery to EXACT of the Hybrigel Consumable from the lot to which
such records pertain.  Upon EXACT’s
reasonable request, Discovery will allow EXACT to review Discovery’s
documentation required under the QSR and any other documentation necessary for
EXACT and Discovery to comply with United States laws and regulations.  Discovery.

 

11.7                           General
Obligations of Discovery and EXACT.

 

11.7.1            Discovery shall
manufacture and ship the Hybrigel Consumables in accordance with the Hybrigel
Consumable Specifications, and shall comply with the QSR requirements set forth
in 21 CFR 820.

 

11.7.2            Each party shall
promptly notify the other party of, and shall provide the other party with
copies of, any correspondence and other documentation received or prepared in
connection with any of the following events: (1) receipt of any material
correspondence from the FDA in connection with the manufacture of Hybrigel
Consumables; (2) any recall of Hybrigel Consumables; (3) the withdrawal of
Hybrigel Consumables from the market; (4) any regulatory comments relating to
the manufacture of Hybrigel Consumables requiring a response or action by either
party.

 

11.7.3            Discovery shall
maintain all manufacturing, quality assurance and analytical records; all
records of shipments of Hybrigel Consumables from Discovery; and all validation
data relating to Hybrigel Consumables for a period of seven (7) years.  Discovery shall make such data available to
the FDA upon request of the FDA, such request being made either directly to
EXACT or to Discovery, or otherwise as required by applicable law.

 

26

 

11.8                           Acceptance
of Products.  Discovery shall test
each newly manufactured lot of Hybrigel Consumables for conformance with the
Hybrigel Consumable Specifications. 
Each lot meeting the Hybrigel Consumable Specifications shall be deemed
accepted and Discovery shall complete and forward to EXACT a Discovery
Certificate of Conformance for such lot.

 

11.9                           Packaging.  All labels and labeling produced by
Discovery for Hybrigel Consumables, including packaging layout, design and
color, shall be supplied by EXACT.

 

11.10                     Quality.  The Parties agree to cooperate in good faith
and use commercially reasonable efforts to develop and implement a quality plan
designed to minimize or eliminate Hybrigel Consumable defects and provide for
improvement during this Agreement’s Term in Hybrigel Consumable quality based
upon implementation of improvements resulting from customer feedback or
relating to EXACT design improvements.

 

ARTICLE 12:  GENERAL.

 

12.1                           Publicity.  Neither party shall originate any publicity,
news release or public announcement, written or oral, whether to the public,
press or otherwise, relating to this Agreement, to any amendment hereto or
performance hereunder, or the relationship between the Parties, without prior
written approval of the other Party. 
Notice of any such publicity, news release or public announcement will
be given to the other party at least ten (10) days in advance of release.

 

12.2                           Headings.  All headings used in this Agreement and its
attachments are intended for convenience of reference only and shall not affect
the construction or interpretation of the Agreement

 

12.3                           Choice
of Law.  The validity and
interpretation of this Agreement and the legal relations of the Parties to it
are governed by the laws of the Commonwealth of Massachusetts without regard to
any choice of law principal that would dictate the application of the law of
another jurisdiction.  The Parties agree
that any legal action arising out of or in connection with this Agreement shall
be brought in the federal or state courts of Massachusetts, and the Parties
irrevocably submit for all purposes to the jurisdiction of such court.

 

12.4                           Independent
Contractors.  The Parties agree that, in the performance of
this Agreement, they are and shall be independent contractors.  Nothing herein shall be construed to
constitute a partnership or joint venture between the Parties nor shall either
Party be construed as the agent of the other Party for any purpose whatsoever,
and no Party shall bind or attempt to bind the other Party to any contract or
the performance of any obligation, or represent to any third party that it has
any right to enter into any binding obligation on the other Party’s behalf.

 

12.5                           Amendments
in Writing.  No waiver, alteration
or modification of any of the provisions of this Agreement shall be binding
unless made in writing and signed

 

27

 

by both of the Parties
hereto.

 

12.6                           Failure
to Enforce.  If either Party fails
to enforce any term of this Agreement or fails to exercise any remedy, such
failure to enforce or exercise on that occasion shall not prevent enforcement
or exercise on any other occasion.

 

12.7                           Exercise
of Rights and Remedies.  All rights
and remedies, whether conferred by this Agreement or by any other instrument or
by law shall be cumulative, and may be exercised singularly or concurrently.

 

12.8                           Severability.  If any provision of this Agreement is held
invalid by any law, rule, order, or regulation of any government or by the
final determination of any court of competent jurisdiction, such invalidity
shall not affect the enforceability of any other provisions and such provisions
shall be interpreted so as to best accomplish the objectives of such invalid
provisions within the limits of applicable law or applicable court decision.

 

12.9                           Inability
to Perform.  Neither Party to this
Agreement shall be liable for its failure to perform or any delay in its
performance of any of its obligations hereunder caused by an event outside the
affected Party’s reasonable control (“Force Majeure”) and the time required for
such performance shall be extended for a period equal to the period of such
delay.  Force Majeure shall include
fire, flood, earthquake, other natural disaster, war, embargo, acts of
terrorism, riot, or the intervention of any government authority, acts of the
public enemy, acts of God or other unforeseeable causes beyond the reasonable
control, and without the fault or negligence of, the affected Party, provided
that the Party that is unable to perform notifies the other Party of such
inability as soon as practicable.  If,
however, a Party’s performance is delayed as a result of any of the foregoing
situations for a period of sixty (60) days or more from the date of such
notification, then the other Party may terminate this Agreement in accordance
with section 9.3 hereof, provided that notice of only 60 days rather than
90 days will be required.

 

12.10                     Notice.  Notices to be given under this Agreement
shall be in writing, and sent by prepaid registered or certified mail, return
receipt requested, or by prepaid overnight courier service, or by facsimile, to
the addresses set forth immediately below (or to such other addresses as the
Parties may designate by notice given in accordance with this provision):

 

For EXACT:

 

President

EXACT Sciences
Corporation

63 Great Road

Maynard, MA 01754

Fax: (978) 897-3481

 

28

 

With a copy to:

 

General Counsel

EXACT Sciences
Corporation

63 Great Road

Maynard, MA 01754

Fax: (978) 897-3481

 

For Discovery:

 

Discovery Labware, Inc.

296 Concord Road

Billerica, MA 01821

Attention: Vice President
and General Manager

Manager Fax: (978)
901-7490

 

With a copy to:

 

Becton Dickinson and
Company

1 Becton Drive

Franklin Lakes, NJ 07417

Attention:  Vice President and General Counsel

Fax:  (201) 847-7445

 

All such notices, if properly addressed, shall be
effective when received.

 

12.11                     Entire Agreement.  This Agreement (including all Attachments
and Appendices, which are incorporated by reference herein) constitutes the
complete and exclusive statement of the agreement between the Parties, and supersedes all prior agreements, proposals, negotiations
and communications between the Parties, (except with respect to EXACT’s
purchase order No. 9192), both oral and written, regarding the subject
matter hereof.

 

12.12                     Counterparts.  This Agreement may be executed in one or
more counterparts, each of which when executed shall be deemed to be an
original but all of which taken together shall constitute one and the same
Agreement.

 

29

 

12.13                     No Other Terms.  In the event of a conflict between the terms
of this Agreement and any Purchase Order, acceptance, specification, EXACT’s
supplier agreement or acknowledgement, sales acknowledgement document, packing
slip, invoice, or other document, the parties hereby reject such terms and
conditions, and the terms and conditions of this Agreement shall prevail unless
otherwise expressly agreed to in writing by both parties.

 

30

 

[SIGNATURES
APPEAR ON FOLLOWING PAGE]

 

31

 

IN WITNESS WHEREOF, the Parties have executed this Agreement by
their duly authorized representatives under seal as of the Effective Date.

 

 

	
  EXACT SCIENCES CORPORATION

  	
  DISCOVERY LABWARE, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/
  Don M. Hardison

  	
   

  	
  By:

  	
  /s/
  Joseph S. Gentile

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Name:

  	
  Don M. Hardison

  	
   

  	
  Name:

  	
  Joseph S. Gentile

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Title:

  	
  President and CEO

  	
   

  	
  Title:

  	
  Vice President and General
  Manager

  	
   

  

 

32

 

APPENDIX A

 

 

FORM OF DISCOVERY CERTIFICATE OF
CONFORMANCE

 

	
  BD
  Biosciences

  Discovery Labware

  296 Concord Road, Suite 280,

  Billerica, MA 01821

  	
   

  	
  BD
  France S.A.

  BD Biosciences

  Labware Europe

  11 rue Aristide Bergès - BP 4

  38800 Le Point De Claix, France

  

 

CERTIFICATE OF QUALITY

 

	
  Date:

  	
   

  	
   

  

 

 

BD Biosciences - Labware
certifies that the product listed below meets the following criteria:

 

	
  BD  Falcon Catalog No:

  	
   

  	
  LOT #:

  	
   

  

 

QSR (GMP) Compliance – BD Falcon  Products
are manufactured in accordance with the current Quality System Requirements
Standards as specified in Chapter 1, Title 21 of the USA Federal Regulations,
Section 820 titled “Good Manufacturing Practices for Medical Devices”.

 

Quality Control Testing - Representative
production samples are collected and inspected in accordance with current
applicable product specifications. 
Inspection records are reviewed and signed off by qualified personnel
for product release.

 

Cytotoxicity – Quality Control testing is
conducted to qualify all material resins using USP and ISO 10993 standards for
cytotoxicity and have been shown to be non-toxic.

 

DNA / DNase Free - Representative
production samples are collected and tested in accordance with current applicable
product specifications.  Test results
are reviewed and signed off by qualified personnel for product release.

 

VERIFICATION:

 

	
   

  	
   

  
	
  Treyburn Quality Representative

  
	
  

  

 

33

 

APPENDIX B

 

 

CERTIFICATE OF ANALYSIS

 

Exact Sciences certifies
that the membrane lot listed below has been tested and has met all of the
following criteria.

 

	
  Membrane Type:

  	
  Membrane Lot#:

  
	
   

  	
   

  
	
  Membrane qty:

  	
  Date of manufacture:

  
	
   

  	
   

  
	
  Shipping date:

  	
  Qty tested:

  
	
   

  	
   

  
	
  BD SAP number: tbd

  	
   

  

 

Test data

 

	
  Test

  	
   

  	
  Specification

  	
   

  	
  Result

  	
   

  	
  Pass/Fail

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Dimensions

  	
   

  	
  7.5” x 5.5”
  sheet

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Visual – free of dust
  and dirt

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Visual – No tears or
  cuts

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Packaging – free of
  dirt, dust

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Packaging – not damaged

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Results of Membrane QC

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

	
  Certified by:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
  Date:

  	
   

  	
   

  

 

34

 

APPENDIX C

 

MANUFACTURING PLAN

 

 

PHASE I:

 

Tooling construction
design, development, and validation of the following:

 

[CONFIDENTIAL
TREATMENT REQUESTED]/*/

 

PHASE II

 

[CONFIDENTIAL TREATMENT REQUESTED]/*/

 

PHASE III:

 

The earlier of
[CONFIDENTIAL TREATMENT REQUESTED]/*/.

 

35

*CONFIDENTIAL
TREATMENT REQUESTED

 

APPENDIX D

 

SPECIFICATIONS

 

[CONFIDENTIAL
TREATMENT REQUESTED]/*/

 

36

*CONFIDENTIAL
TREATMENT REQUESTED

 

APPENDIX
E

 

EXACT’S INITIAL FORECAST

 

[CONFIDENTIAL TREATMENT
REQUESTED]/*/

 

37

*CONFIDENTIAL
TREATMENT REQUESTED

 

APPENDIX
F

 

FORM
OF PURCHASE ORDER

 

Exact Sciences, Inc.

Address and contact
information

 

(Vendor)

 

Discovery Labware, Inc.

2 Oak Park

Bedford, MA  01730-9902

 

Tel: 781-275-0004,
800-343-2035

Fax:  800-743-6200

 

Fed ID #22-3124058

 

Purchase Order Number

Order Date

Requestor

Deliver To:

 

Vendor Code

Buyer

Terms:  30 days net of receipt

Ship Via:

FOB

Freight

Taxable

Account Number

Confirm To:

 

Item

Part Number/Description

Exact Sciences PreGen Pure Consumable

Membrane Type and Designation

 

Quantity

Unit of Measure (Case /
Unit) TBD

Unit Price TBD

Extension

Total Order

 

Membrane Type -
Identifier

Unit identifier TBD

Estimated 8 to 12 week
delivery term upon receipt of order

 

38

 

APPENDIX
G

 

PURCHASE PRICE

 

[CONFIDENTIAL TREATMENT REQUESTED]/*/

 

39

*CONFIDENTIAL
TREATMENT REQUESTED

 

APPENDIX H

 

FORM OF SITE VISIT CONFIDENTIALITY
AGREEMENT

 

CONFIDENTIALITY
AGREEMENT

(Plant/Facility
Visit)

 

This AGREEMENT, made and effective May 1st,
2003 by and between EXACT Sciences Corporation, with a place of business at 63
Great Road, Maynard, Massachusetts 01754 (“RECIPIENT”) and Becton, Dickinson
and Company, a New Jersey corporation, with a place of business at 1 Becton
Drive, Franklin Lakes, New Jersey 07417 (“BD”).

 

WHEREAS, RECIPIENT wishes to visit BD’s facilities
located in Bedford, Massachusetts and Treyburn, North Carolina, to discuss BD’s
proprietary information and documentation limited to BD’s General Quality
System Information.  The parties
recognize that during the visit and in discussions between the parties in
connection with or related to the visit (which conversations may be before,
during or after the visit), there may be disclosure by BD of certain
confidential, proprietary, trade secret or like previously undisclosed
information (“CONFIDENTIAL INFORMATION”).

 

 

In consideration of the premises and mutual covenants
contained herein, BD and RECIPIENT agree as follows:

 

1.                    All
CONFIDENTIAL INFORMATION disclosed by BD (including but not limited to
in-writing or other permanent visual form or orally or by visual observation)
shall be deemed and shall remain the property of BD, and the RECIPIENT shall
not be allowed to make any copies, drawings, sketches, designs, take
photographs or videos of the facilities, equipment or processes of BD or its
affiliates and other type of tangible way of reproducing information furnished
by BD, nor use any other audiovisual recording equipment in any way while in
BD’s facilities or its affiliates.

 

2.                    Unless
expressly authorized by BD in writing, which refers by name and date to this
Agreement, RECIPIENT shall retain all CONFIDENTIAL INFORMATION in confidence,
shall not disclose such CONFIDENTIAL INFORMATION or any part thereof to any
third-party and shall not use the CONFIDENTIAL INFORMATION for its benefit or
for the benefit of any third-party except generally for background purposes
with respect to examples of good manufacturing procedures.  However, the obligation of confidentiality
with respect to the CONFIDENTIAL INFORMATION shall not apply to any
information which:

 

(a)        is already known to
RECIPIENT and its value appreciated at the time of disclosure as evidenced by
written documents; or

(b)          is
generally available to the public without restriction or becomes publicly known
through no wrongful act of RECIPIENT; or

(c)           is
received by RECIPIENT through no fault of RECIPIENT from a third-party who had
a legal right to provide it.

 

3.                    Specific CONFIDENTIAL
INFORMATION disclosed by BD will not be deemed within any exceptions set forth
in (a), (b) or (c) above merely because it is embraced by more general
information to which one or more of those exceptions may apply.

 

40

 

Even though CONFIDENTIAL
INFORMATION is within one of the above exceptions, RECIPIENT will not disclose
to third parties that the excepted CONFIDENTIAL INFORMATION was received from
BD.

 

4.                    Nothing
contained herein shall be construed, either expressly or implicitly, to grant
to RECIPIENT any rights to technology or license under any patent, copyright or
trademark or other proprietary right now or hereinafter in existence, owned or
controlled by BD.

 

5.                    In the event
the parties make a later contract or agreement concerning anything covered by
this Agreement, this Agreement shall continue to remain in full force and
effect unless specifically stated to the contrary in such later contract.

 

6.                    RECIPIENT
agrees that nothing herein shall obligate BD to disclose information by virtue
of this Agreement, and that nothing in this Agreement shall be construed or
otherwise interpreted by RECIPIENT as an obligation or intent to enter into any
business relationship with each other, and no decisions should be made in
reliance on entry into such a relationship. 
However, RECIPIENT recognizes that from time to time BD may wish to
disclose information, which is of a character considered to be so highly
proprietary and sensitive that additional restrictions on use and/or disclosure
are necessary before such information can be disclosed.  In such event, if mutually desired, the
parties will attempt to negotiate a separate agreement governing the disclosure
of such information.

 

7.                    This Agreement
constitutes the complete understanding between the parties of each party’s
obligations to the other party relating to the CONFIDENTIAL INFORMATION.  This Agreement can be modified only by a
written document executed by an authorized representative of the parties, which
refers to this Agreement and includes a copy of this Agreement as an
attachment.

 

8.                    The parties
understand and agree that there is neither an expressed nor implied expectation
of any kind or type of payment or other compensation by BD to RECIPIENT arising
out of this Agreement or anything carried out under this Agreement, except as
may be set forth in any subsequent written agreement between the parties.  Further, there is no obligation or
commitment by the parties hereto to enter into any agreement subsequent to this
Agreement.

 

9.                    BD personnel
are not authorized to receive information in confidence.  RECIPIENT shall not disclose any of its
trade secrets or proprietary information to BD, and all communications from
RECIPIENT to BD shall be made on a non-confidential basis.

 

10.              This Agreement shall
become effective on the date first set above and has no termination date.  The obligations undertaken herein as the
RECIPIENT shall survive and continue with no expiration date.

 

11.              Any notice or other
communication made or given by either party in connection with this Agreement
shall be sent via facsimile (with confirmation) or by registered certified
mail, postage prepaid, return receipt requested, or by courier service
addressed or the other party at its address set forth below:

 

41

 

	
  Becton, Dickinson and
  Company

  	
   

  	
  EXACT Sciences Corporation

  
	
  1Becton Drive

  Franklin Lakes, New Jersey 07417

  Attn: David W. Highet

  VP & Chief Intellectual Property Counsel

  Fax: (201) 848-9228

  	
   

  	
  63 Great Road

  Maynard, Massachusetts 01754

  Attn: President

  

 

12.              This Agreement shall
be governed by the laws of the State of New Jersey, without reference to choice
or conflict of law principles, otherwise applicable.  The parties consent and agree that the United States Federal
District Court for the District of New Jersey shall have sole and exclusive
jurisdiction to resolve any interpretation, construction, breach, dispute or
other controversy arising out of, connected with or associated with this
Agreement.

 

This
Agreement shall be executed in two or more identical counterparts, each of
which shall be deemed to be an original and all of which taken together shall
be deemed to constitute the Agreement when a duly authorized representative of
each party has signed a counterpart. 
The parties intend to sign and deliver this Agreement by facsimile
transmission.  Each party agrees that
the delivery of the Agreement by facsimile shall have the same force and effect
as delivery of original signatures and that each party may use such facsimile
signatures as evidence of the execution and delivery of the Agreement by all
parties to the same extent that an original signature could be used.

 

Each
person executing this Agreement represents and warrants that they are acting on
behalf of a Party, as identified in the first paragraph of this Agreement, and
not in an individual capacity.  Each
person executing this Agreement further represents and warrants that they are authorized
to enter into such Agreements for and on behalf of their respective Party.

 

 

	
  EXACT Sciences Corporation:

  	
   

  	
   

  	
  BECTON, DICKINSON AND COMPANY

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Joseph S.
  Gentile

  Vice President & General Manager

  Discovery Labware

  BD Biosciences

  
					

 

42<PAGE>

                                                                   Exhibit 10.17

                          SECURITIES PURCHASE AGREEMENT

         SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of April 16,
2003,  by  and  among  Torbay  Holdings,  Inc.,  a  Delaware  corporation,  with
headquarters  located at 4 Mulford Place,  Suite 2G,  Hempstead,  New York 11550
(the  "Company"),  and each of the purchasers  set forth on the signature  pages
hereto (the "Buyers").

         WHEREAS:

         A. The  Company  and the  Buyers  are  executing  and  delivering  this
Agreement in reliance upon the exemption from securities  registration  afforded
by the rules and regulations as promulgated by the United States  Securities and
Exchange  Commission  (the "SEC") under the  Securities  Act of 1933, as amended
(the "1933 Act");

         B. Buyers desire to purchase and the Company desires to issue and sell,
upon the terms and conditions  set forth in this  Agreement (i) 12%  convertible
debentures of the Company,  in the form  attached  hereto as Exhibit "A", in the
aggregate  principal  amount  of  up  to  Two  Hundred  Fifty  Thousand  Dollars
($250,000) (together with any debenture(s) issued in replacement thereof or as a
dividend  thereon or otherwise with respect thereto in accordance with the terms
thereof,  the "Debentures"),  convertible into shares of common stock, par value
$.0001  per share,  of the  Company  (the  "Common  Stock"),  upon the terms and
subject to the  limitations and conditions set forth in such Debentures and (ii)
warrants,  in the form  attached  hereto as Exhibit  "B", to purchase up to Five
Hundred Thousand (500,000) shares of Common Stock (the "Warrants");

         C. Each Buyer wishes to purchase,  upon the terms and conditions stated
in this Agreement, such principal amount of Debentures and number of Warrants as
is set forth immediately below its name on the signature pages hereto; and

         D.  Contemporaneous  with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement,
in  the  form  attached  hereto  as  Exhibit  "C"  (the   "Registration   Rights
Agreement"),  pursuant  to which  the  Company  has  agreed to  provide  certain
registration rights under the 1933 Act and the rules and regulations promulgated
thereunder, and applicable state securities laws.

         NOW  THEREFORE,  the Company and each of the Buyers  severally (and not
jointly) hereby agree as follows:

         1. PURCHASE AND SALE OF DEBENTURES AND WARRANTS.

              a.  Purchase of Debentures  and Warrants.  On the Closing Date (as
defined  below),  the Company  shall issue and sell to each Buyer and each Buyer
severally  agrees  to  purchase  from  the  Company  such  principal  amount  of
Debentures and number of Warrants as is set forth immediately below such Buyer's
name on the signature pages hereto,  for an aggregate of Fifty Thousand  Dollars
($50,000)  principal  amount of Debentures and Warrants to purchase an aggregate
of 100,000 shares of Common Stock.

<PAGE>

              b. Form of Payment.  On the Closing Date (as defined  below),  (i)
each Buyer shall pay the purchase  price for the  Debentures and the Warrants to
be issued  and sold to it at the  Closing  (as  defined  below)  (the  "Purchase
Price") by wire  transfer of  immediately  available  funds to the  Company,  in
accordance with the Company's written wiring  instructions,  against delivery of
the  Debentures  in the  principal  amount equal to the  Purchase  Price and the
number of Warrants as is set forth  immediately  below such  Buyer's name on the
signature  pages hereto,  and (ii) the Company shall deliver such Debentures and
Warrants duly executed on behalf of the Company, to such Buyer, against delivery
of such Purchase Price.

              c. Closing Date.  Subject to the  satisfaction (or written waiver)
of the conditions  thereto set forth in Section 6 and Section 7 below,  the date
and time of the issuance and sale of the Debentures and the Warrants pursuant to
this Agreement (the "Closing Date") shall be 12:00 noon,  Eastern  Standard Time
on April 16, 2003 or such other  mutually  agreed upon time.  The closing of the
transactions  contemplated by this Agreement (the "Closing")  shall occur on the
Closing Date at such location as may be agreed to by the parties.

              d. Subsequent  Closings.  On the final business day of each of the
eight (8) months  beginning  in May 2003 and ending in December  2003  (each,  a
"Funding  Date"),  the Company shall issue and sell to the Buyers and the Buyers
severally  agree to  purchase  from the  Company  an  aggregate  of  Twenty-Five
Thousand  Dollars  ($25,000)  principal  amount of  Debentures  and  Warrants to
purchase  an  aggregate  of  50,000  shares  of  Common  Stock.  Subject  to the
satisfaction (or written waiver) of the conditions  thereto set forth in Section
6 and Section 7 below,  on each  Funding  Date,  the  Company  will issue to the
Buyers such  Debentures and Warrants in the amounts  specified by the Buyers and
the Buyers  shall pay for such  Debentures  and  Warrants  by wire  transfer  of
immediately  available funds to the Company. In addition,  on each Funding Date,
an  authorized  officer  of the  Company  shall  deliver to the Buyers a closing
certificate in form and substance  satisfactory  to the Buyers.  Notwithstanding
the foregoing,  either the Company or a  majority-in-interest  of the Buyers may
terminate  their  obligations  under this  Section  1(d) upon  thirty  (30) days
written notice to the other party.

         2. BUYERS'  REPRESENTATIONS  AND WARRANTIES.  Each Buyer severally (and
not  jointly)  represents  and  warrants to the Company  solely as to such Buyer
that:

              a.  Investment  Purpose.  As of the  date  hereof,  the  Buyer  is
purchasing  the  Debentures  and  the  shares  of  Common  Stock  issuable  upon
conversion  of or  otherwise  pursuant  to the  Debentures  (including,  without
limitation,  such additional shares of Common Stock, if any, as are issuable (i)
on  account  of  interest  on the  Debentures,  (ii) as a result  of the  events
described in Sections 1.3 and 1.4(g) of the  Debentures  and Section 2(c) of the
Registration  Rights  Agreement or (iii) in payment of the  Standard  Liquidated
Damages  Amount (as defined in Section 2(f) below)  pursuant to this  Agreement,
such  shares  of  Common  Stock  being  collectively  referred  to herein as the
"Conversion  Shares") and the  Warrants and the shares of Common Stock  issuable
upon  exercise  thereof  (the  "Warrant  Shares"  and,   collectively  with  the
Debentures,  Warrants  and  Conversion  Shares,  the  "Securities")  for its own
account and not with a present  view  towards  the public  sale or  distribution
thereof, except pursuant to sales registered or exempted from registration under
the 1933 Act; provided,  however, that by making the representations herein, the
Buyer  does not agree to hold any of the  Securities  for any  minimum  or other
specific term and reserves the right to dispose of the Securities at any time in
accordance  with or pursuant to a registration  statement or an exemption  under
the 1933 Act.

                                       2
<PAGE>

              b.  Accredited  Investor  Status.  The  Buyer  is  an  "accredited
investor" as that term is defined in Rule 501(a) of Regulation D (an "Accredited
Investor").

              c.  Reliance  on  Exemptions.   The  Buyer  understands  that  the
Securities are being offered and sold to it in reliance upon specific exemptions
from the registration requirements of United States federal and state securities
laws and that the  Company is relying  upon the truth and  accuracy  of, and the
Buyer's   compliance   with,  the   representations,   warranties,   agreements,
acknowledgments  and  understandings  of the Buyer set forth  herein in order to
determine the  availability  of such exemptions and the eligibility of the Buyer
to acquire the Securities.

              d. Information. The Buyer and its advisors, if any, have been, and
for so long as the Debentures and Warrants remain  outstanding  will continue to
be,  furnished  with  all  materials  relating  to the  business,  finances  and
operations  of the Company and  materials  relating to the offer and sale of the
Securities which have been requested by the Buyer or its advisors. The Buyer and
its advisors,  if any, have been, and for so long as the Debentures and Warrants
remain  outstanding  will  continue  to  be,  afforded  the  opportunity  to ask
questions of the Company.  Notwithstanding  the  foregoing,  the Company has not
disclosed to the Buyer any material nonpublic  information and will not disclose
such information  unless such information is disclosed to the public prior to or
promptly following such disclosure to the Buyer.  Neither such inquiries nor any
other due diligence  investigation  conducted by Buyer or any of its advisors or
representatives  shall  modify,  amend or  affect  Buyer's  right to rely on the
Company's representations and warranties contained in Section 3 below. The Buyer
understands that its investment in the Securities  involves a significant degree
of risk.

              e.  Governmental  Review.  The  Buyer  understands  that no United
States federal or state agency or any other  government or  governmental  agency
has passed upon or made any recommendation or endorsement of the Securities.

              f. Transfer or Re-sale.  The Buyer  understands that (i) except as
provided  in the  Registration  Rights  Agreement,  the sale or  re-sale  of the
Securities  has not been and is not being  registered  under the 1933 Act or any
applicable  state  securities  laws,  and the  Securities may not be transferred
unless  (a) the  Securities  are  sold  pursuant  to an  effective  registration
statement  under the 1933 Act, (b) the Buyer shall have delivered to the Company
an opinion of counsel that shall be in form,  substance and scope  customary for
opinions of counsel in comparable transactions to the effect that the Securities
to be sold or transferred  may be sold or  transferred  pursuant to an exemption
from such registration,  which opinion shall be accepted by the Company, (c) the
Securities are sold or  transferred  to an  "affiliate"  (as defined in Rule 144
promulgated  under the 1933 Act (or a successor rule) ("Rule 144")) of the Buyer
who agrees to sell or otherwise  transfer the Securities only in accordance with
this Section 2(f) and who is an Accredited Investor, (d) the Securities are sold
pursuant to Rule 144, or (e) the  Securities  are sold  pursuant to Regulation S
under the 1933 Act (or a successor rule)  ("Regulation  S"), and the Buyer shall
have  delivered  to the  Company an  opinion  of counsel  that shall be in form,
substance and scope customary for opinions of counsel in corporate transactions,
which opinion shall be accepted by the Company; (ii) any sale of such Securities
made in  reliance on Rule 144 may be

                                       3
<PAGE>

made only in accordance with the terms of said Rule and further, if said Rule is
not applicable,  any re-sale of such Securities under circumstances in which the
seller  (or the  person  through  whom the sale is made)  may be deemed to be an
underwriter  (as that term is  defined in the 1933 Act) may  require  compliance
with some other exemption under the 1933 Act or the rules and regulations of the
SEC thereunder;  and (iii) neither the Company nor any other person is under any
obligation  to  register  such  Securities  under  the  1933  Act or  any  state
securities  laws or to comply  with the terms and  conditions  of any  exemption
thereunder  (in each  case,  other  than  pursuant  to the  Registration  Rights
Agreement).  Notwithstanding  the foregoing or anything else contained herein to
the contrary,  the Securities may be pledged as collateral in connection  with a
bona fide margin  account or other  lending  arrangement.  In the event that the
Company  does not accept  the  opinion  of  counsel  provided  by the Buyer with
respect  to  the  transfer  of   Securities   pursuant  to  an  exemption   from
registration,  such as Rule 144 or  Regulation S (provided  that such opinion is
correct and complies with all applicable  rules and  regulations),  within three
(3) business  days of delivery of the opinion to the Company,  the Company shall
pay to the Buyer  liquidated  damages of three  percent (3%) of the  outstanding
amount of the  Debentures  per month plus  accrued  and unpaid  interest  on the
Debentures,  prorated for partial months, in cash or shares at the option of the
Buyer ("Standard Liquidated Damages Amount"). If the Buyer elects to be paid the
Standard  Liquidated Damages Amount in shares of Common Stock, such shares shall
be  issued  at the  Conversion  Price at the  time of  payment  of the  Standard
Liquidated Damages Amount.

              g. Legends.  The Buyer  understands  that the  Debentures  and the
Warrants and, until such time as the  Conversion  Shares and Warrant Shares have
been registered  under the 1933 Act as contemplated by the  Registration  Rights
Agreement or otherwise  may be sold pursuant to Rule 144 or Regulation S without
any  restriction as to the number of securities as of a particular date that can
then be immediately  sold,  the Conversion  Shares and Warrant Shares may bear a
restrictive  legend in  substantially  the following  form (and a  stop-transfer
order may be placed against transfer of the certificates for such Securities):

                  "The securities  represented by this certificate have not been
                  registered  under the Securities Act of 1933, as amended.  The
                  securities  may not be sold,  transferred  or  assigned in the
                  absence  of  an  effective   registration  statement  for  the
                  securities under said Act, or an opinion of counsel,  in form,
                  substance  and scope  customary  for  opinions  of  counsel in
                  comparable  transactions,  that  registration  is not required
                  under  said  Act  or  unless  sold  pursuant  to  Rule  144 or
                  Regulation S under said Act."

         The legend set forth above shall be removed and the Company shall issue
a certificate without such legend to the holder of any Security upon which it is
stamped,  if, unless otherwise required by applicable state securities laws, (a)
such Security is registered for sale under an effective  registration  statement
filed  under  the  1933 Act or  otherwise  may be sold  pursuant  to Rule 144 or
Regulation  S without any  restriction  as to the number of  securities  as of a
particular  date that can then be immediately  sold, or (b) such holder provides
the Company with an opinion of counsel,  in form,  substance and scope customary
for opinions of counsel in comparable transactions,  to the effect that a public
sale or transfer of such  Security  may be made without  registration  under the
1933 Act,  which  opinion  shall be  accepted by the Company so that the sale or
transfer is effected or (c) such holder  provides  the Company  with  reasonable
assurances  that

                                       4
<PAGE>

such Security can be sold pursuant to Rule 144 or Regulation S. The Buyer agrees
to sell all Securities,  including those  represented by a  certificate(s)  from
which the legend has been removed,  in  compliance  with  applicable  prospectus
delivery requirements, if any.

              h. Authorization; Enforcement. This Agreement and the Registration
Rights Agreement have been duly and validly authorized.  This Agreement has been
duly  executed  and  delivered  on  behalf  of the  Buyer,  and  this  Agreement
constitutes,  and upon  execution and delivery by the Buyer of the  Registration
Rights Agreement,  such agreement will constitute,  valid and binding agreements
of the Buyer enforceable in accordance with their terms.

              i.  Residency.  The Buyer is a resident  of the  jurisdiction  set
forth immediately below such Buyer's name on the signature pages hereto.

         3.   REPRESENTATIONS  AND  WARRANTIES  OF  THE  COMPANY.   The  Company
represents and warrants to each Buyer that:

              a.  Organization  and  Qualification.  The Company and each of its
Subsidiaries  (as defined  below),  if any,  is a  corporation  duly  organized,
validly  existing and in good  standing  under the laws of the  jurisdiction  in
which it is incorporated, with full power and authority (corporate and other) to
own,  lease,  use and operate its properties and to carry on its business as and
where now owned, leased, used, operated and conducted.  Schedule 3(a) sets forth
a list of all of the  Subsidiaries of the Company and the  jurisdiction in which
each is incorporated. The Company and each of its Subsidiaries is duly qualified
as a  foreign  corporation  to do  business  and is in good  standing  in  every
jurisdiction  in which its  ownership  or use of  property  or the nature of the
business  conducted by it makes such  qualification  necessary  except where the
failure to be so qualified or in good standing would not have a Material Adverse
Effect.  "Material  Adverse  Effect"  means any material  adverse  effect on the
business, operations, assets, financial condition or prospects of the Company or
its Subsidiaries,  if any, taken as a whole, or on the transactions contemplated
hereby or by the  agreements  or  instruments  to be entered into in  connection
herewith.  "Subsidiaries"  means any corporation or other organization,  whether
incorporated  or  unincorporated,   in  which  the  Company  owns,  directly  or
indirectly, any equity or other ownership interest.

              b. Authorization;  Enforcement.  (i) The Company has all requisite
corporate  power and  authority  to enter into and perform this  Agreement,  the
Registration Rights Agreement, the Debentures and the Warrants and to consummate
the transactions contemplated hereby and thereby and to issue the Securities, in
accordance with the terms hereof and thereof, (ii) the execution and delivery of
this  Agreement,  the  Registration  Rights  Agreement,  the  Debentures and the
Warrants  by  the  Company  and  the  consummation  by  it of  the  transactions
contemplated hereby and thereby (including without  limitation,  the issuance of
the Debentures and the Warrants and the issuance and reservation for issuance of
the Conversion  Shares and Warrant Shares  issuable upon  conversion or exercise
thereof) have been duly  authorized  by the Company's  Board of Directors and no
further consent or authorization of the Company, its Board of Directors,  or its
stockholders  is  required,  (iii) this  Agreement  has been duly  executed  and
delivered by the Company by its authorized  representative,  and such authorized
representative  is the true and official  representative  with authority to sign
this Agreement and the other documents executed in connection  herewith and bind
the Company accordingly, and (iv) this Agreement constitutes, and upon execution
and delivery by the Company of the Registration

                                       5
<PAGE>

Rights Agreement, the Debentures and the Warrants, each of such instruments will
constitute,  a legal,  valid and binding  obligation of the Company  enforceable
against the Company in accordance with its terms.

              c.  Capitalization.  As of the date hereof, the authorized capital
stock of the Company  consists of (i)  100,000,000  shares of Common  Stock,  of
which 29,719,607  shares are issued and outstanding,  no shares are reserved for
issuance  pursuant to the  Company's  stock option plans,  3,768,000  shares are
reserved in connection  with consulting  agreements;  45,903,635 are reserved in
connection with warrants and convertible debentures;  and 101,000,000 shares are
reserved for issuance  upon  conversion  of the  Debentures  and exercise of the
Warrants (subject to adjustment  pursuant to the Company's covenant set forth in
Section 4(h) below);  and (ii)  20,000,000  shares of preferred  stock, of which
420,000 shares are issued and  outstanding.  All of such  outstanding  shares of
capital stock are, or upon issuance will be, duly  authorized,  validly  issued,
fully paid and  nonassessable.  No shares of capital  stock of the  Company  are
subject to preemptive  rights or any other similar rights of the stockholders of
the Company or any liens or encumbrances  imposed through the actions or failure
to act of the Company. Except as disclosed in Schedule 3(c), as of the effective
date of this Agreement, (i) there are no outstanding options,  warrants,  scrip,
rights to subscribe  for,  puts,  calls,  rights of first  refusal,  agreements,
understandings,   claims  or  other  commitments  or  rights  of  any  character
whatsoever relating to, or securities or rights convertible into or exchangeable
for any shares of capital  stock of the Company or any of its  Subsidiaries,  or
arrangements  by which the Company or any of its  Subsidiaries  is or may become
bound to issue  additional  shares of capital stock of the Company or any of its
Subsidiaries,  (ii) there are no  agreements  or  arrangements  under  which the
Company or any of its  Subsidiaries  is obligated to register the sale of any of
its or their  securities  under the 1933 Act  (except  the  Registration  Rights
Agreement) and (iii) there are no anti-dilution  or price adjustment  provisions
contained in any security  issued by the Company (or in any agreement  providing
rights to  security  holders)  that will be  triggered  by the  issuance  of the
Debentures,  the Warrants,  the Conversion Shares or Warrant Shares. The Company
has furnished to the Buyer true and correct copies of the Company's  Certificate
of   Incorporation   as  in  effect  on  the  date   hereof   ("Certificate   of
Incorporation"),  the  Company's  By-laws,  as in effect on the date hereof (the
"By-laws"),  and the terms of all securities convertible into or exercisable for
Common  Stock of the Company and the material  rights of the holders  thereof in
respect  thereto.  The Company shall provide the Buyer with a written  update of
this  representation  signed by the Company's Chief Executive or Chief Financial
Officer on behalf of the Company as of the Closing Date.

              d.  Issuance of Shares.  Subject to the  Stockholder  Approval (as
defined in Section  4(1)),  the  Conversion  Shares and Warrant  Shares are duly
authorized and reserved for issuance and, upon  conversion of the Debentures and
exercise of the Warrants in  accordance  with their  respective  terms,  will be
validly issued,  fully paid and non-assessable,  and free from all taxes, liens,
claims  and  encumbrances  with  respect to the issue  thereof  and shall not be
subject to preemptive  rights or other  similar  rights of  stockholders  of the
Company and will not impose personal liability upon the holder thereof.

              e.  Acknowledgment  of  Dilution.   The  Company  understands  and
acknowledges  the  potentially  dilutive  effect to the  Common  Stock  upon the
issuance of the  Conversion  Shares and

                                       6
<PAGE>

Warrant Shares upon conversion of the Debenture or exercise of the Warrants. The
Company further  acknowledges that its obligation to issue Conversion Shares and
Warrant Shares upon  conversion of the Debentures or exercise of the Warrants in
accordance with this Agreement,  the Debentures and the Warrants is absolute and
unconditional  regardless of the dilutive  effect that such issuance may have on
the ownership interests of other stockholders of the Company.

              f. No Conflicts.  Subject to the Stockholder  Approval (as defined
in Section 4(1)), the execution, delivery and performance of this Agreement, the
Registration  Rights  Agreement,  the Debentures and the Warrants by the Company
and the consummation by the Company of the transactions  contemplated hereby and
thereby  (including,  without  limitation,  the  issuance  and  reservation  for
issuance of the Conversion Shares and Warrant Shares) will not (i) conflict with
or result in a violation of any provision of the Certificate of Incorporation or
By-laws or (ii) violate or conflict with, or result in a breach of any provision
of, or  constitute  a default (or an event which with notice or lapse of time or
both could become a default) under, or give to others any rights of termination,
amendment,  acceleration or cancellation of, any agreement,  indenture,  patent,
patent license or instrument to which the Company or any of its  Subsidiaries is
a party,  or (iii) result in a violation of any law,  rule,  regulation,  order,
judgment or decree (including  federal and state securities laws and regulations
and regulations of any self-regulatory organizations to which the Company or its
securities are subject)  applicable to the Company or any of its Subsidiaries or
by which any  property  or asset of the  Company or any of its  Subsidiaries  is
bound  or  affected   (except  for  such  conflicts,   defaults,   terminations,
amendments,   accelerations,   cancellations   and   violations  as  would  not,
individually or in the aggregate,  have a Material Adverse Effect).  Neither the
Company  nor any of its  Subsidiaries  is in  violation  of its  Certificate  of
Incorporation, By-laws or other organizational documents and neither the Company
nor any of its  Subsidiaries is in default (and no event has occurred which with
notice or lapse of time or both could put the Company or any of its Subsidiaries
in default) under, and neither the Company nor any of its Subsidiaries has taken
any action or failed to take any action  that would give to others any rights of
termination,   amendment,   acceleration  or  cancellation  of,  any  agreement,
indenture or  instrument  to which the Company or any of its  Subsidiaries  is a
party  or by  which  any  property  or  assets  of  the  Company  or  any of its
Subsidiaries  is bound or affected,  except for possible  defaults as would not,
individually or in the aggregate, have a Material Adverse Effect. The businesses
of the Company and its Subsidiaries,  if any, are not being conducted, and shall
not be conducted so long as a Buyer owns any of the Securities,  in violation of
any  law,  ordinance  or  regulation  of  any  governmental  entity.  Except  as
specifically  contemplated  by this Agreement and as required under the 1933 Act
and any applicable  state securities laws, the Company is not required to obtain
any consent, authorization or order of, or make any filing or registration with,
any court, governmental agency, regulatory agency,  self-regulatory organization
or stock  market  or any  third  party in order for it to  execute,  deliver  or
perform any of its obligations  under this Agreement,  the  Registration  Rights
Agreement, the Debentures or the Warrants in accordance with the terms hereof or
thereof or to issue and sell the Debentures and Warrants in accordance  with the
terms  hereof  and  to  issue  the  Conversion  Shares  upon  conversion  of the
Debentures  and the Warrant  Shares upon  exercise  of the  Warrants.  Except as
disclosed in Schedule 3(f), all consents,  authorizations,  orders,  filings and
registrations  which the Company is required to obtain pursuant to the preceding
sentence  have been  obtained or effected  on or prior to the date  hereof.  The
Company is not in violation of the listing  requirements of the Over-the-Counter
Bulletin Board (the "OTCBB") and does not reasonably  anticipate that the Common
Stock will be delisted by the OTCBB in the foreseeable  future.  The Company and
its Subsidiaries are unaware of any facts or circumstances which might give rise
to any of the foregoing.

                                       7
<PAGE>

              g. SEC  Documents;  Financial  Statements.  The Company has timely
filed all reports,  schedules, forms, statements and other documents required to
be  filed by it with  the SEC  pursuant  to the  reporting  requirements  of the
Securities  Exchange  Act of 1934,  as  amended  (the  "1934  Act")  (all of the
foregoing filed prior to the date hereof and all exhibits  included  therein and
financial statements and schedules thereto and documents (other than exhibits to
such documents) incorporated by reference therein, being hereinafter referred to
herein as the "SEC Documents"). The Company has delivered to each Buyer true and
complete copies of the SEC Documents,  except for such exhibits and incorporated
documents.  As of their  respective  dates,  the SEC  Documents  complied in all
material  respects  with the  requirements  of the 1934  Act and the  rules  and
regulations of the SEC promulgated  thereunder  applicable to the SEC Documents,
and  none of the SEC  Documents,  at the  time  they  were  filed  with the SEC,
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.  None of the  statements  made in any such SEC  Documents is, or has
been,  required to be amended or updated under  applicable  law (except for such
statements as have been amended or updated in subsequent  filings prior the date
hereof).  As of their respective dates, the financial  statements of the Company
included in the SEC Documents  complied as to form in all material respects with
applicable  accounting  requirements  and the published rules and regulations of
the SEC with respect  thereto.  Such financial  statements have been prepared in
accordance  with  United  States  generally  accepted   accounting   principles,
consistently  applied,  during  the  periods  involved  (except  (i)  as  may be
otherwise  indicated in such financial  statements or the notes thereto, or (ii)
in the case of unaudited interim statements,  to the extent they may not include
footnotes or may be condensed or summary  statements)  and fairly present in all
material  respects the  consolidated  financial  position of the Company and its
consolidated  Subsidiaries as of the dates thereof and the consolidated  results
of their  operations and cash flows for the periods then ended (subject,  in the
case of unaudited statements,  to normal year-end audit adjustments).  Except as
set  forth  in the  financial  statements  of the  Company  included  in the SEC
Documents, the Company has no liabilities,  contingent or otherwise,  other than
(i)  liabilities  incurred  in the  ordinary  course of business  subsequent  to
December 31, 2001 and (ii) obligations under contracts and commitments  incurred
in the ordinary  course of business and not required  under  generally  accepted
accounting  principles  to be reflected  in such  financial  statements,  which,
individually or in the aggregate, are not material to the financial condition or
operating results of the Company.

              h. Absence of Certain Changes.  Since December 31, 2001, there has
been no material  adverse  change and no  material  adverse  development  in the
assets,  liabilities,  business,  properties,  operations,  financial condition,
results of operations or prospects of the Company or any of its Subsidiaries.

              i.  Absence  of  Litigation.  There  is no  action,  suit,  claim,
proceeding,  inquiry  or  investigation  before or by any court,  public  board,
government  agency,  self-regulatory  organization  or body  pending  or, to the
knowledge  of the  Company  or any of its  Subsidiaries,  threatened  against or
affecting the Company or any of its Subsidiaries, or their officers or directors
in their capacity as such, that could have a Material  Adverse Effect.  Schedule
3(i)  contains  a  complete  list and  summary  description  of any  pending  or
threatened   proceeding   against  or  affecting  the  Company  or  any  of  its
Subsidiaries, without regard to whether it would have a Material Adverse Effect.
The Company and its Subsidiaries are unaware of any facts or circumstances which
might give rise to any of the foregoing.

                                       8
<PAGE>

         j. Patents, Copyrights, etc.

              (i) The Company and each of its Subsidiaries owns or possesses the
requisite  licenses or rights to use all patents,  patent  applications,  patent
rights, inventions, know-how, trade secrets, trademarks, trademark applications,
service  marks,  service  names,  trade  names  and  copyrights   ("Intellectual
Property")  necessary to enable it to conduct its business as now operated (and,
except  as set  forth in  Schedule  3(j)  hereof,  to the best of the  Company's
knowledge,  as presently contemplated to be operated in the future); there is no
claim or action by any person  pertaining to, or proceeding  pending,  or to the
Company's knowledge threatened,  which challenges the right of the Company or of
a Subsidiary with respect to any Intellectual Property necessary to enable it to
conduct its business as now operated (and,  except as set forth in Schedule 3(j)
hereof, to the best of the Company's knowledge,  as presently contemplated to be
operated in the future); to the best of the Company's  knowledge,  the Company's
or its Subsidiaries'  current and intended  products,  services and processes do
not  infringe on any  Intellectual  Property or other rights held by any person;
and the Company is unaware of any facts or  circumstances  which might give rise
to any of the  foregoing.  The Company and each of its  Subsidiaries  have taken
reasonable  security measures to protect the secrecy,  confidentiality and value
of their Intellectual Property.

              (ii) All of the Company's computer software and computer hardware,
and other  similar or  related  items of  automated,  computerized  or  software
systems that are used or relied on by the Company in the conduct of its business
or that  were,  or  currently  are being,  sold or  licensed  by the  Company to
customers (collectively, "Information Technology"), are Year 2000 Compliant. For
purposes of this Agreement,  the term "Year 2000 Compliant"  means, with respect
to the Company's  Information  Technology,  that the  Information  Technology is
designed to be used prior to, during and after the calendar  Year 2000,  and the
Information  Technology  used  during  each such  time  period  will  accurately
receive, provide and process date and time data (including,  but not limited to,
calculating,  comparing and sequencing) from, into and between the 20th and 21st
centuries,  including the years 1999 and 2000, and leap-year  calculations,  and
will not malfunction, cease to function, or provide invalid or incorrect results
as a result of the date or time  data,  to the  extent  that  other  information
technology,  used in  combination  with  the  Information  Technology,  properly
exchanges  date and time data with it. The Company has  delivered  to the Buyers
true and correct copies of all analyses,  reports,  studies and similar  written
information,  whether  prepared  by the  Company or another  party,  relating to
whether the Information Technology is Year 2000 Compliant, if any.

         k. No Materially Adverse Contracts, Etc. Neither the Company nor any of
its   Subsidiaries  is  subject  to  any  charter,   corporate  or  other  legal
restriction,  or any judgment,  decree,  order,  rule or regulation which in the
judgment of the  Company's  officers  has or is expected in the future to have a
Material  Adverse Effect.  Neither the Company nor any of its  Subsidiaries is a
party to any  contract  or  agreement  which in the  judgment  of the  Company's
officers has or is expected to have a Material Adverse Effect.

         l. Tax Status.  Except as set forth on Schedule  3(l),  the Company and
each of its Subsidiaries has made or filed all federal, state and foreign income
and all other tax returns, reports and declarations required by any jurisdiction
to which it is subject  (unless and only to the extent that the Company and each
of its Subsidiaries has set aside on its books  provisions  reasonably  adequate
for the payment of all unpaid and  unreported  taxes) and has paid

                                       9
<PAGE>

all taxes and other  governmental  assessments  and charges that are material in
amount, shown or determined to be due on such returns, reports and declarations,
except  those  being  contested  in good  faith  and has set  aside on its books
provisions  reasonably  adequate  for  the  payment  of all  taxes  for  periods
subsequent to the periods to which such returns,  reports or declarations apply.
There are no unpaid taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction,  and the officers of the Company know of no basis
for any such claim.  The Company has not  executed a waiver with  respect to the
statute of limitations  relating to the assessment or collection of any foreign,
federal,  state or local tax.  Except as set forth on Schedule 3(l), none of the
Company's tax returns is presently being audited by any taxing authority.

              m. Certain Transactions.  Except as set forth on Schedule 3(m) and
except for arm's length transactions pursuant to which the Company or any of its
Subsidiaries  makes  payments in the ordinary  course of business  upon terms no
less  favorable  than the Company or any of its  Subsidiaries  could obtain from
third  parties and other than the grant of stock  options  disclosed on Schedule
3(c), none of the officers,  directors, or employees of the Company is presently
a party to any transaction  with the Company or any of its  Subsidiaries  (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 corporation, partnership, trust or other entity in
which any officer,  director, or any such employee has a substantial interest or
is an officer, director, trustee or partner.

              n.  Disclosure.  All  information  relating to or  concerning  the
Company or any of its  Subsidiaries  set forth in this Agreement and provided to
the Buyers  pursuant to Section 2(d) hereof and otherwise in connection with the
transactions  contemplated  hereby is true and correct in all material  respects
and the Company has not omitted to state any material fact necessary in order to
make the statements made herein or therein,  in light of the circumstances under
which they were made, not misleading.  No event or circumstance  has occurred or
exists with  respect to the Company or any of its  Subsidiaries  or its or their
business,  properties,  prospects,  operations or financial  conditions,  which,
under  applicable  law,  rule  or  regulation,  requires  public  disclosure  or
announcement  by the  Company but which has not been so  publicly  announced  or
disclosed  (assuming for this purpose that the Company's reports filed under the
1934 Act are being incorporated into an effective  registration  statement filed
by the Company under the 1933 Act).

              o.  Acknowledgment  Regarding Buyers' Purchase of Securities.  The
Company  acknowledges  and  agrees  that the  Buyers  are  acting  solely in the
capacity of arm's  length  purchasers  with  respect to this  Agreement  and the
transactions contemplated hereby. The Company further acknowledges that no Buyer
is acting as a financial  advisor or fiduciary of the Company (or in any similar
capacity)  with  respect to this  Agreement  and the  transactions  contemplated
hereby  and  any  statement  made  by  any  Buyer  or any  of  their  respective
representatives or agents in connection with this Agreement and the transactions
contemplated  hereby is not advice or a recommendation  and is merely incidental
to the Buyers'  purchase of the Securities.  The Company  further  represents to
each Buyer that the  Company's  decision to enter into this  Agreement  has been
based   solely  on  the   independent   evaluation   of  the   Company  and  its
representatives.

                                       10
<PAGE>

              p. No  Integrated  Offering.  Neither the Company,  nor any of its
affiliates,  nor any  person  acting on its or their  behalf,  has  directly  or
indirectly  made any offers or sales in any security or solicited  any offers to
buy any security under  circumstances that would require  registration under the
1933 Act of the issuance of the  Securities  to the Buyers.  The issuance of the
Securities to the Buyers will not be integrated  with any other  issuance of the
Company's  securities (past,  current or future) for purposes of any stockholder
approval provisions applicable to the Company or its securities.

              q. No Brokers.  The  Company has taken no action  which would give
rise to any claim by any person for brokerage  commissions,  transaction fees or
similar  payments  relating to this Agreement or the  transactions  contemplated
hereby.

              r. Permits;  Compliance.  The Company and each of its Subsidiaries
is in possession of all franchises, grants,  authorizations,  licenses, permits,
easements, variances, exemptions,  consents, certificates,  approvals and orders
necessary to own,  lease and operate its properties and to carry on its business
as it is now being conducted (collectively, the "Company Permits"), and there is
no action  pending or, to the  knowledge  of the Company,  threatened  regarding
suspension or  cancellation of any of the Company  Permits.  Neither the Company
nor any of its  Subsidiaries is in conflict with, or in default or violation of,
any of  the  Company  Permits,  except  for  any  such  conflicts,  defaults  or
violations  which,  individually  or in the  aggregate,  would not reasonably be
expected to have a Material Adverse Effect. Since December 31, 2001, neither the
Company nor any of its Subsidiaries  has received any notification  with respect
to possible  conflicts,  defaults or violations of applicable  laws,  except for
notices relating to possible conflicts, defaults or violations, which conflicts,
defaults or violations would not have a Material Adverse Effect.

              s. Environmental Matters.

              (i)  Except as set  forth in  Schedule  3(s),  there  are,  to the
Company's  knowledge,  with respect to the Company or any of its Subsidiaries or
any predecessor of the Company,  no past or present  violations of Environmental
Laws (as defined below), releases of any material into the environment, actions,
activities,   circumstances,   conditions,  events,  incidents,  or  contractual
obligations which may give rise to any common law environmental liability or any
liability  under the  Comprehensive  Environmental  Response,  Compensation  and
Liability  Act of 1980 or similar  federal,  state,  local or  foreign  laws and
neither the Company nor any of its  Subsidiaries  has  received  any notice with
respect to any of the foregoing,  nor is any action pending or, to the Company's
knowledge,  threatened  in  connection  with  any of  the  foregoing.  The  term
"Environmental Laws" means all federal, state, local or foreign laws relating to
pollution or protection of human health or the environment  (including,  without
limitation,  ambient air, surface water, groundwater, land surface or subsurface
strata), including, without limitation, laws relating to emissions,  discharges,
releases or threatened releases of chemicals,  pollutants contaminants, or toxic
or hazardous substances or wastes (collectively, "Hazardous Materials") into the
environment, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous Materials,
as well as all  authorizations,  codes,  decrees,  demands  or  demand  letters,
injunctions,  judgments,  licenses,  notices or notice letters, orders, permits,
plans or regulations issued, entered, promulgated or approved thereunder.

                                       11
<PAGE>

              (ii) Other than those that are or were stored, used or disposed of
in compliance with  applicable  law, no Hazardous  Materials are contained on or
about any real property currently owned, leased or used by the Company or any of
its Subsidiaries,  and no Hazardous Materials were released on or about any real
property  previously  owned,  leased  or  used  by  the  Company  or  any of its
Subsidiaries  during the period the  property  was owned,  leased or used by the
Company or any of its Subsidiaries, except in the normal course of the Company's
or any of its Subsidiaries' business.

              (iii)  Except  as  set  forth  in  Schedule  3(s),  there  are  no
underground storage tanks on or under any real property owned, leased or used by
the  Company  or  any of its  Subsidiaries  that  are  not  in  compliance  with
applicable law.

         t. Title to Property.  The Company and its  Subsidiaries  have good and
marketable  title in fee  simple to all real  property  and good and  marketable
title to all personal  property  owned by them which is material to the business
of the Company and its  Subsidiaries,  in each case free and clear of all liens,
encumbrances  and defects  except such as are described in Schedule 3(t) or such
as would not have a Material  Adverse  Effect.  Any real property and facilities
held under  lease by the  Company  and its  Subsidiaries  are held by them under
valid,  subsisting and enforceable leases with such exceptions as would not have
a Material Adverse Effect.

         u. Insurance.  The Company and each of its  Subsidiaries are insured by
insurers of recognized  financial  responsibility  against such losses and risks
and in such  amounts as  management  of the  Company  believes to be prudent and
customary  in the  businesses  in which the  Company  and its  Subsidiaries  are
engaged.  Neither the Company nor any such  Subsidiary has any reason to believe
that it will not be able to renew its  existing  insurance  coverage as and when
such coverage expires or to obtain similar coverage from similar insurers as may
be  necessary  to continue its business at a cost that would not have a Material
Adverse Effect. The Company has provided to Buyer true and correct copies of all
policies  relating to directors' and officers'  liability  coverage,  errors and
omissions coverage, and commercial general liability coverage.

         v.  Internal  Accounting   Controls.   The  Company  and  each  of  its
Subsidiaries  maintain a system of internal accounting controls  sufficient,  in
the  judgment  of the  Company's  board  of  directors,  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.

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

                                       12
<PAGE>

              x.  Solvency.  Except as set forth on Schedule  3(x),  the Company
(after  giving effect to the  transactions  contemplated  by this  Agreement) is
solvent  (i.e.,  its  assets  have a fair  market  value in excess of the amount
required to pay its probable  liabilities  on its existing  debts as they become
absolute and matured) and  currently the Company has no  information  that would
lead it to reasonably  conclude that the Company would not,  after giving effect
to the transaction contemplated by this Agreement, have the ability to, nor does
it intend to take any action  that would  impair its  ability  to, pay its debts
from time to time  incurred in connection  therewith as such debts  mature.  The
Company did not receive a qualified  opinion from its  auditors  with respect to
its most recent  fiscal year end and,  after giving  effect to the  transactions
contemplated  by this  Agreement,  does not anticipate or know of any basis upon
which its  auditors  might issue a  qualified  opinion in respect of its current
fiscal year.

              y. No  Investment  Company.  The  Company  is not,  and  upon  the
issuance and sale of the Securities as  contemplated  by this Agreement will not
be an  "investment  company"  required  to be  registered  under the  Investment
Company Act of 1940 (an "Investment Company").  The Company is not controlled by
an Investment Company.

              z. Breach of Representations and Warranties by the Company. If the
Company  breaches any of the  representations  or  warranties  set forth in this
Section  3, and in  addition  to any  other  remedies  available  to the  Buyers
pursuant  to this  Agreement,  the Company  shall pay to the Buyer the  Standard
Liquidated  Damages Amount in cash or in shares of Common Stock at the option of
the  Buyer,  until  such  breach is cured.  If the  Buyers  elect to be paid the
Standard Liquidated Damages Amounts in shares of Common Stock, such shares shall
be issued at the Conversion Price at the time of payment.

         4. COVENANTS.

              a. Best  Efforts.  The  parties  shall use their  best  efforts to
satisfy  timely  each of the  conditions  described  in  Section 6 and 7 of this
Agreement.

              b. Form D; Blue Sky Laws. The Company agrees to file a Form D with
respect to the Securities as required  under  Regulation D and to provide a copy
thereof to each Buyer  promptly  after such  filing.  The Company  shall,  on or
before the  Closing  Date,  take such  action as the  Company  shall  reasonably
determine is necessary to qualify the  Securities  for sale to the Buyers at the
applicable  closing  pursuant to this Agreement under  applicable  securities or
"blue sky" laws of the states of the  United  States (or to obtain an  exemption
from such qualification), and shall provide evidence of any such action so taken
to each Buyer on or prior to the Closing Date.

              c.  Reporting  Status;  Eligibility  to Use Form S-3, SB-2 or Form
S-1. The Company's  Common Stock is  registered  under Section 12(g) of the 1934
Act. The Company  represents and warrants that it meets the requirements for the
use of Form S-3 (or if the Company is not eligible for the use of Form S-3 as of
the Filing Date (as defined in the Registration  Rights Agreement),  the Company
may use the form of  registration  for which it is

                                       13
<PAGE>

eligible  at  that  time)  for  registration  of the  sale by the  Buyer  of the
Registrable  Securities (as defined in the Registration  Rights  Agreement).  So
long as the Buyer  beneficially  owns any of the  Securities,  the Company shall
timely file all reports  required to be filed with the SEC  pursuant to the 1934
Act, and the Company  shall not  terminate  its status as an issuer  required to
file  reports  under  the  1934  Act  even  if the  1934  Act or the  rules  and
regulations thereunder would permit such termination. The Company further agrees
to file all reports required to be filed by the Company with the SEC in a timely
manner so as to become eligible, and thereafter to maintain its eligibility, for
the use of Form S-3.  The Company  shall issue a press  release  describing  the
materials  terms of the transaction  contemplated  hereby as soon as practicable
following  the Closing Date but in no event more than two (2)  business  days of
the Closing  Date,  which press  release shall be subject to prior review by the
Buyers.  The Company  agrees that such press release shall not disclose the name
of the Buyers unless  expressly  consented to in writing by the Buyers or unless
required by applicable  law or  regulation,  and then only to the extent of such
requirement.

              d. Use of Proceeds.  The Company  shall use the proceeds  from the
sale of the Debentures and the Warrants in the manner set forth in Schedule 4(d)
attached  hereto and made a part hereof and shall not,  directly or  indirectly,
use  such  proceeds  for any loan to or  investment  in any  other  corporation,
partnership, enterprise or other person (except in connection with its currently
existing direct or indirect Subsidiaries)

              e. Future  Offerings.  Subject to the exceptions  described below,
the   Company   will   not,   without   the   prior   written   consent   of   a
majority-in-interest  of the Buyers, not to be unreasonably withheld,  negotiate
or contract with any party to obtain additional equity financing (including debt
financing  with an equity  component)  that  involves (A) the issuance of Common
Stock at a  discount  to the  market  price of the  Common  Stock on the date of
issuance  (taking  into  account the value of any warrants or options to acquire
Common Stock issued in connection  therewith) or (B) the issuance of convertible
securities that are convertible into an indeterminate number of shares of Common
Stock or (C) the issuance of warrants  during the period (the "Lock-up  Period")
beginning on the Closing Date and ending on the later of (i) two hundred seventy
(270) days from the Closing Date and (ii) one hundred eighty (180) days from the
date  the  Registration   Statement  (as  defined  in  the  Registration  Rights
Agreement)  is declared  effective  (plus any days in which sales cannot be made
thereunder). In addition, subject to the exceptions described below, the Company
will not conduct any equity financing  (including debt with an equity component)
("Future  Offerings") during the period beginning on the Closing Date and ending
two (2) years  after the end of the  Lock-up  Period  unless it shall have first
delivered to each Buyer, at least twenty (20) business days prior to the closing
of such Future Offering, written notice describing the proposed Future Offering,
including the terms and

                                       14
<PAGE>

conditions thereof and proposed  definitive  documentation to be entered into in
connection therewith, and providing each Buyer an option during the fifteen (15)
day period  following  delivery of such  notice to  purchase  its pro rata share
(based on the ratio that the aggregate principal amount of Debentures  purchased
by it hereunder bears to the aggregate principal amount of Debentures  purchased
hereunder) of the  securities  being offered in the Future  Offering on the same
terms as contemplated by such Future  Offering (the  limitations  referred to in
this sentence and the  preceding  sentence are  collectively  referred to as the
"Capital  Raising  Limitations").  In the event the  terms and  conditions  of a
proposed Future Offering are amended in any respect after delivery of the notice
to the Buyers concerning the proposed Future Offering, the Company shall deliver
a new notice to each Buyer  describing  the amended terms and  conditions of the
proposed Future Offering and each Buyer  thereafter  shall have an option during
the fifteen  (15) day period  following  delivery of such new notice to purchase
its pro  rata  share  of the  securities  being  offered  on the  same  terms as
contemplated  by such  proposed  Future  Offering,  as  amended.  The  foregoing
sentence shall apply to successive amendments to the terms and conditions of any
proposed Future Offering. The Capital Raising Limitations shall not apply to any
transaction   involving  (i)  issuances  of  securities  in  a  firm  commitment
underwritten  public offering  (excluding a continuous offering pursuant to Rule
415 under the 1933 Act) or (ii) issuances of securities as  consideration  for a
merger, consolidation or purchase of assets, or in connection with any strategic
partnership  or joint  venture  (the  primary  purpose  of which is not to raise
equity  capital),  or in connection  with the  disposition  or  acquisition of a
business,  product or license by the Company.  The Capital  Raising  Limitations
also shall not apply to the issuance of  securities  upon exercise or conversion
of the Company's options,  warrants or other convertible  securities outstanding
as of the date hereof or to the grant of additional options or warrants,  or the
issuance of additional securities,  under any Company stock option or restricted
stock plan approved by the  stockholders  of the Company.  In the event that the
Company  completes a Future Offering on terms more favorable to another investor
than the transaction  contemplated  hereby,  the terms of the Debentures and the
Warrants will be amended to reflect such more favorable  terms.

              f. Expenses.  At the Closing,  the Company shall reimburse  Buyers
for expenses  incurred by them in connection with the negotiation,  preparation,
execution,  delivery and performance of this Agreement and the other  agreements
to  be  executed  in  connection  herewith  ("Documents"),   including,  without
limitation,  attorneys' and consultants' fees and expenses, transfer agent fees,
fees  for  stock  quotation  services,   fees  relating  to  any  amendments  or
modifications  of the  Documents or any consents or waivers of provisions in the
Documents,  fees for the  preparation  of opinions of counsel,  escrow fees, and
costs of  restructuring  the  transactions  contemplated by the Documents.  When
possible,  the Company must pay these fees directly,  otherwise the Company must
make immediate payment for reimbursement to the Buyers for all fees and expenses
immediately  upon written notice by the Buyer or the submission of an invoice by
the Buyer.  If the Company  fails to reimburse the Buyer in full within five (5)
business days of the written  notice or submission of invoice by the Buyer,  the
Company  shall pay  interest on the total amount of fees to be  reimbursed  at a
rate of 15% per annum.

              g. Financial Information. The Company agrees to send the following
reports to each Buyer until such Buyer transfers,  assigns,  or sells all of the
Securities:  (i) within  ten (10) days after the filing  with the SEC, a copy of
its Annual Report on Form 10-KSB,  its Quarterly  Reports on Form 10-QSB and any
Current  Reports on Form 8-K; (ii) within one (1) day after  release,  copies of
all press releases issued by the Company or any of its  Subsidiaries;  and (iii)
contemporaneously with the making available or giving to the stockholders of the
Company,  copies of any notices or other information the Company makes available
or gives to such stockholders.

              h.  Authorization  and  Reservation  of  Shares.  Subject  to  the
Stockholder  Approval  (as defined in Section  4(1)),  the Company  shall at all
times have  authorized,  and reserved for the purpose of issuance,  a sufficient
number of shares of Common Stock to provide for the full  conversion or exercise
of the outstanding Debentures and Warrants and issuance of the Conversion Shares
and Warrant Shares in connection therewith (based on the

                                       15
<PAGE>

Conversion  Price of the  Debentures or Exercise Price of the Warrants in effect
from time to time) and as  otherwise  required  by the  Debentures.  The Company
shall not reduce the number of shares of Common Stock reserved for issuance upon
conversion  of  Debentures  and exercise of the Warrants  without the consent of
each Buyer.  The  Company  shall at all times  maintain  the number of shares of
Common Stock so reserved for issuance at an amount ("Reserved  Amount") equal to
no less than two (2) times the number that is then  actually  issuable upon full
conversion of the Debentures and Additional  Debentures and upon exercise of the
Warrants  and the  Additional  Warrants  (based on the  Conversion  Price of the
Debentures  or the Exercise  Price of the Warrants in effect from time to time).
If at any time the number of shares of Common Stock  authorized and reserved for
issuance  ("Authorized and Reserved  Shares") is below the Reserved Amount,  the
Company will  promptly  take all  corporate  action  necessary to authorize  and
reserve a sufficient number of shares, including, without limitation,  calling a
special  meeting of  stockholders  to  authorize  additional  shares to meet the
Company's  obligations  under this Section 4(h), in the case of an  insufficient
number of authorized shares,  obtain stockholder approval of an increase in such
authorized number of shares,  and voting the management shares of the Company in
favor of an increase in the authorized  shares of the Company to ensure that the
number of authorized  shares is sufficient to meet the Reserved  Amount.  If the
Company  fails to obtain  such  stockholder  approval  within  thirty  (30) days
following the date on which the number of Authorized and Reserved Shares exceeds
the  Reserved  Amount,  the  Company  shall  pay to the  Borrower  the  Standard
Liquidated Damages Amount, in cash or in shares of Common Stock at the option of
the Buyer. If the Buyer elects to be paid the Standard Liquidated Damages Amount
in shares of Common Stock,  such shares shall be issued at the Conversion  Price
at the time of payment.  In order to ensure that the  Company has  authorized  a
sufficient  amount of  shares to meet the  Reserved  Amount  at all  times,  the
Company must deliver to the Buyer at the end of every month a list detailing (1)
the current  amount of shares  authorized  by the Company and  reserved  for the
Buyer;  and (2) amount of shares  issuable upon conversion of the Debentures and
upon  exercise  of the  Warrants  and as  payment  of  interest  accrued  on the
Debentures  for one year.  If the Company fails to provide such list within five
(5) business  days of the end of each month,  the Company shall pay the Standard
Liquidated Damages Amount, in cash or in shares of Common Stock at the option of
the  Buyer,  until the list is  delivered.  If the  Buyer  elects to be paid the
Standard  Liquidated Damages Amount in shares of Common Stock, such shares shall
be issued at the Conversion Price at the time of payment.

              i. Listing. The Company shall promptly secure any required listing
of the  Conversion  Shares and  Warrant  Shares  upon each  national  securities
exchange or  automated  quotation  system,  if any,  upon which shares of Common
Stock are then listed  (subject to official  notice of issuance) and, so long as
any  Buyer  owns any of the  Securities,  shall  maintain,  so long as any other
shares of Common Stock shall be so listed, such listing of all Conversion Shares
and Warrant Shares from time to time issuable upon  conversion of the Debentures
or exercise of the  Warrants.  The Company will obtain and, so long as any Buyer
owns any of the Securities, maintain the listing and trading of its Common Stock
on the OTCBB, the Nasdaq National Market ("Nasdaq"),  the Nasdaq SmallCap Market
("Nasdaq SmallCap"), the New York Stock Exchange ("NYSE"), or the American Stock
Exchange ("AMEX") and will comply in all respects with the Company's  reporting,
filing  and  other  obligations  under  the  bylaws  or  rules  of the  National
Association of Securities  Dealers  ("NASD") and such exchanges,  as applicable.
The  Company  shall  promptly  provide  to each Buyer  copies of any  notices it
receives  from the OTCBB and any other  exchanges or quotation  systems on which
the Common  Stock is then listed  regarding  the  continued  eligibility  of the
Common Stock for listing on such exchanges and quotation systems.

                                       16
<PAGE>

              j. Corporate  Existence.  So long as a Buyer beneficially owns any
Debentures or Warrants,  the Company shall maintain its corporate  existence and
shall not sell all or substantially all of the Company's  assets,  except in the
event of a merger or consolidation  or sale of all or  substantially  all of the
Company's  assets,  where the surviving or successor  entity in such transaction
(i) assumes the Company's  obligations  hereunder and under the  agreements  and
instruments  entered into in connection  herewith and (ii) is a publicly  traded
corporation  whose  Common  Stock is listed for  trading  on the OTCBB,  Nasdaq,
Nasdaq SmallCap, NYSE or AMEX.

              k. No Integration.  The Company shall not make any offers or sales
of any  security  (other than the  Securities)  under  circumstances  that would
require registration of the Securities being offered or sold hereunder under the
1933 Act or cause the offering of the Securities to be integrated with any other
offering  of  securities  by the  Company  for the  purpose  of any  stockholder
approval provision applicable to the Company or its securities.

              l.  Stockholder  Approval.  The Company shall file an  information
statement  with the SEC no later than April 30, 2003 and use its best efforts to
obtain, on or before June 15, 2003, such approvals of the Company's stockholders
as may be  required  to issue all of the shares of Common  Stock  issuable  upon
conversion or exercise of, or otherwise  with respect to, the Debentures and the
Warrants in accordance with Delaware law and any applicable rules or regulations
of the OTCBB and  Nasdaq,  either  through a reverse  stock  split of the Common
Stock or an increase in authorized  capital (the  "Stockholder  Approval").  The
Company shall  furnish to each Buyer and its legal  counsel  promptly (but in no
event less than two (2)  business  days)  before the same is filed with the SEC,
one copy of the  information  statement  and any  amendment  thereto,  and shall
deliver  to each  Buyer  promptly  each  letter  written  by or on behalf of the
Company to the SEC or the staff of the SEC, and each item of correspondence from
the SEC or the  staff of the SEC,  in each  case  relating  to such  information
statement  (other than any portion thereof which contains  information for which
the Company has sought confidential  treatment).  The Company will promptly (but
in no event more than three (3) business  days)  respond to any and all comments
received from the SEC (which  comments  shall promptly be made available to each
Buyer). The Company shall comply with the filing and disclosure  requirements of
Section 14 under the 1934 Act in connection with the Stockholder  Approval.  The
Company  represents  and warrants  that its Board of Directors  has approved the
proposal  contemplated  by this Section 4(l) and shall indicate such approval in
the information statement used in connection with the Stockholder Approval.

              m.  Breach  of  Covenants.  If  the  Company  breaches  any of the
covenants  set forth in this  Section 4, and in addition  to any other  remedies
available to the Buyers pursuant to this Agreement, the Company shall pay to the
Buyers the Standard  Liquidated  Damages Amount,  in cash or in shares of Common
Stock at the option of the  Buyer,  until  such  breach is cured.  If the Buyers
elect to be paid the Standard  Liquidated Damages Amount in shares,  such shares
shall be issued at the Conversion Price at the time of payment.

                                       17
<PAGE>

         5. TRANSFER  AGENT  INSTRUCTIONS.  The Company shall issue  irrevocable
instructions to its transfer agent to issue certificates, registered in the name
of each Buyer or its nominee,  for the  Conversion  Shares and Warrant Shares in
such  amounts as  specified  from time to time by each Buyer to the Company upon
conversion of the Debentures or exercise of the Warrants in accordance  with the
terms  thereof  (the  "Irrevocable  Transfer  Agent  Instructions").   Prior  to
registration  of the Conversion  Shares and Warrant Shares under the 1933 Act or
the date on which the Conversion  Shares and Warrant Shares may be sold pursuant
to Rule 144  without  any  restriction  as to the number of  Securities  as of a
particular date that can then be immediately sold, all such  certificates  shall
bear the restrictive  legend  specified in Section 2(g) of this  Agreement.  The
Company warrants that no instruction  other than the Irrevocable  Transfer Agent
Instructions  referred to in this Section 5, and stop transfer  instructions  to
give  effect to Section  2(f) hereof (in the case of the  Conversion  Shares and
Warrant  Shares,  prior to  registration  of the  Conversion  Shares and Warrant
Shares under the 1933 Act or the date on which the Conversion Shares and Warrant
Shares may be sold pursuant to Rule 144 without any restriction as to the number
of Securities as of a particular date that can then be immediately  sold),  will
be given by the  Company to its  transfer  agent and that the  Securities  shall
otherwise be freely  transferable on the books and records of the Company as and
to the extent provided in this Agreement and the Registration  Rights Agreement.
Nothing in this  Section  shall  affect in any way the Buyer's  obligations  and
agreement  set  forth in  Section  2(g)  hereof to  comply  with all  applicable
prospectus delivery requirements,  if any, upon re-sale of the Securities.  If a
Buyer provides the Company with (i) an opinion of counsel in form, substance and
scope  customary for opinions in comparable  transactions,  to the effect that a
public sale or  transfer of such  Securities  may be made  without  registration
under  the 1933 Act and such  sale or  transfer  is  effected  or (ii) the Buyer
provides reasonable  assurances that the Securities can be sold pursuant to Rule
144, the Company shall permit the transfer,  and, in the case of the  Conversion
Shares and Warrant Shares,  promptly instruct its transfer agent to issue one or
more  certificates,  free  from  restrictive  legend,  in such  name and in such
denominations as specified by such Buyer. The Company acknowledges that a breach
by it of its obligations hereunder will cause irreparable harm to the Buyers, by
vitiating  the  intent  and  purpose of the  transactions  contemplated  hereby.
Accordingly, the Company acknowledges that the remedy at law for a breach of its
obligations under this Section 5 may be inadequate and agrees, in the event of a
breach or  threatened  breach by the Company of the  provisions of this Section,
that the Buyers shall be entitled,  in addition to all other available remedies,
to an  injunction  restraining  any breach  and  requiring  immediate  transfer,
without the  necessity  of showing  economic  loss and without any bond or other
security being required.

         6.  CONDITIONS TO THE COMPANY'S  OBLIGATION TO SELL.  The obligation of
the Company  hereunder to issue and sell the  Debentures and Warrants to a Buyer
at the Closing is subject to the satisfaction,  at or before the Closing Date of
each of the following conditions thereto, provided that these conditions are for
the  Company's  sole benefit and may be waived by the Company at any time in its
sole discretion:

              a. The applicable Buyer shall have executed this Agreement and the
Registration Rights Agreement, and delivered the same to the Company.

              b. The applicable Buyer shall have delivered the Purchase Price in
accordance with Section 1(b) above.

              c. The  representations  and  warranties of the  applicable  Buyer
shall be true and correct in all material  respects as of the date when made and
as of the Closing Date as

                                       18
<PAGE>

though made at that time (except for  representations  and warranties that speak
as of a specific date), and the applicable Buyer shall have performed, satisfied
and  complied  in all  material  respects  with the  covenants,  agreements  and
conditions  required by this  Agreement to be  performed,  satisfied or complied
with by the applicable Buyer at or prior to the Closing Date.

              d. No litigation,  statute,  rule,  regulation,  executive  order,
decree,  ruling or injunction shall have been enacted,  entered,  promulgated or
endorsed by or in any court or governmental  authority of competent jurisdiction
or  any   self-regulatory   organization   having  authority  over  the  matters
contemplated  hereby which prohibits the consummation of any of the transactions
contemplated by this Agreement.

         7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE. The obligation of
each Buyer  hereunder to purchase the  Debentures and Warrants at the Closing is
subject  to the  satisfaction,  at or  before  the  Closing  Date of each of the
following  conditions,  provided that these conditions are for such Buyer's sole
benefit and may be waived by such Buyer at any time in its sole discretion:

              a.  The  Company  shall  have  executed  this  Agreement  and  the
Registration Rights Agreement, and delivered the same to the Buyer.

              b. The Company  shall have  delivered to such Buyer duly  executed
Debentures  (in such  denominations  as the Buyer shall request) and Warrants in
accordance with Section 1(b) above.

              c. The  Irrevocable  Transfer Agent  Instructions  shall have been
delivered to and acknowledged in writing by the Company's Transfer Agent.

              d. The representations and warranties of the Company shall be true
and  correct  in all  material  respects  as of the date when made and as of the
Closing  Date as  though  made at such  time  (except  for  representations  and
warranties  that  speak  as of a  specific  date)  and the  Company  shall  have
performed,  satisfied and complied in all material  respects with the covenants,
agreements and conditions required by this Agreement to be performed,  satisfied
or complied with by the Company at or prior to the Closing Date. The Buyer shall
have received a certificate  or  certificates,  executed by the chief  executive
officer of the Company,  dated as of the Closing Date,  to the foregoing  effect
and as to such  other  matters  as may be  reasonably  requested  by such  Buyer
including,  but not  limited  to  certificates  with  respect  to the  Company's
Certificate  of  Incorporation,  By-laws  and  Board of  Directors'  resolutions
relating to the transactions contemplated hereby.

              e. No litigation,  statute,  rule,  regulation,  executive  order,
decree,  ruling or injunction shall have been enacted,  entered,  promulgated or
endorsed by or in any court or governmental  authority of competent jurisdiction
or  any   self-regulatory   organization   having  authority  over  the  matters
contemplated  hereby which prohibits the consummation of any of the transactions
contemplated by this Agreement.

              f. No event shall have occurred which could reasonably be expected
to have a Material Adverse Effect on the Company.

                                       19
<PAGE>

              g. The Buyer  shall have  received  an  opinion  of the  Company's
counsel,  dated as of the Closing Date, in form, scope and substance  reasonably
satisfactory  to the Buyer and in  substantially  the same form as  Exhibit  "D"
attached hereto.

              h.  The  Buyer  shall  have  received  an  officer's   certificate
described in Section 3(c) above, dated as of the Closing Date.

         8. GOVERNING LAW; MISCELLANEOUS.

              a. Governing Law. THIS  AGREEMENT  SHALL BE ENFORCED,  GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED  ENTIRELY WITHIN SUCH STATE,  WITHOUT REGARD
TO THE  PRINCIPLES OF CONFLICT OF LAWS.  THE PARTIES HERETO HEREBY SUBMIT TO THE
EXCLUSIVE  JURISDICTION OF THE UNITED STATES FEDERAL COURTS LOCATED IN NEW YORK,
NEW  YORK  WITH  RESPECT  TO ANY  DISPUTE  ARISING  UNDER  THIS  AGREEMENT,  THE
AGREEMENTS ENTERED INTO IN CONNECTION HEREWITH OR THE TRANSACTIONS  CONTEMPLATED
HEREBY OR THEREBY. BOTH PARTIES IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT
FORUM TO THE MAINTENANCE OF SUCH SUIT OR PROCEEDING.  BOTH PARTIES FURTHER AGREE
THAT  SERVICE OF PROCESS UPON A PARTY MAILED BY FIRST CLASS MAIL SHALL BE DEEMED
IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT OR
PROCEEDING. NOTHING HEREIN SHALL AFFECT EITHER PARTY'S RIGHT TO SERVE PROCESS IN
ANY  OTHER  MANNER   PERMITTED  BY  LAW.   BOTH  PARTIES   AGREE  THAT  A  FINAL
NON-APPEALABLE  JUDGMENT IN ANY SUCH SUIT OR PROCEEDING  SHALL BE CONCLUSIVE AND
MAY BE ENFORCED IN OTHER  JURISDICTIONS BY SUIT ON SUCH JUDGMENT OR IN ANY OTHER
LAWFUL  MANNER.  THE PARTY WHICH DOES NOT PREVAIL IN ANY DISPUTE  ARISING  UNDER
THIS  AGREEMENT  SHALL  BE  RESPONSIBLE  FOR ALL FEES  AND  EXPENSES,  INCLUDING
ATTORNEYS'  FEES,  INCURRED  BY THE  PREVAILING  PARTY IN  CONNECTION  WITH SUCH
DISPUTE.

              b.  Counterparts;  Signatures by Facsimile.  This Agreement may be
executed in one or more counterparts,  each of which shall be deemed an original
but all of which shall  constitute  one and the same  agreement and shall become
effective when  counterparts have been signed by each party and delivered to the
other party.  This Agreement,  once executed by a party, may be delivered to the
other party hereto by facsimile transmission of a copy of this Agreement bearing
the signature of the party so delivering this Agreement.

              c. Headings. The headings of this Agreement are for convenience of
reference only and shall not form part of, or affect the interpretation of, this
Agreement.

              d. Severability. In the event that any provision of this Agreement
is invalid or  unenforceable  under any applicable  statute or rule of law, then
such  provision  shall be deemed  inoperative to the extent that it may conflict
therewith  and shall be deemed  modified to conform with such statute or rule of
law. Any provision hereof which may prove invalid or unenforceable under any law
shall not affect the validity or enforceability of any other provision hereof.

                                       20
<PAGE>

              e.  Entire   Agreement;   Amendments.   This   Agreement  and  the
instruments  referenced  herein contain the entire  understanding of the parties
with  respect  to  the  matters  covered  herein  and  therein  and,  except  as
specifically  set forth  herein or  therein,  neither  the Company nor the Buyer
makes any representation, warranty, covenant or undertaking with respect to such
matters.  No provision of this  Agreement may be waived or amended other than by
an instrument in writing signed by the party to be charged with enforcement.

              f.  Notices.  Any notices  required or permitted to be given under
the  terms of this  Agreement  shall be sent by  certified  or  registered  mail
(return receipt  requested) or delivered  personally or by courier  (including a
recognized  overnight  delivery  service) or by facsimile and shall be effective
five days after being  placed in the mail,  if mailed by regular  United  States
mail,  or upon  receipt,  if  delivered  personally  or by courier  (including a
recognized  overnight delivery service) or by facsimile,  in each case addressed
to a party. The addresses for such communications shall be:

                           If to the Company:

                                    Torbay Holdings, Inc.
                                    4 Mulford Place, Suite 2G
                                    Hempstead, New York  11550
                                    Attention:  William Thomas Large
                                    Facsimile:  509-472-4654

                           With copies to:

                                    Seth A. Farbman, PC
                                    301 Eastwood Road
                                    Woodmere, New York 11598
                                    Attention:  Seth A. Farbman, Esq.
                                    Facsimile:  516-569-6084

If to a Buyer: To the address set forth  immediately  below such Buyer's name on
the signature pages hereto.

                                       21
<PAGE>

                                With copy to:

                                    Ballard Spahr Andrews & Ingersoll, LLP
                                    1735 Market Street
                                    51st Floor
                                    Philadelphia, Pennsylvania  19103
                                    Attention:  Gerald J. Guarcini, Esq.
                                    Telephone:  215-864-8625
                                    Facsimile:  215-864-8999
                                    Email:  guarcini@ballardspahr.com

Each party shall provide notice to the other party of any change in address.

              g.  Successors and Assigns.  This Agreement  shall be binding upon
and inure to the  benefit  of the  parties  and their  successors  and  assigns.
Neither the Company nor any Buyer shall  assign this  Agreement or any rights or
obligations   hereunder   without  the  prior  written  consent  of  the  other.
Notwithstanding the foregoing, subject to Section 2(f), any Buyer may assign its
rights  hereunder  to  any  person  that  purchases   Securities  in  a  private
transaction from a Buyer or to any of its  "affiliates," as that term is defined
under the 1934 Act, without the consent of the Company.

              h. Third Party  Beneficiaries.  This Agreement is intended for the
benefit of the parties  hereto and their  respective  permitted  successors  and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.

              i. Survival. The representations and warranties of the Company and
the  agreements  and covenants set forth in Sections 3, 4, 5 and 8 shall survive
the closing hereunder  notwithstanding any due diligence investigation conducted
by or on behalf of the Buyers.  Each party hereto  agrees to indemnify  and hold
harmless each of the other  parties  hereto and all their  officers,  directors,
employees and agents for loss or damage arising as a result of or related to any
breach or alleged breach by such party of any of its representations, warranties
and  covenants  set forth in Sections 2, 3 and 4 hereof or any of its  covenants
and  obligations  under this  Agreement or the  Registration  Rights  Agreement,
including advancement of expenses as they are incurred.

              j.  Publicity.  The Company and each of the Buyers  shall have the
right to  review a  reasonable  period  of time  before  issuance  of any  press
releases,  SEC,  OTCBB or NASD  filings,  or any other  public  statements  with
respect to the transactions  contemplated hereby;  provided,  however,  that the
Company shall be entitled,  without the prior approval of each of the Buyers, to
make any press release or SEC,  OTCBB (or other  applicable  trading  market) or
NASD filings with respect to such  transactions as is required by applicable law
and  regulations  (although each of the Buyers shall be consulted by the Company
in  connection  with any such press  release  prior to its  release and shall be
provided with a copy thereof and be given an opportunity to comment thereon).

              k. Further  Assurances.  Each party shall do and perform, or cause
to be done and  performed,  all such further acts and things,  and shall execute
and deliver all such other agreements, certificates,  instruments and documents,
as the other party may  reasonably

                                       22
<PAGE>

request in order to carry out the intent and  accomplish  the  purposes  of this
Agreement and the consummation of the transactions contemplated hereby.

              l. No Strict  Construction.  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.

              m. Remedies.  The Company  acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Buyers by vitiating the
intent and purpose of the  transaction  contemplated  hereby.  Accordingly,  the
Company  acknowledges  that the  remedy at law for a breach  of its  obligations
under this Agreement will be inadequate and agrees,  in the event of a breach or
threatened  breach by the Company of the provisions of this Agreement,  that the
Buyers shall be entitled,  in addition to all other available remedies at law or
in equity, and in addition to the penalties  assessable herein, to an injunction
or  injunctions  restraining,  preventing or curing any breach of this Agreement
and to  enforce  specifically  the  terms and  provisions  hereof,  without  the
necessity of showing  economic loss and without any bond or other security being
required.

                                       23
<PAGE>

         IN WITNESS WHEREOF,  the undersigned Buyers and the Company have caused
this Agreement to be duly executed as of the date first above written.

TORBAY HOLDINGS, INC.

---------------------------------------
William Thomas Large
President and Chief Executive Officer

AJW PARTNERS, LLC
By: SMS Group, LLC

--------------------------------------
Corey S. Ribotsky
Manager

RESIDENCE:  Delaware

ADDRESS:    1044 Northern Boulevard
            Suite 302
            Roslyn, New York  11576
            Facsimile: (516) 739-7115
            Telephone: (516) 739-7110

AGGREGATE SUBSCRIPTION AMOUNT:

         Aggregate Principal Amount of Debentures:            $16,668
         Number of Warrants:                                   33,336
         Aggregate Purchase Price:                            $16,668

                                       24
<PAGE>

NEW MILLENNIUM CAPITAL PARTNERS II, LLC
By:  First Street Manager II, LLC

------------------------------------
Corey S. Ribotsky
Manager

RESIDENCE:      New York

ADDRESS:        1044 Northern Boulevard
                Suite 302
                Roslyn, New York  11576
                Facsimile: (516) 739-7115
                Telephone: (516) 739-7110

AGGREGATE SUBSCRIPTION AMOUNT:

         Aggregate Principal Amount of Debentures:              $0
         Number of Warrants:                                     0
         Aggregate Purchase Price:                              $0

                                       25
<PAGE>

AJW OFFSHORE, LTD.
By:  First Street Manager II, LLC

--------------------------------------
Corey S. Ribotsky
Manager

RESIDENCE:        New York

ADDRESS:          1044 Northern Boulevard
                  Suite 302
                  Roslyn, New York  11576
                  Facsimile: (516) 739-7115
                  Telephone: (516) 739-7110

AGGREGATE SUBSCRIPTION AMOUNT:

         Aggregate Principal Amount of Debentures:              $16,666
         Number of Warrants:                                     33,332
         Aggregate Purchase Price:                              $16,666

                                       26
<PAGE>

AJW QUALIFIED PARTNERS, LLC
By:  AJW Manager, LLC

------------------------------------
Corey S. Ribotsky
Manager

RESIDENCE:       New York

ADDRESS:         1044 Northern Boulevard
Suite 302
Roslyn, New York 11576
Facsimile:       (516) 739-7115
Telephone:       (516) 739-7110

                         AGGREGATE SUBSCRIPTION AMOUNT:

         Aggregate Principal Amount of Debentures:                       $16,666
         Number of Warrants:                                              33,332
         Aggregate Purchase Price:                                       $16,666

                                       27

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