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EXHIBIT 10.34    
  

 
 

SECURITY AGREEMENT    
  

        THIS SECURITY AGREEMENT (the "Security Agreement") is made and dated as of the 3rd day of September, 2002 by and between DIEDRICH COFFEE, INC., a Delaware
corporation ("Company"), and BANK OF THE WEST, doing business as UNITED CALIFORNIA BANK (the "Lender"). 

 
 

RECITALS    
  

        A.    Pursuant
to that certain Credit Agreement dated of even date herewith by and between Company and the Lender (as amended, extended and replaced from time to time, the
"Credit Agreement," and with capitalized terms not otherwise defined herein used with the meanings given such terms in the Credit Agreement) the Lender has agreed to extend credit to Company from time
to time. 

        B.    As
a condition precedent to the Lender's obligation to extend credit under the Credit Agreement and as security for the payment and performance of the Obligations,
Company is required to execute and deliver this Security Agreement, and to grant to the Lender and to create a security interest in certain property of Company, as hereinafter provided. 

        NOW,
THEREFORE, in consideration of the above Recitals and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto hereby
agree as follows: 

 
 

AGREEMENT    
  

        1.    Grant of Security Interest.    Company hereby pledges, assigns and grants to the Lender a security interest in
the property described in Paragraph 2 below (collectively and severally, the "Collateral") to secure payment and performance of the Obligations. 

        2.    Collateral.    The Collateral shall consist of all right, title and interest of Company in and to the following: 

        (a)  One
hundred percent (100%) of all shares of capital stock, now owned or hereafter acquired by the Company of each now existing and hereafter formed or acquired directly
owned Subsidiary of the Company, together with, in all cases, all new, substituted and additional securities at any time issued with respect thereto (collectively and severally, the "Pledged Shares")
with all the Pledged Shares in existence as of the date hereof being listed and described on Schedule 1 hereto); 

        (b)  All
now existing and hereafter arising rights of the holder of Pledged Shares with respect thereto, including, without limitation, all voting rights and all rights to
cash and noncash dividends and other distributions on account thereof; 

        (c)  All
now existing and hereafter arising accounts, chattel paper, documents, instruments, letter-of-credit rights, commercial tort claims, and
general intangibles (as those terms are defined in the California Uniform Commercial Code as in effect from time to time (the "Code")) of Company, whether or not arising out of or in connection with
the sale or lease of goods or the rendering of services, and all rights of Company now and hereafter arising in and to all security agreements, guaranties, leases and other writings securing or
otherwise relating to any such accounts, chattel paper, documents, instruments, letter-of-credit rights, commercial tort claims and general intangibles; 

        (d)  All
inventory of Company, now owned and hereafter acquired, wherever located, including, without limitation, all merchandise, goods and other personal property which are
held for sale or lease or leased by Company or to be furnished under a contract of service, all raw 

 

materials, work in process, materials used or consumed in Company's business and finished goods, all goods in which Company has an interest in mass or a joint or other interest or gifts of any kind
(including goods in which Company has an interest or right as consignee), and all goods which are returned to or repossessed by Company, together with all additions and accessions thereto and
replacements therefor and products thereof and documents therefor; 

        (e)  All
equipment of Company, now owned and hereafter acquired, wherever located, and all parts thereof and all accessions, additions, attachments, improvements,
substitutions and replacements thereto and therefor, including, without limitation, all machinery, tools, dies, blueprints, catalogues, computer hardware and software, furniture, furnishings and
fixtures; 

        (f)    All
now existing and hereafter acquired Computer Hardware and Software Collateral, Copyright Collateral, Patent Collateral, Trademark Collateral and Trade Secrets
Collateral (as those terms are defined in Paragraph 16 below) (collectively, the "Intellectual Property Collateral"); 

        (g)  All
deposit accounts, now existing and hereafter arising or established, maintained in Company's name with any financial institution, and any and all funds at any time
held therein and all certificates, instruments and other writings, if any, from time to time representing, evidencing or deposited into such accounts, and all interest, dividends, cash, instruments
and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the foregoing; provided, however, that the Collateral shall not
include any of the accounts maintained with the Lender in which Liquid Assets are being held pursuant to Paragraph 13(o) of the Credit Agreement; 

        (h)  All
of Company's right, title and interest in and to (but not Company's obligations under) all now existing and hereafter arising contracts and agreements to which
Company is party, including, without limitation, each of the agreements listed on Schedule 2 hereto, in each case as such agreements may be
amended, supplemented or otherwise modified from time to time (such agreements, as so amended, supplemented or modified, individually, an "Assigned Agreement," and, collectively, the "Assigned
Agreements"), including, without limitation, all rights of Company to receive moneys due and to become due under or pursuant to the Assigned Agreements, all rights of Company to receive proceeds of
any insurance, indemnity, warranty or guaranty with respect to the Assigned Agreements, all claims of Company for damages arising out of or for breach of or default under the Assigned Agreements, and
all rights of Company to terminate, amend, supplement or modify the Assigned Agreements, to perform thereunder and to compel performance and otherwise exercise all remedies thereunder; provided,
however, that with respect to any such contract or agreement where the grant of a security interest in Company's right, title and interest therein is prohibited by the terms thereof, or would give any
other party the right to terminate its obligations thereunder, or is not permitted because any necessary consent to such grant has not been obtained, the Collateral shall include only the rights of
Company to receive moneys due and to become due, if any, under or pursuant to such contract or agreement; 

        (i)    All
now existing and hereafter acquired books, records, writings, data bases, information and other property relating to, used or useful in connection with, embodying,
incorporating or referring to, any of the foregoing Collateral; 

        (j)    All
other property of Company now or hereafter in the possession, custody or control of the Lender, and all property of Company in which the Lender now has or hereafter
acquires a security interest; 

        (k)  All
now existing and hereafter acquired cash and cash equivalents held by Company not otherwise included in the foregoing Collateral; and 

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        (l)    All
products and proceeds of the foregoing Collateral. For purposes of this Security Agreement, the term "proceeds" shall have the meaning provided in the Code, and also
includes any voluntary or involuntary disposition, and all rights to payment, including return premiums, with respect to any insurance. 

Notwithstanding
anything herein to the contrary, in no event shall the Collateral include, and the Company shall not be deemed to have granted a security interest in, any of the Company's rights or
interests in any license, permit, contract or agreement (or in any Equipment leased or financed thereunder) to which the Company is a party or any of its rights or interests thereunder to the extent,
but only to the extent, that such a grant would, under the terms of such license, permit, contract or agreement or otherwise, result in a breach of the terms of, or constitute a default under any
license, permit, contract or agreement (other than to the extent that any such term would be rendered ineffective pursuant to Sections 9-401, 9-406(d), 9-407,
9-408 or 9-409 under the Code or any other applicable law (including the Bankruptcy Code) or principles of equity); provided,
that immediately upon the ineffectiveness, lapse or termination of any such provision, the Collateral shall include, and the Company shall be deemed to have granted a security interest in, all such
rights and interest as if such provision had never been in effect. 

        3.    Obligations.    The obligations secured by this Security Agreement shall consist of all Obligations of Company
under the Credit Agreement and each other Loan Document, in each case whether now existing or hereafter arising, voluntary or involuntary, whether or not jointly owed with others, direct or indirect,
absolute or contingent, liquidated or unliquidated, and whether or not from time to time decreased or extinguished and later increased, created or incurred. 

        4.    Representations and Warranties.    In addition to all representations and warranties of Company set forth in the
other Loan Documents, which are incorporated herein by this reference, Company hereby represents and warrants that: 

        (a)  Company
is the sole owner of and has good and marketable title to the Collateral (or, in the case of after-acquired Collateral, at the time Company acquires rights in
the Collateral, except as specifically disclosed on Schedule 5 hereto. 

        (b)  No
Person has (or, in the case of after-acquired Collateral, at the time Company acquires rights therein, will have) any right, title, claim or interest (by way of
security interest or other Lien or charge) in, against or to the Collateral other than as permitted by the Credit Agreement, except as specifically disclosed on  Schedule 5 hereto. 

        (c)  All
information heretofore, herein or hereafter supplied to the Lender by or on behalf of Company with respect to the Collateral is accurate and complete in all material
respects. 

        (d)  Company
has delivered to the Lender all instruments and chattel paper (in each case, in excess of $5,000.00) and other items of Collateral in which a security interest
is or may be perfected by possession, together with such additional writings, including, without limitation, assignments, with respect thereto as the Lender shall request. 

        (e)  The
Company is (or, in the case of after-acquired Pledged Shares, at the time the Company acquires rights therein will be) the record and beneficial owner of, and has
(and will have) good and marketable title to the Pledged Shares. The Pledged Shares have been (or will be) validly issued and are (or upon issuance will be) fully paid and non-assessable
and there are no (and in the future will be no) outstanding options, warrants or shareholder or other similar agreements with respect to the Pledged Shares. 

        (f)    All
of the trademarks of the Company registered or applied to be registered with the United States Patent and Trademark Office as of the date hereof are as set forth on  Schedule 3 hereto. 

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        5.    Covenants and Agreements of Company.    In addition to all covenants and agreements of Company set forth in the
other Loan Documents, which are incorporated herein by this reference, Company hereby agrees, at no cost or expense to the Lender: 

        (a)  To
do all acts (other than acts which are required to be done by the Lender) that may be necessary to maintain, preserve and protect the Collateral and the first
priority, perfected security interest of the Lender therein. 

        (b)  Not
to use or permit any Collateral to be used unlawfully or in violation of any provision of this Security Agreement, any other agreement with the Lender related
hereto, or any law, rule, regulation, order, writ, judgment, injunction, decree or award binding on Company or affecting any of the Collateral or any contractual obligation affecting any of the
Collateral. 

        (c)  To
pay promptly when due all taxes, assessments, charges, encumbrances and Liens now or hereafter imposed upon or affecting any Collateral. 

        (d)  To
appear in and defend any action or proceeding which may affect its title to or the Lender's interest in the Collateral. 

        (e)  Not
to surrender or lose possession of (other than to the Lender), sell, encumber, lease, rent, or otherwise dispose of or transfer any Collateral or right or interest
therein except as expressly provided herein and in the other Loan Documents, and to keep the Collateral free of all levies and security interests or other Liens or charges except as permitted by the
Credit Agreement or otherwise approved in writing by the Lender; provided, however, that, unless an Event of Default shall have occurred and be continuing, Company may, in the ordinary course of
business, sell or lease any Collateral (1) consisting of Inventory, or (2) in connection with the closing of a retail store or the sale of a retail store in accordance with  Paragraph 13(p) of the Credit Agreement. 

        (f)    To
account fully for and promptly deliver to the Lender, in the form received, all documents, chattel paper in excess of $5,000.00, all stock certificates evidencing
Pledged Shares, instruments in excess of $5,000.00 and agreements constituting Collateral hereunder, and all proceeds of the Collateral received, all endorsed to the Lender or in blank, as requested
by the Lender, and accompanied by such stock powers as appropriate and until so delivered all such documents, instruments, agreements and proceeds shall be held by Company in trust for the Lender,
separate from all other property of Company. 

        (g)  To
keep separate, accurate and complete records of the Collateral and to provide the Lender with such records and such other reports and information relating to the
Collateral as the Lender may reasonably request from time to time. 

        (h)  To
give the Lender thirty (30) days prior written notice of any change in Company's chief place of business or legal name or trade name(s) or style(s) referred to
in Paragraph 11 below. 

        (i)    To
keep the records concerning the Collateral at the location(s) referred to in Paragraph 11 below and not to remove such records from such location(s) without
the prior written consent of the Lender. 

        (j)    To
keep the Collateral at the warehouse location(s) referred to in Paragraph 11 below and not to remove the Collateral from such warehouse location(s) without the
prior written consent of the Lender. 

        (k)  To
keep the Collateral in good condition and repair and not to cause or permit any waste or unusual or unreasonable depreciation of the Collateral. 

        6.    Authorized Action by Secured Party.    Company hereby agrees that following the occurrence and during the
continuance of an Event of Default, without presentment, notice or demand, and without 

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affecting or impairing in any way the rights of the Lender with respect to the Collateral, the obligations of Company hereunder or the Obligations, the Lender may, but shall not be obligated to and
shall incur no liability to Company or any third party for failure to, take any action which Company is obligated by this Security Agreement to do and to exercise such rights and powers as Company
might exercise with respect to the Collateral, and Company hereby irrevocably appoints the Lender as its attorney-in-fact to exercise such rights and powers, including without
limitation, to: 

        (a)  Collect
by legal proceedings or otherwise and endorse, receive and receipt for all dividends, interest, payments, proceeds and other sums and property now or hereafter
payable on or on account of the Collateral. 

        (b)  Enter
into any extension, reorganization, deposit, merger, consolidation or other agreement pertaining to, or deposit, surrender, accept, hold or apply other property in
exchange for the Collateral. 

        (c)  Insure,
process and preserve the Collateral. 

        (d)  Transfer
the Collateral to its own or its nominee's name. 

        (e)  Make
any compromise or settlement, and take any action it deems advisable, with respect to the Collateral. 

        (f)    Subject
to the provisions of Paragraph 7 below, notify any obligor on any Collateral to make payment directly to the Lender. 

Company
hereby grants to the Lender an exclusive, irrevocable power of attorney, with full power and authority in the place and stead of Company to take all such action permitted under this
Paragraph 6; provided, however, that the Lender agrees that it shall not exercise such power of attorney unless there shall have occurred and be continuing an Event of Default. Company agrees
to reimburse the Lender upon demand for any costs and expenses, including, without limitation, reasonable attorneys' fees, the Lender may incur while acting as Company's
attorney-in-fact hereunder, all of which costs and expenses are included in the Obligations secured hereby. It is further agreed and understood between the parties hereto that
such care as the Lender gives to the safekeeping of its own property of like kind shall constitute reasonable care of the Collateral when in the Lender's possession; provided, however, that the Lender
shall not be required to make any presentment, demand or protest, or give any notice and need not take any action to preserve any rights against any prior party or any other person in connection with
the Obligations or with respect to the Collateral. 

        7.    Collection of Collateral Payments.    

        (a)  Company
shall, at its sole cost and expense, use commercially reasonable best efforts to obtain payment, when due and payable, of all sums due or to become due with
respect to any Collateral ("Collateral Payments" or a "Collateral Payment"), including, without limitation, the taking of such action with respect thereto as the Lender may reasonably request, or, in
the absence of such request, as Company may reasonably deem advisable; provided, however, that Company shall not, without the prior written consent of the Lender, grant or agree to any rebate, refund,
compromise or extension with respect to any Collateral Payment or accept any prepayment on account thereof other than in the ordinary course of Company's business. Upon the request of the Lender made
at any time following the occurrence and during the continuance of an Event of Default, Company will notify and direct any party who is or might become obligated to make any Collateral Payment, to
make payment thereof to such accounts as the Lender may direct in writing and to execute all instruments and take all action required by the Lender to ensure the rights of the Lender in any Collateral
subject to the Federal Assignment of Claims Act of 1940, as amended. 

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        (b)  Upon
the request of the Lender made at any time following the occurrence and during the continuance of an Event of Default, Company will, forthwith upon receipt,
transmit and deliver to the Lender, in the form received, all cash, checks, drafts and other instruments for the payment of money (properly endorsed where required so that such items may be collected
by the Lender) which may be received by Company at any time as payment on account of any Collateral Payment and if such request shall be made, until delivery to the Lender, such items will be held in
trust for the Lender and will not be commingled by Company with any of its other funds or property. Thereafter, the Lender is hereby authorized and empowered to endorse the name of Company on any
check, draft or other instrument for the payment of money received by the Lender on account of any Collateral Payment if the Lender believes such endorsement is necessary or desirable for purposes of
collection. 

        (c)  Company
will indemnify and save harmless the Lender from and against all reasonable liabilities and expenses on account of any adverse claim asserted against the Lender
relating to any moneys received by the Lender on account of any Collateral Payment and such obligation of Company shall continue in effect after and notwithstanding the discharge of the Obligations
and the release of the security interest granted in Paragraph 1 above. 

        8.    Additional Covenants Regarding Intellectual Property Collateral.    

        (a)  Company
shall not, unless it shall either reasonably and in good faith determine that such Collateral is of negligible economic value to Company or that there is a valid
purpose to do otherwise: 

        (1)  Permit
any Patent Collateral to lapse or become abandoned or dedicated to the public or otherwise be unenforceable; 

        (2)  (i) Fail
to continue to use any of the Trademark Collateral in order to maintain all of the Trademark Collateral in full force free from any claim of abandonment
for non-use, (ii) fail to maintain as in the past the quality of products and services offered under all of the Trademark Collateral, (iii) fail to employ all of the
Trademark Collateral registered with any Federal or state or foreign authority with an appropriate notice of such registration, (iv) adopt or use any other Trademark which is confusingly
similar or a colorable imitation of any of the Trademark Collateral, (v) use any of the Trademark Collateral registered with any Federal or state or foreign authority except for the uses for
which registration or application for registration of all of the Trademark Collateral has been made, or (vi) do or permit any act or knowingly omit to do any act whereby any of the Trademark
Collateral may lapse or become invalid or unenforceable; or 

        (3)  Do
or permit any act or knowingly omit to do any act whereby any of the Copyright Collateral or any of the Trade Secrets Collateral may lapse or become invalid or
unenforceable or placed in the public domain except upon expiration of the end of an unrenewable term of a registration thereof. 

        (b)  Company
shall notify the Lender immediately if it knows, or has reason to know, that any application or registration relating to any material item of the Intellectual
Property Collateral may become abandoned or dedicated to the public or placed in the public domain or invalid or unenforceable, or of any adverse determination or development (including the
institution of, or any such determination or development in, any proceeding in the United States Patent and Trademark Office, the United States Copyright Office or any foreign counterpart thereof or
any court) regarding Company's ownership of any of the Intellectual Property Collateral, its right to register the same or to keep and maintain and enforce the same. 

        (c)  In
no event shall Company or any of its agents, employees, designees or licensees file an application for the registration of any Intellectual Property Collateral with
the United States Patent 

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and Trademark Office, the United States Copyright Office or any similar office or agency in any other country or any. political subdivision thereof, unless it promptly informs the Lender, and upon
request of the Lender, executes and delivers any and all agreements, instruments, documents and papers as the Lender may reasonably request to evidence the Lender's security interest in such
Intellectual Property Collateral and the goodwill and general intangibles of Company relating thereto or represented thereby. 

        (d)  Company
shall, contemporaneously herewith, execute and deliver to the Lender such supplemental agreements for filing in the United States Patent and Trademark Office and
United States Copyright Office as the Lender may require and shall execute and deliver to the Lender any other document required to acknowledge or register or perfect the Lender's interest in any part
of the Intellectual Property Collateral. 

        9.    Administration of the Pledged Shares.    In addition to any provisions of this Security Agreement which govern
the administration of the Collateral generally, the following provisions shall govern the administration of the Pledged Shares: 

        (a)  Until
there shall have occurred and be continuing an Event of Default, the Company shall be entitled to vote or consent with respect to the Pledged Shares in any manner
not inconsistent with this Security Agreement or any document or instrument delivered or to be delivered pursuant to or in connection with any thereof and to receive all dividends paid with respect to
the Pledged Shares. If there shall have occurred and be continuing an Event of Default and the Lender shall have notified the Company that the Lender desires to exercise its proxy rights with respect
to all or a portion of the Pledged Shares, the Company hereby grants to the Lender an irrevocable proxy for the Pledged Shares pursuant to which proxy the Lender shall be entitled to vote or consent,
in its discretion, and in such event the Company agrees to deliver to the Lender such further evidence of the grant of such proxy as the Lender may request. 

        (b)  In
the event that at any time or from time to time after the date hereof, the Company, as record and beneficial owner of the Pledged Shares, shall receive or shall
become entitled to receive, any dividend or any other distribution whether in securities or property by way of stock split, spin-off, split-up or reclassification, combination
of shares or the like, or in case of any reorganization, consolidation or merger, and the Company, as record and beneficial owner of the Pledged Shares, shall thereby be entitled to receive securities
or property in respect of such Pledged Shares, then and in each such case, the Company shall deliver to the Lender and the Lender shall be entitled to receive and retain all such securities or
property as part of the Pledged Shares as security for the payment and performance of the Company Obligations; provided, however, that until there shall have occurred and be continuing an Event of
Default, the Company shall be entitled to retain any cash dividends paid on account of the Pledged Shares. 

        (c)  Upon
the occurrence of an Event of Default, the Lender is authorized to sell the Pledged Shares and, at any such sale of any of the Pledged Shares, if it deems it
advisable to do so, to restrict the prospective bidders or purchasers to persons or entities who (1) will represent and agree that they are purchasing for their own account, for investment, and
not with a view to the distribution or sale of any of the Pledged Shares; and (2) satisfy the offeree and purchaser requirements for a valid private placement transaction under
Section 4(2) of the Securities Act of 1933, as amended (the "Act"), and under Securities and Exchange Commission Release Nos. 33-6383; 34-18524; 35-22407;
39-700; IC-12264; AS-306, or under any similar statute, rule or regulation. The Company agrees that disposition of the Pledged Shares pursuant to any private sale
made as provided above may be at prices and on other terms less favorable than if the Pledged Shares were sold at public sale, and that the Lender has no obligation to delay the sale of any Pledged
Shares for public sale under the Act. The Company agrees that a private sale or sales made under the foregoing circumstances shall be deemed to have been made in a commercially 

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reasonable manner. In the event that the Lender elects to sell the Pledged Shares, or part of them, and there is a public market for the Pledged Shares, in a public sale the Company shall use its
commercially reasonable best efforts to register and qualify the Pledged Shares, or applicable part thereof, under the Act and all state Blue Sky or securities laws required by the proposed terms of
sale and all expenses thereof shall be payable by the Company, including, but not limited to, all costs of (i) registration or qualification of, under the Act or any state Blue Sky or
securities laws or pursuant to any applicable rule or regulation issued pursuant thereto, any Pledged Shares, and (ii) sale of such Pledged Shares, including, but not limited to, brokers' or
underwriters' commissions, fees or discounts, accounting and legal fees, costs of printing and other expenses of transfer and sale. 

        (d)  If
any consent, approval or authorization of any state, municipal or other governmental department, agency or authority should be necessary to effectuate any sale or
other disposition of the Pledged Shares, or any part thereof, the Company will execute such applications and other instruments as may be required in connection with securing any such consent, approval
or authorization, and will otherwise use its commercially reasonable best efforts to secure the same. 

        (e)  Nothing
contained in this Paragraph 9 shall be deemed to limit the other obligations of the Company contained in the Credit Agreement or this Security Agreement
and the rights of the Lender hereunder or thereunder. 

        10.    Remedies.    Upon the occurrence and during the continuance of an Event of Default, the Lender may, without
notice to or demand on Company and in addition to all rights and remedies available to the Lender with respect to the Obligations, at law, in equity or otherwise, do any one or more of the following: 

        (a)  Foreclose
or otherwise enforce the Lender's security interest in any manner permitted by law or provided for in this Security Agreement. 

        (b)  Sell,
lease or otherwise dispose of any Collateral at one or more public or private sales at the Lender's place of business or any other place or places, including,
without limitation, any broker's board or securities exchange, whether or not such Collateral is present at the place of sale, for cash or credit or future delivery, on such terms and in such manner
as the Lender may determine. 

        (c)  Recover
from Company all costs and expenses, including, without limitation, reasonable attorneys' fees (including the allocated cost of internal counsel), incurred or
paid by the Lender in exercising any right, power or remedy provided by this Subsidiary Security Agreement. 

        (d)  Require
Company to assemble the Collateral and make it available to the Lender at a place to be designated by the Lender. 

        (e)  Enter
onto property where any Collateral is located and take possession thereof with or without judicial process. 

        (f)    Prior
to the disposition of the Collateral, store, process, repair or recondition it or otherwise prepare it for disposition in any manner and to the extent the Lender
deems appropriate and in connection with such preparation and disposition, without charge, use any trademark, tradename, copyright, patent or technical process used by Company. 

Company
shall be given five (5) Business Days' prior notice of the time and place of any public sale or of the time after which any private sale or other intended disposition of Collateral is
to be made, which notice Company hereby agrees shall be deemed reasonable notice thereof. Upon any sale or other disposition pursuant to this Security Agreement, the Lender shall have the right to
deliver, assign and transfer to the purchaser thereof the Collateral or portion thereof so sold or disposed of. Each purchaser at any such sale or other disposition (including the Lender) shall hold
the Collateral free 

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from any claim or right of whatever kind, including any equity or right of redemption of Company and Company specifically waives (to the extent permitted by law) all rights of redemption, stay or
appraisal which it has or may have under any rule of law or statute now existing or hereafter adopted. 

        11.    Chief Place of Business; Collateral Location; Records Location.    Company represents that the state in which
it was organized and its chief place of business are as set forth on Schedule 4 attached hereto; that the only trade name(s) or style(s) used by
Company are set forth on said Schedule 4; and that, except as otherwise disclosed to the Lender in writing prior to the date hereof, the
Collateral and Company's records concerning the Collateral are located at its chief place of business. 

        12.    Waiver of Hearing.    Company expressly waives to the extent permitted under applicable law any constitutional
or other right to a judicial hearing prior to the time the Lender takes possession or disposes of the Collateral upon the occurrence and during the continuance of an Event of Default. 

        13.    Cumulative Rights.    The rights, powers and remedies of the Lender under this Security Agreement shall be in
addition to all rights, powers and remedies given to the Lender by virtue of any statute or rule of law, the Credit Agreement or any other agreement, all of which rights, powers and remedies shall be
cumulative and may be exercised successively or concurrently without impairing the Lender's security interest in the Collateral. 

        14.    Waiver.    Any forbearance or failure or delay by the Lender in exercising any right, power or remedy shall not
preclude the further exercise thereof, and every right, power or remedy of the Lender shall continue in full force and effect until such right, power or remedy is specifically waived in a writing
executed by the Lender. Company waives any right to require the Lender to proceed against any person or to exhaust any Collateral or to pursue any remedy in the Lender's power. 

        15.    Setoff.    Company agrees that the Lender may exercise its rights of setoff with respect to the Obligations in
the same manner as if the Obligations were unsecured. 

        16.    Intellectual Property Collateral.    For purposes of this Security Agreement, the following capitalized terms
shall have the following meanings: 

        "Computer Hardware and Software Collateral" means all of Company's right, title and interest in all now existing and hereafter created or
acquired: 

        (a)  Computer
and other electronic data processing hardware, integrated computer systems, central processing units, memory units, display terminals, printers, features,
computer elements, card readers, tape drives, hard and soft disk drives, cables, electrical supply hardware, generators, power equalizers, accessories and all peripheral devices and other related
computer hardware; 

        (b)  Software
programs (including both source code, object code and all related applications and data files), whether owned, licensed or leased, designed for use on the
computers and electronic data processing hardware described in subparagraph (a) above; 

        (c)  All
firmware associated therewith; 

        (d)  All
documentation (including flow charts, logic diagrams, manuals, guides and specifications) with respect to such hardware, software and firmware described in
subparagraph (a) through (c) above; and 

        (e)  All
rights with respect to all of the foregoing, including, without limitation, any and all of Company's copyrights, licenses, options, warranties, service contracts,
program services, test rights, renewal rights and indemnifications and any substitutions, replacements, additions or model conversions of any of the foregoing. 

        "Copyright Collateral" means copyrights and all semi-conductor chip product mask works of Company, whether statutory or common
law, registered or unregistered, now or hereafter in force 

9

 

throughout the world including, without limitation, all of Company's right, title and interest in and to all copyrights and mask works registered in the United States Copyright Office or anywhere
else in the world, and all applications for registration thereof, whether pending or in preparation, all copyright and mask work licenses, the right of Company to sue for past, present and future
infringements of any thereof, all rights of Company corresponding thereto throughout the world, all extensions and renewals of any thereof and all proceeds of the foregoing, including, without
limitation, licenses, royalties, income, payments, claims damages and proceeds of suit. 

        "Patent Collateral" means: 

        (a)  All
of Company's letters patent and applications for letters patent throughout the world, including all of Company's patent applications in preparation for filing
anywhere in the world and with the United States Patent and Trademark Office; 

        (b)  All
of Company's patent licenses; 

        (c)  All
reissues, divisions, continuations, continuations-in-part, extensions, renewals and reexaminations of any of the items described in  clauses (a) and (b); and 

        (d)  All
proceeds of, and rights associated with, the foregoing (including license royalties and proceeds of infringements suits), the right of Company to sue third parties
for past, present or future infringements of any patent or patent application of Company, and for breach of enforcement of any patent license, and all rights corresponding thereto throughout the
world. 

        "Trademark Collateral" means: 

        (a)  All
of Company's trademarks, trade names, corporate names, business names, fictitious business names, trade styles, service marks, certification makers, collective
marks, logos, other source of business identifiers, prints and labels on which any of the foregoing have appeared or appear, designs and general intangibles of a like nature (all of the foregoing
items in this clause (a) being collectively called a "Trademark"), now existing anywhere in the world or hereafter adopted or acquired, whether currently in use or not, all registrations and
recordings thereof and all applications in connection therewith, whether pending or in preparation for filing, including registrations, recordings and applications in the United States Patent and
Trademark Office or in any office or agency of the United States of America or any State thereof or any foreign country; 

        (b)  All
of Company's Trademark licenses; 

        (c)  All
reissues, extensions or renewals of any of the items described in clauses (a) and  (b); 

        (d)  All
of the goodwill of the business of Company connected with the use of, and symbolized by the items described in, clauses
(a) and (b), and 

        (e)  All
proceeds of, and rights of Company associated with, the foregoing, including any claim by Company against third parties for past, present or future infringement or
dilution of any Trademark, Trademark registration or Trademark license, or for any injury to the goodwill associated with the use of any such Trademark or for breach or enforcement of any Trademark
license. 

        "Trade Secrets Collateral" means common law and statutory trade secrets and all other confidential or proprietary or useful information
and all know-how obtained by or used in or contemplated at any time for use in the business of Company (all of the foregoing being collectively called a "Trade Secret"), whether or not
such Trade Secret has been reduced to a writing or other tangible form including all documents and things embodying, incorporating or referring in any way to such Trade Secret, all Trade Secret
licenses, including the right to sue for 

10

 

and to enjoin and to collect damages for the actual or threatened misappropriation of any Trade Secret and for the breach or enforcement of any such Trade Secret license. 

        17.    Financing Statements.    The Company hereby acknowledges and agrees that the Lender, in connection with the
filing of any UCC financing statements necessary to perfect or maintain the perfection of its Lien in the Collateral hereunder, may utilize a general description of the Collateral, such as "all now
owned and hereafter acquired personal property of the Company." 

        18    Governing Law.    This Security Agreement shall be governed by and construed in accordance with the internal
laws of the State of California. 

        IN
WITNESS WHEREOF, this Security Agreement is executed as of the day and year first above written. 

	 	 	DIEDRICH COFFEE, INC.,

a Delaware corporation
	

 	
 	

By:	

/s/  PHILIP G. HIRSCH      

	 	 	Name:	Philip G. Hirsch
	 	 	Its:	Chief Executive Officer
	

 	
 	

By:	

/s/  MATTHEW C. MCGUINNESS      

	 	 	Name:	Matthew C. McGuinness
	 	 	Its:	Executive Vice President and Chief Financial Officer
	

 	
 	

BANK OF THE WEST, doing business as

UNITED CALIFORNIA BANK
	

 	
 	

By:	

/s/  BRUCE YOUNG      

	 	 	Name:	Bruce Young
	 	 	Its:	Vice President

11

QuickLinks

EXHIBIT 10.34

SECURITY AGREEMENT

RECITALS

AGREEMENTExhibit 10.1

SECURITIES PURCHASE AGREEMENT

This Securities Purchase Agreement (this “Agreement”)
is dated as of September 23, 2002, among SuperGen, Inc., a Delaware corporation
(the “Company”), and the purchasers identified on the signature pages
hereto (each a “Purchaser” and collectively the “Purchasers”).

WHEREAS, subject to the terms and conditions set forth
in this Agreement and pursuant to Section 4(2) of the Securities Act (as
defined below), and Rule 506 promulgated thereunder, the Company desires to
issue and sell to the Purchasers, and the Purchasers, severally and not
jointly, desire to purchase from the Company, up to $7,000,000 of the Company’s
common stock, $0.001 par value per share, and certain Warrants (as defined
below), as more fully described in this Agreement.

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

ARTICLE I.

DEFINITIONS

                1.1           Definitions.  In addition to the terms defined elsewhere
in this Agreement, for all purposes of this Agreement, the following terms have
the meanings indicated in this Section 1.1:

 

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

“Business Day” means any day except Saturday, Sunday and any day
which shall be a federal legal holiday or a day on which banking institutions
in The City of New York are authorized or required by law or other governmental
action to close.

“Closing” means the closing of the purchase and sale of the
Securities pursuant to Section 2.1.

“Closing Date” means the date of the Closing, which shall occur
on the business day following the date hereof.

“Closing Price” means on any particular date
(a) the last reported closing bid price per share of Common Stock on such
date on the Trading Market (as reported by Bloomberg L.P. at 4:15 PM (New York
time)), or (b) if there is no such price on such date, then the closing bid
price on the Trading Market on the date nearest preceding such date (as
reported by Bloomberg L.P. at 4:15 PM (New York time) for the closing bid price
for regular session trading on such day), or (c)  if the Common Stock is
not then listed or quoted on the Trading Market and if prices for the Common
Stock are then reported in the “pink sheets” published by the National
Quotation Bureau Incorporated

 

 

(or a similar organization or agency succeeding to its functions of
reporting prices), the most recent bid price per share of the Common Stock so
reported, or (d) if the shares of Common Stock are not then publicly
traded the fair market value of a share of Common Stock as determined by an
appraiser selected in good faith by the Purchasers of a majority in interest of
the Common Stock.

“Commission” means the Securities and Exchange Commission.

“Common Stock”
means the common stock of the Company, $0.001 par value per share, and any
securities into which such common stock may hereafter be reclassified.

“Common Stock
Equivalents” means any securities of the Company or the Subsidiaries which
would entitle the holder thereof to acquire at any time Common Stock, including
without limitation, any debt, preferred stock, rights, options, warrants or
other instrument that is at any time convertible into or exchangeable for, or
otherwise entitles the holder thereof to receive, Common Stock.

“Company Counsel” means Wilson Sonsini Goodrich & Rosati PC,
counsel to the Company.

“Effective Date” means the date that the Registration Statement
is first declared effective by the Commission.

“Exchange Act” means the Securities Exchange Act of 1934, as
amended.

“Material Adverse Effect” shall have the meaning ascribed to
such term in Section 3.1(b).

“Per Share Purchase Price” means $2.50(as appropriately adjusted
for any stock splits, stock dividends, stock combinations and other similar
transactions of the Common Stock that occur after the date of this Agreement).

“Person” means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof)
or other entity of any kind.

“Proceeding” means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.

“Purchasers’ Counsel” means Feldman & Weinstein LLP with
offices located at 420 Lexington Avenue, New York, New York 10170-0002.

“Registration Statement” means a registration statement meeting
the requirements set forth in the Registration Rights Agreement and covering
the resale by the Purchasers of the Shares and the Warrant Shares.

2

 

“Registration Rights Agreement” means the Registration Rights
Agreement, dated as of the date of this Agreement, among the Company and the
Purchasers, in the form of Exhibit B hereto.

“Rule 144,” means Rule 144 promulgated by the Commission
pursuant to the Securities Act, as such Rules may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.

“Securities” means the Shares, the Warrants and the Warrant
Shares.

“Securities Act” means the Securities Act of 1933, as amended.

“Shares” means the shares of Common Stock issuable to the
Purchasers pursuant to this Agreement.

“Subscription Amount” means, as to each Purchaser, the amount
set forth below such Purchaser’s signature block on the signature pages hereto.

“Subsidiary” means a “significant subsidiary” as that term is
defined in Regulation S-X.

“Trading Day” means (i) a day on which the Common Stock is
traded on a Trading Market, or (ii) if the Common Stock is not listed on a
Trading Market, a day on which the Common Stock is traded in the
over-the-counter market, as reported by the OTC Bulletin Board, or (iii) if the
Common Stock is not quoted on the OTC Bulletin Board, a day on which the Common
Stock is quoted in the over-the-counter market as reported by the National
Quotation Bureau Incorporated (or any similar organization or agency succeeding
its functions of reporting prices); provided, that in the event that the Common
Stock is not listed or quoted as set forth in (i), (ii) and (iii) hereof, then
Trading Day shall mean a Business Day.

“Trading Market” means the following markets or exchanges on
which the Common Stock is listed or quoted for trading on the date in question:
American Stock Exchange, the New York Stock Exchange, the Nasdaq National
Market or The Nasdaq SmallCap Market.

“Transaction Documents” means this Agreement, the Registration
Rights Agreement, the Warrant and any other documents or agreements executed in
connection with the transactions contemplated hereunder.

“Warrants” means the Common Stock purchase warrants, in the form
of Exhibit A, issuable to the Purchasers at the Closing, which
Warrant Shares shall have an exercise price equal to, as to 66 2/3% of the
Warrant Shares subject to the Warrants issued to each Purchaser, $4.00, and as
to the remaining 33 1/3% of the Warrant Shares subject to the Warrants issued
to each Purchaser, $5.00, which Warrants shall be 

3

 

exercisable for a period of 4 years from their date of issuance subject
to redemption on an earlier date as set forth therein.

“Warrant Shares”
means the shares of Common Stock issuable upon exercise of the Warrants.

 

ARTICLE II.

PURCHASE AND SALE

            2.1        Closing. 
Subject to the terms and conditions set forth in this Agreement, at the
Closing the Company shall issue and sell to each Purchaser, and each Purchaser
shall, severally and not jointly with the other Purchasers, purchase from the
Company, (a) a number of Shares equal to the Subscription Amount set forth
below such Purchaser’s address on the signature pages to this Agreement divided
by the Per Share Purchase Price for such Subscription Amount, and (b) the
Warrants as determined in accordance with Section 2.2(a).  The Closing shall take place at the offices
of Purchasers’ Counsel or at such other location or time as the parties may
agree.

 

            2.2        Closing
Deliveries.

 

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

(i)            this Agreement duly executed by the
Company.

(ii)           an irrevocable instruction to the
Company’s transfer agent instructing it to issue a certificate evidencing a
number of Shares equal to the Subscription Amount indicated below such
Purchaser’s name on the signature page of this Agreement divided by the Per
Share Purchase Price, registered in the name of such Purchaser;

(iii)          a legal opinion of Company Counsel, in
form of Exhibit C hereto, addressed to the Purchasers;

(iv)          the Registration Rights Agreement duly
executed by the Company; and

(v)           the Warrants, registered in the name
of such Purchaser, pursuant to which such Purchaser shall have the right to
acquire up to the number of shares of Common Stock equal to 100% of the Shares
to be issued to such Purchaser at the Closing.

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

(i)            this Agreement duly executed by such
Purchaser;

(ii)           the Subscription Amount indicated
below such Purchaser’s address for notice on the signature page of this
Agreement, in United States dollars and in immediately available funds, by wire
transfer to the account designated by the Company on the signature page hereto;
and

4

 

(iii)          the Registration Rights Agreement duly
executed by such Purchaser.

(c)           all
representations and warranties of the other party contained herein shall remain
true and correct as of the Closing Date;

(d)           as
of the Closing Date, there shall have been no Material Adverse Effect (as
defined in Section 3.1(b)) with respect to the Company since the date hereof;
and

(e)           from
the date hereof to the Closing Date, trading in the Common Stock shall not have
been suspended by the Commission (except for any suspension of trading of
limited duration agreed to by the Company, which suspension shall be terminated
prior to the Closing), and, at any time prior to such Closing Date, trading in
securities generally as reported by Bloomberg Financial Markets shall not have
been suspended or limited, or minimum prices shall not have been established on
securities whose trades are reported by such service, or on any Trading  Market, nor shall a banking moratorium have
been declared either by the United States or New York State authorities, nor
shall there have occurred any material outbreak or escalation of hostilities or
other national or international calamity of such magnitude in its effect on, or
any material adverse change in, any financial market which, in each case, in
the reasonable judgment of the Investors, makes it impracticable or inadvisable
to purchase the Shares at the Closing.

ARTICLE III.

REPRESENTATIONS AND WARRANTIES

            3.1        Representations
and Warranties of the Company Except as set forth under the corresponding section
of the disclosure letter supplied by the Company to the Purchaser as of the
date of this Agreement (the “Disclosure Schedules”), the Company hereby makes
the following representations and warranties to each Purchaser as of the date
hereof:

 

(a)           Subsidiaries.  Schedule 3.1(a) lists the Company’s
Subsidiaries, none of which is material to the Company.  The Company owns, directly or indirectly,
all of the capital stock or other equity interests of each Subsidiary free and
clear of any lien, charge, security interest, encumbrance, right of first
refusal or other restriction (collectively, “Liens”), and all the issued
and outstanding shares of capital stock or other equity interests of each
Subsidiary are validly issued and are fully paid, non-assessable and free of
preemptive and similar rights.

(b)           Organization and Qualification.  The Company is an entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization, with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently conducted.  The Company is not in violation of any of
the provisions of its respective certificate or articles of incorporation,
bylaws or other organizational or charter documents.  The Company is duly qualified to conduct business and is in good
standing as a foreign corporation or other entity in each jurisdiction in which
the nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in good
standing, as the case may be, would not, individually or in the aggregate, (i)
adversely affect the legality, validity or enforceability of any Transaction
Document, (ii) have or

5

 

result in or be reasonably likely to have or result in
a material adverse effect on the results of operations, assets, business or
condition (financial or otherwise) of the Company and the Subsidiaries, taken
as a whole, or (iii) adversely impair the Company’s ability to perform in any
material respect on a timely basis its obligations under any Transaction Document
(any of (i), (ii) or (iii), a “Material Adverse Effect”).

(c)           Authorization; Enforcement.  The Company has the requisite corporate
power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to carry out
its obligations hereunder or thereunder. 
The execution and delivery of each of the Transaction Documents by the
Company and the consummation by it of the transactions contemplated hereby or
thereby have been duly authorized by all necessary action on the part of the
Company and no further consent or action is required by the Company, its Board
of Directors or stockholders in connection therewith.  Each Transaction Document has been (or upon delivery will have
been) duly executed by the Company and, when delivered in accordance with the
terms hereof, will constitute the valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, subject to laws
of general application relating to bankruptcy, insolvency and the relief of
debtors and rules of law governing specific performance, injunctive relief or
other equitable remedies, except that the indemnification provisions of the
Registration Rights Agreement may further be limited by principles of public
policy.

(d)           No Conflicts.  The execution, delivery and performance of
the Transaction Documents by the Company and the consummation by the Company of
the transactions contemplated hereby and thereby do not and will not (i)
conflict with or violate any provision of the Company’s or any Subsidiary’s
certificate or articles of incorporation, bylaws or other organizational or
charter documents, 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, acceleration or
cancellation (with or without notice, lapse of time or both) of, any agreement,
credit facility, debt or other instrument (evidencing a Company or Subsidiary
debt or otherwise) or other agreement to which the Company or any Subsidiary is
a party or by which any property or asset of the Company or any Subsidiary is
bound or affected, or (iii) result in a violation of any law, rule, regulation,
order, judgment, injunction, decree or other restriction of any court or
governmental authority to which the Company or a Subsidiary is subject
(including federal and state securities laws and regulations), or by which any
property or asset of the Company or a Subsidiary is bound or affected; except
in the case of each of clauses (ii) and (iii), such as would not, individually
or in the aggregate, have or reasonably be expected to result in a Material
Adverse Effect.

(e)           Filings, Consents and Approvals.  The Company is not required to obtain any
consent, waiver, authorization or order of, give any notice to, or make any
filing or registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution, delivery
and performance by the Company of the Transaction Documents, other than the
filing with the Commission of the Registration Statement, the application(s) to
each Trading Market for the listing of the

6

 

Shares and Warrant Shares for trading thereon in the
time and manner required thereby, and applicable Blue Sky filings
(collectively, the “Required Approvals”).

(f)            Issuance of the Securities.  The Securities are duly authorized and, when
issued and paid for in accordance with the Transaction Documents, will be duly
and validly issued, fully paid and nonassessable, free and clear of all
Liens.  The Company has reserved from
its duly authorized capital stock the maximum number of shares of Common Stock
issuable pursuant to this Agreement and the Warrants.

(g)           Capitalization.  The number of shares and type of all
authorized, issued and outstanding capital stock of the Company is set forth in
Schedule 3.1(g) of the Disclosure Schedules.  No securities of the Company are entitled to preemptive or
similar rights, and no Person has any right of first refusal, preemptive right,
right of participation, or any similar right to participate in the transactions
contemplated by the Transaction Documents. 
Except as disclosed in Schedule 3.1(g), there are no outstanding
options, warrants, script rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities, rights or obligations
convertible into or exercisable or exchangeable for, or giving any Person any
right to subscribe for or acquire, any shares of Common Stock, or contracts,
commitments, understandings or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock,
or securities or rights convertible into or exercisable or exchangeable for
shares of Common Stock.  The issue and
sale of the Securities will not obligate the Company to issue shares of Common
Stock or other securities to any Person (other than the Purchasers) and will not
result in a right of any holder of Company securities to adjust the exercise,
conversion, exchange or reset price under such securities.

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

7

 

material respects the financial position of the
Company and its consolidated subsidiaries as of and for the dates thereof and
the results of operations and cash flows for the periods then ended, subject,
in the case of unaudited statements, to normal, immaterial, year-end audit
adjustments.

(i)            Material Changes.   Since the date of the most recent quarterly
report on Form 10-Q, except as specifically disclosed in the SEC Reports, (i)
there has been no event, occurrence or development that has had or that could
reasonably be expected to result in a Material Adverse Effect, (ii) the Company
has not incurred any liabilities (contingent or otherwise) other than (A) trade
payables and accrued expenses incurred in the ordinary course of business
consistent with past practice and (B) liabilities not required to be reflected
in the Company’s financial statements pursuant to GAAP or required to be
disclosed in filings made with the Commission, (iii) the Company has not
altered its method of accounting or the identity of its auditors, (iv) the
Company has not declared or made any dividend or distribution of cash or other
property to its stockholders or purchased, redeemed or made any agreements to
purchase or redeem any shares of its capital stock, and (v) the Company has not
issued any equity securities to any officer, director or Affiliate, except
pursuant to existing Company stock option plans.  The Company does not have pending before the Commission any
request for confidential treatment of information.

(j)            Litigation.  There is no action, suit, inquiry, notice of
violation, proceeding or investigation pending or, to the knowledge of the Company,
threatened against or affecting the Company, any Subsidiary or any of their
respective properties before or by any court, arbitrator, governmental or
administrative agency or regulatory authority (federal, state, county, local or
foreign) (collectively, an “Action”) which (i) adversely affects or
challenges the legality, validity or enforceability of any of the Transaction
Documents or the Securities or (ii) could, if there were an unfavorable
decision, individually or in the aggregate, have or reasonably be expected to
result in a Material Adverse Effect. 
Neither the Company nor any Subsidiary, to the knowledge of the Company
nor any director or officer thereof, is or has been the subject of any Action
involving a claim of violation of or liability under federal or state
securities laws or a claim of breach of fiduciary duty.  There has not been, and to the knowledge of
the Company, there is not pending or contemplated, any investigation by the
Commission involving the Company or any current or former director or officer
of the Company.  The Commission has not
issued any stop order or other order suspending the effectiveness of any
registration statement filed by the Company or any Subsidiary under the
Exchange Act or the Securities Act.

(k)           Labor Relations.  No material labor dispute exists or, to the
knowledge of the Company, is imminent with respect to any of the employees of
the Company.

(l)            Compliance.  The Company (i) is not in default under or
in violation of (and no event has occurred that has not been waived that, with
notice or lapse of time or both, would result in a default by the Company
under), nor has the Company received notice of a claim that it is in default
under or that it is in violation of, any indenture, loan or credit agreement or
any other agreement or instrument to which it is a party or by

8

 

which it or any of its properties is bound (whether or
not such default or violation has been waived), (ii) is in violation of any
order of any court, arbitrator or governmental body, or (iii) is or has been in
violation of any statute, rule or regulation of any governmental authority,
including, without limitation, all foreign, federal, state and local laws
relating to taxes, environmental protection, occupational health and safety,
product quality and safety and employment and labor matters, except in each
case as would not, individually or in the aggregate, have or reasonably be
expected to result in a Material Adverse Effect.

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

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

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

(p)           Insurance.  The Company and the Subsidiaries are insured
by insurers of recognized financial responsibility against such losses and
risks and in such amounts as are prudent and customary in the businesses in
which the Company and the Subsidiaries are engaged.  The Company has no reason to believe that it will not be able to
renew its existing insurance coverage as and when such coverage expires or to
obtain similar

9

 

coverage from similar insurers as may be necessary to
continue its business without a significant increase in cost.

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

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

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

(t)            Certain Fees.  Except for fees payable to Rodman &
Renshaw, Inc., no brokerage or finder’s fees or commissions are or will be
payable by the Company to any broker, financial advisor or consultant, finder,
placement agent, investment banker, bank or other Person with respect to the
transactions contemplated by this Agreement. 
The Purchasers shall have no obligation with respect to any fees or with
respect to any claims made by or on behalf of other Persons for fees of a type
contemplated in this Section that may be due in connection with the
transactions contemplated by this Agreement.

10

 

(u)           Private Placement. Assuming
the accuracy of the Purchasers representations and warranties set forth in
Section 3.2, no registration under the Securities Act is required for the offer
and sale of the Securities by the Company to the Purchasers as contemplated
hereby.  The issuance and sale of the
Securities hereunder does not contravene the rules and regulations of any
Trading Market and no stockholder approval is required for the Company to
fulfill its obligations under the Transaction Documents, including issuing and
delivering to the Purchasers the maximum number of Securities contemplated by
this Agreement and the maximum number of Warrant Shares issuable upon exercise
in full of the Warrants based on their present exercise price.

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

(w)          Investment Company. The Company
is not, and is not an Affiliate of, an “investment company” within the meaning
of the Investment Company Act of 1940, as amended.

(x)            Registration Rights.  The Company has not granted or agreed to
grant to any Person any rights (including “piggy-back” registration rights) to
have any securities of the Company registered with the Commission or any other
governmental authority that have not been satisfied.

(y)           Disclosure.  The Company confirms that, neither the
Company nor any other Person acting on its behalf has provided any of the
Purchasers or their agents or counsel with any information that constitutes or
might constitute material, non-public information.   The Company understands and confirms that the Purchasers will
rely on the foregoing representations and covenants in effecting transactions
in securities of the Company.  All
disclosure provided to the Purchasers regarding the Company, its business and
the transactions contemplated hereby, including the Disclosure Schedules to
this Agreement, furnished by or on behalf of the Company are true and correct
and do not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading.

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

11

 

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

 

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

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

(c)           Purchaser Status.  At the time such Purchaser was offered the
Securities, it was, and at the date hereof it is an “accredited investor” as
defined in Rule 501(a) under the Securities Act.  The Purchaser is not required to be registered as a broker-dealer
under Section 15 of the Exchange Act.

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

(e)           Tax Liability Such Purchaser
has reviewed with its own tax advisors the federal, state, local and foreign
tax consequences of this investment and the transactions contemplated by the
Agreements.  With respect to such
matters, such Purchaser relies solely on such advisors and not on any
statements or representations of the Company or any of its agents other than
the representations and warranties set forth herein.  Such Purchaser understands that it (and not the Company) shall be
responsible for its own tax liability that may arise as a result of this
investment or the transactions contemplated by the Agreements.

(f)            General Solicitation.  Such Purchaser is not purchasing the
Securities as a result of any advertisement, article, notice or other
communication regarding the Securities published in any newspaper, magazine or
similar media or broadcast over television or radio or presented at any seminar
or any other general solicitation or general advertisement.

12

 

The Company acknowledges and agrees that each
Purchaser does not make or has not made any representations or warranties with
respect to the transactions contemplated hereby other than those specifically
set forth in this Section 3.2.

ARTICLE IV.

OTHER AGREEMENTS OF THE PARTIES

                4.1           Transfer Restrictions.

 

(a)           Securities may only be disposed of in
compliance with state and federal securities laws.  In connection with any transfer of Securities other than pursuant
to an effective registration statement, to the Company, to an Affiliate of a
Purchaser or in connection with a pledge as contemplated in Section 4.1(b), the
Company may require the transferor thereof to provide to the Company an opinion
of counsel selected by the transferor, the form and substance of which opinion
shall be reasonably satisfactory to the Company, to the effect that such
transfer does not require registration of such transferred Securities under the
Securities Act.  As a condition of
transfer, any such transferee shall agree in writing to be bound by the terms
of this Agreement and shall have the rights of a Purchaser under this Agreement
and the Registration Rights Agreement.

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

[NEITHER] THESE SECURITIES [NOR THE SECURITIES INTO
WHICH THESE SECURITIES ARE EXERCISABLE] HAVE [NOT] BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY.

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

13

 

documentation as a
pledgee or secured party of Securities may reasonably request in connection
with a pledge or transfer of the Securities, including the preparation and
filing of any required prospectus supplement under Rule 424(b)(3) of the
Securities Act or other applicable provision of the Securities Act to
appropriately amend the list of Selling Stockholders thereunder.

(c)           Certificates evidencing the Shares
and Warrant Shares shall not contain any legend (including the legend set forth
in Section 4.1(b)), (i) while a registration statement (including the
Registration Statement) covering the resale of such security is effective under
the Securities Act, or (ii) following any sale of such Shares or Warrant
pursuant to Rule 144, or (iii) if such Shares or Warrant Shares are eligible
for sale under Rule 144(k), or (iv) if such legend is not required under
applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the Staff of the Commission).  The Company shall cause its counsel to issue
the legal opinion to the Company’s transfer agent on the Effective Date.  If all or any portion of a Warrant is exercised
at a time when there is an effective registration statement to cover the resale
of the Warrant Shares, such Warrant Shares shall be issued free of all
legends.  The Company agrees that
following the Effective Date or at such time as such legend is no longer
required under this Section 4.1(c), it will, no later than three Trading Days
following the delivery by a Purchaser to the Company or the Company’s transfer
agent of a certificate representing Shares or Warrant Shares, as the case may
be, issued with a restrictive legend, deliver or cause to be delivered to such
Purchaser a certificate representing such Securities that is free from all
restrictive and other legends.  The
Company may not make any notation on its records or give instructions to any
transfer agent of the Company that enlarge the restrictions on transfer set
forth in this Section.

(d)           In addition to such Purchaser’s other
available remedies, the Company shall pay to a Purchaser, in cash, as
liquidated damages and not as a penalty, for each $1,000 of Shares or Warrant
Shares (based on the Closing Price of the Common Stock on the date such
Securities are submitted to the Company’s transfer agent) subject to Section
4.1(c), $10 per Trading Day (increasing to $20 per Trading Day 3 Trading Days
after such damages have begun to accrue) for each Trading Day after such third
Trading Day until such certificate is delivered.

                4.2           Furnishing of Information.  As long as any Purchaser owns Securities,
the Company covenants to timely file (or obtain extensions in respect thereof
and file within the applicable grace period) all reports required to be filed
by the Company after the date hereof pursuant to the Exchange Act.  Upon the request of any such Person, the
Company shall deliver to such Person a written certification of a duly
authorized officer as to whether it has complied with the preceding sentence.
As long as any Purchaser owns Securities, if the Company is not required to
file reports pursuant to such laws, it will prepare and furnish to the
Purchasers and make publicly available in accordance with Rule 144(c) such
information as is required for the Purchasers to sell the Securities under Rule
144. The Company further covenants that it will take such further action as any
holder of Securities may reasonably request, all to the extent required from
time to time to enable such Person to sell such Securities without registration
under the Securities Act within the limitation of the exemptions provided by
Rule 144.

 

14

 

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

 

                4.4           Limitation on Future Financing.  Until 90 days after the Effective Date, the
Company shall not undertake or enter into, or publicly announce an intention to
undertake or enter into, any financing pursuant to which the Company issues any
Common Stock or Common Stock Equivalents entitling any Person to acquire shares
of Common Stock.

 

                4.5           Securities Laws Disclosure;
Publicity.  The Company shall  by 8:30 a.m., Eastern time, on the Business
Day following the date of this Agreement, issue a press release or file a
Current Report on Form 8-K, in each case reasonably acceptable to the
Purchasers disclosing in reasonable detail the material terms of the
transactions contemplated hereby and (ii) make such other filings and notices
in the manner and time required by the Commission.  The Company and the Purchasers shall consult with each other in
issuing any press releases with respect to the transactions contemplated
hereby, and neither party shall issue any such press release or otherwise make
any such public statement without the prior consent of the other, which consent
shall not unreasonably be withheld, except if such disclosure is required by
law, in which case the disclosing party shall promptly provide the other party
with prior notice of such public statement or communication.  Notwithstanding the foregoing, the Company
shall not publicly disclose the name of any Purchaser, or include the name of
any Purchaser in any filing with the Commission or any regulatory agency or
Trading Market, without the prior written consent of such Purchaser, except to
the extent such disclosure is required by law or Trading Market regulations, in
which case the Company shall provide the Purchasers with prior notice of such
disclosure.

 

                4.6           Shareholders Rights Plan.  No claim will be made or enforced by the
Company or any other Person that any Purchaser is an “Acquiring Person” under
any shareholders rights plan or similar plan or arrangement in effect or
hereafter adopted by the Company, or that any Purchaser could be deemed to
trigger the provisions of any such plan or arrangement, by virtue of receiving
Securities under the Transaction Documents or under any other agreement between
the Company and the Purchasers.

 

                4.7           Non-Public Information.  The Company covenants and agrees that
neither it nor any other Person acting on its behalf has provided or will
provide any Purchaser or its agents or counsel with any information that the
Company believes constitutes material non-public information, unless prior
thereto such Purchaser shall have executed a written agreement regarding the
confidentiality and use of such information. 
The Company understands and confirms that each Purchaser shall be
relying on the foregoing representations in effecting transactions in
securities of the Company.

 

                4.8           Use of Proceeds.  The Company shall use the net proceeds from
the sale of the Securities hereunder for working capital purposes and not for
the satisfaction of any portion of the Company’s debt (other than payment of
trade payables in the ordinary course of the

15

 

Company’s
business and prior practices), to redeem any Company equity or equity–equivalent
securities or to settle any outstanding litigation.

                4.9           Reservation and Listing of
Securities.

 

(a) The Company shall maintain a
reserve from its duly authorized shares of Common Stock for issuance pursuant
to the Transaction Documents in such amount as may be required to fulfill its
obligations in full under the Transaction Documents.

(b) The Company shall: (i) in the
time and manner required by any Trading Market on which the Common Stock is
then traded or listed, prepare and file with such Trading Market an additional
shares listing application covering a number of shares of Common Stock at least
equal to the shares of Common Stock issuable under this Agreement and pursuant
to the Warrants, (ii) take all steps necessary to cause such shares of Common
Stock to be approved for listing on each such Trading Market as soon as
possible thereafter, (iii) provide to the Purchasers evidence of such listing,
and (iv) maintain the listing of such Common Stock on each such Trading Market
or on each Trading Market on which the Common Stock is then traded or
listed.  Failure to obtain such listing
prior to the Effective Date shall be deemed an Event under the Registration
Rights Agreement.

ARTICLE V.

MISCELLANEOUS

                5.1           Fees and Expenses.  Except as otherwise set forth in this
Agreement, each party shall pay the fees and expenses of its advisers, counsel,
accountants and other experts, if any, and all other expenses incurred by such
party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement.  The
Company shall pay all stamp and other taxes and duties levied in connection
with the sale of the Securities.

 

                5.2           Entire Agreement.  The Transaction Documents, together with the
Exhibits and Schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements
and understandings, oral or written, with respect to such matters, which the
parties acknowledge have been merged into such documents, exhibits and
schedules.

 

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

16

 

signature pages hereto or such other
address as may be designated in writing hereafter, in the same manner, by such
Person.

 

                5.4           Amendments; Waivers.  No provision of this Agreement may be waived
or amended except in a written instrument signed, in the case of an amendment,
by the Company and each of the Purchasers or, in the case of a waiver, by the
party against whom enforcement of any such waiver is sought.  No waiver of any default with respect to any
provision, condition or requirement of this Agreement shall be deemed to be a
continuing waiver in the future or a waiver of any subsequent default or a
waiver of any other provision, condition or requirement hereof, nor shall any
delay or omission of either party to exercise any right hereunder in any manner
impair the exercise of any such right.

 

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

 

                5.6           Successors and Assigns.  This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted
assigns.  The Company may not assign
this Agreement or any rights or obligations hereunder without the prior written
consent of the Purchasers. Any Purchaser may assign any or all of its rights
under this Agreement to any Person to whom such Purchaser assigns or transfers
any Securities, provided such transferee agrees in writing to be bound, with
respect to the transferred Securities, by the provisions hereof that apply to
the “Purchasers.”

 

                5.7           No Third-Party Beneficiaries.  This Agreement is intended for the benefit
of the parties hereto and their respective successors and permitted assigns and
is not for the benefit of, nor may any provision hereof be enforced by, any
other Person, except as otherwise set forth in Section 4.6 and 4.7.

 

                5.8           Governing Law.  All questions concerning the construction,
validity, enforcement and interpretation of the Transaction Documents shall be
governed by and construed and enforced in accordance with the internal laws of
the State of New York, without regard to the principles of conflicts of law
thereof.  Each party agrees that all
legal proceedings concerning the interpretations, enforcement and defense of
the transactions contemplated by this Agreement and any other Transaction
Documents (whether brought against a party hereto or its respective affiliates,
directors, officers, shareholders, employees or agents) shall be commenced
exclusively in the state and federal courts sitting in the City of New York, Borough
of Manhattan.  Each party hereto hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in the City of New York, Borough of Manhattan for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of the any of the Transaction Documents), and hereby
irrevocably waives, and agrees not to assert in any suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of any such
court, that such suit, action or proceeding is improper.  Each party hereto hereby irrevocably waives
personal service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such 

17

 

party at the
address in effect for notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice
thereof.  Nothing contained herein shall
be deemed to limit in any way any right to serve process in any manner
permitted by law. Each party hereto (including its affiliates, agents,
officers, directors and employees) hereby irrevocably waives, to the fullest
extent permitted by applicable law, any and all right to trial by jury in any
legal proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby. If either party shall commence an action or
proceeding to enforce any provisions of a Transaction Document, then the
prevailing party in such action or proceeding shall be reimbursed by the other
party for its attorneys fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such action or proceeding.

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

 

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

 

                5.11         Severability.  If any provision of this Agreement is held
to be invalid or unenforceable in any respect, the validity and enforceability of
the remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.

 

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

 

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

 

                5.14         Remedies.  In addition to being entitled to exercise
all rights provided herein or granted by law, including recovery of damages,
each of the Purchasers and the Company will be

 

18

 

entitled to
specific performance under the Transaction Documents.  The parties agree that monetary damages may not be adequate
compensation for any loss incurred by reason of any breach of obligations
described in the foregoing sentence and hereby agrees to waive in any action
for specific performance of any such obligation the defense that a remedy at
law would be adequate.

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

 

                5.16         Independent Nature of Purchasers’
Obligations and Rights.  The
obligations of each Purchaser under any Transaction Document are several and
not joint with the obligations of any other Purchaser, and no Purchaser shall
be responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. 
Nothing contained herein or in any Transaction Document, and no action
taken by any Purchaser pursuant thereto, shall be deemed to constitute the
Purchasers as a partnership, an association, a joint venture or any other kind
of entity, or create a presumption that the Purchasers are in any way acting in
concert or as a group with respect to such obligations or the transactions
contemplated by the Transaction Document. 
Each Purchaser shall be entitled to independently protect and enforce
its rights, including without limitation the rights arising out of this
Agreement or out of the other Transaction Documents, and it shall not be
necessary for any other Purchaser to be joined as an additional party in any
proceeding for such purpose.

 

*******************************

19

 

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

	
   

  	
  COMPANY:

  
	
   

  	
   

  
	
  Address for
  Notice:

  	
  SUPERGEN, INC.

  
	
  4140 Dublin Blvd

  	
   

  
	
  Suite 200

  	
   

  
	
  Dublin,
  California 94568

  	
  By:

  	
  /s/ JOSEPH
  RUBINFELD

  
	
  Tel: (925)
  560-0100

  	
   

  	
  Name: 

  	
  Joseph Rubinfeld

  
	
  Fax: (925)
  560-0101

  	
   

  	
  Title:

  	
  President/CEO

  

 

 

Wire Instructions of the
Company:

 

PURCHASERS:

 

	
  SMITHFIELD FIDUCIARY LLC

  	
   

  	
  Address for Notice:

  
	
   

  	
   

  	
  c/o Highbridge Capital Management, LLC

  
	
   

  	
   

  	
  9 West 57th Street, 27th Floor

  
	
  By:  

  	
  /s/ ADAM J. CHILL

  	
   

  	
  New York, New York
  10019

  
	
   

  	
  Name:

  	
  Adam J. Chill

  	
   

  	
  Attn: Ari J. Storch/ Adam J.
  Chill

  
	
   

  	
  Title:

  	
  Authorized Signatory

  	
   

  	
  Fax:  (212)
  751-0755

  
	
   

  	
   

  	
   

  	
   

  	
  Phone: (212) 287-4720

  

 

Subscription Amount: 
$2,500,000

 

	
  CRANSHIRE CAPITAL L.P.

  	
   

  	
  Address for Notice:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Downsview Capital, Inc.

  
	
  By:

  	
  /s/ MITCHELL D. KOPIN

  	
   

  	
  The General Partner

  
	
   

  	
  Name:

  	
  Mitchell D. Kopin

  	
   

  	
  666 Dundee Road, Suite 1901

  
	
   

  	
  Title:

  	
  President — Downsview Capital,
  Inc.

  	
   

  	
  Northbrook, IL  60062

  
	
   

  	
   

  	
  The General Partner

  	
   

  	
   

  

 

Subscription Amount: 
$500,000

 

	
  AIG DKR SOUNDSHORE PRIVATE INVESTORS HOLDING FUND LTD.

  
	
   

  	
   

  	
  Address for Notice:

  
	
   

  	
   

  	
  29 Richmond Road

  
	
  By:

  	
  /s/ ANTHONY GIORDANO

  	
   

  	
  Pembroke HM08 Bermuda

  
	
   

  	
  Name:

  	
  Anthony Giordano

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Director

  	
   

  	
   

  

 

Subscription Amount: 
$416,000

 

20

 

[SIGNATURE PAGE TO
PURCHASE AGREEMENT CONTINUED]

 

	
  OMICRON MASTER TRUST

  	
   

  	
  Address for Notice:

  
	
  By:  Omicron Capital L.P., as subadvisor

  	
   

  	
  c/o Omicron Capital
  L.P.

  
	
  By:  Omicron Capital Inc., its general partner

  	
   

  	
  153 E. 53rd
  Street

  
	
   

  	
   

  	
  48th Floor

  
	
   

  	
   

  	
  New York, New York
  10022

  
	
  By:

  	
  /s/ BRUCE BERNSTEIN

  	
   

  	
  Attn:  Brian Daly

  
	
   

  	
  Name:  

  	
  Bruce Bernstein

  	
   

  	
  Fax:  (212) 508-7028

  
	
   

  	
  Title:

  	
  President

  	
   

  	
   

  

 

Subscription Amount: 
$600,000

 

	
  OTATO L.P.

  	
   

  	
  Address for Notice:

  
	
   

  	
   

  	
  c/o OTA LLC

  
	
   

  	
   

  	
  1 Manhattanville Road

  
	
  By:

  	
  /s/ JAMES SANTORI

  	
   

  	
  Purchase, NY  10577

  
	
   

  	
  Name:

  	
  James Santori

  	
   

  	
   

  
	
   

  	
  Title:

  	
  CFO

  	
   

  	
   

  

 

Subscription Amount: 
$250,000

 

 

	
  MAINFIELD ENTERPRISES INC.

  	
   

  	
  Address for
  Notice:

  
	
   

  	
   

  	
  c/o Sage Capital
  Growth Inc.

  
	
   

  	
   

  	
  660 Madison
  Avenue, 18th Floor

  
	
  By:

  	
  /s/ AVI VIGDER

  	
   

  	
  New York,
  NY  10021

  
	
   

  	
  Name:

  	
  Avi Vigder

  	
   

  	
  Attn:  Danny Golan

  
	
   

  	
  Title:

  	
  Director

  	
   

  	
  Fax: (212)
  651-9010

  

 

 

Subscription
Amount:  $250,000

 

21

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