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

Date of Report (Date of earliest event reported): March 31, 2003

ORCHID BIOSCIENCES, INC.
(Exact name of registrant as specified in its charter)

Delaware	000-30267	22-3392819
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

4390 US Route One, Princeton, NJ 08540

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (609) 750–2200

Item 5. Other Events.

On April 2, 2003, Orchid BioSciences, Inc. publicly disseminated a press release announcing that it had completed a $16 million private placement on March 31, 2003. The information contained in the press release is incorporated herein by reference and is filed as Exhibit 99.1 hereto.

Item 7. Financial Statements and Exhibits.

(c)	Exhibits.
3.1	Certificate of Designations, Preferences and Rights of Series A Convertible Preferred Stock of Orchid BioSciences, Inc.
4.1	Warrant, dated March 31, 2003, issued to investors.
10.1	Securities Purchase Agreement, dated March 31, 2003, between Orchid BioSciences, Inc. and the Purchasers set forth on the execution pages thereof.
10.2	Registration Rights Agreement, dated March 31, 2003.
10.3	First Amendment to Rights Agreement, dated as of March 31, 2003, by and between Orchid BioSciences, Inc., and American Stock Transfer & Trust Company as rights agent.
99.1	Press release, dated April 2, 2003.

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SIGNATURES

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

	ORCHID BIOSCIENCES, INC.
	(Registrant)
Date: April 2, 2003	By:	/s/ ANDREW SAVADELIS
	Name:	Andrew P. Savadelis
	Title:	Sr. Vice President, Finance and
		Chief Financial Officer

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EXHIBIT INDEX

Exhibit Number	Description
3.1	Certificate of Designations, Preferences and Rights of Series A Convertible Preferred Stock of Orchid BioSciences, Inc.
4.1	Warrant, dated March 31, 2003, issued to investors.
10.1	Securities Purchase Agreement, dated March 31, 2003, between Orchid BioSciences, Inc. and the Purchasers set forth on the execution pages thereof.
10.2	Registration Rights Agreement, dated March 31, 2003.
10.3	First Amendment to Rights Agreement, dated as of March 31, 2003, by and between Orchid BioSciences, Inc., and American Stock Transfer & Trust Company as rights agent.
99.1	Press release, dated April 2, 2003.

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EX-3.1

EXHIBIT 3.1

CERTIFICATE OF DESIGNATIONS,
PREFERENCES AND RIGHTS

of

SERIES A CONVERTIBLE PREFERRED STOCK

of

ORCHID BIOSCIENCES, INC.

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

Orchid BioSciences, 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 1,680 shares of Preferred Stock, is the Series A Convertible Preferred Stock (the “Series A Preferred Stock”) and the face amount shall be Ten Thousand U.S. Dollars ($10,000.00) per share (the “Face Amount”).

II. DIVIDENDS

The Series A Preferred Stock will bear dividends and the holders of the Series A Preferred Stock shall be entitled to receive dividends on the Series A Preferred Stock as set forth in Article IV.

III. CERTAIN DEFINITIONS

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

A.  “Affiliate” has the meaning assigned to such term in Rule 12b-2, promulgated under the Securities Exchange Act of 1934, as amended.

B.  “Change of Control Event” means (a) a consolidation or merger of the Corporation with or into any person or entity, acting individually or in concert with others, that results in the holders of the voting securities of the Corporation immediately prior thereto (together with their respective Affiliates) holding or having the right to direct the voting of less than fifty percent (50%) of the total outstanding voting securities of the Corporation or such other surviving entity immediately following such Change of Control Event, (b) a sale or other disposition, in one transaction or a series of related transactions, of all or substantially all of the assets of the Corporation, or (c) the sale or issuance, in one transaction or a series of related transactions, by the Corporation or any of its stockholders of any securities to any person or entity, acting individually or in concert with others, such that, following the consummation of such transaction(s), such person(s) or entity(ies) (together with their respective Affiliates) would own or have the right to acquire greater than fifty percent (50%) of the outstanding shares of Common Stock (calculated on a fully-diluted basis).

C.  “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 A 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.

D.  “Common Stock” shall mean the Corporation’s Common Stock, par value $0.001 per share.

E.  “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), if any.

F.  “Conversion Date” means, for (i) 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 5:00 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 if the Notice of Conversion is faxed or otherwise delivered after 5:00 p.m., New York City time, on the Conversion Date indicated in the Notice of Conversion, the Conversion Date shall be the next business day, and (ii) for any Mandatory Conversion, that date specified in the notice delivered to the holders of the Series A Preferred Stock being converted pursuant to Article IV.C in the event that such Mandatory Conversion occurs.

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G.  “Conversion Price” means $0.45, and shall be subject to adjustment as provided herein.

H.  “Dividend” means initially an amount equal to (the Rate (as hereinafter defined)) x (N/365) x (10,000). The “Rate” shall initially be equal to .06. Thereafter, on the tenth (10^th) quarter end following the initial Issuance Date, the Rate will increase by .02, and the Rate shall continue to increase by .02 on every quarter end thereafter until the Series A Preferred Stock is converted or redeemed in full; provided, however, that (except pursuant to the following sentence) the Rate shall not exceed .12. The Rate shall be increased to .14 (the “Delisted Rate”) automatically and without any further action by any party effective upon the second scheduled Dividend Date (as defined below) to occur following the Common Stock ceasing to be listed upon the NNM or another National Securities Market; provided that the Rate will revert back to the otherwise applicable non-Delisted Rate upon the Common Stock becoming subsequently listed (or registered) on a National Securities Market. Any of the foregoing increases in the Rate may be waived by consent in writing of the holders of a majority of the outstanding Series A Preferred Stock.

I.  “Issuance Date” means, with respect to each share of Series A 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 A Preferred Stock was issued.

J.  “Measurement Date” means for purposes of any issuance of securities, the date of issuance thereof.

K.  “N” means the number of days from, but excluding, the Issuance Date or the date that the last payment of a Dividend was made in full, whichever is less.

L.  “National Securities Market” means 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).

M.  “Warrants” shall mean the warrants issued by the Corporation to the initial holders pursuant to the Securities Purchase Agreement.

IV. CONVERSION; PAYMENT OF DIVIDENDS

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

(i)  The Dividend shall be payable cumulatively out of funds legally available therefor, at the applicable Rate, as to each outstanding share of Series A Preferred Stock on every successive March 31, June 30, September 30 and December 31, and upon conversion or redemption of such share (each such date or occurrence, a “Dividend Date”). Payment of a Dividend shall be made, at the option of the Corporation, either (x) in cash or (y) by the issuance of Common Stock by the Corporation, valued at the average Closing Sales Price of the Common Stock for the five trading day period immediately proceeding the applicable Dividend Date.

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(ii)  Subject to the limitations on conversions contained in Paragraph C of this Article IV, each holder of shares of Series A Preferred Stock may, at any time and from time to time, convert (an “Optional Conversion”) each of its shares of Series A 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 A 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 A Preferred Stock being converted and (y) a certificate representing the number of shares of Series A 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. Notwithstanding the foregoing, in no event shall the Company be required to effect a conversion of Series A Preferred Stock into less than 1,000 shares of Common Stock, unless such conversion would result in the conversion of all shares of Series A Preferred Stock then held by such holder.

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(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 A Preferred Stock, provided however, that the Corporation 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 shares of Common Stock in a name other than the holder of the Series A Preferred Stock.

(iii)  No Fractional Shares. If any conversion of Series A 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 five (5) day average Closing Sales Price at such time, and the number of shares of Common Stock issuable upon conversion of the Series A 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 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. The fees of the accountant shall be borne (i) by the Corporation if the holder’s calculation of the Conversion Price is closer to the accountant’s calculation of the Conversion Price, and (ii) by the holder if the reverse is true.

C.  Limitations on Conversions. The conversion of shares of Series A 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 A 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 A Preferred Stock in excess of the Cap Amount. The Cap Amount shall be allocated pro rata to the holders of Series A 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.

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(ii)  No Five Percent Holders. In no event shall a holder of shares of Series A Preferred Stock of the Corporation have the right to convert shares of Series A Preferred Stock into shares of Common Stock or to dispose of any shares of Series A Preferred Stock to the extent that such right to effect such conversion 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 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 a sufficient number of shares of its authorized but unissued shares of Common Stock for issuance upon conversion of the Series A 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 A Preferred Stock outstanding at the then current Conversion Price thereof. The Reserved Amount shall be allocated to the holders of Series A 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 A Preferred Stock and upon exercise of the then outstanding Warrants, the Corporation shall immediately notify the holders of Series A 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 A 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 A 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.E) 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 A 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 A 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.E.

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VI. FAILURE TO SATISFY CONVERSIONS

A.  Conversion Defaults. If, at any time, (x) a holder of shares of Series A 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 (or if there is a dispute with respect to such conversion, the fifth business day after such dispute is resolved in accordance with Article IV.B), such number of 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 A Preferred Stock (or makes a public announcement via press release) at any time of its intention not to issue 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 A 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.E.

“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 A Preferred Stock, and (ii) with respect to a Conversion Default described in clause (y) of its definition, the date the Corporation issues shares of Common Stock in satisfaction of all conversions of Series A 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 A 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 A 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.

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VII. INABILITY TO CONVERT DUE TO CAP AMOUNT

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

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 A 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, SmallCap, the OTC Bulletin Board (“OTCBB”) or the Bulletin Board Exchange (“BBX”) for an aggregate of 10 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 A Preferred Stock for the resale of all of their Registrable Securities (as defined in the Registration Rights Agreement) for an aggregate of more than 45 days (other than as permitted under the Registration Rights Agreement); provided, however, that if the Redemption Amount (as defined below) is paid within 90 days after the receipt of the applicable Redemption Notice (as defined below), the Redemption Amount payable by the Corporation pursuant to this Article VIII.A(ii) shall be reduced by any amounts previously paid by the Company pursuant to Section 2(b) of the Registration Rights Agreement, and if the Redemption Amount is paid on or after the 90^th day after receipt of the applicable Redemption Notice, the Redemption Amount shall not be so reduced;

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(iii)  the Corporation fails to remove any restrictive legend on any certificate or any shares of Common Stock issued to the holders of Series A Preferred Stock upon conversion of the Series A 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 A 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 A 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 90 days of their initiation;

(vii)  the Corporation shall either

(a)  (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 $250,000 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 $250,000 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

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(b)  consummate a Change of Control Event;

(viii)  the Corporation shall fail to pay in full Dividends on any two (2) consecutive Dividend Dates; or

(ix)  except with respect to matters covered by subparagraphs (i) - (viii) above, as to which such applicable subparagraphs shall apply, the Corporation otherwise shall materially breach any material term (or to the extent such term is already qualified as to materiality, shall breach such 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 A 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 E 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 A 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; providedthat, in the event of Redemption Event described in Section VIII.A(vii)(b) above, the following sentence shall apply. In the event of a Change of Control Event at an effective price per share of less than 200% of then-applicable Conversion Price, each holder of Preferred Stock shall have the option of receiving either (a) the applicable Redemption Amount, or if (a) is not selected, then (b) the consideration received by the holders of Common Stock as a result of the Change in Control Event, as if the Series A Preferred Stock had been converted. 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 A 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 A Preferred Stock stating the date upon which the Corporation received such Redemption Notice and the amount of Series A Preferred Stock covered thereby. The Corporation shall not redeem any shares of Series A 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 A 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 A 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.

Definition of Redemption Amount. The “Redemption Amount” with respect to a share of Series A Preferred Stock means an amount equal to:

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V x R

where:

“V” means the Face Amount thereof plus the accrued Dividends thereon through the date of payment of the Redemption Amount; and

“R” means,

(i) in the case of any Redemption Event described in Section VIII.A (other than the Redemption Event described in Section VIII.A(vii)(b)) or an Optional Redemption pursuant to Section VIII.C, 125%;

(ii) in the case of the Redemption Event described in Section VIII.A(vii)(b), 150%; and

(iii) in the case of a Beneficial Redemption pursuant to Section VIII.D, 100%.

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 A 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 A Preferred Stock (an “Optional Redemption”), payable in cash, in an amount equal to the Redemption Amount. The Corporation may redeem shares of Series A Preferred Stock pursuant to this Article 8.C in whole or in part. If the Corporation elects to redeem shares of Series A Preferred Stock in part, it shall do so on a pro rata basis, based on the number of shares of Series A Preferred Stock outstanding on the date that the Optional Redemption Notice is first delivered to holders.

(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 A 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 A 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 A 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 A 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 A Preferred Stock being redeemed are actually delivered to the Corporation or the transfer agent.

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(iv)  Notwithstanding the delivery of an Optional Redemption Notice, a holder may convert some or all of its shares of Series A 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 A Preferred Stock subject to an Optional Redemption Notice due to the limitation contained in Article IV.C(ii), the Optional Redemption Date, for such holder only, shall automatically be extended by that number of days by which such holder is so precluded, provided, however, that in no event shall the Optional Redemption Date be extended by more than sixty (60) days.

(v)  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 (the “Registration Rights Agreement”) shall have been declared effective by the United States 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 A 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) listed or traded on any National Securities Market;

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

(d)  all amounts, if any, then accrued or payable under this Certificate of Designation (other than accrued and unpaid Dividend payments) or the Registration Rights Agreement shall have been paid.

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D.  Beneficial Redemption. If at any time all of the Required Conditions are satisfied and (i) at any time after the Registration Statement Effective Date, the Closing Sales Price of the Common Stock is greater than 250% of the then-applicable Conversion Price for at least twenty (20) out of thirty (30) consecutive trading days, (ii) upon the closing of a firm commitment 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 200% of the then-applicable Conversion Price per share and (B) with gross proceeds to the Corporation of not less than $20,000,000, or (iii) upon the closing of a Change of Control Event at an effective price per share equal to at least 200% of the then-applicable Conversion Price then, at the option of the Corporation exercisable by the delivery of written notice to the holders of the Series A Preferred Stock, delivered no more than thirty (30) days prior to and no less than fifteen (15) days prior to the Redemption Date stated in such notice, the Corporation shall redeem shares of the Series A Preferred Stock (a “Beneficial Redemption”), payable in cash, in an amount equal to the Redemption Amount.

E.  Redemption Defaults. If the Corporation fails to pay any holder the Redemption Amount with respect to any share of Series A 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 A Preferred Stock entitled to redemption (i) shall be entitled to interest on the Redemption Amount at a per annum rate equal to the lower of fifteen percent (15%) 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, and (ii) shall have the right, at any time and from time to time, to require the Corporation, upon written notice, to immediately convert (in accordance with the terms of Paragraph A of Article IV) all or any portion of the Redemption Amount into shares of Common Stock, at the Conversion Price then in effect, during the period beginning on the date on which the Corporation receives the Redemption Notice or the Optional Redemption Date, as applicable, and ending on the Conversion Date with respect to the conversion of such Redemption Amount. In the event the Corporation is not able to redeem all of the shares of Series A 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 A Preferred Stock from each holder pro rata, based on the total number of shares of Series A 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 A 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 A 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 a majority the holders of Series A Preferred Stock obtained in accordance with Article XIII hereof, such class or series of capital stock specifically, by its terms, ranks senior to or paripassu with the Series A Preferred Stock) (collectively with the Common Stock, “Junior Securities”); (ii) pari passu with any other class or series of capital stock of the Corporation hereafter created (with the written consent of a majority of the holders of Series A Preferred Stock obtained in accordance with Article XIII hereof) specifically ranking, by its terms, on parity with the Series A 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 a majority of the holders of Series A Preferred Stock obtained in accordance with Article XIII hereof) specifically ranking, by its terms, senior to the Series A 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.

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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 90 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 A 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 A Preferred Stock and holders of PariPassu 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 A 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 A Preferred Stock means an amount equal to the Face Amount thereof plus the accrued but unpaid Dividends 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.

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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 A 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 A Preferred Stock then outstanding) shall be made with respect to the rights and interests of the holders of the Series A Preferred Stock to the end that the economic value of the shares of Series A 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 A Preferred Stock has received written notice of such transaction at least 30 days prior to the consummation of the transaction or event (or 30 days prior to the date of the meeting or other formal action of shareholders relating thereto, whichever is earlier, but in no event earlier than public announcement of such proposed transaction), (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 A Preferred Stock) the obligations of this Certificate of Designation. 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 A Preferred Stock outstanding as of the date of such transaction, and shall similarly apply to successive reclassifications, consolidations, mergers, sales, transfers or share exchanges.

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C.  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 A Preferred Stock shall be entitled, upon any conversion of shares of Series A 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 A 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 A Preferred Stock receives such securities pursuant to the conversion hereof.

D.  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 A 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 A 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.

E.  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 A 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 A 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 A Preferred Stock.

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F.  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 D, but for the manner in which such action is taken or structured, which would in any way diminish the value of the Series A 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

A.  General. Except as otherwise expressly provided elsewhere in the Certificate of Incorporation, this Series A Certificate of Designations, Preferences and Rights or as otherwise required by the Delaware General Corporation Law (the “DGCL”), (a) each holder of Series A Preferred Stock shall be entitled to vote on all matters submitted to a vote of the stockholders of the Corporation and shall be entitled to that number of votes equal to the largest number of whole shares of Common Stock into which such holder’s shares of Series A Preferred Stock could be converted, pursuant to the provisions of Section IV hereof (subject to the limitations contained in Article IV.D(ii)), at the record date for the determination of stockholders entitled to vote on such matters or, if no such record date is established, at the date such vote is taken or any written consent of stockholders is solicited, and (b) the holders of shares of Series A Preferred Stock and Common Stock shall vote together (or tender written consents in lieu of a vote) as a single class on all matters submitted to the stockholders of the Corporation.

B.  Notification. The Corporation shall provide each holder of Series A Preferred Stock with prior notification of any meeting of the stockholders (and copies of proxy materials and other information sent to stockholders) and a brief statement regarding the business to be transacted at the meeting to the extent known at such time, at least 30 days prior to the date of the meeting or other formal action of shareholders (or 30 days prior to the consummation of the transaction or event if a transaction or fundamental corporate event is to be voted upon, whichever is earlier, but in no event earlier than public announcement of such proposed transaction).

C.  Class Voting. To the extent that under the DGCL the vote of the holders of the Series A 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 A 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 A Preferred Stock (except as otherwise may be required under the DGCL) shall constitute the approval of such action by the class.

XIII. PROTECTION PROVISIONS

So long as any shares of Series A Preferred Stock are outstanding, the Corporation shall not without first obtaining the approval (by vote or written consent, as provided by the DGCL) of the holders of a majority of the then outstanding shares of Series A Preferred Stock:

(a)  alter or change the rights, preferences or privileges of the Series A Preferred Stock, whether through merger, sale, consolidation or otherwise (unless such event is a Change of Control Event, in which case no special approval shall be required pursuant to this section);

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(b)  alter or change the rights, preferences or privileges of any capital stock of the Corporation so as to affect adversely the Series A Preferred Stock, whether through merger, sale, consolidation or otherwise (unless such event is a Change of Control Event, in which case no special approval shall be required pursuant to this section);

(c)  create any Senior Securities;

(d)  create any PariPassu Securities, except as otherwise provided in the Securities Purchase Agreement;

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

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

(g)  issue any shares of Series A 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;

(j)  issue any debt securities that would have any preferences over the Series A Preferred Stock upon liquidation of the Corporation;

(k)  except for shares of Geneshield, Inc. (“Geneshield”) that are issued to employees, consultants or directors of Geneshield pursuant to an employee benefit plan as in effect on or before March 1, 2003, permit any subsidiary to issue any securities, other than to the Corporation; or

(l)  except for the sale of assets relating to the Corporation’s Orchid Diagnostics business and exclusive or non-exclusive licenses of intellectual property on arms’ length bases, sell or otherwise transfer any independently-significant asset or intellectual property to any other person(s) or entity(ies) (including, without limitation, to any subsidiary(ies) of the Corporation), unless such sale or transfer is a Change of Control Event, in which case no special approval shall be required pursuant to this section.

Notwithstanding the foregoing, the provisions of Sections XIII.A(c), (d), (f) or (j) shall not apply to securities or debt issued or issuable in the ordinary course of business in connection with any bank, commercial or equipment financing, including but not limited to working capital lines of credit, equipment leases and bank debt or other debt. Furthermore, 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 A Preferred Stock then outstanding.

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XIV. MISCELLANEOUS

A.  Cancellation of Series A Preferred Stock. If any shares of Series A Preferred Stock are converted pursuant to Article IV, the shares so converted 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 A 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 A 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 A Preferred Stock based on the number of shares of Series A 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 A Preferred Stock based on the number of shares of Series A 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 A 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 A Preferred Stock shall be allocated to the remaining holders of shares of Series A Preferred Stock, pro rata based on the number of shares of Series A 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 A Preferred Stock are outstanding, if requested by a holder, the Corporation shall deliver (or cause its transfer agent to deliver) to such holder a written report notifying such holder of any occurrence which prohibits the Corporation from issuing Common Stock upon any such conversion. If issued, the report shall also specify (i) the total number of shares of Series A 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 A 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 A 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 A Preferred Stock before the Corporation would exceed the Cap Amount and the Reserved Amount. If requested, the Corporation (or its transfer agent) shall use its best efforts to deliver the report for each quarter to each requesting 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.

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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 Dividend, 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 fifteen percent (15%) 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 A 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 A 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 A 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 A Preferred Stock with respect to such unconverted shares of Series A 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 A Preferred Stock.

G.  Transfer. Subject to applicable law and the legend, if any, on the certificate(s) to be transferred, the Series A Preferred Stock may be transferred at any time and from time to time by the holder thereof, provided that no transfer may be made in a private transaction to a direct competitor of the Corporation, or to an entity that has publicly announced its intention of competing directly with the Corporation.

H.  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 A 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 A 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.

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[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

IN WITNESS WHEREOF, this Certificate of Designation is executed on behalf of the Corporation this 31st day of March, 2003.

Orchid Biosciences, Inc.

By:  Andrew P. Savadelis         
Name:  Andrew P. Savadelis
Title:  Sr. Vice President & Chief Financial Officer

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EX-4.1

EXHIBIT 4.1

VOID AFTER 5:00 P.M., NEW YORK CITY
TIME, ON MARCH 31, 2008
 (UNLESS EXTENDED PURSUANT TO SECTION 2 HEREOF)

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

Right to Purchase 2,666,667 Shares of
Common Stock, par value $.001 per share

Date: March 31, 2003

ORCHID BIOSCIENCES, INC.
STOCK PURCHASE WARRANT

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(j)    Certain Definitions.

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

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

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

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

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

7.    Transfer, Exchange and Replacement of Warrant.

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

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

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

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

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

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

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

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

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

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If to the Company:

Orchid BioSciences, Inc.
4390 US Route One North
Princeton, NJ 08540
Telephone: (609) 750-2200
Fax: (609) 750-6400
Attn: Chief Financial Officer

with a copy simultaneously transmitted by like means to:
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
One Financial Center
Boston, MA 02111
Telephone: (617) 542-6000
Fax: (617) 542-2241
Attn: John J. Cheney, III, Esq.

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

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

11.    Miscellaneous.

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

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

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

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

(e)    Redemption of Warrant by Company.

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

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

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

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

(f)    Indemnification by Company.

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

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

[Remainder of page left blank.]

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

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

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FORM OF EXERCISE AGREEMENT

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

To:	Orchid BioSciences, Inc.
	Telephone: (609) 750-2200
	Attn: Chief Financial Officer

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

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

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

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

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

Dated:
	Signature of Holder
	Name of Holder (Print)
	Address:

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.

Schedule of Other Investors to Whom this Form of
Warrant was Issued (per Instruction 2 to Item 601 of Reg. S-K)

Investor	Number of Shares for which Warrant is exercisable
BayStar Capital II, L.P.	2,000,000
DMG Legacy Fund LLC	300,000
DMG Legacy Institutional Fund LLC	2,790,000
DMG Legacy International Ltd.	2,910,000
SCO Capital Partners LLC	300,000
Paul A. Scharfer	200,000

EX-10.1

  EXHIBIT 10.1

SECURITIES PURCHASE AGREEMENT

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

WHEREAS:

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

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

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

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

1.   PURCHASE AND SALE OF UNITS.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

4.   COVENANTS.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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5.   TRANSFER AGENT INSTRUCTIONS.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

8.   GOVERNING LAW; MISCELLANEOUS.

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

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

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

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

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

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

If to the Company:

Orchid BioSciences, Inc.
4390 US Route One North
Princeton, NJ 08540
Telephone: (609) 750-2200
Fax: (609) 750-6400
Attn: Chief Financial Officer

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

Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
One Financial Center
Boston, MA 02111
Telephone: (617) 542-6000
Fax: (617) 542-2241
Attn: John J. Cheney, III, Esq.

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

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

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

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

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

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

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

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(l)   [Reserved.]

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

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

(o)   Indemnification by Company.

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

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

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

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

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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

ORCHID BIOSCIENCES, INC.

By:	/s/ ANDREW P. SAVADELIS
Name:	Andrew P. Savadelis
Title:	Sr. Vice President, Finance and Chief Financial Officer

PURCHASER:

SDS MERCHANT FUND, LP

By:	/s/ STEVE DERBY
	Name: Steve Derby
	Title:  Managing Member

ADDRESS:
53 Forest Ave., 2^nd Floor
Old Greenwich, CT 06870
Attn: Steve Derby, Managing Member

Units: 400
Purchase Price ($10,000 per Unit): $4,000,000

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

ORCHID BIOSCIENCES, INC.

By:	/s/ ANDREW P. SAVADELIS
Name:	Andrew P. Savadelis
Title:	Sr. Vice President, Finance and Chief Financial Officer

PURCHASER:

BAYSTAR CAPITAL II, L.P.

By:	/s/ STEVE DERBY
	Name: Steve Derby
	Title:  Portfolio Manager

ADDRESS
80 E. Sir Francis Drake Blvd., Suite 2B
Larkspur, CA 94939-1709
Attn: Steve Derby, Portfolio Manager

Units: 300
Purchase Price ($10,000 per Unit): $3,000,000

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

ORCHID BIOSCIENCES, INC.

By:	/s/ ANDREW P. SAVADELIS
Name:	Andrew P. Savadelis
Title:	Sr. Vice President, Finance and Chief Financial Officer

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

PURCHASER:

DMG LEGACY FUND LLC

By:	/s/ THOMAS MCAULEY
Name:	Thomas McAuley
Title:	Chief Investment Officer

ADDRESS
53 Forest Ave.
Suite 202
Old Greenwich, CT 06870
Attn: Thomas McAuley, Chief Investment Officer

Units: 45
Purchase Price ($10,000 per Unit): $450,000

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

ORCHID BIOSCIENCES, INC

By:	/s/ ANDREW P. SAVADELIS
Name:	Andrew P. Savadelis
Title:	Sr. Vice President, Finance and Chief Financial Officer

PURCHASER:

DMG LEGACY INSTITUTIONAL FUND LLC

By:	/s/ THOMAS MCAULEY
Name:	Thomas McAuley
Title:	Chief Investment Officer

ADDRESS
53 Forest Ave.
Suite 202
Old Greenwich, CT 06870
Attn: Thomas McAuley, Chief Investment Officer

Units: 418.5
Purchase Price ($10,000 per Unit): $4,185,000

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

ORCHID BIOSCIENCES, INC.

By:	/s/ ANDREW P. SAVADELIS
Name:	Andrew P. Savadelis
Title:	Sr. Vice President, Finance and Chief Financial Officer

PURCHASER:

DMG LEGACY INTERNATIONAL LTD.

By:	/s/ THOMAS MCAULEY
Name:	Thomas McAuley
Title:	Chief Investment Officer

ADDRESS
53 Forest Ave.
Suite 202
Old Greenwich, CT 06870
Attn: Thomas McAuley, Chief Investment Officer

Units: 436.5
Purchase Price ($10,000 per Unit): $4,365,000

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EX-10.2

EXHIBIT 10.2

REGISTRATION RIGHTS AGREEMENT

REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as of March 31, 2003, by and among Orchid BioSciences, Inc., a corporation organized under the laws of the State of Delaware (the “Company”), and the undersigned (together with their affiliates, the “Initial Investors”).

WHEREAS:

A.     In connection with the Securities Purchase Agreement, dated as of March 31, 2003, 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 A 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 9 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”).

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(iii)     “Registrable Securities” means (a) the Conversion Shares, (b) the Warrant Shares, (c) any shares of Common Stock issued as a dividend or premium on Preferred Stock and (d) any other 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 sixtieth (60th) 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 11(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.

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(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 one hundred twenty (120) days 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 3(b) hereof is not declared effective by the SEC within ninety (90) days after the applicable Registration Trigger Date (as defined in Section 3(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 3(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 (including as provided in Section 3(g)), 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 in cash upon demand 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 on the date giving rise to the Company’s obligations hereunder (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 (prorated on a daily basis for each 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 ninetieth (90th) day following a Registration Trigger Date (as defined in Section 3(b)) and prior to the date the Registration Statement filed pursuant to Section 3(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, except as otherwise provided herein (including as provided in Section 3(g)); 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. Notwithstanding anything contained herein to the contrary, the Company shall not be required to make any payments to an Investor pursuant to this Section 2(b) due to events or circumstances wholly beyond its control. Such events or circumstances shall include, but not be limited to, (i) acts of god, (ii) acts of terrorism or any other calamity or crisis that adversely affects the Investor’s ability to sell Registrable Securities pursuant to such Registration Statement, (iii) if trading generally shall have been suspended or materially limited on or by the NNM (as defined in Section 3(k)) or such other securities exchange or electronic trading system on which the Common Stock is then listed or traded gross negligence, or (iv) willful misfeasance on the part of such Investor.

(c)     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 resale by the Initial Investors 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.

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3.     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).

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(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 ninety (90) 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 the Initial Investors’ Counsel (as defined in Section 3(h)), 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). The Company shall furnish to each Investor whose Registrable Securities are included in the Registration Statement and the Initial Investors’ Counsel (i) 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 (ii) 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.

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(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 3(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 or in the Securities Purchase Agreement), 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 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)     Delay Periods; Suspension of Sales.

(i)     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(g)(ii) below, up to thirty (30) days after the date on which the Company provides a notice to the Investors under Section 3(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 thirty (30) days.

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(ii)     The Company will give prompt written notice, in the manner prescribed by Section 3(e) 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.

(h)     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.

(i)     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.

(j)     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.

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(k)     The Company shall have filed a Notification Form: Listing of Additional Shares with respect to the Common Shares and the Warrant Shares with the Nasdaq National Market (“NNM”) on or before the Closing (as defined in the Securities Purchase Agreement). The Company will use its best efforts to continue the listing and trading of its Common Stock on the NNM, the NYSE, the AMEX or 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.

(l)     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.

(m)     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.

(n)     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.

(o)     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).

(p)     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 3(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).

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4.     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 Section 3(e), 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 Section 3(e) 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 transfer ee 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.

5.     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 3 above, including, without limitation, all registration, listing and qualifications fees, printers and accounting fees, the fees and disbursements of counsel for the Company, and the fees and disbursements of one counsel selected by the Investors, shall be borne by the Company. The Investors shall be responsible for paying the underwriting commissions or brokerage fees and taxes of any kind (including, without limitation, transfer taxes) applicable to any disposition, sale or transfer of Registrable Securities.

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

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(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 Statemen t 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, co llectively, “Violations”). Subject to the restrictions set forth in Section 6(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 6(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 unr easonably 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 3(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 9 hereof.

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(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 6(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 ar ises 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 6(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 6(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 6(b) and Section 7) 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 9 hereof. Notwithstanding anything to the contrary contained herein, the indemnification agreement contained in this Section 6(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 6 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 6, 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 fee s 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 Investor s 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 6, except to the extent that the indemnifying party is actually prejudiced in its ability to defend such action. The indemnification required by this Section 6 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.

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7.     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 6 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 6, (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 fra udulent 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.

8.     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.

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9.     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, provided however, that the rights of any Investor hereunder may not be assigned to direct competitors of the Company or persons or entities that have announced plans to compete directly with the Company. In addition, and notwithstanding anything to the contrary contained in this Agreement, the 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, provided such pledge is consistent with applicable laws, rules and regulations, including those promulgated under the Securities Act.

10.     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 more than fifty percent (50%) 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 10 shall be binding upon each Investor and the Company.

11.     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.

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(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:

Orchid BioSciences, Inc.
4390 US Route One North
Princeton, NJ 08540
Telephone: (609) 750-2200
Fax: (609) 750-6400
Attn: Chief Financial Officer

with a copy simultaneously transmitted by like means to:

Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
One Financial Center
Boston, MA 02111
Telephone: (617) 542-6000
Fax: (617) 542-2241
Attn: John J. Cheney, III, Esq.

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 11(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. Each of the Company and the Investor 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. Each of the Company and the Investor irrevocably waives the defense of an inconvenient forum to the maintenance of such suit or proceeding. Each of the Company and the Investor further agrees that service of process mailed by first class mail shall be deemed in every respect effective service of process in any such suit or proceeding. Nothing herein shall affect the Company’s or the Investors’ right to serve process in any o ther manner permitted by law. Each of the Company and the Investor 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.

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(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 9 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 outstanding 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 Secu rities 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.

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(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.

[Remainder of page left blank.]

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

ORCHID BIOSCIENCES, INC.
By:	/s/ Andrew P. Savadelis
Name:  Andrew P. Savadelis
Its:  Sr. Vice President, Finance & Chief Financial Officer
INITIAL INVESTORS:
SDS MERCHANT FUND, LP
By:	/s/ Steve Derby
Name:  Steve Derby
Title:  Managing Member
BAYSTAR CAPITAL II, L.P.
By:	/s/ Steve Derby
Name:  Steve Derby
Title:  Portfolio Manager
DMG LEGACY FUND LLC
By:	/s/ Thomas McAuley
Name:  Thomas McAuley
Title:  Chief Investment Officer
DMG LEGACY INSTITUTIONAL FUND LLC
By:	/s/ Thomas McAuley
Name:  Thomas McAuley
Title:  Chief Investment Officer
DMG LEGACY INTERNATIONAL LTD.
By:	/s/ Thomas McAuley
Name:  Thomas McAuley
Title:  Chief Investment Officer

17

EX-10.3

EXHIBIT 10.3

FIRST AMENDMENT TO
RIGHTS AGREEMENT
BETWEEN
ORCHID BIOSCIENCES, INC.
AND
AMERICAN STOCK TRANSFER & TRUST COMPANY

This First Amendment to Rights Agreement (the “Amendment”) is made as of this 31^st day of March, 2003 by and between Orchid BioSciences, Inc., a Delaware corporation (the “Company”), and American Stock Transfer & Trust Company as rights agent (the “Rights Agent”). Capitalized terms used but not defined herein shall have the meanings given to such terms in the Purchase Agreement (as defined below).

WHEREAS, the Company has entered into a Securities Purchase Agreement dated as of March 31, 2003 by and among the Company and the Purchasers set forth on the execution pages thereof (the “Purchase Agreement”), pursuant to which the Company will issue and sell to the Purchasers units, each consisting of (i) one share of the Company’s Series A Convertible Preferred Stock, par value $.001 per share (the “Preferred Shares”), convertible into 22,222.22 shares of the Company’s common stock, par value $.001 per share (the “Common Stock”), and (ii) a warrant (the “Warrants”) to acquire 6,666.67 shares of Common Stock;

WHEREAS, the Company and the Rights Agent are parties to a Rights Agreement dated as of July 27, 2001 (the “Rights Agreement”); and

WHEREAS, the parties desire to amend the Rights Agreement in connection with the execution and delivery of the Purchase Agreement, the issuance and sale of the Preferred Shares and Warrants and the issuance of Common Stock upon the conversion of the Preferred Shares and the exercise of the Warrants, and the Company and the Rights Agent have executed and delivered this Amendment.

NOW, THEREFORE, in consideration of the foregoing and the mutual agreements herein set forth, the parties hereby agree as follows:

1.     The definition of “Acquiring Person” set forth in Section 1(a) of the Rights Agreement is hereby amended by adding the following sentence to the end of such definition:

“Notwithstanding the foregoing, none of SDS Capital Partners, SDS Merchant Fund, LP, BayStar Capital II, L.P., DMG Legacy Fund LLC, DMG Legacy Institutional Fund LLC or DMG Legacy International Ltd., or any affiliate thereof (each a “Preferred Purchaser” and collectively, the “Preferred Purchasers”) shall be or become an Acquiring Person by reason of (i) the execution or delivery of the Securities Purchase Agreement dated as of March 31, 2003 by and among the Company and the Purchasers set forth on the execution pages thereof (the “Purchase Agreement”), (ii) the purchase of shares of Series A Convertible Preferred Stock, par value $.001 per share, of the Company (the “Preferred Shares”) pursuant to the terms and conditions of the Purchase Agreement, (iii) the purchase of warrants to purchase shares of Common Stock of the Company (the “Warrants”) pursuant to the terms and conditions of the Purchase Agreement, (iv) the issuance of shares of Common Stock of the Company upon the conversion of Preferred Shares purchased pursuant to the terms and conditions of the Purchase Agreement, (v) the issuance of shares of Common Stock of the Company as a dividend on the Preferred Shares purchased pursuant to the terms and conditions of the Purchase Agreement or (vi) the issuance of shares of Common Stock of the Company upon the exercise of Warrants purchased pursuant to the terms and conditions of the Purchase Agreement.”

2.     The definition of “Stock Acquisition Date” set forth in Section 1(nn) of the Rights Agreement is hereby amended by adding the following sentence to the end of such definition:

“Notwithstanding anything else set forth in this Agreement, a Stock Acquisition Date shall not be deemed to have occurred by reason of (i) the execution or delivery of the Purchase Agreement by each of the Preferred Purchasers, (ii) the purchase of shares of Preferred Shares by each of the Preferred Purchasers pursuant to the terms and conditions of the Purchase Agreement, (iii) the purchase of Warrants by each of the Preferred Purchasers pursuant to the terms and conditions of the Purchase Agreement, (iv) the issuance of shares of Common Stock of the Company to each of the Preferred Purchasers upon the conversion of Preferred Shares purchased pursuant to the terms and conditions of the Purchase Agreement, (v) the issuance of shares of Common Stock of the Company to each of the Preferred Purchasers as a dividend on the Preferred Shares purchased pursuant to the terms and conditions of the Purchase Agreement or (vi) the issuance of shares of Common Stock of the Company to each of the Preferred Purchasers upon the exercise of Warrants purchased pursuant to the terms and conditions of the Purchase Agreement.”

3.     The definition of “Triggering Event” set forth in Section 1(rr) of the Rights Agreement is hereby amended by adding the following sentence to the end of such definition:

“Notwithstanding anything else set forth in this Agreement, a Triggering Event shall not be deemed to have occurred by reason of (i) the execution or delivery of the Purchase Agreement by each of the Preferred Purchasers, (ii) the purchase of shares of Preferred Shares by each of the Preferred Purchasers pursuant to the terms and conditions of the Purchase Agreement, (iii) the purchase of Warrants by each of the Preferred Purchasers pursuant to the terms and conditions of the Purchase Agreement, (iv) the issuance of shares of Common Stock of the Company to each of the Preferred Purchasers upon the conversion of Preferred Shares purchased pursuant to the terms and conditions of the Purchase Agreement, (v) the issuance of shares of Common Stock of the Company to each of the Preferred Purchasers as a dividend on the Preferred Shares purchased pursuant to the terms and conditions of the Purchase Agreement or (vi) the issuance of shares of Common Stock of the Company to each of the Preferred Purchasers upon the exercise of Warrants purchased pursuant to the terms and conditions of the Purchase Agreement.”

4.     Section 3(a) of the Rights Agreement shall be amended by adding the following sentence to the end thereof:

2

“Notwithstanding anything else set forth in this Agreement, no Distribution Date shall be deemed to have occurred by reason of (i) the execution or delivery of the Purchase Agreement by each of the Preferred Purchasers, (ii) the purchase of shares of Preferred Shares by each of the Preferred Purchasers pursuant to the terms and conditions of the Purchase Agreement, (iii) the purchase of Warrants by each of the Preferred Purchasers pursuant to the terms and conditions of the Purchase Agreement, (iv) the issuance of shares of Common Stock of the Company to each of the Preferred Purchasers upon the conversion of Preferred Shares purchased pursuant to the terms and conditions of the Purchase Agreement, (v) the issuance of shares of Common Stock of the Company to each of the Preferred Purchasers as a dividend on the Preferred Shares purchased pursuant to the terms and conditions of the Purchase Agreement or (vi) the issuance of shares of Common Stock of the Company to each of the Preferred Purchasers upon the exercise of Warrants purchased pursuant to the terms and conditions of the Purchase Agreement.”

5.     The Rights Agreement, as amended by this Amendment, shall remain in full force and effect in accordance with its terms, until terminated as provided in the Rights Agreement as so amended.

6.     This Amendment shall be deemed to be a contract made under the laws of the State of Delaware and for all purposes shall be governed by and construed in accordance with the laws of such State applicable to contracts to be made and performed entirely within such State. This Amendment may be executed in any number of counterparts, each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute one and the same instrument. If any term, provision, covenant or restriction of this Amendment is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Amendment shall remain in full force and effect and shall in no way be affected, impaired or invalidated.

[The remainder of this page is intentionally left blank.]

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IN WITNESS WHEREOF, the parties herein have caused this Amendment to be duly executed and attested, all as of the date and year first above written.

Attest:		ORCHID BIOSCIENCES, INC.
By:	/s/ Brian P. Keane	By:	/s/ Andrew P. Savadelis
Name:  Brian P. Keane		Name:  Andrew P. Savadelis
Title:  Counsel		Title:  Sr. Vice President & CFO
Attest:		AMERICAN STOCK TRANSFER & TRUST COMPANY
By: /s/ Susan Silber		By: /s/ Herbert J. Lemmer
Name: Susan Silber		Name: Herbert J. Lemmer
Title: Assistant Secretary		Title: Vice President

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EX-99.1

FOR IMMEDIATE RELEASE

Contacts:
Orchid BioSciences, Inc.
(609) 750-2200
Andrew P. Savadelis
Chief Financial Officer
Tracy J. Henrikson
Director, Corporate Communications

ORCHID BIOSCIENCES, INC. CLOSES $16 MILLION FINANCING

PRINCETON, N.J., Apr. 2, 2003 — Orchid BioSciences, Inc. (Nasdaq: ORCH), the leader in profiling genetic uniqueness, today announced that it has completed a $16 million private financing with BayStar Capital, SDS Capital Partners and other institutional investors.

The financing is a significant step in the company’s successful implementation of a number of important strategic and financial actions over the past several months. Orchid plans to use the proceeds from the transaction to support growth in the ongoing operations of its genoprofiling forensic, paternity and public health testing service businesses, for general corporate purposes and to support the company’s goal of achieving profitability in the fourth quarter of 2003.

Orchid sold 1,600 shares of newly issued convertible preferred stock, with each preferred share convertible into approximately 22,222 shares of its common stock. Each preferred share in the proposed offering has a purchase price of $10,000 and includes a warrant to purchase approximately 6,667 shares of Orchid’s common stock. The preferred shares in the proposed offering are convertible into common stock at a per share conversion price of $0.45 and the warrants will be exercisable at $0.45 per share. Orchid also issued 75 shares of convertible preferred stock, along with the associated warrants, as a fee to the placement agent in the transaction.

Pursuant to NASD Marketplace Rule 4350(i)(2), Orchid requested and received from Nasdaq an exception to Nasdaq’s shareholder approval requirements in connection with the private financing.

The securities issued in the financing, as well as the common stock into which the preferred shares will be convertible and for which the warrants will be exercisable, will not be registered under the Securities Act of 1933, as amended, and may not be offered or sold in the U.S. absent registration or an applicable exemption from registration requirements. Orchid does, however, intend to file a registration statement covering the resale of the shares of common stock issuable upon conversion of the preferred shares and the exercise of the warrants within 60 days of the closing of the financing.

About Orchid BioSciences

Orchid BioSciences is the leading provider of services and products for profiling genetic uniqueness. Orchid’s interlocking strategic business units address distinctive markets that together represent a unique balance of established, predictable growth, such as forensic and paternity DNA testing, and large upside potential, like pharmacogenetics-based personalized healthcare. All leverage Orchid’s network of accredited genotyping laboratories, its leading technologies and its expertise in genetic analysis. Orchid provides identity genomics testing for forensics and paternity through Orchid Cellmark and Orchid GeneScreen, and also provides public health genotyping services. Orchid GeneShield is developing pharmacogenetics-based programs designed to accelerate the adoption of personalized healthcare. More information on Orchid can be found at www.orchid.com.

This release shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Company’s securities in any state in which such offer, solicitation or sale would be unlawful prior to their registration or qualification under the securities laws of any such state.

All statements in this press release that are not historical are forward–looking statements within the meaning of Section 21E of the Securities Exchange Act as amended, including statements regarding: Orchid’s anticipated use of the proceeds from the transaction. Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected, including, but not limited to, the ability of the potential investors to back out of the financing prior to the closing. These risks and other additional factors affecting Orchid’s business are discussed in the “Forward–Looking Statements” section of Orchid’s Form 10–Q for the quarterly period ended September 30, 2002 and the “Overview” and “Risk Factors” sections of Orchid’s Annual Report on Form 10–K for the year ended December 31, 2001, filed with the Securities and Exchange Commission. Orchi d expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward–looking statements contained herein to reflect any change in Orchid’s expectations with regard thereto or any change in events, conditions, or circumstances on which any such statements are based, except as may be required by law.

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