Document:

exv4w2

 

Exhibit 4.2

THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAW, AND MAY
NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF OR EXERCISED
UNLESS (i) A REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS
SHALL HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR (ii) AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS IS AVAILABLE IN CONNECTION WITH SUCH OFFER,
SALE OR TRANSFER.

AN INVESTMENT IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK. HOLDERS MUST RELY ON THEIR OWN
ANALYSIS OF THE INVESTMENT AND ASSESSMENT OF THE RISKS INVOLVED.

			 
	Warrant to Purchase

                     shares
	 	Warrant Number                     

Warrant to Purchase Common Stock

of

DYNAVAX TECHNOLOGIES CORPORATION

THIS CERTIFIES that [            ] or any subsequent holder
hereof (“Holder”) has the right to purchase from DYNAVAX TECHNOLOGIES CORPORATION, a Delaware
corporation, (the “Company”), ___(___) fully paid and nonassessable shares, of
the Company’s common stock, $0.001 par value per share (“Common Stock”), subject to adjustment as
provided herein, at a price equal to the Exercise Price as defined in Section 3 below, at any time
during the Term (as defined below).

Holder agrees with the Company that this Warrant to Purchase Common Stock of the Company (this
“Warrant” or this “Agreement”) is issued and all rights hereunder shall be held subject to all of
the conditions, limitations and provisions set forth herein.

1. Date of Issuance and Term.

This Warrant shall be deemed to be issued on ___(“Date of Issuance”). The term of this
Warrant begins on the Date of Issuance and ends at 5:00 p.m., New York City time, on the sixty-six
month anniversary of the Date of Issuance (the “Term”). This Warrant was issued in conjunction with
that certain Loan Agreement (the “Loan Agreement”) and the Registration Rights Agreement
(“Registration Rights Agreement”) by and between the Company, Deerfield Private Design Fund, L.P.
and certain other parties, each dated July 18, 2007, entered into in conjunction herewith.

If at any time after the date hereof Holder and its Affiliates and any other persons or entities
whose beneficial ownership of Common Stock would be aggregated with the Holder’s for purposes of
Section 13(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) (including shares held by
any “group” of which the Holder is a member, but excluding shares beneficially owned by virtue of
the ownership of securities or rights to acquire securities that have limitations on the right to
convert, exercise or purchase similar to the limitation set forth herein) shall collectively
beneficially own less than 9.98% of the total number of shares of Common Stock of the Company then
issued and outstanding, then Holder may deliver a written notice to the Company (the “9.98%
Notice”) providing that Holder irrevocably elects to be subject to the following provision of this
paragraph. “Notwithstanding anything herein to the contrary, the Company shall not issue to the
Holder, and the Holder may not acquire, a number of shares of Common Stock upon exercise of this
Warrant to the extent that, upon such exercise, the number of shares of Common Stock then
beneficially owned by the Holder and its Affiliates and any other persons or entities whose
beneficial ownership of Common Stock would be aggregated with the Holder’s for purposes of Section
13(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) (including shares held by any
“group” of which the Holder is a member, but excluding shares beneficially owned by virtue of the
ownership of securities or rights to acquire securities that have limitations on the right to
convert, exercise or purchase similar to the limitation set forth herein) would exceed 9.98% of the
total number of shares of Common Stock then issued and outstanding. For purposes hereof, “group”
has the meaning set forth in Section 13(d) of the Exchange Act and applicable regulations of the
Securities and Exchange Commission (the “SEC”), and the percentage held by the Holder shall be
determined in a manner consistent with the provisions of Section 13(d) of the Exchange Act. Upon
the written request of the Holder, the Company shall, within two (2) Trading Days confirm orally
and in writing to the Holder the number of shares of Common Stock then outstanding.”

“Affiliate” means any person or entity that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with a person or entity, as
such terms are used in and construed under Rule 144 under the Securities Act of 1933, as amended
(the “Securities Act”). With respect to a Holder of Warrants, any investment fund or managed
account that is managed on a discretionary basis by the same investment manager as such Holder will
be deemed to be an Affiliate of such Holder.

“Holder” means Deerfield Special Situations Fund, L.P. and any transferee or assignee pursuant to
the terms of this Warrant.

 

2. Exercise.

(a) Manner of Exercise. During the Term, this Warrant may be Exercised as to all or any lesser
whole number of shares of Common Stock covered hereby (the “Warrant Shares” or the “Shares”) upon
surrender of this Warrant, with the Exercise Form attached hereto as Exhibit A (the
“Exercise Form”) duly completed and executed, together with the full Exercise Price (as defined
below, which may be satisfied by a Cash Exercise or a Cashless Exercise, as each is defined below)
for each share of Common Stock as to which this Warrant is Exercised, at the office of the Company,
Dynavax Technologies Corporation, 2929 Seventh Street; Suite 100; Berkeley, CA 94710; Phone: (510)
848-5100, Fax: (510) 848-1327, or at such other office or agency as the Company may designate in
writing, by overnight mail, with an advance copy of the Exercise Form sent to the Company and its
transfer agent (“Transfer Agent”) by facsimile (such surrender and payment of the Exercise Price
hereinafter called the “Exercise” of this Warrant).

(b) Date of Exercise. The “Date of Exercise” of the Warrant shall be defined as the date that the
Exercise Form attached hereto as Exhibit A, completed and executed, is sent by facsimile to
the Company, provided that the original Warrant and Exercise Form are received by the Company and
the Exercise Price is satisfied, each as soon as practicable and in any event within three (3)
Business Days thereafter. Alternatively, the Date of Exercise shall be defined as the date the
original Exercise Form is received by the Company and the Exercise Price is satisfied, if Holder
has not sent advance notice by facsimile. Upon delivery of the duly completed and executed Exercise
Form to the Company by facsimile or otherwise, the Holder shall be deemed for all corporate
purposes to have become the holder of record of the Warrant Shares with respect to which this
Warrant has been Exercised, irrespective of the date such Warrant Shares are credited to the
Holder’s DTC account or the date of delivery of the certificates evidencing such Warrant Shares as
the case may be.

(c) Delivery of Common Stock Upon Exercise. Within three (3) business days after any Date of
Exercise (the “Delivery Period”), the Company shall issue and deliver (or cause its Transfer Agent
so to issue and deliver) in accordance with the terms hereof to or upon the order of the Holder
that number of shares of Common Stock (“Exercise Shares”) for the portion of this Warrant Exercised
as shall be determined in accordance herewith. Upon the Exercise of this Warrant or any part
thereof, the Company shall, at its own cost and expense, take all necessary action, including
obtaining and delivering, an opinion of counsel to ensure that the Transfer Agent shall issue stock
certificates in the name of Holder or such other persons as designated by Holder in such
denominations in the Exercise Form representing the number of shares of Common Stock issuable upon
such Exercise. Holder may not revoke its Exercise or alter its designations following delivery of
the Exercise Notice except as otherwise expressly provided herein.

(d) Delivery Failure. In addition to any other remedies which may be available to the Holder, in
the event that the Company fails for any reason to effect delivery of the Exercise Shares by the
end of the Delivery Period (a “Delivery Failure”), the Holder will be entitled to revoke all or
part of the relevant Exercise Form by delivery of a notice to such effect to the Company whereupon
the Company and the Holder shall each be restored to their respective positions immediately prior
to the delivery of such notice, except that the liquidated damages described herein shall be
payable through the date notice of revocation or rescission is given to the Company.

(e) Legends.

(i) Restrictive Legend. The Holder understands that until such time as this Warrant, the
Exercise Shares and any other shares required to be issued hereunder at any time and from time to
time (“Additional Shares”) have been registered under the Securities Act, as contemplated by the
Registration Rights Agreement or otherwise may be sold pursuant to Rule 144 or Rule 144(k) under
the Securities Act or an exemption from registration under the Securities Act without any
restriction as to the number of securities as of a particular date that can then be immediately
sold, this Warrant, the Exercise Shares and Additional Shares may bear a restrictive legend in
substantially the following form (and a stop-transfer order may be placed against transfer of the
certificates for such securities):

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES
MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER SAID ACT, OR PURSUANT TO AN EXEMPTION FROM REGISTRATION
UNDER SAID ACT INCLUDING, WITHOUT LIMITATION, PURSUANT TO RULES 144 OR 144A UNDER SAID ACT
OR PURSUANT TO A PRIVATE SALE EFFECTED UNDER APPLICABLE FORMAL OR INFORMAL SEC
INTERPRETATION OR GUIDANCE, SUCH AS A SO-CALLED “4(1) AND A HALF” SALE.”

“THE SALE, TRANSFER OR ASSIGNMENT OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO THE TERMS AND CONDITIONS OF A CERTAIN REGISTRATION RIGHTS AGREEMENT DATED AS OF
JULY 18, 2007, AS AMENDED FROM TIME TO TIME, AMONG THE COMPANY AND CERTAIN HOLDERS OF ITS
OUTSTANDING SECURITIES. COPIES OF SUCH AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN
REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE COMPANY.”

(ii) Removal of Restrictive Legends. This Warrant and certificates evidencing the Exercise
Shares and Additional Shares shall not be required to contain any legend restricting the transfer
thereof (including the legend set forth above in subsection 2(e)(i)): (A) while a registration
statement (including a Registration Statement, as defined in the Registration Rights Agreement)
covering the sale or resale

2

 

of such security is effective under the Securities Act, or (B) following any sale of such Warrant,
Exercise Shares and/or Additional Shares pursuant to Rule 144, or (C) if such Warrant, Exercise
Shares and/or Additional Shares are eligible for sale under Rule 144(k), or (D) if such legend is
not required under applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the SEC) (collectively, the “Unrestricted
Conditions”). Subject to Section 2(e)(iii), the Company shall use best efforts to take all actions
necessary to effect the issuance of this Warrant, Exercise Shares and Additional Shares without a
restrictive legend or removal of the legend hereunder. If the Unrestricted Conditions are met at
the time of issuance of this Warrant, Exercise Shares and/or Additional Shares, then such Warrant,
Exercise Shares and/or Additional Shares shall be issued free of all legends. The Company agrees
that following the Effective Date or at such time as the Unrestricted Conditions are met or such
legend is otherwise no longer required under this Section 2(e), it will, no later than three (3)
Trading Days following the delivery (the “Unlegended Shares Delivery Deadline”) by the Holder to
the Company of this Warrant and any certificates representing Exercise Shares and Additional
Shares, as applicable, issued with a restrictive legend (such third Trading Day, the “Legend
Removal Date”), deliver or cause to be delivered to such Holder this Warrant and/or a certificate
(or electronic transfer) representing such shares that is free from all restrictive legends. For
purposes hereof, “Effective Date” shall mean the date that the Registration Statement that the
Company files pursuant to the Registration Rights Agreement has been declared effective by the SEC.

(iii) Sale of Unlegended Shares. Holder agrees that the removal of the restrictive legend
from this Warrant and any certificates representing Exercise Shares and/or Additional Shares as set
forth in Section 2(e)(i) above is predicated upon the Company’s reliance that the Holder will sell
this Warrant, Exercise Shares or Additional Shares pursuant to either the registration requirements
of the Securities Act, including any applicable prospectus delivery requirements, or an exemption
therefrom, and that if such securities are sold pursuant to a Registration Statement, they will be
sold in compliance with the plan of distribution set forth therein.

(f) Cancellation of Warrant. This Warrant shall be canceled upon the full Exercise of this Warrant,
and as soon as practical after the Date of Exercise, Holder shall be entitled to receive Common
Stock for the number of shares purchased upon such Exercise of this Warrant. If this Warrant is
not Exercised in full, cancellation shall apply with respect to the Exercised portion and Holder
shall be entitled to receive a new Warrant representing any unexercised portion of this Warrant in
addition to any Common Stock purchased upon Exercise.

(g) Holder of Record. Nothing in this Warrant shall be construed as conferring upon Holder any
rights as a stockholder of the Company prior to Exercise.

(h) Delivery of Electronic Shares. If the Holder provides its Transfer Agent with information
required in order to issue shares of Common Stock to the Holder electronically and if the Transfer
Agent is participating in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer
(“FAST”) program, the Company shall use best efforts to cause the Transfer Agent to electronically
transmit the Common Stock issuable upon Exercise to the Holder by crediting the account of the
Holder’s broker with DTC through its Deposit Withdrawal Agent Commission (DWAC) system. The time
periods for delivery and penalties described herein shall apply to the electronic transmittals
described herein. Any delivery not effected by electronic transmission shall be effected by
delivery of physical certificates.

(i) Buy-In. If the Company fails to cause its Transfer Agent to transmit to the Holder the
certificates or electronic shares through DWAC representing the Exercise Shares pursuant to an
Exercise on or before the Delivery Period, and if after such date the Holder is required by its
broker to purchase (in an open market transaction or otherwise) or the Holder’s brokerage firm
otherwise purchases shares of Common Stock to deliver in satisfaction of a sale by the Holder of
the Exercise Shares which the Holder was entitled to receive upon such Exercise (a “Buy-In”), then
the Company shall (1) pay in cash to the Holder the amount by which (x) the Holder’s total purchase
price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds
(y) the amount obtained by multiplying (A) the number of Exercise Shares that the Company was
required to deliver to the Holder in connection with the Exercise not later than the expiration of
the Delivery Period and (B) the price at which the sell order giving rise to such purchase
obligation was executed, and (2) at the option of the Holder, either (x) reinstate the portion of
the Warrant and equivalent number of Exercise Shares for which such Exercise was not honored or (y)
deliver to the Holder the number of shares of Common Stock that would have been issued had the
Company timely complied with Section 2(c). For example, if the Holder purchases Common Stock having
a total purchase price of $11,000 to cover a Buy-In with respect to an attempted Exercise of the
Warrant with an aggregate sale price giving rise to such purchase obligation of $10,000, under
clause (1) of the immediately preceding sentence the Company shall be required to pay the Holder
$1,000. The Holder shall provide the Company written notice indicating the amounts payable to the
Holder in respect of the Buy-In, together with applicable confirmations and other evidence
reasonably requested by the Company. Nothing herein shall limit a Holder’s right to pursue any
other remedies available to it hereunder, at law or in equity including, without limitation, a
decree of specific performance and/or injunctive relief with respect to the Company’s failure to
timely deliver certificates or electronic shares representing shares of Common Stock upon Exercise
of the Warrant as required pursuant to the terms hereof.

3. Payment of Warrant Exercise Price.

(a) Exercise Price. The Exercise Price (“Exercise Price”) shall initially equal $5.13 per share
subject to adjustment pursuant to the terms hereof.

(b) Payment of the Exercise Price may be made by either of the following, or a combination thereof,
at the election of Holder:

3

 

(i) Cash Exercise: The Holder may exercise this Warrant in cash, bank or cashier’s check or wire
transfer (a “Cash Exercise”); or

(ii) Cashless Exercise: The Holder may exercise this Warrant in a cashless exercise transaction. In
order to effect a Cashless Exercise, the Holder shall surrender this Warrant at the principal
office of the Company together with notice of cashless election, in which event the Company shall
issue Holder a number of shares of Common Stock computed using the following formula (a “Cashless
Exercise”):

X = Y (A-B)/A

where: X = the number of shares of Common Stock to be issued to Holder.

Y = the number of shares of Common Stock for which this Warrant is being Exercised.

A = the Market Price of one (1) share of Common Stock (for purposes of this Section 3(ii),
where “Market Price,” as of any date, means the Volume Weighted Average Price (as defined
herein) of the Company’s Common Stock during the ten (10) consecutive Trading Day period
immediately preceding the Date of Exercise).

B = the Exercise Price.

As used herein, the “Volume Weighted Average Price” for any security as of any date means the
daily volume weighted average price (based on a Trading Day from 9:30 p.m. to 4:00 p.m. (New
York time)) of the Company’s Common Stock on The NASDAQ Global Market (“NASDAQ”) as reported by
Bloomberg Financial L.P. using the AQR function or an equivalent, reliable reporting service
mutually acceptable to and hereafter designated by holders of a majority in interest of the
Warrants and the Company (“Bloomberg”) or, if NASDAQ is not the principal trading market for
such security, the volume weighted average sale price of such security on the principal
securities exchange or trading market where such security is listed or traded as reported by
Bloomberg, or, if no volume weighted average sale price is reported for such security, then the
last closing trade price of such security as reported by Bloomberg, or, if no last closing
trade price is reported for such security by Bloomberg, the average of the bid prices of any
market makers for such security that are listed in the over the counter market by the National
Association of Securities Dealers or in the “pink sheets” by the National Quotation Bureau,
Inc. If the Volume Weighted Average Price cannot be calculated for such security on such date
in the manner provided above, the volume weighted average price shall be the fair market value
as mutually determined by the Company and the Holders of a majority in interest of the Warrants
being Exercised for which the calculation of the volume weighted average price is required in
order to determine the Exercise Price of such Warrants. “Trading Day” shall mean any day on
which the Common Sock is traded for any period on NASDAQ, or on the principal securities
exchange or other securities market on which the Common Stock is then being traded.

For purposes of Rule 144 and sub-section (d)(3)(ii) thereof, it is intended, understood and
acknowledged that the Common Stock issuable upon Exercise of this Warrant in a cashless Exercise
transaction shall be deemed to have been acquired at the time this Warrant was issued. Moreover, it
is intended, understood and acknowledged that the holding period for the Common Stock issuable upon
Exercise of this Warrant in a cashless Exercise transaction shall be deemed to have commenced on
the date this Warrant was issued.

(c) Dispute Resolution. Following receipt by the Company of an Exercise Notice or
Redemption Notice (i) the Company shall determine the closing price and the Volume Weighted Average
Price of the Common Stock and arithmetically calculate the Exercise Price, Market Price and any
Redemption Price, as the case may be, and (ii) the Company shall send its determination and
calculation via facsimile to the Holder within two (2) business days of receipt, or deemed receipt,
by the Company of such Exercise Notice or Redemption Notice. If the Holder and the Company are
unable to agree upon such determination or calculation within two (2) business days of such
determination or arithmetic calculation being submitted to the Holder, then the Company shall,
within two (2) business days submit via facsimile (i) the disputed determination of the closing
price or the Volume Weighted Average Price of the Common Stock to an independent, reputable
investment bank selected by the Company and approved by the Holder, which approval shall not be
unreasonably withheld or (ii) the disputed arithmetic calculation of the Exercise Price, Market
Price or any Redemption Price to the Company’s independent, outside accountant. The Company shall
cause the investment bank or the accountant, as the case may be, to perform the determinations or
calculations and notify the Company and the Holder of the results no later than five (5) business
days from the time it receives the disputed determinations or calculations. If the calculation is
found in favor of the Company, then the expenses of the investment bank or accountant shall be
borne by the Holder. Otherwise such expenses shall be borne by the Company. Such investment bank’s
or accountant’s determination or calculation, as the case may be, shall be binding upon all parties
absent demonstrable error.

4. Transfer and Registration.

(a) Transfer Rights. Subject to the provisions of Section 8 of this Warrant, this Warrant may be
transferred on the books of the Company, in whole or in part, in person or by attorney, upon
surrender of this Warrant properly completed and endorsed. This Warrant shall be canceled upon such
surrender and, as soon as practicable thereafter, the person to whom such transfer is made shall be
entitled to receive a new Warrant or Warrants as to the portion of this Warrant transferred, and
Holder shall be entitled to receive a new Warrant as to the portion hereof retained.

(b) Registrable Securities. The Common Stock issuable upon the Exercise of this Warrant as well as
the Additional Shares have registration rights pursuant to the Registration Rights Agreement.

4

 

5. Adjustments; Purchase Rights.

(a) Participation. The Holder, as the holder of this Warrant, shall be entitled to receive such
dividends paid and distributions of any kind made to the holders of Common Stock of the Company to
the same extent as if the Holder had Exercised this Warrant into Common Stock (without regard to
any limitations on exercise herein or elsewhere and without regard to whether or not a sufficient
number of shares are authorized and reserved to effect any such exercise and issuance) and had held
such shares of Common Stock on the record date for such dividends and distributions. Payments under
the preceding sentence shall be made concurrently with the dividend or distribution to the holders
of Common Stock.

(b) Recapitalization or Reclassification. If the Company shall at any time effect a
recapitalization, reclassification or other similar transaction of such character that the shares
of Common Stock shall be changed into or become exchangeable for a larger or smaller number of
shares, then upon the effective date thereof, the number of shares of Common Stock which Holder
shall be entitled to purchase upon Exercise of this Warrant shall be increased or decreased, as the
case may be, in direct proportion to the increase or decrease in the number of shares of Common
Stock by reason of such recapitalization, reclassification or similar transaction, and the Exercise
Price shall be, in the case of an increase in the number of shares, proportionally decreased and,
in the case of decrease in the number of shares, proportionally increased. The Company shall give
Holder the same notice it provides to holders of Common Stock of any transaction described in this
Section 5(b).

(c) Rights Upon Major Transaction.

(i) Major Transaction. (A) If at any time after the date hereof Holder has delivered a 9.98%
Notice, a Major Transaction (as defined below) occurs, the Holder, at its option, may require the
Company to redeem the Holder’s outstanding Warrants in accordance with Section 5(c)(i)(C) below.
Otherwise, a Major Transaction that occurs after the Holder has delivered a 9.98% Notice shall be
treated as an Assumption (as defined below) in accordance with Section 5(c)(i)(B) below unless the
Holder waives its rights under this Section 5(c) with respect to that Major Transaction. Each of
the following events shall constitute a “Major Transaction”:

(1) a consolidation, merger, exchange of shares, recapitalization, reorganization, business
combination, share issuance, tender offer, exchange offer or other similar event (a) following
which the holders of Common Stock immediately preceding such consolidation, merger, exchange,
recapitalization, reorganization, combination, share issuance, tender offer, exchange offer or
event either (i) no longer hold a majority of the shares of Common Stock or (ii) no longer have the
ability to elect a majority of the board of directors of the Company or (b) as a result of which a
majority of the outstanding shares of Common Stock shall be changed into (or holders of a majority
of the outstanding shares of Common Stock become entitled to receive) cash and/or securities of
another entity (collectively, a “Change of Control Transaction”);

(2) the sale or transfer of significant assets of the Company which, without limitation, shall
include, but not be limited to, a sale or transfer of assets in one transaction or a series of
related transactions for a purchase price of more than $75,000,000 or a sale or transfer of more
than 50% of the Company’s assets (including proprietary rights that are material to the operations
and business of the Company);

(3) the liquidation, bankruptcy, insolvency, dissolution or winding-up (or the occurrence of any
analogous proceeding) affecting the Company; or

(4) the shares of Common Stock cease to be listed, traded or publicly quoted on the NASDAQ Global
Market and are not promptly re-listed or requoted on either the New York Stock Exchange, the
American Stock Exchange or the NASDAQ National Market.

(B) Assumption. The Company shall not consummate a Major Transaction following delivery of a 9.98%
Notice unless any Person purchasing the Company’s assets or Common Stock, or any successor entity
resulting from such Major Transaction (in each case, a “Successor Entity”), assumes in writing all
of the obligations of the Company under this Warrant, the Loan Agreement and the Registration
Rights Agreement in accordance with the provisions of this Section 5(c)(i)(B) pursuant to written
agreements, including agreements to deliver to each holder of Warrants in exchange for such
Warrants a security of the Successor Entity evidenced by a written instrument substantially similar
in form and substance to the Warrants, including, without limitation, representing the appropriate
number of securities of the Successor Entity, having similar exercise rights as the Warrants
(including but not limited to a similar Exercise Price and similar Exercise Price adjustment
provisions based on the price per share or conversion ratio to be received by the holders of the
Common Stock in the Major Transaction) and similar registration rights as provided by the
Registration Rights Agreement. Upon the occurrence of any Major Transaction following delivery of a
9.98% Notice, any Successor Entity shall succeed to, and be substituted for (so that from and after
the date of such Major Transaction, the provisions of this Warrant and the Registration Rights
Agreement referring to the “Company” shall refer instead to the Successor Entity), and may exercise
every right and power of the Company and shall assume all of the obligations of the Company under
this Warrant with the same effect as if such Successor Entity had been named as the Company herein.
Upon consummation of the Major Transaction, the Successor Entity shall deliver to the Holder
confirmation that there shall be issued upon exercise or redemption of this Warrant at any time
after the consummation of the Major Transaction, in lieu of the shares of Common Stock (or other
securities, cash, assets or other property) issuable upon the exercise of the Warrants prior to
such Major Transaction, such shares of publicly traded common stock (or their equivalent) of the
Successor Entity, as adjusted in accordance with the provisions of this Warrant. The provisions of
this Section shall

5

 

apply similarly and equally to successive Major Transactions and shall be applied without regard to
any limitations on the exercise of this Warrant other than any applicable beneficial ownership
limitations.

(C) Notice; Major Transaction Redemption Right. At least thirty (30) days prior to the consummation
of any Major Transaction (including, without limitation, prior to the delivery of a 9.98% Notice),
but, in any event, on the first to occur of (x) the date of the public announcement of such Major
Transaction if such announcement is made before 4:00 p.m., New York City time, or (y) the day
following the public announcement of such Major Transaction if such announcement is made on and
after 4:00 p.m., New York City time, the Company shall deliver written notice thereof via
facsimile, and overnight courier to the Holder (a “Major Transaction Notice”). Provided a 9.98%
Notice shall have theretofore been delivered, then at any time during the period beginning after
the Holder’s receipt of a Major Transaction Notice and ending twenty (20) Trading Days thereafter
(an “MT Redemption Period”), the Holder may require the Company to redeem (a “Redemption Upon Major
Transaction”) all or any portion of this Warrant by delivering an irrevocable written notice
thereof (“Major Transaction Redemption Notice”) to the Company, which Major Transaction Redemption
Notice shall indicate the portion of the principal amount (the “Redemption Principal Amount”) of
the Warrant that the Holder is electing to have redeemed. The portion of this Warrant subject to
redemption pursuant to this Section 5(c)(i)(C) shall be redeemed by the Company at a price (the
“Major Transaction Warrant Redemption Price”) payable (x) in the case of a Major Transaction where
the consideration payable to the holders of the Common Stock consists solely of cash, in cash equal
to the “Black Scholes value” as determined in accordance with Section 10(b) hereof of the remaining
outstanding portion of the Warrant and (y) in the case of a Major Transaction not described in the
foregoing proviso (x), in shares of Common Stock equal to the “Black Scholes value” as determined
in accordance with Section 10(b) hereof of the remaining outstanding portion of the Warrant valued
based upon 95% of the Volume Weighted Average Price of shares of Common Stock on the fifth Trading
Day prior to the announcement of the Major Transaction, provided, however Holder shall receive up
to such amount of shares of Common Stock such that Holder and its Affiliates and any other persons
or entities whose beneficial ownership of Common Stock would be aggregated with the Holder’s for
purposes of Section 13(d) of the Exchange Act (including shares held by any “group” of which the
Holder is a member, but excluding shares beneficially owned by virtue of the ownership of
securities or rights to acquire securities that have limitations on the right to convert, exercise
or purchase similar to the limitation set forth herein) shall not collectively beneficially own
greater than 9.98% of the total number of shares of Common Stock of the Company then issued and
outstanding.

(D) Escrow; Payment of Major Transaction Redemption Price. Following the receipt of a Major
Transaction Redemption Notice from the Holder, the Company shall not consummate a Major Transaction
unless it (or in the case of a Major Transaction consisting solely of cash consideration, the
counterparty to such transaction) shall first place into an escrow account with an independent
escrow agent, within three (3) Trading Days following the expiration of the MT Redemption Period
(the “Major Transaction Escrow Deadline”), an amount in cash or shares of Common Stock, as
applicable, equal to the Major Transaction Warrant Redemption Price (as defined below).
Concurrently upon closing of any Major Transaction following delivery of a 9.98% Notice, the
Company shall pay or shall instruct the escrow agent to pay the Major Transaction Warrant
Redemption Price to the Holder. For purposes of determining the amount in cash required to be
placed in escrow pursuant to the provisions of this Section 5(c)(i)(D), the calculation of the
price referred to in clause (1) of the first column of Schedule 1 hereto with respect to Stock
Price shall be determined based on the Closing Market Price (as defined herein) of the Common Stock
on the Trading Day immediately preceding the date that the funds are deposited with the escrow
agent.

(E) Injunction. Following the receipt of a Major Transaction Redemption Notice from the Holder, in
the event that the Company attempts to consummate a Major Transaction without placing the Major
Transaction Warrant Redemption Price in escrow in accordance with subsection (D) above or without
payment of the Major Transaction Warrant Redemption Price to the Holder upon consummation of such
Major Transaction, the Holder shall have the right to apply for an injunction in any state or
federal courts sitting in the City of New York, borough of Manhattan to prevent the closing of such
Major Transaction until the Major Transaction Redemption Price is paid to the Holder, in full.

Redemptions required by this Section 5(c) shall be made in accordance with the provisions of
Section 12 and shall have priority to payments to holders of Common Stock in connection with a
Major Transaction except to the extent that the Holder would be deemed to be a creditor of the
Company in which case the Holder shall be treated on a pari passu basis. To the extent redemptions
required by Section 5(c)(i)(C) are deemed or determined by a court of competent jurisdiction to be
prepayments of the Warrant by the Company, such redemptions shall be deemed to be voluntary
prepayments.

(ii) Major Transaction; Common Stock Ownership Greater Than or Equal to 9.98%. In the event that a
Major Transaction occurs at any time prior to the delivery of a 9.98% Notice where shares of Common
Stock of the Company are converted into the right to receive cash or other consideration, then upon
receipt of the Major Transaction Notice (x) in the case where the value of the consideration to be
received for Common Stock is greater than the Exercise Price (as determined in the reasonable
discretion of the Holder), this Warrant shall automatically and immediately convert, immediately
prior to consummation of the Major Transaction, into shares of Common Stock and shall be deemed to
have been exercised immediately prior to the consummation of the Major Transaction or (y) in the
case where the value of the consideration received for Common Stock is lower than the Exercise
Price (as determined in the reasonable discretion of the Holder), this Warrant shall be canceled
and deemed null and void. For purposes of this Section 5(c)(ii), Holder shall provide notice to
the Company within two (2) business days upon receipt of a Major Transaction Notice providing
whether Holder is exercising this Warrant pursuant to Cash Exercise or Cashless Exercise. Any
automatic exercise of the Warrant pursuant to proviso (x) shall be effected without the requirement
of prior notice by the Holder but otherwise in accordance

6

 

with the terms for Cashless Exercise hereof, unless the Holder notifies the Company at least five
(5) business days prior to consummation of the Major Transaction that it elects to have the
exercise handled as a Cash Exercise.

For purposes hereof:

“Eligible Market” means the over the counter Bulletin Board, the New York Stock Exchange, Inc., the
NYSE Arca, the NASDAQ Capital Market, the NASDAQ Global Market, the NASDAQ Global Select Market or
the American Stock Exchange.

“Parent Entity” of a Person means an entity that, directly or indirectly, controls the applicable
Person and whose common stock or equivalent equity security is quoted or listed on an Eligible
Market, or, if there is more than one such Person or Parent Entity, the Person or Parent Entity
with the largest public market capitalization as of the date of consummation of a Major
Transaction.

“Person” means an individual, a limited liability company, a partnership, a joint venture, a
corporation, a trust, an unincorporated organization, any other entity and a government or any
department or agency thereof.

(d) Exercise Price Adjusted. As used in this Warrant, the term “Exercise Price” shall mean the
purchase price per share specified in Section 3 of this Warrant, until the occurrence of an event
stated in this Section 5 or otherwise set forth in this Warrant, and thereafter shall mean said
price as adjusted from time to time in accordance with the provisions of said subsection. No
adjustment made pursuant to any provision of this Section 5 shall have the net effect of increasing
the Exercise Price in relation to the split adjusted and distribution adjusted price of the Common
Stock.

(e) Adjustments: Additional Shares, Securities or Assets. In the event that at any time, as a
result of an adjustment made pursuant to this Section 5 or otherwise, Holder shall, upon Exercise
of this Warrant, become entitled to receive shares and/or other securities or assets (other than
Common Stock) then, wherever appropriate, all references herein to shares of Common Stock shall be
deemed to refer to and include such shares and/or other securities or assets; and thereafter the
number of such shares and/or other securities or assets shall be subject to adjustment from time to
time in a manner and upon terms as nearly equivalent as practicable to the provisions of this
Section 5.

(f) Notice of Adjustments. Whenever the Exercise Price is adjusted pursuant to the terms of this
Warrant, the Company shall promptly mail to the Holder a notice (an “Exercise Price Adjustment
Notice”) setting forth the Exercise Price after such adjustment and setting forth a statement of
the facts requiring such adjustment. The Company shall, upon the written request at any time of the
Holder, furnish to such Holder a like Warrant setting forth (i) such adjustment or readjustment,
(ii) the Exercise Price at the time in effect and (iii) the number of shares of Common Stock and
the amount, if any, of other securities or property which at the time would be received upon
Exercise of the Warrant. For purposes of clarification, whether or not the Company provides an
Exercise Price Adjustment Notice pursuant to this Section 5(f), upon the occurrence of any event
that leads to an adjustment of the Exercise Price, the Holders are entitled to receive a number of
Exercise Shares based upon the new Exercise Price, as adjusted, for exercises occurring on or after
the date of such adjustment, regardless of whether a Holder accurately refers to the adjusted
Exercise Price in the Exercise Form.

6. Fractional Interests.

No fractional shares or scrip representing fractional shares shall be issuable upon the Exercise of
this Warrant, but on Exercise of this Warrant, Holder may purchase only a whole number of shares of
Common Stock. If, on Exercise of this Warrant, Holder would be entitled to a fractional share of
Common Stock or a right to acquire a fractional share of Common Stock, such fractional share shall
be disregarded and the number of shares of Common Stock issuable upon Exercise shall be the next
higher number of shares.

7. Reservation of Shares.

From and after the date hereof, the Company shall at all times reserve for issuance such number of
authorized and unissued shares of Common Stock (or other securities substituted therefor as herein
above provided) as shall be sufficient for the Exercise of this Warrant and payment of the Exercise
Price. If at any time the number of shares of Common Stock authorized and reserved for issuance is
below the number of shares sufficient for the Exercise of this Warrant (a “Share Authorization
Failure”) (based on the Exercise Price in effect from time to time), the Company will promptly take
all corporate action necessary to authorize and reserve a sufficient number of shares, including,
without limitation, calling a special meeting of stockholders to authorize additional shares to
meet the Company’s obligations under this Section 7, in the case of an insufficient number of
authorized shares, and using its best efforts to obtain stockholder approval of an increase in such
authorized number of shares. The Company covenants and agrees that upon the Exercise of this
Warrant, all shares of Common Stock issuable upon such Exercise shall be duly and validly issued,
fully paid and nonassessable and not subject to preemptive rights, rights of first refusal or
similar rights granted or provided by the Company to any person or entity.

8. Restrictions on Transfer.

(a) Registration or Exemption Required. Subject to the representations and warranties of the Holder
set forth in Section 3.3 of the Loan Agreement, this Warrant has been issued in a transaction
exempt from the registration requirements of the Securities Act by

7

 

virtue of Regulation D and exempt from state registration under applicable state laws. The Warrant
and the Common Stock issuable upon the Exercise of this Warrant may not be pledged, transferred,
sold or assigned except pursuant to an effective registration statement or an exemption to the
registration requirements of the Securities Act and applicable state laws including, without
limitation, a so-called “4(1) and a half” transaction.

(b) Assignment. Subject to Section 8(a), the Holder may sell, transfer, assign, pledge or otherwise
dispose of this Warrant, in whole or in part. Holder shall deliver a written notice to Company,
substantially in the form of the Assignment attached hereto as Exhibit B, indicating the
person or persons to whom the Warrant shall be assigned and the respective number of warrants to be
assigned to each assignee. The Company shall effect the assignment within three (3) business days
(the “Transfer Delivery Period”), and shall deliver to the assignee(s) designated by Holder a
Warrant or Warrants of like tenor and terms for the appropriate number of shares. This Warrant and
the rights evidenced hereby shall inure to the benefit of and be binding upon the successors and
assigns of the Holder. The provisions of this Warrant are intended to be for the benefit of all
Holders from time to time of this Warrant, and shall be enforceable by any such Holder. For
avoidance of doubt, in the event Holder notifies the Company that such sale or transfer is a so
called “4(1) and half” transaction, the parties hereto agree that a legal opinion from outside
counsel for the Holder delivered to counsel for the Company substantially in the form attached
hereto as Exhibit C shall be the only requirement to satisfy an exemption from registration under
the Securities Act of 1933, as amended to effectuate such “4(1) and half” transaction.

(c) Any Warrant delivered to a transferee who would be able to deliver a 9.98% Notice shall be in
the form annexed hereto as Exhibit D.

9. Noncircumvention. The Company hereby covenants and agrees that the Company will not, by
amendment of its certificate of incorporation, bylaws or through any reorganization, transfer of
assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or
any other voluntary action, avoid or seek to avoid the observance or performance of any of the
terms of this Warrant, and will at all times in good faith carry out all the provisions of this
Warrant and take all action as may be reasonably required to protect the rights of the Holder.
Without limiting the generality of the foregoing, the Company (i) shall not increase the par value
of any shares of Common Stock receivable upon the exercise of this Warrant above the Exercise Price
then in effect, and (ii) shall take all such actions as may be necessary or appropriate in order
that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock
upon the exercise of this Warrant.

10. Events of Failure; Definition of Black Scholes Value.

(a) Definition.

The occurrence of each of the following shall be considered to be an “Event of Failure.”

(i) A Delivery Failure occurs, where a “Delivery Failure” shall be deemed to have
occurred if the Company fails to deliver Exercise Shares or any Additional Shares
pursuant to this Warrant to the Holder within any applicable Delivery Period or other
period that such shares are required to be delivered hereunder, as the case may be;

(ii) A Legend Removal Failure occurs, where a “Legend Removal Failure” shall be
deemed to have occurred if the Company fails to issue this Warrant, Exercise Shares
and/or Additional Shares without a restrictive legend, or fails to remove a
restrictive legend, when and as required under Section 2(e) hereof;

(iii) a Transfer Delivery Failure occurs, where a “Transfer Delivery Failure” shall
be deemed to have occurred if the Company fails to deliver a Warrant within any
applicable Transfer Delivery Period; and

(iv) a Registration Failure (as defined below).

For purpose hereof, “Registration Failure” means that (A) the Company fails to file with the SEC on
or before the Filing Deadline (as defined in the Registration Rights Agreement) any Registration
Statement required to be filed pursuant to Section 2(a) of the Registration Rights Agreement, or
(B) the Company fails to use its best efforts to obtain effectiveness with the SEC of any
Registration Statement (as defined in the Registration Rights Agreement) that are required to be
filed pursuant to Section 2(a) of the Registration Rights Agreement as soon as possible after
filing, or fails to use best efforts to keep such Registration Statement current and effective as
required in Section 3 of the Registration Rights Agreement, (C) the Company fails to file any
amendment to the Registration Statement, or any additional Registration Statement required to be
filed pursuant to Section 3(b) of the Registration Rights Agreement within twenty (20) days of the
applicable Registration Trigger Date (as defined in the Registration Rights Agreement), or fails to
use its best efforts to cause such amendment and/or new Registration Statement to become effective
as soon as possible after filing, or (iv) any Registration Statement required to be filed under the
Registration Rights Agreement, after its initial effectiveness and during the Registration Period
(as defined in the Registration Rights Agreement), lapses in effect or sales of all of the
Registrable Securities (as defined in the Registration Rights Agreement) cannot otherwise be made
thereunder by reason of the Company’s failure to amend or supplement the prospectus included
therein in accordance with the Registration Rights Agreement, the Company’s failure to file and use
best efforts to obtain effectiveness with the SEC of an additional Registration Statement or
amended Registration Statement required pursuant to Section 3 of the Registration Rights Agreement,
or (D) the Company fails to provide a commercially reasonable written response to any comments to
any Registration Statement submitted by the SEC within ten (10) business days of the date that such
SEC comments are received by the Company.

8

 

(b) Failure Payments; Black-Scholes Determination. The Company understands that any Event of
Failure (as defined above) could result in economic loss to the Holder. In the event that any Event
of Failure occurs, as compensation to the Holder for such loss, the Company agrees to pay (as
liquidated damages and not as a penalty) to the Holder an amount payable in shares of Common Stock
that are valued for these purposes at 95% of the Volume Weighted Average Price on the date of such
calculation (“Failure Payments”) equal to 18% per annum (or the maximum rate permitted by
applicable law, whichever is less) of the Black-Scholes value (as determined below) of the
remaining unexercised portion of this Warrant on the date of such Event of Failure (as recalculated
on the first business day of each month thereafter for as long as Failure Payments shall continue
to accrue), which shall accrue daily from the date of such Event of Failure until the Event of
Failure is cured, accruing daily and compounded monthly, provided, however, in the event a 9.98%
Notice shall have theretofore been delivered, the Holder shall receive up to such amount of shares
of Common Stock such that Holder and any other persons or entities whose beneficial ownership of
Common Stock would be aggregated with the Holder’s for purposes of Section 13(d) of the Exchange
Act (including shares held by any “group” of which the Holder is a member, but excluding shares
beneficially owned by virtue of the ownership of securities or rights to acquire securities that
have limitations on the right to convert, exercise or purchase similar to the limitation set forth
herein) shall not collectively beneficially own greater than 9.98% of the total number of shares of
Common Stock of the Company then issued and outstanding. For purposes of clarification, it is
agreed and understood that Failure Payments shall continue to accrue following any Event of Default
until the applicable Default Amount is paid in full.

For purposes hereof, the “Black-Scholes” value of a Warrant shall be determined by use of the Black
Scholes Option Pricing Model using the criteria set forth on Schedule 1 hereto.

(c) Payment of Accrued Failure Payments. The shares representing accrued Failure Payments for each
Event of Failure shall be issued and delivered on or before the fifth (5th) Trading Day of each
month following a month in which Failure Payments accrued. Nothing herein shall limit the Holder’s
right to pursue all remedies available at law or in equity (including a decree of specific
performance and/or injunctive relief). Notwithstanding the above, if a particular Event of Failure
results in an Event of Default pursuant to Section 11 hereof, then the Failure Payment shall be
considered to have been satisfied upon payment to the Holder of an amount equal to the greater of
(i) the Failure Payment, or (ii) the Default Amount, payable in accordance with Section 11.

(d) Maximum Interest Rate. Nothing contained herein or in any document referred to herein or
delivered in connection herewith shall be deemed to establish or require the payment of a rate of
interest or other charges in excess of the maximum permitted by applicable law. In the event that
the rate of interest required to be paid or other charges hereunder exceed the maximum permitted by
such law, any payments in excess of such maximum shall be credited against amounts owed by the
Company to the Holder and thus refunded to the Company.

11. Default and Redemption.

(a) Events Of Default. Each of the following events shall be considered to be an “Event of
Default,” unless waived by the Holder:

(i) A Registration Failure occurs and remains uncured for a period of more than thirty (30) days;

(ii) Failure To Deliver Common Stock. A Delivery Failure (as defined above) occurs and remains
uncured for a period of more than twenty (20) days; or at any time, the Company announces or states
in writing that it will not honor its obligations to issue shares of Common Stock to the Holder
upon Exercise by the Holder of the Exercise rights of the Holder in accordance with the terms of
this Warrant;

(iii) Legend Removal Failure. A Legend Removal Failure (as defined above) occurs and remains
uncured for a period of twenty (20) days; and

(iv) Major Transaction. The Company has effected a Major Transaction without paying the Major
Transaction Warrant Redemption Price to the Holder pursuant to Section 5(c)(i)(C) or, if the Holder
did not elect a Redemption Upon Major Transaction, the Company has failed to meet the Assumption
requirements of Section 5(c)(i)(B) prior to effecting a Major Transaction.

(b) Mandatory Redemption.

(i) Mandatory Redemption Amount. If any Events of Default shall occur following delivery of a 9.98%
Notice then, unless waived by the Holder, upon the occurrence and during the continuation of any
Event of Default, at the option of the Holder, such option exercisable through the delivery of
written notice and the Warrant to the Company by such Holder (the “Default Notice”), the
outstanding amount of this Warrant shall be immediately redeemed by the Company and the Company
shall pay to the Holder (a “Mandatory Redemption”), in full satisfaction of its obligations
hereunder, an amount in shares of Common Stock (the “Mandatory Redemption Amount” or the “Default
Amount”) equal to the the Black-Scholes value (as determined in accordance with Section 10(b)) of
the remaining unexercised portion of this Warrant on the Trading Day immediately preceding the date
that the Mandatory Redemption Amount is paid to the Holder, provided, however, Holder shall receive
up to such amount of shares of Common Stock such that Holder and its Affiliates and any other
persons or entities whose beneficial ownership of Common Stock would be aggregated with the
Holder’s for purposes of Section 13(d) of the Exchange Act (including shares held by any “group” of
which the Holder is a member, but excluding shares beneficially owned by virtue of the ownership of
securities or rights to acquire securities

9

 

that have limitations on the right to convert, exercise or purchase similar to the limitation set
forth herein) shall not collectively beneficially own greater than 9.98% of the total number of
shares of Common Stock of the Company then issued and outstanding.

The Mandatory Redemption Amount shall be payable, in shares of Common Stock that are valued
for these purposes at 95% of the average of the Volume Weighted Average Prices for the five (5)
business days prior to the date of the applicable Default Notice.

(ii) Liquidated Damages. The parties hereto acknowledge and agree that the sums payable as Failure
Payments or pursuant to a Mandatory Redemption shall give rise to liquidated damages and not
penalties. The parties further acknowledge that (i) the amount of loss or damages likely to be
incurred by the Holder is incapable or is difficult to precisely estimate, (ii) the amounts
specified bear a reasonable proportion and are not plainly or grossly disproportionate to the
probable loss likely to be incurred by the Holder, and (iii) the parties are sophisticated business
parties and have been represented by sophisticated and able legal and financial counsel and
negotiated this Agreement at arm’s length.

The Default Amount, together with all other amounts payable hereunder, shall immediately become due
and payable, all without demand, presentment or notice, all of which hereby are expressly waived,
together with all costs, including, without limitation, legal fees and expenses, of collection, and
the Holder shall be entitled to exercise all other rights and remedies available at law or in
equity.

(c) Posting Of Bond. In the event that any Event of Default occurs hereunder, the Company may not
raise as a legal defense (in any Lawsuit, as defined below, or otherwise) or justification to such
Event of Default any claim that such Holder or any one associated or affiliated with such Holder
has been engaged in any violation of law, unless the Company has posted a surety bond (a “Surety
Bond”) for the benefit of such Holder in the amount of 130% of the aggregate Surety Bond Value (as
defined below) of all of the Holder’s Warrants (the “Bond Amount”), which Surety Bond shall remain
in effect until the completion of litigation of the dispute and the proceeds of which shall be
payable to such Holder to the extent Holder obtains judgment.

For purposes hereof, a “Lawsuit” shall mean any lawsuit, arbitration or other dispute resolution
filed by either party herein pertaining to any of this Warrant or the Registration Rights
Agreement.

“Surety Bond Value,” for the Warrants shall mean 100% of the of the Black-Scholes value of the
remaining unexercised portion of this Warrant on the Trading Day immediately preceding the date
that such bond goes into effect.

(d) Remedies, Other Obligations, Breaches And Injunctive Relief. The remedies provided in this
Warrant shall be cumulative and in addition to all other remedies at law or in equity (including a
decree of specific performance and/or other injunctive relief), and nothing herein shall limit the
right of the Holder to pursue actual damages for any failure by the Company to comply with the
terms of this Warrant. The Company acknowledges that a breach by it of its obligations hereunder
will cause irreparable harm to the Holder and that the remedy at law for any such breach may be
inadequate. The Company therefore agrees that, in the event of any such breach, the Holder of this
Warrant shall be entitled, in addition to all other available remedies, to an injunction
restraining any breach without any bond or other security being required.

(e) Limitation on Issuance of Common Stock. Notwithstanding anything herein to the contrary, in
no event shall the number of shares of Common Stock issuable pursuant to this Warrant, together
with all shares issuable pursuant to all additional warrants issuable from time to time under the
Loan Agreement, exceed 7,900,000 shares. The restriction contained in the immediately preceding
sentence shall be appropriately adjusted to reflect any stock splits, reclassifications,
recapitalizations or like events. Shares of Common Stock delivered upon any Exercise or the making
of any Failure Payment shall be subject to registration under the Securities Act only as expressly
provided under the Registration Rights Agreement.

12. Holder’s Redemptions. In the event that the Holder has sent a Default Notice or a Major
Transaction Redemption Notice to the Company pursuant to Section 5(c) or a Default Notice pursuant
to Section 11(b)(i), respectively (each, a “Redemption Notice”), the Holder shall promptly submit
this Warrant to the Company. If the Holder has submitted a Major Transaction Redemption Notice in
accordance with Section 5(c)(i)(C), the Company shall deliver the applicable Major Transaction
Redemption Price to the Holder concurrently with the consummation of such Major Transaction. In
the event that the Company does not pay the applicable Redemption Price to the Holder within the
time period required, at any time thereafter and until the Company pays such unpaid Redemption
Price in full, the Holder shall have the option, in lieu of redemption, to require the Company to
promptly return to the Holder all or any portion of this Warrant that was submitted for redemption
and for which the applicable Major Transaction Redemption Price (together with any late charges
thereon) has not been paid. Upon the Company’s receipt of such notice, (x) the applicable
Redemption Notice shall be null and void with respect to such Redemption Principal Amount, (y) the
Company shall immediately return this Warrant, or issue a new Warrant to the Holder representing
the portion of this Warrant that was submitted for redemption and (z) the Exercise Price of this
Warrant or such new Warrant shall be adjusted to the lesser of (A) the Exercise Price as in effect
on the date on which the applicable Redemption Notice is voided and (B) the lowest Closing Price
during the period beginning on and including the date on which the applicable Redemption Notice is
delivered to the Company and ending on and including the date on which the applicable Redemption
Notice is voided. The Holder’s delivery of a notice voiding a Redemption Notice and exercise of its
rights following such notice shall not affect the Company’s obligations to make any payments of
Failure Payments which have accrued prior to the date of such notice with respect to the Warrant
subject to such notice.

13. Benefits of this Warrant.

10

 

Nothing in this Warrant shall be construed to confer upon any person other than the Company and
Holder any legal or equitable right, remedy or claim under this Warrant and this Warrant shall be
for the sole and exclusive benefit of the Company and Holder.

14. Governing Law.

All questions concerning the construction, validity, enforcement and interpretation of this
Agreement shall be governed by and construed and enforced in accordance with the internal laws of
the State of New York, without regard to the principles of conflicts of law thereof. Each party
agrees that all legal proceedings concerning the interpretations, enforcement and defense of the
transactions contemplated by this Agreement (whether brought against a party hereto or its
respective affiliates, directors, officers, shareholders, employees or agents) shall be commenced
exclusively in the state and federal courts sitting in the City of New York. Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the
City of New York, borough of Manhattan for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed herein, and hereby
irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it
is not personally subject to the jurisdiction of any such court, that such suit, action or
proceeding is improper or is an inconvenient venue for such proceeding. 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 other manner permitted by law. The parties hereby waive all rights to a trial by
jury. If either party shall commence an action or proceeding to enforce any provisions of this
Agreement, then the prevailing party in such action or proceeding shall be reimbursed by the other
party for its reasonable attorneys’ fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such action or proceeding.

15. Loss of Warrant.

Upon receipt by the Company of evidence of the loss, theft, destruction or mutilation of this
Warrant, and (in the case of loss, theft or destruction) of indemnity or security reasonably
satisfactory to the Company, and upon surrender and cancellation of this Warrant, if mutilated, the
Company shall execute and deliver a new Warrant of like tenor and date.

16. Notice or Demands.

Notices or demands pursuant to this Warrant to be given or made by Holder to or on the Company
shall be sufficiently given or made if sent by certified or registered mail, return receipt
requested, postage prepaid, and addressed, until another address is designated in writing by the
Company, to the address set forth in Section 2(a) above. Notices or demands pursuant to this
Warrant to be given or made by the Company to or on Holder shall be sufficiently given or made if
sent by certified or registered mail, return receipt requested, postage prepaid, and addressed, to
the address of Holder set forth in the Company’s records, until another address is designated in
writing by Holder.

11

 

IN WITNESS WHEREOF, the undersigned has executed this Warrant as of the 18th day of July, 2007.

	 	 	 	 	 
	DYNAVAX TECHNOLOGIES CORPORATION

	 
	 
	 	 	 	 
	By:

	 	 	 	 
	 

	 	 	 	 
	Print Name:
	 	 	 	 
	Title:
	 	 	 	 

12

 

EXHIBIT A

EXERCISE FORM FOR WARRANT

TO: DYNAVAX TECHNOLOGIES CORPORATION

The undersigned hereby irrevocably Exercises the right to purchase   of
the shares of Common Stock (the “Common Stock”) of DYNAVAX TECHNOLOGIES CORPORATION, a Delaware
corporation (the “Company”), evidenced by the attached warrant (the “Warrant”), and herewith makes
payment of the Exercise price with respect to such shares in full, all in accordance with the
conditions and provisions of said Warrant.

1. The undersigned agrees not to offer, sell, transfer or otherwise dispose of any of the Common
Stock obtained on Exercise of the Warrant, except in accordance with the provisions of Section 8(a)
of the Warrant.

2. The undersigned requests that any stock certificates for such shares be issued free of any
restrictive legend, if appropriate, and a warrant representing any unexercised portion hereof be
issued, pursuant to the Warrant in the name of the undersigned and delivered to the undersigned at
the address set forth below.

3. The undersigned is exercising the attached Warrant pursuant to:

o Cash Exercise                                                             o Cashless Exercise

Dated:                                         

 

Signature

 

Print Name

 

Address

NOTICE

The signature to the foregoing Exercise Form must correspond to the name as written upon the face
of the attached Warrant in every particular, without alteration or enlargement or any change
whatsoever.

 

 

EXHIBIT B

ASSIGNMENT

(To be executed by the registered holder

desiring to transfer the Warrant)

FOR VALUE RECEIVED, the undersigned holder of the attached warrant (the “Warrant”) hereby sells,
assigns and transfers unto the person or persons below named the right to purchase 
             shares of the Common Stock of DYNAVAX TECHNOLOGIES CORPORATION, a Delaware corporation,
evidenced by the attached Warrant and does hereby irrevocably constitute and appoint                     attorney to transfer the said Warrant on the books of the Company, with full power of
substitution in the premises.

	 	 	 
	 
	 	 	 
	Dated:                         

	 	Signature

Fill in for new registration of Warrant:

	 	 
	 
	 
	Name

	 

	 
	 
	Address

	 

	 
	 
	Please print name and address of assignee 

(including zip code number)

NOTICE

The signature to the foregoing Assignment must correspond to the name as written upon the face of
the attached Warrant in every particular, without alteration or enlargement or any change
whatsoever.

 

 

EXHIBIT C

FORM OF OPINION

______, 20__

Cooley Godward Kronish LLP

3175 Hanover Street

Palo Alto, California 94304-1130

Attn: Glen Sato, Esq.

Re: Dynavax Technologies Corporation (the “Company”)

Dear Sir:

[___] (“[___]”) intends to transfer ___Warrants (the “Warrants”) of
the Company to ___(“___”) without registration under the Securities Act of
1933, as amended (the “Securities Act”). In connection therewith, we have examined and
relied upon the truth of representations contained in an Investor Representation Letter
attached hereto and have examined such other documents and issues of law as we have
deemed relevant.

Based on and subject to the foregoing, we are of the opinion that the transfer of the
Warrants by Deerfield to ___may be effected without registration under the Securities
Act, provided, however, that the Warrants to be transferred to ___
contain a legend restricting its transferability pursuant to the Securities Act and that
transfer of the Warrants is subject to a stop order.

The foregoing opinion is furnished only to the Cooley Godward Kronish LLP and may not be
used, circulated, quoted or otherwise referred to or relied upon by you for any purposes
other than the purpose for which furnished or by any other person for any purpose,
without our prior written consent.

Very truly yours,

 

 

[FORM OF INVESTOR REPRESENTATION LETTER]

_____, 20__

[_______________]

Gentlemen:

___(“___”) has agreed to purchase ___Warrants (the “Warrants”) of Dynavax
Technologies Corporation (the “Company”) from [___] (“[___]”). We understand that
the Warrants are “restricted securities.” We represent and warrant that ___is a sophisticated
institutional investor that would qualify as an “Accredited Investor” as defined in Rule 501 of
Regulation D under the Securities Act of 1933, as amended (the “Securities Act”).

___represents and warrants as of the date hereof as follows:

1. That it is acquiring the Warrants and the shares of common stock, $0.001 par value per
share underlying such Warrants (the “Exercise Shares”) solely for its account for investment
and not with a view to or for sale or distribution of said Warrants or Exercise Shares or any
part thereof. ___also represents that the entire legal and beneficial interests of the
Warrants and Exercise Shares ___is acquiring is being acquired for, and will be held
for, its account only;

2. That the Warrants and the Exercise Shares have not been registered under the Securities
Act on the basis that no distribution or public offering of the stock of the Company is to be
effected. ___realizes that the basis for the exemption may not be present if,
notwithstanding its representations, ___has a present intention of acquiring the
securities for a fixed or determinable period in the future, selling (in connection with a
distribution or otherwise), granting any participation in, or otherwise distributing the
securities. ___has no such present intention;

3. That the Warrants and the Exercise Shares must be held indefinitely unless they are
subsequently registered under the Securities Act or an exemption from such registration is
available. ___recognizes that the Company has no obligation to register the Warrants,
or to comply with any exemption from such registration;

4. That neither the Warrants nor the Exercise Shares may be sold pursuant to Rule 144
adopted under the Securities Act unless certain conditions are met, including, among other
things, the existence of a public market for the shares, the availability of certain current
public information about Company, the resale following the required holding period under Rule
144 and the number of shares being sold during any three month period not exceeding specified
limitations;

5. That it will not make any disposition of all or any part of the Warrants or Exercise
Shares in any event unless and until:

(i) The Company shall have received a letter secured by ___from the Securities
and Exchange Commission stating that no action will be recommended to the Securities
and Exchange Commission with respect to the proposed disposition;

(ii) There is then in effect a registration statement under the Securities Act
covering such proposed disposition and such disposition is made in accordance with
said registration statement; or

(iii) ___shall have notified the Company of the proposed disposition and, in
the case of a sale or transfer in a so called “4(1) and a half” transaction, shall
have furnished counsel to the Company with an opinion of counsel, reasonably
satisfactory to counsel to the Company.

We acknowledge that the Company will place stop orders with respect to the Warrants and the
Warrants, and if a registration statement is not effective, the Exercise Shares shall bear the
following restrictive legend:

 

 

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES
MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER SAID ACT, OR PURSUANT TO AN EXEMPTION FROM REGISTRATION
UNDER SAID ACT INCLUDING, WITHOUT LIMITATION, PURSUANT TO RULES 144 OR 144A UNDER SAID ACT
OR PURSUANT TO A PRIVATE SALE EFFECTED UNDER APPLICABLE FORMAL OR INFORMAL SEC
INTERPRETATION OR GUIDANCE, SUCH AS A SO-CALLED “4(1) AND A HALF” SALE.”

“THE SALE, TRANSFER OR ASSIGNMENT OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO THE TERMS AND CONDITIONS OF A CERTAIN REGISTRATION RIGHTS AGREEMENT DATED AS OF
JULY 18, 2007, AS AMENDED FROM TIME TO TIME, AMONG THE COMPANY AND CERTAIN HOLDERS OF ITS
OUTSTANDING SECURITIES. COPIES OF SUCH AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN
REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE COMPANY.”

At any time and from time to time after the date hereof, ___shall, without further
consideration, execute and deliver to [___] or the Company such other instruments or documents
and shall take such other actions as they may reasonably request to carry out the transactions
contemplated hereby.

Very truly yours,

 

 

EXHIBIT D

Schedule 1

Black-Scholes Value

	 	 	 	 	 	 	 	 	 
	 	 	Calculation Under Section 5(c)(i)(C)	 	Calculation Under Section 10(b) or 11(b)
	Remaining Term

	 	Number of calendar days from date
of public announcement of the Major
Transaction until the last date on
which the Warrant may be exercised.
	 	Number of calendar days from date of
the Event of Failure until the last
date on which the Warrant may be
exercised.

	 
	 	 	 	 	 	 	 	 
	Interest Rate

	 	A risk-free interest rate corresponding to the US$ LIBOR/Swap rate for a period equal to the
 Remaining Term, or the closest shorter term thereto if there is no LIBOR/Swap rate equal to the Remaining Term.	 	A risk-free interest rate corresponding
to the US$ LIBOR/Swap rate for a period equal to the Remaining Term.
	 
	 	 	 	 	 	 	 	 
	Volatility

	 	45%	 	 	 	45%	 	 
	 
	 	 	 	 	 	 	 	 
	Stock Price

	 	The greater of (1) the closing
price of the Common Stock on
NASDAQ, or, if that is not the
principal trading market for the
Common Stock, such principal market
on which the Common Stock is traded
or listed (the “Closing Market
Price”) on the Trading Day
immediately following the first
public announcement of a Major
Transaction, or (2) the Volume
Weighted Average Price as of the
Trading Day immediately preceding
the first public announcement of
the Major Transaction.
	 	The volume Weighted Average Price on
the date of such calculation.

	 
	 	 	 	 	 	 	 	 
	Dividends

	 	Zero.
	 	Zero.

 

Schedule 1

Black-Scholes Value

	 	 	 	 	 	 	 	 	 
	 	 	Calculation Under Section 5(c)(i)(C)	 	Calculation Under Section 10(b) or 11(b)
	Remaining Term

	 	Number of calendar days from date
of public announcement of the Major
Transaction until the last date on
which the Warrant may be exercised.
	 	Number of calendar days from date of
the Event of Failure until the last
date on which the Warrant may be
exercised.

	 
	 	 	 	 	 	 	 	 
	Interest Rate

	 	A risk-free interest rate corresponding to the US$ LIBOR/Swap rate for a period equal to the Remaining Term, or the closest
 shorter term thereto if there is no LIBOR/Swap rate equal to the
Remaining Term.	 	A risk-free interest rate corresponding
to the US$ LIBOR/Swap rate for a period
equal to the Remaining Term.
	 
	 	 	 	 	 	 	 	 
	Volatility

	 	45%	 	 	 	45%	 	 
	 
	 	 	 	 	 	 	 	 
	Stock Price

	 	The greater of (1) the closing
price of the Common Stock on
NASDAQ, or, if that is not the
principal trading market for the
Common Stock, such principal market
on which the Common Stock is traded
or listed (the “Closing Market
Price”) on the Trading Day
immediately following the first
public announcement of a Major
Transaction, or (2) the Volume
Weighted Average Price as of the
Trading Day immediately preceding
the first public announcement of
the Major Transaction.
	 	The volume Weighted Average Price on
the date of such calculation.

	 
	 	 	 	 	 	 	 	 
	Dividends

	 	Zero.
	 	Zero.exv10w1

 

EXHIBIT 10.1

[THIS AGREEMENT IS SUBJECT TO ARBITRATION]

EMPLOYMENT, CONFIDENTIALITY, AND NON-COMPETITION AGREEMENT

     This “Agreement” is between the “Company,” Interphase Corporation, and Marc E.
DeVinney, “Executive.” The Company is organized under the laws of the State of Texas. Its
principal place of business is located at 2901 North Dallas Parkway, Suite 200, Plano, TX 75093.

Background Statement

     The Company enables rapid platform design and integration for the global voice and data
communications markets through custom and off-the-shelf communications equipment, embedded software
development suites, and systems integration and consulting services for telecom and enterprise
networks. Executive desires to be employed or continue to be employed by the Company. The Company
desires to employ Executive, provided that as an express, prior condition of such employment,
Executive enters into this Agreement with the Company.

     This Agreement sets forth the terms of Executive’s employment. The parties agree that this
Agreement is supported by valuable consideration, that mutual promises and obligations have been
undertaken by the parties to it, and that the agreement is entered into voluntarily by the parties.

Statement of Agreement

	1.	 	Duties. Executive shall devote Executive’s best efforts to the business of the Company.
Executive shall perform such duties and responsibilities customary to the position of Vice
President of Engineering, including those described on Exhibit A to this Agreement. Executive
shall also perform those duties assigned by the Company from time to time.

	2.	 	Terms. The “initial term” of employment under this Agreement shall terminate six (6) months
after the date of this Agreement. The initial term of this Agreement shall automatically
renew for successive six (6) month periods, referred to as “successor terms,” unless either
party gives thirty (30) days written notice of its intention not to renew prior to the
expiration of the initial or any successor term or Executive is terminated for cause.

Page 1

 

	3.	 	Terminable Only For Cause. This Agreement may be terminated by the Company prior to the
expiration of the initial term or any successor term as follows:

	 	(a)	 	Due to the death of Executive;
	 
	 	(b)	 	Due to a physical or mental disability which prevents Executive from performing
the essential functions of his full duties for a period of ninety (90) consecutive days
during the term of this Agreement, as determined in good faith by a physician
reasonably acceptable to the Company; or,
	 
	 	(c)	 	For Cause, which is (i) fraud, misappropriation, embezzlement, dishonesty, or
other act of material misconduct against the Company or any affiliate of the Company;
(ii) failure to perform specific and lawful directives of Executive’s superiors; (iii)
violation of any rules or regulations of any governmental or regulatory body, which is
materially injurious to the financial condition of the Company; (iv) conviction of or
plea of guilty or nolo contendere to a felony; (v) violation of the provisions of 8, 9,
10, 11, 13, or 16; or, (vi) substantial failure to perform the duties and
responsibilities of Executive under this Agreement.

In the event of termination under this paragraph, Executive shall be entitled only to
Executive’s base salary earned through the date of termination. No accrued but unpaid
bonuses or commissions shall be due to Executive.

	4.	 	Termination Without Cause or Nonrenewal. In the event the Company gives Executive thirty
days written notice of its intention not renew a term of this Agreement, or if Executive is
terminated without cause after the expiration of the initial term, the Executive shall receive
an amount equal to six-months severance pay based on the Executive’s base salary at the time
of termination, payable in bi-monthly or bi-weekly installments as dictated by the regular pay
dates of the Company. No accrued but unpaid bonuses or commissions shall be due to Executive
under this Paragraph. No other severance payment or benefits shall be due Executive other
than those provided for under this Agreement. Notwithstanding anything stated herein to the
contrary, in the event Executive becomes employed during the period in which the Executive is
eligible to receive post-employment payments under this Paragraph, any amounts received by
Executive in the form of compensation, salary, or other payments shall be offset or shall
reduce any amounts or liability owed by the Company to the Executive under this Paragraph.

Page 2

 

	5.	 	Compensation. Employer shall pay and provide benefits to Executive according to the
provisions of Executive’s compensation plan described in the attached Exhibit B.
Executive’s compensation plan shall be reviewed on a periodic basis. The Company reserves
the right, and Executive hereby authorizes Company, to make deductions from Executive’s pay
or bonuses to satisfy any outstanding obligations of Executive to the Company. The Company
may offset against the final payment of wages or bonuses owed to Executive any amounts due
the Company from Executive.
	 
	6.	 	Changes in Position, Location, or Compensation. If the Company transfers, promotes, or
reassigns Executive to another position or geographic area, or both parties agree to a change
in compensation or benefits during a term of this Agreement or upon the renewal of a term of
this Agreement, an updated employment agreement may be substituted by agreement of the parties
but is not required. Mutually-agreeable changes in compensation or benefits shall be effected
by amendment to and incorporation of a modified Exhibit B, initialed by the parties or their
authorized representative. All provisions, promises, terms or conditions not modified by an
amendment of Exhibits A - C shall remain in effect and shall not be deemed revoked or
modified beyond the changes set forth in one or more amended Exhibits.
	 
	7.	 	Executive Representation/Warranty. Executive represents that Executive is not a party to any
agreement with a third party, or limited by a court order, containing a non-competition
provision or other restriction which would preclude Executive’s employment with Company or any
of the services which Executive will provide on the Company’s behalf.
	 
	8.	 	Duty of Loyalty. Executive acknowledges the common law duties of reasonable care, loyalty,
and honesty which arise out of the principal/agent relationship of the parties. While
employed and thereafter for whatever term the law may impose, Executive shall not engage in
any activity to the detriment of the Company. By way of illustration and not as a limitation,
Executive shall not discuss with any customer or potential customer of the Company any plans
by Executive or any other Executives of the Company to leave the employment of the Company and
compete with the Company.
	 
	9.	 	Company Documents. Executive agrees and acknowledges that Executive holds as the Company’s
property all memoranda, books, papers, letters, and other data, including duplicates, relating
to the Company’s business and affairs (“Company Documents”). This includes Company Documents
created or used by Executive or otherwise coming into Executive’s possession in connection
with the performance of Executive’s job duties. All Company Documents in the possession,
custody, or control of Executive shall be returned to the Company at the time of termination
of employment.

Page 3

 

Confidential Information and Non-Competition

	10.	 	In exchange for the mutual promises and obligations contained in this Agreement, and
contemporaneous with its execution or soon thereafter, Employer promises to deliver to
Executive or permit Executive to acquire, be exposed to, and/or have access to material, data,
and information of the Company and/or its customers or clients that is confidential,
proprietary and/or a trade secret (“Confidential Information”). At all times, both during and
after the termination of employment, the Executive shall keep and retain in confidence and
shall not disclose, except as required in the course of the Executive’s employment with the
Company, to any person, firm or corporation, or use for the Executive’s own purposes, any
Confidential Information. For the purposes of this paragraph, such information shall include,
but is not limited to:

	 	1.	 	The Company’s standard operating procedures, processes, formulae, know-how,
scientific, technical, or product information, whether patentable or not, which is of
value to the Company and not generally known by the Company’s competitors;
	 
	 	2.	 	All confidential information obtained from third parties and customers
concerning their products, business, or equipment specifications;
	 
	 	3.	 	Confidential business information of the Company, including, but not limited
to, marketing and business plans, strategies, projections, business opportunities,
client identities or lists, sales and cost information, internal financial statements
or reports, profit, loss, or margin information, customer price information; and,
	 
	 	4.	 	Other information designated by the Company or deemed by law to be confidential
information.

	11.	 	Non-Competition. In consideration of the mutual promises contained in this Agreement,
the sufficiency of which is acknowledged by the parties, Executive agrees that during the term
of his employment and for a period of twelve (12) calendar months after termination of
employment from the Company (whether voluntary or involuntary), Executive shall not, directly
or indirectly, either as principal, agent, manager, employee, partner, shareholder, director,
officer, consultant or otherwise:

	 	1.	 	Become associated or affiliated with, employed by, or financially interested in
any business operation which competes in the business currently engaged in by Company.
(The phrase “business currently engaged in by the Company” includes, but is not limited
to, the type of activities in which the Company was engaged during Executive’s tenure,
such as designs and delivers high performance connectivity adapters for computer and
telecommunication

Page 4

 

	 	 	 	networks.)

	 	2.	 	Solicit or attempt to solicit the business or patronage of any person, firm,
corporation, partnership, association, department of government or other entity with
whom the Company has had any contact during a period of twelve (12) calendar months
preceding the date of this Agreement (“Customers”), or otherwise induce such Customers
to reduce, terminate, restrict or otherwise alter business relationships with the
Company in any fashion; or,
	 
	 	3.	 	In any way solicit or attempt to solicit the business or patronage of any
Customers.
	 
	 	4.	 	The parties intend the above restrictions on competition to be completely
severable and independent, and any invalidity or unenforceability of any one or more
such restrictions shall not render invalid or unenforceable any one or more
restrictions.

	12.	 	Limitations on Scope. In recognition of the broad geographic scope of the Company’s business
and the ease of competing with the Company in any part of the United States, the restrictions
on competition set forth herein are intended to cover the following geographic areas:

	 	1.	 	The geographic territory identified on the attached Exhibit C;
	 
	 	2.	 	The cities containing a facility or operation owned or managed by the Company;
and,
	 
	 	3.	 	A fifty (50) mile radius outside the boundary limits of each such city.

The parties intend the above geographical areas to be completely severable and independent,
and any invalidity or unenforceability of this Agreement with respect to any one area shall
not render this Agreement unenforceable as applied to any one or more of the other areas.

	13.	 	Non-Solicitation of Employees. During employment and for a period of twelve (12) months
after termination, Executive agrees not to hire, employ, solicit, divert, recruit, or attempt
to induce, directly or indirectly, any existing or future employee of the Company to leave
their position with the Company or to become associated with a competing business.

Remedies for Breach

	14.	 	Company’s Right to Obtain an Injunction. Executive acknowledges that the Company will have
no adequate means of protecting its rights under Paragraphs 10, 11, 12, or 13 of this
Agreement other than be securing an injunction (a court order prohibiting the Executive from

Page 5

 

violating the Agreement). Accordingly, the Executive agrees that the Company is entitled to
enforce this Agreement by obtaining a temporary, preliminary, and permanent injunction and
any other appropriate equitable relief. Executive acknowledges that the Company’s recovery
of damages will not be an adequate means to redress a breach of this Agreement. Nothing
contained in this paragraph, however, shall prohibit the Company from pursuing any remedies
in addition to injunctive relief, including recovery of damages. Executive expressly
acknowledges that the Company has sole discretion regarding whether to seek a remedy for
breaches of Paragraphs 10, 11, 12, or 13 in a court of competent jurisdiction or by
arbitration procedures outlined in paragraph 15.

	15.	 	Arbitration. Executive and the Company agree that any unresolved dispute or controversy
involving a claim for monetary damages and/or declaratory or injunctive relief arising under
or in connection with this Agreement shall be settled exclusively by arbitration, conducted
before a single arbitrator in Dallas, Texas, according to the rules of the American
Arbitration Association then in effect. Judgment may be entered on the arbitrator’s award in
any court having jurisdiction. The direct expense of any arbitration proceeding shall be
borne by the Company. Notwithstanding the foregoing, nothing in this Paragraph is intended to
subject a claim by either party arising under Paragraphs 10, 11, 12, or 13 to mandatory
arbitration. Any claim arising under Paragraphs 10, 11, 12, or 13 shall be litigated in the
courts of the relevant jurisdiction and venue.

Inventions and Discoveries

	16.	 	Discoveries, Inventions, & Copyrights. Executive shall disclose promptly to the Company any
and all conceptions and ideas for inventions, improvements, and valuable discoveries, whether
patentable or not, which are conceived or made by the Executive, solely or jointly, during
Executive’s term of employment and which pertain to the business activities of the Company.
Executive hereby assigns and agrees to assign all his interest therein to the Company or to
its nominee. Whenever requested to do so by the Company, Executive shall execute any and all
applications, assignments, or other instruments which the Company shall deem necessary to
apply for and obtain Letters of Patent of the United States or any foreign country or to
otherwise protect the Company’s interest therein.

General Provisions

	17.	 	Condition to Seeking Subsequent Employment. Executive agrees to show a copy of this
Agreement to any Competitor with whom Executive interviews during the Executive’s employment
with the Company or with whom the Executive interviews within twelve (12) months following the
effective date of the termination of the Executive’s employment with the Company.

	18.	 	Attorneys’ Fees. If any party shall obtain a final judgment of a court of competent

Page 6

 

jurisdiction, subject to no further appeal, pursuant to which any other party shall be
determined to have breached its obligations hereunder or made any misrepresentations, such
prevailing party shall be entitled to recover, in addition to any award of damages,
reasonable attorneys’ fees, costs, and expenses incurred by such party in obtaining such
judgment.

	19.	 	Non-Disparagement and Confidentiality. Except as may be required by law or as consented to
in writing by an authorized officer or agent of the Company, Executive agrees not to make any
statements whatsoever, directly or indirectly, written or oral, which could reasonably become
public, which could be interpreted as embarrassing, disparaging, prejudicial, or in any way
detrimental or inimical to the interests of the Company. Furthermore, Executive agrees to
hold confidential and not to disclose, make public, or to communicate orally or in writing to
any person or entity (other than Executive’s significant other and immediate family), directly
or indirectly, the terms of this Agreement or any matters set forth herein, except only: (a)
as may be compelled by court orders; (b) as may be necessary to enforce the terms of this
Agreement; (c) to legal, accounting, and financial advisors; (d) as may be necessary in
connection with the application for or obtaining loans or credit; (e) as may be necessary to
comply with applicable laws and government regulations; or, (e) as may be necessary or
desirable in obtaining future employment.

	20.	 	Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the
Company, its subsidiaries, affiliates, successors, and assigns.

	21.	 	Nonwaiver. Any waiver by the Company of a breach of any provision of this Agreement must be
in writing and signed by the Company to be effective. Any waiver by the Company of a breach
of any provision of this Agreement shall not operate or be construed as a waiver by the
Company of any different or subsequent breach of this Agreement by Executive.

	22.	 	Applicable Law. This Agreement shall be construed in accordance with and governed by the
laws of the State of Texas, without giving effect to the conflict of laws provisions thereof.

	23.	 	Forum Selection Clause. Any and all causes of action for equitable relief relating to the
enforcement of this Agreement and not otherwise subject to the mandatory arbitration
provisions of Paragraph 15 may, in the Employer’s sole discretion, be brought in the
United States District Court for the Northern District of Texas or the Dallas County District
of the Texas State Courts. The parties agree that the provisions of this paragraph benefit
both Employer and Executive. Any and all causes of action by and between Employer and
Executive can be quickly and efficiently resolved in the agreed-upon forum, which will not
unduly burden either Employer or Executive, and which will substantially aid Employer and
Executive in providing the opportunity for uniform treatment with respect to any issues
relating to the covenants contained in this Agreement.

	24.	 	Entire Agreement. This Agreement represents the entire agreement between the Company

Page 7

 

and the
Executive with respect to the subject matter hereof, supersedes all prior agreements dealing
with the same subject matter, and may not be changed except in a writing signed by
the party against whom enforcement of the Agreement, as so changed, is sought.

	25.	 	Severability. The invalidity of any term or provision of this Agreement, including any term
or provision of paragraphs 10, 11, 12, or 13 shall not invalidate or otherwise affect any
other term or provision of this Agreement.

	26.	 	This agreement shall be effective August 31, 2007.

	 	 	 	 	 
	 	Interphase Corporation

 	 
	 	By:  	/s/ Gregory B. Kalush
 	 
	 	 	Its: President and Chief Executive Officer
 	 
	 	 	 	 
	 

	 	 	 	 	 
	 	Executive

 	 
	 	 	/s/ Marc E. DeVinney
 	 
	 	 	 
	 	 	 
	 

Page 8

 

Exhibit A

Job Description

	 	 	 
	Job Title: VP of Engineering

	 	Department: Engineering
	Reports To: President and CEO

	 	FLSA Status: Exempt
	Prepared By: D. Shute & G. Kalush

	 	Approved By: Deborah Shute
	Prepared Date: August 7, 2007

	 	Approved Date: August 13, 2007

SUMMARY

As the senior Engineering individual for the company, the VP of Engineering is fully responsible
for representing and leading all global Engineering functions in product development and new
product development activities. Ultimately oversees and ensures success of all product
development, Engineering schedule accuracy, goal attainment, budget responsibilities, key corporate
and Engineering processes, and personnel-related decisions.

The Vice President of Engineering is a member of the Executive Team and has responsibilities
critical to the short-term and long-term profitability, growth, and overall success of the Company.
Reporting directly to the CEO, this position provides proactive Engineering team leadership and
organizational leadership. The VP of Engineering plays a key role in contributing to the company’s
strategic direction and overall strategy in conjunction with the Chief Technology Officer, VP of
Strategic Marketing, and CEO.

As a member of the Executive Team, the VP of Engineering must embrace the organization’s vision,
goals, and values, and display a sense of unity and alignment with the CEO and the rest of the
leadership team which is necessary to achieve superior business results within the Company.

ESSENTIAL DUTIES AND RESPONSIBILITIES include the following. Other duties may be assigned.
Management reserves the right to change these duties at any time.

Engineering Leadership

Overall responsibility for all aspects of Engineering (hardware and software development, SVT,
DVT), Interoperability and Systems Integration, and Engineering Project Management for the Company
on a worldwide basis. This includes establishing effective metrics/measurements and review
processes.

Accountable for creating, gaining approval of, and implementing the Engineering strategy and
architecture for the Company.

 

 

Plans and directs the overall Engineering function through local and remote management in multiple development locations toward the achievement of corporate goals and
objectives.

Accountabilities encompass:

Software Development

Hardware Development

SVT

DVT

CAD

Interoperability

Systems Integration

Engineering Project Management

Implements processes, procedures, systems that maintain the integrity and accuracy of the Company’s
Engineering schedules. Advises the CEO, the Executive Team, and other internal teams on these
matters, as required.

Directs a team of Engineering professionals.

Functions as a responsive “business partner” supporting other functions, i.e., sales, marketing,
manufacturing, operations, supply chain management, finance, human resources, etc., by providing a
broad range of pro-active support, insight and attention to detail in areas such as:

Customer responses (RFI, RFQ, RFP, etc.)

Technical Feasibility studies and ERA (Engineering Requirements Analysis)

CPCD’s & MRD’s

CP-12 process deliverables and execution

PIDs (Product Development Documentation)

Engineering Schedules

Engineering change orders

Operating Plans and Budgeting

Headcount changes

Employee relations

Manages the project management function ensuring Engineering schedules stay on track and that all
potential impacts or slips are communication appropriately with the Executives and CEO.

Further the collection and use of information gathering (including schedule status, variances,
hours worked by person by product, project expenses) using analytical tools, analyses, and metrics
essential to assessing overall business performance and

 

 

variances from “Plan”. Produces reports and “dashboard” metrics that drive meaningful information and decision making further down the
organizational ladder. Ensures the full commitment and optimization of the company’s SAP system,
and other software tools available.

Builds and maintains a strong Engineering team. Makes enlightened decisions regarding the staff’s
selection, promotion, and development. Must develop a Succession Plan with ready-now backups to
engineering leadership within a two to three (2-3) year period and make every effort to develop and
broaden the incumbent Directors of Engineering, Managers, and principle staff as appropriate.

Establishes Engineering’s vision and mission, short-term and long-range operating plans, programs,
budgets, and development schedules. Implements the necessary strategies, initiatives, and
processes to achieve success.

The VP of Engineering is responsible for the establishing and maintaining the processes, metrics,
policies, programs, and objectives to ensure Interphase meets its development commitments to it’s
customers for all scheduled product deliveries.

Directs and coordinates the activities of local and remote Engineering teams on a global basis and
ensures effective communication, consistency, and alignment in their practices and systems, and
timeliness of their committed deliverables.

Ensures process excellence and compliance to CP12 and other key processes involving Engineering.

Advances the R&D process from design initiatives at the customer level to specification, design for
testing, design for manufacturing, and migration from one technology to another within the context
of the design capabilities of the organization.

Ensures the company’s vision and values are instilled in the Engineering/development organization.

Confers with CEO to review achievements and to discuss required changes in programs, resources,
processes, strategies or goals as a result of current customer or market conditions.

Maintains significant interaction with suppliers, marketing and Engineering/development teams to
effectively evaluate future programs under consideration.

Executive Management

Contributes as a member of the CEO’s Executive Staff on all long-term strategic and annual
operating planning activities. Participates in future plans and the associated business/budgeting
activities to achieve desired results. Prepares detailed budgets,

 

 

operating plans, CAPEX plans, cost reduction programs, etc.

Supports the integration of new products, programs, customers, partners, vendors, and potential acquisitions from an operational perspective, as well as other proposed business
development and strategic alliance initiatives. Visible to customers and involved in “adding
value” throughout the organization. (Viewed and leveraged as a resource by peers.)

In tandem with other key leaders, cultivates a synergistic environment in which there is
cross-functional discussion and the formulation of action plans to pro-actively address the
company’s SWOT, customer requests and requirements, business development opportunities, promising
new products, acquisitions, etc.

Actively participates in customer/partner/vendor meetings, audits, and presentations, “world
tours”, and trade show activities as appropriate. Presents at Operations Reviews and Board
Meetings as requested or required.

The VP of Engineering will assist the Chief Technology Officer, the VP of Strategic Marketing and
the CEO and the rest of the company’s executive management team in setting the future direction and
vision for the company and helping to develop strategies to achieve the company’s long-term goals.
This includes any necessary realignment in the company’s skills, processes, and metrics to be
successful in achieving future strategic directions.

This position will assist the CTO in the assessment of emerging technologies for positioning
Interphase to take maximum advantage of our company’s core competencies, skills and market
position. Also serves to assist the CTO as the technology guide for the company.

Participates closely with the CTO, VP of Global Sales, the VP of Strategic Marketing, and the CEO
in developing the strategic product plan for Interphase.

Assists the CTO, VP of Strategic Marketing, and CEO in the formulation and development of the
company’s strategic vision, complete with the assessment of resources and skills required,
technology risk, development assurance programs and required strategic business partners necessary
to secure a strong portfolio of successful programs for a five-year business horizon. Participates
in strategic planning sessions.

Recommends outsourcing and partnership opportunities as needs arise to improve time to market, or
achieve corporate objectives.

 

 

SUPERVISORY RESPONSIBILITIES The VP of Engineering directs and leads subordinate managers
including Directors of Engineering (Europe and North America), Director of Interoperability &
Systems Integration, and Sr. Manager of Project Management. Responsible for the overall direction,
coordination, and evaluation of these units. Carries out supervisory responsibilities in
accordance with the organization’s policies and applicable laws and governmental regulations.
Responsibilities include interviewing, hiring, and training employees; planning, assigning, and
directing work; appraising performance; rewarding and disciplining employees; addressing complaints
and resolving problems.

QUALIFICATIONS To perform this job successfully, an individual must be able to perform each
essential duty satisfactorily. The requirements listed below are representative of the knowledge,
skill, and/or ability required. Reasonable accommodations may be made to enable individuals with
disabilities to perform the essential functions.

EDUCATION and/or EXPERIENCE

B.S. degree in Electrical Engineering or Computer Science is required. An advanced technical
degree (M.S. or PhD) and/or MBA would be highly desirable.

Prefer fifteen (15+) years of broad Engineering experience, in the design and development of
hardware and/or software products for the computer or telecommunications networking industry.
Experience should be ideally and predominantly secured with either an established or start-up
telecom equipment provider, and/or high tech software/hardware engineering services company. .

Must have strong leadership skills and the ability to inspire and motivate teams to perform well
and meet company objectives. Must have the ability to translate customer and/or marketing
requirements into high performing products. May be asked to interface with major customers to
understand their needs and communicate that across the organization to various departments.
Leadership skills also include the ability to develop and communicate vision and business
strategies. Must have knowledge of market and emerging technologies.

Ideally, five plus (5+) years of background functioning as the senior Engineering leader of a
Company, major operating group or subsidiary with accountability for software, hardware, and
Engineering project management. Prefer that they been a member of the Executive Committee.

Requires an extremely capable VP of Engineering who can truly operate as an influential member of
the CEO’s Staff while making “value-added” contributions in Engineering and throughout the
organization. Building solid working relationships with key Executive Officers and the Company’s
Board of Directors will also be imperative to the overall execution of the VP’s responsibilities.

 

 

Must possess a balanced business background encompassing more than just technical skills. Equally
important, will be the ability to aggressively contribute to the company’s long-term and short-term
strategic vision, functioning as a major contributor in support of the Company’s growth strategy,
new products, and services is a high priority, as is the need to become the CEO’s confidant and
“business partner”.

COMMUNICATION AND LANGUAGE SKILLS

Must communicate effectively, concisely, and accurately with integrity, having the ability to
decipher and understand complex customer and market requirements, analyze and interpret complex
scientific and technical journals and documentation, financial reports, and legal documents and be
able to explain them accurately. Must possess the ability to respond to inquiries or complaints
from customers, partners, regulatory agencies, members of the business community, Board members, or
employees that are from the simple to the complex in nature. Must possess the ability to
effectively and concisely express key relevant information in written form, whether writing
speeches, or articles for publication that conform to prescribed style and format. Ability to
effectively present information to customers, the executive Leadership Team, the Board of
Directors, our employees, public groups, and/or the media.

MATHEMATICAL SKILLS

Ability to work with advanced engineering and mathematical concepts such as algorithms, probability
and statistical inference, and fundamentals of plane and solid geometry and trigonometry. Ability
to apply concepts such as fractions, percentages, ratios, and proportions to practical situations.

REASONING ABILITY

Excellent ability to read and understand very complex and technical information and then apply that
knowledge of information to the company’s own situation to develop strategies and solve problems.
Must be able to pro-actively and effectively define problems, collect data, establish facts, make
sound recommendations, draw valid conclusions, and solve complex problems daily. Ability to
interpret an extensive variety of technical instructions or engineering schematics in mathematical
or diagram form and deal with several abstract and concrete variables.

PHYSICAL DEMANDS The physical demands described here are representative of those that must be met
by an employee to successfully perform the essential functions of this job. Reasonable
accommodations may be made to enable individuals with disabilities to perform the essential
functions.

While performing the duties of this job, the employee is regularly required to talk and hear. The
employee frequently is required to walk, sit, stand, and reach with hands and arms.
International travel requires sitting for prolonged periods of time. The employee must
occasionally lift and/or move up to 25 pounds. Specific vision abilities required by this job
include close vision and color vision.

 

 

WORK ENVIRONMENT

The work environment characteristics described here are representative of those an employee
encounters while performing the essential functions of this job. Reasonable accommodations may be
made to enable individuals with disabilities to perform the essential functions.

This position does require regular and significant travel, both national and international.
Employee must possess, or be qualified to obtain, a valid passport.

	 	 	 	 	 
	 

	 	Initials
	 	                    
	 

	 	 	 	                    

Exhibit A

 

 

Exhibit B

Compensation

Base Salary. $6,538.47 per pay period ($170,000/year on an annual basis), of which there
are 26 in each calendar year, less deductions as may be required by law or authorized by
Executive.

Key Talent Bonus. Executive shall be eligible for an annual bonus for FY2007 of $35,000
based upon the Corporation’s existing Executive Bonus Plan. This bonus will be tied to
Executive Incentive Targets (MBOs) for 2007. The bonus will be awarded based on achievement
of specific corporate objectives, as determined by the Company, and is subject to change
annually by the Board of Directors.

Equity. The Corporation shall, according to the Company’s Long-Term Stock Incentive Plan
and with the approval of the CEO and Board of Directors, grant to Executive 10,000 shares of
restricted stock of the Company. Executive’s right, title, and interest to any stock
conferred under the Employment Agreement shall be controlled and governed by terms and
conditions of the Company’s Long-Term Stock Incentive Plan. The per share price will be
determined as of the close of NASDAQ trading on Executive’s first day of employment.

Executive Benefit Plans. Based on the plans in force at the time, and subject to change at
any time, the Executive will be provided with a comprehensive and competitive benefits
package including medical, dental, vision, life, AD&D, STD, LTD, etc., all effective on hire
date. Executive will be 401k eligible with discretionary matching contribution after 60
days of employment. The Executive shall be eligible to participate in any benefit plan
maintained by the Company, according to the terms and conditions of those plans. Executive
will pay same as all other Executive and non-Executive employees for health premiums.

Severance Pay. 6 months package, subject to terms and conditions. Please refer to section
4, “Termination Without Cause or Nonrenewal”, on page 2 of the Employment Agreement.

Executive Disability Plan. The Executive is eligible to apply for a voluntary Executive
Disability Plan. If approved by the carrier for coverage, the premiums will be paid for by
the Executive.

Vacation and Leave. Executive shall be entitled to three (3) weeks of vacation per year,
accrued monthly, and six (6) sick days per year, and any other paid leave benefits provided
for in the Company’s Policy Guide.

Cell Phone & Computer. Executive will be furnished with a laptop and cell phone/PDA
for business purposes.

 

 

Office Furnishings. The Company agrees to provide office space and furnishings to Executive
commensurate with the Company’s decor and culture.

	 	 	 	 	 
	 

	 	Initials:
	 	                    
	 

	 	 	 	                    

Exhibit B

 

 

Exhibit C

Designated Cities — Per Paragraph 11a of Employment, Confidentiality,

and Non-Compete Agreement.

The Continental United States

	 	 	 	 	 
	 

	 	Initials:
	 	                    
	 

	 	 	 	                    

Exhibit C

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00129-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00129-of-00352.parquet"}]]