Document:

EXHIBIT 4.1

	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  NUMBER

  	
  AmeriServ
  Financial, Inc.

  	
  SHARES

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  COMMON
  STOCK

  	
  [AMERISERV
  LOGO HERE]

  	
   

  
	
   

  	
   

  	
  COMMON
  STOCK

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  INCORPORATED UNDER THE
  LAWS OF THE COMMONWEALTH OF PENNSYLVANIA

  	
  SEE REVERSE
  FOR IMPORTANT NOTICE ON TRANSFER RESTRICTIONS AND OTHER INFORMATION

  
	
   

  	
   

  	
   

  
	
   

  	
  PAR VALUE $2.50 PER
  SHARE

  	
  CUSIP
  03074-A102

  
	
   

  	
   

  	
   

  

 

 

This Certifies that

 

is the record holder of 

 

FULLY PAID AND NONASSESSABLE SHARES OF COMMON
STOCK OF

 

AMERISERV FINANCIAL, INC.

 

transferable only on the books of the
Corporation by the holder hereof in person, or by duly authorized attorney,
upon surrender of this certificate properly endorsed.  This certificate is not valid unless countersigned and registered
by the Transfer Agent and Registrar.

 

Witness the facsimile seal of the Corporation and the
facsimile signatures of its duly authorized officers.

 

 

 

Dated:

 

 

                                                                                [SEAL]

 

	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  CORPORATE SECRETARY

  	
  CHIEF
  FINANCIAL OFFICER

  
	
   

  	
   

  
	
   

  
	
  AMERISERV FINANCIAL, INC.

  

 

 

 

                THIS
CERTIFICATE ALSO EVIDENCES AND ENTITLES THE HOLDER HEREOF TO CERTAIN RIGHTS AS
SET FORTH IN THE RIGHTS AGREEMENT BETWEEN AMERISERV FINANCIAL, INC. (THE
SUCCESSOR NAME OF USBANCORP, INC. (THE “COMPANY”) AND FLEET NATIONAL BANK, AS
RIGHTS AGENT (THE “RIGHTS AGENT”), DATED AS OF FEBRUARY 24, 1995 (THE “RIGHTS AGREEMENT”),
THE TERMS OF WHICH ARE HEREIN INCORPORATED HEREIN BY REFERENCE AND A COPY OF
WHICH IS ON FILE AT THE PRINCIPAL OFFICES OF THE COMPANY.  UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN
THE RIGHTS AGREEMENT, SUCH RIGHTS WILL BE EVIDENCED BY THIS CERTIFICATE.  THE COMPANY OR THE RIGHTS AGENT WILL MAIL TO
THE HOLDER OF THIS CERTIFICATE A COPY OF THE RIGHTS AGREEMENT, AS IN EFFECT ON
THE DATE OF MAILING WITHOUT CHARGE PROMPTLY AFTER RECEIPT OF A WRITTEN REQUEST
THEREFOR.  UNDER CERTAIN CIRCUMSTANCES
SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS ISSUED TO, OR HELD BY, ANY ADVERSE
PERSON OR ANY AFFILIATE OR ASSOCIATE THEREOF (AS SUCH TERMS ARE DEFINED IN THE
RIGHTS AGREEMENT), WHETHER CURRENTLY HELD BY OR ON BEHALF OF SUCH PERSON OR BY
ANY SUBSEQUENT HOLDER, MAY BECOME NULL AND VOID.

 

                The
following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as 
though they were written out in full according to applicable laws or
regulations:

 

	
  TEN COM

  	
  -

  	
  as tenants in common

  	
  UNIF GIFT MIN ACT

  	
  -

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Custodian

  	
   

  
	
  TEN ENT

  	
  -

  	
  as tenants by the
  entireties

  	
   

  	
   

  	
  (Cust)

  	
   

  	
  (Minor)

  
	
  JT TEN

  	
  -

  	
  as joint tenants with
  right of

  	
   

  	
   

  	
  under Uniform Gifts to
  Minors

  
	
   

  	
   

  	
  survivorship and not as
  tenants

  	
   

  	
   

  	
  Act

  	
   

  
	
   

  	
   

  	
  in common

  	
   

  	
   

  	
   

  	
  (State)

  
	
   

  	
   

  	
   

  	
  UNIF TRF MIN ACT

  	
  -

  	
   

  	
  Custodian (Unit age

  	
   

  	
  )

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  (Cust)

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  under Uniform Transfers

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  to Minors Act

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  (State)

  
														

 

 

Additional abbreviations may also be used though not in the above list

 

 

                FOR VALUE
RECEIVED,                                                               
hereby sell, assign and transfer unto

 

 

	
  PLEASE
  INSERT SOCIAL SECURITY OR OTHER

  	
   

  
	
  IDENTIFYING
  NUMBER OF ASSIGNEE

  	
   

  
	
   

  	
   

  

 

 

	
   

  
	
  (PLEASE
  PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)

  
	
   

  
	
   

  	
  Shares
  of

  
	
  the common stock
  represented by the within Certificate, and do hereby irrevocably constitute
  and appoint

  
	
   

  	
  Attorney

  
	
  to transfer the said stock
  on the books of the within named Corporation with full power of substitution
  in the premises.

  
			

 

 

 

	
   

  	
   

  	
   

  
	
  Dated

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  NOTICE:  THE SIGNATURE(S) TO THIS ASSIGNMENT MUST
  CORRESPOND WITH THE NAME(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN
  EVERY PARTICULAR WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.

  
	
  In
  Presence of

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  THE SIGNATURE(S) SHOULD BE
  GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS
  AND LOAN ASSOCIATIONS AND CREDIT UNIONS) WITH MEMBERSHIP IN AN APPROVED
  SIGNATURE GUARANTEE MEDALLION PROGRAM PURSUANT TO S.E.C. RULE 17ad-15.

  	
   

  	
   

  
					

 

KEEP
THIS CERTIFICATE IN A SAFE PLACE.  IF IT
IS LOST, STOLEN, OR DESTROYED, THE CORPORATION WILL REQUIRE A BOND OF INDEMNITY
AS A CONDITION TO THE ISSUANCE OF A REPLACEMENT CERTIFICATE.Exhibit 4.2

AMERISERV
FINANCIAL, INC.

PURCHASE AGREEMENT

THIS
PURCHASE AGREEMENT (this “Agreement”) is made as of the __ day of
October, 2004, by and between Ameriserv Financial, Inc., a corporation
organized under the laws of the State of Pennsylvania (the “Company”),
with its principal offices at Main and Franklin Streets, P.O. Box 430,
Johnstown, Pennsylvania 15907-0430, and the purchaser whose name and address is
set forth on the signature page hereof (the “Purchaser”).

RECITALS

A.            The Company desires to issue and
sell shares of the common stock, par value $2.50 per share, of the Company (the
“Common
Stock”) in a private placement (the “Offering”).  It is anticipated that the Offering will
occur in two stages.

B.            In furtherance of the Offering, the
Company has prepared and delivered to the Purchaser a confidential private
placement memorandum dated as of October 5, 2004 (such confidential private
placement memorandum, as amended or supplemented, including all documents
incorporated by reference therein, including any SEC Filings (as defined in
Section 4.15) and any other documents incorporated by reference pursuant
to Section 4.15 herein that are filed on or before the date hereof,
collectively, the “Private Placement Memorandum”).

C.            The Purchaser desires, upon the
terms and conditions set forth in this Agreement, to purchase shares of the
Company’s Common Stock in the Offering.

D.            The Company and the Purchaser are
executing and delivering this Agreement in reliance upon the exemption from
securities regulation afforded by Section 4(2) of the Securities Act (as
defined in Section 3.4) and Rule 506 under Regulation D.

IN
CONSIDERATION of the premises and mutual covenants contained in this Agreement
and other good and valuable consideration the receipt and sufficiency of which
are hereby acknowledged, the Company and the Purchaser agree as follows:

SECTION 1.     Authorization of
Sale of the Shares.  Subject to the
terms and conditions of this Agreement, the Company has authorized the sale of
up to ____________ aggregate shares (the “Shares”) of Common Stock at a purchase
price of $4.50 per Share in two stages, an Initial Closing and a Subsequent
Closing (as such terms are defined in Sections 3.2 and 3.3, respectively).  The portion of Shares to be issued and sold by
the Company at the Initial Closing may be referred to herein as the “Initial
Shares,” and the portion of Shares to be issued and sold at the
Subsequent Closing may be referred to herein as the “Subsequent Shares.”  The Company reserves the right to increase
or decrease the aggregate number of Shares of Common Stock to be sold prior to
the Initial Closing.

SECTION 2.   Agreement to Sell
and Purchase the Shares.  At either
or both of the Closings (as defined in Section 3.1), as the case may be, the
Company will sell to the

 

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Purchaser and the
Purchaser will buy from the Company, upon the terms and conditions hereinafter
set forth, the number of Shares set forth on the signature page hereto in the
following proportion: __% of the Shares at the Initial Closing (but not
exceeding an aggregate number of Shares constituting more than 19.9% of the
Company’s outstanding shares of Common Stock) and the balance of the Shares at
the Subsequent Closing.  The Company proposes
to enter into this same form of purchase agreement with certain other investors
(the “Other
Purchasers”) and expects to complete sales of the Shares to
them.  The Purchaser and the Other
Purchasers are hereinafter sometimes collectively referred to as the “Purchasers,”
and this Agreement and the agreements executed by the Other Purchasers are
hereinafter sometimes collectively referred to as the “Agreements.” Notwithstanding
any contrary provisions of the Agreements, the obligations of each Purchaser
are several and not joint with the obligations of any other Purchaser, and no
Purchaser shall be responsible in any way for the performance of the
obligations of any other Purchaser. 
Nothing contained herein, and no action taken by any Purchaser, shall be
deemed to constitute the Purchasers as a partnership, an association, a joint
venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Agreements.  Each Purchaser shall be entitled to
independently protect and enforce its rights, including without limitation the
rights arising out of its Agreement and it shall not be necessary for any other
Purchaser to be joined as an additional party in any proceeding for such
purpose.  The term “Placement Agent” shall mean
Lehman Brothers Inc.

SECTION 3.           Delivery
of the Shares at the Closings.

3.1    Location of the Closings.  The completion of the purchase and sale of
the Initial Shares and the Subsequent Shares (each, a “Closing,” and, collectively,
the “Closings”)
shall occur at the offices of Stevens & Lee P.C., 620 Freedom
Business Center, Suite 200, King of Prussia, PA 19406, on the dates set forth
hereafter (each, a “Closing Date,”
and, collectively, the “Closing Dates”).

3.2    Date and Timing of the
Initial Closing.  The completion of
the purchase and sale of the Initial Shares (the “Initial Closing”) shall occur as soon as practicable and as agreed by
the parties hereto within one (1) business day following the execution of
the Agreements, or on such later date or at such different location as the
parties shall agree in writing, but not prior to the date that all of the
conditions relevant to the Initial Closing set forth in Section 3.5 below have
been satisfied or waived by the appropriate party (the “Initial Closing Date”).  The Initial Closing shall occur at a time to
be agreed upon by the Company and the Placement Agent and of which the
Purchasers will be notified by facsimile transmission or otherwise.

3.3    Date and Timing of the Subsequent
Closing.  The completion
of the purchase and
sale of the Subsequent Shares (the “Subsequent Closing”) shall occur within three (3) business days
following the date on which all of the conditions relevant to the Subsequent
Closing set forth in Section 3.5 below have been satisfied or waived by the
appropriate party but no later than December 20, 2004, or on such later date or
at such different location as the Company and all Purchasers shall agree in
writing (the “Subsequent Closing Date”). 
The Subsequent Closing shall occur at a time to be agreed upon by the
Company and the Placement Agent and of which the Purchasers will be notified by
facsimile transmission or otherwise.

 

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3.4    Actions to be Taken
Prior to, and at, the Closings.  (a)     Upon execution of this Agreement, the
Company shall authorize its transfer agent (the “Transfer Agent”) to arrange
delivery to the Purchaser of one or more stock certificates registered in the
name of the Purchaser, or in such nominee name(s) as designated by the
Purchaser in writing, representing the number of Initial Shares issuable to the
Purchaser (that is, the product of the Closing Percentage and the number of
Shares to be purchased by the Purchaser as set forth on the signature page
hereto) and bearing an appropriate legend referring to the fact that the
Initial Shares were sold in reliance upon the exemption from registration under
the Securities Act of 1933, as amended (the “Securities Act”) provided by
Section 4(2) thereof and Rule 506 thereunder. 
At the Initial Closing, the Transfer Agent shall deliver to the
Placement Agent a certificate of the Transfer Agent, in form and substance
reasonably acceptable to the Placement Agent, certifying that it is duly
authorized to issue the Initial Shares.

(b)           Prior to the Subsequent Closing Date,
the Company shall authorize its transfer agent (the “Transfer Agent”) to arrange
delivery to the Purchaser of one or more stock certificates registered in the
name of the Purchaser, or in such nominee name(s) as designated by the
Purchaser in writing, representing the number of Subsequent Shares issuable to
the Purchaser (that is, the product of (i) the difference between 1 and the
Closing Percentage and (ii) the number of Shares to be purchased by the
Purchaser as set forth on the signature page hereto) and bearing an appropriate
legend referring to the fact that the Subsequent Shares were sold in reliance
upon the exemption from registration under the Securities Act of 1933, as
amended (the “Securities Act”) provided by Section 4(2) thereof and Rule 506
thereunder.  At the Subsequent Closing,
the Transfer Agent shall deliver to the Placement Agent a certificate of the
Transfer Agent, in form and substance reasonably acceptable to the Placement
Agent, certifying that it is duly authorized to issue the Subsequent Shares.

(c)           The name(s) in which the stock
certificates for Shares are to be registered are set forth in the Stock
Certificate Questionnaire included in the Questionnaire attached hereto as
Appendix I (the “Questionnaire”).

3.5    Conditions Precedent to Closings.  (a)    The
Company’s obligation to complete the purchase and sale of the Initial Shares
and deliver such stock certificate(s) to the Purchaser at the Closings shall be
subject to the following conditions, any one or more of which may be waived in
writing by the Company: 
(i) receipt by the Company of same-day funds in the full amount of
the purchase price for the Initial Shares being purchased hereunder;
(ii) completion of the purchases and sales under the Agreements with
Purchasers of Initial Shares having an aggregate purchase price of at least
eight million US dollars ($8,000,000); (iii) the accuracy of the
representations and warranties (as if such representations and warranties were
made on the applicable Closing Date) made by the Purchasers and the fulfillment
of those undertakings and covenants of the Purchasers required to be fulfilled
prior to the applicable Closing; (iv) the Purchaser shall have executed
and delivered to the Company the Registration Statement Questionnaire attached
hereto as part of the Questionnaire, pursuant to which the Purchaser shall
provide information necessary to confirm such Purchaser’s status as an
“accredited investor” as defined in Rule 501 promulgated under the
Securities Act; (v) no proceeding challenging this Agreement or any of the
Agreements with any of the Other 

 

3

 

Purchasers or the transactions contemplated hereby or thereby or
seeking to prohibit, alter, prevent or materially delay the applicable Closing
shall have been instituted or shall be pending before any court, arbitrator or
governmental body, agency or official; 
and (vi) the sale of the Initial Shares shall not be prohibited by
any law or governmental order or regulation. The Purchaser’s obligation to
accept delivery of such stock certificate(s) and to pay for the Initial Shares
evidenced thereby shall be subject to the conditions:  (aa) that the representations and warranties made by the
Company herein are accurate as of the Initial Closing Date; (bb) that the
Company has fulfilled all undertakings and covenants set forth herein required
to be fulfilled prior to the Initial Closing; (cc) that the Common Stock
shall be quoted on the Nasdaq National Market System (“Nasdaq”); (dd) the absence of
any material adverse change affecting the Company, its financial condition or
its results of operations; and (ee) the sale of Subsequent Shares shall
not be prohibited by any law or governmental order or regulation.

(b)           The Company’s obligation to complete
the purchase and sale of the Subsequent Shares and deliver such stock
certificate(s) to the Purchaser at the Closings shall be subject to the
following conditions, any one or more of which may be waived in writing by the
Company:  (i) receipt by the
Company of same-day funds in the full amount of the purchase price for the
Subsequent Shares being purchased hereunder; (ii) the accuracy of the
representations and warranties (as if such representations and warranties were
made on the applicable Closing Date) made by the Purchasers and the fulfillment
of those undertakings and covenants of the Purchasers required to be fulfilled
prior to the applicable Closing; (iii) the delivery of a certificate
executed by the Chief Executive Officer of the Company certifying that all of
the conditions set forth in this subsection (b) have been met; (iv) no
proceeding challenging this Agreement or any of the Agreements with any of the
Other Purchasers or the transactions contemplated hereby or thereby or seeking
to prohibit, alter, prevent or materially delay the applicable Closing shall
have been instituted or shall be pending before any court, arbitrator or
governmental body, agency or official; 
(v) the absence of any material adverse change affecting the Company,
its financial condition or its results of operations; (vi) the sale of Subsequent
Shares shall not be prohibited by any law or governmental order or regulation
and (vii) the Company shall have obtained the requisite stockholder approval
(the “Required
Stockholder Approval”) of the transactions contemplated herein to
take place at the Subsequent Closing in a manner that complies with Rule
4350(i) of the National Association of Securities Dealers, Inc. (“NASD”).  
The Company shall give the Purchaser prompt notice of the satisfaction
of the condition set forth in clause (vii) of the preceding sentence (the “Subseqent
Share Notice”).  The
Purchaser’s obligation to accept delivery of such stock certificate(s) and to
pay for the Subsequent Shares evidenced thereby shall be subject to the
conditions:  (aa) that the
representations and warranties made by the Company herein are accurate as of
the Subsequent Closing Date; (bb) that the Company has fulfilled all
undertakings and covenants set forth herein required to be fulfilled prior to
the Subsequent Closing; (cc) that the Common Stock shall be quoted on the
Nasdaq National Market System (“Nasdaq”); (dd) the absence of any material
adverse change affecting the Company, its financial condition or its results of
operations; (ee) the sale of Subsequent Shares shall not be prohibited by
any law or governmental order or regulation; and (ff) the VWAP (as defined
below) of the Common Stock shall have been at least $4.50.

(c)           If the condition set forth in Section
3.5(b)(ff) hereof is not met within one (1) business day after receipt of the
Required Stockholder Approval, Purchaser shall have the

 

4

 

option, but not the obligation, to purchase the Subsequent Shares (the “Subsequent
Share Option”) notwithstanding the non-fulfillment of such
condition, and shall have five (5) business days after the Subsequent Share
Notice to exercise all or a portion of the Subsequent Share Option to purchase
all or a portion of the Subsequent Shares. 
The Subsequent Share Option may be exercised by delivery to the Company
of written notice providing: (i) the name of the Purchaser; (ii) the address to
which Common Stock certificates are to be mailed; and (iv) payment in the
amount of the product of $4.50 times the number of Subsequent Shares with
respect to which the Subsequent Share Option is being exercised, delivered in
person or sent by registered mail, return receipt requested, to the Company,
and the Subsequent Share Option shall be considered exercised on the date the
notice and appropriate payment are delivered to the Company or deposited in the
mail, as the case may be.

(d)           “VWAP” means the quotient of (i) the
average of the closing high bid price per share for each of the twenty (20)
trading days preceding the date of the Required Stockholder Approval multiplied
by the number of shares traded on such day as set forth by Nasdaq, divided by
(ii) the total number of shares traded on such days.

SECTION 4.           Representations,
Warranties and Covenants of the Company. 
The Company hereby represents and warrants to, and covenants with, the
Purchaser as follows:

4.1    Organization
and Qualification.   The Company is
a corporation duly incorporated, validly existing and in good standing under
the laws of the Commonwealth of Pennsylvania and the Company is qualified to do
business as a foreign corporation in each jurisdiction in which qualification
is required, except where failure to so qualify would not reasonably be
expected to have a Material Adverse Effect (as defined in Section 4.22).  Set forth on Schedule 4.1 is a complete and correct
list of all entities at least 50% of the outstanding equity of which is owned,
directly or indirectly, by the Company (or which are otherwise directly or
indirectly controlled by the Company) 
(each, a “Subsidiary” and collectively, the “Subsidiaries”) of the
Company.  Each Subsidiary is duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation and is qualified to do business as a foreign
corporation in each jurisdiction in which qualification is required, except
where failure to so qualify would not have a Material Adverse Effect.

4.2    Authorized
Capital Stock.  As of August 31,
2004, (i) the authorized capital stock of the Company consisted of twenty four
million (24,000,000) shares of Common Stock and two million (2,000,000) shares
of Preferred Stock, of which thirteen million nine hundred seventy seven
thousand twenty-three (13,977,023) shares of Common Stock and no shares of
Preferred Stock were issued and outstanding; (ii) there were outstanding
options granted pursuant to the Company’s stock option plans (as described in
Section 4.2(iii)) to purchase a total of three hundred ninety-three thousand
eight hundred forty-eight (393,848) shares of Common Stock; (iii) there were
available for issuance under the Company’s stock option and purchase plans a
total of eight hundred thousand (800,000) shares of Common Stock; and (iv)
there were one hundred sixty-seven thousand eight hundred twenty-eight
(167,828) shares of Common Stock reserved for issuance under the Company’s
dividend reinvestment plan.  The issued
and outstanding shares of the Company’s Common Stock have been duly authorized
and validly issued, are fully paid and nonassessable, have been issued in
compliance with all federal and state securities laws and were not issued in
violation of or subject to any

 

5

 

preemptive rights or
other rights to subscribe for or purchase securities, and conform in all
material respects to the description thereof contained in the Private Placement
Memorandum or incorporated by reference in the Private Placement
Memorandum.  Except for stock options
and other awards granted under the option, award and purchase plans of the
Company described in the Private Placement Memorandum or except as otherwise
disclosed in or contemplated by the Private Placement Memorandum, the Company
does not have outstanding any options to purchase, or any preemptive rights or
other rights to subscribe for or to purchase, any securities or obligations
convertible into, or any contracts or commitments to issue or sell, shares of
its capital stock or any such options, rights, convertible securities or
obligations.  The description of the
Company’s stock, stock bonus and other stock plans or arrangements and the
options or other rights granted and exercised thereunder, set forth or
incorporated by reference in the Private Placement Memorandum accurately and
fairly presents in all material respects all information pertaining to such
plans, arrangements, options and rights. 
With respect to each Subsidiary, (i) all the issued and outstanding
shares of the Subsidiary’s capital stock have been duly authorized and validly
issued, are fully paid and nonassessable, have been issued in compliance with
applicable federal and state securities laws, were not issued in violation of
or subject to any preemptive rights or other rights to subscribe for or
purchase securities, and (ii) there are no outstanding options to
purchase, or any preemptive rights or other rights to subscribe for or to purchase,
any securities or obligations convertible into, or any contracts or commitments
to issue or sell, shares of the Subsidiary’s capital stock or any such options,
rights, convertible securities or obligations. 
Except as disclosed on Schedule 4.1, the Company directly or indirectly
owns 100% of the outstanding equity of each Subsidiary.

4.3    Issuance,
Sale and Delivery of the Shares. 
The Shares have been duly authorized and, when issued, delivered and
paid for in the manner set forth in this Agreement, will be duly authorized,
validly issued, fully paid and nonassessable, subject, in the case of the
Subsequent Shares, to obtaining the Required Stockholder Approval.  No preemptive rights or other rights to
subscribe for or purchase exist with respect to the issuance and sale of the
Shares by the Company pursuant to this Agreement.  Except as set forth in the Private Placement Memorandum or in any
document incorporated by reference therein, no stockholder of the Company has
any right (which has not been waived or has not expired by reason of lapse of
time following notification of the Company’s intent to file the registration
statement to be filed by it pursuant to Section 7.1 (the “Registration Statement”)) to
require the Company to register the sale of any shares owned by such
stockholder under the Securities Act in the Registration Statement.  No further approval or authority of the
stockholders or the Board of Directors of the Company or any other person will
be required for the issuance and sale of the Shares to be sold by the Company
as contemplated herein.

4.4    Due
Execution, Delivery and Performance of this Agreement.  The Company has all requisite corporate
power and authority to enter into this Agreement and perform the transactions
contemplated hereby subject, in the case of the issuance, sale and delivery of
the Subsequent Shares, to obtaining the Required Stockholder Approval.  This Agreement has been duly authorized,
executed and delivered by the Company. 
The execution, delivery and performance of this Agreement by the Company
and the consummation of the transactions herein contemplated will not violate
any provision of the organizational documents of the Company and will not
result in the creation of any lien, charge, security interest or encumbrance
upon any assets of the Company or of any of its Subsidiaries pursuant to the
terms

 

6

 

or provisions of, or will
not conflict with, result in the breach or violation of, or constitute, either
by itself or upon notice or the passage of time or both, a default under any
agreement, mortgage, deed of trust, lease, franchise, license, indenture,
permit or other instrument to which the Company or any of its Subsidiaries is a
party or by which the Company or any of its Subsidiaries or any of their
respective properties may be bound or affected or, to the Company’s knowledge,
any statute or any authorization, judgment, decree, order, rule or regulation
of any court or any regulatory body, administrative agency or other
governmental body applicable to the Company or any of its Subsidiaries or any
of their respective properties where such conflict, breach, violation or
default is reasonably likely to result in a Material Adverse Effect.  No consent, approval, authorization or other
order of any court, regulatory body, administrative agency or other
governmental body is required for the execution and delivery of this Agreement
or the consummation of the transactions contemplated by this Agreement, except
for compliance with the Blue Sky laws and federal securities laws applicable to
the offering of the Shares.  Upon the
execution and delivery of this Agreement by the Company, and assuming the valid
execution hereof by the Purchaser, this Agreement will constitute a valid and
binding obligation of the Company, enforceable in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors’ and contracting
parties’ rights generally and except as enforceability may be subject to
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law) and except as the
indemnification agreements of the Company in Section 7.3 hereof may be legally
unenforceable.

4.5    Accountants.  The firm of Deloitte & Touche LLP, which
has expressed its opinion with respect to the consolidated financial statements
included in the Company’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2003 (portions of which are incorporated by reference in the
Private Placement Memorandum), has represented that it is an independent
accountant as required by the Securities Act and the rules and regulations
promulgated thereunder (the “Rules and Regulations”).

4.6    Contracts.  Except as set forth in the Private Placement
Memorandum, the contracts that are material to the Company are in full force
and effect on the date hereof; and neither the Company nor any of its
Subsidiaries nor, to the Company’s knowledge, any other party thereto, is in
breach of or default under any of such contracts which breach or default would
have a Material Adverse Effect.

4.7    No
Actions.  Except as disclosed in the
Private Placement Memorandum, (1) there are no legal or governmental
actions, suits or proceedings, pending or threatened,and (2) to the
Company’s knowledge, there are no legal or governmental actions, suits, or
proceedings threatened, to which the Company or any of its Subsidiaries is or
may be a party or subject or of which property of the Company or any of its
Subsidiaries is or may be the subject, or related to applicable environmental
or discrimination matters, or instituted by the Securities and Exchange
Commission (the “Commission”), the NASD, any state securities commission or
other governmental or regulatory entity, which actions, suits or proceedings,
individually or in the aggregate, would prevent or might reasonably be expected
to prevent or materially and adversely affect the transactions contemplated by
this Agreement or result in a Material Adverse Effect; and, to the Company’s
knowledge, no labor disturbance by the employees of the Company or of any of
its Subsidiaries exists, or is imminent which is reasonably expected to 

 

7

 

have a Material Adverse
Effect.  Except as disclosed in the
Private Placement Memorandum, neither the Company nor any of its Subsidiaries
is party to or subject to the provisions of any material injunction, judgment,
decree or order of any court, regulatory body administrative agency or other
governmental body.

4.8    Properties.  Each of the Company and its Subsidiaries has
good and marketable title to all the properties and assets reflected as owned
by it in the consolidated financial statements incorporated by reference in the
Private Placement Memorandum (the “Proprietary Assets”), subject to no lien,
mortgage, pledge, charge or encumbrance of any kind except (i) those, if
any, reflected in such consolidated financial statements, or (ii) those
which are not material in amount and do not materially adversely affect the use
made of such property by the Company or any of its Subsidiaries.  Each of the Company and its Subsidiaries
holds its leased properties under valid and binding leases, subject to such
exceptions as are not materially significant in relation to its business.  To the knowledge of the Company, the
Proprietary Assets of the Company and its Subsidiaries constitute all the
Proprietary Assets necessary to enable the Company and its Subsidiaries to
conduct their businesses in the manner in which such businesses have been and
are being conducted.  Except as set
forth in the Private Placement Memorandum, (x) neither the Company nor any of
its Subsidiaries has licensed any of its Proprietary Assets to any individual,
sole proprietorship, partnership, corporation, limited liability company,
business trust, unincorporated association, joint stock corporation, trust,
joint venture or other entity, any university or similar institution, or any
government or any agency or instrumentality or political subdivision thereof
(each a “Person”)
on an exclusive, semi-exclusive or royalty-free basis, and (y) neither the
Company nor any of its Subsidiaries has entered into any covenant not to
compete or contract limiting such entity’s ability to exploit fully any of such
entity’s material Proprietary Assets or to transact business in any material
market or geographical area or with any Person.  “Proprietary Assets” shall include, but shall not be limited to,
the Intellectual Property of the Company, as defined in Section 4.10 below.

4.9    No
Material Change.  Since June 30,
2004 and except as described in or specifically contemplated by the Private
Placement Memorandum:  (i) neither
the Company nor any of its Subsidiaries has incurred any material liabilities
or obligations, indirect, or contingent, or entered into any material oral or
written agreement or other transaction not in the ordinary course of business
or which could reasonably be expected to have a Material Adverse Effect;
(ii) neither the Company nor any of its Subsidiaries has sustained any
material loss or damage to its physical properties or assets from fire, flood,
windstorm, accident or other calamity not covered by insurance;
(iii) neither the Company nor any of its Subsidiaries has paid or declared
any dividends or other distributions with respect to its capital stock, and
neither the Company nor any of its Subsidiaries has defaulted in the payment of
principal or interest on any outstanding debt obligations; and (iv) there
has not been any change in the capital stock of the Company or of any of its
Subsidiaries other than the sale of the Shares hereunder and shares or options
issued pursuant to employee equity incentive plans or purchase plans approved
by the Company’s Board of Directors and repurchases of shares or options
pursuant to repurchase plans already approved by the Company’s Board of
Directors, or any increase in indebtedness material to the Company or any of
its Subsidiaries.

4.10    Intellectual
Property.  Except as disclosed in
the Private Placement Memorandum: 
(i) the Company owns or has obtained valid and enforceable licenses
or options

 

8

 

for the inventions,
patent applications, patents, trademarks (both registered and unregistered),
trade names, trademark applications, copyrights, copyright applications,
maskworks, maskwork applications, trade secrets, fictitious business names,
service marks, service mark applications, know how, customer lists, franchise
systems, computer software, computer program, designs, blueprints, engineering
drawings, proprietary products, source code, technology, proprietary rights or
other intellectual property rights or intangible assets and all licenses and
other rights required to use or exploit any of the foregoing, currently used in
the conduct of the Company’s business (collectively, the “Intellectual Property”); and
(ii) (a) there are no third parties who have any ownership rights to
any Intellectual Property that is owned by, or has been licensed to, the
Company for the products described in the Private Placement Memorandum that
would preclude the Company from conducting its business as currently conducted
and have a Material Adverse Effect, except for the ownership rights of the
owners of the Intellectual Property licensed or optioned by the Company;
(b) to the Company’s knowledge, there are currently no sales of any
products that would constitute an infringement by third parties of any
Intellectual Property owned, licensed or optioned by the Company, which
infringement would have a Material Adverse Effect; (c) there is no pending
or, to the Company’s knowledge, threatened action, suit, proceeding or claim by
others challenging the rights of the Company in or to any Intellectual Property
owned, licensed or optioned by the Company, other than claims which would not
reasonably be expected to have a Material Adverse Effect; (d) there is no
pending or, to the Company’s knowledge, threatened action, suit, proceeding or
claim by others challenging the validity or scope of any Intellectual Property
owned, licensed or optioned by the Company, other than any such actions, suits,
proceedings and claims that would not reasonably be expected to have a Material
Adverse Effect; and (e) there is no pending or, to the Company’s
knowledge, threatened action, suit, proceeding or claim by others that the
Company infringes or otherwise violates any patent, trademark, copyright, trade
secret or other proprietary right of others, other than non-material actions,
suits, proceedings and claims.

4.11    Compliance.  Other than as set forth in the Private
Placement Memorandum, neither the Company nor any of its Subsidiaries has been
advised, nor has reason to believe, that it is not conducting business in
compliance with all applicable laws, rules and regulations of the jurisdictions
in which it is conducting its business, including, without limitation, all
applicable local, state and federal environmental laws and regulations; in each
case, except where failure to be in compliance would not have a Material
Adverse Effect.

4.12    Taxes.  The Company and each of its Subsidiaries
have filed all necessary federal, state and foreign income and franchise tax
returns and have paid or accrued all taxes shown as due thereon, and neither
the Company nor any of its Subsidiaries has knowledge of a tax deficiency which
has been or might be asserted or threatened against it which is reasonably
likely to have a Material Adverse Effect.

4.13         Investment Company.  The Company is not an “investment company”
or an “affiliated person” of, or “promoter” or “principal underwriter” for an
investment company, within the meaning of the Investment Company Act of 1940,
as amended.

4.14    Offering
Materials.  Except for the SEC
Filings (as defined in Section 4.15 below), the Company has not distributed and
will not distribute prior to either of the Closing Dates to the Purchaser any
offering material or material non-public information in connection

 

9

 

with the offering and
sale of the Shares other than the Private Placement Memorandum or any amendment
or supplement thereto.  Neither the
Company nor any person acting on its behalf has in the past or will hereafter
take any action to sell, offer for sale or solicit offers to buy any securities
of the Company which would subject the offer, issuance or sale of the Shares
contemplated by this Agreement to the registration requirements of Section 5 of
the Securities Act.

4.15         Additional Information.  (a) 
To the extent incorporated by reference in the Private Placement
Memorandum, the information contained in the following documents, did not, as
of the date of the applicable document, include 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 the light of the circumstances
in which they were made, not misleading, as of their respective filing dates
or, if amended, as so amended (the following documents, collectively, the “SEC Filings”):

1.      The Company’s Annual
Report on Form 10-K for the year ended December 31, 2003 (excluding “Item
1.- Business” and “Item 7A Quantitative and Qualitative Disclosures About
Market Risk” set forth therein) filed with the Commission on March 23, 2004;

2.             The Company’s
Quarterly Reports on Form 10-Q for the quarters ended (i) March 31, 2004 filed
with the Commission on May 13, 2004 and (ii) June 30, 2004 filed with the
Commission on August 9, 2004;

3.      The Company’s Current
Reports on Form 8-K, filed with the Commission on January 5, 2004, January 28,
2004, August 26, 2004 and August 31, 2004;

4.             The Company’s Proxy
Statement on Schedule 14A for the 2004 Annual Meeting of Stockholders filed
with the Commission on March 17, 2004; and

5.      Any future filings the
Company makes with the Commission  under
Sections 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of
1934, as amended (the “Exchange Act”), until the Closing.

In addition, as of the date of this Agreement, the Private Placement
Memorandum, which, to the Company’s knowledge, the Placement Agent has
furnished to the Purchaser, does not include any untrue statement of a material
fact or omit to state any material fact necessary to make the statements
therein, in the light of the circumstances in which they were made, not
misleading.

(b)           In furtherance and not in limitation
of the provisions of Section 4.15(a), the consolidated financial statements of
the Company and the related notes contained in or incorporated by reference
into the SEC Filings present fairly in all material respects, in accordance
with generally accepted accounting principles, the consolidated financial
position of the Company and its Subsidiaries as of the dates indicated, and the
results of their operations, cash flows, and the changes in stockholders’
equity for the periods therein specified, subject, in the case of unaudited
financial statements for interim periods, to normal year-end audit adjustments
and the absence of full footnote disclosure as required by generally accepted
accounting principles.  Such
consolidated financial statements (including the related notes) have

 

10

 

been prepared in all material respects in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods therein specified, subject, in the case of unaudited financial
statements for interim periods, to normal year-end adjustments, and except as
otherwise described therein and except that unaudited financial statements may
not contain all footnotes required by generally accepted accounting principles.

4.16    Form
D.  No later than fifteen (15) days
after each of the Closings, the Company shall file a Form D with respect to the
Shares offered and purchased pursuant to such Closing as required under
Regulation D and shall provide a copy thereof to the Purchaser promptly after
filing.

4.17    Legal
Opinion.  Prior to the Initial
Closing, Stevens & Lee P.C. (“Stevens & Lee”), counsel to the
Company, will deliver its legal opinion to the Placement Agent substantially in
the form attached as Exhibit A to this Agreement, with specific reference
to the Initial Shares.  Such opinion
shall also state that each of the Purchasers may rely thereon as though it were
addressed directly to such Purchaser. 
Prior to the Subsequent Closing, Stevens and Lee shall reaffirm the
entirety of such legal opinion, with specific reference to the Subsequent
Shares.

4.18    Certificate.  At the Closing, the Company will deliver to
the Purchaser a certificate executed by the chief executive officer, or the
chief financial or accounting officer of the Company, dated the applicable
Closing Date, in form and substance reasonably satisfactory to the Purchaser,
to the effect that the representations and warranties of the Company set forth
in this Section 4 are true and correct as of such Closing Date, and the Company
has complied in all material respects with all the agreements and satisfied all
the conditions herein on its part to be performed or satisfied on or prior to
such Closing Date.

4.19    Reporting
Company; Form S-3.  The Company is
subject to the reporting requirements of the Exchange Act and has filed all
reports required thereby since June 30, 2004. 
The Company satisfies the registrant requirements for the use of a
registration statement on Form S-3 to register the Shares for resale by the
Purchaser under the Securities Act.  To the
Company’s knowledge, there exist no facts or circumstances (including without
limitation any required approvals or waivers or any circumstances that may
delay or prevent the obtaining of accountant’s consents) that reasonably could
be expected to prohibit or delay the preparation and filing of the registration
statement on Form S-3 for the resale of the Shares by the Purchaser
contemplated by Section 7 of this Agreement.

4.20    Quotation
on Nasdaq.  Except as set forth in
the SEC Documents, the Company has not, in the two years preceding the date
hereof, received notice (written or oral) from Nasdaq, any stock exchange,
market or trading facility on which the Common Stock is or has been listed (or
on which it has been quoted) to the effect that the Company is not in
compliance with the listing or maintenance requirements of such exchange,
market or trading facility.  The Company
is in compliance with all such listing and maintenance requirements.  The Company shall use its commercially
reasonable efforts to maintain the designation and quotation, or listing, of
the Common Stock on Nasdaq or on another national securities exchange for a
minimum of two (2) years following the last Closing Date.

 

11

 

4.21    Use
of Purchaser Name.  Except as may be
required by applicable law, the Company shall not use, directly or indirectly,
the Purchaser’s name or the name of any of its affiliates in any advertisement,
announcement, press release or other similar communication unless it has
received the prior written consent of the Purchaser for the specific use
contemplated or as otherwise required by applicable law or regulation.

4.22    Material
Adverse Effect.  As used in this
Section 4, the term “Material Adverse Effect” means a material
adverse effect upon the business, financial condition, results of operation,
properties, liabilities or operations of the Company and its Subsidiaries taken
as a whole.

4.23    No
Defaults.  Except as disclosed in
the Private Placement Memorandum, neither the Company nor any of its
Subsidiaries is in violation or default of any provision of its articles of
incorporation (or equivalent documents under relevant jurisdictions of
organization) or bylaws, or in breach of or default with respect to any
provision of any agreement, judgment, decree, order, mortgage, deed of trust,
lease, franchise, license, indenture, permit or other instrument to which it is
a party or by which it or any of its properties are bound and where such breach
or default is reasonably likely to result in a Material Adverse Effect.

4.24    Transfer
Taxes.  On the Closing Dates, all
stock transfer or other taxes (other than income or similar taxes) which are
required to be paid in connection with the sale and transfer of the Shares to
be sold to the Purchaser hereunder will be, or will have been, fully paid or
provided for by the Company, and all laws imposing such taxes will be or will
have been complied with.

4.25    Use
of Proceeds.  The Company will use
the proceeds from the sale of the Shares as described under “Use of Proceeds”
in the Private Placement Memorandum.

4.26    Price
of Common Stock.  The Company has
not taken any action intended to stabilize or manipulate the price of the
Company’s shares of the Common Stock to facilitate the sale or resale of the
Shares.  The Company has not repurchased
any of its shares of Common Stock since June 30, 2004.

4.27    Disclosure.  Except as included in the Private Placement
Memorandum, neither the Company nor, to the Company’s knowledge, any Person
acting on behalf of the Company, has provided the Purchaser with any
information that the Company believes constitutes material, non-public
information.  On or before 9:00 a.m.,
New York City Time, on  the first
business day after each Closing Date, the Company shall (i) issue a press
release in form reasonably acceptable to counsel for the Purchaser describing
the transactions contemplated by this Agreement that are relevant to such
Closing Date and (ii) file a Current Report on Form 8-K describing the material
terms of the transactions contemplated by this Agreement (including all
exhibits, the “8-K Filings”), and
disclosing such portions of the Private Placement Memorandum and the Chief
Exceutive Officer’s certificate delivered pursuant to Section 3.5(b) as contain
material nonpublic information with respect to the Company that has not
previously been publicly disclosed by the Company, and attaching, in the case
of the Initial Closing Date, as an exhibit to the first 8-K Filing a form of
this Agreement.  Except for information
that may be provided to the Purchaser pursuant to Section 5(h) of this
Agreement, the Company shall not,

 

12

 

and shall use
commercially reasonable efforts to cause each of its officers, directors,
employees and agents not to, provide Purchaser with any material nonpublic
information regarding the Company from and after the filing of the first 8-K
Filing without the express written consent of such Purchaser.  The Company understands and confirms that
the Purchaser will rely on the representations and covenants set forth in this
Section 4.27 in effecting transactions in securities of the Company.

4.28         Off-Balance Sheet Arrangements.  There is no transaction, arrangement, or
other relationship between the Company and an unconsolidated or other off
balance sheet entity that is required to be disclosed by the Company in its
Exchange Act filings and is not so disclosed or that otherwise would be
reasonably likely to have a Material Adverse Effect.

 

SECTION 5.           Representations,
Warranties and Covenants of the Purchaser.

(a)           The Purchaser
represents and warrants to, and covenants with, the Company that:  (i) the Purchaser is knowledgeable,
sophisticated and experienced in making, and is qualified to make, decisions
with respect to investments in shares representing an investment decision like
that involved in the purchase of the Shares, including investments in
securities issued by the Company and comparable entities, and has requested,
received, reviewed and considered all information it deems relevant in making
an informed decision to purchase the Shares, including the Private Placement
Memorandum; (ii) the Purchaser is acquiring the number of Shares set forth
on the signature page hereto in the ordinary course of its business and for its
own account for investment only and with no present intention or view toward
the public sale or distribution thereof, except in compliance with applicable
federal and state securities laws (this representation and warranty not
limiting the Purchaser’s right to sell such Shares pursuant to the Registration
Statement or in compliance with an exemption from registration under the
Securities Act or, other than with respect to any claims arising out of a
breach of this representation and warranty, the Purchaser’s right to
indemnification under Section 7.3); (iii) the Purchaser will not, directly
or indirectly, except (as to each of clauses (A), (B) and (C) below) in
compliance with and only to the extent required to comply with the Securities
Act, the Rules and Regulations and such other securities or Blue Sky laws as
may be applicable, (A) offer, sell, pledge, transfer or otherwise dispose of
(or solicit any offers to buy, purchase or otherwise acquire or take a pledge
of) any of the Shares, (B) engage in any short sale which results in a
disposition of any of the Shares by Purchaser, or (C) hedge the economic risk
of the Purchaser’s investment in the Shares; (iv) the Purchaser has completed
or caused to be completed the Questionnaire and the answers thereto are true
and correct in all material respects as of the date hereof and will be true and
correct in all material respects as of the Closing, and the Purchaser will
notify the Company as promptly as possible of any material change in any such
information provided in the Questionnaire prior to effectiveness of the
Registration Statement; (v) the Purchaser has, in connection with its
decision to purchase the number of Shares set forth on the signature page
hereto, relied solely upon the Private Placement Memorandum and the documents
included therein or incorporated by reference and the representations and
warranties of the Company contained herein; (vi) the Purchaser is an
“accredited investor” within the meaning of Rule 501(a) of Regulation D
promulgated under the Securities Act; and (vii) the Purchaser agrees to
notify the Company as promptly as possible of any change in any of the
foregoing information until such time as the Purchaser has sold all of its
Shares or the Company is no longer required to keep the Registration Statement
effective.

 

13

 

(b)           The Purchaser
understands that the Shares are being offered and sold to it in reliance upon
specific exemptions from the registration requirements of Securities Act, the
Rules and Regulations and state securities laws, and that the Company is
relying upon the truth and accuracy of, and the Purchaser’s compliance with,
the representations, warranties, agreements, acknowledgments and understandings
of the Purchaser set forth herein in order to determine the availability of
such exemptions and the eligibility of the Purchaser to acquire the Shares.

(c)           The Purchaser agrees
to use the information contained in the Private Placement Memorandum for the
sole purpose of evaluating a possible investment in the Shares and the
Purchaser hereby acknowledges that it is prohibited from reproducing or
distributing the Private Placement Memorandum, this Purchase Agreement, or any
other offering materials or other information provided by the Company in
connection with the Purchaser’s consideration of its investment in the Company,
in whole or in part, or divulging or discussing any of their contents except to
its advisors and representatives for the purpose of evaluating such
investment.  The Purchaser shall
maintain in confidence the receipt and content of any notice of a Suspension
(as defined in Section 5(h) below). 
The foregoing agreements shall not apply to any information that is or
becomes publicly available through no fault of the Purchaser, or that the
Purchaser is legally required to disclose; provided, however, that if the Purchaser
is requested or ordered to disclose any such information pursuant to any court
or other government order or any other applicable legal procedure, it shall
provide the Company with prompt notice of any such request or order in time
sufficient to enable the Company to seek an appropriate protective order.

(d)           The Purchaser
understands that its investment in the Shares involves a significant degree of
risk and that the market price of the Common Stock has been and continues to be
volatile and that no representation is being made as to the future value of the
Common Stock.  The Purchaser has the knowledge
and experience in financial and business matters as to be capable of evaluating
the merits and risks of an investment in the Shares and has the ability to bear
the economic risks of an investment in the Shares.  The Purchaser has been afforded the opportunity to ask questions
of the Company regarding such matters and acknowledges that neither such
inquiries nor any other due diligence investigation conducted by the Purchaser
or any of its advisors or representatives modifies, amends or affects the Purchaser’s
right to rely on the Company’s representations and warranties contained in
Section 4 above.

(e)           The Purchaser
understands that no United States federal or state agency or any other
government or governmental agency has passed upon or made any recommendation or
endorsement of the Shares.

(f)            The Purchaser
understands that, until such time as the Registration Statement has been
declared effective or the Shares may be sold by non-affiliates of the Company
pursuant to Rule 144 under the Securities Act without any restriction as to the
number of securities as of a particular date that can then be immediately sold,
the Shares may bear a restrictive legend in substantially the following form
(and a stop-transfer order may be placed against transfer of the certificates
for the Shares):

“THE SECURITIES
REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT

 

14

 

OF 1933, AS AMENDED
(THE “SECURITIES ACT”), OR UNDER THE SECURITIES LAWS OF ANY OTHER
JURISDICTION.  THE SECURITIES MAY NOT BE
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS, OR AN OPINION OF COUNSEL, IN FORM, SUBSTANCE AND SCOPE
REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER
THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT
TO RULE 144 UNDER THE SECURITIES ACT.”

(g)           The Purchaser’s
principal executive offices are in the jurisdiction set forth immediately below
the Purchaser’s name on the signature pages hereto.

(h)           The Purchaser hereby
covenants with the Company not to make any sale of the Shares under the
Registration Statement without effectively causing the prospectus delivery
requirement under the Securities Act to be satisfied, and the Purchaser
acknowledges and agrees that such Shares are not transferable on the books of
the Company pursuant to a sale of Shares under a Registration Statement unless
the certificate submitted to the Transfer Agent evidencing the Shares is
accompanied by a separate Purchaser’s Certificate of Subsequent Sale
(i) in the form of Appendix II hereto, (ii) executed by an officer
of, or other authorized person designated by, the Purchaser, and (iii) to
the effect that (A) the Shares have been sold in accordance with the
Registration Statement, the Securities Act and any applicable state securities
or Blue Sky laws and (B) if applicable, the requirement of delivering a
current prospectus has been satisfied. 
The Purchaser acknowledges that there may occasionally be times when the
Company must suspend the use of the prospectus forming a part of the
Registration Statement (a “Suspension”) until such time as an
amendment to the Registration Statement has been filed by the Company and
declared effective by the Commission, or such time as such prospectus has been
supplemented, or until such time as the Company has filed an appropriate report
with the Commission pursuant to the Exchange Act.  The Purchaser hereby covenants that it will not sell any Shares
pursuant to said prospectus during the period commencing at the time at which
it receives written notice of the Suspension of the use of said prospectus
(without providing any other material information other than at the written
request of the Purchaser) and ending at the time the Company gives the
Purchaser written notice that the Purchaser may thereafter effect sales
pursuant to said prospectus.  The
Purchaser shall not be prohibited from selling Shares under the Registration
Statement as a result of Suspensions on more than two (2) occasions of not
more than thirty (30) days each in any 12-month period, unless, in the
good faith judgment of the Company’s Board of Directors following the written
advice of counsel, the sale of Shares under the Registration Statement in
reliance on this paragraph would be reasonably likely to cause a violation of
the Securities Act or the Exchange Act; provided that the Company shall remain
liable for liquidated damages pursuant to Section 7.7 hereof with respect to
any Suspensions exceeding the aforementioned two permitted 30-day Suspensions
in any 12-month period.

 

15

 

(i)            The Purchaser
further represents and warrants to, and covenants with, the Company that
(i) the Purchaser has full right, power, authority and capacity to enter
into this Agreement and to consummate the transactions contemplated hereby and
has taken all necessary action to authorize the execution, delivery and
performance of this Agreement; (ii) upon the execution and delivery of
this Agreement, this Agreement shall constitute a legal, valid and binding
obligation of the Purchaser, enforceable in accordance with its terms, except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors’ and contracting
parties’ rights generally and except as enforceability may be subject to
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law) and except as the
indemnification agreements of the Purchaser in Section 7.3 hereof may be
legally unenforceable; (iii) the execution, delivery and performance of
this Agreement by the Purchaser and the consummation by the Purchaser of the
transactions contemplated hereby will not (A) conflict with or result in a
violation of any provision of the Purchaser’s certificate of incorporation or
other organizational documents, or (B) violate or conflict with, or result
in a breach of any provision of, or constitute a default under, or give to
others any rights of termination, amendment, acceleration or cancellation of,
any agreement, indenture or other instrument to which the Purchaser is a party,
or (C) result in a violation of any law, rule, regulation, order, judgment
or decree applicable to the Purchaser, except in each case for any such
violation that would not have a material adverse effect on the ability of the
Purchaser to consummate the transactions contemplated by the Agreement;
(iv) the Purchaser is not required to obtain any consent, authorization or
order of, or make any filing or registration with, any court or governmental
agency or any regulatory or self-regulatory agency in order for it to execute,
deliver or perform any of its obligations under this Agreement in accordance
with the terms hereof, except for such consents, authorizations, orders,
filings or registrations that have already been obtained; (v) the Purchaser
has no present intent to consummate a “change of control” of the Company, as
such term is understood in Rule 13d of the Exchange Act; (vi) the
Purchaser is not a party to any litigation against the Company; and
(vii) the Purchaser understands that nothing in this Agreement or any
other materials presented to the Purchaser in connection with the purchase and
sale of the Shares constitutes legal, tax or investment advice.  The Purchaser has consulted its own legal,
tax and investment advisors, as it, in its sole discretion, has deemed
necessary or appropriate in connection with the purchase of the Shares.

(j)            Proxy Statement;
Stockholders Meeting.  (i)  As promptly as possible, but in no event
later than 15 business days following the Initial Closing, the Company shall
take all action necessary to call a meeting of its stockholders (together with
any adjournments or postponements thereof, the “Stockholders Meeting”) for
the purpose of seeking the Required Stockholder Approval for the issuance and
sale to the Purchasers of the Shares to be sold pursuant to the Subsequent
Closing and for all matters to be voted upon incident thereto (collectively,
the “Proposal”).  In connection therewith, the Company will
promptly prepare and file with the SEC proxy materials (including a proxy
statement (as amended or supplemented, the “Proxy Statement”) and form of
proxy) for use at the Stockholders Meeting and, after receiving and promptly
responding to any comments of the Commission thereon, shall promptly mail such
proxy materials to the stockholders of the Company.  Each Purchaser shall promptly furnish in writing to the Company
such information relating to such Purchaser and its investment in the Company
as the Company may reasonably request for inclusion in such proxy materials;
provided that no Purchaser shall be obliged to furnish any such information if
there has been no

 

 

16

 

change in such Purchaser’s beneficial ownership (as defined under the
Exchange Act) of Common Stock since the Initial Closing Date.  The Company will comply with Section 14(a)
of the Exchange Act and the rules promulgated thereunder in relation to any
proxy statement  and any form of proxy
to be sent to the stockholders of the Company in connection with the
Stockholders Meeting, and the Proxy Statement shall not, on the date the Proxy
Statement (or any amendment thereof or supplement thereto) is first mailed to
stockholders or at the time of the Stockholders Meeting, contain any statement
which, at the time and in the light of the circumstances under which it is
made, is false or misleading with respect to any material fact, or which omits
to state any material fact necessary in order to make the statements therein
not false or misleading or necessary to correct any statement in any earlier
communication with respect to the solicitation of a proxy for the Stockholders
Meeting or the subject matter thereof which has become false or
misleading.  If the Company should
discover at any time prior to the Subsequent Closing any event relating to the
Company or any of its Subsidiaries or any of their respective affiliates,
officers or directors that is required to be set forth in a supplement or
amendment to the Proxy Statement, in addition to the Company’s obligations
under the Exchange Act, the Company will promptly inform its stockholders and
the Investors thereof.

 

(ii)           Subject to its
fiduciary obligations under applicable law (as determined in good faith by the
Company’s Board of Directors after consultation with the Company’s outside
counsel), the Company’s Board of Directors shall recommend to the Company’s
stockholders (and not revoke or amend such recommendation) that the
stockholders vote in favor of the Proposal and shall cause the Company to take
all commercially reasonable action (including, without limitation, the hiring
of a proxy solicitation firm of nationally recognized standing) to solicit the
Required Stockholder Approval.  Whether
or not the Company’s Board of Directors determines at any time after the date
hereof that, due to its fiduciary duties, it must revoke or amend its
recommendation to the Company’s stockholders, the Company is required to, and
will take, in accordance with applicable law and its Certificate of
Incorporation and Bylaws, all action necessary to convene the Stockholders
Meeting as promptly as practicable to consider and vote upon the approval of
the Proposal.

 

(iii)          In the event that the Company does not
file the Proxy Statement within 15 business days following the Initial Closing
in accordance with the provisions of Section 5(j)(i) hereof, the Company shall
pay to the Purchaser, pro rata based on their pro rata share of the aggregate
purchase price, liquidated damages in the amount of 0.333% of the purchase
price paid by such Purchaser for its Shares pursuant to this Agreement for each
business day delay thereafter.  In the
event that the Company’s Board of Directors has withdrawn or modified its
recommendation to stockholders pursuant to the provisions of Section 5(j)(ii), upon
termination of the Agreement in accordance with its terms the Company shall pay
to the Purchaser a breakup fee equal to 50% of the aggregate amount invested by
the Purchaser at the Initial Closing in cash.

SECTION
5A.                       Conduct of
Business of the Company.  From the
date of the execution of this Agreement until the later of the Subsequent
Closing Date or the expiration of the Subsequent Share Option, the Company,
unless otherwise expressly contemplated by this Agreement or consented to in
writing by the Purchasers, will, and will cause its Subsidiaries to, carry on
their respective businesses only in the ordinary course of business, consistent
with past practices and reasonable business operations (“Ordinary Course of Business”),
use their respective reasonable best efforts to preserve intact their business
organizations and assets, retain 

 

17

 

the services of their officers and employees and maintain their
relationships with customers, suppliers, licensors, licensees and others having
business dealings with them. Without limiting the generality of the foregoing,
from the date of the execution of this Agreement until the later of the
Subsequent Closing Date or the expiration of the Subsequent Share Option, except
as set forth in the Private Placement Memorandum, the Company shall not, and
shall not permit its Subsidiaries to:

 

(a)  (i) 
increase in any manner the compensation or fringe benefits of, or pay
any bonus to, any director, officer or employee, except for increases or
bonuses in the Ordinary Course of Business to employees who are not directors
or officers and except pursuant to existing arrangements previously disclosed
to or approved in writing by the Purchasers; (ii) grant any severance or termination
pay (other than pursuant to the normal severance practices or existing
agreements of the Company or its subsidiary in effect on the date of this
Agreement) to, or enter into any severance agreement with, any director,
officer or employee, or enter into any employment agreement with any director,
officer or employee; (iii) establish, adopt, enter into or amend any plan or
other arrangement, except as may be required to comply with applicable law
(except the execution and delivery of the Amendment ); (iv) pay any benefit not
provided for under any plan or other arrangement; (v) grant any awards under
any bonus, incentive, performance or other compensation plan or arrangement or
plan or other arrangement (including the grant of stock options, stock appreciation
rights, stock-based or stock-related awards, performance units or restricted
stock, or the removal of existing restrictions in any plan or other arrangement
or agreement or awards made thereunder), except for grants in the Ordinary
Course of Business;

 

(b)  declare, set aside or pay any dividend on,
or make any other distribution in respect of, outstanding shares of capital
stock or effect a split, reverse split or other reclassification of it Common
Stock;

 

(c)  (i) 
redeem, purchase or otherwise acquire any shares of capital stock of the
Company or any securities or obligations convertible into or exchangeable for
any shares of capital stock of the Company, or any options, warrants or
conversion or other rights to acquire any shares of capital stock of the
Company or any such securities or obligations, or any other securities thereof,
other than redemption and purchases from departing employees in the Ordinary
Course of Business; (ii) effect any reorganization or recapitalization; or
(iii) split, combine or reclassify any of its capital stock or issue or
authorize or propose the issuance of any other securities in respect of, in
lieu of or in substitution for, shares of its capital stock;

 

(d)  except upon the exercise of Company stock
options in accordance with their terms, issue, deliver, award, grant or sell,
or authorize the issuance, delivery, award, grant or sale (including the grant
of any limitations in voting rights or other encumbrances) of, any shares of
any class of its capital stock (including shares held in treasury), any
securities convertible into or 

 

18

 

exercisable or exchangeable for any such shares, or any rights,
warrants or options to acquire, any such shares, or amend or otherwise modify
the terms of any such rights, warrants or options the effect of which shall be
to make such terms more favorable to the holders thereof;

 

(e)  acquire or agree to acquire, by merging or
consolidating with, by purchasing an equity interest in or a portion of the
assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division thereof, or
otherwise acquire or agree to acquire any assets of any other person (other
than the purchase of assets from suppliers or vendors in the Ordinary Course of
Business);

 

(f)  sell, lease, exchange, mortgage, pledge,
transfer or otherwise subject to any encumbrance or dispose of, or agree to
sell, lease, exchange, mortgage, pledge, transfer or otherwise subject to any
encumbrance or dispose of, any of its assets, except for sales, dispositions or
transfers in the Ordinary Course of Business;

 

(g)  adopt any amendments to its articles or
certificate of incorporation, bylaws or other comparable charter or organizational
documents (other than to increase its authorized Common Stock by no more than
6,000,000 shares );

 

(h)  pay, discharge, settle or satisfy any
claims, liabilities or obligations (whether absolute or contingent, matured or
unmatured, known or unknown), other than the payment, discharge or
satisfaction, in the Ordinary Course of Business or in accordance with their
terms, of liabilities reflected or reserved against in, or contemplated by, the
most recent financial statement or incurred in the Ordinary Course of Business,
or waive any material benefits of, or agree to modify in any material respect,
any confidentiality, standstill or similar agreements to which the Company is a
party;

 

(i)  except in the Ordinary Course of Business,
waive, release or assign any rights or claims, or modify, amend or terminate
any agreement to which the Company is a party;

 

(j)  make any change in any method of accounting
or accounting practice or policy other than those required by GAAP or a
governmental entity; or

 

                                (k)  authorize, or commit or agree to do any of
the foregoing.

SECTION 6.           Survival
of Representations and Warranties. Notwithstanding any investigation made
by any party to this Agreement or by the Placement Agent, all representations
and warranties made by the Company and the Purchaser herein shall survive the
execution of this Agreement, the delivery to the Purchaser of the Shares being
purchased and the payment therefor for a period of one year from the
applicable Closing Date.

 

19

 

SECTION 7.           Registration of the Shares; Compliance with the
Securities Act.

7.1    Registration
Procedures and Expenses.  The
Company shall:

(a)           Subject to receipt
of necessary information in writing from the Purchasers, as soon as reasonably
practicable, but in no event later than fifteen (15) business days following
each of the Closing Dates (each, a “Filing Date” and collectively, the “Filing Dates”),
prepare and file with the Commission a Registration Statement on Form S-3 relating
to the sale of the Shares by the Purchaser and the Other Purchasers from time
to time on Nasdaq or the facilities of any national securities exchange on
which the Common Stock is then traded or in privately negotiated transactions
(each a “Registration Statement,” and, collectively, the “Registration
Statements”).  If
Form S-3 is not available at that time, the Company will file a
registration statement or such form as is then available to effect a
registration of the Shares, subject to the consent of a majority of the
Purchasers, which consent shall not be unreasonably withheld;

(b)           use its best
efforts, subject to receipt of necessary information from the Purchasers, to
cause the Commission to declare each Registration Statement effective within sixty
(60) calendar days after the Closing Date to which it pertains (the “Required
Effective Dates”).  However,
so long as the Company filed a Registration Statement by the applicable Filing
Date, if the Registration Statements receive Commission review, then the
Required Effective Date will be the ninetieth (90th) calendar day after
the relevant Closing Date.  The
Company’s best efforts will include, but not be limited to, promptly responding
to all comments received from the staff of the Commission.  If the Company receives notification from
the Commission that a Registration Statement will receive no action or review
from the Commission, then the Company will, subject to its rights under this
Agreement, use its best efforts to cause such Registration Statement to become
effective within five (5) business days after such Commission
notification;

(c)           use its best efforts
to promptly prepare and file with the Commission such amendments and
supplements to each Registration Statement and the prospectus used in connection
therewith as may be necessary to keep each Registration Statement effective
until the earliest of (i) two years after the Closing Date in connection
with which it was filed, (ii) the date on which the Purchasers may sell all of
the Shares then held by the Purchasers that were purchased pursuant to the
relevant Closing, without registration, pursuant to Rule 144(k) of the
Securities Act or (iii) such time as all Shares purchased by all Purchasers in
the stage of the Offering to which such Registration Statement pertains have
been sold pursuant to a Registration Statement or Rule 144 of the Securities
Act.  Thereafter, the Company shall be
entitled to withdraw the applicable Registration Statement and the Purchasers
shall have no further right to offer or sell any of the Shares pursuant to such
Registration Statement;

(d)           furnish to the
Purchaser with respect to the Shares registered under a Registration Statement
(and to each underwriter, if any, of such Shares) such number of copies of
prospectuses and such other documents as the Purchaser may reasonably request,
in order to facilitate the public sale or other disposition of all or any of
such Shares by the Purchaser;

(e)           file documents
required of the Company for normal Blue Sky clearance in states specified in
writing by the Purchaser and reasonably acceptable to the Company; provided,

 

20

 

however, that the Company shall not be required
to (i) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 7.1; (ii) file
a general consent to service of process in any such jurisdiction;
(iii) subject itself to taxation in any such jurisdiction;
(iv) provide any undertakings that cause material expense or burden to the
Company; or (v) make any change to its organizational documents, which in
each case the Board of Directors of the Company determines to be contrary to
the best interests of the Company and its stockholders;

(f)            bear all expenses
in connection with the procedures in paragraphs (a) through (e) of this
Section 7.1 and the registration of the Shares pursuant to the Registration
Statements, other than fees and expenses, if any, of counsel or other advisers
to the Purchaser or the Other Purchasers or underwriting discounts, brokerage
fees and commissions incurred by the Purchaser or the Other Purchasers, if any;
and

(g)           promptly notify the Purchaser of the
effectiveness of a Registration Statement, and any post-effective amendments
thereto, as well as of the receipt by the Company of any stop orders of the
Commission with respect to a Registration Statement and the lifting of any such
order.

Notwithstanding
the foregoing, it shall be a condition precedent to the obligations of the
Company to take any action pursuant to paragraphs (a) through (f) of this
Section 7.1, that the Purchaser shall furnish to the Company such
information regarding itself, the Shares to be sold by the Purchaser, and the
intended method of disposition of such Shares as shall be required to effect
the registration of the Shares, all of which information shall be furnished to
the Company in writing specifically for use in the Registration Statement.

The
Company understands that the Purchaser disclaims being an underwriter, but the
Purchaser being deemed an underwriter shall not relieve the Company of any
obligations it has hereunder, provided, however, that if the Company
receives notification from the Commission that the Purchaser is deemed an
underwriter, then the period in which the Company is obligated to submit an
acceleration request to the Commission shall be extended to the earlier of
(i) the ninetieth (90th) day after such Commission notification, or
(ii) one hundred twenty (120) days after the initial filing of the relevant
Registration Statement with the Commission. 
Notwithstanding the foregoing, the parties understand and agree that the
Company shall not be obligated to retain an underwriter with respect to the
offer and sale of Shares pursuant to either Registration Statement.

7.2     Transfer
of Shares After Registration.  While
a Registration Statement is effective and available for resale, the Purchaser
agrees that it will not effect any disposition of the Shares or its right to
purchase the Shares that would constitute a sale within the meaning of the
Securities Act, except as contemplated in the Registration Statements referred
to in Section 7.1 hereof in the section titled “Plan of Distribution” or
pursuant to an applicable exemption from registration, the availability of
which is confirmed in writing by counsel to the Purchaser (the form, substance
and scope of which opinion shall be reasonably acceptable to the Company) and
delivered to the Company, and that it will promptly notify the Company of any
changes in the information set forth in the Registration Statements regarding
the Purchaser or its plan of distribution.

 

21

 

7.3         Indemnification.

(i)                                     For purpose of this Agreement, the term “Purchaser/Affiliate”
shall mean any affiliate of the Purchaser (as defined in Rule 405 under
the Securities Act) and any person who controls the Purchaser or any affiliate
of the Purchaser within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act; and

(ii)                                  For purpose of this Section 7.3, the term
“Registration
Statement” shall include any final prospectus, exhibit, supplement
or amendment included in or relating to, and any document incorporated by
reference in, a Registration Statement referred to in Section 7.1 hereof.

(a)           The Company agrees
to indemnify and hold harmless the Purchaser and each Purchaser/Affiliate
against any losses, claims, damages, liabilities or expenses, joint or several,
to which the Purchaser or Purchaser/Affiliate may become subject, under the
Securities Act, the Exchange Act, or any other federal or state statutory law
or regulation, or at common law or otherwise (including in settlement of any
litigation, if such settlement is effected with the written consent of the
Company), insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof as contemplated below) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in a Registration Statement, including the prospectus, financial
statements and schedules, and all other documents filed as a part thereof, as
amended at the time of effectiveness of such Registration Statement, including
any information deemed to be a part thereof as of the time of effectiveness
pursuant to paragraph (b) of Rule 430A, or pursuant to Rule 434, of the Rules
and Regulations, or the prospectus, in the form first filed with the Commission
pursuant to Rule 424(b) of the Rules and Regulations, or filed as part of such
Registration Statement at the time of effectiveness if no Rule 424(b) filing is
required (a “Prospectus”), or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state in any of
them a material fact required to be stated therein or necessary to make the
statements in a Registration Statement or any amendment or supplement thereto
not misleading or in the Prospectus or any amendment or supplement thereto not
misleading in the light of the circumstances under which they were made, or
arise out of or are based in whole or in part on any material breach of the
representations and warranties of the Company contained in this Agreement, or
any material breach by the Company of its obligations hereunder, and will
reimburse the Purchaser or Purchaser/Affiliate for any legal and other expenses
as such expenses are reasonably incurred by the Purchaser or
Purchaser/Affiliate in connection with investigating, defending, settling,
compromising or paying any such loss, claim, damage, liability, expense or
action; provided,
however,
that the Company will not be liable in any such case to the extent, but only to
the extent, that any such loss, claim, damage, liability or expense arises out
of or is based upon (i) an untrue statement or alleged untrue statement or
omission or alleged omission made in a Registration Statement, the Prospectus
or any amendment or supplement thereto in reliance upon and in conformity with
written information furnished to the Company by or on behalf of the Purchaser
expressly for use therein, or (ii) the failure of the Purchaser to comply
with the covenants and agreements contained in Section 5(h) or
Section 7.2 hereof respecting the sale of the Shares, or (iii) the inaccuracy
of any representations made by the Purchaser herein or (iv) any statement
or omission in any Prospectus that is corrected in any subsequent Prospectus
that was delivered to the Purchaser prior to the pertinent sale or sales by the
Purchaser.

 

22

 

(b)           The Purchaser will
severally, but not jointly, indemnify and hold harmless the Company, each of
its directors, each of its officers who signed a Registration Statement and
each person, if any, who controls the Company within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act, against any losses,
claims, damages, liabilities or expenses to which the Company, each of its
directors, each of its officers who signed such Registration Statement or controlling
person may become subject, under the Securities Act, the Exchange Act, or any
other federal or state statutory law or regulation, or at common law or
otherwise (including in settlement of any litigation, if such settlement is
effected with the written consent of the Purchaser) insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof as
contemplated below) arise out of or are based upon (i) any failure to
comply with the covenants and agreements contained in Sections 5(h) or 7.2
hereof respecting the sale of the Shares or (ii) any material breach of
any representation made by the Purchaser herein or (iii) any untrue or
alleged untrue statement of any material fact contained in such Registration
Statement, the Prospectus related thereto, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements in such Registration Statement or any amendment or
supplement thereto not misleading or in the Prospectus related thereto or any
amendment or supplement thereto not misleading in the light of the
circumstances under which they were made, in each case to the extent, but only
to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in such Registration Statement, such
Prospectus, or any amendment or supplement thereto, in reliance upon and in
conformity with written information furnished to the Company by the Purchaser
expressly for use therein, and the Purchaser will reimburse the Company, each
of its directors, each of its officers who signed such Registration Statement
or controlling person for any legal and other expense reasonably incurred by
the Company, each of its directors, each of its officers who signed such
Registration Statement or controlling person in connection with investigating,
defending, settling, compromising or paying any such loss, claim, damage,
liability, expense or action; provided, however, that the obligations of the
Purchaser under this Section 7.3 shall not exceed the net proceeds to such
Purchaser from the sale of Shares pursuant to such Registration Statement.

(c)           Promptly after
receipt by an indemnified party under this Section 7.3 of notice of the threat
or commencement of any action, such indemnified party will, if a claim in
respect thereof is to be made against an indemnifying party under this Section
7.3, promptly notify the indemnifying party in writing thereof; but the
omission so to notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party for contribution or
otherwise under the indemnity agreement contained in this Section 7.3 (except
to the extent that such omission materially and adversely affects the
indemnifying person’s ability to defend such action).  Subject to provisions hereinafter stated, in case any such action
is brought against any indemnified party and such indemnified party seeks or
intends to seek indemnity from an indemnifying party, the indemnifying party
will be entitled to participate in, and, to the extent that it may wish,
jointly with all other indemnifying parties similarly notified, to assume  the defense thereof with counsel reasonably
satisfactory to such indemnified party; provided, however, if the defendants in
any such action include both the indemnified party and the indemnifying party,
and the indemnifying party and the indemnified party, based upon the advice of
such indemnified party’s counsel, shall have reasonably concluded that there
may be a conflict of interest between the positions of the indemnifying party
and the indemnified party in 

 

23

 

conducting the defense of any such action or that
there may be legal defenses available to it and/or other indemnified parties
which are different from or additional to those available to the indemnifying
party, the indemnified party or parties shall have the right to select separate
counsel to assume such legal defenses and to otherwise participate in the
defense of such action on behalf of such indemnified party or parties.  Upon receipt of notice from the indemnifying
party to such indemnified party of its election so to assume the defense of
such action and approval by the indemnified party of counsel, the indemnifying
party will not be liable to such indemnified party under this Section 7.3 for
any legal or other expenses subsequently incurred by such indemnified party in
connection with the defense thereof unless (i) the indemnified party shall
have employed such counsel in connection with the assumption of legal defenses
in accordance with the proviso to the preceding sentence (it being understood,
however, that the indemnifying party shall not be liable for the expenses of
more than one separate counsel, approved by such indemnifying party in the case
of paragraph (a), representing the indemnified parties who are parties to such
action (including indemnified parties under Agreements with Other Purchasers,
plus local counsel, if appropriate) or (ii) the indemnifying party shall
not have employed counsel reasonably satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after notice of
commencement of action, in each of which cases the reasonable fees and expenses
of counsel shall be at the expense of the indemnifying party.  In no event shall any indemnifying person be
liable in respect of any amounts paid in settlement of any action unless the
indemnifying person shall have approved the terms of such settlement; provided
that such consent shall not be unreasonably withheld.  No indemnifying person shall, without the
prior written consent of the indemnified person, 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 includes an unconditional
release of such indemnified person from all liability on claims that are the
subject matter of such proceeding.

(d)           If the
indemnification provided for in this Section 7.3 is required by its terms but
is for any reason held to be unavailable to or otherwise insufficient to hold
harmless an indemnified party under paragraphs (a), (b) or (c) of this Section
7.3 in respect to any losses, claims, damages, liabilities or expenses referred
to herein, then each applicable indemnifying party shall contribute to the amount
paid or payable by such indemnified party as a result of any losses, claims,
damages, liabilities or expenses referred to herein (i) in such proportion
as is appropriate to reflect the relative benefits received by the Company and
the Purchaser from the placement of the Common Stock contemplated by this
Agreement or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but the relative
fault of the Company and the Purchaser in connection with the statements or
omissions or inaccuracies in the representations and warranties in this
Agreement that resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations.  The relative benefits received by the
Company on the one hand and the Purchaser on the other shall be deemed to be in
the same proportion as the amount paid by the Purchaser to the Company pursuant
to this Agreement for the Shares purchased by the Purchaser that were sold
pursuant to the relevant Registration Statement bears to the difference (the “Difference”)
between the amount the Purchaser paid for the Shares that were sold pursuant to
such Registration Statement and the amount received by the Purchaser from such
sale.  The relative fault of the Company
on the one hand and the Purchaser on the other shall be determined by

 

24

 

reference to, among other things, whether  the untrue or alleged statement of a
material fact or the omission or alleged omission to state a material fact or
the inaccurate or the alleged inaccurate representation and/or warranty relates
to information supplied by the Company or by the Purchaser and the parties’
relative intent, knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission. 
The amount paid or payable by a party as a result of the losses, claims,
damages, liabilities and expenses referred to above shall be deemed to include,
subject to the limitations set forth in paragraph (c) of this Section 7.3, any
legal or other fees or expenses reasonably incurred by such party in connection
with investigating or defending any action or claim.  The provisions set forth in paragraph (c) of this Section 7.3
with respect to the notice of the threat or commencement of any threat or
action shall apply if a claim for contribution is to be made under this
paragraph (d); provided, however, that no additional notice shall be
required with respect to any threat or action for which notice has been given
under paragraph (c) for purposes of indemnification.  The Company and the Purchaser agree that it would not be just and
equitable if contribution pursuant to this Section 7.3 were determined solely
by pro rata allocation (even if the Purchaser were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable considerations referred to in this paragraph.  Notwithstanding the provisions of this
Section 7.3, the Purchaser shall not be required to contribute any amount in
excess of the amount by which the Difference exceeds the amount of any damages
which such Purchaser has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission.  No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.  The
Purchaser’s obligation to contribute pursuant to this Section 7.3 is several
and not joint.

(e)           The Purchaser hereby
acknowledges that it is a sophisticated business person who was represented by
counsel during the negotiations regarding the provisions hereof including,
without limitation, the provisions of this Section 7.3, and is fully
informed regarding said provisions. 
Each of the Company and the Purchaser is advised that federal or state public
policy as interpreted by the courts in certain jurisdictions may be contrary to
certain of the provisions of this Section 7.3, and each of the Company and
the Purchaser hereby expressly waives and relinquishes any right or ability to
assert such public policy as a defense to a claim under this Section 7.3
and further agrees not to attempt to assert any such defense.

7.4    Termination
of Conditions and Obligations.  The
conditions precedent imposed by Section 5 or this Section 7 upon the
transferability of the Shares shall cease and terminate as to any particular
number of the Shares upon the earliest to occur of (i) the sale of such Shares
pursuant to a Registration Statement, (ii) the sale of such Shares pursuant to
Rule 144 under the Securities Act or (iii) the passage of two (2) years
from the effective date of the Registration Statement covering such Shares or
at such time as an opinion of counsel satisfactory in form and substance to the
Company and the Purchaser shall have been rendered to the effect that such
conditions are not necessary in order to comply with the Securities Act.

7.5    Information
Available. As long as any Purchaser owns the Shares and the Company is
subject to the filing requirements of the Exchange Act, the Company covenants
to timely file (or obtain extensions in respect thereof and file within the
applicable grace period) all reports required to be filed by the Company after
the date hereof pursuant to the Exchange Act.

 

25

 

So long as a Registration
Statement is effective covering the resale of Shares owned by the Purchaser,
the Company will furnish to the Purchaser upon such Purchaser’s request:

(a)           as soon as
practicable after available (but in the case of the Company’s Annual Report to
Stockholders, concurrently with delivery to its shareholders generally) one
copy of (i) its Annual Report to Stockholders (which Annual Report shall
contain financial statements audited in accordance with U.S. generally accepted
accounting principles by a nationally recognized firm of certified public
accountants), (ii) if not included in substance in the Annual Report to
Stockholders, upon the request of the Purchaser, its Annual Report on Form
10-K, (iii) upon the request of the Purchaser, its Quarterly Reports on
Form 10-Q, (iv) upon the request of the Purchaser, its Current Reports on
Form 8-K, and (v) a full copy of the particular Registration Statement
covering the Shares (the foregoing, in each case, excluding exhibits);

(b)           all exhibits
excluded by the parenthetical to subparagraph (a)(v) of this Section 7.5; and

(c)           upon the reasonable
request of the Purchaser, a reasonable number of copies of the prospectuses and
supplements thereto to supply to any other party requiring such prospectuses
and supplements; and the Company, upon the reasonable request of the Purchaser,
will meet with the Purchaser or a representative thereof at the Company’s
headquarters to discuss information relevant for disclosure in a Registration
Statement covering the Shares; provided, that the Company provide to the
Purchaser at the Purchaser’s request a reasonable time prior to such meeting a
copy of the draft Registration Statement, any SEC comments and amendments; provided
further, that the Company shall disclose any confidential
information to the Purchaser only if the Purchaser has requested such
information in writing and shall have entered into a confidentiality agreement
with the Company in form and substance reasonably satisfactory to the Company
with respect thereto.

7.6           Assignment of Registration Rights.  The rights of the Purchaser hereunder,
including the right to have the Company register the Shares pursuant to this
Agreement, will be automatically assigned by the Purchaser to permitted
transferees or assignees of at least 25% of the Shares, but only if
(a) the Purchaser agrees in writing with the transferee or assignee to
assign such rights, and a copy of such agreement is furnished to the Company
within a reasonable time after such assignment, (b) the Company is, within
a reasonable time after such transfer or assignment, furnished with written
notice of the name and address of such transferee or assignee and the Shares
with respect to which such registration rights are being transferred or
assigned, (c) after such transfer or assignment, the further disposition
of such Shares by the transferee or assignee is restricted under the Securities
Act and applicable state securities laws, (d) at or before the time the
Company received the written notice contemplated by clause (b) of this
sentence, the transferee or assignee agrees in writing with the Company to be
bound by all of the provisions contained herein, (e) the transferee is an
“accredited investor” as that term is defined in Rule 501 of
Regulation D, and (f) the transfer of Shares is made in accordance
with the provisions of Section 5 and Section 7.2 hereof.

7.7           Delay in Filing or Effectiveness of
Registration Statement. If a Registration Statement is not filed by the
Company with the Commission on or prior to either Filing Date, then for each
day following such Filing Date, until but excluding the date such

 

26

 

Registration Statement is
filed, or if such Registration Statement is not declared effective by the
Commission by the Required Effective Date, then for each day following the
relevant Required Effective Date, until but excluding the date the Commission
declares such Registration Statement effective, the Company shall, for each
such day, pay the Purchaser with respect to any such failure, as liquidated
damages and not as a penalty, an amount equal to 0.0333% of the purchase price
paid by such Purchaser for its Shares covered by such Registration Statement
pursuant to this Agreement; and for any such day, such payment shall be made no
later than the first business day of the calendar month next succeeding the
month in which such day occurs.  If the
Purchaser shall be prohibited from selling Shares under a Registration
Statement as a result of a Suspension of more than thirty (30) days or
Suspensions on more than two (2) occasions of not more than
thirty (30) days each in any 12-month period, then for each day on which a
Suspension is in effect that exceeds the maximum allowed period for a Suspension
or Suspensions, but not including any day on which a Suspension is lifted, the
Company shall pay the Purchaser, as liquidated damages and not as a penalty, an
amount equal to 0.0333% of the purchase price paid by such Purchaser for its
Shares covered by such Registration Statement pursuant to this Agreement for
each such day, and such payment shall be made no later than the first business
day of the calendar month next succeeding the month in which such day
occurs.  For purposes of this Section
7.7, a Suspension shall be deemed lifted on the date that notice that the
Suspension has been lifted is delivered to the Purchaser pursuant to Section 9
of this Agreement.  Any payments made
pursuant to this Section 7.7 shall not constitute the Purchaser’s exclusive remedy
for such events.  Notwithstanding the
foregoing provisions, in no event shall the Company be obligated to pay such
liquidated damages to more than one Purchaser in respect of the same Shares for
the same period of time.  The liquidated
damage payments imposed hereunder shall be made to the Purchaser in cash.

SECTION 8.           Broker’s
Fee.  The Purchaser acknowledges
that the Company intends to pay the Placement Agent a fee in respect of the
sale of the Shares to the Purchaser. 
The Purchaser and the Company hereby agree that the Purchaser shall not
be responsible for such fee.  Each of
the parties hereto hereby represents that, on the basis of any actions and
agreements by it, there are no other brokers or finders entitled to
compensation in connection with the sale of the Shares to the Purchaser.

SECTION 9.           Notices.  All notices, requests, consents and other
communications hereunder shall be in writing, shall be sent by confirmed
facsimile or nationally recognized overnight express courier postage prepaid,
and shall be deemed given (i) when so faxed or (ii) the day after so mailed by
such overnight express courier (except that notices of Suspensions or stop
orders must be made both by facsimile and by overnight express courier) as
follows:

(a)   if to the
Company, to:

Ameriserv Financial, Inc.

Main and Franklin Streets

P.O. Box 430

Johnstown, PA  15907-0430

Attention:  Allan Dennison, President

Facsimile:  (814) 533-5427

 

27

 

with a copy to:

Stevens & Lee P.C.

620 Freedom Business Center, Suite 200,

King of Prussia, PA 19406

Attention: Jeffrey Waldron, Esq.

Facsimile:  (610) 371-7974

 

or to such other person at such other place as the Company shall
designate to the Purchaser in writing; and

(b)           if to the Purchaser,
at its address as set forth at the end of this Agreement, or at such other
address or addresses as may have been furnished to the Company in writing.

SECTION 10.         Amendment.  No provision of this Agreement may be
waived, modified or amended except pursuant to an instrument in writing signed
by the Company and the Purchaser.

SECTION 11.         Headings.  The headings of the various sections of this
Agreement have been inserted for convenience of reference only and shall not be
deemed to be part of this Agreement.

SECTION 12.         Severability.  In case any provision contained in this
Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.

SECTION 13.         Governing
Law; Jurisdiction.  This Agreement
shall be governed by and construed in accordance with the laws of the State of
New York without giving effect to the principles of conflicts of law.  Any legal suit, action or proceeding arising
out of or based upon this Agreement or the transactions contemplated hereby (“Related
Proceedings”) may be instituted in the federal courts of the United
States of America or the state courts of New York State located in New York,
New York (collectively, the “Specified Courts”), and each party
irrevocably submits to the non-exclusive jurisdiction of such Specified Courts
of such courts in any such suit, action or proceeding.  Service of any process, summons, notice or
document by mail to such party’s address set forth above shall be effective
service of process for any suit, action or other proceeding brought in any such
court.  The parties irrevocably and
unconditionally waive any objection to the laying of venue of any suit, action
or other proceeding in the Specified Courts and irrevocably and unconditionally
waive and agree not to plead or claim in any such court that any such suit,
action or other proceeding brought in any such court has been brought in an
inconvenient forum.  With respect to any
Related Proceeding, each party irrevocably waives, to the fullest extent
permitted by applicable law, all immunity (whether on the basis of sovereignty
or otherwise) from jurisdiction, service of process, attachment (both before
and after judgment) and execution to which it might otherwise be entitled in
the Specified Courts or any other court of competent jurisdiction.

 

28

 

SECTION 14.         Counterparts.  This Agreement may be executed in
two (2) or more counterparts, each of which shall constitute an original,
but all of which, when taken together, shall constitute but one instrument, and
shall become effective when one or more counterparts have been signed by each
party hereto and delivered to the other parties.  Facsimile signatures shall be deemed original signatures.

SECTION 15.         Entire
Agreement.  This Agreement and the
instruments referenced herein contain the entire understanding of the parties
with respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither the Company nor the Purchaser
makes any representation, warranty, covenant or undertaking with respect to
such matters.  This Agreement supersedes
all prior agreements and understandings among the parties hereto with respect
to the subject matter hereof.

SECTION 16.         Third Party
Beneficiaries.  This Agreement is
intended for the benefit of the parties hereto and their respective permitted
successors and assigns, and is not for the benefit of, nor may any provision
hereof be enforced by, any other person.

SECTION 17.         Successors
and Assigns.  This Agreement is
binding upon and inures to the benefit of the parties and their successors and
assigns.  The Company may assign this
Agreement or any rights or obligations hereunder in connection with a merger,
consolidation, sale of all or substantially all of the Company’s assets or sale
of 50% or more of the outstanding equity securities of the Company without the
prior written consent of the Purchaser, and the Purchaser may not assign this
Agreement or any rights or obligations hereunder except as provided in
Section 7.6 hereof. 
Notwithstanding the foregoing, at any time prior to the effectiveness of
the Registration Statement, the Purchaser may assign its rights and obligations
under Section 7 hereunder to any of its Purchaser/Affiliates without the
consent of the Company so long as (i) such Purchaser/Affiliate is an
“accredited investor” (within the meaning of Regulation D under the
Securities Act), (ii) such Purchaser/Affiliate agrees in writing to be bound by
this Agreement, (iii) such Purchaser/Affiliate completes and delivers to the
Company the Questionnaire attached as Appendix I and (iv) any transfer of
Shares to such Purchaser/Affiliate complies with Section 5 and
Section 7.2 hereof; provided, however, that if such assignment is
made to 10 or more separate persons or entities, then the Purchaser originally
party to this Agreement, and not any subsequent assignee, shall have the right
to enforce the terms of, and receive notices under, Section 7.3 hereof.

SECTION 18.         Further
Assurances.  Each party will do and
perform, or cause to be done and performed, all such further acts and things,
and will execute and deliver all other agreements, certificates, instruments
and documents, as another party may reasonably request in order to carry out
the intent and accomplish the purposes of this Agreement and the consummation
of the transactions contemplated hereby.

SECTION 19.         No Strict
Construction.  The language used in
this Agreement is deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied
against any party.

 

29

 

 

SECTION 20.         Publicity.  The Company shall have the right to approve
before issuance any press release or any other public statements with respect
to the transactions contemplated by this Agreement.

[Remainder of page intentionally
blank]

 

30

 

IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their duly authorized representatives as of the day and year first above
written.

AMERISERV FINANCIAL, INC.

	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
  Allan R. Dennison

  
	
   

  	
  Title:

  	
  President and CEO

  
				

 

 

 

	
  Number of Shares
  (including Initial Shares and Subsequent Shares) to be purchased by
  Purchaser:___________

  
	
  Price Per Share:
  $____________

  
	
  Aggregate Purchase price
  for Shares to be purchased by Purchaser: $____________

  

Print or Type:

 

	
   

  	
  Name of Purchaser:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  
	
   

  	
  Name of Individual
  representing

  
	
   

  	
  Purchaser:

  
	
   

  
	
   

  	
   

  
	
   

  
	
   

  	
  Title of Individual
  representing

  
	
   

  	
  Purchaser:

  
	
   

  
	
   

  	
   

  
	
  Signature by:

  

 

	
   

  	
  Signature of Individual
  representing

  
	
   

  	
  Purchaser (if an
  Institution):

  
	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
   

  
	
   

  	
  Telephone:

  	
   

  
	
   

  	
   

  
	
   

  	
  Facsimile:

  	
   

  
				

 

31

 

SUMMARY
INSTRUCTION SHEET FOR PURCHASER

(to be read in conjunction with the entire

Purchase Agreement that follows)

A.                                   Complete the following items
on the Purchase Agreement:

1.                                       Signature page:

(i)                                   Name of Purchaser

(ii)                                Name of Individual
representing Purchaser

(iii)                               Title of Individual
representing Purchaser

(iv)                              Signature of Individual
representing Purchaser

(v)                                 Number of Shares purchased
and aggregate purchase price

2.                                       Appendix I - the Questionnaire:

Provide
the information requested by the Questionnaire.

3.                                       Return the properly
completed and signed Purchase Agreement including the properly completed
Appendix I to (initially by facsimile with hard copy by overnight delivery):

Lehman Brothers Inc.                

745 Seventh Avenue                                 

19th Floor

New York, NY 10019

Attention: Grant Miller

Facsimile: 646-758-3885

B.                                     Instructions regarding the
transfer of funds for the purchase of Shares will be sent by facsimile to the
Purchaser by the Placement Agent at a later date.

C.                                   Upon the resale of the
Shares by the Purchaser after the Registration Statement covering the Shares is
effective, as described in the Purchase Agreement, the Purchaser:

(i)                                   must deliver a current
prospectus of the Company to the buyer (prospectuses must be obtained from the
Company at the Purchaser’s request); and

(ii)                                must send a letter in the
form of Appendix II to the Company so that the Shares may be properly
transferred.

 

32

 

APPENDIX I

AMERISERV FINANCIAL, INC.

QUESTIONNAIRE

STOCK CERTIFICATE QUESTIONNAIRE

Pursuant
to Section 3.5 of the Agreement, please provide us with the
following information:

	
  1.

  	
   

  	
  The exact name that your
  Shares are to be registered in (this is the name that will appear on your
  stock certificate(s)).  You may use a
  nominee name if appropriate:

  	
   

  	
  _______________________________________

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  The relationship between
  the Purchaser of the Shares and the Registered Holder listed in response to
  item 1 above:

  	
   

  	
  _______________________________________

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  The mailing address of the
  Registered Holder listed in response to item 1 above:

  	
   

  	
  _______________________________________

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  The Social Security Number
  or Tax Identification Number of the Registered Holder listed in response to
  item 1 above:

  	
   

  	
  _______________________________________

  

 

33

 

REGISTRATION STATEMENT QUESTIONNAIRE

In
connection with the preparation of the Registration Statement, Ameriserv
Financial, Inc., a Pennsylvania corporation (the “Company”), will use the
responses to this questionnaire to qualify prospective Purchaser for purposes
of United States federal and state securities laws.  This is not an offer to sell or the solicitation of an offer to
buy securities.  Such an offer can be
made only by appropriate offering documentation.  Any such offer may be conditioned upon your qualification as an
accredited purchaser under federal and state securities laws.

Please
complete, sign, date and return one copy of this Questionnaire in accordance
with the instructions on the Summary Instruction Sheet for the Purchaser on the
page immediately preceding this Appendix I.

All
investors (including partnerships, trusts, corporations, etc.) must complete
Parts I, II and III of this Questionnaire.

If
the answer to any question below is “none” or “not applicable”, please so
indicate.

Your answers will be kept
confidential at all times.  However, by
signing this Questionnaire, you agree that the Company may present this
Questionnaire to such parties as it deems appropriate to establish the
availability of exemptions from registration under state and federal securities
laws.

 

 

 

34

 

PART I  —  GENERAL

1.             Please state your
or your organization’s name exactly as it should appear in the Registration
Statement:

                                                                                                                                                                                                                

2.             Please provide the
number of shares that you or your organization will beneficially own
immediately after Closing, including those Shares purchased by you or your
organization pursuant to this Purchase Agreement and those shares purchased by
you or your organization through other transactions:

                                                                                                                                                                                                                

3.             Have you or your
organization had any position, office or other material relationship within the
past three years with the Company or its affiliates?

[  ] Yes 
                                  [  ] No

If
yes, please indicate the nature of any such relationships below:

                                                                                                                                                                                                                

                                                                                                                                                                                                                

                                                                                                                                                                                                                

4.             Are
you (i) an NASD Member (see definition on next page), (ii) a
Controlling (see definition) shareholder of an NASD Member, (iii) a Person
Associated with a Member of the NASD (see definition), or (iv) an
Underwriter or a Related Person (see definition) with respect to the proposed
offering; or (b) do you own any shares or other securities of any NASD
Member not purchased in the open market; or (c) have you made any
outstanding subordinated loans to any NASD Member?

[  ] Yes 
                                  [  ] No

If
“yes,” please describe below

                                                                                                                                                                                                                

                                                                                                                                                                                                                

                                                                                                                                                                                                                

NASD Member.  The term “NASD member” means either any broker or
dealer admitted to membership in the National Association of Securities
Dealers, Inc. (“NASD”).  (NASD Manual, By-laws Article I,
Definitions)

 

35

 

Control.  The term “control”
(including the terms “controlling,”
“controlled by” and “under common control with”) means the
possession, direct or indirect, of the power, either individually or with
others, to direct or cause the direction of the management and policies of a
person, whether through the ownership of voting securities, by contract, or
otherwise.  (Rule 405 under the
Securities Act of 1933, as amended)

Person
Associated with a member of the NASD.  The term “person associated
with a member of the NASD” means every sole proprietor, partner,
officer, director, branch manager or executive representative of any NASD
Member, or any natural person occupying a similar status or performing similar
functions, or any natural person engaged in the investment banking or
securities business who is directly or indirectly controlling or controlled by a
NASD Member, whether or not such person is registered or exempt from
registration with the NASD pursuant to its bylaws.  (NASD Manual, By-laws Article I, Definitions)

Underwriter
or a Related Person.  The term “underwriter or a related person” means,
with respect to a proposed offering, underwriters, underwriters’ counsel,
financial consultants and advisors, finders, members of the selling or
distribution group, and any and all other persons associated with or related to
any of such persons.  (NASD Interpretation)

 

 

36

 

PART II 

                1.             Identification

 

	
  Name: (exact name as it
  will appear on stock certificate):

  
	
   

  
	
   

  
	
  Address of principal place
  of business:

  	
   

  
	
   

  
	
   

  
	
   

  
	
  State (or Country) of
  formation or incorporation:

  	
   

  
	
   

  
	
  Contact Person:

  	
   

  
	
   

  
	
  Telephone Number:

  	
   

  
	
   

  
	
  Facsimile Number:

  	
   

  
	
   

  
	
  Type of Entity
  (corporation, partnership, trust, etc.):

  	
   

  
	
   

  
	
  Taxpayer or Employer
  Identification Number:

  	
   

  
	
   

  
	
  Was the entity formed for
  the purpose of this investment?

  
							

 

                                                [  ] Yes                                                                    [  ] No

 

If the answer is yes, all
shareholders, partners or other equity owners must complete an Individual
Questionnaire.  Please contact Ameriserv
Financial, Inc. as soon as possible to obtain such questionnaire.  If the above answer is no, please continue
completing this form.

 

2.             Proposed Investment

Please indicate the amount
of your proposed investment: $                                        .

3.                                       Description of
Investor

Please check the appropriate
box to indicate which of the following accurately describe the nature of the
business conducted by the investing entity:

[  ]                                  A corporation or partnership
with total assets in excess of $5,000,000, not organized for the purpose of
this particular investment;

[  ]                                  A private business
development company as defined in Section 202(a)(22) of the Investment Advisors
Act of 1940 (a U.S. venture capital fund which invests

 

37

 

                                                primarily
through private placements in non-publicly traded securities and makes
available (either directly or through co-investors) to the portfolio companies
significant guidance concerning management, operations or business objectives);

[  ]                                  A Small Business Investment
Company licensed by the U.S. Small Business Administration under Section 301
(c) or (d) of the Small Business Investment Act of 1958;

[  ]                                  An investment company
registered under the Investment Company Act of 1940 or a business development
company as defined in Section 2(a)(48) of that Act;

[  ]                                  A bank as defined in Section
3(a)(2) or a savings and loan association or other institution defined in
Section 3(a)(5)(A) of the Securities Act of 1933, acting in either an
individual or fiduciary capacity;

[  ]           An insurance
company as defined in Section 2(13) of the Securities Act of 1933;

[  ]                                  An employee benefit plan
within the meaning of Title I of the Employee Retirement Income Security Act of
1974 (i) whose investment decision is made by a fiduciary which is either a
bank, savings and loan association, insurance company, or registered investment
advisor, or (ii) whose total assets exceeding $5,000,000, or (iii), if a
self-directed plan, a plan whose investment decisions are made solely by
persons who are accredited investors;

[  ]                                  A charitable, religious,
educational or other organization described in Section 501(c)(3) of the Internal
Revenue Code, not formed for the purpose of this Investment, with total assets
in excess of $5,000,000;

[  ]                                  A trust with total assets in
excess of $5,000,000, not formed for the specific purpose of acquiring the
securities offered, whose purchase is directed by a sophisticated person as
described in Rule 506(b)(2)(ii) of the Securities Act of 1933 and who completed
item 4 below of this Questionnaire;

[  ]                                  An entity not located in the
U.S., none of whose equity owners are U.S. citizens or U.S. residents;

[  ]                                  A broker or dealer
registered under Section 15 of the Securities Exchange Act of 1934;

[  ]                                  A plan having assets
exceeding $5,000,000 established and maintained by a government agency for its
employees; or

[  ]           Other (Describe:)

 

38

 

4.             Investment Experience

Please provide information
detailing the business, financial and investment experience of the entity and
investment manager of such entity.

	
   

  
	
   

  
	
   

  
	
   

  
	
   

  

PART III — SIGNATURE

The above information is
true and correct and the undersigned recognizes that the Company and its
counsel are relying on the truth and accuracy of such information in relying on
an exemption from the registration requirements of the Securities Act of 1933,
as amended, and in determining applicable state securities laws and relying on
exemptions contained therein.  The
undersigned agrees to notify the Company promptly of any changes in the
foregoing information which may occur prior to the investment.

Executed at                                                            ,
on _________ ___, 2004.

(Signature)

                                                                  

(Title if for Entity)

 

 

39

 

 

 

APPENDIX II

Attention:

PURCHASER’S CERTIFICATE OF SUBSEQUENT SALE

The
undersigned, [an officer of, or
other person duly authorized by] [fill
in official name of individual or institution]
hereby certifies that [ he/she, said institution] is the Purchaser of the shares evidenced
by the attached certificate, and as such, sold [fill in number of shares] of
such shares on [date] in accordance with and in the manner
described in Registration Statement number [fill
in the number of the Registration Statement or otherwise identify Registration
Statement]; applicable federal and
state securities laws  and the
requirement of delivering a  current
prospectus by the Company have been complied with in connection with such sale.

Print or Type:

Name
of Purchaser

(Individual or
    Institution):                       ___________________

Name
of Individual

representing

Purchaser (if an

Institution)                        ___________________

Title
of Individual

representing

Purchaser (if an

Institution):                       ___________________

Signature by:

Individual Purchaser

or Individual repre-

senting Purchaser:           ___________________

 

 

40

 

Schedule
4.1

Schedule of
Wholly-owned Subsidiaries

The following are all the direct or indirect Subsidiaries, and all are
wholly-owned except as set forth below:

 

                                Ameriserv
Financial Bank

 

                                Standard
Mortgage Corporation of Georgia

 

                                Ameriserv
Financial Services Corporation

 

                                Ameriserv
Life Insurance Company

 

                                Ameriserv
Trust and Financial Services Company

 

                                Ameriserv
Associates, Inc.

                                

 

41

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