8-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934

March 25, 2002
Date of Report (Date of earliest event reported)

VIROLOGIC, INC.

(Exact name of Registrant as specified in charter)

Delaware
(State or other jurisdiction of incorporation) 000-30369
(Commission File Number) 94-3234479
(I.R.S. Employer Identification No.)

270 East Grand Avenue
South San Francisco, California 94080
(650) 635-1100
(Address, including zip code, and telephone number, including area code, of principal executive officers)

N/A
(Former name or former address, if changed since last report)

TABLE OF CONTENTS

	Item 5. Other Events
	Item 7. Financial Statements and Exhibits.
SIGNATURE
INDEX TO EXHIBITS
EXHIBIT 3.1
EXHIBIT 4.1
EXHIBIT 4.2
EXHIBIT 10.1
EXHIBIT 10.2
EXHIBIT 99.1

Item 5. Other Events

     On March 22, 2002, ViroLogic, Inc. ( “ViroLogic” ) entered into a Securities Purchase Agreement (the “Purchase Agreement” ) with several large investors (collectively, the “Purchasers” ), pursuant to which ViroLogic agreed to issue and sell to the Purchasers, and the Purchasers agreed to purchase from ViroLogic, an aggregate of 1,005 shares (the “Shares” ) of ViroLogic’s Series B Convertible Preferred Stock, and warrants to purchase an aggregate of 2.2 million shares of ViroLogic’s common stock (the “Warrants” ), for an aggregate purchase price of $10,050,000 in a private placement (the “Financing” ). The closing (the “Closing”) occurred on March 25, 2002 and Virologic received the $10,050,000 gross proceeds. The rights, preferences and privileges of the Series B Convertible Preferred Stock are set forth in the Certificate of Designations, Preferences and Rights filed with the Delaware Secretary of State. The Warrants are subject to the terms and conditions of the Stock Purchase Warrant issued by ViroLogic and evidencing the Warrants. In connection with the Financing, ViroLogic also granted warrants to purchase an aggregate 637,261 shares of common stock to holders of Series A Preferred Stock as a payment in order to secure their consent and waiver concerning the Financing and the resulting impact on the Series A Preferred Stock. The terms of these warrants are substantially similar to those granted to the Purchasers. Pursuant to a Registration Rights Agreement, ViroLogic has agreed to prepare and file with the Securities and Exchange Commission a registration statement covering the resale of the shares of ViroLogic common stock issuable upon conversion of the Series B Convertible Preferred Stock and issuable upon exercise of the Warrants (and approximately 2,044,677 additional shares of Common Stock, bringing the expected total to be registered to 8,656,529 shares of Common Stock).

     The press release issued by ViroLogic on March 26, 2002 announcing the Financing is filed herewith as Exhibit 99.1.

Item 7. Financial Statements and Exhibits.

     Exhibits.

3.1	Certificate of Designations, Preferences and Rights of Series B Convertible Preferred Stock, as filed with the Secretary of State of the State of Delaware on March 22, 2002.
4.1	Form of Stock Purchase Warrant issued to purchasers of Series B Preferred Stock.
4.2	Form of Stock Purchase Warrant issued to holders of Series A Preferred Stock in connection with the sale of Series B Preferred Stock.
10.1	Securities Purchase Agreement, dated as of March 22, 2002, by and among ViroLogic, Inc. and each of the Purchasers.
10.2	Registration Rights Agreement, dated as of March 22, 2002, by and between ViroLogic, Inc. and each of the Purchasers.
99.1	Press Release issued March 26, 2002.

SIGNATURE

     Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	VIROLOGIC, INC
Dated: March 25, 2002	By:	/s/ William D. Young
		William D. Young Chief Executive Officer

INDEX TO EXHIBITS

3.1	Certificate of Designations, Preferences and Rights of Series B Convertible Preferred Stock, as filed with the Secretary of State of the State of Delaware on March 22, 2002.
4.1	Form of Stock Purchase Warrant issued to purchasers of Series B Preferred Stock.
4.2	Form of Stock Purchase Warrant issued to holders of Series A Preferred Stock in connection with the sale of Series B Preferred Stock.
10.1	Securities Purchase Agreement, dated as of March 22, 2002, by and among ViroLogic, Inc. and each of the Purchasers.
10.2	Registration Rights Agreement, dated as of March 22, 2002, by and between ViroLogic, Inc. and each of the Purchasers.
99.1	Press Release issued March 26, 2002.

EX-3.1 3 a80301ex3-1.txt EXHIBIT 3.1 EXHIBIT 3.1 CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS OF SERIES B CONVERTIBLE PREFERRED STOCK OF VIROLOGIC, INC. (Pursuant to Section 151 of the Delaware General Corporation Law) ViroLogic, Inc., a corporation organized and existing under the laws of the State of Delaware (the "CORPORATION"), hereby certifies that the Board of Directors of the Corporation (the "BOARD OF DIRECTORS" or the "BOARD") pursuant to authority of the Board of Directors as required by Section 151 of the Delaware General Corporation Law, and in accordance with the provisions of its Certificate of Incorporation and Bylaws, each as amended and restated through the date hereof, has and hereby authorizes a series of the Corporation's previously authorized Preferred Stock, par value $.001 per share (the "PREFERRED STOCK"), and hereby states the designation and number of shares, and fixes the relative rights, preferences, privileges, powers and restrictions thereof as follows: I. DESIGNATION AND AMOUNT The designation of this series, which consists of 1,022 shares of Preferred Stock, is the Series B Convertible Preferred Stock (the "SERIES B PREFERRED STOCK") and the face amount shall be Ten Thousand U.S. Dollars ($10,000.00) per share (the "FACE AMOUNT"). II. NO DIVIDENDS The Series B Preferred Stock will bear no dividends, and the holders of the Series B Preferred Stock shall not be entitled to receive dividends on the Series B Preferred Stock. III. CERTAIN DEFINITIONS For purposes of this Certificate of Designation, the following terms shall have the following meanings: A. "CLOSING SALES PRICE" means, for any security as of any date, the last sales price of such security on the Nasdaq National Market ("NNM") or other trading market where such security is listed or traded as reported by Bloomberg Financial Markets (or a comparable reporting service of national reputation selected by the Corporation and reasonably acceptable to holders of a majority of the then outstanding shares of Series B Preferred Stock ("MAJORITY HOLDERS") if Bloomberg Financial Markets is not then reporting closing sales prices of such security) (collectively, "BLOOMBERG"), or if the foregoing does not apply, the last reported sales price of such security on a national exchange or in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg, or, if no such price is reported for such security by Bloomberg, the average of the bid prices of all market makers for such security as reported in the "pink sheets" by the National Quotation Bureau, Inc., in each case for such date or, if such date was not a trading day for such security, on the next preceding date which was a trading day. If the Closing Sales Price cannot be calculated for such security as of either of such dates on any of the foregoing bases, the Closing Sales Price of such security on such date shall be the fair market value as reasonably determined by an investment banking firm selected by the Corporation and reasonably acceptable to the Majority Holders, with the costs of such appraisal to be borne by the Corporation. B. "COMMON STOCK DEEMED OUTSTANDING" shall mean the number of shares of Common Stock actually outstanding (not including shares of Common Stock held in the treasury of the Corporation). C. "CONVERSION DATE" means, (i) for any Optional Conversion (as defined below), the date specified in the notice of conversion in the form attached hereto (the "NOTICE OF CONVERSION"), so long as a copy of the Notice of Conversion is faxed (or delivered by other means resulting in notice) to the Corporation before 11:59 p.m., New York City time, on the Conversion Date indicated in the Notice of Conversion; provided, however, that if the Notice of Conversion is not so faxed or otherwise delivered before such time, then the Conversion Date shall be the date the holder faxes or otherwise delivers the Notice of Conversion to the Corporation, and (ii) for any Mandatory Conversion, that date specified in the notice delivered to the holders of the Series B Preferred Stock being converted pursuant to Article IV.C in the event that such Mandatory Conversion occurs. D. "CONVERSION PRICE" means $2.28, and shall be subject to adjustment as provided herein. E. "ISSUANCE DATE" means, with respect to each share of Series B Preferred Stock, the date of the closing under the Securities Purchase Agreement by and among the Corporation and the purchasers named therein (the "SECURITIES PURCHASE AGREEMENT") pursuant to which such share of Series B Preferred Stock was issued. F. "N" means the number of days from, but excluding, the Issuance Date or the date that the last payment of the Premium was made in full, whichever is less. G. "PREMIUM" means initially an amount equal to (the Rate)x(N/365)x(10,000). The "RATE" shall initially be equal to .06. Thereafter, on the date that is 18 months after the initial Issuance Date under the Securities Purchase Agreement, the Rate will increase by .02, and the Rate shall thereafter continue to increase by .02 every six (6) months after the date that is 18 months after the initial Issuance Date until the Series B Preferred Stock is converted or redeemed in full; provided, however, that the Rate shall not exceed .14. H. "MEASUREMENT DATE" means for purposes of any issuance of securities, the date of issuance thereof. I. "WARRANTS" shall mean the warrants issued by the Corporation to the initial holders of Series B Preferred Stock pursuant to the Securities Purchase Agreement. IV. CONVERSION; PAYMENT OF PREMIUM A. Premium; Conversion at the Option of the Holder. (i) The Premium shall be payable, at the applicable Rate, (a) upon any conversion (regardless of whether it is an Optional Conversion or a Mandatory Conversion) of each share of Series B Preferred Stock and (b) as to each outstanding share of Series B Preferred Stock every six (6) months after the Issuance Date of such share until such share is fully converted or fully redeemed. Payment of the Premium shall be made in cash. (ii) Subject to the limitations on conversions contained in Paragraph D of this Article IV, each holder of shares of Series B Preferred Stock may, at any time and from time to time, convert (an "OPTIONAL CONVERSION") each of its shares of Series B Preferred Stock into a number of fully paid and nonassessable shares of Common Stock determined in accordance with the following formula: 10,000 CONVERSION PRICE B. Mechanics of Conversion. In order to effect an Optional Conversion, a holder shall: (x) fax (or otherwise deliver) a copy of the fully executed Notice of Conversion to the Corporation (Attention: Secretary) and (y) surrender or cause to be surrendered the original certificates representing the Series B Preferred Stock being converted (the "PREFERRED STOCK CERTIFICATES"), duly endorsed, along with a copy of the Notice of Conversion as soon as practicable thereafter to the Corporation. Upon receipt by the Corporation of a facsimile copy of a Notice of Conversion from a holder, the Corporation shall promptly send, via facsimile, a confirmation to such holder stating that the Notice of Conversion has been received, the date upon which the Corporation expects to deliver the Common Stock issuable upon such conversion and the name and telephone number of a contact person at the Corporation regarding the conversion. The Corporation shall not be obligated to issue shares of Common Stock upon a conversion unless either the Preferred Stock Certificates are delivered to the Corporation as provided above, or the holder notifies the Corporation that such Preferred Stock Certificates have been lost, stolen or destroyed and delivers the documentation to the Corporation required by Article XIV.B hereof. (i) Delivery of Common Stock Upon Conversion. Upon the surrender of Preferred Stock Certificates accompanied by a Notice of Conversion, the Corporation (itself, or through its transfer agent) shall, no later than the later of (a) the second business day following the Conversion Date and (b) the business day following the date of such surrender (or, in the case of lost, stolen or destroyed certificates, after provision of indemnity pursuant to Article XIV.B) (the "DELIVERY PERIOD"), issue and deliver (i.e., deposit with a nationally recognized overnight courier service postage prepaid) to the holder or its nominee (x) that number of shares of Common Stock issuable upon conversion of such shares of Series B Preferred Stock being converted and (y) a certificate representing the number of shares of Series B Preferred Stock not being converted, if any. Notwithstanding the foregoing, if the Corporation's transfer agent is participating in the Depository Trust Company ("DTC") Fast Automated Securities Transfer program, and so long as the certificates therefor do not bear a legend (pursuant to the terms of the Securities Purchase Agreement) and the holder thereof is not then required to return such certificate for the placement of a legend thereon (pursuant to the terms of the Securities Purchase Agreement), the Corporation shall cause its transfer agent to promptly electronically transmit the Common Stock issuable upon conversion to the holder by crediting the account of the holder or its nominee with DTC through its Deposit Withdrawal Agent Commission system ("DTC TRANSFER"). If the aforementioned conditions to a DTC Transfer are not satisfied, the Corporation shall deliver as provided above to the holder physical certificates representing the Common Stock issuable upon conversion. Further, a holder may instruct the Corporation to deliver to the holder physical certificates representing the Common Stock issuable upon conversion in lieu of delivering such shares by way of DTC Transfer. (ii) Taxes. The Corporation shall pay any and all taxes that may be imposed upon it with respect to the issuance and delivery of the shares of Common Stock upon the conversion of the Series B Preferred Stock. (iii) No Fractional Shares. If any conversion of Series B Preferred Stock would result in the issuance of a fractional share of Common Stock, such fractional share shall be payable in cash based upon the ten (10) day average Closing Sales Price at such time, and the number of shares of Common Stock issuable upon conversion of the Series B Preferred Stock shall be the next lower whole number of shares. (iv) Conversion Disputes. In the case of any dispute with respect to a conversion, the Corporation shall promptly issue such number of shares of Common Stock as are not disputed in accordance with subparagraph (i) above. If such dispute involves the calculation of the Conversion Price, and such dispute is not promptly resolved by discussion between the relevant holder and the Corporation, the Corporation shall submit the disputed calculations to an independent outside accountant via facsimile within three business days of receipt of the Notice of Conversion. The accountant, at the Corporation's sole expense, shall promptly audit the calculations and notify the Corporation and the holder of the results no later than three business days from the date it receives the disputed calculations. The accountant's calculation shall be deemed conclusive, absent manifest error. The Corporation shall then issue the appropriate number of shares of Common Stock in accordance with subparagraph (i) above. C. Mandatory Conversion. Subject to the limitations on conversion contained in paragraph D of this Article IV, if at any time all of the Required Conditions (as defined herein) are satisfied and (i) at any time after 270 days after the Registration Statement Effective Date (as defined herein), the Closing Sales Price of the Common Stock is greater than $4.56 (as adjusted to reflect any stock dividends, distributions, combinations, reclassifications and other similar transactions effected by the Corporation in respect to its Common Stock) for at least twenty (20) consecutive trading days, (ii) upon the closing of an underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, covering the offer and sale of Common Stock for the account of the Corporation to the public (A) at an offering price per share (prior to underwriter's commissions and discounts) of not less than $4.56 per share (as adjusted to reflect any stock dividends, distributions, combinations, reclassifications and other similar transactions effected by the Corporation in respect to its Common Stock) and (B) with gross proceeds to the Corporation of not less than $40,000,000, or (iii) the holders of at least eighty-one percent (81%) of the then-outstanding shares of Series B Preferred Stock shall consent thereto in writing, then, at the option of the Corporation exercisable by the delivery of written notice to the holders of the Series B Preferred Shares, delivered no more than ten (10) days prior to and no less than three (3) days prior to the Conversion Date stated in such notice, convert all or any shares of Series B Preferred Shares into a number of fully paid and nonassessable shares of Common Stock determined in accordance with the formula set forth in Paragraph A of this Article IV (a "MANDATORY CONVERSION"). Thereafter, the Corporation and the holders shall follow the applicable conversion procedures set forth in Article IV.B (including the requirement that the Holder deliver the Preferred Stock Certificates representing the Series B Preferred Stock being converted to the Corporation); provided, however, the Holder shall not be required to deliver a Notice of Conversion to the Corporation. In the event the Corporation elects to convert only a portion of the outstanding shares of Series B Preferred Stock pursuant to this Article IV.C, the outstanding shares of Series B Preferred Stock shall be converted pro rata among the holders based upon their aggregate relative ownership of outstanding shares of Series B Preferred Stock as of the Conversion Date. (i) The "REQUIRED CONDITIONS" shall consist of the following: (a) the registration statement required to be filed by the Corporation pursuant to Section 2(a) of the Registration Rights Agreement, dated as of the Issuance Date, by and among the Corporation and the initial holders of Series B Preferred Stock (the "REGISTRATION RIGHTS AGREEMENT") shall have been declared effective by the Securities and Exchange Commission (the date on which such registration statement is declared effective is hereinafter referred to as the "REGISTRATION STATEMENT EFFECTIVE DATE")(it being understood that the Corporation shall comply with its obligations under Article 3 of the Registration Rights Agreement relating to the effectiveness of such registration statement); (b) all shares of Common Stock issuable upon conversion of the Series B Preferred Stock and exercise of the Warrants are then (a) authorized and reserved for issuance, (b) registered under the Securities Act for resale by the holders and (c) eligible to be listed or traded on any of the New York Stock Exchange ("NYSE"), the American Stock Exchange ("AMEX"), the NNM, or the NASDAQ SmallCap Market ("SMALLCAP") (or the successor to any of them); (c) no Redemption Event (as defined in Article VIII below) shall have occurred without having been cured; (d) all amounts, if any, then accrued or payable under this Certificate of Designation (including, without limitation, all Premiums) or the Registration Rights Agreement shall have been paid. D. Limitations on Conversions. The conversion of shares of Series B Preferred Stock shall be subject to the following limitations (each of which limitations shall be applied independently): (i) Cap Amount. If, notwithstanding the representations and warranties of the Corporation contained in Section 3(c) of the Securities Purchase Agreement, the Corporation is prohibited by Rule 4350(i) of the National Association of Securities Dealers, Inc. ("NASD"), or any successor or similar rule, or the rules or regulations of any other securities exchange on which the Common Stock is then listed or traded, from issuing a number of shares of Common Stock upon conversion of Series B Preferred Stock (together with any shares of Common Stock, or securities convertible into Common Stock, issued pursuant to the Securities Purchase Agreement or other agreements entered in connection therewith) in excess of a prescribed amount (the "CAP AMOUNT") (without stockholder approval or otherwise), then the Corporation shall not issue shares upon conversion of Series B Preferred Stock in excess of the Cap Amount. Assuming solely for purposes of this paragraph (D) that such Rule 4350(i) or similar rule is applicable, the Cap Amount shall be 4,482,618 shares. The Cap Amount shall be allocated pro rata to the holders of Series B Preferred Stock as provided in Article XIV.C. In the event the Corporation is prohibited from issuing shares of Common Stock as a result of the operation of this subparagraph (i), the Corporation shall comply with Article VII. (ii) Additional Restrictions on Conversion or Transfer. In no event shall a holder of shares of Series B Preferred Stock of the Corporation have the right to convert shares of Series B Preferred Stock into shares of Common Stock or to dispose of any shares of Series B Preferred Stock to the extent that such right to effect such conversion or disposition would result in the holder or any of its affiliates together beneficially owning more than the greater of (a) 4.99% of the outstanding shares of Common Stock or (b) that percentage of the outstanding shares of Common Stock held by such holder and its affiliates immediately prior to the Issuance Date (including in such calculation any shares of Common Stock underlying warrants to purchase Common Stock (other than such holder's portion of the Warrants) held by such holder immediately prior to the Issuance Date). For purposes of this subparagraph, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and Regulation 13D-G thereunder. The restriction contained in this subparagraph may not be altered, amended, deleted or changed in any manner whatsoever unless the holders of a majority of the outstanding shares of Common Stock and the Majority Holders shall approve, in writing, such alteration, amendment, deletion or change. V. RESERVATION OF SHARES OF COMMON STOCK A. Reserved Amount. On or prior to the Issuance Date, the Corporation shall reserve 6,723,684 shares of its authorized but unissued shares of Common Stock for issuance upon conversion of the Series B Preferred Stock and thereafter the number of authorized but unissued shares of Common Stock so reserved (the "RESERVED AMOUNT") shall at all times be sufficient to provide for the conversion of all of the Series B Preferred Stock outstanding at the then current Conversion Price thereof. The Reserved Amount shall be allocated to the holders of Series B Preferred Stock as provided in Article XIV.C. B. Increases to Reserved Amount. If the Reserved Amount for any three consecutive trading days (the last of such three trading days being the "AUTHORIZATION TRIGGER DATE") shall be less than 100% of the number of shares of Common Stock issuable upon conversion of the then outstanding shares of Series B Preferred Stock and upon exercise of the then outstanding Warrants, the Corporation shall immediately notify the holders of Series B Preferred Stock of such occurrence and shall take immediate action (including, if necessary, seeking stockholder approval to authorize the issuance of additional shares of Common Stock) to increase the Reserved Amount to 100% of the number of shares of Common Stock then issuable upon conversion of all of the outstanding Series B Preferred Stock at the then current Conversion Price. In the event the Corporation fails to so increase the Reserved Amount within 90 days after an Authorization Trigger Date, each holder of Series B Preferred Stock shall thereafter have the option, exercisable in whole or in part at any time and from time to time by delivery of a Redemption Notice (as defined in Article VIII.D) to the Corporation, to require the Corporation to purchase for cash, at an amount per share equal to the Redemption Amount (as defined in Article VIII.B), a portion of the holder's Series B Preferred Stock such that, after giving effect to such purchase, the holder's allocated portion of the Reserved Amount exceeds 100% of the total number of shares of Common Stock issuable to such holder upon conversion of its Series B Preferred Stock. If the Corporation fails to redeem any of such shares within five (5) business days after its receipt of such Redemption Notice, then such holder shall be entitled to the remedies provided in Article VIII.D. VI. FAILURE TO SATISFY CONVERSIONS A. Conversion Defaults. If, at any time, (x) a holder of shares of Series B Preferred Stock submits a Notice of Conversion and the Corporation fails for any reason (other than because such issuance would exceed such holder's allocated portion of the Reserved Amount or Cap Amount, for which failures the holders shall have the remedies set forth in Articles V and VII, respectively) to deliver, on or prior to the fifth business day following the expiration of the Delivery Period for such conversion, such number of freely tradable shares of Common Stock to which such holder is entitled upon such conversion, or (y) the Corporation provides written notice to any holder of Series B Preferred Stock (or makes a public announcement via press release) at any time of its intention not to issue freely tradable shares of Common Stock upon exercise by any holder of its conversion rights in accordance with the terms of this Certificate of Designation (other than because such issuance would exceed such holder's allocated portion of the Reserved Amount or Cap Amount) (each of (x) and (y) being a "CONVERSION DEFAULT") then the holder may elect at any time and from time to time prior to the Default Cure Date (as defined below) for such Conversion Default, by delivery of a Redemption Notice to the Corporation, to have all or any portion of such holder's outstanding shares of Series B Preferred Stock purchased by the Corporation for cash, at an amount per share equal to the Redemption Amount (as defined in Article VIII.B). If the Corporation fails to redeem any of such shares within five business days after its receipt of such Redemption Notice, then such holder shall be entitled to the remedies provided in Article VIII.D. "DEFAULT CURE DATE" means, as applicable, (i) with respect to a Conversion Default described in clause (x) of its definition, the date the Corporation effects the conversion of the full number of shares of Series B Preferred Stock, and (ii) with respect to a Conversion Default described in clause (y) of its definition, the date the Corporation issues freely tradable shares of Common Stock in satisfaction of all conversions of Series B Preferred Stock in accordance with Article IV.A, or (iii) with respect to either type of a Conversion Default, the date on which the Corporation redeems shares of Series B Preferred Stock held by such holder pursuant to this Article VI.A. B. Buy-In Cure. Unless the Corporation has notified the applicable holder in writing prior to the delivery by such holder of a Notice of Conversion that the Corporation is unable to honor conversions, if (i) (a) the Corporation fails to promptly deliver during the Delivery Period shares of Common Stock to a holder upon a conversion of shares of Series B Preferred Stock or (b) there shall occur a Legend Removal Failure (as defined in Article VIII.A(iii) below) and (ii) thereafter, such holder purchases (in an open market transaction or otherwise) shares of Common Stock to make delivery in satisfaction of a sale by such holder of the unlegended shares of Common Stock (the "SOLD SHARES") which such holder anticipated receiving upon such conversion (a "BUY-IN"), the Corporation shall pay such holder (in addition to any other remedies available to the holder) the amount by which (x) such holder's total purchase price (including brokerage commissions, if any) for the unlegended shares of Common Stock so purchased exceeds (y) the net proceeds received by such holder from the sale of the Sold Shares. For example, if a holder purchases unlegended shares of Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to shares of Common Stock it sold for $10,000, the Corporation will be required to pay the holder $1,000. A holder shall provide the Corporation written notification and supporting documentation indicating any amounts payable to such holder pursuant to this Paragraph B. The Corporation shall make any payments required pursuant to this Paragraph B in accordance with and subject to the provisions of Article XIV.E. VII. INABILITY TO CONVERT DUE TO CAP AMOUNT A. Obligation to Cure. If at any time after the Issuance Date the then unissued portion of any holder's Cap Amount is less than 100% of the number of shares of Common Stock then issuable upon conversion of such holder's shares of Series B Preferred Stock (a "TRADING MARKET TRIGGER EVENT"), the Corporation shall immediately notify the holders of Series B Preferred Stock of such occurrence and shall take immediate action (including, if necessary, seeking the approval of its stockholders to authorize the issuance of the full number of shares of Common Stock which would be issuable upon the conversion of the then outstanding shares of Series B Preferred Stock but for the Cap Amount) to eliminate any prohibitions under applicable law or the rules or regulations of any stock exchange, interdealer quotation system or other self-regulatory organization with jurisdiction over the Corporation or any of its securities on the Corporation's ability to issue shares of Common Stock in excess of the Cap Amount ("TRADING MARKET PROHIBITIONS"). In the event the Corporation fails to eliminate all such Trading Market Prohibitions within 90 days after the Trading Market Trigger Event, then each holder of Series B Preferred Stock shall thereafter have the option, exercisable in whole or in part at any time and from time to time until such date that all such Trading Market Prohibitions are eliminated, by delivery of a Redemption Notice (as defined in Article VIII.D) to the Corporation, to require the Corporation to purchase for cash, at an amount per share equal to the Redemption Amount (as defined in Article VIII.B), a number of the holder's shares of Series B Preferred Stock such that, after giving effect to such redemption, the then unissued portion of such holder's Cap Amount exceeds 100% of the total number of shares of Common Stock issuable upon conversion of such holder's shares of Series B Preferred Stock. If the Corporation fails to redeem any of such shares within five (5) business days after its receipt of such Redemption Notice, then such holder shall be entitled to the remedies provided in Article VIII.D. VIII. REDEMPTION DUE TO CERTAIN EVENTS A. Redemption by Holder. In the event (each of the events described in clauses (i)-(ix) below after expiration of the applicable cure period (if any) being a "REDEMPTION EVENT"): (i) the Common Stock (including any of the shares of Common Stock issuable upon conversion of the Series B Preferred Stock) is suspended from trading on any of, or is not listed (and authorized) for trading on at least one of, the NYSE, the AMEX, the NNM or SmallCap for an aggregate of 20 trading days in any nine month period; (ii) (A) the registration statement required to be filed by the Corporation pursuant to Section 2(a) of the Registration Rights Agreement has not been declared effective by the 120th day following the Filing Date (as defined in the Registration Rights Agreement) or such registration statement, after being declared effective, cannot be utilized by the holders of Series B Preferred Stock for the resale of all of their Registrable Securities (as defined in the Registration Rights Agreement) for an aggregate of more than 30 days (other than as permitted under the Registration Rights Agreement); (iii) the Corporation fails to remove any restrictive legend on any certificate or any shares of Common Stock issued to the holders of Series B Preferred Stock upon conversion of the Series B Preferred Stock as and when required by this Certificate of Designation, the Securities Purchase Agreement or the Registration Rights Agreement (a "LEGEND REMOVAL FAILURE"), and any such failure continues uncured for five business days after the Corporation has been notified thereof in writing by the holder that the holder has complied with the terms of the Securities Purchase Agreement with respect to such legend removal; (iv) the Corporation provides written notice (or otherwise indicates) to any holder of Series B Preferred Stock, or states by way of public announcement distributed via a press release, at any time, of its intention not to issue, or otherwise refuses to issue, shares of Common Stock to any holder of Series B Preferred Stock upon conversion in accordance with the terms of this Certificate of Designation (other than due to the circumstances contemplated by Articles V or VII for which the holders shall have the remedies set forth in such Articles); (v) the Corporation or any subsidiary of the Corporation shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business, or such a receiver or trustee shall otherwise be appointed; (vi) bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings for the relief of debtors shall be instituted by or against the Corporation or any subsidiary of the Corporation and if instituted against the Corporation by a third party, shall not be dismissed within 60 days of their initiation; (vii) the Corporation shall: (a) sell, convey or dispose of all or substantially all of its assets (the presentation of any such transaction for stockholder approval being conclusive evidence that such transaction involves the sale of all or substantially all of the assets of the Corporation); (b) merge, consolidate or engage in any other business combination with any other entity (other than pursuant to a migratory merger effected solely for the purpose of changing the jurisdiction of incorporation of the Corporation and other than pursuant to a merger in which the Corporation is the surviving or continuing entity and its capital stock is unchanged) provided that such merger, consolidation or business combination is required to be reported by the Company on a Current Report pursuant to Item 1 of Form 8-K, or any successor form; (c) either (i) fail to pay, when due, or within any applicable grace period, any payment with respect to any indebtedness of the Corporation in excess of $350,000 due to any third party, other than payments contested by the Corporation in good faith, or otherwise is in breach or violation of any agreement for monies owed or owing in an amount in excess of $350,000 which breach or violation permits the other party thereto to declare a default or otherwise accelerate amounts due thereunder, or (ii) suffer to exist any other default or event of default under any agreement binding the Corporation which default or event of default would or is likely to have a material adverse effect on the business, operations, properties, prospects or financial condition of the Corporation; or (d) have thirty-five percent (35%) or more of the voting power of its capital stock owned beneficially by one person, entity or "group" (as such term is used under Section 13(d) of the Securities Exchange Act of 1934, as amended); or (viii) except with respect to matters covered by subparagraphs (i) - -- (vii) above, as to which such applicable subparagraphs shall apply, the Corporation otherwise shall breach any material term hereunder or under the Securities Purchase Agreement, the Registration Rights Agreement or the Warrants (as defined in the Securities Purchase Agreement), including, without limitation, the representations and warranties contained therein (i.e., in the event of a material breach as of the date such representation and warranty was made) and if such breach is curable, shall fail to cure such breach within 10 business days after the Corporation has been notified thereof in writing by the holder; then, upon the occurrence of any such Redemption Event, each holder of shares of Series B Preferred Stock shall thereafter have the option, exercisable in whole or in part at any time and from time to time by delivery of a Redemption Notice (as defined in Paragraph D below) to the Corporation while such Redemption Event continues, to require the Corporation to purchase for cash any or all of the then outstanding shares of Series B Preferred Stock held by such holder for an amount per share equal to the Redemption Amount (as defined in Paragraph B below) in effect at the time of the redemption hereunder. For the avoidance of doubt, the occurrence of any event described in clauses (i), (ii), (iv) or (v) above shall immediately constitute a Redemption Event and there shall be no cure period. Upon the Corporation's receipt of any Redemption Notice hereunder (other than during the three trading day period following the Corporation's delivery of a Redemption Announcement (as defined below) to all of the holders in response to the Corporation's initial receipt of a Redemption Notice from a holder of Series B Preferred Stock), the Corporation shall immediately (and in any event within one business day following such receipt) deliver a written notice (a "REDEMPTION ANNOUNCEMENT") to all holders of Series B Preferred Stock stating the date upon which the Corporation received such Redemption Notice and the amount of Series B Preferred Stock covered thereby. The Corporation shall not redeem any shares of Series B Preferred Stock during the three trading day period following the delivery of a required Redemption Announcement hereunder. At any time and from time to time during such three trading day period, each holder of Series B Preferred Stock may request (either orally or in writing) information from the Corporation with respect to the instant redemption (including, but not limited to, the aggregate number of shares of Series B Preferred Stock covered by Redemption Notices received by the Corporation) and the Corporation shall furnish (either orally or in writing) as soon as practicable such requested information to such requesting holder. B. Definition of Redemption Amount. The "REDEMPTION AMOUNT" with respect to a share of Series B Preferred Stock means an amount equal to the greater of: (i) V X M --- C P and (ii) V X R where: "V" means the Face Amount thereof plus the accrued Premium thereon through the date of payment of the Redemption Amount; "CP" means the Conversion Price in effect on the date on which the Corporation receives the Redemption Notice; "M" means (i) with respect to all redemptions other than redemptions pursuant to Article VIII.A(vii) hereof, the highest Closing Sales Price of the Corporation's Common Stock during the period beginning on the date on which the Corporation receives the Redemption Notice and ending on the date immediately preceding the date of payment of the Redemption Amount and (ii) with respect to redemptions pursuant to Article VIII.A(vii) hereof, the greater of (a) the amount determined pursuant to clause (i) of this definition or (b) the fair market value, as of the date on which the Corporation receives the Redemption Notice, of the consideration payable to the holder of a share of Common Stock pursuant to the transaction which triggers the redemption. For purposes of this definition, "fair market value" shall be determined by the mutual agreement of the Corporation and holders of a majority-in-interest of the shares of Series B Preferred Stock then outstanding, or if such agreement cannot be reached within five business days prior to the date of redemption, by an investment banking firm selected by the Corporation and reasonably acceptable to holders of a majority-in-interest of the then outstanding shares of Series B Preferred Stock, with the costs of such appraisal to be borne by the Corporation; and "R" means 120%. C. Optional Redemption by Corporation. (i) At any time after the second anniversary of the Issuance Date if all of the Required Conditions are satisfied, at the option of the Corporation exercised by the delivery of written notice (an "OPTIONAL REDEMPTION NOTICE") to all holders of the shares of Series B Preferred Stock, delivered no more than thirty (30) days before and no less than fifteen (15) days prior to the date of redemption set forth therein (the "OPTIONAL REDEMPTION DATE"), the Corporation shall redeem shares of the Series B Preferred Stock, payable in cash, in an amount equal to the Redemption Amount. Notwithstanding anything to the contrary contained herein, for purposes of this Article VIII.C, the Redemption Amount for each share of Series B Preferred Stock being redeemed shall equal "V" as defined in Article VIII.B. (ii) The Corporation may not deliver to a holder an Optional Redemption Notice unless on or prior to the date of delivery of such Optional Redemption Notice, the Corporation shall have segregated on the books and records of the Corporation an amount of cash sufficient to pay all amounts to which the holders of shares of Series B Preferred Stock are entitled upon such redemption pursuant to subparagraph (i) of this Paragraph C. Any Optional Redemption Notice delivered shall be irrevocable and shall be accompanied by a statement executed by a duly authorized officer of the Corporation. (iii) The Redemption Amount shall be paid to the holders being redeemed within five (5) business days of the Optional Redemption Date; provided, however, that the Corporation shall not be obligated to deliver any portion of the Redemption Amount until either the Preferred Stock Certificates representing the shares of Series B Preferred Stock being redeemed are delivered to the office of the Corporation or the escrow agent or the holder notifies the Corporation or the transfer agent that such certificates have been lost, stolen or destroyed and delivers the documentation in accordance with Article XIV.B hereof. Notwithstanding anything herein to the contrary, in the event that the Preferred Stock Certificates of the shares of Series B Preferred Stock being redeemed are not delivered to the Corporation or the transfer agent prior to the fifth business day following the Optional Redemption Date, the redemption of the Series B Preferred Stock pursuant to this Article VIII.C shall still be deemed effective as of the Optional Redemption Date and the Redemption Amount shall be paid to the holder being redeemed within five (5) business days of the date the Series B Preferred Stock being redeemed are actually delivered to the Corporation or the transfer agent. (iv) Notwithstanding the delivery of an Optional Redemption Notice, a holder may convert some or all of its shares of Series B Preferred Stock subject to such Optional Redemption Notice by the delivery prior to the Optional Redemption Date of a Notice of Conversion to the Corporation pursuant to the procedures set forth in Article IV.B. In the event a holder would be precluded from converting any shares of Series B Preferred Stock subject to an Optional Redemption Notice due to the limitation contained in Article IV.D(ii), the Optional Redemption Date shall automatically be extended by sixty (60) days. D. Redemption Defaults. If the Corporation fails to pay any holder the Redemption Amount with respect to any share of Series B Preferred Stock within five business days after its receipt of a notice requiring such redemption (a "REDEMPTION NOTICE") or within five business days of the Optional Redemption Date, as applicable, then the holder of Series B Preferred Stock entitled to redemption shall be entitled to interest on the Redemption Amount at a per annum rate equal to the lower of twenty-four percent (24%) and the highest interest rate permitted by applicable law from the date on which the Corporation receives the Redemption Notice or the Optional Redemption Date, as applicable, until the date of payment of the Redemption Amount hereunder. In the event the Corporation is not able to redeem all of the shares of Series B Preferred Stock subject to Redemption Notices delivered prior to the date upon which such redemption is to be effected, the Corporation shall redeem shares of Series B Preferred Stock from each holder pro rata, based on the total number of shares of Series B Preferred Stock outstanding at the time of redemption included by such holder in all Redemption Notices delivered prior to the date upon which such redemption is to be effected relative to the total number of shares of Series B Preferred Stock outstanding at the time of redemption included in all of the Redemption Notices delivered prior to the date upon which such redemption is to be effected. IX. RANK All shares of the Series B Preferred Stock shall rank (i) prior to (a) the Corporation's Common Stock; and (b) any class or series of capital stock of the Corporation hereafter created (unless, with the consent of the holders of at least eighty-one percent (81%) of the Series B Preferred Stock obtained in accordance with Article XIII hereof, such class or series of capital stock specifically, by its terms, ranks senior to or pari passu with the Series B Preferred Stock) (collectively with the Common Stock, "JUNIOR SECURITIES"); (ii) pari passu with the Corporation's Series A Convertible Preferred Stock and any other class or series of capital stock of the Corporation hereafter created (with the written consent of the holders of at least eighty-one percent (81%) of the Series B Preferred Stock obtained in accordance with Article XIII hereof) specifically ranking, by its terms, on parity with the Series B Preferred Stock (the "PARI PASSU SECURITIES"); and (iii) junior to any class or series of capital stock of the Corporation hereafter created (with the written consent of the holders of at least eighty-one percent (81%) of the Series B Preferred Stock obtained in accordance with Article XIII hereof) specifically ranking, by its terms, senior to the Series B Preferred Stock (collectively, the "SENIOR SECURITIES"), in each case as to distribution of assets upon liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary. X. LIQUIDATION PREFERENCE A. If the Corporation shall commence a voluntary case under the U.S. Federal bankruptcy laws or any other applicable bankruptcy, insolvency or similar law, or consent to the entry of an order for relief in an involuntary case under any law or to the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of the Corporation or of any substantial part of its property, or make an assignment for the benefit of its creditors, or admit in writing its inability to pay its debts generally as they become due, or if a decree or order for relief in respect of the Corporation shall be entered by a court having jurisdiction in the premises in an involuntary case under the U.S. Federal bankruptcy laws or any other applicable bankruptcy, insolvency or similar law resulting in the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of the Corporation or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and any such decree or order shall be unstayed and in effect for a period of 60 consecutive days and, on account of any such event, the Corporation shall liquidate, dissolve or wind up, or if the Corporation shall otherwise liquidate, dissolve or wind up, including, but not limited to, the sale or transfer of all or substantially all of the Corporation's assets in one transaction or in a series of related transactions (only in the event a holder does not elect its rights with respect to such sale of transfer as set forth in Article XI.B. if applicable) (a "LIQUIDATION EVENT"), no distribution shall be made to the holders of any shares of capital stock of the Corporation (other than Senior Securities pursuant to the rights, preferences and privileges thereof) upon liquidation, dissolution or winding up unless prior thereto the holders of shares of Series B Preferred Stock shall have received the Liquidation Preference with respect to each share. If, upon the occurrence of a Liquidation Event, the assets and funds available for distribution among the holders of the Series B Preferred Stock and holders of Pari Passu Securities, if any, shall be insufficient to permit the payment to such holders of the preferential amounts payable thereon, then the entire assets and funds of the Corporation legally available for distribution to the Series B Preferred Stock and the Pari Passu Securities, if any, shall be distributed ratably among such shares in proportion to the ratio that the Liquidation Preference payable on each such share bears to the aggregate Liquidation Preference payable on all such shares. B. The purchase or redemption by the Corporation of stock of any class, in any manner permitted by law, shall not, for the purposes hereof, be regarded as a liquidation, dissolution or winding up of the Corporation. Neither the consolidation or merger of the Corporation with or into any other entity nor the sale or transfer by the Corporation of less than substantially all of its assets shall, for the purposes hereof, be deemed to be a liquidation, dissolution or winding up of the Corporation. C. The "LIQUIDATION PREFERENCE" with respect to a share of Series B Preferred Stock means an amount equal to the Face Amount thereof plus the accrued Premium thereon through the date of final distribution. The Liquidation Preference with respect to any Pari Passu Securities, if any, shall be as set forth in the Certificate of Designation filed in respect thereof. XI. ADJUSTMENTS TO THE CONVERSION PRICE The Conversion Price shall be subject to adjustment from time to time as follows: A. Stock Splits, Stock Dividends, Etc. If, at any time on or after the Issuance Date, the number of outstanding shares of Common Stock is increased by a stock split, stock dividend, combination, reclassification or other similar event, the Conversion Price shall be proportionately reduced, or if the number of outstanding shares of Common Stock is decreased by a reverse stock split, combination or reclassification of shares, or other similar event, the Conversion Price shall be proportionately increased. In such event, the Corporation shall notify the Corporation's transfer agent of such change on or before the effective date thereof. B. Adjustment Due to Merger, Consolidation, Etc. If, at any time after the Issuance Date, there shall be (i) any reclassification or change of the outstanding shares of Common Stock (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination), (ii) any consolidation or merger of the Corporation with any other entity (other than a merger in which the Corporation is the surviving or continuing entity and its capital stock is unchanged), (iii) any sale or transfer of all or substantially all of the assets of the Corporation or (iv) any share exchange pursuant to which all of the outstanding shares of Common Stock are converted into other securities or property (each of (i) - (iv) above being a "CORPORATE CHANGE"), then the holders of Series B Preferred Stock shall thereafter have the right to receive upon conversion, in lieu of the shares of Common Stock otherwise issuable, such shares of stock, securities and/or other property as would have been issued or payable in such Corporate Change with respect to or in exchange for the number of shares of Common Stock which would have been issuable upon conversion had such Corporate Change not taken place, and in any such case, appropriate provisions (in form and substance reasonably satisfactory to the holders of a majority of the Series B Preferred Stock then outstanding) shall be made with respect to the rights and interests of the holders of the Series B Preferred Stock to the end that the economic value of the shares of Series B Preferred Stock are in no way diminished by such Corporate Change and that the provisions hereof (including, without limitation, in the case of any such consolidation, merger or sale in which the successor entity or purchasing entity is not the Corporation, an immediate adjustment of the Conversion Price so that the Conversion Price immediately after the Corporate Change reflects the same relative value as compared to the value of the surviving entity's common stock that existed between the Conversion Price and the value of the Corporation's Common Stock immediately prior to such Corporate Change shall thereafter be applicable, as nearly as may be practicable in relation to any shares of stock or securities thereafter deliverable upon the conversion thereof). The Corporation shall not effect any Corporate Change unless (i) each holder of Series B Preferred Stock has received written notice of such transaction at least 45 days prior thereto, but in no event later than 15 days prior to the record date for the determination of stockholders entitled to vote with respect thereto, (ii) if required by Section 4(i) of the Securities Purchase Agreement, the consent of the Purchasers (as defined in the Securities Purchase Agreement) shall have been obtained in accordance with such Section 4(i), and (iii) the resulting successor or acquiring entity (if not the Corporation) assumes by written instrument (in form and substance reasonable satisfactory to the holders of a majority of the Series B Preferred Stock) the obligations of this Certificate of Designation (including, without limitation, the obligation to make payments of Premium accrued but unpaid through the date of such consolidation, merger or sale and accruing thereafter). The above provisions shall apply regardless of whether or not there would have been a sufficient number of shares of Common Stock authorized and available for issuance upon conversion of the shares of Series B Preferred Stock outstanding as of the date of such transaction, and shall similarly apply to successive reclassifications, consolidations, mergers, sales, transfers or share exchanges. C. [Intentionally omitted]. D. Adjustment Due to Distribution. If, at any time after the Issuance Date, the Corporation shall declare or make any distribution of its assets (or rights to acquire its assets) to holders of Common Stock as a partial liquidating dividend, by way of return of capital or otherwise (including any dividend or distribution to the Corporation's stockholders in cash or shares (or rights to acquire shares) of capital stock of a subsidiary (i.e., a spin-off)) (a "DISTRIBUTION"), then the holders of Series B Preferred Stock shall be entitled, upon any conversion of shares of Series B Preferred Stock after the date of record for determining stockholders entitled to such Distribution, to receive the amount of such assets which would have been payable to the holder with respect to the shares of Common Stock issuable upon such conversion had such holder been the holder of such shares of Common Stock on the record date for the determination of stockholders entitled to such Distribution. If the Distribution involves rights, warrants, options or any other form of convertible securities and the right to exercise or convert such securities would expire in accordance with its terms prior to the conversion of the Series B Preferred Stock, then the terms of such securities shall provide that such exercise or convertibility right shall remain in effect until 30 days after the date the holder of Series B Preferred Stock receives such securities pursuant to the conversion hereof. E. [Intentionally omitted]. F. Purchase Rights. If, at any time after the Issuance Date, the Corporation issues any Convertible Securities or rights to purchase stock, warrants, securities or other property (the "PURCHASE RIGHTS") pro rata to the record holders of any class of Common Stock, then the holders of Series B Preferred Stock will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which such holder could have acquired if such holder had held the number of shares of Common Stock acquirable upon complete conversion of the Series B Preferred Stock (without giving effect to the limitations contained in Article IV.D) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights. G. [Intentionally omitted]. H. Exceptions to Adjustment of Conversion Price. No adjustment to the Conversion Price will be made (i) upon the exercise of any warrants, options or convertible securities issued and outstanding on the Issue Date that are set forth on Schedule 3(d) of the Securities Purchase Agreement in accordance with the terms of such securities as of such date; (ii) upon the grant or exercise of any stock or options to employees, directors or consultants of the Corporation which may hereafter be granted to or exercised by any employee, director or consultant under any stock option or similar benefit plan of the Corporation now existing or to be implemented in the future, so long as the issuance of such stock or options is approved by a majority of the Board of Directors of the Corporation or a majority of the members of a committee of non-employee directors established for such purpose; (iii) upon conversion of the Series B Preferred Stock or exercise of the Warrants, (iv) the issuance of securities in connection with strategic business partnerships or joint ventures (including, without limitation, such transactions with major pharmaceutical lab or life sciences companies), the primary purpose of which, in the reasonable judgment of the Board of Directors, is not to raise additional capital, or (vi) the issuance of securities pursuant to any equipment financing from a bank or similar financial or lending institution approved by the Board of Directors. I. Notice of Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price pursuant to this Article XI amounting to a more than 5% change in such Conversion Price, the Corporation, at its expense, shall promptly compute such adjustment or readjustment and prepare and furnish to each holder of Series B Preferred Stock a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, upon the written request at any time of any holder of Series B Preferred Stock, furnish to such holder a like certificate setting forth (i) such adjustment or readjustment, (ii) the Conversion Price at the time in effect and (iii) the number of shares of Common Stock and the amount, if any, of other securities or property which at the time would be received upon conversion of a share of Series B Preferred Stock. J. Other Action Affecting Conversion Price. If the Corporation takes any action affecting the Common Stock after the date hereof that would be covered by Article XI.A through H, but for the manner in which such action is taken or structured, which would in any way diminish the value of the Series B Preferred Stock, then the Conversion Price shall be adjusted in such manner as the Board of Directors of the Corporation shall in good faith determine to be equitable under the circumstances. XII. VOTING RIGHTS The holders of the Series B Preferred Stock have no voting power whatsoever, except as otherwise provided by the Delaware General Corporation Law (the "BUSINESS CORPORATION LAW"), in this Article XII and in Article XIII below. Notwithstanding the above, the Corporation shall provide each holder of Series B Preferred Stock with prior notification of any meeting of the stockholders (and copies of proxy materials and other information sent to stockholders). If the Corporation takes a record of its stockholders for the purpose of determining stockholders entitled to (a) receive payment of any dividend or other distribution, any right to subscribe for, purchase or otherwise acquire (including by way of merger, consolidation or recapitalization) any share of any class or any other securities or property, or to receive any other right, or (b) to vote in connection with any proposed sale, lease or conveyance of all or substantially all of the assets of the Corporation, or any proposed merger, consolidation, liquidation, dissolution or winding up of the Corporation, the Corporation shall mail a notice to each holder, at least 15 days prior to the record date specified therein (or 45 days prior to the consummation of the transaction or event, whichever is earlier, but in no event earlier than public announcement of such proposed transaction), of the date on which any such record is to be taken for the purpose of such vote, dividend, distribution, right or other event, and a brief statement regarding the amount and character of such vote, dividend, distribution, right or other event to the extent known at such time. To the extent that under the Business Corporation Law the vote of the holders of the Series B Preferred Stock, voting separately as a class or series, as applicable, is required to authorize a given action of the Corporation, the affirmative vote or consent of the holders of at least a majority of the then outstanding shares of the Series B Preferred Stock represented at a duly held meeting at which a quorum is present or by written consent of the holders of at least a majority of the then outstanding shares of Series B Preferred Stock (except as otherwise may be required under the Business Corporation Law) shall constitute the approval of such action by the class. To the extent that under the Business Corporation Law holders of the Series B Preferred Stock are entitled to vote on a matter with holders of Common Stock, voting together as one class, each share of Series B Preferred Stock shall be entitled to a number of votes equal to the number of shares of Common Stock into which it is then convertible (subject to the limitations contained in Article IV.D(ii)) using the record date for the taking of such vote of stockholders as the date as of which the Conversion Price is calculated. XIII. PROTECTION PROVISIONS So long as any shares of Series B Preferred Stock are outstanding, the Corporation shall not without first obtaining the approval (by vote or written consent, as provided by the Business Corporation Law) of the holders of at least eighty-one percent (81%) of the then outstanding shares of Series B Preferred Stock: (a) alter or change the rights, preferences or privileges of the Series B Preferred Stock; (b) alter or change the rights, preferences or privileges of any capital stock of the Corporation so as to affect adversely the Series B Preferred Stock; (c) create any Senior Securities; (d) create any Pari Passu Securities; (e) increase the authorized number of shares of Series B Preferred Stock; (f) issue any shares of Senior Securities or Pari Passu Securities; (g) issue any shares of Series B Preferred Stock other than pursuant to the Securities Purchase Agreement; (h) redeem, or declare or pay any cash dividend or distribution on, any Junior Securities; (i) increase the par value of the Common Stock; or (j) issue any debt securities that would have any preferences over the Series B Preferred Shares upon liquidation of the Corporation. Notwithstanding the foregoing, no change pursuant to this Article XIII shall be effective to the extent that, by its terms, it applies to less than all of the holders of shares of Series B Preferred Stock then outstanding. XIV. MISCELLANEOUS A. Cancellation of Series B Preferred Stock. If any shares of Series B Preferred Stock are converted pursuant to Article IV or redeemed or repurchased by the Corporation, the shares so converted or redeemed shall be canceled, shall return to the status of authorized, but unissued preferred stock of no designated series, and shall not be issuable by the Corporation as Series B Preferred Stock. B. Lost or Stolen Certificates. Upon receipt by the Corporation of (i) evidence of the loss, theft, destruction or mutilation of any Preferred Stock Certificate(s) and (ii) (y) in the case of loss, theft or destruction, of indemnity (without any bond or other security) reasonably satisfactory to the Corporation, or (z) in the case of mutilation, upon surrender and cancellation of the Preferred Stock Certificate(s), the Corporation shall execute and deliver new Preferred Stock Certificate(s) of like tenor and date. However, the Corporation shall not be obligated to reissue such lost or stolen Preferred Stock Certificate(s) if the holder contemporaneously requests the Corporation to convert such Series B Preferred Stock. C. Allocation of Cap Amount and Reserved Amount. The initial Cap Amount and Reserved Amount shall be allocated pro rata among the holders of Series B Preferred Stock based on the number of shares of Series B Preferred Stock issued to each holder. Each increase to the Cap Amount and the Reserved Amount shall be allocated pro rata among the holders of Series B Preferred Stock based on the number of shares of Series B Preferred Stock held by each holder at the time of the increase in the Cap Amount or Reserved Amount. In the event a holder shall sell or otherwise transfer any of such holder's shares of Series B Preferred Stock, each transferee shall be allocated a pro rata portion of such transferor's Cap Amount and Reserved Amount. Any portion of the Cap Amount or Reserved Amount which remains allocated to any person or entity which does not hold any Series B Preferred Stock shall be allocated to the remaining holders of shares of Series B Preferred Stock, pro rata based on the number of shares of Series B Preferred Stock then held by such holders. D. Quarterly Statements of Available Shares. For each calendar quarter beginning in the quarter in which the initial registration statement required to be filed pursuant to Section 2(a) of the Registration Rights Agreement is declared effective and thereafter so long as any shares of Series B Preferred Stock are outstanding, the Corporation shall deliver (or cause its transfer agent to deliver) to each holder a written report notifying the holders of any occurrence which prohibits the Corporation from issuing Common Stock upon any such conversion. The report shall also specify (i) the total number of shares of Series B Preferred Stock outstanding as of the end of such quarter, (ii) the total number of shares of Common Stock issued upon all conversions of Series B Preferred Stock prior to the end of such quarter, (iii) the total number of shares of Common Stock which are reserved for issuance upon conversion of the Series B Preferred Stock as of the end of such quarter and (iv) the total number of shares of Common Stock which may thereafter be issued by the Corporation upon conversion of the Series B Preferred Stock before the Corporation would exceed the Cap Amount and the Reserved Amount. The Corporation (or its transfer agent) shall use its best efforts to deliver the report for each quarter to each holder prior to the tenth day of the calendar month following the quarter to which such report relates. In addition, the Corporation (or its transfer agent) shall provide, as promptly as practicable delivery to the Corporation of a written request by any holder, any of the information enumerated in clauses (i) - (iv) of this Paragraph D as of the date of such request. E. Payment of Cash; Defaults. Whenever the Corporation is required to make any cash payment to a holder under this Certificate of Designation (as payment of any Premium, upon redemption or otherwise), such cash payment shall be made to the holder within five business days after delivery by such holder of a notice specifying that the holder elects to receive such payment in cash and the method (e.g., by check, wire transfer) in which such payment should be made and any supporting documentation reasonably requested by the Corporation to substantiate the holder's claim to such cash payment or the amount thereof. If such payment is not delivered within such five business day period, such holder shall thereafter be entitled to interest on the unpaid amount at a per annum rate equal to the lower of eighteen percent (18%) and the highest interest rate permitted by applicable law until such amount is paid in full to the holder. F. Status as Stockholder. Upon submission of a Notice of Conversion by a holder of Series B Preferred Stock, (i) the shares covered thereby (other than the shares, if any, which cannot be issued because their issuance would exceed such holder's allocated portion of the Reserved Amount or Cap Amount) shall be deemed converted into shares of Common Stock and (ii) the holder's rights as a holder of such converted shares of Series B Preferred Stock shall cease and terminate, excepting only the right to receive certificates for such shares of Common Stock and to any remedies provided herein or otherwise available at law or in equity to such holder because of a failure by the Corporation to comply with the terms of this Certificate of Designation. In situations where Article VI.B is applicable, the number of shares of Common Stock referred to in clauses (i) and (ii) of the immediately preceding sentence shall be determined on the date on which such shares of Common Stock are delivered to the holder. Notwithstanding the foregoing, if a holder has not received certificates for all shares of Common Stock prior to the sixth business day after the expiration of the Delivery Period with respect to a conversion of Series B Preferred Stock for any reason, then (unless the holder otherwise elects to retain its status as a holder of Common Stock by so notifying the Corporation within five business days after the expiration of such 6 business day period after expiration of the Delivery Period) the holder shall regain the rights of a holder of Series B Preferred Stock with respect to such unconverted shares of Series B Preferred Stock and the Corporation shall, as soon as practicable, return such unconverted shares to the holder. In all cases, the holder shall retain all of its rights and remedies for the Corporation's failure to convert Series B Preferred Stock. G. Remedies Cumulative. The remedies provided in this Certificate of Designation shall be cumulative and in addition to all other remedies available under this Certificate of Designation, at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit a holder's right to pursue actual damages for any failure by the Corporation to comply with the terms of this Certificate of Designation. The Corporation acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the holders of Series B Preferred Stock and that the remedy at law for any such breach may be inadequate. The Corporation therefore agrees, in the event of any such breach or threatened breach, that the holders of Series B Preferred Stock shall be entitled, in addition to all other available remedies, to an injunction restraining any breach, without the necessity of showing economic loss and without any bond or other security being required. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, this Certificate of Designation is executed on behalf of the Corporation this 22nd day of March, 2002. VIROLOGIC, INC. By: /s/ William D. Young ----------------------------------- Name: William D. Young Title: Chairman & CEO NOTICE OF CONVERSION (To be Executed by the Registered Holder in order to Convert the Series B Preferred Stock) The undersigned hereby irrevocably elects to convert ____________ shares of Series B Preferred Stock (the "CONVERSION"), represented by stock certificate No(s). ___________ (the "PREFERRED STOCK CERTIFICATES"), into shares of common stock ("COMMON STOCK") of ViroLogic, Inc. (the "CORPORATION") according to the conditions of the Certificate of Designations, Preferences and Rights of Series B Convertible Preferred Stock (the "CERTIFICATE OF DESIGNATION"), as of the date written below. If securities are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto. No fee will be charged to the holder for any conversion, except for transfer taxes, if any. Each Preferred Stock Certificate is attached hereto (or evidence of loss, theft or destruction thereof). Except as may be provided below, the Corporation shall electronically transmit the Common Stock issuable pursuant to this Notice of Conversion to the account of the undersigned or its nominee (which is _________________) with DTC through its Deposit Withdrawal Agent Commission System ("DTC TRANSFER"). The undersigned acknowledges and agrees that all offers and sales by the undersigned of the securities issuable to the undersigned upon conversion of the Series B Preferred Stock have been or will be made only pursuant to an effective registration of the transfer of the Common Stock under the Securities Act of 1933, as amended (the "ACT"), or pursuant to an exemption from registration under the Act. [ ] In lieu of receiving the shares of Common Stock issuable pursuant to this Notice of Conversion by way of DTC Transfer, the undersigned hereby requests that the Corporation issue and deliver to the undersigned physical certificates representing such shares of Common Stock. Date of Conversion:______________________ Applicable Conversion Price:_____________ Signature:_______________________________ Name:____________________________________ Address:_________________________________ _________________________________ _________________________________ EX-4.1 4 a80301ex4-1.txt EXHIBIT 4.1 EXHIBIT 4.1 VOID AFTER 5:00 P.M., NEW YORK CITY TIME, ON SEPTEMBER __, 2006 (UNLESS EXTENDED PURSUANT TO SECTION 2 HEREOF) THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER JURISDICTION. THE SECURITIES REPRESENTED HEREBY MAY NOT BE OFFERED, SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER APPLICABLE SECURITIES LAWS UNLESS OFFERED, SOLD OR TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THOSE LAWS. Right to Purchase ________ Shares of Common Stock, par value $.001 per share Date: March __, 2002 VIROLOGIC, INC. STOCK PURCHASE WARRANT THIS CERTIFIES THAT, for value received, _______________________, or its registered assigns, is entitled to purchase from ViroLogic, Inc., a corporation organized under the laws of the State of Delaware (the "COMPANY"), at any time or from time to time during the period specified in Section 2 hereof, _____________________________________ fully paid and nonassessable shares of the Company's common stock, par value $.001 per share (the "COMMON STOCK"), at an exercise price per share (the "EXERCISE PRICE") equal to $2.508. The number of shares of Common Stock purchasable hereunder (the "WARRANT SHARES") and the Exercise Price are subject to adjustment as provided in Section 4 hereof. The term "WARRANTS" means this Warrant and the other warrants of the Company issued pursuant to that certain Securities Purchase Agreement, dated as of March __, 2002, by and among the Company and the other signatories thereto (the "SECURITIES PURCHASE AGREEMENT"). This Warrant is subject to the following terms, provisions and conditions: 1. Manner of Exercise; Issuance of Certificates; Payment for Shares. Subject to the provisions hereof, including, without limitation, the limitations contained in Section 7 hereof, this Warrant may be exercised by the holder hereof, in whole or in part, by the surrender of this Warrant, together with a completed exercise agreement in the form attached hereto (the "EXERCISE AGREEMENT"), to the Company during normal business hours on any business day at the Company's principal executive offices (or such other office or agency of the Company as it may designate by notice to the holder hereof), and (i) payment to the Company in cash, by certified or official bank check or by wire transfer for the account of the Company, of the Exercise Price for the Warrant Shares specified in the Exercise Agreement or (ii) if the holder is effectuating a Cashless Exercise (as defined in Section 11(c) hereof) pursuant to Section 11(c) hereof, delivery to the Company of a written notice of an election to effect a Cashless Exercise for the Warrant Shares specified in the Exercise Agreement. The Warrant Shares so purchased shall be deemed to be issued to the holder hereof or such holder's designee, as the record owner of such shares, as of the close of business on the date on which this Warrant shall have been surrendered, the completed Exercise Agreement shall have been delivered, and payment shall have been made for such shares as set forth above or, if such date is not a business date, on the next succeeding business date. The Warrant Shares so purchased, representing the aggregate number of shares specified in the Exercise Agreement, shall (by the Company or through its transfer agent) be delivered (i.e., deposited with a nationally-recognized overnight courier service postage prepaid) to the holder hereof within a reasonable time, not exceeding two business days, after this Warrant shall have been so exercised (the "DELIVERY PERIOD"). If the Company's transfer agent is participating in the Depository Trust Company ("DTC") Fast Automated Securities Transfer program, and so long as the certificates therefor do not bear a legend (pursuant to the terms of the Securities Purchase Agreement) and the holder is not obligated to return such certificate for the placement of a legend thereon (pursuant to the terms of the Securities Purchase Agreement), the Company shall cause its transfer agent to electronically transmit the Warrant Shares so purchased to the holder by crediting the account of the holder or its nominee with DTC through its Deposit Withdrawal Agent Commission system ("DTC TRANSFER"). If the aforementioned conditions to a DTC Transfer are not satisfied, the Company shall deliver as provided herein to the holder physical certificates representing the Warrant Shares so purchased. Further, the holder may instruct the Company to deliver to the holder physical certificates representing the Warrant Shares so purchased in lieu of delivering such shares by way of DTC Transfer. Any certificates so delivered shall be in such denominations as may be reasonably requested by the holder hereof, shall be registered in the name of such holder or such other name as shall be designated by such holder and, following the date on which the Warrant Shares have been registered under the Securities Act pursuant to that certain Registration Rights Agreement, dated as of March __, 2002, by and between the Company and the other signatories thereto (the "REGISTRATION RIGHTS AGREEMENT") or otherwise may be sold by the holder pursuant to Rule 144 promulgated under the Securities Act (or a successor rule), shall not bear any restrictive legend. If this Warrant shall have been exercised only in part, then the Company shall, at its expense, at the time of delivery of such certificates, deliver to the holder a new Warrant representing the number of shares with respect to which this Warrant shall not then have been exercised. If, at any time, a holder of this Warrant submits this Warrant, an Exercise Agreement and payment to the Company of the Exercise Price for each of the Warrant Shares specified in the Exercise Agreement (including pursuant to a Cashless Exercise), and the Company fails for any reason to deliver, on or prior to the fourth business day following the expiration of the Delivery Period for such exercise, the number of shares of Common Stock to which the holder is entitled upon such exercise (an "EXERCISE DEFAULT"), then the Company shall pay to the holder payments ("EXERCISE DEFAULT PAYMENTS") for an Exercise Default in the amount of (a) (N/365), multiplied by (b) the amount by which the Market Price (as defined in Section 4(l) hereof) on the date the Exercise Agreement giving rise to the Exercise Default is transmitted in accordance with this Section 1 (the "EXERCISE DEFAULT DATE") exceeds the Exercise Price in respect of such Warrant Shares, multiplied by (c) the number of shares of Common Stock the Company failed to so deliver in such Exercise Default, multiplied by (d) .24, where N = the number of days from the Exercise Default Date to the date that the Company effects the full exercise of this Warrant which gave rise to the Exercise Default. The accrued Exercise Default Payment for each calendar month shall be paid in cash and shall be made to holder by the fifth day of the month following the month in which it has accrued. Nothing herein shall limit the holder's right to pursue actual damages for the Company's failure to maintain a sufficient number of authorized shares of Common Stock as required pursuant to the terms of Section 3(b) hereof or to otherwise issue shares of Common Stock upon exercise of this Warrant in accordance with the terms hereof, and the holder shall have the right to pursue all remedies available at law or in equity (including a decree of specific performance and/or injunctive relief). 2. Period of Exercise. This Warrant shall be exercisable at any time or from time to time during the period beginning on the date (the "COMMENCEMENT DATE") six months and one day from the date of initial issuance of this Warrant (the "ISSUE DATE") and ending at 5:00 p.m., New York City time, on the fourth anniversary of the Commencement Date (the "EXERCISE PERIOD"). The Exercise Period shall automatically be extended by one (1) day for each day on which the Company does not have a number of shares of Common Stock reserved for issuance upon exercise hereof at least equal to the number of shares of Common Stock issuable upon exercise hereof. 3. Certain Agreements of the Company. The Company hereby covenants and agrees as follows: (a) Shares to be Fully Paid. All Warrant Shares will, upon issuance in accordance with the terms of this Warrant, be validly issued, fully paid, and nonassessable and free from all taxes, liens, claims and encumbrances. (b) Reservation of Shares. During the Exercise Period, the Company shall at all times have authorized, and reserved for the purpose of issuance upon exercise of this Warrant, a sufficient number of shares of Common Stock to provide for the exercise in full of this Warrant (without giving effect to the limitations on exercise set forth in Section 7(g) hereof). (c) Listing. The Company shall promptly secure the listing of the shares of Common Stock issuable upon exercise of this Warrant upon each national securities exchange or automated quotation system, if any, upon which shares of Common Stock are then listed or become listed (subject to official notice of issuance upon exercise of this Warrant) and shall maintain, so long as any other shares of Common Stock shall be so listed, such listing of all shares of Common Stock from time to time issuable upon the exercise of this Warrant; and the Company shall so list on each national securities exchange or automated quotation system, as the case may be, and shall maintain such listing of, any other shares of capital stock of the Company issuable upon the exercise of this Warrant if and so long as any shares of the same class shall be listed on such national securities exchange or automated quotation system. (d) Certain Actions Prohibited. The Company will not, by amendment of its charter or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed by it hereunder, but will at all times in good faith assist in the carrying out of all the provisions of this Warrant and in the taking of all such action as may reasonably be requested by the holder of this Warrant in order to protect the economic benefit inuring to the holder hereof and the exercise privilege of the holder of this Warrant against dilution or other impairment, consistent with the tenor and purpose of this Warrant. Without limiting the generality of the foregoing, the Company (i) will not increase the par value of any shares of Common Stock receivable upon the exercise of this Warrant above the Exercise Price then in effect, and (ii) will take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant. (e) Successors and Assigns. This Warrant will be binding upon any entity succeeding to the Company by merger, consolidation, or acquisition of all or substantially all of the Company's assets. (f) Blue Sky Laws. The Company shall, on or before the date of issuance of any Warrant Shares, take such actions as the Company shall reasonably determine are necessary to qualify the Warrant Shares for, or obtain exemption for the Warrant Shares for, sale to the holder of this Warrant upon the exercise hereof under applicable securities or "blue sky" laws of the states of the United States, and shall provide evidence of any such action so taken to the holder of this Warrant prior to such date; provided, however, that the Company shall not be required in connection therewith or as a condition thereto to (a) qualify to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(f), (b) subject itself to general taxation in any such jurisdiction or (c) file a general consent to service of process in any such jurisdiction. 4. Antidilution Provisions. During the Exercise Period, the Exercise Price and the number of Warrant Shares issuable hereunder shall be subject to adjustment from time to time as provided in this Section 4. In the event that any adjustment of the Exercise Price as required herein results in a fraction of a cent, such Exercise Price shall be rounded up or down to the nearest cent. (a) [Intentionally Omitted] (b) [Intentionally Omitted] (c) Subdivision or Combination of Common Stock. If the Company, at any time during the Exercise Period, subdivides (by any stock split, stock dividend, recapitalization, reorganization, reclassification or otherwise) its shares of Common Stock into a greater number of shares, then, after the date of record for effecting such subdivision, the Exercise Price in effect immediately prior to such subdivision will be proportionately reduced. If the Company, at any time during the Exercise Period, combines (by reverse stock split, recapitalization, reorganization, reclassification or otherwise) its shares of Common Stock into a smaller number of shares, then, after the date of record for effecting such combination, the Exercise Price in effect immediately prior to such combination will be proportionately increased. (d) Adjustment in Number of Shares. Upon each adjustment of the Exercise Price pursuant to the provisions of this Section 4, the number of shares of Common Stock issuable upon exercise of this Warrant at each such Exercise Price shall be adjusted by multiplying a number equal to the Exercise Price in effect immediately prior to such adjustment by the number of shares of Common Stock issuable upon exercise of this Warrant at such Exercise Price immediately prior to such adjustment and dividing the product so obtained by the adjusted Exercise Price. (e) Consolidation, Merger or Sale. In case of any consolidation of the Company with, or merger of the Company into, any other corporation, or in case of any sale or conveyance of all or substantially all of the assets of the Company other than in connection with a plan of complete liquidation of the Company at any time during the Exercise Period, then as a condition of such consolidation, merger or sale or conveyance, adequate provision will be made whereby the holder hereof will have the right to acquire and receive upon exercise of this Warrant in lieu of the shares of Common Stock immediately theretofore acquirable upon the exercise of this Warrant, such shares of stock, securities, cash or assets as may be issued or payable with respect to or in exchange for the number of shares of Common Stock immediately theretofore acquirable and receivable upon exercise of this Warrant had such consolidation, merger or sale or conveyance not taken place. In any such case, the Company will make appropriate provision to insure that the provisions of this Section 4 hereof will thereafter be applicable as nearly as may be in relation to any shares of stock or securities thereafter deliverable upon the exercise of this Warrant. The Company will not effect any consolidation, merger or sale or conveyance unless prior to the consummation thereof, the successor corporation (if other than the Company) assumes by written instrument the obligations under this Warrant and the obligations to deliver to the holder hereof such shares of stock, securities or assets as, in accordance with the foregoing provisions, the holder may be entitled to acquire. Notwithstanding the foregoing, in the event of any consolidation of the Company with, or merger of the Company into, any other corporation, or the sale or conveyance of all or substantially all of the assets of the Company, at any time during the Exercise Period, the holder hereof shall, at its option, have the right to receive, in connection with such transaction, cash consideration equal to the fair market value of this Warrant as determined in accordance with customary valuation methodology used in the investment banking industry. (f) Distribution of Assets. In case the Company shall declare or make any distribution of its assets (or rights to acquire its assets) to holders of Common Stock as a partial liquidating dividend, stock repurchase by way of return of capital or otherwise (including any dividend or distribution to the Company's stockholders of cash or shares (or rights to acquire shares) of capital stock of a subsidiary) (a "DISTRIBUTION"), at any time during the Exercise Period, then the holder hereof shall be entitled upon exercise of this Warrant for the purchase of any or all of the shares of Common Stock subject hereto, to receive the amount of such assets (or rights) which would have been payable to the holder had such holder been the holder of such shares of Common Stock on the record date for the determination of stockholders entitled to such Distribution. If the Company distributes rights, warrants, options or any other form of convertible securities and the right to exercise or convert such securities would expire in accordance with their terms prior to the expiration of the Exercise Period, then the terms of such securities shall provide that such exercise or convertibility right shall remain in effect until 30 days after the date the holder hereof receives such securities pursuant to the exercise hereof. (g) Notice of Adjustment. Upon the occurrence of any event which requires any adjustment of the Exercise Price, then, and in each such case, the Company shall give notice thereof to the holder hereof, which notice shall state the Exercise Price resulting from such adjustment and the increase or decrease in the number of Warrant Shares purchasable at such price upon exercise, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. Such calculation shall be certified by the chief financial officer of the Company. (h) Minimum Adjustment of Exercise Price. No adjustment of the Exercise Price shall be made in an amount of less than $.01, but any such lesser adjustment shall be carried forward and shall be made at the time and together with the next subsequent adjustment which, together with any adjustments so carried forward, shall amount to not less than $.01. (i) No Fractional Shares. No fractional shares of Common Stock are to be issued upon the exercise of this Warrant, but the Company shall pay a cash adjustment in respect of any fractional share which would otherwise be issuable in an amount equal to the same fraction of the Market Price of a share of Common Stock on the date of such exercise. (j) Other Notices. In case at any time: (i) the Company shall declare any dividend upon the Common Stock payable in shares of stock of any class or make any other distribution (other than dividends or distributions payable in cash out of retained earnings consistent with the Company's past practices with respect to declaring dividends and making distributions) to the holders of the Common Stock; (ii) the Company shall offer for subscription pro rata to the holders of the Common Stock any additional shares of stock of any class or other rights; (iii) there shall be any capital reorganization of the Company, or reclassification of the Common Stock, or consolidation or merger of the Company with or into, or sale of all or substantially all of its assets to, another corporation or entity; or (iv) there shall be a voluntary or involuntary dissolution, liquidation or winding-up of the Company; then, in each such case, the Company shall give to the holder of this Warrant (a) notice of the date or estimated date on which the books of the Company shall close or a record shall be taken for determining the holders of Common Stock entitled to receive any such dividend, distribution, or subscription rights or for determining the holders of Common Stock entitled to vote in respect of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up and (b) in the case of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up, notice of the date (or, if not then known, a reasonable estimate thereof by the Company) when the same shall take place. Such notice shall also specify the date on which the holders of Common Stock shall be entitled to receive such dividend, distribution, or subscription rights or to exchange their Common Stock for stock or other securities or property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, or winding-up, as the case may be. Such notice shall be given at least fifteen (15) days prior to the record date or the date on which the Company's books are closed in respect thereto. Failure to give any such notice or any defect therein shall not affect the validity of the proceedings referred to in clauses (i), (ii), (iii) and (iv) above. Notwithstanding the foregoing, the Company shall publicly disclose the substance of any notice delivered hereunder prior to delivery of such notice to the holder hereof. (k) Certain Events. If, at any time during the Exercise Period, any event occurs of the type contemplated by the adjustment provisions of this Section 4 but not expressly provided for by such provisions, the Company will give notice of such event as provided in Section 4(g) hereof, and an appropriate adjustment in the Exercise Price and the number of shares of Common Stock acquirable upon exercise of this Warrant at each such Exercise Price shall be made so that the rights of the holder shall be neither enhanced nor diminished by such event. (l) Certain Definitions. (i) "MARKET PRICE," as of any date, (i) means the average of the closing sales prices for the shares of Common Stock on the Nasdaq National Market or other trading market where such security is listed or traded as reported by Bloomberg Financial Markets (or a comparable reporting service of national reputation selected by the Company and reasonably acceptable to the holders if Bloomberg Financial Markets is not then reporting sales prices of such security)(collectively, "BLOOMBERG") for the ten (10) consecutive trading days immediately preceding such date, or (ii) if the Nasdaq National Market is not the principal trading market for the shares of Common Stock, the average of the reported sales prices reported by Bloomberg on the principal trading market for the Common Stock during the same period, or, if there is no sales price for such period, the last sales price reported by Bloomberg for such period, or (iii) if the foregoing do not apply, the last sales price of such security in the over-the-counter market on the pink sheets or bulletin board for such security as reported by Bloomberg, or if no sales price is so reported for such security, the last bid price of such security as reported by Bloomberg, or (iv) if market value cannot be calculated as of such date on any of the foregoing bases, the Market Price shall be the average fair market value as reasonably determined by an investment banking firm selected by the Company and reasonably acceptable to the holder, with the costs of the appraisal to be borne by the Company. The manner of determining the Market Price of the Common Stock set forth in the foregoing definition shall apply with respect to any other security in respect of which a determination as to market value must be made hereunder. (ii) "COMMON STOCK," for purposes of this Section 4, includes the Common Stock and any additional class of stock of the Company having no preference as to dividends or distributions on liquidation, provided that the shares purchasable pursuant to this Warrant shall include only Common Stock in respect of which this Warrant is exercisable, or shares resulting from any subdivision or combination of such Common Stock, or in the case of any reorganization, reclassification, consolidation, merger, or sale of the character referred to in Section 4(e) hereof, the stock or other securities or property provided for in such Section. 5. Issue Tax. The issuance of certificates for Warrant Shares upon the exercise of this Warrant shall be made without charge to the holder of this Warrant or such shares for any issuance tax or other costs in respect thereof, provided that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than the holder of this Warrant. 6. No Rights or Liabilities as a Stockholder. This Warrant shall not entitle the holder hereof to any voting rights or other rights as a stockholder of the Company. No provision of this Warrant, in the absence of affirmative action by the holder hereof to purchase Warrant Shares, and no mere enumeration herein of the rights or privileges of the holder hereof, shall give rise to any liability of such holder for the Exercise Price or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company. 7. Transfer, Exchange and Replacement of Warrant. (a) Restriction on Transfer. This Warrant and the rights granted to the holder hereof are transferable, in whole or in part, upon surrender of this Warrant, together with a properly executed assignment in the form attached hereto, at the office or agency of the Company referred to in Section 7(e) below, provided, however, that any transfer or assignment shall be subject to the conditions set forth in Sections 7(f) and (g) hereof and to the provisions of Sections 2(f) and 2(g) of the Securities Purchase Agreement. Until due presentment for registration of transfer on the books of the Company, the Company may treat the registered holder hereof as the owner and holder hereof for all purposes, and the Company shall not be affected by any notice to the contrary. Notwithstanding anything to the contrary contained herein, the registration rights described in Section 8 hereof are assignable only in accordance with the provisions of the Registration Rights Agreement. (b) Warrant Exchangeable for Different Denominations. This Warrant is exchangeable, upon the surrender hereof by the holder hereof at the office or agency of the Company referred to in Section 7(e) below, for new warrants of like tenor of different denominations representing in the aggregate the right to purchase the number of shares of Common Stock which may be purchased hereunder, each of such new warrants to represent the right to purchase such number of shares (at the Exercise Price therefor) as shall be designated by the holder hereof at the time of such surrender, and all such warrants thereafter constituting the Warrant referenced herein. (c) Replacement of Warrant. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction, or mutilation of this Warrant and, in the case of any such loss, theft, or destruction, upon delivery of an indemnity agreement reasonably satisfactory in form and amount to the Company, or, in the case of any such mutilation, upon surrender and cancellation of this Warrant, the Company, at its expense, will execute and deliver, in lieu thereof, a new Warrant of like tenor. (d) Cancellation; Payment of Expenses. Upon the surrender of this Warrant in connection with any transfer, exchange, or replacement as provided in this Section 7, this Warrant shall be promptly canceled by the Company. The Company shall pay all taxes (other than securities transfer taxes) and all other expenses (other than legal expenses, if any, incurred by the Holder or transferees) and charges payable in connection with the preparation, execution, and delivery of any Warrant pursuant to this Section 7. (e) Warrant Register. The Company shall maintain, at its principal executive offices (or such other office or agency of the Company as it may designate by notice to the holder hereof), a register for this Warrant, in which the Company shall record the name and address of the person in whose name this Warrant has been issued, as well as the name and address of each transferee and each prior owner of this Warrant. (f) Exercise or Transfer Without Registration. If, at the time of the surrender of this Warrant in connection with any exercise, transfer, or exchange of this Warrant, this Warrant (or, in the case of any exercise, the Warrant Shares issuable hereunder), shall not be registered under the Securities Act and under applicable state securities or blue sky laws, the Company may require, as a condition of allowing such exercise, transfer, or exchange, (i) that the holder or transferee of this Warrant, as the case may be, furnish to the Company a written opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that such exercise, transfer, or exchange may be made without registration under the Securities Act and under applicable state securities or blue sky laws (the cost of which shall be borne by the Company if the Company's counsel renders such an opinion and up to $500 of such cost shall be borne by the Company if the holder's counsel is requested to render such opinion), (ii) that the holder or transferee execute and deliver to the Company an investment letter in form and substance acceptable to the Company and (iii) that the transferee be an "ACCREDITED INVESTOR" as defined in Rule 501(a) promulgated under the Securities Act; provided that no such opinion, letter, or status as an "accredited investor" shall be required in connection with a transfer pursuant to Rule 144 under the Securities Act. (g) Additional Restrictions on Exercise or Transfer. In no event shall the holder hereof have the right to exercise any portion of this Warrant for shares of Common Stock or to dispose of any portion of this Warrant to the extent that such right to effect such exercise or disposition would result in the holder or any of its affiliates together beneficially owning more than the greater of (a) 4.99% of the outstanding shares of Common Stock or (b) that percentage of the outstanding shares of Common Stock held by such holder and its affiliates immediately prior to the Issuance Date (including in such calculation any shares of Common Stock underlying warrants to purchase Common Stock (other than this Warrant) held by such holder immediately prior to the Issuance Date). For purposes of this Section 7(g), beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and Regulation 13D-G thereunder. The restriction contained in this Section 7(g) may not be altered, amended, deleted or changed in any manner whatsoever unless the holders of a majority of the outstanding shares of Common Stock and the holder hereof shall approve, in writing, such alteration, amendment, deletion or change. 8. Registration Rights. The initial holder of this Warrant (and certain assignees thereof) is entitled to the benefit of such registration rights in respect of the Warrant Shares as are set forth in the Registration Rights Agreement, including the right to assign such rights to certain assignees, as set forth therein. 9. Notices. Any notices required or permitted to be given under the terms of this Warrant shall be sent by certified or registered mail (return receipt requested) or delivered personally or by courier or by confirmed telecopy, and shall be effective five days after being placed in the mail, if mailed, or upon receipt or refusal of receipt, if delivered personally or by courier, or by confirmed telecopy, in each case addressed to a party. The addresses for such communications shall be: If to the Company: ViroLogic, Inc. 270 East Grand Avenue South San Francisco, California 94080 Telephone: (650) 635-1100 Attn: Chief Executive Officer with a copy simultaneously transmitted by like means to: Cooley Godward LLP 4401 Eastgate Mall San Diego, California 92121 Telephone: (858) 550-6000 Attn: Christopher J. Kearns, Esq. If to the holder, at such address as such holder shall have provided in writing to the Company, or at such other address as such holder furnishes by notice given in accordance with this Section 9. 10. Governing Law; Jurisdiction. This Warrant shall be governed by and construed in accordance with the laws of the State of Delaware. The Company irrevocably consents to the jurisdiction of the United States federal courts and state courts located in the State of Delaware in any suit or proceeding based on or arising under this Warrant and irrevocably agrees that all claims in respect of such suit or proceeding may be determined in such courts. The Company irrevocably waives any objection to the laying of venue and the defense of an inconvenient forum to the maintenance of such suit or proceeding. The Company further agrees that service of process upon the Company mailed by certified or registered mail shall be deemed in every respect effective service of process upon the Company in any such suit or proceeding. Nothing herein shall affect the holder's right to serve process in any other manner permitted by law. The Company agrees that a final non-appealable judgment in any such suit or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on such judgment or in any other lawful manner. 11. Miscellaneous. (a) Amendments. Except as provided in Section 7(g) hereof, this Warrant and any provision hereof may only be amended by an instrument in writing signed by the Company and the holder hereof. (b) Descriptive Headings. The descriptive headings of the several Sections of this Warrant are inserted for purposes of reference only, and shall not affect the meaning or construction of any of the provisions hereof. (c) Cashless Exercise. This Warrant may be exercised at any time after the first anniversary of the Issue Date and before the expiration of the Exercise Period by presentation and surrender of this Warrant to the Company at its principal executive offices with a written notice of the holder's intention to effect a cashless exercise, including a calculation of the number of shares of Common Stock to be issued upon such exercise in accordance with the terms hereof (a "CASHLESS EXERCISE"). In the event of a Cashless Exercise, in lieu of paying the Exercise Price in cash, the holder shall surrender this Warrant for that number of shares of Common Stock determined by multiplying the number of Warrant Shares to which it would otherwise be entitled by a fraction, the numerator of which shall be the difference between the then current Market Price of a share of the Common Stock on the date of exercise and the Exercise Price, and the denominator of which shall be the then current Market Price per share of Common Stock. (d) Trading Day. For purposes of this Warrant, the term "trading day" means any day on which the principal United States securities exchange or trading market where the Common Stock is then listed is open for trading. (e) Redemption of Warrant by Company. (i) Provided that (x) all shares of Common Stock issuable upon exercise of the Warrants are then (A) authorized and reserved for issuance, (B) registered under the Securities Act of 1933, as amended, for resale by the holders of the Warrants, and (C) eligible to be traded on the Nasdaq National Market or its successor, (y) all of the Required Conditions (as defined in the Certificate of Designation) are satisfied, and (z) the Closing Bid Price (as defined in the Certificate of Designation) of the Common Stock is greater than 200% of the Exercise Price as in effect on the Issue Date for twenty (20) or more consecutive trading days immediately prior to the delivery by the Company of a Redemption Notice (as defined below), the Company may elect, upon delivery of at least twenty (20) days' prior written notice (the "REDEMPTION NOTICE") to the holder hereof, to redeem all or a portion of the Warrant for a redemption amount equal to the number of Warrant Shares issuable upon the exercise of all or a portion of this Warrant that is being redeemed multiplied by $.10 (the "REDEMPTION AMOUNT"). For example, if the Company elects to redeem a Warrant exercisable for 10,000 shares of Common Stock, the Company will pay the holder a Redemption Amount equal to $1,000. In the event the Company elects to redeem only some of the outstanding Warrants pursuant to this Section 11(e), such Warrants shall be redeemed pro rata among all the holders of the Warrants based upon the percentage of Warrants held by such holders against the total outstanding Warrants. Notwithstanding the foregoing, the Company may only redeem Warrants exercisable for no more than 400,000 shares of Common Stock in any 30 day period. (ii) The Company may not deliver a Notice of Redemption unless on or prior to the date of delivery of a Notice of Redemption, the Company shall have segregated on the books and records of the Company an amount of cash sufficient to pay all amounts to which holders of the Warrants that are being redeemed are entitled pursuant to Section 11(e)(i). Any Notice of Redemption delivered shall be irrevocable and shall be accompanied by a statement executed by a duly authorized officer of the Company. (iii) The Redemption Amount shall be paid to the holder within three (3) business days of the date of redemption set forth in the Notice of Redemption; provided, however, that the Company shall not be obligated to deliver any portion of the Redemption Amount until either this Warrant is delivered to the Company or the holder notifies the Company that the Warrant has been lost, stolen or destroyed and delivers the documentation in accordance with Section 7(c) hereof. In the event only a portion of this Warrant is being redeemed, the Company shall issue , at its expense, a new Warrant representing the number of shares with respect to which this Warrant shall not then have been redeemed or exercised. (iv) Notwithstanding the delivery of a Redemption Notice, the holder may exercise all or a portion of this Warrant subject to such Redemption Notice by the delivery prior to the date of redemption set forth in such notice of an Exercise Agreement pursuant to the procedures set forth in Section 1. (f) Indemnification by Company. (i) The Company shall hold harmless and indemnify the holder of this Warrant from and against, and shall compensate and reimburse such holder for, any damages which are directly or indirectly suffered or incurred by such holder or to which such holder may otherwise become subject (regardless of whether or not such damages relate to any third-party claim) and which arise from or as a result of, or are directly or indirectly connected with any breach of any of the Company's covenants set forth herein. (ii) In the event of the assertion or commencement by any person of any claim or legal proceeding with respect to which the holder may have indemnification rights pursuant to this Section 11(f)(i), the holder shall promptly notify the Company thereof in writing, but the failure to so notify the Company will not limit the holder's rights to indemnification hereunder, except to the extent the Company demonstrates that the defense of such action is prejudiced by the failure to so give such notice. IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its duly authorized officer. VIROLOGIC, INC. By:___________________________________ Name:______________________________ Title:_____________________________ FORM OF EXERCISE AGREEMENT (TO BE EXECUTED BY THE HOLDER IN ORDER TO EXERCISE THE WARRANT) To: ViroLogic,Inc. 270 East Grand Avenue South San Francisco, California 94080 Telephone: (650) 635-1100 Attn: Chief Executive Officer The undersigned hereby irrevocably exercises the right to purchase ________ shares of the Common Stock of ViroLogic, Inc., a corporation organized under the laws of the State of Delaware (the "COMPANY"), evidenced by the attached Warrant, and herewith [makes payment of the Exercise Price with respect to such shares in full][elects to effect a Cashless Exercise (as defined in Section 11(c) of such Warrant], all in accordance with the conditions and provisions of said Warrant. The undersigned agrees not to offer, sell, transfer or otherwise dispose of any Common Stock obtained on exercise of the Warrant, except under circumstances that will not result in a violation of the Securities Act of 1933, as amended, or any state securities laws. The undersigned represents that it is an "accredited investor" as that term is defined in Rule 501(a) of Regulation D under the Securities Act of 1933, as amended. [ ] The undersigned requests that the Company cause its transfer agent to electronically transmit the Common Stock issuable pursuant to this Exercise Agreement to the account of the undersigned or its nominee (which is _________________) with DTC through its Deposit Withdrawal Agent Commission System ("DTC TRANSFER"), provided that such transfer agent participates in the DTC Fast Automated Securities Transfer program. [ ] In lieu of receiving the shares of Common Stock issuable pursuant to this Exercise Agreement by way of DTC Transfer, the undersigned hereby requests that the Company cause its transfer agent to issue and deliver to the undersigned physical certificates representing such shares of Common Stock. The undersigned requests that a Warrant representing any unexercised portion hereof be issued, pursuant to the Warrant, in the name of the Holder and delivered to the undersigned at the address set forth below: Dated:________________________________ ______________________________________ Signature of Holder ______________________________________ Name of Holder (Print) Address: ______________________________________ ______________________________________ ______________________________________ FORM OF ASSIGNMENT FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers all the rights of the undersigned under the within Warrant, with respect to the number of shares of Common Stock covered thereby set forth hereinbelow, to: Name of Assignee Address No. of Shares - ---------------- ------- ------------- , and hereby irrevocably constitutes and appoints ______________________________ as agent and attorney-in-fact to transfer said Warrant on the books of the within-named corporation, with full power of substitution in the premises. Dated: _________________________, ____ In the presence of ______________________________________ Name:_________________________________ Signature:_______________________ Title of Signing Officer or Agent (if any): _________________________ Address:_________________________ _________________________ Note: The above signature should correspond exactly with the name on the face of the within Warrant. EX-4.2 5 a80301ex4-2.txt EXHIBIT 4.2 EXHIBIT 4.2 VOID AFTER 5:00 P.M., NEW YORK CITY TIME, ON SEPTEMBER __, 2006 (UNLESS EXTENDED PURSUANT TO SECTION 2 HEREOF) THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER JURISDICTION. THE SECURITIES REPRESENTED HEREBY MAY NOT BE OFFERED, SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER APPLICABLE SECURITIES LAWS UNLESS OFFERED, SOLD OR TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THOSE LAWS. Right to Purchase _________Shares of Common Stock, par value $.001 per share Date: March __, 2002 VIROLOGIC, INC. STOCK PURCHASE WARRANT THIS CERTIFIES THAT, for value received, ______________, or its registered assigns, is entitled to purchase from ViroLogic, Inc., a corporation organized under the laws of the State of Delaware (the "COMPANY"), at any time or from time to time during the period specified in Section 2 hereof, _____________________________________ fully paid and nonassessable shares of the Company's common stock, par value $.001 per share (the "COMMON STOCK"), at an exercise price per share (the "EXERCISE PRICE") equal to $2.508. The number of shares of Common Stock purchasable hereunder (the "WARRANT SHARES") and the Exercise Price are subject to adjustment as provided in Section 4 hereof. The term "WARRANTS" means this Warrant and the other warrants of the Company issued to the "Purchasers" under that certain Securities Purchase Agreement, dated as of June 29, 2001, by and among the Company and the other signatories thereto (the "SECURITIES PURCHASE AGREEMENT"), and additional warrants issued of even date herewith to Purchasers in connection with the issuance hereof. 1 This Warrant is subject to the following terms, provisions and conditions: 1. Manner of Exercise; Issuance of Certificates; Payment for Shares. Subject to the provisions hereof, including, without limitation, the limitations contained in Section 7 hereof, this Warrant may be exercised by the holder hereof, in whole or in part, by the surrender of this Warrant, together with a completed exercise agreement in the form attached hereto (the "EXERCISE AGREEMENT"), to the Company during normal business hours on any business day at the Company's principal executive offices (or such other office or agency of the Company as it may designate by notice to the holder hereof), and (i) payment to the Company in cash, by certified or official bank check or by wire transfer for the account of the Company, of the Exercise Price for the Warrant Shares specified in the Exercise Agreement or (ii) if the holder is effectuating a Cashless Exercise (as defined in Section 11(c) hereof) pursuant to Section 11(c) hereof, delivery to the Company of a written notice of an election to effect a Cashless Exercise for the Warrant Shares specified in the Exercise Agreement. The Warrant Shares so purchased shall be deemed to be issued to the holder hereof or such holder's designee, as the record owner of such shares, as of the close of business on the date on which this Warrant shall have been surrendered, the completed Exercise Agreement shall have been delivered, and payment shall have been made for such shares as set forth above or, if such date is not a business date, on the next succeeding business date. The Warrant Shares so purchased, representing the aggregate number of shares specified in the Exercise Agreement, shall (by the Company or through its transfer agent) be delivered (i.e., deposited with a nationally-recognized overnight courier service postage prepaid) to the holder hereof within a reasonable time, not exceeding two business days, after this Warrant shall have been so exercised (the "DELIVERY PERIOD"). If the Company's transfer agent is participating in the Depository Trust Company ("DTC") Fast Automated Securities Transfer program, and so long as the certificates therefor do not bear a legend (under the same criteria set forth in the Securities Purchase Agreement for the warrants issued pursuant thereto (the "PRIOR WARRANTS")) and the holder is not obligated to return such certificate for the placement of a legend thereon (under the same criteria set forth for the Prior Warrants in the Securities Purchase Agreement), the Company shall cause its transfer agent to electronically transmit the Warrant Shares so purchased to the holder by crediting the account of the holder or its nominee with DTC through its Deposit Withdrawal Agent Commission system ("DTC TRANSFER"). If the aforementioned conditions to a DTC Transfer are not satisfied, the Company shall deliver as provided herein to the holder physical certificates representing the Warrant Shares so purchased. Further, the holder may instruct the Company to deliver to the holder physical certificates representing the Warrant Shares so purchased in lieu of delivering such shares by way of DTC Transfer. Any certificates so delivered shall be in such denominations as may be reasonably requested by the holder hereof, shall be registered in the name of such holder or such other name as shall be designated by such holder and, following the date on which the Warrant Shares have been registered under the Securities Act or otherwise may be sold by the holder pursuant to Rule 144 promulgated under the Securities Act (or a successor rule), shall not bear any restrictive legend. If this Warrant shall have been exercised only in part, then the Company shall, at its expense, at the time of delivery of such certificates, deliver to the holder a new Warrant representing the number of shares with respect to which this Warrant shall not then have been exercised. If, at any time, a holder of this Warrant submits this Warrant, an Exercise Agreement and payment to the Company of the Exercise Price for each of the Warrant Shares specified in the 2 Exercise Agreement (including pursuant to a Cashless Exercise), and the Company fails for any reason to deliver, on or prior to the fourth business day following the expiration of the Delivery Period for such exercise, the number of shares of Common Stock to which the holder is entitled upon such exercise (an "EXERCISE DEFAULT"), then the Company shall pay to the holder payments ("EXERCISE DEFAULT PAYMENTS") for an Exercise Default in the amount of (a) (N/365), multiplied by (b) the amount by which the Market Price (as defined in Section 4(l) hereof) on the date the Exercise Agreement giving rise to the Exercise Default is transmitted in accordance with this Section 1 (the "EXERCISE DEFAULT DATE") exceeds the Exercise Price in respect of such Warrant Shares, multiplied by (c) the number of shares of Common Stock the Company failed to so deliver in such Exercise Default, multiplied by (d) .24, where N = the number of days from the Exercise Default Date to the date that the Company effects the full exercise of this Warrant which gave rise to the Exercise Default. The accrued Exercise Default Payment for each calendar month shall be paid in cash and shall be made to holder by the fifth day of the month following the month in which it has accrued. Nothing herein shall limit the holder's right to pursue actual damages for the Company's failure to maintain a sufficient number of authorized shares of Common Stock as required pursuant to the terms of Section 3(b) hereof or to otherwise issue shares of Common Stock upon exercise of this Warrant in accordance with the terms hereof, and the holder shall have the right to pursue all remedies available at law or in equity (including a decree of specific performance and/or injunctive relief). 2. Period of Exercise. This Warrant shall be exercisable at any time or from time to time during the period beginning on the date (the "COMMENCEMENT DATE") six months and one day from the date of initial issuance of this Warrant (the "ISSUE DATE") and ending at 5:00 p.m., New York City time, on the fourth anniversary of the Commencement Date (the "EXERCISE PERIOD"). The Exercise Period shall automatically be extended by one (1) day for each day on which the Company does not have a number of shares of Common Stock reserved for issuance upon exercise hereof at least equal to the number of shares of Common Stock issuable upon exercise hereof. 3. Certain Agreements of the Company. The Company hereby covenants and agrees as follows: (a) Shares to be Fully Paid. All Warrant Shares will, upon issuance in accordance with the terms of this Warrant, be validly issued, fully paid, and nonassessable and free from all taxes, liens, claims and encumbrances. (b) Reservation of Shares. During the Exercise Period, the Company shall at all times have authorized, and reserved for the purpose of issuance upon exercise of this Warrant, a sufficient number of shares of Common Stock to provide for the exercise in full of this Warrant (without giving effect to the limitations on exercise set forth in Section 7(g) hereof). (c) Listing. The Company shall promptly secure the listing of the shares of Common Stock issuable upon exercise of this Warrant upon each national securities exchange or automated quotation system, if any, upon which shares of Common Stock are then listed or become listed (subject to official notice of issuance upon exercise of this Warrant) and shall maintain, so long as any other shares of Common Stock shall be so listed, such listing of all shares of Common Stock from time to time issuable upon the exercise of this Warrant; and the Company shall so list 3 on each national securities exchange or automated quotation system, as the case may be, and shall maintain such listing of, any other shares of capital stock of the Company issuable upon the exercise of this Warrant if and so long as any shares of the same class shall be listed on such national securities exchange or automated quotation system. (d) Certain Actions Prohibited. The Company will not, by amendment of its charter or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed by it hereunder, but will at all times in good faith assist in the carrying out of all the provisions of this Warrant and in the taking of all such action as may reasonably be requested by the holder of this Warrant in order to protect the economic benefit inuring to the holder hereof and the exercise privilege of the holder of this Warrant against dilution or other impairment, consistent with the tenor and purpose of this Warrant. Without limiting the generality of the foregoing, the Company (i) will not increase the par value of any shares of Common Stock receivable upon the exercise of this Warrant above the Exercise Price then in effect, and (ii) will take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant. (e) Successors and Assigns. This Warrant will be binding upon any entity succeeding to the Company by merger, consolidation, or acquisition of all or substantially all of the Company's assets. (f) Blue Sky Laws. The Company shall, on or before the date of issuance of any Warrant Shares, take such actions as the Company shall reasonably determine are necessary to qualify the Warrant Shares for, or obtain exemption for the Warrant Shares for, sale to the holder of this Warrant upon the exercise hereof under applicable securities or "blue sky" laws of the states of the United States, and shall provide evidence of any such action so taken to the holder of this Warrant prior to such date; provided, however, that the Company shall not be required in connection therewith or as a condition thereto to (a) qualify to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(f), (b) subject itself to general taxation in any such jurisdiction or (c) file a general consent to service of process in any such jurisdiction. 4. Antidilution Provisions. During the Exercise Period, the Exercise Price and the number of Warrant Shares issuable hereunder shall be subject to adjustment from time to time as provided in this Section 4. In the event that any adjustment of the Exercise Price as required herein results in a fraction of a cent, such Exercise Price shall be rounded up or down to the nearest cent. (a) [Intentionally Omitted] (b) [Intentionally Omitted] (c) Subdivision or Combination of Common Stock. If the Company, at any time during the Exercise Period, subdivides (by any stock split, stock dividend, recapitalization, 4 reorganization, reclassification or otherwise) its shares of Common Stock into a greater number of shares, then, after the date of record for effecting such subdivision, the Exercise Price in effect immediately prior to such subdivision will be proportionately reduced. If the Company, at any time during the Exercise Period, combines (by reverse stock split, recapitalization, reorganization, reclassification or otherwise) its shares of Common Stock into a smaller number of shares, then, after the date of record for effecting such combination, the Exercise Price in effect immediately prior to such combination will be proportionately increased. (d) Adjustment in Number of Shares. Upon each adjustment of the Exercise Price pursuant to the provisions of this Section 4, the number of shares of Common Stock issuable upon exercise of this Warrant at each such Exercise Price shall be adjusted by multiplying a number equal to the Exercise Price in effect immediately prior to such adjustment by the number of shares of Common Stock issuable upon exercise of this Warrant at such Exercise Price immediately prior to such adjustment and dividing the product so obtained by the adjusted Exercise Price. (e) Consolidation, Merger or Sale. In case of any consolidation of the Company with, or merger of the Company into, any other corporation, or in case of any sale or conveyance of all or substantially all of the assets of the Company other than in connection with a plan of complete liquidation of the Company at any time during the Exercise Period, then as a condition of such consolidation, merger or sale or conveyance, adequate provision will be made whereby the holder hereof will have the right to acquire and receive upon exercise of this Warrant in lieu of the shares of Common Stock immediately theretofore acquirable upon the exercise of this Warrant, such shares of stock, securities, cash or assets as may be issued or payable with respect to or in exchange for the number of shares of Common Stock immediately theretofore acquirable and receivable upon exercise of this Warrant had such consolidation, merger or sale or conveyance not taken place. In any such case, the Company will make appropriate provision to insure that the provisions of this Section 4 hereof will thereafter be applicable as nearly as may be in relation to any shares of stock or securities thereafter deliverable upon the exercise of this Warrant. The Company will not effect any consolidation, merger or sale or conveyance unless prior to the consummation thereof, the successor corporation (if other than the Company) assumes by written instrument the obligations under this Warrant and the obligations to deliver to the holder hereof such shares of stock, securities or assets as, in accordance with the foregoing provisions, the holder may be entitled to acquire. Notwithstanding the foregoing, in the event of any consolidation of the Company with, or merger of the Company into, any other corporation, or the sale or conveyance of all or substantially all of the assets of the Company, at any time during the Exercise Period, the holder hereof shall, at its option, have the right to receive, in connection with such transaction, cash consideration equal to the fair market value of this Warrant as determined in accordance with customary valuation methodology used in the investment banking industry. (f) Distribution of Assets. In case the Company shall declare or make any distribution of its assets (or rights to acquire its assets) to holders of Common Stock as a partial liquidating dividend, stock repurchase by way of return of capital or otherwise (including any dividend or distribution to the Company's stockholders of cash or shares (or rights to acquire shares) of capital stock of a subsidiary) (a "Distribution"), at any time during the Exercise Period, then the holder hereof shall be entitled upon exercise of this Warrant for the purchase of any or all of the shares of Common Stock subject hereto, to receive the amount of such assets (or rights) which would 5 have been payable to the holder had such holder been the holder of such shares of Common Stock on the record date for the determination of stockholders entitled to such Distribution. If the Company distributes rights, warrants, options or any other form of convertible securities and the right to exercise or convert such securities would expire in accordance with their terms prior to the expiration of the Exercise Period, then the terms of such securities shall provide that such exercise or convertibility right shall remain in effect until 30 days after the date the holder hereof receives such securities pursuant to the exercise hereof. (g) Notice of Adjustment. Upon the occurrence of any event which requires any adjustment of the Exercise Price, then, and in each such case, the Company shall give notice thereof to the holder hereof, which notice shall state the Exercise Price resulting from such adjustment and the increase or decrease in the number of Warrant Shares purchasable at such price upon exercise, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. Such calculation shall be certified by the chief financial officer of the Company. (h) Minimum Adjustment of Exercise Price. No adjustment of the Exercise Price shall be made in an amount of less than $.01, but any such lesser adjustment shall be carried forward and shall be made at the time and together with the next subsequent adjustment which, together with any adjustments so carried forward, shall amount to not less than $.01. (i) No Fractional Shares. No fractional shares of Common Stock are to be issued upon the exercise of this Warrant, but the Company shall pay a cash adjustment in respect of any fractional share which would otherwise be issuable in an amount equal to the same fraction of the Market Price of a share of Common Stock on the date of such exercise. (j) Other Notices. In case at any time: (i) the Company shall declare any dividend upon the Common Stock payable in shares of stock of any class or make any other distribution (other than dividends or distributions payable in cash out of retained earnings consistent with the Company's past practices with respect to declaring dividends and making distributions) to the holders of the Common Stock; (ii) the Company shall offer for subscription pro rata to the holders of the Common Stock any additional shares of stock of any class or other rights; (iii) there shall be any capital reorganization of the Company, or reclassification of the Common Stock, or consolidation or merger of the Company with or into, or sale of all or substantially all of its assets to, another corporation or entity; or (iv) there shall be a voluntary or involuntary dissolution, liquidation or winding-up of the Company; then, in each such case, the Company shall give to the holder of this Warrant (a) notice of the date or estimated date on which the books of the Company shall close or a record shall be taken for determining the holders of Common Stock entitled to receive any such dividend, distribution, or subscription rights or for determining the holders of Common Stock entitled to vote in respect of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding- 6 up and (b) in the case of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up, notice of the date (or, if not then known, a reasonable estimate thereof by the Company) when the same shall take place. Such notice shall also specify the date on which the holders of Common Stock shall be entitled to receive such dividend, distribution, or subscription rights or to exchange their Common Stock for stock or other securities or property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, or winding-up, as the case may be. Such notice shall be given at least fifteen (15) days prior to the record date or the date on which the Company's books are closed in respect thereto. Failure to give any such notice or any defect therein shall not affect the validity of the proceedings referred to in clauses (i), (ii), (iii) and (iv) above. Notwithstanding the foregoing, the Company shall publicly disclose the substance of any notice delivered hereunder prior to delivery of such notice to the holder hereof. (k) Certain Events. If, at any time during the Exercise Period, any event occurs of the type contemplated by the adjustment provisions of this Section 4 but not expressly provided for by such provisions, the Company will give notice of such event as provided in Section 4(g) hereof, and an appropriate adjustment in the Exercise Price and the number of shares of Common Stock acquirable upon exercise of this Warrant at each such Exercise Price shall be made so that the rights of the holder shall be neither enhanced nor diminished by such event. (l) Certain Definitions. (i) "MARKET PRICE," as of any date, (i) means the average of the closing sales prices for the shares of Common Stock on the Nasdaq National Market or other trading market where such security is listed or traded as reported by Bloomberg Financial Markets (or a comparable reporting service of national reputation selected by the Company and reasonably acceptable to the holders if Bloomberg Financial Markets is not then reporting sales prices of such security)(collectively, "BLOOMBERG") for the ten (10) consecutive trading days immediately preceding such date, or (ii) if the Nasdaq National Market is not the principal trading market for the shares of Common Stock, the average of the reported sales prices reported by Bloomberg on the principal trading market for the Common Stock during the same period, or, if there is no sales price for such period, the last sales price reported by Bloomberg for such period, or (iii) if the foregoing do not apply, the last sales price of such security in the over-the-counter market on the pink sheets or bulletin board for such security as reported by Bloomberg, or if no sales price is so reported for such security, the last bid price of such security as reported by Bloomberg, or (iv) if market value cannot be calculated as of such date on any of the foregoing bases, the Market Price shall be the average fair market value as reasonably determined by an investment banking firm selected by the Company and reasonably acceptable to the holder, with the costs of the appraisal to be borne by the Company. The manner of determining the Market Price of the Common Stock set forth in the foregoing definition shall apply with respect to any other security in respect of which a determination as to market value must be made hereunder. (ii) "COMMON STOCK," for purposes of this Section 4, includes the Common Stock and any additional class of stock of the Company having no preference as to dividends or distributions on liquidation, provided that the shares purchasable pursuant to this Warrant shall include only Common Stock in respect of which this Warrant is exercisable, or shares 7 resulting from any subdivision or combination of such Common Stock, or in the case of any reorganization, reclassification, consolidation, merger, or sale of the character referred to in Section 4(e) hereof, the stock or other securities or property provided for in such Section. 5. Issue Tax. The issuance of certificates for Warrant Shares upon the exercise of this Warrant shall be made without charge to the holder of this Warrant or such shares for any issuance tax or other costs in respect thereof, provided that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than the holder of this Warrant. 6. No Rights or Liabilities as a Stockholder. This Warrant shall not entitle the holder hereof to any voting rights or other rights as a stockholder of the Company. No provision of this Warrant, in the absence of affirmative action by the holder hereof to purchase Warrant Shares, and no mere enumeration herein of the rights or privileges of the holder hereof, shall give rise to any liability of such holder for the Exercise Price or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company. 7. Transfer, Exchange and Replacement of Warrant. (a) Restriction on Transfer. This Warrant and the rights granted to the holder hereof are transferable, in whole or in part, upon surrender of this Warrant, together with a properly executed assignment in the form attached hereto, at the office or agency of the Company referred to in Section 7(e) below, provided, however, that any transfer or assignment shall be subject to the conditions set forth in Sections 7(f) and (g) hereof and to the provisions of Sections 2(f) and 2(g) of the Securities Purchase Agreement. Until due presentment for registration of transfer on the books of the Company, the Company may treat the registered holder hereof as the owner and holder hereof for all purposes, and the Company shall not be affected by any notice to the contrary. Notwithstanding anything to the contrary contained herein, the registration rights described in Section 8 hereof are assignable only in accordance with the provisions of the First Registration Rights Agreement dated as of June 29, 2001 by and among the Company and the "Initial Investors" listed on the signature pages thereof. (b) Warrant Exchangeable for Different Denominations. This Warrant is exchangeable, upon the surrender hereof by the holder hereof at the office or agency of the Company referred to in Section 7(e) below, for new warrants of like tenor of different denominations representing in the aggregate the right to purchase the number of shares of Common Stock which may be purchased hereunder, each of such new warrants to represent the right to purchase such number of shares (at the Exercise Price therefor) as shall be designated by the holder hereof at the time of such surrender, and all of such warrants thereafter constituting the Warrant referenced herein. (c) Replacement of Warrant. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction, or mutilation of this Warrant and, in the case of any such loss, theft, or destruction, upon delivery of an indemnity agreement reasonably satisfactory in form and amount to the Company, or, in the case of any such mutilation, upon surrender and cancellation of this Warrant, the Company, at its expense, will execute and deliver, in lieu thereof, a new Warrant of like tenor. 8 (d) Cancellation; Payment of Expenses. Upon the surrender of this Warrant in connection with any transfer, exchange, or replacement as provided in this Section 7, this Warrant shall be promptly canceled by the Company. The Company shall pay all taxes (other than securities transfer taxes) and all other expenses (other than legal expenses, if any, incurred by the Holder or transferees) and charges payable in connection with the preparation, execution, and delivery of any Warrant pursuant to this Section 7. (e) Warrant Register. The Company shall maintain, at its principal executive offices (or such other office or agency of the Company as it may designate by notice to the holder hereof), a register for this Warrant, in which the Company shall record the name and address of the person in whose name this Warrant has been issued, as well as the name and address of each transferee and each prior owner of this Warrant. (f) Exercise or Transfer Without Registration. If, at the time of the surrender of this Warrant in connection with any exercise, transfer, or exchange of this Warrant, this Warrant (or, in the case of any exercise, the Warrant Shares issuable hereunder), shall not be registered under the Securities Act and under applicable state securities or blue sky laws, the Company may require, as a condition of allowing such exercise, transfer, or exchange, (i) that the holder or transferee of this Warrant, as the case may be, furnish to the Company a written opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that such exercise, transfer, or exchange may be made without registration under the Securities Act and under applicable state securities or blue sky laws (the cost of which shall be borne by the Company if the Company's counsel renders such an opinion and up to $500 of such cost shall be borne by the Company if the holder's counsel is requested to render such opinion), (ii) that the holder or transferee execute and deliver to the Company an investment letter in form and substance acceptable to the Company and (iii) that the transferee be an "ACCREDITED INVESTOR" as defined in Rule 501(a) promulgated under the Securities Act; provided that no such opinion, letter, or status as an "accredited investor" shall be required in connection with a transfer pursuant to Rule 144 under the Securities Act. (g) Additional Restrictions on Exercise or Transfer. In no event shall the holder hereof have the right to exercise any portion of this Warrant for shares of Common Stock or to dispose of any portion of this Warrant to the extent that such right to effect such exercise or disposition would result in the holder or any of its affiliates beneficially owning more than 4.99% of the outstanding shares of Common Stock. For purposes of this Section 7(g), beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and Regulation 13D-G thereunder. The restriction contained in this Section 7(g) may not be altered, amended, deleted or changed in any manner whatsoever unless the holders of a majority of the outstanding shares of Common Stock and the holder hereof shall approve, in writing, such alteration, amendment, deletion or change. 8. Registration Rights. The initial holder of this Warrant (and certain assignees thereof) is entitled to the benefit of such registration rights in respect of the Warrant Shares as are set forth in the Registration Rights Agreement of even date herewith among the Company and purchasers of the Company's Series B Convertible Preferred Stock. 9 9. Notices. Any notices required or permitted to be given under the terms of this Warrant shall be sent by certified or registered mail (return receipt requested) or delivered personally or by courier or by confirmed telecopy, and shall be effective five days after being placed in the mail, if mailed, or upon receipt or refusal of receipt, if delivered personally or by courier, or by confirmed telecopy, in each case addressed to a party. The addresses for such communications shall be: If to the Company: ViroLogic, Inc. 270 East Grand Avenue South San Francisco, California 94080 Telephone: (650) 635-1100 Attn: Chief Executive Officer with a copy simultaneously transmitted by like means to: Cooley Godward LLP 4401 Eastgate Mall San Diego, California 92121 Telephone: (858) 550-6000 Attn: Christopher J. Kearns, Esq. If to the holder, at such address as such holder shall have provided in writing to the Company, or at such other address as such holder furnishes by notice given in accordance with this Section 9. 10. Governing Law; Jurisdiction. This Warrant shall be governed by and construed in accordance with the laws of the State of Delaware. The Company irrevocably consents to the jurisdiction of the United States federal courts and state courts located in the State of Delaware in any suit or proceeding based on or arising under this Warrant and irrevocably agrees that all claims in respect of such suit or proceeding may be determined in such courts. The Company irrevocably waives any objection to the laying of venue and the defense of an inconvenient forum to the maintenance of such suit or proceeding. The Company further agrees that service of process upon the Company mailed by certified or registered mail shall be deemed in every respect effective service of process upon the Company in any such suit or proceeding. Nothing herein shall affect the holder's right to serve process in any other manner permitted by law. The Company agrees that a final non-appealable judgment in any such suit or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on such judgment or in any other lawful manner. 11. Miscellaneous. (a) Amendments. Except as provided in Section 7(g) hereof, this Warrant and any provision hereof may only be amended by an instrument in writing signed by the Company and the holder hereof. 10 (b) Descriptive Headings. The descriptive headings of the several Sections of this Warrant are inserted for purposes of reference only, and shall not affect the meaning or construction of any of the provisions hereof. (c) Cashless Exercise. This Warrant may be exercised at any time after the first anniversary of the Issue Date and before the expiration of the Exercise Period by presentation and surrender of this Warrant to the Company at its principal executive offices with a written notice of the holder's intention to effect a cashless exercise, including a calculation of the number of shares of Common Stock to be issued upon such exercise in accordance with the terms hereof (a "CASHLESS EXERCISE"). In the event of a Cashless Exercise, in lieu of paying the Exercise Price in cash, the holder shall surrender this Warrant for that number of shares of Common Stock determined by multiplying the number of Warrant Shares to which it would otherwise be entitled by a fraction, the numerator of which shall be the difference between the then current Market Price of a share of the Common Stock on the date of exercise and the Exercise Price, and the denominator of which shall be the then current Market Price per share of Common Stock. (d) Trading Day. For purposes of this Warrant, the term "trading day" means any day on which the principal United States securities exchange or trading market where the Common Stock is then listed is open for trading. (e) Redemption of Warrant by Company. (i) Provided that (x) all shares of Common Stock issuable upon exercise of the Warrants are then (A) authorized and reserved for issuance, (B) registered under the Securities Act of 1933, as amended, for resale by the holders of the Warrants, and (C) eligible to be traded on the Nasdaq National Market or its successor, (y) all of the Required Conditions (as defined in the Certificate of Designations, Preferences and Rights of the Series A Convertible Preferred Stock of the Company (the "CERTIFICATE OF DESIGNATIONS")) are satisfied, and (z) the Closing Bid Price (as defined in the Certificate of Designations) of the Common Stock is greater than 200% of the Exercise Price as in effect on the Issue Date for twenty (20) or more consecutive trading days immediately prior to the delivery by the Company of a Redemption Notice (as defined below), the Company may elect, upon delivery of at least twenty (20) days' prior written notice (the "REDEMPTION NOTICE") to the holder hereof, to redeem all or a portion of the Warrant for a redemption amount equal to the number of Warrant Shares issuable upon the exercise of all or a portion of this Warrant that is being redeemed multiplied by $.10 (the "REDEMPTION AMOUNT"). For example, if the Company elects to redeem Warrant to the extent exercisable for 10,000 shares of Common Stock, the Company will pay the holder a Redemption Amount equal to $1,000. In the event the Company elects to redeem only some of the outstanding Warrants pursuant to this Section 11(e), such Warrants shall be redeemed pro rata among all the holders of the Warrants based upon the percentage of Warrants held by such holders against the total outstanding Warrants. Notwithstanding the foregoing, the Company may only redeem Warrants exercisable for no more than 400,000 shares of Common Stock in any 30 day period. (ii) The Company may not deliver a Notice of Redemption unless on or prior to the date of delivery of a Notice of Redemption, the Company shall have segregated on the books and records of the Company an amount of cash sufficient to pay all amounts to which holders 11 of the Warrants that are being redeemed are entitled pursuant to Section 11(e)(i). Any Notice of Redemption delivered shall be irrevocable and shall be accompanied by a statement executed by a duly authorized officer of the Company. (iii) The Redemption Amount shall be paid to the holder within three (3) business days of the date of redemption set forth in the Notice of Redemption; provided, however, that the Company shall not be obligated to deliver any portion of the Redemption Amount until either this Warrant is delivered to the Company or the holder notifies the Company that the Warrant has been lost, stolen or destroyed and delivers the documentation in accordance with Section 7(c) hereof. In the event only a portion of this Warrant is being redeemed, the Company shall issue , at its expense, a new Warrant representing the number of shares with respect to which this Warrant shall not then have been redeemed or exercised. (iv) Notwithstanding the delivery of a Redemption Notice, the holder may exercise all or a portion of this Warrant subject to such Redemption Notice by the delivery prior to the date of redemption set forth in such notice of an Exercise Agreement pursuant to the procedures set forth in Section 1. (f) Indemnification by Company. (i) The Company shall hold harmless and indemnify the holder of this Warrant from and against, and shall compensate and reimburse such holder for, any damages which are directly or indirectly suffered or incurred by such holder or to which such holder may otherwise become subject (regardless of whether or not such damages relate to any third-party claim) and which arise from or as a result of, or are directly or indirectly connected with any breach of any of the Company's covenants set forth herein. (ii) In the event of the assertion or commencement by any person of any claim or legal proceeding with respect to which the holder may have indemnification rights pursuant to this Section 11(f)(i), the holder shall promptly notify the Company thereof in writing, but the failure to so notify the Company will not limit the holder's rights to indemnification hereunder, except to the extent the Company demonstrates that the defense of such action is prejudiced by the failure to so give such notice. 12 IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its duly authorized officer. VIROLOGIC, INC. By:___________________________________ Name:______________________________ Title:_____________________________ 13 FORM OF EXERCISE AGREEMENT (TO BE EXECUTED BY THE HOLDER IN ORDER TO EXERCISE THE WARRANT) To: ViroLogic,Inc. 270 East Grand Avenue South San Francisco, California 94080 Telephone: (650) 635-1100 Attn: Chief Executive Officer The undersigned hereby irrevocably exercises the right to purchase _____________ shares of the Common Stock of ViroLogic, Inc., a corporation organized under the laws of the State of Delaware (the "COMPANY"), evidenced by the attached Warrant, and herewith [makes payment of the Exercise Price with respect to such shares in full][elects to effect a Cashless Exercise (as defined in Section 11(c) of such Warrant], all in accordance with the conditions and provisions of said Warrant. The undersigned agrees not to offer, sell, transfer or otherwise dispose of any Common Stock obtained on exercise of the Warrant, except under circumstances that will not result in a violation of the Securities Act of 1933, as amended, or any state securities laws. The undersigned represents that it is an "accredited investor" as that term is defined in Rule 501(a) of Regulation D under the Securities Act of 1933, as amended. [ ] The undersigned requests that the Company cause its transfer agent to electronically transmit the Common Stock issuable pursuant to this Exercise Agreement to the account of the undersigned or its nominee (which is _________________) with DTC through its Deposit Withdrawal Agent Commission System ("DTC TRANSFER"), provided that such transfer agent participates in the DTC Fast Automated Securities Transfer program. [ ] In lieu of receiving the shares of Common Stock issuable pursuant to this Exercise Agreement by way of DTC Transfer, the undersigned hereby requests that the Company cause its transfer agent to issue and deliver to the undersigned physical certificates representing such shares of Common Stock. The undersigned requests that a Warrant representing any unexercised portion hereof be issued, pursuant to the Warrant, in the name of the Holder and delivered to the undersigned at the address set forth below: Dated:________________________________ ______________________________________ Signature of Holder ______________________________________ Name of Holder (Print) Address: ______________________________________ ______________________________________ ______________________________________ FORM OF ASSIGNMENT FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers all the rights of the undersigned under the within Warrant, with respect to the number of shares of Common Stock covered thereby set forth hereinbelow, to:

Name of Assignee Address No. of Shares - ---------------- ------- -------------

, and hereby irrevocably constitutes and appoints ______________________________ as agent and attorney-in-fact to transfer said Warrant on the books of the within-named corporation, with full power of substitution in the premises. Dated: _________________________, ____ In the presence of ______________________________________ Name:_________________________________ Signature:_______________________ Title of Signing Officer or Agent (if any): _________________________ Address:_________________________ _________________________ Note: The above signature should correspond exactly with the name on the face of the within Warrant. EX-10.1 6 a80301ex10-1.txt EXHIBIT 10.1 EXHIBIT 10.1 SECURITIES PURCHASE AGREEMENT SECURITIES PURCHASE AGREEMENT (this "AGREEMENT"), dated as of March 22, 2002, between ViroLogic, Inc., a corporation organized under the laws of the State of Delaware (the "COMPANY"), and each of the purchasers (individually, a "PURCHASER" and collectively the "PURCHASERS") set forth on the execution pages hereof (the "EXECUTION PAGES, and each an "EXECUTION PAGE"). WHEREAS: A. The Company and each Purchaser are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by the provisions of Regulation D ("REGULATION D"), as promulgated by the United States Securities and Exchange Commission (the "SEC") under the Securities Act of 1933, as amended (the "SECURITIES ACT"). B. The Company desires to sell, and each Purchaser desires to purchase, upon the terms and conditions stated in this Agreement, units (the "UNITS"), each Unit consisting of (i) one share of the Company's Series B Convertible Preferred Stock, par value $.001 per share (the "PREFERRED SHARES"), convertible into approximately 4,385.965 shares of the Company's common stock, par value $.001 per share (the "COMMON STOCK"), and (ii) a warrant, in the form attached hereto as Exhibit B (the "WARRANTS"), to acquire approximately 2,192.982 shares of Common Stock. The rights, preferences and privileges of the Preferred Shares, including the terms upon which such Preferred Shares are convertible into shares of Common Stock, are set forth in the form of Certificate of Designations, Preferences and Rights attached hereto as Exhibit A (the "CERTIFICATE OF DESIGNATION"). The shares of Common Stock issuable upon conversion of the Preferred Shares pursuant to the Certificate of Designation are referred to herein as the "CONVERSION SHARES" and the shares of Common Stock issuable upon exercise of or otherwise pursuant to the Warrants are referred to herein as the "WARRANT SHARES." The Preferred Shares, the Warrants, the Conversion Shares and the Warrant Shares are collectively referred to herein as the "SECURITIES" and each of them may individually be referred to herein as a "SECURITY." C. Contemporaneous with the execution and delivery of this Agreement, the parties hereto are executing and delivering a Registration Rights Agreement, in the form attached hereto as Exhibit C (the "REGISTRATION RIGHTS AGREEMENT"), pursuant to which the Company has agreed to provide certain registration rights under the Securities Act and the rules and regulations promulgated thereunder, and applicable state securities laws. This Agreement, the Certificate of Designation, the Warrants and the Registration Rights Agreement are collectively referred to herein as the "TRANSACTION DOCUMENTS." NOW, THEREFORE, the Company and the Purchasers hereby agree as follows: 1. PURCHASE AND SALE OF UNITS. (a) Purchase of Units. The issuance, sale and purchase of the Units shall take place in one closing, which is referred to herein as the "CLOSING." (i) On the Closing Date (as defined below), subject to the satisfaction (or waiver) of the conditions set forth in Section 6 and Section 7 below, the Company shall issue and sell to each Purchaser, and each Purchaser agrees to purchase from the Company, such number of Units as is set forth on such Purchaser's Execution Page attached hereto. The purchase price (the "PURCHASE PRICE") per Unit shall be equal to Ten Thousand Dollars ($10,000). (b) Form of Payment. On the Closing Date, each Purchaser shall pay the applicable purchase price by wire transfer to the Company in accordance with the Company's written wiring instructions, against delivery of the Units being purchased at the Closing by such Purchaser, and the Company shall deliver such Units against delivery of the applicable purchase price. (c) Closing Date. Subject to the satisfaction (or waiver) of the conditions thereto set forth in Section 6 and Section 7 below, the date and time of the issuance and sale of the Units to each of the Purchasers pursuant to this Agreement at the Closing shall be 12:00 noon, New York City time, on March __, 2002, subject to a two business day grace period at either party's option, but in any event not later than March __, 2002, or such other time as may be mutually agreed upon by the Company and the Purchasers purchasing a majority of the Units at the Closing (the "CLOSING DATE"). The Closing shall occur at the offices of Drinker Biddle & Reath LLP at One Logan Square, 18th & Cherry Streets, Philadelphia, PA 19103. 2. PURCHASER'S REPRESENTATIONS AND WARRANTIES. Each Purchaser severally, but not jointly, represents and warrants to the Company as follows: (a) Purchase for Own Account, Etc.. Such Purchaser is purchasing the Units for such Purchaser's own account and not with a present view towards the public sale or distribution thereof, except pursuant to sales that are exempt from the registration requirements of the Securities Act and/or sales registered under the Securities Act. Such Purchaser understands that Purchaser must bear the economic risk of this investment indefinitely, unless the Securities are registered pursuant to the Securities Act and any applicable state securities or blue sky laws or an exemption from such registration is available, and that the Company has no present intention of registering the resale of any such Securities other than as contemplated by the Registration Rights Agreement. Notwithstanding anything in this Section 2(a) to the contrary, by making the representations herein, the Purchaser does not agree to hold the Securities for any minimum or other specific term and reserves the right to dispose of the Securities at any time in accordance with or pursuant to a registration statement or an exemption from the registration requirements under the Securities Act. (b) Accredited Investor Status. Such Purchaser is an "ACCREDITED INVESTOR" as that term is defined in Rule 501(a) of Regulation D under the Securities Act; the Purchaser is also knowledgeable, sophisticated and experienced in making, and is qualified to make decisions with respect to, investments in shares presenting an investment decision like that involved in the purchase of the Units, including investments in securities issued by the Company and investments in comparable companies; and the Purchaser has requested, received, reviewed and considered all information it deems relevant in making an informed decision to purchase the Units. (c) Reliance on Exemptions. Such Purchaser understands that the Units are being offered and sold to such Purchaser in reliance upon specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying upon the truth and accuracy of, and such Purchaser's compliance with, the representations, warranties, agreements, acknowledgments and understandings of such Purchaser set forth herein in order to determine the availability of such exemptions and the eligibility of such Purchaser to acquire the Securities. (d) Information. Such Purchaser and its counsel, if any, have been furnished all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of the Securities which have been specifically requested by such Purchaser or its counsel. Such Purchaser and its counsel have been afforded the opportunity to ask questions of the Company and have received what such Purchaser believes to be satisfactory answers to any such inquiries. Neither such inquiries nor any other investigation conducted by such Purchaser or its counsel or any of its representatives shall modify, amend or affect such Purchaser's right to rely on the Company's representations and warranties contained in Section 3 below. Such Purchaser understands that such Purchaser's investment in the Securities involves a high degree of risk. (e) Governmental Review. Such Purchaser understands that no United States federal or state agency or any other government or governmental agency has passed upon or made any recommendation or endorsement of the Securities. (f) Transfer or Resale. Such Purchaser understands that (i) except as provided in the Registration Rights Agreement, the sale or resale of the Securities have not been and are not being registered under the Securities Act or any state securities laws, and the Securities may not be transferred unless (a) the transfer is made pursuant to and as set forth in an effective registration statement under the Securities Act covering the Securities; or (b) such Purchaser shall have delivered to the Company an opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that the Securities to be sold or transferred may be sold or transferred pursuant to an exemption from such registration; or (c) sold under and in compliance with Rule 144 promulgated under the Securities Act (or a successor rule) ("RULE 144"); or (d) sold or transferred in accordance with applicable securities laws to an affiliate of such Purchaser who agrees to sell or otherwise transfer the Securities only in accordance with the provisions of this Section 2(f) and who is an Accredited Investor; and (ii) neither the Company nor any other person is under any obligation to register such Securities under the Securities Act or any state securities laws (other than pursuant to the Registration Rights Agreement). Notwithstanding the foregoing or anything else contained herein to the contrary, the Securities may be pledged as collateral in connection with a bona fide margin account or other lending arrangement, provided such pledge is consistent with applicable laws, rules and regulations. (g) Legends. Such Purchaser understands that the certificates for the Preferred Shares, Warrants and, until such time as the Conversion Shares and Warrant Shares have been registered under the Securities Act (including registration pursuant to Rule 416 thereunder) as contemplated by the Registration Rights Agreement or otherwise may be sold by such Purchaser under Rule 144(k), the certificates for the Conversion Shares and Warrant Shares shall bear a restrictive legend in substantially the following form: The securities represented by this certificate have not been registered under the Securities Act of 1933, as amended, or the securities laws of any state of the United States or in any other jurisdiction. The securities represented hereby may not be offered, sold or transferred in the absence of an effective registration statement for the securities under applicable securities laws unless offered, sold or transferred pursuant to an available exemption from the registration requirements of those laws. The Company agrees that at any time the Registration Statement is effective, and assuming compliance with the applicable provisions of the Certificate of Designation or the Warrant, as applicable, the Company shall instruct its transfer agent to issue (and provide such transfer agent with any additional documentation that may be necessary to cause the Conversion Shares and the Warrant Shares to be issued without the restrictive legend above), in connection with the issuance of the Conversion Shares and Warrant Shares, certificates representing such Conversion Shares and Warrant Shares without the restrictive legend above, provided such Conversion Shares and Warrant Shares are to be sold pursuant to the prospectus contained in the Registration Statement. The parties acknowledge that the Company has certain rights with respect to transfers of the Securities as set forth in the Registration Rights Agreements. The legend set forth above shall be removed and the Company shall issue a certificate without such legend to the holder of any Security upon which it is stamped, if, unless otherwise required by state securities laws, (a) the sale of such Security is registered under the Securities Act (including registration pursuant to Rule 416 thereunder) as contemplated by the Registration Rights Agreement and the Security is sold pursuant to and as set forth in such Registration Statement and in the Securities Act; (b) such holder provides the Company with an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that a public sale or transfer of such Security may be made without registration under the Securities Act; or (c) such holder provides the Company with reasonable assurances that such Security can be sold under Rule 144. In the event the above legend is removed from any Security and thereafter the effectiveness of a registration statement covering such Security is suspended or the Company determines that a supplement or amendment thereto is required by applicable securities laws, then upon reasonable advance written notice to such Purchaser the Company may require that the above legend be placed on any such Security that cannot then be sold pursuant to an effective registration statement or under Rule 144 and such Purchaser shall cooperate in the replacement of such legend. Such legend shall thereafter be removed when such Security may again be sold pursuant to an effective registration statement or under Rule 144. (h) Authorization; Enforcement. This Agreement and the Registration Rights Agreement have been duly and validly authorized, executed and delivered on behalf of such Purchaser and are valid and binding agreements of such Purchaser enforceable against such Purchaser in accordance with their terms. (i) Residency. Such Purchaser is a resident of the jurisdiction set forth under such Purchaser's name on the Execution Page hereto executed by such Purchaser. (j) No Short Sales. Neither such Purchaser nor any of its affiliates (as that term is defined in Rule 144 under the Securities Act) has, directly or indirectly, engaged in any short sale of, had in effect a short position in (whether such short sale or position was against the box and regardless of when such position was entered into), or granted any rights with respect to the Common Stock, at any time during the six month period immediately prior to the Closing Date. The Purchasers' representations and warranties made in this Article 2 are made solely for the purpose of permitting the Company to make a determination that the offer and sale of the Preferred Shares and Warrants pursuant to this Agreement complies with applicable U.S. federal and state securities laws and not for any other purpose. Accordingly, the Company should not rely on such representations and warranties for any other purpose. 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as set forth on a Schedule of Exceptions executed and delivered by the Company to the Purchasers at Closing, the Company represents and warrants to each Purchaser as follows: (a) Organization and Qualification. The Company and each of its subsidiaries is a corporation duly organized and existing in good standing under the laws of the jurisdiction in which it is incorporated, and has the requisite corporate power to own its properties and to carry on its business as now being conducted. The Company and each of its subsidiaries is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which the nature of the business conducted by it makes such qualification necessary and where the failure so to qualify would have a Material Adverse Effect. "MATERIAL ADVERSE EFFECT" means any material adverse effect on (i) the Securities, (ii) the ability of the Company to perform its obligations hereunder or under the Certificate of Designation, the Warrants or the Registration Rights Agreement or (iii) the business, operations, properties, prospects or financial condition of the Company and its subsidiaries, taken as a whole. (b) Authorization; Enforcement. (i) The Company has the requisite corporate power and authority to enter into and perform its obligations under this Agreement, the Warrants and the Registration Rights Agreement, to issue and sell the Units in accordance with the terms hereof, to issue the Conversion Shares upon conversion of the Preferred Shares in accordance with the terms of the Certificate of Designation and to issue the Warrant Shares upon exercise of the Warrants in accordance with the terms of such Warrants; (ii) the execution, delivery and performance of this Agreement, the Warrants and the Registration Rights Agreement by the Company and the consummation by it of the transactions contemplated hereby and thereby (including, without limitation, the issuance of the Preferred Shares and Warrants and the issuance and reservation for issuance of the Conversion Shares and Warrant Shares) have been duly authorized by the Company's Board of Directors and no further consent or authorization of the Company, its Board of Directors, or any committee of the Board of Directors is required, and (iii) this Agreement constitutes, and, upon execution and delivery by the Company of the Warrants and the Registration Rights Agreement, such agreements will constitute, valid and binding obligations of the Company enforceable against the Company in accordance with their terms. (c) Stockholder Authorization. Neither the execution, delivery or performance by the Company of this Agreement, the Warrants or the Registration Rights Agreement nor the consummation by it of the transactions contemplated hereby or thereby (including, without limitation, the issuance of the Preferred Shares or Warrants or the issuance or reservation for issuance of the Conversion Shares or Warrant Shares) requires any consent or authorization of the Company's stockholders. (d) Capitalization. The capitalization of the Company as of the date hereof, including the authorized capital stock, the number of shares issued and outstanding, the number of shares issuable and reserved for issuance pursuant to the Company's stock option plans, the number of shares issuable and reserved for issuance pursuant to securities (other than the Preferred Shares and Warrants) exercisable or exchangeable for, or convertible into, any shares of capital stock and the number of shares to be reserved for issuance upon conversion of the Preferred Shares and exercise of the Warrants is set forth on Schedule 3(d). All of such outstanding shares of capital stock have been, or upon issuance in accordance with the terms of any such warrants, options or preferred stock, will be, validly issued, fully paid and non-assessable. No shares of capital stock of the Company (including the Preferred Shares, the Conversion Shares and the Warrant Shares) are subject to preemptive rights or any other similar rights of the stockholders of the Company or any liens or encumbrances. Except for the Securities and as set forth on Schedule 3(d), as of the date of this Agreement, (i) there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into or exercisable or exchangeable for, any shares of capital stock of the Company or any of its subsidiaries, or arrangements by which the Company or any of its subsidiaries is or may become bound to issue additional shares of capital stock of the Company or any of its subsidiaries, nor are any such issuances or arrangements contemplated, and (ii) there are no agreements or arrangements under which the Company or any of its subsidiaries is obligated to register the sale of any of its or their securities under the Securities Act (except the Registration Rights Agreements). Schedule 3(d) sets forth all of the Company issued securities or instruments containing antidilution or similar provisions that will be triggered by, and all of the resulting adjustments that will be made to such securities and instruments as a result of, the issuance of the Securities in accordance with the terms of this Agreement, the Certificate of Designation or the Warrants. The Company has furnished to the Purchasers true and correct copies of the Company's Certificate of Incorporation as in effect on the date hereof ("CERTIFICATE OF INCORPORATION"), the Company's By-laws as in effect on the date hereof (the "BY-LAWS"), and all other instruments and agreements governing securities convertible into or exercisable or exchangeable for capital stock of the Company. The Certificate of Designation, in the form attached hereto, will be duly filed prior to Closing with the Secretary of State of the State of Delaware and, upon the issuance of the Preferred Shares in accordance with the terms hereof, each Purchaser shall be entitled to the rights set forth therein. (e) Issuance of Shares. The Preferred Shares are duly authorized and, upon issuance in accordance with the terms of this Agreement, will be validly issued, fully paid and non-assessable, and free from all taxes, liens, claims and encumbrances (other than restrictions on transfer contained in this Agreement and in the Registration Rights Agreements) and will not be subject to preemptive rights, rights of first refusal or other similar rights of stockholders of the Company and will not impose personal liability on the holders thereof. The Conversion Shares and Warrant Shares are duly authorized and reserved for issuance, and, upon conversion of the Preferred Shares and exercise of the Warrants in accordance with the terms thereof, will be validly issued, fully paid and non-assessable, and free from all taxes, liens, claims and encumbrances (other than restrictions on transfer contained in this Agreement and in the Registration Rights Agreements) and will not be subject to preemptive rights, rights of first refusal or other similar rights of stockholders of the Company and will not impose personal liability upon the holder thereof. (f) No Conflicts. The execution, delivery and performance of this Agreement, the Warrants and the Registration Rights Agreement by the Company, the performance by the Company of its obligations under the Certificate of Designation, and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance and reservation for issuance, as applicable, of the Preferred Shares, Warrants, Conversion Shares and Warrant Shares) will not (i) result in a violation of the Certificate of Incorporation or By-laws or (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment (including, without limitation, the triggering of any anti-dilution provisions), acceleration or cancellation of, any agreement, indenture or instrument to which the Company or any of its subsidiaries is a party, or result in a violation of any law, rule, regulation, order, judgment or decree (including United States federal and state securities laws and regulations and rules or regulations of any self-regulatory organizations to which either the Company or its securities are subject) applicable to the Company or any of its subsidiaries or by which any property or asset of the Company or any of its subsidiaries is bound or affected (except, with respect to clause (ii), for such conflicts, defaults, terminations, amendments, accelerations, cancellations and violations that would not, individually or in the aggregate, have a Material Adverse Effect). Neither the Company nor any of its subsidiaries is in violation of its Certificate of Incorporation, By-laws or other organizational documents and neither the Company nor any of its subsidiaries is in default (and no event has occurred which, with notice or lapse of time or both, would put the Company or any of its subsidiaries in default) under, nor has there occurred any event giving others (with notice or lapse of time or both) any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company or any of its subsidiaries is a party, except for actual or possible violations, defaults or rights that would not, individually or in the aggregate, have a Material Adverse Effect. The businesses of the Company and its subsidiaries are not being conducted, and shall not be conducted so long as a Purchaser owns any of the Preferred Shares, in violation of any law, ordinance or regulation of any governmental entity, except for possible violations the sanctions for which either singly or in the aggregate would not have a Material Adverse Effect. Except as specifically contemplated by this Agreement and the Registration Rights Agreement, the Company is not required to obtain any consent, approval, authorization or order of, or make any filing or registration with, any court or governmental agency or any regulatory or self regulatory agency in order for it to execute, deliver or perform any of its obligations under this Agreement, the Warrants or the Registration Rights Agreement or to perform its obligations under the Certificate of Designation, in each case in accordance with the terms hereof or thereof. The Company is not in violation of the listing requirements of the Nasdaq National Market ("NNM") and has received no notice regarding the potential delisting of the Common Stock by the NNM. (g) SEC Documents, Financial Statements. Since December 31, 2000, the Company has timely filed (within applicable extension periods) all reports, schedules, forms, statements and other documents required to be filed by it with the SEC pursuant to the reporting requirements of the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT") (all of the foregoing filed prior to the date hereof and all exhibits included therein and financial statements and schedules thereto and documents incorporated by reference therein, being hereinafter referred to herein as the "SEC DOCUMENTS"). The Company has delivered to each Purchaser true and complete copies of the SEC Documents. To the extent that any SEC Document is available under the SEC's EDGAR filing system prior to the date hereof, such SEC Document shall be deemed to have been delivered to each of the Purchasers. 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. None of the statements made in any such SEC Documents is, or has been, required to be amended or updated under applicable law (except for such statements as have been amended or updated in subsequent filings made prior to the date hereof). As of their respective dates, the financial statements of the Company included in the SEC Documents complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC applicable with respect thereto. Such financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP"), consistently applied, during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto, or (ii) in the case of unaudited interim statements, to the extent they may not include footnotes or may be condensed or summary statements) and fairly present in all material respects the consolidated financial position of the Company and its consolidated subsidiaries as of the dates thereof and the consolidated results of their operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to immaterial year-end audit adjustments). Except as set forth in the financial statements of the Company included in the SEC Documents filed prior to the date hereof, the Company has no liabilities, contingent or otherwise, other than (i) liabilities incurred in the ordinary course of business subsequent to the date of such financial statements and (ii) obligations under contracts and commitments incurred in the ordinary course of business and not required under GAAP to be reflected in such financial statements, which liabilities and obligations referred to in clauses (i) and (ii), individually or in the aggregate, are not material to the financial condition or operating results of the Company. (h) Absence of Certain Changes. Since December 31, 2000, there has been no material adverse change and no material adverse development in the business, properties, operations, prospects, financial condition or results of operations of the Company and its subsidiaries, taken as a whole, except as disclosed in the SEC Documents filed prior to the date hereof. (i) Absence of Litigation. Except as disclosed in the SEC Documents filed prior to the date hereof, there is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body, including, without limitation, the SEC or NASDAQ, pending or, to the knowledge of the Company or any of its subsidiaries, threatened against or affecting the Company, any of its subsidiaries, or any of their respective directors or officers in their capacities as such. There are no facts which, if known by a potential claimant or governmental authority, could give rise to a claim or proceeding which, if asserted or conducted with results unfavorable to the Company or any of its subsidiaries, could reasonably be expected to have a Material Adverse Effect. (j) Intellectual Property. Each of the Company and its subsidiaries owns or is licensed to use all patents, patent applications, trademarks, trademark applications, trade names, service marks, copyrights, copyright applications, licenses, permits, inventions, discoveries, processes, scientific, technical, engineering and marketing data, object and source codes, know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures) and other similar rights and proprietary knowledge (collectively, "INTANGIBLES") necessary for the conduct of its business as now being conducted. To the best knowledge of the Company, neither the Company nor any subsidiary of the Company infringes or is in conflict with any right of any other person with respect to any Intangibles. Except as set forth on Schedule 3(j), neither the Company nor any of its subsidiaries has received written notice of any pending conflict with or infringement upon such third party Intangibles. Except as set forth on Schedule 3(j), the termination of the Company's ownership of, or right to use, any single Intangible would not result in a Material Adverse Effect on the Company. Neither the Company nor any of its subsidiaries has entered into any consent agreement, indemnification agreement, forbearance to sue or settlement agreement with respect to the validity of the Company's or its subsidiaries' ownership or right to use its Intangibles and, to the best knowledge of the Company, there is no reasonable basis for any such claim to be successful. The Intangibles are valid and enforceable and no registration relating thereto has lapsed, expired or been abandoned or canceled or is the subject of cancellation or other adversarial proceedings, and all applications therefor are pending and in good standing. The Company and its subsidiaries have complied, in all material respects, with their respective contractual obligations relating to the protection of the Intangibles used pursuant to licenses. To the best knowledge of the Company, no person is infringing on or violating the Intangibles owned or used by the Company or its subsidiaries. (k) Foreign Corrupt Practices. Neither the Company, nor any of its subsidiaries, nor any director, officer, agent, employee or other person acting on behalf of the Company or any subsidiary has, in the course of his actions for, or on behalf of, the Company, used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977; or made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee. (l) Disclosure. All information relating to or concerning the Company set forth in this Agreement or provided to any Purchaser pursuant to Section 2(d) hereof or otherwise in connection with the transactions contemplated hereby is true and correct in all material respects and the Company has not omitted to state any material fact necessary in order to make the statements made herein or therein, in light of the circumstances under which they were made, not misleading. (m) Acknowledgment Regarding Purchasers' Purchase of the Units. The Company acknowledges and agrees that none of the Purchasers is acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this Agreement or the transactions contemplated hereby, the relationship between the Company and the Purchasers is "arms-length" and any statement made by any Purchaser or any of its representatives or agents in connection with this Agreement and the transactions contemplated hereby is merely incidental to such Purchaser's purchase of Securities and has not been relied upon by the Company, its officers or directors in any way. The Company further acknowledges that the Company's decision to enter into this Agreement has been based solely on an independent evaluation by the Company and its representatives. (n) Listing. The Company has secured the listing of the Conversion Shares and Warrant Shares upon each national securities exchange or automated quotation system upon which shares of Common Stock are currently listed (subject to official notice of issuance). (o) Form S-3 Eligibility. The Company is currently eligible to register the resale of its Common Stock on a registration statement on Form S-3 under the Securities Act. There exist no facts or circumstances that would prohibit or delay the preparation and filing of a registration statement on Form S-3 with respect to the Registrable Securities (as defined in the Registration Rights Agreement). The Company has no basis to believe that its past or present independent public auditors will withhold their consent to the inclusion, or incorporation by reference, of their audit opinion concerning the Company's financial statements which are included in the Registration Statement required to be filed pursuant to the Registration Rights Agreement. (p) No General Solicitation. Neither the Company nor any distributor participating on the Company's behalf in the transactions contemplated hereby (if any) nor any person acting for the Company, or any such distributor, has conducted any "general solicitation," as such term is defined in Regulation D, with respect to any of the Securities being offered hereby. (q) No Integrated Offering. Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf, has directly or indirectly made any offers or sales of any security or solicited any offers to buy any security under circumstances that would require registration of the Securities being offered hereby under the Securities Act or cause this offering of Securities to be integrated with any prior offering of securities of the Company for purposes of the Securities Act or any applicable stockholder approval provisions, including, without limitation, Rule 4350(i) of the NASD or any similar rule. (r) No Brokers. The Company has taken no action which would give rise to any claim by any person (including CIBC World Markets and UBS Warburg, both of whom have had financial advisory relationships with the Company) for brokerage commissions or finder's fees or for similar payments by any Purchaser relating to this Agreement or the transactions contemplated hereby. (s) Acknowledgment Regarding Securities. The number of Conversion Shares issuable upon conversion of the Preferred Shares may increase in certain circumstances. The Company's executive officers have studied and fully understand the nature of the Securities being sold hereunder. The Company acknowledges that its obligation to issue Conversion Shares upon conversion of the Preferred Shares in accordance with the Certificate of Designation is, other than as set forth in the Certificate of Designation, absolute and unconditional, regardless of the dilution that such issuance may have on the ownership interests of other stockholders and the availability of remedies provided for in the Transaction Documents relating to a failure or refusal to issue Conversion Shares. Taking the foregoing into account, the Company's Board of Directors has determined in its good faith business judgment that the issuance of the Preferred Shares and Warrants hereunder and the consummation of the other transactions contemplated hereby are in the best interests of the Company and its stockholders. The Company's Board of Directors and executive officers fully intend to honor their obligations hereunder to issue Conversion Shares upon conversion of the Preferred Shares regardless of the dilution that such issuance may have on the ownership interests of other stockholders and the availability of remedies provided for in the Transaction Documents relating to their failure or refusal to issue Conversion Shares. (t) Title. The Company and its subsidiaries have good and marketable title in fee simple to all real property and good and merchantable title to all personal property owned by them that is material to the business of the Company and its subsidiaries, in each case free and clear of all liens, encumbrances and defects except such as do not materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by the Company and its subsidiaries. Any real property and facilities held under lease by the Company and its subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not materially interfere with the use made and proposed to be made of such property and buildings by the Company and its subsidiaries. (u) Tax Status. Except as set forth in the SEC Documents, the Company and each of its subsidiaries has made or filed all foreign, U.S. federal, state and local income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject (unless and only to the extent that the Company and each of its subsidiaries has set aside on its books provisions reasonably adequate for the payment of all unpaid and unreported taxes) and has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and has set aside on its books provisions reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company know of no basis for any such claim. The Company has not executed a waiver with respect to any statute of limitations relating to the assessment or collection of any federal, state or local tax. None of the Company's tax returns is presently being audited by any taxing authority. (v) Key Employees. Each of the Company's directors, officers and any Key Employee (as defined below) is currently serving the Company in the capacity disclosed in the SEC Documents. No Key Employee, to the best of the knowledge of the Company and its subsidiaries, is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement, non-competition agreement, or any other contract or agreement or any restrictive covenant, and the continued employment of each Key Employee does not subject the Company or any of its subsidiaries to any liability with respect to any of the foregoing matters. No Key Employee has, to the knowledge of the Company and its subsidiaries, any intention to terminate or limit his employment with, or services to, the Company or any of its subsidiaries, nor, to the knowledge of the Company, is any such Key Employee subject to any constraints which would cause such employee to be unable to devote his full time and attention to such employment or services. "KEY EMPLOYEE" means the persons listed on Schedule 3(v) and any individual who assumes or performs any of the duties of a Key Employee. (w) Insurance. The Company and its subsidiaries have in force fire, casualty, product liability and other insurance policies, with extended coverage and in such amounts as are customarily carried by persons engaged in the same or similar business as the Company and its subsidiaries. No default or event has occurred that could give rise to a default under any such policy. (x) Environmental Matters. There is no environmental litigation or other environmental proceeding pending or threatened by any governmental regulatory authority or others with respect to the current or any former business of the Company or its subsidiaries or any partnership or joint venture currently or at any time affiliated with the Company or its subsidiaries. No state of facts exists as to environmental matters or Hazardous Substances (as defined below) that involves the reasonable likelihood of a material capital expenditure by the Company or its subsidiaries or that may otherwise have a Material Adverse Effect. No Hazardous Substances have been treated, stored or disposed of, or otherwise deposited, in or on the properties owned or leased by the Company or its subsidiaries or by any partnership or joint venture currently or at any time affiliated with the Company or its subsidiaries in violation of any applicable environmental laws. The environmental compliance programs of the Company and its subsidiaries comply in all respects with all environmental laws, whether federal, state or local, currently in effect. As used herein, "HAZARDOUS SUBSTANCES" means any substance, waste, contaminant, pollutant or material that has been determined by any governmental authority to be capable of posing a risk of injury to health, safety, property or the environment. (y) Inventory. All inventory of the Company and its subsidiaries is valued on the Company's consolidated books and records at the lower of standard cost, which approximates actual cost, or the fair market value thereof. Except, to the extent of the Company's reserves for obsolete or unmerchantable inventory reflected in the Company's SEC Documents, all such inventory, after consideration of reserves consisting of finished goods is of merchantable quality and is saleable in the ordinary course of business consistent with past practice. (z) Regulatory Permits. The Company and its subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal, state or foreign regulatory authorities which are material to conduct its business, and neither the Company nor any of its subsidiaries has received any written notice of any proceeding relating to the revocation or modification of any such certificate, authorization or permit. 4. COVENANTS. (a) Best Efforts. The parties shall use their best efforts timely to satisfy each of the conditions described in Section 6 and Section 7 of this Agreement. (b) Form D: Blue Sky Laws. The Company shall file with the SEC a Form D with respect to the Securities as required under Regulation D and provide a copy thereof to each Purchaser promptly after such filing. The Company shall, on or before the Closing Date, take such action as the Company shall reasonably determine is necessary to qualify the Securities for sale to each Purchaser pursuant to this Agreement under applicable securities or "blue sky" laws of the states of the United States or obtain exemption therefrom, and shall provide evidence of any such action so taken to each Purchaser on or prior to the Closing Date. Within four (4) trading days after the Closing Date, the Company shall file a Form 8-K concerning this Agreement and the transactions contemplated hereby, which Form 8-K shall attach this Agreement and its Exhibits as exhibits to such Form 8-K. (c) Reporting Status. So long as any Purchaser beneficially owns any of the Securities, the Company shall timely file (within applicable extension periods) all reports required to be filed with the SEC pursuant to the Exchange Act, and the Company shall not terminate its status as an issuer required to file reports under the Exchange Act even if the Exchange Act or the rules and regulations thereunder would permit such termination. In addition, the Company shall take all actions reasonably necessary to meet the "registrant eligibility" requirements set forth in the general instructions to Form S-3 or any successor form thereto, to continue to be eligible to register the resale of its Common Stock on a registration statement on Form S-3 under the Securities Act. (d) Use of Proceeds. The Company shall use the proceeds from the sale of the Preferred Shares and Warrants for general corporate purposes and working capital and such proceeds shall not be used to repay indebtedness (other than indebtedness incurred in the ordinary course of business), make acquisitions, or make payments to stockholders or affiliates of the Company. Subject to the use of proceeds as outlined above, the Company will invest the proceeds (i) in evidences of indebtedness issued or fully guaranteed by the United States of America and having a maturity of not more than one year from the date of acquisition; (ii) in certificates of deposit, notes, acceptances and repurchase agreements having a maturity of not more than one year from the date of acquisition issued by a bank organized in the United States having capital, surplus and undivided profits of at least $500,000,000; (iii) in the highest-rated commercial paper having a maturity of not more than one year from the date of acquisition; and (iv) in "Money Market" fund shares, or in money market accounts fully insured by the Federal Deposit Insurance Corporation and sponsored by banks and other financial institutions, provided that the investments consist principally of the types of investments described in clauses (i), (ii), or (iii) above. (e) Participation Right. Subject to the terms and conditions specified in this Section 4(e), for a period of one year after the date that the Registration Statement (as defined in the Registration Rights Agreement) the Company is required to file pursuant to Section 2(a) of the Registration Rights Agreement is declared effective, the Purchasers shall have a right to participate with respect to the issuance or possible issuance of (i) future equity or equity-linked securities, or (ii) debt which is convertible into equity or in which there is an equity component ("ADDITIONAL SECURITIES") on the same terms and conditions as offered by the Company to the other purchasers of such Additional Securities. Each time the Company proposes to offer any Additional Securities, the Company shall make an offering of such Additional Securities to each Purchaser in accordance with the following provisions: (i) the Company shall deliver a notice (the "NOTICE") to the Purchasers stating (i) its bona fide intention to offer such Additional Securities, (ii) the number of such Additional Securities to be offered, (iii) the price and terms, if any, upon which it proposes to offer such Additional Securities, and (iv) the anticipated closing date of the sale of such Additional Securities. (ii) by written notification received by the Company, within twenty (20) days after giving of the Notice, any Purchaser may elect to purchase or obtain, at the price and on the terms specified in the Notice, up to that portion of such Additional Securities which equals the proportion that the number of shares of Common Stock purchased by such Purchaser pursuant to the terms hereof bears to the total number of shares of Common Stock then outstanding (assuming in each case full conversion and exercise of all convertible or exercisable securities then outstanding). The Company shall promptly, in writing, inform each Purchaser which elects to purchase all of the Additional Shares available to it ("FULLY-EXERCISING PURCHASER") of any other Purchaser's failure to do likewise. During the five-day period commencing after such information is given, each Fully-Exercising Purchaser shall be entitled to obtain that portion of the Additional Securities for which the Purchasers were entitled to subscribe but which were not subscribed for by the Purchasers which is equal to the proportion that the number of shares of Common Stock held by such Fully-Exercising Purchaser bears to the total number of shares of Common Stock held by all Fully-Exercising Purchasers who wish to purchase some of the unsubscribed shares; (iii) if all Additional Securities which the Purchasers are entitled to obtain pursuant to subsection 4(e)(ii) are not elected to be obtained as provided in subsection 4(e)(ii) hereof, the Company may, during the 75-day period following the expiration of the period provided in subsection 4(e)(ii) hereof, offer the remaining unsubscribed portion of such Additional Securities to any person or persons at a price not less than, and upon terms no more favorable to the offeree than, those specified in the Notice. If the Company does not consummate the sale of such Additional Securities within such period, the right provided hereunder shall be deemed to be revived and such Additional Securities shall not be offered or sold unless first reoffered to the Purchasers in accordance herewith; (iv) the participation right in this Section 4(e) shall not be applicable to (i) the issuance or sale of shares of Common Stock (or options therefor) to employees, officers, directors, or consultants of the Company for the primary purpose of soliciting or retaining their employment or service pursuant to a stock option plan (or similar equity incentive plan) approved by the Board of Directors, (ii) the issuance of securities in connection with a bona fide underwritten public offering at an offering price per share (prior to underwriter's commissions and discounts) of not less than $4.56 per share (as adjusted to reflect any stock dividends, distributions, combinations, reclassifications and other similar transactions effected by the Corporation in respect to its Common Stock) that results in total proceeds to the Company of at least $40,000,000, (iii) the issuance or sale of the Preferred Shares, (iv) the issuance of securities in connection with mergers, acquisitions, strategic business partnerships or joint ventures (including, without limitation, such transactions with major pharmaceutical labs or life sciences companies), the primary purpose of which, in the reasonable judgment of the Board of Directors, is not to raise additional capital, (v) the issuance of securities pursuant to any equipment financing from a bank or similar financial or lending institution approved by the Board of Directors, or (vi) any issuance of securities as to which the holders of a majority of the then outstanding Preferred Shares shall have executed a written waiver of the rights contained in this Section 4(e). (v) the participation right set forth in this Section 4(e) may not be assigned or transferred, except that such right is assignable by each Purchaser to any wholly-owned subsidiary or parent of, or to any corporation or entity that is, within the meaning of the Securities Act, controlling, controlled by or under common control with, any such Purchaser. (f) Expenses. The Company shall pay to SDS Capital Partners ("SDS CAPITAL") at the Closing, reimbursement for the out-of-pocket expenses reasonably incurred by SDS Capital's advisors in connection with the negotiation, preparation, execution and delivery of this Agreement and the other agreements to be executed in connection herewith, including, without limitation, SDS Capital's advisors' reasonable due diligence and attorneys' fees and expenses (the "EXPENSES"); provided, however, that in lieu of such payment SDS Capital (or its affiliates) shall be permitted to deduct all Expenses from the purchase price payable by SDS Capital (or its affiliates) hereunder. In addition, from time to time thereafter, upon SDS Capital's written request, the Company shall pay to SDS Capital such additional Expenses, if any, not covered by such payment, in each case to the extent reasonably incurred by SDS Capital's agents prior to the Closing in connection with the negotiation, preparation, execution and delivery of this Agreement. (g) Financial Information. The Company shall send the following reports to each Purchaser until such Purchaser transfers, assigns or sells all of its Securities: within ten (10) days after the filing with the SEC, a copy of its Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q, its proxy statements and any Current Reports on Form 8-K. To the extent that any of the foregoing documents is available under the SEC's EDGAR filing system, such documents shall be deemed to have been delivered to each of the Purchasers. (h) Reservation of Shares. The Company shall at all times have authorized and reserved for the purpose of issuance a sufficient number of shares of Common Stock to provide for the full conversion of the outstanding Preferred Shares and issuance of the Conversion Shares in connection therewith, the full exercise of the Warrants and the issuance of the Warrant Shares in connection therewith and in each case to the extent required by the Certificate of Designation and the Warrants. (i) Listing. The Company shall have filed an application for the listing of the Conversion Shares and the Warrant Shares on the NNM on or before the Closing. From the time that such application has been approved and thereafter, the Company shall maintain, so long as any Purchaser (or any of their affiliates) own any Securities, the listing of all Conversion Shares and Warrant Shares from time to time issuable upon conversion of the Preferred Shares and exercise of the Warrants on each national securities exchange or automated quotation system on which shares of Common Stock are currently listed. The Company will use its best efforts to continue the listing and trading of its Common Stock on the NNM, the New York Stock Exchange ("NYSE"), the American Stock Exchange ("AMEX") or the Nasdaq SmallCap Market (the "SMALLCAP") and will comply in all material respects with the reporting, filing and other obligations under the bylaws or rules of the NASD and such exchanges, as applicable. The Company shall promptly provide to each holder of Preferred Shares and/or Warrants copies of any notices it receives regarding the continued eligibility of the Common Stock for trading on the NNM or, if applicable, any securities exchange or automated quotation system on which securities of the same class or series issued by the Company are then listed or quoted, if any. (j) Corporate Existence. So long as a Purchaser beneficially owns any Securities, the Company shall maintain its corporate existence, and in the event of a merger, consolidation or sale of all or substantially all of the Company's assets, the Company shall ensure that the surviving or successor entity in such transaction (i) assumes the Company's obligations hereunder and under the Certificate of Designation, the Warrants and the agreements and instruments entered into in connection herewith regardless of whether or not the Company would have had a sufficient number of shares of Common Stock authorized and available for issuance in order to effect the conversion of all Preferred Shares and exercise in full of all Warrants outstanding as of the date of such transaction and (ii) is a publicly traded corporation whose common stock is listed for trading on the NNM, SmallCap, NYSE or AMEX. Notwithstanding the foregoing, the Company covenants and agrees that it will not engage in any merger, consolidation or sale of all or substantially all of its assets at any time prior to the effectiveness of the Registration Statement required to be filed pursuant to the Registration Rights Agreement without (A) providing each Purchaser with written notice of such transaction at least 60 days prior to the consummation of such transaction and (B) obtaining the written consent of the Purchasers holding a majority-in-interest of the then outstanding Preferred Shares on or before the 10th day after the delivery of such notice by the Company. (k) No Integrated Offerings. The Company shall not make any offers or sales of any security (other than the Securities) under circumstances that would require registration of the Securities being offered or sold hereunder under the Securities Act or cause this offering of the Securities to be integrated with any other offering of securities by the Company for purposes of any stockholder approval provision applicable to the Company or its securities. (l) Legal Compliance. The Company shall conduct its business and the business of its subsidiaries in compliance with all laws, ordinances or regulations of governmental entities applicable to such businesses, except where the failure to do so would not have a Material Adverse Effect. (m) Redemptions and Dividends. So long as any Purchaser beneficially owns any Preferred Shares, the Company shall not, without first obtaining the written approval of such Purchaser, repurchase, redeem, or declare or pay any cash dividend or distribution on, any shares of capital stock of the Company. (n) Information. The Company will furnish to each Purchaser, so long as it holds any Preferred Shares: (i) concurrently with the filing with the SEC of its annual reports on Form 10-K, a certificate of the President, a Vice President or a senior financial officer of the Company stating that, based upon such examination or investigation and review of this Agreement as in the opinion of the signer is necessary to enable the signer to express an informed opinion with respect thereto, neither the Company nor any of its subsidiaries is or has during such period been in default in the performance or observance of any of the terms, covenants or conditions hereof, or, if the Company or any of its subsidiaries shall be or shall have been in default, specifying all such defaults, and the nature and period of existence thereof, and what action the Company or such subsidiary has taken, is taking or proposes to take with respect thereto; and (ii) the information the Company must deliver to any holder or to any prospective transferee of Securities in order to permit the sale or other transfer of such Securities pursuant to Rule 144A of the SEC or any similar rule then in effect. The Company will keep at its principal executive office a true copy of this Agreement (as at the time in effect), and cause the same to be available for inspection at such office during normal business hours by any holder of Securities or any prospective transferee of Securities designated by a holder thereof. (o) Inspection of Properties and Books. So long as any Purchaser shall hold any Securities, such Purchaser and its representatives and agents (collectively, the "INSPECTORS") shall have the right, at such Purchaser's expense, to visit and inspect any of the properties of the Company and of its subsidiaries, to examine the books of account and records of the Company and of its subsidiaries, to make or be provided with copies and extracts therefrom, to discuss the affairs, finances and accounts of the Company and of its subsidiaries with, and to be advised as to the same by, its and their officers, employees and independent public accountants (and by this provision the Company authorizes such accountants to discuss such affairs, finances and accounts, whether or not a representative of the Company is present) all at such reasonable times and intervals and to such reasonable extent as such Purchaser may desire; provided, however, that each Inspector shall hold in confidence and shall not make any disclosure (except to such Purchaser) of any such information which the Company determines in good faith to be confidential, and of which determination the Inspectors are so notified, unless (a) the disclosure of such information is necessary to avoid or correct a misstatement or omission in any Registration Statement filed pursuant to the Registration Rights Agreement, (b) the release of such information is ordered pursuant to a subpoena or other order from a court or government body of competent jurisdiction, or (c) such information has been made generally available to the public other than by disclosure in violation of this or any other agreement. The Company shall not be required to disclose any confidential information to any Inspector until and unless such Inspector shall have entered into confidentiality agreements (in form and substance satisfactory to the Company) with the Company with respect thereto, substantially in the form of this Section 4(o). Each Purchaser agrees that it shall, upon learning that disclosure of such information is sought in or by a court or governmental body of competent jurisdiction or through other means, give prompt notice to the Company and allow the Company, at its expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order for, the information deemed confidential. Notwithstanding the foregoing, the Company shall be permitted to withhold from disclosure under this paragraph any material protected by attorney-client privilege. (p) Waivers and Consents. Prior to the effectiveness any Registration Statement filed in accordance with Section 2(a) of the Registration Rights Agreement, the Company shall have obtained proper waivers from the stockholders and warrant holders referred to on Schedule 3(f) of the Schedule of Exceptions to this Agreement. (q) Prohibition on Short Sales. No Purchaser nor any of its affiliates (as such term is defined in Rule 144 under the Securities Act) shall, directly or indirectly, engage in any short sale of, have in effect a short position in (whether such short sale or position is against the box and regardless of when such position was entered into) or grant any rights with respect to the Common Stock, at any time during the period beginning on the Closing Date and expiring on the date of the effectiveness of the Registration Statement filed in accordance with Section 2(a) of the Registration Rights Agreement. (r) Confidential Agreement. Each Purchaser will hold in confidence all information concerning this Agreement and the placement of shares hereunder until the earlier of such time as (i) the Company has made a public announcement concerning the Agreement and the placement of shares hereunder or (ii) this Agreement is terminated. 5. TRANSFER AGENT INSTRUCTIONS. (a) The Company shall instruct its transfer agent to issue certificates (subject to the legend and other provisions hereof and in the Certificate of Designation and the Warrants), registered in the name of each Purchaser or its nominee, for the Conversion Shares and the Warrant Shares in such amounts as specified from time to time by such Purchaser to the Company upon conversion of the Preferred Shares or exercise of the Warrants, as applicable. To the extent and during the periods provided in Sections 2(f) and 2(g) of this Agreement, all such certificates shall bear the restrictive legend specified in Section 2(g) of this Agreement. (b) The Company warrants that no instruction other than such instructions referred to in this Section 5, the Registration Rights Agreement and stop transfer instructions to give effect to Section 2(f) hereof in the case of the transfer of the Conversion Shares or Warrant Shares prior to registration of the Conversion Shares and Warrant Shares under the Securities Act or without an exemption therefrom, will be given by the Company to its transfer agent and that the Securities shall otherwise be freely transferable on the books and records of the Company as and to the extent provided in this Agreement and the Registration Rights Agreement. Nothing in this Section shall affect in any way each Purchaser's obligations and agreement set forth in Section 2(g) hereof to resell the Securities pursuant to an effective registration statement or under an exemption from the registration requirements of applicable securities law. (c) If any Purchaser provides the Company and the transfer agent with an opinion of counsel, which opinion of counsel shall be in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that the Securities have been sold or transferred pursuant to an exemption from registration, or any Purchaser provides the Company with an opinion of counsel, which opinion of counsel shall be in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that such Securities may be sold under Rule 144(k), the Company shall permit the transfer and, in the case of the Conversion Shares and Warrant Shares, promptly instruct its transfer agent to issue one or more certificates in such name and in such denominations as specified by such Purchaser. 6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL. The obligation of the Company hereunder to issue and sell the Units to each Purchaser hereunder is subject to the satisfaction, at or before the Closing, of each of the following conditions thereto, provided that these conditions are for the Company's sole benefit and may be waived by the Company at any time in its sole discretion. (a) Each Purchaser shall have executed such Purchaser's Execution Page to this Agreement and the Registration Rights Agreement and delivered the same to the Company. (b) Each Purchaser shall have delivered such Purchaser's Purchase Price for the Units being purchased at the Closing in accordance with Section 1(b) above. (c) The representations and warranties of each Purchaser shall be true and correct as of the date when made and as of the Closing Date as though made at that time (except for representations and warranties that speak as of a specific date, which representations and warranties shall be true and correct as of such date), and such Purchaser shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by such Purchaser at or prior to the Closing Date. (d) No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement. 7. CONDITIONS TO EACH PURCHASER'S OBLIGATION TO PURCHASE. The obligation of each Purchaser hereunder to purchase the Units to be purchased by it at the Closing is subject to the satisfaction, at or before the Closing Date, of each of the following conditions, provided that such conditions are for such Purchaser's sole benefit and may be waived by such Purchaser at any time in such Purchaser's sole discretion: (a) The Company shall have executed this Agreement, the Warrants and the Registration Rights Agreement, and delivered executed original copies of the same to such Purchaser. (b) The Certificate of Designation shall have been filed and accepted for filing with the Secretary of State of the State of Delaware and a copy thereof certified by the Secretary of State of Delaware shall have been delivered to such Purchaser. (c) The Company shall have delivered to such Purchaser duly executed certificates and Warrant agreements (each in such denominations as such Purchaser shall request) representing the Preferred Shares and Warrants being so purchased by such Purchaser at the Closing in accordance with Section 1(b) above. (d) The Common Stock shall be authorized for quotation and listed on the NNM and trading in the Common Stock (or the NNM generally) shall not have been suspended by the SEC or the NNM. (e) The representations and warranties of the Company shall be true and correct as of the date when made and as of the Closing Date as though made at that time (except for representations and warranties that speak as of a specific date, which representations and warranties shall be true and correct as of such date) and the Company shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company at or prior to the Closing Date. The Company shall have delivered for the benefit of the Purchasers, a certificate, executed by the Chief Executive Officer of the Company after reasonable investigation, dated as of the Closing Date to the foregoing effect and as to such other matters as may reasonably be requested by such Purchaser. (f) No statute, rule, regulation, executive order, decree, ruling, injunction, action or proceeding shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which questions the validity of, challenges or prohibits the consummation of, any of the transactions contemplated by this Agreement. (g) Each Purchaser shall have received an opinion of the Company's counsel, dated as of the Closing Date, in form, scope and substance reasonably satisfactory to the Purchaser and in substantially the form of Exhibit D attached hereto. (h) Each Purchaser shall have received a copy of resolutions, duly adopted by the Board of Directors of the Company, which shall be in full force and effect at the time of the Closing, authorizing the consummation by the Company of the transactions contemplated hereby and by the Registration Rights Agreement and the Warrant, certified as such by the Secretary or Assistant Secretary of the Company. 8. GOVERNING LAW; MISCELLANEOUS. (a) Governing Law; Jurisdiction. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware applicable to contracts made and to be performed in the State of Delaware. The Company and the Purchasers irrevocably consent to the jurisdiction of the United States federal courts and the state courts located in the State of Delaware in any suit or proceeding based on or arising under this Agreement and irrevocably agree that all claims in respect of such suit or proceeding may be determined in such courts. The Company irrevocably waives the defense of an inconvenient forum to the maintenance of such suit or proceeding. The Company further agrees that service of process upon the Company mailed by first class mail shall be deemed in every respect effective service of process upon the Company in any such suit or proceeding. Nothing herein shall affect the right of any Purchaser to serve process in any other manner permitted by law. The Company agrees that a final non-appealable judgment in any such suit or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on such judgment or in any other lawful manner. (b) Counterparts. This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party. This Agreement, once executed by a party, may be delivered to the other parties hereto by facsimile transmission of a copy of this Agreement bearing the signature of the party so delivering this Agreement. In the event any signature is delivered by facsimile transmission, the party using such means of delivery shall cause the manually executed Execution Page(s) hereof to be physically delivered to the other party within five (5) days of the execution hereof, provided that the failure to so deliver any manually executed Execution Page shall not affect the validity or enforceability of this Agreement. (c) Headings. The headings of this Agreement are for convenience of reference and shall not form part of, or affect the interpretation of, this Agreement. (d) Severability. If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement or the validity or enforceability of this Agreement in any other jurisdiction. (e) Entire Agreement; Amendments. This Agreement and the instruments referenced herein contain the entire understanding of the Purchasers, the Company, their affiliates and persons acting on their behalf with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor any Purchaser makes any representation, warranty, covenant or undertaking with respect to such matters. No provision of this Agreement may be waived other than by an instrument in writing signed by the party to be charged with enforcement and no provision of this Agreement may be amended other than by an instrument in writing signed by the Company and each Purchaser. (f) Notices. Any notices required or permitted to be given under the terms of this Agreement shall be sent by certified or registered mail (return receipt requested) or delivered personally, by responsible overnight carrier or by confirmed facsimile, and shall be effective five (5) days after being placed in the mail, if mailed, or upon receipt or refusal of receipt, if delivered personally or by responsible overnight carrier or confirmed facsimile, in each case addressed to a party. The addresses for such communications shall be: If to the Company: ViroLogic, Inc. 270 East Grand Avenue South San Francisco, California 94080 Telephone: (650) 635-1100 Attn: Chief Executive Officer with a copy simultaneously transmitted by like means to (which transmittal shall not constitute notice hereunder): Cooley Godward LLP 4401 Eastgate Mall San Diego, California 92121 Telephone: (858) 550-6000 Attn: Christopher J. Kearns, Esq. If to any Purchaser, to such address set forth under such Purchaser's name on the Execution Page hereto executed by such Purchaser. Each party shall provide notice to the other parties of any change in address. (g) Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns. Except as provided herein or therein, neither the Company nor any Purchaser shall assign this Agreement or any rights or obligations hereunder. Notwithstanding the foregoing, any Purchaser may assign its rights hereunder to any of its "affiliates," as that term is defined under the Exchange Act, without the consent of the Company or to any other person or entity with the consent of the Company, which consent shall not be unreasonably withheld. This provision shall not limit a Purchaser's right to transfer the Securities pursuant to the terms of the Certificate of Designation, the Warrants and this Agreement or to assign such Purchaser's rights hereunder or thereunder to any such transferee. In addition, and notwithstanding anything to the contrary contained in this Agreement, the Registration Rights Agreement or the Warrants, the Securities may be pledged and all rights of any Purchaser under this Agreement or any other agreement or document related to the transactions contemplated hereby may be assigned, without further consent of the Company, to a bona fide pledgee in connection with such Purchaser's margin or brokerage account. (h) Third Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other person; provided that Section 4(f) may be enforced by SDS Capital. (i) Survival. The representations and warranties of the Company and the agreements and covenants set forth in Sections 3, 4, 5 and 8 hereof shall survive the Closing notwithstanding any due diligence investigation conducted by or on behalf of any Purchaser. Moreover, none of the representations and warranties made by the Company herein shall act as a waiver of any rights or remedies any Purchaser may have under applicable U.S. federal or state securities laws. (j) Publicity. The Company and each Purchaser shall have the right to approve before issuance any press releases, SEC or NASD filings, or any other public statements with respect to the transactions contemplated hereby; provided, however, that the Company shall be entitled, without the prior approval of the Purchasers, to make any press release or SEC or NASD filings with respect to such transactions as is required by applicable law and regulations (although the Purchasers shall be consulted by the Company in connection with any such press release and filing prior to its release and shall be provided with a copy thereof). (k) Further Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby. (l) Termination. In the event that the Closing shall not have occurred on or before March 31, 2002, unless the parties agree otherwise, this Agreement shall terminate at the close of business on such date. Notwithstanding any termination of this Agreement, any party not in breach of this Agreement shall preserve all rights and remedies it may have against another party hereto for a breach of this Agreement prior to or relating to the termination hereof. (m) Joint Participation in Drafting. Each party to this Agreement has participated in the negotiation and drafting of this Agreement, the Certificate of Designation, the Warrants and the Registration Rights Agreement. As such, the language used herein and therein shall be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction will be applied against any party to this Agreement. (n) Equitable Relief. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to each Purchaser by vitiating the intent and purpose of the transactions contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations hereunder (including, but not limited to, its obligations pursuant to Section 5 hereof) will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Agreement (including, but not limited to, its obligations pursuant to Section 5 hereof), that each Purchaser shall be entitled, in addition to all other available remedies, to an injunction restraining any breach and requiring immediate issuance and transfer of the Securities, without the necessity of showing economic loss and without any bond or other security being required. (o) Additional Acknowledgement. Each Purchaser acknowledges that it has independently evaluated the merits of the transactions contemplated by this Agreement, the Certificate of Designation, the Registration Rights Agreement and the Warrants, that it has independently determined to enter into the transactions contemplated hereby and thereby, that it is not relying on any advice from or evaluation by any other Purchaser, and that it is not acting in concert with any other Purchaser in making its purchase of securities hereunder. The Purchasers and, to its knowledge, the Company agree that the Purchasers have not taken any actions that would deem such Purchasers to be members of a "group" for purposes of Section 13(d) of the Exchange Act. (p) Indemnification by Company. (i) From and after the Closing, the Company shall hold harmless and indemnify each of the Purchasers from and against, and shall compensate and reimburse each of the Purchasers for, any damages which are directly or indirectly suffered or incurred by any of the Purchasers or to which any of the Purchasers may otherwise become subject (regardless of whether or not such damages relate to any third-party claim) and which arise from or as a result of, or are directly or indirectly connected with any inaccuracy in or breach of any of the Company's representations, warranties or covenants set forth herein. (ii) In the event of the assertion or commencement by any person of any claim or legal proceeding with respect to which any Purchaser may have indemnification rights pursuant to Section 8(p)(i), such Purchaser shall promptly notify the Company thereof in writing, but the failure to so notify the Company will not limit any Purchaser's rights to indemnification hereunder, except to the extent the Company demonstrates that the defense of such action is prejudiced by the failure to so give such notice. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, the undersigned Purchaser and the Company have caused this Agreement to be duly executed as of the date first above written. VIROLOGIC, INC. By: ----------------------------- Name: --------------------------- Title: -------------------------- PURCHASER: SDS MERCHANT FUND, L.P. By: /s/ Steve Derby ----------------------------------- Name: Steve Derby Title: Managing Member RESIDENCE: Connecticut ADDRESS: c/o SDS Capital Partners, LLC 1 Sound Shore Drive, Suite 202 Greenwich, CT 06830 Telecopy: (203) 629-0345 Telephone: (203) 629-1231 Attention: Steve Derby with a copy to: Drinker Biddle & Reath LLP One Logan Square 18th & Cherry Streets Philadelphia, PA 19103 Telecopy: (215) 988-2757 Telephone: (215) 988-2880 Attention: Stephen T. Burdumy, Esq. AGGREGATE SUBSCRIPTION AMOUNT Number of Units: 350 Purchase Price ($10,000 per Unit): $3,500,000 IN WITNESS WHEREOF, the undersigned Purchaser and the Company have caused this Agreement to be duly executed as of the date first above written. VIROLOGIC, INC. By: ----------------------------- Name: --------------------------- Title: -------------------------- PURCHASER: DMG LEGACY FUND LLC By: /s/ Thomas E. McAuley ----------------------------------- Name: Thomas McAuley Title: Chief Investment Officer RESIDENCE: Connecticut ADDRESS: c/o DMG Advisors LLC 1 Sound Shore Drive, Suite 202 Greenwich, CT 06830 Telecopy: (203) 629-0345 Telephone: (203) 629-1231 Attention: Andrew Wilder with a copy to: Drinker Biddle & Reath LLP One Logan Square 18th & Cherry Streets Philadelphia, PA 19103 Telecopy: (215) 988-2757 Telephone: (215) 988-2880 Attention: Stephen T. Burdumy, Esq. AGGREGATE SUBSCRIPTION AMOUNT Number of Units: 30 Purchase Price ($10,000 per Unit): $300,000 IN WITNESS WHEREOF, the undersigned Purchaser and the Company have caused this Agreement to be duly executed as of the date first above written. VIROLOGIC, INC. By: ----------------------------- Name: --------------------------- Title: -------------------------- PURCHASER: DMG LEGACY INSTITUTIONAL LLC By: /s/ Thomas E. McAuley ----------------------------------- Name: Thomas McAuley Title: Chief Investment Officer RESIDENCE: Connecticut ADDRESS: c/o DMG Advisors LLC 1 Sound Shore Drive, Suite 202 Greenwich, CT 06830 Telecopy: (203) 629-0345 Telephone: (203) 629-1231 Attention: Andrew Wilder with a copy to: Drinker Biddle & Reath LLP One Logan Square 18th & Cherry Streets Philadelphia, PA 19103 Telecopy: (215) 988-2757 Telephone: (215) 988-2880 Attention: Stephen T. Burdumy, Esq. AGGREGATE SUBSCRIPTION AMOUNT Number of Units: 90 Purchase Price ($10,000 per Unit): $900,000 IN WITNESS WHEREOF, the undersigned Purchaser and the Company have caused this Agreement to be duly executed as of the date first above written. VIROLOGIC, INC. By: ----------------------------- Name: --------------------------- Title: -------------------------- PURCHASER: DMG LEGACY INTERNATIONAL LTD. By: /s/ Thomas E. McAuley ----------------------------------- Name: Thomas McAuley Title: Chief Investment Officer RESIDENCE: Connecticut ADDRESS: c/o DMG Advisors LLC 1 Sound Shore Drive, Suite 202 Greenwich, CT 06830 Telecopy: (203) 629-0345 Telephone: (203) 629-1231 Attention: Andrew Wilder with a copy to: Drinker Biddle & Reath LLP One Logan Square 18th & Cherry Streets Philadelphia, PA 19103 Telecopy: (215) 988-2757 Telephone: (215) 988-2880 Attention: Stephen T. Burdumy, Esq. AGGREGATE SUBSCRIPTION AMOUNT Number of Units: 80 Purchase Price ($10,000 per Unit): $800,000 IN WITNESS WHEREOF, the undersigned Purchaser and the Company have caused this Agreement to be duly executed as of the date first above written. VIROLOGIC, INC. By: /s/ William D. Young ----------------------------------- Name: William D. Young Its: CEO INITIAL INVESTORS: JALAA Equities, LP By: /s/ Jason M. Aryeh ----------------------------------- Name: Jason M. Aryeh Title: General Partner RESIDENCE: ADDRESS: 34 Summers Road Greenwich, CT 06831 Telecopy: (203) 618-9218 Telephone: (203) 661-3280 Attention: Jason Aryeh With a copy to: Tom Schroeder 5561 Adobe Falls Road, Suite C San Diego, CA 92120 Telecopy: (619) 501-6233 Telephone: (619) 501-1752 AGGREGATE SUBSCRIPTION AMOUNT Number of Units: 50 Purchase Price ($10,000 per Unit): $500,000 IN WITNESS WHEREOF, the undersigned Purchaser and the Company have caused this Agreement to be duly executed as of the date first above written. VIROLOGIC, INC. By: /s/ William D. Young ----------------------------------- Name: William D. Young Its: CEO INITIAL INVESTORS: Xmark Fund L.P. By: /s/ Mitchell D. Kaye ----------------------------------- Name: Mitchell D. Kaye Title: CIO, of Investment Manager RESIDENCE: ADDRESS: c/o Brown Simpson Asset Management LLC 152 West 57th Street, 21st Floor New York, NY 10019 Telecopy: (212) 247-1329 Telephone: (212) 247-8200 Attention: Mitchell D. Kaye AGGREGATE SUBSCRIPTION AMOUNT Number of Units: 29 Purchase Price ($10,000 per Unit): $290,000 IN WITNESS WHEREOF, the undersigned Purchaser and the Company have caused this Agreement to be duly executed as of the date first above written. VIROLOGIC, INC. By: /s/ William D. Young ----------------------------------- Name: William D. Young Its: CEO INITIAL INVESTORS: Xmark Fund Ltd. By: /s/ Mitchell D. Kaye ----------------------------------- Name: Mitchell D. Kaye Title: CIO, of Investment Manager RESIDENCE: ADDRESS: c/o Brown Simpson Asset Management LLC 152 West 57th Street, 21st Floor New York, NY 10019 Telecopy: (212) 247-1329 Telephone: (212) 247-8200 Attention: Mitchell D. Kaye AGGREGATE SUBSCRIPTION AMOUNT Number of Units: 71 Purchase Price ($10,000 per Unit): $710,000 IN WITNESS WHEREOF, the undersigned Purchaser and the Company have caused this Agreement to be duly executed as of the date first above written. VIROLOGIC, INC. By: /s/ William D. Young ----------------------------------- Name: William D. Young Its: CEO INITIAL INVESTORS: /s/ William J. Piedemonte - -------------------------------------- William J. Piedemonte RESIDENCE: ADDRESS: 555 Laurel Street, #525 San Mateo, CA 94401 Telecopy: (650) 342-0756 Telephone: (650) 342-6144 AGGREGATE SUBSCRIPTION AMOUNT Number of Units: 5 Purchase Price ($10,000 per Unit): $50,000 IN WITNESS WHEREOF, the undersigned Purchaser and the Company have caused this Agreement to be duly executed as of the date first above written. VIROLOGIC, INC. By: /s/ William D. Young ----------------------------------- Name: William D. Young Its: CEO INITIAL INVESTORS: City of Milford Pension & Retirement Fund By: Zesiger Capital Group LLC as Attorney-in-Fact /s/ James Cleary - -------------------------------------- Name: James Cleary Title: Managing Director RESIDENCE: ADDRESS: c/o Zesiger Capital Group LLC 320 Park Avenue New York, NY 10022 Telecopy: (212) 508-6329 Telephone: (212) 508-6332 Attention: AGGREGATE SUBSCRIPTION AMOUNT Number of Units: 40 Purchase Price ($10,000 per Unit): $400,000 IN WITNESS WHEREOF, the undersigned Purchaser and the Company have caused this Agreement to be duly executed as of the date first above written. VIROLOGIC, INC. By: /s/ William D. Young ----------------------------------- Name: William D. Young Its: CEO INITIAL INVESTORS: Public Employee retirement System of Idaho By: Zesiger Capital Group LLC as Attorney-in-Fact /s/ James Cleary - -------------------------------------- Name: James Cleary Title: Managing Director RESIDENCE: ADDRESS: c/o Zesiger Capital Group LLC 320 Park Avenue New York, NY 10022 Telecopy: (212) 508-6329 Telephone: (212) 508-6332 Attention: AGGREGATE SUBSCRIPTION AMOUNT Number of Units: 35 Purchase Price ($10,000 per Unit): $350,000 IN WITNESS WHEREOF, the undersigned Purchaser and the Company have caused this Agreement to be duly executed as of the date first above written. VIROLOGIC, INC. By: /s/ William D. Young ----------------------------------- Name: William D. Young Its: CEO INITIAL INVESTORS: City of Stamford Fireman's Pension Fund By: Zesiger Capital Group LLC as Attorney-in-Fact /s/ James Cleary - -------------------------------------- Name: James Cleary Title: Managing Director RESIDENCE: ADDRESS: c/o Zesiger Capital Group LLC 320 Park Avenue New York, NY 10022 Telecopy: (212) 508-6329 Telephone: (212) 508-6332 Attention: AGGREGATE SUBSCRIPTION AMOUNT Number of Units: 14 Purchase Price ($10,000 per Unit): $140,000 IN WITNESS WHEREOF, the undersigned Purchaser and the Company have caused this Agreement to be duly executed as of the date first above written. VIROLOGIC, INC. By: /s/ William D. Young ----------------------------------- Name: William D. Young Its: CEO INITIAL INVESTORS: Morgan Trust Co. of the Bahamas Ltd as Trustees U/A/D 11/30/93 By: Zesiger Capital Group LLC as Attorney-in-Fact /s/ James Cleary - -------------------------------------- Name: James Cleary Title: Managing Director RESIDENCE: ADDRESS: c/o Zesiger Capital Group LLC 320 Park Avenue New York, NY 10022 Telecopy: (212) 508-6329 Telephone: (212) 508-6332 Attention: AGGREGATE SUBSCRIPTION AMOUNT Number of Units: 9 Purchase Price ($10,000 per Unit): $90,000 IN WITNESS WHEREOF, the undersigned Purchaser and the Company have caused this Agreement to be duly executed as of the date first above written. VIROLOGIC, INC. By: /s/ William D. Young ----------------------------------- Name: William D. Young Its: CEO INITIAL INVESTORS: Mary Estabil By: Zesiger Capital Group LLC as Attorney-in-Fact /s/ James Cleary - -------------------------------------- Name: James Cleary Title: Managing Director RESIDENCE: ADDRESS: c/o Zesiger Capital Group LLC 320 Park Avenue New York, NY 10022 Telecopy: (212) 508-6329 Telephone: (212) 508-6332 Attention: AGGREGATE SUBSCRIPTION AMOUNT Number of Units: 1 Purchase Price ($10,000 per Unit): $10,000 IN WITNESS WHEREOF, the undersigned Purchaser and the Company have caused this Agreement to be duly executed as of the date first above written. VIROLOGIC, INC. By: /s/ William D. Young ----------------------------------- Name: William D. Young Its: CEO INITIAL INVESTORS: Robert K. Winters By: Zesiger Capital Group LLC as Attorney-in-Fact /s/ James Cleary - -------------------------------------- Name: James Cleary Title: Managing Director RESIDENCE: ADDRESS: c/o Zesiger Capital Group LLC 320 Park Avenue New York, NY 10022 Telecopy: (212) 508-6329 Telephone: (212) 508-6332 Attention: AGGREGATE SUBSCRIPTION AMOUNT Number of Units: 1 Purchase Price ($10,000 per Unit): $10,000 IN WITNESS WHEREOF, the undersigned Purchaser and the Company have caused this Agreement to be duly executed as of the date first above written. VIROLOGIC, INC. By: /s/ William D. Young ----------------------------------- Name: William D. Young Its: CEO PURCHASER: Biotech Target NV By: /s/ A.D. Hove ----------------------------------- Name: A. Hove R. Marei Title: Signatory Authority RESIDENCE: ADDRESS: De Ruyterkade 62 Willemstad Curacao Netherlands Antilles Telecopy: Telephone: Attention: with a copy to: Bellevue Asset Management Graf________ 4 6301 Zug Switzerland Telecopy: Telephone: Attention: AGGREGATE SUBSCRIPTION AMOUNT Number of Units: 200 Purchase Price ($10,000 per Unit): $2,000,000 EX-10.2 7 a80301ex10-2.txt EXHIBIT 10.2 EXHIBIT 10.2 REGISTRATION RIGHTS AGREEMENT REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of March 22, 2002, by and among ViroLogic, Inc., a corporation organized under the laws of the State of Delaware (the "COMPANY"), and the undersigned (together with its affiliates, the "INITIAL INVESTORS"). WHEREAS: A. In connection with the Securities Purchase Agreement, dated as of March 22, 2002, by and among the Company and the Initial Investors (the "SECURITIES PURCHASE AGREEMENT"), the Company has agreed, upon the terms and subject to the conditions contained therein, to issue and sell to the Initial Investors (i) shares of its Series B Convertible Preferred Stock (the "PREFERRED STOCK") that are convertible into shares of the Company's common stock, par value $.001 per share (the "COMMON STOCK"), upon the terms and subject to the limitations and conditions set forth in the Certificate of Designations, Rights and Preferences with respect to such Preferred Stock (the "CERTIFICATE OF DESIGNATION") and (ii) warrants (the "WARRANTS") to acquire shares of Common Stock. The shares of Common Stock issuable upon conversion of the Preferred Stock are referred to herein as the "CONVERSION SHARES" and the shares of Common Stock issuable upon exercise of or otherwise pursuant to the Warrants are referred to herein as the "WARRANT SHARES." B. To induce the Initial Investors to execute and deliver the Securities Purchase Agreement, the Company has agreed to provide certain registration rights under the Securities Act of 1933, as amended, and the rules and regulations thereunder, or any similar successor statute (collectively, the "SECURITIES ACT"), and applicable state securities laws. NOW, THEREFORE, 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 Initial Investors hereby agree as follows: 1. DEFINITIONS. (a) As used in this Agreement, the following terms shall have the following meanings: (i) "INVESTORS" means the Initial Investors and any transferees or assignees who agree to become bound by the provisions of this Agreement in accordance with Section 10 hereof. (ii) "REGISTER," "REGISTERED," and "REGISTRATION" refer to a registration effected by preparing and filing a Registration Statement or Statements in compliance with the Securities Act and pursuant to Rule 415 under the Securities Act or any successor rule providing for offering securities on a continuous basis ("RULE 415"), and the declaration or ordering of effectiveness of such Registration Statement by the United States Securities and Exchange Commission (the "SEC"). (iii) "REGISTRABLE SECURITIES" means (a) the Conversion Shares, (b) the Warrant Shares and (c) any shares of capital stock issued or issuable, from time to time (with any adjustments), as a distribution on or in exchange for or otherwise with respect to any of the foregoing, whether as default payments or otherwise. (iv) "REGISTRATION STATEMENT" means a registration statement of the Company under the Securities Act. (b) Capitalized terms used herein and not otherwise defined herein shall have the respective meanings set forth in the Securities Purchase Agreement. 2. REGISTRATION. (a) Mandatory Registration. The Company shall use its best efforts to prepare promptly and file with the SEC as soon as practicable, but in no event later than the thirtieth (30th) day following the Closing Date (the "FILING DATE"), a Registration Statement on Form S-3 (or, if Form S-3 is not then available, on such form of Registration Statement as is then available to effect a registration of all of the Registrable Securities, subject to the consent of the Initial Investors) covering the resale of all of the Registrable Securities. The Registration Statement filed hereunder, to the extent allowable under the Securities Act and the Rules promulgated thereunder (including Rule 416), shall state that such Registration Statement also covers such indeterminate number of additional shares of Common Stock as may become issuable upon conversion of the Preferred Stock and exercise of the Warrants to prevent dilution resulting from stock splits, stock dividends or similar transactions. The Registrable Securities included in the Registration Statement shall be allocated to the Investors as set forth in Section 12(k) hereof. The Registration Statement (and each amendment or supplement thereto, and each request for acceleration of effectiveness thereof) shall be provided to (and subject to the approval of, which shall not be unreasonably withheld) the Initial Investors and its counsel prior to its filing or other submission. (b) Payments by the Company. The Company shall use its best efforts to cause the Registration Statement required to be filed pursuant to Section 2(a) hereof to become effective as soon as practicable, but in no event later than the sixtieth (60th) day following the Filing Date. At the time of effectiveness, the Company shall ensure that such Registration Statement covers all of the Registrable Securities issuable at such time pursuant to the Preferred Stock and the Warrants (including, if necessary, by filing an amendment prior to the effective date of the Registration Statement to increase the number of shares covered thereby). If (i) (A) the Registration Statement required to be filed by the Company pursuant to Section 2(a) hereof is not filed with the SEC prior to the Filing Date or declared effective by the SEC on or before the ninetieth (90th) day after the Filing Date (the "REGISTRATION DEADLINE") or (B) any Registration Statement required to be filed by the Company pursuant to Section 4(b) hereof is not declared effective by the SEC within sixty (60) days after the applicable Registration Trigger Date (as defined in Section 4(b) hereof), or (ii) if, after any such Registration Statement has been declared effective by the SEC, sales of any of the Registrable Securities required to be covered by such Registration Statement (including any Registrable Securities required to be registered pursuant to Section 4(b) hereof) cannot be made pursuant to such Registration Statement (by reason of a stop order or the Company's failure to update the Registration Statement or any other reason outside the control of the Investors), except as otherwise provided herein or (iii) the Common Stock is not listed or included for quotation on the Nasdaq National Market ("NNM"), the Nasdaq SmallCap Market ("SMALLCAP"), the New York Stock Exchange (the "NYSE") or the American Stock Exchange (the "AMEX") at any time after the Registration Deadline hereunder, then the Company will make payments to the Investors in such amounts and at such times as shall be determined pursuant to this Section 2(b) as partial relief for the damages to the Investors by reason of any such delay in or reduction of their ability to sell the Registrable Securities (which remedy shall not be exclusive of any other remedies available at law or in equity). The Company shall pay to each Investor an amount equal to the product of (i) the aggregate Purchase Price of the Preferred Stock and Warrants purchased at the Closing held by such Investor (including, without limitation, Preferred Stock that has been converted into Conversion Shares and Warrants that have been exercised for Warrant Shares then held by such Investor) (the "AGGREGATE SHARE PRICE"), multiplied by (ii) two hundredths (.02), for each thirty (30) day period (or portion thereof) (A) after the Filing Date and prior to the date the Registration Statement is filed with the SEC pursuant to Section 2(a), (B) after the Registration Deadline and prior to the date the Registration Statement filed pursuant to Section 2(a) is declared effective by the SEC, (C) after the sixtieth (60th) day following a Registration Trigger Date (as defined in Section 4(b)) and prior to the date the Registration Statement filed pursuant to Section 4(b) hereof is declared effective by the SEC, and (D) during which sales of any Registrable Securities cannot be made pursuant to any such Registration Statement after the Registration Statement has been declared effective or the Common Stock is not listed or included for quotation on the NNM, SmallCap, NYSE or AMEX; provided, however, that there shall be excluded from each such period any delays which are solely attributable to changes (other than corrections of Company mistakes with respect to information previously provided by the Investors) required by the Investors in the Registration Statement with respect to information relating to the Investors, including, without limitation, changes to the plan of distribution. Notwithstanding the foregoing, in no event shall the Company be required to pay amounts with respect to (x) both (A) and (B), and (y) both (C) and (D) above for the same period of time. (For example, if the Registration Statement is not effective by the Registration Deadline, the Company would pay $20,000 for each thirty (30) day period thereafter with respect to each $1,000,000 of Aggregate Share Price until the Registration Statement becomes effective.) Such amounts shall be paid in cash. Payments of cash pursuant hereto shall be made within five (5) days after the end of each period that gives rise to such obligation, provided that, if any such period extends for more than thirty (30) days, interim payments shall be made for each such thirty (30) day period. The requirement to make payments pursuant to this section can be waived as to all Investors by the written consent of Investors holding at least eighty-one percent (81%) of the Registrable Securities (c) Piggy-Back Registrations. If at any time prior to the expiration of the Registration Period (as hereinafter defined) the Company shall file with the SEC a Registration Statement relating to an offering for its own account or the account of others under the Securities Act of any of its equity securities (other than on Form S-4 or Form S-8 or their then equivalents relating to equity securities to be issued solely in connection with any acquisition of any entity or business or equity securities issuable in connection with stock option or other employee benefit plans), the Company shall send to each Investor written notice of such determination and, if within fifteen (15) days after the date of such notice, such Investor shall so request in writing, the Company shall include in such Registration Statement all or any part of the Registrable Securities such Investor requests to be registered, except that if, in connection with any underwritten public offering, the managing underwriter(s) thereof shall impose a limitation on the number of shares of Common Stock which may be included in the Registration Statement because, in such underwriter(s)' judgment, marketing or other factors dictate such limitation is necessary to facilitate public distribution, then the Company shall be obligated to include in such Registration Statement only such limited portion of the Registrable Securities with respect to which such Investor has requested inclusion hereunder as the underwriter shall permit. Any exclusion of Registrable Securities shall be made pro rata among the Investors seeking to include Registrable Securities, in proportion to the number of Registrable Securities sought to be included by such Investors; provided, however, that the Company shall not exclude any Registrable Securities unless the Company has first excluded all outstanding securities, the holders of which are not contractually entitled to inclusion of such securities in such Registration Statement or are not contractually entitled to pro rata inclusion with the Registrable Securities; and provided, further, however, that, after giving effect to the immediately preceding proviso, any exclusion of Registrable Securities shall be made pro rata with holders of other securities having the contractual right to include such securities in the Registration Statement other than holders of securities contractually entitled to inclusion of their securities in such Registration Statement by reason of demand registration rights. Notwithstanding the foregoing, no such reduction shall reduce the amount of Registrable Securities included in the registration below twenty-five (25%) of the total amount of securities included in such registration. No right to registration of Registrable Securities under this Section 2(c) shall be construed to limit any registration required under Section 2(a) hereof. If an offering in connection with which an Investor is entitled to registration under this Section 2(c) is an underwritten offering, then each Investor whose Registrable Securities are included in such Registration Statement shall, unless otherwise agreed by the Company, offer and sell such Registrable Securities in an underwritten offering using the same underwriter or underwriters and, subject to the provisions of this Agreement, on the same terms and conditions as other shares of Common Stock included in such underwritten offering. (d) Eligibility for Form S-3. The Company represents and warrants that it meets the requirements for the use of Form S-3 for registration of the sale by the Initial Investors and any other Investor of the Registrable Securities and the Company shall file all reports required to be filed by the Company with the SEC in a timely manner so as to maintain such eligibility for the use of Form S-3. 3. DELAY PERIODS; SUSPENSION OF SALES. (a) Delay Period. If, at any time prior to the expiration of the Registration Period (as defined below), in the good faith reasonable judgment of the Company's Board of Directors, the disposition of Registrable Securities would require the premature disclosure of material non-public information which may reasonably be expected to have an adverse effect on the Company, then the Company shall not be required to maintain the effectiveness of or amend or supplement the Registration Statement for a period (a "DISCLOSURE DELAY PERIOD") expiring upon the earlier to occur of (i) the date on which such material information is disclosed to the public or ceases to be material or (ii) subject to Section 3(b) hereof, up to ten (10) trading days after the date on which the Company provides a notice to the Investors under Section 4(e) hereof stating that the failure to disclose such non-public information causes the prospectus included in the Registration Statement, as then in effect, to include an untrue statement of a material fact or to omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading (each, a "DISCLOSURE DELAY PERIOD NOTICE"). For the avoidance of doubt, in no event shall a Disclosure Delay Period exceed ten (10) trading days. (b) The Company will give prompt written notice, in the manner prescribed by Section 12 hereof, to the Investors of each Disclosure Delay Period. If practicable, such notice shall estimate the duration of such Disclosure Delay Period. Each Investor agrees that, upon receipt of a Disclosure Delay Period Notice prior to the Investor's disposition of all such Registrable Securities, Investor will forthwith discontinue the disposition of such Registrable Securities pursuant to the Registration Statement, and will not deliver any prospectus forming a part thereof in connection with any sale of such Registrable Securities until the expiration of such Disclosure Delay Period. In addition, the provisions of Section 2(b) hereof shall not apply to the Disclosure Delay Periods. Notwithstanding anything in this Section 3 to the contrary, the Company shall not deliver more than two (2) Disclosure Delay Period Notices in any one (1) year period and there shall not be more than an aggregate of sixty (60) calendar days in any twelve (12) month period during which the Company is in a Disclosure Delay Period nor more than an aggregate of thirty (30) calendar days in any ninety (90) calendar day period during which the Company is in a Disclosure Delay Period. 4. OBLIGATIONS OF THE COMPANY. In connection with the registration of the Registrable Securities, the Company shall have the following obligations: (a) The Company shall respond promptly to any and all comments made by the staff of the SEC to the Registration Statement required by Section 2(a), and shall submit to the SEC before the close of business on or before the second business day immediately following the business day on which the Company learns (either by telephone or in writing) that no review of such Registration Statement will be made by the SEC or that the staff of the SEC has no further comments on such Registration Statement, as the case may be, a request for acceleration of the effectiveness of such Registration Statement to a time and date as soon as practicable. The Company shall keep such Registration Statement effective pursuant to Rule 415 at all times until such date as is the earlier of (i) the date on which all of the Registrable Securities have been sold and (ii) the date on which all of the Registrable Securities may be immediately sold to the public without registration or restriction pursuant to Rule 144(k) under the Securities Act or any successor provision (the "REGISTRATION PERIOD"), which Registration Statement (including any amendments or supplements thereto and prospectuses contained therein and all documents incorporated by reference therein) (i) shall comply in all material respects with the requirements of the Securities Act and the rules and regulations of the SEC promulgated thereunder and (ii) shall not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein, or necessary to make the statements therein not misleading. The financial statements of the Company included in the Registration Statement or incorporated by reference therein will comply as to form in all material respects with the applicable accounting requirements and the published rules and regulations of the SEC applicable with respect thereto. Such financial statements will be prepared in accordance with U.S. 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 on summary statements and fairly present in all material respects the consolidated financial position of the Company and its consolidated subsidiaries as of the dates thereof and the consolidated results of their operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to immaterial year-end adjustments). (b) The Company shall use its best efforts, to prepare and file with the SEC such amendments (including post-effective amendments) and supplements to the Registration Statement and the prospectus used in connection with the Registration Statement as may be necessary to keep the Registration Statement effective at all times during the Registration Period, and, during such period, comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities of the Company covered by the Registration Statement until such time as all of such Registrable Securities have been disposed of in accordance with the intended methods of disposition by the seller or sellers thereof as set forth in the Registration Statement. In the event the number of shares available under a Registration Statement filed pursuant to this Agreement is, for any three (3) consecutive trading days (the last of such three (3) trading days being the "REGISTRATION TRIGGER DATE"), insufficient to cover one hundred percent (100%) of the Registrable Securities issued or issuable upon conversion (without giving effect to any limitations on conversion contained in Article IV.D of the Certificate of Designation) of the Preferred Stock and exercise of the Warrants (without giving effect to any limitations on exercise contained in Section 7(g) of the Warrants), the Company shall amend the Registration Statement, or file a new Registration Statement (on the short form available therefor, if applicable), or both, so as to cover one hundred percent (100%) of the Registrable Securities issued or issuable (without giving effect to any limitations on conversion or exercise contained in the Certificate of Designation or the Warrants) as of the Registration Trigger Date, in each case, as soon as practicable, but in any event within fifteen (15) days after the Registration Trigger Date (based on the market price then in effect of the Common Stock and other relevant factors on which the Company reasonably elects to rely). The Company shall use its best efforts to cause such amendment(s) and/or new Registration Statement to become effective as soon as practicable following the filing thereof. In the event the Company fails to obtain the effectiveness of any such Registration Statement within sixty (60) days after a Registration Trigger Date, each Investor shall thereafter have the option, exercisable in whole or in part at any time and from time to time by delivery of a written notice to the Company (a "MANDATORY REDEMPTION NOTICE"), to require the Company to purchase for cash, at an amount per share equal to the Redemption Amount (as defined in Article VIII.B of the Certificate of Designation), a portion of the Investor's Preferred Stock such that the total number of Registrable Securities included on the Registration Statements for resale by such Investor exceeds 100% of the Registrable Securities issued or issuable upon conversion (without giving effect to any limitations on conversion contained in Article IV.D of the Certificate of Designation) of such Investor's Preferred Stock and exercise of such Investor's Warrants. If the Corporation fails to redeem any of such shares within five (5) business days after its receipt of a Mandatory Redemption Notice, then such Investor shall be entitled to the remedies provided in Article VIII.D of the Certificate of Designation. (c) The Company shall furnish to each Investor whose Registrable Securities are included in the Registration Statement and its legal counsel (i) promptly after the same is prepared and publicly distributed, filed with the SEC, or received by the Company, one copy of the Registration Statement and any amendment thereto, each preliminary prospectus and prospectus and each amendment or supplement thereto, and, in the case of the Registration Statement referred to in Section 2(a), each letter written by or on behalf of the Company to the SEC or the staff of the SEC (including, without limitation, any request to accelerate the effectiveness of the Registration Statement or amendment thereto), and each item of correspondence from the SEC or the staff of the SEC, in each case relating to the Registration Statement (other than any portion, if any, thereof which contains information for which the Company has sought confidential treatment), (ii) by the next business day after the date of effectiveness of the Registration Statement or any amendment thereto, a notice stating that the Registration Statement or amendment has been declared effective, and (iii) such number of copies of a prospectus, including a preliminary prospectus, and all amendments and supplements thereto and such other documents as such Investor may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such Investor. (d) The Company shall use its best efforts to (i) register and qualify the Registrable Securities covered by the Registration Statement under such other securities or "blue sky" laws of such jurisdictions in the United States as each Investor who holds Registrable Securities being offered reasonably requests, (ii) prepare and file in those jurisdictions such amendments (including post-effective amendments) and supplements to such registrations and qualifications as may be necessary to maintain the effectiveness thereof during the Registration Period, (iii) take such other actions as may be necessary to maintain such registrations and qualifications in effect at all times during the Registration Period, and (iv) take all other actions reasonably necessary or advisable to qualify the Registrable Securities for sale in such jurisdictions; provided, however, that the Company shall not be required in connection therewith or as a condition thereto to (a) qualify to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 4(d), (b) subject itself to general taxation in any such jurisdiction, (c) file a general consent to service of process in any such jurisdiction, (d) provide any undertakings that cause the Company undue expense or burden, or (e) make any change in its charter or bylaws, which in each case the Board of Directors of the Company determines to be contrary to the best interests of the Company and its stockholders. (e) As promptly as practicable after becoming aware of such event, the Company shall notify each Investor by telephone and facsimile of the happening of any event, of which the Company has knowledge, as a result of which the prospectus included in the Registration Statement, as then in effect, includes an untrue statement of a material fact or omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and, use its best efforts promptly to prepare a supplement or amendment to the Registration Statement to correct such untrue statement or omission, and deliver such number of copies of such supplement or amendment to each Investor as such Investor may reasonably request. (f) The Company shall use its best efforts (i) to prevent the issuance of any stop order or other suspension of effectiveness of a Registration Statement (other than as permitted herein), and, if such an order is issued, to obtain the withdrawal of such order at the earliest practicable moment (including in each case by amending or supplementing such Registration Statement) and (ii) to notify each Investor who holds Registrable Securities being sold (or, in the event of an underwritten offering, the managing underwriters) of the issuance of such order and the resolution thereof (and if such Registration Statement is supplemented or amended, deliver such number of copies of such supplement or amendment to each Investor as such Investor may reasonably request). (g) The Company shall permit a single firm of counsel designated by the Initial Investors to review the Registration Statement and all amendments and supplements thereto a reasonable period of time prior to its filing with the SEC, and not file any document in a form to which such counsel reasonably objects. (h) The Company shall make generally available to its security holders as soon as practical, but not later than ninety (90) days after the close of the period covered thereby, an earnings statement (in form complying with the provisions of Rule 158 under the Securities Act) covering a twelve-month period beginning not later than the first day of the Company's fiscal quarter next following the effective date of the Registration Statement which compliance will be met through the Company's filing, on an appropriate form, the appropriate report of the Company as required by the Securities Exchange Act of 1934, as amended. (i) The Company shall hold in confidence and not make any disclosure of information concerning an Investor provided to the Company unless (i) disclosure of such information is necessary to comply with federal or state securities laws, (ii) the disclosure of such information is necessary to avoid or correct a misstatement or omission in any Registration Statement, (iii) the release of such information is ordered pursuant to a subpoena or other order from a court or governmental body of competent jurisdiction, (iv) such information has been made generally available to the public other than by disclosure in violation of this or any other agreement, or (v) such Investor consents to the form and content of any such disclosure. The Company agrees that it shall, upon learning that disclosure of such information concerning an Investor is sought in or by a court or governmental body of competent jurisdiction or through other means, give prompt notice to such Investor prior to making such disclosure, and allow the Investor, at its expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order for, such information. (j) The Company shall use its best efforts to promptly either (i) cause all of the Registrable Securities covered by the Registration Statement to be listed on the NYSE or the AMEX or another national securities exchange and on each additional national securities exchange on which securities of the same class or series issued by the Company are then listed, if any, if the listing of such Registrable Securities is then permitted under the rules of such exchange, or (ii) secure the designation and quotation of all of the Registrable Securities covered by the Registration Statement on the NNM or SmallCap and, without limiting the generality of the foregoing, to arrange for or maintain at least two market makers to register with the National Association of Securities Dealers, Inc. ("NASD") as such with respect to such Registrable Securities. (k) The Company shall provide a transfer agent and registrar, which may be a single entity, for the Registrable Securities not later than the effective date of the Registration Statement. (l) The Company shall cooperate with the Investors who hold Registrable Securities being offered to facilitate the timely preparation and delivery of certificates (not bearing any restrictive legends to the extent permitted by the Securities Purchase Agreement) representing Registrable Securities to be offered pursuant to the Registration Statement and enable such certificates to be in such denominations or amounts, as the case may be, as the Investors may reasonably request and registered in such names as the Investors may request. (m) At the request of any Investor, the Company shall prepare and file with the SEC such amendments (including post-effective amendments) and supplements to a Registration Statement and the prospectus used in connection with such Registration Statement as may be necessary in order to change the plan of distribution set forth in such Registration Statement. (n) The Company shall comply with all applicable laws related to a Registration Statement and offering and sale of securities and all applicable rules and regulations of governmental authorities in connection therewith (including, without limitation, the Securities Act and the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated by the SEC.) (o) From and after the date of this Agreement, the Company shall not, and shall not agree to, allow the holders of any securities of the Company to include any of their securities which are not Registrable Securities in the Registration Statement under Section 2(a) hereof or any amendment or supplement thereto under Section 4(b) hereof without the consent of the holders of a majority in interest of the Registrable Securities (other than as set forth in the Schedule of Exceptions to the Securities Purchase Agreement). 5. OBLIGATIONS OF THE INVESTORS. In connection with the registration of the Registrable Securities, the Investors shall have the following obligations: (a) It shall be a condition precedent to the obligations of the Company to complete the registration pursuant to this Agreement with respect to the Registrable Securities of a particular Investor that such Investor shall furnish to the Company such information regarding itself, the Registrable Securities held by it and the intended method of disposition of the Registrable Securities held by it as shall be reasonably required to effect the registration of such Registrable Securities and shall execute such documents in connection with such registration as the Company may reasonably request. At least five trading days prior to the first anticipated filing date of the Registration Statement, the Company shall notify each Investor of the information the Company requires from each such Investor. (b) Each Investor, by such Investor's acceptance of the Registrable Securities, agrees to cooperate with the Company as reasonably requested by the Company in connection with the preparation and filing of the Registration Statement hereunder, unless such Investor has notified the Company in writing of such Investor's election to exclude all of such Investor's Registrable Securities from such Registration Statement. (c) Each Investor agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Sections 4(e) or 3(a), such Investor will immediately discontinue disposition of Registrable Securities pursuant to the Registration Statement covering such Registrable Securities until such Investor's receipt of the copies of the supplemented or amended prospectus contemplated by Sections 4(e) or 3(a) and, if so directed by the Company, such Investor shall deliver to the Company (at the expense of the Company) or destroy (and deliver to the Company a certificate of destruction) all copies in such Investor's possession, of the prospectus covering such Registrable Securities current at the time of receipt of such notice. Notwithstanding anything to the contrary, subject to compliance with applicable laws, the Company shall cause the transfer agent for the Registrable Securities to deliver unlegended shares of Common Stock to a transferee of an Investor in accordance with the terms of the Certificate of Designation and Warrants in connection with any sale of Registrable Securities with respect to which such Investor has entered into a contract for sale prior to receipt of such notice and for which such Investor has not yet settled. 6. EXPENSES OF REGISTRATION. All reasonable expenses incurred by the Company or the Investors (but only for reasonable attorney's fees of one counsel for the Investors) in connection with registrations, filings or qualifications pursuant to Sections 2 and 4 above, including, without limitation, all registration, listing and qualifications fees, printers and accounting fees, the fees and disbursements of counsel for the Company, the fees and disbursements of one counsel selected by the Investors, and the underwriting discounts and commissions, shall be borne by the Company. In addition, the Company shall pay all of the Investors' reasonable costs and expenses (including legal fees) incurred in connection with the enforcement of the rights of the Investors hereunder. 7. INDEMNIFICATION. In the event any Registrable Securities are included in a Registration Statement under this Agreement: (a) To the extent permitted by law, the Company will indemnify, hold harmless and defend (i) each Investor who holds such Registrable Securities, and (ii) the directors, officers, partners, members, employees and agents of such Investor and each person who controls any Investor within the meaning of Section 15 of the Securities Act or Section 20 of the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), if any, (each, an "INDEMNIFIED PERSON"), against any joint or several losses, claims, damages, liabilities or expenses (collectively, together with actions, proceedings or inquiries by any regulatory or self-regulatory organization, whether commenced or threatened, in respect thereof, "CLAIMS") to which any of them may become subject insofar as such Claims arise out of or are based upon: (i) any untrue statement or alleged untrue statement of a material fact in a Registration Statement or the omission or alleged omission to state therein a material fact required to be stated or necessary to make the statements therein not misleading, (ii) any untrue statement or alleged untrue statement of a material fact contained in any preliminary prospectus if used prior to the effective date of such Registration Statement, or contained in the final prospectus (as amended or supplemented, if the Company files any amendment thereof or supplement thereto with the SEC) or the omission or alleged omission to state therein any material fact necessary to make the statements made therein, in light of the circumstances under which the statements therein were made, not misleading, or (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any other law, including, without limitation, any state securities law, or any rule or regulation thereunder relating to the offer or sale of the Registrable Securities (the matters in the foregoing clauses (i) through (iii) being, collectively, "VIOLATIONS"). Subject to the restrictions set forth in Section 7(c) with respect to the number of legal counsel, the Company shall reimburse the Investors and each other Indemnified Person, promptly as such expenses are incurred and are due and payable, for any reasonable legal fees or other reasonable expenses incurred by them in connection with investigating or defending any such Claim. Notwithstanding anything to the contrary contained herein, the indemnification agreement contained in this Section 7(a): (i) shall not apply to a Claim arising out of or based upon a Violation which occurs in reliance upon and in conformity with information furnished in writing to the Company by such Indemnified Person expressly for use in the Registration Statement or any such amendment thereof or supplement thereto; (ii) shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of the Company, which consent shall not be unreasonably withheld; and (iii) with respect to any preliminary prospectus, shall not inure to the benefit of any Indemnified Person if the untrue statement or omission of material fact contained in the preliminary prospectus was corrected on a timely basis in the prospectus, as then amended or supplemented, if such corrected prospectus was timely made available by the Company pursuant to Section 4(c) hereof, and the Indemnified Person was promptly advised in writing not to use the incorrect prospectus prior to the use giving rise to a Violation and such Indemnified Person, notwithstanding such advice, used it. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Indemnified Person and shall survive the transfer of the Registrable Securities by the Investors pursuant to Section 10 hereof. (b) In connection with any Registration Statement in which an Investor is participating, each such Investor agrees severally and not jointly to indemnify, hold harmless and defend, to the same extent and in the same manner set forth in Section 7(a), the Company, each of its directors, each of its officers who signs the Registration Statement, its employees, agents and each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, and any other stockholder selling securities pursuant to the Registration Statement or any of its directors or officers or any person who controls such stockholder within the meaning of the Securities Act or the Exchange Act (collectively and together with an Indemnified Person, an "INDEMNIFIED PARTY"), against any Claim to which any of them may become subject, under the Securities Act, the Exchange Act or otherwise, insofar as such Claim arises out of or is based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished to the Company by such Investor expressly for use in connection with such Registration Statement; and subject to Section 7(c) such Investor will reimburse any legal or other expenses (promptly as such expenses are incurred and are due and payable) reasonably incurred by them in connection with investigating or defending any such Claim; provided, however, that the indemnity agreement contained in this Section 7(b) shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of such Investor, which consent shall not be unreasonably withheld; provided, further, however, that the Investor shall be liable under this Agreement (including this Section 7(b) and Section 8) for only that amount as does not exceed the net proceeds actually received by such Investor as a result of the sale of Registrable Securities pursuant to such Registration Statement. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Indemnified Party and shall survive the transfer of the Registrable Securities by the Investors pursuant to Section 10 hereof. Notwithstanding anything to the contrary contained herein, the indemnification agreement contained in this Section 7(b) with respect to any preliminary prospectus shall not inure to the benefit of any Indemnified Party if the untrue statement or omission of material fact contained in the preliminary prospectus was corrected on a timely basis in the prospectus, as then amended or supplemented. (c) Promptly after receipt by an Indemnified Person or Indemnified Party under this Section 7 of notice of the commencement of any action (including any governmental action), such Indemnified Person or Indemnified Party shall, if a Claim in respect thereof is to made against any indemnifying party under this Section 7, deliver to the indemnifying party a written notice of the commencement thereof, and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume control of the defense thereof with counsel mutually satisfactory to the indemnifying party and the Indemnified Person or the Indemnified Party, as the case may be; provided, however, that such indemnifying party shall not be entitled to assume such defense and an Indemnified Person or Indemnified Party shall have the right to retain its own counsel with the fees and expenses to be paid by the indemnifying party, if, in the reasonable opinion of counsel retained by the indemnifying party, the representation by such counsel of the Indemnified Person or Indemnified Party and the indemnifying party would be inappropriate due to actual or potential conflicts of interest between such Indemnified Person or Indemnified Party and any other party represented by such counsel in such proceeding or the actual or potential defendants in, or targets of, any such action include both the Indemnified Person or the Indemnified Party and the indemnifying party and any such Indemnified Person or Indemnified Party reasonably determines that there may be legal defenses available to such Indemnified Person or Indemnified Party which are in conflict with those available to such indemnifying party. The indemnifying party shall pay for only one separate legal counsel for the Indemnified Persons or the Indemnified Parties, as applicable, and such legal counsel shall be selected by Investors holding a majority-in-interest of the Registrable Securities included in the Registration Statement to which the Claim relates (with the approval of the Initial Investors if it holds Registrable Securities included in such Registration Statement), if the Investors are entitled to indemnification hereunder, or by the Company, if the Company is entitled to indemnification hereunder, as applicable. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action shall not relieve such indemnifying party of any liability to the Indemnified Person or Indemnified Party under this Section 7, except to the extent that the indemnifying party is actually prejudiced in its ability to defend such action. The indemnification required by this Section 7 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as such expense, loss, damage or liability is incurred and is due and payable. 8. CONTRIBUTION. To the extent any indemnification by an indemnifying party is prohibited or limited by law, the indemnifying party agrees to make the maximum contribution with respect to any amounts for which it would otherwise be liable under Section 7 to the fullest extent permitted by law as is appropriate to reflect the relative fault of the indemnifying party, on the one hand, and the Indemnified Person or Indemnified Party, as the case may be, on the other hand, with respect to the Violation giving rise to the applicable Claim; provided, however, that (i) no contribution shall be made under circumstances where the maker would not have been liable for indemnification under the fault standards set forth in Section 7, (ii) no person guilty of fraudulent misrepresentation (within the meaning of Section 12(f) of the Securities Act) shall be entitled to contribution from any seller of Registrable Securities who was not guilty of such fraudulent misrepresentation, and (iii) contribution (together with any indemnification or other obligations under this Agreement) by any seller of Registrable Securities shall be limited in amount to the net amount of proceeds received by such seller from the sale of such Registrable Securities. 9. REPORTS UNDER THE EXCHANGE ACT. With a view to making available to the Investors the benefits of Rule 144 promulgated under the Securities Act or any other similar rule or regulation of the SEC that may at any time permit the Investors to sell securities of the Company to the public without registration ("RULE 144"), the Company agrees to: (i) file with the SEC in a timely manner and make and keep available all reports and other documents required of the Company under the Securities Act and the Exchange Act so long as the Company remains subject to such requirements (it being understood that nothing herein shall limit the Company's obligations under Section 4(c) of the Securities Purchase Agreement) and the filing and availability of such reports and other documents is required for the applicable provisions of Rule 144; and (ii) furnish to each Investor so long as such Investor owns shares of Preferred Stock, Warrants or Registrable Securities, promptly upon request, (i) a written statement by the Company that it has complied with the reporting requirements of Rule 144, the Securities Act and the Exchange Act, (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (iii) such other information as may be reasonably requested to permit the Investors to sell such securities under Rule 144 without registration. 10. ASSIGNMENT OF REGISTRATION RIGHTS. The rights of the Investors hereunder, including the right to have the Company register Registrable Securities pursuant to this Agreement, shall be automatically assignable by each Investor to any transferee of all or any portion of the shares of Preferred Stock, the Warrants or the Registrable Securities if: (i) the Investor agrees in writing with the transferee or assignee to assign such rights, and a copy of such agreement is furnished to the Company after such assignment, (ii) the Company is furnished with written notice of (a) the name and address of such transferee or assignee, and (b) the securities with respect to which such registration rights are being transferred or assigned, (iii) following such transfer or assignment, the further disposition of such securities by the transferee or assignee is restricted under the Securities Act and applicable state securities laws, (iv) the transferee or assignee agrees in writing for the benefit of the Company to be bound by all of the provisions contained herein, and (v) such transfer shall have been made in accordance with the applicable requirements of the Securities Purchase Agreement, the Certificate of Designation for the Preferred Stock and the Warrants, as applicable. In addition, and notwithstanding anything to the contrary contained in this Agreement, the Securities Purchase Agreement, the Certificate of Designation or the Warrants, the Securities (as defined in the Securities Purchase Agreement) may be pledged, and all rights of the Investors under this Agreement or any other agreement or document related to the transactions contemplated hereby may be assigned, without further consent of the Company, to a bona fide pledgee in connection with an Investor's margin or brokerage account. 11. AMENDMENT OF REGISTRATION RIGHTS. Provisions of this Agreement may be amended and the observance thereof may be waived (either generally or in a particular instance and either retroactively or prospectively), only with written consent of the Company, and Investors who hold at least eighty-one percent (81%) of the Registrable Securities or, in the case of a waiver, with the written consent of the party charged with the enforcement of any such provision; provided, however, that no consideration shall be paid to an Investor by the Company in connection with an amendment hereto unless each Investor similarly affected by such amendment receives a pro-rata amount of consideration from the Company. Any amendment or waiver effected in accordance with this Section 11 shall be binding upon each Investor and the Company. 12. MISCELLANEOUS. (a) A person or entity is deemed to be a holder of Registrable Securities whenever such person or entity owns of record such Registrable Securities. If the Company receives conflicting instructions, notices or elections from two or more persons or entities with respect to the same Registrable Securities, the Company shall act upon the basis of instructions, notice or election received from the registered owner of such Registrable Securities. (b) Any notices required or permitted to be given under the terms of this Agreement shall be sent by certified or registered mail (return receipt requested), or by a nationally recognized overnight delivery service, or delivered personally or by courier or by confirmed telecopy, and shall be effective five (5) days after being placed in the mail, if mailed certified or registered mailed, or one (1) day after being delivered to the nationally recognized overnight delivery service, if delivered in such manner, or upon receipt or refusal of receipt, if delivered personally or by courier or confirmed telecopy, in each case addressed to a party. The addresses for such communications shall be: If to the Company: ViroLogic, Inc. 270 East Grand Avenue South San Francisco, California 94080 Telephone: (650) 635-1100 Attn: Chief Executive Officer with a copy simultaneously transmitted by like means to: Cooley Godward LLP 4401 Eastgate Mall San Diego, California 92121 Telephone: (858) 550-6000 Attn: Christopher J. Kearns, Esq. and if to any Investor, at such address as such Investor shall have provided in writing to the Company, or at such other address as each such party furnishes by notice given in accordance with this Section 12(b). (c) Failure of any party to exercise any right or remedy under this Agreement or otherwise, or delay by a party in exercising such right or remedy, shall not operate as a waiver thereof. (d) This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware applicable to contracts made and to be performed in the State of Delaware. The Company irrevocably consents to the jurisdiction of the United States federal courts and the state courts located in the State of Delaware in any suit or proceeding based on or arising under this Agreement and irrevocably agrees that all claims in respect of such suit or proceeding may be determined in such courts. The Company irrevocably waives the defense of an inconvenient forum to the maintenance of such suit or proceeding. The Company further agrees that service of process upon the Company, mailed by first class mail shall be deemed in every respect effective service of process upon the Company in any such suit or proceeding. Nothing herein shall affect the Investors' right to serve process in any other manner permitted by law. The Company agrees that a final non-appealable judgment in any such suit or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on such judgment or in any other lawful manner. (e) This Agreement, the Securities Purchase Agreement (including all schedules and exhibits thereto) and the Warrants constitute 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 and therein. This Agreement, the Securities Purchase Agreement and the Warrants supersede all prior agreements and understandings among the parties hereto with respect to the subject matter hereof and thereof. (f) Subject to the requirements of Section 10 hereof, this Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties hereto. (g) The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (h) This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement. This Agreement, once executed by a party, may be delivered to the other party hereto by facsimile transmission of a copy of this Agreement bearing the signature of the party so delivering this Agreement. (i) Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby. (j) All consents, approvals and other determinations to be made by the Investors pursuant to this Agreement shall be made by the Investors holding a majority in interest of the Registrable Securities (determined as if all shares of Preferred Stock and Warrants then outstanding had been converted into or exercised for Registrable Securities) held by all Investors. (k) The initial number of Registrable Securities included on any Registration Statement and each increase to the number of Registrable Securities included thereon shall be allocated pro rata among the Investors based on the number of Registrable Securities held by each Investor at the time of such establishment or increase, as the case may be. In the event an Investor shall sell or otherwise transfer any of such holder's Registrable Securities, each transferee shall be allocated a pro rata portion of the number of Registrable Securities included on a Registration Statement for such transferor. Any shares of Common Stock included on a Registration Statement and which remain allocated to any person or entity which does not hold any Registrable Securities shall be allocated to the remaining Investors, pro rata based on the number of shares of Registrable Securities then held by such Investors. For the avoidance of doubt, the number of Registrable Securities held by any Investor shall be determined as if all shares of Preferred Stock and Warrants then outstanding were converted into or exercised for Registrable Securities. (l) Each party to this Agreement has participated in the negotiation and drafting of this Agreement. As such, the language used herein shall be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction will be applied against any party to this Agreement. (m) For purposes of this Agreement, the term "business day" means any day other than a Saturday or Sunday or a day on which banking institutions in the State of New York are authorized or obligated by law, regulation or executive order to close, and the term "trading day" means any day on which NNM, or if the Common Stock is not then traded on NNM the principal securities exchange or trading market where the Common Stock is then listed or traded, is open for trading. IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the date first above written. VIROLOGIC, INC. By: /s/ William D. Young ----------------------------------- Name: William D. Young Its: Chairman & CEO INITIAL INVESTORS: SDS MERCHANT FUND, L.P. By: /s/ Steve Derby ----------------------------------- Name: Steve Derby Title: Managing Member IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the date first above written. VIROLOGIC, INC. By: ----------------------------------- Name: --------------------------------- Its: ---------------------------------- INITIAL INVESTORS: DMG LEGACY FUND LLC By: /s/ Thomas E. McAuley ----------------------------------- Name: Thomas McAuley Title: Chief Investment Officer IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the date first above written. VIROLOGIC, INC. By: ----------------------------------- Name: --------------------------------- Its: ---------------------------------- INITIAL INVESTORS: DMG LEGACY INSTITUTIONAL LLC By: /s/ Thomas E. McAuley ----------------------------------- Name: Thomas McAuley Title: Chief Investment Officer IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the date first above written. VIROLOGIC, INC. By: ----------------------------------- Name: --------------------------------- Its: ---------------------------------- INITIAL INVESTORS: DMG LEGACY INTERNATIONAL LTD. By: /s/ Thomas E. McAuley ----------------------------------- Name: Thomas McAuley Title: Chief Investment Officer IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the date first above written. VIROLOGIC, INC. By: /s/ William D. Young ----------------------------------- Name: William D. Young Its: Chairman & CEO INITIAL INVESTORS: Biotech Target NV By: /s/ A.D. Hove ----------------------------------- Name: A. Hove R. Marei Title: Signatory Authority IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the date first above written. VIROLOGIC, INC. By: /s/ William D. Young ----------------------------------- Name: William D. Young Its: Chairman & CEO INITIAL INVESTORS: JALAA Equities, LP By: /s/ Jason M. Aryeh ----------------------------------- Name: Jason M. Aryeh Title: General Partner IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the date first above written. VIROLOGIC, INC. By: /s/ William D. Young ----------------------------------- Name: William D. Young Its: Chairman & CEO INITIAL INVESTORS: Xmark Fund L.P. By: /s/ Mitchell D. Kaye ----------------------------------- Name: Mitchell D. Kaye Title: CIO, of Investment Manager IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the date first above written. VIROLOGIC, INC. By: /s/ William D. Young ----------------------------------- Name: William D. Young Its: Chairman & CEO INITIAL INVESTORS: Xmark Fund Ltd. By: /s/ Mitchell D. Kaye ----------------------------------- Name: Mitchell D. Kaye Title: CIO, of Investment Manager IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the date first above written. VIROLOGIC, INC. By: /s/ William D. Young ----------------------------------- Name: William D. Young Its: Chairman & CEO INITIAL INVESTORS: /s/ William J. Piedemonte - -------------------------------------- William J. Piedemonte IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the date first above written. VIROLOGIC, INC. By: /s/ William D. Young ----------------------------------- Name: William D. Young Its: Chairman & CEO INITIAL INVESTORS: City of Milford Pension & Retirement Fund By: Zesiger Capital Group LLC as Attorney-in-Fact /s/ James Cleary - -------------------------------------- Name: James Cleary Title: Managing Director IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the date first above written. VIROLOGIC, INC. By: /s/ William D. Young ----------------------------------- Name: William D. Young Its: Chairman & CEO INITIAL INVESTORS: Public Employee retirement System of Idaho By: Zesiger Capital Group LLC as Attorney-in-Fact /s/ James Cleary - -------------------------------------- Name: James Cleary Title: Managing Director IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the date first above written. VIROLOGIC, INC. By: /s/ William D. Young ----------------------------------- Name: William D. Young Its: Chairman & CEO INITIAL INVESTORS: City of Stamford Fireman's Pension Fund By: Zesiger Capital Group LLC as Attorney-in-Fact /s/ James Cleary - -------------------------------------- Name: James Cleary Title: Managing Director IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the date first above written. VIROLOGIC, INC. By: /s/ William D. Young ----------------------------------- Name: William D. Young Its: Chairman & CEO INITIAL INVESTORS: Morgan Trust Co. of the Bahamas Ltd as Trustees U/A/D 11/30/93 By: Zesiger Capital Group LLC as Attorney-in-Fact /s/ James Cleary - -------------------------------------- Name: Managing Director Title: James Cleary IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the date first above written. VIROLOGIC, INC. By: /s/ William D. Young ----------------------------------- Name: William D. Young Its: Chairman & CEO INITIAL INVESTORS: Mary Estabil By: Zesiger Capital Group LLC as Attorney-in-Fact /s/ James Cleary - -------------------------------------- Name: James Cleary Title: Managing Director IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the date first above written. VIROLOGIC, INC. By: /s/ William D. Young ----------------------------------- Name: William D. Young Its: Chairman & CEO INITIAL INVESTORS: Robert K. Winters By: Zesiger Capital Group LLC as Attorney-in-Fact /s/ James Cleary - -------------------------------------- Name: James Cleary Title: Managing Director EX-99.1 8 a80301ex99-1.txt EXHIBIT 99.1 Exhibit 99.1 [VIROLOGIC LOGO] FOR IMMEDIATE RELEASE CONTACT: MARCH 26, 2002 Karen Wilson, CFO (650) 624-4164 kwilson@virologic.com www.virologic.com VIROLOGIC RAISES $10 MILLION THROUGH PRIVATE PLACEMENT -- Cash Position Sufficient to Achieve Breakeven by the End of 2002-- SOUTH SAN FRANCISCO, CA -- ViroLogic, Inc. (NASDAQ: VLGC) today announced it has closed a transaction to sell newly designated shares of 6% convertible preferred stock to several large investors in a private placement resulting in gross proceeds to the company of $10 million. ViroLogic expects to use the proceeds from this financing to support and enhance ongoing commercial activities, accelerate research and development of new products, and for general administrative expenses, capital expenditures and working capital. "The Company's cash position should now be sufficient to get us to breakeven by the end of 2002," said Bill Young, ViroLogic's Chairman and CEO. "It comes at a great time as we continue to increase sales, launch new products and turn the corner to profitability." ViroLogic develops and markets rapid, highly sensitive drug resistance assays that allow physicians to directly and reliably measure the level of clinically significant HIV drug resistance. With this information, physicians can individualize treatment regimens for their patients to maintain effective therapy and avoid unnecessary side effects, resulting in improved outcomes and reduced treatment costs. Pharmaceutical companies are also using ViroLogic's assays to develop new drugs to which HIV might be less resistant. ViroLogic is the only company to directly market a full line of premium resistance technologies, including phenotyping, genotyping and the combination of the two. In addition, ViroLogic has a robust pipeline of new products which it plans to launch throughout the year, including a patient testing assay for viral fitness and drug development assays for HIV vaccines and hepatitis B virus. The preferred stock will be convertible into common stock at a premium to the current market price. The purchasers will also receive warrants to purchase a total of 2.2 million shares of common stock, at an exercise price that is also at a premium to the current market price. The offer and sale of the securities being sold by ViroLogic in the private placement will not be and has not been registered under the Securities Act of 1933, as amended, and may not be sold by ViroLogic absent registration or an applicable exemption from registration requirements. However, the Company has agreed to file a registration statement for the resale of the shares underlying the preferred stock and the warrants. This news release is not an offer to sell, or a solicitation of an offer to buy, the securities discussed herein. ABOUT VIROLOGIC ViroLogic is a biotechnology company advancing individualized medicine and pharmacogenomics by discovering, developing and marketing innovative products to guide and improve treatment of serious viral diseases such as AIDS and hepatitis. The Company's products are designed to help doctors optimize treatment regimens for their patients that lead to better outcomes and reduced costs. The Company's technology is also being used by numerous biopharmaceutical companies to develop new and improved antiviral therapeutics and vaccines targeted at emerging drug-resistant viruses. Certain statements in this press release are forward-looking, including statements relating to the offer and sale of shares of preferred stock and the issuance of warrants, the potential of the Company to reach breakeven and become profitable, as well as anticipated uses of proceeds and potential pipeline and product development efforts. These forward-looking statements are subject to risks and uncertainties and other factors, which may cause actual results to differ materially from the anticipated results or other expectations expressed in such forward-looking statements. These risks and uncertainties include, but are not limited to, whether planned pipeline and product development efforts will be successful, whether PhenoSense(TM) testing will achieve market acceptance, whether payers will authorize reimbursement for our products, whether we will be able to expand our sales and marketing capabilities, whether we encounter problems or delays in automating our process, whether we successfully introduce new products using our PhenoSense technology, including entry, fitness, vaccine and hepatitis assays, whether intellectual property underlying our PhenoSense technology is adequate, whether we are able to build brand loyalty, the ability to raise additional capital, and other risks and uncertainties detailed from time to time in our reports to the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2000 and the Company's most recent Report on Form 10-Q. # # # -----END PRIVACY-ENHANCED MESSAGE-----

EX-3.1

                                                                     EXHIBIT 3.1

                          CERTIFICATE OF DESIGNATIONS,

                             PREFERENCES AND RIGHTS

                                       OF

                      SERIES B CONVERTIBLE PREFERRED STOCK

                                       OF

                                 VIROLOGIC, INC.

                         (Pursuant to Section 151 of the
                        Delaware General Corporation Law)

      ViroLogic, Inc., a corporation organized and existing under the laws of
the State of Delaware (the "CORPORATION"), hereby certifies that the Board of
Directors of the Corporation (the "BOARD OF DIRECTORS" or the "BOARD") pursuant
to authority of the Board of Directors as required by Section 151 of the
Delaware General Corporation Law, and in accordance with the provisions of its
Certificate of Incorporation and Bylaws, each as amended and restated through
the date hereof, has and hereby authorizes a series of the Corporation's
previously authorized Preferred Stock, par value $.001 per share (the "PREFERRED
STOCK"), and hereby states the designation and number of shares, and fixes the
relative rights, preferences, privileges, powers and restrictions thereof as
follows:

                            I. DESIGNATION AND AMOUNT

      The designation of this series, which consists of 1,022 shares of
Preferred Stock, is the Series B Convertible Preferred Stock (the "SERIES B
PREFERRED STOCK") and the face amount shall be Ten Thousand U.S. Dollars
($10,000.00) per share (the "FACE AMOUNT").

                                II. NO DIVIDENDS

      The Series B Preferred Stock will bear no dividends, and the holders of
the Series B Preferred Stock shall not be entitled to receive dividends on the
Series B Preferred Stock.

                            III. CERTAIN DEFINITIONS

      For purposes of this Certificate of Designation, the following terms shall
have the following meanings:

      A.    "CLOSING SALES PRICE" means, for any security as of any date, the
last sales price of such security on the Nasdaq National Market ("NNM") or other
trading market where such security is listed or traded as reported by Bloomberg
Financial Markets (or a comparable reporting service of national reputation
selected by the Corporation and reasonably acceptable to holders of a majority
of the then outstanding shares of Series B Preferred Stock ("MAJORITY HOLDERS")
if Bloomberg Financial Markets is not then reporting closing sales prices of
such security) (collectively,




"BLOOMBERG"), or if the foregoing does not apply, the last reported sales price
of such security on a national exchange or in the over-the-counter market on the
electronic bulletin board for such security as reported by Bloomberg, or, if no
such price is reported for such security by Bloomberg, the average of the bid
prices of all market makers for such security as reported in the "pink sheets"
by the National Quotation Bureau, Inc., in each case for such date or, if such
date was not a trading day for such security, on the next preceding date which
was a trading day. If the Closing Sales Price cannot be calculated for such
security as of either of such dates on any of the foregoing bases, the Closing
Sales Price of such security on such date shall be the fair market value as
reasonably determined by an investment banking firm selected by the Corporation
and reasonably acceptable to the Majority Holders, with the costs of such
appraisal to be borne by the Corporation.

      B.    "COMMON STOCK DEEMED OUTSTANDING" shall mean the number of shares of
Common Stock actually outstanding (not including shares of Common Stock held in
the treasury of the Corporation).

      C.    "CONVERSION DATE" means, (i) for any Optional Conversion (as defined
below), the date specified in the notice of conversion in the form attached
hereto (the "NOTICE OF CONVERSION"), so long as a copy of the Notice of
Conversion is faxed (or delivered by other means resulting in notice) to the
Corporation before 11:59 p.m., New York City time, on the Conversion Date
indicated in the Notice of Conversion; provided, however, that if the Notice of
Conversion is not so faxed or otherwise delivered before such time, then the
Conversion Date shall be the date the holder faxes or otherwise delivers the
Notice of Conversion to the Corporation, and (ii) for any Mandatory Conversion,
that date specified in the notice delivered to the holders of the Series B
Preferred Stock being converted pursuant to Article IV.C in the event that such
Mandatory Conversion occurs.

      D.    "CONVERSION PRICE" means $2.28, and shall be subject to adjustment
as provided herein.

      E.    "ISSUANCE DATE" means, with respect to each share of Series B
Preferred Stock, the date of the closing under the Securities Purchase Agreement
by and among the Corporation and the purchasers named therein (the "SECURITIES
PURCHASE AGREEMENT") pursuant to which such share of Series B Preferred Stock
was issued.

      F.    "N" means the number of days from, but excluding, the Issuance Date
or the date that the last payment of the Premium was made in full, whichever is
less.

      G.    "PREMIUM" means initially an amount equal to (the
Rate)x(N/365)x(10,000). The "RATE" shall initially be equal to .06. Thereafter,
on the date that is 18 months after the initial Issuance Date under the
Securities Purchase Agreement, the Rate will increase by .02, and the Rate shall
thereafter continue to increase by .02 every six (6) months after the date that
is 18 months after the initial Issuance Date until the Series B Preferred Stock
is converted or redeemed in full; provided, however, that the Rate shall not
exceed .14.

      H.    "MEASUREMENT DATE" means for purposes of any issuance of securities,
the date of issuance thereof.




      I.    "WARRANTS" shall mean the warrants issued by the Corporation to the
initial holders of Series B Preferred Stock pursuant to the Securities Purchase
Agreement.

                       IV. CONVERSION; PAYMENT OF PREMIUM

      A.    Premium; Conversion at the Option of the Holder.

            (i)   The Premium shall be payable, at the applicable Rate, (a) upon
any conversion (regardless of whether it is an Optional Conversion or a
Mandatory Conversion) of each share of Series B Preferred Stock and (b) as to
each outstanding share of Series B Preferred Stock every six (6) months after
the Issuance Date of such share until such share is fully converted or fully
redeemed. Payment of the Premium shall be made in cash.

            (ii)  Subject to the limitations on conversions contained in
Paragraph D of this Article IV, each holder of shares of Series B Preferred
Stock may, at any time and from time to time, convert (an "OPTIONAL CONVERSION")
each of its shares of Series B Preferred Stock into a number of fully paid and
nonassessable shares of Common Stock determined in accordance with the following
formula:

                                     10,000
                                CONVERSION PRICE

      B.    Mechanics of Conversion. In order to effect an Optional Conversion,
a holder shall: (x) fax (or otherwise deliver) a copy of the fully executed
Notice of Conversion to the Corporation (Attention: Secretary) and (y) surrender
or cause to be surrendered the original certificates representing the Series B
Preferred Stock being converted (the "PREFERRED STOCK CERTIFICATES"), duly
endorsed, along with a copy of the Notice of Conversion as soon as practicable
thereafter to the Corporation. Upon receipt by the Corporation of a facsimile
copy of a Notice of Conversion from a holder, the Corporation shall promptly
send, via facsimile, a confirmation to such holder stating that the Notice of
Conversion has been received, the date upon which the Corporation expects to
deliver the Common Stock issuable upon such conversion and the name and
telephone number of a contact person at the Corporation regarding the
conversion. The Corporation shall not be obligated to issue shares of Common
Stock upon a conversion unless either the Preferred Stock Certificates are
delivered to the Corporation as provided above, or the holder notifies the
Corporation that such Preferred Stock Certificates have been lost, stolen or
destroyed and delivers the documentation to the Corporation required by Article
XIV.B hereof.

            (i)   Delivery of Common Stock Upon Conversion. Upon the surrender
of Preferred Stock Certificates accompanied by a Notice of Conversion, the
Corporation (itself, or through its transfer agent) shall, no later than the
later of (a) the second business day following the Conversion Date and (b) the
business day following the date of such surrender (or, in the case of lost,
stolen or destroyed certificates, after provision of indemnity pursuant to
Article XIV.B) (the "DELIVERY PERIOD"), issue and deliver (i.e., deposit with a
nationally recognized overnight courier service postage prepaid) to the holder
or its nominee (x) that number of shares of Common Stock issuable upon
conversion of such shares of Series B Preferred Stock being converted and (y) a
certificate representing the number of shares of Series B Preferred Stock not
being converted, if any.




Notwithstanding the foregoing, if the Corporation's transfer agent is
participating in the Depository Trust Company ("DTC") Fast Automated Securities
Transfer program, and so long as the certificates therefor do not bear a legend
(pursuant to the terms of the Securities Purchase Agreement) and the holder
thereof is not then required to return such certificate for the placement of a
legend thereon (pursuant to the terms of the Securities Purchase Agreement), the
Corporation shall cause its transfer agent to promptly electronically transmit
the Common Stock issuable upon conversion to the holder by crediting the account
of the holder or its nominee with DTC through its Deposit Withdrawal Agent
Commission system ("DTC TRANSFER"). If the aforementioned conditions to a DTC
Transfer are not satisfied, the Corporation shall deliver as provided above to
the holder physical certificates representing the Common Stock issuable upon
conversion. Further, a holder may instruct the Corporation to deliver to the
holder physical certificates representing the Common Stock issuable upon
conversion in lieu of delivering such shares by way of DTC Transfer.

            (ii)  Taxes. The Corporation shall pay any and all taxes that may be
imposed upon it with respect to the issuance and delivery of the shares of
Common Stock upon the conversion of the Series B Preferred Stock.

            (iii) No Fractional Shares. If any conversion of Series B Preferred
Stock would result in the issuance of a fractional share of Common Stock, such
fractional share shall be payable in cash based upon the ten (10) day average
Closing Sales Price at such time, and the number of shares of Common Stock
issuable upon conversion of the Series B Preferred Stock shall be the next lower
whole number of shares.

            (iv)  Conversion Disputes. In the case of any dispute with respect
to a conversion, the Corporation shall promptly issue such number of shares of
Common Stock as are not disputed in accordance with subparagraph (i) above. If
such dispute involves the calculation of the Conversion Price, and such dispute
is not promptly resolved by discussion between the relevant holder and the
Corporation, the Corporation shall submit the disputed calculations to an
independent outside accountant via facsimile within three business days of
receipt of the Notice of Conversion. The accountant, at the Corporation's sole
expense, shall promptly audit the calculations and notify the Corporation and
the holder of the results no later than three business days from the date it
receives the disputed calculations. The accountant's calculation shall be deemed
conclusive, absent manifest error. The Corporation shall then issue the
appropriate number of shares of Common Stock in accordance with subparagraph (i)
above.

      C.    Mandatory Conversion. Subject to the limitations on conversion
contained in paragraph D of this Article IV, if at any time all of the Required
Conditions (as defined herein) are satisfied and (i) at any time after 270 days
after the Registration Statement Effective Date (as defined herein), the Closing
Sales Price of the Common Stock is greater than $4.56 (as adjusted to reflect
any stock dividends, distributions, combinations, reclassifications and other
similar transactions effected by the Corporation in respect to its Common Stock)
for at least twenty (20) consecutive trading days, (ii) upon the closing of an
underwritten public offering pursuant to an effective registration statement
under the Securities Act of 1933, as amended, covering the offer and sale of
Common Stock for the account of the Corporation to the public (A) at an offering
price per share (prior to underwriter's commissions and discounts) of not less
than $4.56 per share (as adjusted to reflect any stock dividends, distributions,
combinations, reclassifications and other similar



transactions effected by the Corporation in respect to its Common Stock) and (B)
with gross proceeds to the Corporation of not less than $40,000,000, or (iii)
the holders of at least eighty-one percent (81%) of the then-outstanding shares
of Series B Preferred Stock shall consent thereto in writing, then, at the
option of the Corporation exercisable by the delivery of written notice to the
holders of the Series B Preferred Shares, delivered no more than ten (10) days
prior to and no less than three (3) days prior to the Conversion Date stated in
such notice, convert all or any shares of Series B Preferred Shares into a
number of fully paid and nonassessable shares of Common Stock determined in
accordance with the formula set forth in Paragraph A of this Article IV (a
"MANDATORY CONVERSION"). Thereafter, the Corporation and the holders shall
follow the applicable conversion procedures set forth in Article IV.B (including
the requirement that the Holder deliver the Preferred Stock Certificates
representing the Series B Preferred Stock being converted to the Corporation);
provided, however, the Holder shall not be required to deliver a Notice of
Conversion to the Corporation. In the event the Corporation elects to convert
only a portion of the outstanding shares of Series B Preferred Stock pursuant to
this Article IV.C, the outstanding shares of Series B Preferred Stock shall be
converted pro rata among the holders based upon their aggregate relative
ownership of outstanding shares of Series B Preferred Stock as of the Conversion
Date.

            (i)   The "REQUIRED CONDITIONS" shall consist of the following:

                  (a)   the registration statement required to be filed by the
Corporation pursuant to Section 2(a) of the Registration Rights Agreement, dated
as of the Issuance Date, by and among the Corporation and the initial holders of
Series B Preferred Stock (the "REGISTRATION RIGHTS AGREEMENT") shall have been
declared effective by the Securities and Exchange Commission (the date on which
such registration statement is declared effective is hereinafter referred to as
the "REGISTRATION STATEMENT EFFECTIVE DATE")(it being understood that the
Corporation shall comply with its obligations under Article 3 of the
Registration Rights Agreement relating to the effectiveness of such registration
statement);

                  (b)   all shares of Common Stock issuable upon conversion of
the Series B Preferred Stock and exercise of the Warrants are then (a)
authorized and reserved for issuance, (b) registered under the Securities Act
for resale by the holders and (c) eligible to be listed or traded on any of the
New York Stock Exchange ("NYSE"), the American Stock Exchange ("AMEX"), the NNM,
or the NASDAQ SmallCap Market ("SMALLCAP") (or the successor to any of them);

                  (c)   no Redemption Event (as defined in Article VIII below)
shall have occurred without having been cured;

                  (d)   all amounts, if any, then accrued or payable under this
Certificate of Designation (including, without limitation, all Premiums) or the
Registration Rights Agreement shall have been paid.

      D.    Limitations on Conversions. The conversion of shares of Series B
Preferred Stock shall be subject to the following limitations (each of which
limitations shall be applied independently):





                  (i)   Cap Amount. If, notwithstanding the representations and
warranties of the Corporation contained in Section 3(c) of the Securities
Purchase Agreement, the Corporation is prohibited by Rule 4350(i) of the
National Association of Securities Dealers, Inc. ("NASD"), or any successor or
similar rule, or the rules or regulations of any other securities exchange on
which the Common Stock is then listed or traded, from issuing a number of shares
of Common Stock upon conversion of Series B Preferred Stock (together with any
shares of Common Stock, or securities convertible into Common Stock, issued
pursuant to the Securities Purchase Agreement or other agreements entered in
connection therewith) in excess of a prescribed amount (the "CAP AMOUNT")
(without stockholder approval or otherwise), then the Corporation shall not
issue shares upon conversion of Series B Preferred Stock in excess of the Cap
Amount. Assuming solely for purposes of this paragraph (D) that such Rule
4350(i) or similar rule is applicable, the Cap Amount shall be 4,482,618 shares.
The Cap Amount shall be allocated pro rata to the holders of Series B Preferred
Stock as provided in Article XIV.C. In the event the Corporation is prohibited
from issuing shares of Common Stock as a result of the operation of this
subparagraph (i), the Corporation shall comply with Article VII.

                  (ii)  Additional Restrictions on Conversion or Transfer. In no
event shall a holder of shares of Series B Preferred Stock of the Corporation
have the right to convert shares of Series B Preferred Stock into shares of
Common Stock or to dispose of any shares of Series B Preferred Stock to the
extent that such right to effect such conversion or disposition would result in
the holder or any of its affiliates together beneficially owning more than the
greater of (a) 4.99% of the outstanding shares of Common Stock or (b) that
percentage of the outstanding shares of Common Stock held by such holder and its
affiliates immediately prior to the Issuance Date (including in such calculation
any shares of Common Stock underlying warrants to purchase Common Stock (other
than such holder's portion of the Warrants) held by such holder immediately
prior to the Issuance Date). For purposes of this subparagraph, beneficial
ownership shall be determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended, and Regulation 13D-G thereunder. The
restriction contained in this subparagraph may not be altered, amended, deleted
or changed in any manner whatsoever unless the holders of a majority of the
outstanding shares of Common Stock and the Majority Holders shall approve, in
writing, such alteration, amendment, deletion or change.

                    V. RESERVATION OF SHARES OF COMMON STOCK

      A.    Reserved Amount. On or prior to the Issuance Date, the Corporation
shall reserve 6,723,684 shares of its authorized but unissued shares of Common
Stock for issuance upon conversion of the Series B Preferred Stock and
thereafter the number of authorized but unissued shares of Common Stock so
reserved (the "RESERVED AMOUNT") shall at all times be sufficient to provide for
the conversion of all of the Series B Preferred Stock outstanding at the then
current Conversion Price thereof. The Reserved Amount shall be allocated to the
holders of Series B Preferred Stock as provided in Article XIV.C.

      B.    Increases to Reserved Amount. If the Reserved Amount for any three
consecutive trading days (the last of such three trading days being the
"AUTHORIZATION TRIGGER DATE") shall be less than 100% of the number of shares of
Common Stock issuable upon conversion of the then outstanding shares of Series B
Preferred Stock and upon exercise of the then outstanding Warrants,




the Corporation shall immediately notify the holders of Series B Preferred Stock
of such occurrence and shall take immediate action (including, if necessary,
seeking stockholder approval to authorize the issuance of additional shares of
Common Stock) to increase the Reserved Amount to 100% of the number of shares of
Common Stock then issuable upon conversion of all of the outstanding Series B
Preferred Stock at the then current Conversion Price. In the event the
Corporation fails to so increase the Reserved Amount within 90 days after an
Authorization Trigger Date, each holder of Series B Preferred Stock shall
thereafter have the option, exercisable in whole or in part at any time and from
time to time by delivery of a Redemption Notice (as defined in Article VIII.D)
to the Corporation, to require the Corporation to purchase for cash, at an
amount per share equal to the Redemption Amount (as defined in Article VIII.B),
a portion of the holder's Series B Preferred Stock such that, after giving
effect to such purchase, the holder's allocated portion of the Reserved Amount
exceeds 100% of the total number of shares of Common Stock issuable to such
holder upon conversion of its Series B Preferred Stock. If the Corporation fails
to redeem any of such shares within five (5) business days after its receipt of
such Redemption Notice, then such holder shall be entitled to the remedies
provided in Article VIII.D.

                       VI. FAILURE TO SATISFY CONVERSIONS

      A.    Conversion Defaults. If, at any time, (x) a holder of shares of
Series B Preferred Stock submits a Notice of Conversion and the Corporation
fails for any reason (other than because such issuance would exceed such
holder's allocated portion of the Reserved Amount or Cap Amount, for which
failures the holders shall have the remedies set forth in Articles V and VII,
respectively) to deliver, on or prior to the fifth business day following the
expiration of the Delivery Period for such conversion, such number of freely
tradable shares of Common Stock to which such holder is entitled upon such
conversion, or (y) the Corporation provides written notice to any holder of
Series B Preferred Stock (or makes a public announcement via press release) at
any time of its intention not to issue freely tradable shares of Common Stock
upon exercise by any holder of its conversion rights in accordance with the
terms of this Certificate of Designation (other than because such issuance would
exceed such holder's allocated portion of the Reserved Amount or Cap Amount)
(each of (x) and (y) being a "CONVERSION DEFAULT") then the holder may elect at
any time and from time to time prior to the Default Cure Date (as defined below)
for such Conversion Default, by delivery of a Redemption Notice to the
Corporation, to have all or any portion of such holder's outstanding shares of
Series B Preferred Stock purchased by the Corporation for cash, at an amount per
share equal to the Redemption Amount (as defined in Article VIII.B). If the
Corporation fails to redeem any of such shares within five business days after
its receipt of such Redemption Notice, then such holder shall be entitled to the
remedies provided in Article VIII.D.

            "DEFAULT CURE DATE" means, as applicable, (i) with respect to a
Conversion Default described in clause (x) of its definition, the date the
Corporation effects the conversion of the full number of shares of Series B
Preferred Stock, and (ii) with respect to a Conversion Default described in
clause (y) of its definition, the date the Corporation issues freely tradable
shares of Common Stock in satisfaction of all conversions of Series B Preferred
Stock in accordance with Article IV.A, or (iii) with respect to either type of a
Conversion Default, the date on which the Corporation redeems shares of Series B
Preferred Stock held by such holder pursuant to this Article VI.A.




      B.    Buy-In Cure. Unless the Corporation has notified the applicable
holder in writing prior to the delivery by such holder of a Notice of Conversion
that the Corporation is unable to honor conversions, if (i) (a) the Corporation
fails to promptly deliver during the Delivery Period shares of Common Stock to a
holder upon a conversion of shares of Series B Preferred Stock or (b) there
shall occur a Legend Removal Failure (as defined in Article VIII.A(iii) below)
and (ii) thereafter, such holder purchases (in an open market transaction or
otherwise) shares of Common Stock to make delivery in satisfaction of a sale by
such holder of the unlegended shares of Common Stock (the "SOLD SHARES") which
such holder anticipated receiving upon such conversion (a "BUY-IN"), the
Corporation shall pay such holder (in addition to any other remedies available
to the holder) the amount by which (x) such holder's total purchase price
(including brokerage commissions, if any) for the unlegended shares of Common
Stock so purchased exceeds (y) the net proceeds received by such holder from the
sale of the Sold Shares. For example, if a holder purchases unlegended shares of
Common Stock having a total purchase price of $11,000 to cover a Buy-In with
respect to shares of Common Stock it sold for $10,000, the Corporation will be
required to pay the holder $1,000. A holder shall provide the Corporation
written notification and supporting documentation indicating any amounts payable
to such holder pursuant to this Paragraph B. The Corporation shall make any
payments required pursuant to this Paragraph B in accordance with and subject to
the provisions of Article XIV.E.

                  VII. INABILITY TO CONVERT DUE TO CAP AMOUNT

      A.    Obligation to Cure. If at any time after the Issuance Date the then
unissued portion of any holder's Cap Amount is less than 100% of the number of
shares of Common Stock then issuable upon conversion of such holder's shares of
Series B Preferred Stock (a "TRADING MARKET TRIGGER EVENT"), the Corporation
shall immediately notify the holders of Series B Preferred Stock of such
occurrence and shall take immediate action (including, if necessary, seeking the
approval of its stockholders to authorize the issuance of the full number of
shares of Common Stock which would be issuable upon the conversion of the then
outstanding shares of Series B Preferred Stock but for the Cap Amount) to
eliminate any prohibitions under applicable law or the rules or regulations of
any stock exchange, interdealer quotation system or other self-regulatory
organization with jurisdiction over the Corporation or any of its securities on
the Corporation's ability to issue shares of Common Stock in excess of the Cap
Amount ("TRADING MARKET PROHIBITIONS"). In the event the Corporation fails to
eliminate all such Trading Market Prohibitions within 90 days after the Trading
Market Trigger Event, then each holder of Series B Preferred Stock shall
thereafter have the option, exercisable in whole or in part at any time and from
time to time until such date that all such Trading Market Prohibitions are
eliminated, by delivery of a Redemption Notice (as defined in Article VIII.D) to
the Corporation, to require the Corporation to purchase for cash, at an amount
per share equal to the Redemption Amount (as defined in Article VIII.B), a
number of the holder's shares of Series B Preferred Stock such that, after
giving effect to such redemption, the then unissued portion of such holder's Cap
Amount exceeds 100% of the total number of shares of Common Stock issuable upon
conversion of such holder's shares of Series B Preferred Stock. If the
Corporation fails to redeem any of such shares within five (5) business days
after its receipt of such Redemption Notice, then such holder shall be entitled
to the remedies provided in Article VIII.D.




                     VIII. REDEMPTION DUE TO CERTAIN EVENTS

      A.    Redemption by Holder. In the event (each of the events described in
clauses (i)-(ix) below after expiration of the applicable cure period (if any)
being a "REDEMPTION EVENT"):

            (i)   the Common Stock (including any of the shares of Common Stock
issuable upon conversion of the Series B Preferred Stock) is suspended from
trading on any of, or is not listed (and authorized) for trading on at least one
of, the NYSE, the AMEX, the NNM or SmallCap for an aggregate of 20 trading days
in any nine month period;

            (ii)  (A) the registration statement required to be filed by the
Corporation pursuant to Section 2(a) of the Registration Rights Agreement has
not been declared effective by the 120th day following the Filing Date (as
defined in the Registration Rights Agreement) or such registration statement,
after being declared effective, cannot be utilized by the holders of Series B
Preferred Stock for the resale of all of their Registrable Securities (as
defined in the Registration Rights Agreement) for an aggregate of more than 30
days (other than as permitted under the Registration Rights Agreement);

            (iii) the Corporation fails to remove any restrictive legend on any
certificate or any shares of Common Stock issued to the holders of Series B
Preferred Stock upon conversion of the Series B Preferred Stock as and when
required by this Certificate of Designation, the Securities Purchase Agreement
or the Registration Rights Agreement (a "LEGEND REMOVAL FAILURE"), and any such
failure continues uncured for five business days after the Corporation has been
notified thereof in writing by the holder that the holder has complied with the
terms of the Securities Purchase Agreement with respect to such legend removal;

            (iv)  the Corporation provides written notice (or otherwise
indicates) to any holder of Series B Preferred Stock, or states by way of public
announcement distributed via a press release, at any time, of its intention not
to issue, or otherwise refuses to issue, shares of Common Stock to any holder of
Series B Preferred Stock upon conversion in accordance with the terms of this
Certificate of Designation (other than due to the circumstances contemplated by
Articles V or VII for which the holders shall have the remedies set forth in
such Articles);

            (v)   the Corporation or any subsidiary of the Corporation shall
make an assignment for the benefit of creditors, or apply for or consent to the
appointment of a receiver or trustee for it or for a substantial part of its
property or business, or such a receiver or trustee shall otherwise be
appointed;

            (vi)  bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings for the relief of debtors shall be instituted
by or against the Corporation or any subsidiary of the Corporation and if
instituted against the Corporation by a third party, shall not be dismissed
within 60 days of their initiation;

            (vii) the Corporation shall:





                   (a)   sell, convey or dispose of all or substantially all of
its assets (the presentation of any such transaction for stockholder approval
being conclusive evidence that such transaction involves the sale of all or
substantially all of the assets of the Corporation);

                   (b)   merge, consolidate or engage in any other business
combination with any other entity (other than pursuant to a migratory merger
effected solely for the purpose of changing the jurisdiction of incorporation of
the Corporation and other than pursuant to a merger in which the Corporation is
the surviving or continuing entity and its capital stock is unchanged) provided
that such merger, consolidation or business combination is required to be
reported by the Company on a Current Report pursuant to Item 1 of Form 8-K, or
any successor form;

                   (c)   either (i) fail to pay, when due, or within any
applicable grace period, any payment with respect to any indebtedness of the
Corporation in excess of $350,000 due to any third party, other than payments
contested by the Corporation in good faith, or otherwise is in breach or
violation of any agreement for monies owed or owing in an amount in excess of
$350,000 which breach or violation permits the other party thereto to declare a
default or otherwise accelerate amounts due thereunder, or (ii) suffer to exist
any other default or event of default under any agreement binding the
Corporation which default or event of default would or is likely to have a
material adverse effect on the business, operations, properties, prospects or
financial condition of the Corporation; or

                   (d)   have thirty-five percent (35%) or more of the voting
power of its capital stock owned beneficially by one person, entity or "group"
(as such term is used under Section 13(d) of the Securities Exchange Act of
1934, as amended); or

            (viii) except with respect to matters covered by subparagraphs (i)
- -- (vii) above, as to which such applicable subparagraphs shall apply, the
Corporation otherwise shall breach any material term hereunder or under the
Securities Purchase Agreement, the Registration Rights Agreement or the Warrants
(as defined in the Securities Purchase Agreement), including, without
limitation, the representations and warranties contained therein (i.e., in the
event of a material breach as of the date such representation and warranty was
made) and if such breach is curable, shall fail to cure such breach within 10
business days after the Corporation has been notified thereof in writing by the
holder; then, upon the occurrence of any such Redemption Event, each holder of
shares of Series B Preferred Stock shall thereafter have the option, exercisable
in whole or in part at any time and from time to time by delivery of a
Redemption Notice (as defined in Paragraph D below) to the Corporation while
such Redemption Event continues, to require the Corporation to purchase for cash
any or all of the then outstanding shares of Series B Preferred Stock held by
such holder for an amount per share equal to the Redemption Amount (as defined
in Paragraph B below) in effect at the time of the redemption hereunder. For the
avoidance of doubt, the occurrence of any event described in clauses (i), (ii),
(iv) or (v) above shall immediately constitute a Redemption Event and there
shall be no cure period. Upon the Corporation's receipt of any Redemption Notice
hereunder (other than during the three trading day period following the
Corporation's delivery of a Redemption Announcement (as defined below) to all of
the holders in response to the Corporation's initial receipt of a Redemption
Notice from a holder of Series B Preferred Stock), the Corporation shall
immediately (and in any




event within one business day following such receipt) deliver a written notice
(a "REDEMPTION ANNOUNCEMENT") to all holders of Series B Preferred Stock stating
the date upon which the Corporation received such Redemption Notice and the
amount of Series B Preferred Stock covered thereby. The Corporation shall not
redeem any shares of Series B Preferred Stock during the three trading day
period following the delivery of a required Redemption Announcement hereunder.
At any time and from time to time during such three trading day period, each
holder of Series B Preferred Stock may request (either orally or in writing)
information from the Corporation with respect to the instant redemption
(including, but not limited to, the aggregate number of shares of Series B
Preferred Stock covered by Redemption Notices received by the Corporation) and
the Corporation shall furnish (either orally or in writing) as soon as
practicable such requested information to such requesting holder.

      B.    Definition of Redemption Amount. The "REDEMPTION AMOUNT" with
respect to a share of Series B Preferred Stock means an amount equal to the
greater of:

            (i)   V     X     M
                 ---
                 C P

      and   (ii)  V     X     R

where:

            "V" means the Face Amount thereof plus the accrued Premium thereon
through the date of payment of the Redemption Amount;

            "CP" means the Conversion Price in effect on the date on which the
Corporation receives the Redemption Notice;

            "M" means (i) with respect to all redemptions other than redemptions
pursuant to Article VIII.A(vii) hereof, the highest Closing Sales Price of the
Corporation's Common Stock during the period beginning on the date on which the
Corporation receives the Redemption Notice and ending on the date immediately
preceding the date of payment of the Redemption Amount and (ii) with respect to
redemptions pursuant to Article VIII.A(vii) hereof, the greater of (a) the
amount determined pursuant to clause (i) of this definition or (b) the fair
market value, as of the date on which the Corporation receives the Redemption
Notice, of the consideration payable to the holder of a share of Common Stock
pursuant to the transaction which triggers the redemption. For purposes of this
definition, "fair market value" shall be determined by the mutual agreement of
the Corporation and holders of a majority-in-interest of the shares of Series B
Preferred Stock then outstanding, or if such agreement cannot be reached within
five business days prior to the date of redemption, by an investment banking
firm selected by the Corporation and reasonably acceptable to holders of a
majority-in-interest of the then outstanding shares of Series B Preferred Stock,
with the costs of such appraisal to be borne by the Corporation; and

            "R" means 120%.





      C.    Optional Redemption by Corporation.

            (i)   At any time after the second anniversary of the Issuance Date
if all of the Required Conditions are satisfied, at the option of the
Corporation exercised by the delivery of written notice (an "OPTIONAL REDEMPTION
NOTICE") to all holders of the shares of Series B Preferred Stock, delivered no
more than thirty (30) days before and no less than fifteen (15) days prior to
the date of redemption set forth therein (the "OPTIONAL REDEMPTION DATE"), the
Corporation shall redeem shares of the Series B Preferred Stock, payable in
cash, in an amount equal to the Redemption Amount. Notwithstanding anything to
the contrary contained herein, for purposes of this Article VIII.C, the
Redemption Amount for each share of Series B Preferred Stock being redeemed
shall equal "V" as defined in Article VIII.B.

            (ii)  The Corporation may not deliver to a holder an Optional
Redemption Notice unless on or prior to the date of delivery of such Optional
Redemption Notice, the Corporation shall have segregated on the books and
records of the Corporation an amount of cash sufficient to pay all amounts to
which the holders of shares of Series B Preferred Stock are entitled upon such
redemption pursuant to subparagraph (i) of this Paragraph C. Any Optional
Redemption Notice delivered shall be irrevocable and shall be accompanied by a
statement executed by a duly authorized officer of the Corporation.

            (iii) The Redemption Amount shall be paid to the holders being
redeemed within five (5) business days of the Optional Redemption Date;
provided, however, that the Corporation shall not be obligated to deliver any
portion of the Redemption Amount until either the Preferred Stock Certificates
representing the shares of Series B Preferred Stock being redeemed are delivered
to the office of the Corporation or the escrow agent or the holder notifies the
Corporation or the transfer agent that such certificates have been lost, stolen
or destroyed and delivers the documentation in accordance with Article XIV.B
hereof. Notwithstanding anything herein to the contrary, in the event that the
Preferred Stock Certificates of the shares of Series B Preferred Stock being
redeemed are not delivered to the Corporation or the transfer agent prior to the
fifth business day following the Optional Redemption Date, the redemption of the
Series B Preferred Stock pursuant to this Article VIII.C shall still be deemed
effective as of the Optional Redemption Date and the Redemption Amount shall be
paid to the holder being redeemed within five (5) business days of the date the
Series B Preferred Stock being redeemed are actually delivered to the
Corporation or the transfer agent.

            (iv)  Notwithstanding the delivery of an Optional Redemption Notice,
a holder may convert some or all of its shares of Series B Preferred Stock
subject to such Optional Redemption Notice by the delivery prior to the Optional
Redemption Date of a Notice of Conversion to the Corporation pursuant to the
procedures set forth in Article IV.B. In the event a holder would be precluded
from converting any shares of Series B Preferred Stock subject to an Optional
Redemption Notice due to the limitation contained in Article IV.D(ii), the
Optional Redemption Date shall automatically be extended by sixty (60) days.

      D.    Redemption Defaults. If the Corporation fails to pay any holder the
Redemption Amount with respect to any share of Series B Preferred Stock within
five business days after its receipt of a notice requiring such redemption (a
"REDEMPTION NOTICE") or within five business days



of the Optional Redemption Date, as applicable, then the holder of Series B
Preferred Stock entitled to redemption shall be entitled to interest on the
Redemption Amount at a per annum rate equal to the lower of twenty-four percent
(24%) and the highest interest rate permitted by applicable law from the date on
which the Corporation receives the Redemption Notice or the Optional Redemption
Date, as applicable, until the date of payment of the Redemption Amount
hereunder. In the event the Corporation is not able to redeem all of the shares
of Series B Preferred Stock subject to Redemption Notices delivered prior to the
date upon which such redemption is to be effected, the Corporation shall redeem
shares of Series B Preferred Stock from each holder pro rata, based on the total
number of shares of Series B Preferred Stock outstanding at the time of
redemption included by such holder in all Redemption Notices delivered prior to
the date upon which such redemption is to be effected relative to the total
number of shares of Series B Preferred Stock outstanding at the time of
redemption included in all of the Redemption Notices delivered prior to the date
upon which such redemption is to be effected.

                                    IX. RANK

      All shares of the Series B Preferred Stock shall rank (i) prior to (a) the
Corporation's Common Stock; and (b) any class or series of capital stock of the
Corporation hereafter created (unless, with the consent of the holders of at
least eighty-one percent (81%) of the Series B Preferred Stock obtained in
accordance with Article XIII hereof, such class or series of capital stock
specifically, by its terms, ranks senior to or pari passu with the Series B
Preferred Stock) (collectively with the Common Stock, "JUNIOR SECURITIES"); (ii)
pari passu with the Corporation's Series A Convertible Preferred Stock and any
other class or series of capital stock of the Corporation hereafter created
(with the written consent of the holders of at least eighty-one percent (81%) of
the Series B Preferred Stock obtained in accordance with Article XIII hereof)
specifically ranking, by its terms, on parity with the Series B Preferred Stock
(the "PARI PASSU SECURITIES"); and (iii) junior to any class or series of
capital stock of the Corporation hereafter created (with the written consent of
the holders of at least eighty-one percent (81%) of the Series B Preferred Stock
obtained in accordance with Article XIII hereof) specifically ranking, by its
terms, senior to the Series B Preferred Stock (collectively, the "SENIOR
SECURITIES"), in each case as to distribution of assets upon liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary.

                            X. LIQUIDATION PREFERENCE

      A.    If the Corporation shall commence a voluntary case under the U.S.
Federal bankruptcy laws or any other applicable bankruptcy, insolvency or
similar law, or consent to the entry of an order for relief in an involuntary
case under any law or to the appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or other similar official) of the Corporation
or of any substantial part of its property, or make an assignment for the
benefit of its creditors, or admit in writing its inability to pay its debts
generally as they become due, or if a decree or order for relief in respect of
the Corporation shall be entered by a court having jurisdiction in the premises
in an involuntary case under the U.S. Federal bankruptcy laws or any other
applicable bankruptcy, insolvency or similar law resulting in the appointment of
a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other
similar official) of the Corporation or of any substantial part of its property,
or ordering the winding up or liquidation of its affairs, and any such decree or
order shall be unstayed and in effect for a period of 60 consecutive days and,
on account of any such event, the




Corporation shall liquidate, dissolve or wind up, or if the Corporation shall
otherwise liquidate, dissolve or wind up, including, but not limited to, the
sale or transfer of all or substantially all of the Corporation's assets in one
transaction or in a series of related transactions (only in the event a holder
does not elect its rights with respect to such sale of transfer as set forth in
Article XI.B. if applicable) (a "LIQUIDATION EVENT"), no distribution shall be
made to the holders of any shares of capital stock of the Corporation (other
than Senior Securities pursuant to the rights, preferences and privileges
thereof) upon liquidation, dissolution or winding up unless prior thereto the
holders of shares of Series B Preferred Stock shall have received the
Liquidation Preference with respect to each share. If, upon the occurrence of a
Liquidation Event, the assets and funds available for distribution among the
holders of the Series B Preferred Stock and holders of Pari Passu Securities, if
any, shall be insufficient to permit the payment to such holders of the
preferential amounts payable thereon, then the entire assets and funds of the
Corporation legally available for distribution to the Series B Preferred Stock
and the Pari Passu Securities, if any, shall be distributed ratably among such
shares in proportion to the ratio that the Liquidation Preference payable on
each such share bears to the aggregate Liquidation Preference payable on all
such shares.

      B.    The purchase or redemption by the Corporation of stock of any class,
in any manner permitted by law, shall not, for the purposes hereof, be regarded
as a liquidation, dissolution or winding up of the Corporation. Neither the
consolidation or merger of the Corporation with or into any other entity nor the
sale or transfer by the Corporation of less than substantially all of its assets
shall, for the purposes hereof, be deemed to be a liquidation, dissolution or
winding up of the Corporation.

      C.    The "LIQUIDATION PREFERENCE" with respect to a share of Series B
Preferred Stock means an amount equal to the Face Amount thereof plus the
accrued Premium thereon through the date of final distribution. The Liquidation
Preference with respect to any Pari Passu Securities, if any, shall be as set
forth in the Certificate of Designation filed in respect thereof.

                     XI. ADJUSTMENTS TO THE CONVERSION PRICE

      The Conversion Price shall be subject to adjustment from time to time as
follows:

      A.    Stock Splits, Stock Dividends, Etc. If, at any time on or after the
Issuance Date, the number of outstanding shares of Common Stock is increased by
a stock split, stock dividend, combination, reclassification or other similar
event, the Conversion Price shall be proportionately reduced, or if the number
of outstanding shares of Common Stock is decreased by a reverse stock split,
combination or reclassification of shares, or other similar event, the
Conversion Price shall be proportionately increased. In such event, the
Corporation shall notify the Corporation's transfer agent of such change on or
before the effective date thereof.

      B.    Adjustment Due to Merger, Consolidation, Etc. If, at any time after
the Issuance Date, there shall be (i) any reclassification or change of the
outstanding shares of Common Stock (other than a change in par value, or from
par value to no par value, or from no par value to par value, or as a result of
a subdivision or combination), (ii) any consolidation or merger of the
Corporation with any other entity (other than a merger in which the Corporation
is the surviving or continuing entity and its capital stock is unchanged), (iii)
any sale or transfer of all or substantially




all of the assets of the Corporation or (iv) any share exchange pursuant to
which all of the outstanding shares of Common Stock are converted into other
securities or property (each of (i) - (iv) above being a "CORPORATE CHANGE"),
then the holders of Series B Preferred Stock shall thereafter have the right to
receive upon conversion, in lieu of the shares of Common Stock otherwise
issuable, such shares of stock, securities and/or other property as would have
been issued or payable in such Corporate Change with respect to or in exchange
for the number of shares of Common Stock which would have been issuable upon
conversion had such Corporate Change not taken place, and in any such case,
appropriate provisions (in form and substance reasonably satisfactory to the
holders of a majority of the Series B Preferred Stock then outstanding) shall be
made with respect to the rights and interests of the holders of the Series B
Preferred Stock to the end that the economic value of the shares of Series B
Preferred Stock are in no way diminished by such Corporate Change and that the
provisions hereof (including, without limitation, in the case of any such
consolidation, merger or sale in which the successor entity or purchasing entity
is not the Corporation, an immediate adjustment of the Conversion Price so that
the Conversion Price immediately after the Corporate Change reflects the same
relative value as compared to the value of the surviving entity's common stock
that existed between the Conversion Price and the value of the Corporation's
Common Stock immediately prior to such Corporate Change shall thereafter be
applicable, as nearly as may be practicable in relation to any shares of stock
or securities thereafter deliverable upon the conversion thereof). The
Corporation shall not effect any Corporate Change unless (i) each holder of
Series B Preferred Stock has received written notice of such transaction at
least 45 days prior thereto, but in no event later than 15 days prior to the
record date for the determination of stockholders entitled to vote with respect
thereto, (ii) if required by Section 4(i) of the Securities Purchase Agreement,
the consent of the Purchasers (as defined in the Securities Purchase Agreement)
shall have been obtained in accordance with such Section 4(i), and (iii) the
resulting successor or acquiring entity (if not the Corporation) assumes by
written instrument (in form and substance reasonable satisfactory to the holders
of a majority of the Series B Preferred Stock) the obligations of this
Certificate of Designation (including, without limitation, the obligation to
make payments of Premium accrued but unpaid through the date of such
consolidation, merger or sale and accruing thereafter). The above provisions
shall apply regardless of whether or not there would have been a sufficient
number of shares of Common Stock authorized and available for issuance upon
conversion of the shares of Series B Preferred Stock outstanding as of the date
of such transaction, and shall similarly apply to successive reclassifications,
consolidations, mergers, sales, transfers or share exchanges.

      C.    [Intentionally omitted].

      D.    Adjustment Due to Distribution. If, at any time after the Issuance
Date, the Corporation shall declare or make any distribution of its assets (or
rights to acquire its assets) to holders of Common Stock as a partial
liquidating dividend, by way of return of capital or otherwise (including any
dividend or distribution to the Corporation's stockholders in cash or shares (or
rights to acquire shares) of capital stock of a subsidiary (i.e., a spin-off))
(a "DISTRIBUTION"), then the holders of Series B Preferred Stock shall be
entitled, upon any conversion of shares of Series B Preferred Stock after the
date of record for determining stockholders entitled to such Distribution, to
receive the amount of such assets which would have been payable to the holder
with respect to the shares of Common Stock issuable upon such conversion had
such holder been the holder of such shares of Common Stock on the record date
for the determination of stockholders entitled to such Distribution. If the
Distribution involves rights, warrants, options or any other form of convertible




securities and the right to exercise or convert such securities would expire in
accordance with its terms prior to the conversion of the Series B Preferred
Stock, then the terms of such securities shall provide that such exercise or
convertibility right shall remain in effect until 30 days after the date the
holder of Series B Preferred Stock receives such securities pursuant to the
conversion hereof.

      E.    [Intentionally omitted].

      F.    Purchase Rights. If, at any time after the Issuance Date, the
Corporation issues any Convertible Securities or rights to purchase stock,
warrants, securities or other property (the "PURCHASE RIGHTS") pro rata to the
record holders of any class of Common Stock, then the holders of Series B
Preferred Stock will be entitled to acquire, upon the terms applicable to such
Purchase Rights, the aggregate Purchase Rights which such holder could have
acquired if such holder had held the number of shares of Common Stock acquirable
upon complete conversion of the Series B Preferred Stock (without giving effect
to the limitations contained in Article IV.D) immediately before the date on
which a record is taken for the grant, issuance or sale of such Purchase Rights,
or, if no such record is taken, the date as of which the record holders of
Common Stock are to be determined for the grant, issue or sale of such Purchase
Rights.

      G.    [Intentionally omitted].

      H.    Exceptions to Adjustment of Conversion Price. No adjustment to the
Conversion Price will be made (i) upon the exercise of any warrants, options or
convertible securities issued and outstanding on the Issue Date that are set
forth on Schedule 3(d) of the Securities Purchase Agreement in accordance with
the terms of such securities as of such date; (ii) upon the grant or exercise of
any stock or options to employees, directors or consultants of the Corporation
which may hereafter be granted to or exercised by any employee, director or
consultant under any stock option or similar benefit plan of the Corporation now
existing or to be implemented in the future, so long as the issuance of such
stock or options is approved by a majority of the Board of Directors of the
Corporation or a majority of the members of a committee of non-employee
directors established for such purpose; (iii) upon conversion of the Series B
Preferred Stock or exercise of the Warrants, (iv) the issuance of securities in
connection with strategic business partnerships or joint ventures (including,
without limitation, such transactions with major pharmaceutical lab or life
sciences companies), the primary purpose of which, in the reasonable judgment of
the Board of Directors, is not to raise additional capital, or (vi) the issuance
of securities pursuant to any equipment financing from a bank or similar
financial or lending institution approved by the Board of Directors.

      I.    Notice of Adjustments. Upon the occurrence of each adjustment or
readjustment of the Conversion Price pursuant to this Article XI amounting to a
more than 5% change in such Conversion Price, the Corporation, at its expense,
shall promptly compute such adjustment or readjustment and prepare and furnish
to each holder of Series B Preferred Stock a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Corporation shall, upon the written
request at any time of any holder of Series B Preferred Stock, furnish to such
holder a like certificate setting forth (i) such adjustment or readjustment,
(ii) the Conversion Price at the time in effect and (iii) the number of shares
of Common Stock and the amount, if any, of other securities or property which at
the time would be received upon conversion of a share of Series B Preferred
Stock.




      J.    Other Action Affecting Conversion Price. If the Corporation takes
any action affecting the Common Stock after the date hereof that would be
covered by Article XI.A through H, but for the manner in which such action is
taken or structured, which would in any way diminish the value of the Series B
Preferred Stock, then the Conversion Price shall be adjusted in such manner as
the Board of Directors of the Corporation shall in good faith determine to be
equitable under the circumstances.

                               XII. VOTING RIGHTS

      The holders of the Series B Preferred Stock have no voting power
whatsoever, except as otherwise provided by the Delaware General Corporation Law
(the "BUSINESS CORPORATION LAW"), in this Article XII and in Article XIII below.

      Notwithstanding the above, the Corporation shall provide each holder of
Series B Preferred Stock with prior notification of any meeting of the
stockholders (and copies of proxy materials and other information sent to
stockholders). If the Corporation takes a record of its stockholders for the
purpose of determining stockholders entitled to (a) receive payment of any
dividend or other distribution, any right to subscribe for, purchase or
otherwise acquire (including by way of merger, consolidation or
recapitalization) any share of any class or any other securities or property, or
to receive any other right, or (b) to vote in connection with any proposed sale,
lease or conveyance of all or substantially all of the assets of the
Corporation, or any proposed merger, consolidation, liquidation, dissolution or
winding up of the Corporation, the Corporation shall mail a notice to each
holder, at least 15 days prior to the record date specified therein (or 45 days
prior to the consummation of the transaction or event, whichever is earlier, but
in no event earlier than public announcement of such proposed transaction), of
the date on which any such record is to be taken for the purpose of such vote,
dividend, distribution, right or other event, and a brief statement regarding
the amount and character of such vote, dividend, distribution, right or other
event to the extent known at such time.

      To the extent that under the Business Corporation Law the vote of the
holders of the Series B Preferred Stock, voting separately as a class or series,
as applicable, is required to authorize a given action of the Corporation, the
affirmative vote or consent of the holders of at least a majority of the then
outstanding shares of the Series B Preferred Stock represented at a duly held
meeting at which a quorum is present or by written consent of the holders of at
least a majority of the then outstanding shares of Series B Preferred Stock
(except as otherwise may be required under the Business Corporation Law) shall
constitute the approval of such action by the class. To the extent that under
the Business Corporation Law holders of the Series B Preferred Stock are
entitled to vote on a matter with holders of Common Stock, voting together as
one class, each share of Series B Preferred Stock shall be entitled to a number
of votes equal to the number of shares of Common Stock into which it is then
convertible (subject to the limitations contained in Article IV.D(ii)) using the
record date for the taking of such vote of stockholders as the date as of which
the Conversion Price is calculated.




                           XIII. PROTECTION PROVISIONS

      So long as any shares of Series B Preferred Stock are outstanding, the
Corporation shall not without first obtaining the approval (by vote or written
consent, as provided by the Business Corporation Law) of the holders of at least
eighty-one percent (81%) of the then outstanding shares of Series B Preferred
Stock:

                  (a)   alter or change the rights, preferences or privileges of
the Series B Preferred Stock;

                  (b)   alter or change the rights, preferences or privileges of
any capital stock of the Corporation so as to affect adversely the Series B
Preferred Stock;

                  (c)   create any Senior Securities;

                  (d)   create any Pari Passu Securities;

                  (e)   increase the authorized number of shares of Series B
Preferred Stock;

                  (f)   issue any shares of Senior Securities or Pari Passu
Securities;

                  (g)   issue any shares of Series B Preferred Stock other than
pursuant to the Securities Purchase Agreement;

                  (h)   redeem, or declare or pay any cash dividend or
distribution on, any Junior Securities;

                  (i)   increase the par value of the Common Stock; or

                  (j)   issue any debt securities that would have any
preferences over the Series B Preferred Shares upon liquidation of the
Corporation.

Notwithstanding the foregoing, no change pursuant to this Article XIII shall be
effective to the extent that, by its terms, it applies to less than all of the
holders of shares of Series B Preferred Stock then outstanding.

                               XIV. MISCELLANEOUS

      A.    Cancellation of Series B Preferred Stock. If any shares of Series B
Preferred Stock are converted pursuant to Article IV or redeemed or repurchased
by the Corporation, the shares so converted or redeemed shall be canceled, shall
return to the status of authorized, but unissued preferred stock of no
designated series, and shall not be issuable by the Corporation as Series B
Preferred Stock.

      B.    Lost or Stolen Certificates. Upon receipt by the Corporation of (i)
evidence of the loss, theft, destruction or mutilation of any Preferred Stock
Certificate(s) and (ii) (y) in the case of loss, theft or destruction, of
indemnity (without any bond or other security) reasonably satisfactory to the
Corporation, or (z) in the case of mutilation, upon surrender and cancellation
of the Preferred



Stock Certificate(s), the Corporation shall execute and deliver new Preferred
Stock Certificate(s) of like tenor and date. However, the Corporation shall not
be obligated to reissue such lost or stolen Preferred Stock Certificate(s) if
the holder contemporaneously requests the Corporation to convert such Series B
Preferred Stock.

      C.    Allocation of Cap Amount and Reserved Amount. The initial Cap Amount
and Reserved Amount shall be allocated pro rata among the holders of Series B
Preferred Stock based on the number of shares of Series B Preferred Stock issued
to each holder. Each increase to the Cap Amount and the Reserved Amount shall be
allocated pro rata among the holders of Series B Preferred Stock based on the
number of shares of Series B Preferred Stock held by each holder at the time of
the increase in the Cap Amount or Reserved Amount. In the event a holder shall
sell or otherwise transfer any of such holder's shares of Series B Preferred
Stock, each transferee shall be allocated a pro rata portion of such
transferor's Cap Amount and Reserved Amount. Any portion of the Cap Amount or
Reserved Amount which remains allocated to any person or entity which does not
hold any Series B Preferred Stock shall be allocated to the remaining holders of
shares of Series B Preferred Stock, pro rata based on the number of shares of
Series B Preferred Stock then held by such holders.

      D.    Quarterly Statements of Available Shares. For each calendar quarter
beginning in the quarter in which the initial registration statement required to
be filed pursuant to Section 2(a) of the Registration Rights Agreement is
declared effective and thereafter so long as any shares of Series B Preferred
Stock are outstanding, the Corporation shall deliver (or cause its transfer
agent to deliver) to each holder a written report notifying the holders of any
occurrence which prohibits the Corporation from issuing Common Stock upon any
such conversion. The report shall also specify (i) the total number of shares of
Series B Preferred Stock outstanding as of the end of such quarter, (ii) the
total number of shares of Common Stock issued upon all conversions of Series B
Preferred Stock prior to the end of such quarter, (iii) the total number of
shares of Common Stock which are reserved for issuance upon conversion of the
Series B Preferred Stock as of the end of such quarter and (iv) the total number
of shares of Common Stock which may thereafter be issued by the Corporation upon
conversion of the Series B Preferred Stock before the Corporation would exceed
the Cap Amount and the Reserved Amount. The Corporation (or its transfer agent)
shall use its best efforts to deliver the report for each quarter to each holder
prior to the tenth day of the calendar month following the quarter to which such
report relates. In addition, the Corporation (or its transfer agent) shall
provide, as promptly as practicable delivery to the Corporation of a written
request by any holder, any of the information enumerated in clauses (i) - (iv)
of this Paragraph D as of the date of such request.

      E.    Payment of Cash; Defaults. Whenever the Corporation is required to
make any cash payment to a holder under this Certificate of Designation (as
payment of any Premium, upon redemption or otherwise), such cash payment shall
be made to the holder within five business days after delivery by such holder of
a notice specifying that the holder elects to receive such payment in cash and
the method (e.g., by check, wire transfer) in which such payment should be made
and any supporting documentation reasonably requested by the Corporation to
substantiate the holder's claim to such cash payment or the amount thereof. If
such payment is not delivered within such five business day period, such holder
shall thereafter be entitled to interest on the unpaid amount at a per




annum rate equal to the lower of eighteen percent (18%) and the highest interest
rate permitted by applicable law until such amount is paid in full to the
holder.

      F.    Status as Stockholder. Upon submission of a Notice of Conversion by
a holder of Series B Preferred Stock, (i) the shares covered thereby (other than
the shares, if any, which cannot be issued because their issuance would exceed
such holder's allocated portion of the Reserved Amount or Cap Amount) shall be
deemed converted into shares of Common Stock and (ii) the holder's rights as a
holder of such converted shares of Series B Preferred Stock shall cease and
terminate, excepting only the right to receive certificates for such shares of
Common Stock and to any remedies provided herein or otherwise available at law
or in equity to such holder because of a failure by the Corporation to comply
with the terms of this Certificate of Designation. In situations where Article
VI.B is applicable, the number of shares of Common Stock referred to in clauses
(i) and (ii) of the immediately preceding sentence shall be determined on the
date on which such shares of Common Stock are delivered to the holder.
Notwithstanding the foregoing, if a holder has not received certificates for all
shares of Common Stock prior to the sixth business day after the expiration of
the Delivery Period with respect to a conversion of Series B Preferred Stock for
any reason, then (unless the holder otherwise elects to retain its status as a
holder of Common Stock by so notifying the Corporation within five business days
after the expiration of such 6 business day period after expiration of the
Delivery Period) the holder shall regain the rights of a holder of Series B
Preferred Stock with respect to such unconverted shares of Series B Preferred
Stock and the Corporation shall, as soon as practicable, return such unconverted
shares to the holder. In all cases, the holder shall retain all of its rights
and remedies for the Corporation's failure to convert Series B Preferred Stock.

      G.    Remedies Cumulative. The remedies provided in this Certificate of
Designation shall be cumulative and in addition to all other remedies available
under this Certificate of Designation, at law or in equity (including a decree
of specific performance and/or other injunctive relief), and nothing herein
shall limit a holder's right to pursue actual damages for any failure by the
Corporation to comply with the terms of this Certificate of Designation. The
Corporation acknowledges that a breach by it of its obligations hereunder will
cause irreparable harm to the holders of Series B Preferred Stock and that the
remedy at law for any such breach may be inadequate. The Corporation therefore
agrees, in the event of any such breach or threatened breach, that the holders
of Series B Preferred Stock shall be entitled, in addition to all other
available remedies, to an injunction restraining any breach, without the
necessity of showing economic loss and without any bond or other security being
required.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]




      IN WITNESS WHEREOF, this Certificate of Designation is executed on behalf
of the Corporation this 22nd day of March, 2002.

                                          VIROLOGIC, INC.

                                          By:  /s/  William D. Young
                                             -----------------------------------
                                             Name:  William D. Young
                                             Title: Chairman & CEO




                              NOTICE OF CONVERSION

                    (To be Executed by the Registered Holder
                in order to Convert the Series B Preferred Stock)

      The undersigned hereby irrevocably elects to convert ____________ shares
of Series B Preferred Stock (the "CONVERSION"), represented by stock certificate
No(s). ___________ (the "PREFERRED STOCK CERTIFICATES"), into shares of common
stock ("COMMON STOCK") of ViroLogic, Inc. (the "CORPORATION") according to the
conditions of the Certificate of Designations, Preferences and Rights of Series
B Convertible Preferred Stock (the "CERTIFICATE OF DESIGNATION"), as of the date
written below. If securities are to be issued in the name of a person other than
the undersigned, the undersigned will pay all transfer taxes payable with
respect thereto. No fee will be charged to the holder for any conversion, except
for transfer taxes, if any. Each Preferred Stock Certificate is attached hereto
(or evidence of loss, theft or destruction thereof).

      Except as may be provided below, the Corporation shall electronically
transmit the Common Stock issuable pursuant to this Notice of Conversion to the
account of the undersigned or its nominee (which is _________________) with DTC
through its Deposit Withdrawal Agent Commission System ("DTC TRANSFER").

      The undersigned acknowledges and agrees that all offers and sales by the
undersigned of the securities issuable to the undersigned upon conversion of the
Series B Preferred Stock have been or will be made only pursuant to an effective
registration of the transfer of the Common Stock under the Securities Act of
1933, as amended (the "ACT"), or pursuant to an exemption from registration
under the Act.

[ ]   In lieu of receiving the shares of Common Stock issuable pursuant to this
      Notice of Conversion by way of DTC Transfer, the undersigned hereby
      requests that the Corporation issue and deliver to the undersigned
      physical certificates representing such shares of Common Stock.

                                       Date of Conversion:______________________

                                       Applicable Conversion Price:_____________

                                       Signature:_______________________________

                                       Name:____________________________________

                                       Address:_________________________________

                                               _________________________________

                                               _________________________________

EX-4.1

                                                                     EXHIBIT 4.1

      VOID AFTER 5:00 P.M., NEW YORK CITY
      TIME, ON SEPTEMBER __, 2006
      (UNLESS EXTENDED PURSUANT TO SECTION 2 HEREOF)

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

                                         Right to Purchase ________ Shares of
                                         Common Stock, par value $.001 per share

Date: March __, 2002

                                 VIROLOGIC, INC.

                             STOCK PURCHASE WARRANT

      THIS CERTIFIES THAT, for value received, _______________________, or its
registered assigns, is entitled to purchase from ViroLogic, Inc., a corporation
organized under the laws of the State of Delaware (the "COMPANY"), at any time
or from time to time during the period specified in Section 2 hereof,
_____________________________________ fully paid and nonassessable shares of the
Company's common stock, par value $.001 per share (the "COMMON STOCK"), at an
exercise price per share (the "EXERCISE PRICE") equal to $2.508. The number of
shares of Common Stock purchasable hereunder (the "WARRANT SHARES") and the
Exercise Price are subject to adjustment as provided in Section 4 hereof. The
term "WARRANTS" means this Warrant and the other warrants of the Company issued
pursuant to that certain Securities Purchase Agreement, dated as of March __,
2002, by and among the Company and the other signatories thereto (the
"SECURITIES PURCHASE AGREEMENT").




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

      1.    Manner of Exercise; Issuance of Certificates; Payment for Shares.
Subject to the provisions hereof, including, without limitation, the limitations
contained in Section 7 hereof, this Warrant may be exercised by the holder
hereof, in whole or in part, by the surrender of this Warrant, together with a
completed exercise agreement in the form attached hereto (the "EXERCISE
AGREEMENT"), to the Company during normal business hours on any business day at
the Company's principal executive offices (or such other office or agency of the
Company as it may designate by notice to the holder hereof), and (i) payment to
the Company in cash, by certified or official bank check or by wire transfer for
the account of the Company, of the Exercise Price for the Warrant Shares
specified in the Exercise Agreement or (ii) if the holder is effectuating a
Cashless Exercise (as defined in Section 11(c) hereof) pursuant to Section 11(c)
hereof, delivery to the Company of a written notice of an election to effect a
Cashless Exercise for the Warrant Shares specified in the Exercise Agreement.
The Warrant Shares so purchased shall be deemed to be issued to the holder
hereof or such holder's designee, as the record owner of such shares, as of the
close of business on the date on which this Warrant shall have been surrendered,
the completed Exercise Agreement shall have been delivered, and payment shall
have been made for such shares as set forth above or, if such date is not a
business date, on the next succeeding business date. The Warrant Shares so
purchased, representing the aggregate number of shares specified in the Exercise
Agreement, shall (by the Company or through its transfer agent) be delivered
(i.e., deposited with a nationally-recognized overnight courier service postage
prepaid) to the holder hereof within a reasonable time, not exceeding two
business days, after this Warrant shall have been so exercised (the "DELIVERY
PERIOD"). If the Company's transfer agent is participating in the Depository
Trust Company ("DTC") Fast Automated Securities Transfer program, and so long as
the certificates therefor do not bear a legend (pursuant to the terms of the
Securities Purchase Agreement) and the holder is not obligated to return such
certificate for the placement of a legend thereon (pursuant to the terms of the
Securities Purchase Agreement), the Company shall cause its transfer agent to
electronically transmit the Warrant Shares so purchased to the holder by
crediting the account of the holder or its nominee with DTC through its Deposit
Withdrawal Agent Commission system ("DTC TRANSFER"). If the aforementioned
conditions to a DTC Transfer are not satisfied, the Company shall deliver as
provided herein to the holder physical certificates representing the Warrant
Shares so purchased. Further, the holder may instruct the Company to deliver to
the holder physical certificates representing the Warrant Shares so purchased in
lieu of delivering such shares by way of DTC Transfer. Any certificates so
delivered shall be in such denominations as may be reasonably requested by the
holder hereof, shall be registered in the name of such holder or such other name
as shall be designated by such holder and, following the date on which the
Warrant Shares have been registered under the Securities Act pursuant to that
certain Registration Rights Agreement, dated as of March __, 2002, by and
between the Company and the other signatories thereto (the "REGISTRATION RIGHTS
AGREEMENT") or otherwise may be sold by the holder pursuant to Rule 144
promulgated under the Securities Act (or a successor rule), shall not bear any
restrictive legend. If this Warrant shall have been exercised only in part, then
the Company shall, at its expense, at the time of delivery of such certificates,
deliver to the holder a new Warrant representing the number of shares with
respect to which this Warrant shall not then have been exercised.




      If, at any time, a holder of this Warrant submits this Warrant, an
Exercise Agreement and payment to the Company of the Exercise Price for each of
the Warrant Shares specified in the Exercise Agreement (including pursuant to a
Cashless Exercise), and the Company fails for any reason to deliver, on or prior
to the fourth business day following the expiration of the Delivery Period for
such exercise, the number of shares of Common Stock to which the holder is
entitled upon such exercise (an "EXERCISE DEFAULT"), then the Company shall pay
to the holder payments ("EXERCISE DEFAULT PAYMENTS") for an Exercise Default in
the amount of (a) (N/365), multiplied by (b) the amount by which the Market
Price (as defined in Section 4(l) hereof) on the date the Exercise Agreement
giving rise to the Exercise Default is transmitted in accordance with this
Section 1 (the "EXERCISE DEFAULT DATE") exceeds the Exercise Price in respect of
such Warrant Shares, multiplied by (c) the number of shares of Common Stock the
Company failed to so deliver in such Exercise Default, multiplied by (d) .24,
where N = the number of days from the Exercise Default Date to the date that the
Company effects the full exercise of this Warrant which gave rise to the
Exercise Default. The accrued Exercise Default Payment for each calendar month
shall be paid in cash and shall be made to holder by the fifth day of the month
following the month in which it has accrued. Nothing herein shall limit the
holder's right to pursue actual damages for the Company's failure to maintain a
sufficient number of authorized shares of Common Stock as required pursuant to
the terms of Section 3(b) hereof or to otherwise issue shares of Common Stock
upon exercise of this Warrant in accordance with the terms hereof, and the
holder shall have the right to pursue all remedies available at law or in equity
(including a decree of specific performance and/or injunctive relief).

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

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

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

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

            (c)   Listing. The Company shall promptly secure the listing of the
shares of Common Stock issuable upon exercise of this Warrant upon each national
securities exchange or automated quotation system, if any, upon which shares of
Common Stock are then listed or become listed (subject to official notice of
issuance upon exercise of this Warrant) and shall maintain, so




long as any other shares of Common Stock shall be so listed, such listing of all
shares of Common Stock from time to time issuable upon the exercise of this
Warrant; and the Company shall so list on each national securities exchange or
automated quotation system, as the case may be, and shall maintain such listing
of, any other shares of capital stock of the Company issuable upon the exercise
of this Warrant if and so long as any shares of the same class shall be listed
on such national securities exchange or automated quotation system.

            (d)   Certain Actions Prohibited. The Company will not, by amendment
of its charter or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities, or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed by it hereunder, but will at all times in good faith
assist in the carrying out of all the provisions of this Warrant and in the
taking of all such action as may reasonably be requested by the holder of this
Warrant in order to protect the economic benefit inuring to the holder hereof
and the exercise privilege of the holder of this Warrant against dilution or
other impairment, consistent with the tenor and purpose of this Warrant. Without
limiting the generality of the foregoing, the Company (i) will not increase the
par value of any shares of Common Stock receivable upon the exercise of this
Warrant above the Exercise Price then in effect, and (ii) will take all such
actions as may be necessary or appropriate in order that the Company may validly
and legally issue fully paid and nonassessable shares of Common Stock upon the
exercise of this Warrant.

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

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

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

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

            (a)   [Intentionally Omitted]

            (b)   [Intentionally Omitted]




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

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

            (e)   Consolidation, Merger or Sale. In case of any consolidation of
the Company with, or merger of the Company into, any other corporation, or in
case of any sale or conveyance of all or substantially all of the assets of the
Company other than in connection with a plan of complete liquidation of the
Company at any time during the Exercise Period, then as a condition of such
consolidation, merger or sale or conveyance, adequate provision will be made
whereby the holder hereof will have the right to acquire and receive upon
exercise of this Warrant in lieu of the shares of Common Stock immediately
theretofore acquirable upon the exercise of this Warrant, such shares of stock,
securities, cash or assets as may be issued or payable with respect to or in
exchange for the number of shares of Common Stock immediately theretofore
acquirable and receivable upon exercise of this Warrant had such consolidation,
merger or sale or conveyance not taken place. In any such case, the Company will
make appropriate provision to insure that the provisions of this Section 4
hereof will thereafter be applicable as nearly as may be in relation to any
shares of stock or securities thereafter deliverable upon the exercise of this
Warrant. The Company will not effect any consolidation, merger or sale or
conveyance unless prior to the consummation thereof, the successor corporation
(if other than the Company) assumes by written instrument the obligations under
this Warrant and the obligations to deliver to the holder hereof such shares of
stock, securities or assets as, in accordance with the foregoing provisions, the
holder may be entitled to acquire. Notwithstanding the foregoing, in the event
of any consolidation of the Company with, or merger of the Company into, any
other corporation, or the sale or conveyance of all or substantially all of the
assets of the Company, at any time during the Exercise Period, the holder hereof
shall, at its option, have the right to receive, in connection with such
transaction, cash consideration equal to the fair market value of this Warrant
as determined in accordance with customary valuation methodology used in the
investment banking industry.

            (f)   Distribution of Assets. In case the Company shall declare or
make any distribution of its assets (or rights to acquire its assets) to holders
of Common Stock as a partial liquidating dividend, stock repurchase by way of
return of capital or otherwise (including any dividend or distribution to the
Company's stockholders of cash or shares (or rights to acquire shares) of
capital stock of a subsidiary) (a "DISTRIBUTION"), at any time during the
Exercise Period, then the




holder hereof shall be entitled upon exercise of this Warrant for the purchase
of any or all of the shares of Common Stock subject hereto, to receive the
amount of such assets (or rights) which would have been payable to the holder
had such holder been the holder of such shares of Common Stock on the record
date for the determination of stockholders entitled to such Distribution. If the
Company distributes rights, warrants, options or any other form of convertible
securities and the right to exercise or convert such securities would expire in
accordance with their terms prior to the expiration of the Exercise Period, then
the terms of such securities shall provide that such exercise or convertibility
right shall remain in effect until 30 days after the date the holder hereof
receives such securities pursuant to the exercise hereof.

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

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

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

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

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

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

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

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

then, in each such case, the Company shall give to the holder of this Warrant
(a) notice of the date or estimated date on which the books of the Company shall
close or a record shall be taken for determining the holders of Common Stock
entitled to receive any such dividend, distribution, or




subscription rights or for determining the holders of Common Stock entitled to
vote in respect of any such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding-up and (b) in the case of any
such reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up, notice of the date (or, if not then known, a
reasonable estimate thereof by the Company) when the same shall take place. Such
notice shall also specify the date on which the holders of Common Stock shall be
entitled to receive such dividend, distribution, or subscription rights or to
exchange their Common Stock for stock or other securities or property
deliverable upon such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation, or winding-up, as the case may be. Such notice
shall be given at least fifteen (15) days prior to the record date or the date
on which the Company's books are closed in respect thereto. Failure to give any
such notice or any defect therein shall not affect the validity of the
proceedings referred to in clauses (i), (ii), (iii) and (iv) above.
Notwithstanding the foregoing, the Company shall publicly disclose the substance
of any notice delivered hereunder prior to delivery of such notice to the holder
hereof.

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

            (l)   Certain Definitions.

                  (i)   "MARKET PRICE," as of any date, (i) means the average of
the closing sales prices for the shares of Common Stock on the Nasdaq National
Market or other trading market where such security is listed or traded as
reported by Bloomberg Financial Markets (or a comparable reporting service of
national reputation selected by the Company and reasonably acceptable to the
holders if Bloomberg Financial Markets is not then reporting sales prices of
such security)(collectively, "BLOOMBERG") for the ten (10) consecutive trading
days immediately preceding such date, or (ii) if the Nasdaq National Market is
not the principal trading market for the shares of Common Stock, the average of
the reported sales prices reported by Bloomberg on the principal trading market
for the Common Stock during the same period, or, if there is no sales price for
such period, the last sales price reported by Bloomberg for such period, or
(iii) if the foregoing do not apply, the last sales price of such security in
the over-the-counter market on the pink sheets or bulletin board for such
security as reported by Bloomberg, or if no sales price is so reported for such
security, the last bid price of such security as reported by Bloomberg, or (iv)
if market value cannot be calculated as of such date on any of the foregoing
bases, the Market Price shall be the average fair market value as reasonably
determined by an investment banking firm selected by the Company and reasonably
acceptable to the holder, with the costs of the appraisal to be borne by the
Company. The manner of determining the Market Price of the Common Stock set
forth in the foregoing definition shall apply with respect to any other security
in respect of which a determination as to market value must be made hereunder.

                  (ii)  "COMMON STOCK," for purposes of this Section 4, includes
the Common Stock and any additional class of stock of the Company having no
preference as to




dividends or distributions on liquidation, provided that the shares purchasable
pursuant to this Warrant shall include only Common Stock in respect of which
this Warrant is exercisable, or shares resulting from any subdivision or
combination of such Common Stock, or in the case of any reorganization,
reclassification, consolidation, merger, or sale of the character referred to in
Section 4(e) hereof, the stock or other securities or property provided for in
such Section.

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

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

      7.    Transfer, Exchange and Replacement of Warrant.

            (a)   Restriction on Transfer. This Warrant and the rights granted
to the holder hereof are transferable, in whole or in part, upon surrender of
this Warrant, together with a properly executed assignment in the form attached
hereto, at the office or agency of the Company referred to in Section 7(e)
below, provided, however, that any transfer or assignment shall be subject to
the conditions set forth in Sections 7(f) and (g) hereof and to the provisions
of Sections 2(f) and 2(g) of the Securities Purchase Agreement. Until due
presentment for registration of transfer on the books of the Company, the
Company may treat the registered holder hereof as the owner and holder hereof
for all purposes, and the Company shall not be affected by any notice to the
contrary. Notwithstanding anything to the contrary contained herein, the
registration rights described in Section 8 hereof are assignable only in
accordance with the provisions of the Registration Rights Agreement.

            (b)   Warrant Exchangeable for Different Denominations. This Warrant
is exchangeable, upon the surrender hereof by the holder hereof at the office or
agency of the Company referred to in Section 7(e) below, for new warrants of
like tenor of different denominations representing in the aggregate the right to
purchase the number of shares of Common Stock which may be purchased hereunder,
each of such new warrants to represent the right to purchase such number of
shares (at the Exercise Price therefor) as shall be designated by the holder
hereof at the time of such surrender, and all such warrants thereafter
constituting the Warrant referenced herein.

            (c)   Replacement of Warrant. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction, or mutilation of
this Warrant and, in the case of any such loss, theft, or destruction, upon
delivery of an indemnity agreement reasonably satisfactory in form and amount to
the Company, or, in the case of any such mutilation, upon surrender and




cancellation of this Warrant, the Company, at its expense, will execute and
deliver, in lieu thereof, a new Warrant of like tenor.

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

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

            (f)   Exercise or Transfer Without Registration. If, at the time of
the surrender of this Warrant in connection with any exercise, transfer, or
exchange of this Warrant, this Warrant (or, in the case of any exercise, the
Warrant Shares issuable hereunder), shall not be registered under the Securities
Act and under applicable state securities or blue sky laws, the Company may
require, as a condition of allowing such exercise, transfer, or exchange, (i)
that the holder or transferee of this Warrant, as the case may be, furnish to
the Company a written opinion of counsel (which opinion shall be in form,
substance and scope customary for opinions of counsel in comparable
transactions) to the effect that such exercise, transfer, or exchange may be
made without registration under the Securities Act and under applicable state
securities or blue sky laws (the cost of which shall be borne by the Company if
the Company's counsel renders such an opinion and up to $500 of such cost shall
be borne by the Company if the holder's counsel is requested to render such
opinion), (ii) that the holder or transferee execute and deliver to the Company
an investment letter in form and substance acceptable to the Company and (iii)
that the transferee be an "ACCREDITED INVESTOR" as defined in Rule 501(a)
promulgated under the Securities Act; provided that no such opinion, letter, or
status as an "accredited investor" shall be required in connection with a
transfer pursuant to Rule 144 under the Securities Act.

            (g)   Additional Restrictions on Exercise or Transfer. In no event
shall the holder hereof have the right to exercise any portion of this Warrant
for shares of Common Stock or to dispose of any portion of this Warrant to the
extent that such right to effect such exercise or disposition would result in
the holder or any of its affiliates together beneficially owning more than the
greater of (a) 4.99% of the outstanding shares of Common Stock or (b) that
percentage of the outstanding shares of Common Stock held by such holder and its
affiliates immediately prior to the Issuance Date (including in such calculation
any shares of Common Stock underlying warrants to purchase Common Stock (other
than this Warrant) held by such holder immediately prior to the Issuance Date).
For purposes of this Section 7(g), beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and Regulation 13D-G thereunder. The restriction contained in this
Section 7(g) may not be altered, amended, deleted or changed in any manner
whatsoever unless the holders of a majority of the outstanding




shares of Common Stock and the holder hereof shall approve, in writing, such
alteration, amendment, deletion or change.

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

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

                  If to the Company:

                  ViroLogic, Inc.
                  270 East Grand Avenue
                  South San Francisco, California 94080
                  Telephone: (650) 635-1100
                  Attn: Chief Executive Officer

                  with a copy simultaneously transmitted by like means to:

                  Cooley Godward LLP
                  4401 Eastgate Mall
                  San Diego, California 92121
                  Telephone: (858) 550-6000
                  Attn: Christopher J. Kearns, Esq.

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

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




      11.   Miscellaneous.

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

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

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

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

            (e)   Redemption of Warrant by Company.

                  (i)   Provided that (x) all shares of Common Stock issuable
upon exercise of the Warrants are then (A) authorized and reserved for issuance,
(B) registered under the Securities Act of 1933, as amended, for resale by the
holders of the Warrants, and (C) eligible to be traded on the Nasdaq National
Market or its successor, (y) all of the Required Conditions (as defined in the
Certificate of Designation) are satisfied, and (z) the Closing Bid Price (as
defined in the Certificate of Designation) of the Common Stock is greater than
200% of the Exercise Price as in effect on the Issue Date for twenty (20) or
more consecutive trading days immediately prior to the delivery by the Company
of a Redemption Notice (as defined below), the Company may elect, upon delivery
of at least twenty (20) days' prior written notice (the "REDEMPTION NOTICE") to
the holder hereof, to redeem all or a portion of the Warrant for a redemption
amount equal to the number of Warrant Shares issuable upon the exercise of all
or a portion of this Warrant that is being redeemed multiplied by $.10 (the
"REDEMPTION AMOUNT"). For example, if the Company elects to redeem a Warrant
exercisable for 10,000 shares of Common Stock, the Company will pay the holder a
Redemption Amount equal to $1,000. In the event the Company elects to redeem
only some of the outstanding Warrants pursuant to this Section 11(e), such
Warrants shall be redeemed pro rata among all the holders of the Warrants based
upon the percentage of Warrants held by such holders against the total
outstanding Warrants. Notwithstanding the foregoing, the Company may only




redeem Warrants exercisable for no more than 400,000 shares of Common Stock in
any 30 day period.

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

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

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

            (f)   Indemnification by Company.

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

                  (ii)  In the event of the assertion or commencement by any
person of any claim or legal proceeding with respect to which the holder may
have indemnification rights pursuant to this Section 11(f)(i), the holder shall
promptly notify the Company thereof in writing, but the failure to so notify the
Company will not limit the holder's rights to indemnification hereunder, except
to the extent the Company demonstrates that the defense of such action is
prejudiced by the failure to so give such notice.




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

                                          VIROLOGIC, INC.


                                          By:___________________________________
                                             Name:______________________________
                                             Title:_____________________________





                           FORM OF EXERCISE AGREEMENT

         (TO BE EXECUTED BY THE HOLDER IN ORDER TO EXERCISE THE WARRANT)

To:   ViroLogic,Inc.
      270 East Grand Avenue
      South San Francisco, California 94080
      Telephone:  (650) 635-1100
      Attn:  Chief Executive Officer

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

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

[ ]   The undersigned requests that the Company cause its transfer agent to
      electronically transmit the Common Stock issuable pursuant to this
      Exercise Agreement to the account of the undersigned or its nominee (which
      is _________________) with DTC through its Deposit Withdrawal Agent
      Commission System ("DTC TRANSFER"), provided that such transfer agent
      participates in the DTC Fast Automated Securities Transfer program.

[ ]   In lieu of receiving the shares of Common Stock issuable pursuant to this
      Exercise Agreement by way of DTC Transfer, the undersigned hereby requests
      that the Company cause its transfer agent to issue and deliver to the
      undersigned physical certificates representing such shares of Common
      Stock.

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

Dated:________________________________    ______________________________________
                                                 Signature of Holder

                                          ______________________________________
                                                 Name of Holder (Print)

                                                 Address:
                                          ______________________________________
                                          ______________________________________
                                          ______________________________________




                               FORM OF ASSIGNMENT

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


Name of Assignee                    Address                       No. of Shares
- ----------------                    -------                       -------------
                                                            






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

Dated: _________________________, ____

In the presence of

______________________________________

                                          Name:_________________________________


                                               Signature:_______________________
                                               Title of Signing Officer or Agent
                                               (if any):
                                                       _________________________
                                               Address:_________________________
                                                       _________________________


                                               Note: The above signature should
                                                     correspond exactly with the
                                                     name on the face of the
                                                     within Warrant.

EX-4.2

                                                                     EXHIBIT 4.2

      VOID AFTER 5:00 P.M., NEW YORK CITY
      TIME, ON SEPTEMBER __, 2006
      (UNLESS EXTENDED PURSUANT TO SECTION 2 HEREOF)

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

                                         Right to Purchase _________Shares of
                                         Common Stock, par value $.001 per share

Date: March __, 2002

                                 VIROLOGIC, INC.

                             STOCK PURCHASE WARRANT

      THIS CERTIFIES THAT, for value received, ______________, or its registered
assigns, is entitled to purchase from ViroLogic, Inc., a corporation organized
under the laws of the State of Delaware (the "COMPANY"), at any time or from
time to time during the period specified in Section 2 hereof,
_____________________________________ fully paid and nonassessable shares of the
Company's common stock, par value $.001 per share (the "COMMON STOCK"), at an
exercise price per share (the "EXERCISE PRICE") equal to $2.508. The number of
shares of Common Stock purchasable hereunder (the "WARRANT SHARES") and the
Exercise Price are subject to adjustment as provided in Section 4 hereof. The
term "WARRANTS" means this Warrant and the other warrants of the Company issued
to the "Purchasers" under that certain Securities Purchase Agreement, dated as
of June 29, 2001, by and among the Company and the other signatories thereto
(the "SECURITIES PURCHASE AGREEMENT"), and additional warrants issued of even
date herewith to Purchasers in connection with the issuance hereof.



                                       1


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

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

      If, at any time, a holder of this Warrant submits this Warrant, an
Exercise Agreement and payment to the Company of the Exercise Price for each of
the Warrant Shares specified in the



                                       2


Exercise Agreement (including pursuant to a Cashless Exercise), and the Company
fails for any reason to deliver, on or prior to the fourth business day
following the expiration of the Delivery Period for such exercise, the number of
shares of Common Stock to which the holder is entitled upon such exercise (an
"EXERCISE DEFAULT"), then the Company shall pay to the holder payments
("EXERCISE DEFAULT PAYMENTS") for an Exercise Default in the amount of (a)
(N/365), multiplied by (b) the amount by which the Market Price (as defined in
Section 4(l) hereof) on the date the Exercise Agreement giving rise to the
Exercise Default is transmitted in accordance with this Section 1 (the "EXERCISE
DEFAULT DATE") exceeds the Exercise Price in respect of such Warrant Shares,
multiplied by (c) the number of shares of Common Stock the Company failed to so
deliver in such Exercise Default, multiplied by (d) .24, where N = the number of
days from the Exercise Default Date to the date that the Company effects the
full exercise of this Warrant which gave rise to the Exercise Default. The
accrued Exercise Default Payment for each calendar month shall be paid in cash
and shall be made to holder by the fifth day of the month following the month in
which it has accrued. Nothing herein shall limit the holder's right to pursue
actual damages for the Company's failure to maintain a sufficient number of
authorized shares of Common Stock as required pursuant to the terms of Section
3(b) hereof or to otherwise issue shares of Common Stock upon exercise of this
Warrant in accordance with the terms hereof, and the holder shall have the right
to pursue all remedies available at law or in equity (including a decree of
specific performance and/or injunctive relief).

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

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

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

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

            (c)   Listing. The Company shall promptly secure the listing of the
shares of Common Stock issuable upon exercise of this Warrant upon each national
securities exchange or automated quotation system, if any, upon which shares of
Common Stock are then listed or become listed (subject to official notice of
issuance upon exercise of this Warrant) and shall maintain, so long as any other
shares of Common Stock shall be so listed, such listing of all shares of Common
Stock from time to time issuable upon the exercise of this Warrant; and the
Company shall so list



                                       3


on each national securities exchange or automated quotation system, as the case
may be, and shall maintain such listing of, any other shares of capital stock of
the Company issuable upon the exercise of this Warrant if and so long as any
shares of the same class shall be listed on such national securities exchange or
automated quotation system.

            (d)   Certain Actions Prohibited. The Company will not, by amendment
of its charter or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities, or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed by it hereunder, but will at all times in good faith
assist in the carrying out of all the provisions of this Warrant and in the
taking of all such action as may reasonably be requested by the holder of this
Warrant in order to protect the economic benefit inuring to the holder hereof
and the exercise privilege of the holder of this Warrant against dilution or
other impairment, consistent with the tenor and purpose of this Warrant. Without
limiting the generality of the foregoing, the Company (i) will not increase the
par value of any shares of Common Stock receivable upon the exercise of this
Warrant above the Exercise Price then in effect, and (ii) will take all such
actions as may be necessary or appropriate in order that the Company may validly
and legally issue fully paid and nonassessable shares of Common Stock upon the
exercise of this Warrant.

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

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

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

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

            (a)   [Intentionally Omitted]

            (b)   [Intentionally Omitted]

            (c)   Subdivision or Combination of Common Stock. If the Company, at
any time during the Exercise Period, subdivides (by any stock split, stock
dividend, recapitalization,



                                       4


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

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

            (e)   Consolidation, Merger or Sale. In case of any consolidation of
the Company with, or merger of the Company into, any other corporation, or in
case of any sale or conveyance of all or substantially all of the assets of the
Company other than in connection with a plan of complete liquidation of the
Company at any time during the Exercise Period, then as a condition of such
consolidation, merger or sale or conveyance, adequate provision will be made
whereby the holder hereof will have the right to acquire and receive upon
exercise of this Warrant in lieu of the shares of Common Stock immediately
theretofore acquirable upon the exercise of this Warrant, such shares of stock,
securities, cash or assets as may be issued or payable with respect to or in
exchange for the number of shares of Common Stock immediately theretofore
acquirable and receivable upon exercise of this Warrant had such consolidation,
merger or sale or conveyance not taken place. In any such case, the Company will
make appropriate provision to insure that the provisions of this Section 4
hereof will thereafter be applicable as nearly as may be in relation to any
shares of stock or securities thereafter deliverable upon the exercise of this
Warrant. The Company will not effect any consolidation, merger or sale or
conveyance unless prior to the consummation thereof, the successor corporation
(if other than the Company) assumes by written instrument the obligations under
this Warrant and the obligations to deliver to the holder hereof such shares of
stock, securities or assets as, in accordance with the foregoing provisions, the
holder may be entitled to acquire. Notwithstanding the foregoing, in the event
of any consolidation of the Company with, or merger of the Company into, any
other corporation, or the sale or conveyance of all or substantially all of the
assets of the Company, at any time during the Exercise Period, the holder hereof
shall, at its option, have the right to receive, in connection with such
transaction, cash consideration equal to the fair market value of this Warrant
as determined in accordance with customary valuation methodology used in the
investment banking industry.

            (f)   Distribution of Assets. In case the Company shall declare or
make any distribution of its assets (or rights to acquire its assets) to holders
of Common Stock as a partial liquidating dividend, stock repurchase by way of
return of capital or otherwise (including any dividend or distribution to the
Company's stockholders of cash or shares (or rights to acquire shares) of
capital stock of a subsidiary) (a "Distribution"), at any time during the
Exercise Period, then the holder hereof shall be entitled upon exercise of this
Warrant for the purchase of any or all of the shares of Common Stock subject
hereto, to receive the amount of such assets (or rights) which would



                                       5



have been payable to the holder had such holder been the holder of such shares
of Common Stock on the record date for the determination of stockholders
entitled to such Distribution. If the Company distributes rights, warrants,
options or any other form of convertible securities and the right to exercise or
convert such securities would expire in accordance with their terms prior to the
expiration of the Exercise Period, then the terms of such securities shall
provide that such exercise or convertibility right shall remain in effect until
30 days after the date the holder hereof receives such securities pursuant to
the exercise hereof.

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

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

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

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

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

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

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

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

then, in each such case, the Company shall give to the holder of this Warrant
(a) notice of the date or estimated date on which the books of the Company shall
close or a record shall be taken for determining the holders of Common Stock
entitled to receive any such dividend, distribution, or subscription rights or
for determining the holders of Common Stock entitled to vote in respect of any
such reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-



                                       6


up and (b) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding-up, notice of
the date (or, if not then known, a reasonable estimate thereof by the Company)
when the same shall take place. Such notice shall also specify the date on which
the holders of Common Stock shall be entitled to receive such dividend,
distribution, or subscription rights or to exchange their Common Stock for stock
or other securities or property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation, or
winding-up, as the case may be. Such notice shall be given at least fifteen (15)
days prior to the record date or the date on which the Company's books are
closed in respect thereto. Failure to give any such notice or any defect therein
shall not affect the validity of the proceedings referred to in clauses (i),
(ii), (iii) and (iv) above. Notwithstanding the foregoing, the Company shall
publicly disclose the substance of any notice delivered hereunder prior to
delivery of such notice to the holder hereof.

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

            (l)   Certain Definitions.

                  (i)   "MARKET PRICE," as of any date, (i) means the average of
the closing sales prices for the shares of Common Stock on the Nasdaq National
Market or other trading market where such security is listed or traded as
reported by Bloomberg Financial Markets (or a comparable reporting service of
national reputation selected by the Company and reasonably acceptable to the
holders if Bloomberg Financial Markets is not then reporting sales prices of
such security)(collectively, "BLOOMBERG") for the ten (10) consecutive trading
days immediately preceding such date, or (ii) if the Nasdaq National Market is
not the principal trading market for the shares of Common Stock, the average of
the reported sales prices reported by Bloomberg on the principal trading market
for the Common Stock during the same period, or, if there is no sales price for
such period, the last sales price reported by Bloomberg for such period, or
(iii) if the foregoing do not apply, the last sales price of such security in
the over-the-counter market on the pink sheets or bulletin board for such
security as reported by Bloomberg, or if no sales price is so reported for such
security, the last bid price of such security as reported by Bloomberg, or (iv)
if market value cannot be calculated as of such date on any of the foregoing
bases, the Market Price shall be the average fair market value as reasonably
determined by an investment banking firm selected by the Company and reasonably
acceptable to the holder, with the costs of the appraisal to be borne by the
Company. The manner of determining the Market Price of the Common Stock set
forth in the foregoing definition shall apply with respect to any other security
in respect of which a determination as to market value must be made hereunder.

                  (ii)  "COMMON STOCK," for purposes of this Section 4, includes
the Common Stock and any additional class of stock of the Company having no
preference as to dividends or distributions on liquidation, provided that the
shares purchasable pursuant to this Warrant shall include only Common Stock in
respect of which this Warrant is exercisable, or shares



                                       7


resulting from any subdivision or combination of such Common Stock, or in the
case of any reorganization, reclassification, consolidation, merger, or sale of
the character referred to in Section 4(e) hereof, the stock or other securities
or property provided for in such Section.

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

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

      7.    Transfer, Exchange and Replacement of Warrant.

            (a)   Restriction on Transfer. This Warrant and the rights granted
to the holder hereof are transferable, in whole or in part, upon surrender of
this Warrant, together with a properly executed assignment in the form attached
hereto, at the office or agency of the Company referred to in Section 7(e)
below, provided, however, that any transfer or assignment shall be subject to
the conditions set forth in Sections 7(f) and (g) hereof and to the provisions
of Sections 2(f) and 2(g) of the Securities Purchase Agreement. Until due
presentment for registration of transfer on the books of the Company, the
Company may treat the registered holder hereof as the owner and holder hereof
for all purposes, and the Company shall not be affected by any notice to the
contrary. Notwithstanding anything to the contrary contained herein, the
registration rights described in Section 8 hereof are assignable only in
accordance with the provisions of the First Registration Rights Agreement dated
as of June 29, 2001 by and among the Company and the "Initial Investors" listed
on the signature pages thereof.

            (b)   Warrant Exchangeable for Different Denominations. This Warrant
is exchangeable, upon the surrender hereof by the holder hereof at the office or
agency of the Company referred to in Section 7(e) below, for new warrants of
like tenor of different denominations representing in the aggregate the right to
purchase the number of shares of Common Stock which may be purchased hereunder,
each of such new warrants to represent the right to purchase such number of
shares (at the Exercise Price therefor) as shall be designated by the holder
hereof at the time of such surrender, and all of such warrants thereafter
constituting the Warrant referenced herein.

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



                                       8


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

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

            (f)   Exercise or Transfer Without Registration. If, at the time of
the surrender of this Warrant in connection with any exercise, transfer, or
exchange of this Warrant, this Warrant (or, in the case of any exercise, the
Warrant Shares issuable hereunder), shall not be registered under the Securities
Act and under applicable state securities or blue sky laws, the Company may
require, as a condition of allowing such exercise, transfer, or exchange, (i)
that the holder or transferee of this Warrant, as the case may be, furnish to
the Company a written opinion of counsel (which opinion shall be in form,
substance and scope customary for opinions of counsel in comparable
transactions) to the effect that such exercise, transfer, or exchange may be
made without registration under the Securities Act and under applicable state
securities or blue sky laws (the cost of which shall be borne by the Company if
the Company's counsel renders such an opinion and up to $500 of such cost shall
be borne by the Company if the holder's counsel is requested to render such
opinion), (ii) that the holder or transferee execute and deliver to the Company
an investment letter in form and substance acceptable to the Company and (iii)
that the transferee be an "ACCREDITED INVESTOR" as defined in Rule 501(a)
promulgated under the Securities Act; provided that no such opinion, letter, or
status as an "accredited investor" shall be required in connection with a
transfer pursuant to Rule 144 under the Securities Act.

            (g)   Additional Restrictions on Exercise or Transfer. In no event
shall the holder hereof have the right to exercise any portion of this Warrant
for shares of Common Stock or to dispose of any portion of this Warrant to the
extent that such right to effect such exercise or disposition would result in
the holder or any of its affiliates beneficially owning more than 4.99% of the
outstanding shares of Common Stock. For purposes of this Section 7(g),
beneficial ownership shall be determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended, and Regulation 13D-G thereunder.
The restriction contained in this Section 7(g) may not be altered, amended,
deleted or changed in any manner whatsoever unless the holders of a majority of
the outstanding shares of Common Stock and the holder hereof shall approve, in
writing, such alteration, amendment, deletion or change.

      8.    Registration Rights. The initial holder of this Warrant (and certain
assignees thereof) is entitled to the benefit of such registration rights in
respect of the Warrant Shares as are set forth in the Registration Rights
Agreement of even date herewith among the Company and purchasers of the
Company's Series B Convertible Preferred Stock.



                                       9


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

                  If to the Company:

                  ViroLogic, Inc.
                  270 East Grand Avenue
                  South San Francisco, California 94080
                  Telephone:  (650) 635-1100
                  Attn:  Chief Executive Officer

                  with a copy simultaneously transmitted by like means to:

                  Cooley Godward LLP
                  4401 Eastgate Mall
                  San Diego, California 92121
                  Telephone:  (858) 550-6000
                  Attn:  Christopher J. Kearns, Esq.

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

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

      11.   Miscellaneous.

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



                                       10


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

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

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

            (e)   Redemption of Warrant by Company.

                  (i)   Provided that (x) all shares of Common Stock issuable
upon exercise of the Warrants are then (A) authorized and reserved for issuance,
(B) registered under the Securities Act of 1933, as amended, for resale by the
holders of the Warrants, and (C) eligible to be traded on the Nasdaq National
Market or its successor, (y) all of the Required Conditions (as defined in the
Certificate of Designations, Preferences and Rights of the Series A Convertible
Preferred Stock of the Company (the "CERTIFICATE OF DESIGNATIONS")) are
satisfied, and (z) the Closing Bid Price (as defined in the Certificate of
Designations) of the Common Stock is greater than 200% of the Exercise Price as
in effect on the Issue Date for twenty (20) or more consecutive trading days
immediately prior to the delivery by the Company of a Redemption Notice (as
defined below), the Company may elect, upon delivery of at least twenty (20)
days' prior written notice (the "REDEMPTION NOTICE") to the holder hereof, to
redeem all or a portion of the Warrant for a redemption amount equal to the
number of Warrant Shares issuable upon the exercise of all or a portion of this
Warrant that is being redeemed multiplied by $.10 (the "REDEMPTION AMOUNT"). For
example, if the Company elects to redeem Warrant to the extent exercisable for
10,000 shares of Common Stock, the Company will pay the holder a Redemption
Amount equal to $1,000. In the event the Company elects to redeem only some of
the outstanding Warrants pursuant to this Section 11(e), such Warrants shall be
redeemed pro rata among all the holders of the Warrants based upon the
percentage of Warrants held by such holders against the total outstanding
Warrants. Notwithstanding the foregoing, the Company may only redeem Warrants
exercisable for no more than 400,000 shares of Common Stock in any 30 day
period.

                  (ii)  The Company may not deliver a Notice of Redemption
unless on or prior to the date of delivery of a Notice of Redemption, the
Company shall have segregated on the books and records of the Company an amount
of cash sufficient to pay all amounts to which holders



                                       11


of the Warrants that are being redeemed are entitled pursuant to Section
11(e)(i). Any Notice of Redemption delivered shall be irrevocable and shall be
accompanied by a statement executed by a duly authorized officer of the Company.

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

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

                  (f)   Indemnification by Company.

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

                        (ii)  In the event of the assertion or commencement by
any person of any claim or legal proceeding with respect to which the holder may
have indemnification rights pursuant to this Section 11(f)(i), the holder shall
promptly notify the Company thereof in writing, but the failure to so notify the
Company will not limit the holder's rights to indemnification hereunder, except
to the extent the Company demonstrates that the defense of such action is
prejudiced by the failure to so give such notice.



                                       12


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

                                          VIROLOGIC, INC.


                                          By:___________________________________
                                             Name:______________________________
                                             Title:_____________________________



                                       13


                           FORM OF EXERCISE AGREEMENT

         (TO BE EXECUTED BY THE HOLDER IN ORDER TO EXERCISE THE WARRANT)

To:   ViroLogic,Inc.
      270 East Grand Avenue
      South San Francisco, California 94080
      Telephone:  (650) 635-1100
      Attn:  Chief Executive Officer

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

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

[ ]   The undersigned requests that the Company cause its transfer agent to
      electronically transmit the Common Stock issuable pursuant to this
      Exercise Agreement to the account of the undersigned or its nominee (which
      is _________________) with DTC through its Deposit Withdrawal Agent
      Commission System ("DTC TRANSFER"), provided that such transfer agent
      participates in the DTC Fast Automated Securities Transfer program.

[ ]   In lieu of receiving the shares of Common Stock issuable pursuant to this
      Exercise Agreement by way of DTC Transfer, the undersigned hereby requests
      that the Company cause its transfer agent to issue and deliver to the
      undersigned physical certificates representing such shares of Common
      Stock.

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

Dated:________________________________    ______________________________________
                                                 Signature of Holder

                                          ______________________________________
                                                 Name of Holder (Print)

                                                 Address:
                                          ______________________________________
                                          ______________________________________
                                          ______________________________________




                               FORM OF ASSIGNMENT

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



Name of Assignee                    Address                       No. of Shares
- ----------------                    -------                       -------------
                                                            






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

Dated: _________________________, ____

In the presence of

______________________________________

                                          Name:_________________________________


                                               Signature:_______________________
                                               Title of Signing Officer or Agent
                                               (if any):
                                                       _________________________
                                               Address:_________________________
                                                       _________________________


                                               Note: The above signature should
                                                     correspond exactly with the
                                                     name on the face of the
                                                     within Warrant.

EX-10.1

                                                                    EXHIBIT 10.1

                         SECURITIES PURCHASE AGREEMENT

      SECURITIES PURCHASE AGREEMENT (this "AGREEMENT"), dated as of March 22,
2002, between ViroLogic, Inc., a corporation organized under the laws of the
State of Delaware (the "COMPANY"), and each of the purchasers (individually, a
"PURCHASER" and collectively the "PURCHASERS") set forth on the execution pages
hereof (the "EXECUTION PAGES, and each an "EXECUTION PAGE").

      WHEREAS:

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

      B.    The Company desires to sell, and each Purchaser desires to purchase,
upon the terms and conditions stated in this Agreement, units (the "UNITS"),
each Unit consisting of (i) one share of the Company's Series B Convertible
Preferred Stock, par value $.001 per share (the "PREFERRED SHARES"), convertible
into approximately 4,385.965 shares of the Company's common stock, par value
$.001 per share (the "COMMON STOCK"), and (ii) a warrant, in the form attached
hereto as Exhibit B (the "WARRANTS"), to acquire approximately 2,192.982 shares
of Common Stock. The rights, preferences and privileges of the Preferred Shares,
including the terms upon which such Preferred Shares are convertible into shares
of Common Stock, are set forth in the form of Certificate of Designations,
Preferences and Rights attached hereto as Exhibit A (the "CERTIFICATE OF
DESIGNATION"). The shares of Common Stock issuable upon conversion of the
Preferred Shares pursuant to the Certificate of Designation are referred to
herein as the "CONVERSION SHARES" and the shares of Common Stock issuable upon
exercise of or otherwise pursuant to the Warrants are referred to herein as the
"WARRANT SHARES." The Preferred Shares, the Warrants, the Conversion Shares and
the Warrant Shares are collectively referred to herein as the "SECURITIES" and
each of them may individually be referred to herein as a "SECURITY."

      C.    Contemporaneous with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement,
in the form attached hereto as Exhibit C (the "REGISTRATION RIGHTS AGREEMENT"),
pursuant to which the Company has agreed to provide certain registration rights
under the Securities Act and the rules and regulations promulgated thereunder,
and applicable state securities laws. This Agreement, the Certificate of
Designation, the Warrants and the Registration Rights Agreement are collectively
referred to herein as the "TRANSACTION DOCUMENTS."

      NOW, THEREFORE, the Company and the Purchasers hereby agree as follows:

1.    PURCHASE AND SALE OF UNITS.

      (a)   Purchase of Units. The issuance, sale and purchase of the Units
shall take place in one closing, which is referred to herein as the "CLOSING."




            (i)   On the Closing Date (as defined below), subject to the
satisfaction (or waiver) of the conditions set forth in Section 6 and Section 7
below, the Company shall issue and sell to each Purchaser, and each Purchaser
agrees to purchase from the Company, such number of Units as is set forth on
such Purchaser's Execution Page attached hereto. The purchase price (the
"PURCHASE PRICE") per Unit shall be equal to Ten Thousand Dollars ($10,000).

      (b)   Form of Payment. On the Closing Date, each Purchaser shall pay the
applicable purchase price by wire transfer to the Company in accordance with the
Company's written wiring instructions, against delivery of the Units being
purchased at the Closing by such Purchaser, and the Company shall deliver such
Units against delivery of the applicable purchase price.

      (c)   Closing Date. Subject to the satisfaction (or waiver) of the
conditions thereto set forth in Section 6 and Section 7 below, the date and time
of the issuance and sale of the Units to each of the Purchasers pursuant to this
Agreement at the Closing shall be 12:00 noon, New York City time, on March __,
2002, subject to a two business day grace period at either party's option, but
in any event not later than March __, 2002, or such other time as may be
mutually agreed upon by the Company and the Purchasers purchasing a majority of
the Units at the Closing (the "CLOSING DATE"). The Closing shall occur at the
offices of Drinker Biddle & Reath LLP at One Logan Square, 18th & Cherry
Streets, Philadelphia, PA 19103.

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

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

      (b)   Accredited Investor Status. Such Purchaser is an "ACCREDITED
INVESTOR" as that term is defined in Rule 501(a) of Regulation D under the
Securities Act; the Purchaser is also knowledgeable, sophisticated and
experienced in making, and is qualified to make decisions with respect to,
investments in shares presenting an investment decision like that involved in
the purchase of the Units, including investments in securities issued by the
Company and investments in comparable companies; and the Purchaser has
requested, received, reviewed and considered all information it deems relevant
in making an informed decision to purchase the Units.




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

      (d)   Information. Such Purchaser and its counsel, if any, have been
furnished all materials relating to the business, finances and operations of the
Company and materials relating to the offer and sale of the Securities which
have been specifically requested by such Purchaser or its counsel. Such
Purchaser and its counsel have been afforded the opportunity to ask questions of
the Company and have received what such Purchaser believes to be satisfactory
answers to any such inquiries. Neither such inquiries nor any other
investigation conducted by such Purchaser or its counsel or any of its
representatives shall modify, amend or affect such Purchaser's right to rely on
the Company's representations and warranties contained in Section 3 below. Such
Purchaser understands that such Purchaser's investment in the Securities
involves a high degree of risk.

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

      (f)   Transfer or Resale. Such Purchaser understands that (i) except as
provided in the Registration Rights Agreement, the sale or resale of the
Securities have not been and are not being registered under the Securities Act
or any state securities laws, and the Securities may not be transferred unless
(a) the transfer is made pursuant to and as set forth in an effective
registration statement under the Securities Act covering the Securities; or (b)
such Purchaser shall have delivered to the Company an opinion of counsel (which
opinion shall be in form, substance and scope customary for opinions of counsel
in comparable transactions) to the effect that the Securities to be sold or
transferred may be sold or transferred pursuant to an exemption from such
registration; or (c) sold under and in compliance with Rule 144 promulgated
under the Securities Act (or a successor rule) ("RULE 144"); or (d) sold or
transferred in accordance with applicable securities laws to an affiliate of
such Purchaser who agrees to sell or otherwise transfer the Securities only in
accordance with the provisions of this Section 2(f) and who is an Accredited
Investor; and (ii) neither the Company nor any other person is under any
obligation to register such Securities under the Securities Act or any state
securities laws (other than pursuant to the Registration Rights Agreement).
Notwithstanding the foregoing or anything else contained herein to the contrary,
the Securities may be pledged as collateral in connection with a bona fide
margin account or other lending arrangement, provided such pledge is consistent
with applicable laws, rules and regulations.

      (g)   Legends. Such Purchaser understands that the certificates for the
Preferred Shares, Warrants and, until such time as the Conversion Shares and
Warrant Shares have been registered under the Securities Act (including
registration pursuant to Rule 416 thereunder) as contemplated by the
Registration Rights Agreement or otherwise may be sold by such Purchaser




under Rule 144(k), the certificates for the Conversion Shares and Warrant Shares
shall bear a restrictive legend in substantially the following form:

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

      The Company agrees that at any time the Registration Statement is
effective, and assuming compliance with the applicable provisions of the
Certificate of Designation or the Warrant, as applicable, the Company shall
instruct its transfer agent to issue (and provide such transfer agent with any
additional documentation that may be necessary to cause the Conversion Shares
and the Warrant Shares to be issued without the restrictive legend above), in
connection with the issuance of the Conversion Shares and Warrant Shares,
certificates representing such Conversion Shares and Warrant Shares without the
restrictive legend above, provided such Conversion Shares and Warrant Shares are
to be sold pursuant to the prospectus contained in the Registration Statement.
The parties acknowledge that the Company has certain rights with respect to
transfers of the Securities as set forth in the Registration Rights Agreements.

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

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




      (i)   Residency. Such Purchaser is a resident of the jurisdiction set
forth under such Purchaser's name on the Execution Page hereto executed by such
Purchaser.

      (j)   No Short Sales. Neither such Purchaser nor any of its affiliates (as
that term is defined in Rule 144 under the Securities Act) has, directly or
indirectly, engaged in any short sale of, had in effect a short position in
(whether such short sale or position was against the box and regardless of when
such position was entered into), or granted any rights with respect to the
Common Stock, at any time during the six month period immediately prior to the
Closing Date.

      The Purchasers' representations and warranties made in this Article 2 are
made solely for the purpose of permitting the Company to make a determination
that the offer and sale of the Preferred Shares and Warrants pursuant to this
Agreement complies with applicable U.S. federal and state securities laws and
not for any other purpose. Accordingly, the Company should not rely on such
representations and warranties for any other purpose.

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

      (a)   Organization and Qualification. The Company and each of its
subsidiaries is a corporation duly organized and existing in good standing under
the laws of the jurisdiction in which it is incorporated, and has the requisite
corporate power to own its properties and to carry on its business as now being
conducted. The Company and each of its subsidiaries is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which the nature of the business conducted by it makes such qualification
necessary and where the failure so to qualify would have a Material Adverse
Effect. "MATERIAL ADVERSE EFFECT" means any material adverse effect on (i) the
Securities, (ii) the ability of the Company to perform its obligations hereunder
or under the Certificate of Designation, the Warrants or the Registration Rights
Agreement or (iii) the business, operations, properties, prospects or financial
condition of the Company and its subsidiaries, taken as a whole.

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




      (c)   Stockholder Authorization. Neither the execution, delivery or
performance by the Company of this Agreement, the Warrants or the Registration
Rights Agreement nor the consummation by it of the transactions contemplated
hereby or thereby (including, without limitation, the issuance of the Preferred
Shares or Warrants or the issuance or reservation for issuance of the Conversion
Shares or Warrant Shares) requires any consent or authorization of the Company's
stockholders.

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

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




Preferred Shares and exercise of the Warrants in accordance with the terms
thereof, will be validly issued, fully paid and non-assessable, and free from
all taxes, liens, claims and encumbrances (other than restrictions on transfer
contained in this Agreement and in the Registration Rights Agreements) and will
not be subject to preemptive rights, rights of first refusal or other similar
rights of stockholders of the Company and will not impose personal liability
upon the holder thereof.

      (f)   No Conflicts. The execution, delivery and performance of this
Agreement, the Warrants and the Registration Rights Agreement by the Company,
the performance by the Company of its obligations under the Certificate of
Designation, and the consummation by the Company of the transactions
contemplated hereby and thereby (including, without limitation, the issuance and
reservation for issuance, as applicable, of the Preferred Shares, Warrants,
Conversion Shares and Warrant Shares) will not (i) result in a violation of the
Certificate of Incorporation or By-laws or (ii) conflict with, or constitute a
default (or an event that with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment
(including, without limitation, the triggering of any anti-dilution provisions),
acceleration or cancellation of, any agreement, indenture or instrument to which
the Company or any of its subsidiaries is a party, or result in a violation of
any law, rule, regulation, order, judgment or decree (including United States
federal and state securities laws and regulations and rules or regulations of
any self-regulatory organizations to which either the Company or its securities
are subject) applicable to the Company or any of its subsidiaries or by which
any property or asset of the Company or any of its subsidiaries is bound or
affected (except, with respect to clause (ii), for such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations that would
not, individually or in the aggregate, have a Material Adverse Effect). Neither
the Company nor any of its subsidiaries is in violation of its Certificate of
Incorporation, By-laws or other organizational documents and neither the Company
nor any of its subsidiaries is in default (and no event has occurred which, with
notice or lapse of time or both, would put the Company or any of its
subsidiaries in default) under, nor has there occurred any event giving others
(with notice or lapse of time or both) any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which
the Company or any of its subsidiaries is a party, except for actual or possible
violations, defaults or rights that would not, individually or in the aggregate,
have a Material Adverse Effect. The businesses of the Company and its
subsidiaries are not being conducted, and shall not be conducted so long as a
Purchaser owns any of the Preferred Shares, in violation of any law, ordinance
or regulation of any governmental entity, except for possible violations the
sanctions for which either singly or in the aggregate would not have a Material
Adverse Effect. Except as specifically contemplated by this Agreement and the
Registration Rights Agreement, the Company is not required to obtain any
consent, approval, authorization or order of, or make any filing or registration
with, any court or governmental agency or any regulatory or self regulatory
agency in order for it to execute, deliver or perform any of its obligations
under this Agreement, the Warrants or the Registration Rights Agreement or to
perform its obligations under the Certificate of Designation, in each case in
accordance with the terms hereof or thereof. The Company is not in violation of
the listing requirements of the Nasdaq National Market ("NNM") and has received
no notice regarding the potential delisting of the Common Stock by the NNM.




      (g)   SEC Documents, Financial Statements. Since December 31, 2000, the
Company has timely filed (within applicable extension periods) all reports,
schedules, forms, statements and other documents required to be filed by it with
the SEC pursuant to the reporting requirements of the Securities Exchange Act of
1934, as amended (the "EXCHANGE ACT") (all of the foregoing filed prior to the
date hereof and all exhibits included therein and financial statements and
schedules thereto and documents incorporated by reference therein, being
hereinafter referred to herein as the "SEC DOCUMENTS"). The Company has
delivered to each Purchaser true and complete copies of the SEC Documents. To
the extent that any SEC Document is available under the SEC's EDGAR filing
system prior to the date hereof, such SEC Document shall be deemed to have been
delivered to each of the Purchasers. 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. None of the statements made in any such SEC Documents is, or has
been, required to be amended or updated under applicable law (except for such
statements as have been amended or updated in subsequent filings made prior to
the date hereof). As of their respective dates, the financial statements of the
Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC applicable with respect thereto. Such financial
statements have been prepared in accordance with U.S. generally accepted
accounting principles ("GAAP"), consistently applied, during the periods
involved (except (i) as may be otherwise indicated in such financial statements
or the notes thereto, or (ii) in the case of unaudited interim statements, to
the extent they may not include footnotes or may be condensed or summary
statements) and fairly present in all material respects the consolidated
financial position of the Company and its consolidated subsidiaries as of the
dates thereof and the consolidated results of their operations and cash flows
for the periods then ended (subject, in the case of unaudited statements, to
immaterial year-end audit adjustments). Except as set forth in the financial
statements of the Company included in the SEC Documents filed prior to the date
hereof, the Company has no liabilities, contingent or otherwise, other than (i)
liabilities incurred in the ordinary course of business subsequent to the date
of such financial statements and (ii) obligations under contracts and
commitments incurred in the ordinary course of business and not required under
GAAP to be reflected in such financial statements, which liabilities and
obligations referred to in clauses (i) and (ii), individually or in the
aggregate, are not material to the financial condition or operating results of
the Company.

      (h)   Absence of Certain Changes. Since December 31, 2000, there has been
no material adverse change and no material adverse development in the business,
properties, operations, prospects, financial condition or results of operations
of the Company and its subsidiaries, taken as a whole, except as disclosed in
the SEC Documents filed prior to the date hereof.

      (i)   Absence of Litigation. Except as disclosed in the SEC Documents
filed prior to the date hereof, there is no action, suit, proceeding, inquiry or
investigation before or by any court, public board, government agency,
self-regulatory organization or body, including, without




limitation, the SEC or NASDAQ, pending or, to the knowledge of the Company or
any of its subsidiaries, threatened against or affecting the Company, any of its
subsidiaries, or any of their respective directors or officers in their
capacities as such. There are no facts which, if known by a potential claimant
or governmental authority, could give rise to a claim or proceeding which, if
asserted or conducted with results unfavorable to the Company or any of its
subsidiaries, could reasonably be expected to have a Material Adverse Effect.

      (j)   Intellectual Property. Each of the Company and its subsidiaries owns
or is licensed to use all patents, patent applications, trademarks, trademark
applications, trade names, service marks, copyrights, copyright applications,
licenses, permits, inventions, discoveries, processes, scientific, technical,
engineering and marketing data, object and source codes, know-how (including
trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures) and other similar rights and
proprietary knowledge (collectively, "INTANGIBLES") necessary for the conduct of
its business as now being conducted. To the best knowledge of the Company,
neither the Company nor any subsidiary of the Company infringes or is in
conflict with any right of any other person with respect to any Intangibles.
Except as set forth on Schedule 3(j), neither the Company nor any of its
subsidiaries has received written notice of any pending conflict with or
infringement upon such third party Intangibles. Except as set forth on Schedule
3(j), the termination of the Company's ownership of, or right to use, any single
Intangible would not result in a Material Adverse Effect on the Company. Neither
the Company nor any of its subsidiaries has entered into any consent agreement,
indemnification agreement, forbearance to sue or settlement agreement with
respect to the validity of the Company's or its subsidiaries' ownership or right
to use its Intangibles and, to the best knowledge of the Company, there is no
reasonable basis for any such claim to be successful. The Intangibles are valid
and enforceable and no registration relating thereto has lapsed, expired or been
abandoned or canceled or is the subject of cancellation or other adversarial
proceedings, and all applications therefor are pending and in good standing. The
Company and its subsidiaries have complied, in all material respects, with their
respective contractual obligations relating to the protection of the Intangibles
used pursuant to licenses. To the best knowledge of the Company, no person is
infringing on or violating the Intangibles owned or used by the Company or its
subsidiaries.

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

      (l)   Disclosure. All information relating to or concerning the Company
set forth in this Agreement or provided to any Purchaser pursuant to Section
2(d) hereof or otherwise in connection with the transactions contemplated hereby
is true and correct in all material respects and the Company has not omitted to
state any material fact necessary in order to make the




statements made herein or therein, in light of the circumstances under which
they were made, not misleading.

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

      (n)   Listing. The Company has secured the listing of the Conversion
Shares and Warrant Shares upon each national securities exchange or automated
quotation system upon which shares of Common Stock are currently listed (subject
to official notice of issuance).

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

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

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

      (r)   No Brokers. The Company has taken no action which would give rise to
any claim by any person (including CIBC World Markets and UBS Warburg, both of
whom have had financial advisory relationships with the Company) for brokerage
commissions or finder's fees or for similar payments by any Purchaser relating
to this Agreement or the transactions contemplated hereby.




      (s)   Acknowledgment Regarding Securities. The number of Conversion Shares
issuable upon conversion of the Preferred Shares may increase in certain
circumstances. The Company's executive officers have studied and fully
understand the nature of the Securities being sold hereunder. The Company
acknowledges that its obligation to issue Conversion Shares upon conversion of
the Preferred Shares in accordance with the Certificate of Designation is, other
than as set forth in the Certificate of Designation, absolute and unconditional,
regardless of the dilution that such issuance may have on the ownership
interests of other stockholders and the availability of remedies provided for in
the Transaction Documents relating to a failure or refusal to issue Conversion
Shares. Taking the foregoing into account, the Company's Board of Directors has
determined in its good faith business judgment that the issuance of the
Preferred Shares and Warrants hereunder and the consummation of the other
transactions contemplated hereby are in the best interests of the Company and
its stockholders. The Company's Board of Directors and executive officers fully
intend to honor their obligations hereunder to issue Conversion Shares upon
conversion of the Preferred Shares regardless of the dilution that such issuance
may have on the ownership interests of other stockholders and the availability
of remedies provided for in the Transaction Documents relating to their failure
or refusal to issue Conversion Shares.

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

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

      (v)   Key Employees. Each of the Company's directors, officers and any Key
Employee (as defined below) is currently serving the Company in the capacity
disclosed in the SEC Documents. No Key Employee, to the best of the knowledge of
the Company and its subsidiaries, is, or is now expected to be, in violation of
any material term of any employment




contract, confidentiality, disclosure or proprietary information agreement,
non-competition agreement, or any other contract or agreement or any restrictive
covenant, and the continued employment of each Key Employee does not subject the
Company or any of its subsidiaries to any liability with respect to any of the
foregoing matters. No Key Employee has, to the knowledge of the Company and its
subsidiaries, any intention to terminate or limit his employment with, or
services to, the Company or any of its subsidiaries, nor, to the knowledge of
the Company, is any such Key Employee subject to any constraints which would
cause such employee to be unable to devote his full time and attention to such
employment or services. "KEY EMPLOYEE" means the persons listed on Schedule 3(v)
and any individual who assumes or performs any of the duties of a Key Employee.

      (w)   Insurance. The Company and its subsidiaries have in force fire,
casualty, product liability and other insurance policies, with extended coverage
and in such amounts as are customarily carried by persons engaged in the same or
similar business as the Company and its subsidiaries. No default or event has
occurred that could give rise to a default under any such policy.

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

      (y)   Inventory. All inventory of the Company and its subsidiaries is
valued on the Company's consolidated books and records at the lower of standard
cost, which approximates actual cost, or the fair market value thereof. Except,
to the extent of the Company's reserves for obsolete or unmerchantable inventory
reflected in the Company's SEC Documents, all such inventory, after
consideration of reserves consisting of finished goods is of merchantable
quality and is saleable in the ordinary course of business consistent with past
practice.

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




4.    COVENANTS.

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

      (b)   Form D: Blue Sky Laws. The Company shall file with the SEC a Form D
with respect to the Securities as required under Regulation D and provide a copy
thereof to each Purchaser promptly after such filing. The Company shall, on or
before the Closing Date, take such action as the Company shall reasonably
determine is necessary to qualify the Securities for sale to each Purchaser
pursuant to this Agreement under applicable securities or "blue sky" laws of the
states of the United States or obtain exemption therefrom, and shall provide
evidence of any such action so taken to each Purchaser on or prior to the
Closing Date. Within four (4) trading days after the Closing Date, the Company
shall file a Form 8-K concerning this Agreement and the transactions
contemplated hereby, which Form 8-K shall attach this Agreement and its Exhibits
as exhibits to such Form 8-K.

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

      (d)   Use of Proceeds. The Company shall use the proceeds from the sale of
the Preferred Shares and Warrants for general corporate purposes and working
capital and such proceeds shall not be used to repay indebtedness (other than
indebtedness incurred in the ordinary course of business), make acquisitions, or
make payments to stockholders or affiliates of the Company. Subject to the use
of proceeds as outlined above, the Company will invest the proceeds (i) in
evidences of indebtedness issued or fully guaranteed by the United States of
America and having a maturity of not more than one year from the date of
acquisition; (ii) in certificates of deposit, notes, acceptances and repurchase
agreements having a maturity of not more than one year from the date of
acquisition issued by a bank organized in the United States having capital,
surplus and undivided profits of at least $500,000,000; (iii) in the
highest-rated commercial paper having a maturity of not more than one year from
the date of acquisition; and (iv) in "Money Market" fund shares, or in money
market accounts fully insured by the Federal Deposit Insurance Corporation and
sponsored by banks and other financial institutions, provided that the
investments consist principally of the types of investments described in clauses
(i), (ii), or (iii) above.

      (e)   Participation Right. Subject to the terms and conditions specified
in this Section 4(e), for a period of one year after the date that the
Registration Statement (as defined in the Registration Rights Agreement) the
Company is required to file pursuant to Section 2(a) of the Registration Rights
Agreement is declared effective, the Purchasers shall have a right to
participate with respect to the issuance or possible issuance of (i) future
equity or equity-linked




securities, or (ii) debt which is convertible into equity or in which there is
an equity component ("ADDITIONAL SECURITIES") on the same terms and conditions
as offered by the Company to the other purchasers of such Additional Securities.
Each time the Company proposes to offer any Additional Securities, the Company
shall make an offering of such Additional Securities to each Purchaser in
accordance with the following provisions:

            (i)   the Company shall deliver a notice (the "NOTICE") to the
Purchasers stating (i) its bona fide intention to offer such Additional
Securities, (ii) the number of such Additional Securities to be offered, (iii)
the price and terms, if any, upon which it proposes to offer such Additional
Securities, and (iv) the anticipated closing date of the sale of such Additional
Securities.

            (ii)  by written notification received by the Company, within twenty
(20) days after giving of the Notice, any Purchaser may elect to purchase or
obtain, at the price and on the terms specified in the Notice, up to that
portion of such Additional Securities which equals the proportion that the
number of shares of Common Stock purchased by such Purchaser pursuant to the
terms hereof bears to the total number of shares of Common Stock then
outstanding (assuming in each case full conversion and exercise of all
convertible or exercisable securities then outstanding). The Company shall
promptly, in writing, inform each Purchaser which elects to purchase all of the
Additional Shares available to it ("FULLY-EXERCISING PURCHASER") of any other
Purchaser's failure to do likewise. During the five-day period commencing after
such information is given, each Fully-Exercising Purchaser shall be entitled to
obtain that portion of the Additional Securities for which the Purchasers were
entitled to subscribe but which were not subscribed for by the Purchasers which
is equal to the proportion that the number of shares of Common Stock held by
such Fully-Exercising Purchaser bears to the total number of shares of Common
Stock held by all Fully-Exercising Purchasers who wish to purchase some of the
unsubscribed shares;

            (iii) if all Additional Securities which the Purchasers are entitled
to obtain pursuant to subsection 4(e)(ii) are not elected to be obtained as
provided in subsection 4(e)(ii) hereof, the Company may, during the 75-day
period following the expiration of the period provided in subsection 4(e)(ii)
hereof, offer the remaining unsubscribed portion of such Additional Securities
to any person or persons at a price not less than, and upon terms no more
favorable to the offeree than, those specified in the Notice. If the Company
does not consummate the sale of such Additional Securities within such period,
the right provided hereunder shall be deemed to be revived and such Additional
Securities shall not be offered or sold unless first reoffered to the Purchasers
in accordance herewith;

            (iv)  the participation right in this Section 4(e) shall not be
applicable to (i) the issuance or sale of shares of Common Stock (or options
therefor) to employees, officers, directors, or consultants of the Company for
the primary purpose of soliciting or retaining their employment or service
pursuant to a stock option plan (or similar equity incentive plan) approved by
the Board of Directors, (ii) the issuance of securities in connection with a
bona fide underwritten public offering at an offering price per share (prior to
underwriter's commissions and discounts) of not less than $4.56 per share (as
adjusted to reflect any stock dividends, distributions, combinations,
reclassifications and other similar transactions effected by the Corporation in
respect to its Common Stock) that results in total proceeds to the Company of at




least $40,000,000, (iii) the issuance or sale of the Preferred Shares, (iv) the
issuance of securities in connection with mergers, acquisitions, strategic
business partnerships or joint ventures (including, without limitation, such
transactions with major pharmaceutical labs or life sciences companies), the
primary purpose of which, in the reasonable judgment of the Board of Directors,
is not to raise additional capital, (v) the issuance of securities pursuant to
any equipment financing from a bank or similar financial or lending institution
approved by the Board of Directors, or (vi) any issuance of securities as to
which the holders of a majority of the then outstanding Preferred Shares shall
have executed a written waiver of the rights contained in this Section 4(e).

            (v)   the participation right set forth in this Section 4(e) may not
be assigned or transferred, except that such right is assignable by each
Purchaser to any wholly-owned subsidiary or parent of, or to any corporation or
entity that is, within the meaning of the Securities Act, controlling,
controlled by or under common control with, any such Purchaser.

      (f)   Expenses. The Company shall pay to SDS Capital Partners ("SDS
CAPITAL") at the Closing, reimbursement for the out-of-pocket expenses
reasonably incurred by SDS Capital's advisors in connection with the
negotiation, preparation, execution and delivery of this Agreement and the other
agreements to be executed in connection herewith, including, without limitation,
SDS Capital's advisors' reasonable due diligence and attorneys' fees and
expenses (the "EXPENSES"); provided, however, that in lieu of such payment SDS
Capital (or its affiliates) shall be permitted to deduct all Expenses from the
purchase price payable by SDS Capital (or its affiliates) hereunder. In
addition, from time to time thereafter, upon SDS Capital's written request, the
Company shall pay to SDS Capital such additional Expenses, if any, not covered
by such payment, in each case to the extent reasonably incurred by SDS Capital's
agents prior to the Closing in connection with the negotiation, preparation,
execution and delivery of this Agreement.

      (g)   Financial Information. The Company shall send the following reports
to each Purchaser until such Purchaser transfers, assigns or sells all of its
Securities: within ten (10) days after the filing with the SEC, a copy of its
Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q, its proxy
statements and any Current Reports on Form 8-K. To the extent that any of the
foregoing documents is available under the SEC's EDGAR filing system, such
documents shall be deemed to have been delivered to each of the Purchasers.

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

      (i)   Listing. The Company shall have filed an application for the listing
of the Conversion Shares and the Warrant Shares on the NNM on or before the
Closing. From the time that such application has been approved and thereafter,
the Company shall maintain, so long as any Purchaser (or any of their
affiliates) own any Securities, the listing of all Conversion Shares and Warrant
Shares from time to time issuable upon conversion of the Preferred Shares and




exercise of the Warrants on each national securities exchange or automated
quotation system on which shares of Common Stock are currently listed. The
Company will use its best efforts to continue the listing and trading of its
Common Stock on the NNM, the New York Stock Exchange ("NYSE"), the American
Stock Exchange ("AMEX") or the Nasdaq SmallCap Market (the "SMALLCAP") and will
comply in all material respects with the reporting, filing and other obligations
under the bylaws or rules of the NASD and such exchanges, as applicable. The
Company shall promptly provide to each holder of Preferred Shares and/or
Warrants copies of any notices it receives regarding the continued eligibility
of the Common Stock for trading on the NNM or, if applicable, any securities
exchange or automated quotation system on which securities of the same class or
series issued by the Company are then listed or quoted, if any.

      (j)   Corporate Existence. So long as a Purchaser beneficially owns any
Securities, the Company shall maintain its corporate existence, and in the event
of a merger, consolidation or sale of all or substantially all of the Company's
assets, the Company shall ensure that the surviving or successor entity in such
transaction (i) assumes the Company's obligations hereunder and under the
Certificate of Designation, the Warrants and the agreements and instruments
entered into in connection herewith regardless of whether or not the Company
would have had a sufficient number of shares of Common Stock authorized and
available for issuance in order to effect the conversion of all Preferred Shares
and exercise in full of all Warrants outstanding as of the date of such
transaction and (ii) is a publicly traded corporation whose common stock is
listed for trading on the NNM, SmallCap, NYSE or AMEX. Notwithstanding the
foregoing, the Company covenants and agrees that it will not engage in any
merger, consolidation or sale of all or substantially all of its assets at any
time prior to the effectiveness of the Registration Statement required to be
filed pursuant to the Registration Rights Agreement without (A) providing each
Purchaser with written notice of such transaction at least 60 days prior to the
consummation of such transaction and (B) obtaining the written consent of the
Purchasers holding a majority-in-interest of the then outstanding Preferred
Shares on or before the 10th day after the delivery of such notice by the
Company.

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

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

      (m)   Redemptions and Dividends. So long as any Purchaser beneficially
owns any Preferred Shares, the Company shall not, without first obtaining the
written approval of such Purchaser, repurchase, redeem, or declare or pay any
cash dividend or distribution on, any shares of capital stock of the Company.

      (n)   Information. The Company will furnish to each Purchaser, so long as
it holds any Preferred Shares:



            (i)   concurrently with the filing with the SEC of its annual
reports on Form 10-K, a certificate of the President, a Vice President or a
senior financial officer of the Company stating that, based upon such
examination or investigation and review of this Agreement as in the opinion of
the signer is necessary to enable the signer to express an informed opinion with
respect thereto, neither the Company nor any of its subsidiaries is or has
during such period been in default in the performance or observance of any of
the terms, covenants or conditions hereof, or, if the Company or any of its
subsidiaries shall be or shall have been in default, specifying all such
defaults, and the nature and period of existence thereof, and what action the
Company or such subsidiary has taken, is taking or proposes to take with respect
thereto; and

            (ii)  the information the Company must deliver to any holder or to
any prospective transferee of Securities in order to permit the sale or other
transfer of such Securities pursuant to Rule 144A of the SEC or any similar rule
then in effect.

            The Company will keep at its principal executive office a true copy
of this Agreement (as at the time in effect), and cause the same to be available
for inspection at such office during normal business hours by any holder of
Securities or any prospective transferee of Securities designated by a holder
thereof.

      (o)   Inspection of Properties and Books. So long as any Purchaser shall
hold any Securities, such Purchaser and its representatives and agents
(collectively, the "INSPECTORS") shall have the right, at such Purchaser's
expense, to visit and inspect any of the properties of the Company and of its
subsidiaries, to examine the books of account and records of the Company and of
its subsidiaries, to make or be provided with copies and extracts therefrom, to
discuss the affairs, finances and accounts of the Company and of its
subsidiaries with, and to be advised as to the same by, its and their officers,
employees and independent public accountants (and by this provision the Company
authorizes such accountants to discuss such affairs, finances and accounts,
whether or not a representative of the Company is present) all at such
reasonable times and intervals and to such reasonable extent as such Purchaser
may desire; provided, however, that each Inspector shall hold in confidence and
shall not make any disclosure (except to such Purchaser) of any such information
which the Company determines in good faith to be confidential, and of which
determination the Inspectors are so notified, unless (a) the disclosure of such
information is necessary to avoid or correct a misstatement or omission in any
Registration Statement filed pursuant to the Registration Rights Agreement, (b)
the release of such information is ordered pursuant to a subpoena or other order
from a court or government body of competent jurisdiction, or (c) such
information has been made generally available to the public other than by
disclosure in violation of this or any other agreement. The Company shall not be
required to disclose any confidential information to any Inspector until and
unless such Inspector shall have entered into confidentiality agreements (in
form and substance satisfactory to the Company) with the Company with respect
thereto, substantially in the form of this Section 4(o). Each Purchaser agrees
that it shall, upon learning that disclosure of such information is sought in or
by a court or governmental body of competent jurisdiction or through other
means, give prompt notice to the Company and allow the Company, at its expense,
to undertake appropriate action to prevent disclosure of, or to obtain a
protective order for, the information deemed confidential. Notwithstanding the
foregoing, the Company shall be permitted to withhold from disclosure under this
paragraph any material protected by attorney-client privilege.



      (p)   Waivers and Consents. Prior to the effectiveness any Registration
Statement filed in accordance with Section 2(a) of the Registration Rights
Agreement, the Company shall have obtained proper waivers from the stockholders
and warrant holders referred to on Schedule 3(f) of the Schedule of Exceptions
to this Agreement.

      (q)   Prohibition on Short Sales. No Purchaser nor any of its affiliates
(as such term is defined in Rule 144 under the Securities Act) shall, directly
or indirectly, engage in any short sale of, have in effect a short position in
(whether such short sale or position is against the box and regardless of when
such position was entered into) or grant any rights with respect to the Common
Stock, at any time during the period beginning on the Closing Date and expiring
on the date of the effectiveness of the Registration Statement filed in
accordance with Section 2(a) of the Registration Rights Agreement.

      (r)   Confidential Agreement. Each Purchaser will hold in confidence all
information concerning this Agreement and the placement of shares hereunder
until the earlier of such time as (i) the Company has made a public announcement
concerning the Agreement and the placement of shares hereunder or (ii) this
Agreement is terminated.

5.    TRANSFER AGENT INSTRUCTIONS.

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

      (b)   The Company warrants that no instruction other than such
instructions referred to in this Section 5, the Registration Rights Agreement
and stop transfer instructions to give effect to Section 2(f) hereof in the case
of the transfer of the Conversion Shares or Warrant Shares prior to registration
of the Conversion Shares and Warrant Shares under the Securities Act or without
an exemption therefrom, will be given by the Company to its transfer agent and
that the Securities shall otherwise be freely transferable on the books and
records of the Company as and to the extent provided in this Agreement and the
Registration Rights Agreement. Nothing in this Section shall affect in any way
each Purchaser's obligations and agreement set forth in Section 2(g) hereof to
resell the Securities pursuant to an effective registration statement or under
an exemption from the registration requirements of applicable securities law.

      (c)   If any Purchaser provides the Company and the transfer agent with an
opinion of counsel, which opinion of counsel shall be in form, substance and
scope customary for opinions of counsel in comparable transactions, to the
effect that the Securities have been sold or transferred pursuant to an
exemption from registration, or any Purchaser provides the Company with an
opinion of counsel, which opinion of counsel shall be in form, substance and
scope customary for opinions of counsel in comparable transactions, to the
effect that such Securities may be sold under Rule 144(k), the Company shall
permit the transfer and, in the case of the




Conversion Shares and Warrant Shares, promptly instruct its transfer agent to
issue one or more certificates in such name and in such denominations as
specified by such Purchaser.

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

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

      (a)   Each Purchaser shall have executed such Purchaser's Execution Page
to this Agreement and the Registration Rights Agreement and delivered the same
to the Company.

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

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

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

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

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

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

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




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

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

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

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

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

8.    GOVERNING LAW; MISCELLANEOUS.

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




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

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

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

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

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

                  If to the Company:

                  ViroLogic, Inc.
                  270 East Grand Avenue
                  South San Francisco, California 94080
                  Telephone:  (650) 635-1100
                  Attn:  Chief Executive Officer




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

                  Cooley Godward LLP
                  4401 Eastgate Mall
                  San Diego, California 92121
                  Telephone:  (858) 550-6000
                  Attn:  Christopher J. Kearns, Esq.

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

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

      (g)   Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and assigns. Except as
provided herein or therein, neither the Company nor any Purchaser shall assign
this Agreement or any rights or obligations hereunder. Notwithstanding the
foregoing, any Purchaser may assign its rights hereunder to any of its
"affiliates," as that term is defined under the Exchange Act, without the
consent of the Company or to any other person or entity with the consent of the
Company, which consent shall not be unreasonably withheld. This provision shall
not limit a Purchaser's right to transfer the Securities pursuant to the terms
of the Certificate of Designation, the Warrants and this Agreement or to assign
such Purchaser's rights hereunder or thereunder to any such transferee. In
addition, and notwithstanding anything to the contrary contained in this
Agreement, the Registration Rights Agreement or the Warrants, the Securities may
be pledged and all rights of any Purchaser under this Agreement or any other
agreement or document related to the transactions contemplated hereby may be
assigned, without further consent of the Company, to a bona fide pledgee in
connection with such Purchaser's margin or brokerage account.

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

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

      (j)   Publicity. The Company and each Purchaser shall have the right to
approve before issuance any press releases, SEC or NASD filings, or any other
public statements with respect to the transactions contemplated hereby;
provided, however, that the Company shall be entitled, without the prior
approval of the Purchasers, to make any press release or SEC or NASD filings
with respect to such transactions as is required by applicable law and
regulations (although the Purchasers shall be consulted by the Company in
connection with any such press release and filing prior to its release and shall
be provided with a copy thereof).




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

      (l)   Termination. In the event that the Closing shall not have occurred
on or before March 31, 2002, unless the parties agree otherwise, this Agreement
shall terminate at the close of business on such date. Notwithstanding any
termination of this Agreement, any party not in breach of this Agreement shall
preserve all rights and remedies it may have against another party hereto for a
breach of this Agreement prior to or relating to the termination hereof.

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

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

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

      (p)   Indemnification by Company.

            (i)   From and after the Closing, the Company shall hold harmless
and indemnify each of the Purchasers from and against, and shall compensate and
reimburse each of the Purchasers for, any damages which are directly or
indirectly suffered or incurred by any of the Purchasers or to which any of the
Purchasers may otherwise become subject (regardless of whether or not such
damages relate to any third-party claim) and which arise from or as a result




of, or are directly or indirectly connected with any inaccuracy in or breach of
any of the Company's representations, warranties or covenants set forth herein.

            (ii)  In the event of the assertion or commencement by any person of
any claim or legal proceeding with respect to which any Purchaser may have
indemnification rights pursuant to Section 8(p)(i), such Purchaser shall
promptly notify the Company thereof in writing, but the failure to so notify the
Company will not limit any Purchaser's rights to indemnification hereunder,
except to the extent the Company demonstrates that the defense of such action is
prejudiced by the failure to so give such notice.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]




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

VIROLOGIC, INC.

      By:
         -----------------------------
      Name:
           ---------------------------
      Title:
            --------------------------

PURCHASER:

SDS MERCHANT FUND, L.P.


By:    /s/ Steve Derby
   -----------------------------------
    Name:  Steve Derby
    Title: Managing Member

RESIDENCE: Connecticut

ADDRESS:   c/o SDS Capital Partners, LLC
           1 Sound Shore Drive, Suite 202
           Greenwich, CT  06830
           Telecopy: (203) 629-0345
           Telephone: (203) 629-1231
           Attention: Steve Derby

           with a copy to:

           Drinker Biddle & Reath LLP
           One Logan Square
           18th & Cherry Streets
           Philadelphia, PA  19103
           Telecopy: (215) 988-2757
           Telephone: (215) 988-2880
           Attention: Stephen T. Burdumy, Esq.

AGGREGATE SUBSCRIPTION AMOUNT

                                    
Number of Units:                              350
Purchase Price ($10,000 per Unit):     $3,500,000






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

VIROLOGIC, INC.

      By:
         -----------------------------
      Name:
           ---------------------------
      Title:
            --------------------------

PURCHASER:

DMG LEGACY FUND LLC


By:    /s/ Thomas E. McAuley
   -----------------------------------
    Name:  Thomas McAuley
    Title: Chief Investment Officer

RESIDENCE: Connecticut

ADDRESS:   c/o DMG Advisors LLC
           1 Sound Shore Drive, Suite 202
           Greenwich, CT  06830
           Telecopy:  (203) 629-0345
           Telephone:  (203) 629-1231
           Attention:  Andrew Wilder

           with a copy to:

           Drinker Biddle & Reath LLP
           One Logan Square
           18th & Cherry Streets
           Philadelphia, PA  19103
           Telecopy:  (215) 988-2757
           Telephone:  (215) 988-2880
           Attention:  Stephen T. Burdumy, Esq.

AGGREGATE SUBSCRIPTION AMOUNT

                                      
Number of Units:                               30
Purchase Price ($10,000 per Unit):       $300,000







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

VIROLOGIC, INC.

      By:
         -----------------------------
      Name:
           ---------------------------
      Title:
            --------------------------

PURCHASER:

DMG LEGACY INSTITUTIONAL LLC


By:    /s/ Thomas E. McAuley
   -----------------------------------
    Name:  Thomas McAuley
    Title: Chief Investment Officer

RESIDENCE: Connecticut
ADDRESS:   c/o DMG Advisors LLC
           1 Sound Shore Drive, Suite 202
           Greenwich, CT  06830
           Telecopy:  (203) 629-0345
           Telephone:  (203) 629-1231
           Attention:  Andrew Wilder

           with a copy to:

           Drinker Biddle & Reath LLP
           One Logan Square
           18th & Cherry Streets
           Philadelphia, PA  19103
           Telecopy:  (215) 988-2757
           Telephone:  (215) 988-2880
           Attention:  Stephen T. Burdumy, Esq.

AGGREGATE SUBSCRIPTION AMOUNT
                                      
Number of Units:                               90
Purchase Price ($10,000 per Unit):       $900,000






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

VIROLOGIC, INC.

      By:
         -----------------------------
      Name:
           ---------------------------
      Title:
            --------------------------

PURCHASER:

DMG LEGACY INTERNATIONAL LTD.


By:    /s/ Thomas E. McAuley
   -----------------------------------
    Name:  Thomas McAuley
    Title: Chief Investment Officer

RESIDENCE: Connecticut

ADDRESS:   c/o DMG Advisors LLC
           1 Sound Shore Drive, Suite 202
           Greenwich, CT  06830
           Telecopy:  (203) 629-0345
           Telephone:  (203) 629-1231
           Attention:  Andrew Wilder

           with a copy to:

           Drinker Biddle & Reath LLP
           One Logan Square
           18th & Cherry Streets
           Philadelphia, PA  19103
           Telecopy:  (215) 988-2757
           Telephone:  (215) 988-2880
           Attention:  Stephen T. Burdumy, Esq.

AGGREGATE SUBSCRIPTION AMOUNT
                                      
Number of Units:                               80
Purchase Price ($10,000 per Unit):       $800,000






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

VIROLOGIC, INC.



By: /s/ William D. Young
   -----------------------------------
Name:   William D. Young
Its:    CEO


INITIAL INVESTORS:

JALAA Equities, LP

By: /s/ Jason M. Aryeh
   -----------------------------------
Name:   Jason M. Aryeh
Title:  General Partner

RESIDENCE:
ADDRESS:  34 Summers Road
          Greenwich, CT  06831
          Telecopy:  (203) 618-9218
          Telephone:  (203) 661-3280
          Attention:  Jason Aryeh

          With a copy to:

          Tom Schroeder
          5561 Adobe Falls Road, Suite C
          San Diego, CA  92120
          Telecopy:  (619) 501-6233
          Telephone:  (619) 501-1752


AGGREGATE SUBSCRIPTION AMOUNT

                                      
Number of Units:                         50
Purchase Price ($10,000 per Unit):       $500,000






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

VIROLOGIC, INC.



By:    /s/ William D. Young
   -----------------------------------
Name:  William D. Young
Its:   CEO


INITIAL INVESTORS:

Xmark Fund L.P.



By:    /s/ Mitchell D. Kaye
   -----------------------------------
Name:  Mitchell D. Kaye
Title: CIO, of Investment Manager

RESIDENCE:
ADDRESS:    c/o Brown Simpson Asset Management LLC
            152 West 57th Street, 21st Floor
            New York, NY  10019
            Telecopy:  (212) 247-1329
            Telephone:  (212) 247-8200
            Attention:  Mitchell D. Kaye


AGGREGATE SUBSCRIPTION AMOUNT

                                      
Number of Units:                         29
Purchase Price ($10,000 per Unit):       $290,000






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

VIROLOGIC, INC.



By:    /s/ William D. Young
   -----------------------------------
Name:  William D. Young
Its:   CEO


INITIAL INVESTORS:

Xmark Fund Ltd.



By:    /s/ Mitchell D. Kaye
   -----------------------------------
Name:  Mitchell D. Kaye
Title: CIO, of Investment Manager

RESIDENCE:
ADDRESS:    c/o Brown Simpson Asset Management LLC
            152 West 57th Street, 21st Floor
            New York, NY  10019
            Telecopy:  (212) 247-1329
            Telephone:  (212) 247-8200
            Attention:  Mitchell D. Kaye


AGGREGATE SUBSCRIPTION AMOUNT

                                      
Number of Units:                         71
Purchase Price ($10,000 per Unit):       $710,000






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

VIROLOGIC, INC.



By:    /s/ William D. Young
   -----------------------------------
Name:  William D. Young
Its:   CEO


INITIAL INVESTORS:

       /s/ William J. Piedemonte
- --------------------------------------
William J. Piedemonte

RESIDENCE:
ADDRESS:    555 Laurel Street, #525
            San Mateo, CA  94401
            Telecopy:  (650) 342-0756
            Telephone: (650) 342-6144


AGGREGATE SUBSCRIPTION AMOUNT

                                       
Number of Units:                          5
Purchase Price ($10,000 per Unit):        $50,000






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

VIROLOGIC, INC.



By:    /s/ William D. Young
   -----------------------------------
Name:  William D. Young
Its:   CEO


INITIAL INVESTORS:

City of Milford Pension & Retirement Fund

By: Zesiger Capital Group LLC
    as Attorney-in-Fact

       /s/ James Cleary
- --------------------------------------
Name:  James Cleary
Title: Managing Director

RESIDENCE:
ADDRESS:    c/o Zesiger Capital Group LLC
            320 Park Avenue
            New York, NY  10022
            Telecopy:  (212) 508-6329
            Telephone:  (212) 508-6332
            Attention:


AGGREGATE SUBSCRIPTION AMOUNT

                                      
Number of Units:                         40
Purchase Price ($10,000 per Unit):       $400,000






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

VIROLOGIC, INC.



By:    /s/ William D. Young
   -----------------------------------
Name:  William D. Young
Its:   CEO


INITIAL INVESTORS:

Public Employee retirement System of Idaho

By: Zesiger Capital Group LLC
    as Attorney-in-Fact

       /s/ James Cleary
- --------------------------------------
Name:  James Cleary
Title: Managing Director

RESIDENCE:
ADDRESS:    c/o Zesiger Capital Group LLC
            320 Park Avenue
            New York, NY  10022
            Telecopy:  (212) 508-6329
            Telephone:  (212) 508-6332
            Attention:


AGGREGATE SUBSCRIPTION AMOUNT

                                      
Number of Units:                         35
Purchase Price ($10,000 per Unit):       $350,000






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

VIROLOGIC, INC.



By:    /s/ William D. Young
   -----------------------------------
Name:  William D. Young
Its:   CEO


INITIAL INVESTORS:

City of Stamford Fireman's Pension Fund

By: Zesiger Capital Group LLC
    as Attorney-in-Fact

       /s/ James Cleary
- --------------------------------------
Name:  James Cleary
Title: Managing Director

RESIDENCE:
ADDRESS:    c/o Zesiger Capital Group LLC
            320 Park Avenue
            New York, NY  10022
            Telecopy:  (212) 508-6329
            Telephone:  (212) 508-6332
            Attention:


AGGREGATE SUBSCRIPTION AMOUNT

                                      
Number of Units:                         14
Purchase Price ($10,000 per Unit):       $140,000






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

VIROLOGIC, INC.



By:    /s/ William D. Young
   -----------------------------------
Name:  William D. Young
Its:   CEO


INITIAL INVESTORS:

Morgan Trust Co. of the Bahamas Ltd as Trustees U/A/D 11/30/93

By: Zesiger Capital Group LLC
    as Attorney-in-Fact

       /s/ James Cleary
- --------------------------------------
Name:  James Cleary
Title: Managing Director

RESIDENCE:
ADDRESS:    c/o Zesiger Capital Group LLC
            320 Park Avenue
            New York, NY  10022
            Telecopy:  (212) 508-6329
            Telephone:  (212) 508-6332
            Attention:


AGGREGATE SUBSCRIPTION AMOUNT

                                       
Number of Units:                          9
Purchase Price ($10,000 per Unit):        $90,000






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

VIROLOGIC, INC.



By:    /s/ William D. Young
   -----------------------------------
Name:  William D. Young
Its:   CEO


INITIAL INVESTORS:

Mary Estabil

By: Zesiger Capital Group LLC
    as Attorney-in-Fact

       /s/ James Cleary
- --------------------------------------
Name:  James Cleary
Title: Managing Director

RESIDENCE:
ADDRESS:    c/o Zesiger Capital Group LLC
            320 Park Avenue
            New York, NY  10022
            Telecopy:  (212) 508-6329
            Telephone:  (212) 508-6332
            Attention:


AGGREGATE SUBSCRIPTION AMOUNT

                                       
Number of Units:                          1
Purchase Price ($10,000 per Unit):        $10,000






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

VIROLOGIC, INC.



By:    /s/ William D. Young
   -----------------------------------
Name:  William D. Young
Its:   CEO


INITIAL INVESTORS:

Robert K. Winters

By: Zesiger Capital Group LLC
    as Attorney-in-Fact

       /s/ James Cleary
- --------------------------------------
Name:  James Cleary
Title: Managing Director

RESIDENCE:
ADDRESS:    c/o Zesiger Capital Group LLC
            320 Park Avenue
            New York, NY  10022
            Telecopy:  (212) 508-6329
            Telephone:  (212) 508-6332
            Attention:


AGGREGATE SUBSCRIPTION AMOUNT

                                       
Number of Units:                          1
Purchase Price ($10,000 per Unit):        $10,000






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

VIROLOGIC, INC.


By:    /s/ William D. Young
   -----------------------------------
Name:  William D. Young
Its:   CEO


PURCHASER:

Biotech Target NV

By:    /s/ A.D. Hove
   -----------------------------------
Name:  A. Hove  R. Marei
Title: Signatory Authority

RESIDENCE:
ADDRESS:    De Ruyterkade 62
            Willemstad
            Curacao
            Netherlands Antilles
            Telecopy:
            Telephone:
            Attention:

            with a copy to:

            Bellevue Asset Management
            Graf________ 4
            6301 Zug
            Switzerland
            Telecopy:
            Telephone:
            Attention:

AGGREGATE SUBSCRIPTION AMOUNT

                                    
Number of Units:                       200
Purchase Price ($10,000 per Unit):     $2,000,000

EX-10.2

                                                                    EXHIBIT 10.2

                         REGISTRATION RIGHTS AGREEMENT

      REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of March 22,
2002, by and among ViroLogic, Inc., a corporation organized under the laws of
the State of Delaware (the "COMPANY"), and the undersigned (together with its
affiliates, the "INITIAL INVESTORS").

                                    WHEREAS:

      A.    In connection with the Securities Purchase Agreement, dated as of
March 22, 2002, by and among the Company and the Initial Investors (the
"SECURITIES PURCHASE AGREEMENT"), the Company has agreed, upon the terms and
subject to the conditions contained therein, to issue and sell to the Initial
Investors (i) shares of its Series B Convertible Preferred Stock (the "PREFERRED
STOCK") that are convertible into shares of the Company's common stock, par
value $.001 per share (the "COMMON STOCK"), upon the terms and subject to the
limitations and conditions set forth in the Certificate of Designations, Rights
and Preferences with respect to such Preferred Stock (the "CERTIFICATE OF
DESIGNATION") and (ii) warrants (the "WARRANTS") to acquire shares of Common
Stock. The shares of Common Stock issuable upon conversion of the Preferred
Stock are referred to herein as the "CONVERSION SHARES" and the shares of Common
Stock issuable upon exercise of or otherwise pursuant to the Warrants are
referred to herein as the "WARRANT SHARES."

      B.    To induce the Initial Investors to execute and deliver the
Securities Purchase Agreement, the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended, and the rules
and regulations thereunder, or any similar successor statute (collectively, the
"SECURITIES ACT"), and applicable state securities laws.

      NOW, THEREFORE, 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 Initial
Investors hereby agree as follows:

      1.    DEFINITIONS.

            (a)   As used in this Agreement, the following terms shall have the
following meanings:

                  (i)   "INVESTORS" means the Initial Investors and any
transferees or assignees who agree to become bound by the provisions of this
Agreement in accordance with Section 10 hereof.

                  (ii)  "REGISTER," "REGISTERED," and "REGISTRATION" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the Securities Act and pursuant to Rule 415 under
the Securities Act or any successor rule providing for offering securities on a
continuous basis ("RULE 415"), and the declaration or ordering of effectiveness
of such Registration Statement by the United States Securities and Exchange
Commission (the "SEC").




                  (iii) "REGISTRABLE SECURITIES" means (a) the Conversion
Shares, (b) the Warrant Shares and (c) any shares of capital stock issued or
issuable, from time to time (with any adjustments), as a distribution on or in
exchange for or otherwise with respect to any of the foregoing, whether as
default payments or otherwise.

                  (iv)  "REGISTRATION STATEMENT" means a registration statement
of the Company under the Securities Act.

            (b)   Capitalized terms used herein and not otherwise defined herein
shall have the respective meanings set forth in the Securities Purchase
Agreement.

      2.    REGISTRATION.

            (a)   Mandatory Registration. The Company shall use its best efforts
to prepare promptly and file with the SEC as soon as practicable, but in no
event later than the thirtieth (30th) day following the Closing Date (the
"FILING DATE"), a Registration Statement on Form S-3 (or, if Form S-3 is not
then available, on such form of Registration Statement as is then available to
effect a registration of all of the Registrable Securities, subject to the
consent of the Initial Investors) covering the resale of all of the Registrable
Securities. The Registration Statement filed hereunder, to the extent allowable
under the Securities Act and the Rules promulgated thereunder (including Rule
416), shall state that such Registration Statement also covers such
indeterminate number of additional shares of Common Stock as may become issuable
upon conversion of the Preferred Stock and exercise of the Warrants to prevent
dilution resulting from stock splits, stock dividends or similar transactions.
The Registrable Securities included in the Registration Statement shall be
allocated to the Investors as set forth in Section 12(k) hereof. The
Registration Statement (and each amendment or supplement thereto, and each
request for acceleration of effectiveness thereof) shall be provided to (and
subject to the approval of, which shall not be unreasonably withheld) the
Initial Investors and its counsel prior to its filing or other submission.

            (b)   Payments by the Company. The Company shall use its best
efforts to cause the Registration Statement required to be filed pursuant to
Section 2(a) hereof to become effective as soon as practicable, but in no event
later than the sixtieth (60th) day following the Filing Date. At the time of
effectiveness, the Company shall ensure that such Registration Statement covers
all of the Registrable Securities issuable at such time pursuant to the
Preferred Stock and the Warrants (including, if necessary, by filing an
amendment prior to the effective date of the Registration Statement to increase
the number of shares covered thereby). If (i) (A) the Registration Statement
required to be filed by the Company pursuant to Section 2(a) hereof is not filed
with the SEC prior to the Filing Date or declared effective by the SEC on or
before the ninetieth (90th) day after the Filing Date (the "REGISTRATION
DEADLINE") or (B) any Registration Statement required to be filed by the Company
pursuant to Section 4(b) hereof is not declared effective by the SEC within
sixty (60) days after the applicable Registration Trigger Date (as defined in
Section 4(b) hereof), or (ii) if, after any such Registration Statement has been
declared effective by the SEC, sales of any of the Registrable Securities
required to be covered by such Registration Statement (including any Registrable
Securities required to be registered pursuant to Section 4(b) hereof) cannot be
made pursuant to such Registration Statement (by reason of a stop order or the
Company's failure to update the Registration Statement or any other reason
outside the control of the Investors), except as




otherwise provided herein or (iii) the Common Stock is not listed or included
for quotation on the Nasdaq National Market ("NNM"), the Nasdaq SmallCap Market
("SMALLCAP"), the New York Stock Exchange (the "NYSE") or the American Stock
Exchange (the "AMEX") at any time after the Registration Deadline hereunder,
then the Company will make payments to the Investors in such amounts and at such
times as shall be determined pursuant to this Section 2(b) as partial relief for
the damages to the Investors by reason of any such delay in or reduction of
their ability to sell the Registrable Securities (which remedy shall not be
exclusive of any other remedies available at law or in equity). The Company
shall pay to each Investor an amount equal to the product of (i) the aggregate
Purchase Price of the Preferred Stock and Warrants purchased at the Closing held
by such Investor (including, without limitation, Preferred Stock that has been
converted into Conversion Shares and Warrants that have been exercised for
Warrant Shares then held by such Investor) (the "AGGREGATE SHARE PRICE"),
multiplied by (ii) two hundredths (.02), for each thirty (30) day period (or
portion thereof) (A) after the Filing Date and prior to the date the
Registration Statement is filed with the SEC pursuant to Section 2(a), (B) after
the Registration Deadline and prior to the date the Registration Statement filed
pursuant to Section 2(a) is declared effective by the SEC, (C) after the
sixtieth (60th) day following a Registration Trigger Date (as defined in Section
4(b)) and prior to the date the Registration Statement filed pursuant to Section
4(b) hereof is declared effective by the SEC, and (D) during which sales of any
Registrable Securities cannot be made pursuant to any such Registration
Statement after the Registration Statement has been declared effective or the
Common Stock is not listed or included for quotation on the NNM, SmallCap, NYSE
or AMEX; provided, however, that there shall be excluded from each such period
any delays which are solely attributable to changes (other than corrections of
Company mistakes with respect to information previously provided by the
Investors) required by the Investors in the Registration Statement with respect
to information relating to the Investors, including, without limitation, changes
to the plan of distribution. Notwithstanding the foregoing, in no event shall
the Company be required to pay amounts with respect to (x) both (A) and (B), and
(y) both (C) and (D) above for the same period of time. (For example, if the
Registration Statement is not effective by the Registration Deadline, the
Company would pay $20,000 for each thirty (30) day period thereafter with
respect to each $1,000,000 of Aggregate Share Price until the Registration
Statement becomes effective.) Such amounts shall be paid in cash. Payments of
cash pursuant hereto shall be made within five (5) days after the end of each
period that gives rise to such obligation, provided that, if any such period
extends for more than thirty (30) days, interim payments shall be made for each
such thirty (30) day period. The requirement to make payments pursuant to this
section can be waived as to all Investors by the written consent of Investors
holding at least eighty-one percent (81%) of the Registrable Securities

            (c)   Piggy-Back Registrations. If at any time prior to the
expiration of the Registration Period (as hereinafter defined) the Company shall
file with the SEC a Registration Statement relating to an offering for its own
account or the account of others under the Securities Act of any of its equity
securities (other than on Form S-4 or Form S-8 or their then equivalents
relating to equity securities to be issued solely in connection with any
acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans), the Company shall
send to each Investor written notice of such determination and, if within
fifteen (15) days after the date of such notice, such Investor shall so request
in writing, the Company shall include in such Registration Statement all or any
part of the Registrable Securities such Investor




requests to be registered, except that if, in connection with any underwritten
public offering, the managing underwriter(s) thereof shall impose a limitation
on the number of shares of Common Stock which may be included in the
Registration Statement because, in such underwriter(s)' judgment, marketing or
other factors dictate such limitation is necessary to facilitate public
distribution, then the Company shall be obligated to include in such
Registration Statement only such limited portion of the Registrable Securities
with respect to which such Investor has requested inclusion hereunder as the
underwriter shall permit. Any exclusion of Registrable Securities shall be made
pro rata among the Investors seeking to include Registrable Securities, in
proportion to the number of Registrable Securities sought to be included by such
Investors; provided, however, that the Company shall not exclude any Registrable
Securities unless the Company has first excluded all outstanding securities, the
holders of which are not contractually entitled to inclusion of such securities
in such Registration Statement or are not contractually entitled to pro rata
inclusion with the Registrable Securities; and provided, further, however, that,
after giving effect to the immediately preceding proviso, any exclusion of
Registrable Securities shall be made pro rata with holders of other securities
having the contractual right to include such securities in the Registration
Statement other than holders of securities contractually entitled to inclusion
of their securities in such Registration Statement by reason of demand
registration rights. Notwithstanding the foregoing, no such reduction shall
reduce the amount of Registrable Securities included in the registration below
twenty-five (25%) of the total amount of securities included in such
registration. No right to registration of Registrable Securities under this
Section 2(c) shall be construed to limit any registration required under Section
2(a) hereof. If an offering in connection with which an Investor is entitled to
registration under this Section 2(c) is an underwritten offering, then each
Investor whose Registrable Securities are included in such Registration
Statement shall, unless otherwise agreed by the Company, offer and sell such
Registrable Securities in an underwritten offering using the same underwriter or
underwriters and, subject to the provisions of this Agreement, on the same terms
and conditions as other shares of Common Stock included in such underwritten
offering.

            (d)   Eligibility for Form S-3. The Company represents and warrants
that it meets the requirements for the use of Form S-3 for registration of the
sale by the Initial Investors and any other Investor of the Registrable
Securities and the Company shall file all reports required to be filed by the
Company with the SEC in a timely manner so as to maintain such eligibility for
the use of Form S-3.

      3.    DELAY PERIODS; SUSPENSION OF SALES.

            (a)   Delay Period. If, at any time prior to the expiration of the
Registration Period (as defined below), in the good faith reasonable judgment of
the Company's Board of Directors, the disposition of Registrable Securities
would require the premature disclosure of material non-public information which
may reasonably be expected to have an adverse effect on the Company, then the
Company shall not be required to maintain the effectiveness of or amend or
supplement the Registration Statement for a period (a "DISCLOSURE DELAY PERIOD")
expiring upon the earlier to occur of (i) the date on which such material
information is disclosed to the public or ceases to be material or (ii) subject
to Section 3(b) hereof, up to ten (10) trading days after the date on which the
Company provides a notice to the Investors under Section 4(e) hereof stating
that the failure to disclose such non-public information causes the prospectus
included in the Registration Statement, as then in effect, to include an untrue
statement of a material fact or to omit to state a material fact required




to be stated therein or necessary to make the statements therein not misleading
(each, a "DISCLOSURE DELAY PERIOD NOTICE"). For the avoidance of doubt, in no
event shall a Disclosure Delay Period exceed ten (10) trading days.

            (b)   The Company will give prompt written notice, in the manner
prescribed by Section 12 hereof, to the Investors of each Disclosure Delay
Period. If practicable, such notice shall estimate the duration of such
Disclosure Delay Period. Each Investor agrees that, upon receipt of a Disclosure
Delay Period Notice prior to the Investor's disposition of all such Registrable
Securities, Investor will forthwith discontinue the disposition of such
Registrable Securities pursuant to the Registration Statement, and will not
deliver any prospectus forming a part thereof in connection with any sale of
such Registrable Securities until the expiration of such Disclosure Delay
Period. In addition, the provisions of Section 2(b) hereof shall not apply to
the Disclosure Delay Periods. Notwithstanding anything in this Section 3 to the
contrary, the Company shall not deliver more than two (2) Disclosure Delay
Period Notices in any one (1) year period and there shall not be more than an
aggregate of sixty (60) calendar days in any twelve (12) month period during
which the Company is in a Disclosure Delay Period nor more than an aggregate of
thirty (30) calendar days in any ninety (90) calendar day period during which
the Company is in a Disclosure Delay Period.

      4.    OBLIGATIONS OF THE COMPANY.

      In connection with the registration of the Registrable Securities, the
Company shall have the following obligations:

            (a)   The Company shall respond promptly to any and all comments
made by the staff of the SEC to the Registration Statement required by Section
2(a), and shall submit to the SEC before the close of business on or before the
second business day immediately following the business day on which the Company
learns (either by telephone or in writing) that no review of such Registration
Statement will be made by the SEC or that the staff of the SEC has no further
comments on such Registration Statement, as the case may be, a request for
acceleration of the effectiveness of such Registration Statement to a time and
date as soon as practicable. The Company shall keep such Registration Statement
effective pursuant to Rule 415 at all times until such date as is the earlier of
(i) the date on which all of the Registrable Securities have been sold and (ii)
the date on which all of the Registrable Securities may be immediately sold to
the public without registration or restriction pursuant to Rule 144(k) under the
Securities Act or any successor provision (the "REGISTRATION PERIOD"), which
Registration Statement (including any amendments or supplements thereto and
prospectuses contained therein and all documents incorporated by reference
therein) (i) shall comply in all material respects with the requirements of the
Securities Act and the rules and regulations of the SEC promulgated thereunder
and (ii) shall not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein, or necessary to make the
statements therein not misleading. The financial statements of the Company
included in the Registration Statement or incorporated by reference therein will
comply as to form in all material respects with the applicable accounting
requirements and the published rules and regulations of the SEC applicable with
respect thereto. Such financial statements will be prepared in accordance with
U.S. 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 on summary statements and fairly present in all material respects the
consolidated financial position of the Company and its consolidated subsidiaries
as of the dates thereof and the consolidated results of their operations and
cash flows for the periods then ended (subject, in the case of unaudited
statements, to immaterial year-end adjustments).

            (b)   The Company shall use its best efforts, to prepare and file
with the SEC such amendments (including post-effective amendments) and
supplements to the Registration Statement and the prospectus used in connection
with the Registration Statement as may be necessary to keep the Registration
Statement effective at all times during the Registration Period, and, during
such period, comply with the provisions of the Securities Act with respect to
the disposition of all Registrable Securities of the Company covered by the
Registration Statement until such time as all of such Registrable Securities
have been disposed of in accordance with the intended methods of disposition by
the seller or sellers thereof as set forth in the Registration Statement. In the
event the number of shares available under a Registration Statement filed
pursuant to this Agreement is, for any three (3) consecutive trading days (the
last of such three (3) trading days being the "REGISTRATION TRIGGER DATE"),
insufficient to cover one hundred percent (100%) of the Registrable Securities
issued or issuable upon conversion (without giving effect to any limitations on
conversion contained in Article IV.D of the Certificate of Designation) of the
Preferred Stock and exercise of the Warrants (without giving effect to any
limitations on exercise contained in Section 7(g) of the Warrants), the Company
shall amend the Registration Statement, or file a new Registration Statement (on
the short form available therefor, if applicable), or both, so as to cover one
hundred percent (100%) of the Registrable Securities issued or issuable (without
giving effect to any limitations on conversion or exercise contained in the
Certificate of Designation or the Warrants) as of the Registration Trigger Date,
in each case, as soon as practicable, but in any event within fifteen (15) days
after the Registration Trigger Date (based on the market price then in effect of
the Common Stock and other relevant factors on which the Company reasonably
elects to rely). The Company shall use its best efforts to cause such
amendment(s) and/or new Registration Statement to become effective as soon as
practicable following the filing thereof. In the event the Company fails to
obtain the effectiveness of any such Registration Statement within sixty (60)
days after a Registration Trigger Date, each Investor shall thereafter have the
option, exercisable in whole or in part at any time and from time to time by
delivery of a written notice to the Company (a "MANDATORY REDEMPTION NOTICE"),
to require the Company to purchase for cash, at an amount per share equal to the
Redemption Amount (as defined in Article VIII.B of the Certificate of
Designation), a portion of the Investor's Preferred Stock such that the total
number of Registrable Securities included on the Registration Statements for
resale by such Investor exceeds 100% of the Registrable Securities issued or
issuable upon conversion (without giving effect to any limitations on conversion
contained in Article IV.D of the Certificate of Designation) of such Investor's
Preferred Stock and exercise of such Investor's Warrants. If the Corporation
fails to redeem any of such shares within five (5) business days after its
receipt of a Mandatory Redemption Notice, then such Investor shall be entitled
to the remedies provided in Article VIII.D of the Certificate of Designation.

            (c)   The Company shall furnish to each Investor whose Registrable
Securities are included in the Registration Statement and its legal counsel (i)
promptly after the same is prepared and publicly distributed, filed with the
SEC, or received by the Company, one copy of the Registration Statement and any
amendment thereto, each preliminary prospectus and prospectus and each amendment
or supplement thereto, and, in the case of the Registration Statement referred
to in




Section 2(a), each letter written by or on behalf of the Company to the SEC or
the staff of the SEC (including, without limitation, any request to accelerate
the effectiveness of the Registration Statement or amendment thereto), and each
item of correspondence from the SEC or the staff of the SEC, in each case
relating to the Registration Statement (other than any portion, if any, thereof
which contains information for which the Company has sought confidential
treatment), (ii) by the next business day after the date of effectiveness of the
Registration Statement or any amendment thereto, a notice stating that the
Registration Statement or amendment has been declared effective, and (iii) such
number of copies of a prospectus, including a preliminary prospectus, and all
amendments and supplements thereto and such other documents as such Investor may
reasonably request in order to facilitate the disposition of the Registrable
Securities owned by such Investor.

            (d)   The Company shall use its best efforts to (i) register and
qualify the Registrable Securities covered by the Registration Statement under
such other securities or "blue sky" laws of such jurisdictions in the United
States as each Investor who holds Registrable Securities being offered
reasonably requests, (ii) prepare and file in those jurisdictions such
amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (iii) take such other
actions as may be necessary to maintain such registrations and qualifications in
effect at all times during the Registration Period, and (iv) take all other
actions reasonably necessary or advisable to qualify the Registrable Securities
for sale in such jurisdictions; provided, however, that the Company shall not be
required in connection therewith or as a condition thereto to (a) qualify to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this Section 4(d), (b) subject itself to general taxation in any such
jurisdiction, (c) file a general consent to service of process in any such
jurisdiction, (d) provide any undertakings that cause the Company undue expense
or burden, or (e) make any change in its charter or bylaws, which in each case
the Board of Directors of the Company determines to be contrary to the best
interests of the Company and its stockholders.

            (e)   As promptly as practicable after becoming aware of such event,
the Company shall notify each Investor by telephone and facsimile of the
happening of any event, of which the Company has knowledge, as a result of which
the prospectus included in the Registration Statement, as then in effect,
includes an untrue statement of a material fact or omission to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading, and, use its best efforts promptly to prepare a supplement or
amendment to the Registration Statement to correct such untrue statement or
omission, and deliver such number of copies of such supplement or amendment to
each Investor as such Investor may reasonably request.

            (f)   The Company shall use its best efforts (i) to prevent the
issuance of any stop order or other suspension of effectiveness of a
Registration Statement (other than as permitted herein), and, if such an order
is issued, to obtain the withdrawal of such order at the earliest practicable
moment (including in each case by amending or supplementing such Registration
Statement) and (ii) to notify each Investor who holds Registrable Securities
being sold (or, in the event of an underwritten offering, the managing
underwriters) of the issuance of such order and the resolution thereof (and if
such Registration Statement is supplemented or amended, deliver such number of
copies of such supplement or amendment to each Investor as such Investor may
reasonably request).




            (g)   The Company shall permit a single firm of counsel designated
by the Initial Investors to review the Registration Statement and all amendments
and supplements thereto a reasonable period of time prior to its filing with the
SEC, and not file any document in a form to which such counsel reasonably
objects.

            (h)   The Company shall make generally available to its security
holders as soon as practical, but not later than ninety (90) days after the
close of the period covered thereby, an earnings statement (in form complying
with the provisions of Rule 158 under the Securities Act) covering a
twelve-month period beginning not later than the first day of the Company's
fiscal quarter next following the effective date of the Registration Statement
which compliance will be met through the Company's filing, on an appropriate
form, the appropriate report of the Company as required by the Securities
Exchange Act of 1934, as amended.

            (i)   The Company shall hold in confidence and not make any
disclosure of information concerning an Investor provided to the Company unless
(i) disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other order
from a court or governmental body of competent jurisdiction, (iv) such
information has been made generally available to the public other than by
disclosure in violation of this or any other agreement, or (v) such Investor
consents to the form and content of any such disclosure. The Company agrees that
it shall, upon learning that disclosure of such information concerning an
Investor is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to such Investor prior
to making such disclosure, and allow the Investor, at its expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, such information.

            (j)   The Company shall use its best efforts to promptly either (i)
cause all of the Registrable Securities covered by the Registration Statement to
be listed on the NYSE or the AMEX or another national securities exchange and on
each additional national securities exchange on which securities of the same
class or series issued by the Company are then listed, if any, if the listing of
such Registrable Securities is then permitted under the rules of such exchange,
or (ii) secure the designation and quotation of all of the Registrable
Securities covered by the Registration Statement on the NNM or SmallCap and,
without limiting the generality of the foregoing, to arrange for or maintain at
least two market makers to register with the National Association of Securities
Dealers, Inc. ("NASD") as such with respect to such Registrable Securities.

            (k)   The Company shall provide a transfer agent and registrar,
which may be a single entity, for the Registrable Securities not later than the
effective date of the Registration Statement.

            (l)   The Company shall cooperate with the Investors who hold
Registrable Securities being offered to facilitate the timely preparation and
delivery of certificates (not bearing any restrictive legends to the extent
permitted by the Securities Purchase Agreement) representing Registrable
Securities to be offered pursuant to the Registration Statement and enable such




certificates to be in such denominations or amounts, as the case may be, as the
Investors may reasonably request and registered in such names as the Investors
may request.

            (m)   At the request of any Investor, the Company shall prepare and
file with the SEC such amendments (including post-effective amendments) and
supplements to a Registration Statement and the prospectus used in connection
with such Registration Statement as may be necessary in order to change the plan
of distribution set forth in such Registration Statement.

            (n)   The Company shall comply with all applicable laws related to a
Registration Statement and offering and sale of securities and all applicable
rules and regulations of governmental authorities in connection therewith
(including, without limitation, the Securities Act and the Securities Exchange
Act of 1934, as amended, and the rules and regulations promulgated by the SEC.)

            (o)   From and after the date of this Agreement, the Company shall
not, and shall not agree to, allow the holders of any securities of the Company
to include any of their securities which are not Registrable Securities in the
Registration Statement under Section 2(a) hereof or any amendment or supplement
thereto under Section 4(b) hereof without the consent of the holders of a
majority in interest of the Registrable Securities (other than as set forth in
the Schedule of Exceptions to the Securities Purchase Agreement).

      5.    OBLIGATIONS OF THE INVESTORS. In connection with the registration of
the Registrable Securities, the Investors shall have the following obligations:

            (a)   It shall be a condition precedent to the obligations of the
Company to complete the registration pursuant to this Agreement with respect to
the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request. At least five
trading days prior to the first anticipated filing date of the Registration
Statement, the Company shall notify each Investor of the information the Company
requires from each such Investor.

            (b)   Each Investor, by such Investor's acceptance of the
Registrable Securities, agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of the
Registration Statement hereunder, unless such Investor has notified the Company
in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from such Registration Statement.

            (c)   Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Sections 4(e) or
3(a), such Investor will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until such Investor's receipt of the copies of the supplemented or
amended prospectus contemplated by Sections 4(e) or 3(a) and, if so directed by
the Company, such Investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver




to the Company a certificate of destruction) all copies in such Investor's
possession, of the prospectus covering such Registrable Securities current at
the time of receipt of such notice. Notwithstanding anything to the contrary,
subject to compliance with applicable laws, the Company shall cause the transfer
agent for the Registrable Securities to deliver unlegended shares of Common
Stock to a transferee of an Investor in accordance with the terms of the
Certificate of Designation and Warrants in connection with any sale of
Registrable Securities with respect to which such Investor has entered into a
contract for sale prior to receipt of such notice and for which such Investor
has not yet settled.

      6.    EXPENSES OF REGISTRATION. All reasonable expenses incurred by the
Company or the Investors (but only for reasonable attorney's fees of one counsel
for the Investors) in connection with registrations, filings or qualifications
pursuant to Sections 2 and 4 above, including, without limitation, all
registration, listing and qualifications fees, printers and accounting fees, the
fees and disbursements of counsel for the Company, the fees and disbursements of
one counsel selected by the Investors, and the underwriting discounts and
commissions, shall be borne by the Company. In addition, the Company shall pay
all of the Investors' reasonable costs and expenses (including legal fees)
incurred in connection with the enforcement of the rights of the Investors
hereunder.

      7.    INDEMNIFICATION. In the event any Registrable Securities are
included in a Registration Statement under this Agreement:

            (a)   To the extent permitted by law, the Company will indemnify,
hold harmless and defend (i) each Investor who holds such Registrable
Securities, and (ii) the directors, officers, partners, members, employees and
agents of such Investor and each person who controls any Investor within the
meaning of Section 15 of the Securities Act or Section 20 of the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT"), if any, (each, an
"INDEMNIFIED PERSON"), against any joint or several losses, claims, damages,
liabilities or expenses (collectively, together with actions, proceedings or
inquiries by any regulatory or self-regulatory organization, whether commenced
or threatened, in respect thereof, "CLAIMS") to which any of them may become
subject insofar as such Claims arise out of or are based upon: (i) any untrue
statement or alleged untrue statement of a material fact in a Registration
Statement or the omission or alleged omission to state therein a material fact
required to be stated or necessary to make the statements therein not
misleading, (ii) any untrue statement or alleged untrue statement of a material
fact contained in any preliminary prospectus if used prior to the effective date
of such Registration Statement, or contained in the final prospectus (as amended
or supplemented, if the Company files any amendment thereof or supplement
thereto with the SEC) or the omission or alleged omission to state therein any
material fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading, or
(iii) any violation or alleged violation by the Company of the Securities Act,
the Exchange Act, any other law, including, without limitation, any state
securities law, or any rule or regulation thereunder relating to the offer or
sale of the Registrable Securities (the matters in the foregoing clauses (i)
through (iii) being, collectively, "VIOLATIONS"). Subject to the restrictions
set forth in Section 7(c) with respect to the number of legal counsel, the
Company shall reimburse the Investors and each other Indemnified Person,
promptly as such expenses are incurred and are due and payable, for any
reasonable legal fees or other reasonable expenses incurred by them in
connection with investigating or defending any such Claim. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained




in this Section 7(a): (i) shall not apply to a Claim arising out of or based
upon a Violation which occurs in reliance upon and in conformity with
information furnished in writing to the Company by such Indemnified Person
expressly for use in the Registration Statement or any such amendment thereof or
supplement thereto; (ii) shall not apply to amounts paid in settlement of any
Claim if such settlement is effected without the prior written consent of the
Company, which consent shall not be unreasonably withheld; and (iii) with
respect to any preliminary prospectus, shall not inure to the benefit of any
Indemnified Person if the untrue statement or omission of material fact
contained in the preliminary prospectus was corrected on a timely basis in the
prospectus, as then amended or supplemented, if such corrected prospectus was
timely made available by the Company pursuant to Section 4(c) hereof, and the
Indemnified Person was promptly advised in writing not to use the incorrect
prospectus prior to the use giving rise to a Violation and such Indemnified
Person, notwithstanding such advice, used it. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
the Indemnified Person and shall survive the transfer of the Registrable
Securities by the Investors pursuant to Section 10 hereof.

            (b)   In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees severally and not jointly
to indemnify, hold harmless and defend, to the same extent and in the same
manner set forth in Section 7(a), the Company, each of its directors, each of
its officers who signs the Registration Statement, its employees, agents and
each person, if any, who controls the Company within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act, and any other
stockholder selling securities pursuant to the Registration Statement or any of
its directors or officers or any person who controls such stockholder within the
meaning of the Securities Act or the Exchange Act (collectively and together
with an Indemnified Person, an "INDEMNIFIED PARTY"), against any Claim to which
any of them may become subject, under the Securities Act, the Exchange Act or
otherwise, insofar as such Claim arises out of or is based upon any Violation,
in each case to the extent (and only to the extent) that such Violation occurs
in reliance upon and in conformity with written information furnished to the
Company by such Investor expressly for use in connection with such Registration
Statement; and subject to Section 7(c) such Investor will reimburse any legal or
other expenses (promptly as such expenses are incurred and are due and payable)
reasonably incurred by them in connection with investigating or defending any
such Claim; provided, however, that the indemnity agreement contained in this
Section 7(b) shall not apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of such Investor, which
consent shall not be unreasonably withheld; provided, further, however, that the
Investor shall be liable under this Agreement (including this Section 7(b) and
Section 8) for only that amount as does not exceed the net proceeds actually
received by such Investor as a result of the sale of Registrable Securities
pursuant to such Registration Statement. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of such
Indemnified Party and shall survive the transfer of the Registrable Securities
by the Investors pursuant to Section 10 hereof. Notwithstanding anything to the
contrary contained herein, the indemnification agreement contained in this
Section 7(b) with respect to any preliminary prospectus shall not inure to the
benefit of any Indemnified Party if the untrue statement or omission of material
fact contained in the preliminary prospectus was corrected on a timely basis in
the prospectus, as then amended or supplemented.

            (c)   Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 7 of notice of the commencement of any action
(including any governmental action),




such Indemnified Person or Indemnified Party shall, if a Claim in respect
thereof is to made against any indemnifying party under this Section 7, deliver
to the indemnifying party a written notice of the commencement thereof, and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the Indemnified Person or
the Indemnified Party, as the case may be; provided, however, that such
indemnifying party shall not be entitled to assume such defense and an
Indemnified Person or Indemnified Party shall have the right to retain its own
counsel with the fees and expenses to be paid by the indemnifying party, if, in
the reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Indemnified Person or Indemnified Party
and the indemnifying party would be inappropriate due to actual or potential
conflicts of interest between such Indemnified Person or Indemnified Party and
any other party represented by such counsel in such proceeding or the actual or
potential defendants in, or targets of, any such action include both the
Indemnified Person or the Indemnified Party and the indemnifying party and any
such Indemnified Person or Indemnified Party reasonably determines that there
may be legal defenses available to such Indemnified Person or Indemnified Party
which are in conflict with those available to such indemnifying party. The
indemnifying party shall pay for only one separate legal counsel for the
Indemnified Persons or the Indemnified Parties, as applicable, and such legal
counsel shall be selected by Investors holding a majority-in-interest of the
Registrable Securities included in the Registration Statement to which the Claim
relates (with the approval of the Initial Investors if it holds Registrable
Securities included in such Registration Statement), if the Investors are
entitled to indemnification hereunder, or by the Company, if the Company is
entitled to indemnification hereunder, as applicable. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of any
liability to the Indemnified Person or Indemnified Party under this Section 7,
except to the extent that the indemnifying party is actually prejudiced in its
ability to defend such action. The indemnification required by this Section 7
shall be made by periodic payments of the amount thereof during the course of
the investigation or defense, as such expense, loss, damage or liability is
incurred and is due and payable.

      8.    CONTRIBUTION. To the extent any indemnification by an indemnifying
party is prohibited or limited by law, the indemnifying party agrees to make the
maximum contribution with respect to any amounts for which it would otherwise be
liable under Section 7 to the fullest extent permitted by law as is appropriate
to reflect the relative fault of the indemnifying party, on the one hand, and
the Indemnified Person or Indemnified Party, as the case may be, on the other
hand, with respect to the Violation giving rise to the applicable Claim;
provided, however, that (i) no contribution shall be made under circumstances
where the maker would not have been liable for indemnification under the fault
standards set forth in Section 7, (ii) no person guilty of fraudulent
misrepresentation (within the meaning of Section 12(f) of the Securities Act)
shall be entitled to contribution from any seller of Registrable Securities who
was not guilty of such fraudulent misrepresentation, and (iii) contribution
(together with any indemnification or other obligations under this Agreement) by
any seller of Registrable Securities shall be limited in amount to the net
amount of proceeds received by such seller from the sale of such Registrable
Securities.

      9.    REPORTS UNDER THE EXCHANGE ACT. With a view to making available to
the Investors the benefits of Rule 144 promulgated under the Securities Act or
any other similar rule




or regulation of the SEC that may at any time permit the Investors to sell
securities of the Company to the public without registration ("RULE 144"), the
Company agrees to:

                  (i)   file with the SEC in a timely manner and make and keep
available all reports and other documents required of the Company under the
Securities Act and the Exchange Act so long as the Company remains subject to
such requirements (it being understood that nothing herein shall limit the
Company's obligations under Section 4(c) of the Securities Purchase Agreement)
and the filing and availability of such reports and other documents is required
for the applicable provisions of Rule 144; and

                  (ii)  furnish to each Investor so long as such Investor owns
shares of Preferred Stock, Warrants or Registrable Securities, promptly upon
request, (i) a written statement by the Company that it has complied with the
reporting requirements of Rule 144, the Securities Act and the Exchange Act,
(ii) a copy of the most recent annual or quarterly report of the Company and
such other reports and documents so filed by the Company, and (iii) such other
information as may be reasonably requested to permit the Investors to sell such
securities under Rule 144 without registration.

      10.   ASSIGNMENT OF REGISTRATION RIGHTS. The rights of the Investors
hereunder, including the right to have the Company register Registrable
Securities pursuant to this Agreement, shall be automatically assignable by each
Investor to any transferee of all or any portion of the shares of Preferred
Stock, the Warrants or the Registrable Securities if: (i) the Investor agrees in
writing with the transferee or assignee to assign such rights, and a copy of
such agreement is furnished to the Company after such assignment, (ii) the
Company is furnished with written notice of (a) the name and address of such
transferee or assignee, and (b) the securities with respect to which such
registration rights are being transferred or assigned, (iii) following such
transfer or assignment, the further disposition of such securities by the
transferee or assignee is restricted under the Securities Act and applicable
state securities laws, (iv) the transferee or assignee agrees in writing for the
benefit of the Company to be bound by all of the provisions contained herein,
and (v) such transfer shall have been made in accordance with the applicable
requirements of the Securities Purchase Agreement, the Certificate of
Designation for the Preferred Stock and the Warrants, as applicable. In
addition, and notwithstanding anything to the contrary contained in this
Agreement, the Securities Purchase Agreement, the Certificate of Designation or
the Warrants, the Securities (as defined in the Securities Purchase Agreement)
may be pledged, and all rights of the Investors under this Agreement or any
other agreement or document related to the transactions contemplated hereby may
be assigned, without further consent of the Company, to a bona fide pledgee in
connection with an Investor's margin or brokerage account.

      11.   AMENDMENT OF REGISTRATION RIGHTS. Provisions of this Agreement may
be amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with
written consent of the Company, and Investors who hold at least eighty-one
percent (81%) of the Registrable Securities or, in the case of a waiver, with
the written consent of the party charged with the enforcement of any such
provision; provided, however, that no consideration shall be paid to an Investor
by the Company in connection with an amendment hereto unless each Investor
similarly affected by such amendment receives a pro-rata




amount of consideration from the Company. Any amendment or waiver effected in
accordance with this Section 11 shall be binding upon each Investor and the
Company.

      12.   MISCELLANEOUS.

            (a)   A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.

            (b)   Any notices required or permitted to be given under the terms
of this Agreement shall be sent by certified or registered mail (return receipt
requested), or by a nationally recognized overnight delivery service, or
delivered personally or by courier or by confirmed telecopy, and shall be
effective five (5) days after being placed in the mail, if mailed certified or
registered mailed, or one (1) day after being delivered to the nationally
recognized overnight delivery service, if delivered in such manner, or upon
receipt or refusal of receipt, if delivered personally or by courier or
confirmed telecopy, in each case addressed to a party. The addresses for such
communications shall be:

                  If to the Company:

                  ViroLogic, Inc.
                  270 East Grand Avenue
                  South San Francisco, California 94080
                  Telephone:  (650) 635-1100
                  Attn:  Chief Executive Officer

                  with a copy simultaneously transmitted by like means to:

                  Cooley Godward LLP
                  4401 Eastgate Mall
                  San Diego, California 92121
                  Telephone:  (858) 550-6000
                  Attn:  Christopher J. Kearns, Esq.

and if to any Investor, at such address as such Investor shall have provided in
writing to the Company, or at such other address as each such party furnishes by
notice given in accordance with this Section 12(b).

            (c)   Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.

            (d)   This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware applicable to contracts made
and to be performed in the State of




Delaware. The Company irrevocably consents to the jurisdiction of the United
States federal courts and the state courts located in the State of Delaware in
any suit or proceeding based on or arising under this Agreement and irrevocably
agrees that all claims in respect of such suit or proceeding may be determined
in such courts. The Company irrevocably waives the defense of an inconvenient
forum to the maintenance of such suit or proceeding. The Company further agrees
that service of process upon the Company, mailed by first class mail shall be
deemed in every respect effective service of process upon the Company in any
such suit or proceeding. Nothing herein shall affect the Investors' right to
serve process in any other manner permitted by law. The Company agrees that a
final non-appealable judgment in any such suit or proceeding shall be conclusive
and may be enforced in other jurisdictions by suit on such judgment or in any
other lawful manner.

            (e)   This Agreement, the Securities Purchase Agreement (including
all schedules and exhibits thereto) and the Warrants constitute 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 and therein. This Agreement, the
Securities Purchase Agreement and the Warrants supersede all prior agreements
and understandings among the parties hereto with respect to the subject matter
hereof and thereof.

            (f)   Subject to the requirements of Section 10 hereof, this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto.

            (g)   The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.

            (h)   This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same agreement. This Agreement, once executed by a party, may be
delivered to the other party hereto by facsimile transmission of a copy of this
Agreement bearing the signature of the party so delivering this Agreement.

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

            (j)   All consents, approvals and other determinations to be made by
the Investors pursuant to this Agreement shall be made by the Investors holding
a majority in interest of the Registrable Securities (determined as if all
shares of Preferred Stock and Warrants then outstanding had been converted into
or exercised for Registrable Securities) held by all Investors.

            (k)   The initial number of Registrable Securities included on any
Registration Statement and each increase to the number of Registrable Securities
included thereon shall be allocated pro rata among the Investors based on the
number of Registrable Securities held by each Investor at the time of such
establishment or increase, as the case may be. In the event an Investor shall
sell or otherwise transfer any of such holder's Registrable Securities, each
transferee shall be




allocated a pro rata portion of the number of Registrable Securities included on
a Registration Statement for such transferor. Any shares of Common Stock
included on a Registration Statement and which remain allocated to any person or
entity which does not hold any Registrable Securities shall be allocated to the
remaining Investors, pro rata based on the number of shares of Registrable
Securities then held by such Investors. For the avoidance of doubt, the number
of Registrable Securities held by any Investor shall be determined as if all
shares of Preferred Stock and Warrants then outstanding were converted into or
exercised for Registrable Securities.

            (l)   Each party to this Agreement has participated in the
negotiation and drafting of this Agreement. As such, the language used herein
shall be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction will be applied against any
party to this Agreement.

            (m)   For purposes of this Agreement, the term "business day" means
any day other than a Saturday or Sunday or a day on which banking institutions
in the State of New York are authorized or obligated by law, regulation or
executive order to close, and the term "trading day" means any day on which NNM,
or if the Common Stock is not then traded on NNM the principal securities
exchange or trading market where the Common Stock is then listed or traded, is
open for trading.




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

VIROLOGIC, INC.

By:    /s/ William D. Young
   -----------------------------------
Name:  William D. Young
Its:   Chairman & CEO

INITIAL INVESTORS:

SDS MERCHANT FUND, L.P.


By:    /s/ Steve Derby
   -----------------------------------
   Name:   Steve Derby
   Title:  Managing Member




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

VIROLOGIC, INC.

By:
   -----------------------------------
Name:
     ---------------------------------
Its:
    ----------------------------------

INITIAL INVESTORS:

DMG LEGACY FUND LLC


By:    /s/ Thomas E. McAuley
   -----------------------------------
   Name:   Thomas McAuley
   Title:  Chief Investment Officer




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

VIROLOGIC, INC.

By:
   -----------------------------------
Name:
     ---------------------------------
Its:
    ----------------------------------

INITIAL INVESTORS:

DMG LEGACY INSTITUTIONAL LLC


By:    /s/ Thomas E. McAuley
   -----------------------------------
   Name:   Thomas McAuley
   Title:  Chief Investment Officer




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

VIROLOGIC, INC.

By:
   -----------------------------------
Name:
     ---------------------------------
Its:
    ----------------------------------

INITIAL INVESTORS:

DMG LEGACY INTERNATIONAL LTD.


By:    /s/ Thomas E. McAuley
   -----------------------------------
   Name:   Thomas McAuley
   Title:  Chief Investment Officer




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

VIROLOGIC, INC.



By:    /s/ William D. Young
   -----------------------------------
Name:  William D. Young
Its:   Chairman & CEO

INITIAL INVESTORS:

Biotech Target NV

By:    /s/ A.D. Hove
   -----------------------------------
Name:  A. Hove          R. Marei
Title: Signatory Authority





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

VIROLOGIC, INC.



By:    /s/ William D. Young
   -----------------------------------
Name:  William D. Young
Its:   Chairman & CEO

INITIAL INVESTORS:

JALAA Equities, LP

By:    /s/ Jason M. Aryeh
   -----------------------------------
Name:  Jason M. Aryeh
Title: General Partner




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

VIROLOGIC, INC.



By:    /s/ William D. Young
   -----------------------------------
Name:  William D. Young
Its:   Chairman & CEO

INITIAL INVESTORS:

Xmark Fund L.P.



By:    /s/ Mitchell D. Kaye
   -----------------------------------
Name:  Mitchell D. Kaye
Title: CIO, of Investment Manager




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

VIROLOGIC, INC.



By:    /s/ William D. Young
   -----------------------------------
Name:  William D. Young
Its:   Chairman & CEO

INITIAL INVESTORS:

Xmark Fund Ltd.



By:    /s/ Mitchell D. Kaye
   -----------------------------------
Name:  Mitchell D. Kaye
Title: CIO, of Investment Manager




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

VIROLOGIC, INC.



By:    /s/ William D. Young
   -----------------------------------
Name:  William D. Young
Its:   Chairman & CEO

INITIAL INVESTORS:

       /s/ William J. Piedemonte
- --------------------------------------
William J. Piedemonte




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

VIROLOGIC, INC.



By:    /s/ William D. Young
   -----------------------------------
Name:  William D. Young
Its:   Chairman & CEO

INITIAL INVESTORS:

City of Milford Pension & Retirement Fund

By: Zesiger Capital Group LLC
    as Attorney-in-Fact

       /s/ James Cleary
- --------------------------------------
Name:  James Cleary
Title: Managing Director




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

VIROLOGIC, INC.



By:    /s/ William D. Young
   -----------------------------------
Name:  William D. Young
Its:   Chairman & CEO

INITIAL INVESTORS:

Public Employee retirement System of Idaho

By: Zesiger Capital Group LLC
    as Attorney-in-Fact

       /s/ James Cleary
- --------------------------------------
Name:  James Cleary
Title: Managing Director




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

VIROLOGIC, INC.


By:    /s/ William D. Young
   -----------------------------------
Name:  William D. Young
Its:   Chairman & CEO

INITIAL INVESTORS:

City of Stamford Fireman's Pension Fund

By: Zesiger Capital Group LLC
    as Attorney-in-Fact

       /s/ James Cleary
- --------------------------------------
Name:  James Cleary
Title: Managing Director




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

VIROLOGIC, INC.



By:    /s/ William D. Young
   -----------------------------------
Name:  William D. Young
Its:   Chairman & CEO

INITIAL INVESTORS:

Morgan Trust Co. of the Bahamas Ltd as Trustees U/A/D 11/30/93

By: Zesiger Capital Group LLC
    as Attorney-in-Fact

       /s/ James Cleary
- --------------------------------------
Name:  Managing Director
Title: James Cleary




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

VIROLOGIC, INC.



By:    /s/ William D. Young
   -----------------------------------
Name:  William D. Young
Its:   Chairman & CEO

INITIAL INVESTORS:

Mary Estabil

By: Zesiger Capital Group LLC
    as Attorney-in-Fact

       /s/ James Cleary
- --------------------------------------
Name:  James Cleary
Title: Managing Director




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

VIROLOGIC, INC.



By:    /s/ William D. Young
   -----------------------------------
Name:  William D. Young
Its:   Chairman & CEO

INITIAL INVESTORS:

Robert K. Winters

By: Zesiger Capital Group LLC
    as Attorney-in-Fact

       /s/ James Cleary
- --------------------------------------
Name:  James Cleary
Title: Managing Director

EX-99.1

                                                                    Exhibit 99.1
[VIROLOGIC LOGO]
FOR IMMEDIATE RELEASE                           CONTACT:
MARCH 26, 2002                                  Karen Wilson, CFO
                                                (650) 624-4164
                                                kwilson@virologic.com
                                                www.virologic.com

        VIROLOGIC RAISES $10 MILLION THROUGH PRIVATE PLACEMENT

     -- Cash Position Sufficient to Achieve Breakeven by the End of 2002--

SOUTH SAN FRANCISCO, CA -- ViroLogic, Inc. (NASDAQ: VLGC) today announced it has
closed a transaction to sell newly designated shares of 6% convertible preferred
stock to several large investors in a private placement resulting in gross
proceeds to the company of $10 million.

ViroLogic expects to use the proceeds from this financing to support and enhance
ongoing commercial activities, accelerate research and development of new
products, and for general administrative expenses, capital expenditures and
working capital.

"The Company's cash position should now be sufficient to get us to breakeven by
the end of 2002," said Bill Young, ViroLogic's Chairman and CEO. "It comes at a
great time as we continue to increase sales, launch new products and turn the
corner to profitability."

ViroLogic develops and markets rapid, highly sensitive drug resistance assays
that allow physicians to directly and reliably measure the level of clinically
significant HIV drug resistance. With this information, physicians can
individualize treatment regimens for their patients to maintain effective
therapy and avoid unnecessary side effects, resulting in improved outcomes and
reduced treatment costs. Pharmaceutical companies are also using ViroLogic's
assays to develop new drugs to which HIV might be less resistant. ViroLogic is
the only company to directly market a full line of premium resistance
technologies, including phenotyping, genotyping and the combination of the two.
In addition, ViroLogic has a robust pipeline of new products which it plans to
launch throughout the year, including a patient testing assay for viral fitness
and drug development assays for HIV vaccines and hepatitis B virus.

The preferred stock will be convertible into common stock at a premium to the
current market price. The purchasers will also receive warrants to purchase a
total of 2.2 million shares of common stock, at an exercise price that is also
at a premium to the current market price. The offer and sale of the securities
being sold by ViroLogic in the private placement will not be and has not been
registered under the Securities Act of 1933, as amended, and may not be sold by
ViroLogic absent registration or an applicable exemption from registration
requirements. However, the Company has agreed to file a registration statement
for the resale of the shares underlying the preferred stock and the warrants.
This news release is not an offer to sell, or a solicitation of an offer to buy,
the securities discussed herein.




ABOUT VIROLOGIC

ViroLogic is a biotechnology company advancing individualized medicine and
pharmacogenomics by discovering, developing and marketing innovative products to
guide and improve treatment of serious viral diseases such as AIDS and
hepatitis. The Company's products are designed to help doctors optimize
treatment regimens for their patients that lead to better outcomes and reduced
costs. The Company's technology is also being used by numerous biopharmaceutical
companies to develop new and improved antiviral therapeutics and vaccines
targeted at emerging drug-resistant viruses.

Certain statements in this press release are forward-looking, including
statements relating to the offer and sale of shares of preferred stock and the
issuance of warrants, the potential of the Company to reach breakeven and become
profitable, as well as anticipated uses of proceeds and potential pipeline and
product development efforts. These forward-looking statements are subject to
risks and uncertainties and other factors, which may cause actual results to
differ materially from the anticipated results or other expectations expressed
in such forward-looking statements. These risks and uncertainties include, but
are not limited to, whether planned pipeline and product development efforts
will be successful, whether PhenoSense(TM) testing will achieve market
acceptance, whether payers will authorize reimbursement for our products,
whether we will be able to expand our sales and marketing capabilities, whether
we encounter problems or delays in automating our process, whether we
successfully introduce new products using our PhenoSense technology, including
entry, fitness, vaccine and hepatitis assays, whether intellectual property
underlying our PhenoSense technology is adequate, whether we are able to build
brand loyalty, the ability to raise additional capital, and other risks and
uncertainties detailed from time to time in our reports to the Securities and
Exchange Commission, including our Annual Report on Form 10-K for the year ended
December 31, 2000 and the Company's most recent Report on Form 10-Q.

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