Document:

Form of Warrant

 Exhibit 4.1 
  

NANOGEN, INC. 
  
 WARRANT 
  

			
	Warrant No. [          ]	  	Dated: September 28, 2005

  
 Nanogen, Inc., a
Delaware corporation (the “Company”), hereby certifies that, for value received, [
                             ] or its registered assigns (the “Holder”), is entitled
to purchase from the Company up to a total of [                      ] shares of common stock, $0.001 par value per share (the “Common
Stock”), of the Company (each such share, a “Warrant Share” and all such shares, the “Warrant Shares”) at an exercise price equal to $4.00 (as adjusted from time to time as provided in
Section 7, the “Exercise Price”), at any time and from time to time, in whole or in part, on or after the date hereof through and including September 28, 2010 (the “Expiration Date”), and subject to
the following terms and conditions. 
  
 1. Registration of
Warrant. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder hereof from time to time. The Company may deem and treat
the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary. 
  
 2. Registration of Transfers. Subject to compliance with applicable
federal and state securities laws, any portion of this Warrant may be transferred, and the Company shall register such transfer in the Warrant Register, upon surrender of this Warrant, with the Form of Assignment attached hereto duly completed and
signed, to the Company at its address specified herein. Upon any such registration or transfer, a new warrant to purchase Common Stock, in substantially the form of this Warrant (any such new warrant, a “New Warrant”), evidencing
the portion of this Warrant so transferred shall be issued to the transferee and a New Warrant evidencing the remaining portion of this Warrant not so transferred, if any, shall be issued to the transferring Holder. The acceptance of the New Warrant
by the transferee thereof shall be deemed the acceptance by such transferee of all of the rights and obligations of a holder of a Warrant. 
  
 3. Exercise and Duration of Warrant. 
  
 (a) This Warrant shall be exercisable by the registered Holder at any time and from time, in whole or in part, on or after
September 28, 2005 to and including the Expiration Date. At 5:00 P.M., New York City time on the Expiration Date, the portion of this Warrant not exercised prior thereto shall be and become void and of no value. 
  
 (b) A Holder may exercise this Warrant by delivering to the
Company (i) an exercise notice, in the form attached hereto (the “Exercise Notice”), appropriately completed and duly signed, and (ii) payment of the Exercise Price for the number of Warrant Shares as to which this Warrant
is being exercised, and the date such items are delivered to the Company (as determined in accordance with the notice provisions hereof) is an “Exercise Date.” 

 (c) If at any time after the date of issuance of this Warrant there is no effective
Registration Statement on Form S-3 (or similar form) registering, or no current prospectus available for, the issuance of the Warrant Shares to the Holder, then this Warrant may also be exercised at such time by means of a “cashless
exercise” in which the Holder shall be entitled to receive a certificate for the number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where: 
  

			
	 (A) =
	  	the VWAP on the Trading Day immediately preceding the date of such election;
		
	 (B) =
	  	the Exercise Price of this Warrant, as adjusted; and
		
	 (X) =
	  	the number of Warrant Shares issuable upon exercise of this Warrant in accordance with the terms of this Warrant by means of a cash exercise rather than a cashless exercise.

  
 (d)
For the purposes of this Section 3(c), the following definitions shall apply: 
  
 (i) “Trading Day” means a day on which the Common Stock is traded on a Trading Market. 
  
 (ii) “Trading Market” means the following
markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the Nasdaq SmallCap Market, the American Stock Exchange, the New York Stock Exchange, the Nasdaq National Market or the OTC Bulletin Board.

  
 (iii) “VWAP” 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 a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest
preceding date) on the primary Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg Financial L.P. (based on a Trading Day from 9:30 a.m. Eastern Time to 4:02 p.m. Eastern Time); (b) if the Common Stock is
not then listed or quoted on the Trading Market and if prices for the Common Stock are then reported in the “Pink Sheets” published by the Pink Sheets, LLC (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 (c) in all other cases, the fair market value of a share of Common Stock as determined by a nationally recognized-independent appraiser selected in good faith by
the Holder and reasonably acceptable to the Company. 
  
 (e) Notwithstanding anything to the contrary contained herein, the number of shares of Common Stock that may be acquired by the Holder upon any exercise of this Warrant (or otherwise in respect hereof) shall be limited to the extent
necessary to insure that, following such exercise (or other issuance), the total number of shares of Common Stock then beneficially owned by such Holder and its affiliates and any other persons whose beneficial ownership of Common Stock would be
aggregated with the Holder’s for purposes of Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), does not exceed 9.99% of 

  

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the total number of issued and outstanding shares of Common Stock, including for such purpose the shares of Common Stock issuable upon such exercise, but
excluding the number of shares of Common Stock which would be issuable upon (A) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by such Holder or any of its affiliates and (B) exercise or conversion of
the unexercised or nonconverted portion of any other securities of the Company. For such purposes, beneficial ownership shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated
thereunder. Each delivery of an Exercise Notice hereunder will constitute a representation by the Holder that it has evaluated the limitation set forth in this paragraph and determined that issuance of the full number of Warrant Shares requested in
such Exercise Notice is permitted under this paragraph. This provision shall not restrict the number of shares of Common Stock which a Holder may receive or beneficially own in order to determine the amount of securities or other consideration that
such Holder may receive in the event of a merger or other business combination or reclassification involving the Company as contemplated in Section 7(c) of this Warrant. This restriction may not be waived. 
  
 4. Delivery of Warrant Shares. 
  
 (a) Upon exercise of this Warrant, the Company shall
promptly (but in no event later than three trading days after the Exercise Date) issue or cause to be issued and cause to be delivered to or upon the written order of the Holder and in such name or names as the Holder may designate, a certificate
for the Warrant Shares issuable upon such exercise, free of restrictive legends. If the Holder provides or previously provided the necessary account information to the Company, the Company shall issue and deliver such Warrant Shares in a balance
account of the Holder with the Depository Trust Company through its Deposit Withdrawal Agent Commission System. The Holder, or any person so designated by the Holder to receive Warrant Shares, shall be deemed to have become holder of record of such
Warrant Shares as of the Exercise Date. The Company shall, upon request of the Holder, use commercially reasonable efforts to deliver Warrant Shares hereunder electronically through the Depository Trust Corporation or another established clearing
corporation performing similar functions. 
  
 (b)
This Warrant is exercisable on or after September 28, 2005, either in its entirety or, from time to time, for a portion of the number of Warrant Shares. Upon surrender of this Warrant following one or more partial exercises, the Company shall
issue or cause to be issued, at its expense, a New Warrant evidencing the right to purchase the remaining number of Warrant Shares. 
  
 (c) In addition to any other rights available to the Holder, if the Company fails to deliver to the Holder a certificate representing
Warrant Shares by the third trading day after the date on which delivery of such certificate is required by this Warrant, and if after such third trading day the Holder purchases (in an open market transaction or otherwise) shares of Common Stock to
deliver in satisfaction of a sale by the Holder of the Warrant Shares that the Holder anticipated receiving from the Company (a “Buy-In”), then the Company shall, within three trading days after the Holder’s request and in the
Holder’s discretion, either (i) pay cash to the Holder in an amount equal to the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased less the Exercise Price (the 

  

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“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 the Holder a certificate or certificates representing such Common Stock and pay cash to the Holder 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. 
  
 (d) The Company’s obligations to issue and deliver Warrant Shares in accordance with the terms hereof
are absolute and unconditional, irrespective of any action or inaction by the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any person or any action to enforce the same,
or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder or any other person of any obligation to the Company or any violation or alleged violation of law by the Holder or any other person,
and irrespective of any other circumstance which might otherwise limit such obligation of the Company to the Holder in connection with the issuance of Warrant Shares. Nothing herein shall limit the Holder’s right to pursue any other remedies
available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock
upon exercise of this Warrant as required pursuant to the terms hereof. 
  
 5. Charges, Taxes and Expenses. Issuance and delivery of certificates for shares of Common Stock upon exercise of this Warrant shall be made without charge to the Holder for any issue or transfer tax, withholding tax, transfer agent
fee or other incidental tax or expense in respect of the issuance of such certificates, all of which taxes and expenses shall be paid by the Company; provided, however, that the Company shall not be required to pay any tax which may be payable in
respect of any transfer involved in the registration of any certificates for Warrant Shares or Warrant in a name other than that of the Holder or an affiliate thereof. The Holder shall be responsible for all other tax liability that may arise as a
result of holding or transferring this Warrant or receiving Warrant Shares upon exercise hereof. 
  
 6. Reservation of Warrant Shares. The Company covenants that it will at all times reserve and keep available out of the aggregate of its authorized
but unissued and otherwise unreserved Common Stock, solely for the purpose of enabling it to issue Warrant Shares upon exercise of this Warrant as herein provided, the number of Warrant Shares which are then issuable and deliverable upon the
exercise of this entire Warrant, free from preemptive rights or any other contingent purchase rights of persons other than the Holder (taking into account the adjustments and restrictions of Section 7). The Company covenants that all
Warrant Shares so issuable and deliverable shall, upon issuance and the payment of the applicable Exercise Price in accordance with the terms hereof, be duly and validly authorized, issued and fully paid and nonassessable. The Company will take all
such action as may be necessary to assure that such shares of Common Stock may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of any securities exchange or automated quotation system upon
which the Common Stock may be listed. 
  

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 7. Certain Adjustments. 
  
 (a) Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding,
(i) pays a stock dividend on its Common Stock or otherwise makes a distribution on any class of capital stock that is payable in shares of Common Stock, (ii) subdivides outstanding shares of Common Stock into a larger number of shares, or
(iii) combines outstanding shares of Common Stock into a smaller number of shares, then in each such case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock outstanding
immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to clause (i) of this paragraph shall become effective immediately
after the record date for the determination of stockholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (ii) or (iii) of this paragraph shall become effective immediately after the effective
date of such subdivision or combination. 
  
 (b)
Number of Warrant Shares. Simultaneously with any adjustment to the Exercise Price pursuant to paragraph (a) of this Section, the number of Warrant Shares that may be purchased upon exercise of this Warrant shall be increased or
decreased proportionately, so that after such adjustment the aggregate Exercise Price payable hereunder for the increased or decreased number of Warrant Shares shall be the same as the aggregate Exercise Price in effect immediately prior to such
adjustment. 
  
 (c) Adjustment for
Reorganization. If there shall occur any reorganization, recapitalization, reclassification, consolidation or merger involving the Company in which the Common Stock is converted into or exchanged for securities, cash or other property (other
than a transaction covered by Section 7(a) or 7(d)) (collectively, a “Reorganization”), then, following such Reorganization, the Holder shall receive upon exercise hereof the kind and amount of securities, cash or
other property which the Holder would have been entitled to receive pursuant to such Reorganization if such exercise had taken place immediately prior to such Reorganization. In any such case, appropriate adjustment (as determined reasonably and in
good faith by the Board of Directors of the Company) shall be made in the application of the provisions set forth herein with respect to the rights and interests thereafter of the Holder, to the end that the provisions set forth in this
Section 7 (including provisions with respect to changes in and other adjustments of the Exercise Price) shall thereafter be applicable, as nearly as reasonably may be, in relation to any securities, cash or other property thereafter
deliverable upon the exercise of this Warrant. This Warrant shall remain exercisable until the Expiration Date notwithstanding any Reorganization. The provisions of this Section 7(c) shall similarly apply to successive Reorganizations.

  
 (d) Adjustments for Other Dividends and
Distributions. If the Company, at any time while this Warrant is outstanding, shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in securities
of the Company (other than shares of Common Stock) or in cash or other property, then and in each such event provision shall be made so that the Holder shall receive upon exercise hereof, in addition to the number of shares of Common Stock issuable
hereunder, the kind and amount of securities of the Company, cash or other property which the Holder would have been entitled to receive had this Warrant been exercised on the date of such event and had the Holder thereafter, during the period from
the date of such event to and including the Exercise Date, retained any such securities receivable during such period, giving application to 

  

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all adjustments called for during such period under this Section 7 with respect to the rights of the Holder. 
  
 (e) Calculations. All calculations under this
Section 7 shall be made to the nearest cent or the nearest 1/100th of a share, as applicable. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company,
and the disposition of any such shares shall be considered an issue or sale of Common Stock. 
  
 (f) Notice of Adjustments. Upon the occurrence of each adjustment pursuant to this Section 7, the Company at its
expense shall, as promptly as reasonably practicable but in any event not later than 10 days thereafter, compute such adjustment in accordance with the terms of this Warrant and prepare a certificate setting forth such adjustment, including a
statement of the adjusted Exercise Price and adjusted number or type of Warrant Shares or other securities issuable upon exercise of this Warrant (as applicable), describing the transactions giving rise to such adjustments and showing in detail the
facts upon which such adjustment is based. Upon written request, the Company will promptly deliver a copy of each such certificate to the Holder (but in any event not later than 10 days thereafter). 
  
 (g) Notice of Corporate Events. If the Company
(i) declares a dividend or any other distribution of cash, securities or other property in respect of its Common Stock, including without limitation any granting of rights or warrants to subscribe for or purchase any capital stock of the
Company or any Subsidiary, (ii) authorizes or approves, enters into any agreement contemplating, or solicits, stockholder approval for any merger, sale or similar transaction pursuant to which Common Stock is converted or exchanged for cash,
securities or property or (iii) authorizes the voluntary dissolution, liquidation or winding up of the affairs of the Company, then the Company shall deliver to the Holder a notice describing the material terms and conditions of such
transaction, at least 15 calendar days prior to the applicable record or effective date on which a person would need to hold Common Stock in order to participate in or vote with respect to such transaction. 
  
 8. Payment of Exercise Price. The Holder shall pay the Exercise Price
in cash in immediately available funds. 
  
 9. Fractional
Shares. The Company shall not be required to issue or cause to be issued fractional Warrant Shares on the exercise of this Warrant. If any fraction of a Warrant Share would, except for the provisions of this Section, be issuable upon exercise of
this Warrant, the number of Warrant Shares to be issued will be rounded up to the nearest whole share. 
  
 10. Reservation, Registration and Listing of Common Stock. 
  
 (a) The Company covenants that it will at all times reserve and keep available, free from any pre-emptive
rights, out of its authorized and unissued Common Stock, solely for the purpose of issue upon exercise of this Warrant, such number of shares of Common stock of the Company as shall then be issuable upon the exercise of this Warrant. The Company
covenants that all Warrant Shares which shall be so issuable upon exercise of this Warrant shall, upon such issue, be duly authorized, validly issued, fully paid and non-assessable. 
  

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 (b) The issuance of this Warrant, and the offer of the Warrant Shares issuable upon
exercise of such Warrants, have each been registered under the Securities Act of 1933, as amended, pursuant to the Company’s Registration Statement on Form S-3 (Registration No. 333-125975) (the “Registration Statement”).
The Company covenants and agrees that from and after the date hereof it will maintain the effectiveness of the Registration Statement with respect to the continuing offer of the Warrant Shares issuable upon exercise of such Warrants through the
Expiration Date of the Warrants. 
  
 (c) The
Company shall maintain the listing and trading of the Company’s shares of Common Stock on the Nasdaq National Market or a national exchange. 
  
 11. Notices. Any and all notices or other communications or deliveries hereunder (including without limitation any Exercise Notice) 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 number specified in this Section prior to 5:00 p.m. (New York City
time) on a trading day, (ii) the next trading day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section on a day that is not a trading day or later than 5:00
p.m. (New York City time) on any trading day, (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 and facsimile number for such notices or communications shall be as set forth on Schedule I hereto, as may be updated from time to time by providing notice pursuant to this Section 11. 
  
 12. Warrant Agent. The Company shall serve as warrant agent under this
Warrant. Upon 30 days’ notice to the Holder, the Company may appoint a new warrant agent. Any corporation into which the Company or any new warrant agent may be merged or any corporation resulting from any consolidation to which the Company or
any new warrant agent shall be a party or any corporation to which the Company or any new warrant agent transfers substantially all of its corporate trust or shareholders services business shall be a successor warrant agent under this Warrant
without any further act. Any such successor warrant agent shall promptly cause notice of its succession as warrant agent to be mailed (by first class mail, postage prepaid) to the Holder at the Holder’s last address as shown on the
Company’s Warrant Register. 
  
 13. Loss, Theft or
Destruction of Warrant. In the event that the Holder notifies the Company that this Warrant has been lost, stolen or destroyed, then a replacement Warrant, identical in all respects to the original Warrant (except for any adjustment pursuant
hereto to the Exercise Price or number of Warrant Shares issuable hereunder, if different from the numbers shown on the original Warrant) shall be delivered to the Holder by the Company, provided that the Holder executes and delivers to the Company
an agreement reasonably satisfactory to the Company to indemnify the Company from any loss incurred by the Company in connection with such Warrant. 
  

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 14. Miscellaneous. 
  
 (a) Subject to the restrictions of transfer set forth on the first page hereof, this Warrant may be assigned
by the Holder. This Warrant may be amended only in writing signed by the Company and the Holder and their successors and assigns. 
  
 (b) This terms of this Warrant may be amended, modified or waived only with the written consent of the party against which enforcement of
the same is sought. 
  
 (c) The Company will not,
by amendment of its governing documents or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holder against impairment.
Without limiting the generality of the foregoing, the Company (i) will not increase the par value of any Warrant Shares above the amount payable therefor on such exercise, (ii) will take all such action as may be reasonably necessary or
appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares on the exercise of this Warrant, and (iii) will not close its shareholder books or records in any manner which interferes with the
timely exercise of this Warrant. 
  
 (d)
GOVERNING LAW. THE CORPORATE LAWS OF THE STATE OF DELAWARE
SHALL GOVERN ALL ISSUES CONCERNING THE RELATIVE RIGHTS OF THE COMPANY
AND ITS STOCKHOLDERS. ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT
AND INTERPRETATION OF THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED
AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK. 
  
 (e) If the Company fails
to comply with any provision of this Warrant, the Company shall pay to the Holder such amounts as shall be sufficient to cover any third party costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of
appellate proceedings, incurred by the Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder. 
  
 (f) The headings herein are for convenience only, do not constitute a part of this Warrant and shall not be
deemed to limit or affect any of the provisions hereof. 
  
 (g) In case any one or more of the provisions of this Warrant shall be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Warrant shall not in any
way be affected or impaired thereby and the parties will attempt in good faith to agree upon a valid and enforceable provision which shall be a commercially reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Warrant. 
  
 [REMAINDER OF PAGE INTENTIONALLY
LEFT BLANK, 
 SIGNATURE PAGE FOLLOWS] 
  

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 IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by its authorized officer as
of the date first indicated above. 
  

			
	NANOGEN, INC.
		
	 By:
	 	 
	 Name:
	 	 
	 Title:
	 	 

  

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 Schedule I 
  
 ADDRESSES FOR NOTICES 
  
 If to the Company: 
  
 Nanogen, Inc. 
 10398 Pacific Center Court

 San Diego, CA 92121 
 Attention:                              
  
 If to the Holder: 

 FORM OF EXERCISE NOTICE 
  
 (To be executed by the Holder to exercise the right to purchase shares of Common Stock under the foregoing Warrant) 
  
 To: Nanogen, Inc. 
  
 The undersigned is the Holder of Warrant No.              (the
“Warrant”) issued by Nanogen, Inc., a Delaware corporation (the “Company”). Capitalized terms used herein and not otherwise defined have the respective meanings set forth in the Warrant. 
  

	1.	The Warrant is currently exercisable to purchase a total of
                             Warrant Shares. 

  

	2.	The undersigned Holder hereby exercises its right to purchase
                             Warrant Shares pursuant to the Warrant. 

  

	3.	The holder shall pay the sum of
$                             to the Company in accordance with the terms of the Warrant.

  

	4.	Pursuant to this exercise, the Company shall deliver to the holder
                             Warrant Shares in accordance with the terms of the Warrant.

  

	5.	Following this exercise, the Warrant shall be exercisable to purchase a total of
                             Warrant Shares. 

  

									
	 Dated:
                            ,         
	 	 	 	 Name of Holder:

				
	 	 	 	 	(Print)	 	 
					
	 	 	 	 	 	 	By:	 	 
	 	 	 	 	 	 	 Name:
	 	 
	 	 	 	 	 	 	 Title:
	 	 
				
	 	 	 	 	 	 	(Signature must conform in all respects to name of holder as specified on the face of the Warrant)

 FORM OF ASSIGNMENT 
  
 [To be completed and signed only upon transfer of Warrant] 
  
 FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
                                     the right represented by
the within Warrant to purchase                          shares of Common Stock of Nanogen, Inc. to which the within
Warrant relates and appoints                          attorney to transfer said right on the books of Nanogen, Inc. with
full power of substitution in the premises. 
  

									
	 Dated:
                                ,
            
	 	 	 	 
					
	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	(Signature must conform in all respects to name of holder as specified on the face of the Warrant)
					
	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Address of Transferee
					
	 	 	 	 	 	 	 	 	 
				
	 	 	 	 	 	 	 
				
	 In the presence of:Placement Agency Agreement

 Exhibit 10.1 
  
 NANOGEN, INC. 
  
 6,802,721 Shares of Common Stock and 
 Warrants to Purchase 1,020,408 Shares of Common Stock 
  
 PLACEMENT AGENCY AGREEMENT 
  
 September 27,
2005 
  
 Seven Hills Partners LLC 
 Stonegate Securities, Inc. 
 c/o Seven Hills Partners LLC

 88 Kearny Street, Fifth Floor 
 San Francisco, California 94108

  
 Ladies and Gentlemen: 
  
 Nanogen, Inc., a Delaware corporation (the “Company”),
proposes, subject to the terms and conditions stated herein, to issue and sell to certain investors (collectively, the “Investors”) up to 6,802,721 units (the “Units”), each Unit consisting of (i) one share
(the “Shares”) of the Company’s common stock, par value $0.001 per share (the “Common Stock”), and (ii) one warrant (the “Warrants”) to purchase 0.15 shares of Common Stock in
substantially the form attached hereto as Exhibit A. The Company desires to engage Seven Hills Partners LLC as its lead placement agent (“the “Lead Placement Agent”) and Stonegate Securities, Inc. as its co-placement agent (the
“Co-Placement Agent” and, together with the Lead Placement Agent, the “Placement Agents”) in connection with such issuance and sale. The shares issuable upon the exercise of the Warrants are referred to herein as
the “Warrant Shares” and, together with the Units, the Shares and the Warrants, are referred to herein as the “Securities.” The Units will not be issued or certificated. The Shares and the Warrants will be issued
separately and may be transferred separately. The Securities are described more fully in the Registration Statement (as hereinafter defined). 
  
 The Company hereby confirms as follows its agreements with the Placement Agents: 
  
 1. Agreement to Act as Placement Agents; Representations and Warranties of the Placement Agents. On the basis of the
representations, warranties and agreements of the Company herein contained and subject to all the terms and conditions of this Agreement, the Placement Agents agree to act as the Company’s exclusive placement agents in connection with the
issuance and sale, on a best efforts basis, by the Company of the Units to the Investors. Upon the occurrence of the Closing (as hereinafter defined), the Company shall pay to the Placement Agents 4.8% of the total gross proceeds received by the
Company from the sale of the Units as set forth on the cover page of the Prospectus (as hereinafter defined). Upon the exercise of any Warrant, the Placement Agents shall be entitled to receive a cash fee equal to 4.8% of the funds received by the
Company upon any such exercise, payable immediately upon receipt by the Company to the Lead Placement Agent. Each of the Placement Agents represents and warrants to the Company that it is registered as a broker-dealer with the Securities and
Exchange Commission (the “Commission”) and all relevant states in which registration is required in connection with the sale of the Units 

 
and is a member of the National Association of Securities Dealers, Inc. (the “NASD”). The Co-Placement Agent hereby authorizes the Lead
Placement Agent to take such action on its behalf and to exercise such powers under this Agreement as are provided to the Lead Placement Agent by the terms hereof, together with such powers as are reasonably incidental thereto. 
  
 2. Delivery and Payment. Concurrently with the execution and delivery
of this Agreement, the Company, the Placement Agents and Wells Fargo Bank, N.A., as escrow agent (the “Escrow Agent”), shall enter into an escrow agreement substantially in the form of Exhibit B attached hereto (the “Escrow
Agreement”), pursuant to which an escrow account will be established, at the Company’s expense, for the benefit of the Company and the Investors (the “Escrow Account”). Prior to or on the Closing Date (as hereinafter
defined), each of the Investors will deposit in the Escrow Account an amount equal to the price per Unit as shown on the cover page of the Prospectus multiplied by the number of Units to be purchased by such Investor (such amounts in the aggregate
are hereinafter referred to as the “Escrow Funds”). At 12:00 p.m., Pacific time, on September 28, 2005 or at such other time or times on such other date or dates as provided in the Escrow Agreement (such date or dates are
hereinafter referred to as the “Closing Date”), the Escrow Agent will disburse the Escrow Funds from the Escrow Account to the Company and the Lead Placement Agent as provided in the Escrow Agreement and the Company shall deliver
the Units to the Investors. The Shares shall be delivered to the Investors through the facilities of The Depository Trust Company’s DWAC system. Each Investor will receive from the Company the Warrants purchased by the Investor promptly
following the Closing. The closing of the sale of the Units to the Investors (the “Closing”) shall take place at the office of Morrison & Foerster LLP, 425 Market Street, San Francisco, California 94105, or such other place
as may be agreed upon by the Company and the Lead Placement Agent. All actions taken at the Closing shall be deemed to have occurred simultaneously. The parties agree that closing of the purchase of the Units will be on an “any or all”
basis such that there may be more than one Closing or the Lead Placement Agent may specify a single Closing at which the closing of the subscription for all Units shall occur. 
  
 The Shares and the Warrants shall be registered in such names and in such denominations as the Lead Placement Agent shall
request by written notice to the Company. 
  
 3.
Representations and Warranties of the Company. The Company represents and warrants to the Placement Agents that: 
  
 (a) Registration Statement. The Company has filed with the Commission a “shelf” registration statement on Form S-3 (Registration
No. 333-125975), which has become effective, relating to the Securities, under the Securities Act of 1933, as amended (the “Act”), and the rules and regulations (collectively referred to as the “Rules and
Regulations”) of the Commission promulgated thereunder. The registration statement, as amended at the time it became effective, including the exhibits and information (if any) deemed to be part of the registration statement at the time of
effectiveness pursuant to Rule 430A or Rule 434(d) under the Act, is hereinafter referred to as the “Registration Statement.” No stop order suspending the effectiveness of the Registration Statement has been issued and, to the
Company’s knowledge, no proceeding for that purpose has been initiated or threatened by the Commission. The Company, if required by the Rules and Regulations, proposes to file the Prospectus (as hereinafter defined) with the Commission pursuant
to Rule 424(b) of the Rules and Regulations (“Rule 424(b)”). The 

  

 2 

 
Prospectus, in the form in which it is to be filed with the Commission pursuant to Rule 424(b), or, if the Prospectus is not to be filed with the Commission
pursuant to Rule 424(b), the Prospectus in the form included as part of the Registration Statement at the time the Registration Statement became effective, is hereinafter referred to as the “Prospectus,” except that if any revised
prospectus or prospectus supplement shall be provided to the Placement Agents by the Company for use in connection with the offering and sale of the Units which differs from the Prospectus (whether or not such revised prospectus or prospectus
supplement is required to be filed by the Company pursuant to Rule 424(b)), the term “Prospectus” shall be deemed to include such revised prospectus or prospectus supplement, as the case may be, from and after the time it is first provided
to the Placement Agents for such use. Any preliminary prospectus or prospectus subject to completion included in the Registration Statement or filed with the Commission pursuant to Rule 424 under the Act is hereafter called a “Preliminary
Prospectus.” Any reference herein to the Registration Statement, any Preliminary Prospectus or the Prospectus shall be deemed to refer to and include the documents incorporated by reference therein pursuant to Item 12 of Form S-3 which
were filed by the Company under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), on or before the last to occur of the effective date of the Registration Statement, the date of the Preliminary Prospectus, or the
date of the Prospectus, and any reference herein to the terms “amend,” “amendment” or “supplement” with respect to the Registration Statement, any Preliminary Prospectus or the Prospectus shall be deemed to refer to and
include (i) the filing of any document under the Exchange Act after the effective date of the Registration Statement, the date of such Preliminary Prospectus or the date of the Prospectus, as the case may be, and on or before the Closing Date,
which is incorporated therein by reference and (ii) any such document so filed. As used in this Agreement, the phrase “disclosed in” as it relates to information disclosed in any document includes any information included or
incorporated by reference in such document. 
  
 (b)
Registration Statement and Prospectus. When the Registration Statement became effective, the Registration Statement (and any post-effective amendment thereto), as amended or as supplemented if the Company shall have filed with the Commission
any amendment or supplement to the Registration Statement, complied in all material respects with the Act and the Rules and Regulations, and did not contain any untrue statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading. Upon the filing or first delivery to the Investors of the Prospectus, as of the date hereof, and at the Closing Date, the Prospectus (as amended or as supplemented if the
Company shall have filed with the Commission any amendment or supplement to the Prospectus), complied and will comply in all material respects with the Act and the Rules and Regulations, and did not and will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein (in light of the circumstances under which they were made) not misleading; except that no representation or warranty is made
in this Section 3(b) with respect to statements or omissions made in reliance upon and in conformity with written information furnished to the Company by the Placement Agents expressly for inclusion in the Registration Statement or the
Prospectus, or any amendment or supplement thereto, as stated in Section 7(b) hereof. The Company has not distributed any offering materials in connection with the offering and sale of the Units other than the Registration Statement and the
Prospectus. 
  

 3 

 (c) Subsidiaries. SynX Pharma, Inc., Epoch Biosciences, Inc., Nanogen Europe B.V., Nanotronics,
Inc., Nanogen Recognomics GmbH and Oy Jurilab Ltd are the only subsidiaries of the Company. Except as set forth in the Prospectus, the Company owns, directly or indirectly, all or a majority of the capital stock, membership interests or partnership
interests, as applicable, of each such subsidiary free and clear of any lien, charge, security interest, encumbrance, right of first refusal or other restriction, and all the issued and outstanding shares of capital stock, membership interests or
partnership interest of each such subsidiary are validly issued and are fully paid, nonassessable and free of preemptive and similar rights. The capitalized term “Subsidiaries” or “Subsidiaries” as used herein shall refer to the
foregoing subsidiaries of the Company other than Oy Jurilab Ltd. 
  
 (d) Financial Statements. The consolidated financial statements and the related notes thereto of the Company included or incorporated by reference in the Registration Statement and the Prospectus comply in all material respects with
the applicable requirements of the Act and the Exchange Act, as applicable, and present fairly, in all material respects the consolidated financial position of the Company and its Subsidiaries, taken as a whole, as of the dates indicated and the
results of their consolidated operations and the changes in their consolidated cash flows for the periods specified; such financial statements have been prepared in conformity with generally accepted accounting principles applied on a consistent
basis throughout the periods covered thereby (except as otherwise stated therein and subject, in the case of unaudited financial statements, to the absence of footnotes and normal year end adjustments), and the other financial and statistical
information of the Company included or incorporated by reference in the Registration Statement and the Prospectus has been derived from the accounting records of the Company and its Subsidiaries and presents fairly the information shown thereby. The
pro forma financial statements and other pro forma financial information, if any, included or incorporated by reference in the Registration Statement and the Prospectus with respect to the Company present fairly, and with respect the information
shown therein, have been prepared in accordance with the applicable requirements of the Act and the Rules and Regulations with respect to pro forma financial statements (including Article 11 of Regulation S-X) and have been properly computed on the
basis described therein. No other consolidated financial statements or schedules of the Company or any other entity are required by the Act or the Rules and Regulations to be included in the Registration Statement or the Prospectus. 
  
 (e) No Material Adverse Change. Except as set forth in or otherwise
contemplated by the Registration Statement (exclusive of any amendment thereof but inclusive of any report incorporated by reference therein on or prior to the date of this Agreement) or the Prospectus (exclusive of any supplement thereto but
inclusive of any report incorporated by reference therein on or prior to the date of this Agreement), since the date of the most recent financial statements of the Company included or incorporated by reference in the Registration Statement and the
Prospectus and prior to Closing, (i) there has not been any change in the capital stock of the Company (except for changes in the number of outstanding shares of Common Stock of the Company due to the issuance of shares upon the exercise or
conversion of securities exercisable for, or convertible into, shares of Common Stock outstanding on the date hereof) or long-term debt of the Company or any of its Subsidiaries or any dividend or distribution of any kind declared, set aside for
payment, paid or made by the Company on any class of capital stock; (ii) any material adverse change, or, to the knowledge of the Company, any development that would result in a material adverse change in or affecting the general affairs,
business, properties, 

  

 4 

 
management, consolidated financial position, stockholders’ equity or results of operations of the Company and its Subsidiaries taken as a whole (a
“Material Adverse Change”); (iii) neither the Company nor any of its Subsidiaries have entered or will enter into any transaction or agreement, not in the ordinary course of business, that is material to the Company and its
Subsidiaries taken as a whole or incurred or will incur any liability or obligation, direct or contingent, not in the ordinary course of business, that is material to the Company and its Subsidiaries taken as a whole; and (iv) neither the
Company nor any of its Subsidiaries has sustained or will sustain any material loss or interference with its business from any force majeure, including fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor
disturbance or dispute or any action, order or decree of any court or arbitrator or governmental or regulatory authority, except in each case as otherwise disclosed in the Registration Statement and the Prospectus. 
  
 (f) Organization. Each of the Company and its Subsidiaries,
respectively, is and at the Closing Date will be, duly organized, validly existing as a corporation or other business entity, as applicable, and in good standing under the laws of its respective jurisdiction of organization, and each of the Company
and its Subsidiaries, respectively, is and at the Closing Date will be, duly qualified as a foreign corporation for transaction of business and in good standing under the laws of each other jurisdiction in which their respective ownership or lease
of property or the conduct of their respective businesses requires such qualification, and have, and at the Closing Date will have, all corporate or other power and authority necessary to own or hold their respective properties and to conduct their
respective businesses as described in the Registration Statement and the Prospectus, except where the failure to be so qualified or in good standing or have such power or authority would not, individually or in the aggregate, have a material adverse
effect or would have a material adverse effect on or affecting the general affairs, business, properties, management, consolidated financial position, stockholders’ equity or results of operations of the Company and its Subsidiaries taken as a
whole (a “Material Adverse Effect”). 
  
 (g)
Capitalization. The issued and outstanding shares of capital stock of the Company have been validly issued, are fully paid and nonassessable and, other than as disclosed in or contemplated by the Registration Statement or the Prospectus, are
not subject to any preemptive or similar rights. The Company has an authorized, issued and outstanding capitalization as set forth in the Registration Statement and the Prospectus as of the dates referred to therein (other than the grant of
additional options under the Company’s existing stock option plans, or changes in the number of outstanding shares of Common Stock of the Company due to the issuance of shares upon the exercise or conversion of securities exercisable for, or
convertible into, shares of Common Stock outstanding on the date hereof) and such authorized capital stock conforms to the description thereof set forth in the Registration Statement and the Prospectus. The description of the securities of the
Company in the Registration Statement and the Prospectus is, and at the Closing Date will be, complete and accurate in all material respects. Except as disclosed in or contemplated by the Registration Statement or the Prospectus, as of the date
referred to therein, the Company did not have outstanding any options to purchase, or any rights or warrants to subscribe for, or any securities or obligations convertible into, or exchangeable for, or any contracts or commitments to issue or sell,
any shares of capital stock or other securities. 
  

 5 

 (h) Due Authorization and Enforceability. The Company has full legal power and authority to enter
into this Agreement and the Escrow Agreement (together, the “Transaction Documents”) and the Warrants and to consummate the transactions contemplated hereby and thereby by the Company. The Transaction Documents have been duly
authorized, executed and delivered by the Company and constitute legal, valid and binding obligations of the Company enforceable against the Company in accordance with their respective terms, except as rights to indemnity and contribution thereunder
may be limited by federal or state securities laws and matters of public policy and except as such enforceability may be subject to the effect of applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights
generally and equitable principles of general applicability. When the Warrants have been duly executed and delivered by the Company to the Investors in accordance with this Agreement, the Warrants will constitute legal, valid and binding obligations
of the Company enforceable against the Company in accordance with their respective terms, except as rights to indemnity and contribution thereunder may be limited by federal or state securities laws and matters of public policy and except as such
enforceability may be subject to the effect of applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally and equitable principles of general applicability. 
  
 (i) The Securities. The Shares and the Warrant Shares have been duly
authorized by the Company and, when issued and delivered and paid for as provided herein, will be validly issued, fully paid and nonassessable and will conform to the descriptions thereof disclosed in the Prospectus; and the issuance of the Shares
and the Warrant Shares is not subject to any preemptive or similar rights. 
  
 (j) No Violation or Default. Neither the Company nor any of its Subsidiaries is: (i) in violation of its charter or by-laws or similar organizational documents; (ii) in default, and no event has
occurred that, with notice or lapse of time or both, would constitute such a default, in the due performance or observance of any term, covenant or condition contained in any indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound or to which any of the property or assets of the Company or any of its Subsidiaries is subject; or (iii) in
violation of any law or statute or any judgment, order, rule or regulation of any court or arbitrator or governmental or regulatory authority, except, in the case of each of clauses (ii) and (iii) above, for any such violation or default
that would not, individually or in the aggregate, have a Material Adverse Effect and, only with respect to the Subsidiaries, in the case of clause (i) above, except for any such violation that would not, individually or in the aggregate, have a
Material Adverse Effect. 
  
 (k) No Conflicts. The
execution, delivery and performance by the Company of each of the Transaction Documents, the issuance and sale by the Company of the Shares and the Warrant Shares and the consummation by the Company of the transactions contemplated by the
Transaction Documents will not (i) conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Company or any of its Subsidiaries pursuant to, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company or any of its Subsidiaries is a party or by which the Company or
any of its Subsidiaries is bound or to which any of the property or assets of the 

  

 6 

 
Company or any of its Subsidiaries is subject; (ii) result in any violation of the provisions of the charter or by-laws or similar organizational
documents of the Company or any of its Subsidiaries; or (iii) result in the violation of any law or statute or any judgment, order, rule or regulation of any court or arbitrator or governmental or regulatory authority, except, in the case of
each of clauses (i) and (iii) above, for any such conflict, breach, violation, default, lien, charge or encumbrance that would not, individually or in the aggregate, have a Material Adverse Effect and, only with respect to the
Subsidiaries, in the case of clause (ii) above, except for any such violation that would not, individually or in the aggregate, have a Material Adverse Effect. 
  
 (l) No Consents Required. No consent, approval, authorization, order, registration or qualification of or with any
court or arbitrator or governmental or regulatory authority is required for the execution, delivery and performance by the Company of each of the Transaction Documents, the issuance and sale by the Company of the Shares and the Warrant Shares and
the consummation by the Company of the transactions contemplated by the Transaction Documents, except for the inclusion of the Shares and the Warrant Shares for quotation on the NASDAQ National Market and such consents, approvals, authorizations,
orders and registrations or qualifications as may be required under applicable state securities laws or by the by-laws and rules of the NASD in connection with the distribution of the Units by the Placement Agents. 
  
 (m) Legal Proceedings. There are no legal, governmental or regulatory
actions, suits or proceedings pending, nor, to the Company’s knowledge, any legal, governmental or regulatory investigations pending, to which the Company or any of its Subsidiaries is a party or to which any property of the Company or any of
its Subsidiaries is the subject that, individually or in the aggregate, if determined adversely to the Company or any of its Subsidiaries, would reasonably be expected by the Company to have a Material Adverse Effect or materially and adversely
affect the ability of the Company to perform its obligations under the Transaction Documents; to the Company’s knowledge, no such actions, suits or proceedings are threatened or contemplated by any governmental or regulatory authority or
threatened by others; and (i) there are no current or pending legal, governmental or regulatory investigations, actions, suits or proceedings that are required under the Act to be disclosed in the Prospectus that are not so disclosed; and
(ii) there are no contracts or other documents that are required under the Act to be filed as exhibits to the Registration Statement that are not so filed. 
  

(n) Independent Accountants. Ernst & Young LLP, who have certified certain financial statements of the Company and its Subsidiaries,
serves as the Company’s independent registered public accounting firm (the “Accountants”) with respect to the Company and its Subsidiaries as required by the Act. 
  
 (o) Title to Real and Personal Property. The Company and its Subsidiaries have good and marketable title in fee
simple to all items of real property and good and marketable title to all personal property owned by them, in each case free and clear of all liens, encumbrances and claims except those that (i) do not materially interfere with the use made and
proposed to be made of such property by the Company and its Subsidiaries or (ii) would not, individually or in the aggregate, have a Material Adverse Effect, and except as disclosed in the Prospectus. Any real property leased by the Company and
its Subsidiaries is held by them under valid, existing and enforceable leases, without any liens, restrictions, encumbrances or claims, except those that (A) do not materially interfere with the use made or proposed to be made of such property
by the 

  

 7 

 
Company or any of its Subsidiaries or (B) would not, individually or in the aggregate, have a Material Adverse Effect. 
  
 (p) Title to Intellectual Property. The Company and its Subsidiaries
own or possess adequate rights to use all patents, patent applications, trademarks, service marks, trade names, trademark registrations, service mark registrations, copyrights, licenses and know-how (including trade secrets and other unpatented
and/or unpatentable proprietary or confidential information, systems or procedures) (collectively, the “Intellectual Property”) necessary for the conduct of their respective businesses as conducted as of the date hereof, except to
the extent that the failure to own or possess adequate rights to use such Intellectual Property would not, individually or in the aggregate, have a Material Adverse Effect, and except as disclosed in the Prospectus. The Intellectual Property of the
Company does not, to the knowledge of the Company, infringe or conflict with any right or valid and enforceable patent of any Intellectual Property of any third party which is the subject of a patent application known to the Company which could
result in a Material Adverse Effect, and, except as disclosed in the Prospectus, the Company and its Subsidiaries have not received any written notice of any claim of infringement or conflict which asserted Intellectual Property rights of others,
which infringement or conflict, if the subject of an unfavorable decision, would result in a Material Adverse Effect. To the knowledge of the Company, no third party, including any academic or governmental organization, possesses rights to the
Intellectual Property of the Company which, if exercised, could enable such third party to develop products competitive to those of the Company or could have a material adverse effect on the ability of the Company to conduct its business in the
manner disclosed in the Prospectus. 
  
 (q) No Undisclosed
Relationships. No relationship, direct or indirect, exists between or among the Company or any of its Subsidiaries, on the one hand, and the directors, officers, stockholders, customers or suppliers of the Company or any of its Subsidiaries, on
the other, which is required by the Act to be disclosed in the Registration Statement and the Prospectus and is not so disclosed. 
  
 (r) Investment Company Act. The Company is not and, after giving effect to the offering and sale of the Securities to be sold by the Company and
the application of the proceeds thereof as described in the Prospectus, will not be an “investment company” or an entity “controlled” by an “investment company” within the meaning of the Investment Company Act of 1940,
as amended, and the rules and regulations of the Commission promulgated thereunder. 
  
 (s) Taxes. The Company and its Subsidiaries have filed all federal, state, local and foreign tax returns which have been required to be filed and paid all taxes shown thereon through the date hereof, to the
extent that such taxes have become due and are not being contested in good faith; and no tax deficiency has been determined adversely to the Company or any of its Subsidiaries which has had, or would have, individually or in the aggregate, a
Material Adverse Effect. 
  
 (t) Licenses and Permits. The
Company and its Subsidiaries possess or have obtained all licenses, certificates, permits and other authorizations issued by, and have made all declarations and filings with, the appropriate federal, state, local and foreign governmental or
regulatory authorities that are necessary for the ownership or lease of their respective properties 

  

 8 

 
or the conduct of their respective businesses as described in the Registration Statement and the Prospectus (the “Permits”), except where
the failure to possess, obtain or make the same would not, individually or in the aggregate, have a Material Adverse Effect; and neither the Company nor any of its Subsidiaries has received written notice of any proceeding relating to revocation or
modification of any such Permit or has any reason to believe that such Permit will not be renewed in the ordinary course, except where such revocation or modification of any such Permit or the failure to obtain any such renewal would not,
individually or in the aggregate, have a Material Adverse Effect. 
  
 (u) No Labor Disputes. No labor disturbance by or dispute with employees of the Company or any of its Subsidiaries exists or, to the knowledge of the Company, is threatened which would result in a Material Adverse Effect. 

 
 (v) Compliance With Environmental Laws. The Company and its
Subsidiaries: (i) are in compliance with any and all applicable federal, state, local and foreign laws, rules, regulations, decisions and orders relating to the protection of human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants (collectively, “Environmental Laws”); (ii) have received and are in compliance with all permits, licenses and other approvals required of them under applicable Environmental Laws
to conduct their respective businesses as described in the Registration Statement and the Prospectus; and (iii) have not received notice of any actual or potential liability for the investigation or remediation of any disposal or release of
hazardous or toxic substances or wastes, pollutants or contaminants, except, in the case of any of clauses (i), (ii) or (iii) above, for any such failure to comply or failure to receive required permits, licenses, or other approvals or any
such liability as would not, individually or in the aggregate, have a Material Adverse Effect. 
  
 (w) Compliance With ERISA. Each material employee benefit plan, within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), that is
maintained, administered or contributed to by the Company or any of its affiliates for employees or former employees of the Company and its Subsidiaries has been maintained in material compliance with its terms and the requirements of any applicable
statutes, orders, rules and regulations, including but not limited to ERISA and the Internal Revenue Code of 1986, as amended (the “Code”); no prohibited transaction, within the meaning of Section 406 of ERISA or
Section 4975 of the Code, has occurred which would result in a material liability to the Company with respect to any such plan excluding transactions effected pursuant to a statutory or administrative exemption; and for each such plan that is
subject to the funding rules of Section 412 of the Code or Section 302 of ERISA, no “accumulated funding deficiency” as defined in Section 412 of the Code has been incurred, whether or not waived, and the fair market value
of the assets of each such plan (excluding for these purposes accrued but unpaid contributions) exceeds the present value of all benefits accrued under such plan determined using reasonable actuarial assumptions. 
  
 (x) Accounting Controls. The Company and its Subsidiaries maintain
systems 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 

  

 9 

 
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. The Company has established disclosure controls and procedures (as defined in Exchange Act Rules 13a-15 and 15d-15) for the
Company and designed such disclosure controls and procedures to ensure that material information relating to the Company and its Subsidiaries is made known to the certifying officers by others within those entities and that such disclosure controls
and procedures are appropriate to allow timely decisions regarding required disclosure to be included in the Company’s periodic filings under the Exchange Act. The Company’s certifying officers have evaluated the effectiveness of the
Company’s disclosure controls and procedures as of the end of the quarter ended June 30, 2005 (such date, the “Evaluation Date”). The Company presented in its Form 10-Q for the quarter ended June 30, 2005 the
conclusions of the certifying officers about the effectiveness of the disclosure controls and procedures based on their evaluations as of the Evaluation Date. Since the Evaluation Date, there have been no significant changes in the Company’s
internal control over financial reporting (as such term is defined in Exchange Act Rules 13a-15 and 15d-15) or, to the Company’s knowledge, in other factors that could significantly affect the Company’s internal controls. 
  
 (y) Insurance. The Company and its Subsidiaries carry, or are covered
by, insurance, including directors and officers liability insurance, in such amounts and covering such risks as are adequate for the conduct of its businesses as described in the Registration Statement and the Prospectus and the value of its
properties or as is customary for companies engaged in similar businesses in similar industries. 
  
 (z) No Unlawful Payments. Neither the Company nor any of its Subsidiaries has at any time during the last five years: (i) used any corporate
funds for any unlawful contribution to any candidate for public office; or (ii) made any payment to any federal or state government officer or official or other person charged with similar public duties, other than payments required or
permitted by the laws of the United States or any jurisdiction thereof. 
  
 (aa) No Broker’s Fees. Neither the Company nor any of its Subsidiaries is a party to any contract, agreement or understanding with any person (other than this Agreement) that would give rise to a valid claim against the Company
or any of its Subsidiaries or the Placement Agents for a brokerage commission, finder’s fee or like payment in connection with the offering and sale of the Units. 
  
 (bb) No Registration Rights or Lock-Up Expirations. No person has the right to require the Company or any of its
Subsidiaries to register any securities for sale under the Act by reason of the filing of the Registration Statement with the Commission or by reason of the issuance and sale of the Securities, except for rights which have been waived or complied
with. No securities of the Company are subject to a “lock-up” agreement or similar restriction on transfer that, in whole or in part, expired within 30 days of the date hereof or is scheduled to expire within 30 days of the date hereof,
except as otherwise contemplated by this Agreement. 
  
 (cc) No
Stabilization. The Company has not taken, directly or indirectly, any action designed to or that could cause or result in any stabilization or manipulation of the price of the Shares. 
  

 10 

 (dd) Forward-Looking Statements. No forward-looking statement (within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act) (a “Forward Looking Statement”) contained in the Registration Statement and the Prospectus has been made or reaffirmed without a reasonable basis or
has been disclosed other than in good faith. The Forward-Looking Statements incorporated by reference in the Registration Statement and the Prospectus from the Company’s Annual Report on Form 10-K for the year ended December 31, 2004,
Quarterly Reports on Form 10-Q for the periods ending on March 31, 2005 and June 30, 2005, and Current Reports on Form 8-K filed on July 6, 2004, December 21, 2004, January 11, 2005, June 10, 2005, and
August 19, 2005 (i) are available for coverage of the safe harbor for forward-looking statements set forth in Section 27A of the Act, Rule 175(b) under the Act, Section 21E of the Exchange Act or Rule 3b-6 under the Exchange Act,
as applicable, (ii) were made by the Company with a reasonable basis and in good faith and reflect the Company’s good faith reasonable best estimate of the matters described therein, at the respective dates as of which such statements were
made, and (iii) have been prepared in accordance with Item 10 of Regulation S-K under the Act. 
  
 (ee) Contracts. All material contracts to which the Company is a party have been duly authorized, executed and delivered by the Company, constitute
valid and binding agreements of the Company, assuming the due authorization, execution and delivery by the counterparties thereto, and are enforceable against the Company in accordance with the terms thereof, subject to the effect of applicable
bankruptcy, insolvency or similar laws affecting creditors’ rights generally and equitable principles of general applicability. 
  
 (ff) Certificates. No statement, representation or warranty made in the certificate to be delivered to the Placement Agents pursuant to
Section 6(h) below will be, when made, inaccurate, untrue or incorrect in any material respect. 
  
 (gg) Form S-3. The offering of the Securities would meet the requirements for registration with the Securities and Exchange Commission on
registration statement Form S-3 pursuant to the standards for Form S-3 in effect prior to October 21, 1992. 
  
 (hh) Compliance with Sarbanes Oxley and Listing Regulations. The Company is in compliance in all material respects with all of the provisions of
the Sarbanes Oxley Act of 2002 (the “Sarbanes Oxley Act”) that are effective and applicable to the Company as of the date hereof. The Common Stock is currently listed on NASDAQ. The Company has not, in the 12 months preceding the date
hereof, received notice from NASDAQ, or any other securities exchange or self regulatory organization on which the Common Stock is or has been listed or quoted to the effect that the Company is not in compliance with the listing or maintenance
requirements of such exchange or automated quotation system. The Company is in compliance with all such listing and maintenance requirements, and is not aware of any fact, circumstance or condition that would cause it to be out of compliance in the
foreseeable future with all such listing and maintenance requirements. 
  

 11 

 4. Further Agreements of the Company. The Company covenants and agrees with the Placement Agents
that: 
  
 (a) Effectiveness. The Registration Statement has
become effective, and if Rule 430A under the Act (“Rule 430A”) is used or the filing of the Prospectus is otherwise required under Rule 424(b), the Company will file the Prospectus (properly completed if Rule 430A has been used)
pursuant to Rule 424(b) within the prescribed time period and will provide a copy of such filing to the Placement Agents promptly following such filing. 
  
 (b) Amendments or Supplements. The Company will not, during such period as the Prospectus would be required by law to be delivered in connection
with sales of the Securities by an underwriter or dealer in connection with the offering contemplated by this Agreement, file any amendment or supplement to the Registration Statement or the Prospectus, except as required by law, unless a copy
thereof shall first have been submitted to the Placement Agents within a reasonable period of time prior to the filing thereof and the Placement Agents shall not have reasonably objected thereto in good faith. 
  
 (c) Notice to Placement Agents. The Company will notify the Placement
Agents promptly, and will, if requested, confirm such notification in writing: (1) when any post-effective amendment to the Registration Statement becomes effective, but only during the period mentioned in Section 4(b); (2) of any
request by the Commission for any amendment to the Registration Statement or any amendment or supplement to the Prospectus or for additional information relating to or in connection with the sale of the Securities, but only during the period
mentioned in Section 4(b); (3) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose or the threat thereof, but only during the
period mentioned in Section 4(b); (4) of becoming aware of the occurrence of any event during the period mentioned in Section 4(b) that in the judgment of the Company makes any statement made in the Registration Statement or the
Prospectus untrue in any material respect or that requires the making of any changes in the Registration Statement or the Prospectus in order to make the statements therein, in light of the circumstances in which they are made, not misleading; and
(5) of receipt by the Company of any notification with respect to any suspension of the qualification of the Securities for offer and sale in any jurisdiction. If at any time during the period mentioned in Section 4(b) the Commission shall
issue any order suspending the effectiveness of the Registration Statement in connection with the offering contemplated hereby, the Company will make every reasonable effort to obtain the withdrawal of any such order at the earliest possible moment.
If the Company has omitted any information from the Registration Statement, pursuant to Rule 430A, it will use its best efforts to comply with the provisions of and make all requisite filings with the Commission pursuant to said Rule 430A and to
notify the Placement Agents promptly of all such filings. 
  
 (d)
Ongoing Compliance of the Prospectus. If, at any time when a Prospectus relating to the Securities is required to be delivered under the Act, the Company becomes aware of the occurrence of any event as a result of which the Prospectus, as
then amended or supplemented, would, in the reasonable judgment of counsel to the Company or counsel to the Placement Agents, include any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not misleading, or the Registration Statement, as then amended or supplemented, would, in the reasonable judgment of counsel to the Company or counsel to the Placement Agents,
include any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein not misleading, or if for any other reason it is 

  

 12 

 
necessary, in the reasonable judgment of counsel to the Company or counsel to the Placement Agents, at any time to amend or supplement the Prospectus or the
Registration Statement to comply with the Act or the Rules and Regulations, the Company will promptly notify the Placement Agents and, subject to Section 4(b) hereof, will promptly prepare and file with the Commission, at the Company’s
expense, an amendment to the Registration Statement (or a report to be filed and incorporated by reference in the Registration Statement or the Prospectus) or an amendment or supplement to the Prospectus that corrects such statement or omission or
effects such compliance and will deliver to the Placement Agents, without charge, copies thereof in compliance with Section 4(e) below. The Company consents to the use of the Prospectus or any amendment or supplement thereto by the Placement
Agents, and the Placement Agents agree to provide to each Investor, prior to the Closing, a copy of the Prospectus and any amendments or supplements thereto. 
  
 (e) Delivery of Copies. The Company will furnish and deliver to the Placement Agents and counsel to the Lead Placement Agent without charge
(i) signed copies of the Registration Statement, including financial statements and schedules, and all exhibits thereto and (ii) so long as a prospectus relating to the Securities is required to be delivered under the Act, as many copies
of each Preliminary Prospectus or the Prospectus or any amendment or supplement thereto as the Placement Agents may reasonably request. 
  
 (f) Compliance with Undertakings. The Company will comply with all of the undertakings contained in the Registration Statement. 
  
 (g) Blue Sky Compliance. Prior to the sale of the Units to the
Investors, the Company will cooperate with the Placement Agents and their counsel in connection with the registration or qualification of the Units for offer and sale under the state securities or Blue Sky laws of such jurisdictions as the Placement
Agents may reasonably request; provided, that in no event shall the Company be obligated to qualify to do business in any jurisdiction where it is not now so qualified or to take any action which would subject it to general service of process in any
jurisdiction where it is not now so subject. 
  
 (h) Use of
Proceeds. The Company will apply the net proceeds from the offering and sale of the Units in the manner set forth in the Prospectus under the caption “Use of Proceeds.” 
  
 (i) NASDAQ National Market. The Company will use its best efforts to ensure that the Shares and the Warrant Shares
are quoted on the NASDAQ National Market at the time of the Closing. 
  
 (j) Reports. For a period of three years from the Closing Date, the Company will furnish to the Placement Agents, as soon as they are available, copies of all reports or other communications (financial or other) furnished to holders
of the Securities, other than any such reports or communications filed with or furnished to the Commission pursuant to the Commission’s EDGAR system. 
  
 (k) Clear Market; Standstill. 
  
 (i) For a period of 30 days after the date hereof, the Company will not: (1) offer, pledge, announce the intention to sell, sell,
contract to sell, sell any option or contract to 

  

 13 

 
purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or
indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock; or (2) enter into any swap or other arrangement that transfers, in whole or in part, any of the economic consequences of
ownership of the Common Stock, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of Common Stock or such other securities, in cash or otherwise, without the prior written consent of the Lead
Placement Agent, other than (A) the Securities to be sold hereunder, (B) securities required to be issued pursuant to contractual obligations of the Company in effect as of the date hereof and disclosed to the Lead Placement Agent or its
counsel prior to the Closing, (C) securities issued on a pro rata basis to all holders of a class of outstanding equity securities of the Company, (D) securities issued in connection with strategic alliances, acquisitions, mergers or
similar agreements, (E) equity securities issued pursuant to employee benefit or purchase plans (including plans adopted in accordance with Rule 10b5-1 promulgated by the Commission under the Exchange Act) in effect as of the date hereof, and
(F) options issued to new employees of the Company pursuant to the provisions of NASD Marketplace Rule 4350(i)(1)(A)(iv). 
  
 (ii) In addition to the restrictions set forth in paragraph (i) above, the Company will not, except as otherwise contemplated herein,
offer, announce the intention to offer, or sell any shares of Common Stock, any securities convertible into or exercisable or exchangeable for Common Stock or any other equity securities of the Company as part of an equity financing of the Company,
other than in connection with (1) a consolidation or merger of the Company with or into any other corporation or other entity, provided that such consolidation or merger is not effected solely to merge or consolidate with a wholly-owned
subsidiary of the Company or (2) any acquisition of the capital stock or assets of any other corporation or other entity, provided that such other corporation or entity is not a wholly-owned subsidiary of the Company (the
“Standstill”). The Standstill shall terminate on the earlier to occur of (A) December 31, 2005 and (B) such date on which the average closing price for the Common Stock on the Nasdaq National Market (or other market or
exchange on which the Common Stock is listed or quoted for trading on the date in question) for the twenty (20) trading days immediately preceding such date is equal to or exceeds $4.00 per share. 
  
 5. Expenses. Whether or not the transactions contemplated by this
Agreement are consummated or this Agreement is terminated, the Company will pay all of its costs and expenses incident to the performance of the obligations of the Company under this Agreement, including but not limited to costs and expenses of or
relating to (i) the preparation and filing of the Registration Statement (including each pre- and post-effective amendment thereto) and exhibits thereto, each Preliminary Prospectus, the Prospectus and any amendment or supplement to the
Prospectus, and the photocopying of copies thereof, (ii) the preparation and delivery of certificates representing the Securities, (iii) furnishing (including costs of shipping and mailing) such copies of the Registration Statement
(including all pre- and post-effective amendments thereto), the Prospectus and any Preliminary Prospectus, and all amendments and supplements to the Prospectus, as may be requested for use in connection with the direct placement of the Securities,
(iv) the quotation of the Common Stock on the NASDAQ National Market, (v) the registration or qualification of the Securities for offer and sale under the securities or Blue Sky laws of such jurisdictions designated pursuant to
Section 4(g), including the reasonable fees, disbursements and other charges of counsel to the Placement Agents in connection therewith, not 

  

 14 

 
to exceed $5,000 (such amount exclusive of any filing fees) without the consent of the Company, (vi) fees, disbursements and other charges of counsel to
the Company, (vii) fees and disbursements of the Accountants incurred in delivering the letters described in Section 6(g) of this Agreement and (viii) the fees of the Escrow Agent. It is understood, however, that except as provided in
this Section 5, Section 7 entitled “Indemnification and Contribution” and Section 8(b), the Placement Agents shall pay all of its own expenses, including the fees and disbursements of its counsel. 
  
 6. Conditions of the Obligations of the Placement Agents. The
obligations of the Placement Agents hereunder are subject to the following conditions: 
  
 (a) (i) No stop order suspending the effectiveness of the Registration Statement shall have been issued, and no proceedings for that purpose shall be pending or threatened by any securities or other governmental
authority (including, without limitation, the Commission), (ii) no order suspending the effectiveness of the Registration Statement or the qualification or registration of the Securities under the securities laws or Blue Sky laws of any
jurisdiction shall be in effect and no proceeding for such purpose shall be pending before or threatened or contemplated by any securities or other governmental authority (including, without limitation, the Commission), (iii) any request for
additional information on the part of the staff of any securities or other governmental authority (including, without limitation, the Commission) shall have been complied with to the satisfaction of the staff of the Commission or such authorities
and (iv) after the date hereof no amendment or supplement to the Registration Statement or the Prospectus shall have been filed unless a copy thereof was first submitted to the Lead Placement Agent and the Lead Placement Agent did not object
thereto in good faith. 
  
 (b) Since the respective dates as of
which information is given in the Registration Statement (exclusive of any amendment thereof) and the Prospectus (exclusive of any supplement thereto), (i) there shall not have been a Material Adverse Change, whether or not arising from
transactions in the ordinary course of business, in each case other than as set forth in or contemplated by the Registration Statement (exclusive of any amendment thereof but inclusive of any report incorporated by reference therein on or prior to
the date of this Agreement) or the Prospectus (exclusive of any supplement thereto but inclusive of any report incorporated by reference therein on or prior to the date of this Agreement), and (ii) the Company shall not have sustained any
material loss or interference with its business or properties from fire, explosion, flood or other casualty, whether or not covered by insurance, or from any labor dispute or any court or legislative or other governmental action, order or decree,
which is not set forth in the Registration Statement (exclusive of any amendment thereof but inclusive of any report incorporated by reference therein on or prior to the date of this Agreement) or the Prospectus (exclusive of any supplement thereto
but inclusive of any report incorporated by reference therein on or prior to the date of this Agreement), if in the judgment of the Lead Placement Agent any such development makes it impracticable or inadvisable to consummate the sale and delivery
of the Units to Investors at the public offering price. 
  
 (c)
Since the respective dates as of which information is given in the Registration Statement and the Prospectus (including, in each case, any report incorporated by reference therein on or prior to the date of this Agreement), there shall have been no
litigation or other proceeding instituted against the Company or any of its officers or directors in their capacities as 

  

 15 

 
such, before or by any federal, state or local court, commission, regulatory body, administrative agency or other governmental body, domestic or foreign,
which litigation or proceeding is expected by management to have a Material Adverse Effect. 
  
 (d) Each of the representations and warranties of the Company contained herein shall be true and correct at the Closing Date, as if made on such date, and all covenants and agreements herein contained to be performed
on the part of the Company and all conditions herein contained to be fulfilled or complied with by the Company at or prior to the Closing Date shall have been duly performed, fulfilled or complied with. 
  
 (e) The Placement Agents shall have received an opinion, dated the Closing
Date, of Morgan, Lewis & Bockius LLP, counsel to the Company, in form and substance reasonably satisfactory to the Lead Placement Agent, with respect to the matters set forth in Exhibit C hereto. 
  
 (f) The Placement Agents shall have received opinions, dated the Closing
Date, of O’Melveny & Myers LLP, Townsend and Townsend and Crew, LLP and McHale & Slavin, P.A., each of which is intellectual property counsel to the Company, in form and substance reasonably satisfactory to the Lead Placement
Agent, with respect to the matters set forth in Exhibit D hereto. 
  
 (g) Concurrently with the execution and delivery of this Agreement, or, if the Company elects to rely on Rule 430A, on the date of the Prospectus, the Accountants shall have furnished to the Placement Agents a letter, dated the date of its
delivery (the “Original Letter”), addressed to the Placement Agents and in form and substance reasonably satisfactory to the Lead Placement Agent containing statements and information of the type customarily included in
accountants’ “comfort letters” to underwriters, provided that the Placement Agents have made to the Accountants such representations as are required by the Accountants in order to permit the Accountants to prepare and so deliver the
Original Letter. At the Closing Date, the Accountants shall have furnished to the Placement Agents a letter, dated the date of its delivery, which shall confirm, on the basis of a review in accordance with the procedures set forth in the Original
Letter, that nothing has come to their attention during the period from the date of the Original Letter referred to in the prior sentence to a date (specified in the letter) not more than five days prior to the Closing Date which would require any
change in the Original Letter if it were required to be dated and delivered at the Closing Date. 
  
 (h) At the Closing Date, there shall be furnished to the Placement Agents a certificate, dated the date of its delivery, signed by each of the Chief
Executive Officer and the Chief Financial Officer of the Company, each in his capacity as such, in form and substance reasonably satisfactory to the Placement Agents to the effect that each signer has carefully examined the Registration Statement
and the Prospectus and that to each of such person’s knowledge: 
  
 (i) (A) (x) As of its effective date, the Registration Statement did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to
make the statements therein not misleading and (y) as of the date of such certificate, the Prospectus does not contain any untrue statement of 

  

 16 

 
a material fact or omit 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; and (B) no event has occurred as a result of which it is necessary to amend or supplement the Prospectus in order to make the statements therein not untrue or misleading in any material
respect; 
  
 (ii) Each of the representations and
warranties of the Company contained in this Agreement are true and correct as if such representations and warranties were made on the Closing Date; 
  
 (iii) Each of the covenants and agreements required in this Agreement to be performed by the Company on or prior to the Closing Date and
each condition required herein to be fulfilled or complied with by the Company on or prior to the Closing Date has been duly performed, fulfilled or complied with, in all material respects; 
  
 (iv) (A) No stop order suspending the effectiveness of
the Registration Statement or any part thereof shall have been issued, and no proceedings for that purpose shall be pending or threatened by any securities or other governmental authority (including, without limitation, the Commission), (B) no
order suspending the effectiveness of the Registration Statement or the qualification or registration of the Securities under the securities or Blue Sky laws of any jurisdiction shall be in effect and no proceeding for such purpose shall be pending
before or threatened or contemplated by any securities or other governmental authority (including, without limitation, the Commission), and (C) any request for additional information on the part of the staff of any securities or other
governmental authority (including, without limitation, the Commission) shall have been complied with to the satisfaction of the staff of the Commission or such authorities; and 
  
 (v) Subsequent to the date of the most recent financial statements disclosed in the Prospectus, there has
been no material adverse change in the financial position or results of operations of the Company, except as set forth in or contemplated by the Prospectus. 
  
 (i) The Securities shall be qualified for sale in such states as the Placement Agents may reasonably request and each such qualification shall be in
effect and not subject to any stop order or other proceeding on the Closing Date; provided that in no event shall the Company be obligated to qualify to do business in any jurisdiction where it is not now so qualified or to take any action which
would subject it to taxation or general service of process in any jurisdiction where it is not now so subject. 
  
 (j) The Company shall have furnished or caused to be furnished to the Placement Agents such certificates, in addition to those specifically mentioned
herein, as the Lead Placement Agent may have reasonably requested as to the accuracy and completeness, at the Closing Date, of any statement in the Registration Statement or the Prospectus, as to the accuracy, at the Closing Date, of the
representations and warranties of the Company, as to the performance by the Company of its obligations hereunder, or as to the fulfillment of the conditions concurrent and precedent to the obligations hereunder of the Placement Agents. 

 

 17 

 (k) The Lead Placement Agent shall have received an executed “lock-up” agreement, in the form
of Exhibit E hereto, from Howard Birndorf relating to sales and certain other dispositions of shares of Common Stock or certain other securities, and such lock-up agreement shall be in full force and effect on the Closing Date. 
  
 7. Indemnification and Contribution. 
  
 (a) Indemnification of the Placement Agents. The Company agrees to
indemnify and hold harmless each Placement Agent and their respective affiliates, directors, officers, employees, agents and each person, if any, who controls such Placement Agent within the meaning of Section 15 of the Act or Section 20
of the Exchange Act, from and against any and all losses, claims, damages and liabilities, joint or several (including, without limitation, reasonable fees of one outside legal counsel and other expenses reasonably incurred in connection with any
suit, action or proceeding or any claim asserted, as such fees and expenses are incurred) that arise out of, or are based upon any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or the
Prospectus (or any amendment or supplement thereto), or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances
under which they were made, not misleading, except insofar as such losses, claims, damages or liabilities arise out of, or are based upon, any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in
conformity with any information furnished to the Company in writing by the Placement Agents expressly for use therein, it being understood and agreed that the only such information furnished by the Placement Agents consists of the information
described as such in subsection (b) below. 
  
 (b)
Indemnification of the Company. Each Placement Agent, severally and not jointly, agrees to indemnify and hold harmless the Company, its affiliates, directors and officers who signed the Registration Statement, its employees, agents and each
person, if any, who controls the Company within the meaning of Section 15 of the Act or Section 20 of the Exchange Act to the same extent as the indemnity set forth in paragraph (a) above, but only with respect to any losses, claims,
damages or liabilities that arise out of, or are based upon, any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with any information furnished to the Company in writing by the Placement
Agents expressly for use in the Registration Statement or the Prospectus (or any amendment or supplement thereto), it being understood and agreed that the only such information furnished by the Placement Agents consists of the statements set forth
under the heading “Plan of Distribution.” 
  
 (c)
Notice and Procedures. If any suit, action, proceeding (including any governmental or regulatory investigation), claim or demand shall be brought, threatened or asserted against any person in respect of which indemnification may be sought
pursuant to either paragraph (a) or (b) above, such person (the “Indemnified Person”) shall promptly notify the person against whom such indemnification may be sought (the “Indemnifying Person”) in
writing; provided that the failure to notify the Indemnifying Person shall not relieve it from any liability that it may have under this Section 7 except to the extent that it has been prejudiced thereby; and provided, further, that the failure
to notify the Indemnifying Person shall not relieve it from any liability that it may have to an Indemnified Person otherwise than under this Section 

  

 18 

 
7. If any such proceeding shall be brought, threatened or asserted against an Indemnified Person and it shall have notified the Indemnifying Person thereof,
the Indemnifying Person shall retain counsel reasonably satisfactory to the Indemnified Person to represent the Indemnified Person and any others entitled to indemnification pursuant to this Section 7 that the Indemnifying Person may designate
in such proceeding and shall pay the fees and expenses of such counsel related to such proceeding, as incurred. In any such proceeding, any Indemnified Person shall have the right to retain its own counsel, but the fees and expenses of such counsel
shall be at the expense of such Indemnified Person, unless: (i) the Indemnifying Person and the Indemnified Person shall have mutually agreed to the contrary; (ii) the Indemnifying Person has failed within a reasonable time to retain
counsel reasonably satisfactory to the Indemnified Person; (iii) the Indemnified Person shall have reasonably concluded that there may be legal defenses available to it that are different from or in addition to those available to the
Indemnifying Person; or (iv) the named parties in any such proceeding (including any impleaded parties) include both the Indemnifying Person and the Indemnified Person and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them. It is understood and agreed that the Indemnifying Person shall not, in connection with any proceeding or related proceedings, be liable for the fees and expenses of more than
one separate firm (in addition to any local counsel) for all Indemnified Persons, and that all such fees and expenses shall be reasonable and shall be paid or reimbursed as they are incurred. Any such separate firm for the Placement Agents, their
affiliates, directors, officers, employees and agents and any control persons of the Placement Agents shall be designated in writing by the Placement Agents and any such separate firm for the Company, its directors, its officers who signed the
Registration Statement, its employees and agents, and any control persons of the Company shall be designated in writing by the Company. The Indemnifying Person shall not be liable for any settlement of any proceeding with respect to which
indemnification is available hereunder that is effected without its written consent, but if any such proceeding is settled with such consent or if there be a final judgment in any such proceeding for the plaintiff, the Indemnifying Person agrees to
indemnify each Indemnified Person from and against any loss or liability by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an Indemnified Person shall have requested that an Indemnifying Person
reimburse the Indemnified Person for the reasonable fees and expenses of counsel in connection with any such proceeding as contemplated by this paragraph, the Indemnifying Person shall be liable for any settlement of any proceeding effected without
its written consent if (i) such settlement is entered into more than 30 days after receipt by the Indemnifying Person of such request and (ii) the Indemnifying Person shall not have reimbursed the Indemnified Person in accordance with such
request prior to the date of such settlement. No Indemnifying Person shall, without the written consent of the Indemnified Person (which consent shall not be unreasonably withheld, conditioned or delayed), effect any settlement of any pending or
threatened proceeding in respect of which any Indemnified Person is or could have been a party and indemnification could have been sought hereunder by such Indemnified Person, unless such settlement (x) includes an unconditional release of such
Indemnified Person, in form and substance reasonably satisfactory to such Indemnified Person, from all liability on claims that are the subject matter of such proceeding and (y) does not include any statement as to or any admission of fault,
culpability or a failure to act by or on behalf of any Indemnified Person. 
  
 (d) Contribution. If the indemnification provided for in paragraphs (a) and (b) above is unavailable to an Indemnified Person or insufficient in respect of any losses, claims, damages 

  

 19 

 
or liabilities referred to therein, then each Indemnifying Person under such paragraph, in lieu of indemnifying such Indemnified Person thereunder, shall
contribute to the amount paid or payable by such Indemnified Person as a result of such losses, claims, damages or liabilities (i) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and
the Placement Agents on the other from the offering of the Units or (ii) if the allocation provided by clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) but also the relative fault of the Company on the one hand and the Placement Agents on the other in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative benefits received by the Company on the one hand and the Placement Agents on the other shall be deemed to be in the same respective proportions as the net proceeds (before deducting expenses) received
by the Company from the sale of the Units and the total fee received by the Placement Agents in connection therewith, in each case as set forth in the table on the cover of the Prospectus, bear to the aggregate offering price of the Units. The
relative fault of the Company on the one hand and the Placement Agents on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by the Company or by the Placement Agents and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. 
  
 (e) Limitation on Liability. The Company and the Placement Agents
agree that it would not be just and equitable if contribution pursuant to this Section 7 were determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in
paragraph (d) above. The amount paid or payable by an Indemnified Person as a result of the losses, claims, damages and liabilities referred to in paragraph (d) above shall be deemed to include, subject to the limitations set forth above,
any legal or other expenses incurred by such Indemnified Person (and not reimbursed by the Indemnifying Person) in connection with any such action or claim. Notwithstanding the provisions of this Section 7, in no event shall any Placement Agent
be required to contribute any amount in excess of the amount by which the fees received by such Placement Agent hereunder with respect to the offering of the Shares exceed the amount of any damages that such Placement Agent has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No Placement Agent shall be responsible in any way for the performance of the obligations of the other Placement Agent hereunder. No person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Placement Agents’ obligations in
Section 7(d) to contribute are several in proportion to the respective agency fee received by each of them and not joint. 
  
 (f) Non-Exclusive Remedies. The remedies provided for in this Section 7 are not exclusive and shall not limit any rights or remedies which may
otherwise be available to any Indemnified Person at law or in equity. 
  

 20 

 8. Termination. 
  
 (a) The obligations of the Placement Agents under this Agreement may be terminated, in the absolute discretion of the Lead
Placement Agent, at any time prior to the Closing Date, by notice to the Company from the Lead Placement Agent, without liability on the part of the Placement Agents to the Company if, prior to delivery and payment for the Units: (i) trading in
securities generally shall have been suspended or limited or minimum or maximum prices shall have been generally established on NASDAQ, the New York Stock Exchange, the American Stock Exchange, the National Association of Securities Dealers Inc.,
the Chicago Board Options Exchange, the Chicago Mercantile Exchange or the Chicago Board of Trade (each, a “Trading Market”), or additional material governmental restrictions, not in force on the date of this Agreement, shall have been
imposed upon trading in securities generally by any of the foregoing Trading Markets or by order of the Commission or any court or other governmental authority; (ii) trading in the Common Stock of the Company shall have been suspended by the
Commission or by NASDAQ, or trading of any other securities issued or guaranteed by the Company shall have been suspended on any Trading Market or in any over-the-counter market; (iii) a general moratorium on commercial banking activities shall
have been declared by federal, New York State or California authorities; or (iv) any change in the financial or securities markets in the United States or any outbreak or escalation of hostilities within or outside the United States, or
declaration by the United States of a national emergency or war or other calamity or crisis shall have occurred, the effect of any of which is, in the sole judgment of the Lead Placement Agent, material and adverse and makes it impracticable or
inadvisable to market the Units or proceed with the offering, sale or delivery of the Units on the terms and in the manner contemplated by this Agreement and the Prospectus. 
  
 (b) If this Agreement shall be terminated pursuant to any of the provisions hereof (other than a termination of the
Placement Agents’ engagement pursuant to Section 8(a)), or if the sale of the Units provided for herein is not consummated because any condition to the obligations of the Placement Agents set forth herein is not satisfied or because of any
refusal, inability or failure on the part of the Company to perform any agreement herein or comply with any provision hereof, the Company will, subject to demand by the Placement Agents, reimburse the Placement Agents for all reasonable
out-of-pocket expenses incurred in connection herewith. 
  
 9.
Notices. Notice given pursuant to any of the provisions of this Agreement shall be in writing and, unless otherwise specified, shall be mailed or delivered (a) if to the Company, at the office of Nanogen, Inc., 10398 Pacific Center
Court, San Diego, California 92121, Attention: Howard Birndorf, Chairman and Chief Executive Officer (facsimile: (858) 410-4949), with a copy (which shall not constitute notice) to Morgan, Lewis & Bockius LLP, One Market Plaza, Spear
Street Tower, San Francisco, CA 94105, Attention: Scott Karchmer, Esq. (facsimile: (415) 442-1001), (b) if to the Lead Placement Agent, at the office of Seven Hills Partners LLC, 88 Kearny Street, Fifth Floor, San Francisco, California
94108, Attention: Kathryn E. Coffey (facsimile: (415) 869-6262), with a copy (which shall not constitute notice) to Morrison & Foerster LLP, 425 Market Street, San Francisco, California 94105, Attention: Gavin B. Grover, Esq.
(facsimile: (415) 268-7522), or (3) if to the Co-Placement Agent, at the office of Stonegate Securities, Inc., 5950 Sherry Lane, Suite 410, Dallas, Texas 75225, Attention: Bob Blakely (facsimile: 214-987-1981), with a copy (which shall not
constitute notice) to Morrison & Foerster LLP, 425 Market Street, San Francisco, California 94105, 

  

 21 

 
Attention: Gavin B. Grover, Esq. (facsimile: (415) 268-7522). All notices, requests, consents and other communications hereunder shall be in writing,
shall be addressed to the receiving party’s address set forth above or to such other address as a party may designate by notice hereunder, and shall be either (i) delivered by hand, (ii) made by telex, telecopy, e-mail or facsimile
transmission, (iii) sent by recognized overnight courier, or (iv) sent by registered or certified mail, return receipt requested, postage prepaid. All notices, requests, consents and other communications hereunder shall be deemed to have
been made (i) if by hand, at the time of the delivery thereof to the receiving party at the address of such party set forth above, (ii) if made by telex, telecopy, e-mail or facsimile transmission, at the time that receipt thereof has been
acknowledged by electronic confirmation or otherwise, (iii) if sent by overnight courier, on the next business day following the day such notice is delivered to the courier service, or (iv) if sent by registered or certified mail, on the
5th business day following the day such mailing is made. 
  
 10.
Survival. The respective representations, warranties, agreements, covenants, indemnities and other statements of the Company and the Placement Agents set forth in this Agreement or made by or on behalf of them, respectively, pursuant to this
Agreement shall remain in full force and effect, regardless of (i) any investigation made by or on behalf of the Company, any of its officers or directors, the Placement Agents or any controlling person referred to in Section 7 hereof and
(ii) delivery of and payment for the Units. The respective agreements, covenants, indemnities and other statements set forth in Sections 5, 7 and 8 hereof shall remain in full force and effect, regardless of any termination or cancellation
of this Agreement. 
  
 11. Successors. This Agreement shall
inure to the benefit of and shall be binding upon the Placement Agents, the Company and their respective successors and legal representatives, and nothing expressed or mentioned in this Agreement is intended or shall be construed to give any other
person any legal or equitable right, remedy or claim under or in respect of this Agreement, or any provisions herein contained, this Agreement and all conditions and provisions hereof being intended to be and being for the sole and exclusive benefit
of such persons and for the benefit of no other person except that (i) the indemnification and contribution contained in Sections 7(a) and (d) of this Agreement shall also be for the benefit of the directors, officers, employees and
agents of the Placement Agents and any person or persons who control the Placement Agents within the meaning of Section 15 of the Act or Section 20 of the Exchange Act and (ii) the indemnification and contribution contained in
Sections 7(b) and (d) of this Agreement shall also be for the benefit of the directors of the Company, the officers of the Company who have signed the Registration Statement, its employees and agents, and any person or persons who control
the Company within the meaning of Section 15 of the Act or Section 20 of the Exchange Act. No purchaser of the Units shall be deemed to be a successor Investor by reason merely of such purchase. 
  
 12. Applicable Law. The validity and interpretations of this
Agreement, and the terms and conditions set forth herein, shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to the conflicts of laws provisions thereof. 
  
 13. Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 
  

 22 

 14. Entire Agreement; Amendments and Waiver. This Agreement constitutes the entire understanding
between the parties hereto as to the matters covered hereby and supersedes all prior understandings, written or oral, relating to such subject matter. The terms and provisions of this Agreement may be modified or amended, or any of the provisions
hereof waived, pursuant to the written consent of the Company and the Lead Placement Agent. 
  
 [Remainder of Page Intentionally Left Blank] 
  

 23 

 Please confirm that the foregoing correctly sets forth the agreement between the Company and the
Placement Agents. 
  

			
	 Very truly yours,

	
	 Nanogen, Inc.

		
	 By:
	 	 
	 	 	 Name:

	 	 	 Title:

  

			
	 Confirmed as of the date first

	 above mentioned:

	
	 Seven Hills Partners LLC

		
	 By:
	 	 
	 	 	 Name:

	 	 	 Title:

	
	 Stonegate Securities, Inc.

		
	 By:
	 	 
	 	 	 Name:

	 	 	 Title:

  

 24

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