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Exhibit 10.1    
  

ABBOTT LABORATORIES SUPPLEMENTAL PENSION PLAN  

(As amended thru the 16th Amendment

effective April 26, 2002)  

 

ABBOTT LABORATORIES SUPPLEMENTAL PENSION PLAN 

Section 1

INTRODUCTION  

        1-1.  On
September 9, 1977, December 14, 1979 and February 10, 1984 the Board of Directors of Abbott Laboratories ("Abbott") adopted certain
resolutions providing for payment of (i) pension benefits
calculated under the Abbott Laboratories Annuity Retirement Plan ("Annuity Plan") in excess of those which may be paid under that plan under the limits imposed by Section 415 of the U.S.
Internal Revenue Code, as amended, and the Employee Retirement Income Security Act ("ERISA") and (ii) the additional pension benefits that would be payable under the Annuity Plan if deferred
awards under the Abbott Laboratories Management Incentive Plan were included in "final earnings" as defined in the Annuity Plan. 

        The
purpose of this ABBOTT LABORATORIES SUPPLEMENTAL PENSION PLAN (the "Supplemental Plan") is to clarify, restate and supersede the prior resolutions. 

        1-2.  The
Supplemental Plan shall apply to employees of Abbott and its subsidiaries and affiliates existing as of the date of adoption of the Supplemental Plan or
thereafter created or acquired. (Abbott and each of such subsidiaries and affiliates are hereinafter referred to as an "employer" and collectively as the "employers"). 

        1-3.  All
benefits provided under the Supplemental Plan shall be provided from the general assets of the employers and not from any trust fund or other designated
asset. All participants in the Supplemental Plan shall be general creditors of the employers with no priority over other creditors. 

        1-4.  The
Supplemental Plan shall be administered by the Abbott Laboratories Employee Benefit Board of Review appointed and acting under the Annuity Plan ("Board
of Review"). Except as stated below, the Board of Review shall perform all powers and duties with respect to the Supplemental Plan, including the power to direct payment of benefits, allocate costs
among employers, adopt amendments and determine questions of interpretation. The Board of Directors of Abbott shall have the sole authority to terminate the Supplemental Plan. 

Section 2

ERISA ANNUITY PLAN SUPPLEMENTAL BENEFIT  

        2-1.  The
benefits described in this Section 2 shall apply to all participants in the Annuity Plan who retire, or terminate with a vested pension under
that plan, on or after September 9, 1977. 

        2-2.  Each
Annuity Plan participant whose retirement or vested pension under that plan would otherwise be limited by Section 415, Internal Revenue Code,
shall receive a supplemental pension under this Supplemental Plan in an amount, which, when added to his or her Annuity Plan pension, will equal the amount the participant would be entitled to under
the Annuity Plan as in effect from time to time,
based on the particular option selected by the participant, without regard to the limitations imposed by Section 415, Internal Revenue Code. 

Section 3

1986 TAX REFORM ACT SUPPLEMENTAL BENEFIT  

        3-1.  The
benefits described in this Section 3 shall apply to all participants in the Annuity Plan who retire, or terminate with a vested pension under
that plan, after December 31, 1988. 

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        3-2.  Each
Annuity Plan participant shall receive a supplemental pension under this Supplemental Plan in an amount determined as follows: 

	(a)
	The
supplemental pension shall be the difference, if any, between:

	(i)
	the
monthly benefit payable under the Annuity Plan plus any supplement provided by Section 2; and

	(ii)
	the
monthly benefit which would have been payable under the Annuity Plan (without regard to the limits imposed by Section 415, Internal Revenue
Code) if the participant's "final earnings", as defined in the Annuity Plan, had included compensation in excess of the limits imposed by Section 401(a)(17), Internal Revenue Code, and any
"pre-tax contributions" made by the participant under the Abbott Laboratories Supplemental 401(k) Plan. 

Section 4

DEFERRED MIP ANNUITY PLAN SUPPLEMENTAL BENEFIT  

        4-1.  The
benefits described in this Section 4 shall apply to all participants in the Annuity Plan who retire, or terminate with a vested pension, under
that plan, on or after December 14, 1979 and who were
awarded Management Incentive Plan awards for any calendar year during the ten consecutive calendar years ending with the year of retirement or termination of employment. 

        4-2.  Each
Annuity Plan participant shall receive a supplemental pension under this Supplemental Plan in an amount determined as follows: 

	(a)
	The
supplemental pension shall be the difference, if any, between:

	(i)
	the
monthly benefit payable under the Annuity Plan plus any supplement provided by Section 2 and Section 3; and

	(ii)
	the
monthly benefit which would have been payable under the Annuity Plan (without regard to the limits imposed by Section 415, Internal Revenue
Code) if the participant's "final earnings", as defined in the Annuity Plan, were one-sixtieth of the sum of:

	(A)
	the
participant's total "basic earnings" (excluding any payments under the Management Incentive Plan or any Division Incentive Plan) received in the
sixty consecutive calendar months for which his basic earnings (excluding any payments under the Management Incentive Plan or any Division Incentive Plan) were highest within the last one hundred
twenty consecutive calendar months immediately preceding his retirement or termination of employment; and

	(B)
	the
amount of the participant's total awards under the Management Incentive Plan and any Division Incentive Plan (whether paid immediately or deferred)
made for the five consecutive calendar years during the ten consecutive calendar years ending with the year of retirement or termination for which such amount is the greatest and (for participants
granted Management Incentive Plan awards for less than five consecutive calendar years during such ten year period) which include all Management Incentive Plan awards granted for consecutive calendar
years within such ten year period. 

	(b)
	That
portion of any Management Incentive Plan award which the Compensation Committee has determined shall be excluded from the participant's "basic earnings" shall be excluded from
the calculation of "final earnings" for purposes of this Section 4-2. "Final earnings" for purposes of this subsection 4-2 shall include any compensation in
excess of the limits imposed by Section 401(a)(17), Internal Revenue Code. 

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	(c)
	In
the event the period described in subsection 4-2(a)(ii)(B) is the final five calendar years of employment and a Management Incentive Plan award is made to the
participant subsequent to retirement for the participant's final calendar year of employment, the supplemental pension shall be adjusted by adding such new award and subtracting a portion of the
earliest Management Incentive Plan award included in the calculation, from the amount determined under subsection 4-2(a)(ii)(B). The portion subtracted shall be equal to that
portion of the participant's final calendar year of employment during which the participant was employed by Abbott. If such adjustment results in a greater supplemental pension, the greater pension
shall be paid beginning the first month following the date of such new award. 

Section 5

CORPORATE OFFICER ANNUITY PLAN SUPPLEMENTAL BENEFIT  

        5-1.  The
benefits described in this Section 5 shall apply to all participants in the Annuity Plan who are corporate officers of Abbott as of
September 30, 1993 or who become corporate officers thereafter, and who retire, or terminate with a vested pension under that plan on or after September 30, 1993. The term "corporate
officer" for purposes of this Supplemental Plan shall mean an individual elected an officer of Abbott by its Board of Directors (or designated as such for purposes of this Section 5 by the
Compensation Committee of the Board of Directors of Abbott), but shall not include assistant officers. 

        5-2.  Subject
to the limitations and adjustments described below, each participant described in subsection 5-1 shall receive a monthly
supplemental pension under this Supplemental Plan commencing on the participant's normal retirement date under the Annuity Plan and payable as a life annuity, equal to 6/10 of
1 percent (.006) of the participant's final earnings (as determined under subsection 4-2) for each of the first twenty years of the participant's benefit service (as defined
in the Annuity Plan) occurring after the participant's attainment of age 35. 

        5-3.  In
no event shall the sum of (a) the participant's aggregate percentage of final earnings calculated under subsection 5-2 and
(b) of the participant's aggregate percentage of final earnings calculated under subsection 5-1(b)(i) of the Annuity Plan, exceed the maximum aggregate percentage of final
earnings allowed under subsection 5-1(b)(i) of the Annuity Plan (without regard to any limits imposed by the Internal Revenue Code), as in effect on the date of the participant's
retirement or termination. In the event the limitation described in this subsection 5-3 would be exceeded for any participant, the participant's aggregate percentage calculated
under subsection 5-2 shall be reduced until the limit is not exceeded. 

        5-4.  Benefit
service occurring between the date a participant ceases to be a corporate officer of Abbott and the date the participant again becomes a corporate
officer of Abbott shall be disregarded in calculating the participant's aggregate percentage under subsection 5-2. 

        5-5.  Any
supplemental pension otherwise due a participant under this Section 5 shall be reduced by the amount (if any) by which: 

	(a)
	the
sum of (i) the benefits due such participant under the Annuity Plan and this Supplemental Plan, plus (ii) the actuarially equivalent value of the
employer-paid portion of all benefits due such participant under the primary retirement plans of all non-Abbott employers of such participant; exceeds

	(b)
	the
maximum benefit that would be due under the Annuity Plan (without regard to the limits imposed by Section 415, Internal Revenue Code) based on the participant's final
earnings (as determined under subsection 4-2), if the participant had accrued the maximum benefit service recognized by the Annuity Plan. 

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The
term "primary retirement plan" shall mean any pension benefit plan as defined in ERISA, whether or not qualified under the Internal Revenue Code, which is determined by the Board of Review to be
the primary pension plan of its sponsoring employer. The term "non-Abbott employer" shall mean any employer other than Abbott or a subsidiary or affiliate of Abbott. A retirement plan
maintained by an employer prior to such employer's acquisition by Abbott shall be deemed a retirement plan maintained by a non-Abbott employer for purposes of this
subsection 5-5. 

        5-6.  Any
supplemental pension due a participant under this Section 5 shall be actuarially adjusted as provided in the Annuity Plan to reflect the pension
form selected by the participant and the participant's age at commencement of the pension, and shall be paid as provided in subsection 6-2. 

Section 6

CORPORATE OFFICER ANNUITY PLAN SUPPLEMENTAL EARLY RETIREMENT BENEFIT  

        6-1.  The
benefits described in this Section 6 shall apply to all persons described in subsection 5-1. 

        6-2.  The
supplemental pension due under Sections 2, 3, 4 and 5 to each participant described in subsection 6-1 shall be reduced as
provided in subsections 5-3 and 5-6 of the Annuity Plan for each month by which its commencement date precedes the last day of the month in which the participant will
attain
age 60. No reduction will be made for the period between the last day of the months the participant will attain age 60 and age 62. 

        6-3.  Each
participant described in subsection 6-1 shall receive a monthly supplemental pension under this Supplemental Plan equal to any
reduction made in such participant's Annuity Plan pension under subsections 5-3 or 5-6 of the Annuity Plan for the period between the last day of the months the
participant will attain age 60 and age 62. 

Section 7

MISCELLANEOUS  

        7-1.  For
purposes of this Supplemental Plan, the term "Management Incentive Plan" shall mean the Abbott Laboratories 1971 Management Incentive Plan, the Abbott
Laboratories 1981 Management Incentive Plan and all successor plans to those plans. 

        7-2.  The
supplemental pension described in Sections 2, 3, 4, 5 and 6 shall be paid to the participant or his or her beneficiary based on the particular
pension option elected by the participant, in the same manner, at the same time, for the same period and on the same terms and conditions as the pension payable to the participant or his beneficiary
under the Annuity Plan. In the event a participant is paid his or her pension under the Annuity Plan in a lump sum, any supplemental pension due under Sections 2, 3, 4, 5 or 6 shall likewise be
paid in a lump sum. Notwithstanding the foregoing provision of this subsection 7-2: (a) if the present value of the vested supplemental pensions described in
Sections 2, 3, 4, 5 and 6 of a participant who is actively employed by Abbott as a corporate officer exceeds $100,000, then payment of such pensions shall be made to the participant under
Section 8 below; and (b) if the monthly vested supplemental pensions, expressed as a straight life annuity, due a participant or his or her beneficiary under Sections 2, 3, 4, 5
and 6 do not exceed an aggregate of One Hundred Fifty Dollars ($150.00) as of the commencement date of the pension payable such participant or his or her beneficiary under the Annuity Plan, and
payment of such supplemental pension has not previously been made under Section 8, the present value of such supplemental pensions shall be paid such participant or beneficiary in a
lump-sum. 

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        7-3.  Notwithstanding
any other provisions of this Supplemental Plan, if employment of any participant with Abbott and its subsidiaries and affiliates should
terminate for any reason within five (5) years after the date of a Change in Control: 

	(a)
	The
present value of any supplemental pension due the participant under Section 2 (whether or not then payable) shall be paid to the participant in a lump sum within thirty
(30) days following such termination; and

	(b)
	The
present value of any supplemental pension due the participant under Sections 3 or 4 (whether or not then payable) shall be paid to the participant in a lump sum within
thirty (30) days following such termination. 

The
supplemental pension described in paragraph (a) shall be computed using as the applicable limit under Section 415, Internal Revenue Code, such limit as is in effect on the
termination date and based on the assumption that the participant will receive his or her Annuity Plan pension in the form of a straight life annuity with no ancillary benefits. The present values of
the supplemental pensions described in paragraphs (a) and (b) shall be computed as of the date of payment by using an interest rate equal to the Pension Benefit Guaranty Corporation
interest rate applicable to an immediate annuity, as in effect on the date of payment. 

        7-4.  For
purposes of subsection 7-3, a "Change in Control" shall be deemed to have occurred on the earliest of the following dates: 

	(a)
	The
date any entity or person (including a "group" as defined in Section 13(d)(3) of the Securities Exchange Act of 1934 (the "Exchange Act")) shall have become the beneficial
owner of, or shall have obtained voting control over thirty percent (30%) or more of the outstanding common shares of the Company;

	(b)
	The
date the shareholders of the Company approve a definitive agreement (A) to merge or consolidate the Company with or into another corporation, in which the Company is not
the continuing or surviving corporation or pursuant to which any common shares of the Company would be converted into cash, securities or other property of another corporation, other than a merger of
the Company in which holders of common shares immediately prior to the merger have the same proportionate ownership of common stock of the surviving corporation immediately after the merger as
immediately before, or (B) to sell or otherwise dispose of substantially all the assets of the Company; or

	(c)
	The
date there shall have been a change in a majority of the Board of Directors of the Company within a twelve (12) month period unless the nomination for election by the
Company's shareholders of each new director was approved by the vote of two-thirds of the directors then still in office who were in office at the beginning of the twelve (12) month
period. 

        7-5.  The
provisions of subsections 7-3, 7-4 and this subsection 7-5 may not be amended or deleted, nor
superseded by any other provision of this Supplement Plan, during the period beginning on the date of a Change in Control and ending on the date five years following such Change in Control. 

        7-6.  All
benefits due under this Supplemental Plan shall be paid by Abbott and Abbott shall be reimbursed for such payments by the employee's employer. In the
event the employee is employed by more than one employer, each employer shall reimburse Abbott in proportion to the period of time the employee was employed by such employer, as determined by the
Board of Review in its sole discretion. 

        7-7.  The
benefits under the Supplemental Plan are not in any way subject to the debts or other obligations of the persons entitled to benefits and may not be
voluntarily or involuntarily sold, transferred or assigned. 

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        7-8  Nothing
contained in this Supplemental Plan shall confer on any employee the right to be retained in the employ of Abbott or any of its subsidiaries or
affiliates. 

        7-9.  Upon
adoption of this Supplemental Plan, the prior resolutions shall be deemed rescinded. 

Section 8

ALTERNATE PAYMENT OF SUPPLEMENTAL PENSIONS  

        8-1.  If,
as of December 31, 1995 or any subsequent December 31, the present value of the supplemental pension described in Sections 2, 3, 4,
5 and 6 of a participant, who is actively employed by Abbott as a corporate officer, exceeds $100,000, then payment of such present value shall be made, at the direction of the participant, by either
of the following methods: (a) current payment in cash directly to the participant, or (b) current payment of a portion of such present value (determined as of that December 31) in
cash for the participant directly to a Grantor Trust established by the participant, and current payment of the balance of such present value in cash directly to the participant, provided that the
payment made directly to the participant shall approximate the aggregate federal, state and local individual income taxes attributable to the amount paid pursuant to this
subparagraph 8-1(b) (as determined pursuant to the tax rates set forth in subsection 8-14). 

        8-2.  If
the present value of a participant's supplemental pension has been paid to the participant (including amounts paid to the participant's Grantor Trust)
pursuant to subsection 8-1 (either as in effect prior to June 1, 1996 that applied to any participant with a supplemental pension with a present value in excess of $100,000
or as currently in effect that requires the participant to have a supplemental pension with a present value in excess of $100,000 and to be a corporate officer), then as of each subsequent
December 31, such participant shall be entitled to a payment in an amount equal to: (i) the present value (as of that December 31) of the participant's supplemental pension
described in Sections 2, 3, 4, 5 and 6, less (ii) the current value (as of that December 31) of the payments previously made to the participant under
subsections 8-1 and 8-2. Payments under this subsection 8-2 shall be made, at the direction of the participant, by either of the following methods:
(a) current payment in cash directly to the participant, or (b) current payment of a portion of such amount in cash for the participant directly to the Grantor Trust established by the
participant; and current payment of the balance of such amount in cash directly to the participant, provided that the payment made directly to the participant shall approximate the aggregate federal,
state and local individual income taxes attributable to the amount paid pursuant to this subparagraph 8-2(b) (as determined pursuant to the tax rates set forth in
subsection 8-14). No payments shall be made under this subsection 8-2 as of any December 31 after the calendar year in which the participant retires or
otherwise terminates employment with Abbott. 

        8-3.  Present
values for the purposes of subsections 8-1, 8-2, 8-4 and 8-5 shall be determined using
reasonable actuarial assumptions specified for this purpose by Abbott and consistently applied. The "current value" of the payments previously made to a participant under
subsections 8-1 and 8-2 means the aggregate amount of such payments, with interest thereon (at the rate specified for this purpose by Abbott). For purposes of
subsections 8-4 and 8-5, "Projected Taxes" with respect to any payment of supplemental pension benefits under subsections 8-1 or 8-2,
shall mean the taxes which Abbott projects will be incurred by the participant on the income earned (i) on the payment (net of taxes) that is made pursuant to subsections 8-1
or 8-2, (ii) on the corresponding payment(s) for Projected Taxes that are made pursuant to subsection 8-4 and, if applicable, 8-5 and (iii) on
the accumulated income earned on any of the payments covered by parts (i) and (ii) hereof, during the life of such participant's Grantor Trust (or during the period that such Grantor
Trust would have been in existence if the participant had elected to receive all of the payments under subsections 8-1 and 8-2 in cash). In calculating such Projected
Taxes, Abbott shall use the aggregate of the current federal, state and local tax rates specified by subsection 8-14. 

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        8-4.  Effective
as of December 31, 1995, or any subsequent December 31, as a result of any payment made to a Qualified Participant for any calendar
year pursuant to subsection 8-1 or 8-2, Abbott shall also make a corresponding payment to such Qualified Participant in the amount of the present value of the Projected
Taxes. A "Qualified Participant" is either (i) a participant who as of December 31, 1995 was actively employed by Abbott and who had previously received, or as of such date was qualified
to receive, a payment under subsection 8-1; or (ii) a participant who as of any subsequent December 31 qualifies to receive a payment pursuant to
subsection 8-1. The payment for Projected Taxes under this subsection 8-4 shall be made to the Qualified Participant in the identical manner that the payment
under subsection 8-1 or 8-2 was made. For example, (a) if the Qualified Participant elected to receive the payment under subsection 8-1
directly in cash, then Abbott shall also pay the present value of the Projected Taxes on such payment in cash directly to the Qualified Participant, and (b) if the Qualified Participant elected
to receive the payment under subsection 8-1 into a Grantor Trust established by the Qualified Participant, then Abbott shall pay the present value of the Projected Taxes on such
payment as follows: current payment of a portion of such present value (determined as of that December 31) in cash for such Qualified Participant directly to a Grantor Trust established by such
participant, and current payment of the balance of such present value in cash directly to such Qualified Participant, provided that the payment made directly to such participant shall approximate the
aggregate federal, state and local individual income taxes attributable to the amount paid pursuant to this
subparagraph 8-4(b) (as determined pursuant to the tax rates set forth in subsection 8-14). No payments shall be made under this subsection 8-4
as of any December 31 after the calendar year in which the participant retires or otherwise terminates employment with Abbott. 

        8-5.  In
the event that Abbott has made any payment for projected Taxes under subsection 8-4 in cash directly to the Qualified Participant and
there is a subsequent increase in the tax rates for such Qualified Participant, Abbott shall make a further cash payment to such Qualified Participant in the amount of (a) the present value of
the Projected Taxes on the payments that were made under subsections 8-1 and 8-2 in cash directly to such Qualified Participant using the actual tax rates for previous
years and the new tax rates (determined in accordance with subsection 8-14) for the current and subsequent years, less (b) the amount that would have been in the Qualified
Participant's Tax Payment Account with respect to the payments made under subsections 8-1 and 8-2 in cash directly to the Participant, if such payments had instead been
made to the Qualified Participant's Grantor Trust. Such amount shall be paid by Abbott directly to the Qualified Participant in cash. In the event that Abbott has made any payment for Projected Taxes
under subsection 8-4 to the Qualified Participant's Grantor Trust, then Abbott shall as of December 31 of each year, make a further payment to the Qualified Participant in
the amount of (a) the present value (as of that December 31) of the Projected Taxes on the payments that were made under subsections 8-1 and 8-2 into the
Qualified Participant's Grantor Trust less (b) the balance of such Qualified Participant's Tax Payment Account (as described in subsection 8-8). Such payment shall be paid by
Abbott as follows: the current payment of a portion of such amount in cash directly to the Qualified Participant's Grantor Trust and the current payment of the balance of such amount in cash directly
to such Qualified Participant; provided, that the payments made directly to such Qualified Participant shall approximate the aggregate federal, state and local individual income taxes attributable to
the amount paid pursuant to this subsection 8-5. No payments shall be made under this subsection 8-5 for any year following the participant's death. In the event
that the calculation required by this subsection 8-5 for a Grantor Trust demonstrates that there has been an overpayment of projected taxes, such overpayment shall be held within
the Grantor Trust in an Excess Tax Account and may be used by Abbott as a credit against any payments due hereunder or as specified in subsection 8-12. 

        8-6.  For
each Qualified Participant whose Grantor Trust has received a payment pursuant to subsection 8-4, Abbott, as the administrator of
such Grantor Trust, shall direct the trustee to distribute to the participant from the income of such Grantor Trust, a sum of money sufficient to pay the taxes on trust earnings for such year. The
taxes shall be calculated by multiplying the income of the Grantor Trust by the aggregate of the federal, state, and local tax rates (determined in accordance with subsection 8-14). 

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        8-7.  A
participant shall be deemed to have irrevocably waived and shall be foreclosed from any right to receive any supplemental pension benefits on that portion
of the supplemental pension that the participant elects to be paid in cash under subsection 8-1 or 8-2. A participant, who has elected to receive a payment under
subsection 8-1 or 8-2 to a Grantor Trust, must establish such trust in a form which Abbott determines to be substantially similar to the trust attached to this
Supplemental Plan as Exhibit A. If a participant fails to make an election under subsection 8-1 or 8-2, or if a participant makes
an election under subsection 8-1 or 8-2 to receive payment in a Grantor Trust but fails to establish a Grantor Trust, then payment shall be made in cash directly to the
participant. Each payment required under subsections 8-1, 8-2, 8-4 and 8-5 shall be made as soon as practicable after the amount thereof can be
ascertained by Abbott, but in no event later than the last day of the calendar year following the December 31 as of which such payment becomes due. 

        8-8.  Abbott
will establish and maintain a separate Supplemental Pension Account in the name of each participant, a separate After-Tax Supplemental
Pension Account in the name of each participant, and a separate Tax Payment Account in the name of each participant. The Supplemental Pension Account shall reflect any amounts: (i) paid to a
participant (including amounts paid to a participant's Grantor Trust) pursuant to subsections 8-1 and 8-2; (ii) credited to such Account pursuant to
subsection 8-9; and (iii) disbursed to a participant for supplemental pension benefits (or which would have been disbursed to a participant if the participant had not elected
to receive a cash disbursement pursuant to subsections 8-1 and 8-2). The After-Tax Supplemental Pension Account shall also reflect such amounts but shall be
maintained on an after-tax basis. The Tax Payment Account shall reflect any amounts (i) paid to a Qualified Participant (net of taxes) pursuant to subsections 8-4
and 8-5 and (ii) disbursed to a participant for the payment of taxes pursuant to subsection 8-6. The accounts established pursuant to this
subsection 8-8 are for the convenience of the administration of the Plan and no trust relationship with respect to such accounts is intended or should be implied. 

        8-9.  As
of the end of each calendar year, a participant's Supplemental Pension Account shall be credited with interest calculated at a reasonable rate of
interest specified for this purpose by Abbott and consistently applied. Any amount so credited shall be referred to as a participant's "Interest Accrual". The calculation of the Interest Accrual shall
be based on the balance of the payments made pursuant to subsections 8-1 and 8-2 and any Interest Accrual thereon from previous years. As of the end of each calendar
year a participant's After-Tax Supplemental Pension Account shall be credited with interest which shall be referred to as the After-Tax Interest Accrual. The
"After-Tax Interest Accrual" shall be an amount equal to (a) the Interest Accrual credit to the participant's Supplemental Pension Account for such year less (b) the product
of (i) the amount of such Interest Accrual multiplied by (ii) the aggregate of the federal, state and local income tax rates (determined in accordance with
subsection 8-14). The Excess Interest Account shall be the cumulative amount, if any, by which the net income earned by the Grantor Trust on the payments made pursuant to
Sections 8-1, 8-2, 8-4, 8-5 and 8-10 (and interest earned thereon) for all years that the Grantor Trust has been in existence exceeds
the After-Tax Interest Accrual for such years. 

        8-10.  In
addition to any payment made to a participant for any calendar year pursuant to subsections 8-1, 8-2, 8-4 and
8-5, Abbott shall also make a payment to a participant's Grantor Trust (a "Guaranteed Rate Payment"), for any year in which the net income of such trust does not equal or exceed the
participant's After-Tax Interest Accrual for that year. The Guaranteed Rate Payment shall equal the difference between the participant's After-Tax Interest Accrual and such net
income of the participant's Grantor Trust for the year, and shall be paid within 180 days of the end of that year. Any funds in a participant's Excess Interest Account may be used by Abbott as
a credit against any Guaranteed Rate Payment due to the participant under this subsection 8-10 or as specified in subsection 8-12. No payments shall be made under
this subsection 8-10 for any year following the year of the participant's death. 

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        8-11.  If
at any time after a participant's retirement or other termination of employment with Abbott, there is no longer a balance in his or her Grantor Trust,
then such participant (or his or her surviving spouse if such spouse is entitled to periodic payments from the Grantor Trust) shall be entitled to a "Continuation Payment" under this
subsection 8-11. The amount of the Continuation Payment shall be equal to the amount of the supplemental pension that would have been payable to the participant (or surviving
spouse) had no payments been made to or for the participant's Grantor Trust under subsections 8-1 and 8-2. Continuation Payments shall be made monthly, beginning with
the month in which there is no longer a sufficient balance in the participant's Grantor Trust and ending with the month of the participant's (or surviving spouse's) death. Payments under this
subsection 8-11 shall be made by the employers (in such proportions as Abbott shall designate) directly from their general corporate assets. Appropriate adjustments to the
Continuation Payments shall be made in the event distributions have been made from a participant's Grantor Trust for reasons other than benefit payments to the participant or surviving spouse. 

        8-12.  To
the extent that Abbott is obligated to make a payment to a participant under subsections 8-1, 8-2, 8-4,
8-5 or 8-10, Abbott shall have the right to offset such payment with any funds in the participant's Excess Interest Account or Excess Tax Account. In addition, any funds in a
participant's Excess Tax Account may be used by Abbott as a credit against any future Guaranteed Rate Payment due to the participant under subsection 8-10. 

        8-13.  For
participants who are not Qualified Participants that received any payment pursuant to subsection 8-4, in addition to the payments
provided under subsections 8-1 and 8-2, each participant shall also be entitled to a Tax Gross Up payment for each year there is a balance in his or her Supplemental
Pension Account. The "Tax Gross Up" shall approximate: (a) the product of (i) the participant's After-Tax Interest Accrual for the year (calculated using the greater of the
rate of return of the Grantor Trusts or the rate specified in subsection 8-9), multiplied by (ii) the aggregate of the federal, state and local tax rates (determined in
accordance with subsection 8-14) plus (b) an amount equal to the product of (i) any payment made pursuant to this subsection 8-13, multiplied by
(ii) the aggregate tax rate determined under subparagraph 8-13(a)(ii) above, such that the participant is fully compensated for taxes on payments made hereunder.
Payment of the Tax Gross Up shall be made by the employers (in such proportions as Abbott shall designate) directly from their general corporate assets. The Tax Gross Up for a year shall be paid to
the participant as soon as practicable after the amount of the Tax Gross Up can be ascertained by Abbott, but in no event later than the last day of the calendar year following the calendar year to
which the Tax Gross Up relates. No payments shall be made under this subsection 8-13 for any year following the year of the participant's death. 

        8-14.  For
purposes of this Supplemental Plan, a participant's federal income tax rate shall be deemed to be the highest marginal rate of federal individual
income tax in effect in the calendar year in which a calculation under this Supplemental Plan is to be made, and state and local tax rates shall be deemed to be the highest marginal rates of
individual income tax in effect in the state and locality of the participant's residence in the calendar year for which such a calculation is to be made, net of any federal tax benefits. 

10

 

SUPPLEMENTAL BENEFIT

GRANTOR TRUST  

        THIS AGREEMENT, made this        day of
                                        ,
19    , by and between
                                        ,
(the "grantor"), and The Northern Trust Company, located at Chicago, Illinois, as trustee
(the "trustee"), 

WITNESSETH
THAT: 

        WHEREAS,
the grantor desires to establish and maintain a trust to hold certain benefits received by the grantor under the Abbott Laboratories Supplemental Pension Plan, as it may be
amended from time to time. 

        NOW,
THEREFORE, IT IS AGREED as follows: 

ARTICLE I

Introduction  

        I-1.    Name.    This agreement and the trust hereby evidenced (the "trust") may be referred to as the
"                                        
Supplemental Benefit Grantor Trust." 

        I-2.    The Trust Fund.    The "trust fund" as at any date means all property then held by the trustee
under this agreement. 

        I-3.    Status of the Trust.    The trust shall be irrevocable. The trust is intended to constitute a
grantor trust under Sections 671-678 of the Internal Revenue Code, as amended, and shall be construed accordingly. 

        I-4.    The Administrator.    Abbott Laboratories ("Abbott") shall act as the "administrator" of the
trust, and as such shall have certain powers, rights and duties under this agreement as described below. Abbott will certify to the trustee from time to time the person or persons authorized to act on
behalf of Abbott as the administrator. The trustee may rely on the latest certificate received without further inquiry or verification. 

        I-5.    Acceptance.    The trustee accepts the duties and obligations of the "trustee" hereunder, agrees
to accept funds delivered to it by the grantor or the administrator, and agrees to hold such funds (and any proceeds from the investment of such funds) in trust in accordance with this agreement. 

ARTICLE II

Distribution of the Trust Fund  

        II-1.    Supplemental Pension Account.    The administrator shall maintain a "supplemental pension
account" under the trust. As of the end of each calendar year, the administrator shall charge the account with all distributions made from the account during that year; and credit the account with its
share of trust income and realized gains and charge the account with its share of trust expenses and realized losses for the year. 

        II-2.    Distributions Prior to the Grantor's Death.    Principal and accumulated income shall not be
distributed from the trust prior to the grantor's retirement or other termination of employment with Abbott or a subsidiary of Abbott (the grantor's "settlement date"); provided that, each year the
administrator may direct the trustee to distribute to the grantor a portion of the income of the trust fund for that year, with the balance of such income to be accumulated in the trust. The
administrator shall inform the trustee of the grantor's settlement date. Thereafter, the trustee shall distribute the amounts from time to time credited to the supplemental pension account to the
grantor, if then living, 

11

 

in the same manner, at the same time and over the same period as the pension payable to the grantor under Abbott Laboratories Annuity Retirement Plan. 

        II-3.    Distributions After the Grantor's Death.    The grantor, from time to time may name any person or
persons (who may be named contingently or successively and who may be natural persons or fiduciaries) to whom the principal of the trust fund and all accrued or undistributed income thereof shall be
distributed upon the grantor's death. The grantor may direct that such amounts be distributed in a lump sum or, if the beneficiary is the grantor's spouse (or a trust for which the grantor's spouse is
the sole income beneficiary), in the same manner, at the same time and over the same period as the pension payable to the grantor's surviving spouse under the Abbott Laboratories Annuity Retirement
Plan. If the grantor directs the same method of distribution as the pension payable to the surviving spouse under the Abbott Laboratories Annuity Retirement Plan to the spouse as beneficiary, any
amounts remaining at the death of the spouse beneficiary shall be distributed in a lump sum to the executor or administrator of the spouse beneficiary's estate. If the grantor directs the same method
of distribution as the pension payable to the surviving spouse under the Abbott Laboratories Annuity Retirement Plan to a trust for which the grantor's spouse is the sole income beneficiary, any
amounts remaining at the death of the spouse shall be distributed in a lump sum to such trust. Despite the foregoing, if (i) the beneficiary is a trust for which the grantor's spouse is the
sole income beneficiary, (ii) payments are being made pursuant to this paragraph II-3 other than in a lump sum and (iii) income earned by the trust fund for the year
exceeds the amount of the annual installment payment, then such trust may elect to withdraw such excess income by written notice to the trustee. Each designation shall revoke all prior designations,
shall be in writing and shall be effective only when filed by the grantor with the administrator during the grantor's lifetime. If the grantor fails to direct a method of distribution, the
distribution shall be made in a lump sum. If the grantor fails to designate a beneficiary as provided above, then on the grantor's death, the trustee shall distribute the balance of the trust fund in
a lump sum to the executor or administrator of the grantor's estate." 

        II-4.    Facility of Payment.    When a person entitled to a distribution hereunder is under legal
disability, or, in the trustee's opinion, is in any way incapacitated so as to be unable to manage his or her financial affairs, the trustee may make such distribution to such person's legal
representative, or to a relative or friend of such person for such person's benefit. Any distribution made in accordance with the preceding sentence shall be a full and complete discharge of any
liability for such distribution hereunder. 

        II-5.    Perpetuities.    Notwithstanding any other provisions of this agreement, on the day next
preceding the end of 21 years after the death of the last to die of the grantor and the grantor's descendants living on the date of this instrument, the trustee shall immediately distribute any
remaining balance in the trust to the beneficiaries then entitled to distributions hereunder. 

ARTICLE III

Management of the Trust Fund  

        III-1.    General Powers.    The trustee shall, with respect to the trust fund, have the following powers,
rights and duties in addition to those provided elsewhere in this agreement or by law: 

	(a)
	Subject
to the limitations of subparagraph (b) next below, to sell, contract to sell, purchase, grant or exercise options to purchase, and otherwise deal with all assets
of the trust fund, in such way, for such considerations, and on such terms and conditions as the trustee decides.

	(b)
	To
invest and reinvest the trust fund, without distinction between principal and income, in obligations of the United States Government and its agencies or which are backed by the
full faith and credit of the United States Government and in any mutual funds, common trust funds or collective investment funds which invest solely in such obligations, provided that to the extent
practicable no more than Ten Thousand Dollars ($10,000) shall be invested in such 

12

 

mutual
funds, common trust funds or collective investment funds at any time; and any such investment made or retained by the trustee in good faith shall be proper despite any resulting risk or lack
of diversification or marketability. 

	(c)
	To
deposit cash in any depositary (including the banking department of the bank acting as trustee) without liability for interest, in amounts not in excess of those reasonably
necessary to make distributions from the trust.

	(d)
	To
borrow from anyone, with the administrator's approval, such sum or sum from time to time as the trustee considers desirable to carry out this trust, and to mortgage or pledge all
or part of the trust fund as security.

	(e)
	To
retain any funds or property subject to any dispute without liability for interest and to decline to make payment or delivery thereof until final adjudication by a court of
competent jurisdiction or until an appropriate release is obtained.

	(f)
	To
begin, maintain or defend any litigation necessary in connection with the administration of this trust, except that the trustee shall not be obliged or required to do so unless
indemnified to the trustee's satisfaction.

	(g)
	To
compromise, contest, settle or abandon claims or demands.

	(h)
	To
give proxies to vote stocks and other voting securities, to join in or oppose (alone or jointly with others) voting trusts, mergers, consolidations, foreclosures, reorganizations,
liquidations, or other changes in the financial structure of any corporation, and to exercise or sell stock subscription or conversion rights.

	(i)
	To
hold securities or other property in the name of a nominee, in a depositary, or in any other way, with or without disclosing the trust relationship.

	(j)
	To
divide or distribute the trust fund in undivided interests or wholly or partly in kind.

	(k)
	To
pay any tax imposed on or with respect to the trust; to defer making payment of any such tax if it is indemnified to its satisfaction in the premises; and to require before making
any payment such release or other document from any lawful taxing authority and such indemnity from the intended payee as the trustee considers necessary for its protection.

	(l)
	To
deal without restriction with the legal representative of the grantor's estate or the trustee or other legal representative of any trust created by the grantor or a trust or estate
in which a beneficiary has an interest, even though the trustee, individually, shall be acting in such other capacity, without liability for any loss that may result.

	(m)
	Upon
the prior written consent of the administrator, to appoint or remove by written instrument any bank or corporation qualified to act as successor trustee, wherever located, as
special trustee as to part or all of the trust fund, including property as to which the trustee does not act, and such special trustee, except as specifically limited or provided by this or the
appointing instrument, shall have all of the rights, titles, powers, duties, discretions and immunities of the trustee, without liability for any action taken or omitted to be taken under this or the
appointing instrument.

	(n)
	To
appoint or remove by written instrument any bank, wherever located, as custodian of part or all of the trust fund, and each such custodian shall have such rights, powers, duties
and discretions as are delegated to it by the trustee.

	(o)
	To
employ agents, attorneys, accountants or other persons, and to delegate to them such powers as the trustee considers desirable, and the trustee shall be protected in acting or
refraining from acting on the advice of persons so employed without court action. 

13

 

	(p)
	To
perform any and all other acts which in the trustee's judgment are appropriate for the proper management, investment and distribution of the trust fund. 

        III-2.    Principal and Income.    Any income earned on the trust fund which is not distributed as
provided in Article II shall be accumulated and from time to time added to the principal of the trust. The grantor's interest in the trust shall include all assets or other property held by the
trustee hereunder, including principal and accumulated income. 

        III-3.    Statements.    The trustee shall prepare and deliver monthly to the administrator and annually
to the grantor, if then living, otherwise to each beneficiary then entitled to distributions under this agreement, a statement (or series of statements) setting forth (or which taken together set
forth) all investments, receipts, disbursements and other transactions effected by the trustee during the reporting period; and showing the trust fund and the value thereof at the end of such period. 

        III-4.    Compensation and Expenses.    All reasonable costs, charges and expenses incurred in the
administration of this trust, including compensation to the trustee, any compensation to agents, attorneys, accountants and other persons employed by the trustee, and expenses incurred in connection
with the sale, investment and reinvestment of the trust fund shall be paid from the trust fund. 

ARTICLE IV

General Provisions  

        IV-1.    Interests Not Transferable.    The interests of the grantor or other persons entitled to
distributions hereunder are not subject to their debts or other obligations and may not be voluntarily or involuntarily sold, transferred, alienated, assigned or encumbered. 

        IV-2.    Disagreements as to Acts.    If there is a disagreement between the trustee and anyone as to any
act or transaction reported in any accounting, the trustee shall have the right to a settlement of its account by any court. 

        IV-3.    Trustee's Obligations.    No power, duty or responsibility is imposed on the trustee except as
set forth in this agreement. The trustee is not obliged to determine whether funds delivered to or distributions from the trust are proper under the trust, or whether any tax is due or payable as a
result of any such delivery or distribution. The trustee shall be protected in making any distribution from the trust as directed pursuant to Article II without inquiring as to whether the
distributee is entitled thereto; the trustee shall not be liable for any distribution made in good faith without written notice or knowledge that the distribution is not proper under the terms of this
agreement; and the trustee shall not be liable for any action taken because of the specific direction of the administrator. 

        IV-4.    Good Faith Actions.    The trustee's exercise or non-exercise of its powers and
discretions in good faith shall be conclusive on all persons. No one shall be obliged to see to the application of any money paid or property delivered to the trustee. The certificate of the trustee
that it is acting according to this agreement will fully protect all persons dealing with the trustee. 

        IV-5.    Waiver of Notice.    Any notice required under this agreement may be waived by the person
entitled to such notice. 

        IV-6.    Controlling Law.    The laws of the State of Illinois shall govern the interpretation and
validity of the provisions of this agreement and all questions relating to the management, administration, investment and distribution of the trust hereby created. 

        IV-7.    Successors.    This agreement shall be binding on all persons entitled to distributions hereunder
and their respective heirs and legal representatives, and on the trustee and its successors. 

14

 

ARTICLE V

Changes in Trustee  

        V-1.    Resignation or Removal of Trustee.    The trustee may resign at any time by giving thirty days'
advance notice to the administrator and the grantor. The administrator may remove a trustee by written notice to the trustee and the grantor. 

        V-2.    Appointment of Successor Trustee.    The administrator shall fill any vacancy in the office of
trustee as soon as practicable by written notice to the successor trustee; and shall give prompt written notice thereof to the grantor, if then living, otherwise to each beneficiary then entitled to
payments or distributions under this agreement. A successor trustee shall be a bank (as defined in Section 581 of the Internal Revenue Code, as amended). 

        V-3.    Duties of Resigning or Removed Trustee and of Successor Trustee.    A trustee that resigns or is
removed shall furnish promptly to the administrator and the successor trustee an account of its administration of the trust from the date of its last account. Each successor trustee shall succeed to
the title to the trust fund vested in its predecessor without the signing or filing of any instrument, but each predecessor trustee shall execute all documents and do all acts necessary to vest such
title of record in the successor trustee. Each successor trustee shall have all the powers conferred by this agreement as if originally named trustee. No successor trustee shall be personally liable
for any act or failure to act of a predecessor trustee. With the approval of the administrator, a successor trustee may accept the account furnished and the property delivered by a predecessor trustee
without incurring any liability for so doing, and such acceptance will be complete discharge to the predecessor trustee. 

ARTICLE VI

Amendment and Termination  

        VI-1.    Amendment.    With the consent of the administrator, this trust may be amended from time to time
by the grantor, if then living, otherwise by a majority of the beneficiaries then entitled to payments or distributions hereunder, except as follows: 

	(a)
	The
duties and liabilities of the trustee cannot be changed substantially without its consent.

	(b)
	This
trust may not be amended so as to make the trust revocable. 

        VI-2.    Termination.    This trust shall not terminate, and all rights, titles, powers, duties,
discretions and immunities imposed on or reserved to the trustee, the administrator, the grantor and the beneficiaries shall continue in effect, until all assets of the trust have been distributed by
the trustee as provided in Article II. 

*
* * 

        IN
WITNESS WHEREOF, the grantor and the trustee have executed this agreement as of the day and year first above written. 

	 	
 Grantor
	

 	

The Northern Trust Company, as Trustee
	

 	

By	
 	

    

	

 	

Its	
 	

    

15

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Exhibit 4.1    
  

 
 

SECURITIES PURCHASE AGREEMENT    
  

        This Securities Purchase Agreement is entered into and dated as of August 12, 2002 (this "Agreement"),
among EarthShell Corporation, a Delaware corporation (the "Company"), and the purchasers identified on the signature pages hereto (each, a
"Purchaser" and collectively, the "Purchasers"). 

        WHEREAS,
subject to the terms and conditions set forth in this Agreement, the Company desires to issue and sell to the Purchasers, and the Purchasers, severally and not jointly, desire
to purchase from the Company, certain securities of the Company pursuant to the terms set forth herein. 

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

 
 

ARTICLE I.    
    
    DEFINITIONS    

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

        "Actual Minimum" means, as of any date, the maximum aggregate number of shares of Common Stock then issued or potentially issuable in the
future pursuant to the Transaction Documents, including any
Underlying Shares issuable upon exercise or conversion in full of all Warrants and convertible Securities, ignoring any limits on the number of shares of Common Stock that may be owned by a Purchaser
at any one time and assuming that (a) any previously unconverted Debentures are held until the fifth anniversary of the Closing Date or, if earlier, until maturity, and all interest on the
Debentures is paid in shares of Common Stock, (b) the maximum number of Underlying Shares is issued pursuant to the Warrants, (c) the Conversion Price (as defined in the Debentures) at
all times on and after the date of determination equals 100% of the actual Conversion Price on the Trading Day immediately prior to the date of determination. 

        "Affiliate" means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under
common control with a Person, as such terms are used in and construed under Rule 144 under the Securities Act. With respect to a Purchaser, any investment fund or managed account that is
managed on a discretionary basis by the same investment manager as such Purchaser will be deemed to be an Affiliate of such Purchaser. 

        "Bankruptcy Event" means any of the following events: (a) the Company or any Subsidiary commences a case or other proceeding under
any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to the Company or any Subsidiary
thereof; (b) there is commenced against the Company or any Subsidiary any such case or proceeding that is not dismissed within 60 days after commencement; (c) the Company or any
Subsidiary is adjudicated by a court of competent jurisdiction insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered; (d) the Company or
any Subsidiary suffers any appointment of any custodian or the like for it or any substantial part of its property that is not discharged or stayed within 60 days; (e) under applicable
bankruptcy law the Company or any Subsidiary makes a general assignment for the benefit of creditors; (f) the Company or any Subsidiary fails to pay, or states that it is unable to pay or is
unable to pay, its debts generally as they become due; (g) the Company or any Subsidiary calls a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of
its debts; or (h) the Company or any Subsidiary, by any act or failure to act, expressly indicates its consent to, approval of or acquiescence in any of the foregoing or takes any corporate or
other action for the purpose of effecting any of the foregoing. 

 

        "Change of Control" means the occurrence of any of the following in one or a series of related transactions: (i) an acquisition
after the date hereof by an individual or legal entity or "group" (as described in Rule 13d-5(b)(1) under the Exchange Act) of more than one-third of the voting rights
or equity interests in the Company; (ii) a replacement of more than one-half of the members of the Company's board of directors in a single election of directors that is not
approved by those individuals who are members of the board of directors on the date hereof (or other directors previously approved by such individuals); (iii) a merger or consolidation of the
Company or any Subsidiary or a sale of more
than one-third of the assets of the Company in one or a series of related transactions, unless following such transaction or series of transactions, the holders of the Company's securities
prior to the first such transaction continue to hold at least two-thirds of the voting rights and equity interests in the surviving entity or acquirer of such assets; (iv) a
recapitalization, reorganization or other transaction involving the Company or any Subsidiary that constitutes or results in a transfer of more than one-third of the voting rights or
equity interests in the Company, unless following such transaction or series of transactions, the holders of the Company's securities prior to the first such transaction continue to hold at least
two-thirds of the voting rights and equity interests in the surviving entity or acquirer of such assets; (v) consummation of a "Rule 13e-3 transaction" as defined
in Rule 13e-3 under the Exchange Act with respect to the Company, or (vi) the execution by the Company or its controlling shareholders of an agreement providing for or
reasonably likely to result in any of the foregoing events. 

        "Closing" means the closing of the purchase and sale of the Securities pursuant to  Section 2.1. 

        "Closing Date" means the date of the Closing. 

        "Closing Price" means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common
Stock is then listed or quoted on an Eligible Market or any other national securities exchange, the closing bid price per share of the Common Stock for such date (or the nearest preceding date) on the
primary Eligible Market or exchange on which the Common Stock is then listed or quoted; (b) if prices for the Common Stock are then quoted on the OTC Bulletin Board, the closing bid price per
share of the Common Stock for such date (or the nearest preceding date) so quoted; (c) if prices for the Common Stock are then reported in the "Pink Sheets" published by the National Quotation
Bureau Incorporated (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported; or (d) in all
other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by a majority in interest of the Purchasers. 

        "Commission" means the Securities and Exchange Commission. 

        "Common Stock" means the common stock of the Company, $0.01 par value per share, and any securities into which such common stock may
hereafter be reclassified. 

        "Company Counsel" means Gibson, Dunn & Crutcher LLP, counsel to the Company. 

        "Debentures" means $10,000,000 in aggregate principal amount of secured convertible debentures due August 12, 2007 issued by the
Company to the Purchasers hereunder in the form of Exhibit A hereto. 

        "Eligible Market" means any of the New York Stock Exchange, the American Stock Exchange, the Nasdaq National Market or the Nasdaq Small
Cap Market. 

        "Event Equity Value" means 115% of the average of the Closing Prices for the five Trading Days preceding either (a) the date of
delivery of the notice requiring payment of the Event Equity Value or (b) the date on which such required payment (together with any other payments, 

2

 

expenses and liquidated damages then due and payable under the Transaction Documents) is paid in full, whichever is greater. 

        "Exchange Act" means the Securities Exchange Act of 1934, as amended. 

        "Going Concern Opinion" means the issuance of an audit letter containing a "going concern" by the Company's independent public accountant
for the Company's current annual report on Form 10-K pursuant to Section 13 or 15(d) under the Exchange Act. 

        "Letter of Credit" means the Letter of Credit issued by Wachovia Bank, National Association to each purchaser in the form of
Exhibit E hereto in an aggregate amount equal to $10,000,000. 

        "Losses" means any and all losses, claims, damages, liabilities, settlement costs and expenses, including without limitation costs of
preparation of legal action and reasonable attorneys' fees. 

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

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

        "Purchaser Counsel" means Proskauer Rose LLP, counsel to the Purchasers. 

        "Registration Statement" means the Company's registration statement on Form S-3 (No. 333-76092),
declared effective by the Commission on January 7, 2002, as updated through the date hereof. 

        "Required Minimum" means, as of any date, the maximum aggregate number of shares of Common Stock then issued or potentially issuable in
the future pursuant to the Transaction Documents, including any Underlying Shares issuable upon exercise or conversion in full of all Warrants and convertible Securities, ignoring any limits on the
number of shares of Common Stock that may be owned by a Purchaser at any one time and assuming that:(a) any previously unconverted Debentures are held until the fifth anniversary of the Closing
Date or, if earlier, until maturity, and all interest on the Debentures is paid in shares of Common Stock, (b) the maximum number of Underlying Shares is issued pursuant to the Warrants and
(c) the Conversion Price (as defined in the Debentures) at all times on and after the date of determination equals 50% of the actual Conversion Price (as defined in the Debentures) on the
Trading Day immediately prior to the date of determination. 

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

        "Securities" means the Shares, the Debentures, the Warrants and the Underlying Shares issued or issuable (as applicable) to the applicable
Purchaser pursuant to the Transaction Documents. 

        "Securities Act" means the Securities Act of 1933, as amended. 

        "Shares" means an aggregate of three (3) shares of Common Stock, which are being purchased by the Purchasers pursuant to this
Agreement. 

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

3

 

        "Supplement" means the prospectus supplement to the prospectus which was filed with the Registration Statement reflecting the sale of the
Securities. 

        "Trading Day" means (a) any day on which the Common Stock is listed or quoted and traded on its primary Trading Market,
(b) if the Common Stock is not then listed or quoted and traded on any Eligible Market, then a day on which trading occurs on the Nasdaq National Market (or any successor thereto), or
(c) if trading does not occur on the Nasdaq National Market (or any successor thereto), any business day. 

        "Trading Market" means Nasdaq National Market or any other national securities exchange, market or trading or quotation facility on which
the Common Stock is then listed or quoted. 

        "Transaction Documents" means this Agreement, the Warrants, the Debentures, the Transfer Agent Instructions, the Letter of Credit and any
other documents or agreements executed or delivered in connection with the transactions contemplated hereunder. 

        "Transfer Agent Instructions" means the Company's transfer agent instructions in the form of  Exhibit C. 

        "Triggering Event" means any of the following events: (a) immediately prior to any Bankruptcy Event; (b) the Common Stock is
not listed or quoted, or is suspended from trading, on an Eligible Market for a period of five Trading Days (which need not be consecutive Trading Days); (c) the Company fails for any reason to
deliver a certificate evidencing any Securities to a Purchaser within five Trading Days after delivery of such certificate is required pursuant to any Transaction Document or the exercise or
conversion rights of the Holders pursuant to the Transaction Documents are otherwise suspended for any reason; (d) the Company fails to have available a sufficient number of authorized but
unissued and otherwise unreserved shares of Common Stock available to issue Underlying Shares upon any exercise of the Warrants or any conversion of convertible Securities; (e) at any time
after the Closing Date, any Common Stock issuable pursuant to the Transaction Documents is not listed on an Eligible Market; (f) the Company effects or publicly announces its intention to
effect any exchange, recapitalization or other transaction that effectively requires or rewards physical delivery of certificates evidencing the Common Stock, unless following such transaction or
series of transactions, the holders of the Company's securities prior to the first such transaction continue to hold at least two-thirds of the voting rights and equity interests in the
surviving entity or acquirer of such assets; (g) the Company fails to make any cash payment required under the Transaction Documents and such failure is not cured within five Trading Days after
notice of such default is first given to the Company by a Purchaser; (h) the issuance of a Going Concern Opinion; or (i) the Company defaults in the timely performance of any other
obligation under the Transaction Documents and such default continues uncured for a period of 20 days after the date on which written notice of such default is first given to the Company by a
Purchaser (it being understood that no prior notice need be given in the case of a default that cannot reasonably be cured within 20 days). 

        "Underlying Shares" means the shares of Common Stock issuable upon conversion of the Debentures and upon exercise of the Warrants and in
satisfaction of any other obligation of the Company to issue shares of Common Stock pursuant to the Transaction Documents. 

        "Warrant" means a Common Stock purchase warrant in the form of Exhibit C. 

 
 

ARTICLE II.    
    
    PURCHASE AND SALE    

        2.1    Closing.    Subject to the terms and conditions set forth in this Agreement, at the Closing the Company shall
issue and sell to the Purchasers, and the Purchasers shall, severally and not jointly, purchase from the Company, the Shares, the Debentures and the Warrants for an aggregate purchase 

4

 

price of $10,000,000. The Closing shall take place at the offices of Purchaser Counsel immediately following the execution and delivery of this Agreement by the parties or at such other location or
time as the parties may agree. 

        2.2    Closing Deliveries.    

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

        (i)    this
Agreement duly executed by the Company; 

        (ii)  one
or more stock certificates evidencing the number of Shares indicated below such Purchaser's name on the signature page of this Agreement, registered in the name of
such Purchaser or evidence that such Shares have been delivered to a balance account with The Depository Trust Company through its Deposit Withdrawal Agent Commission System; 

        (iii)  Debentures
in the aggregate principal amount indicated below such Purchaser's name on the signature page of this Agreement, registered in the name of such Purchaser; 

        (iv)  a
Warrant, registered in the name of such Purchaser, pursuant to which such Purchaser shall have the right to acquire the number of shares of Common Stock indicated
below such Purchaser's name on the signature page of this Agreement, on the terms set forth therein; 

        (v)  the
legal opinion of Company Counsel, in the form of Exhibit D, executed by such counsel and delivered to the Purchasers; 

        (vi)  evidence
that the Company has filed the Supplement with the Commission; 

        (vii) the
Transfer Agent Instructions duly executed by the Company and acknowledged by the Company's transfer agent; 

        (viii)  the
Letter of Credit duly executed by Wachovia Bank, National Association to each purchaser; 

        (ix)  a
certificate from a duly authorized officer certifying on behalf of the Company that each of the conditions set forth in Section 5.1 has been satisfied; and 

        (x)  any
other document reasonably requested by the Purchasers or Purchaser Counsel. 

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

        (i)    the
purchase price indicated below such Purchaser's name on the signature page of this Agreement, in United States dollars and in immediately available funds, by wire
transfer to an account designated in writing by the Company for such purpose; and 

        (ii)  this
Agreement duly executed by such Purchaser. 

 
 

ARTICLE III.    
    
    REPRESENTATIONS AND WARRANTIES    

        3.1    Representations and Warranties of the Company.    The Company hereby makes the following representations and
warranties to the Purchasers: 

        (a)    Subsidiaries.    The Company does not directly or indirectly control or own any
interest in any other corporation, partnership, joint venture or other business association or entity (a "Subsidiary"), other than those listed in
Schedule 3.1(a). Except as disclosed in Schedule 3.1(a), the Company owns, directly or indirectly, all of the capital stock of each Subsidiary free and clear 

5

 

of any lien, charge, claim, security interest, encumbrance, right of first refusal or other restriction (collectively, "Liens"), and all the issued and
outstanding shares of capital stock of each Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights. 

        (b)    Organization and Qualification.    Each of the Company and the Subsidiaries is an
entity duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization (as applicable), with the requisite power
and authority to own and use its properties and assets and to carry on its business as currently conducted. Neither the Company nor any Subsidiary is in violation of any of the provisions of its
respective certificate or articles of incorporation, bylaws or other organizational or charter documents. Each of the Company and the Subsidiaries is duly qualified to do business and is in good
standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the
failure to be so qualified or in good standing, as the case may be, could not, individually or in the aggregate, (i) adversely affect the legality, validity or enforceability of any Transaction
Document, (ii) have or result in a material adverse effect on the results of operations, assets, business or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a
whole, or (iii) adversely impair the Company's ability to perform fully on a timely basis its obligations under any of the Transaction Documents (any of (i), (ii) or (iii), a
"Material Adverse Effect"). 

        (c)    Authorization; Enforcement.    The Company has the requisite corporate power and
authority to enter into and to consummate the transactions contemplated by each of the Transaction Documents and otherwise to carry out its obligations hereunder. The execution and delivery of each of
the Transaction Documents by the Company and the consummation by it of the transactions contemplated hereunder and thereunder have been duly authorized by all necessary action on the part of the
Company and no further consent or action is required by the Company, its Board of Directors or its stockholders. Each of the Transaction Documents has been (or upon delivery will be) duly executed by
the Company and, when delivered in accordance with the terms hereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms. 

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

        (e)    Filings, Consents and Approvals.    Neither the Company nor any Subsidiary is required
to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other 

6

 

Person in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than (i) the required filing of the Supplement, (ii) applicable Blue
Sky filings, and (iii) in all other cases where the failure to obtain such consent, waiver, authorization or order, or to give such notice or make such filing or registration could not have or
result in, individually or in the aggregate, a Material Adverse Effect (collectively, the "Required Approvals"). 

        (f)    Issuance of the Securities.    The Securities have been duly authorized and, when
issued and paid for in accordance with the Transaction Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens. The Company has reserved from its duly
authorized capital stock a number of shares of Common Stock to be issued to the applicable Purchasers upon conversion or exercise of the Debentures or Warrants and such number of reserved shares of
Common Stock shall be at least equal to the Required Minimum calculated as of the date hereof. 

        (g)    Registration Statement.    The Company's Registration Statement was declared effective
by the Commission on January 7, 2002. The Registration Statement is effective on the date hereof and the Company has not received notice that the Commission has issued or intends to issue a
stop order with respect to the Registration Statement or that the Commission otherwise has suspended or withdrawn the effectiveness of the Registration Statement, either temporarily or permanently, or
intends or has threatened in writing to do so. The Registration Statement (including the information or documents incorporated by reference therein), as of the time it was declared effective, and any
amendments or supplements thereto, each as of the time of filing, did not contain any untrue statement of material fact or omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading. The issuance of the Securities to the Purchasers is registered by the Registration Statement. 

        (h)    Listing and Maintenance Requirements.    Except as specified in the SEC Reports, the
Company has not, in the two years preceding the date hereof, received notice (written or oral) from the Trading Market to the effect that the Company is not in compliance with the listing or
maintenance requirements thereof. The Company is, and has no reason to believe that it will not in the foreseeable future
continue to be, in compliance with the listing and maintenance requirements for continued trading of the Common Stock on the Trading Market. The issuance and sale of the Securities hereunder does not
contravene the rules and regulations of the Trading Market and no approval of the shareholders of the Company is required for the Company to issue and deliver to the Purchasers the maximum number of
Securities contemplated by this Agreement assuming exercise of the Warrants and conversion of the Debentures on the date hereof. 

        (i)    Certain Fees.    Except for listing fees to be paid by the Company to the Trading
Market and the placement fee payable to Olympus Securities, LLC in connection with the transactions contemplated by this Agreement, no fees or commissions will be payable by the Company to any
broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by this Agreement. The Purchasers shall have no
obligation with respect to any fees incurred by the Company or any other Person (other than the Purchasers, if the Purchasers have agreed in writing to pay such fees) or with respect to any claims
made by or on behalf of other Persons for fees of a type contemplated in this Section that may be due in connection with the transactions contemplated by this Agreement. The Company shall indemnify
and hold harmless each Purchaser, their respective employees, officers, directors, agents, and partners, and their respective affiliates, from and against all claims, losses, damages, costs (including
the reasonable costs of preparation and reasonable attorney's fees) and expenses suffered in respect of any such claimed or existing fees incurred by the Company or any other Person (other than the
Purchasers, if the Purchasers have agreed in writing to pay such fees), as such fees and expenses are incurred. 

7

 

        (j)    Disclosure.    The Company confirms that neither it nor any other Person acting on its
behalf has provided any of the Purchasers or their respective agents or counsel with any information that constitutes or might constitute material, nonpublic information. The Company understands and
confirms that each of the Purchasers will rely on the foregoing representations in effecting transactions in securities of the Company. All disclosure provided to the Purchasers regarding the Company,
its business and the transactions contemplated hereby, including the Schedules to this Agreement, the Registration Statement and the Supplement, furnished by or on behalf of the Company are true and
correct and do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which
they were made, not misleading. No event or circumstance has occurred or information 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 Exchange Act are being incorporated into an effective registration statement filed by the Company under the Securities Act). The
Company acknowledges and agrees that no Purchaser makes or has made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in
Section 3. 

        (k)    No Violation.    The issuance and sale of the Securities hereunder does not conflict
with or violate any rules or regulations of the Trading Market. 

        (l)    SEC Reports; Financial Statements.    The Company has filed all reports required to be
filed by it under the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the date hereof (or such shorter period as the Company was required by law
to file such material) (the foregoing materials being collectively referred to herein as the "SEC Reports" and, together with this Agreement and the
Schedules to this Agreement, the "Disclosure Materials") on a timely basis or has received a valid extension of such time of filing and has filed any
such SEC Reports prior to the expiration of any such extension. The Company has delivered to the Purchasers a copy of all SEC Reports filed within the 20 days preceding the date hereof. As of
their respective dates, the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act and the rules and regulations of the Commission promulgated
thereunder, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the SEC Reports comply in all material respects
with applicable accounting requirements and the rules and regulations of the Commission with respect thereto as in effect at the time of filing. Such financial statements have been prepared in
accordance with generally accepted accounting principles applied on a consistent basis during the periods involved ("GAAP"), except as may be otherwise
specified in such financial statements or the notes thereto, and fairly present in all material respects the financial position of the Company and its consolidated subsidiaries as of and for the dates
thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments. All
material agreements to which the Company or any Subsidiary is a party or to which the property or assets of the Company or any Subsidiary are subject are included as part of or specifically identified
in the SEC Reports. 

        (m)    Capitalization.    The number of shares and type of all authorized, issued and
outstanding capital stock, options and other securities of the Company (whether or not presently convertible or exchangeable for shares of capital stock of the Company) is set forth in
Schedule 3.1(m). All outstanding shares of capital stock are duly authorized, validly issued, fully paid and nonassessable 

8

 

and have been issued in compliance with all applicable securities laws. Except as disclosed in Schedule 3.1(m), there are no outstanding options, warrants, script rights to subscribe to, calls
or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exchangeable for, or giving any Person any right to subscribe for or acquire, any
shares of Common Stock, or contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is or may become bound to issue additional shares of Common Stock, or
securities or rights convertible or exchangeable into shares of Common Stock. Except as disclosed in Schedule 3.1(m), 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) and the issue and sale of the Securities will not obligate the Company to issue shares of
Common Stock or other securities to any Person and will not result in a right of any holder of Company securities to adjust the exercise, conversion, exchange or reset price under such securities. To
the knowledge of the Company, except as specifically disclosed in Schedule 3.1(m), no Person or group of related Persons beneficially owns (as determined pursuant to
Rule 13d-3 under the Exchange Act), or has the right to acquire, by agreement with or by obligation binding upon the Company, beneficial ownership of in excess of 5% of the
outstanding Common Stock, ignoring for such purposes any limitation on the number of shares of Common Stock that may be owned at any single time. 

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

        (o)    Litigation.    There is no action, suit, inquiry, notice of violation, proceeding or
investigation pending or, to the knowledge of the Company, threatened against or affecting the Company, any Subsidiary or any of their respective properties before or by any court, arbitrator,
governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) (collectively, an "Action") which
(i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or the Securities or (ii) could, if there were an unfavorable decision,
individually or in the aggregate, have or result in a Material Adverse Effect. Schedule 3.1(o) of the Disclosure Schedule contains a complete list and summary description of any pending or, to
the knowledge of the Company, threatened proceeding against or affecting the Company or any of its Subsidiaries, without regard to whether it would have a Material Adverse Effect. Neither the Company
nor any Subsidiary, nor any director or officer thereof, is or has been the subject of any Action involving a claim of violation of or liability under federal or state securities laws or a claim of
breach of fiduciary duty. The Company does not have pending before the Commission any request for confidential treatment of information. There has not been, and to the knowledge of the Company, there
is not pending or contemplated, any investigation by the Commission involving the Company or any current or former director or officer of the Company. The Commission has not issued any stop order or
other order suspending the effectiveness of any registration statement filed by the Company or any Subsidiary under the Exchange Act or the Securities Act. No strike, work stoppage, slow down or other
material labor problem exists or, to 

9

 

the knowledge of the Company, is threatened or imminent with respect to any of the employees of the Company or the Subsidiaries. 

        (p)    Compliance.    Neither the Company nor any Subsidiary (i) is in default under or
in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has the Company
or any Subsidiary received notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a
party or by which it or any of its properties is bound (whether or not such default or violation has been waived), (ii) is in violation of any order of any court, arbitrator or governmental
body, or (iii) is or has been in violation of any statute, rule or regulation of any governmental authority, including without limitation all foreign, federal, state and local laws relating to
taxes, environmental protection, occupational health and safety, product quality and safety and employment and labor matters, except in each case as could not, individually or in the aggregate, have
or result in a Material Adverse Effect. 

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

        (r)    Title to Assets.    The Company and the Subsidiaries have good and marketable title in
fee simple to all real property owned by them that is material to the business of the Company and the Subsidiaries and good and marketable title in all personal property owned by them that is material
to the business of the Company and the Subsidiaries, in each case free and clear of all Liens, except for Liens as do not materially affect the value of such property and do not materially interfere
with the use made and proposed to be made of such property by the Company and the Subsidiaries. Any real property and facilities held under lease by the Company and the Subsidiaries are held by them
under valid, subsisting and enforceable leases of which the Company and the Subsidiaries are in compliance. 

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

        (t)    Insurance.    The Company and the Subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses in which the Company and the Subsidiaries are engaged. Neither the Company nor
any Subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may
be necessary to continue its business without a significant increase in cost. 

        (u)    Transactions With Affiliates and Employees.    Except as set forth in SEC Reports filed
at least ten days prior to the date hereof, none of the officers or directors of the Company and, to the knowledge of the Company, none of the employees of the Company is presently a party to any 

10

 

transaction with the Company or any Subsidiary (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company,
any
entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner. 

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

        (w)    Solvency.    Based on the financial condition of the Company as of the Closing Date,
(i) the Company's fair saleable value of its assets exceeds the amount that will be required to be paid on or in respect of the Company's existing debts and other liabilities (including known
contingent liabilities) as they mature; and (ii) the current cash flow of the Company, together with the proceeds the Company would receive, were it to liquidate all of its assets, after taking
into account all anticipated uses of the cash, would be sufficient to pay all amounts on or in respect of its debt when such amounts are required to be paid. The Company does not intend to incur debts
beyond its ability to pay such debts as they mature (taking into account the timing and amounts of cash to be payable on or in respect of its debt). 

        (x)    Acknowledgment Regarding Purchasers' Purchase of Securities.    The Company
acknowledges and agrees that each of the Purchasers is acting solely in the capacity of an arm's length purchaser with respect to this Agreement and the transactions contemplated hereby. The Company
further acknowledges that no Purchaser 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 advice given by any Purchaser or any of their respective representatives or agents in connection with this Agreement and the transactions contemplated hereby is merely incidental to the
Purchasers' purchase of the Securities. The Company further represents to each Purchaser that the Company's decision to enter into this Agreement has been based solely on the independent evaluation of
the Company and its representatives. 

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

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

        (aa)    Seniority.    As of the date of this Agreement, no indebtedness of the Company is
senior to the Debentures in right of payment, whether with respect to interest or upon liquidation or dissolution, or otherwise. 

11

  

        3.2    Representations and Warranties of the Purchasers.    Each Purchaser hereby for itself and for no other
Purchaser, represents, warrants and covenants to the Company that each such Purchaser is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its
incorporation. Such Purchaser has full right, power, authority and capacity to enter into this Agreement and to consummate the transactions contemplated hereby and has taken all necessary action to
authorize the execution, delivery and performance of this Agreement. Upon the execution and delivery of this Agreement and assuming the valid execution hereof by the Company, this Agreement shall
constitute the valid and binding obligation of such Purchaser enforceable in accordance with its terms. 

        The
Company acknowledges and agrees that no Purchaser makes or has made any representations or warranties with respect to the transactions contemplated hereby other than those
specifically set forth in this Section 3. 

 
 

ARTICLE IV.    
    
    OTHER AGREEMENTS OF THE PARTIES    

        4.1    Acknowledgment of Dilution.    The Company acknowledges that the issuance of the Securities (including the
Underlying Shares) will result in dilution of the outstanding shares of Common Stock, which dilution may be substantial under certain market conditions. The Company further acknowledges that its
obligations under the Transaction Documents, including without limitation its obligation to issue the Securities (including the Underlying Shares) pursuant to the Transaction Documents, are
unconditional and absolute and not subject to any right of set off, counterclaim, delay or reduction, regardless of the effect of any such dilution or any claim that the Company may have against any
Purchaser. 

        4.2    Furnishing of Information.    As long as any Purchaser owns the Securities issued or issuable to it, the
Company covenants to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to
the Exchange Act. Upon the request of any such Person, the Company shall deliver to such Person a written certification of a duly authorized officer as to whether it has complied with the preceding
sentence. 

        4.3    Reservation and Listing of Securities.    

        (a)  The
Company shall maintain a reserve from its duly authorized shares of Common Stock for issuance pursuant to the Transaction Documents in such amount as may be required
to fulfill its obligations in full under the Transaction Documents. 

        (b)  If,
on any date, the number of authorized but unissued (and otherwise unreserved) shares of Common Stock (the "Remaining Authorized
Shares") is less than 125% of (i) the Actual Minimum on such date, minus (ii) the number of shares of Common Stock previously issued pursuant to the Transaction
Documents, then the Board of Directors of the Company shall use its reasonable best efforts to amend the Company's certificate of incorporation to increase the number of authorized but unissued shares
of Common Stock to at least the Required Minimum at such time (minus the number of shares of Common Stock previously issued pursuant to the Transaction Documents), as soon as possible and in any event
not later than the 90th day after such date; provided that the Company will not be required at any time to authorize a number of shares of Common Stock greater than the maximum remaining number of
shares of Common Stock that could possibly be issued after such time pursuant to the Transaction Documents. 

        (c)  If,
at the time any Purchaser requests an exercise or conversion of any Securities, the Actual Minimum minus the number of shares of Common Stock previously issued
pursuant to the Transaction Documents exceeds the Remaining Authorized Shares, then the Company shall issue to the Purchaser requesting such exercise or conversion a number of Underlying Shares not 

12

 

exceeding such Purchaser's pro-rata portion of the Remaining Authorized Shares (based on such Purchaser's share of the aggregate purchase price paid hereunder and considering any
Underlying Shares previously issued to such Purchaser), and the remainder of the Underlying Shares issuable in connection with such exercise or conversion (if any) shall constitute
"Excess Shares" pursuant to Section 4.3(g) below. 

        (d)  The
Company shall (i) in the time and manner required by each Trading Market, prepare and file with such Trading Market an additional shares listing application
covering a number of shares of Common Stock at least equal to the greater of (A) the Required Minimum on the Closing Date and (B) the Required Minimum on the date of such application,
(ii) take all steps necessary to cause such shares of Common Stock to be approved for listing on each Trading Market as soon as possible thereafter, (iii) provide to the Purchasers
evidence of such listing, and (iv) maintain the listing of such Common Stock on each such Trading Market or another Eligible Market. 

        (e)  If,
on any date, the number of shares of Common Stock issuable under the Transaction Documents previously listed on a Trading Market is less than 125% of the Actual
Minimum on such date, then the Company shall take the necessary actions to list on such Trading Market, as soon as reasonably
possible, a number of shares of Common Stock at least equal to the Required Minimum on such date; provided that the Company will not be required at any time to list a number of shares of Common Stock
greater than the maximum number of shares of Common Stock that could possibly be issued pursuant to the Transaction Documents. 

        (f)    If
the Trading Market is the Nasdaq National Market or the Nasdaq SmallCap Market, then the maximum number of shares of Common Stock that the Company may issue pursuant
to the Transaction Documents at an effective purchase price less than the Closing Price on the Trading Day immediately preceding the Closing Date equals 27,429,883 shares (the
"Issuable Maximum"), unless the Company obtains shareholder approval in accordance with the rules and regulations of such Trading Market. If, at the
time any Purchaser requests an exercise or conversion of any Securities, the Actual Minimum (excluding any shares issued or issuable at an effective purchase price in excess of the Closing Price on
the Trading Day immediately preceding the Closing Date) exceeds the Issuable Maximum (and if the Company has not previously obtained the required shareholder approval), then the Company shall issue to
the Purchaser requesting such exercise or conversion a number of Underlying Shares of Common Stock not exceeding such Purchaser's pro-rata portion of the Issuable Maximum (based on such
Purchaser's share of the aggregate purchase price paid hereunder and considering any Underlying Shares previously issued to such Purchaser), and the remainder of the Underlying Shares issuable in
connection with such exercise or conversion (if any) shall constitute "Excess Shares" pursuant to Section 4.3(g) below. 

        (g)  Any
Purchaser whose receipt of Excess Shares upon exercise or conversion of Securities is restricted based on the number of Remaining Authorized Shares or the Issuable
Maximum shall have the option, by notice to the Company, to require the Company to either:(i) use its reasonable best efforts to obtain the required shareholder approval necessary to permit the
issuance of such Excess Shares as soon as is possible, but in any event not later than the 90th day after such notice, or (ii) within five Trading Days after such notice, pay cash to such
Purchaser, as liquidated damages and not as a penalty, in an amount equal to the number of Excess Shares multiplied by 115% of the average Closing Price over the five Trading Days immediately prior to
the date of such notice or, if greater, the five Trading Days immediately prior to the date of payment (the "Cash Amount"), and the Company shall have
no further obligation to issue any of such Excess Shares. If the exercising or converting Purchaser elects the first option under the preceding sentence and the Company fails to obtain the required
shareholder approval on or prior to the 90th day after such notice, then within three Trading Days after such 60th day, the Company shall pay the Cash Amount to such Purchaser, as liquidated damages
and not as penalty. 

13

 

        4.4    Conversion and Exercise Procedures.    The form of Exercise Notice included in the Warrants and the form of
Holder Conversion Notice included in the Debentures set forth the totality of the procedures required by the Purchasers in order to exercise the Warrants or convert the Debentures. No additional legal
opinion or other information or instructions shall be necessary to enable the Purchasers to exercise their Warrants or convert their Debentures. The Company shall honor exercises of the Warrants and
conversions of the Debentures and shall deliver Underlying Shares in accordance with the terms, conditions and time periods set forth in the Transaction Documents. 

        4.5    Subsequent Placements.    

        (a)  Until
90 Days following the Closing Date, the Company will not, directly or indirectly, effect any, offer, sell, grant any option to purchase, or otherwise dispose of
(or announce any offer, sale, grant or any option to purchase or other disposition of) any of its or the Subsidiaries' equity or equity equivalent securities, including, without limitation, any debt,
preferred stock or other instrument or security that is, at any time during its life and under any circumstances, convertible into or exchangeable for Common Stock (any such offer, sale, grant,
disposition or announcement being referred to as a "Subsequent Placement") unless the Company shall have first complied with this Section 4.5(a). 

          (i)  The
Company shall deliver to each Purchaser a written notice (the "Offer") of any proposed or intended issuance or sale
or exchange of the securities being offered (the "Offered Securities") in a Subsequent Placement, which Offer shall (w) identify and describe the
Offered Securities, (x) describe the price and other terms upon which they are to be issued, sold or exchanged, and the number or amount of the Offered Securities to be issued, sold or
exchanged, (y) identify the persons or entities (if known) to which or with which the Offered Securities are to be offered, issued, sold or exchanged and (z) offer to issue and sell to
or exchange with each Purchaser (A) a pro rata portion of the Offered Securities, based on such Purchaser's pro rata portion of the aggregate purchase price paid by the Purchasers for all of
the Securities purchased hereunder (the "Basic Amount"), and (B) with respect to each Purchaser that elects to purchase its Basic Amount, any
additional portion of the Offered Securities attributable to the Basic Amounts of other Purchasers as such Purchaser shall indicate it will purchase or acquire should the other Purchasers subscribe
for less than their Basic Amounts (the "Undersubscription Amount"). 

        (ii)  To
accept an Offer, in whole or in part, a Purchaser must deliver a written notice to the Company prior to 5:00 p.m., New York time, on the fifth Trading Day
after the Offer, setting forth the portion of the Purchaser's Basic Amount that such Purchaser elects to purchase and, if such Purchaser shall elect to purchase all of its Basic Amount, the
Undersubscription Amount, if any, that such Purchaser elects to purchase (in either case, the "Notice of Acceptance"). If the Basic Amounts subscribed
for by all Purchasers in the aggregate are less than the total of all of the Basic Amounts, then each Purchaser who has set forth an Undersubcription Amount in its Notice of Acceptance shall be
entitled to purchase, in addition to the Basic Amounts subscribed for, the Undersubscription Amount it has subscribed for; provided, however, that if
the Undersubscription Amounts subscribed for exceed the difference between the total of all the Basic Amounts and the Basic Amounts subscribed for (the "Available
Undersubscription Amount"), each Purchaser who has subscribed for any Undersubscription Amount shall be entitled to purchase that portion of the Available Undersubscription
Amount as the Basic Amount of such Purchaser bears to the total Basic Amounts of all Purchasers that have subscribed for Undersubscription Amounts, subject to rounding by the Board of Directors to the
extent its deems reasonably necessary. 

        (iii)  The
Company shall have five (5) Trading Days from the expiration of the period set forth in Section 4.5(a)(ii) above to issue, sell or exchange all or
any part of such Offered 

14

 

Securities as to which a Notice of Acceptance has not been given by the Purchasers (the "Refused Securities"), but only to the offerees described in
the Offer (if so described therein) and only upon terms and conditions (including, without limitation, unit prices and interest rates) that are not more favorable to the acquiring person or persons or
less favorable to the Company than those set forth in the Offer. 

        (iv)  In
the event the Company shall propose to sell less than all the Refused Securities (any such sale to be in the manner and on the terms specified in
Section 4.5(a)(iii) above), then each Purchaser may, at its sole option and in its sole discretion, reduce the number or amount of the Offered Securities specified in its Notice of Acceptance
to an amount that shall be not less than the number or amount of the Offered Securities that the Purchaser elected to purchase pursuant to Section 4.5(a)(ii) above multiplied by a fraction,
(i) the numerator of which shall be the number or amount of Offered Securities the Company actually proposes to issue, sell or exchange (including Offered Securities to be issued or sold to
Purchasers pursuant to Section 4.5(a)(ii) above prior to such reduction) and (ii) the denominator of which shall be the original amount of the Offered Securities. In the event that any
Purchaser so elects to reduce the number or amount of Offered Securities specified in its Notice of Acceptance, the Company may not issue, sell or exchange more than the reduced number or amount of
the Offered Securities unless and until such securities have again been offered to the Purchasers in accordance with Section 4.5(a)(i) above. 

        (v)  Upon
the closing of the issuance, sale or exchange of all or less than all of the Refused Securities, the Purchasers shall acquire from the Company, and the Company
shall issue to the Purchasers, the number or amount of Offered Securities specified in the Notices of Acceptance, as reduced pursuant to Section 4.5(a)(iv) above if the Purchasers have so
elected, upon the terms and conditions specified in the Offer. The purchase by the Purchasers of any Offered Securities is subject in all cases to the preparation, execution and delivery by the
Company and the Purchasers of a purchase agreement relating to such Offered Securities reasonably satisfactory in form and substance to the Purchasers, the Company and their respective counsel. 

        (vi)  Any
Offered Securities not acquired by the Purchasers or other persons in accordance with Section 4.5(a)(iii) above may not be issued, sold or exchanged until
they are again offered to the Purchasers under the procedures specified in this Agreement. 

        (b)  The
restrictions contained in paragraph (a) of this Section shall not apply to (i) the granting of options to employees, officers and directors of the
Company pursuant to any stock option plan duly adopted by the Company or to the issuance of Common Stock upon exercise of such options, or (ii) strategic transactions not significantly for the
purpose of raising capital. 

        4.6    Securities Laws Disclosure; Publicity.    The Company shall, on the Closing Date, issue a press release
reasonably acceptable to the Purchasers disclosing all material terms of the transactions contemplated hereby. Thereafter, the Company shall timely file any filings and notices required by the
Commission or
applicable law with respect to the transactions contemplated hereby and provide copies thereof to the Purchasers promptly after filing except any such filings or notices that are publicly available;
provided that Company provides prior written notice of such public filings or notices to the Purchasers. The Company shall, at least two Trading Days prior to the filing or dissemination of any
disclosure required by this paragraph, provide a copy thereof to the Purchasers for their review. The Company and the Purchasers shall consult with each other in issuing any press releases or
otherwise making public statements or filings and other communications with the Commission or any regulatory agency or Trading Market with respect to the transactions contemplated hereby, and neither
party shall issue any such press release or otherwise make any such public statement, filing or other communication without the prior consent of the other, except if such disclosure is required by
law, in 

15

 

which case the disclosing party shall promptly provide the other party with prior notice of such public statement, filing or other communication. Notwithstanding the foregoing, the Company shall not
publicly disclose the name of any Purchaser, or include the name of any Purchaser in any filing with the Commission or any regulatory agency or Trading Market, other than by filing the Transaction
Documents with the Commission under the Exchange Act without the prior written consent of such Purchaser, except to the extent such disclosure (but not any disclosure as to the controlling Persons
thereof) is required by law or Trading Market regulations, in which case the Company shall provide the Purchasers with prior notice of such disclosure. Neither the Company nor any Person acting on its
behalf will provide any Purchaser with material, nonpublic information about the Company unless such Purchaser consents to receive such information in writing in advance, and neither the Purchasers
nor any Person acting on behalf of any Purchaser shall request any such information. 

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

        4.8    Indemnification.    

        (a)  The
Company will indemnify and hold harmless each Purchaser and any of their respective Affiliates or any officer, director, partner, controlling person, employee or
agent of a Purchaser or any of their respective Affiliates (a "Related Person") for its reasonable legal and other expenses (including the costs of any
investigation, preparation and travel) and for any Losses incurred in connection with any Proceeding, insofar as such Losses arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement or the Supplement, or any amendment or supplement thereto, and all other documents filed as a part thereof, as amended at the
time of effectiveness of the Registration Statement, including any information deemed to be a part thereof as of the time of effectiveness pursuant to paragraph (b) of Rule 430A, or
pursuant to Rule 434, under the Securities Act, or arise out of or are based upon the omission or alleged omission to state in any of them a material fact required to be stated therein or
necessary to make the statements in any of them, in light of the circumstances under which they were made, not misleading, as such expenses or Losses are incurred. In addition, the Company shall
indemnify and hold harmless each Purchaser and Related Person from and against any and all Losses, as incurred, arising out of or relating to any breach by the Company of any of the representations,
warranties or covenants made by the Company
in this Agreement or any other Transaction Document, or any allegation by a third party that, if true, would constitute such a breach. The conduct of any Proceeding for which indemnification is
available under this paragraph shall be governed by Section 4.8(b). The indemnification obligations of the Company under this paragraph shall be in addition to any liability that the Company
may otherwise have and shall be binding upon and inure to the benefit of any successors, assigns, heirs and personal representatives of the Purchasers and any such Related Persons. The Company also
agrees that neither the Purchasers nor any Related Persons shall have any liability to the Company or any Person asserting claims on behalf of or in right of the Company in connection with or as a
result of the transactions contemplated by the Transaction Documents, except to the extent that any losses, claims, damages, liabilities or expenses incurred by the Company result from the gross
negligence or willful misconduct of the applicable Purchaser or Related Person in connection with such transactions. If the Company breaches its obligations under any Transaction Document, then, in
addition to any other liabilities the Company may have under any Transaction Document or applicable law, the Company shall pay or reimburse the Purchasers on demand for all costs of collection and
enforcement (including reasonable attorneys fees and expenses). Without limiting 

16

 

the generality of the foregoing, the Company specifically agrees to reimburse the Purchasers on demand for all costs of enforcing the indemnification obligations in this paragraph. 

        (b)    Conduct of Indemnification Proceedings.    If any Proceeding shall be brought or asserted against any Person
entitled to indemnity hereunder (an "Indemnified Party"), such Indemnified Party shall promptly notify the Person from whom indemnity is sought (the
"Indemnifying Party") in writing, and the Indemnifying Party shall have the right to assume the defense thereof, including the employment of counsel
reasonably satisfactory to the Indemnified Party and the payment of all fees and expenses incurred in connection with defense thereof; provided, that the failure of any Indemnified Party to give such
notice shall not relieve the Indemnifying Party of its obligations or liabilities pursuant to this Agreement, except (and only) to the extent that it shall be finally determined by a court of
competent jurisdiction (which determination is not subject to appeal or further review) that such failure shall have proximately and materially adversely prejudiced the Indemnifying Party. 

        An
Indemnified Party shall have the right to employ separate counsel in any such Proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be
at the expense of such Indemnified Party or Parties unless: (i) the Indemnifying Party has agreed in writing to pay such fees and expenses; or (ii) the Indemnifying Party shall have
failed promptly to assume the defense of such Proceeding and to employ counsel reasonably satisfactory to such Indemnified Party in any such Proceeding; or (iii) the named parties to any such
Proceeding (including any impleaded parties) include both such Indemnified Party and the Indemnifying Party, and such Indemnified Party shall have been advised by counsel that a conflict of interest
is likely to exist if the same counsel were to represent such Indemnified Party and the Indemnifying Party (in which case, if such Indemnified Party notifies the Indemnifying Party in writing that it
elects to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall not have the right to assume the defense thereof and such counsel shall be at the expense of
the Indemnifying Party). The Indemnifying Party shall not be liable for any settlement of any such Proceeding effected without its written consent, which consent shall not be unreasonably withheld. No
Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending Proceeding in respect of which any Indemnified Party is a party, unless such
settlement includes an unconditional release of such Indemnified Party from all liability on claims that are the subject matter of such Proceeding. 

        All
fees and expenses of the Indemnified Party (including reasonable fees and expenses to the extent incurred in connection with investigating or preparing to defend such Proceeding in a
manner not inconsistent with this Section) shall be paid to the Indemnified Party, as incurred, within ten Trading Days of written notice thereof to the Indemnifying Party (regardless of whether it is
ultimately determined that an Indemnified Party is not entitled to indemnification hereunder; provided, that the Indemnifying Party may require such Indemnified Party to undertake to reimburse all
such fees and expenses to the extent it is finally judicially determined that such Indemnified Party is not entitled to indemnification hereunder). 

        4.9    Shareholders Rights Plan.    No claim will be made or enforced by the Company or any other Person that any
Purchaser is an "Acquiring Person" under any shareholders rights plan or similar plan or arrangement in effect or hereafter adopted by the Company, or that any Purchaser could be deemed to trigger the
provisions of any such plan or arrangement, by virtue of receiving Shares or Underlying Shares under the Transaction Documents or under any other agreement between the Company and the Purchasers. 

        4.10    Delivery of Certificates.    In addition to any other rights available to a Purchaser, if the Company fails to
deliver to such Purchaser a certificate representing Common Stock by the third Trading Day after the date on which delivery of such certificate is required by any Transaction Document, and if after
such third Trading Day such Purchaser purchases (in an open market 

17

 

transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by such Purchaser of the shares that the Purchaser anticipated receiving from the Company (a
"Buy-In"), then, in the Purchaser's sole discretion, the Company shall, within three Trading Days after such Purchaser's request, either
(i) pay cash to such Purchaser in an amount equal to such Purchaser's total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased (the
"Buy-In Price"), at which point the Company's obligation to deliver such certificate (and to issue such Common Stock) shall terminate, or
(ii) promptly honor its obligation to deliver to such Purchaser a certificate or certificates representing such Common Stock and pay cash to such Purchaser in an amount equal to the excess (if
any) of the Buy-In Price over the product of (A) such number of shares of Common Stock, times (B) the Closing Price on the date of the event giving rise to the Company's
obligation to deliver such certificate. 

 
 

ARTICLE V.    
    
    CONDITIONS    

        5.1    Conditions Precedent to the Obligations of the Purchasers.    The obligation of each Purchaser to acquire
Securities at the Closing is subject to the satisfaction or waiver by such Purchaser, at or before the Closing, of each of the following conditions: 

        (a)    Supplement.    The Company shall have filed the Supplement with the Commission. 

        (b)    Registration Statement.    The Registration Statement shall be effective on the Closing Date as to all
Securities, not subject to any threatened or actual stop order and will not on the Closing Date contain any untrue statement of material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading. 

        (c)    Representations and Warranties.    The representations and warranties of the Company contained herein shall be
true and correct in all material respects as of the date when made and as of the Closing as though made on and as of such date; 

        (d)    Performance.    The Company and each other Purchaser shall have performed, satisfied and complied in all
material respects with all covenants, agreements and conditions required by the Transaction Documents to be performed, satisfied or complied with by it at or prior to the Closing; 

        (e)    No Injunction.    No statute, rule, regulation, executive order, decree, ruling or injunction shall have been
enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction that prohibits the consummation of any of the transactions contemplated by the Transaction
Documents; 

        (f)    Adverse Changes.    Since the date of execution of this Agreement, no event or series of events shall have
occurred that reasonably would be expected to have or result in a Material Adverse Effect; and 

        (g)    No Suspensions of Trading in Common Stock; Listing.    Trading in the Common Stock shall not have been
suspended by the Commission or any Trading Market (except for any suspensions of trading of not more than one Trading Day solely to permit dissemination of material information regarding the Company)
at any time since the date of execution of this Agreement, and the Common Stock shall have been at all times since such date listed for trading on an Eligible Market. 

18

  

        5.2    Conditions Precedent to the Obligations of the Company.    The obligation of the Company to sell Securities
at
the Closing is subject to the satisfaction or waiver by the Company, at or before the Closing, of each of the following conditions: 

        (a)    Representations and Warranties.    The representations and warranties of the Purchasers contained herein shall
be true and correct in all material respects as of the date when made and as of the Closing Date as though made on and as of such date; 

        (b)    Performance.    The Purchasers shall have performed, satisfied and complied in all material respects with all
covenants, agreements and conditions required by the Transaction Documents to be performed, satisfied or complied with by the Purchasers at or prior to the Closing; and 

        (c)    No Injunction.    No statute, rule, regulation, executive order, decree, ruling or injunction shall have been
enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction that prohibits the consummation of any of the transactions contemplated by the Transaction
Documents. 

 
 

ARTICLE VI.    
    
    MISCELLANEOUS    

        6.1    Termination.    This Agreement may be terminated by the Company or any Purchaser, by written notice to the
other parties, if the Closing has not been consummated by the third Trading Day following the date of this Agreement; provided that no such termination will affect the right of any party to sue for
any breach by the other party (or parties). 

        6.2    Fees and Expenses.    At the Closing, the Company shall pay to Beacon Equities, Inc. an aggregate of
$50,000 for a portion of their legal fees and expenses incurred in connection with the preparation and
negotiation of this Agreement, of which amount $25,000 has been previously paid by the Company to the Purchaser Counsel. In lieu of the foregoing payment, Beacon Equities, Inc. may retain such
amount at the Closing or require the Company to pay such amount directly to Purchaser Counsel. In addition, the Company shall pay to Beacon Equities, Inc. an aggregate of $10,000 for their
remaining legal fees and expenses incurred in connection with the preparation and negotiation of this Agreement upon the prepayment or conversion (or any combination thereof) of $2,000,000 or more of
the original principal amount of Debentures issued to all Holders on the Original Issue Date (as defined in the Debenture). In lieu of the foregoing remaining payment, Beacon Equities, Inc. may
require the Company to pay such amount directly to Purchaser Counsel. Except as expressly set forth in the Transaction Documents to the contrary, each party shall pay the fees and expenses of its
advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement.
The Company shall pay all transfer agent fees, stamp taxes and other taxes and duties levied in connection with the issuance of any Securities. 

        6.3    Entire Agreement.    The Transaction Documents, together with the Exhibits and Schedules thereto, contain the
entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules. At or after the Closing, and without further consideration, the Company will execute and deliver to the Purchasers such
further documents as may be reasonably requested in order to give practical effect to the intention of the parties under the Transaction Documents. 

        6.4    Notices.    Any and all notices or other communications or deliveries required or permitted to be provided
hereunder shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the
facsimile 

19

 

number specified in this Section prior to 6:30 p.m. (New York City time) on a Trading Day, (ii) the Trading Day after the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile number specified in this Agreement later than 6:30 p.m. (New York City time) on any date and earlier than 11:59 p.m. (New York City time) on such
date, (iii) the Trading Day following the date of mailing, if sent by nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is
required to be given. The address for such notices and communications shall be as follows: 

	If to the Company:	 	EarthShell Corporation

800 Miramonte Drive

Santa Barbara, California 93109

Facsimile No.: (805) 899-3517

Attn: Chief Financial Officer
	

With a copy to:	
 	

Gibson, Dunn & Crutcher LLP.

2029 Century Park East

Los Angeles, California 90067

Facsimile No.: (310) 551-8741

Attn: Robert K. Montgomery, Esq.
	

If to the Purchasers:	
 	

To the address set forth under such Purchaser's name on the signature pages attached hereto.

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

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

        6.6    Construction.    The headings herein are for convenience only, do not constitute a part of this Agreement and
shall not be deemed to limit or affect any of the provisions hereof. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party. 

        6.7    Successors and Assigns.    This Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of the Purchasers. Any Purchaser may assign
its rights under this Agreement to any Person to whom such Purchaser assigns or transfers any Securities. 

        6.8    No Third-Party Beneficiaries.    This Agreement is intended for the benefit of the parties hereto and their
respective successors and permitted assigns and is not for the benefit of, nor may any provision
hereof be enforced by, any other Person, except that each Related Person is an intended third party beneficiary of Section 4.8 and may enforce the provisions of such Section directly against
the Company. 

        6.9    Governing Law.    All questions concerning the construction, validity, enforcement and interpretation of this
Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof. Each party agrees
that all legal proceedings concerning the interpretations, enforcement and defense of 

20

 

the transactions contemplated by any of the Transaction Documents (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall
be commenced exclusively in the state and federal courts sitting in the City of New York, Borough of Manhattan. Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the state
and federal courts sitting in the City of New York, Borough of Manhattan for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or
discussed herein (including with respect to the enforcement of any of this Agreement), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is
not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper. Each party hereto hereby irrevocably waives personal service of process and consents to
process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in
effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit
in any way any right to serve process in any manner permitted by law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury
in any legal proceeding arising out of or relating to this Agreement or any of the Transaction Documents or the transactions contemplated hereby or thereby. If either party shall commence an action or
proceeding to enforce any provisions of this Agreement or any Transaction Document, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its reasonable
attorneys fees and other reasonable costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding. 

        6.10    Survival.    The representations, warranties, agreements and covenants contained herein shall survive the
Closing and the delivery, exercise and/or conversion of the Securities, as applicable. 

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

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

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

        6.14    Replacement of Securities.    If any certificate or instrument evidencing any Securities is mutilated, lost,
stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof, or in lieu of and substitution therefor, a new certificate or
instrument, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and customary and reasonable indemnity, if requested. The applicants for a new 

21

 

certificate or instrument under such circumstances shall also pay any reasonable third-party costs associated with the issuance of such replacement Securities. 

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

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

        6.17    Usury.    To the extent it may lawfully do so, the Company hereby agrees not to insist upon or plead or in any
manner whatsoever claim, and will resist any and all efforts to be compelled to take the benefit or advantage of, usury laws wherever enacted, now or at any time hereafter in force, in connection with
any claim, action or proceeding that may be brought by any Purchaser in order to enforce any right or remedy under any Transaction Document. Notwithstanding any provision to the
contrary contained in any Transaction Document, it is expressly agreed and provided that the total liability of the Company under the Transaction Documents for payments in the nature of interest shall
not exceed the maximum lawful rate authorized under applicable law (the "Maximum Rate"), and, without limiting the foregoing, in no event shall any rate
of interest or default interest, or both of them, when aggregated with any other sums in the nature of interest that the Company may be obligated to pay under the Transaction Documents exceed such
Maximum Rate. It is agreed that if the maximum contract rate of interest allowed by law and applicable to the Transaction Documents is increased or decreased by statute or any official governmental
action subsequent to the date hereof, the new maximum contract rate of interest allowed by law will be the Maximum Rate of interest applicable to the Transaction Documents from the effective date
forward, unless such application is precluded by applicable law. If under any circumstances whatsoever, interest in excess of the Maximum Rate is paid by the Company to any Purchaser with respect to
indebtedness evidenced by the Transaction Documents, such excess shall be applied by such Purchaser to the unpaid principal balance of any such indebtedness or be refunded to the Company, the manner
of handling such excess to be at such Purchaser's election. 

        6.18    Independent Nature of Purchasers.    The obligations of each Purchaser under any Transaction Document are
several and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance of the obligations of any other Purchaser under any Transaction
Document. The decision of each Purchaser to purchase Securities pursuant to this Agreement has been made by such Purchaser independently of any other Purchaser and independently of any information,
materials, statements or opinions as to the business, affairs, operations, assets, properties, liabilities, results of operations, condition (financial or otherwise) or prospects of the Company or of
the Subsidiary which may have been made or given by any other Purchaser or by any agent or employee of any other Purchaser, and no Purchaser or any of its agents or employees shall have any liability
to any other Purchaser (or any other person) relating to or arising from any such information, materials, statements or opinions. Nothing contained herein, or in any Transaction 

22

 

Document, and no action taken by any Purchaser pursuant hereto or thereto, shall be deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity,
or create a presumption that the Purchasers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Documents. Each
Purchaser shall be entitled to independently protect and enforce its rights, including without limitation the rights arising out of this Agreement or out of the other Transaction Documents, and it
shall not be necessary for any other Purchaser to be joined as an additional party in any proceeding for such purpose. 

        6.19    Adjustments in Share Numbers and Prices.    In the event of any stock split, subdivision, dividend or
distribution payable in shares of Common Stock (or other securities or rights convertible into, or entitling the holder thereof to receive directly or indirectly shares of Common Stock), combination
or other similar recapitalization or event occurring after the date hereof, each reference in this Agreement to a number of shares or a price per share shall be amended to appropriately account for
such event. 

[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGES FOLLOW] 

23

 

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

	 	 	EARTHSHELL CORPORATION
	

 	
 	

By:	

    

	 	 	 	Name:	 
	 	 	 	Title:	 

[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGES OF PURCHASERS FOLLOW 

24

 

	 	 	BEACON EQUITIES, INC.
	

 	
 	

By:	

    

	 	 	 	Name:	Kenneth L. Henderson
	 	 	 	Title:	Attorney-in-Fact
	  

    	 	 	 	 	 	 
	

 	
 	

Purchase Price:	
 	

$6,000,000
	

 	
 	

Number of Shares to be acquired:	
 	

1
	

 	
 	

Aggregate Principal Amount of Debentures to be acquired:	
 	

$6,000,000
	

 	
 	

Number of Underlying Shares issuable under Warrant:	
 	

1,500,000
	

 	
 	

Address for Notice:
	

 	
 	

c/o Bryan Cave Robinson Silverman LLP.

1290 Avenue of the Americas

New York, NY 10104

Telephone No.: (212) 541-2275

Facsimile No.: (212) 541-1357

Attn.: Kenneth Henderson
	

 	
 	

With a copy to:

Proskauer Rose LLP

1585 Broadway

New York, NY 10036-8299

Telephone No.: (212) 969-3689

Facsimile No.: (212) 969-2900

Attn: Adam J. Kansler, Esq.

25

 

	 	 	CLEVELAND OVERSEAS LIMITED
	

 	
 	

By:	

    

	 	 	 	Name:	 	 	 
	 	 	 	Title:	 	 	 
	  

    	 	 	 	 	 	 
	

 	
 	

Purchase Price:	
 	

$1,500,000
	

 	
 	

Number of Shares to be acquired:	
 	

1
	

 	
 	

Aggregate Principal Amount of Debentures to be acquired:	
 	

$1,500,000
	

 	
 	

Number of Underlying Shares issuable under Warrant:	
 	

375,000
	

 	
 	

Address for Notice:

C/o GTF Global Trade & Finance SA

St. Makusgasse 19

P.O. Box 932, 9490

Vaduz, Liechenstein

Telephone No.: 423-239-7777

Facsimile No.: 423-239-7779

Attn: Mr. E. Vogt

26

 

	 	 	CRANSHIRE CAPTIAL, L.P.
	

 	
 	

By:	

    

	 	 	 	Name:	 	 	 
	 	 	 	Title:	 	 	 
	  

    	 	 	 	 	 	 
	

 	
 	

Purchase Price:	
 	

$2,500,000
	

 	
 	

Number of Shares to be acquired:	
 	

1
	

 	
 	

Aggregate Principal Amount of Debentures to be acquired:	
 	

$2,500,000
	

 	
 	

Number of Underlying Shares issuable under Warrant:	
 	

625,000
	

 	
 	

Address for Notice:

Cranshire Capital, L.P.

666 Dundee Road, Suite 1901

Northbrook, IL 60062

Telephone No.: (847) 562-9030

Facsimile No.: (847) 562-9031

Attn: Mitchell Kopin

27

 

	 Exhibits:
	A.	 	Form of Debenture
	

B.	
 	

Form of Warrant
	

C.	
 	

Transfer Agent Instructions
	

D.	
 	

Opinion of Company Counsel
	

E.	
 	

Form of Letter of Credit
	
 Schedules:
	3.1(a)	 	Subsidiaries
	

3.1(m)	
 	

Capitalization
	

3.1(o)	
 	

Litigation

28

QuickLinks

Exhibit 4.1

SECURITIES PURCHASE AGREEMENT

ARTICLE I. DEFINITIONS

ARTICLE II. PURCHASE AND SALE

ARTICLE III. REPRESENTATIONS AND WARRANTIES

ARTICLE IV. OTHER AGREEMENTS OF THE PARTIES

ARTICLE V. CONDITIONS

ARTICLE VI. MISCELLANEOUS

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00041-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00041-of-00352.parquet"}]]