Exhibit 10.27(i)

 

ANACOR PHARMACEUTICALS, INC.

 

EQUITY DISTRIBUTION AGREEMENT

 

January 18, 2013

 

Wedbush Securities Inc.

One Bush Street, Suite 1700
San Francisco, California 94104

 

Ladies and Gentlemen:

 

1.             Introductory.  Anacor Pharmaceuticals, Inc., a Delaware
corporation (the “Company”), proposes, subject to the terms and conditions
stated herein, to issue and sell through or to Wedbush Securities Inc., as sales
agent or principal (“Wedbush”), on the terms and subject to the conditions of
this Equity Distribution Agreement (this “Agreement”), shares of its authorized
but unissued common stock, par value $0.001 per share, having an aggregate gross
sales price of up to $25 million (the “Shares”).  The shares of common stock,
par value $0.001 per share, of the Company to be outstanding after giving effect
to the sales contemplated hereby are hereinafter referred to as the “Common
Stock”.

 

The Company and Wedbush hereby confirm their agreement with respect to the
issuance and sale of the Shares as follows:

 

2.             Registration Statement and Prospectus. The Company has filed with
the Securities and Exchange Commission (the “Commission”) a registration
statement on Form S-3 (File No. 333-185486) under the Securities Act of 1933, as
amended (the “Act”), and the rules and regulations of the Commission thereunder,
and such amendments thereto (including post-effective amendments) as may be
required to the date of this Agreement.  Such registration statement, as amended
(including any post-effective amendments), has been declared effective by the
Commission.  The registration statement as of its most recent effective date,
including the information (if any) deemed to be part of the registration
statement at the time of effectiveness pursuant to Rule 430A or Rule 430B under
the Act, is hereinafter referred to as the “Registration Statement”, and the
related base prospectus dated December 14, 2012 and filed as part of the
Registration Statement, together with any amendments or supplements thereto as
of the most recent effective date of the Registration Statement, is hereinafter
referred to as the “Basic Prospectus.”  “Prospectus Supplement” means the final
prospectus supplement, relating to the Shares, filed by the Company with the
Commission pursuant to Rule 424(b) under the Act on or before the second
business day after the date hereof, in the form furnished by the Company to
Wedbush in connection with the offering of the Shares.  Except where the context
otherwise requires, “Prospectus” means the Basic Prospectus, as supplemented by
the Prospectus Supplement and the most recent Interim Prospectus Supplement (as
defined in Section 7(c) below), if any. For purposes of this Agreement,
(i) “free writing prospectus” has the meaning set forth in Rule 405 under the
Act and (ii) “Permitted Free Writing Prospectuses” means the documents listed on
Schedule I hereto. As used herein, the terms “Registration Statement”, “Basic
Prospectus”, “Prospectus Supplement”, “Interim Prospectus Supplement” and
“Prospectus” shall include the documents, if any, incorporated by reference
therein. The terms “supplement”, “amendment”, and “amend” as used herein with
respect to the Registration Statement, the Basic Prospectus, the Prospectus
Supplement, any Interim Prospectus Supplement, the Prospectus or any free
writing prospectus shall include all documents subsequently filed by the Company

 

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with the Commission pursuant to the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), that are deemed to be incorporated by reference therein
(the “Incorporated Documents”).

 

3.             Sale of Shares.  On the basis of the representations, warranties
and agreements herein contained, but subject to the terms and conditions herein
set forth, the Company and Wedbush agree that the Company may from time to time
seek to sell Shares through Wedbush, acting as sales agent, or directly to
Wedbush, acting as principal, as follows:

 

(a)           The Company may submit its orders to Wedbush by telephone
(including any price, time or size limits or other customary parameters or
conditions) to sell Shares on any Trading Day (as defined herein) which order
shall be confirmed by Wedbush (and accepted by the Company) by electronic mail
using a form substantially similar to that attached hereto as Exhibit A. As used
herein, “Trading Day” shall mean any trading day on the NASDAQ Global Market
(the “Exchange”), other than a day on which the Exchange is scheduled to close
prior to its regular weekday closing time.

 

(b)           Subject to the terms and conditions hereof, Wedbush shall use its
commercially reasonable efforts to execute any Company order submitted to it
hereunder to sell Shares and with respect to which Wedbush has agreed to act as
sales agent. The Company acknowledges and agrees that (i) there can be no
assurance that Wedbush will be successful in selling the Shares, (ii) Wedbush
will incur no liability or obligation to the Company or any other person or
entity if it does not sell Shares for any reason and (iii) Wedbush shall be
under no obligation to purchase Shares on a principal basis pursuant to this
Agreement, except as otherwise specifically agreed by Wedbush and the Company.

 

(c)           Wedbush hereby covenants and agrees not to make any sales of the
Shares on behalf of the Company other than as permitted by the terms of this
Agreement.

 

(d)           The Company shall not authorize the issuance and sale of, and
Wedbush shall not sell as sales agent, any Share at a price lower than the
minimum price therefor designated by the Company pursuant to
Section 3(a) above.  In addition, Wedbush or the Company may, upon notice to the
other party hereto by telephone (confirmed promptly by email or facsimile),
suspend an offering of the Shares with respect to which Wedbush is acting as
sales agent; provided, however, that such suspension or termination shall not
affect or impair the parties’ respective obligations with respect to the Shares
sold hereunder prior to the giving of such notice.

 

(e)           If acting as sales agent hereunder, Wedbush shall provide written
confirmation (which may be by facsimile or email) to the Company following the
close of trading on the Exchange each day in which Shares are sold under this
Agreement setting forth (i) the amount of Shares sold on such day, (ii) the
gross offering proceeds received from such sale and (iii) the commission payable
by the Company to Wedbush with respect to such sales.

 

(f)            At each Time of Sale (as defined below), Settlement Date (as
defined below) and Representation Date (as defined below), the Company shall be
deemed to have affirmed each representation and warranty contained in this
Agreement.  Any obligation of Wedbush to use its commercially reasonable efforts
to sell the Shares on behalf of the Company as sales agent shall be subject to
the continuing accuracy of the representations and warranties of the Company
herein, to the performance by the Company of its obligations hereunder and to
the continuing satisfaction of the additional conditions specified in Section 9
of this Agreement.

 

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(g)           Notwithstanding any other provision of this Agreement, the Company
and Wedbush agree that no sales of Shares shall take place, the Company shall
not request the sales of any Shares that would be sold and Wedbush shall not be
obligated to sell or offer to sell, during any period in which the Company’s
counsel has advised the Company that sales of Common Stock should not be made
under applicable law or during any period in which the Company is in possession
of material non-public information.

 

4.             Fees and Expense Reimbursement.

 

(a)           The compensation to Wedbush for sales of the Shares with respect
to which Wedbush acts as sales agent hereunder shall be equal to 2.0% of the
gross offering proceeds of the Shares sold pursuant to this Agreement.  The
Company may sell Shares to Wedbush as principal at a price agreed upon at the
relevant Time of Sale.

 

(b)           The Company shall from time to time reimburse Wedbush for its
reasonable out-of-pocket expenses, including the reasonable fees and
disbursements of counsel for Wedbush, incurred by Wedbush in connection with the
transactions and other matters contemplated hereunder in an amount not to exceed
$45,000 in the aggregate.  Additionally, after the execution and delivery of
this Agreement, the Company will reimburse Wedbush for its reasonable
out-of-pocket expenses, including the reasonable fees and disbursements of
counsel for Wedbush, related to the maintenance, due diligence expenses and
other reasonable out-of-pocket expenses associated herewith up to $10,000 in the
aggregate per calendar quarter.  Notwithstanding the foregoing, in no event
shall the Company be liable for any such reimbursable expenses pursuant to this
paragraph (b) in excess of $150,000 in the aggregate.

 

(c)           In no event shall the total compensation payable to Wedbush
hereunder (including any reimbursement of reasonable out-of-pocket expenses)
exceed 8% of the aggregate gross proceeds expected to be received by the Company
from the sale of Shares hereunder.

 

5.             Delivery and Payment.

 

(a)           Settlement for sales of the Shares pursuant to this Agreement will
occur on the third Trading Day (or such earlier day as is industry practice for
regular-way trading) following the date on which such sales are made (each such
day, a “Settlement Date”).  On each Settlement Date, the Shares sold through or
to Wedbush for settlement on such date shall be issued and delivered by the
Company to Wedbush or as Wedbush may otherwise direct against payment of the net
proceeds from the sale of such Shares.  Settlement for all such Shares shall be
effected by free delivery of the Shares by the Company or its transfer agent
(i) to Wedbush’s or its designee’s account (provided Wedbush shall have given
the Company written notice of such designee prior to the Settlement Date) at The
Depository Trust Company (“DTC”), (ii) through credit to the purchaser’s balance
account with DTC through its Deposit Withdrawal Agent Commission system
(provided Wedbush shall have given the Company written notice of account
information prior to the Settlement Date), or (iii) by such other means of
delivery as may be mutually agreed upon by the parties hereto, which in all
cases shall be freely tradable, transferable, registered shares in good
deliverable form, in return for payment in same day funds delivered to the
account designated by the Company. If the Company, or its transfer agent (if
applicable), shall default on its obligation to deliver the Shares on any
Settlement Date, the Company shall (i) hold Wedbush harmless against any loss,
claim, damage, or expense (including reasonable legal fees and expenses), as
incurred, arising out of or in connection with such default by the Company and
(ii) pay Wedbush any commission, discount or other compensation to which it
would otherwise be entitled absent such default.

 

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6.             Representations and Warranties of the Company.  The Company
represents and warrants to, and agrees with, Wedbush that:

 

(a)           Effectiveness of Registration Statement.  The Registration
Statement has become effective; no stop order suspending the effectiveness of
the Registration Statement is in effect, and no proceedings for such purpose are
pending before or threatened by the Commission.

 

(b)           Compliance with Act Requirements.  (i) (A) At the respective times
the Registration Statement and each amendment thereto became effective, (B) at
each deemed effective date with respect to Wedbush pursuant to
Rule 430B(f)(2) under the Act (each, a “Deemed Effective Time”), (C) as of each
time Shares are sold pursuant to this Agreement (each, a “Time of Sale”), (D) at
each Settlement Date and (E) at all times during which a prospectus is required
by the Act to be delivered (whether physically or through compliance with
Rule 172 under the Act or any similar rule) in connection with any sale of
Shares (the “Delivery Period”), the Registration Statement complied and will
comply in all material respects with the requirements of the Act and the
rules and regulations under the Act; (ii) the Basic Prospectus complied at the
time it was filed with the Commission, complies as of the date hereof and, as of
each Time of Sale and at all times during the Delivery Period, will comply in
all material respects with the rules and regulations under the Act; (iii) each
of the Prospectus Supplement, any Interim Prospectus Supplement and the
Prospectus will comply, as of the date that it is filed with the Commission, as
of each Time of Sale, as of each Settlement Date and at all times during the
Delivery Period, in all material respects with the rules and regulations under
the Act and (iv) the Incorporated Documents, when they were filed with the
Commission, conformed in all material respects to the requirements of the
Exchange Act and the rules and regulations of the Commission thereunder, and any
further Incorporated Documents so filed and incorporated by reference, when they
are filed with the Commission, will conform in all material respects to the
requirements of the Exchange Act and the rules and regulations of the Commission
thereunder.

 

(c)           Absence of Material Misstatements and Omissions. (i) As of the
date hereof, at the respective times the Registration Statement and each
amendment thereto became effective and at each Deemed Effective Time, the
Registration Statement did not and will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; (ii) as of each Time of
Sale, the Prospectus (as amended and supplemented at such Time of Sale) and any
Permitted Free Writing Prospectus, considered together (collectively, the
“General Disclosure Package”), did not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; (iii) as of its date, the Prospectus did not contain an
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading; and (iv) at any Settlement Date, the
Prospectus (as amended and supplemented at such Settlement Date) did not and
will not contain an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading; provided, however,
that this representation and warranty shall not apply to any statements in or
omissions from any such document based upon written information furnished to the
Company by Wedbush, if any, specifically for use therein, it being understood
and agreed that the only such information is that described as such in
Section 9(b) hereof.

 

(d)           Free Writing Prospectuses.  Any free writing prospectus that the
Company is required to file pursuant to Rule 433(d) under the Act has been, or
will be, filed with the Commission in accordance with the requirements of the
Act and the applicable rules and

 

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regulations of the Commission thereunder. Each free writing prospectus that the
Company has filed, or is required to file, pursuant to Rule 433(d) under the Act
or that was prepared by or on behalf of or used or referred to by the Company
complies or will comply in all material respects with the requirements of the
Act and the applicable rules and regulations of the Commission thereunder. Each
free writing prospectus, as of its issue date and at all subsequent times
through the completion of the public offer and sale of the Shares or until any
earlier date that the Company notified or notifies Wedbush, did not, does not
and will not include any material information that conflicted, conflicts or will
conflict with the information contained in the Registration Statement or the
Prospectus.  Except for the Permitted Free Writing Prospectuses, if any, each
furnished to Wedbush before first use, the Company has not prepared, used or
referred to, and will not, without Wedbush’s prior consent, prepare, use or
refer to, any free writing prospectus.

 

(e)           Not an “Ineligible Issuer”.  (A) (i) At the time of filing the
Registration Statement and (ii) at the time of the most recent amendment thereto
for the purposes of complying with Section 10(a)(3) of the Act (whether such
amendment was by post-effective amendment, incorporated report filed pursuant to
Section 13 or 15(d) of the Exchange Act or form of prospectus), the Company was
not an “ineligible issuer” as defined in Rule 405 of the Act; and (B) (i) at the
time of filing of the Registration Statement, (ii) at the earliest time
thereafter that the Company or another offering participant made a bona fide
offer (within the meaning of Rule 164(h)(2) under the Act) of the Shares and
(iii) at the date hereof, the Company was not and is not an “ineligible issuer”
as defined in Rule 405 under the Act.

 

(f)            Shelf Registration Statement.  The date of this Agreement is not
more than three years subsequent to the initial effective date of the
Registration Statement.

 

(g)           Good Standing of the Company; No Subsidiaries. The Company has
been duly incorporated and is existing and in good standing under the laws of
the State of Delaware, with power and authority (corporate and other) to own its
properties and conduct its business as disclosed in the Registration Statement,
the General Disclosure Package and the Prospectus; and the Company is duly
qualified to do business as a foreign corporation in good standing in all other
jurisdictions in which its ownership or lease of property or the conduct of its
business requires such qualification, except to the extent that the failure to
be so qualified or be in good standing would not materially and adversely affect
the Company or its business, properties, business prospects, conditions
(financial or other) or results of operations (such effect is referred to herein
as a “Material Adverse Effect”).  The Company has no subsidiaries and does not
own any equity interest in any other entity.  Except as disclosed in the
Registration Statement, the General Disclosure Package and the Prospectus, the
Company has no “variable interests” in “variable interest entities,” as such
terms are defined in Financial Accounting Standards Board Interpretation No. 46.

 

(h)           Exchange Act Reports.  The Company has filed in a timely manner
all reports required to be filed pursuant to Sections 13(a), 13(e), 14 and
15(d) of the Exchange Act during the preceding 12 months.

 

(i)            Capital Stock.  The Shares to be issued and sold by the Company
hereunder and all other outstanding shares of capital stock of the Company have
been duly authorized; all outstanding shares of capital stock of the Company
are, and, when the Shares have been delivered and paid for in accordance with
this Agreement, such Shares will have been, validly issued, fully paid and
nonassessable, and such Shares will conform to the information in the General
Disclosure Package and the Prospectus and to the description of such Shares
contained in the

 

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General Disclosure Package and the Prospectus; the stockholders of the Company
have no statutory or contractual preemptive rights with respect to the Common
Stock; none of the outstanding shares of capital stock of the Company are or
will have been issued in violation of any statutory or contractual preemptive
rights of any security holder; and the authorized equity capitalization of the
Company is as set forth in the General Disclosure Package and the Prospectus.

 

(j)            No Finder’s Fee.  There are no contracts, agreements or
understandings between the Company and any person other than Wedbush that would
give rise to a valid claim against the Company or Wedbush for a brokerage
commission, finder’s fee or other like payment in connection with the offering
contemplated by this Agreement.

 

(k)           Financial Statements.  The financial statements and schedules
included or incorporated by reference in the Registration Statement, the
Prospectus and the General Disclosure Package present fairly the financial
condition of the Company as of the respective dates thereof and the results of
operations and cash flows of the Company for the respective periods covered
thereby, all in conformity with generally accepted accounting principles applied
on a consistent basis throughout the entire period involved.  No other financial
statements or schedules of the Company are required by the Act, the Exchange
Act, or the rules and regulations thereunder to be included in the Registration
Statement, the Prospectus or the General Disclosure Package.  Ernst & Young LLP
(the “Accountant”), who has reported on the financial statements and schedules
of the Company, is an independent accountant with respect to the Company as
required by the Act and the rules and regulations thereunder and Rule 3600T of
the Public Company Accounting Oversight Board.  The summary and selected
consolidated financial and statistical data, if any, included in or incorporated
by reference into the Registration Statement, the Prospectus and the General
Disclosure Package present fairly the information shown therein and have been
compiled on a basis consistent with the Company’s audited financial statements.

 

(l)            Absence of Changes.  Subsequent to the respective dates as of
which information is given in the Registration Statement, the Prospectus and the
General Disclosure Package, except as set forth in or contemplated by the
Registration Statement, the Prospectus and the General Disclosure Package,
(i) there has not been any change in the capitalization of the Company (other
than in connection with the grant, exercise or vesting of awards or options to
purchase the Common Stock granted pursuant to the Company’s equity incentive
plans from the shares reserved therefor), (ii) no Material Adverse Effect has
occurred for any reason whatsoever, (iii) the Company has not incurred, except
in the ordinary course of business as disclosed in the Registration Statement,
the General Disclosure Package and the Prospectus, any material liabilities or
obligations, direct or contingent, (iv) the Company has not entered into, except
in the ordinary course of business as disclosed in the Registration Statement,
the General Disclosure Package and the Prospectus, any material transactions
other than pursuant to this Agreement and the transactions referred to herein
and (iv) the Company has not paid or declared any dividends or other
distributions of any kind on any class of its capital stock.

 

(m)          Not An Investment Company.  The Company is not, and will not become
as a result of the transactions contemplated hereby, an “investment company” or
an “affiliated person” of, or “promoter” or “principal underwriter” for, an
“investment company,” as such terms are defined in the Investment Company Act of
1940, as amended.

 

(n)           Litigation.  Except as disclosed in the Registration Statement,
the General Disclosure Package and the Prospectus, there are no actions, suits
or proceedings pending or, to the knowledge of the Company, threatened against
or affecting the Company or against any of its

 

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officers or directors in their capacity as such, before or by any federal or
state court, commission, regulatory body, administrative agency or other
governmental body, domestic or foreign, wherein an unfavorable ruling, decision
or finding would reasonably be expected to have a Material Adverse Effect.

 

(o)           Absence of Existing Defaults and Conflicts.  Except as disclosed
in the Registration Statement, the General Disclosure Package and the
Prospectus, the Company is not (i) in violation of any provision of its
certificate of incorporation or bylaws, (ii) in default in any respect, and no
event has occurred which, with notice or lapse of time or both, would constitute
such a default, in the due performance or observance of any indenture, contract,
lease, mortgage, deed of trust, note agreement, loan agreement or other
agreement, obligation, condition, covenant or instrument to which it is a party
or by which it is bound or to which any of its property or assets is subject, or
(iii) in violation in any respect of any statute, law, rule, regulation,
ordinance, judgment, order or decree of any court, regulatory body,
administrative agency, governmental body, arbitrator or other authority having
jurisdiction over the Company or any of its properties, as applicable, except,
with respect to clauses (ii) and (iii), any violations or defaults which,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect.

 

(p)           Absence of Further Requirements.  Except as disclosed in the
Registration Statement, the General Disclosure Package and the Prospectus, no
consent, approval, authorization or order of, or any filing or declaration with,
any court or governmental agency or body is required for the consummation by the
Company of the transactions on its part contemplated herein, including the
offering and sale of the Shares, except such as have been obtained under the Act
or the rules and regulations thereunder and such as may be required under state
securities or Blue Sky laws.

 

(q)           Authorization; Absence of Defaults and Conflicts Resulting from
Transaction.  The Company has full corporate power and authority to enter into
this Agreement.  This Agreement has been duly authorized, executed and delivered
by the Company.  This Agreement is a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms.  The performance
of this Agreement and the consummation of the transactions contemplated hereby,
will not (i) result in the creation or imposition of any lien, charge or
encumbrance upon any of the assets of the Company pursuant to the terms or
provisions of, or result in a breach or violation of any of the terms or
provisions of, or conflict with or constitute a default under, or give any party
a right to terminate any of its obligations under, or result in the acceleration
of any obligation under, (A) the certificate of incorporation or bylaws of the
Company, or (B) any indenture, mortgage, deed of trust, voting trust agreement,
loan agreement, bond, debenture, note agreement or other evidence of
indebtedness, lease, contract or other agreement or instrument to which the
Company is a party or by which the Company or any of its properties is bound or
affected, except, in the case of clause (i)(B), any lien, breach, violation,
conflict, default or acceleration that would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect, or
(ii) violate or conflict with any judgment, ruling, decree, order, statute,
rule or regulation of any court or other governmental agency or body applicable
to the business or properties of the Company, except any violation or conflict
that would not, individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect.

 

(r)            Title to Property.  The Company has good and marketable title to
all properties and assets described in the Registration Statement, the General
Disclosure Package or the Prospectus as owned by it, free and clear of all
liens, charges, encumbrances or restrictions,

 

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except such as are described in the Registration Statement, the General
Disclosure Package and the Prospectus or are not material to the business of the
Company.  The Company has valid, subsisting and enforceable leases for the
properties described in the Registration Statement, the General Disclosure
Package or the Prospectus as leased by it.  The Company owns or leases all such
properties as are necessary to its operations as now conducted or as proposed to
be conducted, except where the failure to so own or lease would not reasonably
be expected to have a Material Adverse Effect, individually or in the aggregate.

 

(s)            Off Balance Sheet Interests and Contracts.  Except as disclosed
in the Registration Statement, the General Disclosure Package and the
Prospectus, there is no document, contract, permit or instrument, affiliate
transaction or off-balance sheet transaction (including, without limitation, any
“variable interests” in “variable interest entities,” as such terms are defined
in Financial Accounting Standards Board Interpretation No. 46) of a character
required to be described in the Registration Statement, the General Disclosure
Package or the Prospectus or to be filed as an Exhibit to the Registration
Statement that is not described or filed as required.  All such contracts
described in the immediately preceding sentence to which the Company is a party
have been duly authorized, executed and delivered by the Company, constitute
valid and binding agreements of the Company and are enforceable against and by
the Company in accordance with the terms thereof.

 

(t)            Accuracy of Statements.  No statement, representation, warranty
or covenant made by the Company in this Agreement or made in any certificate or
document required by Section 9 of this Agreement to be delivered to Wedbush was
or will be, when made, inaccurate, untrue or incorrect in any material respect.

 

(u)           Offering Material; Stabilization.  The Company has not
distributed, and will not distribute, any offering material in connection with
the offering and sale of the Shares other than the General Disclosure Package,
any Permitted Free Writing Prospectus, the Prospectus, any Interim Prospectus
Supplement, the Registration Statement and other materials, if any, permitted by
the Act.  Neither the Company nor any of its directors, officers or controlling
persons has taken, directly or indirectly, any action designed, or that might
reasonably be expected, to cause or result, under the Act or otherwise, in, or
that has constituted, stabilization or manipulation of the price of any security
of the Company to facilitate the sale or resale of the Shares.

 

(v)           Registration Rights.  No holder of securities of the Company has
rights to the registration of any securities of the Company because of the
filing of the Registration Statement or the offering of the Shares, which rights
have not been waived by the holder thereof as of the date hereof.

 

(w)          Listing.  The Common Stock is registered under Section 12(b) of the
Exchange Act and the Shares have been approved for listing on the NASDAQ Global
Market, subject to notice of issuance.

 

(x)           Possession of Intellectual Property.  Except as disclosed in the
Registration Statement, the General Disclosure Package and the Prospectus, (i) 
the Company owns or has adequate rights (or believes it can obtain adequate
rights on reasonable terms) to use all trademarks, trademark applications, trade
names, domain names, patents, patent applications, patent rights, copyrights,
technology, know-how, trade secrets, service marks, trade dress rights, and
other intellectual property and proprietary rights (collectively, “Intellectual
Property”) and has such other licenses, approvals, permits, and governmental
authorizations with respect to such Intellectual Property, in each case
sufficient to conduct its business as now conducted and as now

 

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proposed to be conducted, except for the absence of rights to Intellectual
Property that would not reasonably be expected to have a Material Adverse
Effect, and, to the Company’s knowledge, none of the Intellectual Property of
the Company is invalid or unenforceable, except where such invalidity or
unenforceability would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect, and all material patent applications
of the Company have been properly filed and, to the Company’s knowledge,
prosecuted in accordance with all applicable laws, (ii)  the Company has no
knowledge that the conduct of its business, as now conducted, and as now
proposed to be conducted, will infringe, misappropriate, conflict, or otherwise
interfere with, the Intellectual Property of any third party which, individually
or in the aggregate, would reasonably be expected to have a Material Adverse
Effect, (iii)  the Company is not aware of any infringement, misappropriation,
conflict or violation by Intellectual Property owned or controlled by any third
party, of or with the Company Intellectual Property, which, individually or in
the aggregate, would reasonably be expected to have a Material Adverse Effect,
(iv) there is no pending or, to the Company’s knowledge, threatened action,
suit, proceeding, or other claim against the Company or, to the Company’s
knowledge, any employee of the Company, asserting that the Company Intellectual
Property infringes third party Intellectual Property, which, individually or in
the aggregate, would reasonably be expected to have a Material Adverse Effect,
and (v) the Company has not received any written notice of infringement with
respect to any patent or any written notice challenging the validity, scope or
enforceability of any Intellectual Property owned by or licensed to the Company,
which, individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect.  Except as disclosed in the Registration Statement, the
General Disclosure Package and the Prospectus, the Company Intellectual Property
is free and clear of any pledge, lien, security interest, encumbrance, claim or
equitable interest whether imposed by agreement, contract, understanding, law or
equity, which, individually or in the aggregate, would reasonably be expected to
result in a Material Adverse Effect.

 

(y)           Taxes.  Except as disclosed in the Registration Statement, the
General Disclosure Package and the Prospectus, the Company has filed all
federal, state, local and foreign income tax returns that have been required to
be filed and has paid all taxes and assessments received by it to the extent
that such taxes or assessments have become due, except where the Company is
contesting such matters in good faith and has established appropriate reserves
therefore in accordance with generally accepted accounting principles or where
the failure to do so would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.  The Company does not have any tax
deficiency that has been or, to the knowledge of the Company, might be asserted
or threatened against it that would reasonably be expected to have a Material
Adverse Effect.

 

(z)           Permits and Licenses.  Except as disclosed in the Registration
Statement, the General Disclosure Package and the Prospectus, the Company owns
or possesses all authorizations, approvals, orders, licenses, registrations,
other certificates and permits of and from all governmental regulatory officials
and bodies, necessary to conduct its businesses as contemplated in the
Registration Statement, the General Disclosure Package and the Prospectus,
except where the failure to own or possess all such authorizations, approvals,
orders, licenses, registrations, other certificates and permits would not
reasonably be expected to have a Material Adverse Effect, individually or in the
aggregate.  There is no proceeding pending or threatened (or any basis therefor
known to the Company) that may cause any such authorization, approval, order,
license, registration, certificate or permit to be revoked, withdrawn,
cancelled, suspended or not renewed; and the Company is conducting its business
in compliance with all laws, rules and regulations applicable thereto, except
where such noncompliance would not reasonably be expected to have a Material
Adverse Effect, individually or in the aggregate.

 

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(aa)         FCPA Compliance.  The Company does not have and, to the Company’s
knowledge, none of its employees or agents at any time during the last five
years have (i) made any unlawful contribution to any candidate for foreign
office, or failed to disclose fully any contribution in violation of law, or
(ii) made any payment to any federal or state governmental officer or official,
or other person charged with similar public or quasi-public duties, other than
payments required or permitted by the laws of the United States or any
jurisdiction thereof.

 

(bb)         Internal Controls and Compliance With Sarbanes-Oxley Act.  The
Company is in compliance in all material respects with the provisions of the
Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”) which are applicable to it.  The
Company maintains a system of internal control over financial reporting (as
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) sufficient to
provide reasonable assurances (1) that records are maintained that, in
reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) that transactions are recorded as
necessary to permit preparation of financial statements in accordance with U.S.
generally accepted accounting principles, and that receipts and expenditures of
the Company are being made only in accordance with authorizations of management
and directors of the Company; and (3) regarding prevention or timely detection
of unauthorized acquisition, use, or disposition of the Company’s assets that
could have a material effect on the financial statements.  The Company has
established and maintains disclosure controls and procedures (as defined in
Rule 13a-15(e) and 15d-15(e) under the Exchange Act).  Such disclosure controls
and procedures are reasonably designed to ensure that information required to be
disclosed by the Company in the reports that it files or submits under the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the Commission’s rules and forms and that such information
is accumulated and communicated to the Company’s principal executive officer and
its principal financial officer. Such disclosure controls and procedures are
sufficient to provide reasonable assurance that the Company’s principal
executive officer and principal financial officer are alerted to material
information required to be included in the Company’s periodic reports required
under the Exchange Act so as to allow timely decisions regarding required
disclosure. For purposes of the preceding sentence, “principal executive
officer” and “principal financial officer” shall have the meanings given to such
terms in Sarbanes-Oxley.

 

(cc)         ERISA Compliance.  Except as disclosed in the Registration
Statement, the General Disclosure Package and the Prospectus, the Company has
fulfilled in all material respects its obligations, if any, under the minimum
funding standards of Section 302 of the United States Employee Retirement Income
Security Act of 1974 (“ERISA”) and the regulations and published interpretations
thereunder with respect to each “plan” (as defined in Section 3(3) of ERISA and
such regulations and published interpretations) in which employees of the
Company are eligible to participate and each such plan is in compliance in all
material respects with the presently applicable provisions of ERISA and such
regulations and published interpretations.  No “prohibited transaction” (as
defined in Section 406 of ERISA, or Section 4975 of the Internal Revenue Code of
1986, as amended from time to time) has occurred with respect to any employee
benefit plan which would reasonably be expected to result in a Material Adverse
Effect, individually or in the aggregate.

 

(dd)         Labor Issues.  No labor problem or dispute with the employees of
the Company exists or, to the Company’s knowledge, is threatened or imminent,
which would reasonably be expected to result in a Material Adverse Effect. 
Except as disclosed in the Registration Statement, the General Disclosure
Package and the Prospectus, to the Company’s knowledge, no key employee or
significant group of employees of the Company plans to terminate employment with
the Company.

 

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(ee)         Statistical and Market-Related Data.  Any third-party statistical
and market-related data included or incorporated by reference in the
Registration Statement, the Prospectus or the General Disclosure Package are
based on or derived from sources that the Company believes to be reliable and
accurate.

 

(ff)          Forward-Looking Statements.  No forward-looking statement (within
the meaning of Section 27A of the Act and Section 21E of the Exchange Act)
contained in the Registration Statement, the Prospectus or the General
Disclosure Package has been made or reaffirmed without a reasonable basis or has
been disclosed other than in good faith.

 

(gg)         Environmental Laws.  Except as disclosed in the Registration
Statement, the General Disclosure Package and the Prospectus, the Company (i) is
in compliance with any and all applicable federal, state, local and foreign
laws, rules, regulations, decisions and orders relating to the protection of
human health and safety, the environment or hazardous or toxic substances or
wastes, pollutants or contaminants (collectively, “Environmental Laws”);
(ii) has received and is in compliance with all permits, licenses or other
approvals required of them under applicable Environmental Laws to conduct its
business; and (iii) has not received notice of any actual or potential liability
for the investigation or remediation of any disposal or release of hazardous or
toxic substances or wastes, pollutants or contaminants, except in the case of
subsections (i), (ii) and (iii) of this subsection (gg) as would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.

 

(hh)         Regulatory Authorizations.  Except as disclosed in the Registration
Statement, the General Disclosure Package and the Prospectus, the Company
possesses all certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities necessary to conduct its
business (including without limitation, applications for marketing approval,
manufacture, distribution, promotion, testing, use, or sale of any product
candidates) as disclosed in the Registration Statement, the General Disclosure
Package and the Prospectus, except where the failure to possess such
certificates, authorizations and permits would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect; and the
Company has not received and is otherwise not aware of any notices,
correspondence or other communications from any regulatory agency or subdivision
thereof, relating to the revocation or modification of, non-compliance with, or
failure to obtain, any such certificate, authorization or permit which, if the
subject of an unfavorable decision, ruling or finding, would, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect.

 

(ii)           Conduct of Clinical Trials.  All preclinical and clinical studies
conducted by or on behalf of the Company that are material to the Company are
described in the Registration Statement, the General Disclosure Package and the
Prospectus.  To the Company’s knowledge, after reasonable inquiry, the clinical
and preclinical studies conducted by or on behalf of the Company that are
described in the Registration Statement, the General Disclosure Package or the
Prospectus or the results of which are referred to in the Registration
Statement, the General Disclosure Package or the Prospectus were and, if still
ongoing, are being conducted in material compliance with all laws and
regulations applicable thereto in the jurisdictions in which they are being
conducted and with all laws and regulations applicable to preclinical and
clinical studies from which data will be submitted to support marketing
approval. The descriptions in the Registration Statement, the General Disclosure
Package and the Prospectus of the results of such studies do not contain any
misstatement of a material fact or omit to state any material facts necessary to
make such descriptions not misleading and fairly present the data derived from
such studies, and the Company has no knowledge of any large well-controlled
clinical study the

 

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aggregate results of which are inconsistent with or otherwise call into question
the results of any clinical study conducted by or on behalf of the Company that
are described in the Registration Statement, the General Disclosure Package or
the Prospectus or the results of which are referred to in the Registration
Statement, the General Disclosure Package or the Prospectus.  Except as
disclosed in the Registration Statement, the General Disclosure Package and the
Prospectus, the Company has not received any written notices or statements from
the United States Food and Drug Administration (the “FDA”), the European
Medicines Agency (“EMEA”) or any other governmental agency or authority
imposing, requiring, requesting or suggesting a clinical hold, termination,
suspension or material modification for or of any clinical or preclinical
studies that are described in the Registration Statement, the General Disclosure
Package or the Prospectus or the results of which are referred to in the
Registration Statement, the General Disclosure Package or the Prospectus.

 

(jj)           Absence of Certain Developments.  Except as disclosed in the
Registration Statement, the General Disclosure Package and the Prospectus, the
Company has not received any written notices or statements from the FDA, the
EMEA or any other governmental agency, and otherwise has no knowledge or reason
to believe, that (i) any new drug application or marketing authorization
application for any product or potential product of the Company is or has been
rejected or determined to be non-approvable or conditionally approvable; (ii) a
delay in time for review and/or approval of a marketing authorization
application or marketing approval application in any other jurisdiction for any
product or potential product of the Company is or may be required, requested or
being implemented; (iii) one or more clinical studies for any product or
potential product of the Company shall or may be requested or required in
addition to the clinical studies described in the Registration Statement, the
General Disclosure Package and the Prospectus as a precondition to or condition
of issuance or maintenance of a marketing approval for such product or potential
product; (iv) any license, approval, permit or authorization to conduct any
clinical trial of or market any product or potential product of the Company has
been, will be or may be suspended, revoked, modified or limited, except in the
cases of clauses (i), (ii), (iii) and (iv) where such rejections,
determinations, delays, requests, suspensions, revocations, modifications or
limitations would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.

 

(kk)         Compliance with Certain Laws, Rules, Procedures, Etc.  Except as
disclosed in the Registration Statement, the General Disclosure Package and the
Prospectus, to the Company’s knowledge, the preclinical and clinical testing,
application for marketing approval of, manufacture, distribution, promotion and
sale of the products and potential products of the Company is in compliance, in
all material respects, with all laws, rules and regulations applicable to such
activities, including without limitation applicable good laboratory practices,
good clinical practices and good manufacturing practices, except for such
non-compliance as would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. The descriptions of the results of
such tests and trials contained in the Registration Statement, the General
Disclosure Package or the Prospectus are accurate in all material respects. 
Except to the extent disclosed in the Registration Statement, the General
Disclosure Package and the Prospectus, the Company has not received notice of
adverse finding, warning letter or clinical hold notice from the FDA or any
non-U.S. counterpart of any of the foregoing, or any untitled letter or other
correspondence or notice from the FDA or any other governmental authority or
agency or any institutional or ethical review board alleging or asserting
noncompliance with any law, rule or regulation applicable in any jurisdiction,
except notices, letters, and correspondences and non-U.S. counterparts thereof
alleging or asserting such noncompliance as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.  Except as
disclosed in the Registration Statement, the General Disclosure Package and the

 

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Prospectus, the Company has not, either voluntarily or involuntarily, initiated,
conducted or issued, or caused to be initiated, conducted or issued, any recall,
field correction, market withdrawal or replacement, safety alert, warning, “dear
doctor” letter, investigator notice, or other notice or action relating to an
alleged or potential lack of safety or efficacy of any product or potential
product of the Company, any alleged product defect of any product or potential
product of the Company, or any violation of any material applicable law, rule,
regulation or any clinical trial or marketing license, approval, permit or
authorization for any product or potential product of the Company, and the
Company is not aware of any facts or information that would cause it to initiate
any such notice or action and has no knowledge or reason to believe that the
FDA, the EMEA or any other governmental agency or authority or any institutional
or ethical review board or other non-governmental authority intends to impose,
require, request or suggest such notice or action.  The pre-clinical or clinical
studies, tests, investigations, and trials conducted by or on behalf of the
Company that are described in the Registration Statement, the General Disclosure
Package or the Prospectus were and, if still in progress, are being, conducted
in compliance with all applicable U.S. and foreign statutes, rules, regulations,
orders, or other laws, and, for any data to be submitted to the FDA pursuant to
such studies, all applicable Good Laboratory Practices and Good Clinical
Practices in all material respects.  The descriptions of the pre-clinical or
clinical studies, tests, investigations, and trials, including the related
results and regulatory status thereof, contained in the Registration Statement,
the General Disclosure Package or the Prospectus are accurate in all material
respects.  The Company has not received and is otherwise not aware of any
notices, correspondence or other communication from the FDA or other
governmental regulatory agency or subdivision thereof, or any institutional or
ethical review boards, asserting non-compliance with any applicable statutes,
rules, regulations, orders, or other laws, or requiring or requesting the
termination, suspension or modification of any preclinical or clinical studies,
tests, investigations, or trials conducted by, or on behalf of, the Company or
in which the Company has participated.

 

(ll)           Money Laundering Laws.  The operations of the Company are and
have been conducted at all times in compliance in all material respects with
applicable financial recordkeeping and reporting requirements of the Currency
and Foreign Transactions Reporting Act of 1970, as amended, the money laundering
statutes of all applicable jurisdictions, the rules and regulations thereunder
and any related or similar rules, regulations or guidelines issued, administered
or enforced by any governmental agency (collectively, the “Money Laundering
Laws”) and no action, suit or proceeding by or before any court or governmental
agency, authority or body or any arbitrator involving the Company with respect
to the Money Laundering Laws is pending or, to the knowledge of the Company,
threatened.

 

(mm)      Foreign Assets.  The Company is not and, to the knowledge of the
Company, no director, officer, agent, employee or affiliate of the Company is
currently subject to any U.S. sanctions administered by the Office of Foreign
Assets Control of the U.S. Treasury Department (“OFAC”); and the Company will
not directly or indirectly use the proceeds of the offering, or lend, contribute
or otherwise make available such proceeds, to any joint venture partner or other
person or entity, for the purpose of financing the activities of any person
currently subject to any U.S. sanctions administered by OFAC.

 

7.             Certain Agreements of the Company.  The Company agrees with
Wedbush as follows:

 

(a)           Copies of Registration Statement and Prospectuses.  To furnish to
Wedbush copies of the Registration Statement (excluding exhibits) and copies of
the Prospectus (or the Prospectus as amended or supplemented) in such quantities
as Wedbush may from time to time reasonably request.  In case Wedbush is
required to deliver, under the Act (whether physically or

 

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through compliance with Rule 172 under the Act or any similar rule), a
prospectus relating to the Shares after the nine-month period referred to in
Section 10(a)(3) of the Act, or after the time a post-effective amendment to the
Registration Statement is required pursuant to Item 512(a) of Regulation S-K
under the Act, upon the request of Wedbush, and at its own expense, the Company
shall prepare and deliver to Wedbush as many copies as Wedbush may reasonably
request of an amended Registration Statement or amended or supplemented
prospectus complying with Item 512(a) of Regulation S-K or Section 10(a)(3) of
the Act, as the case may be.

 

(b)           No Amendments, Supplements, Free Writing Prospectuses Without
Consent.  Before amending or supplementing the Registration Statement or the
Prospectus, to furnish to Wedbush a copy of each such proposed amendment or
supplement and not to file any such proposed amendment or supplement to which
Wedbush reasonably objects (other than any prospectus supplement relating to the
offering of securities other than the Shares).  To furnish to Wedbush a copy of
each proposed free writing prospectus to be prepared by or on behalf of, used
by, or referred to by the Company and not to use or refer to any proposed free
writing prospectus to which Wedbush reasonably objects. Not to take any action
that would result in Wedbush or the Company being required to file with the
Commission pursuant to Rule 433(d) under the Act a free writing prospectus
prepared by or on behalf of Wedbush that Wedbush otherwise would not have been
required to file thereunder.

 

(c)           Continued Reporting; Interim Prospectus Supplement.  To file,
subject to Section 7(b) above, promptly all reports and any definitive proxy or
information statements required to be filed by the Company with the Commission
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to
the date of the Prospectus Supplement and for the duration of the Delivery
Period. For the duration of the Delivery Period, to include in its quarterly
reports on Form 10-Q, and in its annual reports on Form 10-K, a summary
detailing, for the relevant reporting period, (i) the number of Shares sold
through Wedbush pursuant to this Agreement, (ii) the net proceeds received by
the Company from such sales and (iii) the compensation paid by the Company to
Wedbush with respect to such sales (or alternatively, prepare a prospectus
supplement (each, an “Interim Prospectus Supplement”) with such summary
information and, at least once a quarter and subject to Section 7(b) above, file
such Interim Prospectus Supplement pursuant to Rule 424(b) under the Act (and
within the time periods required by Rule 424(b) and Rules 430A, 430B or 430C
under the Act)).

 

(d)           Disclosure of Sales.  To file any Permitted Free Writing
Prospectus to the extent required by Rule 433 under the Act; to provide copies
of the Prospectus and such Prospectus Supplement and each Permitted Free Writing
Prospectus (to the extent not previously delivered or filed on the Commission’s
Electronic Data Gathering, Analysis and Retrieval system or any successor system
thereto (collectively, “EDGAR”)) to Wedbush via e-mail in “.pdf” format on such
filing date to an e-mail account designated by Wedbush; and, at Wedbush’s
request, to also furnish copies of the Prospectus and such Prospectus Supplement
to the Exchange and each other exchange or market on which sales were effected,
in each case, as may be required by the rules or regulations of the Exchange or
such other exchange or market.

 

(e)           Notice of Stop Orders, Etc.  During the Delivery Period to advise
Wedbush, promptly after it receives notice thereof, of the issuance of any stop
order by the Commission suspending the effectiveness of the Registration
Statement or preventing the use of the Prospectus, of the suspension of the
qualification of the Shares for offering or sale in any jurisdiction, of the
initiation or threatening of any proceeding for any such purpose, or of any
request by the Commission for the amending or supplementing of the Registration
Statement, the Prospectus Supplement, the Prospectus or any Permitted Free
Writing Prospectus or for

 

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additional information; and, in the event of the issuance of any such stop order
or of any order preventing or suspending the use of any prospectus relating to
the Shares or suspending any such qualification, to use promptly its best
efforts to obtain its withdrawal.

 

(f)            Prompt Amendment or Supplement.  If, after the date hereof and
during the Delivery Period, either (i) any event shall occur or condition exist
as a result of which the Prospectus would include any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, or (ii) for any other reason it shall be necessary during
such same period to amend or supplement the Prospectus or to file any document
in order to comply with the Act or the Exchange Act, to promptly advise Wedbush
by telephone (with confirmation in writing or electronic mail) and to promptly
prepare and file, subject to Section 7(b) above, with the Commission an
amendment or supplement to the Registration Statement or the Prospectus which
will correct such statement or omission or effect such compliance and to furnish
to Wedbush as many copies as Wedbush may reasonably request of such amendment or
supplement.

 

(g)           Blue Sky Compliance.  To endeavor to qualify the Shares for offer
and sale under the securities or Blue Sky laws of such U.S. jurisdictions as
Wedbush shall reasonably request and to continue such qualifications in effect
so long as necessary under such laws for the distribution of the Shares
provided, however, that the Company shall not be required to qualify to do
business in any U.S. jurisdiction where it is not now qualified or to take any
action which would subject it to general or unlimited service of process in any
U.S. jurisdiction where it is not now subject.

 

(h)           Earnings Statement.  As soon as practicable, but not later than
16 months, after the date of this Agreement, the Company will make generally
available to its securityholders an earnings statement covering a period of at
least 12 months beginning after the date of this Agreement and satisfying the
provisions of Section 11(a) of the Act and Rule 158.

 

(i)            Payment of Expenses.  The Company, whether or not the
transactions contemplated hereunder are consummated or this Agreement is
terminated, will pay or cause to be paid all fees and expenses incident to the
performance of its obligations under this Agreement, including but not limited
to (i) any filing fees and other expenses (including reasonable fees and
disbursements of counsel to Wedbush subject to the limitations contained in
Section 4(b)) incurred in connection with qualification of the Shares for sale
under the laws of such jurisdictions as Wedbush may designate and the
preparation and printing of memoranda relating thereto, (ii) any costs and
expenses related to the review by the Financial Industry Regulatory
Authority, Inc. (“FINRA”) of the terms of the sale of the Shares (including
filing fees and the reasonable fees and disbursements of counsel for Wedbush
relating to such review subject to the limitations contained in Section 4(b)),
(iii) any travel expenses of the Company’s officers and employees and any other
expenses of the Company in connection with attending or hosting meetings with
prospective purchasers of the Shares, (iv) fees and expenses incident to listing
the Shares on the NASDAQ Global Market and other national and foreign exchanges,
(v) fees and expenses in connection with the registration of the Shares under
the Exchange Act, (vi) fees and expenses incurred in distributing the General
Disclosure Package, the Prospectus (including any amendments and supplements
thereto), any Interim Prospectus Supplement or any Permitted Free Writing
Prospectuses and for expenses incurred for preparing, printing and distributing
the General Disclosure Package, the Prospectus (including any amendments and
supplements thereto), any Interim Prospectus Supplement or any Permitted Free
Writing Prospectuses to investors or prospective investors and (vii) all other
costs and expenses incurred by the Company incident to the performance of the
obligations of the Company hereunder for which provision is

 

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not otherwise made in this Section.  In addition, the Company, whether or not
the transactions contemplated hereunder are consummated or this Agreement is
terminated, shall upon demand from time to time reimburse Wedbush for its
reasonable out-of-pocket expenses as provided in, and subject to the limitations
contained in, Section 4(b) hereof.

 

(j)            Shelf Registration Statement.  The date of this Agreement is not
more than three years subsequent to the initial effective date of the
Registration Statement.  If, immediately prior to the third anniversary of the
initial effective date of the Registration Statement, any of the Shares remain
unsold, the Company will, at its option, prior to that third anniversary file,
if it has not already done so, a new shelf registration statement relating to
the Shares, in a form satisfactory to Wedbush, and use its best efforts to cause
such new registration statement to be declared effective within 180 days after
that third anniversary so as to enable the continued public offering and sale of
the Shares after such third anniversary, and otherwise will take all other
action necessary or appropriate to permit the public offering and sale of the
Shares to continue as contemplated hereby.  References herein to the
Registration Statement shall include any new shelf registration statement
relating to the offering of the Shares.

 

(k)           Maintenance of Exchange Listing.  To use its commercially
reasonable efforts to cause the Shares to be listed for trading on the Exchange
and to maintain such listing.

 

(l)            Officer’s Certificate.  Upon commencement of the offering of the
Shares under this Agreement (and upon the recommencement of the offering of the
Shares under this Agreement following the termination of a suspension of sales
hereunder), and each time that (i) the Registration Statement or the Prospectus
shall be amended or supplemented (other than a prospectus supplement relating
solely to the offering of securities other than the Shares), (ii) there is filed
with the Commission any document incorporated by reference into the Prospectus
(other than a Current Report on Form 8-K, unless Wedbush shall otherwise
reasonably request), or (iii) Shares are delivered to Wedbush as principal on a
Settlement Date (such commencement date and each such date referred to in (i),
(ii) and (iii) above, a “Representation Date”), to furnish or cause to be
furnished to Wedbush forthwith a certificate dated and delivered the date of
effectiveness of such amendment, the date of filing with the Commission of such
supplement or other document, or the relevant Settlement Date, as the case may
be, in form reasonably satisfactory to Wedbush to the effect that the statements
contained in the certificate referred to in Section 9(d) of this Agreement are
true and correct at the time of such amendment, supplement, filing, or delivery,
as the case may be, as though made at and as of such time modified as necessary
to relate to the Registration Statement and the Prospectus as amended and
supplemented to the time of delivery of such certificate.

 

(m)          Opinions of Counsel.  Upon commencement of the offering of the
Shares under this Agreement (and upon the recommencement of the offering of the
Shares under this Agreement following the termination of a suspension of sales
hereunder) and at each other date specified in Section 9(e), the Company shall
cause to be furnished to Wedbush, dated as of such date, in form and substance
reasonably satisfactory to Wedbush, (i) the written opinion of Cooley LLP, the
Company’s counsel, or other counsel to the Company reasonably acceptable to
Wedbush, and (ii) the written opinion of Morgan, Lewis and Bockius LLP, the
Company’s intellectual property counsel, or other counsel to the Company
reasonably acceptable to Wedbush, each as described in Section 9(e), each
modified as necessary to relate to the Registration Statement, the General
Disclosure Package and the Prospectus as amended and supplemented to the time of
delivery of such opinions.  Upon commencement of the offering of the Shares
under this Agreement, upon any Representation Date resulting from the filing of
the Company’s Annual Report on Form 10-K and upon any Representation Date
resulting from the

 

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delivery of Shares to Wedbush as principal (other than in the ordinary course of
business) on a Settlement Date, the Company shall cause to be furnished to
Wedbush, dated as of such date, in form and substance reasonably satisfactory to
Wedbush, the written negative assurance letter of Cooley LLP, the Company’s
counsel, or other counsel to the Company reasonably acceptable to Wedbush, as
described in Section 9(e), modified as necessary to relate to the Registration
Statement, the General Disclosure Package and the Prospectus as amended and
supplemented to the time of delivery of such opinion.

 

(n)           Reliance Letters.  With respect to Section 7(m) above, in lieu of
delivering such opinions or letters for Representation Dates subsequent to the
commencement of the offering of the Shares under this Agreement such counsel may
furnish Wedbush with a letter (a “Reliance Letter”) to the effect that Wedbush
may rely on a prior opinion or letter delivered under Section 7(m) to the same
extent as if it were dated the date of such letter (except that statements in
such prior opinion or letter shall be deemed to relate to the Registration
Statement and the Prospectus as amended or supplemented as of such
Representation Date).

 

(o)           Comfort Letters.  At each date specified in Section 9(f), the
Accountant shall deliver to Wedbush the comfort letters described in
Section 9(f).

 

(p)           Due Diligence Requests.  To comply with any due diligence review
or call and any other due diligence requests reasonably requested by Wedbush.

 

(q)           Share Reservation.  To reserve and keep available at all times,
free of preemptive rights, Shares for the purpose of enabling the Company to
satisfy its obligations hereunder.

 

(r)            Trading.  That, subject to compliance with any applicable
requirements of Regulation M under the Exchange Act, it consents to Wedbush
trading in the Common Stock for Wedbush’s own account and for the accounts of
its clients at the same time as sales of the Shares occur pursuant to this
Agreement.

 

(s)            Affirmation of Representations and Warranties.  That each
acceptance by the Company of an offer to purchase the Shares hereunder shall be
deemed to be an affirmation to Wedbush that the representations and warranties
of the Company contained in or made pursuant to this Agreement are true and
correct as of the date of such acceptance as though made at and as of such date,
and an undertaking that such representations and warranties will be true and
correct as of the Settlement Date for the Shares relating to such acceptance as
though made at and as of such date (except that such representations and
warranties shall be deemed to relate to the Registration Statement and the
Prospectus as amended and supplemented relating to such Shares).

 

(t)            No Sales of Common Stock.  Not to sell, offer to sell, contract
or agree to sell, hypothecate, pledge, grant any option to sell or otherwise
dispose of or agree to dispose of, directly or indirectly, any shares of the
Common Stock or securities convertible into or exchangeable or exercisable for
the Common Stock or warrants or other rights to purchase the Common Stock or any
other securities of the Company that are substantially similar to the Common
Stock or permit the registration under the Act of any shares of the Common
Stock, except for (i) the registration of the Shares and the sales through
Wedbush pursuant to this Agreement, (ii) any shares of Common Stock issued by
the Company upon the exercise of an option or warrant or the conversion of a
security outstanding on the date hereof and referred to in the Prospectus,
(iii) any shares of Common Stock issued or options to purchase Common Stock
granted pursuant to existing employee benefit plans of the Company or (iv) any
shares of

 

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Common Stock issued pursuant to any non-employee director stock plan, dividend
reinvestment plan or stock purchase plan of the Company, during the Delivery
Period, without (A) giving Wedbush at least three business days’ prior written
notice specifying the nature of the proposed sale and the date of such proposed
sale and (B) Wedbush suspending activity under this program for such period of
time as requested by the Company.

 

(u)           Reporting Requirements.  During the period of three years after
the date of this Agreement, the Company will furnish or make available to
Wedbush (i) as soon as available, a copy of each report and any definitive proxy
statement of the Company filed with the Commission under the Exchange Act or
mailed to stockholders, and (ii) from time to time, such other information
concerning the Company as Wedbush may reasonably request in writing.  However,
so long as the Company is subject to the reporting requirements of either
Section 13 or Section 15(d) of the Exchange Act and is timely filing reports
with the Commission on EDGAR, it is not required to furnish such filed reports
or statements to Wedbush required pursuant to subsection (i) above.

 

(v)           Use of Proceeds.  The Company will use the net proceeds received
in connection with any offering of the Shares in the manner described in the
“Use of Proceeds” section of the General Disclosure Package and the Prospectus.

 

8.             Covenants of Wedbush.  Wedbush covenants with the Company not to
take any action that would result in the Company being required to file with the
Commission under Rule 433(d) a free writing prospectus prepared by or on behalf
of Wedbush that otherwise would not be required to be filed by the Company
thereunder, but for the action of Wedbush.

 

9.             Conditions of the Obligations of Wedbush.  The obligations of
Wedbush are subject to the following conditions:

 

(a)           Filings; No Stop Orders; Etc.  If filing of the Prospectus, or any
amendment or supplement thereto, or any Permitted Free Writing Prospectus, is
required under the Act or the rules and regulations thereunder, the Company
shall have filed the Prospectus (or such amendment or supplement) or such
Permitted Free Writing Prospectus with the Commission in the manner and within
the time period so required (without reliance on Rule 424(b)(8) or Rule 164(b));
the Registration Statement shall remain effective; no stop order suspending the
effectiveness of the Registration Statement or any part thereof, or any
amendment thereof, nor suspending or preventing the use of any portion of the
General Disclosure Package or the Prospectus shall have been issued; no
proceedings for the issuance of such an order shall have been initiated or
threatened; and any request of the Commission for additional information (to be
included in the Registration Statement, the Prospectus or the General Disclosure
Package or otherwise) shall have been complied with to Wedbush’s reasonable
satisfaction.

 

(b)           No Material Misstatements or Omissions.  Wedbush shall not have
reasonably determined, and advised the Company, that the Registration Statement,
the General Disclosure Package, the Prospectus, or any amendment thereof or
supplement thereto, or any Permitted Free Writing Prospectus, contains an untrue
statement of fact which, in Wedbush’s reasonable opinion, is material, or omits
to state a fact which, in Wedbush’s reasonable opinion, is material and is
required to be stated therein or necessary to make the statements therein not
misleading.

 

(c)           No Material Adverse Changes.  Subsequent to the execution and
delivery of this Agreement, there shall not have occurred (i) any change, or any
development or event involving a prospective change, in the condition (financial
or otherwise), results of operations, business,

 

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properties or prospects of the Company which, in the reasonable judgment of
Wedbush is material and adverse and makes it impractical or inadvisable to
market the Shares; (ii) any downgrading in the rating of any debt securities of
the Company by any “nationally recognized statistical rating organization” (as
defined for purposes of Rule 436(g)), or any public announcement that any such
organization has under surveillance or review its rating of any debt securities
of the Company (other than an announcement with positive implications of a
possible upgrading, and no implication of a possible downgrading, of such
rating) or any announcement that the Company has been placed on negative
outlook; (iii) any change in U.S. or international financial, political or
economic conditions or currency exchange rates or exchange controls, the effect
of which is such as to make it, in the reasonable judgment of Wedbush
impractical to market or to enforce contracts for the sale of the Shares,
whether in the primary market or in respect of dealings in the secondary market;
(iv) any suspension or material limitation of trading in securities generally on
the New York Stock Exchange, or any setting of minimum or maximum prices for
trading on such exchange; (v) any suspension of trading of any securities of the
Company on the Exchange, any other exchange or in the over-the-counter market;
(vi) any banking moratorium declared by any U.S. federal or New York
authorities; (vii) any major disruption of settlements of securities, payment,
or clearance services in the United States or any other country where such
securities are listed or (viii) any attack on, outbreak or escalation of
hostilities or act of terrorism involving the United States, any declaration of
war by Congress or any other national or international calamity or emergency if,
in the reasonable judgment of Wedbush, the effect of any such attack, outbreak,
escalation, act, declaration, calamity or emergency is such as to make it
impractical or inadvisable to market the Shares or to enforce contracts for the
sale of the Shares.

 

(d)           Officer’s Certificate.  Wedbush shall have received on each
Representation Date, and on such other dates as may be reasonably requested by
Wedbush, a certificate, dated such Representation Date and signed by an
executive officer of the Company, to the effect set forth in
Section 9(c)(ii) above and to the effect that (i) the representations and
warranties of the Company contained in this Agreement are true and correct as of
such Representation Date; (ii) the Company has complied with all of the
agreements and satisfied all of the conditions on its part to be performed or
satisfied hereunder on or before such Representation Date; (iii) no stop order
suspending the effectiveness of the Registration Statement has been issued and
no proceeding for that purpose has been initiated or, to the knowledge of the
Company, threatened by the Commission; (iv) the Prospectus Supplement, any
Interim Prospectus Supplement and each Permitted Free Writing Prospectus have
been timely filed with the Commission under the Act (in the case of a Permitted
Free Writing Prospectus, to the extent required by Rule 433 under the Act), and
all requests for additional information on the part of the Commission have been
complied with or otherwise satisfied; (v) if delivered on a Representation Date
that is not also a Settlement Date, as of such Representation Date, or if
delivered on a Settlement Date, at the Time of Sale applicable relating to the
Shares, the Registration Statement did not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading; (vi) if delivered on
a Representation Date that is not also a Settlement Date, as of such
Representation Date, or if delivered on a Settlement Date, at the Time of Sale
relating to the applicable Shares and at the Settlement Date, the General
Disclosure Package and the Prospectus did not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; provided, however, that no such
certificate shall apply to any statements or omissions made in reliance upon and
in conformity with information furnished in writing to the Company by Wedbush
expressly for use in the General Disclosure Package and the Prospectus; and
(vii) the Shares to be sold on that date, if any, have been duly and validly
authorized by the Company and

 

19

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that all corporate action required to be taken for the authorization, issuance
and sale of the Shares on that date, if any, has been validly and sufficiently
taken.

 

(e)           Opinions of Counsel.  Wedbush shall have received upon
commencement of the offering of the Shares under this Agreement (and upon the
recommencement of the offering of the Shares under this Agreement following the
termination of a suspension of sales hereunder), on each Representation Date,
and on such other dates as may be reasonably requested by Wedbush, (i) the
written opinion of Cooley LLP, the Company’s counsel, or other counsel to the
Company reasonably acceptable to Wedbush, in form and substance reasonably
satisfactory to Wedbush; and (ii) the written opinion of Morgan, Lewis and
Bockius LLP, the Company’s intellectual property counsel, or other counsel to
the Company reasonably acceptable to Wedbush, in form and substance reasonably
satisfactory to Wedbush.  Wedbush shall have received upon commencement of the
offering of the Shares under this Agreement, upon any Representation Date
resulting from the filing of the Company’s Annual Report on Form 10-K and upon
any Representation Date resulting from the delivery or Shares to Wedbush as
principal on a Settlement Date, the written negative assurance letter of Cooley
LLP, the Company’s counsel, or other counsel to the Company reasonably
acceptable to Wedbush, in form and substance reasonably acceptable to Wedbush;
provided, however, that such counsel shall not be required to deliver a negative
assurance letter on such date unless counsel to Wedbush also delivers a negative
assurance letter in customary form to Wedbush on such date.

 

(f)            Accountant’s Comfort Letter.  Wedbush shall have received, upon
commencement of the offering of the Shares under this Agreement (and upon the
recommencement of the offering of the Shares under this Agreement following the
termination of a suspension of sales hereunder) and each time that (i) the
Registration Statement or the Prospectus shall be amended or supplemented to
include additional financial information, (ii) any Shares are delivered to
Wedbush as principal on a Settlement Date, (iii) the Company shall file an
annual report on Form 10-K or quarterly report on Form 10-Q, (iv) there is filed
with the Commission any document (other than an annual report on Form 10-K or
quarterly report on Form 10-Q) incorporated by reference into the Prospectus
which contains additional amended financial information or (v) on such other
dates as may be reasonably requested by Wedbush, from the Accountant, (A) a
letter from the Accountant, dated such date in form and substance reasonably
satisfactory to Wedbush (the first such letter, the “Initial Comfort Letter”)
and (B) a letter updating the Initial Comfort Letter with any information that
would have been included in the Initial Comfort Letter had it been given on such
date and modified as necessary to relate to the Registration Statement, the
Prospectus Supplement, the Prospectus or any issuer free writing prospectus, as
amended and supplemented to the date of such letter.

 

(g)           Listing of Shares.  The Shares shall have been duly authorized for
listing on the Exchange upon official notice of issuance at or prior to the
Settlement Date.

 

(h)           FINRA Matters.  Unless exemption is available pursuant to FINRA
Rule 5110(b)(7)(c)(i), FINRA shall have confirmed that it has not raised any
objection with respect to the fairness and reasonableness of the sales agency
terms and arrangements.

 

(i)            Additional Certificates.  The Company shall have furnished to
Wedbush such certificates, in addition to those specifically mentioned herein,
as Wedbush may have reasonably requested as to the accuracy and completeness of
any statement in the Registration Statement, the Prospectus or the General
Disclosure Package, as to the accuracy of the representations and warranties of
the Company herein, as to the performance by the Company of its obligations

 

20

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hereunder, or as to the fulfillment of the conditions concurrent and precedent
to Wedbush’s obligations hereunder.

 

(j)            Copies.  The Company will furnish Wedbush with such conformed
copies of such opinions, certificates, letters and documents as Wedbush may
reasonably request.  Wedbush may in its sole discretion waive compliance with
any conditions to its obligations hereunder.

 

10.          Indemnification and Contribution.

 

(a)           Indemnification of Wedbush.  The Company will indemnify and hold
harmless Wedbush, its partners, members, directors, officers, employees, agents,
affiliates and each person, if any, who controls Wedbush within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act (each, an “Indemnified
Party”), against any and all losses, claims, damages or liabilities, joint or
several, to which such Indemnified Party may become subject, under the Act, the
Exchange Act, other Federal or state statutory law or regulation or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in any part of the Registration
Statement or any amendment thereof, the General Disclosure Package, any issuer
free writing prospectus as defined in Rule 433(h) under the Act, any Company
information that the Company has filed, or is required to file, pursuant to
Rule 433(d) under the Act, or the Prospectus or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse each Indemnified Party for any legal
or other expenses reasonably incurred by such Indemnified Party in connection
with investigating or defending against any such loss, claim, damage, liability,
action, litigation, investigation or proceeding whatsoever (whether or not such
Indemnified Party is a party thereto), whether threatened or commenced, and in
connection with the enforcement of this provision with respect to any of the
above as such expenses are incurred; provided, however, that the Company will
not be liable in any such case to the extent that any such loss, claim, damage
or liability arises out of or is based upon an untrue statement or alleged
untrue statement in or omission or alleged omission from any of such documents
in reliance upon and in conformity with written information furnished to the
Company by Wedbush specifically for use therein, it being understood and agreed
that the only such information furnished by Wedbush consists of the information
described as such in subsection (b) below.

 

(b)           Indemnification of Company.  Wedbush will indemnify and hold
harmless the Company, each of its directors and each of its officers who signs
the Registration Statement and each person, if any, who controls the Company
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act
(each, an “Agent Indemnified Party”), against any losses, claims, damages or
liabilities to which such Agent Indemnified Party may become subject, under the
Act, the Exchange Act, other Federal or state statutory law or regulation or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any part of the Registration
Statement or any amendment thereof, the General Disclosure Package, any issuer
free writing prospectus, any Company information that the Company has filed, or
is required to file, pursuant to Rule 433(d) under the Act, or the Prospectus or
any amendment or supplement thereto, or arise out of or are based upon the
omission or the alleged omission of a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each case
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was made in reliance upon and
in conformity with written information furnished to the Company by Wedbush
specifically for use therein, and will

 

21

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reimburse any legal or other expenses reasonably incurred by such Agent
Indemnified Party in connection with investigating or defending against any such
loss, claim, damage, liability, action, litigation, investigation or proceeding
whatsoever (whether or not such Agent Indemnified Party is a party thereto),
whether threatened or commenced, based upon any such untrue statement or
omission, or any such alleged untrue statement or omission as such expenses are
incurred, it being understood and agreed that the only information furnished by
Wedbush specifically for inclusion in the Registration Statement, the General
Disclosure Package, the Prospectus or any issuer free writing prospectus
consists of (i) the name, “Wedbush PacGrow Life Sciences” on the cover page of
the Prospectus Supplement, (ii) the 2.0% commission set forth on the cover of
the Prospectus and in the “Plan of Distribution” section of the Prospectus and
(iii) the information contained in the last sentence of the first paragraph of
the “Plan of Distribution” section of the Prospectus.

 

(c)           Actions against Parties; Notification.  Promptly after receipt by
an indemnified party under this Section of notice of the commencement of any
action, such indemnified party will, if a claim in respect thereof is to be made
against the indemnifying party under subsection (a) or (b) above, notify the
indemnifying party of the commencement thereof; but the failure to notify the
indemnifying party shall not relieve it from any liability that it may have
under subsection (a) or (b) above except to the extent that it has been
materially prejudiced (through the forfeiture of substantive rights or defenses)
by such failure; and provided further that the failure to notify the
indemnifying party shall not relieve it from any liability that it may have to
an indemnified party otherwise than under subsection (a) or (b) above.  In case
any such action is brought against any indemnified party and it notifies the
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate therein and, to the extent that it may wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party (who shall not,
except with the consent of the indemnified party, be counsel to the indemnifying
party), and after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, the indemnifying party will
not be liable to such indemnified party under this Section for any legal or
other expenses subsequently incurred by such indemnified party in connection
with the defense thereof other than reasonable costs of investigation.  The
indemnified party will have the right to employ its own counsel in any such
action, but the fees, expenses and other charges of such counsel will be at the
expense of such indemnified party unless (i) the employment of counsel by the
indemnified party has been authorized in writing by the indemnifying party,
(ii) the indemnified party has concluded (based on advice of counsel) that there
may be legal defenses available to it or other indemnified parties that are
different from or in addition to those available to the indemnifying party,
(iii) a conflict or potential conflict exists (based on advice of counsel to the
indemnified party) between the indemnified party and the indemnifying party (in
which case the indemnifying party will not have the right to direct the defense
of such action on behalf of the indemnified party), or (iv) the indemnifying
party has not in fact employed counsel reasonably satisfactory to the
indemnified party to assume the defense of such action within a reasonable time
after receiving notice of the commencement of the action, in each of which cases
the reasonable fees, disbursements and other charges of counsel will be at the
expense of the indemnifying party or parties.  No indemnifying party shall,
without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened action in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party unless such settlement (i) includes
an unconditional release of such indemnified party from all liability on any
claims that are the subject matter of such action and (ii) does not include a
statement as to, or an admission of, fault, culpability or a failure to act by
or on behalf of an indemnified party.

 

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(d)           Contribution.  If the indemnification provided for in this
Section is unavailable or insufficient to hold harmless an indemnified party
under subsection (a) or (b) above, then each indemnifying party shall contribute
to the amount paid or payable by such indemnified party as a result of the
losses, claims, damages or liabilities referred to in subsection (a) or
(b) above (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and Wedbush on the other from
the offering of the Shares or (ii) if the allocation provided by clause
(i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause
(i) above but also the relative fault of the Company on the one hand and Wedbush
on the other in connection with the statements or omissions which resulted in
such losses, claims, damages or liabilities as well as any other relevant
equitable considerations.  The relative benefits received by the Company on the
one hand and Wedbush on the other shall be deemed to be in the same proportion
as the total net proceeds from the offering (before deducting expenses) received
by the Company bear to the total commissions received by Wedbush.  The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
or Wedbush and the parties’ relative intent, knowledge, access to information
and opportunity to correct or prevent such untrue statement or omission.  The
amount paid by an indemnified party as a result of the losses, claims, damages
or liabilities referred to in the first sentence of this subsection (d) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any action or
claim that is the subject of this subsection (d).  Notwithstanding the
provisions of this subsection (d), Wedbush shall not be required to contribute
any amount in excess of the amount by which total compensation received by
Wedbush hereunder exceeds the amount of any damages which Wedbush has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission.  No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.  The Company and Wedbush agree that it would not be just and
equitable if contribution pursuant to this Section 10(d) were determined by pro
rata allocation or by any other method of allocation that does not take account
of the equitable considerations referred to in this Section 10(d).

 

(e)           Control Persons.  The obligations of the Company under this
Section shall be in addition to any liability which the Company may otherwise
have and shall extend, upon the same terms and conditions, to each person, if
any, who controls Wedbush within the meaning of the Act; and the obligations of
Wedbush under this Section shall be in addition to any liability that Wedbush
may otherwise have and shall extend, upon the same terms and conditions, to each
director of the Company, to each officer of the Company who has signed the
Registration Statement and to each person, if any, who controls the Company
within the meaning of the Act.

 

11.          Survival of Certain Representations and Obligations.  The
respective indemnities, agreements, representations, warranties and other
statements of the Company or its officers and of Wedbush set forth in or made
pursuant to this Agreement will remain in full force and effect, regardless of
any investigation, or statement as to the results thereof, made by or on behalf
of Wedbush, the Company or any of their respective representatives, officers or
directors or any controlling person, and will survive delivery of and payment
for the Shares.

 

12.          Termination.

 

(a)           By the Company.  The Company shall have the right, by giving
written notice as hereinafter specified, to terminate this Agreement in its sole
discretion at any time.  Any such

 

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termination shall be without liability of any party to any other party, except
that (i) with respect to any pending sale through Wedbush for the Company, the
obligations of the Company, including, but not limited to, its obligations under
Section 5 above, shall remain in full force and effect notwithstanding such
termination; and (ii) the provisions of Section 4(b), Section 6 and Section 10
of this Agreement shall remain in full force and effect notwithstanding such
termination. Subject to the provisions of Section 4(b), upon termination of this
Agreement by the Company, the Company will promptly on demand reimburse Wedbush
for any unreimbursed expenses incurred prior to the effective date of such
termination.

 

(b)           By Wedbush.  Wedbush shall have the right, by giving written
notice as hereinafter specified, to terminate this Agreement in its sole
discretion at any time. Any such termination shall be without liability of any
party to any other party except that (i) with respect to any pending sale
through Wedbush for the Company, the obligations of the Company, including, but
not limited to, its obligations under Section 5 above, shall remain in full
force and effect notwithstanding such termination; and (ii) the provisions of
Section 4(b), Section 6 and Section 10 of this Agreement shall remain in full
force and effect notwithstanding such termination.

 

(c)           Effect of Termination.  This Agreement shall remain in full force
and effect until and unless terminated hereunder pursuant to Section 12(a) or
(b) above or otherwise by mutual agreement of the parties; provided that any
such termination by mutual agreement or pursuant to this clause (c) shall in all
cases be deemed to provide that Section 4(b), Section 6 and Section 10 of this
Agreement shall remain in full force and effect.

 

(d)           Effective Date of Termination.  Any termination of this Agreement
shall be effective on the date specified in such notice of termination; provided
that such termination shall not be effective until the close of business on the
date of receipt of such notice by Wedbush or the Company, as the case may be. If
such termination shall occur prior to the Settlement Date for any sale of
Shares, such sale shall settle in accordance with the provisions of Section 5.

 

13.          Notices.  All communications hereunder will be in writing and, if
sent to Wedbush, will be mailed, delivered or telegraphed and confirmed to
Wedbush Securities Inc., One Bush Street, Suite 1700, San Francisco, California
94104; Attention: Head of Equity Capital Markets, or, if sent to the Company,
will be mailed, delivered or telegraphed and confirmed to it at 1020 East Meadow
Circle, Palo Alto, California 94303-4230; Attention: Chief Financial Officer.

 

14.          Successors.  This Agreement will inure to the benefit of and be
binding upon parties hereto and their respective successors and the officers and
directors and controlling persons referred to in Section 10, and no other person
will have any right or obligation hereunder

 

15.          Counterparts.  This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.

 

16.          Inconsistent Provisions. In the event of any conflict between the
terms of this Agreement and the terms of that certain engagement letter between
the Company and Wedbush dated January 7, 2013, the terms of this Agreement shall
control.

 

17.          Absence of Fiduciary Relationship.  The Company acknowledges and
agrees that:

 

(a)           No Other Relationship.  Wedbush has been retained solely to act as
agent in connection with the sale of the Shares and that no fiduciary, advisory
or agency relationship

 

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between the Company and Wedbush has been created in respect of any of the
transactions contemplated by this Agreement, irrespective of whether Wedbush has
advised or is advising the Company on other matters;

 

(b)           Absence of Obligation to Disclose.  The Company has been advised
that Wedbush and its affiliates are engaged in a broad range of transactions
that may involve interests that differ from those of the Company and that
Wedbush has no obligation to disclose such interests and transactions to the
Company by virtue of any fiduciary, advisory or agency relationship; and

 

(c)           Waiver.  The Company waives, to the fullest extent permitted by
law, any claims it may have against Wedbush for breach of fiduciary duty or
alleged breach of fiduciary duty and agrees that Wedbush shall have no liability
(whether direct or indirect) to the Company in respect of such a fiduciary duty
claim or to any person asserting a fiduciary duty claim on behalf of or in right
of the Company, including stockholders, employees or creditors of the Company.

 

18.          Applicable Law.  This Agreement shall be governed by, and construed
in accordance with, the laws of the State of New York.  The Company hereby
submits to the non-exclusive jurisdiction of any court of the State of New York
located in New York County or the United States District Court for the Southern
District of New York in any suit or proceeding arising out of or relating to
this Agreement or the transactions contemplated thereby.  The Company
irrevocably and unconditionally waives any objection to the laying of venue of
any suit or proceeding arising out of or relating to this Agreement or the
transactions contemplated thereby in any court of the State of New York located
in New York County or the United States District Court for the Southern District
of New York and irrevocably and unconditionally waives and agrees not to plead
or claim in any such court that any such suit or proceeding in any such court
has been brought in an inconvenient forum.

 

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If the foregoing is in accordance with your understanding of our agreement,
kindly sign and return to the Company one of the counterparts hereof, whereupon
it will become a binding agreement between the Company and you in accordance
with its terms.

 

 

Very truly yours,

 

 

 

ANACOR PHARMACEUTICALS, INC.

 

 

 

 

 

 

 

By:

/s/ Geoffrey Parker

 

Name:

Geoffrey Parker

 

Title:

SVP & CFO

 

Signature Page to Equity Distribution Agreement

 

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The foregoing Equity Distribution Agreement is hereby confirmed and accepted as
of the date first above written.

 

 

WEDBUSH SECURITIES INC.

 

 

 

 

 

 

 

By:

/s/ Benjamin J. Davey

 

Name:

Benjamin J. Davey

 

Title:

Managing Director, Head of ECM

 

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SCHEDULE I

 

Permitted Free Writing Prospectuses

 

NONE

 

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EXHIBIT A

 

Form of Transaction Confirmation

 

[Wedbush Securities Inc. Letterhead]

 

VIA ELECTRONIC MAIL

 

·, 20·

 

Anacor Pharmaceuticals, Inc.

1020 East Meadow Circle

Palo Alto, California 94303-4230

 

Attention: ·

 

TRANSACTION CONFIRMATION

 

Dear ·:

 

This Confirmation sets forth the terms of the agreement of Wedbush Securities
Inc. (“Wedbush”) with Anacor Pharmaceuticals, Inc. (the “Company”) relating to
the sale of shares of the Company’s common stock, par value $0.001 per share,
having an aggregate gross sales price of up to $25 million pursuant to the
Equity Distribution Agreement between the Company and Wedbush, dated January 18,
2013 (the “Agreement”). Unless otherwise defined below, capitalized terms
defined in the Agreement shall have the same meanings when used herein.

 

By countersigning or otherwise indicating in writing the Company’s acceptance of
this Confirmation (an “Acceptance”), the Company shall have agreed with Wedbush
to engage in the following transaction:

 

[Number of Shares to be sold][Aggregate Gross Price of Shares to be sold]: ·

 

Minimum price at which Shares may be sold: $·

 

Date(s) on which Shares may be sold: ·

 

Compensation to Wedbush (if different than the Agreement): ·

 

Manner in which Shares are to be sold: ·

 

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The transaction set forth in this Confirmation will not be binding on the
Company or Wedbush unless and until the Company delivers its Acceptance;
provided, however, that neither the Company nor Wedbush will be bound by the
terms of this Confirmation unless the Company delivers its Acceptance by ·am/pm
(New York time) on [the date hereof/ ·, 201·].

 

By delivering its Acceptance, the Company shall have agreed with Wedbush that
the Prospectus (as defined in the Agreement), including the Incorporated
Documents, as of the date of the Acceptance, does not contain an untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading.

 

The transaction, if it becomes binding on the parties, shall be subject to all
of the representations, warranties, covenants and other terms and conditions of
the Agreement, except to the extent amended or modified hereby, all of which are
expressly incorporated herein by reference. Each of the representations and
warranties set forth in the Agreement shall be deemed to have been made at and
as of the date of the Company’s Acceptance, and at every Time of Sale and any
Settlement Date.

 

If the foregoing conforms to your understanding of our agreement, please so
indicate your Acceptance by signing below.

 

Very truly yours,

 

WEDBUSH SECURITIES INC.

 

 

By:

 

 

Name:

 

 

Title:

 

 

 

ACCEPTED as of the date first above written

 

ANACOR PHARMACEUTICALS, INC.

 

By:

 

 

Name:

 

 

Title:

 

 

 

[Note: The Company’s Acceptance may also be evidenced by a separate written
acceptance referencing this Confirmation and delivered in accordance with the
Agreement]

 

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