Exhibit 10.1

NOTE PURCHASE AGREEMENT

NOTE PURCHASE AGREEMENT (this “Agreement”), dated as of June 2, 2010, between
Exelixis, Inc., a Delaware corporation (the “Borrower”), Deerfield Private
Design Fund, L.P., a Delaware limited partnership, and Deerfield Private Design
International, L.P., a limited partnership organized under the laws of the
British Virgin Islands, (individually, a “Purchaser” and together, the
“Purchasers” and, together with the Borrower, the “Parties”).

W I T N E S S E T H

WHEREAS, the Borrower wishes to issue and sell to the Purchasers, and the
Purchasers wish to purchase from the Borrower, Notes in the aggregate initial
principal amounts set forth herein;

NOW, THEREFORE, in consideration of the mutual agreements set forth herein, the
Purchasers and the Borrower agree as follows:

ARTICLE I

DEFINITIONS

Section 1.1 General Definitions. Wherever used in this Agreement, the Exhibits
or the Schedules attached hereto, unless the context otherwise requires, the
following terms have the following meanings:

“Additional Amounts” has the meaning given to it in Section 2.5(b).

“Affiliate” means any person or entity that, directly or indirectly through one
or more intermediaries, controls or is controlled by or is under common control
with a person or entity, as such terms are used in and construed under Rule 144
under the Securities Act. With respect to a Purchaser, any investment fund or
managed account that is managed on a discretionary basis by the same investment
manager as such Purchaser will be deemed to be an Affiliate of such Purchaser.
As used in this definition of “Affiliate,” the term “control” means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through ownership
of voting securities or partnership or other ownership interest, by contract, or
otherwise.

“Business Day” means a day on which banks are open for business in The City of
New York and San Francisco.

“Cash and Cash Equivalents” means, with respect to any date of determination and
any Person, cash and cash equivalents and short-term and long-term marketable
securities, in each case including those included in long-term investments, as
set forth on such Person’s consolidated balance sheet as of such date.

“Closing” has the meaning given to it in Section 2.1.

 

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“Closing Date” has the meaning given to it in Section 2.1.

“Code” means the Internal Revenue Code of 1986, as amended, and any Treasury
Regulations promulgated thereunder.

“Common Stock” means the common stock, par value $0.001 per share, of the
Borrower.

“Contract Year” means each one-year period ending on an anniversary of the date
of this Agreement.

“Customary Subordination Terms” means, with respect to any subordinated
Indebtedness, that no payment in respect of such Indebtedness may be made if
(a) an Event of Default pursuant to Section 5.5(a) shall have occurred and is
continuing, including as a result of the delivery of an Acceleration Notice (as
defined in Section 5.5), until such Acceleration Notice is rescinded or the
Notes have been paid in full or (b) any other Event of Default shall have
occurred and be continuing and the Purchasers shall have sent to the Borrower a
notice of default (a “Payment Blockage Notice”); provided that no more than one
Payment Blockage Notice may be sent during any 365 day period and payments in
respect of such notes may resume upon the earliest to occur of (i) the date on
which such default is cured or waived, (ii) 91 days after the date the Notes are
paid in full, (iii) the date 179 days after the date on which the Payment
Blockage Notice is received, and (iv) the date the Payment Blockage Notice is
rescinded.

“Development/Commercialization Agreement” means any collaborative agreement,
license, joint venture, partnership or other collaborative arrangement,
regardless of form, for the research, development or commercial exploitation, or
the right to research, develop or exploit, technology, intellectual property,
regulatory rights or products of any Person, including, without limitation, any
agreement, license, joint venture, partnership or arrangement described in
clause (a) of the definition of Excluded Transaction.

“Development/Commercialization Revenue” means, with respect to any fiscal year
of the Borrower, (a) all cash consideration actually received by the Borrower
and its Subsidiaries during such fiscal year relating to (i) upfront payments
pursuant to any Development/Commercialization Agreements entered into after the
Closing Date, and (ii) milestone, profit share and royalty payments pursuant to
any Development/Commercialization Agreements, and (b) any cash actually received
by the Borrower and its Subsidiaries during such fiscal year from the
monetization of any non-cash consideration relating to payments described in
clauses (i) and (ii) above; provided, in each case, any payments received by the
Borrower in respect of the expenses of sponsored research and any other expenses
and capital expenditures incurred by the Borrower and reimbursed pursuant to any
Development Commercialization Agreement shall be excluded from the definition of
Development/Commercialization Revenue.

“Default” means any event which, at the giving of notice, lapse of time or
fulfillment of any other applicable condition (or any combination of the
foregoing), would constitute an Event of Default.

 

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“Discount Factor” means 1/1.00024d, with “d” being the number of calendar days
from the Purchasers’ receipt of an Optional Prepayment Payment through the
Maturity Date; provided, however, that “d” shall never be greater than 1460.

“Dollars” and the “$” sign mean the lawful currency of the United States of
America.

“Event of Default” has the meaning given to it in Section 5.5.

“Excluded Taxes” means all income taxes, minimum or alternative minimum income
taxes, withholding taxes imposed on gross amounts, any tax determined based upon
income, capital gains, gross income, sales, net profits, windfall profits or
similar items, franchise taxes (or any other tax measured by capital, capital
stock or net worth), gross receipts taxes, branch profits taxes, margin taxes
(or any other taxes imposed on or measured by net income, or imposed in lieu of
net income) in any jurisdiction by any Government Authority (or political
subdivision or taxing authority thereof) other than, solely with respect to a
Purchaser that is not a “United States person” within the meaning of
Section 7701(a)(30) of the Code, any Taxes imposed by any U.S. federal, U.S.
state or U.S. local Government Authority in connection with any payments
received (whether in cash or stock) under this Agreement by such Purchaser or
with the execution and delivery of, and the performance of its obligations
under, this Agreement.

“Excluded Transaction” means any of the following transactions:

(a) the entering into any collaborative arrangement, licensing agreement, joint
venture or partnership providing for the research, development or commercial
exploitation of compounds, products or services that provides for the payments
received therefrom or the Borrower’s income or profits to be shared with another
Person, including, without limitation, (1) the grant, to an entity engaged in
the pharmaceutical or biotechnology industry, of a license or option to obtain a
license to any of the Borrower’s intellectual property or other assets, provided
that the Borrower or a wholly owned subsidiary of the Borrower (and not any
third party or any of the Borrower’s stockholders) directly receives from such
entity all consideration paid or payable by such entity in consideration of such
grant (other than any payments made by such third party in satisfaction of
obligations of the Borrower or its wholly-owned subsidiaries), which
consideration may, but need not, include (without limitation) upfront,
milestone, royalty and profit-sharing payments, and (2) the grant of a license
or option to obtain a license to, or the sale or other transfer of, the
Borrower’s intellectual property or other assets to any entity that intends to
research, develop or commercialize products or services covered by such
intellectual property or embodying or arising from such other assets, whether
directly or through the Borrower or another entity, provided that the Borrower
or a wholly owned subsidiary of the Borrower (and not any third party or any of
the Borrower’s stockholders) retains the right or has the obligation to
reacquire such intellectual property or other assets or to terminate such
license or option; and

(b) the incurrence, grant or existence of, or any sale or transfer of any assets
in connection with, any Permitted Lien.

“Financing Documents” means this Agreement, the Notes, the Security Agreement
and any other document or instrument delivered in connection with any of the
foregoing whether or not specifically mentioned herein or therein.

 

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“Government Authority” means any government, governmental department, ministry,
cabinet, commission, board, bureau, agency, tribunal, regulatory authority,
instrumentality, judicial, legislative, fiscal, or administrative body or
entity, domestic or foreign, federal, state or local having jurisdiction over
the matter or matters and Person or Persons in question, including, without
limitation, the SEC.

“GSK Loan” means all Indebtedness of the Borrower to Smith Kline Beecham
Corporation pursuant to that certain Loan and Security Agreement, dated as of
October 28, 2002, as amended, supplemented or otherwise modified from time to
time, between the Borrower and Smith Kline Beecham Corporation.

“Indebtedness” means (a) indebtedness for borrowed money or the deferred price
of property or services, such as reimbursement and other obligations for surety
bonds and letters of credit (but excluding trade and accounts payable in the
ordinary course of business), (b) obligations evidenced by notes, bonds,
debentures or similar instruments, (c) capital lease obligations, (d) any
guarantees of, or other direct or indirect liability for the obligations of
another person, and (e) all obligations from any interest rate, currency or
commodity swap agreement, interest rate cap or collar agreement, or other
agreement or arrangement designed to protect against fluctuation in interest
rates, currency exchange rates or commodity prices; provided that endorsements
in the ordinary course of business shall not constitute Indebtedness.

“Indemnified Person” has the meaning given to it in Section 6.11.

“Indemnity” has the meaning given to it in Section 6.11.

“Issue Price” means, with respect to each Note, the “Issue Price” set forth
therefor on the Schedule of Purchasers.

“Lien” means any lien, pledge, preferential arrangement, mortgage, security
interest, deed of trust, charge, assignment, hypothecation, title retention,
privilege or other encumbrance on or with respect to property or interest in
property having the practical effect of constituting a security interest, in
each case with respect to the payment of any obligation with, or from the
proceeds of, any asset or revenue of any kind.

“Loss” has the meaning given to it in Section 6.11.

“Major Transaction” means, any of the following transactions:

(a) a consolidation, merger, exchange of shares, recapitalization,
reorganization, business combination or other similar event (in each case other
than a stock split, recapitalization, reclassification or other similar
transaction of such character that the shares of Common Stock shall be changed
into or become exchangeable for a larger or smaller number of shares and other
than a merger effected for purposes of changing the Borrower’s state of
incorporation), (i) following which the holders of Common Stock immediately
preceding such consolidation, merger, exchange, recapitalization,
reorganization, combination or event either (A) no longer hold a majority of the
shares of Common Stock or (B) no longer have the ability to elect a majority of
the board of directors of the Borrower or (ii) as a result of which shares of
Common

 

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Stock shall be changed into (or the shares of Common Stock become entitled to
receive) the same or a different number of shares of the same or another class
or classes of stock or securities of another entity (collectively, a “Change of
Control Transaction”);

(b) (i) the sale or transfer of assets in one transaction or a series of related
transactions for a purchase price (excluding any consideration allocable to any
Excluded Transaction, as defined below) of more than $400 million (the
“Aggregate Consideration”) or (ii) a sale or transfer of more than 50% of the
Borrower’s assets; and

(c) the consummation of a purchase, tender or exchange offer made to the holders
of outstanding shares of Common Stock, as result of which a Change of Control
Transaction shall have occurred.

If the maximum aggregate consideration payable in a transaction or series of
related transactions described in clause (a)(i) above (A) includes contingent
payments related to future events, and (B) exceeds the Aggregate Consideration
(without applying any discounts or valuation procedures described below), then
for purposes of determining whether the Aggregate Consideration has been
reached, the net present value of such contingent payments shall be determined
prior to the public announcement of such transaction by a qualified third-party
valuation firm retained by the Borrower selected from a list of such firms
previously agreed upon between the Borrower and the Purchasers and any
transferee or assignee of the Purchasers.

Notwithstanding the foregoing, an Excluded Transaction shall not constitute a
Major Transaction.

“Major Transaction Put Date” means, with respect to any Major Transaction as to
which a Put Notice was sent in accordance with Section 5.4, the date of the
consummation of the applicable Major Transaction.

“Mandatory Prepayment Amount” has the meaning given to it in Section 2.2(a).

“Material Adverse Effect” means a material adverse effect on (a) the business,
operations, prospects, condition (financial or otherwise) or property of the
Borrower, (b) the validity or enforceability of any provision of any Financing
Document, (c) the ability of the Borrower to timely perform the Obligations or
(d) the rights and remedies of the Purchasers under any Financing Document;
provided, however, that none of the following shall be deemed either alone or in
combination to constitute, and none of the following shall be taken into account
in determining whether there has been or would be, a Material Adverse Effect:
(A) any adverse effect that results directly or indirectly from general
economic, business, financial or market conditions; and (B) any adverse effect
arising directly or indirectly from or otherwise relating to any of the
industries or industry sectors in which the Borrower operates.

“Maturity Date” means the fifth anniversary of the Closing Date.

“Notes” means the secured convertible notes purchased by the Purchasers pursuant
to Section 2.1 hereof in the forms attached hereto as Exhibit A-1 and Exhibit
A-2.

 

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“Obligations” means all obligations (monetary or otherwise) of the Borrower
arising under or in connection with the Financing Documents.

“Optional Prepayment Amount” has the meaning set forth in Section 2.2(d).

“Optional Prepayment Price” means, with respect to any optional prepayment
pursuant to Section 2.2(c) or 2.2(d), the product of: (i) the portion of the
Principal Amount being prepaid, (ii) the Discount Factor, and (iii) (a) 1.105 if
the prepayment is prior to the second anniversary of the Closing Date, (b) 1.07
if the prepayment is after the second such anniversary but prior to the third
such anniversary and (c) 1.035 if the prepayment is after the third such
anniversary.

“Organizational Documents” means the Amended and Restated Certificate of
Incorporation, and the certificate of amendment thereto, and the Amended and
Restated By-laws of the Borrower.

“Permitted Indebtedness” means: (a) Indebtedness of Borrower in favor of the
Purchasers arising under the Notes and this Agreement, (b) Indebtedness existing
as of the date hereof and disclosed on Exhibit B hereof, (c) Indebtedness to
trade creditors incurred in the ordinary course of business, (d) Indebtedness
incurred in connection with collaboration, licensing, joint venture or
partnership arrangements, (e) Indebtedness in respect of purchase money
financing, capital lease obligations and equipment financing facilities,
including without limitation, indebtedness pursuant to that certain Loan and
Security Agreement, dated as of May 22, 2002, as amended, supplemented or
otherwise modified from time to time, between the Borrower and Silicon Valley
Bank (and any borrowings thereunder converted into term loans), (f) unsecured
Indebtedness consisting of subordinated convertible notes so long as such notes
are subject to the Customary Subordination Terms, (g) Indebtedness incurred to
finance insurance premiums or time-based license royalties or payments in the
ordinary course of business, (h) Indebtedness in respect of netting services,
overdraft protections and other similar and customary services in connection
with deposit accounts, (i) guaranties in the ordinary course of business of the
obligations of suppliers, customers and licensees of the Borrower,
(j) Indebtedness owed to any Subsidiary, (k) Indebtedness in respect of any and
all interest rate swap transactions, basis swaps, credit derivative
transactions, forward interest rate transactions, commodity swaps, commodity
options, forward commodity contracts, equity or equity index swaps or options,
bond or bond price or bond index swaps or options or forward bond or forward
bond price or forward bond index transactions, interest rate options, forward
foreign exchange transactions, interest rate or foreign exchange rate cap, floor
or collar transactions, currency swap transactions, cross-currency rate swap
transactions, currency options, spot contracts, or any other similar
transactions or any combination of any of the foregoing (including any options
to enter into any of the foregoing), in each case in the ordinary course of
business, (l) any Indebtedness the net proceeds of which are used to prepay the
Notes, (m) Indebtedness in respect of workers’ compensation claims,
self-insurance obligations, indemnities, bankers’ acceptances, performance and
surety bonds, appeal or other similar bonds, in each case in the ordinary course
of business, in any such case, any reimbursement obligations in connection
therewith, (n) Indebtedness in connection with letter of credit obligations
incurred in the ordinary course of business, (o) indebtedness arising from
agreements providing for indemnification, and (p) extensions, refinancings,
replacements and renewals of any items of Permitted Indebtedness, provided that
(i) the principal amounts and premiums, if any, are not increased (plus the
amount of any customary penalties, premiums and costs and expenses incurred
therewith) and (ii) the GSK Loan shall not be refinanced or replaced with any
debt senior to or pari passu with the Obligations.

 

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“Permitted Liens” means: (a) Liens existing on the date hereof and disclosed on
Exhibit C, hereof; (b) Liens in favor of the Purchasers; (c) statutory Liens
created by operation of applicable law; (d) Liens arising in the ordinary course
of business and securing obligations that are not overdue or are being contested
in good faith by appropriate proceedings; (e) Liens securing purchase money or
capitalized lease equipment financing; (f) Liens for Taxes not yet due and
payable or that are being contested in good faith by appropriate proceedings;
(g) pledges or deposits in the ordinary course of business in connection with
workers’ compensation, unemployment insurance and other social security
legislation; (h) deposits to secure the performance of bids, trade contracts and
leases, regulatory or statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature incurred in the
ordinary course of business; (i) easements, rights-of-way, municipal and zoning
and building ordinances, title defects or other irregularities, restrictions and
other similar encumbrances affecting real property which do not in any case
materially detract from the value of the property subject thereto or materially
interfere with the ordinary conduct of the business of the applicable Person;
(j) Liens securing judgments for the payment of money not constituting an Event
of Default; (k) Liens securing Permitted Indebtedness; (l) Liens on a property
of, or on shares of stock of, a Person existing at the time such Person is
merged into or consolidated with the Borrower or a Subsidiary and Liens on
property existing at the time of acquisition thereof by the Borrower or any
Subsidiary; provided that such Liens were not placed on such property in
contemplation of the consummation of such merger, consolidation or acquisition
and do not extend to any assets other than those of the Person merged into or
consolidated with the Borrower or any such Subsidiary, or the property so
acquired, and proceeds and products of any of the foregoing; (m) Liens arising
from filings under the Uniform Commercial Code (or substantially equivalent
filings outside the United States) regarding leases; (n) leases, licenses,
subleases or sublicenses granted to others that do not materially interfere with
the business of the Borrower and the Subsidiaries, taken as a whole; (o) any
option or other agreement to purchase any asset of the Borrower or any
Subsidiary the disposition of which is not otherwise prohibited hereby; (p) the
disposition of accounts receivables in connection with collection in the
ordinary course of business; (q) Liens in favor of financial institutions
arising in connection with the Borrower’s accounts maintained in the ordinary
course of the Borrower’s business held at such institutions to secure standard
fees for services charged by, but not financing made available by, such
institutions; (r) Liens occurring solely by filing of a Uniform Commercial Code
financing statement (or substantially equivalent filings outside the United
States) which filing has not been consented to by the Borrower; (s) cash
collateral pledged to secure standby letter of credit obligations; (t) Liens
securing reimbursement obligations with respect to commercial letters of credit
which encumber documents and other property relating to such letters of credit
and products and proceeds thereof; and (u) Liens on intellectual property of the
Borrower and its Subsidiaries granted in connection with collaboration,
licensing, joint venture or partnership arrangements not prohibited by the
provisions of this Agreement.

“Person” means and includes any natural person, individual, partnership, joint
venture, corporation, trust, limited liability company, limited company, joint
stock company, unincorporated organization, government entity or any political
subdivision or agency thereof, or any other entity.

 

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“Principal Amount” means, with respect to any Note (or portion thereof), the
principal amount of such Note (or portion thereof) payable at maturity thereof,
and with respect to all Notes, means $124,000,000, in each case, less any
repayments pursuant to Section 2.2 hereof.

“Put Notice” has the meaning given to it in Section 5.4.

“Put Price” has the meaning set forth in Section 2.2(c).

“Qualification Criteria” means, in the case of a Major Transaction, a Successor
Entity (i) which has a Market Cap of at least $7.5 billion and outstanding
indebtedness of less than 25% of its Enterprise Value or (ii) whose long-term
debt following a Major Transaction is rated at least “BBB” by Moody’s (or an
equivalent rating by a comparable rating agency). “Market Cap” means the sum of
the number of outstanding shares of each class of equity securities of the
Successor Entity traded or listed on a Principal Market (as defined in
Section 2.9(c)) multiplied by the per share Volume Weighted Average Price for
each such class as of the fifth Trading Day next preceding the announcement of
the applicable Major Transaction. “Enterprise Value” means the sum of the Market
Cap and indebtedness minus Cash and Cash Equivalents as reflected on the balance
sheet of the Successor Entity.

“SEC” means the United States Securities and Exchange Commission.

“Securities Act” means the Securities Act of 1933, as amended, including the
rules and regulations promulgated thereunder.

“Security Agreement” means the Security Agreement, to be dated as of the Closing
Date, between the Borrower and the Purchasers.

“Securities Exchange Act” means the Securities Exchange Act of 1934, as amended,
including the rules and regulations promulgated thereunder.

“Subsidiary” or “Subsidiaries” means, as to the Borrower, any entity of which
securities or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other Persons performing similar functions
are at the time directly or indirectly owned by the Borrower.

“Successor Entity” means any successor to the Borrower resulting from a Major
Transaction.

“Taxes” means all deductions or withholdings for any and all present and future
taxes, levies, imposts, stamp or other duties, fees, assessments, deductions,
withholdings, all other governmental charges, and all liabilities with respect
thereto.

“Volume Weighted Average Price” for any security as of any date or during any
period means the volume weighted average sale price on The NASDAQ Global Select
Market (“NASDAQ”) as reported by, or based upon data reported by, Bloomberg
Financial Markets or

 

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an equivalent, reliable reporting service mutually acceptable to and designated
by the Borrower and the Purchasers (“Bloomberg”) or, if NASDAQ is not the
principal trading market for such security, the volume weighted average sale
price of such security on the principal securities exchange or trading market
where such security is listed or traded as reported by Bloomberg, or, if no
volume weighted average sale price is reported for such security, then the last
closing trade price of such security during such period, as reported by
Bloomberg, or, if no last closing trade price is reported for such security by
Bloomberg, the average of the bid prices of any market makers for such security
that are listed in the over the counter market by the National Association of
Securities Dealers or in the “pink sheets” by the National Quotation Bureau,
Inc. If the Volume Weighted Average Price cannot be calculated for such security
on such date in the manner provided above, the volume weighted average price
shall be the fair market value as mutually determined by the Borrower and the
Purchasers negotiating in good faith.

Section 1.2 Interpretation. In this Agreement, unless the context otherwise
requires, all words and personal pronouns relating thereto shall be read and
construed as the number and gender of the party or parties requires and the verb
shall be read and construed as agreeing with the required word and pronoun; the
division of this Agreement into Articles and Sections and the use of headings
and captions is for convenience of reference only and shall not modify or affect
the interpretation or construction of this Agreement or any of its provisions;
the words “herein,” “hereof,” “hereunder,” “hereinafter” and “hereto” and words
of similar import refer to this Agreement as a whole and not to any particular
Article or Section hereof; the words “include,” “including,” and derivations
thereof shall be deemed to have the phrase “without limitation” attached thereto
unless otherwise expressly stated; references to a specified Article, Exhibit,
Section or Schedule shall be construed as a reference to that specified Article,
Exhibit, Section or Schedule of this Agreement; and any reference to any of the
Financing Documents means such agreement or document as the same shall be
amended, supplemented or modified and from time to time in effect.

Section 1.3 Business Day Adjustment. If the day by which a payment is due to be
made is not a Business Day, that payment shall be made by the next succeeding
Business Day. Any such extension or reduction of time will not be taken into
account in the computation of interest.

ARTICLE II

AGREEMENT FOR THE LOAN

Section 2.1 Note Purchases. Subject to the terms of this Agreement, the Borrower
agrees to issue, and each Purchaser agrees to purchase, Notes in the Principal
Amount set forth opposite such Purchaser’s name on the Schedule of Purchasers
attached hereto. The closing of the sale and purchase of the Notes (the
“Closing”) shall be held on July 2, 2010, or such other time as agreed upon by
the Parties (the “Closing Date”). At the Closing (i) each Purchaser shall
deliver to the Borrower, by wire transfer funds to a deposit account specified
by the Borrower, an amount in readily available funds equal to the Issue Price
set forth opposite such Purchaser’s name on the Schedule of Purchasers attached
hereto; and (ii) the Borrower shall issue and deliver to each Purchaser Notes in
the Principal Amount set forth opposite such Purchaser’s name on the Schedule of
Purchasers attached hereto.

 

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Section 2.2 Prepayment; Maturity.

(a) Subject to the Mandatory Prepayment Amount (as defined below), on or before
January 10, 2013, 2014 and 2015, the Borrower shall prepay a portion of the
Principal Amount of the Notes equal to 15% of the Development/Commercialization
Revenue actually received by the Borrower during the first three quarters of the
previous fiscal year (the “Quarterly Prepayment Amount”); provided that on
January 10, 2013 and January 10, 2014, the Quarterly Prepayment Amount shall not
be less than $10,000,000.

Subject to the Mandatory Prepayment Amount, (i) on or before the Thirtieth
Trading Day (as such term is defined in Section 2.9(e)) after the Borrower files
its Annual Report on Form 10-K for the fiscal years ended December 28,
2012, December 27, 2013 and January 2, 2015 or (ii) if the Borrower is not
required to file reports pursuant to Section 13 or 15(d) of the Securities
Exchange Act, on or before January 31, 2013, January 31, 2014 and January 31,
2015, the Borrower shall prepay a portion of the Principal Amount of the Notes
equal to the difference between (A) 15% of the Development/Commercialization
Revenue actually received by the Borrower during the previous fiscal year and
(B) the Quarterly Prepayment Amount for such previous fiscal year.

The Principal Amount of Notes to be prepaid pursuant to this subsection (a) with
respect to any fiscal year shall not exceed the lesser of (i) the sum of the
Quarterly Prepayment Amount and any further amount payable pursuant to the
preceding paragraph and (ii) $27,500,000 (the “Mandatory Prepayment Amount”).

The Borrower shall provide to the Purchasers at least five Business Days notice
prior to each such mandatory prepayment date the calculation of such
Development/Commercialization Revenue for the relevant fiscal year, together
with the basis for such calculation, and shall promptly provide to the
Purchasers such information as the Purchasers shall reasonably request to permit
the Purchasers to verify each such calculation. Upon Purchasers’ receipt of the
Mandatory Prepayment Amount, the Principal Amount shall be reduced by such
Mandatory Prepayment Amount.

(b) On the Maturity Date, the outstanding Principal Amount of the Notes shall
become due and payable, together with any other accrued and unpaid Obligations.

(c) On a Major Transaction Put Date, the Borrower shall prepay the Notes in full
by paying Purchasers simultaneously with the consummation of the Major
Transaction an amount (the “Put Price”) equal to the sum of: (i) the Optional
Prepayment Price that would be due if the Principal Amount were prepaid in full
on such date, (ii) interest accrued and unpaid on such date, and (iii) any other
accrued and unpaid expenses reimburseable pursuant to Section 6.3.

(d) At any time, and from time to time, the Borrower may prepay all or a portion
(such portion to be not less than $5,000,000) of the Principal Amount (such
amount being the “Optional Prepayment Amount”) by remitting to the Purchasers
(i) the Optional Prepayment Price for the Optional Prepayment Amount, plus
(ii) in the case of

 

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a prepayment of the full Principal Amount other than in connection with a Major
Transaction, all unpaid interest that would accrue and be payable with respect
to the Contract Year in which such prepayment occurs if no prepayment were
effected. Upon the Purchasers’ receipt of payment pursuant to the preceding
sentence, the Principal Amount shall be reduced by the Optional Prepayment
Amount.

Section 2.3 Closing Fee. On the Closing Date, the Borrower shall pay to
Deerfield Management Company, L.P. a closing fee equal to 2.5% of the aggregate
Issue Price of the Notes, which may be payable by set-off against the Issue
Price for the Notes (pro-rated based on the Principal Amount of each Note)
otherwise payable pursuant to Section 2.1.

Section 2.4 Payments. Payments of any amounts due to the Purchasers under this
Agreement shall be made in Dollars in immediately available funds prior to 2:00
p.m New York City time on such date that any such payment is due, at such bank
or places as the Purchasers shall from time to time designate in writing at
least five Business Days prior to such payment date. The Borrower shall pay all
and any costs (administrative or otherwise) imposed by banks, clearing houses,
or any other financial institution in connection with making any payments under
any of the Financing Documents, except for any costs imposed by any of the
Purchasers’ banking institutions.

Section 2.5 Taxes, Duties and Fees.

(a) Subject to the proviso of Section 2.5(b), the Borrower shall pay or cause to
be paid all present and future Taxes (other than Excluded Taxes, if any),
duties, fees and other charges of whatsoever nature, if any, now or at any time
hereafter levied or imposed by any Government Authority by any department,
agency, political subdivision or taxing or other authority thereof or therein,
by any organization of which the applicable Government Authority is a member, or
by any jurisdiction through which the Borrower makes payments hereunder, on or
in connection with the payment of any and all amounts due under this Agreement,
and all payments of principal and other amounts due under this Agreement shall
be made without deduction for or on account of any such Taxes, duties, fees and
other charges, except for Excluded Taxes, which may be deducted or withheld from
payments made by the Borrower only if such deduction or withholding is required
by applicable law.

(b) If the Borrower is required to withhold any such amount or is prevented by
operation of law or otherwise from paying or causing to be paid such Taxes,
duties, fees or other charges as aforesaid except for Excluded Taxes, the
principal or other amounts due under this Agreement (as applicable) shall be
increased to such amount as shall be necessary to yield and remit to the
Purchasers on or after-Tax basis, the full amount it would have received taking
into account any such Taxes (except for Excluded Taxes), duties, fees or other
charges payable on amounts payable by the Borrower under this Section 2.5(b) had
such payment been made without deduction of such Taxes, duties, fees or other
charges (all and any of such additional amounts, subject to the proviso hereto,
herein referred to as the “Additional Amounts”); provided, however, that
notwithstanding anything to the contrary herein, any Taxes (other than Excluded
Taxes) determined to be payable in connection with any payments received
(whether in cash or stock) under this Agreement by such Purchaser or with the
execution and delivery of, and the performance of its obligations under, this
Agreement shall be borne 50% by Borrower

 

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and 50% by the applicable Purchaser(s). The first date on which the Borrower
withholds or determines that it is required to withhold any Taxes as a result of
the provisions relating to conversion of the Notes at the option of the Borrower
into, or payment of interest in, shares of the Borrower’s Common Stock set forth
in Section 2.9 shall be a “Withholding Date.” Any date on which the Borrower
withholds shall be deemed a Withholding Date for purposes of this Agreement
unless the Borrower provides written notice to the Purchasers not less than two
business days prior to withholding stating that it has determined to withhold
for reasons unrelated to the aforesaid option and setting forth the basis for
its decision.

(c) Notwithstanding anything to the contrary herein, Additional Amounts shall
not be payable to the extent the obligation to withhold or deduct would not have
arisen but for the failure of a Purchaser or assignee, immediately following any
request to do so by Borrower, to deliver a properly completed and duly executed
form provided by the Borrower or specified in the Notes establishing an
exemption from or reduction in Tax required under applicable law as a condition
to the exemption or reduction absent a change in applicable law (including
treaties), which such Purchaser is eligible to provide.

(d) If Section 2.5(b) applies and the Purchasers so require, the Borrower shall
deliver to the Purchasers official tax receipts evidencing payment or a copy of
the filed Tax return reporting such payment (or certified copies thereof) of the
Additional Amounts within thirty (30) days of the date of payment.

(e) Purchasers shall cooperate with the Borrower to execute and file such forms
or other documents as they can permissibly execute and file without prejudice or
detriment under the Code to themselves to secure any applicable exemptions from
United States withholding tax, information reporting, and backup withholding, to
reduce the amounts payable by the Borrower pursuant to this Section 2.5 and to
secure any refunds of amounts paid or withheld in accordance with this
Section 2.5. If the Purchasers receive a refund from a Government Authority to
which the Borrower has paid withholding Taxes pursuant to this Section 2.5, or
relating to Taxes in respect of which the Borrower paid Additional Amounts, the
Purchasers shall promptly pay such refund to the Borrower.

Section 2.6 Costs, Expenses and Losses. If, as a result of any failure by the
Borrower to pay any sums when due under this Agreement on the due date therefor
(after the expiration of any applicable grace periods), the Purchasers shall
incur costs, expenses and/or losses, by reason of the liquidation or
redeployment of deposits from third parties or in connection with obtaining
funds to maintain the loans represented by the Notes, the Borrower shall pay to
the Purchasers upon request by the Purchasers, the amount of such costs,
expenses and/or losses within fifteen (15) days after receipt by it of a
certificate from the Purchasers setting forth in reasonable detail such costs,
expenses and/or losses, along with supporting documentation. For the purposes of
the preceding sentence, “costs, expenses and/or losses” shall include, without
limitation, any interest paid or payable to carry any unpaid amount and any
loss, premium, penalty or expense which may be incurred in obtaining,
liquidating or employing deposits of or borrowings from third parties in order
to make, maintain or fund the loans represented by the Notes or any portion
thereof.

 

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Section 2.7 Interest. The outstanding Principal Amount of the Notes shall bear
interest in the annual amount of $6,000,000, payable quarterly in arrears on
each March 31, June 30, September 30 and December 31, with any partial quarterly
periods being pro-rated based on a 365-day or 366-day, as applicable, year. All
interest payments shall be allocated to each Purchaser in accordance with the
aggregate Principal Amount of Notes held by such Purchaser.

Section 2.8 Late Payments. Without limiting the remedies available to the
Purchasers under the Financing Documents or otherwise, to the maximum extent
permitted by applicable law, if the Borrower fails to make any payment of
principal with respect to the Notes when due (after the expiration of any
applicable grace periods), the Borrower shall pay, in respect of the outstanding
Principal Amount of the Notes and so long as such Principal Amount has not been
paid when due, interest equal to 2.0% per annum on the outstanding aggregate
Principal Amount of the Notes. Any such interest shall be in addition to any
interest otherwise payable under Section 2.7 and shall be payable on demand.

Section 2.9 Payment in Common Stock; Conversion Rights

(a) Conversion Right. At any time after the first anniversary of the Closing
Date, and subject to the provisions of this Section 2.9, the Borrower shall have
the right to convert all or a portion of the Notes into, or satisfy all or any
portion of the Optional Prepayment Amount or Mandatory Prepayment Amount for
such Notes in respect of any permitted prepayment under Section 2.2(a) (other
than the first $10,000,000 of payments required to be made pursuant to
Section 2.2(a) on each of January 10, 2013 and January 10, 2014) or 2.2(d) by
delivering, shares of Freely Tradeable Common Stock (as defined below) (a
“Conversion”). Subject to subsections 2.9(i) and (m), the Borrower’s exercise of
its conversion rights under this subsection shall be deemed to satisfy its
obligation to pay the Principal Amount, Optional Prepayment Amount or Mandatory
Prepayment Amount, as applicable, in respect of which such conversion right is
being exercised as of the date of the applicable Share Issuance Closing Date (as
defined below).

(b) Share Issuance Right. In lieu of making any payment of accrued and unpaid
interest in respect of the Notes in cash, at any time after the first
anniversary of the Closing Date, and subject to the provisions of this
Section 2.9, the Borrower may elect to satisfy any such payment by the issuance
to the Purchasers of shares of Freely Tradeable Common Stock (an “Interest Share
Issuance”). Subject to subsections 2.9(i) and (m), the Borrower’s exercise of
its share issuance rights under this subsection shall be deemed to satisfy its
obligation to pay any accrued and unpaid interest in respect of which such share
issuance right is being exercised as of the date of the applicable Share
Issuance Closing Date (as defined below).

(c) Exercise of Share Issuance and Conversion Rights. Subject to the provisions
of this Section 2.9, at any time between the close of regular hours of trading
on any Trading Day and two hours prior to the opening of regular trading hours
for shares of Common Stock on the Principal Market (as defined in subsection
(d) below) on which the shares of Common Stock are then listed (the “Current
Market”) on the immediately following Trading Day, the Borrower may deliver to
the Purchasers notice by phone, electronic mail and facsimile (a “Share Issuance
Notice”) of its intention to issue shares of Common Stock pursuant to the
provisions of this Section 2.9 in payment of interest under the Notes and/or to
convert all or portion of the Notes;

 

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provided, however, that the Borrower may not deliver a Share Issuance Notice
(i) during the occurrence of a Delisting Event (as defined below), (ii) at any
time following a Major Transaction Notice with respect to a Successor Entity
that does not satisfy the Qualification Criteria, (iii) at any time following
the occurrence of an Event of Default (as defined in Section 4.5), (iv) from and
after a Withholding Date or (v) unless all material information regarding the
Borrower has been publicly filed in a report pursuant to the Securities Exchange
Act or is otherwise publicly disclosed. Subject to such provisions, a Share
Issuance Notice shall be irrevocable, shall specify the aggregate Principal
Amount to be converted (and, if applicable, the Optional Prepayment Price
(determined and due as of the last day of the applicable Issuance Period), or
other amount as determined pursuant to Section 2.2(d)) and/or the aggregate
amount of interest under the Notes that the Borrower intends to satisfy by
issuing shares of Common Stock to the Purchasers during the applicable Issuance
Period (as defined in subsection (j) below) (such amount a “Share Issuance
Amount”) and shall specify a floor price for such Conversion and/or Interest
Share Issuance (the “Floor Price”) that is no less than $1.00.

(d) For purposes herein, a “Delisting Event” shall be deemed to have occurred if
the shares of Common Stock cease to be listed, traded or publicly quoted on the
Principal Market on which shares of Common Stock are listed as of the date
hereof, and shall continue until such shares are relisted or requoted on either
the New York Stock Exchange, the American Stock Exchange, the NASDAQ Global
Select Market, the NASDAQ Global Market or the NASDAQ Capital Market (each, a
“Principal Market”), and “Freely Tradeable Common Stock” means, with respect to
any shares of Common Stock issued pursuant to this Section 2.9, either (a) the
shares are registered for primary issuance under the Securities Act under an
effective registration statement filed with the SEC or (b) such shares are
eligible for resale by the Purchasers without restriction and without the need
for registration under any applicable federal or state securities laws; provided
that in the case of clause (b), the Borrower shall have delivered to the
Purchasers an opinion of counsel reasonably satisfactory to the Purchasers,
substantially in the form agreed upon by the parties on the date hereof,
relating to such shares of Common Stock.

(e) Share Issuance or Conversion Closing. For each Trading Day during the
Issuance Period (each, a “Reference Date”), the Borrower shall issue to the
Purchasers a number of shares of Common Stock equal to the product of (1) the
number of shares of Common Stock traded at or above the Floor Price (on all
exchanges and quotation systems on which shares of Common Stock are cited as
having been traded, per the Bloomberg AQR function) on the Reference Date
between 9:35 a.m., New York City time, and the earlier of (a) 3:55 p.m., New
York City time, and (b) such time during the Reference Date as the value (as
determined in accordance with this subsection (e) below) of all shares issuable
in respect of such Reference Date, together with the value of shares issued or
issuable in respect of prior Reference Dates during such Issuance Period are
sufficient to satisfy the entire Share Issuance Amount (the “Applicable Trading
Period”), multiplied by (2) 0.19, rounded to the nearest share (the “Daily Share
Issuance Shares”). By no later than 5:30 p.m., New York City time, on the second
Trading Day following each Reference Date (each, a “Share Issuance Closing
Date”), the Borrower shall cause its transfer agent to electronically transmit
the applicable Daily Share Issuance Shares by crediting the account of the
Purchasers’ prime broker (as specified by the Purchasers no later than one
Trading Day prior to the Share Issuance Closing Date) with DTC through its
Deposit Withdrawal Agent Commission (DWAC) system. Within two hours following
the close of regular trading

 

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hours on each Reference Date, the Purchasers shall deliver a notice to the
Borrower setting forth the number of Daily Share Issuance Shares and the portion
of the Shares Issuance Amount to be satisfied on the Share Issuance Closing Date
relating to such Reference Date, together with appropriate calculations of such
amount. Concurrently with the closing of each Share Issuance on each Share
Issuance Closing Date, an amount (the “Credit Amount”) equal to the product of
(x) the number of shares of Common Stock issued to the Purchaser on such date
multiplied by (y) the Applicable Percentage (as defined below) of the Volume
Weighted Average Price for shares of Common Stock that trade at or above the
Floor Price during the Applicable Trading Period (on all exchanges and quotation
systems on which shares of Common Stock are cited as having been traded, per the
Bloomberg AQR function) on the applicable Reference Date (the “Daily VWAP”)
shall be applied to the accrued and unpaid interest relating to such Interest
Share Issuance and the Notes to be converted (based on the Principal Amount
thereof or in the case of a prepayment pursuant to Section 2.2(d), the amount
set forth therein for the applicable Optional Prepayment Amount). For purposes
herein, “Trading Day” means any day on which the Common Stock is traded for at
least two hours on the Current Market. For purposes herein, “Applicable
Percentage” shall mean (i) if the Daily VWAP is equal to or greater than $3.00,
97.5% and (ii) if the Daily VWAP is below $3.00, 96.5%.

If, as of the end of any Issuance Period, the Share Issuance Amount exceeds the
sum of the applicable Credit Amounts, the Borrower shall (i) pay such difference
to the Purchasers in cash on the first Trading Day following the end of the
Issuance Period or (ii), by notice as provided in Section 2.9(c), initiate a new
Issuance Period (a “Second Issuance Period”) that begins as of the first Trading
Day following the end of the initial Issuance Period for such excess Share
Issuance Amount. The Borrower may not initiate more than one Second Issuance
Period following any initial Issuance Period.

If any part of the amount that is being paid pursuant to a Share Issuance Notice
becomes due prior to the date on which the sum of the Credit Amounts during the
applicable Issuance Period shall equal the Share Issuance Amount, then for that
day and each calendar day thereafter, the difference between the Share Issuance
Amount and the sum of the Credit Amounts as of the end of each such day shall
bear interest at the annual rate of 20%, compounded daily, and the Share
Issuance Amount shall increase daily by the amount of such interest until the
earlier of (A) the sum of the Credit Amounts equals the Share Issuance Amount as
so increased or (B) any excess of the Share Issuance Amount, as so increased,
over the sum of the Credit Amounts has been paid by the Borrower to the
Purchasers in cash.

(f) Borrower Reporting. The Borrower shall file with the SEC a Current Report on
Form 8-K disclosing its delivery of a Share Issuance Notice, or its initiation
of a Second Issuance Period, no later than 8:35 a.m., New York City time, on the
first Reference Date in each Issuance Period.

(g) Subsequent Share Issuances. Following any Share Issuance Notice, the
Borrower may not deliver a subsequent Share Issuance Notice until the date
following the earlier of (i) the Share Issuance Closing Date following which the
Share Issuance Amount specified in such immediately prior Share Issuance Notice
has been fully satisfied and (ii) the expiration of the applicable Issuance
Period related to such prior Share Issuance Notice.

 

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(h) Purchaser Covenant. Subject to compliance with the other provisions
contained herein, the Purchasers agree to use best efforts (which may include,
without limitation, disposing, and causing their respective affiliates to
dispose, of shares of Common Stock and maintaining, and causing their affiliates
to maintain, reduced share ownership levels) to enable the Borrower to issue
shares on any Share Issuance Closing Date equal to 3% of the total number of
shares of Common Stock outstanding on such date without causing the Purchasers
to violate the provisions of Section 2.9(i)(i) below.

(i) Limitations on Share Issuances. Notwithstanding anything herein to the
contrary:

(i) no conversions of the Notes and no payments of interest on the Notes may be
made in shares of Common Stock to the extent that the number of shares so
issued, together with the number of other shares of Common Stock beneficially
owned by the Purchasers and their affiliates and any other persons or entities
whose beneficial ownership of Common Stock would be aggregated with the
Purchasers for purposes of Section 13(d) of the Exchange Act, including any
shares held by any “group” of which the Purchasers are members, but exclusive of
shares issuable at such time upon exercise or conversion of securities or rights
to acquire securities that have limitations on the right to convert, exercise or
purchase similar to the limitations set forth in this Section 2.9(i)(i), would
exceed 9.98% of the total number of shares of Common Stock of the Borrower then
issued and outstanding; and

(ii) the maximum number of shares of Common Stock issued pursuant to the
provisions of this Section 2.9 may not exceed 21,616,563 shares of Common Stock.

For purposes hereof, “group” has the meaning set forth in Section 13(d) of the
Exchange Act and applicable regulations of the SEC, and the percentage held by
the Holder shall be determined in a manner consistent with the provisions of
Section 13(d) of the Exchange Act.

(j) Issuance Period Defined. The “Issuance Period” shall commence on the later
of (the “Commencement Date”) (1) the next full Trading Day following delivery of
the Share Issuance Notice (it being understood that for purposes of this proviso
(1), “the next full Trading Day” shall be the Trading Day on which such Share
Issuance Notice is delivered if the Share Issuance Notice is delivered at least
two hours prior to regular hours trading on such Trading Day) and (2) the next
Trading Day following the filing of the Form 8-K required to be filed under
Section 2.9(f) above (it being understood that for purposes of this proviso (2),
“the next full Trading Day” shall be the date that the Form 8-K is filed if the
Form 8-K is filed by 8:35 a.m., New York City time) and end at the completion of
thirty Trading Days (including such initial Trading Day); provided, however,
that in the event of the occurrence of a Share Delivery Failure during any
Issuance Period, such Issuance Period shall be deemed to have ended at the
completion of the date on which such Share Delivery Failure has occurred.
Notwithstanding anything herein to the contrary, in no event shall the Issuance
Period extend beyond the second Trading Day prior to July 1, 2015 (the “Final
Issuance Date”).

 

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(k) Allocation of Shares. All shares of Common Stock issuable to the Purchasers
pursuant to this Section 2.9 and all Credit Amounts shall be allocated pro rata
among the Notes based on the outstanding Principal Amount of the Notes, and all
Failure Amounts (as defined in subsection (m) below) shall be allocated pro rata
among the Purchasers based on the respective outstanding Principal Amounts of
Notes held by such Purchasers, in each case unless the Purchasers notify the
Borrower in writing of any different allocation ratio.

(l) Issuance of Shares. It shall be a condition precedent to any Conversion or
Share Issuance on any Share Issuance Closing Date that the shares of Common
Stock to be issued have been duly authorized by all necessary corporate action,
when issued in accordance with the terms hereof shall be listed for trading on
the Current Market, shall be validly issued and outstanding and fully paid and
nonassessable, and, when the shares of Common Stock have been issued to the
Purchasers, the Purchasers shall be entitled to all rights accorded to a holder
and beneficial owner of Common Stock.

(m) Failure to Deliver Share Issuance Shares. If the Borrower fails on any Share
Issuance Closing Date to take all actions within its reasonable control to cause
the delivery of the Daily Share Issuance Shares required to be delivered on that
date, and such failure is not cured within one (1) Trading Day following such
Share Issuance Closing Date (a “Share Delivery Failure”), no Principal Amount of
the Notes shall be converted and no interest due under the Notes shall be
reduced in respect of such Daily Shares Issuance Shares until such shares are
actually issued and, in addition to all other obligations under this
Section 2.9, the Borrower shall be obligated to promptly pay to the Purchasers,
for each day that such Share Delivery Failure occurs, an amount equal to the
Failure Amount. As used herein, the “Failure Amount” shall be an amount equal to
5% of the amount that would have constituted the Credit Amount had such failure
not occurred.

(n) Indemnification.

(i) The Borrower will indemnify, hold harmless and defend (i) each Purchaser,
(ii) the directors, officers, partners, managers, members, employees, agents and
each person who controls each Purchaser within the meaning of the Securities Act
or 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 any registration statement, prospectus or
prospectus supplement under the Securities Act covering the issuance of any
shares of Common Stock issuable under this Section 2.9 (collectively, a
“Registration Statement”) or the omission or alleged omission to state therein a
material fact required to be stated or necessary to make the statements therein
not misleading; or (ii) any violation or alleged violation by the Borrower 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, sale or issuance of the shares of Common Stock issuable
pursuant to this Section 2.9

 

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(“Conversion/Repayment Shares”) (the matters in the foregoing clauses (i) and
(ii) being, collectively, “Violations”). The Borrower shall reimburse the
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 2.9(n) shall not apply to amounts paid in
settlement of any Claim if such settlement is effected without the prior written
consent of the Borrower, which consent shall not be unreasonably withheld or
delayed. 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 Conversion/Repayment Shares by a Purchaser and shall be
binding on any transferee.

(ii) Promptly after receipt by an Indemnified Person under this Section 2.9(n)
of notice of the commencement of any action (including any governmental action),
such Indemnified Person shall, if a Claim in respect thereof is to be made
against the Borrower under this Section 2.9(n), deliver to the Borrower a
written notice of the commencement thereof, and the Borrower shall have the
right to participate in, and, to the extent the Borrower so desires, to assume
control of the defense thereof with counsel mutually satisfactory to the
Borrower and the Indemnified Person, as the case may be.

PROVIDED, HOWEVER, that an Indemnified Person shall have the right to retain its
own counsel with the reasonable fees and expenses to be paid by the Borrower,
if, in the reasonable opinion of counsel for a Purchaser, the representation by
such counsel of the Indemnified Person and the Borrower would be inappropriate
due to actual or potential differing interests between such Indemnified Person
and any other party represented by such counsel in such proceeding. The Borrower
shall pay for only one separate legal counsel for the Indemnified Persons, and
such legal counsel shall be selected by the Purchasers. The failure to deliver
written notice to the Borrower within a reasonable time of the commencement of
any such action shall not relieve the Borrower of any liability to the
Indemnified Person under this subsection (n), except to the extent that the
Borrower is actually prejudiced in its ability to defend such action. The
indemnification required by this subsection (n) 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.

(iii) To the extent that the foregoing undertaking by the Borrower may be
unenforceable for any reason, the Borrower shall make the maximum contribution
to the payment and satisfaction of any amounts for which it would otherwise be
liable under subsections 2.9(n)(i) and (ii) above, which is permissible under
applicable law.

 

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ARTICLE III

REPRESENTATIONS AND WARRANTIES

Section 3.1 Representations and Warranties of the Borrower. The Borrower
represents and warrants as of the date hereof, as of the date of each Share
Issuance Notice and as of each Share Issuance Closing Date, as follows:

(a) The Borrower is a corporation duly organized and validly existing under the
laws of the State of Delaware.

(b) The Borrower is conducting its business in compliance with its
Organizational Documents. The Organizational Documents (including all amendments
thereto) as currently in effect have been made available to the Purchasers and
remain in full force and effect.

(c) The Borrower has full power and authority to enter into each of the
Financing Documents and to make the borrowing and the other transactions
contemplated thereby.

(d) All authorizations, consents, approvals, registrations, exemptions and
licenses that are necessary for the borrowing hereunder, the execution and
delivery of the Financing Documents and the performance by the Borrower of its
obligations thereunder, have been obtained and are in full force and effect,
except for such registrations and filings in connection with the issuance of the
shares of Common Stock pursuant to Section 2.9 and filings necessary to comply
with laws, rules, regulations and orders required in the ordinary course of
business.

(e) All authorizations, consents, approvals, registrations, exemptions and
licenses with or from Government Authorities that are necessary for the conduct
of its business as currently conducted and as proposed to be conducted have been
obtained and are in full force and effect, except to the extent any failure to
so obtain would not reasonably be expected to have a Material Adverse Effect;
provided that the failure to receive or obtain approval from an applicable
Governmental Authority for the development or sale of any product shall not
constitute a Material Adverse Effect for purposes of this Section 3.1(e).

(f) No Default or Event of Default (or any other default or event of default,
however described) has occurred under any of the Financing Documents.

(g) Neither the entering into any of the Financing Documents nor the compliance
with any of its terms conflicts with, violates, or results in a breach of any of
the terms of, or constitutes a default or event of default (however described)
or requires any consent under, to the extent applicable, (i) any agreement to
which the Borrower is a party or by which it is bound, (ii) any of the terms of
the Organizational Documents or (iii) any judgment, decree, resolution, award or
order or any statute, rule or regulation applicable to the Borrower or its
assets, except with respect to clause (i) herein, for any

 

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contravention of or default under any agreement that (x) would not materially
adversely affect the business financial position or results of operations of the
Borrower or (y) would not materially adversely affect the rights and remedies of
the Lenders hereunder or any of the Financing Documents.

(h) The Borrower is not engaged in or the subject of any litigation,
arbitration, administrative regulatory compliance proceeding, or investigation,
nor are there any litigation, arbitration, administrative regulatory compliance
proceedings or investigations pending or, to the knowledge of the Borrower,
threatened before or by any Government Authority against the Borrower, that
would reasonably be expected to have a Material Adverse Effect, and the Borrower
is not aware of any facts reasonably likely to give rise to any such proceeding.

(i) The Borrower (i) is capable of paying its debts as they fall due, (ii) is
not bankrupt or insolvent and (iii) has not taken action, and no such action has
been taken by a third party, for the Borrower’s winding up, dissolution, or
liquidation or similar executory or judicial proceeding or for the appointment
of a liquidator, custodian, receiver, trustee, administrator or other similar
officer for the Borrower or any or all of its assets or revenues.

(j) As of the date hereof, no Lien exists on the Borrower’s property, except for
Permitted Liens.

(k) The obligation of the Borrower to make any payment under this Agreement
(together with all charges in connection therewith) is absolute and
unconditional, and there exists no right of setoff or recoupment, counterclaim,
cross-claim or defense of any nature whatsoever to any such payment.

Section 3.2 Borrower Acknowledgment. The Borrower acknowledges that it has made
the representations and warranties referred to in Section 3.1 with the intention
of persuading the Purchasers to enter into the Financing Documents and that the
Purchasers have entered into the Financing Documents on the basis of, and in
full reliance on, each of such representations and warranties.

Section 3.3 Representations and Warranties of the Purchasers. Each of the
Purchasers represents and warrants to the Borrower as of the date hereof:

(a) It is acquiring the Notes solely for its account for investment and not with
a view to or for sale or distribution of the Notes or any part thereof. Each of
the Purchasers also represents that the entire legal and beneficial interests of
the Notes such Purchaser is acquiring is being acquired for, and will be held
for, its account only. It has such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of its
investment and has the ability to bear the economic risks of its investment.

 

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(b) The Notes have not been registered under the Securities Act on the basis
that no distribution or public offering of the stock of the Borrower is to be
effected. Each of the Purchasers realizes that the basis for the exemptions may
not be present, if notwithstanding its representations such Purchaser has a
present intention of acquiring the securities for a fixed or determinable period
in the future, selling (in connection with a distribution or otherwise),
granting any participation in, or otherwise distributing the securities. None of
the Purchasers has such present intention.

(c) It has such knowledge and experience in financial and business matters as to
be capable of evaluating the merits and risks of its investment and has the
ability to bear the economic risks of its investment. The Notes must be held
indefinitely unless they are subsequently registered under the Securities Act or
an exemption for such registration is available.

(d) The Notes may not be sold pursuant to Rule 144 adopted under the Securities
Act unless certain conditions are met, including, among other things, the
availability of certain current public information about the Borrower and the
resale following the required holding period under Rule 144.

(e) It will not make any disposition of all or any part of the Notes until:

(i) The Borrower shall have received a letter secured by such Purchaser from the
SEC stating that no action will be recommended to the SEC with respect to the
proposed disposition;

(ii) There is then in effect a registration statement under the Securities Act
covering such proposed disposition and such disposition is made in accordance
with said registration statement; or

(iii) Such Purchaser shall have notified the Borrower of the proposed
disposition and, in the case of a sale or transfer in a so called “4(1) and a
half” transaction, shall have furnished counsel for the Borrower with an opinion
of counsel on customary form. The Borrower agrees that it will not require an
opinion of counsel with respect to transactions under Rule 144 of the Securities
Act, except in unusual circumstances.

(f) It understands and agrees that the Notes issued to the Purchasers may bear
the following legend.

“THE SECURITY REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, OR APPLICABLE STATE SECURITIES LAWS. THIS SECURITY MAY
NOT BE SOLD, TRANSFERRED OR ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER SAID ACT, OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER
SAID ACT INCLUDING, WITHOUT LIMITATION, PURSUANT TO RULE 144 UNDER SAID ACT.”

(g) Such Purchaser is an “accredited investor” as defined in Regulation D
promulgated the Securities Act.

 

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Section 3.4 Purchasers Acknowledgement. Each of the Purchasers acknowledges that
it has made the representations and warranties referred to in Section 3.3 with
the intention of persuading the Borrower to enter into the Financing Document
and that the Borrower has entered into the Financing Documents on the basis of,
and in full reliance of, each of such representations and warranties. Each
Purchaser further acknowledges that it has had access to such financial and
other information concerning the Borrower and the Notes as it has deemed
necessary in connection with its decision to purchase the Notes, including an
opportunity to ask questions of and request information from the Borrower, that
Borrower has informed it that (a) Borrower may have or may later come into
possession of non-public information concerning the Borrower that may not be
known to such Purchaser and that may or may not be material, (b) such Purchaser
has informed the Borrower that it has not requested and does not want to receive
any such non-public information, and (c) such Purchaser has decided to purchase
the Notes, notwithstanding its lack of knowledge concerning such non-public
information.

ARTICLE IV

CONDITIONS TO PURCHASE OF NOTES

Section 4.1 Conditions to Disbursement of the Loan. The obligation of the
Purchasers to purchase the Notes shall be subject to the fulfillment of the
following conditions. The Purchasers shall have received executed copies of the
Notes and the Security Agreement and a copy of customary closing documents
evidencing the authorization of the Borrower to execute, deliver and perform
each of the Financing Documents and to engage in the transactions contemplated
thereby and an opinion of Borrower’s counsel on customary form reasonably
satisfactory to the Purchasers.

ARTICLE V

PARTICULAR COVENANTS AND EVENTS OF DEFAULT

Section 5.1 Affirmative Covenants. Unless the Purchasers shall otherwise agree:

(a) The Borrower shall (i) maintain its existence and qualification to do
business in such jurisdictions as may be required to conduct its business ,
except where the failure to so maintain such qualification would not reasonably
be expected to have a Material Adverse Effect, and (ii) maintain all approvals
necessary for the Financing Documents to be in effect.

(b) The Borrower shall comply in all material respects with all applicable laws,
rules, regulations and orders of any Government Authority, except where the
necessity of compliance therewith is contested in good faith by appropriate
proceedings or where the failure to so comply, individually or in the aggregate,
would not reasonably be expected to have a Material Adverse Effect.

 

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(c) The Borrower shall obtain, make and keep in full force and effect all
licenses, contracts, consents, approvals and authorizations from and
registrations with Government Authorities that may be required to conduct its
business, except to the extent that the failure to do so would not reasonably be
expected to have a Material Adverse Effect.

(d) The Borrower shall promptly notify the Purchasers of the occurrence of
(i) any Default or Event of Default; (ii) any claims, litigation, arbitration,
mediation or administrative or regulatory proceedings that are instituted or
threatened against the Borrower; except for matters that, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect;
provided that the Borrower shall not be required to provide or otherwise
disclose any material non-public information pursuant to this
Section 5.1(d)(ii); and (iii) each event which, at the giving of notice, lapse
of time, determination of materiality or fulfillment of any other applicable
condition (or any combination of the foregoing), would constitute an Event of
Default (however described) under any of the Financing Documents.

(e)(i) If the Borrower is not required to file reports pursuant to Section 13 or
15(d) of the Securities Exchange Act, the Borrower will provide quarterly
financial statements for itself and its subsidiaries with 45 days after the end
of each quarter, and annual financial statements within 120 days after the end
of each year; (ii) if the Borrower is required to file reports pursuant to
Section 13 or 15 of the Securities Exchange Act, the Borrower will timely file
with the SEC (subject to appropriate extensions made under Rule 12b-25 of the
Securities Exchange Act) any annual, quarterly and other reports (other than
current reports on Form 8-K) required pursuant to Section 13 or 15(d) of the
Exchange Act prepared by the Borrower; and (iii) the Borrower and its
Subsidiaries will provide to the Purchasers copies of all documents, reports,
financial data and other information as the Purchasers may reasonably request,
and permit the Purchasers to visit and inspect any of the properties of the
Borrower and its Subsidiaries, and to discuss its and their affairs, finances
and accounts with its and their officers, all at such times during regular
business hours as the Purchasers may reasonably request; provided that the
Borrower shall not be required to provide or otherwise disclose any material
non-public information pursuant to this Section 5.1(e)(iii).

Section 5.2 Negative Covenants. Unless the Purchasers shall otherwise agree:

(a) The Borrower shall not (i) liquidate or dissolve, or (ii) enter into any
consolidation, merger or reorganization, unless either (A) the Borrower is the
surviving corporation, or (B) the Person formed by such consolidation or
reorganization or into which the Borrower is merged shall be a corporation,
limited liability company, partnership or trust organized and validly existing
under the laws of the United States of America, any state thereof or the
District of Columbia, Japan, or any member country of the European Union, and in
either case such resulting, surviving or transferee Person shall expressly
assume the Obligations.

 

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(b) The Borrower shall not (i) enter into any partnership, joint venture,
syndicate, pool, profit-sharing or royalty agreement or other combination, or
engage in any transaction with an Affiliate (other than a wholly-owned
Subsidiary of the Borrower), whereby its income or profits are shared with
another Person (other than a wholly-owned Subsidiary of the Borrower) or enter
into any management contract or similar arrangement whereby a substantial part
of its business is managed by another Person, (ii) distribute, or permit the
distribution, of any assets of the Borrower or its Subsidiaries, including its
intangibles, to any shareholders of the Borrower or the holder of any equity
interest in any Subsidiary of the Borrower or any of the Borrower’s Affiliates
(other than the Borrower or a wholly-owned Subsidiary of the Borrower);
provided, however, that (A) with respect to the restrictions in clause (i) the
Borrower may enter into any collaborative arrangement, licensing agreement,
joint venture or partnership providing for the research, development or
commercial exploitation of compounds, products or services whereby payments
received therefrom or its income or profits are, or might be, shared with
another Person, including, without limitation, (1) any grant to any entity
engaged in the pharmaceutical or biotechnology industry of a license or option
to obtain a license to any of the Borrower’s intellectual property or other
assets, provided that the Borrower or a wholly owned Subsidiary (and not any
third party or any of the Borrower’s stockholders) directly receives from such
entity all consideration paid or payable by such entity in consideration of such
grant (other than any payments made by such third party in satisfaction of
obligations of the Borrower or its wholly-owned subsidiaries), which
consideration may, but need not, including (without limitation) upfront,
milestone, royalty and profit-sharing payments, and (2) any grant of a license
or option to obtain a license to, or the sale or other transfer of, the
Borrower’s intellectual property or other assets to any entity that intends to
research, develop or commercialize products or services covered by such
intellectual property or embodying or arising from such other assets, whether
directly or through the Borrower or another entity, provided that the Borrower
or a wholly owned Subsidiary (and not any third party or any of the Borrower’s
stockholders) retains the right or has the obligation to reacquire such
intellectual property or other assets or to terminate such license or option,
(B) the Borrower may incur, grant or suffer to exist, or sell or transfer any
assets in connection with any Permitted Liens, and (C) with respect to the
restrictions in clause (ii), royalties and other payments made by any
partnership, joint venture, syndicate, pool, profit-sharing or royalty agreement
or other combination, to the parties thereto shall not be deemed to be a
distribution of assets.

(c) The Borrower shall not create, incur assume, guarantee or become liable with
respect to any Indebtedness, other than Permitted Indebtedness, or voluntarily
prepay any Indebtedness, except (i) prepayments of the Notes, (ii) prepayments
of the GSK Loan, (iii) repayments of borrowings under revolving credit
facilities, (iv) prepayments in connection with the conversion of advances under
equipment financings into term loans, (v) repayments of Permitted Indebtedness
to the extent refinanced or replaced with indebtedness having a weighted average
maturity equal to or greater than the Indebtedness being prepaid (provided that
(A) Permitted Indebtedness subordinated to the Notes shall not be refinanced or
replaced with Indebtedness senior to or pari passu with the Notes and
(B) Permitted Indebtedness pari passu with the Notes shall not be

 

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refinanced or replaced with Indebtedness senior to the Notes) and
(vi) prepayments of loans made in connection with collaboration, licensing,
joint venture or joint partnership arrangements in connection with the
restructuring of such arrangements, in each case not prohibited under this
Agreement.

Section 5.3 [Intentionally Omitted]

Section 5.4 Major Transaction Put. The Borrower shall give the Purchasers notice
of a Major Transaction at least 20 Business Days prior to the anticipated
effective date for such transaction; provided that if such transaction is not
publicly announced in time for Borrower to comply with the foregoing notice
requirement, the Borrower shall give the Purchasers notice of such Major
Transaction no later than two days following the public announcement thereof but
in no event less than 10 calendar days prior to consummation of the Major
Transaction. If the Successor Entity does not satisfy the Qualification
Criteria, the Purchasers, in the exercise of their sole discretion, may deliver
a notice to the Borrower (the “Put Notice”) declaring that the Put Price shall
become due and payable on the Major Transaction Put Date; provided that the Put
Notice is delivered at least 10 Business Days prior to the Major Transaction Put
Date or, in the event notice of such Major Transaction is given by the Borrower
less than 20 Business Days prior to the Major Transaction Put Date, at least 7
calendar days prior to the Major Transaction Put Date. If the Purchasers deliver
a Put Notice, then on the Major Transaction Put Date, the Borrower shall pay the
Put Price to the Purchasers and the Obligations shall terminate. The Borrower
shall not consummate any Major Transaction without complying with the provisions
applicable to the Borrower of Section 2.2(c) and this Section 5.4.

Section 5.5 General Acceleration Provision upon Events of Default. If one or
more of the events specified in this Section 5.5 (each an “Event of Default”)
shall have occurred and be continuing beyond any applicable cure period, the
Purchasers, by written notice to the Borrower, (any such notice, an
“Acceleration Notice”), may declare the Put Price or any part thereof to be, and
the same shall thereupon become, immediately due and payable, without any
further notice and without any presentment, demand, or protest of any kind, all
of which are hereby expressly waived by the Borrower, and take any further
action available at law or in equity, including, without limitation, the sale of
the Notes and all other rights acquired in connection with the Notes; provided,
however, that an Acceleration Notice shall be deemed to have been sent to
Borrower immediately upon the occurrence of any event described in
Section 5.5(e) and, in the case of a proceeding of the type described in
Section 5.5(e)(iv), shall be deemed to have been withdrawn if such proceeding is
dismissed or discontinued within the 90-day period provided for therein (absent
the occurrence of any other Event of Default during such 90-day period):

(a) A Purchaser shall have failed to receive payment of (i) principal when due
under the Notes, or (ii) any other amounts due under the Notes within five
(5) Business Days of their due date; provided, however, that any amounts that
the Borrower shall have elected to pay pursuant to a Share Issuance Notice shall
not be deemed due under the Notes until (A) in the case of Daily Share Issuance
Shares, the applicable Share Issuance Closing Date, and (B) in the case of any
amounts to be paid in cash by the Borrower pursuant to Section 2.9(e), the first
Trading Day immediately following the end of the applicable Share Issuance
Period.

 

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(b) The Borrower shall have failed to comply with the covenant set forth in
Section 5.4.

(c) The Borrower shall have failed to comply in any material respect with the
due observance or performance of any other covenant contained in this Agreement
or any Note and such failure shall not have been cured by the Borrower within
(i) 30 days after such failure in the case of a breach of Section 5.1(e)(i) (it
being agreed that a cure of such breach within such period is “timely”, as such
term is used in such Section), or (ii) 30 days after receiving written notice of
such failure from the Purchasers in the case of any other covenant (other than
that contained in Section 5.4).

(d) Any representation or warranty made by the Borrower in any Financing
Document shall have been incorrect, false or misleading in any material respect
as of the date it was made.

(e)(i) The Borrower shall generally be unable to pay its debts as such debts
become due, or shall admit in writing its inability to pay its debts as they
come due or shall make a general assignment for the benefit of creditors;
(ii) the Borrower shall declare a moratorium on the payment of its debts;
(iii) the commencement by the Borrower of proceedings to be adjudicated bankrupt
or insolvent, or the consent by it to the commencement of bankruptcy or
insolvency proceedings against it, or the filing by it of a petition or answer
or consent seeking reorganization, intervention or other similar relief under
any applicable law, or the consent by it to the filing of any such petition or
to the appointment of an intervenor, receiver, liquidator, assignee, trustee,
sequestrator (or other similar official) of any substantial part of its assets;
(iv) the commencement against the Borrower or all or substantially all of its
assets of a proceeding in any court of competent jurisdiction under any
bankruptcy or other applicable law (as now or hereafter in effect) seeking its
liquidation, winding up, dissolution, reorganization, arrangement, adjustment,
or the appointment of an intervenor, receiver, liquidator, assignee, trustee,
sequestrator (or other similar official), and any such proceeding shall continue
undismissed, or any order, judgment or decree approving or ordering any of the
foregoing shall continue unstayed or otherwise in effect, for a period of ninety
(90) days; (v) the making by the Borrower of an assignment for the benefit of
creditors, or the admission by it in writing of its inability to pay its debt
generally as they become due; or (vi) any other event shall have occurred which
under any applicable law would have an effect analogous to any of those events
listed above in this subsection.

(f) One or more judgments against the Borrower taken as a whole or attachments
against any of its property, which in the aggregate amount exceeds $2,500,000,
and such judgment(s) remain unstayed on appeal, undischarged, unbonded or
undismissed for a period of sixty (60) days from the date of entry of such
judgment(s).

(g) The Borrower repudiates any of the Financing Documents or challenges the
validity or enforceability of the Financing Documents.

 

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(h) The validity of any provision of any of the Financing Document shall be
contested by any legislative, executive or judicial body of any jurisdiction, or
any treaty, law, regulation, communiqué, decree, ordinance or policy of any
jurisdiction shall purport to render any material provision of any Financing
Document invalid or unenforceable or shall purport to prevent or materially
delay the performance or observance by the Borrower of the Obligations and the
Parties are unable to negotiate a replacement provision pursuant to Section 6.7
below.

(i) There is a failure to perform in any agreement to which the Borrower is a
party with a third party or parties resulting in the acceleration of the
maturity of any Indebtedness in an amount in excess of $1,500,000 and such
acceleration is not rescinded, or such Indebtedness is not contested in good
faith or paid or otherwise discharged, within thirty (30) days after such
acceleration.

(j) Cash and Cash Equivalents as of December 30, 2011 are less than $10,000,000
or Cash and Cash Equivalents as of December 28, 2012 are less than $20,000,000.

Notwithstanding the foregoing, no Event of Default shall be deemed to have
occurred pursuant to Section 5.5(a) to the extent Borrower has failed to make
any payment or effect any redemption pursuant to Section 2.2(a) as a result of a
good faith dispute with the Purchasers as to the calculation of any Mandatory
Prepayment Amount; provided that the Borrower shall have redeemed the Notes in
accordance with Section 2.2(a) in an aggregate Principal Amount equal to the
undisputed portion of such Mandatory Redemption Amount and that to the extent
the parties have not resolved such dispute within 30 days, the parties shall
have referred such dispute to a firm of independent certified public accountants
as the Borrower and the Purchasers shall mutually select (the “Auditor”). Each
of the Borrower and the Purchasers shall submit to the Auditor a calculation of
the Mandatory Prepayment Amount. The Auditor shall review the such calculations
and the financial statements and other records of the Borrower and shall
determine the amount of any Mandatory Prepayment Amount, which determination
shall be binding upon the Purchasers and the Borrower (absent manifest error)
and made and certified to the Purchasers and the Borrower as promptly as
practicable but in any event not later than 30 days after its engagement . The
Auditor shall be given full access to the books and records of the Borrower to
enable it to make such determination. The fees of the Auditor shall be paid by
the parties whose calculation of the Mandatory Prepayment Amount was the
furthest from the Mandatory Prepayment Amount determined by the Auditors.

Section 5.6 Automatic Acceleration on Dissolution or Bankruptcy. Notwithstanding
any other provisions of this Agreement, if an Event of Default under
Section 5.5(e) shall occur, the Put Price shall thereupon become immediately due
and payable without any presentment, demand, protest or notice of any kind, all
of which are hereby expressly waived by the Borrower.

Section 5.7 Recovery of Amounts Due. If any amount payable hereunder is not paid
as and when due, the Borrower hereby authorizes the Purchaser to proceed, to the
fullest extent permitted by applicable law, without prior notice, by right of
set-off, banker’s lien or counterclaim, against any moneys or other assets of
the Borrower to the full extent of all amounts payable to the Purchasers.

 

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ARTICLE VI

MISCELLANEOUS

Section 6.1 Notices. Any notice, request or other communication to be given or
made under this Agreement shall be in writing. Such notice, request or other
communication shall be deemed to have been duly given or made when it shall be
delivered by hand, courier (confirmed by facsimile), or facsimile (with a hard
copy delivered within two (2) Business Days) to the Party to which it is
required or permitted to be given or made at such Party’s address specified
below or at such other address as such Party shall have designated by notice to
the other Parties.

For the Borrower:

If sent via U.S. Postal Service:

Exelixis, Inc.

170 Harbor Way

P.O. Box 511

South San Francisco, CA 94083-0511

Attn: Executive Vice President and General Counsel

If sent via any other carrier:

Exelixis, Inc.

Receiving Dept.

220 E. Grand Ave.

South San Francisco, CA 94080

Attn: Executive Vice President and General Counsel

Facsimile: (650) 837-7179

with a courtesy copy to:

Cooley Godward Kronish LLP

Five Palo Alto Square

3000 El Camino Real

Palo Alto, CA 94306

Attention: Suzanne Sawochka Hooper, Esq.

Facsimile: (650) 849-7400

For the Purchasers c/o:

Deerfield Private Design Fund, L.P.

780 Third Avenue, 37th Floor

New York, New York 10017

Attention: James E. Flynn

 

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Facsimile: (212) 573-8111

with a courtesy copy to:

Katten Muchin Rosenman LLP

575 Madison Avenue

New York, New York 10022-2585

Facsimile: (212) 894-5827

Attention: Robert I. Fisher

Section 6.2 Waiver of Notice. Whenever any notice is required to be given to the
Purchasers or the Borrower under the any of the Financing Documents, a waiver
thereof in writing signed by the Person or Persons entitled to such notice,
whether before or after the time stated therein, shall be deemed equivalent to
the giving of such notice.

Section 6.3 Reimbursement of Legal and Other Expenses. If any amount owing to
the Purchasers under any Financing Document shall be collected through
enforcement of such Financing Document, any refinancing or restructuring of the
Notes in the nature of a work-out, settlement, negotiation, or any process of
law, or shall be placed in the hands of third Persons for collection, the
Borrower shall pay (in addition to all monies then due in respect of the Notes
or otherwise payable under any Financing Document) documented attorneys’ and
other fees and expenses reasonably incurred in respect of such enforcement,
refinancing, restructuring, process of law on collection.

Section 6.4 Applicable Law and Consent to Non-Exclusive New York Jurisdiction.
This Agreement shall be governed by and construed in accordance with the laws of
the State of New York, without giving effect to the conflicts of laws principles
thereof other than Sections 5-1401 and 5-1402 of the General Obligations Law of
such State.

(a) Each party hereby irrevocably submits to the jurisdiction of the state and
federal courts sitting in The City of New York, borough of Manhattan or the City
of San Francisco for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein, and
hereby irrevocably waives, and agrees not to assert in any suit, action or other
proceeding, any claim that it is not personally subject to the jurisdiction of
any such court that such court, action or proceeding is improper or is an
inconvenient venue for such proceeding. Final non-appealable judgment against
any party in any such action, suit or other proceeding shall be conclusive and
may be enforced in any jurisdiction by suit on the judgment. Nothing contained
in any Financing Document shall affect the right of the Purchasers to commence
legal proceedings in any court having jurisdiction, or concurrently in more than
one jurisdiction, or to serve process, pleadings and other legal papers upon the
Borrower in any manner authorized by the laws of any such jurisdiction. The
Borrower irrevocably waives, to the fullest extent permitted by applicable law,
any objection which it may now or hereafter have to the laying of venue of any
action, suit or other proceeding arising out of or relating to any Financing
Document, brought in the courts of the State of New York or in the United States
District Court for the Southern District of New York, and any claim that any
such action, suit or other proceeding brought in any such court has been brought
in an inconvenient forum.

 

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(b) The Borrower hereby waives any and all rights to demand a trial by jury in
any action, suit or other proceeding arising out of any Financing Document or
the transactions contemplated by any Financing Document.

(c) To the extent that the Parties may, in any suit, action or other proceeding
brought in any court arising out of or in connection with any Financing
Document, be entitled to the benefit of any provision of law requiring the
Borrower or the Purchasers, as applicable, in such suit, action or other
proceeding to post security for the costs of the Borrower or the Purchasers, as
applicable, or to post a bond or to take similar action, the Parties hereby
irrevocably waive such benefit, in each case to the fullest extent now or
hereafter permitted under any applicable laws.

Section 6.5 Successors and Assigns. This Agreement shall bind and inure to the
respective successors and assigns of the Parties, except that the Borrower may
not assign or otherwise transfer all or any part of its rights under this
Agreement or the Obligations without the prior written consent of the
Purchasers. Notwithstanding the foregoing, nothing in this Section 6.5 shall be
deemed to limit or otherwise restrict a merger, reorganization or sale of
substantially all of the assets of the Borrower.

Section 6.6 Entire Agreement. The Financing Documents contain the entire
understanding of the Parties with respect to the matters covered thereby and
supersede any and all other written and oral communications, negotiations,
commitments and writings with respect thereto. The provisions of this Agreement
may be waived, modified, supplemented or amended only by an instrument in
writing signed by the authorized officer of each Party.

Section 6.7 Severability. If any provision contained in this Agreement shall be
invalid, illegal or unenforceable in any respect under any law, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby. The Parties shall endeavor in good faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions the economic effect of which comes as close as possible to that
of the invalid, illegal or unenforceable provision.

Section 6.8 Counterparts. This Agreement may be executed in several
counterparts, and by each Party on separate counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
agreement.

Section 6.9 Survival.

(a) This Agreement and all agreements, representations and warranties made in
the other Financing Documents, and in any document, certificate or statement
delivered pursuant thereto or in connection therewith shall be considered to
have been relied upon by the Parties and shall survive the execution and
delivery of this Agreement and the purchase of the Notes hereunder regardless of
any investigation made by any other Party or on its behalf, and shall continue
in force until the Obligations shall have

 

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been fully paid, and the Purchasers shall not be deemed to have waived, by
reason of purchasing the Notes, any Default that may arise by reason of such
representation or warranty proving to have been false or misleading,
notwithstanding that the Purchasers may have had notice or knowledge that such
representation or warranty was false or misleading on the date hereof.

(b) The obligations of the Borrower under Section 2.6 and the obligations of the
Borrower and the Purchasers under this Section 6.9 hereof shall survive and
remain in full force and effect regardless of the consummation of the
transactions contemplated hereby, the repayment of the Notes, or the termination
of this Agreement or any provision hereof.

Section 6.10 Waiver. Neither the failure of, nor any delay on the part of, any
Party in exercising any right, power or privilege hereunder, or under any
agreement, document or instrument mentioned herein, shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or
privilege hereunder, or under any agreement, document or instrument mentioned
herein, preclude other or further exercise thereof or the exercise of any other
right, power or privilege; nor shall any waiver of any right, power, privilege
or default hereunder, or under any agreement, document or instrument mentioned
herein, constitute a waiver of any other right, power, privilege or default or
constitute a waiver of any default of the same or of any other term or
provision. No course of dealing and no delay in exercising, or omission to
exercise, any right, power or remedy accruing to the Purchasers upon any default
under this Agreement, or any other agreement shall impair any such right, power
or remedy or be construed to be a waiver thereof or an acquiescence therein; nor
shall the action of the Purchasers in respect of any such default, or any
acquiescence by it therein, affect or impair any right, power or remedy of the
Purchasers in respect of any other default. All rights and remedies herein
provided are cumulative and not exclusive of any rights or remedies otherwise
provided by law.

Section 6.11 Indemnity.

(a) The Parties shall, at all times, indemnify and hold each other harmless (the
“Indemnity”) and each of their respective directors, partners, officers,
employees, agents, counsel and advisors (each, an “Indemnified Person”) in
connection with any losses, claims (including the cost of defending against such
claims), damages, liabilities, penalties, or other expenses which may be
incurred by or asserted against an Indemnified Person arising out of, any
investigation, litigation or proceeding, relating to the Financing Documents
(each, a “Loss”) the extension of credit hereunder or the Notes or the use or
intended use of the proceeds from the sale of the Notes, which an Indemnified
Person may incur or to which an Indemnified Person may become subject. The
Indemnity shall not apply to the extent that a court or arbitral tribunal with
jurisdiction over the subject matter of the Loss, and over the Purchasers or the
Borrower, as applicable, and such other Indemnified Person that had an adequate
opportunity to defend its interests, determines that such Loss resulted from the
gross negligence or willful misconduct of the Indemnified Person, which
determination results in a final, non-appealable judgment or decision of a court
or tribunal of competent jurisdiction. The Indemnity is independent of and in
addition to any other agreement of any Party under any Financing Document to pay
any amount to the Purchasers or the Borrower, as applicable, and any exclusion
of any obligation to pay any amount under this subsection shall not affect the
requirement to pay such amount under any other section hereof or under any other
agreement.

 

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(b) Without prejudice to the survival of any other agreement of any of the
Parties hereunder, the agreements and the obligations of the Parties contained
in this Section 6.11 shall survive the termination of each other provision
hereof and the payment of all amounts payable to the Purchasers hereunder.

Section 6.12 No Usury. The Financing Documents are hereby expressly limited so
that in no contingency or event whatsoever, whether by reason of acceleration or
otherwise, shall the amount paid or agreed to be paid to the Purchasers in
respect of the Notes exceed the maximum amount permissible under applicable law.
If from any circumstance whatsoever fulfillment of any provision hereof, at the
time performance of such provision shall be due, shall involve transcending the
limit of validity prescribed by law, then, ipso facto, the obligation to be
fulfilled shall be reduced to the limit of such validity, and if from any such
circumstance the Purchasers shall ever receive anything which might be deemed
interest under applicable law, that would exceed the highest lawful rate, such
amount that would be deemed excessive interest shall be applied to the reduction
of the principal amount owing on account of the Notes, or if such deemed
excessive interest exceeds the unpaid balance of principal of the Notes, such
deemed excess shall be refunded to the Borrower. All sums paid or agreed to be
paid to the Purchasers for the Notes shall, to the extent permitted by
applicable law, be deemed to be amortized, prorated, allocated and spread
throughout the full term of the Notes until payment in full so that the deemed
rate of interest on account of the Notes is uniform throughout the term thereof.
The terms and provisions of this paragraph shall control and supersede every
other provision of this Agreement and the Notes.

Section 6.13 Further Assurances. From time to time, the Borrower shall perform
any and all acts and execute and deliver to the Purchasers such additional
documents as may be necessary or as requested by the Purchasers to carry out the
purposes of any Financing Document or any or to preserve and protect the
Purchasers’ rights as contemplated therein.

Section 6.14 Termination. This Agreement shall automatically terminate upon the
conversion and/or repayment of all of the Notes (together with the payment of
any other accrued and unpaid amounts under this Agreement), whereupon the
Obligations shall terminate subject to the provisions of Sections 2.9(n), 6.9(b)
and 6.11

[SIGNATURE PAGE FOLLOWS]

 

32

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IN WITNESS WHEREOF, the Parties, acting through their duly authorized
representatives, have caused this Agreement to be signed in their respective
names as of the date first above written.

 

BORROWER:

EXELIXIS, INC.

By:   /s/ George A. Scangos   Name: George A. Scangos, PhD   Title: President
and Chief Executive Officer PURCHASER: DEERFIELD PRIVATE DESIGN FUND, L.P. By:
Deerfield Capital, L.P., General Partner By: J.E. Flynn Capital, LLC, General
Partner

 

By:   /s/ David J. Clark   Name: David J. Clark   Title: Authorized Signatory

 

PURCHASER: DEERFIELD PRIVATE DESIGN INTERNATIONAL, L.P. By: Deerfield Capital,
L.P., General Partner By: J.E. Flynn Capital, LLC, General Partner

 

By:   /s/ David J. Clark   Name: David J. Clark   Title: Authorized Signatory

 

33

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SCHEDULE OF PURCHASERS

 

Name

   Issue Price    Principal Amount

Deerfield Private Design Fund, L.P.

   $ 30,640,000    $ 47,492,000

Deerfield Private Design International, L.P.

   $ 49,360,000    $ 76,508,000

 

34

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EXHIBIT A-1

FORM OF NOTE

SECURED CONVERTIBLE NOTE

THE SECURITY REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, OR APPLICABLE STATE SECURITIES LAWS. THIS SECURITY MAY
NOT BE SOLD, TRANSFERRED OR ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER SAID ACT, OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER
SAID ACT INCLUDING, WITHOUT LIMITATION, PURSUANT TO RULE 144 UNDER SAID ACT.

THIS NOTE IS BEING ISSUED WITH ORIGINAL ISSUE DISCOUNT (“OID”). THE FOLLOWING
INFORMATION IS BEING PROVIDED PURSUANT TO TREASURY REGULATION SECTION 1.275-3:

 

ISSUE PRICE:

AMOUNT OF OID:

ISSUE DATE:

MATURITY DATE:

June     , 2010

FOR VALUE RECEIVED, EXELIXIS, INC., a Delaware corporation (the “Issuer”), by
means of this Promissory Note (this “Note”), hereby unconditionally promises to
pay to Deerfield Private Design International, L.P. (the “Holder”), a principal
amount equal to $[            ] (or such lesser amount as may be outstanding
under this Note as result of prepayments and conversions by the Borrower
pursuant to the Note Purchase Agreement (as defined below)), in lawful money of
the United States of America and in immediately available funds, on the dates
provided in the Note Purchase Agreement.

 

1

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This Note is a “Note” referred to in the Note Purchase Agreement dated as of
June     , 2010 among the Issuer, the Holder and the other parties thereto (as
modified and supplemented and in effect from time to time, the “Note Purchase
Agreement”), with respect to the purchase of this Note by the Holder thereunder.
Capitalized terms used herein and not expressly defined in this Note shall have
the respective meanings assigned to them in the Note Purchase Agreement. All
Obligations of the Issuer under this Note are secured as provided in the
Security Agreement.

This Note shall bear interest on the Principal Amount hereof in the amounts set
forth in and pursuant to the provisions of the Note Purchase Agreement. This
Note is subject to the voluntary and mandatory prepayment provisions set forth
in the Note Purchase Agreement.

The Issuer shall make all payments to the Holder of interest and principal under
this Note in the manner provided in and otherwise in accordance with the Note
Purchase Agreement. The principal amount of this Note may be converted into
shares of Common Stock as set forth in the Note Purchaser Agreement. On the
Maturity Date and on any Major Transaction Put Date, the Principal Amount of
this Note shall become due and payable.

If default is made in the punctual payment of principal or any other amount
under this Note in accordance with the Note Purchase Agreement, or if any other
Event of Default has occurred, this Note shall, at the Holder’s option exercised
at any time upon or after the occurrence of any such payment default or other
Event of Default and in accordance with the applicable provisions of the Note
Purchase Agreement, become immediately due and payable.

All payments of any kind due to the Holder from the Issuer pursuant to this Note
shall be made in the full face amount thereof, other than Excluded Taxes. The
Issuer shall pay all and any costs (administrative or otherwise) imposed by
banks, clearing houses, or any other financial institution, in connection with
making any payments hereunder, except for any costs imposed by the Holder’s
banking institutions.

The Issuer shall pay all reasonable costs of collection, including, without
limitation, all reasonable, documented legal expenses and attorneys’ fees, paid
or incurred by the Holder in collecting and enforcing this Note.

The Issuer and every endorser of this Note, or the obligations represented
hereby, expressly waives presentment, protest, demand, notice of dishonor or
default, and notice of any kind with respect to this Note and the Note Purchase
Agreement or the performance of the obligations under this Note and/or the Note
Purchase Agreement. No renewal or extension of this Note or the Note Purchase
Agreement, no release of any Person primarily or secondarily liable on this Note
or the Note Purchase Agreement, including the Issuer and any endorser, no delay
in the enforcement of payment of this Note or the Note Purchase Agreement, and
no delay or omission in exercising any right or power under this Note or the
Note Purchase Agreement shall affect the liability of the Issuer or any endorser
of this Note.

No delay or omission by the Holder in exercising any power or right hereunder
shall impair such right or power or be construed to be a waiver of any default,
nor shall any single or partial exercise of any power or right hereunder
preclude the full exercise thereof or the exercise of any other power or right.
The provisions of this Note may be waived or amended only in a writing signed by
the Issuer and the Holder. This Note may be prepaid in whole or in part without
premium or penalty, including in shares of Common Stock in accordance with the
provisions of the Note Purchase Agreement.

 

2

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THIS NOTE, AND ANY RIGHTS OF THE HOLDER ARISING OUT OF OR RELATING TO THIS NOTE,
MAY, AT THE OPTION OF THE HOLDER, BE ENFORCED BY THE HOLDER IN THE COURTS OF THE
UNITED STATES OF AMERICA LOCATED IN THE SOUTHERN DISTRICT OF THE STATE OF NEW
YORK OR IN ANY OTHER COURTS HAVING JURISDICTION. FOR THE BENEFIT OF THE HOLDER,
THE ISSUER HEREBY IRREVOCABLY AGREES THAT ANY LEGAL ACTION, SUIT OR OTHER
PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE MAY BE BROUGHT IN THE COURTS
OF THE STATE OF NEW YORK OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN
DISTRICT OF NEW YORK, AND HEREBY CONSENTS THAT PERSONAL SERVICE OF SUMMONS OR
OTHER LEGAL PROCESS MAY BE MADE AS SET FORTH IN SECTION 6.1 OF THE NOTE PURCHASE
AGREEMENT, WHICH SERVICE THE ISSUER AGREES SHALL BE SUFFICIENT AND VALID. THE
ISSUER HEREBY WAIVES ANY AND ALL RIGHTS TO DEMAND A TRIAL BY JURY IN ANY ACTION,
SUIT OR OTHER PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE OR THE
TRANSACTIONS CONTEMPLATED BY THIS NOTE.

This Note shall be governed by, and construed in accordance with, the laws of
the State of New York applicable to contracts made and to be performed in such
State, without giving effect to the conflicts of laws principles thereof other
than Sections 5-1401 and 5-1402 of the General Obligations Law of the State of
New York.

Whenever this Note is held by a noteholder that is not a “United States person”
within the meaning of Section 7701(a)(30) of the Internal Revenue Code of 1986,
as amended (the “Code”), then it is the intention of the Issuer and such
noteholder that (x) all interest accrued and paid on this Note will qualify for
exemption from United States withholding tax as “portfolio interest” because
this Note is an obligation which is in “registered form” within the meaning of
Sections 871(h)(2)(B) and 881(c)(2)(B) of the Code and the applicable Treasury
Regulations promulgated thereunder, and (y) as such, all interest accrued and
paid on this Note will be exempt from United States information reporting under
Sections 6041 and 6049 of the Code and United States backup withholding under
Section 3406 of the Code. The Issuer and the Holder shall reasonably cooperate
with one another, and execute and file such forms or other documents, or do or
refrain from doing such other acts, as may be required, to secure such
exemptions from United States withholding tax, information reporting, and backup
withholding. In furtherance of the foregoing, any transferee or assignee
noteholder that is not a United States person shall represent, warrant and
covenant to the Issuer that (i) such noteholder is not, and will not be as long
as any amounts due under this Note have not been paid in full, a “United States
person,” within the meaning of Section 7701(a)(30) of the Code; (ii) such
noteholder is not, and will not be as long as any amounts due under this Note
have not been paid in full, a person described in Section 881(c)(3) of the Code;
(iii) on or prior to the date of transfer or assignment (and on or prior to the
date the form provided pursuant to this clause (iii) is no longer valid) until
all amounts due under this Note have been paid in full, such noteholder shall
provide the Issuer with a properly executed U.S. Internal Revenue Service
(“IRS”) Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for
United States Tax Withholding (or any successor form prescribed by the

 

3

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IRS), certifying as to such noteholder’s status for purposes of determining
exemption from United States withholding tax, information reporting and backup
withholding with respect to all payments to be made to such noteholder
hereunder; (iv) if an event occurs that would require a change in the exempt
status of such noteholder or any of the other information provided on the most
recent IRS Form W-8BEN (or successor form) previously submitted by such
noteholder to the Issuer, such noteholder will so inform the Issuer in writing
(or by submitting to the Issuer a new IRS Form W-8BEN or successor form) within
30 days after the occurrence of such event; and (v) such noteholder will not
assign or otherwise transfer this Note or any of its rights hereunder except in
accordance with the provisions hereof.

In order to qualify as a “registered note” for purposes of the Code, transfer of
this Note may be effected only by (i) surrender of this Note to the Issuer and
the re-issuance of this Note to the transferee, or the Issuer’s issuance to the
Holder of a new note in the same form as this Note but with the transferee
denoted as the Holder, or (ii) the recording of the identity of the transferee
by the Affiliate of the Holder that is maintaining a record ownership register
of this Note as agent to, and on behalf of, the Issuer. Such Affiliate in its
capacity as such agent shall notify the Issuer in writing immediately upon any
change in such identity. The terms and conditions of this Note shall be binding
upon and inure to the benefit of the Issuer and the Holder and their permitted
assigns; provided, however, that if any such assignment (whether by operation of
law, by way of transfer or participation, or otherwise) is to any noteholder
that is not a “United States person” within the meaning of Section 7701(a)(30)
of the Code, then such noteholder shall submit to the Issuer on or before the
date of such assignment an IRS Form W-8BEN (or any successor form) certifying as
to such noteholder’s status for purposes of determining exemption from United
States withholding tax, information reporting and backup withholding with
respect to all payments to be made to such noteholder under the new note (or
other instrument). Any attempted transfer in violation of the relevant
provisions of this Note shall be void and of no force and effect. Until there
has been a valid transfer of this Note and of all of the rights hereunder by the
Holder in accordance with this Note, the Issuer shall deem and treat the Holder
as the absolute beneficial owner and holder of this Note and of all of the
rights hereunder for all purposes (including, without limitation, for the
purpose of receiving all payments to be made under this Note).

It is the intention of the Issuer and the Holder that this Note is to be a
registered instrument and not a bearer instrument and the provisions of this
Note are to be interpreted accordingly. This Note is intended to be registered
as to both principal and interest and all payments hereunder shall be made to
the named Holder or, in the event of a transfer pursuant to the Note Purchase
Agreement and this Note, to the transferee identified in the record of ownership
of this Note maintained by the Holder on behalf of the Issuer. Transfer of this
Note may not be effected except in accordance with the provisions hereof.

IN WITNESS WHEREOF, an authorized representative of the Issuer has executed this
Note as of the date first written above.

 

4

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EXELIXIS, INC. By:       Name:   Title:

 

5

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EXHIBIT A-2

FORM OF NOTE

SECURED CONVERTIBLE NOTE

THE SECURITY REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, OR APPLICABLE STATE SECURITIES LAWS. THIS SECURITY MAY
NOT BE SOLD, TRANSFERRED OR ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER SAID ACT, OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER
SAID ACT INCLUDING, WITHOUT LIMITATION, PURSUANT TO RULE 144 UNDER SAID ACT.

THIS NOTE IS BEING ISSUED WITH ORIGINAL ISSUE DISCOUNT (“OID”). THE FOLLOWING
INFORMATION IS BEING PROVIDED PURSUANT TO TREASURY REGULATION SECTION 1.275-3:

 

ISSUE PRICE:

AMOUNT OF OID:

ISSUE DATE:

MATURITY DATE:

June     , 2010

FOR VALUE RECEIVED, EXELIXIS INC., a Delaware corporation (the “Issuer”), by
means of this Promissory Note (this “Note”), hereby unconditionally promises to
pay to Deerfield Private Design Fund, L.P. (the “Holder”), a principal amount
equal to $[            ] (or such lesser amount as may be outstanding under this
Note as result of prepayments and conversions by the Borrower pursuant to the
Note Purchase Agreement (as defined below)), in lawful money of the United
States of America and in immediately available funds, on the dates provided in
the Note Purchase Agreement.

 

6

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This Note is a “Note” referred to in the Note Purchase Agreement dated as of
June    , 2010 among the Issuer, the Holder and the other parties thereto (as
modified and supplemented and in effect from time to time, the “Note Purchase
Agreement”), with respect to the purchase of Notes by the Holder thereunder.
Capitalized terms used herein and not expressly defined in this Note shall have
the respective meanings assigned to them in the Note Purchase Agreement. All
Obligations of the Issuer under this Note are secured as provided in the
Security Agreement.

This Note shall bear interest on the Principal Amount hereof in the amounts set
forth in and pursuant to the provisions of the Note Purchase Agreement. This
Note is subject to the voluntary and mandatory prepayment provisions set forth
in the Note Purchase Agreement.

The Issuer shall make all payments to the Holder of interest and principal under
this Note in the manner provided in and otherwise in accordance with the Note
Purchase Agreement. The principal amount of this Note may be converted into
shares of Common Stock as set forth in the Note Purchaser Agreement. On the
Maturity Date and on any Major Transaction Put Date, the Principal Amount of
this Note shall become due and payable.

If default is made in the punctual payment of principal or any other amount
under this Note in accordance with the Note Purchase Agreement, or if any other
Event of Default has occurred, this Note shall, at the Holder’s option exercised
at any time upon or after the occurrence of any such payment default or other
Event of Default and in accordance with the applicable provisions of the Note
Purchase Agreement, become immediately due and payable.

All payments of any kind due to the Holder from the Issuer pursuant to this Note
shall be made in the full face amount thereof, other than Excluded Taxes. The
Issuer shall pay all and any costs (administrative or otherwise) imposed by
banks, clearing houses, or any other financial institution, in connection with
making any payments hereunder, except for any costs imposed by the Holder’s
banking institutions.

The Issuer shall pay all reasonable costs of collection, including, without
limitation, all reasonable, documented legal expenses and attorneys’ fees, paid
or incurred by the Holder in collecting and enforcing this Note.

The Issuer and every endorser of this Note, or the obligations represented
hereby, expressly waives presentment, protest, demand, notice of dishonor or
default, and notice of any kind with respect to this Note and the Note Purchase
Agreement or the performance of the obligations under this Note and/or the Note
Purchase Agreement. No renewal or extension of this Note or the Note Purchase
Agreement, no release of any Person primarily or secondarily liable on this Note
or the Note Purchase Agreement, including the Issuer and any endorser, no delay
in the enforcement of payment of this Note or the Note Purchase Agreement, and
no delay or omission in exercising any right or power under this Note or the
Note Purchase Agreement shall affect the liability of the Issuer or any endorser
of this Note.

No delay or omission by the Holder in exercising any power or right hereunder
shall impair such right or power or be construed to be a waiver of any default,
nor shall any single or partial exercise of any power or right hereunder
preclude the full exercise thereof or the exercise of any other power or right.
The provisions of this Note may be waived or amended only in a writing signed by
the Issuer and the Holder. This Note may be prepaid in whole or in part without
premium or penalty, including in shares of Common Stock in accordance with the
provisions of the Note Purchase Agreement. .

 

7

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THIS NOTE, AND ANY RIGHTS OF THE HOLDER ARISING OUT OF OR RELATING TO THIS NOTE,
MAY, AT THE OPTION OF THE HOLDER, BE ENFORCED BY THE HOLDER IN THE COURTS OF THE
UNITED STATES OF AMERICA LOCATED IN THE SOUTHERN DISTRICT OF THE STATE OF NEW
YORK OR IN ANY OTHER COURTS HAVING JURISDICTION. FOR THE BENEFIT OF THE HOLDER,
THE ISSUER HEREBY IRREVOCABLY AGREES THAT ANY LEGAL ACTION, SUIT OR OTHER
PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE MAY BE BROUGHT IN THE COURTS
OF THE STATE OF NEW YORK OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN
DISTRICT OF NEW YORK, AND HEREBY CONSENTS THAT PERSONAL SERVICE OF SUMMONS OR
OTHER LEGAL PROCESS MAY BE MADE AS SET FORTH IN SECTION 6.1 OF THE NOTE PURCHASE
AGREEMENT, WHICH SERVICE THE ISSUER AGREES SHALL BE SUFFICIENT AND VALID. THE
ISSUER HEREBY WAIVES ANY AND ALL RIGHTS TO DEMAND A TRIAL BY JURY IN ANY ACTION,
SUIT OR OTHER PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE OR THE
TRANSACTIONS CONTEMPLATED BY THIS NOTE.

This Note shall be governed by, and construed in accordance with, the laws of
the State of New York applicable to contracts made and to be performed in such
State, without giving effect to the conflicts of laws principles thereof other
than Sections 5-1401 and 5-1402 of the General Obligations Law of the State of
New York.

Whenever this Note is held by a noteholder that is not a “United States person”
within the meaning of Section 7701(a)(30) of the Internal Revenue Code of 1986,
as amended (the “Code”), then it is the intention of the Issuer and such
noteholder that (x) all interest accrued and paid on this Note will qualify for
exemption from United States withholding tax as “portfolio interest” because
this Note is an obligation which is in “registered form” within the meaning of
Sections 871(h)(2)(B) and 881(c)(2)(B) of the Code and the applicable Treasury
Regulations promulgated thereunder, and (y) as such, all interest accrued and
paid on this Note will be exempt from United States information reporting under
Sections 6041 and 6049 of the Code and United States backup withholding under
Section 3406 of the Code. The Issuer and the Holder shall reasonably cooperate
with one another, and execute and file such forms or other documents, or do or
refrain from doing such other acts, as may be required, to secure such
exemptions from United States withholding tax, information reporting, and backup
withholding. In furtherance of the foregoing, any transferee or assignee
noteholder that is not a United States person shall represent, warrant and
covenant to the Issuer that (i) such noteholder is not, and will not be as long
as any amounts due under this Note have not been paid in full, a “United States
person,” within the meaning of Section 7701(a)(30) of the Code; (ii) such
noteholder is not, and will not be as long as any amounts due under this Note
have not been paid in full, a person described in Section 881(c)(3) of the Code;
(iii) on or prior to the date of transfer or assignment (and on or prior to the
date the form provided pursuant to this clause (iii) is no longer valid) until
all amounts due under this Note have been paid in full, such noteholder shall
provide the Issuer with a properly executed U.S. Internal Revenue Service
(“IRS”) Form W-8BEN, Certificate of Foreign Status of

 

8

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Beneficial Owner for United States Tax Withholding (or any successor form
prescribed by the IRS), certifying as to such noteholder’s status for purposes
of determining exemption from United States withholding tax, information
reporting and backup withholding with respect to all payments to be made to such
noteholder hereunder; (iv) if an event occurs that would require a change in the
exempt status of such noteholder or any of the other information provided on the
most recent IRS Form W-8BEN (or successor form) previously submitted by such
noteholder to the Issuer, such noteholder will so inform the Issuer in writing
(or by submitting to the Issuer a new IRS Form W-8BEN or successor form) within
30 days after the occurrence of such event; and (v) such noteholder will not
assign or otherwise transfer this Note or any of its rights hereunder except in
accordance with the provisions hereof.

In order to qualify as a “registered note” for purposes of the Code, transfer of
this Note may be effected only by (i) surrender of this Note to the Issuer and
the re-issuance of this Note to the transferee, or the Issuer’s issuance to the
Holder of a new note in the same form as this Note but with the transferee
denoted as the Holder, or (ii) the recording of the identity of the transferee
by the Affiliate of the Holder that is maintaining a record ownership register
of this Note as agent to, and on behalf of, the Issuer. Such Affiliate in its
capacity as such agent shall notify the Issuer in writing immediately upon any
change in such identity. The terms and conditions of this Note shall be binding
upon and inure to the benefit of the Issuer and the Holder and their permitted
assigns; provided, however, that if any such assignment (whether by operation of
law, by way of transfer or participation, or otherwise) is to any noteholder
that is not a “United States person” within the meaning of Section 7701(a)(30)
of the Code, then such noteholder shall submit to the Issuer on or before the
date of such assignment an IRS Form W-8BEN (or any successor form) certifying as
to such noteholder’s status for purposes of determining exemption from United
States withholding tax, information reporting and backup withholding with
respect to all payments to be made to such noteholder under the new note (or
other instrument). Any attempted transfer in violation of the relevant
provisions of this Note shall be void and of no force and effect. Until there
has been a valid transfer of this Note and of all of the rights hereunder by the
Holder in accordance with this Note, the Issuer shall deem and treat the Holder
as the absolute beneficial owner and holder of this Note and of all of the
rights hereunder for all purposes (including, without limitation, for the
purpose of receiving all payments to be made under this Note).

It is the intention of the Issuer and the Holder that this Note is to be a
registered instrument and not a bearer instrument and the provisions of this
Note are to be interpreted accordingly. This Note is intended to be registered
as to both principal and interest and all payments hereunder shall be made to
the named Holder or, in the event of a transfer pursuant to the Note Purchase
Agreement and this Note, to the transferee identified in the record of ownership
of this Note maintained by the Holder on behalf of the Issuer. Transfer of this
Note may not be effected except in accordance with the provisions hereof.

 

9

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IN WITNESS WHEREOF, an authorized representative of the Issuer has executed this
Note as of the date first written above.

 

EXELIXIS INC. By:       Name:   Title:

 

10

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EXHIBIT B

PERMITTED INDEBTEDNESS

 

1. All Indebtedness of the Borrower under that certain Loan and Security
Agreement, dated as of October 28, 2002 by and between Smith Kline Beecham
Corporation and Exelixis, Inc. (as amended, modified or otherwise supplemented
through the date hereof).

 

2. All Indebtedness of the Borrower under that certain Loan and Security
Agreement, dated May 22, 2002 by and between Silicon Valley Bank and Exelixis,
Inc. (as amended, modified or otherwise supplemented through the date hereof).

 

1

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EXHIBIT C

PERMITTED LIENS

 

      Juris.   

Secured Party

   File No.    Date of
Filing   

Type of

Filing/Comments

1

   DE   

General Electric Capital

Corporation

 

401 Merritt Seven, 2nd Floor,

Norwalk, CT 06856

   10983788

 

61345586

   8/17/01

 

4/21/06

  

Equipment lease

 

Continuation

2

   DE   

General Electric Capital

Corporation

 

401 Merritt Seven, 2nd Floor,

Norwalk, CT 06856

   10983796

 

61345602

   8/17/01

 

4/21/06

  

Equipment lease

 

Continuation

3

   DE   

General Electric Capital

Corporation

 

401 Merritt Seven, Suite 23,

Norwalk, CT 06851

   11187272

 

40470528

 

40478661

 

63035367

   9/19/01

 

2/20/04

 

2/20/04

 

8/31/06

  

Equipment lease

 

Amendment – delete

equipment

 

Amendment – add

equipment

 

Continuation

4

   DE   

General Electric Capital

Corporation

 

401 Merritt Seven, Suite 23,

Norwalk, CT 06856

   40354235    2/10/04    Equipment lease

5

   DE   

General Electric Capital

Corporation

 

401 Merritt Seven, Suite 23,

Norwalk, CT 06856

   40363947    2/10/04    Equipment lease

6

   DE   

General Electric Capital

Corporation

 

401 Merritt Seven, Suite 23,

Norwalk, CT 06856

   40492209    2/23/04    Equipment lease

7

   DE   

General Electric Capital

Corporation

 

PO Box 414, W-490, Milwaukee,

WI 53201

   42516096    8/30/04    Equipment lease

 

1

--------------------------------------------------------------------------------

8

   DE   

Silicon Valley Bank

 

3003 Tasman Drive, Santa Clara,

CA 95054

   43621499

 

80204527

   12/22/04

 

1/16/08

  

Accounts

 

Amendment – restated

collateral description

9

   DE   

CIT Communications Finance

Corporation

 

1 CIT Drive, Livingston, NJ 07039

   60969600    3/22/06    Equipment lease

 

2