Document:

Prepared and filed by St Ives Burrups

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EXHIBIT 4.1

    

VOID AFTER 5:00 P.M., NEW YORK
  CITY

  TIME, ON MARCH 31, 2008

   (UNLESS EXTENDED PURSUANT
  TO SECTION 2 HEREOF)
  

  THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE
    OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
    AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY
    STATE OF THE UNITED STATES OR ANY OTHER JURISDICTION. THE SECURITIES REPRESENTED
    HEREBY MAY NOT BE OFFERED, SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
    REGISTRATION STATEMENT FOR THE SECURITIES UNDER APPLICABLE SECURITIES LAWS
    UNLESS OFFERED, SOLD OR TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM
    THE REGISTRATION REQUIREMENTS OF THOSE LAWS.

 

Right to Purchase 2,666,667 Shares
  of

  Common Stock, par value $.001 per share

Date: March 31, 2003

ORCHID BIOSCIENCES, INC.

  STOCK PURCHASE WARRANT

THIS CERTIFIES THAT, for value received, SDS Merchant Fund,
LP, or its
registered assigns, is entitled to purchase from Orchid BioSciences, Inc., a
corporation organized under the laws of the State of Delaware
(the “Company”), at any time or from time to time
during the period specified in Section 2 hereof, 2,666,667 fully paid and
 nonassessable shares of the Company’s common stock, par value $.001
 per share (the “Common Stock”), at an exercise price per
 share (the “Exercise Price”) equal to $0.45.
 The number of shares of Common Stock purchasable hereunder (the
 “Warrant Shares”) and the Exercise Price are
  subject to adjustment as provided in Section 4 hereof.  The
   term “Warrants” means this Warrant and the
   other warrants of the Company issued pursuant to that certain Securities
    Purchase Agreement, dated as of March 31, 2003, by and among the
Company and the other signatories thereto (the “Securities
Purchase Agreement”).

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  This Warrant is subject to the following terms, provisions and conditions:
  

  1. Manner of Exercise; Issuance of Certificates;
    Payment for Shares. Subject to the provisions hereof, including, without
    limitation, the limitations contained in Section 7 hereof, this Warrant may
    be exercised by the holder hereof, in whole or in part, by the surrender of
    this Warrant, together with a completed exercise agreement in the form attached
    hereto (the “Exercise Agreement”), to the Company during
    normal business hours on any business day at the Company’s principal
    executive offices (or such other office or agency of the Company as it may
    designate by notice to the holder hereof), and (i) payment to the Company
    in cash, by certified or offi­cial bank check or by wire transfer for
    the account of the Company, of the Exercise Price for the Warrant Shares specified
    in the Exercise Agreement or (ii) if the holder is effectuating a Cashless
    Exercise (as defined in Section 11(c) hereof) pursuant to Section 11(c) hereof,
    delivery to the Company of a written notice of an election to effect a Cashless
    Exercise for the Warrant Shares specified in the Exercise Agreement. The Warrant
    Shares so purchased shall be deemed to be issued to the holder hereof or such
    holder’s designee, as the record owner of such shares, as of the close
    of business on the date on which this Warrant shall have been surrendered,
    the completed Exercise Agreement shall have been delivered, and payment shall
    have been made for such shares as set forth above or, if such date is not
    a business date, on the next succeeding business date. The Warrant Shares
    so purchased, representing the aggregate number of shares specified in the
    Exercise Agreement, shall (by the Company or through its transfer agent) be
    delivered (i.e., deposited with a nationally-recognized overnight courier
    service postage prepaid) to the holder hereof within a reasonable time, not
    exceeding two business days, after this Warrant shall have been so exercised
    (the “Delivery Period”). If the Company’s transfer agent
    is participating in the Depository Trust Company (“DTC”)
    Fast Automated Securities Transfer program, and so long as the certificates
    therefor do not bear a legend (pursuant to the terms of the Securities Purchase
    Agreement) and the holder is not obligated to return such certificate for
    the placement of a legend thereon (pursuant to the terms of the Securities
    Purchase Agreement), the Company shall cause its transfer agent to electronically
    transmit the Warrant Shares so purchased to the holder by crediting the account
    of the holder or its nominee with DTC through its Deposit Withdrawal Agent
    Commission system (“DTC Transfer”). If the aforementioned
    conditions to a DTC Transfer are not satisfied, the Company shall deliver
    as provided herein to the holder physical certificates representing the Warrant
    Shares so purchased. Further, the holder may instruct the Company to deliver
    to the holder physical certificates representing the Warrant Shares so purchased
    in lieu of delivering such shares by way of DTC Transfer. Any certificates
    so delivered shall be in such denominations as may be reasonably requested
    by the holder hereof, shall be registered in the name of such holder or such
    other name as shall be designated by such holder and, following the date on
    which the Warrant Shares have been registered under the Securities Act pursuant
    to that certain Registration Rights Agreement, dated as of March 31, 2003,
    by and between the Company and the other signatories thereto (the “Registration
    Rights Agreement”) or otherwise may be sold by the holder pursuant
    to Rule 144(k) promulgated under the Securities Act (or a successor rule),
    shall not bear any restrictive legend. If this Warrant shall have been exercised
    only in part, then the Company shall, at its expense, at the time of delivery
    of such certificates, deliver to the holder a new Warrant representing the
    number of shares with respect to which this Warrant shall not then have been
    exercised.

  If, at any time, a holder of this Warrant submits
    this Warrant, an Exercise Agreement and payment to the Company of the Exercise
    Price for each of the Warrant Shares specified in the Exercise Agreement (including
    pursuant to a Cashless Exercise), and the Company fails for any reason to
    deliver, on or prior to the fourth business day following the expiration of
    the Delivery Period for such exercise, the number of shares of Common Stock
    to which the holder is entitled upon such exercise (an “Exercise
    Default”), then the Company shall pay to the holder payments (“Exercise
    Default Payments”) for an Exercise Default in the amount of (a)
    (N/365), multiplied by (b) the amount by which the Market Price (as defined
    in Section 4(j) hereof) on the date the Exercise Agreement giving rise to
    the Exercise Default is delivered and payment shall have been made in accordance
    with this Section 1 (the “Exercise Default Date”) exceeds
    the Market Price in respect of such Warrant Shares on the date that the Company
    effects full exercise of the Warrant in accordance with the previously-transmitted
    Exercise Agreement, multiplied by (c) the number of shares of Common Stock
    the Company failed to so deliver in such Exercise Default, multiplied by (d)
    .15. For these purposes, N = the number of days from the Exercise Default
    Date on the date that the Company effects the full exercise of this Warrant
    which gave rise to the Exercise Default. The accrued Exercise Default Payment
    for each calendar month shall be paid in cash and shall be made to holder
    by the fifth day of the month following the month in which it has accrued.
    Nothing herein shall limit the holder’s right to pursue actual damages
    for the Company’s failure to maintain a sufficient number of authorized
    shares of Common Stock as required pursuant to the terms of Section 3(b) hereof
    or to otherwise issue shares of Common Stock upon exercise of this Warrant
    in accordance with the terms hereof, and the holder shall have the right to
    pursue all remedies available at law or in equity (including a decree of specific
    performance and/or injunctive relief).

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2.   Period of Exercise.  This Warrant shall be exercisable
 at any time or from time to time during the period beginning on the date (the “Commencement
 Date”) one year from the date of initial issuance of this Warrant (the “Issue
  Date”) and ending at 5:00 p.m., New York City time, on the fourth anniversary of the
  Commencement Date (the “Exercise Period”).  The Exercise Period shall
  automatically be extended by one (1) day for each day during the Exercise Period (or any
  extension thereof) on which the Company does not have a number of shares of Common Stock
  reserved for issuance upon exercise hereof at least equal to the number of shares of Common
   Stock issuable upon exercise hereof.

3.   Certain Agreements of the Company.  The Company hereby
 covenants and agrees as follows:

(a)   Shares to be Fully Paid.  All Warrant Shares will,
 upon issuance in accordance with the terms of this Warrant, be validly issued, fully paid,
  and nonassessable and free from all taxes, liens, claims and encumbrances.

(b)   Reservation of Shares.
During the Exercise Period, the Company shall at all times have authorized, and reserved
for the purpose of issuance upon exercise of this Warrant, a sufficient number of shares
of Common Stock to provide for the exercise in full of this Warrant (without giving effect
 to the limitations on exercise set forth in Section 7(g) hereof).

(c)   Listing.  The Company shall have filed
 a Notification Form: Listing of Additional Shares with respect to the Common Shares and the Warrant
 Shares with the Nasdaq National Market (“NNM”) on or before the Closing
 (as defined in the Securities Purchase Agreement), and shall maintain, so long as any other
 shares of Common Stock shall be so listed, such listing of all shares of Common Stock from
 time to time issuable upon the exercise of this Warrant; and the Company shall so list on
  each national securities exchange or automated quotation system, as the case may be, and
  shall maintain such listing of, any other shares of capital stock of the Company issuable
  upon the exercise of this Warrant if and so long as any shares of the same class shall be
  listed on such national securities exchange or automated quotation system.

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(d)   Certain Actions Prohibited.
 The Company will not, by amendment of its charter or through any re­organi­zation,
 transfer of assets, consolidation, mer­ger, dissolution, issue or sale of securities, or
 any other voluntary action, avoid or seek to avoid the observance or performance of any of
 the terms to be observed or performed by it hereunder, but will at all times in good faith
  assist in the carrying out of all the provisions of this Warrant and in the taking of all
   such action as may reasonably be requested by the holder of this Warrant in order to protect
    the economic benefit inuring to the holder hereof and the exercise privilege of the holder
 of this Warrant against dilu­tion or other impairment, consistent with the tenor and
 purpose of this Warrant.  Without limiting the general­ity of the foregoing, the
 Company (i) will 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)
  will 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.

(e)   Successors and Assigns.  This Warrant
will be binding upon any entity succeeding to the Company by merger, consolidation,
 or acquisition of all or sub­stantially all of the Company’s assets.

(f)   Blue Sky Laws.  The Company shall,
on or before the date of issuance of any Warrant Shares, take such actions as the Company shall
reasonably determine are necessary to qualify the Warrant Shares for, or obtain exemption for the
Warrant Shares for, sale to the holder of this Warrant upon the exercise hereof under applicable
securities or “blue sky” laws of the states of the United States, and shall provide
evidence of any such action so taken to the holder of this Warrant prior to such date if requested
 by the holder hereof; provided, however, that the Company shall not be required in connection
 therewith or as a condition thereto to (a) qualify to do business in any jurisdiction where it
  would not otherwise be required to qualify but for this Section 3(f), (b) subject itself to
   general taxation in any such jurisdiction or (c) file a general consent to service of process
   in any such jurisdiction.

4.    Antidilution Provisions.  During
the Exercise Period, the Exercise Price and the number of Warrant Shares issuable hereunder
shall be subject to adjustment from time to time as provided in this Section 4.

In the event that any adjustment
 of the Exercise Price as required herein results in a fraction of a cent, such Exercise Price
 shall be rounded up or down to the nearest cent.

(a)   Subdivision or
 Combination of Common Stock.  If the Company, at any time during the Exercise Period, subdivides
 (by any stock split, stock dividend, recapitalization, reorganization, reclassification or otherwise)
  its shares of Common Stock into a greater number of shares, then, after the date of record for
   effecting such subdivision, the Exercise Price in effect immediately prior to such subdivision
   will be proportionately reduced.  If the Company, at any time during the Exercise Period,
   combines (by reverse stock split, recapitalization, reorganization, reclassification or otherwise)
   its shares of Common Stock into a smaller number of shares, then, after the date of record for
    effecting such combination, the Exercise Price in effect immediately prior to such combination
will be proportionately increased.

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(b)    Adjustment in Number of Shares.
Upon each adjustment of the Exercise Price pursuant to the provisions of this Section 4, the number
of shares of Common Stock issuable upon exercise of this Warrant at each such Exercise Price shall
be adjusted by multiplying a number equal to the Exercise Price in effect immediately prior to such
 adjustment by the number of shares of Common Stock issuable upon exercise of this Warrant at such
 Exercise Price immediately prior to such adjustment and dividing the product so obtained by the
 adjusted Exercise Price.

(c)    Consolidation, Merger or Sale.  In case of any consolidation of the Company with, or merger of the Company into, any other corporation, or in case of any sale or conveyance of all or substantially all of the assets of the Company other than in connection with a plan of complete liquidation of the Company at any time during the Exercise Period, then as a condition of such consolidation, merger or sale or conveyance, adequate provision will be made whereby the holder hereof will have the right to acquire and receive upon exercise of this Warrant in lieu of the shares of Common Stock immediately theretofore acquirable upon the exercise of this Warrant, such shares of stock, securities, cash or assets as may be issued or payable with respect to or in exchange for the number of shares of Common Stock immediately theretofore acquirable and receivable upon exercise of this Warrant had such consolidation, merger or sale or conveyance not taken place.  In an

y such case, the Company will make appropriate provision to insure that the provisions of
 this Section 4 hereof will thereafter be applicable as nearly as may be in relation to
 any shares of stock or securities thereafter deliverable upon the exercise of this Warrant.
  The Company will not effect any consolidation, merger or sale or conveyance unless prior
   to the consummation thereof, the successor corporation (if other than the Company)
    assumes by written instrument the obligations under this Warrant and the obligations
to deliver to the holder hereof such shares of stock, securities or assets as, in
 accordance with the foregoing provisions, the holder may be entitled to acquire.

(d)    Distribution of Assets.  In case the Company shall declare or make any distribution of its assets (or rights to acquire its assets) to holders of Common Stock as a partial liquidating dividend, stock repurchase by way of return of capital or otherwise (including any dividend or distribution to the Company’s stockholders of cash or shares (or rights to acquire shares) of capital stock of a subsidiary) (a “Distribution”), at any time during the Exercise Period, then the holder hereof shall be entitled upon exercise of this Warrant for the purchase of any or all of the shares of Common Stock subject hereto, to receive the amount of such assets (or rights) which would have been payable to the holder had such holder been the holder of such shares of Common Stock on the record date for the determination of stockholders entitled to such Distribution.  If the Company distributes rights, warrants, options or any other form of convertible se
curities and the right to exercise or convert such securities would expire in accordance
 with their terms prior to the expiration of the Exercise Period, then the terms of such
 securities shall provide that such exercise or convertibility right shall remain in effect
  until 30 days after the date the holder hereof receives such securities pursuant to the
   exercise hereof.

(e)    Notice of Adjustment.  Upon the occurrence
 of any event which requires any adjustment of the Exercise Price, then, and in each such case,
  the Company shall give notice thereof to the holder hereof, which notice shall state the Exercise
   Price resulting from such adjustment and the increase or decrease in the number of Warrant
   Shares purchasable at such price upon exercise, setting forth in reasonable detail the method
   of calculation and the facts upon which such calculation is based.  Such calculation shall be
    certified by the chief financial officer of the Company.

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(f)    Minimum Adjustment of Exercise Price.
 No adjustment of the Exercise Price shall be made in an amount of less than $.01, but any such
 lesser adjustment shall be carried forward and shall be made at the time and together with the
 next subsequent adjustment which, together with any adjustments so carried forward, shall amount
 to not less than $.01.

(g)    No Fractional Shares.
No fractional shares of Common Stock are to be issued upon the exercise of this Warrant,
 but the Company shall pay a cash adjustment in respect of any fractional share which would
 otherwise be issuable in an amount equal to the same fraction of the Market Price of a share
 of Common Stock on the date of such exercise.

(h)    Other Notices.  In case
at any time:

(i)    the Company shall declare any
 dividend upon the Common Stock payable in shares of stock of any class or make any other
  distribution (other than dividends or distributions payable in cash out of retained earnings
   consistent with the Company’s past practices with respect to declaring dividends and
    making distributions) to the holders of the Common Stock;

(ii)    the Company shall offer for
subscription pro rata to the holders of the Common Stock any additional shares of
stock of any class or other rights;

(iii)    there shall be any capital
reorganiza­tion of the Company, or reclassification of the Common Stock, or consolidation
or merger of the Company with or into, or sale of all or substantially all of its assets to,
another corporation or entity; or

(iv)    there shall be a voluntary or
involuntary dissolution, liquidation or winding-up of the Company;

then, in each such case, the Company shall give
  to the holder of this Warrant (a) notice of the date or estimated date on which
  the books of the Company shall close or a record shall be taken for determining
  the holders of Common Stock entitled to receive any such dividend, distribution,
  or subscription rights or for determining the holders of Common Stock entitled
  to vote in respect of any such reorganization, reclassification, consolidation,
  merger, sale, dissolution, liquidation or winding-up and (b) in the case
  of any such reorganization, reclassification, consolidation, merger, sale, dissolution,
  liquidation or winding-up, notice of the date (or, if not then known, a
  reasonable estimate thereof by the Company) when the same shall take place.
  Such notice shall also specify the date on which the holders of Common Stock
  shall be entitled to receive such dividend, distribution, or subscription rights
  or to exchange their Common Stock for stock or other securities or property
  deliverable upon such reorganization, reclassification, consolidation, merger,
  sale, dissolution, liqui­dation, or winding-up, as the case may be.
  Such notice shall be given at least ten (10) days prior to the record date or
  the date on which the Company’s books are closed in respect thereto. Failure
  to give any such notice or any defect therein shall not affect the validity
  of the proceedings referred to in clauses (i), (ii), (iii) and (iv) above. Notwithstanding
  the foregoing, the Company shall publicly disclose the substance of any notice
  delivered hereunder prior to delivery of such notice to the holder hereof.

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(i)    Certain Events.  If, at any time during the Exercise Period, any event occurs of the type contemplated by the adjustment provisions of this Section 4 but not expressly provided for by such provisions, the Company will give notice of such event as provided in Section 4(e) hereof, and an appropriate adjustment in the Exercise Price and the number of shares of Common Stock acquirable upon exercise of this Warrant at each such Exercise Price shall be made so that the rights of the holder shall be neither enhanced nor
 diminished by such event.

(j)    Certain Definitions.  

(i)    “Certificate of Designation” means
that certain Certificate of Designations, Preferences and Rights relating to the Series A
Convertible Preferred Stock of the Company, filed with the Secretary of State of the State
of Delaware as of the date hereof.

(ii)    “Common Stock,” for purposes
of this Section 4, includes the Common Stock and any additional class of stock of the Company
having no preference as to dividends or distributions on liquidation, provided that the shares
 purchasable pursuant to this Warrant shall include only Common Stock in respect of which this
  Warrant is exercisable, or shares resulting from any subdivision or combination of such Common
   Stock, or in the case of any reorganization, reclassification, consolidation, merger, or
   sale of the character referred to in Section 4(c) hereof, the stock or other securities
   or property provided for in such Section.

(iii)    “Market Price,” as of any date, (i) means the average of the closing sales prices for the shares of Common Stock on the Nasdaq National Market or other trading market where such security is listed or traded as reported by Bloomberg Financial Markets (or a comparable reporting service of national reputation selected by the Company and reasonably acceptable to the holders if Bloomberg Financial Markets is not then reporting sales prices of such security)(collectively, “Bloomberg”) for the five (5) consecutive trading days immediately preceding such date, or (ii) if the Nasdaq National Market is not the principal trading market for the shares of Common Stock, the average of the reported sales prices reported by Bloomberg on the principal trading market for the Common Stock during the same period, or, if there is no sales price for such period, the last sales price reported by Bloomberg for such period, or (iii) if the foregoing do no
t apply, the last sales price of such security in the over-the-counter market on the pink
 sheets or bulletin board for such security as reported by Bloomberg, or if no sales price is
 so reported for such security, the last bid price of such security as reported by Bloomberg,
  or (iv) if market value cannot be calculated as of such date on any of the foregoing bases,
   the Market Price shall be the average fair market value as reasonably determined by an
    investment banking firm selected by the Company and reasonably acceptable to the holder,
 with the costs of the appraisal to be borne by the Company.  The manner of determining
 the Market Price of the Common Stock set forth in the foregoing definition shall apply
 with respect to any other security in respect of which a determination as to market value
  must be made hereunder.

5.    Issue Tax.  The issuance of
certificates for Warrant Shares upon the exercise of this Warrant shall be made without charge
to the holder of this Warrant or such shares for any issuance tax or other costs in respect thereof,
 provided that the Company shall not be required to pay any tax which may be payable in respect of
  any transfer involved in the issuance and delivery of any certificate in a name other than the holder
   of this Warrant.

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6.    No Rights or Liabilities as a Stockholder.  This Warrant shall not entitle the holder hereof to any voting rights or other rights as a stockholder of the Company.  No provision of this Warrant, in the absence of affirmative action by the holder hereof to purchase Warrant Shares, and no mere enumeration herein of the rights or privileges of the holder hereof, shall give rise to any liability of such holder for the Exercise Price or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.

7.    Transfer, Exchange and Replacement of Warrant.

(a)    Restriction on Transfer.  This Warrant and the rights granted to the holder hereof are transferable, in whole or in part, upon surrender of this Warrant, together with a properly executed assignment in the form attached hereto, at the office or agency of the Company referred to in Section 7(e) below, pro­vided, however, that any transfer or assignment shall be subject to the conditions set forth in Sections 7(f) and (g) hereof and to the provisions of Sections 2(f) and 2(g) of the Securities Purchase Agreement, provided further, that this Warrant and the rights granted to the holder hereof are not transferable to direct competitors of the Company or persons or entities that have announced plans to compete directly with the Company.  Until due presentment for registration of transfer on the books of the Company, the Company may treat the registered holder hereof as the owner and holder hereof for all purposes, a

nd the Company shall not be affected by any notice to the con­trary.  Notwithstanding anything to the contrary contained herein, the registration rights described in Section 8 hereof are assignable only in accordance with the provisions of the Registration Rights Agreement. 

(b)    Warrant Exchangeable for Different Denomina­tions.  This Warrant is exchange­able, upon the surrender hereof by the holder hereof at the office or agency of the Company referred to in Section 7(e) below, for new warrants of like tenor of different denominations representing in the aggregate the right to purchase the number of shares of Common Stock which may be purchased hereunder, each of such new warrants to represent the right to purchase such number of shares (at the Exercise Price therefor) as shall be designated by the holder hereof at the time of such surrender, and all such warrants thereafter constituting the Warrant referenced herein.  Notwithstanding the foregoing, in no event shall the Company be required to issue new warrants pursuant to this Section 7(b) for the right to purchase less than 1,000 shares of Common Stock.

(c)    Replacement of Warrant.  Upon receipt of evi­dence reasonably satisfactory to the Company of the loss, theft, destruction, or mutilation of this Warrant and, in the case of any such loss, theft, or destruc­tion, upon delivery of an indemnity agreement reason­ably satisfactory in form and amount to the Company, or, in the case of any such mutilation, upon surrender and cancellation of this Warrant, the Company, at its expense, will execute and deliver, in lieu thereof, a new Warrant of like tenor.

(d)    Cancellation; Payment of Expenses.  Upon the surrender of this Warrant in connection with any trans­fer, exchange, or replacement as provided in this Section 7, this Warrant shall be promptly canceled by the Company.  The Company shall pay all taxes (other than securities transfer taxes) and all other expenses (other than legal expenses, if any, incurred by the Holder or transferees) and charges payable in connection with the preparation, execution, and delivery of any Warrant pursuant to
this Section 7.

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(e)    Warrant Register.  The Company shall maintain, at its principal executive offices (or such other office or agency of the Company as it may designate by notice to the holder hereof), a register for this Warrant, in which the Company shall record the name and address of the person in whose name this Warrant has been issued, as well as the name and address of each transferee and each prior owner of this Warrant.

(f)    Exercise or Transfer Without Registration.  If, at the time of the surrender of this Warrant in connection with any exercise, transfer, or exchange of this Warrant, this Warrant (or, in the case of any exercise, the Warrant Shares issuable hereunder), shall not be registered under the Securities Act and under applicable state securities or blue sky laws, the Com­pany may require, as a condition of allowing such exercise, transfer, or exchange, (i) that the holder or transferee of this Warrant, as the case may be, furnish to the Company a written opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions and reasonably acceptable to the Company) to the effect that such exercise, transfer, or exchange may be made without registration under the Securities Act and under applicable state securities or blue sky laws, (ii) that the holder or transferee execute and deliver to the

 Company an investment letter in form and sub­stance acceptable to the Company and (iii) that the transferee be an “accredited investor” as defined in Rule 501(a) promulgated under the Securities Act; provided that no such opinion, letter, or status as an “accredited investor” shall be required in connection with a transfer pursuant to Rule 144 under the Securities Act. 

(g)    Additional Restrictions on Exercise or Transfer.  In no event shall the holder hereof have the right to exercise any portion of this Warrant for shares of Common Stock or to dispose of any portion of this Warrant to the extent that such right to effect such exercise or disposition would result in the holder or any of its affiliates together beneficially owning more than the greater of (a) 4.99% of the outstanding shares of Common Stock or (b) that percentage of the outstanding shares of Common Stock held by such holder and its affiliates immediately prior to the Issue Date (including in such calculation any shares of Common Stock underlying warrants to purchase Common Stock (other than this Warrant) held by such holder immediately prior to the Issue Date).  For purposes of this Section 7(g), beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and Regulation 13D-G thereunder.

The restriction contained in this Section 7(g) may not be altered, amended, deleted or changed in any manner whatsoever unless the holders of a majority of the outstanding shares of Common Stock and the holder hereof shall approve, in writing, such alteration, amendment, deletion or change.

8.    Registration Rights.  The initial holder of this Warrant (and certain assignees thereof) is entitled to the benefit of such registration rights in respect of the Warrant Shares as are set forth in the Registration Rights Agreement, including the right to assign such rights to certain assignees, as set forth therein.

9.    Notices.  Any notices required or permitted to be given under the terms of this Warrant shall be sent by certified or registered mail (return receipt requested) or delivered personally or by courier or by confirmed telecopy, and shall be effective five days after being placed in the mail, if mailed, or upon receipt or refusal of receipt, if delivered personally or by courier, or by confirmed telecopy, in each case addressed to a party.
 The addresses for such communications shall be:

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If to the Company:

  

  Orchid BioSciences, Inc.

 4390 US Route One North

  Princeton, NJ 08540

  Telephone: (609) 750-2200

  Fax: (609) 750-6400

  Attn: Chief Financial Officer

  

with a copy simultaneously transmitted by like means to:

Mintz, Levin, Cohn, Ferris, Glovsky and Popeo,
  P.C.

 One Financial Center

 Boston, MA 02111

 Telephone: (617) 542-6000

 Fax: (617) 542-2241

 Attn: John J. Cheney, III, Esq.

If to the holder, at such address as such holder shall have provided in writing to the Company, or at such other address as such holder furnishes by notice given in accordance with this Section 9.

  10.    Governing Law; Jurisdiction.
    This Warrant shall be governed by and construed in accordance with the laws
    of the State of Delaware. Each of the Company and the holder hereof irrevocably
    consents to the jurisdiction of the United States federal courts and state
    courts located in the State of Delaware in any suit or proceeding based on
    or arising under this Warrant and irrevocably agrees that all claims in respect
    of such suit or proceeding may be determined in such courts. Each of the Company
    and the holder hereof irrevocably waives any objection to the laying of venue
    and the defense of an inconvenient forum to the maintenance of such suit or
    proceeding. Each of the Company and the holder hereof further agrees that
    service of process mailed by certified or registered mail shall be deemed
    in every respect effective service of process in any such suit or proceeding.
    Nothing herein shall affect the Company’s or the holder’s right
    to serve process in any other manner permitted by law. Each of the Company
    and the holder hereof agrees that a final non-appealable judgment in any such
    suit or proceeding shall be conclusive and may be enforced in other jurisdictions
    by suit on such judgment or in any other lawful manner.

11.    Miscellaneous.

(a)    Amendments.  Except as provided in Section 7(g) hereof, this Warrant and any provision hereof may only be amended by an instrument in writing signed by the Company and
the holder hereof.

(b)    Descriptive Headings.  The descriptive head­ings of the several Sections
of this Warrant are inserted for purposes of reference only, and shall not affect the meaning or
construction of any of the provisions hereof.

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(c)    Cashless Exercise.  This Warrant may be exercised at any time after the first anniversary of the Commencement Date and before the expiration of the Exercise Period by presentation and surrender of this Warrant to the Company at its principal executive offices with a written notice of the holder’s intention to effect a cashless exercise, including a calculation of the number of shares of Common Stock to be issued upon such exercise in accordance with the terms hereof (a “Cashless Exercise”).  In the event of a Cashless Exercise, in lieu of paying the Exercise Price in cash, the holder shall surrender this Warrant for that number of shares of Common Stock determined by multiplying the number of Warrant Shares to which it would otherwise be entitled by a fraction, the numerator of which shall be the difference between the then current Market Price of a share of the Common Stock on the date of exerci
se and the Exercise Price, and the denominator of which shall be the then current Market Price per share of Common Stock.

(d)    Trading Day.  For purposes of this Warrant, the term “trading day” means any day on which the principal United States securities exchange or trading market where the Common Stock is then listed is open for trading. 

(e)    Redemption of Warrant by Company.  

(i)    Provided that (x) all shares of Common Stock issuable upon exercise of the Warrants are then (A) authorized and reserved for issuance, (B) registered under the Securities Act of 1933, as amended, for resale by the holders of the Warrants, and (C) eligible to be traded on a National Securities Market (as defined in the Certificate of Designation), (y) all of the Required Conditions (as defined in the Certificate of Designation) are satisfied, and (z) the Company has undergone a Change of Control Event (as defined in the Certificate of Designation) within the 30-day period immediately prior to the delivery by the Company of a Redemption Notice (as defined below), the Company, or if the Company is not the surviving entity in such Change of Control Event, such other entity that has assumed the obligations hereunder (for purposes of this Section 11(e) only, the (“Company”) may elect, upon delivery of at least thirty (30)
 days’ prior written notice (the “Redemption Notice”) to the holder hereof,
to redeem all of the Warrant for a redemption amount equal to the number
of Warrant Shares issuable upon the exercise of all of this Warrant multiplied
by a value per warrant using the Black-Scholes model of valuation, using,
the Exercise Price, 50% volatility, and an interest rate of 5%
(the “Redemption Amount”).

(ii)    The Company may not deliver a Notice
 of Redemption unless on or prior to the date of delivery of a Notice of Redemption, the
 Company shall have segregated on the books and records of the Company an amount of cash
 sufficient to pay all amounts to which holders of the Warrants that are being redeemed are
 entitled pursuant to Section 11(e)(i).  Any Notice of Redemption delivered shall be irrevocable
 and shall be accompanied by a statement executed by a duly authorized officer of the Company.

(iii)    The Redemption Amount shall be paid to
the holder within three (3) business days of the date of redemption set forth in the Notice
of Redemption; provided, however, that the Company shall not be obligated to deliver any portion
of the Redemption Amount until either this Warrant is delivered to the Company or the holder
notifies the Company that the Warrant has been lost, stolen or destroyed and delivers the
documentation in accordance with Section 7(c) hereof.  In the event only a portion of this
Warrant is being redeemed, the Company shall issue , at its expense, a new Warrant representing
the number of shares with respect to which this Warrant shall not then have been redeemed or
exercised.

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(iv)    Notwithstanding the delivery of a Redemption
Notice, the holder may exercise all or a portion of this Warrant subject to such Redemption Notice
 by the delivery prior to the date of redemption set forth in such notice of an Exercise Agreement
 pursuant to the procedures set forth in Section 1.

(f)    Indemnification by Company.

(i)    The Company shall hold harmless and indemnify
the holder of this Warrant from and against, and shall compensate and reimburse such holder for,
any damages which are directly or indirectly suffered or incurred by such holder or to which such
holder may otherwise become subject (regardless of whether or not such damages relate to any
third-party claim) and which arise from or as a result of, or are directly or indirectly
connected with any breach of any of the Company’s covenants set forth herein.

(ii)    In the event of the assertion or commencement by any person of any claim or legal proceeding with respect to which the holder may have indemnification rights pursuant to this Section 11(f)(i), the holder shall promptly notify the Company thereof in writing, but the failure to so notify the Company will not limit the holder’s rights to indemnification hereunder, except to the extent the Company demonstrates that the defense of such action is prejudiced by the failure to so give such notice.   Within a reasonable time of receipt of such notice, the Company may at its election participate at its own expense in the defense of such claim or assume the defense of any such claim with counsel chosen by the Company; provided, however, that if the defendants in any such action include such holder and the Company and the holder shall have been advised by its counsel that there may be legal defenses available to the holder which are different from or add
itional to and in conflict with or present a potential conflict with those available to the Company,
 such holder shall have the right to employ its own counsel in such action, and in such event the
 reasonable fees and expenses of such counsel shall be borne by the Company.  If the Company assumes
  the defense of such claim and no conflict exists permitting the holder to retain separate counsel
   pursuant to the immediately preceding sentence, the Company shall have no obligation to pay any
    fees or expenses of any counsel retained the holder or any other person entitled to
indemnification hereunder in connection with such a claim.  The holder shall not settle
any claim in respect of which indemnification shall be sought hereunder without the
 prior written consent of the Company. The Company shall not be liable for any settlement
 of any action, claim, suit or proceeding (or for any related losses, damages, liabilities,
 costs or expenses) if such settlement is effectuated without its written consent, which
 shall not be unreasonably withheld.

[Remainder of page left blank.]

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IN WITNESS WHEREOF, the Company has caused this Warrant to be
signed by its duly authorized officer.

    

	 	 ORCHID BIOSCIENCES, INC.
	 	 	 	 
	 	 	 	 
	 	By:	
	

	 	 	Name:	Andrew P. Savadelis
	 	 	Title:	Sr. Vice President, Finance and Chief
	 	 	 	 Financial Officer

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FORM
  OF EXERCISE AGREEMENT

(To
  be Executed by the Holder in order to Exercise the Warrant)

  

	To: 	Orchid BioSciences, Inc. 
	 	 
	 	 
	 	 Telephone: (609) 750-2200

	 	Attn: Chief Financial Officer

  The undersigned hereby irrevocably exercises the right to
    purchase _____________ shares of the Common Stock of Orchid BioSciences, Inc.,
    a corporation organized under the laws of the State of Delaware (the “Company”),
    evidenced by the attached Warrant, and herewith [makes payment of the Exercise
    Price with respect to such shares in full][elects to effect a Cashless Exercise
    (as defined in Section 11(c) of such Warrant], all in accordance with the
    conditions and provisions of said Warrant.

  The undersigned agrees not to offer, sell, transfer
    or otherwise dispose of any Common Stock obtained on exercise of the Warrant,
    except under circumstances that will not result in a violation of the Securities
    Act of 1933, as amended, or any state securities laws. The undersigned represents
    that it is an “accredited investor” as that term is defined in
    Rule 501(a) of Regulation D under the Securities Act of 1933, as amended.
    

		 The undersigned requests that the Company
      cause its transfer agent to electronically transmit the Common Stock issuable
      pursuant to this Exercise Agreement to the account of the undersigned or
      its nominee (which is _________________) with DTC through its Deposit Withdrawal
      Agent Commission System (“DTC Transfer”), provided that
      such transfer agent participates in the DTC Fast Automated Securities Transfer
      program.
	 	 
		In lieu of receiving the shares of Common
      Stock issuable pursuant to this Exercise Agreement by way of DTC Transfer,
      the undersigned hereby requests that the Company cause its transfer agent
      to issue and deliver to the undersigned physical certificates representing
      such shares of Common Stock.

  The undersigned requests that a Warrant representing any unexercised
    portion hereof be issued, pursuant to the Warrant, in the name of the Holder
    and delivered to the undersigned at the address set forth below:

	Dated: 
        

      
	

	 	Signature of
        Holder

	 	 
	 	 
	 	

	 	Name of Holder
        (Print)

	 	 
	 	 
	 	

	 	Address:

	 	 
	 	

	 	

	 	

 

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FORM OF ASSIGNMENT

  FOR VALUE RECEIVED, the undersigned hereby sells,
    assigns, and transfers all the rights of the undersigned under the within
    Warrant, with respect to the number of shares of Common Stock covered thereby
    set forth hereinbelow, to:

	Name of Assignee	Address	No. of Shares

 

, and hereby irrevocably constitutes and appoints _____________________________________ as agent and attorney-in-fact to trans­fer said Warrant on the books of the within-named corporation, with full power of substitution in the premises.

	Dated:	 	 
	
	, 	

	In the presence of	 	 
	 	 	 
	
	 	 

  	Name:
	

  

  	Signature: 
         

	
          

        

	Title of Signing Officer or Agent (if any):
	 

	
          

        

	Address: 
        

	
          

        

	 
	
          

        

	 

	Note:	 The above signature should correspond exactly

        with the name on the face of the within Warrant.

 

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Schedule of Other Investors to Whom
  this Form of

  Warrant was Issued (per Instruction 2
  to Item 601 of Reg. S-K)

 

	Investor	 Number of Shares for

        which Warrant is exercisable

	BayStar Capital II, L.P.	2,000,000

	DMG Legacy Fund LLC	300,000

	DMG Legacy Institutional Fund LLC	2,790,000

	DMG Legacy International Ltd.	2,910,000

	SCO Capital Partners LLC	300,000

	Paul A. Scharfer	200,000Prepared and filed by St Ives Burrups

  EXHIBIT 10.1

SECURITIES
  PURCHASE AGREEMENT

  SECURITIES PURCHASE AGREEMENT (this “Agreement”),
    dated as of March 31, 2003, between Orchid BioSciences, Inc., a corporation
    organized under the laws of the State of Delaware (the “Company”),
    and each of the purchasers (individually, a “Purchaser”
    and collectively the “Purchasers”) set forth on the execution
    pages hereof (the “Execution Pages”and each an“Execution
    Page”).

  WHEREAS:

  A.  The Company and each Purchaser
    are executing and delivering this Agreement in reliance upon the exemption
    from securities registration afforded by the provisions of Rule 506 of Regulation D
    (“Regulation D”), as promulgated by the United States Securities
    and Exchange Commission (the “SEC”) under the Securities
    Act of 1933, as amended (the “Securities Act”).

  B.  The Company desires to sell, and
    each Purchaser desires to purchase, upon the terms and conditions stated in
    this Agreement, units (the “Units”), each Unit consisting
    of (i) one share of the Company’s Series A Convertible Preferred Stock,
    par value $.001 per share (the “Preferred Shares”), convertible
    into approximately 22,222.22 shares of the Company’s common stock, par
    value $.001 per share (the “Common Stock”) (subject to
    adjustment for any stock dividends, combinations or splits with respect to
    the Common Stock), and (ii) a warrant, in the form attached hereto as Exhibit
    B (the “Warrants”), to acquire approximately 6,666.67
    shares of Common Stock (subject to adjustment for any stock dividends, combinations
    or splits with respect to the Common Stock). The rights, preferences and privileges
    of the Preferred Shares, including the terms upon which such Preferred Shares
    are convertible into shares of Common Stock, are set forth in the form of
    Certificate of Designations, Preferences and Rights attached hereto as Exhibit
    A (the “Certificate of Designation”). The shares of
    Common Stock issuable upon conversion of the Preferred Shares pursuant to
    the Certificate of Designation are referred to herein as the “Conversion
    Shares” and the shares of Common Stock issuable upon exercise of
    or otherwise pursuant to the Warrants are referred to herein as the “Warrant
    Shares.” The Preferred Shares, the Warrants, the Conversion Shares
    and the Warrant Shares are collectively referred to herein as the “Securities”
    and each of them may individually be referred to herein as a “Security.”

  C.  In connection with the Closing
    (as defined herein) pursuant to this Agreement, the parties hereto are executing
    and delivering a Registration Rights Agreement, in the form attached hereto
    as Exhibit C (the “Registration Rights Agreement”),
    pursuant to which the Company has agreed to provide certain registration rights
    under the Securities Act and the rules and regulations promulgated thereunder,
    and applicable state securities laws. This Agreement, the Certificate of Designation,
    the Warrants and the Registration Rights Agreement are collectively referred
    to herein as the “Transaction Documents.”

1

  NOW, THEREFORE, in consideration of the premises and mutual
    covenants contained herein and other good and valuable consideration, the
    receipt and sufficiency of which are hereby acknowledged, the Company and
    the Purchasers hereby agree as follows:

  1.   PURCHASE AND SALE OF
    UNITS.

  (a)  Purchase of Units. The
    purchase price (the “Purchase Price”) per Unit shall be
    equal to Ten Thousand Dollars ($10,000). The closing of the sale and purchase
    of the Units shall occur at the offices of Drinker Biddle & Reath LLP
    at One Logan Square, 18th & Cherry Streets, Philadelphia, Pennsylvania
    19103 (the “Closing”). On the date of the Closing, subject
    to the satisfaction (or waiver) of the conditions set forth in Sections 6
    and 7 below, the Company shall issue and sell to each Purchaser and each Purchaser
    shall purchase from the Company the number of Units identified on the signature
    page hereto executed by such Purchaser.

  (b)   Form of Payment. At the
    Closing, each Purchaser shall pay the aggregate Purchase Price for the Units
    being purchased by such Purchaser hereunder by wire transfer to the Company,
    in accordance with the Company’s written wiring instructions, against
    delivery of the duly executed certificates representing the Preferred Shares
    and Warrants being purchased by such Purchaser hereunder. The Company shall
    deliver such certificates and Warrants upon receipt of such aggregate Purchase
    Price.

  (c)   Closing Date. Subject
    to the satisfaction (or waiver) of the conditions thereto set forth in Section
    6 and 7 below, the date and time of the issuance and sale of the Securities
    pursuant to this Agreement shall be 12:00 noon Eastern Time on March 31, 2003
    or such other time as may be mutually agreed upon by the Company and the Purchasers
    (the “Closing Date”).

  2.   PURCHASER’S REPRESENTATIONS,
    WARRANTIES AND COVENANTS. Each Purchaser severally, but not jointly, represents,
    warrants and agrees to the Company as follows:

  (a)  Purchase for Own Account, Etc..
    Such Purchaser is purchasing the Units for such Purchaser’s own account
    for investment only and not with a present view towards the public sale or
    distribution thereof, except pursuant to sales that are exempt from the registration
    requirements of the Securities Act and/or sales registered under the Securities
    Act. Such Purchaser understands that Purchaser must bear the economic risk
    of this investment indefinitely, unless the Securities are registered pursuant
    to the Securities Act and any applicable state securities or blue sky laws
    or an exemption from such registration is available, and that the Company
    has no present intention of registering the resale of any such Securities
    other than as contemplated by the Registration Rights Agreement. Notwithstanding
    anything in this Section 2(a) to the contrary, by making the representations
    herein, the Purchaser does not agree to hold the Securities for any minimum
    or other specific term and reserves the right to dispose of the Securities
    at any time in accordance with or pursuant to a registration statement or
    an exemption from the registration requirements under the Securities Act.

   (b)  Accredited Investor
    Status. Such Purchaser is an “Accredited Investor”
    as that term is defined in Rule 501(a) of Regulation D under the Securities
    Act.

  (c)  Reliance on Exemptions.
    Such Purchaser understands that the Units are being offered and sold to such
    Purchaser in reliance upon specific exemptions from the registration requirements
    of United States federal and state securities laws and that the Company is
    relying upon the truth and accuracy of, and such Purchaser’s compliance
    with, the representations, warranties, agreements, acknowledgments and understandings
    of such Purchaser set forth herein in order to determine the availability
    of such exemptions and the eligibility of such Purchaser to acquire the Securities.

  2

  

  (d)  Information. Such Purchaser is knowledgeable,
    sophisticated and experienced in making, and is qualified to make, decisions
    with respect to investments in securities representing an investment decision
    like that involved in the purchase of the Securities, and such Purchaser or
    its counsel, if any, have been furnished all materials relating to the business,
    finances and operations of the Company and materials relating to the offer
    and sale of the Securities which have been specifically requested by such
    Purchaser or its counsel. Neither such inquiries nor any other investigation
    conducted by such Purchaser or its counsel or any of its representatives shall
    modify, amend or affect such Purchaser’s right to rely on the Company’s
    representations and warranties contained in Section 3 below. Such Purchaser
    understands that such Purchaser’s investment in the Securities involves
    a high degree of risk.

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

   (f)  Transfer or Resale. Such
    Purchaser understands that (i) except as provided in the Registration Rights
    Agreement, the sale or resale of the Securities have not been and are not
    being registered under the Securities Act or any state securities laws, and
    the Securities may not be transferred unless (a) the transfer is made pursuant
    to and as set forth in an effective registration statement under the Securities
    Act covering the Securities; or (b) such Purchaser shall have delivered to
    the Company an opinion of counsel (which opinion shall be in form, substance
    and scope customary for opinions of counsel in comparable transactions) to
    the effect that the Securities to be sold or transferred may be sold or transferred
    pursuant to an exemption from such registration; or (c) sold under and in
    compliance with Rule 144 promulgated under the Securities Act (or a successor
    rule) (“Rule 144”); or (d) sold or transferred in accordance
    with applicable securities laws to an affiliate of such Purchaser who agrees
    to sell or otherwise transfer the Securities only in accordance with the provisions
    of this Section 2(f) and who is an Accredited Investor; and (ii) neither the
    Company nor any other person is under any obligation to register such Securities
    under the Securities Act or any state securities laws (other than pursuant
    to the Registration Rights Agreement). The Purchaser will not, prior to the
    effectiveness of the registration statement pursuant to the Registration Rights
    Agreement, sell, offer to sell, solicit offers to buy, dispose of, loan, pledge
    or grant any right with respect to (collectively, a “Disposition”),
    the Common Stock of the Company in violation of the Securities Act, nor will
    Purchaser engage in any hedging or other transaction which is designed to
    or could reasonably be expected to lead to or result in a Disposition of Common
    Stock of the Company by the Purchaser or any other person or entity in violation
    of the Securities Act. Notwithstanding the foregoing or anything else contained
    herein to the contrary, the Securities may be pledged as collateral in connection
    with a bona fide margin account or other lending arrangement, provided such
    pledge is consistent with applicable laws, rules and regulations, including
    those promulgated under the Securities Act.

  3

  

  
  (g)  Legends. Such Purchaser understands
    that the certificates for the Preferred Shares, Warrants and, until such time
    as the Conversion Shares and Warrant Shares have been registered under the
    Securities Act (including registration pursuant to Rule 416 thereunder) as
    contemplated by the Registration Rights Agreement or otherwise may be sold
    by such Purchaser under Rule 144(k), the certificates for the Conversion Shares
    and Warrant Shares shall bear a restrictive legend in substantially the following
    form:

The securities represented by this
  certificate have not been registered under the Securities Act of 1933, as amended,
  or the securities laws of any state of the United States or in any other jurisdiction.
  The securities represented hereby may not be offered, sold or transferred in
  the absence of an effective registration statement for the securities under
  applicable securities laws unless offered, sold or transferred pursuant to an
  available exemption from the registration requirements of those laws.

  The Company agrees that it shall, immediately following the
    Registration Statement (as defined in the Registration Rights Agreement) being
    declared effective, deliver to its transfer agent an opinion letter of counsel,
    opining that at any time the Registration Statement is effective, the transfer
    agent shall issue, in connection with the issuance of the Conversion Shares
    and Warrant Shares, certificates representing such Conversion Shares and Warrant
    Shares without the restrictive legend above, provided such Conversion Shares
    and Warrant Shares are to be sold pursuant to the prospectus contained in
    the Registration Statement. Upon receipt of such opinion, the Company shall
    cause the transfer agent to confirm, for the benefit of the holders, that
    no further opinion of counsel is required at the time of transfer in order
    to issue such shares without such restrictive legend.

  The legend set forth above shall be removed and
    the Company shall issue a certificate without such legend to the holder of
    any Security upon which it is stamped, if (unless otherwise required by state
    securities laws) (a) the sale of such Security is registered under the Securities
    Act (including registration pursuant to Rule 416 thereunder) as contemplated
    by the Registration Rights Agreement; (b) such holder provides the Company
    with an opinion of counsel, in form, substance and scope customary for opinions
    of counsel in comparable transactions, to the effect that a public sale or
    transfer of such Security may be made without registration under the Securities
    Act; or (c) such holder provides the Company with reasonable assurances that
    such Security can be sold under Rule 144(k). In the event the above legend
    is removed from any Security and thereafter the effectiveness of a registration
    statement covering such Security is suspended or the Company determines that
    a supplement or amendment thereto is required by applicable securities laws,
    then the Company may immediately place a stop-transfer order against
    the certificates with respect to the sale of any Security pursuant to such
    registration statement, and upon reasonable advance written notice to such
    Purchaser the Company may require that the above legend be placed on any such
    Security that cannot then be sold pursuant to an effective registration statement
    or under Rule 144 and such Purchaser shall cooperate in the replacement of
    such legend. Such legend shall thereafter be removed when such Security may
    again be sold pursuant to an effective registration statement or under Rule
    144.

4

  (h)  Authorization; Enforcement. This Agreement and the Registration
    Rights Agreement have been duly and validly authorized, executed and delivered
    on behalf of such Purchaser and are valid and binding agreements of such Purchaser
    enforceable against such Purchaser in accordance with their terms.

   (i)  Residency. Such Purchaser is a resident
    of the jurisdiction set forth under such Purchaser’s name on the Execution
    Page hereto executed by such Purchaser. The Purchaser acknowledges that the
    Company has represented that no action has been or will be taken in any jurisdiction
    outside the United States by the Company that would permit an offering of
    the Shares, or possession or distribution of offering materials in connection
    with the issue of the Shares, in any jurisdiction outside the United States
    where action for that purpose is required. If the Purchaser is located or
    domiciled outside the United States it agrees to comply with all applicable
    laws and regulations in each foreign jurisdiction in which it purchases, offers,
    sells or delivers Shares or has in its possession or distributes any offering
    material, in all cases at its own expense.

   (j)  Prospectus Delivery Requirements. Each
    Purchaser covenants and agrees to comply with the prospectus delivery requirements
    under the Securities Act with respect to all sales of Common Stock made pursuant
    to a registration statement.

   (k)  No Company Advice. Each Purchaser understands
    that nothing in this Agreement or any other materials presented to the Purchaser
    in connection with the purchase and sale of the Shares constitutes legal,
    tax or investment advice. Each Purchaser has consulted such legal, tax and
    investment advisors as it, in its sole discretion, has deemed necessary or
    appropriate in connection with its purchase of Shares.

Except as set forth in Section 2(j) above, the Purchasers’ representations and warranties made in this Article 2 are made solely for the purpose of permitting the Company to make a determination that the offer and sale of the Preferred Shares and Warrants pursuant to this Agreement complies with applicable U.S. federal and state securities laws and not for any other purpose.  The Company may not rely on such representations and warranties for any other purpose.

3.   REPRESENTATIONS AND WARRANTIES OF THE COMPANY.  Except as set forth on a Schedule of Exceptions executed and delivered by the Company to the Purchasers at the Closing (the “Schedule of Exceptions”), the Company represents and warrants to each Purchaser as follows:

  (a)   Organization and Qualification.
    The Company and each of its direct or indirect subsidiaries (as defined by
    Rule 405 under the Securities Act) (collectively, the “Subsidiaries”)
    is a corporation duly organized and existing in good standing under the laws
    of the jurisdiction in which it is incorporated, and has the requisite corporate
    power to own its properties and to carry on its business as now being conducted.
    The Company and each of its Subsidiaries is duly qualified as a foreign corporation
    to do business and is in good standing in every jurisdiction in which the
    nature of the business conducted by it makes such qualification necessary
    and where the failure so to qualify has had or could reasonably be expected
    to have a Material Adverse Effect. “Material Adverse Effect”
    means any material adverse effect on (i) the Securities, (ii) the ability
    of the Company to perform its obligations hereunder or under the other Transaction
    Documents or (iii) the business, operations, properties, prospects, financial
    condition or results of operations of the Company and its Subsidiaries, taken
    as a whole; provided, however, that any reduction in the market price or trading
    volume of the Common Stock shall not, in and of itself, be deemed to constitute
    a Material Adverse Effect; provided further, however, that the foregoing shall
    not prevent a Purchaser from asserting that any underlying cause of such reduction
    independently constitutes a Material Adverse Effect. 

5

  (b)   Authorization; Enforcement. (i) The
    Company has the requisite corporate power and authority to enter into and
    perform its obligations under this Agreement, the Warrants and the Registration
    Rights Agreement, to issue and sell the Units in accordance with the terms
    hereof, to issue the Conversion Shares upon conversion of the Preferred Shares
    in accordance with the terms of the Certificate of Designation and to issue
    the Warrant Shares upon exercise of the Warrants in accordance with the terms
    of such Warrants; (ii) the execution, delivery and performance of this Agreement,
    the Warrants and the Registration Rights Agreement by the Company and the
    consummation by it of the transactions contemplated hereby and thereby (including,
    without limitation, the issuance of the Preferred Shares and Warrants and
    the issuance and reservation for issuance of the Conversion Shares and Warrant
    Shares) have been duly authorized by the Company’s Board of Directors
    and no further consent or authorization of the Company, its Board of Directors,
    or any committee of the Board of Directors is required, and (iii) this Agreement
    constitutes, and, upon execution and delivery by the Company of the Warrants
    and the Registration Rights Agreement, such agreements will constitute, valid
    and binding obligations of the Company enforceable against the Company in
    accordance with their terms. 

  (c)   Stockholder Authorization.
    Neither the execution, delivery or performance by the Company of this Agreement,
    the Warrants or the Registration Rights Agreement nor the consummation by
    it of the transactions contemplated hereby or thereby (including, without
    limitation, the issuance of the Preferred Shares or Warrants or the issuance
    or reservation for issuance of the Conversion Shares or Warrant Shares) requires
    any consent or authorization of the Company’s stockholders, including
    but not limited to, consent under Rule 4350 promulgated by the National Association
    of Securities Dealers, Inc. (the “NASD”) or any similar
    rule. The Company’s representation with respect to the consent or authorization
    of the Company’s stockholders required under Rule 4350 promulgated by
    the NASD is based solely on a waiver of such requirement as set forth in a
    letter from The Nasdaq Stock Market dated March 19, 2003, a copy of which
    has previously been provided to each Purchaser (the “Nasdaq Waiver Letter”).
    The Nasdaq Waiver Letter has not been, and the Company has not received notice
    (written or oral) that it will be, rescinded, modified or revised in any way.
    The Company does not believe and has no reason to believe that the Nasdaq
    Waiver Letter will be rescinded, modified or revised in any way.

  (d)   Capitalization. The capitalization
    of the Company as of the date hereof, including the authorized capital stock,
    the number of shares issued and outstanding, the number of shares issuable
    and reserved for issuance pursuant to the Company’s stock option plans,
    the number of shares issuable and reserved for issuance pursuant to securities
    (other than the Preferred Shares and Warrants) exercisable or exchangeable
    for, or convertible into, any shares of capital stock and the number of shares
    to be reserved for issuance upon conversion of the Preferred Shares and exercise
    of the Warrants is set forth on Schedule 3(d). All of such outstanding
    shares of capital stock have been, or upon issuance in accordance with the
    terms of any such warrants, options or preferred stock, will be, validly issued,
    fully paid and non-assessable. No shares of capital stock of the Company
    (including the Preferred Shares, the Conversion Shares and the Warrant Shares)
    are subject to preemptive rights or any other similar rights of the stockholders
    of the Company or any liens or encumbrances. Except for the Securities and
    as set forth on Schedule 3(d), as of the date of this Agreement, (i)
    there are no outstanding options, warrants, scrip, rights to subscribe to,
    calls or commitments of any character whatsoever relating to, or securities
    or rights convertible into or exercisable or exchangeable for, any shares
    of capital stock of the Company or any of its Subsidiaries, or arrangements
    by which the Company or any of its Subsidiaries is or may become bound to
    issue additional shares of capital stock of the Company or any of its Subsidiaries,
    nor are any such issuances or arrangements contemplated, and (ii) there are
    no agreements or arrangements under which the Company or any of its Subsidiaries
    is obligated to register the sale of any of its or their securities under
    the Securities Act (except the Registration Rights Agreements). Schedule
    3(d) sets forth all of the Company issued securities or instruments containing
    antidilution or similar provisions that will be triggered by, and all of the
    resulting adjustments that will be made to such securities and instruments
    as a result of, the issuance of the Securities in accordance with the terms
    of this Agreement, the Certificate of Designation or the Warrants. The Company
    has furnished to the Purchasers true and correct copies of the Company’s
    Certificate of Incorporation as in effect on the date hereof (“Certificate
    of Incorporation”), the Company’s Bylaws as in effect on the
    date hereof (the “Bylaws”), and all other instruments and
    agreements governing securities convertible into or exercisable or exchangeable
    for capital stock of the Company. The Certificate of Designation, in the form
    attached hereto, will be duly filed prior to Closing with the Secretary of
    State of the State of Delaware and, upon the issuance of the Preferred Shares
    in accordance with the terms hereof, each Purchaser shall be entitled to the
    rights set forth therein.

6

  (e)   Issuance of Shares. The Preferred Shares
    are duly authorized and, upon issuance, delivery and payment therefore in
    accordance with the terms of this Agreement and the Certificate of Designation,
    will be validly issued, fully paid and non-assessable, and free from
    all taxes, liens, claims and encumbrances (other than restrictions on transfer
    contained in this Agreement and in the Registration Rights Agreements) and
    will not be subject to preemptive rights, rights of first refusal or other
    similar rights of stockholders of the Company and the issuance of the Preferred
    Shares in accordance with the terms of this Agreement and the Certificate
    of Designation will not impose personal liability on the holders thereof.
    The Conversion Shares are duly authorized and reserved for issuance, and,
    upon conversion of the Preferred Shares in accordance with the terms thereof,
    will be validly issued, fully paid and non-assessable, and free from
    all taxes, liens, claims and encumbrances (other than restrictions on transfer
    contained in this Agreement and in the Registration Rights Agreements) and
    will not be subject to preemptive rights, rights of first refusal or other
    similar rights of stockholders of the Company and the issuance of the Conversion
    Shares in accordance with the terms of this Agreement and the Certificate
    of Designation will not impose personal liability upon the holder thereof.
    The Warrant Shares shall be duly authorized and reserved for issuance, and,
    upon exercise of the Warrants in accordance with the terms thereof, will be
    validly issued, fully paid and non-assessable, and free from all taxes,
    liens, claims and encumbrances (other than restrictions on transfer contained
    in this Agreement and in the Registration Rights Agreements) and will not
    be subject to preemptive rights, rights of first refusal or other similar
    rights of stockholders of the Company and the issuance of the Warrant Shares
    in accordance with the terms of this Agreement and the Warrant will not impose
    personal liability upon the holder thereof.

  7

  

  
  (f)   No Conflicts. The execution, delivery
    and performance of this Agreement, the Warrants and the Registration Rights
    Agreement by the Company, the performance by the Company of its obligations
    under the Certificate of Designation, and the consummation by the Company
    of the transactions contemplated hereby and thereby (including, without limitation,
    the issuance and reservation for issuance, as applicable, of the Preferred
    Shares, Warrants, Conversion Shares and Warrant Shares) will not (i) result
    in a violation of the Certificate of Incorporation or Bylaws or (ii) conflict
    with, or constitute a default (or an event that with notice or lapse of time
    or both would become a default) under, or give to others any rights of termination,
    amendment (including, without limitation, the triggering of any anti-dilution
    provisions), acceleration or cancellation of, any agreement, indenture or
    instrument to which the Company or any of its Subsidiaries is a party, or
    result in a violation of any law, rule, regulation, order, judgment or decree
    (including United States federal and state securities laws and regulations
    and rules or regulations of any self-regulatory organizations (except
    to the extent any such violation has been waived in the Nasdaq Waiver Letter)
    to which either the Company or its securities are subject) applicable to the
    Company or any of its Subsidiaries or by which any property or asset of the
    Company or any of its Subsidiaries is bound or affected (except, with respect
    to clause (ii), for such conflicts, defaults, terminations, amendments, accelerations,
    cancellations and violations that have not had and could not reasonably be
    expected to have, individually or in the aggregate, a Material Adverse Effect).
    Neither the Company nor any of its Subsidiaries is in violation of its Certificate
    of Incorporation, Bylaws or other organizational documents and neither the
    Company nor any of its Subsidiaries is in default (and no event has occurred
    which, with notice or lapse of time or both, would put the Company or any
    of its Subsidiaries in default) under, nor has there occurred any event giving
    others (with notice or lapse of time or both) any rights of termination, amendment,
    acceleration or cancellation of, any agreement, indenture or instrument to
    which the Company or any of its Subsidiaries is a party. The businesses of
    the Company and its Subsidiaries are not being conducted, and shall not be
    conducted so long as a Purchaser owns any of the Preferred Shares, in violation
    of any law, ordinance or regulation of any governmental entity, except for
    possible violations the sanctions for which either singly or in the aggregate
    have not had and could not reasonably be expected to have a Material Adverse
    Effect. The Company and its board of directors have taken all necessary action,
    if any, in order to render inapplicable any control share acquisition, business
    combination, poison pill (including any distribution under a rights agreement)
    or other similar anti-takeover provision under its Certificate of Incorporation
    or the laws of the state of its incorporation which is or could become applicable
    to the Purchasers as a result of the transactions contemplated by this Agreement,
    including without limitation, the Company’s issuance of the Securities
    and any and all Purchaser’s ownership of the Securities or the Purchaser’s
    ownership of the Common Stock. Except as specifically contemplated by this
    Agreement and the Registration Rights Agreement, the Company is not required
    to obtain any consent, approval, authorization or order of, or make any filing
    or registration with, any court or governmental agency or any regulatory or
    self regulatory agency in order for it to execute, deliver or perform any
    of its obligations under this Agreement, the Warrants or the Registration
    Rights Agreement or to perform its obligations under the Certificate of Designation,
    in each case in accordance with the terms hereof or thereof. Except as set
    forth on Schedule 3(f) of the Schedule of Exceptions, the Company is not in
    violation of the listing requirements of the Nasdaq National Market (“NNM”)
    and has received no notice regarding the potential delisting of the Common
    Stock by the NNM. 

8

  (g)   SEC Documents, Financial Statements.
    All reports, schedules, forms, statements and other documents required to
    be filed by the Company with the SEC pursuant to the reporting requirements
    of the Securities Exchange Act of 1934, as amended (the “Exchange
    Act”) (all of the foregoing filed prior to the date hereof and all
    exhibits included therein and financial statements and schedules thereto and
    documents incorporated by reference therein, being hereinafter referred to
    herein as the “SEC Documents”) have been timely filed by
    the Company (within applicable extension periods) since March 1, 2002. The
    SEC Documents are available on the SEC’s web site at www.sec.gov and
    to the extent requested by any Purchaser, the Company has delivered to each
    such Purchaser true and complete copies of the SEC Documents. With respect
    to SEC Documents filed on or after May 10, 2000, as of their respective dates,
    such SEC Documents complied in all material respects with the requirements
    of the Exchange Act or the Securities Act, as the case may be, and the rules
    and regulations of the SEC promulgated thereunder applicable to the SEC Documents,
    and none of the SEC Documents, at the time they were filed with the SEC, contained
    any untrue statement of a material fact or omitted to state a material fact
    required to be stated therein or necessary in order to make the statements
    therein, in light of the circumstances under which they were made, not misleading.
    None of the statements made in any such SEC Documents is, or has been, required
    to be amended or updated under applicable law (except for such statements
    as have been amended or updated in subsequent filings made prior to the date
    hereof). As of their respective dates, the financial statements of the Company
    included in the SEC Documents complied as to form in all material respects
    with applicable accounting requirements and the published rules and regulations
    of the SEC applicable with respect thereto. Such financial statements have
    been prepared in accordance with U.S. generally accepted accounting principles
    (“GAAP”), consistently applied during the periods involved
    (except (i) as may be otherwise indicated in such financial statements or
    the notes thereto, or (ii) in the case of unaudited interim statements, to
    the extent they may not include footnotes or may be condensed or summary statements)
    and fairly present in all material respects the consolidated financial position
    of the Company and its consolidated Subsidiaries as of the dates thereof and
    the consolidated results of their operations and cash flows for the periods
    then ended (subject, in the case of unaudited statements, to immaterial year-end
    audit adjustments). Except as set forth in the financial statements of the
    Company included in the SEC Documents filed prior to the date hereof or as
    set forth in Schedule 3(g) of the Schedule of Exceptions, the Company has
    no liabilities, contingent or otherwise, other than (i) liabilities incurred
    in the ordinary course of business subsequent to the date of such financial
    statements and (ii) obligations under contracts and commitments incurred in
    the ordinary course of business and not required under GAAP to be reflected
    in such financial statements, which liabilities and obligations referred to
    in clauses (i) and (ii), individually or in the aggregate, are not material
    to the financial condition or operating results of the Company. After giving
    effect to the sale and purchase of Securities at the Closing pursuant to this
    Agreement, as of the Closing, the Company shall be legally permitted to pay
    a dividend in accordance with the Delaware General Corporation Law.

  (h)   Absence of Certain Changes.
    Except as publicly disclosed in the SEC Documents, or as disclosed in press
    releases or other “public disclosures” (as such term is defined
    in Section 101(e) of Regulation FD of the Exchange Act delivered to the Purchasers
    by the Company prior to the date hereof, since September 30, 2002, there has
    been no material adverse change and no material adverse development in the
    business, properties, operations, prospects, financial condition or results
    of operations of the Company and its Subsidiaries, taken as a whole, except
    as disclosed in the SEC Documents filed prior to the date hereof. The Company
    has not taken any steps, and does not currently expect to take any steps,
    to seek protection pursuant to any bankruptcy or receivership law nor does
    the Company or any of its Subsidiaries have any knowledge or reason to believe
    that its creditors intend to initiate involuntary bankruptcy proceedings with
    respect to the Company or any of its Subsidiaries. 

9

  (i)   Transactions With Affiliates. Except
    as publicly disclosed in the SEC Documents, or as disclosed in press releases
    or other “public disclosures” delivered to the Purchasers by the
    Company prior to the date hereof, and other than the grant of stock options
    pursuant to option plans disclosed in such SEC Documents, none of the officers,
    directors, or employees of the Company is presently a party to any transaction
    with the Company or any of its Subsidiaries (other than for ordinary course
    services solely in their capacity as employees, officers or directors), including
    any contract, agreement or other arrangement providing for the furnishing
    of services to or by, providing for rental of real or personal property to
    or from, or otherwise requiring payments to or from any such officer, director
    or employee or any corporation, partnership, trust or other entity in which
    any such officer, director, or employee has an ownership interest of five
    percent or more or is an officer, director, trustee or partner.

  (j)   Absence of Litigation.
    Except as publicly disclosed in the SEC Documents, press releases or other
    “public disclosures” delivered to the Purchasers by the Company
    prior to the date hereof, there is no action, suit, proceeding, inquiry or
    investigation before or by any court, public board, government agency, self-regulatory
    organization or body, including, without limitation, the SEC or NASD, pending
    or, to the knowledge of the Company or any of its Subsidiaries, threatened
    against or affecting the Company, any of its Subsidiaries, or any of their
    respective directors or officers in their capacities as such, which could
    reasonably be expected to have a Material Adverse Effect. To the Company’s
    knowledge, there are no facts which, if known by a potential claimant or governmental
    authority, could give rise to a claim or proceeding which, if asserted or
    conducted with results unfavorable to the Company or any of its Subsidiaries,
    could reasonably be expected to have a Material Adverse Effect.

  (k)   Intellectual Property.
    Each of the Company and its Subsidiaries owns or is duly licensed to use all
    patents, patent applications, trademarks, trademark applications, trade names,
    service marks, copyrights, copyright applications, licenses, permits, inventions,
    discoveries, processes, scientific, technical, engineering and marketing data,
    object and source codes, know-how (including trade secrets and other unpatented
    and/or unpatentable proprietary or confidential information, systems or procedures)
    and other similar rights and proprietary knowledge (collectively, “Intangibles”)
    necessary for the conduct of its business as now being conducted. To the best
    knowledge of the Company, neither the Company nor any Subsidiary of the Company
    infringes or is in conflict with any right of any other person with respect
    to any Intangibles. Except as set forth on Schedule 3(k) of the Schedule
    of Exceptions, neither the Company nor any of its Subsidiaries has received
    written notice of any pending conflict with or infringement upon such third
    party Intangibles. Set forth on Schedule 3(k) of the Schedule of Exceptions,
    is a list of each patent, registered copyright, copyright application, registered
    trademark, trademark application, license or permit for which the termination
    of the Company’s ownership of, or right to use, could reasonably be
    expected to have a Material Adverse Effect. Neither the Company nor any of
    its Subsidiaries has entered into any consent agreement, indemnification agreement,
    forbearance to sue or settlement agreement with respect to the validity of
    the Company’s or its Subsidiaries’ ownership or right to use its
    Intangibles and there is no reasonable basis for any such claim to be successful.
    To the Company’s knowledge, the Intangibles are valid and enforceable
    and no registration relating thereto has lapsed, expired or been abandoned
    or canceled or is the subject of cancellation or other adversarial proceedings,
    and all applications therefor are pending and in good standing. The Company
    and its Subsidiaries have complied, in all material respects, with their respective
    contractual obligations relating to the protection of the Intangibles used
    pursuant to licenses. To the Company’s knowledge, no person is infringing
    on or violating the Intangibles owned or used by the Company or its Subsidiaries.

10

(l)   Foreign Corrupt Practices. Neither the
    Company, nor any of its Subsidiaries, nor any director, officer or, to the
    Company’s knowledge, any employee or other person acting on behalf of
    the Company or any Subsidiary has, in the course of his actions for, or on
    behalf of, the Company, used any corporate funds for any unlawful contribution,
    gift, entertainment or other unlawful expenses relating to political activity;
    made any direct or indirect unlawful payment to any foreign or domestic government
    official or employee from corporate funds; violated or is in violation of
    any provision of the U.S. Foreign Corrupt Practices Act of 1977; or made any
    bribe, rebate, payoff, influence payment, kickback or other unlawful payment
    to any foreign or domestic government official or employee.

  (m)   Disclosure. All information
    relating to or concerning the Company and/or any Subsidiary or Subsidiaries
    set forth in this Agreement or provided to any Purchaser pursuant to Section
    2(d) hereof or otherwise in connection with the transactions contemplated
    hereby is true and correct in all material respects and the Company has not
    omitted to state any material fact necessary in order to make the statements
    made herein or therein, in light of the circumstances under which they were
    made, not misleading. No event or circumstance has occurred or exists with
    respect to the Company or its Subsidiaries or their respective businesses,
    properties, prospects, operations or financial conditions, which has not been
    publicly disclosed but, under applicable law, rule or regulation, would be
    required to be disclosed by the Company in a registration statement filed
    on the date hereof by the Company under the Securities Act with respect to
    a primary issuance of the Company’s securities.

  (n)   Acknowledgment Regarding Purchasers’
    Purchase of the Units. The Company acknowledges and agrees that none of
    the Purchasers is acting as a financial advisor or fiduciary of the Company
    (or in any similar capacity) with respect to this Agreement or the transactions
    contemplated hereby, the relationship between the Company and the Purchasers
    is “arms-length” and any statement made by any Purchaser or any
    of its representatives or agents in connection with this Agreement and the
    transactions contemplated hereby is merely incidental to such Purchaser’s
    purchase of Securities and has not been relied upon by the Company, its officers
    or directors in any way. The Company further acknowledges that the Company’s
    decision to enter into this Agreement has been based solely on an independent
    evaluation by the Company and its representatives.

11

  (o)   Listing. The Company has filed a Notification
    Form: Listing of Additional Shares with respect to the Common Shares and the
    Warrant Shares with the NNM.

  (p)   Form S-3 Eligibility.
    The Company is currently eligible to register the resale of its Common Stock
    on a registration statement filed on Form S-3 under the Securities Act. There
    exist no facts or circumstances that would prohibit or delay the preparation
    and filing of a registration statement on Form S-3 with respect to the Registrable
    Securities (as defined in the Registration Rights Agreement). The Company
    has no basis to believe that its past or present independent public auditors
    will withhold their consent to the inclusion, or incorporation by reference,
    of their audit opinion concerning the Company’s financial statements
    which are included in the Registration Statement required to be filed pursuant
    to the Registration Rights Agreement.

  (q)   No General Solicitation.
    Neither the Company nor any distributor participating on the Company’s
    behalf in the transactions contemplated hereby (if any) nor any person acting
    for the Company, or any such distributor, has conducted any “general
    solicitation,” as such term is defined in Regulation D, with respect
    to any of the Securities being offered hereby.

  (r)   No Integrated Offering.
    Neither the Company, nor any of its affiliates, nor any person acting on its
    or their behalf, has directly or indirectly made any offers or sales of any
    security or solicited any offers to buy any security under circumstances that
    would require registration of the Securities being offered hereby under the
    Securities Act or cause this offering of Securities to be integrated with
    any prior offering of securities of the Company for purposes of the Securities
    Act or any applicable stockholder approval provisions, including, without
    limitation, Rule 4350(i) of the NASD or any similar rule.

  (s)   No Brokers. The Company
    has taken no action which would give rise to any claim by any person for brokerage
    commissions or finder’s fees or for similar payments by any Purchaser
    relating to this Agreement or the transactions contemplated hereby. Other
    than (i) Punk, Ziegel & Company, L.P. (“Punk Ziegel”),
    (ii) SCO Securities LLC (“SCO,” and together with Punk
    Ziegel, the “Placement Agents”), or (iii) as contemplated
    in Section 4(e) of this Agreement or in any of the other Transaction Documents,
    no other person or entity is entitled to payment by the Company of fees, commissions
    and reimbursement of expenses in connection with the transactions contemplated
    hereby.

  (t)   Acknowledgment Regarding Securities.
    The Company’s executive officers have studied and fully understand the
    nature of the Securities being sold hereunder. The Company acknowledges that
    its obligation to issue Conversion Shares upon conversion of the Preferred
    Shares in accordance with the Certificate of Designation is, other than as
    set forth in the Certificate of Designation, absolute and unconditional, regardless
    of the dilution that such issuance may have on the ownership interests of
    other stockholders and the availability of remedies provided for in the Transaction
    Documents relating to a failure or refusal to issue Conversion Shares. Taking
    the foregoing into account, the Company’s Board of Directors has determined
    in its good faith business judgment that the issuance of the Preferred Shares
    and Warrants hereunder and the consummation of the other transactions contemplated
    hereby are in the best interests of the Company and its stockholders. The
    Company fully intends to honor its obligations hereunder to issue Conversion
    Shares upon conversion of the Preferred Shares regardless of the dilution
    that such issuance may have on the ownership interests of other stockholders
    and the availability of remedies provided for in the Transaction Documents
    relating to their failure or refusal to issue Conversion Shares.

12

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

  (v)   Tax Status. Except as
    set forth in the SEC Documents, the Company and each of its Subsidiaries has
    made or filed all foreign, U.S. federal, state and local income and all other
    tax returns, reports and declarations required by any jurisdiction to which
    it is subject (unless and only to the extent that the Company and each of
    its Subsidiaries has set aside on its books provisions reasonably adequate
    for the payment of all unpaid and unreported taxes) and has paid all taxes
    and other governmental assessments and charges that are material in amount,
    shown or determined to be due on such returns, reports and declarations, except
    those being contested in good faith and has set aside on its books provisions
    reasonably adequate for the payment of all taxes for periods subsequent to
    the periods to which such returns, reports or declarations apply. There are
    no unpaid taxes in any material amount claimed to be due by the taxing authority
    of any jurisdiction, and the officers of the Company know of no basis for
    any such claim. The Company has not executed a waiver with respect to any
    statute of limitations relating to the assessment or collection of any federal,
    state or local tax. None of the Company’s tax returns is presently being
    audited by any taxing authority.

  (w)   Key Employees. Each of
    the Company’s directors, officers and any Key Employee (as defined below)
    is currently serving the Company in the capacity disclosed in the SEC Documents.
    No Key Employee is, or is now expected to be, in violation of any material
    term of any employment contract, confidentiality, disclosure or proprietary
    information agreement, non-competition agreement, or any other contract or
    agreement or any restrictive covenant, and the continued employment of each
    Key Employee does not subject the Company or any Subsidiary to any liability
    with respect to any of the foregoing matters. No Key Employee has, to the
    knowledge of the Company and its Subsidiaries, any intention to terminate
    or limit his employment with, or services to, the Company or any Subsidiary,
    nor is any such Key Employee subject to any constraints which would cause
    such employee to be unable to devote his full time and attention to such employment
    or services. “Key Employee” means the persons listed on
    Schedule 3(v) of the Schedule of Exceptions and any individual who
    assumes or performs any of the duties of a Key Employee.

  (x)   Employee Relations. (i)
    Neither the Company nor any of its Subsidiaries is involved in any material
    union labor dispute nor, to the knowledge of the Company or any of its Subsidiaries,
    is any such dispute threatened. The Company and its Subsidiaries believe that
    their relations with their employees are good. No executive officer (as defined
    in Rule 501(f) of the Securities Act) has notified the Company that such officer
    intends to leave the Company or otherwise terminate such officer’s employment
    with the Company; and (ii) the Company and its Subsidiaries are in compliance
    with all federal, state, local and foreign laws and regulations respecting
    employment and employment practices, terms and conditions of employment and
    wages and hours, except where failure to be in compliance would not, either
    individually or in the aggregate, reasonably be expected to result in a Material
    Adverse Effect.

13

  (y)   Insurance. The Company has in force
    fire, casualty, product liability and other insurance policies, with extended
    coverage, sufficient in amount to allow it to replace any of its material
    properties or assets which might be damaged or destroyed or sufficient to
    cover liabilities to which the Company may reasonably become subject, and
    such types and amounts of other insurance with respect to its business and
    properties, on both a per occurrence and an aggregate basis, as are customarily
    carried by persons engaged in the same or similar business as the Company.
    No default or event has occurred that could give rise to a default under any
    such policy.

  

  (z)   Environmental Matters.
    There is no environmental litigation or other environmental proceeding pending
    or, to the Company’s knowledge, threatened by any governmental regulatory
    authority or others with respect to the current or any former business of
    the Company or its Subsidiaries or any partnership or joint venture currently
    or at any time affiliated with the Company or its subsidiaries. No state of
    facts exists as to environmental matters or Hazardous Substances (as defined
    below) that involves the reasonable likelihood of a material capital expenditure
    by the Company or its Subsidiaries or that may otherwise have a Material Adverse
    Effect. No Hazardous Substances have been treated, stored or disposed of,
    or otherwise deposited, in or on the properties owned or leased by the Company
    or its Subsidiaries or by any partnership or joint venture currently or at
    any time affiliated with the Company or its Subsidiaries in violation of any
    applicable environmental laws. The environmental compliance programs of the
    Company and its Subsidiaries comply in all respects with all environmental
    laws, whether federal, state or local, currently in effect. As used herein,
    “Hazardous Substances” means any substance, waste, contaminant,
    pollutant or material that has been determined by any governmental authority
    to be capable of posing a risk of injury to health, safety, property or the
    environment.

  

  (aa)   Regulatory Permits. The
    Company and its Subsidiaries possess all certificates, authorizations and
    permits issued by the appropriate federal, state or foreign regulatory authorities
    which are material to conduct its business, and neither the Company nor any
    of its Subsidiaries has received any written notice of any proceeding relating
    to the revocation or modification of any such certificate, authorization or
    permit.

4.   COVENANTS.

  (a)   Best Efforts. The parties
    shall use their best efforts timely to satisfy each of the conditions described
    in Section 6 and Section 7 of this Agreement.

14

  (b)   Form D: Blue Sky Laws. The Company
    shall file with the SEC a Form D with respect to the Securities as required
    under Regulation D and provide a copy thereof to each Purchaser promptly after
    such filing. The Company shall, on or before the Closing Date, take such action
    as the Company shall reasonably determine is necessary to qualify the Securities
    for sale to each Purchaser pursuant to this Agreement under applicable securities
    or “blue sky” laws of the states of the United States or obtain
    exemption therefrom. Within two (2) trading days after the Closing Date, the
    Company shall file a Form 8-K concerning this Agreement and the transactions
    contemplated hereby, which Form 8-K shall attach this Agreement and its Exhibits
    as exhibits to such Form 8-K (the “8-K Filing”). From and
    after the 8-K Filing, the Company hereby acknowledges that no Purchaser shall
    be in possession of any material nonpublic information received from the Company,
    any of its Subsidiaries or any of its respective officers, directors, employees
    or agents, that is not disclosed in the 8-K Filing. The Company shall not,
    and shall cause each of its Subsidiaries and its and each of their respective
    officers, directors, employees and agents not to, provide any Purchaser with
    any material nonpublic information regarding the Company or any of its Subsidiaries
    from and after the 8-K Filing without the express written consent of such
    Purchaser, provided, however, that a Purchaser which exercises its rights
    under Section 4(n) shall be deemed to have given such express written consent.
    In the event of a breach of the foregoing covenant by the Company, any of
    its Subsidiaries, or any of its or their respective officers, directors, employees
    and agents, in addition to any other remedy provided herein or in the other
    Transaction Documents, a Purchaser shall have the right to request in writing
    that the Company promptly make a public disclosure, in the form of a press
    release, public advertisement or otherwise, of such material nonpublic information.
    If the Company refuses to promptly make such a disclosure, the Company and
    the requesting Purchaser shall meet (in person or telephonically) within two
    (2) business days to resolve the issue. Unless the parties agree that disclosure
    is not required, the Company shall either: (i) commence a Disclosure Delay
    Period (as defined in the Registration Rights Agreement), or (ii) if the Company’s
    Board of Directors does not believe in good faith that the conditions to commencing
    a Disclosure Delay Period set forth in the Registration Rights Agreement have
    been satisfied, make a prompt public disclosure of the nonpublic information
    at issue. Subject to the foregoing, neither the Company nor any Purchaser
    shall issue any press releases or any other public statements with respect
    to the transactions contemplated hereby; provided, however, that the Company
    shall be entitled, without the prior approval of any Purchaser, to make any
    press release or other public disclosure with respect to such transactions
    (i) in substantial conformity with the 8-K Filing and contemporaneously therewith
    and (ii) as is required by applicable law and regulations (provided that in
    the case of clause (i) each Purchaser shall be consulted by the Company in
    connection with any such press release or other public disclosure prior to
    its release if such press release or other public disclosure contains the
    name of such Purchaser).

  (c)   Reporting Status. So long
    as any Purchaser beneficially owns any of the Securities, the Company shall
    timely file (within applicable extension periods) all reports required to
    be filed with the SEC pursuant to the Exchange Act, and the Company shall
    not terminate its status as an issuer required to file reports under the Exchange
    Act even if the Exchange Act or the rules and regulations thereunder would
    permit such termination. In addition, the Company shall take all actions necessary
    to meet the “registrant eligibility” requirements set forth in
    the general instructions to Form S-3 or any successor form thereto, to continue
    to be eligible to register the resale of its Common Stock on a registration
    statement on Form S-3 under the Securities Act.

15

  (d)   Use of Proceeds. The Company shall
    use the proceeds from the sale of the Preferred Shares and Warrants for general
    corporate purposes and working capital. Such proceeds shall not be used to
    (i) pay dividends (other than dividends on the Preferred Shares); (ii) pay
    for any increase in executive compensation or make any loan or other advance
    to any officer, employee, shareholder, director or other affiliate of the
    Company, without the express approval of the Board of Directors acting in
    accordance with past practice; (iii) purchase debt or equity securities of
    any entity (including redeeming the Company’s own securities), except
    for (A) evidences of indebtedness issued or fully guaranteed by the United
    States of America and having a maturity of not more than one year from the
    date of acquisition, (B) in certificates of deposit, notes, acceptances and
    repurchase agreements having a maturity of not more than one year from the
    date of acquisition issued by a bank organized in the United States having
    capital, surplus and undivided profits of at least $500,000,000, (C) in investment-grade
    commercial paper having a maturity of not more than one year from the date
    of acquisition, and (D) in money market accounts sponsored by banks and other
    financial institutions, provided that the investments consist principally
    of the types of investments described in clauses (A), (B), or (C) above; or
    (iv) make any investment not directly related to the Business.

  (e)   Expenses. The Company
    shall pay to SDS Capital Partners (“SDS Capital”) at the
    Closing, reimbursement for the out-of-pocket expenses reasonably incurred
    by SDS Capital, its affiliates, and its or their advisors in connection with
    the negotiation, preparation, execution and delivery of this Agreement and
    the other agreements to be executed in connection herewith, including, without
    limitation, such advisors’ reasonable due diligence and attorneys’
    fees and expenses, up to an aggregate of $35,000 (the “Expenses”).
    The Company has heretofore paid $15,000 toward the Expenses of the Purchasers.
    At the Closing, any excess Expenses will be paid by delivery by the Company
    of a Company check of immediately available funds or wire transfer to SDS
    Capital. In addition, from time to time thereafter, upon SDS Capital’s
    written request, the Company shall pay to SDS Capital such additional Expenses,
    if any, not covered by such payment, in connection with the negotiation, preparation,
    execution and delivery of this Agreement. In the event the Purchasers expect
    their actual out-of-pocket expenses to exceed $35,000, the Purchasers shall
    seek approval from the Company (not to be unreasonably withheld or delayed)
    in advance of incurring any such additional expenses, and any such approved
    expenses shall be reimbursed by the Company.

  (f)   Financial Information.
    Until a Purchaser transfers, assigns or sells all of its Securities, the Company
    shall notify such Purchaser:  (i) within ten (10) days of filing
    with the SEC, its Annual Report on Form 10-K, its Quarterly Reports on Form
    10-Q, its proxy statements and any Current Reports on Form 8-K; and (ii) within
    one (1) day after release all press releases issued by the Company or any
    of its Subsidiaries.

  (g)   Reservation of Shares.
    The Company shall at all times have authorized and reserved for the purpose
    of issuance a sufficient number of shares of Common Stock to provide for the
    full conversion of the outstanding Preferred Shares and issuance of the Conversion
    Shares in connection therewith and the full exercise of the Warrants and the
    issuance of the Warrant Shares in connection therewith, in each case to the
    extent required by the Certificate of Designation and the Warrants.

  (h)   Listing. The Company shall
    have filed a Notification Form: Listing of Additional Shares with respect
    to the Common Shares and the Warrant Shares with the NNM on or before the
    Closing. From the time that such listing form has been accepted and thereafter,
    the Company shall maintain, so long as any Purchaser (or any of their affiliates)
    own any Securities, the listing of all Conversion Shares and Warrant Shares
    from time to time issuable upon conversion of the Preferred Shares and exercise
    of the Warrants on each national securities exchange or automated quotation
    system on which shares of Common Stock are currently listed. The Company will
    use its reasonable best efforts to continue the listing and trading of its
    Common Stock on the NNM, the New York Stock Exchange (“NYSE”),
    the American Stock Exchange (“AMEX”) or the Nasdaq SmallCap
    Market (the “SmallCap”) and will comply in all material
    respects with the reporting, filing and other obligations under the bylaws
    or rules of the NASD and such exchanges, as applicable. The Company shall
    promptly provide to each holder of Preferred Shares and/or Warrants copies
    of any notices it receives regarding the continued eligibility of the Common
    Stock for trading on the NNM or, if applicable, any securities exchange or
    automated quotation system on which securities of the same class or series
    issued by the Company are then listed or quoted, if any.

16

  (i)   Corporate Existence. So long as a Purchaser
    beneficially owns any Securities, the Company shall maintain its corporate
    existence, and in the event of a merger, consolidation or sale of all or substantially
    all of the Company’s assets, the Company shall ensure that the surviving
    or successor entity in such transaction assumes the Company’s obligations
    hereunder and under the Certificate of Designation, the Warrants and the agreements
    and instruments entered into in connection herewith regardless of whether
    or not the Company would have had a sufficient number of shares of Common
    Stock authorized and available for issuance in order to effect the conversion
    of all Preferred Shares and exercise in full of all Warrants outstanding as
    of the date of such transaction. Notwithstanding the foregoing, the Company
    covenants and agrees that it will not engage in any merger, consolidation
    or sale of all or substantially all of its assets at any time prior to the
    effectiveness of the Registration Statement required to be filed pursuant
    to the Registration Rights Agreement without providing each Purchaser with
    written notice of such transaction at least 30 days prior to the consummation
    of such transaction.

  (j)   No Integrated Offerings.
    The Company shall not make any offers or sales of any security (other than
    the Securities) under circumstances that would require registration of the
    Securities being offered or sold hereunder under the Securities Act or cause
    this offering of the Securities to be integrated with any other offering of
    securities by the Company for purposes of any stockholder approval provision
    applicable to the Company or its securities.

  (k)   Legal Compliance. The
    Company shall conduct its business and the business of its subsidiaries in
    compliance with all laws, ordinances or regulations of governmental entities
    applicable to such businesses, except where the failure to do so would not
    have a Material Adverse Effect.

  (l)   Redemptions and Dividends.
    So long as any Purchaser beneficially owns any Preferred Shares, the Company
    shall not, without first obtaining the written approval of the holders of
    a majority of the Preferred Shares then outstanding, repurchase, redeem, or
    declare or pay any cash dividend or distribution on, any shares of capital
    stock of the Company; provided, however, that the foregoing shall not prohibit
    the Company from repurchasing, redeeming or declaring or paying cash dividends
    or distributions on Preferred Shares provided that any such repurchases, redemptions,
    dividends and distributions are made solely in accordance with the terms of
    such Preferred Shares as in effect on the date hereof.

17

  (m)   Information. The Company will furnish
    to each Purchaser, so long as it holds any Preferred Shares, within 10 days
    of the filing with the SEC of its annual reports on Form 10-K, a certificate
    of the President, a Vice President or a senior financial officer of the Company
    stating that, based upon such examination or investigation and review of this
    Agreement as in the opinion of the signer is necessary to enable the signer
    to express an informed opinion with respect thereto, neither the Company nor
    any of its Subsidiaries is or has during such period been in default in the
    performance or observance of any of the terms, covenants or conditions hereof,
    or, if the Company or any of its Subsidiaries shall be or shall have been
    in default, specifying all such defaults, and the nature and period of existence
    thereof, and what action the Company or such Subsidiary has taken, is taking
    or proposes to take with respect thereto. The Company will keep at its principal
    executive office a true copy of this Agreement (as at the time in effect),
    and cause the same to be available for inspection at such office during normal
    business hours and upon reasonable notice by any holder of Securities or any
    prospective transferee of Securities designated by a holder thereof.

  (n)   Inspection of Properties and
    Books. So long as any Purchaser shall hold any Securities, such Purchaser
    and its representatives and agents (collectively, the “Inspectors”)
    shall have the right, at such Purchaser’s expense during normal business
    hours and upon reasonable notice, to visit and inspect any of the properties
    of the Company and of its Subsidiaries, to examine the books of account and
    records of the Company and of its Subsidiaries, to make or be provided with
    copies and extracts therefrom, to discuss the affairs, finances and accounts
    of the Company and of its Subsidiaries with, and to be advised as to the same
    by, its and their officers, employees and independent public accountants (and
    by this provision the Company authorizes such accountants to discuss such
    affairs, finances and accounts, whether or not a representative of the Company
    is present) all at such reasonable times and intervals and to such reasonable
    extent as such Purchaser may desire; provided, however, that each Inspector
    shall hold in confidence and shall not make any disclosure (except to such
    Purchaser) of any such information which the Company determines in good faith
    to be confidential, and of which determination the Inspectors are so notified,
    unless (a) the disclosure of such information is necessary to avoid or correct
    a misstatement or omission in any Registration Statement filed pursuant to
    the Registration Rights Agreement, (b) the release of such information is
    ordered pursuant to a subpoena or other order from a court or government body
    of competent jurisdiction, or (c) such information has been made generally
    available to the public other than by disclosure in violation of this or any
    other agreement. Each Purchaser agrees that it shall, upon learning that disclosure
    of such information is sought in or by a court or governmental body of competent
    jurisdiction or through other means, give prompt notice to the Company and
    allow the Company, at its expense, to undertake appropriate action to prevent
    disclosure of, or to obtain a protective order for, the information deemed
    confidential.

  (o)   Issuance Limitation. If
    the Company is prohibited by Rule 4350 of the NASD or any successor or similar
    rule, or the rules of any other securities exchange or electronic trading
    system on which the Common Stock is then listed or traded (a “Triggering
    Event”), from issuing all of the shares of Common Stock issuable
    upon complete conversion of the Preferred Shares and complete exercise of
    the Warrants (without giving effect to the limitations on conversion and exercise
    contained in Article IV.C of the Certificate of Designations and Section 7(g)
    of the Warrants), the Company shall immediately notify the holders of such
    Triggering Event and, within a period of five (5) days after the occurrence
    of such Triggering Event, purchase from each holder of the Preferred Shares,
    at a per share purchase price equal to the greater of (i) the amount by which
    the Market Price (as defined below) exceeds the then applicable Conversion
    Price and (ii) an amount equal to the then applicable Conversion Price multiplied
    by 125% (the “Per Share Price”), such whole number of Preferred
    Shares such that the Common Stock issuable upon complete conversion of the
    Preferred Shares and complete exercise of the Warrants (without giving effect
    to the limitations on conversion and exercise contained in Article IV.C of
    the Certificate of Designations and Section 7(g) of the Warrants) is no longer
    prohibited by Rule 4350 of the NASD (or any successor or similar rule) or
    the rules of any other securities exchange or electronic trading system on
    which the Common Stock is then listed or traded. In the event that Company
    fails to pay all or any portion of the Per Share Price in accordance with
    this Section 4(o), the Company shall immediately deliver to each holder of
    Preferred Shares to which any portion of the Per Share Price is due and payable,
    a promissory note, payable upon demand, in a principal amount equal to the
    amount of the Per Share Price that such holder is owed in accordance with
    this Section 4(o), and otherwise in form and substance satisfactory to such
    holder. For the sake of clarity, in the event that the Conversion Price equals
    or exceeds the Market Price at any time this Section 4(o) is applicable, the
    Per Share Price shall be an amount equal to the then applicable Conversion
    Price multiplied by 125%. Any promissory note issued by the Company in accordance
    with this Section 4(o) shall bear interest at a rate equal to the lesser of
    15% per annum (calculated on a 360 day a year basis) and the highest rate
    permitted by applicable law.

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  For purposes of this Section 4(o), the term "Market Price,"
    as of any date, (i) means the average closing bid price for the Common Stock
    as reported on the NNM by Bloomberg Financial Markets ("Bloomberg")
    or other nationally recognized reporting service, at the option of the holder
    hereof, for the five (5) consecutive trading days immediately preceding such
    date, or (ii) if the NNM is not the principal trading market for the shares
    of Common Stock, the average of the reported bid prices reported by Bloomberg
    or such other nationally recognized reporting service on the principal trading
    market for the Common Stock during the same period, or, if there is no bid
    price for such period, the last sales price reported by Bloomberg or such
    service for such period, or (iii) if the foregoing do not apply, the last
    bid price of such security in the over-the-counter market on the pink sheets
    for such security as reported by Bloomberg or such service, or if no bid price
    is so reported for such security, the last sale price of such security as
    reported by Bloomberg or such service, or (iv) if market value cannot be calculated
    as of such date on any of the foregoing bases, the Market Price shall be the
    average fair market value as reasonably determined by an investment banking
    firm selected by the Company and reasonably acceptable to the holder, with
    the costs of the appraisal to be borne by the Company.

  (p)   Waivers and Consents. Prior to the
    effectiveness of any Registration Statement filed in accordance with Section
    2(a) of the Registration Rights Agreement, the Company shall have obtained
    proper waivers from any security holders having registration rights.

  (q)   Confidential Agreement.
    Except for any disclosure required by applicable law or rules of the SEC or
    NASD, the Company and each Purchaser will, and will direct its respective
    representatives to, hold in confidence all information concerning this Agreement
    and the placement of shares hereunder until the earlier of such time as (i)
    the Company has made a public announcement concerning the Agreement and the
    placement of shares hereunder or (ii) this Agreement is terminated.

19

  

5.   TRANSFER AGENT INSTRUCTIONS.

  (a)   The Company shall instruct its transfer agent
    to issue certificates (subject to the legend and other provisions hereof and
    in the Certificate of Designation and the Warrants), registered in the name
    of each Purchaser or its nominee, for the Conversion Shares and the Warrant
    Shares in such amounts as specified from time to time by such Purchaser to
    the Company upon conversion of the Preferred Shares or exercise of the Warrants,
    as applicable. To the extent and during the periods provided in Sections 2(f)
    and 2(g) of this Agreement, all such certificates shall bear the restrictive
    legend specified in Section 2(g) of this Agreement.

  (b)   The Company warrants that no
    instruction other than such instructions referred to in this Section 5, the
    Registration Rights Agreement and stop transfer instructions to give effect
    to Section 2(f) or 2(g) hereof, will be given by the Company to its transfer
    agent and that the Securities shall otherwise be freely transferable on the
    books and records of the Company as and to the extent provided in this Agreement
    and the Registration Rights Agreement. Nothing in this Section shall affect
    in any way each Purchaser’s obligations and agreement set forth in Section
    2(g) hereof to resell the Securities pursuant to an effective registration
    statement or under an exemption from the registration requirements of applicable
    securities law.

  (c)   If any Purchaser provides the
    Company and the transfer agent with an opinion of counsel, which opinion of
    counsel shall be in form, substance and scope customary for opinions of counsel
    in comparable transactions, to the effect that the Securities have been sold
    or transferred pursuant to an exemption from registration, or any Purchaser
    provides the Company with an opinion of counsel, which opinion of counsel
    shall be in form, substance and scope customary for opinions of counsel in
    comparable transactions and reasonably acceptable to the Company, to the effect
    that such Securities may be sold under Rule 144(k), the Company shall permit
    the transfer and, in the case of the Conversion Shares and Warrant Shares,
    promptly instruct its transfer agent to issue one or more certificates in
    such name and in such denominations as specified by such Purchaser.

6.   CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL.

  The obligation of the Company hereunder to issue and sell
    the Units to each Purchaser hereunder is subject to the satisfaction, at or
    before the Closing, of each of the following conditions thereto, provided
    that these conditions are for the Company’s sole benefit and may be
    waived by the Company at any time in its sole discretion.

  (a)   Each Purchaser shall have executed
    such Purchaser’s Execution Page to this Agreement and the Registration
    Rights Agreement and delivered executed copies of the same to the Company
    via facsimile, to be followed with originals sent via overnight mail.

  (b)   Each Purchaser shall have delivered
    such Purchaser’s Purchase Price for the Units being purchased at the
    Closing in accordance with Section 1(b) above.

  (c)   The representations and warranties
    of each Purchaser shall be true and correct as of the date when made and as
    of the Closing Date as though made at that time (except for representations
    and warranties that speak as of a specific date, which representations and
    warranties shall be true and correct as of such date), and such Purchaser
    shall have performed, satisfied and complied in all material respects with
    the covenants, agreements and conditions required by this Agreement to be
    performed, satisfied or complied with by such Purchaser at or prior to the
    Closing Date.

20

  (d)   No statute, rule, regulation, executive order,
    decree, ruling or injunction shall have been enacted, entered, promulgated
    or endorsed by any court or governmental authority of competent jurisdiction
    or any self-regulatory organization having authority over the matters contemplated
    hereby which prohibits the consummation of any of the transactions contemplated
    by this Agreement.

  
    (e)   The Company shall have either (i) received
      the Nasdaq Waiver Letter and shall have provided the notice to its shareholders
      required by Rule 4350(i)(2)(B) promulgated by the NASD or (ii) received
      shareholder approval of the transaction contemplated hereby and by the other
      Transaction Documents.

  

  7.   CONDITIONS TO EACH PURCHASER’S
    OBLIGATION TO PURCHASE. The obligation of each Purchaser hereunder to
    purchase the Units to be purchased by it at the Closing is subject to the
    satisfaction, at or before the Closing Date, of each of the following conditions,
    provided that such conditions are for such Purchaser’s sole benefit
    and may be waived by such Purchaser at any time in such Purchaser’s
    sole discretion:

  (a)   The Company shall have executed this Agreement,
    the Warrants and the Registration Rights Agreement, and delivered executed
    original copies of the same to such Purchaser.

  (b)   The Certificate of Designation
    shall have been filed and accepted for filing with the Secretary of State
    of the State of Delaware and a copy thereof certified by the Secretary of
    State of Delaware shall have been delivered to such Purchaser.

  (c)   The Company shall have delivered
    to such Purchaser duly executed certificates and Warrants (each in such denominations
    as such Purchaser shall request) representing the Preferred Shares and Warrants
    being so purchased by such Purchaser at the Closing in accordance with Section
    1(b) above.

  (d)   The Common Stock shall be authorized
    for quotation and listed on the NNM and trading in the Common Stock (or on
    the NNM generally) shall not have been suspended by the SEC or the NNM.

  (e)   The representations and warranties
    of the Company shall be true and correct as of the date when made and as of
    the Closing Date as though made at that time (except for representations and
    warranties that speak as of a specific date, which representations and warranties
    shall be true and correct as of such date), and the Company shall have performed,
    satisfied and complied in all material respects with the covenants, agreements
    and conditions required by this Agreement to be performed, satisfied or complied
    with by the Company at or prior to the Closing Date. The Company shall have
    delivered for the benefit of the Purchasers, a certificate, executed by the
    Chief Financial Officer of the Company after reasonable investigation, dated
    as of the Closing Date to the foregoing effect and as to such other matters
    as may reasonably be requested by such Purchaser prior to the Closing.

21

  

  

  (f)   No statute, rule, regulation,
    executive order, decree, ruling, injunction, action or proceeding shall have
    been enacted, entered, promulgated or endorsed by any court or governmental
    authority of competent jurisdiction or any self-regulatory organization having
    authority over the matters contemplated hereby which questions the validity
    of, challenges or prohibits the consummation of, any of the transactions contemplated
    by this Agreement.

  
    (g)   Each Purchaser shall have received an opinion
      of the Company’s counsel, dated as of the Closing Date, in form, scope
      and substance reasonably satisfactory to the Purchaser and in substantially
      the form of Exhibit D attached hereto.

    (h)   There shall have been no material
      adverse changes and no material adverse developments in the business, properties,
      operations, prospects, financial condition or results of operations of the
      Company and its subsidiaries, taken as a whole, since the date hereof, and
      no information, of which the Purchasers are not currently aware, shall come
      to the attention of the Purchasers that is materially adverse to the Company.

    (i)   Each Purchaser shall have received
      a copy of resolutions, duly adopted by the Board of Directors of the Company,
      which shall be in full force and effect at the time of the Closing, authorizing
      the consummation by the Company of the transactions contemplated hereby
      and by the Registration Rights Agreement and the Warrant, certified as such
      by the Secretary or Assistant Secretary of the Company.

  

8.   GOVERNING LAW; MISCELLANEOUS.

  (a)   Governing Law; Jurisdiction. This Agreement
    shall be governed by and construed in accordance with the laws of the State
    of Delaware applicable to contracts made and to be performed in the State
    of Delaware. The Company and each of the Purchasers irrevocably consent to
    the jurisdiction of the United States federal courts and the state courts
    located in the State of Delaware in any suit or proceeding based on or arising
    under this Agreement and irrevocably agree that all claims in respect of such
    suit or proceeding may be determined in such courts. The Company and each
    of the Purchasers irrevocably waives the defense of an inconvenient forum
    to the maintenance of such suit or proceeding. The Company and each of the
    Purchasers further agrees that service of process mailed by first class mail
    shall be deemed in every respect effective service of process in any such
    suit or proceeding. Nothing herein shall affect the right of the Company or
    any Purchaser to serve process in any other manner permitted by law. The Company
    and each of the Purchasers agrees that a final non-appealable judgment in
    any such suit or proceeding shall be conclusive and may be enforced in other
    jurisdictions by suit on such judgment or in any other lawful manner.

  (b)   Counterparts. This Agreement
    may be executed in two or more counterparts, all of which shall be considered
    one and the same agreement and shall become effective when counterparts have
    been signed by each party and delivered to the other party. This Agreement,
    once executed by a party, may be delivered to the other parties hereto by
    facsimile transmission of a copy of this Agreement bearing the signature of
    the party so delivering this Agreement. In the event any signature is delivered
    by facsimile transmission, the party using such means of delivery shall cause
    the manually executed Execution Page(s) hereof to be physically delivered
    to the other party within five (5) days of the execution hereof, provided
    that the failure to so deliver any manually executed Execution Page shall
    not affect the validity or enforceability of this Agreement.

22

  (c)   Headings. The headings of this Agreement
    are for convenience of reference and shall not form part of, or affect the
    interpretation of, this Agreement.

  (d)   Severability. If any provision
    of this Agreement shall be invalid or unenforceable in any jurisdiction, such
    invalidity or unenforceability shall not affect the validity or enforceability
    of the remainder of this Agreement or the validity or enforceability of this
    Agreement in any other jurisdiction.

  (e)   Entire Agreement; Amendments.
    This Agreement and the instruments referenced herein contain the entire understanding
    of the Purchasers, the Company, their affiliates and persons acting on their
    behalf with respect to the matters covered herein and therein and, except
    as specifically set forth herein or therein, neither the Company nor any Purchaser
    makes any representation, warranty, covenant or undertaking with respect to
    such matters. No provision of this Agreement may be waived other than by an
    instrument in writing signed by the party to be charged with enforcement and
    no provision of this Agreement may be amended other than by an instrument
    in writing signed by the Company and each Purchaser.

  (f)   Notices. Any notices required
    or permitted to be given under the terms of this Agreement shall be sent by
    certified or registered mail (return receipt requested) or delivered personally,
    by responsible overnight carrier or by confirmed facsimile, and shall be effective
    five (5) days after being placed in the mail, if mailed, or upon receipt or
    refusal of receipt, if delivered personally or by responsible overnight carrier
    or confirmed facsimile, in each case addressed to a party. The addresses for
    such communications shall be:

 

If to the Company: 

  Orchid BioSciences, Inc.

    4390 US Route One North

    Princeton, NJ 08540

    Telephone: (609) 750-2200

    Fax: (609) 750-6400

    Attn: Chief Financial Officer

  with a copy simultaneously transmitted by like
    means to (which transmittal shall not constitute notice hereunder):

  Mintz, Levin, Cohn, Ferris, Glovsky and Popeo,
    P.C.

    One Financial Center

    Boston, MA 02111

    Telephone: (617) 542-6000

    Fax: (617) 542-2241

    Attn: John J. Cheney, III, Esq.

  

23

  If to any Purchaser, to such address set forth under such
    Purchaser’s name on the Execution Page hereto executed by such Purchaser.

  Each party shall provide notice to the other
    parties of any change in address.

  (g)   Successors and Assigns.
    This Agreement shall be binding upon and inure to the benefit of the parties
    and their successors and assigns. Except as provided herein, the Company shall
    not assign this Agreement or any rights or obligations hereunder. Any Purchaser
    may assign or transfer the Securities pursuant to the terms of the Certificate
    of Designation, the Warrants and this Agreement or assign such Purchaser’s
    rights hereunder or thereunder to any other person or entity, except for direct
    competitors of the Company or persons or entities that have announced plans
    to compete directly with the Company. In addition, and notwithstanding anything
    to the contrary contained in this Agreement, the Registration Rights Agreement
    or the Warrants, the Securities may be pledged and all rights of any Purchaser
    under this Agreement or any other agreement or document related to the transactions
    contemplated hereby may be assigned, without further consent of the Company,
    to a bona fide pledgee in connection with such Purchaser’s margin or
    brokerage account, provided such pledge is consistent with applicable laws,
    rules and regulations, including those promulgated under the Securities Act.

  (h)   Third Party Beneficiaries.
    This Agreement is intended for the benefit of the parties hereto and their
    respective permitted successors and assigns, and is not for the benefit of,
    nor may any provision hereof be enforced by, any other person; provided that
    Section 4(e) may be enforced by SDS Capital.

  (i)   Survival. The representations
    and warranties of the Company and the agreements and covenants set forth in
    Sections 2, 3, 4, 5, 7 and 8 hereof shall survive the Closings notwithstanding
    any due diligence investigation conducted by or on behalf of any Purchaser.
    Moreover, none of the representations and warranties made by the Company herein
    shall act as a waiver of any rights or remedies any Purchaser may have under
    applicable U.S. federal or state securities laws.

  (j)   Publicity. Except as otherwise
    set forth in the Registration Rights Agreement, the Company and each Purchaser
    whose name shall appear therein shall have the right to approve before issuance
    any press releases, SEC or NASD filings, or any other public statements with
    respect to the transactions contemplated hereby; provided, however, that the
    Company shall be entitled, without the prior approval of the Purchasers, to
    make any press release or SEC or NASD filings with respect to such transactions
    as is required by applicable law and regulations (although the Purchasers
    shall be consulted by the Company in connection with any such press release
    which contains such Purchaser’s name and filing prior to its release
    and shall be provided with a copy thereof). Notwithstanding the foregoing
    or anything else contained herein to the contrary, the Placement Agents are
    entitled to place customary “tombstone advertisements” without
    such approval, so long as any such tombstone advertisement does not contain
    the name of any Purchaser.

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

24

  (l)   [Reserved.]

  (m)   Joint Participation in Drafting.
    Each party to this Agreement has participated in the negotiation and drafting
    of this Agreement, the Certificate of Designation, the Warrants and the Registration
    Rights Agreement. As such, the language used herein and therein shall be deemed
    to be the language chosen by the parties hereto to express their mutual intent,
    and no rule of strict construction will be applied against any party to this
    Agreement.

  (n)   Equitable Relief. The
    Company acknowledges that a breach by it of its obligations hereunder will
    cause irreparable harm to each Purchaser by vitiating the intent and purpose
    of the transactions contemplated hereby. Accordingly, the Company acknowledges
    that the remedy at law for a breach of its obligations hereunder (including,
    but not limited to, its obligations pursuant to Section 5 hereof) will be
    inadequate and agrees, in the event of a breach or threatened breach by the
    Company of the provisions of this Agreement (including, but not limited to,
    its obligations pursuant to Section 5 hereof), that each Purchaser shall be
    entitled, in addition to all other available remedies, to an injunction restraining
    any breach and requiring immediate issuance and transfer of the Securities,
    without the necessity of showing economic loss and without any bond or other
    security being required.

  (o)   Indemnification by Company.

  (i)   From and after the Closing, the
    Company shall hold harmless and indemnify each of the Purchasers from and
    against, and shall compensate and reimburse each of the Purchasers for, any
    damages (including reasonable attorneys fees) which are directly or indirectly
    suffered or incurred by any of the Purchasers or to which any of the Purchasers
    may otherwise become subject (regardless of whether or not such damages relate
    to any third-party claim) and which arise from or as a result of, or are directly
    or indirectly connected with any inaccuracy in or breach of any of the Company’s
    representations, warranties or covenants set forth herein.

  (ii)    In the event of the assertion
    or commencement by any person of any claim or legal proceeding with respect
    to which any Purchaser may have indemnification rights pursuant to Section
    8(o)(i), such Purchaser shall promptly notify the Company thereof in writing,
    but the failure to so notify the Company will not limit any Purchaser’s
    rights to indemnification hereunder, except to the extent the Company demonstrates
    that the defense of such action is prejudiced by the failure to so give such
    notice. Within a reasonable time of receipt of such notice, the Company may
    at its election participate at its own expense in the defense of such claim
    or assume the defense of any such claim with counsel chosen by the Company;
    provided, however, that if the defendants in any such action include any Purchaser
    and the Company and any such Purchaser shall have been advised by its counsel
    that there may be legal defenses available to the Purchasers which are different
    from or additional to and in conflict with or present a potential conflict
    with those available to the Company, such Purchaser shall have the right to
    employ its own counsel in such action, and in such event the reasonable fees
    and expenses of such counsel shall be borne by the Company, provided further,
    however, that the Company shall only be obligated to pay the reasonable fees
    and expenses of one counsel for all Purchasers. If the Company assumes the
    defense of such claim and no conflict exists permitting the Purchasers to
    retain separate counsel pursuant to the immediately preceding sentence, the
    Company shall have no obligation to pay any fees or expenses of any counsel
    retained any Purchaser or any other person entitled to indemnification hereunder
    in connection with such a claim. No Purchaser shall settle any claim in respect
    of which indemnification shall be sought hereunder without the prior written
    consent of the Company. The Company shall not be liable for any settlement
    of any action, claim, suit or proceeding (or for any related losses, damages,
    liabilities, costs or expenses) if such settlement is effectuated without
    its written consent, which shall not be unreasonably withheld.

25

  (p)   Knowledge. As used in this Agreement,
    the term “knowledge” with respect to the Company shall mean and
    include actual knowledge of the Company’s directors and executive officers
    and that knowledge that such directors and executive officers could have obtained
    in the management of his or her business affairs after making due inquiry
    and exercising due diligence which a prudent business person should have made
    or exercised, as applicable, with respect thereto.

  (q)   Additional Acknowledgement.
    Each Purchaser acknowledges that it has independently evaluated the merits
    of the transactions contemplated by this Agreement, the Certificate of Designation,
    the Registration Rights Agreement and the Warrants, that it has independently
    determined to enter into the transactions contemplated hereby and thereby,
    that it is not relying on any advice from or evaluation by any other Purchaser,
    and that it is not acting in concert with any other Purchaser in making its
    purchase of securities hereunder. The Purchasers and, to its knowledge, the
    Company agree that the Purchasers have not taken any actions that would deem
    such Purchasers to be members of a "group" for purposes of Section 13(d) of
    the Exchange Act.

 

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26

  IN WITNESS WHEREOF, the undersigned Purchaser and the Company
    have caused this Agreement to be duly executed as of the date first above
    written.

ORCHID BIOSCIENCES, INC.

  	 By:	 /s/ ANDREW P. SAVADELIS
	 	

	Name: 	Andrew P. Savadelis
	Title:	 Sr. Vice President, Finance and Chief Financial
        Officer

PURCHASER:

SDS MERCHANT FUND, LP

	 By:	 /s/ STEVE DERBY
	 	

	 	Name: Steve Derby
	 	 Title:  Managing Member

ADDRESS:

  53 Forest Ave., 2nd Floor

  Old Greenwich, CT 06870

  Attn: Steve Derby, Managing Member

Units: 400

  Purchase Price ($10,000 per Unit): $4,000,000

27

  IN WITNESS WHEREOF, the undersigned Purchaser
    and the Company have caused this Agreement to be duly executed as of the date
    first above written.

ORCHID BIOSCIENCES, INC.
  

  	 By:	 /s/ ANDREW P. SAVADELIS
	 	

	Name: 	Andrew P. Savadelis
	Title:	 Sr. Vice President, Finance and Chief Financial
        Officer

PURCHASER:

BAYSTAR CAPITAL II, L.P.
  

	 By:	 /s/ STEVE DERBY
	 	

	 	Name: Steve Derby
	 	 Title:  Portfolio Manager

ADDRESS

  80 E. Sir Francis Drake Blvd., Suite 2B

  Larkspur, CA 94939-1709

  Attn: Steve Derby, Portfolio Manager

Units: 300

  Purchase Price ($10,000 per Unit): $3,000,000

28

  IN WITNESS WHEREOF, the undersigned Purchaser
    and the Company have caused this Agreement to be duly executed as of the date
    first above written.

ORCHID BIOSCIENCES, INC.
  

  	 By:	 /s/ ANDREW P. SAVADELIS
	 	

	Name: 	Andrew P. Savadelis
	Title:	 Sr. Vice President, Finance and Chief Financial
        Officer

    Title:  Sr. Vice President, Finance and Chief Financial Officer

PURCHASER:

DMG LEGACY FUND LLC

	 By:	 /s/ THOMAS MCAULEY
	 	

	Name: 	Thomas McAuley
	Title:	 Chief Investment Officer

ADDRESS

  53 Forest Ave.

  Suite 202

  Old Greenwich, CT 06870

  Attn: Thomas McAuley, Chief Investment Officer

Units: 45

  Purchase Price ($10,000 per Unit): $450,000

29

  IN WITNESS WHEREOF, the undersigned Purchaser
    and the Company have caused this Agreement to be duly executed as of the date
    first above written.

ORCHID BIOSCIENCES, INC

  	 By:	 /s/ ANDREW P. SAVADELIS
	 	

	Name: 	Andrew P. Savadelis
	Title:	 Sr. Vice President, Finance and Chief Financial
        Officer

 PURCHASER:

DMG LEGACY INSTITUTIONAL FUND LLC

	 By:	 /s/ THOMAS MCAULEY
	 	

	Name: 	Thomas McAuley
	Title:	 Chief Investment Officer

ADDRESS

  53 Forest Ave.

  Suite 202

  Old Greenwich, CT 06870

  Attn: Thomas McAuley, Chief Investment Officer

Units: 418.5

  Purchase Price ($10,000 per Unit): $4,185,000

30

Back to Contents

IN WITNESS WHEREOF, the undersigned Purchaser and the Company have caused this Agreement to be duly executed as of the date first above written.

ORCHID BIOSCIENCES, INC.

	 By:	 /s/ ANDREW P. SAVADELIS
	 	

	Name: 	Andrew P. Savadelis
	Title:	 Sr. Vice President, Finance and Chief Financial
      Officer

PURCHASER:

DMG LEGACY INTERNATIONAL LTD.
  

	 By:	 /s/ THOMAS MCAULEY
	 	

	Name: 	Thomas McAuley
	Title:	 Chief Investment Officer

ADDRESS

  53 Forest Ave.

  Suite 202

  Old Greenwich, CT 06870

  Attn: Thomas McAuley, Chief Investment Officer

Units: 436.5

  Purchase Price ($10,000 per Unit): $4,365,000

31

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