Document:

SECURITIES PURCHASE AGREEMENT

 

EXHIBIT 10.1

Execution Copy

SECURITIES PURCHASE AGREEMENT

     This Securities Purchase Agreement (this “Agreement”) is dated as of
August 22, 2003 by and between Stratasys, Inc., a Delaware corporation (the
“Company”), and each purchaser identified on the signature pages hereto (each,
a “Purchaser” and collectively, the “Purchasers”).

     WHEREAS, subject to the terms and conditions set forth in this Agreement
and pursuant to Section 4(2) of the Securities Act of 1933, as amended, the
Company desires to issue and sell to each Purchaser, and each Purchaser,
severally and not jointly, desires to purchase from the Company, certain
securities of the Company as more fully described in this Agreement.

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

ARTICLE I

DEFINITIONS

     1.1 Definitions. In addition to the terms defined elsewhere in this
Agreement, the following terms have the meanings indicated:

		
	 	     “Affiliate” means any Person that, directly or indirectly through
one or more intermediaries, controls or is controlled by or is under
common control with a Person, as such terms are used in and construed
under Rule 144.
	 
	 	     “Bankruptcy Event” means any of the following events: (a) the
Company or any Subsidiary commences a case or other proceeding under any
bankruptcy, reorganization, arrangement, adjustment of debt, relief of
debtors, dissolution, insolvency or liquidation or similar law of any
jurisdiction relating to the Company or any Subsidiary thereof; (b) there
is commenced against the Company or any Subsidiary any such case or
proceeding that is not dismissed within 60 days after commencement; (c)
the Company or any Subsidiary is adjudicated insolvent or bankrupt or any
order of relief or other order approving any such case or proceeding is
entered; (d) the Company or any Subsidiary suffers any appointment of any
custodian or the like for it or any substantial part of its property that
is not discharged or stayed within 60 days; (e) the Company or any
Subsidiary makes a general assignment for the benefit of creditors; (f)
the Company or any Subsidiary fails to pay, or states that it is unable
to pay or is unable to pay, its debts generally as they become due; (g)
the Company or any Subsidiary calls a meeting of its creditors with a
view to arranging a composition, adjustment or restructuring of its
debts; or (h) the Company or any Subsidiary, by any act or failure to
act, expressly indicates its consent to, approval of or acquiescence in
any of the foregoing or takes any corporate or other action for the
purpose of effecting any of the foregoing.

 

 

		
	 	     “Business Day” means any day other than Saturday, Sunday or other
day on which commercial banks in The City of New York are authorized or
required by law to remain closed.
	 
	 	     “Change of Control” means the occurrence of any of the following in
one or a series of related transactions: (i) an acquisition after the
date hereof by an individual or legal entity or “group” (as described in
Rule 13d-5(b)(1) under the Exchange Act) of more than one-half of the
voting rights or equity interests in the Company; (ii) a replacement of
more than one-half of the members of the Company’s board of directors
that is not approved by those individuals who are members of the board of
directors on the date hereof (or other directors previously approved by
such individuals); (iii) a merger or consolidation of the Company or any
Subsidiary or a sale of more than one-half of the assets of the Company
in one or a series of related transactions, unless following such
transaction or series of transactions, the holders of the Company’s
securities prior to the first such transaction continue to hold at least
two-thirds of the voting rights and equity interests in of the surviving
entity or acquirer of such assets; (iv) a recapitalization,
reorganization or other transaction involving the Company or any
Subsidiary that constitutes or results in a transfer of more than
one-half of the voting rights or equity interests in the Company; or (v)
consummation of a “Rule 13e-3 transaction” as defined in Rule 13e-3 under
the Exchange Act with respect to the Company.
	 
	 	     “Closing” means the closing of the purchase and sale of the Shares
and the Warrants pursuant to Section 2.1.
	 
	 	     “Closing Date” means the date of the Closing.
	 
	 	     “Closing Price” means, for any date, the price determined by the
first of the following clauses that applies: (a) if the Common Stock is
then listed or quoted on an Eligible Market or any other national
securities exchange, the closing bid price per share of the Common Stock
for such date (or the nearest preceding date) on the primary Eligible
Market or exchange on which the Common Stock is then listed or quoted;
(b) if prices for the Common Stock are then quoted on the OTC Bulletin
Board, the closing bid price per share of the Common Stock for such date
(or the nearest preceding date) so quoted; (c) if prices for the Common
Stock are then reported in the “Pink Sheets” published by the National
Quotation Bureau Incorporated (or a similar organization or agency
succeeding to its functions of reporting prices), the most recent closing
bid price per share of the Common Stock so reported; or (d) in all other
cases, the fair market value of a share of Common Stock as determined by
an independent appraiser selected in good faith by a majority-in-interest
of the Purchasers.
	 
	 	     “Commission” means the Securities and Exchange Commission.
	 
	 	     “Common Stock” means the common stock of the Company, par value
$0.01 per share.

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	 	     “Common Stock Equivalents” means, collectively, Options and
Convertible Securities.
	 
	 	     “Company Counsel” means Snow Becker Krauss P.C.
	 
	 	     “Convertible Securities” means any stock or securities (other than
Options) convertible into or exercisable or exchangeable for Common
Stock.
	 
	 	     “Effective Date” means the date that the Registration Statement is
first declared effective by the Commission.
	 
	 	     “Eligible Market” means any of the New York Stock Exchange, the
American Stock Exchange, the NASDAQ National Market, the NASDAQ Small Cap
Market or the Nasdaq OTC Bulletin Board (or any successor thereto).
	 
	 	     “Exchange Act” means the Securities Exchange Act of 1934, as
amended.
	 
	 	     “Excluded Stock” means the issuance of Common Stock (A) upon
exercise or conversion of any options or other securities described in
Schedule 3.1(f) (provided that such exercise or conversion occurs in
accordance with the terms thereof, without amendment or modification, and
that the applicable exercise or conversion price or ratio is described in
such schedule) or otherwise pursuant to any employee benefit plan
described in Schedule 3.1(f) or hereafter adopted by the Company and
approved by its stockholders, (B) in connection with any issuance of
shares or grant of options to employees, officers, directors or
consultants of the Company pursuant to a stock option plan or other
incentive stock plan duly adopted by the Company’s board of directors or
in respect of the issuance of Common Stock upon exercise of any such
options, (C) pursuant to a bona fide firm commitment underwritten public
offering with a nationally recognized underwriter (excluding any equity
line) and in an aggregate offering amount equal to or greater than
$20,000,000, (D) pursuant to the Company’s bona fide acquisition of
another corporation, or all or a portion of its assets, by merger,
purchase of assets or stock or other corporate reorganization in each
case, as approved by the Company’s board of directors and not for the
principal purpose of raising capital, or (E) in connection with a bona
fide joint venture or development agreement or strategic partnership, the
primary purpose of which is not to raise equity capital.
	 
	 	     “Filing Date” means September 16, 2003.
	 
	 	     “Lien” means any lien, charge, claim, security interest,
encumbrance, right of first refusal or other restriction.
	 
	 	     “Losses” means any and all losses, claims, damages, liabilities,
settlement costs and expenses, including, without limitation, costs of
preparation and reasonable attorneys’ fees.
	 
	 	     “Options” means any rights, warrants or options to subscribe for or
purchase Common Stock or Convertible Securities.

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	 	     “Person” means any individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or
subdivision thereof) or any court or other federal, state, local or other
governmental authority or other entity of any kind.
	 
	 	     “Proceeding” means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
	 
	 	     “Prospectus” means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an
effective registration statement in reliance upon Rule 430A promulgated
under the Securities Act), as amended or supplemented by any prospectus
supplement, with respect to the terms of the offering of any portion of
the Registrable Securities covered by the Registration Statement, and all
other amendments and supplements to the Prospectus, including
post-effective amendments, and all material incorporated by reference or
deemed to be incorporated by reference in such Prospectus.
	 
	 	     “Registrable Securities” means any Common Stock (including
Underlying Shares) issued or issuable pursuant to the Transaction
Documents, together with any securities issued or issuable upon any stock
split, dividend or other distribution, recapitalization or similar event
with respect to the foregoing.
	 
	 	     “Registration Statement” means each registration statement required
to be filed under Article VI, including (in each case) the Prospectus,
amendments and supplements to such registration statement or Prospectus,
including pre- and post-effective amendments, all exhibits thereto, and
all material incorporated by reference or deemed to be incorporated by
reference in such registration statement.
	 
	 	     “Required Effectiveness Date” means December 5, 2003.
	 
	 	     “Rule 144,” “Rule 415,” and “Rule 424” means Rule 144, Rule 415 and
Rule 424, respectively, promulgated by the Commission pursuant to the
Securities Act, as such Rules may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
	 
	 	     “Securities” means the Shares, the Warrants and the Underlying
Shares.
	 
	 	     “Securities Act” means the Securities Act of 1933, as amended.
	 
	 	     “Shares”
means an aggregate of Three Hundred Thousand (300,000)
shares of Common Stock, which are being issued and sold to the Purchasers
at the Closing.
	 
	 	     “Subsidiary” means any Person in which the Company, directly or
indirectly, owns capital stock or holds an equity or similar interest
that are required to be listed in Schedule 3.1(a).

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	 	     “Trading Day” means (a) any day on which the Common Stock is listed
or quoted and traded on its primary Trading Market, (b) if the Common
Stock is not then listed or quoted and traded on any Eligible Market,
then a day on which trading occurs on the Nasdaq National Market (or any
successor thereto), or (c) if trading does not occur on the Nasdaq
National Market (or any successor thereto), any Business Day.
	 
	 	     “Trading Market” means the Nasdaq National Market or any other
Eligible Market on which the Common Stock is then listed or quoted.
	 
	 	     “Transaction Documents” means this Agreement, the Warrants, the
Transfer Agent Instructions and any other documents or agreements
executed in connection with the transactions contemplated hereunder.
	 
	 	     “Transfer Agent” means North American Transfer Company, or any other
transfer agent selected by the Company.
	 
	 	     “Transfer Agent Instructions” means the Irrevocable Transfer Agent
Instructions, in the form of Exhibit D, executed by the Company and
delivered to and acknowledged in writing by the Transfer Agent.
	 
	 	     “Underlying Shares” means the shares of Common Stock issuable upon
exercise of the Warrants and any securities issued in exchange for or in
respect of such shares.
	 
	 	     “Warrants” means, collectively, the Common Stock purchase warrants
issued and sold under this Agreement, in the form of Exhibit A, and any
warrants issued upon exercise of such warrants.

ARTICLE II

PURCHASE AND SALE

     2.1 Closing. Subject to the terms and conditions set forth in this
Agreement, at the Closing the Company shall issue and sell to each Purchaser,
and each Purchaser shall, severally and not jointly, purchase from the Company,
such number of Shares and a Warrant to purchase such number of Underlying
Shares, each as indicated below such Purchaser’s name on the signature page of
this Agreement, for an aggregate purchase price for such Purchaser as indicated
below such Purchaser’s name on the signature page of this Agreement. The
Closing shall take place at the offices of Proskauer Rose LLP immediately
following the execution hereof, or at such other location or time as the
parties may agree.

     2.2 Closing Deliveries.

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

		
	 	     (i) one or more stock certificates, free and clear of all
restrictive and other legends (except as expressly provided in Section
4.1(b) hereof), evidencing the

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	 	number of Shares indicated below such Purchaser’s name on the
signature page of this Agreement, registered in the name of such
Purchaser;

		
	 	     (ii) a Warrant, registered in the name of such Purchaser, pursuant
to which such Purchaser shall have the right to acquire the number of
Underlying Shares indicated below such Purchaser’s name on the signature
page of this Agreement, on the terms set forth therein;
	 
	 	     (iii) a legal opinion of Company Counsel, in the form of Exhibit B,
executed by such counsel and delivered to the Purchasers; and
	 
	 	     (iv) duly executed Transfer Agent Instructions acknowledged by the
Transfer Agent.

		
	 	     (b) At the Closing, each Purchaser shall deliver or cause to be
delivered to the Company the purchase price indicated below such Purchaser’s
name on the signature page of this Agreement, in United States dollars and in
immediately available funds, by wire transfer to an account designated in
writing by the Company for such purpose.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

     3.1 Representations and Warranties of the Company. The Company hereby
represents and warrants to each of the Purchasers as follows:

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

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

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	 	perform fully on a timely basis its obligations under any of the
Transaction Documents (any of (i), (ii) or (iii), a “Material Adverse
Effect”).

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

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

		
	 	     (e) Issuance of the Securities. The Securities (including the
Underlying Shares) are duly authorized and, when issued and paid for in
accordance with the Transaction Documents, will be duly and validly issued,
fully paid and nonassessable, free and clear of all Liens and shall not be
subject to preemptive rights or similar rights of stockholders. The Company
has reserved from its duly authorized capital stock the number of shares of
Common Stock issuable upon exercise of the Warrants.

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

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

		
	 	     (g) SEC Reports; Financial Statements. The Company has filed all
reports required to be filed by it under the Securities Act and the Exchange
Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years
preceding the date hereof (or such shorter period as the Company was required
by law to file such material) (the foregoing materials being collectively
referred to herein as the “SEC Reports” and, together with this Agreement and
the Schedules to this Agreement, the “Disclosure Materials”) on a timely
basis or has received a valid extension of such time of filing and has filed
any such SEC Reports prior to the expiration of any such extension. The
Company has delivered to the Purchasers true, correct and complete copies of
all SEC Reports filed within the ten (10) days preceding the date hereof. As
of their respective dates, the SEC Reports complied in all material respects
with the requirements of the Securities Act and the Exchange Act and the
rules and regulations of the Commission promulgated thereunder, and none of
the SEC Reports, when filed, contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Reports comply in all material
respects with applicable accounting requirements and the rules and
regulations of the Commission with respect thereto as in effect at the time
of filing. Such financial statements have been prepared in accordance with
United States generally accepted accounting principles applied on a
consistent basis during the periods involved (“GAAP”), except as may be
otherwise specified in such financial statements or the notes thereto, and
fairly present in all material respects the financial position of the Company
and its consolidated subsidiaries as of and for the dates thereof and the
results of operations and cash flows for the periods then ended, subject, in
the case of unaudited statements, to normal, immaterial, year-end audit
adjustments. All material agreements to which the Company or any Subsidiary
is a party or to which the property or

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	 	assets of the Company or any Subsidiary are subject are included as part
of or specifically identified in the SEC Reports.

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

		
	 	     (i) Absence of Litigation. Except as set forth in Schedule 3.1(i),
there is no action, suit, claim, proceeding, inquiry or investigation before
or by any court, public board, government agency, self-regulatory
organization or body pending or, to the knowledge of the Company, threatened
against or affecting the Company or any of its Subsidiaries that could,
individually or in the aggregate, have a Material Adverse Effect. Schedule
3.1(i) contains a complete list and summary description of any pending or, to
the knowledge of the Company, threatened proceeding against or affecting the
Company or any of its Subsidiaries that could individually or in the
aggregate, have a Material Adverse Effect.

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

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

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	 	under lease by the Company and the Subsidiaries are held by them under
valid, subsisting and enforceable leases of which the Company and the
Subsidiaries are in compliance.

		
	 	     (l) Certain Fees. Except for the fees to Merriman Curhan Ford & Co. and
described in Schedule 3.1(l), all of which are payable to registered
broker-dealers, no brokerage or finder’s fees or commissions are or will be
payable by the Company to any broker, financial advisor or consultant,
finder, placement agent, investment banker, bank or other Person with respect
to the transactions contemplated by this Agreement, and the Company has not
taken any action that would cause any Purchaser to be liable for any such
fees or commissions.

		
	 	     (m) Private Placement. Neither the Company nor any Person acting on the
Company’s behalf has sold or offered to sell or solicited any offer to buy
the Securities by means of any form of general solicitation or advertising.
Neither the Company nor any of its Affiliates nor any Person acting on the
Company’s behalf has, directly or indirectly, at any time within the past six
months, made any offer or sale of any security or solicitation of any offer
to buy any security under circumstances that would (i) eliminate the
availability of the exemption from registration under Regulation D under the
Securities Act in connection with the offer and sale of the Securities as
contemplated hereby or (ii) cause the offering of the Securities pursuant to
the Transaction Documents to be integrated with prior offerings by the
Company for purposes of any applicable law, regulation or stockholder
approval provisions, including, without limitation, under the rules and
regulations of the Trading Market. The Company is not, and is not an
Affiliate of, an “investment company” within the meaning of the Investment
Company Act of 1940, as amended. The Company is not a United States real
property holding corporation within the meaning of the Foreign Investment in
Real Property Tax Act of 1980.

		
	 	     (n) Form S-3 Eligibility. The Company is eligible to register its Common
Stock for resale by the Purchasers using Form S-3 promulgated under the
Securities Act.

		
	 	     (o) Listing and Maintenance Requirements. The Company has not, in the
two years preceding the date hereof, received notice (written or oral) from
any Trading Market on which the Common Stock is or has been listed or quoted
to the effect that the Company is not in compliance with the listing or
maintenance requirements of such Trading Market. The Company is, and has no
reason to believe that it will not in the foreseeable future continue to be,
in compliance with all such listing and maintenance requirements.

		
	 	     (p) Registration Rights. Except as described in Schedule 3.1(p), the
Company has not granted or agreed to grant to any Person any rights
(including “piggy-back” registration rights) to have any securities of the
Company registered with the Commission or any other governmental authority
that have not been satisfied.

		
	 	     (q) Application of Takeover Protections. There is no control share
acquisition, business combination, poison pill (including any distribution
under a rights agreement) or other similar anti-takeover provision under the
Company’s charter documents or the laws of its state of incorporation that is
or could become applicable to any of the Purchasers as a result of the
Purchasers and the Company fulfilling their obligations or

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	 	exercising their rights under the Transaction Documents, including,
without limitation, as a result of the Company’s issuance of the Securities
and the Purchasers’ ownership of the Securities.

		
	 	     (r) Disclosure. The Company confirms that neither it nor any other
Person acting on its behalf has provided any of the Purchasers or their
agents or counsel with any information that constitutes or might constitute
material, nonpublic information. The Company understands and confirms that
each of the Purchasers will rely on the foregoing representations in
effecting transactions in securities of the Company. All disclosure provided
to the Purchasers regarding the Company, its business and the transactions
contemplated hereby, including the Schedules to this Agreement, furnished by
or on behalf of the Company are true and correct and do not contain any
untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading. No event or
circumstance has occurred or information exists with respect to the Company
or any of its Subsidiaries or its or their business, properties, prospects,
operations or financial condition, which, under applicable law, rule or
regulation, requires public disclosure or announcement by the Company but
which has not been so publicly announced or disclosed. The Company
acknowledges and agrees that no Purchaser makes or has made any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in Section 3.2.

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

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

		
	 	     (u) Insurance. The Company and the Subsidiaries are insured by insurers
of recognized financial responsibility against such losses and risks and in
such amounts as are

11

 

		
	 	prudent and customary in the businesses in which the Company and the
Subsidiaries are engaged. Neither the Company nor any Subsidiary has any
reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business without a
significant increase in cost.

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

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

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

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

12

 

		
	 	with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.

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

		
	 	     (a) Organization; Authority. Such Purchaser is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite corporate or partnership
power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry out its
obligations hereunder and thereunder. The purchase by such Purchaser of the
Shares and the Warrants hereunder has been duly authorized by all necessary
action on the part of such Purchaser. This Agreement has been duly executed
and delivered by such Purchaser and constitutes the valid and binding
obligation of such Purchaser, enforceable against it in accordance with its
terms.

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

		
	 	     (c) Purchaser Status. At the time such Purchaser was offered the Shares
and the Warrants, it was, and at the date hereof it is, an “accredited
investor” as defined in Rule 501(a) under the Securities Act.

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

		
	 	     (e) Access to Information. Such Purchaser acknowledges that it has
reviewed the Disclosure Materials and has been afforded (i) the opportunity
to ask such questions as it has deemed necessary of, and to receive answers
from, representatives of the Company concerning the terms and conditions of
the offering of the Securities and the merits and risks of investing in the
Securities; (ii) access to information about the Company and the Subsidiaries
and their respective financial condition, results of operations, business,
properties, management and prospects sufficient to enable it to evaluate its
investment; and (iii) the opportunity to obtain such additional information
that the Company possesses or can acquire without unreasonable effort or
expense that is necessary to make an informed

13

 

		
	 	investment decision with respect to the investment. In particular, such
Purchaser acknowledges that the Company has offered to provide, subject to
confidentiality, each Purchaser with certain non-public information regarding
the Company and its business and prospects and certain risks in connection
therewith, and such Purchaser has declined to accept such offer and has
agreed to purchase the Securities hereunder regardless of the materiality of
such information. Such Purchaser further acknowledges the risks of an
investment in the Securities, including, without limitation, the risks set
forth on Schedule 3.2(e) and as otherwise set forth in the Company’s SEC
Reports. Neither such inquiries nor any other investigation conducted by or
on behalf of such Purchaser or its representatives or counsel shall modify,
amend or affect such Purchaser’s right to rely on the truth, accuracy and
completeness of the information set forth in the Disclosure Materials and the
Company’s representations and warranties contained in the Transaction
Documents.

		
	 	     (f) Certain Trading Limitations. Each Purchaser agrees that beginning on
the date hereof until the earlier to occur of (a) 90 days from the Closing Date
and (b) the effective date of the Registration Statement to be filed in
connection with the sale of the Company Shares, it will not enter into any
Short Sales. For purposes of this Section 3.2(f), a “Short Sale” by a
Purchaser means a sale of Common Stock that is marked as a short sale and that
is executed at a time when such Purchaser has no equivalent offsetting long
position in the Common Stock. For purposes of determining whether a Purchaser
has an equivalent offsetting long position in the Common Stock, all Common
Stock and all Common Stock that would be issuable upon conversion or exercise
in full of all Options then held by such Purchaser (assuming that such Options
were then fully convertible or exercisable, notwithstanding any provisions to
the contrary, and giving effect to any conversion or exercise price adjustments
scheduled to take effect in the future) shall be deemed to be held long by such
Purchaser.

ARTICLE IV

OTHER AGREEMENTS OF THE PARTIES

     4.1 Transfer Restrictions.

		
	 	     (a) Each Purchaser shall sell, transfer or otherwise dispose of the
Securities only pursuant to an effective registration statement under the
Securities Act or pursuant to an available exemption from the registration
requirements of the Securities Act, and in compliance with any applicable
state securities laws. In connection with any transfer of Securities other
than pursuant to an effective registration statement or to the Company or
pursuant to paragraph (k) of Rule 144, except as otherwise set forth herein,
the Company may require the transferor to provide to the Company an opinion
of counsel selected by the transferor, the form and substance of which
opinion shall be reasonably satisfactory to the Company, to the effect that
such transfer does not require registration under the Securities Act.
Notwithstanding the foregoing, the Company hereby consents to and agrees to
register on the books of the Company and with its Transfer Agent, without any
such legal opinion, any transfer of Securities by a Purchaser to an Affiliate
of such Purchaser, provided that the transferee certifies to the Company that
it is an “accredited investor” as defined in Rule 501(a) under the Securities
Act.

14

 

		
	 	     (b) The Purchasers agree to the imprinting, so long as is required by
this Section 4.1(b), of the following legend on any certificate evidencing
Securities:

	 	 	[NEITHER] THESE SECURITIES [NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE EXERCISABLE] HAVE [NOT] BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF
ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF, THE SECURITIES ACT
AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.
NOTWITHSTANDING THE FOREGOING, THESE SECURITIES [AND THE
SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES] MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN OR FINANCING ARRANGEMENT SECURED BY SUCH SECURITIES.

		
	 	     Certificates evidencing Securities shall not be required to contain such legend
or any other legend (i) while a Registration Statement covering the resale of
such Securities is effective under the Securities Act, or (ii) following any
sale of such Securities pursuant to Rule 144, or (iii) if such Securities are
eligible for sale under paragraph (k) of Rule 144, or (iv) if such legend is
not required under applicable requirements of the Securities Act (including
judicial interpretations and pronouncements issued by the Staff of the
Commission). The Company shall cause its counsel to issue the legal opinion
included in the Transfer Agent Instructions to the Transfer Agent on the
Effective Date. Following the Effective Date or at such earlier time as a
legend is no longer required for certain Securities, the Company will no later
than three Trading Days following the delivery by a Purchaser to the Company or
the Transfer Agent of a legended certificate representing such Securities,
deliver or cause to be delivered to such Purchaser a certificate representing
such Securities that is free from all restrictive and other legends. The
Company may not make any notation on its records or give instructions to any
transfer agent of the Company that enlarge the restrictions on transfer set
forth in this Section.

		
	 	     (c) The Company acknowledges and agrees that a Purchaser may from time to
time pledge or grant a security interest in some or all of the Securities in
connection with a bona fide margin agreement or other loan or financing
arrangement secured by the Securities and, if required under the terms of such
agreement, loan or arrangement, such Purchaser may transfer pledged or secured
Securities to the pledgees or secured parties. Such a pledge or transfer would
not be subject to approval of the Company and no legal opinion of the pledgee,
secured party or pledgor shall be required in connection therewith. Further,
no notice shall be required of such pledge. At the appropriate Purchaser’s
expense, the Company will execute and deliver such reasonable documentation as
a pledgee or secured party of Securities may reasonably request in connection
with a pledge or transfer of the Securities, including the

15

 

preparation and filing of any required prospectus supplement under Rule
424(b)(3) of the Securities Act or other applicable provision of the Securities
Act to appropriately amend the list of selling stockholders thereunder.

     4.2 Furnishing of Information. As long as any Purchaser owns Securities,
the Company covenants to timely file (or obtain extensions in respect thereof
and file within the applicable grace period) all reports required to be filed
by the Company after the date hereof pursuant to the Exchange Act. Upon the
request of any Purchaser, the Company shall deliver to such Purchaser a written
certification of a duly authorized officer as to whether it has complied with
the preceding sentence. As long as any Purchaser owns Securities, if the
Company is not required to file reports pursuant to such laws, it will prepare
and furnish to the Purchasers and make publicly available in accordance with
paragraph (c) of Rule 144 such information as is required for the Purchasers to
sell the Securities under Rule 144. The Company further covenants that it will
take such further action as any holder of Securities may reasonably request to
satisfy the provisions of Rule 144 applicable to the issuer of securities
relating to transactions for the sale of securities pursuant to Rule 144.

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

     4.4 Reservation of Securities. The Company shall maintain a reserve from
its duly authorized shares of Common Stock for issuance pursuant to the
Transaction Documents in such amount as may be required to fulfill its
obligations in full under the Transaction Documents. In the event that at any
time the then authorized shares of Common Stock are insufficient for the
Company to satisfy its obligations in full under the Transaction Documents, the
Company shall promptly take such actions as may be required to increase the
number of authorized shares.

     4.5 Subsequent Placements.

		
	 	     (a) From the date hereof until the Effective Date (the “Blockout
Period”), the Company will not, directly or indirectly, offer, sell, grant
any option to purchase, or otherwise dispose of (or announce any offer, sale,
grant or any option to purchase or other disposition of) any of its or the
Subsidiaries’ equity or equity equivalent securities, including without
limitation any debt, preferred stock or other instrument or security that is,
at any time during its life and under any circumstances, convertible into or
exchangeable or exercisable for Common Stock or Common Stock Equivalents (any
such offer, sale, grant, disposition or announcement being referred to as a
“Subsequent Placement”).

		
	 	     (b) The Blockout Period set forth in the preceding paragraph (a) shall
be extended for the number of Trading Days during such period in which (i)
trading in the Common Stock is suspended by any Trading Market, (ii) the
Registration Statement is not effective, or (iii) the prospectus included in
the Registration Statement may not be used by the Purchasers for the resale
of Registrable Securities thereunder.

16

 

	
	           (c) From the end of the Blockout Period until the one year anniversary
thereof, the Company will not, directly or indirectly, effect any Subsequent
Placement unless the Company shall have first complied with this Section
4.5(c).

		
	 	     (i) The Company shall deliver to each Purchaser a written notice
(the “Offer”) of any proposed or intended issuance or sale or exchange of
the securities being offered (the “Offered Securities”) in a Subsequent
Placement, which Offer shall (w) identify and describe the Offered
Securities, (x) describe the price and other terms upon which they are to
be issued, sold or exchanged, and the number or amount of the Offered
Securities to be issued, sold or exchanged, (y) identify the Persons or
entities (if known) to which or with which the Offered Securities are to
be offered, issued, sold or exchanged and (z) offer to issue and sell to
or exchange with each Purchaser on the same terms as those set forth in
the Subsequent Placement a pro-rata portion of fifty percent (50%) of the
Offered Securities, based on such Purchaser’s pro rata portion of the
aggregate purchase price paid by the Purchasers for all of the Shares
purchased hereunder (the “Basic Amount”), and with respect to each
Purchaser that elects to purchase its Basic Amount, any additional
portion of the Offered Securities attributable to the Basic Amounts of
other Purchasers as such Purchaser shall indicate it will purchase or
acquire should the other Purchasers subscribe for less than their Basic
Amounts (the “Undersubscription Amount”).
	 
	 	     (ii) To accept an Offer, in whole or in part, a Purchaser must
deliver a subscription agreement or other subscription document in
accordance with the terms of the offering for such Subsequent Placement
prior to the end of the ten (10) Trading Day period of the Offer, setting
forth the portion of the Purchaser’s Basic Amount that such Purchaser
elects to purchase (the “Subscription Agreement”) and, if such Purchaser
shall elect to purchase all of its Basic Amount, a written notice setting
forth the Undersubscription Amount, if any, that such Purchaser elects to
purchase (in either case, the “Notice of Acceptance”). If the Basic
Amounts subscribed for by all Purchasers are less than the total of all
of the Basic Amounts, then each Purchaser who has set forth an
Undersubscription Amount in its Notice of Acceptance shall be entitled to
purchase, in addition to the Basic Amounts subscribed for, the
Undersubscription Amount it has subscribed for by submitting an
additional Subscription Agreement for such Undersubscription Amount;
provided, however, that if the Undersubscription Amounts subscribed for
exceed the difference between the total of all the Basic Amounts and the
Basic Amounts subscribed for (the “Available Undersubscription Amount”),
each Purchaser who has subscribed for any Undersubscription Amount shall
be entitled to purchase on that portion of the Available
Undersubscription Amount as the Basic Amount of such Purchaser bears to
the total Basic Amounts of all Purchasers that have subscribed for
Undersubscription Amounts, subject to rounding by the Board of Directors
to the extent its deems reasonably necessary. A Purchaser may subscribe
for Offered Securities in addition to a Purchaser’s Basic Amount of such
Offered Securities and its pro rata share of any Available
Undersubscription Amount of such Offered Securities (such additional
Offered Securities being referred to herein as the “Additional Amount”),
by submitting a Subscription Agreement with respect to such Additional

17

 

		
	 	Amount in accordance with the terms of the offering of such Offered
Securities prior to the expiration of the offering period of such
Subsequent Placement.

		
	 	                (iii) If the Company closes the sale or exchange of Offered
Securities in accordance with the terms of the Subsequent Placement, then
the Company shall be required to accept at such closing each Purchaser’s
Subscription Agreements with respect to its Basic Amount and its pro rata
share of the Available Undersubscription Amount, if any, and may, but
shall not be required to, accept such Purchaser’s Subscription Agreement
with respect to any Additional Amount, all in accordance with the same
terms and conditions of sales of Offered Shares to third party purchasers
in the Subsequent Placement.

		
	 	     (d) The restrictions contained in paragraphs (a) and (c) of this Section
shall not apply to Excluded Stock.

     4.6 Securities Laws Disclosure; Publicity. The Company shall, on or before
9:30a.m., Eastern Standard Time, on August 22, 2003, issue a press release
acceptable to the Purchasers disclosing all material terms of the transactions
contemplated hereby. On the Closing Date, the Company shall file a Current
Report on Form 8-K with the Commission (the “8-K Filing”) describing the terms
of the transactions contemplated by the Transaction Documents and including as
exhibits to such Current Report on Form 8-K this Agreement and the form of
Warrants, in the form required by the Exchange Act. Thereafter, the Company
shall timely file any filings and notices required by the Commission or
applicable law with respect to the transactions contemplated hereby and provide
copies thereof to the Purchasers promptly after filing. Except with respect to
the 8-K Filing (a copy of which will be provided to the Purchasers for their
review as early as practicable prior to its filing), the Company shall, at
least two Trading Days prior to the filing or dissemination of any disclosure
required by this paragraph, provide a copy thereof to the Purchasers for their
review. The Company and the Purchasers shall consult with each other in
issuing any press releases or otherwise making public statements or filings and
other communications with the Commission or any regulatory agency or Trading
Market with respect to the transactions contemplated hereby, and neither party
shall issue any such press release or otherwise make any such public statement,
filing or other communication without the prior consent of the other, except if
such disclosure is required by law, in which case the disclosing party shall
promptly provide the other party with prior notice of such public statement,
filing or other communication. Notwithstanding the foregoing, the Company
shall not publicly disclose the name of any Purchaser, or include the name of
any Purchaser in any filing with the Commission or any regulatory agency or
Trading Market, without the prior written consent of such Purchaser, except to
the extent such disclosure (but not any disclosure as to the controlling
Persons thereof) is required by law or Trading Market regulations, in which
case the Company shall provide the Purchasers with prior notice of such
disclosure. The Company shall not, and shall cause each of its Subsidiaries
and its and each of their respective officers, directors, employees and agents
not to, provide any Purchaser with any material nonpublic information regarding
the Company or any of its Subsidiaries from and after the filing of the 8-K
Filing without the express written consent of such Purchaser. In the event of
a breach of the foregoing covenant by the Company, any of its Subsidiaries, or
any of its or their respective officers, directors, employees and agents, in
addition to any other remedy provided herein or in the

18

 

Transaction Documents, a Purchaser shall have the right to make a public
disclosure, in the form of a press release, public advertisement or otherwise,
of such material nonpublic information without the prior approval by the
Company, its Subsidiaries, or any of its or their respective officers,
directors, employees or agents. No Purchaser shall have any liability to the
Company, its Subsidiaries, or any of its or their respective officers,
directors, employees, stockholders or agents for any such disclosure. Subject
to the foregoing, neither the Company nor any Purchaser shall issue any press
releases or any other public statements with respect to the transactions
contemplated hereby; provided, however, that the Company shall be entitled,
without the prior approval of any Purchaser, to make any press release or other
public disclosure with respect to such transactions (i) in substantial
conformity with the 8-K Filing and contemporaneously therewith and (ii) as is
required by applicable law and regulations (provided that in the case of clause
(i) each Purchaser shall be consulted by the Company in connection with any
such press release or other public disclosure prior to its release). Each
press release disseminated during the 12 months preceding the date of this
Agreement did not at the time of release contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading

     4.7 Use of Proceeds. The Company shall use the net proceeds from the sale
of the Securities hereunder for working capital purposes strategic acquisitions
of companies, lines of business, products or technologies, joint ventures, or
other business partnerships or strategic initiatives, or research and
development, but not for the satisfaction of any portion of the Company’s debt
(other than payment of trade payables and accrued expenses in the ordinary
course of the Company’s business and consistent with prior practices), to
redeem any Company equity or equity-equivalent securities or to settle any
outstanding litigation.

     4.8 Reimbursement. If any Purchaser or any of its Affiliates or any
officer, director, partner, controlling Person, employee or agent of a
Purchaser or any of its Affiliates (a “Related Person”) becomes involved in any
capacity in any Proceeding brought by or against any Person in connection with
or as a result of the transactions contemplated by the Transaction Documents,
the Company will indemnify and hold harmless such Purchaser or Related Person
for its reasonable legal and other expenses (including the costs of any
investigation, preparation and travel) and for any Losses incurred in
connection therewith, as such expenses or Losses are incurred, excluding only
Losses that result directly from such Purchaser’s or Related Person’s gross
negligence or willful misconduct. The conduct of any Proceedings for which
indemnification is available under this paragraph shall be governed by Section
6.4(c) below. The indemnification obligations of the Company under this
paragraph shall be in addition to any liability that the Company may otherwise
have and shall be binding upon and inure to the benefit of any successors,
assigns, heirs and personal representatives of the Purchasers and any such
Related Persons. The Company also agrees that neither the Purchasers nor any
Related Persons shall have any liability to the Company or any Person asserting
claims on behalf of or in right of the Company in connection with or as a
result of the transactions contemplated by the Transaction Documents, except to
the extent that any Losses incurred by the Company result from the gross
negligence or willful misconduct of the applicable Purchaser or Related Person
in connection with such transactions.

19

 

ARTICLE V

CONDITIONS

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

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

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

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

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

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

ARTICLE VI

REGISTRATION RIGHTS

     6.1 Shelf Registration

		
	 	     (a) As promptly as possible, and in any event on or prior to the Filing
Date, the Company shall prepare and file with the Commission a “Shelf”
Registration Statement covering the resale of all Registrable Securities for
an offering to be made on a continuous basis pursuant to Rule 415. The
Registration Statement shall be on Form S-3 (except if the Company is not
then eligible to register for resale the Registrable Securities on Form S-3,
in which case such registration shall be on another appropriate form in
accordance herewith as the Purchasers may consent) and shall contain (except
if otherwise directed by the Purchasers) the “Plan of Distribution” attached
hereto as Exhibit C.

		
	 	     (b) The Company shall use its commercially reasonably efforts to cause
the Registration Statement to be declared effective by the Commission as
promptly as possible after the filing thereof, but in any event prior to the
Required Effectiveness Date, and shall use its commercially reasonable
efforts to keep the Registration Statement continuously effective

20

 

		
	 	under the Securities Act until the earliest of (x) the fifth anniversary
of the Effective Date, (y) the date on which all Registrable Securities
covered by such Registration Statement have been sold or (z) the date on
which all Registrable Securities then held by the Purchasers may be sold
without registration under paragraph (k) of Rule 144 of the Securities Act
(the “Effectiveness Period”).

		
	 	     (c) The Company shall notify each Purchaser in writing promptly (and in
any event within one Trading Day) after receiving notification from the
Commission that the Registration Statement has been declared effective.

		
	 	     (d) Upon the occurrence of any Event (as defined below) during the
Effectiveness Period and on every monthly anniversary thereof until the
applicable Event is cured, as partial relief for the damages suffered
therefrom by the Purchasers (which remedy shall not be exclusive of any other
remedies available under this Agreement, at law or in equity), the Company
shall pay to each Purchaser an amount in cash, as liquidated damages and not
as a penalty, equal to 1% of the aggregate purchase price paid by such
Purchaser hereunder for the Securities then held by such Purchaser for the
first month and 2% for each month thereafter. The payments to which a
Purchaser shall be entitled pursuant to this Section 6.1(d) are referred to
herein as “Event Payments”. Any Event Payments payable pursuant to the terms
hereof shall apply on a pro-rata basis for any portion of a month prior to
the cure of an Event.

For such purposes, each of the
following shall constitute an “Event”:

		
	 	     (i) the Registration Statement is not filed on or prior to the
Filing Date or is not declared effective on or prior to the Required
Effectiveness Date;
	 
	 	     (ii) after the Effective Date, a Purchaser is not permitted to sell
Registrable Securities under the Registration Statement (or a subsequent
Registration Statement filed in replacement thereof) for any reason for
10 or more Trading Days (whether or not consecutive) in any period of 12
consecutive months;
	 
	 	     (iii) after the Effective Date, any Registrable Securities covered
by such Registration Statement are not listed on an Eligible Market;
	 
	 	     (iv) the Common Stock is not listed or quoted, or is suspended from
trading, on an Eligible Market for a period of 10 Trading Days (which
need not be consecutive Trading Days);
	 
	 	     (v) the Company fails for any reason to deliver a certificate
evidencing any Securities to a Purchaser within three Trading Days after
delivery of such certificate is required pursuant to any Transaction
Document; or
	 
	 	     (vi) the Company fails to have available a sufficient number of
authorized but unissued and otherwise unreserved shares of Common Stock
available to

21

 

		
	 	issue Underlying Shares upon any exercise of the Warrants or, at any
time following the Effective Date, any Shares or Underlying Shares are
not listed on an Eligible Market.

		
	 	     (e) If any Event occurs and remains uncured for 60 days, then at any
time or times thereafter any Purchaser may deliver to the Company a notice (a
“Repurchase Notice”) requiring the Company to repurchase all or any portion
of the Shares and any Underlying Shares then held by such Purchaser at a
price (the “Repurchase Price”) per share equal to 100% of the average of the
Closing Prices for the five Trading Days preceding either (a) the date of
delivery of the notice requiring such repurchase, or (b) the date on which
the applicable repurchase price (together with any other payments, expenses
and liquidated damages then due and payable under the Transaction Documents)
is paid in full, whichever is greater. If a Purchaser delivers a Repurchase
Notice pursuant to this Section, the Company shall pay the aggregate
Repurchase Price (together with any other payments, expenses and liquidated
damages then due and payable pursuant to the Transaction Documents) to such
Purchaser no later than the fifth Trading Day following the date of delivery
of the Repurchase Notice, and upon receipt thereof such Purchaser shall
deliver original certificates evidencing the Securities so repurchased to the
Company (to the extent such certificates have been delivered to such
Purchaser). Notwithstanding the foregoing, immediately upon the occurrence
of a Bankruptcy Event, each Purchaser will automatically be deemed to have
delivered a Repurchase Notice pursuant to this paragraph and will be entitled
to receive the corresponding Repurchase Price without any further action or
notice to the Company.

		
	 	     (f) The Company shall not, prior to the Effective Date of the
Registration Statement, prepare and file with the Commission a registration
statement relating to an offering for its own account or the account of
others under the Securities Act of any of its equity securities except for a
registration statement on Form S-8.

     6.2 Registration Procedures. In connection with the Company’s registration
obligations hereunder, the Company shall:

		
	 	     (a) Not less than three Trading Days prior to the filing of a
Registration Statement or any related Prospectus or any amendment or
supplement thereto, the Company shall (i) furnish to each Purchaser and any
counsel designated by any Purchaser (each, a “Purchaser Counsel”, and
Cranshire Capital, L.P.. has initially designated Proskauer Rose LLP) copies
of such Registration Statement, amendment or supplement proposed to be filed,
which documents will be subject to the review of such Purchasers and each
Purchaser Counsel, and (ii) cause its officers and directors, counsel and
independent certified public accountants to respond to such inquiries as
shall be necessary, in the reasonable opinion of each Purchaser Counsel, to
conduct a reasonable investigation within the meaning of the Securities Act.
The Company shall not file a Registration Statement or any such Prospectus or
any amendments or supplements thereto to which Purchasers holding a majority
of the Registrable Securities shall reasonably object.

		
	 	     (b) (i) Prepare and file with the Commission such amendments, including
post-effective amendments, to each Registration Statement and the Prospectus
used in connection therewith as may be necessary to keep the Registration
Statement continuously effective as to the applicable Registrable Securities
for the Effectiveness Period and prepare

22

 

		
	 	and file with the Commission such additional Registration Statements in
order to register for resale under the Securities Act all of the Registrable
Securities; (ii) cause the related Prospectus to be amended or supplemented
by any required Prospectus supplement, and as so supplemented or amended to
be filed pursuant to Rule 424; (iii) respond as promptly as reasonably
possible, and in any event within ten days, to any comments received from the
Commission with respect to the Registration Statement or any amendment
thereto and as promptly as reasonably possible provide the Purchasers true
and complete copies of all correspondence from and to the Commission relating
to the Registration Statement; and (iv) comply in all material respects with
the provisions of the Securities Act and the Exchange Act with respect to the
disposition of all Registrable Securities covered by the Registration
Statement during the applicable period in accordance with the intended
methods of disposition by the Purchasers thereof set forth in the
Registration Statement as so amended or in such Prospectus as so supplemented

		
	 	     (c) Notify the Purchasers of Registrable Securities to be sold and each
Purchaser Counsel as promptly as reasonably possible, and (if requested by
any such Person) confirm such notice in writing no later than one Trading Day
thereafter, of any of the following events: (i) the Commission notifies the
Company whether there will be a “review” of any Registration Statement; (ii)
the Commission comments in writing on any Registration Statement (in which
case the Company shall deliver to each Purchaser a copy of such comments and
of all written responses thereto); (iii) any Registration Statement or any
post-effective amendment is declared effective; (iv) the Commission or any
other Federal or state governmental authority requests any amendment or
supplement to any Registration Statement or Prospectus or requests additional
information related thereto; (v) the Commission issues any stop order
suspending the effectiveness of any Registration Statement or initiates any
Proceedings for that purpose; (vi) the Company receives notice of any
suspension of the qualification or exemption from qualification of any
Registrable Securities for sale in any jurisdiction, or the initiation or
threat of any Proceeding for such purpose; or (vii) the financial statements
included in any Registration Statement become ineligible for inclusion
therein or any statement made in any Registration Statement or Prospectus or
any document incorporated or deemed to be incorporated therein by reference
is untrue in any material respect or any revision to a Registration
Statement, Prospectus or other document is required so that it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.

		
	 	     (d) Use its commercially reasonable efforts to avoid the issuance of or,
if issued, obtain the withdrawal of (i) any order suspending the
effectiveness of any Registration Statement, or (ii) any suspension of the
qualification (or exemption from qualification) of any of the Registrable
Securities for sale in any jurisdiction, at the earliest practicable moment.

		
	 	     (e) Furnish to each Purchaser and each Purchaser Counsel, without
charge, at least one conformed copy of each Registration Statement and each
amendment thereto, including financial statements and schedules, all
documents incorporated or deemed to be incorporated therein by reference, and
all exhibits to the extent requested by such Person

23

 

		
	 	(including those previously furnished or incorporated by reference)
promptly after the filing of such documents with the Commission.

		
	 	     (f) Promptly deliver to each Purchaser and each Purchaser Counsel,
without charge, as many copies of the Prospectus or Prospectuses (including
each form of prospectus) and each amendment or supplement thereto as such
Persons may reasonably request. The Company hereby consents to the use of
such Prospectus and each amendment or supplement thereto by each of the
selling Purchasers in connection with the offering and sale of the
Registrable Securities covered by such Prospectus and any amendment or
supplement thereto.

		
	 	     (g) (i) In the time and manner required by each Trading Market, prepare
and file with such Trading Market an additional shares listing application
covering all of the Registrable Securities; (ii) take all steps necessary to
cause such Registrable Securities to be approved for listing on each Trading
Market as soon as possible thereafter; (iii) provide to the Purchasers
evidence of such listing; and (iv) maintain the listing of such Registrable
Securities on each such Trading Market or another Eligible Market.

		
	 	     (h) Prior to any public offering of Registrable Securities, use its
commercially reasonable efforts to register or qualify or cooperate with the
selling Purchasers and each applicable Purchaser Counsel in connection with
the registration or qualification (or exemption from such registration or
qualification) of such Registrable Securities for offer and sale under the
securities or blue sky laws of such jurisdictions within the United States as
any Purchaser requests in writing, to keep each such registration or
qualification (or exemption therefrom) effective during the Effectiveness
Period and to do any and all other acts or things necessary or advisable to
enable the disposition in such jurisdictions of the Registrable Securities
covered by a Registration Statement; provided, however, that the Company
shall not be obligated to file any general consent to service of process or
to qualify as a foreign corporation or as a dealer in securities in any
jurisdiction in which it is not so qualified or to subject itself to taxation
in respect of doing business in any jurisdiction in which it is not otherwise
subject.

		
	 	     (i) Cooperate with the Purchasers to facilitate the timely preparation
and delivery of certificates representing Registrable Securities to be
delivered to a transferee pursuant to a Registration Statement, which
certificates shall be free, to the extent permitted by this Agreement, of all
restrictive legends, and to enable such Registrable Securities to be in such
denominations and registered in such names as any such Purchasers may
request.

		
	 	     (j) Upon the occurrence of any event described in Section 6.2(c)(vii),
as promptly as reasonably possible, prepare a supplement or amendment,
including a post-effective amendment, to the Registration Statement or a
supplement to the related Prospectus or any document incorporated or deemed
to be incorporated therein by reference, and file any other required document
so that, as thereafter delivered, neither the Registration Statement nor such
Prospectus will contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.

24

 

		
	 	     (k) Cooperate with any due diligence investigation undertaken by the
Purchasers in connection with the sale of Registrable Securities, including
without limitation by making available any documents and information;
provided that the Company will not deliver or make available to any Purchaser
material, nonpublic information unless such Purchaser specifically requests
in advance to receive material, nonpublic information in writing.

		
	 	     (l) If Holders of a majority of the Registrable Securities being offered
pursuant to a Registration Statement select underwriters for the offering,
the Company shall enter into and perform its obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, by providing customary legal opinions, comfort letters and
indemnification and contribution obligations.
	 
	 	     (m) Comply with all applicable rules and regulations of the Commission.

		
	 	     (n) Notwithstanding anything to the contrary in this Section 6.2, at any
time after the Registration Statement has been declared effective, the
Company may delay the disclosure of material, non-public information
concerning the Company the disclosure of which at the time is not, in the
good faith opinion of the Board of Directors of the Company and its counsel,
in the best interest of the Company and, in the opinion of counsel to the
Company, otherwise required (a “Grace Period”); provided, that the Company
shall promptly (i) notify the Purchasers in writing of the existence of
material, non-public information giving rise to a Grace Period and the date
on which the Grace Period will begin, and (ii) notify the Purchasers in
writing of the date on which the Grace Period ends; and, provided further,
that during any consecutive 365 day period, there shall be no more than 2
such Grace Periods and that the total of all such Grace Periods shall not
exceed 20 Trading Days. For purposes of determining the length of a Grace
Period above, the Grace Period shall begin on and include the date the
Purchasers receive the notice referred to in clause (i) above and shall end
on and include the date the Purchasers receive the notice referred to in
clause (ii) above.

     6.3 Registration Expenses. The Company shall pay (or reimburse the
Purchasers for) all fees and expenses incident to the performance of or
compliance with this Agreement by the Company, including without limitation (a)
all registration and filing fees and expenses, including without limitation
those related to filings with the Commission, any Trading Market and in
connection with applicable state securities or Blue Sky laws, (b) printing
expenses (including without limitation expenses of printing certificates for
Registrable Securities and of printing prospectuses requested by the
Purchasers), (c) messenger, telephone and delivery expenses, (d) fees and
expenses of all other Persons retained by the Company in connection with the
consummation of the transactions contemplated by this Agreement, and (e) all
listing fees to be paid by the Company to the Trading Market.

     6.4 Indemnification

		
	 	     (a) Indemnification by the Company. The Company shall, notwithstanding
any termination of this Agreement, indemnify and hold harmless each
Purchaser, the officers, directors, partners, members, agents, brokers
(including brokers who offer and sell Registrable Securities as principal as
a result of a pledge or any failure to perform under a margin call of

25

 

		
	 	Common Stock), investment advisors and employees of each of them, each
Person who controls any such Purchaser (within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act) and the officers,
directors, partners, members, agents and employees of each such controlling
Person, to the fullest extent permitted by applicable law, from and against
any and all Losses, as incurred, arising out of or relating to any untrue or
alleged untrue statement of a material fact contained in the Registration
Statement, any Prospectus or any form of prospectus or in any amendment or
supplement thereto or in any preliminary prospectus, or arising out of or
relating to any omission or alleged omission of a material fact required to
be stated therein or necessary to make the statements therein (in the case of
any Prospectus or form of prospectus or supplement thereto, in the light of
the circumstances under which they were made) not misleading, except to the
extent, but only to the extent, that (i) such untrue statements, alleged
untrue statements, omissions or alleged omissions are based solely upon
information regarding such Purchaser furnished in writing to the Company by
such Purchaser expressly for use therein, or to the extent that such
information relates to such Purchaser or such Purchaser’s proposed method of
distribution of Registrable Securities and was reviewed and expressly
approved in writing by such Purchaser expressly for use in the Registration
Statement, such Prospectus or such form of Prospectus or in any amendment or
supplement thereto or (ii) in the case of an occurrence of an event of the
type specified in Section 6.2(c)(v)-(vii), the use by such Purchaser of an
outdated or defective Prospectus after the Company has notified such
Purchaser in writing that the Prospectus is outdated or defective and prior
to the receipt by such Purchaser of the Advice contemplated in Section 6.5.
The Company shall notify the Purchasers promptly of the institution, threat
or assertion of any Proceeding of which the Company is aware in connection
with the transactions contemplated by this Agreement.

		
	 	     (b) Indemnification by Purchasers. Each Purchaser shall, severally and
not jointly, indemnify and hold harmless the Company, its directors,
officers, agents and employees, each Person who controls the Company (within
the meaning of Section 15 of the Securities Act and Section 20 of the
Exchange Act), and the directors, officers, agents or employees of such
controlling Persons, to the fullest extent permitted by applicable law, from
and against all Losses (as determined by a court of competent jurisdiction in
a final judgment not subject to appeal or review) arising solely out of any
untrue statement of a material fact contained in the Registration Statement,
any Prospectus, or any form of prospectus, or in any amendment or supplement
thereto, or arising solely out of any omission of a material fact required to
be stated therein or necessary to make the statements therein (in the case of
any Prospectus or form of prospectus or supplement thereto, in the light of
the circumstances under which they were made) not misleading to the extent,
but only to the extent, that such untrue statement or omission is contained
in any information so furnished in writing by such Purchaser to the Company
specifically for inclusion in such Registration Statement or such Prospectus
or to the extent that (i) such untrue statements or omissions are based
solely upon information regarding such Purchaser furnished in writing to the
Company by such Purchaser expressly for use therein, or to the extent that
such information relates to such Purchaser or such Purchaser’s proposed
method of distribution of Registrable Securities and was reviewed and
expressly approved in writing by such Purchaser expressly for use in the
Registration Statement, such Prospectus or such form of Prospectus or in any
amendment or supplement thereto or (ii) in the case of an occurrence of an
event of the type specified in Section

26

 

		
	 	6.2(c)(v)-(vii), the use by such Purchaser of an outdated or defective
Prospectus after the Company has notified such Purchaser in writing that the
Prospectus is outdated or defective and prior to the receipt by such
Purchaser of the Advice contemplated in Section 6.5. In no event shall the
liability of any selling Purchaser hereunder be greater in amount than the
dollar amount of the net proceeds received by such Purchaser upon the sale of
the Registrable Securities giving rise to such indemnification obligation.

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

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

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

27

 

Party to undertake to reimburse all such fees and expenses to the extent
it is finally judicially determined that such Indemnified Party is not entitled
to indemnification hereunder).

		
	 	     (d) Contribution. If a claim for indemnification under Section 6.4(a)
or (b) is unavailable to an Indemnified Party (by reasons other than the
specified exclusions to indemnification), then each Indemnifying Party, in
lieu of indemnifying such Indemnified Party, shall contribute to the amount
paid or payable by such Indemnified Party as a result of such Losses, in such
proportion as is appropriate to reflect the relative fault of the
Indemnifying Party and Indemnified Party in connection with the actions,
statements or omissions that resulted in such Losses as well as any other
relevant equitable considerations. The relative fault of such Indemnifying
Party and Indemnified Party shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged
untrue statement of a material fact or omission or alleged omission of a
material fact, has been taken or made by, or relates to information supplied
by, such Indemnifying Party or Indemnified Party, and the parties’ relative
intent, knowledge, access to information and opportunity to correct or
prevent such action, statement or omission. The amount paid or payable by a
party as a result of any Losses shall be deemed to include, subject to the
limitations set forth in Section 6.4(c), any reasonable attorneys’ or other
reasonable fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for such fees
or expenses if the indemnification provided for in this Section was available
to such party in accordance with its terms.

          The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 6.4(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 6.4(d), no Purchaser
shall be required to contribute, in the aggregate, any amount in excess of the
amount by which the proceeds actually received by such Purchaser from the sale
of the Registrable Securities subject to the Proceeding exceeds the amount of
any damages that 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 indemnity and contribution agreements contained in this Section are in
addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.

     6.5 Dispositions. Each Purchaser agrees that it will comply with the
prospectus delivery requirements of the Securities Act as applicable to it in
connection with sales of Registrable Securities pursuant to the Registration
Statement. Each Purchaser further agrees that, upon receipt of a notice from
the Company of the occurrence of any event of the kind described in Sections
6.2(c)(v), (vi) or (vii), such Purchaser will discontinue disposition of such
Registrable Securities under the Registration Statement until such Purchaser’s
receipt of the copies of the supplemented Prospectus and/or amended
Registration Statement contemplated by Section 6.2(j), or until it is advised
in writing (the “Advice”) by the Company that the use of the applicable
Prospectus may be resumed, and, in either case, has received copies of any
additional

28

 

or supplemental filings that are incorporated or deemed to be incorporated
by reference in such Prospectus or Registration Statement. The Company may
provide appropriate stop orders to enforce the provisions of this paragraph.

     6.6 No Piggyback on Registrations. Neither the Company nor any of its
security holders (other than the Purchasers in such capacity pursuant hereto)
may include securities of the Company in the Registration Statement other than
the Registrable Securities, and the Company shall not after the date hereof
enter into any agreement providing any such right to any of its security
holders.

     6.7 Piggy-Back Registrations. If at any time during the Effectiveness
Period there is not an effective Registration Statement covering all of the
Registrable Securities and the Company shall determine to prepare and file with
the Commission a registration statement relating to an offering for its own
account or the account of others under the Securities Act of any of its equity
securities, other than on Form S-4 or Form S-8 (each as promulgated under the
Securities Act) or their then equivalents relating to equity securities to be
issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with stock option or other employee
benefit plans, then the Company shall send to each Purchaser written notice of
such determination and if, within fifteen days after receipt of such notice,
any such Purchaser shall so request in writing, the Company shall include in
such registration statement all or any part of such Registrable Securities such
Purchaser requests to be registered.

ARTICLE VII

MISCELLANEOUS

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

     7.2 Fees and Expenses. At the Closing, the Company shall pay to Cranshire
Capital, L.P. an aggregate of $10,000 for their legal fees and expenses
incurred in connection with the preparation and negotiation of the Transaction
Documents. In lieu of the foregoing payment, Cranshire Capital, L.P. may
retain such amount at the Closing or require the Company to pay such amount
directly to Proskauer Rose LLP. Except as expressly set forth in the
Transaction Documents to the contrary, each party shall pay the fees and
expenses of its advisers, counsel, accountants and other experts, if any, and
all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement. The
Company shall pay all Transfer Agent fees, stamp taxes and other taxes and
duties levied in connection with the issuance of the Securities.

     7.3 Entire Agreement. The Transaction Documents, together with the
Exhibits and Schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements
and understandings, oral or written, with respect to such matters, which the
parties acknowledge have been merged into such documents, exhibits and
schedules. At or after the Closing, and without further consideration, the
Company

29

 

will execute and deliver to the Purchasers such further documents as may
be reasonably requested in order to give practical effect to the intention of
the parties under the Transaction Documents. Notwithstanding anything to the
contrary herein, Securities may be assigned to any Person in connection with a
bona fide margin account or other loan or financing arrangement secured by such
Company Securities.

     7.4 Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
specified in this Section prior to 6:30 p.m. (New York City time) on a Trading
Day, (b) the next Trading Day after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number specified in
this Section on a day that is not a Trading Day or later than 6:30 p.m. (New
York City time) on any Trading Day, (c) the Trading Day following the date of
mailing, if sent by U.S. nationally recognized overnight courier service, or
(d) upon actual receipt by the party to whom such notice is required to be
given. The addresses and facsimile numbers for such notices and communications
are those set forth on the signature pages hereof, or such other address or
facsimile number as may be designated in writing hereafter, in the same manner,
by such Person.

     7.5 Amendments; Waivers. No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment, by
the Company and each of the Purchasers or, in the case of a waiver, by the
party against whom enforcement of any such waiver is sought. No waiver of any
default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver
of any subsequent default or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of either party to exercise
any right hereunder in any manner impair the exercise of any such right.
Notwithstanding the foregoing, a waiver or consent to depart from the
provisions hereof with respect to a matter that relates exclusively to the
rights of Purchasers under Article VI and that does not directly or indirectly
affect the rights of other Purchasers may be given by Purchasers holding at
least a majority of the Registrable Securities to which such waiver or consent
relates.

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

     7.7 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and permitted assigns. The
Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Purchasers. Any Purchaser may assign
its rights under this Agreement to any Person to whom such Purchaser assigns or
transfers any Securities, provided such transferee agrees in writing to be
bound, with respect to the transferred Securities, by the provisions hereof
that apply to the “Purchasers.” Notwithstanding anything to the contrary
herein, Securities may be assigned to any Person in connection with a bona fide
margin account or other loan or financing arrangement secured by such
Securities.

30

 

     7.8 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except that each Related Person is an intended third
party beneficiary of Section 4.8 and each Indemnified Party is an intended
third party beneficiary of Section 6.4 and (in each case) may enforce the
provisions of such Sections directly against the parties with obligations
thereunder.

     7.9 Governing Law; Venue; Waiver Of Jury Trail. ALL QUESTIONS CONCERNING
THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK. THE COMPANY AND PURCHASERS HEREBY IRREVOCABLY SUBMIT TO
THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE CITY
OF NEW YORK, BOROUGH OF MANHATTAN FOR THE ADJUDICATION OF ANY DISPUTE BROUGHT
BY THE COMPANY OR ANY PURCHASER HEREUNDER, IN CONNECTION HEREWITH OR WITH ANY
TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN (INCLUDING WITH RESPECT TO
THE ENFORCEMENT OF ANY OF THE TRANSACTION DOCUMENTS), AND HEREBY IRREVOCABLY
WAIVE, AND AGREE NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING BROUGHT BY THE
COMPANY OR ANY PURCHASER, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE
JURISDICTION OF ANY SUCH COURT, OR THAT SUCH SUIT, ACTION OR PROCEEDING IS
IMPROPER. EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND
CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY
MAILING A COPY THEREOF VIA REGISTERED OR CERTIFIED MAIL OR OVERNIGHT DELIVERY
(WITH EVIDENCE OF DELIVERY) TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES
TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD
AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING CONTAINED HEREIN
SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER
PERMITTED BY LAW. THE COMPANY AND PURCHASERS HEREBY WAIVE ALL RIGHTS TO A
TRIAL BY JURY.

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

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

     7.12 Severability. If any provision of this Agreement is held to be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and

31

 

provisions of this Agreement shall not in any way be affected or impaired
thereby and the parties will attempt to agree upon a valid and enforceable
provision that is a reasonable substitute therefor, and upon so agreeing, shall
incorporate such substitute provision in this Agreement.

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

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

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

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

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

32

 

     7.18 Independent Nature of Purchasers’ Obligations and Rights. The
obligations of each Purchaser under any Transaction Document are several and
not joint with the obligations of any other Purchaser, and no Purchaser shall
be responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. The decision of each Purchaser to
purchase Shares pursuant to this Agreement has been made by such Purchaser
independently of any other Purchaser and independently of any information,
materials, statements or opinions as to the business, affairs, operations,
assets, properties, liabilities, results of operations, condition (financial or
otherwise) or prospects of the Company or of the Subsidiary which may have been
made or given by any other Purchaser or by any agent or employee of any other
Purchaser, and no Purchaser or any of its agents or employees shall have any
liability to any other Purchaser (or any other Person) relating to or arising
from any such information, materials, statements or opinions. Nothing
contained herein or in any Transaction Document, and no action taken by any
Purchaser pursuant thereto, shall be deemed to constitute the Purchasers as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Purchasers are in any way acting in concert or as
a group with respect to such obligations or the transactions contemplated by
the Transaction Document. Each Purchaser acknowledges that no other Purchaser
has acted as agent for such Purchaser in connection with making its investment
hereunder and that no other Purchaser will be acting as agent of such Purchaser
in connection with monitoring its investment hereunder. Each Purchaser shall
be entitled to independently protect and enforce its rights, including without
limitation the rights arising out of this Agreement or out of the other
Transaction Documents, and it shall not be necessary for any other Purchaser to
be joined as an additional party in any proceeding for such purpose.

33

 

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

	 	 	 	 	 
	 	 	STRATASYS, INC.
	 	 	 	 	 
	 	 	
By:
	 	/s/ S. Scott Crump
	 	 	 	 	

	 	 	
Name:
	 	S. Scott Crump
	 	 	
Title:
	 	Chief Executive Officer
	 	 	 	 	 
	 	 	Address for Notice:
	 	 	 	 	 
	 	 	14950 Martin Drive
	 	 	Eden Prairie, MN 55344
	 	 	Facsimile No.: (952) 937-0070
	 	 	Telephone No.: (952) 937-3000
	 	 	Attn: Thomas W. Stenoien
	 	 	 	 	 
	With a copy to:	 	Snow Becker Krauss P.C.
	 	 	605 Third Avenue
	 	 	New York, NY 10158
	 	 	Facsimile No.: 212-949-7052
	 	 	Telephone No.: 212-455-0440
	 	 	Attn: Eric Honick, Esq.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGES FOR PURCHASERS FOLLOW]

 

 

	 	 	 	 	 
	 	 	CRANSHIRE CAPITAL, L.P.
	 	 	 	 	 
	 	 	
By:
	 	/s/ Mitchell P. Kopin
	 	 	 	 	

	 	 	
Name:
	 	Mitchell P. Kopin
	 	 	
Title:
	 	President-Downsview Capital
	 	 	 	 	The General Partner

	 	 	 
	 	 	
Purchase Price: $7,938,000
	 	 	 
	 	 	
Number of Shares to be acquired : 225,000
	 	 	 
	 	 	
Underlying Shares subject to Warrant: 33,750
	 	 	 
	 	 	
Address for Notice:
	 	 	 
	 	 	
Cranshire Capital, L.P.
	 	 	
c/o Mitchell P. Kopin
	 	 	
666 Dundee Road, Suite 1901
	 	 	
Northbrook, IL 60062
	 	 	
Attn: Mitchell P. Kopin
	 	 	
Telephone No.: 847-562-9030
	 	 	
Facsimile No.: 847-562-9031
	 	 	 
	With a copy to:	 	
Proskauer Rose LLP
	 	 	
1585 Broadway
	 	 	
New York, New York 10036-8299
	 	 	
Facsimile No.: (212) 969-2900
	 	 	
Telephone No.: (212) 969-3000
	 	 	
Attn: Adam J. Kansler, Esq.

 

 

	 	 	 	 	 
	 	 	Smithfield Fiduciary LLC
	 	 	 	 	 
	 	 	
By:
	 	/s/ Adam J. Chill
	 	 	 	 	

	 	 	
Name:
	 	Adam J. Chill
	 	 	
Title:
	 	Authorized Signatory

	 	 	 
	 	 	
Purchase Price: $2,646,000
	 	 	 
	 	 	
Number of Shares to be acquired: 75,000
	 	 	 
	 	 	
Underlying Shares subject to Warrant: 11,250
	 	 	 
	 	 	
Address for Notice:
	 	 	 
	 	 	
Smithfield Fiduciary LLC
	 	 	
c/o Highbridge Capital Management, LLC
	 	 	
Nine West 57th Street, 27th Floor
	 	 	
New York, New York 10019
	 	 	
Facsimile No.: 212-751-0755
	 	 	
Telephone No.: 212-287-4720
	 	 	
Attn: Ari J. Storch/Adam J. Chill

 

 

	 	 	 
	 	 	
Exhibits:
	 	 	 
	A	 	
Form of Warrant
	 	 	 
	B	 	
Opinion of Company Counsel
	 	 	 
	C	 	
Plan of Distribution
	 	 	 
	D	 	
Transfer Agent Instructionsexv10w1

 

Exhibit 10.1

PANERA, L.L.C.

CONFIDENTIAL AND PROPRIETARY INFORMATION

AND NON-COMPETITION AGREEMENT

     I, Neal Yanofsky, in consideration of the offer of employment to me by
Panera, L.L.C. (“Panera” and/or “Company”) or to continue employment with
Panera, as the case may be, and the compensation and other consideration that
may hereafter be paid to me, agree to the following:

     1.     EMPLOYEE WARRANTIES

               I warrant that I am free to enter into the terms of this Panera, L.L.C.
Confidential And Proprietary Information And Non-Competition Agreement
(“Agreement”) and that I have no obligations inconsistent with unrestrained
employment by Panera and I further represent and warrant that my performance of
all the terms of this Agreement and as an employee of Panera does not and will
not breach any agreement to keep in confidence information acquired by me in
confidence or in trust prior to my employment by Panera. Moreover, I have not
entered into, and I agree I will not enter into, any agreement either written
or oral in conflict herewith.

     2.     NO ASSURANCES OF CONTINUED EMPLOYMENT

               I understand and agree that nothing in this Agreement or any discussions I
have had with Panera or any of its representatives shall be construed to give
me any right or assurance of continued employment by Panera; and that my
employment relationship with Panera is terminable at will, with or without
notice, with or without reason, by either Panera or me.

     3.     CONFLICTING EMPLOYMENT

               I agree that during the term of my employment with Panera I will not
engage in any other employment, occupation, consulting or other business
activity related to the business in which Panera is now involved or becomes
involved during the term of my employment, nor will I engage in any other
activities that conflict with my obligations to Panera, including, but not
limited to, soliciting franchisees or potential franchisees for personal gain
and/or benefit.

     4.     CONFIDENTIAL NATURE; PUBLIC STATEMENTS

               4.1 I shall keep confidential the terms of this Agreement. A breach of
this confidentiality undertaking shall relieve the Company of any of its
undertakings and obligations set forth herein.

               4.2 The provisions of subsection 4.1 notwithstanding, it shall not be
deemed a violation of my duty to keep the terms hereof confidential should:

                    (i) disclosure be compelled by applicable law or by order of either a
court of competent jurisdiction or governmental or administrative authority.

                    (ii) disclosure of this Agreement be made by me to members of my immediate
family, or to professionals consulted by me for advise regarding this
Agreement, including, without limitation, lawyers and certified public accountants; provided that any
person to whom such disclosure is authorized shall agree to be bound by the
terms of paragraph 4.

 

 

     5.     CONFIDENTIAL AND PROPRIETARY INFORMATION

               5.1 I understand and acknowledge that in the course of my employment, I
have received and/or will receive and/or may receive and/or have access to
certain “Confidential Information” (as defined below) of Panera. I hereby
acknowledges that such Confidential Information constitutes a valuable and
proprietary asset of Panera which Panera desires to protect.

               5.2 For purposes of this Agreement, “Confidential Information” shall
include, but not be limited to, the following: this Agreement; trade secrets;
operating techniques, procedures and methods; product specifications; customer
lists; account information; price lists; discount schedules; budgets,
correspondence with customers, vendors, competitors, employees, partners,
franchisees or any other entity or person; drawings; software; samples; leads
from any source; marketing techniques; procedures and methods; employee lists;
internal financial reports (including, but not limited to, internal sales
and/or profit and loss reports) of the Company and its affiliates and/or
franchisees; sourcing lists; and recruiting lists; and any other such
proprietary information, but shall not include any such information which has
become generally known to or available for use by the public other than by my
unauthorized act(s) or omission(s).

               5.3 I agree that during the term of this Agreement and at any time
thereafter, I will not, without the authorization of Panera: (i) disclose any
Confidential Information to any person or entity for any purpose whatsoever; or
(ii) make use of any Confidential Information for my own purposes or for the
benefit of any other person or entity, other than Panera, and it is expressly
understood and agreed that this prohibition shall include not using any such
Confidential Information in competing with Panera at any time.

     6.     COVENANTS NOT TO COMPETE

               6.1 I covenant and agree that I will not engage in any “Competitive
Activity” (as defined below) at any time during my employment with the Company
and/or within the fifty-two (52) week period following the date of my
termination from the Company for any reason or no reason.

               6.2 “Competitive Activity” shall include the following:

                    (i) being employed by, or directly or indirectly advising, consulting in,
or acting in any way as an agent for any company listed on Attachment A (the
“Listed Competitors”); or

                    (ii) directly or indirectly engaging in, being employed by, advising,
consulting in, or acting in any way as an agent for any entity engaged, in
whole or in part, in any retail food establishment (including any restaurant or
bakery, but excluding any exclusively based pizza concept) in which any of the
following categories constitutes more than twenty percent (20%) of its revenues
(an “Other Competitor”): (a) bakery goods and breads; (b) sandwiches, soups
and/or salads, other than those ordered through a wait person taking orders at
a table (the term “sandwiches” shall not include hamburgers); or (c) coffee and
coffee-based drinks; as well as any business (without regard to revenue) that
manufactures, wholesales and/or distributes fresh or frozen dough or bakery
products which is or may be competitive with or adverse to the Company’s
business and which is within a 100 mile radius of where the Company is engaged
in business or where the Company is attempting to engage in business or where
the Company may reasonably be expected to engage in business within the 12
months immediately following my termination; or

                    (iii) providing any services, directly or indirectly, to any division or
direct or indirect parent company of any Listed Competitor (including the
parent companies listed on Attachment A), or any Other Competitor, or to any
other affiliated company of a Listed Competitor or Other

 

 

Competitor; other than
any entity that owns a minority interest in a Listed Competitor or Other
Competitor solely as a passive investor, without any involvement in the
management of such Listed Competitor or Other Competitor; or

                    (iv) having, or acquiring any interest in (whether as proprietor, partner,
stockholder, consultant, officer, director, or any type of principal
whatsoever) in any Listed Competitor, Other Competitor or in any division, or
direct or indirect parent company of any Listed Competitor or Other Competitor,
except that the direct or indirect ownership of five percent (5%) or less of
the stock of a company whose shares are listed on a national securities
exchange or are quoted on the National Association of Securities Dealers
Automated Quotation System shall not be deemed having or acquiring any such
interest; or

                    (v) directly or indirectly being employed by, advising,
consulting in, or acting in any way as an agent for any entity or individual:
(a) which is a franchisee of the Company, or (b) which was a franchisee of the
Company at any time within the twelve (12) months immediately prior to my
termination from the Company, or (c) which the Company is and/or was attempting
to secure as a franchisee at any time within the twelve (12) months immediately
prior to my termination from the Company, or (d) which the Company may
reasonably be expected to secure as a franchisee at any time within the twelve
(12) months immediately following my termination, or (e) which is or was an
equity owner of 10% or more of a Company franchisee; or

                    (vi) or acquiring any interest in (whether as proprietor, partner,
stockholder, consultant, officer, director, or any type of principal
whatsoever) any entity: (a) which is a franchisee of the Company, or (b) which
was a franchisee of the Company at any time within the twelve (12) months
immediately prior to my termination from the Company, or (c) which the Company
is and/or was attempting to secure as a franchisee at any time within the
twelve (12) months immediately prior to my termination from the Company, or (d)
which the Company may reasonably be expected to secure as a franchisee at any
time within the twelve (12) months immediately following my termination, or (e)
which includes an entity or individual equity owner that is or was an equity
owner of 10% or more of a Company franchisee; except that the direct or
indirect ownership of five percent (5%) or less of the stock of a company whose
shares are listed on a national securities exchange or are quoted on the
National Association of Securities Dealers Automated Quotation System shall not
be deemed having or acquiring any such interest.

               6.3 Both during the term of my employment with the Company and at any time
within the twenty-four (24) month period following my termination from the
Company for any reason or no reason, I hereby agree not to directly or
indirectly solicit or otherwise attempt to induce, influence, or encourage any
employee and/or independent contractor and/or consultant and/or supplier and/or
franchisee of the Company to terminate and/or modify in any way his/her and/or
its employment or other such business relationship with the Company.

               6.4 For purposes of Section 6, references to “the Company’s business”
and/or “where the Company is engaged in business” and/or “where the Company is
attempting to engage in business” and/or “where the Company may reasonably be
expected to engage in business”, shall mean any and/or all current and/or future franchisee operation(s) as well as any
current and/or future Company operation(s).

 

 

               6.5 At any time I may request a waiver, in whole or in part, of Section 6
by notifying the Company in writing of my request. Within 15 days of my
providing the Company with relevant information pertaining to such a waiver
request and my providing such written information as the Company may request
regarding the potential violation of these Covenants Not To Compete, the
Company, through the Chief Executive Officer and/or his/her designee, will
consider such a request and communicate with me.

     7.     SEPARATION PAY

               7.1 Upon the occurrence of a “Separation Event”, as defined below, and
provided I comply with all of the obligations contained in this Agreement
(including, but not limited to Section 6), Panera agrees to: (i) pay me
fifty-two (52) weeks of my “Base Pay” as defined in Section 7.2 below; (ii) at
my option, continue my health and dental insurance for this same fifty-two (52)
week period, with then existing employee premium payments (if any) to be
deducted from my Separation Pay, with COBRA notification to follow; (iii) at my
option, allow me to make my lawful contribution(s) to Panera’s then existing
401K plan for this same fifty-two (52) week period. In addition, if a
Separation Event occurs during 2003 or 2004, Panera agrees to pay me any unpaid
balance of my guaranteed incentive payout of 40% of my Base Pay, pro rated
based upon the number of months in that calendar year that I was employed by
Panera.

               7.2 “Base Pay” shall mean my annualized base salary at the time of the
“Separation Event” as pre-established by the Company, plus my annual car
allowance, if applicable. Unless specifically mentioned in the preceding
sentence, Base Pay shall not include any bonus, incentive compensation
(including, but not limited to, stock options) or other benefits or allowances
I may otherwise be entitled to receive as of the effective date of the
Separation Event.

               If no base salary has been pre-established by the Company, then Base Pay
shall mean my previous year’s annualized base salary as reflected in my most
recent Form W-2 from Panera, plus my annual car allowance, if applicable.
Unless specifically mentioned in the preceding sentence, excluded from this
calculation of my base salary (and, accordingly, to be subtracted from my prior
year’s Form W-2) are any bonuses, incentive compensation (including, but not
limited to, stock options) or other benefits or allowances he received in the
prior year.

               7.3 Panera agrees that the above-described Separation Pay shall be made in
substantially equal installments following my termination and disbursement
shall be on the dates on which I would have received regular salary payments.

               7.4 The above described Separation Pay will be reduced (dollar for dollar,
or the equivalent thereof) solely by any business compensation and / or
benefits I receive and / or earn during the severance period from any business
source, including, without limitation, salary, bonus(es), benefits, consulting
fees, income from self-employment, stocks, stock options, equity rights, or
otherwise (for purposes of this Section 7.4 hereinafter “compensation and/or
benefits”), other than (i) from Panera or (ii) from the sale of Panera equity.
For purposes of this Section 7.4, “compensation and/or benefits” as above
defined shall not include inheritances, income received at any time from
passive investments and/or income received from active investments provided
such active investments are in existence prior to my termination and are
otherwise in compliance with this Agreement. I shall promptly notify Panera of
any and all such compensation and/or benefits. In the event the severance
benefits then payable are less than the dollar for dollar compensation and/or
benefits (or the equivalent thereof) I receive and/or earn during fifty-two
(52) week period following the Separation Event, I shall immediately pay the Company
the difference up to the total value of the severance benefits.

               7.5 Panera shall have no obligation to pay the above described Separation
Pay or any other compensation to me if:

 

 

               (i) no Separation Event occurs, or

               (ii) I fail to comply with the all of my obligations contained in this
Agreement.

               7.6 For purposes of this Agreement, a “Separation Event” shall mean and be
limited to the termination of my employment with Panera other than (i) by
Panera for cause (as defined below), (ii) as a result of my death or permanent
disability (unless termination for a disability is pursuant to Section 7.8
below), or (iii) by my voluntary separation of services and employment with, or
resignation from, Panera, other than for “good reason” (as defined below).

               7.7 For purposes of this Agreement, “cause” shall mean: (A) my failure to
follow the legal written direction of the Board or the CEO, which is not cured
within 10 days following my receipt of written notice from the Board or the CEO
specifying the details thereof, (B) my conviction of, guilty plea to, nolo
contendre plea to, or sentencing to a suspended imposition of sentence for a
felony (other than a felony involving a traffic violation or as a result of
vicarious liability), (C) my conviction of, guilty plea to, nolo contendre plea
to, or sentencing to a suspended imposition of sentence for fraud,
embezzlement, larceny or theft, or (D) my willful misconduct that has a
material adverse effect on Panera. For purposes of this definition, no act, or
failure to act, on my part shall be considered “willful” unless done or omitted
to be done, by me not in good faith and without reasonable belief that my
action or omission was in the best interests of Panera.

               “Good reason” shall mean the following events, unless I consent in
writing: (i) any material reduction in my Base Pay or benefits, in an amount
proportionately greater than any across-the-board reduction to the base
salaries or benefits of other Panera executive officers; (ii) a requirement by
Panera that my principal place of work be moved to a location more than 50
miles away from Needham, Massachusetts; or (iii) a change in my title to a
lesser title that does not include the title Executive Vice President.

               7.8 Panera may terminate my employment if, at any time during my
employment, I become disabled so that I am unable to perform the essential
functions of my employment, with reasonable accommodation, for a period of
ninety (90) days in the aggregate during any 180-day period. The determination
of my disability for purposes of this Section 7.8 shall be made by a qualified
physician acceptable to both parties. In the event that Panera and I are
unable to agree upon a qualified physician, each party shall select a qualified
physician, and in the event those two physicians are unable to agree upon a
determination as to my disability, a third neutral physician (“Neutral
Physician”) acceptable to the parties shall be selected. The determination of
disability by the Neutral Physician shall be final and binding for purposes of
this Agreement. In the event my employment is terminated pursuant to this
Section 7.8, said termination shall be deemed a “Separation Event” pursuant to
Section 7.6 entitling me to “Separation Pay”, provided I comply with the
obligations contained in this Agreement, including Section 7 and its subparts.
In addition to any reductions in Severance Pay provided for in Section 7.4, any
Severance Pay made pursuant to this Section 7.8 shall also be offset dollar for
dollar by any payments made in the aggregate to me under Panera’s then existing
Salary Continuation and/or Long-Term Disability Plan(s).

               7.9 If I shall voluntarily terminate my employment with, or resign from,
the Company I shall provide the Company at least sixty (60) calendar days’
prior written notice thereof and I will be expected to continue to perform my
duties consistent with the Company’s good faith expectations up to the date of
my voluntary termination or resignation.

               7.10 All severance payments required to be made by Panera pursuant to this
Agreement to me shall be subject to the withholding of such amounts, if any,
relating to tax (including federal and state withholding, social security and
other applicable taxes) and other payroll deductions Panera may reasonably
determine it should withhold pursuant to applicable law or regulation or
agreement.

 

 

               7.11 In addition to my other obligations contained in this agreement, in
order to receive any severance benefits as provided above, I shall voluntarily
agree to and sign at or about the time of my termination a full and complete
release in the form appended hereto as Attachment B. It is agreed and
understood that prior to the execution by me of Attachment B, the Company may
modify Attachment B for the sole purpose of complying with any changes in the
law.

     8.     RETURN OF PANERA DOCUMENTS

               When I leave the employ of Panera, I will deliver to Panera any and all
drawings, notes, memoranda, specifications, devices, formulas, and any other
documents pertaining to Panera and/or Panera’s business, including, but not
limited to, computer files, together with all copies thereof, and any other
material containing or disclosing any Confidential Information as defined in
Section 5 above (collectively “such Documents”). The above shall include any
and all such Documents contained on, for example, a home computer system. I
further agree not to retain in any way any such Documents, and I will, for
example, first return such Documents and then delete such Documents from any
home computer system. I further agree that any property situated on Panera’s
premises and/or owned by Panera, including disks and other storage media,
filing cabinets or other work areas, is subject to inspection by Panera
personnel at any time with or without notice.

     9.     BENEFITS

               Except as herein otherwise provided, any benefits arising out of or
connected with my employment shall cease as of the effective date of a
Separation Event or other termination of active employment, as applicable. The
foregoing shall not relieve Panera of its obligations under the law pertaining
to my benefits following the effective date of a Separation Event or other
termination of employment.

 

 

     10.     INJUNCTIVE RELIEF

               I acknowledge that Panera’s remedy at law for a breach of Sections 4, 5, 6
and 8 of this Agreement would be inadequate and I hereby expressly agree that
Panera shall be entitled to apply to any court, having jurisdiction, for an
injunction restraining me in the event of a breach, actual or threatened, of
the covenants contained in this Agreement without the necessity of proof of
actual damages. Such right shall be in addition to any other remedies provided
for herein or otherwise available at law or equity. I further waive any
requirement that a bond be posted or that irreparable damage be demonstrated as
a condition to any injunctive relief.

     11.     ARBITRATION

               Any controversy or claim arising out of or relating to my employment with
Panera (including, but not limited to, applicable state and/or federal law),
this Agreement, or the breach hereof (“claims”), except for claims which may be
enforced pursuant to Section 10, shall be settled exclusively by arbitration
before a single arbitrator which shall be held in the City of Boston, in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association. The provisions hereof shall be a complete bar and defense to any
suit, action or proceeding instituted in any federal, state or local court or
before any administrative tribunal with respect to any matter which is
arbitrable as herein set forth. The provision of this section with respect to
arbitration shall survive the termination or expiration of this Agreement.
Nothing herein contained shall be deemed to give any arbitrator any authority,
power, or right to alter, change, amend, modify, add to, or subtract from any
provisions of this Agreement the arbitrator shall have no authority to award
punitive damages or attorney’s fees to any party. The decision of the
arbitrator shall be final and conclusive. Judgment on an award rendered by the
arbitrator may be entered in any court of competent jurisdiction.

     12.     NOTICES

               Any notices required or permitted hereunder shall be given to the
appropriate party at the address specified below or at such other address as
the party shall specify in writing. Such notice shall be deemed given upon
personal delivery to the appropriate address or if sent by certified or
registered mail, three (3) days after the date of mailing.

     (i)  All notices to me shall be addressed to Neal Yanofsky at:

	 	 	 	55 Hartwell Road

Carlisle, MA 01741

or to such other place(s) as I may designate by written notice to Panera.

 

 

     (ii)  All notices to Panera shall be addressed to Panera at:

	 	 	 	63 Kendrick Street

Needham, MA 02494

Attention: C.E.O.

Attention: General Counsel

With a copy to:

	 	 	 	Panera Bread Company

6710 Clayton Road

Richmond Heights, MO 63105

Attention: C.E.O.

Attention: General Counsel

or to such other place(s) as the Company may designate by written notice to me.

     13.     NOTIFICATION OF NEW EMPLOYER

               I agree that I will advise any prospective employer of the covenants and
restrictions of this Agreement before accepting any offer from another employer
and such notification shall not be a breach of Section 4.1.

     14.     DEATH

               This Agreement and all obligations of Panera hereunder including, but not
limited to, any Severance obligation, shall terminate upon my death. In the
event of a termination upon my death, monies or compensation owed by Panera to
me up to the date of termination shall be paid to my estate or designee.

     15.     MISCELLANEOUS

               15.1 Except as limited by Section 11 above, I agree and consent that this
Agreement and any dispute arising hereunder shall be governed by the laws of
the Commonwealth of Massachusetts and its applicable courts shall have
jurisdiction over such matters; and I agree and consent to waive trial by jury
in any action or proceeding between the parties.

               15.2 No waiver by Panera of any breach of this Agreement shall be a waiver
of any preceding or succeeding breach. No waiver by Panera of any right under
this Agreement shall be construed as a waiver of any other right. Panera shall
not be required to give notice to enforce strict adherence to all terms of this
Agreement.

               15.3 In case any one or more of the provisions contained in this Agreement
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect the
other provisions of this Agreement, this Agreement shall be construed as if
such invalid, illegal or unenforceable provision had never been contained
herein, and each provision of this Agreement shall, if necessary, be deemed to
be independent of each other and each supported by valid consideration. If
moreover, any one or more of the provisions contained in this Agreement shall
for any reason be held to be excessively broad as to duration, geographical
scope, activity or subject, it shall be construed by limiting and reducing it,
so as to be enforceable to the extent compatible with the applicable law as it
shall then appear.

 

 

               15.4 To the extent necessary to provide Panera with the full and complete
benefit of this Agreement, the provisions in this Agreement and my obligations
hereunder shall survive the termination of this Agreement and shall not be
affected by such termination. The provisions of this Agreement shall also
survive the assignment of this Agreement by Panera to any successor in interest
or other assignee.

               15.5 This Agreement will be binding upon my heirs, executors,
administrators and other legal representatives and will be for the benefit of
Panera, its successors, and its assigns.

               15.6 The captions and headings throughout this Agreement are for
convenience and reference only, and they shall in no way be held or deemed to
define, modify or add to the meaning, scope or intent of any provision of this
Agreement.

               15.7 This Agreement is the final, complete and exclusive agreement of the
parties with respect to the subject matter hereof and supersedes and merges all
prior discussions between us. No modification of or amendment to this
Agreement, nor any waiver of any rights under this Agreement, will be effective
unless in writing and signed by the party to be charged. Any subsequent change
or changes in my duties, salary or compensation will not affect the validity or
scope of this Agreement.

               15.8 This Agreement may be executed simultaneously in any number of
counterparts, each of which when so executed and delivered shall be deemed to
be an original but all of which counterparts shall together constitute but one
agreement.

               15.9 By signing below, I acknowledge receiving a copy of this Agreement; I
acknowledge and agree that I am entering into this Agreement voluntarily and of
my own free will; and I acknowledge and agree that I have not been coerced or
suffered any duress in order to induce me to enter into this Agreement.

               15.10 This Agreement shall be effective as of the first date signed below.

     16.     ATTORNEY REVIEW

     I acknowledge that I have been expressly advised by Panera to review this
Agreement with an attorney prior to executing it.

     I HAVE READ THIS AGREEMENT CAREFULLY AND UNDERSTAND THE MEANING OF ITS
VARIOUS TERMS AND THE CONSEQUENCES OF SIGNING THIS AGREEMENT.

     I HAVE BEEN GIVEN MORE THAN REASONABLE TIME TO CONSIDER AND ACCEPT THE
CONDITIONS OF THIS AGREEMENT.

	 	 	 	 	 
	 	 	 	 	 
	 	 	

	 	 	
Signature
	 	 	 	 	 
	 	 	
June 5, 2003
	 	 	
Date
	 	 	 	 	 
	 	 	
Neal Yanofsky

	 	 	Name	(typed or printed)

 

 

	 	 	 
	ACCEPTED AND AGREED TO:
	 	 	 
	PANERA, L.L.C.
	 	 	 
	By:	 	 
	
	 	 
	Title:	 	 
	
	 	 
	Date: June 5, 2003	 	 

 

 

ATTACHMENT A

Listed Competitors

Atlanta Bread Company

Au Bon Pain, ABP Corporation

Bruegger’s Bagel Bakeries

Cosi, Inc.

Corner Bakery

Einstein Bros.

Great Harvest Bread Co.

Krispy Kreme

La Brea Bakery

la Madeleine French Bakery & Café

Montana Mills Bread Company, Inc.

Schlotzsky’s, Inc.

Starbucks Corporation

Tim Hortons

Parent Companies

Compass Group plc

Bruegger’s Corporation

Brooker International, Inc.

New World Restaurant Group, Inc.

Great Harvest Franchising, Inc.

Krispy Kreme Doughnut Corporation

IAWS plc

Groupe Le Duff

Wendy’s International, Inc.

 

 

ATTACHMENT B

GENERAL RELEASE

     I, Neal Yanofsky, of
                              , Massachusetts, for good and
adequate consideration (including the consideration described in the attached
Agreement), do hereby release and absolutely and forever discharge Panera,
L.L.C., its owners, predecessors, successors, affiliates, assigns, officers,
employees, franchisees, insurers, attorneys, investors and agents (hereinafter
“Panera”), from any and all suits, claims, demands, debts, sums of money,
damages, interest, attorneys’ fees, expenses, actions, causes of action,
judgments, accounts, promises, contracts, agreements, and any and all claims in
law or in equity, whether now known or unknown, which I ever had, now have, or
which I, my heirs, executors, administrators or assigns, hereafter can, shall
or may have against Panera arising from any events occurring from the beginning
of time to this date, including, without limitation of the foregoing
generality, all of same arising directly or indirectly out of, in connection
with and/or in any manner relating to my employment with and/or separation from
Panera, including, but expressly not limited to, any claims which I may have to
recover damages of any kind, including back pay, front pay, damages asserted
for physical and emotional injuries, or any claim to reinstatement and/or
employment, or any claims, actions, complaints or charges brought by me or on
my behalf or which could have been brought by me or on my behalf under the
Employment Retirement Income Security Act of 1974 (“ERISA”), the Americans with
Disabilities Act (“ADA”), Title VII of the Civil Rights Act, 42 U.S.C.
§§2000(e) et seq., the Age Discrimination in Employment Act (“ADEA”) or under
any other federal, state, municipal, city, town or common law.

     I further waive my right to any monetary recovery should any federal,
state, or local administrative agency pursue any claim(s) on my behalf arising
out of or related in any way to my employment with Panera and/or separation
from employment with Panera.

     1.     This General Release is a part of an Agreement between me and Panera
that is written in a manner which I understand and which entitles me to receive
money and other things of value to which under my employment arrangement I
would not have received apart from that Agreement.

     2.     By this General Release, Panera has given me written notice to consult
an attorney and I have been given the opportunity to consult with counsel of my
own choosing.

     3.     I have been given adequate time (including in excess of 21 days) to
consider the agreement before signing it, including this General Release.

     4.     I have the right to revoke this General Release within eight (8) days
of signing it by notifying Scott G. Blair, Esq., 42 Charles Street, Hingham,
Massachusetts 02043 in writing of my intention to do so.

     5.     By signing this General Release, I understand that I am waiving any
rights or claims arising under ERISA, ADA, ADEA, TITLE VII or under any other
federal, state, municipal, city, town or common law.

     I acknowledge that the execution of this General Release is my own free,
voluntary and knowing act and deed.

 

 

	 	 	 	 	 
	 	 	EXECUTED UNDER SEAL
	 	 	 	 	 
	 	 	

	 	 
	 	 	
Signature	 	 
	 	 	

	 	 
	 	 	
Date	 	 
	 	 	

	 	 
	 	 	
Name            (typed or printed)	 	 
	 	 	 	 	 
	 	 	
SUBSCRIBED AND SWORN TO	 	 
	 	 	
before me this      day of           , 20    	 	 
	 	 	 	 	 
	 	 	

	 	 
	 	 	
Notary Public	 	 

	 	 	 
	ACCEPTED AND AGREED TO:
	 	 	 
	PANERA, L.L.C.
	 	 	 
	By:	 	 
	
	 	 
	Title:	 	 
	
	 	 
	Date:

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