Document:

100 Middle Street
[LOGO]                                                  Portland, ME 04101-4100
                                                        December 4, 2002

Mr. Mark Collin
Treasurer
UNITIL CORP.
6 Liberty Lane West
Hampton, New Hampshire 03842

Dear Mark:

     This letter agreement sets forth the terms under which Citizens Bank of New
Hampshire (the "Bank") will make available to UNITIL Corporation (the
"Borrower") an unsecured Line of Credit (the "Line") for up to $13,000,000. This
Line will be reviewed again on August 31, 2003 (the "Annual Review Date").

     Any loan under the Line will bear interest (computed on a 360 day per year
basis) of either:

     (1)  Wall Street Journal Prime rate ("WSP") as it may vary; or

     (2)  A fixed rate for each loan based on the London Interbank Offered Rate
          ("LIBOR" for the term of the loan [Not to exceed ninety (90) days] as
          in effect on the date of the loan plus a margin to be determined by
          the Bank from time to time. If the LIBOR rate is selected, the rate
          will be determine by the Bank by 10:00 a.m. on the day of the
          requested borrowing. Each borrowing under this line by you must
          specify the amount of the loan requested, the rate requested and the
          maturity requested.

     Each loan must be not less than $500,000.00. This Line is available subject
to the Bank's continued satisfaction with the financial condition of Borrower
and its subsidiaries and to no substantive changes in monetary or governmental
regulations. Borrower shall deliver to Bank: annual report and 10K report by
April 30; and 10Q by ninety (90) days after the close of each calendar quarter.

     The Borrower shall maintain and fund an account with the Bank which the
Bank may debit for payments due, quarterly fees, and other amounts due. Loan
advances will be made upon telephone request by offers designated in writing by
Borrower and shall be deposited by Bank into the account.

     Loans will be evidenced by a Promissory Note in the form attached hereto.
Each loan and the corresponding information [date, amount, maturity date
(subject to Bank's right to demand payment at any time) and interest rate] will
be recorded on the date of the telephone request. Bank's corresponding advices
of credit and debit will be additional evidence of loans in the format described
above, and the Borrower agrees that absent manifest error, this record shall be
conclusive and binding.

     In consideration for the availability of this Line and until expiration or
earlier written termination of the Line, Borrower will pay Bank a quarterly fee
on or before ten (10) days after the close of each fiscal quarter (with fiscal
quarters closing on March 31, June 30, September 30, and December 31, [with a
final payment due ten (10) days after expiration or earlier written termination
of the Line], equal to the product of .0025 multiplied by the "Daily Average
Unused Portion of the Line" during the preceding fiscal quarter. "Daily Average
Unused Portion of the Line" is determined by summing the "Unused Portion of the
Line" for each day of the relevant fiscal quarter and dividing that sum by the
number of days in the relevant fiscal quarter. "Unused Portion of the Line"
means $13,000,000 minus the amount outstanding on the Line as of the Bank's
close of business on that day. Interest and fees are calculated on the basis of
the actual days elapsed over a 360 day banking year.

     Bank may, at any time, demand payment in full of all loans made under the
Line and interest and other charges due hereunder.

     Borrower acknowledges that bank has disclosed the following finances
charges in connection with this loan: quarterly fees as set forth above and
interest rate set forth above and in the Note.

     If the foregoing satisfactorily sets forth the terms and conditions of this
lending arrangement, please indicate your acceptance thereof by executing and
returning the attached copy of this letter and the attached Promissory Note.

     We are pleased to provide this Line of Credit and look forward to the
ongoing development of our relationship.

                                   Sincerely,

                                   CITIZENS BANK OF NEW HAMPSHIRE

                                   By:  /s/
                                        ------------------------------------
                                        Its:  Vice President

AGREED AND ACCEPTED:

UNITIL CORPORATION

By: /s/ Mark H. Collin
    -----------------------------------------
    Mark H. Collin, Treasurer

By: /s/ Anthony Baratta
    -----------------------------------------
    Anthony Baratta, Chief Financial OfficerSecurities Purchase Agreement

 
SECURITIES
PURCHASE AGREEMENT 
 
This SECURITIES
PURCHASE AGREEMENT (this “Agreement”), dated as of March 25, 2003 is made by and among CYPRESS BIOSCIENCE, INC., a Delaware corporation (the “Company”), and the Purchasers named on the
signature pages hereto, together with their permitted transferees (each, a “Purchaser” and collectively, the “Purchasers”). 
 
Recitals: 
 
A. The Company has retained the services of SCO Financial Group pursuant to the terms of an engagement letter dated November 1,
2002, as amended on March 11, 2003 (the “SCO Engagement Letter”), to assist the Company in connection with a private placement of the Company’s securities (the “Offering”). 
 
B. The Company has also retained the services of
Paramount Capital, Inc. pursuant to the terms of Placement Agency Agreement dated February 14, 2002, as amended (the “Paramount Engagement Letter”) to assist the Company in connection with the Offering. 
 
C. The Company and the Purchasers are executing and
delivering this Agreement in reliance upon the exemption from securities registration afforded by Section 4(2) of the Securities Act and Rule 506 under Regulation D. 
 
D. The Purchasers desire to purchase and the Company desires to sell, upon the terms and conditions
stated in this Agreement, up to a maximum of $10,330,000 of Securities (as defined below). 
 
E. The capitalized terms used herein and not otherwise defined have the meanings given them in Article 8 hereof. 
 
AGREEMENT 
 
In consideration of the premises and the mutual covenants contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Purchasers (severally and not jointly) hereby agree as follows: 
 
ARTICLE 1 
 
PURCHASE AND SALE OF SECURITIES 
 
1.1 Purchase and Sale of Securities. At the Closing the Company will issue and sell to each Purchaser, and each Purchaser will,
severally and not jointly, purchase the number of shares of Common Stock of the Company (the “Shares”) and the number of warrants to purchase shares of Common Stock of the Company (the “Warrants”) set
forth opposite such Purchaser’s name on Exhibit A from the Company (the Shares and the Warrants referred to collectively as the “Securities”). The purchase price for each Security (the “Purchase
Price”) shall be $2.56125, which is equal to the sum of: (i) $2.53, the closing bid price of the Common Stock as reported on The Nasdaq SmallCap Market (symbol “CYPB”) on March 24, 2003, and 
 

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(ii) $0.03125. For each four
Shares purchased by a Purchaser, such Purchaser shall receive a Warrant to purchase one share of Common Stock of the Company at an exercise price equal to $3.84, which represents 150% of the Purchase Price (the “Warrant Purchase
Price”), and the Warrant will be exercisable for five years from the Closing pursuant to the Warrant substantially in the form attached as Exhibit B. 
 
1.2 Payment. At the Closing, each Purchaser will pay the aggregate Purchase Price set forth opposite
its name on Exhibit A hereof by wire transfer of immediately available funds in accordance with the Company’s wire instructions set forth on Exhibit C hereto. The Company will deliver stock certificates representing the Shares and
the Warrant representing the Warrant Shares against delivery of the aggregate Purchase Price as described above. 
 
1.3 Closing Date. The execution of this Agreement will take place on March 25, 2003. The closing of the transactions contemplated
under this Agreement will take place on or prior to April 3, 2003 (the “Closing Date”) and the closing (the “Closing”) will be held at the offices of the Company or at such other
place as the parties agree. 
 
ARTICLE 2

 
PURCHASER’S REPRESENTATIONS AND
WARRANTIES 
 
Each Purchaser represents and
warrants to the Company, severally and not jointly with respect to itself and its purchase hereunder and not with respect to any other Purchaser, that: 
 
2.1 Investment Purpose. The Purchaser is purchasing the Securities for its own account and not with a present view toward the
public sale or distribution thereof. 
 
2.2
Accredited Purchaser Status. The Purchaser is an “accredited investor” as defined in Rule 501(a) of Regulation D. The Purchaser has delivered an Accredited Investor Questionnaire in the form of Exhibit D to the
Company. The Purchaser hereby represents that, either by reason of the Purchaser’s business or financial experience, the Purchaser has the capacity to protect the Purchaser’s own interests in connection with the purchase of the Securities.
In addition, the Purchaser is capable of evaluating the merits and risks of its investment in the Company and has the capacity to protect its own interest. 
 
2.3 Reliance on Exemptions. The Purchaser understands that the Securities are being offered and sold to it in reliance upon
specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying upon the truth and accuracy of, and the Purchaser’s compliance with, the representations, warranties,
agreements, acknowledgments and understandings of the Purchaser set forth herein in order to determine the availability of such exemptions and the eligibility of the Purchaser to acquire the Securities. 
 
2.4 Information. The Purchaser has been furnished with
all relevant materials relating to the business, finances and operations of the Company necessary to make an investment decision, and materials relating to the offer and sale of the Securities, that have been requested by the Purchaser, including,
without limitation, the Company’s Annual Report on Form 10-K for the year ended December 31, 2002 (the “Form 10-K”) and the Purchaser has read 
 

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the Form 10-K. The Purchaser
has been afforded the opportunity to ask questions of the Company. 
 
2.5 Acknowledgement of Risk. The Purchaser acknowledges and understands that its investment in the Securities involves a significant degree of risk, including, without limitation, (i) the Company remains a development
stage business with limited operating history and requires substantial funds in addition to the proceeds from the sale of the Securities; (ii) an investment in the Company is speculative, and only Purchasers who can afford the loss of their entire
investment should consider investing in the Company and the Securities; (iii) the Purchaser may not be able to liquidate its investment; (iv) transferability of the Securities is extremely limited; (v) in the event of a disposition of the
Securities, the Purchaser could sustain the loss of its entire investment; and (vi) the Company has not paid any dividends on its Common Stock since inception and does not anticipate the payment of dividends in the foreseeable future. Such risks are
more fully set forth in the SEC Documents. 
 
2.6 Governmental Review. The Purchaser understands that no United States federal or state agency or any other government or governmental agency has passed upon or made any recommendation or endorsement of the Securities or an
investment therein. 
 
2.7 Transfer or
Resale. The Purchaser understands that: 
 
        (a) the Securities have not been and are not being registered under the Securities Act or any applicable state securities laws and, consequently, the Purchaser may have to bear
the risk of owning the Securities for an indefinite period of time because the Securities may not be transferred unless (i) the resale of the Securities is registered pursuant to an effective registration statement under the Securities Act, as
contemplated in Article 6; (ii) the Purchaser has delivered to the Company an opinion of counsel (in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that the Securities to be sold or transferred
may be sold or transferred pursuant to an exemption from such registration; or (iii) the Securities are sold or transferred pursuant to Rule 144; 
 
        (b) any sale of the Securities made in reliance on Rule 144 may be made only in
accordance with the terms of Rule 144 and, if Rule 144 is not applicable, any resale of the Securities under circumstances in which the seller (or the person through whom the sale is made) may be deemed to be an underwriter (as that term is defined
in the Securities Act) may require compliance with some other exemption under the Securities Act or the rules and regulations of the SEC thereunder; and 
 
        (c) except as set forth in Article 6, neither the Company nor any other person is
under any obligation to register the resale of the Securities under the Securities Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder. 
 
2.8 Legends. The Purchaser understands the certificates representing the Securities will bear a
restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of the certificates for such Securities): 
 
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE 
 

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SECURITIES LAWS OF ANY STATE
OF THE UNITED STATES. THE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER APPLICABLE SECURITIES LAWS, OR UNLESS OFFERED, SOLD OR TRANSFERRED PURSUANT TO AN AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THOSE LAWS. 
 
2.9 Authorization; Enforcement. This Agreement has been duly and validly authorized, executed and delivered on behalf of the Purchaser and represents the valid and binding obligations of the Purchaser enforceable in accordance
with its terms, subject to the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and the application of general principles of equity. 
 
2.10 Residency. The Purchaser is a resident of the
jurisdiction set forth immediately below such Purchaser’s name on the signature pages hereto. 
 
2.11 Acknowledgements Regarding Placement Agent. 
 
        (a) The Purchaser acknowledges that Paramount Capital,
Inc. and SCO Financial Group (collectively, the “Placement Agents”) are acting as the non-exclusive Placement Agents for the Securities being offered hereby and will be compensated by the Company for acting in such capacity.
The Purchaser further acknowledges that the Placement Agents have acted solely as Placement Agents in connection with the Offering by the Company, that the information and data provided to the Purchaser in connection with the transactions
contemplated hereby have not been subjected to independent verification by the Placement Agents, and that the Placement Agents make no representation or warranty with respect to the accuracy or completeness of such information, data or other related
disclosure material. The Purchaser further acknowledges that in making its decision to enter into this Agreement and purchase the Securities it has relied on its own examination of the Company and the terms and consequences of holding the
Securities. The Purchaser further acknowledges that the provisions of this Section 2.11 are for the benefit of, and may be enforced by, the Placement Agents. 
 
        (b) The Purchaser represents that (i) the Purchaser was contacted regarding the
sale of the Securities by one of the Placement Agents (or an authorized agent or representative thereof) with whom the Purchaser had a prior substantial pre-existing relationship and (ii) no Securities were offered or sold to it by means of any form
of general solicitation or general advertising, and in connection therewith the Purchaser did not: (A) receive or review any advertisement, article, notice or other communication published in a newspaper or magazine or similar media or broadcast
over television or radio whether closed circuit, or generally available; or (B) attend any seminar meeting or industry investor conference whose attendees were invited by any general solicitation or general advertising. 
 

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ARTICLE 3

 
REPRESENTATIONS AND WARRANTIES OF THE
COMPANY 
 
The Company represents and warrants
to the Purchasers that: 
 
3.1 Organization and
Qualification. The Company is duly incorporated, validly existing and in good standing under the laws of Delaware, the jurisdiction in which it is incorporated, with full power and authority (corporate and other) to own, lease, use and operate
its properties and to carry on its business as and where now owned, leased, used, operated and conducted. The Company is duly qualified to do business and is in good standing in every jurisdiction in which the nature of the business conducted by it
makes such qualification necessary, except where the failure to be so qualified or in good standing would not have a Material Adverse Effect. 
 
3.2 Authorization; Enforcement. (a) The Company has all requisite corporate power and authority to enter into and to perform its
obligations under this Agreement, to consummate the transactions contemplated hereby and to issue the Securities in accordance with the terms hereof; (b) the execution, delivery and performance of this Agreement by the Company and the consummation
by it of the transactions contemplated hereby (including without limitation the issuance of the Securities) have been duly authorized by the Company’s Board of Directors and no further consent or authorization of the Company, its Board of
Directors, or its stockholders is required (based upon oral advice received from the National Association of Securities Dealers, Inc. (the “NASD”) interpreting the definition of “market value” contained in NASD Rule
4350(i)(1)(D)), (c) this Agreement has been duly executed by the Company; and (d) this Agreement constitutes a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, subject to the effect of
any applicable bankruptcy, insolvency, reorganization, or moratorium or similar laws affecting the rights of creditors generally and the application of general principles of equity. 
 
3.3 Capitalization. The capitalization of the Company is described in the Company’s SEC
Documents. The Company has not issued any capital stock since December 31, 2002 other than pursuant to employee benefit plans disclosed in the Company’s SEC Documents. All of such outstanding shares of capital stock have been duly authorized,
validly issued, fully paid and nonassessable. No shares of capital stock of the Company, including the Securities issuable pursuant to this Agreement, are subject to preemptive rights or any other similar rights of the stockholders of the Company or
any liens or encumbrances imposed through the actions or failure to act of the Company. Except as (y) described in this Section 3.3, or (z) as described in the Company’s SEC Documents and except for (a) the transactions contemplated hereby and
(b) the issuance of the warrants to purchase Common Stock of the Company granted to the Placement Agents, in connection with the SCO Engagement Letter and the Paramount Engagement Letter (collectively, the “Placement Agent
Warrants”), (i) there are no outstanding options, warrants, rights to subscribe for, puts, calls, rights of first refusal, agreements, understandings, claims or other commitments or rights of any character whatsoever relating to, or
securities or rights convertible into, exercisable for, or exchangeable for any shares of capital stock of the Company, or arrangements by which the Company is or may become bound to issue additional shares of capital stock of the `Company; (ii)
there are no agreements or arrangements 
 

5 

 
under which the Company is
obligated to register the sale of any of its securities under the Securities Act (except as contemplated under Article 6) or the resale of its securities (except those obligations that have been complied with) and (iii) there are no anti-dilution or
price adjustment provisions contained in any security issued by the Company (or in any agreement providing rights to security holders) that will be triggered by the issuance of the Securities. The Company has furnished to the Purchasers true and
correct copies of the Company’s Amended and Restated Certificate of Incorporation, as amended (the “Certificate of Incorporation”), as in effect on the date hereof, and the Company’s Amended and Restated Bylaws (the
“Bylaws”) as in effect on the date hereof. 
 
3.4 Issuance of Securities. The Shares and all the shares of Common Stock issuable upon exercise of the Warrants (the “Warrant Shares”) are duly authorized and, upon issuance in accordance with
the terms of this Agreement (and, in the case of Warrant Shares, the Warrants), will be validly issued, fully paid and non-assessable, free from all taxes, liens, claims, encumbrances and charges with respect to the issue thereof, will not be
subject to preemptive rights or other similar rights of stockholders of the Company. 
 
3.5 No Conflicts; No Violation. 
 
        (a) The execution, delivery and performance of this Agreement by the Company and the consummation by the Company of the transactions contemplated
hereby (including, without limitation, the issuance of the Securities) will not (i) conflict with or result in a violation of any provision of its Certificate of Incorporation or Bylaws, (ii) violate or conflict with, or result in a breach of any
provision of, or constitute a default (or an event which with notice or lapse of time or both could become a default) under, or give to others any rights of termination, amendment (including without limitation, the triggering of any anti-dilution
provision), acceleration or cancellation of, any agreement, indenture, patent, patent license, or instrument to which the Company is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including United
States federal and state securities laws and regulations and regulations of any self-regulatory organizations to which the Company or its securities are subject) applicable to the Company or by which any property or asset of the Company is bound or
affected, except for such conflicts, breaches, defaults, terminations, amendments, accelerations, cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect. 
 
        (b) The
Company is not in violation of its Certificate of Incorporation or Bylaws and the Company is not in default (and no event has occurred which with notice or lapse of time or both could put the Company in default) under any agreement, indenture or
instrument to which the Company is a party or by which any property or assets of the Company is bound or affected, except for possible defaults as would not, individually or in the aggregate, have a Material Adverse Effect. 
 
        (c) The
Company is not conducting its business in violation of any law, ordinance or regulation of any governmental entity, the failure to comply with which would, individually or in the aggregate, have a Material Adverse Effect. 
 

6 

 
(d)
Except as specifically contemplated by this Agreement and as required under the Securities Act and any applicable state securities laws or any listing agreement with any securities exchange or automated quotation system, the Company is not
required to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency or any regulatory or self regulatory agency in order for it to execute, deliver or perform any of its obligations
under this Agreement in accordance with the terms hereof, or to issue and sell the Securities in accordance with the terms hereof. All consents, authorizations, orders, filings and registrations that the Company is required to obtain pursuant to the
preceding sentence have been obtained or effected on or prior to the date hereof. 
 
3.6 SEC Documents, Financial Statements. The Company has timely filed all reports, schedules, forms, statements and other documents required to be filed by it with the SEC since January 1, 2002,
pursuant to the reporting requirements of the Exchange Act (all of the foregoing filed prior to the date hereof and all exhibits included therein and financial statements and schedules thereto and documents (other than exhibits) incorporated by
reference therein, being hereinafter referred to herein as the “SEC Documents”). The Company has delivered to each Purchaser, or each Purchaser has had access to, true and complete copies of the
SEC Documents, except for such exhibits and incorporated documents. As of their respective dates, the SEC Documents complied in all material respects with the requirements of the Exchange Act or the Securities Act, as the case may be, and the rules
and regulations of the SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents, at the time they were filed with the SEC, contained any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. As of their respective dates, the financial statements of the Company included in the SEC
Documents complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto. Such financial statements have been prepared in accordance with United States
generally accepted accounting principles, consistently applied, during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto, or (ii) in the case of unaudited interim statements, to the
extent they may not include footnotes or may be condensed or summary statements) and fairly present in all material respects the financial position of the Company as of the dates thereof and the results of its operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments). Except as set forth in the financial statements included in the SEC Documents, the Company has no liabilities, contingent or otherwise, other
than liabilities incurred in the ordinary course of business subsequent to December 31, 2002, and liabilities of the type not required under generally accepted accounting principles to be reflected in such financial statements. Such liabilities
incurred subsequent to December 31, 2002, are not, in the aggregate, material to the financial condition or operating results of the Company. 
 
3.7 Absence of Certain Changes. Except as disclosed in the SEC Documents since December 31, 2002, there has been no material
adverse change in the assets, liabilities, business, properties, operations, financial condition or results of operations of the Company. 
 
3.8 Absence of Litigation. Except as disclosed in the SEC Documents, there is no action, suit, claim, proceeding, inquiry or
investigation before or by any court, public board, 
 

7 

 
government agency,
self-regulatory organization or body pending or, to the knowledge of the Company, threatened against or affecting the Company or any of its officers or directors acting as such that could, individually or in the aggregate, have a Material Adverse
Effect. 
 
3.9 Intellectual Property Rights.
To the Company’s knowledge, the Company owns or possesses licenses or sufficient rights to use all patents, patent applications, patent rights, inventions, know-how, trade secrets, trademarks, trademark applications, service marks, service
names, trade names and copyrights necessary to enable it to conduct its business as now operated and as proposed to be operated as described in the SEC Documents, except where the failure to currently own or posses could not reasonably be expected
to have a Material Adverse Effect (the “Intellectual Property”). Except as set forth in the SEC Documents, there are no material options, licenses or agreements relating to the Intellectual Property, nor is the Company bound
by or a party to any material options, licenses or agreements relating to the patents, patent applications, patent rights, inventions, know-how, trade secrets, trademarks, trademark applications, service marks, service names, trade names or
copyrights of any other person or entity. Except as disclosed in the SEC Documents, there is no claim or action or proceeding pending or, to the Company’s knowledge, threatened that challenges the right of the Company with respect to any
Intellectual Property. 
 
3.10 Tax Status.
The Company has timely made or filed all federal, state and foreign income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject (unless and only to the extent that the Company has set aside on
its books provisions reasonably adequate for the payment of all unpaid and unreported taxes) and has timely paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns,
reports and declarations, except those being contested in good faith, and has set aside on its books provisions reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations
apply. To the knowledge of the Company, there are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company know of no basis for any such claim. The Company has not executed
a waiver with respect to the statute of limitations relating to the assessment or collection of any foreign, federal, state or local tax. None of the Company’s tax returns is presently being audited by any taxing authority. 
 
3.11 Environmental Laws. The Company (i) is in
compliance in all material respects with all applicable foreign federal, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or
contaminants (“Environmental Laws”), (ii) has received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct its business and (iii) is in compliance with all terms and
conditions of any such permit, license or approval where, in each of the three foregoing clauses, the failure to so comply would have, individually or in the aggregate, a Material Adverse Effect 
 
3.12 No Integrated Offering. Neither the Company, nor
any of its affiliates, nor any person acting on its or their behalf, has directly or indirectly made any offers or sales in any security or solicited any offers to buy any security under circumstances that would require registration under the
Securities Act of the issuance of the Securities to the Purchasers. The 
 

8 

 
issuance of the Securities to
the Purchasers will not be integrated with any other issuance of the Company’s securities for purposes of the Securities Act or any applicable rules of Nasdaq. 
 
3.13 No Brokers. The Company has taken no action which would give rise to any claim by any person for
brokerage commissions, placement agent’s fees or similar payments relating to this Agreement or the transactions contemplated hereby, except for dealings with the Placement Agents, whose commissions and fees will be paid by the Company.

 
3.14 Insurance. The Company is insured by
insurers of recognized financial responsibility in the following aggregate amounts (a) $1,000,000 for general liability, (b) $10,000,000 in an umbrella policy (excluding product liability claims) and (c) $10,000,000 for product liability claims. The
Company maintains and will continue to maintain insurance in such amounts and covering such risks as is reasonably adequate consistent with industry practice for the conduct of its business and the value of its property, all of which insurance is in
full force and effect. 
 
3.15 Employment
Matters. The Company is in compliance with all federal, state, local and foreign laws and regulations respecting employment and employment practices, terms and conditions of employment and wages and hours except where failure to be in compliance
would not have a Material Adverse Effect. The Company is not bound by or subject to (and none of its assets or properties is bound by or subject to) any written or oral, express or implied, contract, commitment or arrangement with any labor union,
and no labor union has requested or, to the Company’s knowledge, has sought to represent any of the employees, representatives or agents of the Company. There is no strike or other labor dispute involving the Company pending, or to the
Company’s knowledge, threatened, that could have a Material Adverse Effect nor is the Company aware of any labor organization activity involving its employees. The Company is not aware that any officer or key employee, or that any group of
officers or key employees, intends to terminate their employment with the Company, nor does the Company have a present intention to terminate the employment of any of the foregoing. 
 
3.16 Investment Company Status. The Company is not and upon consummation of the sale of the Securities
will not be an “investment company,” a company controlled by an “investment company” or an “affiliated person” of, or “promoter” or “principal underwriter” for, an “investment company” as
such terms are defined in the Investment Company Act of 1940, as amended. 
 
3.17 Subsidiaries. The Company does not presently own or control, directly or indirectly, any interest in any other corporation, association, joint venture, partnership or other business entity and the Company is not
a direct or indirect participant in any joint venture or partnership. 
 
3.18 No Conflict of Interest. The Company is not indebted, directly or indirectly, to any of its officers or directors or to their respective spouses or children, in any amount whatsoever other than in connection with
expenses or advances of expenses incurred in the ordinary course of business or relocation expenses of employees. None of the Company’s officers, directors or employees, or any members of their immediate families, are directly, or indirectly,
indebted to the Company (other than as described in the SEC Documents) or, to the 
 

9 

 
best of the Company’s
knowledge, have any direct or indirect ownership interest in any entity with which the Company is affiliated or with which the Company has a business relationship, or any entity which competes with the Company, except that officers, directors,
employees and/or stockholders of the Company may own stock in (but not exceeding 5% of the outstanding capital stock of) any publicly traded company that may compete with the Company. To the best of the Company’s knowledge, none of the
Company’s officers, directors or employees or any members of their immediate families are, directly or indirectly, interested in any material contract with the Company. The Company is not a guarantor or indemnitor of any indebtedness of any
other person or entity. 
 
3.19 S-3 Status.
The Company currently meets the “registrant eligibility” requirements set forth in the general instructions to Form S-3 to enable the registration of the resale of the Registrable Securities; provided, however, the Company does
not currently meet the requirements for a primary offering. 
 
3.20 No Registration. Assuming the accuracy of the representations and warranties made by, and compliance with the covenants of, the Purchasers in Article 2 hereof, no registration of the Shares and Warrants under the
Securities Act is required in connection with the offer and sale of the Shares and Warrants by the Company to the Purchasers as contemplated by the Agreement. 
 
ARTICLE 4 
 
COVENANTS 
 
4.1 Form D; Blue Sky Laws. The Company will timely file a Notice of Sale of Securities on Form D with respect to the Securities, as
required under Regulation D. The Company will, on or before the Closing Date, take such action as it reasonably determines to be necessary to qualify the Securities for sale to the Purchasers under this Agreement under applicable securities (or
“blue sky”) laws of the states of the United States (or to obtain an exemption from such qualification). 
 
4.2 Reporting Status; Eligibility to Use Form S-3. The Company’s Common Stock is registered under Section 12 of the Exchange
Act. During the Registration Period (as defined below), the Company will timely file all SEC Documents, and the Company will not terminate its status as an issuer required to file reports under the Exchange Act even if the Exchange Act or the rules
and regulations thereunder would permit such termination. 
 
4.3 Expenses. The Company and each Purchaser is liable for, and will pay, its own expenses incurred in connection with the negotiation, preparation, execution and delivery of this Agreement, including, without limitation,
attorneys’ and consultants’ fees and expenses; provided, however, the Company has agreed to pay Paramount Capital, Inc. a non-accountable expense allowance of $10,000 and the reasonable documented legal fees of ProQuest (not to
exceed $10,000). 
 
4.4 Financial Information.
The financial statements of the Company to be included in any SEC Documents will be prepared in accordance with United States generally accepted 
 
 

10 

accounting principles, consistently applied, and will fairly present in all material respects the
consolidated financial position of the Company and results of its operations and cash flows as of, and for the periods covered by, such financial statements (subject, in the case of unaudited statements, to normal year-end audit adjustments).

 
4.5 Compliance with Law. As long as an
Purchaser owns any of the Securities, the Company will conduct its business in compliance with all applicable laws, rules and regulations of the jurisdictions in which it is conducting business (including, without limitation, all applicable local,
state and federal environmental laws and regulations), the failure to comply with which would have a Material Adverse Effect. 
 
4.6 Sales by Purchasers. Each Purchaser will sell any Securities sold by it in compliance with applicable prospectus delivery
requirements, if any, or otherwise in compliance with the requirements for an exemption from registration under the Securities Act and the rules and regulations promulgated thereunder. No Purchaser will make any sale, transfer or other disposition
of the Securities in violation of federal or state securities laws. 
 
ARTICLE 5 
 
CONDITIONS TO CLOSING 
 
5.1 Purchasers’ Obligations—Legal Opinion. The Purchasers’ obligations to purchase the Securities at the Closing are subject to the Company’s counsel having delivered a legal opinion to each Purchaser in
substantially the form set forth as Exhibit E. 
 
ARTICLE 6 
 
REGISTRATION
RIGHTS 
 
6.1 As used in this Agreement,
the following terms shall have the following meanings: 
 
        (a) “Affiliate” shall mean, with respect to any Person (as defined below), any other Person controlling, controlled by or under direct or indirect common
control with such Person (for the purposes of this definition “control,” when used with respect to any specified Person, shall mean the power to direct the management and policies of such person, directly or indirectly,
whether through ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” shall have meanings correlative to the foregoing). 
 
        (b)
“Business Day” shall mean a day Monday through Friday on which banks are generally open for business in New York. 
 
        (c) “Holders” shall mean any person holding Registrable
Securities or any person to whom the rights under Article 6 have been transferred in accordance with Section 6.9 hereof. 
 

11 

 
        (d) “Person” shall mean any person, individual, corporation, limited liability company, partnership, trust or other nongovernmental entity or any
governmental agency, court, authority or other body (whether foreign, federal, state, local or otherwise). 
 
        (e) The terms
“register,”“registered” and “registration” refer to the registration effected by preparing and filing a registration statement in compliance with the Securities Act, and the
declaration or ordering of the effectiveness of such registration statement. 
 
        (f) “Registrable Securities” shall mean (i) the Shares; (ii) the Warrant Shares; (iii) any shares of Common Stock issuable
upon exercise of the Placement Agent Warrants (the “Placement Agent Shares”); and (iv) any shares of Common Stock issued as (or issuable upon the conversion of any warrant, right or other security which is issued as) a
dividend or other distribution with respect to or in replacement of the Shares, the Warrant Shares or the Placement Agent Shares; provided, however, that securities shall only be treated as Registrable Securities if and only for so long as
they (A) have not been disposed of pursuant to a registration statement declared effective by the SEC, (B) have not been sold in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act so that all
transfer restrictions and restrictive legends with respect thereto are removed upon the consummation of such sale or (C) are held by a Holder or a permitted transferee pursuant to Section 6.9. 
 
        (g)
“Registration Expenses” shall mean all expenses incurred by the Company in complying with Section 6.2 hereof, including, without limitation, all registration, qualification and filing fees, printing expenses, escrow fees,
fees and expenses of counsel for the Company, blue sky fees and expenses and the expense of any special audits incident to or required by any such registration (but excluding the fees of legal counsel for any Holder). 
 
 
        (h) “Registration Statement” shall have the meaning ascribed to such term in Section 6.2. 
 
        (i) “Registration Period”
shall have the meaning ascribed to such term in Section 6.4. 
 
        (j) “Selling Expenses” shall mean all underwriting discounts and selling commissions applicable to the sale of Registrable Securities and all fees and
expenses of legal counsel for any Holder. 
 
6.2 No later than thirty (30) days after the Closing Date (the “Filing Date”), the Company shall use its best efforts to file a registration statement covering the resale of the Registrable Securities
on the appropriate form (the “Registration Statement”) with the SEC and use its best efforts to effect the registration, qualifications or compliances (including, without limitation, the execution of any required undertaking
to file post-effective amendments, appropriate qualifications or exemptions under applicable blue sky or other state securities laws and appropriate compliance with applicable securities laws, requirements or regulations) prior to the date which is
ninety (90) days after the Filing Date. The Company will provide each Holder with a copy of the Registration Statement five (5) business days prior to its filing with the SEC and such Registration Statement, to the extent allowable under applicable
rules and regulations, 
 

12 

 
shall contain appropriate
language permitting a Holder to make distributions to its affiliates, including, without limitation, a Holder’s partners or limited partners. Notwithstanding the foregoing, the Company shall not be obligated to enter into any underwriting
agreement for the sale of any of the Registrable Securities. 
 
6.3 All Registration Expenses incurred in connection with any registration, qualification, exemption or compliance pursuant to Section 6.2 shall be borne by the Company. All Selling Expenses relating to the sale of securities
registered by or on behalf of Holders shall be borne by such Holders pro rata on the basis of the number of securities so registered. 
 
6.4 In the case of the registration, qualification, exemption or compliance effected by the Company pursuant to this Agreement, the
Company shall, upon reasonable request, inform each Holder as to the status of such registration, qualification, exemption and compliance. At its expense the Company shall: 
 
        (a) use its best efforts to keep such registration,
and any qualification, exemption or compliance under state securities laws which the Company determines to obtain, continuously effective until the earlier of the following: (i) the second anniversary of the first date on which no Warrants remain
unexercised or unexpired or (ii) the date all Shares and Warrant Shares may be sold under Rule 144 during any ninety (90) day period. The period of time during which the Company is required hereunder to keep the Registration Statement effective is
referred to herein as “the Registration Period.” 
 
        (b) advise the Holders within two (2) Business Days by facsimile: 
 
                (i) when the Registration Statement
or any amendment thereto has been filed with the SEC and when the Registration Statement or any post-effective amendment thereto has become effective; 
 
                (ii) of any request by the SEC for
amendments or supplements to the Registration Statement or the prospectus included therein or for additional information; 
 
                (iii) of the issuance by the SEC of
any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for such purpose; 
 
                (iv) of the receipt by the Company
of any notification with respect to the suspension of the qualification of the Registrable Securities included therein for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; and 
 
                (v) of the happening of any event that requires the making of any changes in the Registration Statement or the prospectus so that,
as of such date, the statements therein are not misleading and do not omit to state a material fact required to be stated therein or necessary to make the statements therein (in the case of the prospectus, in the light of the circumstances under
which they were made) not misleading; 
 
        (c) use its best efforts to obtain the withdrawal of any order suspending the effectiveness of any Registration Statement at the earliest possible time; 
 

13 

 
        (d) promptly furnish to each Holder, without charge, at least one copy of such Registration Statement and any post-effective amendment thereto, including financial statements and
schedules, and, if the Holder so requests in writing, all exhibits in the form filed with the SEC; 
 
        (e) during the Registration Period, promptly deliver to each Holder, without
charge, as many copies of the prospectus included in such Registration Statement and any amendment or supplement thereto as such Holder may reasonably request; and the Company consents to the use, consistent with the provisions hereof, of the
prospectus or any amendment or supplement thereto by each of the selling Holders of Registrable Securities in connection with the offering and sale of the Registrable Securities covered by the prospectus or any amendment or supplement thereto. In
addition, upon the reasonable request of the Holder and subject in all cases to confidentiality protections reasonably acceptable to the Company, the Company will meet with a Holder or a representative thereof at the Company’s headquarters to
discuss all information relevant for disclosure in the Registration Statement covering the Registrable Securities, and will otherwise cooperate with any Holder conducting an investigation for the purpose of reducing or eliminating such Holder’s
exposure to liability under the Securities Act, including the reasonable production of information at the Company’s headquarters; 
 
        (f) during the Registration Period, promptly deliver to each Holder, without
charge, (i) as soon as practicable (but in the case of the annual report of the Company to its stockholders, within 120 days after the end of each fiscal year of the Company) one copy of the following documents, other than those documents available
via EDGAR: (A) its annual report to its stockholders, if any (which annual report shall contain financial statements audited in accordance with generally accepted accounting principles in the United States of America by a firm of certified public
accountants of recognized standing); (B) if not included in substance in its annual report to stockholders, its annual report on Form 10-K (or similar form); (C) each of its quarterly reports to its stockholders, and, if not included in substance in
its quarterly reports to stockholders, its quarterly report on Form 10-Q (or similar form), and (D) a copy of the full Registration Statement (the foregoing, in each case, excluding exhibits); and (ii) upon reasonable request, all exhibits excluded
by the parenthetical to the immediately preceding clause (D), and all other information that is generally available to the public; 
 
        (g) prior to any public offering of Registrable Securities pursuant to any
Registration Statement, promptly takes such actions as may be necessary to register or qualify or obtain an exemption for offer and sale under the securities or blue sky laws of such jurisdictions as any such Holders reasonably request in writing,
provided that the Company shall not for any such purpose be required to qualify generally to transact business as a foreign corporation in any jurisdiction where it is not so qualified or to consent to general service of process in any such
jurisdiction, and do any and all other acts or things reasonably necessary or advisable to enable the offer and sale in such jurisdictions of the Registrable Securities covered by such Registration Statement; 
 
        (h)
upon the occurrence of any event contemplated by Section 6.4(b)(v) above, the Company shall use its best efforts to promptly prepare a post-effective amendment to the Registration Statement or a supplement to the related prospectus, or file any
other required document so that, as thereafter delivered to purchasers of the Registrable Securities included 
 

14 

 
therein, the prospectus will
not include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; 
 
        (i)
otherwise use its best efforts to comply with all applicable rules and regulations of the SEC which could affect the sale of the Registrable Securities; 
 
        (j) use its best efforts to cause all Registrable Securities to be listed on each
securities exchange or market, if any, on which equity securities issued by the Company have been listed; 
 
        (k) use its best efforts to take all other steps necessary to effect the
registration of the Registrable Securities contemplated hereby and to enable the Holders to sell Registrable Securities under Rule 144; and 
 
        (l) in the event that the Registration Statement has not (i) been filed with the
SEC within 30 (thirty) days after the Closing Date or (ii) been declared effective by the SEC within 120 (one hundred twenty) days after the Closing Date (each such event referred to in clauses (i) and (ii), a “Registration
Default”), for all or part of each 30-day period (a “Penalty Period”) during which the Registration Default remains uncured, pay to each Holder in cash 1% of the aggregate purchase price paid by the Holder for
its Shares and Warrants for each Penalty Period. The Company shall make such payment to the Holder by the fifth business day after the end of each such Penalty Period. 
 
6.5 The Holders shall have no right to take any action to restrain, enjoin or otherwise delay any
registration pursuant to Section 6.2 hereof as a result of any controversy that may arise with respect to the interpretation or implementation of this Agreement. 
 
6.6 (a) To the extent permitted by law, the Company shall indemnify each Holder, each underwriter of
the Registrable Securities and each person controlling such Holder within the meaning of Section 15 of the Securities Act, with respect to which any registration that has been effected pursuant to this Agreement, against all claims, losses, damages
and liabilities (or action in respect thereof), including any of the foregoing incurred in settlement of any litigation, commenced or threatened (subject to Section 6.6(c) below), arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in the Registration Statement, prospectus, any amendment or supplement thereof, or other document incident to any such registration, qualification or compliance or based on any omission (or alleged omission)
to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in light of the circumstances in which they were made, or any violation by the Company of any rule or regulation promulgated
by the Securities Act applicable to the Company and relating to any action or inaction required of the Company in connection with any such registration, qualification or compliance, and will reimburse each Holder, each underwriter of the Registrable
Securities and each person controlling such Holder, for reasonable legal and other expenses reasonably incurred in connection with investigating or defending any such claim, loss, damage, liability or action as incurred; provided that the Company
will not be liable in any such case to the extent that any untrue statement or omission or allegation thereof is made in reliance upon and in conformity with written information furnished to the Company by or on behalf of 
 

15 

 
such Holder and stated to be
specifically for use in preparation of such Registration Statement, prospectus; provided that the Company will not be liable in any such case where the claim, loss, damage or liability arises out of or is related to the failure of the Holder to
comply with the covenants and agreements contained in this Agreement respecting sales of Registrable Securities, and except that the foregoing indemnity agreement is subject to the condition that, insofar as it relates to any such untrue statement
or alleged untrue statement or omission or alleged omission made in the preliminary prospectus but eliminated or remedied in the amended prospectus on file with the SEC at the time the Registration Statement becomes effective or in the amended
prospectus filed with the SEC pursuant to Rule 424(b) or in the prospectus subject to completion under Rule 434 of the Securities Act, which together meet the requirements of Section 10(a) of the Securities Act (the “Final
Prospectus”), such indemnity shall not inure to the benefit of any such Holder, any such underwriter or any such controlling person, if a copy of the Final Prospectus furnished by the Company to the Holder for delivery was not furnished
to the person or entity asserting the loss, liability, claim or damage at or prior to the time such furnishing is required by the Securities Act and the Final Prospectus would have cured the defect giving rise to such loss, liability, claim or
damage. 
 
        (b) Each Holder will severally, if Registrable Securities held by such Holder are included in the securities as to which such registration is being effected, indemnify the
Company, each of its directors and officers, each underwriter of the Registrable Securities and each person who controls the Company within the meaning of Section 15 of the Securities Act, against all claims, losses, damages and liabilities (or
actions in respect thereof), including any of the foregoing incurred in settlement of any litigation, commenced or threatened (subject to Section 6.6(c) below), arising out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in the Registration Statement, prospectus, or any amendment or supplement thereof, incident to any such registration, or based on any omission (or alleged omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in light of the circumstances in which they were made, and will reimburse the Company, such directors and officers, each underwriter of the Registrable Securities and each person
controlling the Company for reasonable legal and any other expenses reasonably incurred in connection with investigating or defending any such claim, loss, damage, liability or action as incurred, in each case to the extent, but only to the extent,
that such untrue statement or omission or allegation thereof is made in reliance upon and in conformity with written information furnished to the Company by or on behalf of the Holder and stated to be specifically for use in preparation of the
Registration Statement, prospectus; provided that the indemnity shall not apply to the extent that such claim, loss, damage or liability results from the fact that a current copy of the prospectus was not made available to the person or entity
asserting the loss, liability, claim or damage at or prior to the time such furnishing is required by the Securities Act and the Final Prospectus would have cured the defect giving rise to such loss, claim, damage or liability. Notwithstanding the
foregoing, (x) a Holder’s aggregate liability pursuant to this subsection (b) and subsection (d) shall be limited to the net amount received by the Investor from the sale of the Registrable Securities and (y) the Investor shall not be liable to
the Company for any consequential damages, including lost profits, solely with respect to losses, claims, damages, liabilities or expenses to which the Company (or any officer, director or controlling person as set forth above) may become subject
(under the Securities Act or otherwise), arising out of, or based upon, any failure to comply with the covenants and agreements concerning its sale or other disposition of the Registrable Securities. 
 

16 

 
        (c) Each party entitled to indemnification under this Section 6.6 (the “Indemnified Party”) shall give notice to the party required to provide
indemnification (the “Indemnifying Party”) promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, and shall permit the Indemnifying Party (at its expense) to assume the
defense of any such claim or any litigation resulting therefrom, provided that counsel for the Indemnifying Party, who shall conduct the defense of such claim or litigation, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such defense at such Indemnified Party’s expense, and provided further that the failure of any Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Agreement, unless such failure is materially prejudicial to the Indemnifying Party in defending such claim or litigation. An Indemnifying Party shall not be liable for any settlement of an action or
claim effected without its written consent (which consent will not be unreasonably withheld). No Indemnifying Party, in its defense of any such claim or litigation, shall, except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation. 
 
        (d) If
the indemnification provided for in this Section 6.6 is held by a court of competent jurisdiction to be unavailable to an Indemnified Party with respect to any loss, liability, claim, damage or expense referred to therein, then the Indemnifying
Party, in lieu of indemnifying such Indemnified Party thereunder, shall contribute to the amount paid or payable by such Indemnified Party as a result of such loss, liability, claim, damage or expense in such proportion as is appropriate to reflect
the relative fault of the Indemnifying Party on the one hand and of the Indemnified Party on the other in connection with the statements or omissions which resulted in such loss, liability, claim, damage or expense as well as any other relevant
equitable considerations. The relative fault of the Indemnifying Party and of the Indemnified Party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a
material fact relates to information supplied by the Indemnifying Party or by the Indemnified Party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.

 
6.7 (a) Each Holder agrees that, upon
receipt of any notice from the Company of the happening of any event requiring the preparation of a supplement or amendment to a prospectus relating to Registrable Securities so that, as thereafter delivered to the Holders, such prospectus shall not
contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, each Holder will forthwith discontinue disposition of Registrable Securities
pursuant to the Registration Statement and prospectus contemplated by Section 6.2 until its receipt of copies of the supplemented or amended prospectus from the Company and, if so directed by the Company, each Holder shall deliver to the Company all
copies, other than permanent file copies then in such Holder’s possession, of the prospectus covering such Registrable Securities current at the time of receipt of such notice. 
 
        (b) Each Holder shall suspend, upon request of the
Company, any disposition of Registrable Securities pursuant to the Registration Statement and prospectus contemplated by 
 

17 

 
Section 6.2 during (i) any
period not to exceed two 60-day periods within any one 12-month period the Company requires in connection with a primary underwritten offering of equity securities and (ii) any period, not to exceed one 45-day period per circumstance or development,
when the Company determines in good faith that offers and sales pursuant thereto should not be made by reason of the presence of material undisclosed circumstances or developments with respect to which the disclosure that would be required in such a
prospectus is premature or would have an adverse effect on the Company. 
 
        (c) As a condition to the inclusion of its Registrable Securities, each Holder shall furnish to the Company such information regarding such Holder and the distribution
proposed by such Holder as the Company may request in writing, including completing the Registration Statement Questionnaire in the form provided by the Company, or as shall be required in connection with any registration referred to in this Article
6. 
 
        (d) Each Holder hereby covenants with the Company (i) not to make any sale of the Registrable Securities without effectively causing the prospectus delivery requirements under
the Securities Act to be satisfied, and (ii) if such Registrable Securities are to be sold by any method or in any transaction other than on a national securities exchange, Nasdaq or in the over-the-counter market, in privately negotiated
transactions, or in a combination of such methods, to notify the Company at least five (5) business days prior to the date on which the Holder first offers to sell any such Registrable Securities. 
 
        (e)
Each Holder acknowledges and agrees that the Registrable Securities sold pursuant to the Registration Statement are not transferable on the books of the Company unless the stock certificate submitted to the transfer agent evidencing such
Registrable Securities is accompanied by a certificate reasonably satisfactory to the Company to the effect that (i) the Registrable Securities have been sold in accordance with such Registration Statement and (ii) the requirement of delivering a
current prospectus has been satisfied. 
 
        (f) Each Holder agrees not to take any action with respect to any distribution deemed to be made pursuant to such Registration Statement which would constitute a violation of
Regulation M under the Exchange Act or any other applicable rule, regulation or law. 
 
        (g) At the end of the Registration Period the Holders shall discontinue sales of shares pursuant to such Registration Statement upon receipt of
notice from the Company of its intention to remove from registration the shares covered by such Registration Statement which remain unsold, and such Holders shall notify the Company of the number of shares registered which remain unsold immediately
upon receipt of such notice from the Company. 
 
6.8 With a view to making available to the Holders the benefits of certain rules and regulations of the SEC which at any time permit the sale of the Registrable Securities to the public without registration, so long as the
Holders still own Registrable Securities, the Company shall use its reasonable best efforts to: 
 
        (a) make and keep public information available, as those terms are understood and defined in Rule 144 under the Securities Act, at all times;

 

18 

 
        (b) file with the SEC in a timely manner all reports and other documents required of the Company under the Exchange Act; and 
 
        (c) so
long as a Holder owns any Registrable Securities, furnish to such Holder, upon any reasonable request, a written statement by the Company as to its compliance with Rule 144 under the Securities Act, and of the Exchange Act, a copy of the most recent
annual or quarterly report of the Company, and such other reports and documents of the Company as such Holder may reasonably request in availing itself of any rule or regulation of the SEC allowing a Holder to sell any such securities without
registration. 
 
6.9 The rights to cause the
Company to register Registrable Securities granted to the Holders by the Company under Section 6.1 may be assigned in full by a Holder in connection with a transfer by such Holder of its Registrable Securities, provided, however, that such
transfer must be made at least 10 days prior to the Filing Date and that (i) such transfer may otherwise be effected in accordance with applicable securities laws; (ii) such Holder gives prior written notice to the Company at least 10 days prior to
the Filing Date; and (iii) such transferee agrees to comply with the terms and provisions of this Agreement, and such transfer is otherwise in compliance with this Agreement. Except as specifically permitted by this Section 6.9, the rights of a
Holder with respect to Registrable Securities as set out herein shall not be transferable to any other Person, and any attempted transfer shall cause all rights of such Holder therein to be forfeited. 
 
6.10 With the written consent of the Company and the
Holders holding at least a majority of the Registrable Securities that are then outstanding, any provision of this Article 6 may be waived (either generally or in a particular instance, either retroactively or prospectively and either for a
specified period of time or indefinitely) or amended. Upon the effectuation of each such waiver or amendment, the Company shall promptly give written notice thereof to the Holders, if any, who have not previously received notice thereof or consented
thereto in writing. 
 
ARTICLE 7

 
INDEMNIFICATION 
 
In consideration of each Purchaser’s execution and
delivery of this Agreement and its acquisition of the Securities hereunder, and in addition to all of the Company’s other obligations under this Agreement, the Company will indemnify and hold harmless each Purchaser and each other holder of the
Securities and all of their stockholders, officers, directors, employees and direct or indirect Purchasers and any of the foregoing person’s agents or other representatives (including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the “Indemnitees”) from and against any and all actions, causes of action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection therewith (regardless of whether any such Indemnitee is a party to the action for which indemnification hereunder is sought), and including reasonable attorneys’ fees and disbursements (the “Indemnified
Liabilities”), incurred by an Indemnitee as a result of, or arising out of, or relating to (a) any breach of any representation or warranty made by the Company in Section 3 of this Agreement (b) any breach of any covenant, agreement or
obligation of the Company contained in Section 4 of this Agreement or (c) any cause of action, 
 

19 

 
suit or claim brought against
such Indemnitee and arising out of or resulting from the execution, delivery, performance, breach or enforcement of this Agreement by the Company. To the extent that the foregoing undertaking by the Company is unenforceable for any reason, the
Company will make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities that is permissible under applicable law. 
 
ARTICLE 8 
 
DEFINITIONS 
 
8.01 “Bylaws” has the meaning set forth in Section 3.3. 
 
8.02 “Certificate of
Incorporation” has the meaning set forth in Section 3.3. 
 
8.03 “Closing” means the closing of the purchase and sale of the Securities under this Agreement. 
 
8.04 “Closing
Date” has the meaning set forth in Section 1.3. 
 
8.05 “Common Stock” means the common stock, par value $.02 per share, of the Company. 
 
8.06 “Company” means Cypress Bioscience, Inc. 
 
8.07 “Environmental
Laws” has the meaning set forth in Section 3.11. 
 
8.08 “Exchange Act” means the Securities Exchange Act of 1934, as amended. 
 
8.09 “Form 10-K” has the meaning set forth in Section 2.4. 
 
8.10 “Indemnitees”
has the meaning set forth in Section 7. 
 
8.11 “Indemnified Liabilities” has the meaning set forth in Section 7. 
 
8.12 “Intellectual Property” has the meaning set forth in Section 3.9. 
 
8.13 “Material Adverse
Effect” means a material adverse effect on (a) the business, operations, assets or financial condition of the Company or (b) the ability of the Company to perform its obligations pursuant to the transactions contemplated by this
Agreement. 
 
8.14
“NASD” has the meaning set forth in Section 3.2. 
 
8.15 “Nasdaq” means The Nasdaq SmallCap Market. 
 
8.16 “Offering” has the meaning set forth in Recital A. 
 
8.17 “Paramount
Engagement Letter” has the meaning set forth in Recital B. 
 
8.18 “Placement Agents” has the meaning set forth in Section 2.11(a). 
 

20 

 
8.19
“Placement Agent Shares” has the meaning set forth in Section 6.1(f). 
 
8.20 “Placement Agent Warrants” has the meaning set forth in Section 3.3. 
 
8.21 “Purchasers”
means the Purchasers whose names are set forth on the signature pages of this Agreement, and their permitted transferees. 
 
8.22 “Purchase Price” has the meaning set forth in Section 1.1. 
 
8.23 “Regulation
D” means Regulation D as promulgated under by the SEC under the Securities Act. 
 
8.24 “Rule 144” means Rule 144 promulgated under the Securities Act, or any successor rule.

 
8.25 “SCO Engagement
Letter” has the meaning set forth in Recital A. 
 
8.26 “SEC” means the United States Securities and Exchange Commission. 
 
8.27 “SEC Documents” has the meaning set forth in Section 3.6. 
 
8.28 “Securities”
has the meaning set forth in Section 1.1. 
 
8.29 “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations thereunder, or any similar successor statute. 
 
8.30 “Shares” has
the meaning set forth in Section 1.1. 
 
8.31
“to the Company’s knowledge” and variations thereon mean to the actual knowledge of Dr. Jay Kranzler and Sabrina Martucci Johnson. 
 
8.32 “Warrants” has the meaning set forth in Section 1.1.

 
8.33 “Warrant Purchase
Price” has the meaning set forth in Section 1.1. 
 
8.34 “Warrant Shares” has the meaning set forth in Section 3.4. 
 
ARTICLE 9 
 
GOVERNING LAW; MISCELLANEOUS 
 
9.1 Governing Law; Jurisdiction. This Agreement will be governed by and interpreted in accordance with the laws of the State
of Delaware without regard to the principles of conflict of laws. The parties hereto hereby submit to the exclusive jurisdiction of the United States federal and state courts located in the State of Delaware with respect to any dispute arising under
this Agreement or the transactions contemplated hereby or thereby. 
 
9.2 Counterparts; Signatures by Facsimile. This Agreement may be executed in two or more counterparts, all of which are considered one and the same agreement and will 
 

21 

become effective when counterparts have been signed by each party and delivered to the other parties. This
Agreement, once executed by a party, may be delivered to the other parties hereto by facsimile transmission of a copy of this Agreement bearing the signature of the party so delivering this Agreement. 
 
9.3 Headings. The headings of this Agreement are for
convenience of reference only, are not part of this Agreement and do not affect its interpretation. 
 
9.4 Severability. If any provision of this Agreement is invalid or unenforceable under any applicable statute or rule of law, then
such provision will be deemed modified in order to conform with such statute or rule of law. Any provision hereof that may prove invalid or unenforceable under any law will not affect the validity or enforceability of any other provision hereof.

 
9.5 Entire Agreement; Amendments. This
Agreement (including all schedules and exhibits hereto) constitutes the entire agreement among the parties hereto with respect to the subject matter hereof and thereof. There are no restrictions, promises, warranties or undertakings, other than
those set forth or referred to herein or therein. This Agreement supersedes all prior agreements and understandings among the parties hereto with respect to the subject matter hereof. No provision of this Agreement may be waived or amended other
than by an instrument in writing signed by the party to be charged with enforcement. 
 
9.6 Notices. Any notices required or permitted to be given under the terms of this Agreement must be sent by certified or registered mail (return receipt requested) or delivered personally or by
courier (including a recognized overnight delivery service) and will be effective five days after being placed in the mail, if mailed by regular U.S. mail, or upon receipt, if delivered personally, or by courier (including a recognized overnight
delivery service), in each case addressed to a party. The addresses for such communications are: 
 

	 If to the Company:
	 	 Cypress Bioscience, Inc.

	 	 	 4350 Executive Drive, Suite 325

	 	 	 San Diego, California 92121

	 	 	 Attn: Chief Executive Officer

 

	 With a copy to:
	 	 Cooley Godward LLP

	 	 	 4401 Eastgate Mall

	 	 	 San Diego, CA 92121

	 	 	 Attn: Fred Muto, Esq.

 
If to a
Purchaser: To the address set forth immediately below such Purchaser’s name on the signature pages hereto. 
 
Each party will provide written notice to the other parties of any change in its address. 
 
9.7 Successors and Assigns. This Agreement is binding
upon and inures to the benefit of the parties and their successors and assigns. The Company will not assign this Agreement or any rights or obligations hereunder without the prior written consent of the 
 

22 

 
Purchasers, and no Purchaser
may assign this Agreement or any rights or obligations hereunder without the prior written consent of the Company. Notwithstanding the foregoing, a Purchaser may assign all or part of its rights and obligations hereunder (subject to compliance with
Section 6.9) to any of its “affiliates,” as that term is defined under the Securities Act, without the consent of the Company so long as the affiliate is an accredited Purchaser (within the meaning of Regulation D under the
Securities Act) and agrees in writing to be bound by this Agreement. This provision does not limit the Purchaser’s right to transfer the Securities pursuant to the terms of this Agreement. 
 
9.8 Third Party Beneficiaries. This Agreement is
intended for the benefit of the parties hereto (except as provided in Section 2.11) and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other person. 
 
9.9 Further Assurances. Each party will do and perform,
or cause to be done and performed, all such further acts and things, and will execute and deliver all other agreements, certificates, instruments and documents, as another party may reasonably request in order to carry out the intent and accomplish
the purposes of this Agreement and the consummation of the transactions contemplated hereby. 
 
9.10 No Strict Construction. The language used in this Agreement is deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be
applied against any party. 
 
9.11 Equitable
Relief. The Company recognizes that, if it fails to perform or discharge any of its obligations under this Agreement, any remedy at law may prove to be inadequate relief to the Purchasers. The Company therefore agrees that the Purchasers are
entitled to seek temporary and permanent injunctive relief in any such case. Each Purchaser also recognizes that, if it fails to perform or discharge any of its obligations under this Agreement, any remedy at law may prove to be inadequate relief to
the Company. Each Purchaser therefore agrees that the Company is entitled to seek temporary and permanent injunctive relief in any such case. 
 
 
 

23 

 
IN WITNESS
WHEREOF, the undersigned Purchasers and the Company have caused this Agreement to be duly executed as of the date first above written. 
 
COMPANY: 
 
CYPRESS BIOSCIENCE, INC. 
 
/s/ Dr. Jay
Kranzler                                       
              
Dr. Jay Kranzler

Chief Executive Officer 
 
 
 
[SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT] 

 
OMNIBUS
SIGNATURE PAGE TO 
CYPRESS BIOSCIENCE, INC. 
SECURITIES PURCHASE AGREEMENT 
 
The undersigned hereby executes and delivers the Securities Purchase Agreement to which this signature page is attached, which, together
with all counterparts of the Agreement and signature pages of the other parties named in said Agreement, shall constitute one and the same document in accordance with the terms of the Agreement. 
 

	 	  	 Print Name:
	  	

	
	 	  	 By:
	  	

	 	  	 Name:
	  	

	 	  	 Title:
	  	

	
	 	  	 Address:
	  	

	 	  	 	  	

	 	  	 	  	

	
	 	  	 Telephone:
	  	

	 	  	 Facsimile:
	  	

	 	  	 SOC/EIN#:
	  	

	
	 	  	 Number of Securities Purchased    
	 	

	
	 	  	 Aggregate Purchase Price    
	 	

 

 
EXHIBIT A

 
SCHEDULE OF PURCHASERS 
 

	 PURCHASER
	  	 NUMBER OF SHARES OF COMMON STOCK

	  	 NUMBER OF WARRANTS

	  	 AGGREGATE PURCHASE PRICE

	 ProQuest Investments, L.P.
	  	 742,668
	  	 185,667
	  	 $
	 1,902,158.42

	 	  	
	  	
	  	
	

	 ProQuest Companion Fund, L.P.
	  	 9,629
	  	 2,407
	  	 $
	 24,662.28

	 	  	
	  	
	  	
	

	 ProQuest Investments II, L.P.
	  	 1,836,547
	  	 459,136
	  	 $
	 4,703,856.00

	 	  	
	  	
	  	
	

	 ProQuest Investments II Advisors Fund, L.P.
	  	 44,197
	  	 11,049
	  	 $
	 113,199.57

	 	  	
	  	
	  	
	

	 Mark Berg IRA
	  	 180,000
	  	 45,000
	  	 $
	 461,025.00

	 	  	
	  	
	  	
	

	 Mark Mazzer
	  	 20,000
	  	 5,000
	  	 $
	 51,225.00

	 	  	
	  	
	  	
	

	 SCO Capital Partners LLC
	  	 195,217
	  	 48,804
	  	 $
	 500,000.00

	 	  	
	  	
	  	
	

	 DMG Legacy Fund LLC
	  	 46,852
	  	 11,713
	  	 $
	 120,000.00

	 	  	
	  	
	  	
	

	 DMG Legacy Institutional Fund LLC
	  	 435,724
	  	 108,931
	  	 $
	 1,116,000.00

	 	  	
	  	
	  	
	

	 DMG Legacy International Ltd
	  	 454,465
	  	 113,616
	  	 $
	 1,164,000.00

	 	  	
	  	
	  	
	

	 Paul Scharfer
	  	 39,043
	  	 9,760
	  	 $
	 100,000.00

	 	  	
	  	
	  	
	

	 Larry and Shirley Kessel
	  	 25,000
	  	 6,250
	  	 $
	 64,031.25

	 	  	
	  	
	  	
	

	 TOTAL
	  	 4,029,342
	  	 1,007,333
	  	 $
	 10,320,157.52

	 	  	
	  	
	  	
	

 
 

A-1 

 
EXHIBIT B

 
FORM OF WARRANT 
 
 

B-1 

 
EXHIBIT C

 
WIRE TRANSFER INSTRUCTIONS

 
 

C-1 

 
EXHIBIT D

 
ACCREDITED INVESTOR QUESTIONNAIRES

 
 

D-1 

 
EXHIBIT E

 
FORM OF LEGAL OPINION 
 

E-1

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