EXHIBIT 10.1

 

At Market Issuance Sales Agreement

 

May 20, 2010

 

McNicoll, Lewis & Vlak LLC
420 Lexington Ave., Suite 628
New York, NY 10170

 

Wm Smith & Co.
1700 Lincoln Street, Suite 2545
Denver, CO 80203

 

Ladies and Gentlemen:

 

ARYx Therapeutics, Inc., a Delaware corporation (the “Company”), confirms its
agreement (this “Agreement”) with McNicoll, Lewis & Vlak LLC, a Delaware limited
liability company (“MLV”), and Wm Smith & Co., a Colorado corporation (“Wm
Smith” and, together with MLV, the “Agents”), as follows:

 

1.                                       ISSUANCE AND SALE OF SHARES.  THE
COMPANY AGREES THAT, FROM TIME TO TIME DURING THE TERM OF THIS AGREEMENT, ON THE
TERMS AND SUBJECT TO THE CONDITIONS SET FORTH HEREIN, IT MAY ISSUE AND SELL
THROUGH MLV, ACTING AS LEAD AGENT, AND WM SMITH, ACTING AS SECONDARY AGENT,
SHARES (THE “SHARES”) OF THE COMPANY’S COMMON STOCK, PAR VALUE $0.001 PER SHARE
(THE “COMMON STOCK”) UP TO AN AGGREGATE OFFERING PRICE OF $6,000,000; PROVIDED,
HOWEVER, THAT IN NO EVENT SHALL THE COMPANY ISSUE OR SELL THROUGH AGENTS SUCH
NUMBER OF SHARES THAT WOULD CAUSE THE COMPANY TO NOT SATISFY THE ELIGIBILITY
REQUIREMENTS FOR USE OF FORM S-3 (INCLUDING INSTRUCTION I.B.6. THEREOF). 
NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN, THE PARTIES HERETO
AGREE THAT COMPLIANCE WITH THE LIMITATIONS SET FORTH IN THIS SECTION 1 ON THE
NUMBER OF SHARES ISSUED AND SOLD UNDER THIS AGREEMENT SHALL BE THE SOLE
RESPONSIBILITY OF THE COMPANY AND THAT AGENTS SHALL HAVE NO OBLIGATION IN
CONNECTION WITH SUCH COMPLIANCE.  THE ISSUANCE AND SALE OF SHARES THROUGH AGENTS
WILL BE EFFECTED PURSUANT TO THE REGISTRATION STATEMENT (AS DEFINED BELOW) FILED
BY THE COMPANY AND DECLARED EFFECTIVE BY THE SECURITIES AND EXCHANGE COMMISSION
(THE “COMMISSION”), ALTHOUGH NOTHING IN THIS AGREEMENT SHALL BE CONSTRUED AS
REQUIRING THE COMPANY TO USE THE REGISTRATION STATEMENT TO ISSUE COMMON STOCK OR
PREFERRED STOCK.

 

The Company intends to file, in accordance with the provisions of the Securities
Act of 1933, as amended, and the rules and regulations thereunder (collectively,
the “Securities Act”), with the Commission a registration statement on Form S-3,
including a base prospectus, with respect to equity and other offerings,
including the Shares, and which will incorporate by reference documents that the
Company has filed or will file in accordance with the provisions of the
Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder (collectively, the “Exchange Act”).  The Company will, if necessary,
prepare a prospectus supplement (the “Prospectus Supplement”) to the base
prospectus to be included as part of such registration statement.  The Company
will furnish to Agents, for use by Agents, copies of the prospectus included as
part of such registration statement, as supplemented by any Prospectus

 

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Supplement, relating to the Shares.  Except where the context otherwise
requires, such registration statement, as amended when it becomes effective,
including all documents filed as part thereof or incorporated by reference
therein, and including any information contained in a Prospectus (as defined
below) subsequently filed with the Commission pursuant to Rule 424(b) under the
Securities Act and also including any other registration statement filed
pursuant to Rule 462(b) under the Securities Act, collectively, are herein
called the “Registration Statement,” and the base prospectus, including all
documents incorporated therein by reference, included in the Registration
Statement, as it may be supplemented by the Prospectus Supplement, in the form
in which such prospectus and/or Prospectus Supplement is filed by the Company
with the Commission pursuant to Rule 424(b) under the Securities Act is herein
called the “Prospectus.” Any reference herein to the Registration Statement, the
Prospectus or any amendment or supplement thereto shall be deemed to refer to
and include the documents incorporated by reference therein, and any reference
herein to the terms “amend,” “amendment” or “supplement” with respect to the
Registration Statement or the Prospectus shall be deemed to refer to and include
the filing after the execution hereof of any document with the Commission deemed
to be incorporated by reference therein.  For purposes of this Agreement, all
references to the Registration Statement, the Prospectus or to any amendment or
supplement thereto shall be deemed to include any copy filed with the Commission
pursuant to its Electronic Data Gathering Analysis and Retrieval System, or if
applicable, the Interactive Data Electronic Application system when used by the
Commission (collectively, “EDGAR”).

 

2.                                       PLACEMENTS.  EACH TIME THAT THE COMPANY
WISHES TO ISSUE AND SELL SHARES HEREUNDER (EACH, A “PLACEMENT”), IT WILL NOTIFY
MLV (ON BEHALF OF MLV AND WM SMITH) BY EMAIL NOTICE (OR OTHER METHOD MUTUALLY
AGREED TO IN WRITING BY THE PARTIES) OF THE NUMBER OF SHARES (THE “PLACEMENT
SHARES”) TO BE ISSUED, THE TYPE OF SHARES, THE TIME PERIOD DURING WHICH SALES
ARE REQUESTED TO BE MADE, ANY LIMITATION ON THE NUMBER OF SHARES THAT MAY BE
SOLD IN ANY ONE DAY AND ANY MINIMUM PRICE BELOW WHICH SALES MAY NOT BE MADE (A
“PLACEMENT NOTICE”), THE FORM OF WHICH IS ATTACHED HERETO AS SCHEDULE 1.  THE
PLACEMENT NOTICE SHALL ORIGINATE FROM ANY OF THE INDIVIDUALS FROM THE COMPANY
SET FORTH ON SCHEDULE 3 (WITH A COPY TO EACH OF THE OTHER INDIVIDUALS FROM THE
COMPANY LISTED ON SUCH SCHEDULE), AND SHALL BE ADDRESSED TO EACH OF THE
INDIVIDUALS FROM MLV SET FORTH ON SCHEDULE 3, AS SUCH SCHEDULE 3 MAY BE AMENDED
FROM TIME TO TIME.  THE PLACEMENT NOTICE SHALL BE EFFECTIVE UNLESS AND UNTIL
(I) MLV, ON BEHALF OF ITSELF AND WM SMITH, DECLINES TO ACCEPT THE TERMS
CONTAINED THEREIN FOR ANY REASON, IN ITS SOLE DISCRETION, (II) THE ENTIRE AMOUNT
OF THE PLACEMENT SHARES HAVE BEEN SOLD, (III) THE COMPANY SUSPENDS OR TERMINATES
THE PLACEMENT NOTICE OR (IV) THE AGREEMENT HAS BEEN TERMINATED UNDER THE
PROVISIONS OF SECTION 12.  THE AMOUNT OF ANY DISCOUNT, COMMISSION OR OTHER
COMPENSATION TO BE PAID BY THE COMPANY TO AGENTS IN CONNECTION WITH THE SALE OF
THE PLACEMENT SHARES SHALL BE CALCULATED IN ACCORDANCE WITH THE TERMS SET FORTH
IN SCHEDULE 2.  IT IS EXPRESSLY ACKNOWLEDGED AND AGREED THAT NEITHER THE COMPANY
NOR EITHER AGENT WILL HAVE ANY OBLIGATION WHATSOEVER WITH RESPECT TO A PLACEMENT
OR ANY PLACEMENT SHARES UNLESS AND UNTIL THE COMPANY DELIVERS A PLACEMENT NOTICE
TO MLV AND MLV DOES NOT DECLINE SUCH PLACEMENT NOTICE PURSUANT TO THE TERMS SET
FORTH ABOVE, AND THEN ONLY UPON THE TERMS SPECIFIED THEREIN AND HEREIN.  IN THE
EVENT OF A CONFLICT BETWEEN THE TERMS OF THIS AGREEMENT AND THE TERMS OF A
PLACEMENT NOTICE, THE TERMS OF THE PLACEMENT NOTICE WILL CONTROL.

 

3.                                       SALE OF PLACEMENT SHARES BY AGENTS. 
SUBJECT TO THE TERMS AND CONDITIONS HEREIN SET FORTH, UPON THE COMPANY’S
ISSUANCE OF A PLACEMENT NOTICE, AND UNLESS THE SALE OF THE

 

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PLACEMENT SHARES DESCRIBED THEREIN HAS BEEN DECLINED, SUSPENDED, OR OTHERWISE
TERMINATED IN ACCORDANCE WITH THE TERMS OF THIS AGREEMENT, MLV, ACTING AS LEAD
AGENT, AND WM SMITH, ACTING AS SECONDARY AGENT, WILL USE THEIR COMMERCIALLY
REASONABLE EFFORTS CONSISTENT WITH THEIR NORMAL TRADING AND SALES PRACTICES TO
SELL SUCH PLACEMENT SHARES UP TO THE AMOUNT SPECIFIED, AND OTHERWISE IN
ACCORDANCE WITH THE TERMS OF SUCH PLACEMENT NOTICE.  AGENTS WILL PROVIDE WRITTEN
CONFIRMATION TO THE COMPANY NO LATER THAN THE OPENING OF THE TRADING DAY (AS
DEFINED BELOW) IMMEDIATELY FOLLOWING THE TRADING DAY ON WHICH IT HAS MADE SALES
OF PLACEMENT SHARES HEREUNDER SETTING FORTH THE NUMBER OF PLACEMENT SHARES SOLD
ON SUCH DAY, THE COMPENSATION PAYABLE BY THE COMPANY TO AGENTS PURSUANT TO
SECTION 2 WITH RESPECT TO SUCH SALES, AND THE NET PROCEEDS (AS DEFINED BELOW)
PAYABLE TO THE COMPANY.  AGENTS MAY DETERMINE A SINGLE AGENT TO BE RESPONSIBLE
FOR MAKING THIS CONFIRMATION ON BEHALF OF BOTH AGENTS.  AGENTS MAY SELL
PLACEMENT SHARES BY ANY METHOD PERMITTED BY LAW DEEMED TO BE AN “AT THE MARKET”
OFFERING AS DEFINED IN RULE 415 OF THE SECURITIES ACT, INCLUDING WITHOUT
LIMITATION SALES MADE DIRECTLY ON NASDAQ GLOBAL MARKET (THE “EXCHANGE”), ON ANY
OTHER EXISTING TRADING MARKET FOR THE COMMON STOCK OR TO OR THROUGH A MARKET
MAKER.  AGENTS MAY ALSO SELL PLACEMENT SHARES IN PRIVATELY NEGOTIATED
TRANSACTIONS.  THE COMPANY ACKNOWLEDGES AND AGREES THAT (I) THERE CAN BE NO
ASSURANCE THAT AGENTS WILL BE SUCCESSFUL IN SELLING PLACEMENT SHARES, AND
(II) NEITHER AGENT WILL INCUR ANY LIABILITY OR OBLIGATION TO THE COMPANY OR ANY
OTHER PERSON OR ENTITY IF IT DOES NOT SELL PLACEMENT SHARES FOR ANY REASON OTHER
THAN A FAILURE BY IT TO USE ITS COMMERCIALLY REASONABLE EFFORTS CONSISTENT WITH
ITS NORMAL TRADING AND SALES PRACTICES TO SELL SUCH PLACEMENT SHARES AS REQUIRED
UNDER THIS SECTION 3.  FOR THE PURPOSES HEREOF, “TRADING DAY” MEANS ANY DAY ON
WHICH COMMON STOCK IS PURCHASED AND SOLD ON THE PRINCIPAL MARKET ON WHICH THE
COMMON STOCK IS LISTED OR QUOTED.

 

4.                                       SUSPENSION OF SALES.  THE COMPANY OR
EITHER AGENT MAY, UPON NOTICE TO THE OTHER PARTIES IN WRITING (INCLUDING BY
EMAIL CORRESPONDENCE TO EACH OF THE INDIVIDUALS OF THE OTHER PARTIES SET FORTH
ON SCHEDULE 3, IF RECEIPT OF SUCH CORRESPONDENCE IS ACTUALLY ACKNOWLEDGED BY ANY
OF THE INDIVIDUALS TO WHOM THE NOTICE IS SENT, OTHER THAN VIA AUTO-REPLY) OR BY
TELEPHONE (CONFIRMED IMMEDIATELY BY VERIFIABLE FACSIMILE TRANSMISSION OR EMAIL
CORRESPONDENCE TO EACH OF THE INDIVIDUALS OF THE OTHER PARTIES SET FORTH ON
SCHEDULE 3), SUSPEND ANY SALE OF PLACEMENT SHARES; PROVIDED, HOWEVER, THAT SUCH
SUSPENSION SHALL NOT AFFECT OR IMPAIR ANY PARTY’S OBLIGATIONS WITH RESPECT TO
ANY PLACEMENT SHARES SOLD HEREUNDER PRIOR TO THE RECEIPT OF SUCH NOTICE.  EACH
OF THE PARTIES AGREES THAT NO SUCH NOTICE UNDER THIS SECTION 4 SHALL BE
EFFECTIVE AGAINST ANY OTHER PARTY UNLESS IT IS MADE TO ONE OF THE INDIVIDUALS
NAMED ON SCHEDULE 3 HERETO, AS SUCH SCHEDULE MAY BE AMENDED FROM TIME TO TIME.

 

5.                                       SETTLEMENT.

 

(A)                                  SETTLEMENT OF PLACEMENT SHARES.  UNLESS
OTHERWISE SPECIFIED IN THE APPLICABLE PLACEMENT NOTICE, SETTLEMENT FOR SALES OF
PLACEMENT SHARES WILL OCCUR ON THE THIRD (3RD) TRADING DAY (OR SUCH EARLIER DAY
AS IS INDUSTRY PRACTICE FOR REGULAR-WAY TRADING) (EACH, A “SETTLEMENT DATE”)
FOLLOWING THE RESPECTIVE POINT OF SALE (AS DEFINED BELOW).  THE AMOUNT OF
PROCEEDS TO BE DELIVERED TO THE COMPANY ON A SETTLEMENT DATE AGAINST RECEIPT OF
THE PLACEMENT SHARES SOLD (THE “NET PROCEEDS”) WILL BE EQUAL TO THE AGGREGATE
SALES PRICE RECEIVED BY AGENTS AT WHICH SUCH PLACEMENT SHARES WERE SOLD, AFTER
DEDUCTION FOR (I) AGENTS’ COMMISSION, DISCOUNT OR OTHER COMPENSATION FOR SUCH
SALES PAYABLE BY THE COMPANY PURSUANT TO SECTION 2 HEREOF, (II) ANY OTHER
AMOUNTS DUE AND PAYABLE BY THE COMPANY TO AGENTS HEREUNDER PURSUANT TO
SECTION 7(G) 

 

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(EXPENSES) HEREOF, AND (III) ANY TRANSACTION FEES IMPOSED BY ANY GOVERNMENTAL OR
SELF-REGULATORY ORGANIZATION IN RESPECT OF SUCH SALES.

 

(B)                                 DELIVERY OF PLACEMENT SHARES.  ON OR BEFORE
EACH SETTLEMENT DATE, THE COMPANY WILL, OR WILL CAUSE ITS TRANSFER AGENT TO,
ELECTRONICALLY TRANSFER THE PLACEMENT SHARES BEING SOLD BY CREDITING THE
APPLICABLE AGENT’S OR ITS DESIGNEE’S ACCOUNT AT THE DEPOSITORY TRUST COMPANY
THROUGH ITS DEPOSIT AND WITHDRAWAL AT CUSTODIAN SYSTEM OR BY SUCH OTHER MEANS OF
DELIVERY AS MAY BE MUTUALLY AGREED UPON BY THE PARTIES HERETO WHICH IN ALL CASES
SHALL BE FREELY TRADEABLE, TRANSFERABLE, REGISTERED SHARES IN GOOD DELIVERABLE
FORM.  ON EACH SETTLEMENT DATE, THE APPLICABLE AGENT WILL DELIVER THE RELATED
NET PROCEEDS IN SAME DAY FUNDS TO AN ACCOUNT DESIGNATED BY THE COMPANY ON, OR
PRIOR TO, THE SETTLEMENT DATE.  THE COMPANY AGREES THAT IF THE COMPANY, OR ITS
TRANSFER AGENT (IF APPLICABLE), DEFAULTS IN ITS OBLIGATION TO DELIVER PLACEMENT
SHARES ON A SETTLEMENT DATE, THE COMPANY AGREES THAT IN ADDITION TO AND IN NO
WAY LIMITING THE RIGHTS AND OBLIGATIONS SET FORTH IN
SECTION 10(A) (INDEMNIFICATION AND CONTRIBUTION) HERETO, IT WILL HOLD AGENTS
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.

 

6.                                       REPRESENTATIONS AND WARRANTIES OF THE
COMPANY.  EXCEPT AS DISCLOSED IN THE REGISTRATION STATEMENT, THE PROSPECTUS
AND/OR A DISCLOSURE SCHEDULE DELIVERED IN CONNECTION HEREWITH, THE COMPANY
REPRESENTS AND WARRANTS TO, AND AGREES WITH, AGENTS THAT AS OF THE DATE OF THIS
AGREEMENT (EXCEPT AS TO THE LAST SENTENCE OF SECTION 6(A)) AND AS OF EACH
REPRESENTATION DATE (AS DEFINED IN SECTION 7(M) BELOW) ON WHICH A CERTIFICATE IS
REQUIRED TO BE DELIVERED PURSUANT TO SECTION 7(M) OF THIS AGREEMENT, AS THE CASE
MAY BE:

 

(A)                                  REGISTRATION STATEMENT AND PROSPECTUS.  THE
COMPANY AND, ASSUMING NO ACT OR OMISSION ON THE PART OF AGENTS THAT WOULD MAKE
SUCH STATEMENT UNTRUE, THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT MEET THE
REQUIREMENTS FOR AND COMPLY WITH THE CONDITIONS FOR THE USE OF FORM S-3 UNDER
THE SECURITIES ACT.  THE REGISTRATION STATEMENT HAS BEEN FILED WITH THE
COMMISSION.  THE PROSPECTUS SUPPLEMENT WILL NAME AGENTS AS UNDERWRITERS, EACH
ACTING AS AGENT, THAT THE COMPANY MIGHT ENGAGE IN THE SECTION ENTITLED “PLAN OF
DISTRIBUTION.” THE COMPANY HAS NOT RECEIVED, AND HAS NO NOTICE OF, ANY ORDER OF
THE COMMISSION PREVENTING OR SUSPENDING THE USE OF THE REGISTRATION STATEMENT,
OR THREATENING OR INSTITUTING PROCEEDINGS FOR THAT PURPOSE.  THE REGISTRATION
STATEMENT AND THE OFFER AND SALE OF SHARES AS CONTEMPLATED HEREBY MEET THE
REQUIREMENTS OF RULE 415 UNDER THE ACT AND COMPLY IN ALL MATERIAL RESPECTS WITH
SAID RULE.  ANY STATUTES, REGULATIONS, CONTRACTS OR OTHER DOCUMENTS THAT ARE
REQUIRED TO BE DESCRIBED IN THE REGISTRATION STATEMENT OR THE PROSPECTUS OR TO
BE FILED AS EXHIBITS TO THE REGISTRATION STATEMENT HAVE BEEN SO DESCRIBED OR
FILED.  COPIES OF THE REGISTRATION STATEMENT, THE PROSPECTUS, AND ANY SUCH
AMENDMENTS OR SUPPLEMENTS AND ALL DOCUMENTS INCORPORATED BY REFERENCE THEREIN
THAT WERE FILED WITH THE COMMISSION ON OR PRIOR TO THE DATE OF THIS AGREEMENT
HAVE BEEN DELIVERED, OR ARE AVAILABLE THROUGH EDGAR, TO AGENTS AND THEIR
RESPECTIVE COUNSEL.  THE COMPANY HAS NOT DISTRIBUTED AND, PRIOR TO THE LATER TO
OCCUR OF EACH SETTLEMENT DATE AND COMPLETION OF THE DISTRIBUTION OF THE
PLACEMENT SHARES, WILL NOT DISTRIBUTE ANY OFFERING MATERIAL IN CONNECTION WITH
THE OFFERING OR SALE OF THE PLACEMENT SHARES OTHER THAN THE REGISTRATION
STATEMENT AND THE PROSPECTUS AND ANY ISSUER FREE WRITING PROSPECTUS (AS DEFINED
BELOW) TO WHICH AGENTS HAVE CONSENTED.  THE COMMON STOCK IS CURRENTLY LISTED ON
THE NASDAQ GLOBAL MARKET UNDER THE TRADING SYMBOL “ARYX”.  EXCEPT AS DISCLOSED
IN THE REGISTRATION STATEMENT,

 

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THE COMPANY HAS NOT, IN THE 12 MONTHS PRECEDING THE DATE HEREOF, RECEIVED NOTICE
FROM THE EXCHANGE TO THE EFFECT THAT THE COMPANY IS NOT IN COMPLIANCE WITH THE
LISTING OR MAINTENANCE REQUIREMENTS.  THE COMPANY HAS NO REASON TO BELIEVE THAT
IT WILL NOT IN THE FORESEEABLE FUTURE CONTINUE TO BE IN COMPLIANCE WITH ALL SUCH
LISTING AND MAINTENANCE REQUIREMENTS.  THE REGISTRATION STATEMENT HAS BEEN
DECLARED EFFECTIVE UNDER THE SECURITIES ACT

 

(B)                                 NO MISSTATEMENT OR OMISSION.  THE
REGISTRATION STATEMENT, WHEN IT BECAME OR BECOMES EFFECTIVE, AND THE PROSPECTUS,
AND ANY AMENDMENT OR SUPPLEMENT THERETO, ON THE DATE OF SUCH PROSPECTUS OR
AMENDMENT OR SUPPLEMENT, CONFORMED OR WILL CONFORM IN ALL MATERIAL RESPECTS WITH
THE REQUIREMENTS OF THE SECURITIES ACT.  AT EACH SETTLEMENT DATE, THE
REGISTRATION STATEMENT AND THE PROSPECTUS, AS OF SUCH DATE, WILL CONFORM IN ALL
MATERIAL RESPECTS WITH THE REQUIREMENTS OF THE SECURITIES ACT.  THE REGISTRATION
STATEMENT, WHEN IT BECAME OR BECOMES EFFECTIVE, DID NOT, OR 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. 
THE PROSPECTUS AND ANY AMENDMENT OR SUPPLEMENT THERETO, ON THE DATE THEREOF AND
AT EACH POINT OF SALE, DID NOT OR WILL NOT INCLUDE AN UNTRUE STATEMENT OF A
MATERIAL FACT OR OMIT TO STATE A MATERIAL FACT NECESSARY TO MAKE THE STATEMENTS
THEREIN, IN LIGHT OF THE CIRCUMSTANCES UNDER WHICH THEY WERE MADE, NOT
MISLEADING.  THE DOCUMENTS INCORPORATED BY REFERENCE IN THE PROSPECTUS OR ANY
PROSPECTUS SUPPLEMENT DID NOT, AND ANY FURTHER DOCUMENTS FILED AND INCORPORATED
BY REFERENCE THEREIN WILL NOT, WHEN FILED WITH THE COMMISSION, CONTAIN AN UNTRUE
STATEMENT OF A MATERIAL FACT OR OMIT TO STATE A MATERIAL FACT REQUIRED TO BE
STATED IN SUCH DOCUMENT OR NECESSARY TO MAKE THE STATEMENTS IN SUCH DOCUMENT, IN
LIGHT OF THE CIRCUMSTANCES UNDER WHICH THEY WERE MADE, NOT MISLEADING.  THE
FOREGOING SHALL NOT APPLY TO STATEMENTS IN, OR OMISSIONS FROM, ANY SUCH DOCUMENT
MADE IN RELIANCE UPON, AND IN CONFORMITY WITH, INFORMATION FURNISHED TO THE
COMPANY BY EITHER AGENT SPECIFICALLY FOR USE IN THE PREPARATION THEREOF.  “POINT
OF SALE” MEANS, FOR A PLACEMENT, THE TIME AT WHICH AN ACQUIROR OF PLACEMENT
SHARES ENTERED INTO A CONTRACT, BINDING UPON SUCH ACQUIROR, TO ACQUIRE SUCH
SHARES.

 

(C)                                  CONFORMITY WITH SECURITIES ACT AND EXCHANGE
ACT.  THE DOCUMENTS INCORPORATED BY REFERENCE IN THE REGISTRATION STATEMENT, THE
PROSPECTUS OR ANY AMENDMENT OR SUPPLEMENT THERETO, WHEN SUCH DOCUMENTS WERE OR
ARE FILED WITH THE COMMISSION UNDER THE SECURITIES ACT OR THE EXCHANGE ACT OR
BECAME OR BECOME EFFECTIVE UNDER THE SECURITIES ACT, AS THE CASE MAY BE,
CONFORMED OR WILL CONFORM IN ALL MATERIAL RESPECTS WITH THE REQUIREMENTS OF THE
SECURITIES ACT AND THE EXCHANGE ACT, AS APPLICABLE.

 

(D)                                 FINANCIAL INFORMATION.  THE CONSOLIDATED
FINANCIAL STATEMENTS AND THE RELATED NOTES THERETO INCLUDED OR INCORPORATED BY
REFERENCE IN THE REGISTRATION STATEMENT AND THE PROSPECTUS COMPLY WITH THE
APPLICABLE REQUIREMENTS OF THE ACT AND THE EXCHANGE ACT, AS APPLICABLE, AND
PRESENT FAIRLY, THE FINANCIAL POSITION OF THE COMPANY AND ITS SUBSIDIARY (AS
DEFINED BELOW) AS OF THE DATES INDICATED AND THE RESULTS OF THEIR OPERATIONS AND
THE CHANGES IN THEIR CONSOLIDATED CASH FLOWS FOR THE PERIODS SPECIFIED; SUCH
FINANCIAL STATEMENTS HAVE BEEN PREPARED IN CONFORMITY WITH GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES APPLIED ON A CONSISTENT BASIS THROUGHOUT THE PERIODS
COVERED THEREBY (EXCEPT (I) AS MAY BE OTHERWISE INDICATED IN SUCH FINANCIAL
STATEMENTS OR THE NOTES THERETO OR (II) IN THE CASE OF UNAUDITED INTERIM
FINANCIAL STATEMENTS, TO THE EXTENT THAT THEY MAY NOT INCLUDE FOOTNOTES OR MAY
BE CONDENSED OR SUMMARY STATEMENTS), AND THE OTHER FINANCIAL INFORMATION
INCLUDED OR INCORPORATED BY REFERENCE IN THE REGISTRATION STATEMENT AND THE
PROSPECTUS HAS BEEN DERIVED FROM THE ACCOUNTING RECORDS OF THE

 

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COMPANY AND ITS SUBSIDIARY AND PRESENTS FAIRLY THE INFORMATION SHOWN THEREBY. 
ANY PRO FORMA FINANCIAL STATEMENTS OR DATA INCLUDED OR INCORPORATED BY REFERENCE
IN THE REGISTRATION STATEMENT AND THE PROSPECTUS COMPLY WITH THE REQUIREMENTS OF
REGULATION S-X OF THE SECURITIES ACT, INCLUDING, WITHOUT LIMITATION, ARTICLE 11
THEREOF, AND THE ASSUMPTIONS USED IN THE PREPARATION OF SUCH PRO FORMA FINANCIAL
STATEMENTS AND DATA ARE REASONABLE, THE PRO FORMA ADJUSTMENTS USED THEREIN ARE
APPROPRIATE TO GIVE EFFECT TO THE CIRCUMSTANCES REFERRED TO THEREIN AND THE PRO
FORMA ADJUSTMENTS HAVE BEEN PROPERLY APPLIED TO THE HISTORICAL AMOUNTS IN THE
COMPILATION OF THOSE STATEMENTS AND DATA.  NO OTHER FINANCIAL STATEMENTS OR
SCHEDULES OF THE COMPANY OR ANY OTHER ENTITY ARE REQUIRED BY THE ACT TO BE
INCLUDED IN THE REGISTRATION STATEMENT OR THE PROSPECTUS.  ALL DISCLOSURES
CONTAINED IN THE REGISTRATION STATEMENT, THE PRICING DISCLOSURE MATERIALS AND
THE PROSPECTUS REGARDING “NON-GAAP FINANCIAL MEASURES” (AS SUCH TERM IS DEFINED
BY ITEM 10 OF REGULATION S-K UNDER THE ACT) COMPLY WITH REGULATION G OF THE
EXCHANGE ACT AND ITEM 10 OF REGULATION S-K UNDER THE ACT, TO THE EXTENT
APPLICABLE.  THE COMPANY DOES NOT HAVE ANY MATERIAL LIABILITIES OR OBLIGATIONS,
DIRECT OR CONTINGENT (INCLUDING ANY OFF-BALANCE SHEET OBLIGATIONS AND ANY
“VARIABLE INTEREST ENTITIES” WITHIN THE MEANING OF FINANCIAL ACCOUNTING
STANDARDS BOARD INTERPRETATION NO. 46), NOT DISCLOSED IN THE REGISTRATION
STATEMENT, THE PRICING DISCLOSURE MATERIALS AND THE PROSPECTUS.

 

(E)                                  CONFORMITY WITH EDGAR FILING.  THE
PROSPECTUS DELIVERED TO AGENTS FOR USE IN CONNECTION WITH THE SALE OF THE
PLACEMENT SHARES PURSUANT TO THIS AGREEMENT WILL BE IDENTICAL TO THE VERSIONS OF
THE PROSPECTUS CREATED TO BE TRANSMITTED TO THE COMMISSION FOR FILING VIA EDGAR,
EXCEPT TO THE EXTENT PERMITTED BY REGULATION S-T.

 

(F)                                    ORGANIZATION.  THE COMPANY AND ITS
SUBSIDIARY ARE, AND WILL BE, DULY ORGANIZED, VALIDLY EXISTING AS A CORPORATION
AND IN GOOD STANDING UNDER THE LAWS OF THEIR RESPECTIVE JURISDICTIONS OF
ORGANIZATION.  THE COMPANY AND ITS SUBSIDIARY ARE, AND WILL BE, DULY LICENSED OR
QUALIFIED AS A FOREIGN CORPORATION FOR TRANSACTION OF BUSINESS AND IN GOOD
STANDING UNDER THE LAWS OF EACH OTHER JURISDICTION IN WHICH THEIR RESPECTIVE
OWNERSHIP OR LEASE OF PROPERTY OR THE CONDUCT OF THEIR RESPECTIVE BUSINESSES
REQUIRES SUCH LICENSE OR QUALIFICATION, AND HAVE ALL CORPORATE POWER AND
AUTHORITY NECESSARY TO OWN OR HOLD THEIR RESPECTIVE PROPERTIES AND TO CONDUCT
THEIR RESPECTIVE BUSINESSES AS DESCRIBED IN THE REGISTRATION STATEMENT AND THE
PROSPECTUS, EXCEPT WHERE THE FAILURE TO BE SO QUALIFIED OR IN GOOD STANDING OR
HAVE SUCH POWER OR AUTHORITY WOULD NOT, INDIVIDUALLY OR IN THE AGGREGATE, HAVE A
MATERIAL ADVERSE EFFECT OR WOULD REASONABLY BE EXPECTED TO HAVE A MATERIAL
ADVERSE EFFECT ON OR AFFECTING THE BUSINESS, PROPERTIES, MANAGEMENT,
CONSOLIDATED FINANCIAL POSITION, STOCKHOLDERS’ EQUITY OR RESULTS OF OPERATIONS
OF THE COMPANY AND ITS SUBSIDIARY TAKEN AS A WHOLE (A “MATERIAL ADVERSE
EFFECT”).

 

(G)                                 SUBSIDIARIES.  ARYX THERAPEUTICS LIMITED, A
COMPANY FORMED UNDER THE LAWS OF THE UNITED KINGDOM (THE “SUBSIDIARY”), IS THE
COMPANY’S ONLY SIGNIFICANT SUBSIDIARY (AS SUCH TERM IS DEFINED IN RULE 1-02 OF
REGULATION S-X PROMULGATED BY THE COMMISSION).  EXCEPT AS SET FORTH IN THE
REGISTRATION STATEMENT IN AND THE PROSPECTUS, THE COMPANY OWNS, DIRECTLY OR
INDIRECTLY, ALL OF THE EQUITY INTERESTS OF THE SUBSIDIARY FREE AND CLEAR OF ANY
LIEN, CHARGE, SECURITY INTEREST, ENCUMBRANCE, RIGHT OF FIRST REFUSAL OR OTHER
RESTRICTION, AND ALL THE EQUITY INTERESTS OF THE SUBSIDIARY ARE VALIDLY ISSUED
AND ARE FULLY PAID, NONASSESSABLE AND FREE OF PREEMPTIVE AND SIMILAR RIGHTS.

 

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(H)                                 NO VIOLATION OR DEFAULT.  NEITHER THE
COMPANY NOR ITS SUBSIDIARY ARE (I) IN VIOLATION OF ITS CHARTER OR BY-LAWS OR
SIMILAR ORGANIZATIONAL DOCUMENTS; (II) IN DEFAULT, AND NO EVENT HAS OCCURRED
THAT, WITH NOTICE OR LAPSE OF TIME OR BOTH, WOULD CONSTITUTE SUCH A DEFAULT, IN
THE DUE PERFORMANCE OR OBSERVANCE OF ANY TERM, COVENANT OR CONDITION CONTAINED
IN ANY INDENTURE, MORTGAGE, DEED OF TRUST, LOAN AGREEMENT OR OTHER AGREEMENT OR
INSTRUMENT TO WHICH THE COMPANY OR ITS SUBSIDIARY ARE A PARTY OR BY WHICH THE
COMPANY OR ITS SUBSIDIARY ARE BOUND OR TO WHICH ANY OF THE PROPERTY OR ASSETS OF
THE COMPANY OR ITS SUBSIDIARY ARE SUBJECT; OR (III) IN VIOLATION OF ANY LAW OR
STATUTE OR ANY JUDGMENT, ORDER, RULE OR REGULATION OF ANY COURT OR ARBITRATOR OR
GOVERNMENTAL OR REGULATORY AUTHORITY, EXCEPT, IN THE CASE OF EACH OF CLAUSES
(II) AND (III) ABOVE, FOR ANY SUCH VIOLATION OR DEFAULT THAT WOULD NOT,
INDIVIDUALLY OR IN THE AGGREGATE, REASONABLY BE EXPECTED TO HAVE A MATERIAL
ADVERSE EFFECT.  TO THE COMPANY’S KNOWLEDGE, NO OTHER PARTY UNDER ANY MATERIAL
CONTRACT OR OTHER AGREEMENT TO WHICH IT OR A SUBSIDIARY IS A PARTY IS IN DEFAULT
IN ANY RESPECT THEREUNDER WHERE SUCH DEFAULT WOULD HAVE A MATERIAL ADVERSE
EFFECT.

 

(I)                                     NO MATERIAL ADVERSE CHANGE.  EXCEPT AS
SET FORTH IN OR OTHERWISE CONTEMPLATED BY THE REGISTRATION STATEMENT (EXCLUSIVE
OF ANY AMENDMENT THEREOF) OR THE PROSPECTUS (EXCLUSIVE OF ANY SUPPLEMENT
THERETO), SINCE THE DATE OF THE MOST RECENT FINANCIAL STATEMENTS OF THE COMPANY
INCLUDED OR INCORPORATED BY REFERENCE IN THE REGISTRATION STATEMENT AND THE
PROSPECTUS AND PRIOR TO EACH SETTLEMENT DATE, (I) THERE HAS NOT BEEN AND WILL
NOT HAVE BEEN ANY CHANGE IN THE CAPITAL STOCK OF THE COMPANY (EXCEPT FOR CHANGES
IN THE NUMBER OF OUTSTANDING SHARES OF COMMON STOCK OF THE COMPANY DUE TO THE
ISSUANCE OF SHARES UPON THE EXERCISE OR CONVERSION OF SECURITIES EXERCISABLE
FOR, OR CONVERTIBLE INTO, SHARES OF COMMON STOCK OUTSTANDING ON THE DATE HEREOF)
OR LONG-TERM DEBT OF THE COMPANY OR OF ITS SUBSIDIARY OR ANY DIVIDEND OR
DISTRIBUTION OF ANY KIND DECLARED, SET ASIDE FOR PAYMENT, PAID OR MADE BY THE
COMPANY ON ANY CLASS OF CAPITAL STOCK, THAT HAS RESULTED IN OR THAT WOULD
REASONABLY BE EXPECTED TO RESULT IN A MATERIAL ADVERSE EFFECT TO THE COMPANY AND
ITS SUBSIDIARY TAKEN AS A WHOLE; (II) OTHER THAN THIS AGREEMENT, NEITHER THE
COMPANY NOR ITS SUBSIDIARY HAVE ENTERED OR WILL ENTER INTO ANY TRANSACTION OR
AGREEMENT, NOT IN THE ORDINARY COURSE OF BUSINESS, THAT IS MATERIAL TO THE
COMPANY AND ITS SUBSIDIARY TAKEN AS A WHOLE OR INCURRED OR WILL INCUR ANY
LIABILITY OR OBLIGATION, DIRECT OR CONTINGENT, NOT IN THE ORDINARY COURSE OF
BUSINESS, THAT IS MATERIAL TO THE COMPANY AND ITS SUBSIDIARY TAKEN AS A WHOLE;
(III) THERE HAS NOT BEEN ANY MATERIAL ADVERSE CHANGE IN THE BUSINESS,
PROPERTIES, MANAGEMENT, FINANCIAL POSITION, STOCKHOLDERS’ EQUITY, OR RESULTS OF
OPERATIONS OF THE COMPANY AND ITS SUBSIDIARY, TAKEN AS A WHOLE; AND (IV) NEITHER
THE COMPANY NOR ITS SUBSIDIARY HAVE SUSTAINED ANY MATERIAL LOSS OR INTERFERENCE
WITH ITS BUSINESS FROM FIRE, EXPLOSION, FLOOD OR OTHER CALAMITY, WHETHER OR NOT
COVERED BY INSURANCE, OR FROM ANY LABOR DISTURBANCE OR DISPUTE OR ANY ACTION,
ORDER OR DECREE OF ANY COURT OR ARBITRATOR OR GOVERNMENTAL OR REGULATORY
AUTHORITY.

 

(J)                                     CAPITALIZATION.  THE ISSUED AND
OUTSTANDING SHARES OF CAPITAL STOCK OF THE COMPANY HAVE BEEN VALIDLY ISSUED, ARE
FULLY PAID AND NONASSESSABLE AND, OTHER THAN AS DISCLOSED IN OR CONTEMPLATED BY
THE REGISTRATION STATEMENT OR THE PROSPECTUS, ARE NOT SUBJECT TO ANY PREEMPTIVE
RIGHTS, RIGHTS OF FIRST REFUSAL OR SIMILAR RIGHTS.  THE COMPANY HAS AN
AUTHORIZED, ISSUED AND OUTSTANDING CAPITALIZATION AS SET FORTH IN THE
REGISTRATION STATEMENT AND THE PROSPECTUS AS OF THE DATES REFERRED TO THEREIN
(OTHER THAN THE GRANT OF ADDITIONAL OPTIONS UNDER THE COMPANY’S EXISTING STOCK
OPTION PLANS, OR CHANGES IN THE NUMBER OF OUTSTANDING SHARES OF COMMON STOCK OF
THE COMPANY DUE TO THE ISSUANCE OF SHARES UPON THE EXERCISE OR CONVERSION OF
SECURITIES EXERCISABLE FOR, OR CONVERTIBLE INTO, SHARES OF COMMON STOCK
OUTSTANDING ON THE DATE

 

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HEREOF) AND SUCH AUTHORIZED CAPITAL STOCK CONFORMS TO THE DESCRIPTION THEREOF
SET FORTH IN THE REGISTRATION STATEMENT AND THE PROSPECTUS.  THE DESCRIPTION OF
THE SECURITIES OF THE COMPANY IN THE REGISTRATION STATEMENT AND THE PROSPECTUS
IS COMPLETE AND ACCURATE IN ALL MATERIAL RESPECTS.  EXCEPT AS DISCLOSED IN OR
CONTEMPLATED BY THE REGISTRATION STATEMENT OR THE PROSPECTUS, AS OF THE DATE
REFERRED TO THEREIN, THE COMPANY DOES NOT HAVE OUTSTANDING ANY OPTIONS TO
PURCHASE, OR ANY RIGHTS OR WARRANTS TO SUBSCRIBE FOR, OR ANY SECURITIES OR
OBLIGATIONS CONVERTIBLE INTO, OR EXCHANGEABLE FOR, OR ANY CONTRACTS OR
COMMITMENTS TO ISSUE OR SELL, ANY SHARES OF CAPITAL STOCK OR OTHER SECURITIES.

 

(K)                                  AUTHORIZATION; ENFORCEABILITY.  THE COMPANY
HAS FULL LEGAL RIGHT, POWER AND AUTHORITY TO ENTER INTO THIS AGREEMENT AND
PERFORM THE TRANSACTIONS CONTEMPLATED HEREBY.  THIS AGREEMENT HAS BEEN DULY
AUTHORIZED, EXECUTED AND DELIVERED BY THE COMPANY AND IS A LEGAL, VALID AND
BINDING AGREEMENT OF THE COMPANY ENFORCEABLE IN ACCORDANCE WITH ITS TERMS,
EXCEPT TO THE EXTENT THAT (I) ENFORCEABILITY MAY BE LIMITED BY BANKRUPTCY,
INSOLVENCY, REORGANIZATION, MORATORIUM OR SIMILAR LAWS AFFECTING CREDITORS’
RIGHTS GENERALLY AND BY GENERAL EQUITABLE PRINCIPLES AND (II) THE
INDEMNIFICATION AND CONTRIBUTION PROVISIONS OF SECTION 10 HEREOF MAY BE LIMITED
BY FEDERAL OR STATE SECURITIES LAWS AND PUBLIC POLICY CONSIDERATIONS IN RESPECT
THEREOF.

 

(L)                                     AUTHORIZATION OF PLACEMENT SHARES.  THE
PLACEMENT SHARES, WHEN ISSUED AND DELIVERED PURSUANT TO THE TERMS APPROVED BY
THE BOARD OF DIRECTORS OR A DULY DESIGNATED COMMITTEE THEREOF, AGAINST PAYMENT
THEREFOR AS PROVIDED HEREIN, WILL BE DULY AND VALIDLY AUTHORIZED AND ISSUED AND
FULLY PAID AND NONASSESSABLE, FREE AND CLEAR OF ANY PLEDGE, LIEN, ENCUMBRANCE,
SECURITY INTEREST OR OTHER CLAIM, INCLUDING ANY STATUTORY OR CONTRACTUAL
PREEMPTIVE RIGHTS, RESALE RIGHTS, RIGHTS OF FIRST REFUSAL OR OTHER SIMILAR
RIGHTS, AND WILL BE REGISTERED PURSUANT TO SECTION 12 OF THE EXCHANGE ACT.  THE
PLACEMENT SHARES, WHEN ISSUED, WILL CONFORM IN ALL MATERIAL RESPECTS TO THE
DESCRIPTION THEREOF SET FORTH IN OR INCORPORATED INTO THE PROSPECTUS.

 

(M)                               NO CONSENTS REQUIRED.  NO CONSENT, APPROVAL,
AUTHORIZATION, ORDER, REGISTRATION OR QUALIFICATION OF OR WITH ANY COURT OR
ARBITRATOR OR GOVERNMENTAL OR REGULATORY AUTHORITY IS REQUIRED FOR THE
EXECUTION, DELIVERY AND PERFORMANCE BY THE COMPANY THIS AGREEMENT, THE ISSUANCE
AND SALE BY THE COMPANY OF THE PLACEMENT SHARES, EXCEPT FOR THE REGISTRATION OF
THE PLACEMENT SHARES UNDER THE ACT AND SUCH CONSENTS, APPROVALS, AUTHORIZATIONS,
ORDERS AND REGISTRATIONS OR QUALIFICATIONS AS MAY BE REQUIRED UNDER APPLICABLE
STATE SECURITIES LAWS OR BY THE BY-LAWS AND RULES OF THE FINANCIAL INDUSTRY
REGULATORY AUTHORITY (“FINRA”) OR THE EXCHANGE IN CONNECTION WITH THE SALE OF
THE PLACEMENT SHARES BY AGENTS.

 

(N)                                 NO PREFERENTIAL RIGHTS.  EXCEPT AS SET FORTH
IN THE REGISTRATION STATEMENT AND THE PROSPECTUS, (I) NO PERSON, AS SUCH TERM IS
DEFINED IN RULE 1-02 OF REGULATION S-X PROMULGATED UNDER THE SECURITIES ACT
(EACH, A “PERSON”), HAS THE RIGHT, CONTRACTUAL OR OTHERWISE, TO CAUSE THE
COMPANY TO ISSUE OR SELL TO SUCH PERSON ANY SHARES OF COMMON STOCK OR SHARES OF
ANY OTHER CAPITAL STOCK OR OTHER SECURITIES OF THE COMPANY, (II) NO PERSON HAS
ANY PREEMPTIVE RIGHTS, RESALE RIGHTS, RIGHTS OF FIRST REFUSAL, OR ANY OTHER
RIGHTS (WHETHER PURSUANT TO A “POISON PILL” PROVISION OR OTHERWISE) TO PURCHASE
ANY SHARES OF COMMON STOCK OR SHARES OF ANY OTHER CAPITAL STOCK OR OTHER
SECURITIES OF THE COMPANY, (III)  NO PERSON HAS THE RIGHT TO ACT AS AN
UNDERWRITER OR AS A FINANCIAL ADVISOR TO THE COMPANY IN CONNECTION WITH THE
OFFER AND SALE OF THE SHARES, AND (IV) NO PERSON HAS THE RIGHT, CONTRACTUAL OR
OTHERWISE, TO REQUIRE THE COMPANY TO REGISTER UNDER

 

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THE SECURITIES ACT ANY SHARES OF COMMON STOCK OR SHARES OF ANY OTHER CAPITAL
STOCK OR OTHER SECURITIES OF THE COMPANY, OR TO INCLUDE ANY SUCH SHARES OR OTHER
SECURITIES IN THE REGISTRATION STATEMENT OR THE OFFERING CONTEMPLATED THEREBY,
WHETHER AS A RESULT OF THE FILING OR EFFECTIVENESS OF THE REGISTRATION STATEMENT
OR THE SALE OF THE PLACEMENT SHARES AS CONTEMPLATED THEREBY OR OTHERWISE.

 

(O)                                 INDEPENDENT PUBLIC ACCOUNTANT.  ERNST &
YOUNG LLP (THE “ACCOUNTANT”), WHOSE REPORT ON THE CONSOLIDATED FINANCIAL
STATEMENTS OF THE COMPANY IS FILED WITH THE COMMISSION AS PART OF THE
REGISTRATION STATEMENT AND THE PROSPECTUS, ARE AND, DURING THE PERIODS COVERED
BY THEIR REPORT, WERE INDEPENDENT PUBLIC ACCOUNTANTS WITHIN THE MEANING OF THE
SECURITIES ACT AND THE PUBLIC COMPANY ACCOUNTING OVERSIGHT BOARD (UNITED
STATES).  TO THE COMPANY’S KNOWLEDGE, AFTER DUE AND CAREFUL INQUIRY, THE
ACCOUNTANT IS NOT IN VIOLATION OF THE AUDITOR INDEPENDENCE REQUIREMENTS OF THE
SARBANES-OXLEY ACT OF 2002 (THE “SARBANES-OXLEY ACT”) WITH RESPECT TO THE
COMPANY.

 

(P)                                 ENFORCEABILITY OF AGREEMENTS.  TO THE
KNOWLEDGE OF THE COMPANY, ALL AGREEMENTS BETWEEN THE COMPANY AND THIRD PARTIES
EXPRESSLY REFERENCED IN THE PROSPECTUS ARE LEGAL, VALID AND BINDING OBLIGATIONS
OF THE COMPANY ENFORCEABLE IN ACCORDANCE WITH THEIR RESPECTIVE TERMS, EXCEPT TO
THE EXTENT THAT (I) ENFORCEABILITY MAY BE LIMITED BY BANKRUPTCY, INSOLVENCY,
REORGANIZATION, MORATORIUM OR SIMILAR LAWS AFFECTING CREDITORS’ RIGHTS GENERALLY
AND BY GENERAL EQUITABLE PRINCIPLES AND (II) THE INDEMNIFICATION PROVISIONS OF
CERTAIN AGREEMENTS MAY BE LIMITED BE FEDERAL OR STATE SECURITIES LAWS OR PUBLIC
POLICY CONSIDERATIONS IN RESPECT THEREOF AND EXCEPT FOR ANY UNENFORCEABILITY
THAT, INDIVIDUALLY OR IN THE AGGREGATE, WOULD NOT UNREASONABLY BE EXPECTED TO
HAVE A MATERIAL ADVERSE EFFECT.

 

(Q)                                 NO LITIGATION.  EXCEPT AS SET FORTH IN THE
REGISTRATION STATEMENT OR THE PROSPECTUS, THERE ARE NO LEGAL, GOVERNMENTAL OR
REGULATORY ACTIONS, SUITS OR PROCEEDINGS PENDING, NOR, TO THE COMPANY’S
KNOWLEDGE, ANY LEGAL, GOVERNMENTAL OR REGULATORY INVESTIGATIONS, TO WHICH THE
COMPANY OR ITS SUBSIDIARY IS A PARTY OR TO WHICH ANY PROPERTY OF THE COMPANY OR
ITS SUBSIDIARY IS THE SUBJECT THAT, INDIVIDUALLY OR IN THE AGGREGATE, IF
DETERMINED ADVERSELY TO THE COMPANY OR ITS SUBSIDIARY, WOULD REASONABLY BE
EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT OR MATERIALLY AND ADVERSELY AFFECT
THE ABILITY OF THE COMPANY TO PERFORM ITS OBLIGATIONS UNDER THIS AGREEMENT; TO
THE COMPANY’S KNOWLEDGE, NO SUCH ACTIONS, SUITS OR PROCEEDINGS ARE THREATENED OR
CONTEMPLATED BY ANY GOVERNMENTAL OR REGULATORY AUTHORITY OR THREATENED BY
OTHERS; AND (I) THERE ARE NO CURRENT OR PENDING LEGAL, GOVERNMENTAL OR
REGULATORY INVESTIGATIONS, ACTIONS, SUITS OR PROCEEDINGS THAT ARE REQUIRED UNDER
THE ACT TO BE DESCRIBED IN THE PROSPECTUS THAT ARE NOT SO DESCRIBED; AND
(II) THERE ARE NO CONTRACTS OR OTHER DOCUMENTS THAT ARE REQUIRED UNDER THE ACT
TO BE FILED AS EXHIBITS TO THE REGISTRATION STATEMENT THAT ARE NOT SO FILED.

 

(R)                                    LICENSES AND PERMITS.  EXCEPT AS SET
FORTH IN THE REGISTRATION STATEMENT OR THE PROSPECTUS, THE COMPANY AND ITS
SUBSIDIARY POSSESS OR HAVE OBTAINED, AND AT EACH SETTLEMENT DATE WILL POSSESS
AND WILL HAVE OBTAINED, ALL LICENSES, CERTIFICATES, CONSENTS, ORDERS, APPROVALS,
PERMITS AND OTHER AUTHORIZATIONS ISSUED BY, AND HAVE MADE ALL DECLARATIONS AND
FILINGS WITH, THE APPROPRIATE FEDERAL, STATE, LOCAL OR FOREIGN GOVERNMENTAL OR
REGULATORY AUTHORITIES THAT ARE NECESSARY FOR THE OWNERSHIP OR LEASE OF THEIR
RESPECTIVE PROPERTIES OR THE CONDUCT OF THEIR RESPECTIVE BUSINESSES AS DESCRIBED
IN THE REGISTRATION STATEMENT AND THE PROSPECTUS (THE “PERMITS”), EXCEPT WHERE
THE FAILURE TO POSSESS, OBTAIN OR MAKE THE SAME WOULD NOT, INDIVIDUALLY

 

9

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OR IN THE AGGREGATE, REASONABLY BE EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT. 
EXCEPT AS DISCLOSED IN THE REGISTRATION STATEMENT OR THE PROSPECTUS, NEITHER THE
COMPANY NOR ITS SUBSIDIARY HAVE RECEIVED WRITTEN NOTICE OF ANY PROCEEDING
RELATING TO REVOCATION OR MODIFICATION OF ANY SUCH PERMIT OR HAS ANY REASON TO
BELIEVE THAT SUCH PERMIT WILL NOT BE RENEWED IN THE ORDINARY COURSE, EXCEPT
WHERE THE FAILURE TO OBTAIN ANY SUCH RENEWAL WOULD NOT, INDIVIDUALLY OR IN THE
AGGREGATE, REASONABLY BE EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT.

 

(S)                                  NOT A SHELL COMPANY.  THE COMPANY IS NOT A
SHELL COMPANY (AS DEFINED IN RULE 405 UNDER THE SECURITIES ACT) AND HAS NOT BEEN
A SHELL COMPANY FOR AT LEAST 12 CALENDAR MONTHS PREVIOUSLY AND IF IT HAS BEEN A
SHELL COMPANY AT ANY TIME PREVIOUSLY, HAS FILED CURRENT FORM 10 INFORMATION (AS
DEFINED IN INSTRUCTION I.B.6 OF FORM S-3) WITH THE COMMISSION AT LEAST 12
CALENDAR MONTHS PREVIOUSLY REFLECTING ITS STATUS AS AN ENTITY THAT IS NOT A
SHELL COMPANY.

 

(T)                                    NO MATERIAL DEFAULTS.  NEITHER THE
COMPANY NOR THE SUBSIDIARY HAS DEFAULTED ON ANY INSTALLMENT ON INDEBTEDNESS FOR
BORROWED MONEY OR ON ANY RENTAL ON ONE OR MORE LONG-TERM LEASES, WHICH DEFAULTS,
INDIVIDUALLY OR IN THE AGGREGATE, COULD REASONABLY BE EXPECTED TO HAVE A
MATERIAL ADVERSE EFFECT.  THE COMPANY HAS NOT FILED A REPORT PURSUANT TO
SECTION 13(A) OR 15(D) OF THE EXCHANGE ACT SINCE THE FILING OF ITS LAST ANNUAL
REPORT ON FORM 10-K, INDICATING THAT IT (I) HAS FAILED TO PAY ANY DIVIDEND OR
SINKING FUND INSTALLMENT ON PREFERRED STOCK OR (II) HAS DEFAULTED ON ANY
INSTALLMENT ON INDEBTEDNESS FOR BORROWED MONEY OR ON ANY RENTAL ON ONE OR MORE
LONG-TERM LEASES, WHICH DEFAULTS, INDIVIDUALLY OR IN THE AGGREGATE, COULD
REASONABLY BE EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT.

 

(U)                                 CERTAIN MARKET ACTIVITIES.  NEITHER THE
COMPANY, NOR THE SUBSIDIARY, NOR ANY OF THEIR RESPECTIVE DIRECTORS, OFFICERS OR
CONTROLLING PERSONS HAS TAKEN, DIRECTLY OR INDIRECTLY, ANY ACTION DESIGNED, OR
THAT HAS CONSTITUTED OR MIGHT REASONABLY BE EXPECTED TO CAUSE OR RESULT IN,
UNDER THE EXCHANGE ACT OR OTHERWISE, THE STABILIZATION OR MANIPULATION OF THE
PRICE OF ANY SECURITY OF THE COMPANY TO FACILITATE THE SALE OR RESALE OF THE
PLACEMENT SHARES.

 

(V)                                 BROKER/DEALER RELATIONSHIPS.  NEITHER THE
COMPANY NOR THE SUBSIDIARY OR ANY RELATED ENTITIES (I) IS REQUIRED TO REGISTER
AS A “BROKER” OR “DEALER” IN ACCORDANCE WITH THE PROVISIONS OF THE EXCHANGE ACT
OR (II) DIRECTLY OR INDIRECTLY THROUGH ONE OR MORE INTERMEDIARIES, CONTROLS OR
IS A “PERSON ASSOCIATED WITH A MEMBER” OR “ASSOCIATED PERSON OF A MEMBER”
(WITHIN THE MEANING OF ARTICLE I OF THE NASD MANUAL ADMINISTERED BY FINRA).

 

(W)                               NO RELIANCE.  THE COMPANY HAS NOT RELIED UPON
EITHER AGENT OR LEGAL COUNSEL FOR EITHER AGENT FOR ANY LEGAL, TAX OR ACCOUNTING
ADVICE IN CONNECTION WITH THE OFFERING AND SALE OF THE PLACEMENT SHARES.

 

(X)                                   TAXES.  THE COMPANY AND ITS SUBSIDIARY
HAVE FILED ALL FEDERAL, STATE, LOCAL AND FOREIGN TAX RETURNS WHICH HAVE BEEN
REQUIRED TO BE FILED AND PAID ALL TAXES SHOWN THEREON THROUGH THE DATE HEREOF,
TO THE EXTENT THAT SUCH TAXES HAVE BECOME DUE AND ARE NOT BEING CONTESTED IN
GOOD FAITH.  EXCEPT AS OTHERWISE DISCLOSED IN OR CONTEMPLATED BY THE
REGISTRATION STATEMENT OR THE PROSPECTUS, NO TAX DEFICIENCY HAS BEEN DETERMINED
ADVERSELY TO THE COMPANY OR ITS SUBSIDIARY WHICH HAS HAD, OR WOULD REASONABLY BE
EXPECTED TO HAVE, INDIVIDUALLY OR IN THE AGGREGATE, A MATERIAL ADVERSE EFFECT. 
THE COMPANY HAS NO KNOWLEDGE OF ANY FEDERAL, STATE OR

 

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OTHER GOVERNMENTAL TAX DEFICIENCY, PENALTY OR ASSESSMENT WHICH HAS BEEN OR MIGHT
BE ASSERTED OR THREATENED AGAINST IT WHICH COULD HAVE A MATERIAL ADVERSE EFFECT.

 

(Y)                                 TITLE TO REAL AND PERSONAL PROPERTY.  EXCEPT
AS SET FORTH IN THE REGISTRATION STATEMENT OR THE PROSPECTUS, THE COMPANY AND
ITS SUBSIDIARY HAVE GOOD AND VALID TITLE IN FEE SIMPLE TO ALL ITEMS OF REAL
PROPERTY AND GOOD AND VALID TITLE TO ALL PERSONAL PROPERTY DESCRIBED IN THE
REGISTRATION STATEMENT OR PROSPECTUS AS BEING OWNED BY THEM THAT ARE MATERIAL TO
THE BUSINESSES OF THE COMPANY OR SUCH SUBSIDIARY, IN EACH CASE FREE AND CLEAR OF
ALL LIENS, ENCUMBRANCES AND CLAIMS, EXCEPT THOSE THAT (I) DO NOT MATERIALLY
INTERFERE WITH THE USE MADE AND PROPOSED TO BE MADE OF SUCH PROPERTY BY THE
COMPANY AND ITS SUBSIDIARY OR (II) WOULD NOT REASONABLY BE EXPECTED,
INDIVIDUALLY OR IN THE AGGREGATE, TO HAVE A MATERIAL ADVERSE EFFECT.  ANY REAL
PROPERTY DESCRIBED IN THE REGISTRATION STATEMENT OR PROSPECTUS AS BEING LEASED
BY THE COMPANY AND ITS SUBSIDIARY IS HELD BY THEM UNDER VALID, EXISTING AND
ENFORCEABLE LEASES, EXCEPT THOSE THAT (A) DO NOT MATERIALLY INTERFERE WITH THE
USE MADE OR PROPOSED TO BE MADE OF SUCH PROPERTY BY THE COMPANY OR ITS
SUBSIDIARY OR (B) WOULD NOT BE REASONABLY EXPECTED, INDIVIDUALLY OR IN THE
AGGREGATE, TO HAVE A MATERIAL ADVERSE EFFECT.

 

(Z)                                   INTELLECTUAL PROPERTY.  EXCEPT AS SET
FORTH IN THE REGISTRATION STATEMENT OR THE PROSPECTUS, THE COMPANY AND ITS
SUBSIDIARY OWN OR POSSESS ADEQUATE ENFORCEABLE RIGHTS TO USE ALL PATENTS, PATENT
APPLICATIONS, TRADEMARKS (BOTH REGISTERED AND UNREGISTERED), SERVICE MARKS,
TRADE NAMES, TRADEMARK REGISTRATIONS, SERVICE MARK REGISTRATIONS, COPYRIGHTS,
LICENSES AND KNOW-HOW (INCLUDING TRADE SECRETS AND OTHER UNPATENTED AND/OR
UNPATENTABLE PROPRIETARY OR CONFIDENTIAL INFORMATION, SYSTEMS OR PROCEDURES)
(COLLECTIVELY, THE “INTELLECTUAL PROPERTY”), NECESSARY FOR THE CONDUCT OF THEIR
RESPECTIVE BUSINESSES AS CONDUCTED AS OF THE DATE HEREOF, EXCEPT TO THE EXTENT
THAT THE FAILURE TO OWN OR POSSESS ADEQUATE RIGHTS TO USE SUCH INTELLECTUAL
PROPERTY WOULD NOT, INDIVIDUALLY OR IN THE AGGREGATE, REASONABLY BE EXPECTED TO
HAVE A MATERIAL ADVERSE EFFECT; THE COMPANY AND ITS SUBSIDIARY HAVE NOT RECEIVED
ANY WRITTEN NOTICE OF ANY CLAIM OF INFRINGEMENT OR CONFLICT WHICH ASSERTED
INTELLECTUAL PROPERTY RIGHTS OF OTHERS, WHICH INFRINGEMENT OR CONFLICT, IF THE
SUBJECT OF AN UNFAVORABLE DECISION, WOULD RESULT IN A MATERIAL ADVERSE EFFECT;
THE COMPANY HAS CONDUCTED SEARCHES OF THE UNITED STATES PATENTS OF RECORD AND
PUBLISHED FOREIGN PATENTS ISSUED TO THIRD PARTIES THAT MAY INTERFERE WITH ANY OF
THE COMPANY’S OR ITS SUBSIDIARY’S PATENTS OR PATENT APPLICATIONS AND IT HAS
DETERMINED THAT NONE OF THE COMPANY’S OR ITS SUBSIDIARY’S PATENTS OR PATENT
APPLICATIONS INTERFERE WITH ANY OTHER UNITED STATES PATENTS OR UNITED STATES
PATENT APPLICATIONS WHICH CORRESPOND TO PUBLISHED FOREIGN PATENTS; THE COMPANY
HAS CONDUCTED AN INFRINGEMENT SEARCH AND DETERMINED THAT NO PATENT HELD BY ANY
THIRD PARTY IS INFRINGED BY THE ACTIVITIES OF THE COMPANY AND ITS SUBSIDIARY;
THERE ARE NO PENDING, OR TO THE COMPANY’S KNOWLEDGE, THREATENED JUDICIAL
PROCEEDINGS OR INTERFERENCE PROCEEDINGS CHALLENGING THE COMPANY’S OR ITS
SUBSIDIARY’S RIGHTS IN OR TO OR THE VALIDITY OF THE SCOPE OF ANY OF THE
COMPANY’S OR ITS SUBSIDIARY’S PATENTS, PATENT APPLICATIONS OR PROPRIETARY
INFORMATION; NO OTHER ENTITY OR INDIVIDUAL HAS ANY RIGHT OR CLAIM IN ANY OF THE
COMPANY’S OR ITS SUBSIDIARY’S PATENTS, PATENT APPLICATIONS OR ANY PATENT TO BE
ISSUED THEREFROM BY VIRTUE OF ANY CONTRACT, LICENSE OR OTHER AGREEMENT ENTERED
INTO BETWEEN SUCH ENTITY OR INDIVIDUAL AND THE COMPANY OR BY ANY NON-CONTRACTUAL
OBLIGATION, OTHER THAN BY WRITTEN LICENSES GRANTED BY THE COMPANY; THE COMPANY
AND ITS SUBSIDIARY HAVE NOT RECEIVED ANY WRITTEN NOTICE OF ANY CLAIM CHALLENGING
THE RIGHTS OF THE COMPANY OR A SUBSIDIARY IN OR TO ANY INTELLECTUAL PROPERTY
OWNED, LICENSED OR OPTIONED BY THE COMPANY OR SUCH SUBSIDIARY WHICH CLAIM, IF
THE SUBJECT OF AN UNFAVORABLE DECISION WOULD RESULT IN AN MATERIAL ADVERSE
EFFECT.

 

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(AA)                          COMPLIANCE PROGRAM.  THE COMPANY HAS ESTABLISHED
AND ADMINISTERS A COMPLIANCE PROGRAM APPLICABLE TO THE COMPANY, TO ASSIST THE
COMPANY AND THE DIRECTORS, OFFICERS AND EMPLOYEES OF THE COMPANY IN COMPLYING
WITH APPLICABLE REGULATORY GUIDELINES.

 

(BB)                          ENVIRONMENTAL LAWS.  EXCEPT AS SET FORTH IN THE
REGISTRATION STATEMENT OR THE PROSPECTUS, THE COMPANY AND ITS SUBSIDIARY (I) ARE
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) HAVE RECEIVED AND ARE IN COMPLIANCE WITH ALL PERMITS, LICENSES OR OTHER
APPROVALS REQUIRED OF THEM UNDER APPLICABLE ENVIRONMENTAL LAWS TO CONDUCT THEIR
RESPECTIVE BUSINESSES AS DESCRIBED IN THE REGISTRATION STATEMENT AND THE
PROSPECTUS; AND (III) HAVE 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 ANY OF CLAUSES (I), (II) OR (III) ABOVE, FOR ANY SUCH FAILURE TO
COMPLY OR FAILURE TO RECEIVE REQUIRED PERMITS, LICENSES, OTHER APPROVALS OR
LIABILITY AS WOULD NOT, INDIVIDUALLY OR IN THE AGGREGATE, REASONABLY BE EXPECTED
TO HAVE A MATERIAL ADVERSE EFFECT.

 

(CC)                            DISCLOSURE CONTROLS.  THE COMPANY HAS
ESTABLISHED DISCLOSURE CONTROLS AND PROCEDURES (AS DEFINED IN EXCHANGE ACT
RULES 13A-15 AND 15D-15) FOR THE COMPANY AND DESIGNED SUCH DISCLOSURE CONTROLS
AND PROCEDURES TO ENSURE THAT MATERIAL INFORMATION RELATING TO THE COMPANY AND
ITS SUBSIDIARY IS MADE KNOWN TO THE CERTIFYING OFFICERS BY OTHERS WITHIN THOSE
ENTITIES, PARTICULARLY DURING THE PERIOD IN WHICH THE COMPANY’S ANNUAL REPORT ON
FORM 10-K OR QUARTERLY REPORT ON FORM 10-Q, AS THE CASE MAY BE, IS BEING
PREPARED.  THE COMPANY’S CERTIFYING OFFICERS HAVE EVALUATED THE EFFECTIVENESS OF
THE COMPANY’S CONTROLS AND PROCEDURES AS OF A DATE WITHIN 90 DAYS PRIOR TO THE
FILING DATE OF THE FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2009 (SUCH DATE,
THE “EVALUATION DATE”).  THE COMPANY PRESENTED IN ITS FORM 10-K FOR THE YEAR
ENDED DECEMBER 31, 2009 THE CONCLUSIONS OF THE CERTIFYING OFFICERS ABOUT THE
EFFECTIVENESS OF THE DISCLOSURE CONTROLS AND PROCEDURES BASED ON THEIR
EVALUATIONS AS OF THE EVALUATION DATE.  EXCEPT AS SET FORTH IN THE REGISTRATION
STATEMENT OR THE PROSPECTUS, THERE HAVE BEEN NO SIGNIFICANT CHANGES IN THE
COMPANY’S INTERNAL CONTROLS (AS SUCH TERM IS DEFINED IN ITEM 307(B) OF
REGULATION S-K UNDER THE ACT) SINCE THE EVALUATION DATE.

 

(DD)                          SARBANES-OXLEY.  TO THE KNOWLEDGE OF THE COMPANY,
THERE IS AND HAS BEEN NO FAILURE ON THE PART OF THE COMPANY AND ANY OF THE
COMPANY’S DIRECTORS OR OFFICERS, IN THEIR CAPACITIES AS SUCH, TO COMPLY WITH ANY
APPLICABLE PROVISIONS OF THE SARBANES-OXLEY ACT AND THE RULES AND REGULATIONS
PROMULGATED THEREUNDER.  EACH OF THE PRINCIPAL EXECUTIVE OFFICER AND THE
PRINCIPAL FINANCIAL OFFICER OF THE COMPANY (OR EACH FORMER PRINCIPAL EXECUTIVE
OFFICER OF THE COMPANY AND EACH FORMER PRINCIPAL FINANCIAL OFFICER OF THE
COMPANY AS APPLICABLE) HAS MADE ALL CERTIFICATIONS REQUIRED BY SECTIONS 302 AND
906 OF THE SARBANES-OXLEY ACT WITH RESPECT TO ALL REPORTS, SCHEDULES, FORMS,
STATEMENTS AND OTHER DOCUMENTS REQUIRED TO BE FILED BY IT OR FURNISHED BY IT TO
THE COMMISSION.  FOR PURPOSES OF THE PRECEDING SENTENCE, “PRINCIPAL EXECUTIVE
OFFICER” AND “PRINCIPAL FINANCIAL OFFICER” SHALL HAVE THE MEANINGS GIVEN TO SUCH
TERMS IN THE SARBANES-OXLEY ACT.

 

(EE)                            FINDER’S FEES.  NEITHER THE COMPANY NOR THE
SUBSIDIARY HAS INCURRED ANY LIABILITY FOR ANY FINDER’S FEES, BROKERAGE
COMMISSIONS OR SIMILAR PAYMENTS IN CONNECTION WITH THE

 

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TRANSACTIONS HEREIN CONTEMPLATED, EXCEPT AS MAY OTHERWISE EXIST WITH RESPECT TO
AGENTS PURSUANT TO THIS AGREEMENT.

 

(FF)                              LABOR DISPUTES.  NO LABOR DISTURBANCE BY OR
DISPUTE WITH EMPLOYEES OF THE COMPANY OR ITS SUBSIDIARY EXISTS OR, TO THE
KNOWLEDGE OF THE COMPANY, IS THREATENED WHICH WOULD REASONABLY BE EXPECTED TO
RESULT IN A MATERIAL ADVERSE EFFECT

 

(GG)                            INVESTMENT COMPANY ACT.  NEITHER THE COMPANY NOR
THE SUBSIDIARY IS OR, AFTER GIVING EFFECT TO THE OFFERING AND SALE OF THE
PLACEMENT SHARES, WILL BE AN “INVESTMENT COMPANY” OR AN ENTITY “CONTROLLED” BY
AN “INVESTMENT COMPANY,” AS SUCH TERMS ARE DEFINED IN THE INVESTMENT COMPANY ACT
OF 1940, AS AMENDED (THE “INVESTMENT COMPANY ACT”).

 

(HH)                          OPERATIONS.  THE OPERATIONS OF THE COMPANY AND ITS
SUBSIDIARY ARE AND HAVE BEEN CONDUCTED AT ALL TIMES IN COMPLIANCE WITH
APPLICABLE FINANCIAL RECORD KEEPING AND REPORTING REQUIREMENTS OF THE CURRENCY
AND FOREIGN TRANSACTIONS REPORTING ACT OF 1970, AS AMENDED, THE MONEY LAUNDERING
STATUTES OF ALL JURISDICTIONS TO WHICH THE COMPANY OR ITS SUBSIDIARY ARE
SUBJECT, 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”), EXCEPT AS WOULD NOT
REASONABLY BE EXPECTED TO RESULT IN A MATERIAL ADVERSE EFFECT; AND NO ACTION,
SUIT OR PROCEEDING BY OR BEFORE ANY COURT OR GOVERNMENTAL AGENCY, AUTHORITY OR
BODY OR ANY ARBITRATOR INVOLVING THE COMPANY OR ITS SUBSIDIARY WITH RESPECT TO
THE MONEY LAUNDERING LAWS IS PENDING OR, TO THE KNOWLEDGE OF THE COMPANY,
THREATENED.

 

(II)                                  OFF-BALANCE SHEET ARRANGEMENTS.  THERE ARE
NO TRANSACTIONS, ARRANGEMENTS AND OTHER RELATIONSHIPS BETWEEN AND/OR AMONG THE
COMPANY, AND/OR, TO THE KNOWLEDGE OF THE COMPANY, ANY OF ITS AFFILIATES AND ANY
UNCONSOLIDATED ENTITY, INCLUDING, BUT NOT LIMITED TO, ANY STRUCTURAL FINANCE,
SPECIAL PURPOSE OR LIMITED PURPOSE ENTITY (EACH, AN “OFF BALANCE SHEET
TRANSACTION”) THAT COULD REASONABLY BE EXPECTED TO AFFECT MATERIALLY THE
COMPANY’S LIQUIDITY OR THE AVAILABILITY OF OR REQUIREMENTS FOR ITS CAPITAL
RESOURCES, INCLUDING THOSE OFF BALANCE SHEET TRANSACTIONS DESCRIBED IN THE
COMMISSION’S STATEMENT ABOUT MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS (RELEASE NOS.  33-8056; 34-45321; FR-61),
REQUIRED TO BE DESCRIBED IN THE PROSPECTUS WHICH HAVE NOT BEEN DESCRIBED AS
REQUIRED.

 

(JJ)                                UNDERWRITER AGREEMENTS.  THE COMPANY IS NOT
A PARTY TO ANY AGREEMENT WITH AN AGENT OR UNDERWRITER FOR ANY OTHER
“AT-THE-MARKET” OR CONTINUOUS EQUITY TRANSACTION.

 

(KK)                          ERISA.  TO THE KNOWLEDGE OF THE COMPANY, EACH
MATERIAL EMPLOYEE BENEFIT PLAN, WITHIN THE MEANING OF SECTION 3(3) OF THE
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”), THAT IS
MAINTAINED, ADMINISTERED OR CONTRIBUTED TO BY THE COMPANY OR ANY OF ITS
AFFILIATES FOR EMPLOYEES OR FORMER EMPLOYEES OF THE COMPANY AND ITS SUBSIDIARY
HAS BEEN MAINTAINED IN MATERIAL COMPLIANCE WITH ITS TERMS AND THE REQUIREMENTS
OF ANY APPLICABLE STATUTES, ORDERS, RULES AND REGULATIONS, INCLUDING BUT NOT
LIMITED TO ERISA AND THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”);
NO PROHIBITED TRANSACTION, WITHIN THE MEANING OF SECTION 406 OF ERISA OR
SECTION 4975 OF THE CODE, HAS OCCURRED WHICH WOULD RESULT IN A MATERIAL
LIABILITY TO THE COMPANY WITH RESPECT TO ANY SUCH PLAN EXCLUDING TRANSACTIONS

 

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EFFECTED PURSUANT TO A STATUTORY OR ADMINISTRATIVE EXEMPTION; AND FOR EACH SUCH
PLAN THAT IS SUBJECT TO THE FUNDING RULES OF SECTION 412 OF THE CODE OR
SECTION 302 OF ERISA, NO “ACCUMULATED FUNDING DEFICIENCY” AS DEFINED IN
SECTION 412 OF THE CODE HAS BEEN INCURRED, WHETHER OR NOT WAIVED, AND THE FAIR
MARKET VALUE OF THE ASSETS OF EACH SUCH PLAN (EXCLUDING FOR THESE PURPOSES
ACCRUED BUT UNPAID CONTRIBUTIONS) EXCEEDS THE PRESENT VALUE OF ALL BENEFITS
ACCRUED UNDER SUCH PLAN DETERMINED USING REASONABLE ACTUARIAL ASSUMPTIONS.

 

(LL)                                  FORWARD LOOKING STATEMENTS.  NO
FORWARD-LOOKING STATEMENT (WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES
ACT AND SECTION 21E OF THE EXCHANGE ACT) (A “FORWARD LOOKING STATEMENT”)
CONTAINED IN THE REGISTRATION STATEMENT AND THE PROSPECTUS HAS BEEN MADE OR
REAFFIRMED WITHOUT A REASONABLE BASIS OR HAS BEEN DISCLOSED OTHER THAN IN GOOD
FAITH.  THE FORWARD LOOKING STATEMENTS INCORPORATED BY REFERENCE IN THE
REGISTRATION STATEMENT AND THE PROSPECTUS FROM THE COMPANY’S ANNUAL REPORT ON
FORM 10-K FOR THE YEAR MOST RECENTLY ENDED (I) ARE WITHIN THE COVERAGE OF THE
SAFE HARBOR FOR FORWARD LOOKING STATEMENTS SET FORTH IN SECTION 27A OF THE ACT,
RULE 175(B) UNDER THE ACT OR RULE 3B-6 UNDER THE EXCHANGE ACT, AS APPLICABLE,
(II) WERE MADE BY THE COMPANY WITH A REASONABLE BASIS AND IN GOOD FAITH AND
REFLECT THE COMPANY’S GOOD FAITH COMMERCIALLY REASONABLE BEST ESTIMATE OF THE
MATTERS DESCRIBED THEREIN, AND (III) HAVE BEEN PREPARED IN ACCORDANCE WITH ITEM
10 OF REGULATION S-K UNDER THE ACT.

 

(MM)                  AGENT PURCHASES.  THE COMPANY ACKNOWLEDGES AND AGREES THAT
AGENTS HAVE INFORMED THE COMPANY THAT EITHER AGENT MAY, TO THE EXTENT PERMITTED
UNDER THE SECURITIES ACT AND THE EXCHANGE ACT, PURCHASE AND SELL SHARES OF
COMMON STOCK FOR ITS OWN ACCOUNT WHILE THIS AGREEMENT IS IN EFFECT, PROVIDED,
THAT (I) NO SUCH PURCHASE OR SALES SHALL TAKE PLACE WHILE A PLACEMENT NOTICE IS
IN EFFECT (EXCEPT TO THE EXTENT EACH AGENT MAY ENGAGE IN SALES OF PLACEMENT
SHARES PURCHASED OR DEEMED PURCHASED FROM THE COMPANY AS A “RISKLESS PRINCIPAL”
OR IN A SIMILAR CAPACITY) AND (II) THE COMPANY SHALL NOT BE DEEMED TO HAVE
AUTHORIZED OR CONSENTED TO ANY SUCH PURCHASES OR SALES BY EITHER AGENT.

 

(NN)                          MARGIN RULES.  NEITHER THE ISSUANCE, SALE AND
DELIVERY OF THE SHARES NOR THE APPLICATION OF THE PROCEEDS THEREOF BY THE
COMPANY AS DESCRIBED IN THE REGISTRATION STATEMENT AND THE PROSPECTUS WILL
VIOLATE REGULATION T, U OR X OF THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE
SYSTEM OR ANY OTHER REGULATION OF SUCH BOARD OF GOVERNORS.

 

(OO)                          INSURANCE.  THE COMPANY AND ITS SUBSIDIARY CARRY,
OR ARE COVERED BY, INSURANCE IN SUCH AMOUNTS AND COVERING SUCH RISKS AS THE
COMPANY AND ITS SUBSIDIARY REASONABLY BELIEVE ARE ADEQUATE FOR THE CONDUCT OF
THEIR PROPERTIES AND AS IS CUSTOMARY FOR COMPANIES ENGAGED IN SIMILAR BUSINESSES
IN SIMILAR INDUSTRIES.

 

(PP)                          NO IMPROPER PRACTICES.  (I) NEITHER THE COMPANY
NOR, TO THE COMPANY’S KNOWLEDGE, THE SUBSIDIARY, NOR TO THE COMPANY’S KNOWLEDGE,
ANY OF THEIR RESPECTIVE EXECUTIVE OFFICERS HAS, IN THE PAST FIVE YEARS, MADE ANY
UNLAWFUL CONTRIBUTIONS TO ANY CANDIDATE FOR ANY POLITICAL OFFICE (OR FAILED
FULLY TO DISCLOSE ANY CONTRIBUTION IN VIOLATION OF LAW) OR MADE ANY CONTRIBUTION
OR OTHER PAYMENT TO ANY OFFICIAL OF, OR CANDIDATE FOR, ANY FEDERAL, STATE,
MUNICIPAL, OR FOREIGN OFFICE OR OTHER PERSON CHARGED WITH SIMILAR PUBLIC OR
QUASI-PUBLIC DUTY IN VIOLATION OF ANY LAW OR OF THE CHARACTER REQUIRED TO BE
DISCLOSED IN THE PROSPECTUS; (II) NO RELATIONSHIP, DIRECT OR INDIRECT, EXISTS
BETWEEN OR AMONG THE COMPANY OR, TO THE COMPANY’S KNOWLEDGE, ANY SUBSIDIARY OR
ANY AFFILIATE OF ANY OF THEM, ON THE ONE HAND, AND THE DIRECTORS, OFFICERS AND
STOCKHOLDERS OF

 

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THE COMPANY OR, TO THE COMPANY’S KNOWLEDGE, ANY SUBSIDIARY, ON THE OTHER HAND,
THAT IS REQUIRED BY THE SECURITIES ACT TO BE DESCRIBED IN THE REGISTRATION
STATEMENT AND THE PROSPECTUS THAT IS NOT SO DESCRIBED; (III) NO RELATIONSHIP,
DIRECT OR INDIRECT, EXISTS BETWEEN OR AMONG THE COMPANY OR ANY SUBSIDIARY OR ANY
AFFILIATE OF THEM, ON THE ONE HAND, AND THE DIRECTORS, OFFICERS, STOCKHOLDERS OR
DIRECTORS OF THE COMPANY OR, TO THE COMPANY’S KNOWLEDGE, ANY SUBSIDIARY, ON THE
OTHER HAND, THAT IS REQUIRED BY THE RULES OF FINRA TO BE DESCRIBED IN THE
REGISTRATION STATEMENT AND THE PROSPECTUS THAT IS NOT SO DESCRIBED; AND
(IV) EXCEPT AS DESCRIBED IN THE PROSPECTUS, THERE ARE NO MATERIAL OUTSTANDING
LOANS OR ADVANCES OR MATERIAL GUARANTEES OF INDEBTEDNESS BY THE COMPANY OR, TO
THE COMPANY’S KNOWLEDGE, ANY SUBSIDIARY TO OR FOR THE BENEFIT OF ANY OF THEIR
RESPECTIVE OFFICERS OR DIRECTORS OR ANY OF THE MEMBERS OF THE FAMILIES OF ANY OF
THEM.

 

(QQ)                          STATUS UNDER THE SECURITIES ACT.  THE COMPANY WAS
NOT AND IS NOT AN INELIGIBLE ISSUER AS DEFINED IN RULE 405 UNDER THE SECURITIES
ACT AT THE TIMES SPECIFIED IN RULES 164 AND 433 UNDER THE ACT IN CONNECTION WITH
THE OFFERING OF THE SHARES.

 

(RR)                                NO MISSTATEMENT OR OMISSION IN AN ISSUER
FREE WRITING PROSPECTUS.  EACH ISSUER FREE WRITING PROSPECTUS, AS DEFINED IN
RULE 405 UNDER THE ACT RELATING TO THE PLACEMENT SHARES (AN “ISSUER FREE WRITING
PROSPECTUS,” AND TOGETHER WITH THE PROSPECTUS THE “PRICING DISCLOSURE
MATERIALS”), WHEN CONSIDERED TOGETHER WITH THE PRICING DISCLOSURE MATERIALS AS
OF THE APPLICABLE POINT OF SALE, DID NOT OR 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, IN LIGHT OF THE
CIRCUMSTANCES UNDER WHICH THEY WERE MADE, NOT MISLEADING; PROVIDED, HOWEVER,
THAT THE COMPANY MAKES NO REPRESENTATION OR WARRANTY WITH RESPECT TO ANY
STATEMENT CONTAINED IN ANY ISSUER FREE WRITING PROSPECTUS IN RELIANCE UPON AND
IN CONFORMITY WITH INFORMATION CONCERNING EITHER AGENT AND FURNISHED BY EITHER
AGENT TO THE COMPANY EXPRESSLY FOR USE IN THE ISSUER FREE WRITING PROSPECTUS.

 

(SS)                              CONFORMITY OF ISSUER FREE WRITING PROSPECTUS. 
EACH ISSUER FREE WRITING PROSPECTUS CONFORMED OR WILL CONFORM IN ALL MATERIAL
RESPECTS TO THE REQUIREMENTS OF THE ACT ON THE DATE OF FIRST USE, AND THE
COMPANY HAS COMPLIED OR WILL COMPLY WITH ANY FILING REQUIREMENTS APPLICABLE TO
SUCH ISSUER FREE WRITING PROSPECTUS PURSUANT TO THE ACT.  EACH ISSUER 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, DID NOT, DOES NOT AND
WILL NOT INCLUDE ANY INFORMATION THAT CONFLICTED, CONFLICTS OR WILL CONFLICT
WITH THE INFORMATION CONTAINED IN THE REGISTRATION STATEMENT OR THE PROSPECTUS,
INCLUDING ANY DOCUMENT INCORPORATED BY REFERENCE THEREIN THAT HAS NOT BEEN
SUPERSEDED OR MODIFIED.  THE COMPANY HAS NOT MADE ANY OFFER RELATING TO THE
SHARES THAT WOULD CONSTITUTE AN ISSUER FREE WRITING PROSPECTUS WITHOUT THE PRIOR
WRITTEN CONSENT OF AGENTS.  THE COMPANY HAS RETAINED IN ACCORDANCE WITH THE ACT
ALL ISSUER FREE WRITING PROSPECTUSES THAT WERE NOT REQUIRED TO BE FILED PURSUANT
TO THE ACT.

 

(TT)                                STOCK TRANSFER TAXES.  ON EACH SETTLEMENT
DATE, ALL STOCK TRANSFER OR OTHER TAXES (OTHER THAN INCOME TAXES) WHICH ARE
REQUIRED TO BE PAID IN CONNECTION WITH THE SALE AND TRANSFER OF THE SHARES TO BE
SOLD HEREUNDER WILL BE, OR WILL HAVE BEEN, FULLY PAID OR PROVIDED FOR BY THE
COMPANY AND ALL LAWS IMPOSING SUCH TAXES WILL BE OR WILL HAVE BEEN FULLY
COMPLIED WITH.

 

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7.                                      COVENANTS OF THE COMPANY.  THE COMPANY
COVENANTS AND AGREES WITH AGENTS THAT:

 

(A)                                 REGISTRATION STATEMENT AMENDMENTS.  AFTER
THE DATE OF THE EFFECTIVENESS OF THE REGISTRATION STATEMENT WITH THE COMMISSION
AND DURING ANY PERIOD IN WHICH A PROSPECTUS RELATING TO ANY PLACEMENT SHARES IS
REQUIRED TO BE DELIVERED BY AGENTS UNDER THE SECURITIES ACT (INCLUDING IN
CIRCUMSTANCES WHERE SUCH REQUIREMENT MAY BE SATISFIED PURSUANT TO RULE 172 UNDER
THE SECURITIES ACT), (I) THE COMPANY WILL NOTIFY AGENTS PROMPTLY OF THE TIME
WHEN ANY SUBSEQUENT AMENDMENT TO THE REGISTRATION STATEMENT, OTHER THAN
DOCUMENTS INCORPORATED BY REFERENCE, HAS BEEN FILED WITH THE COMMISSION AND/OR
HAS BECOME EFFECTIVE OR ANY SUBSEQUENT SUPPLEMENT TO THE PROSPECTUS HAS BEEN
FILED AND OF ANY REQUEST BY THE COMMISSION FOR ANY AMENDMENT OR SUPPLEMENT TO
THE REGISTRATION STATEMENT OR PROSPECTUS OR FOR ADDITIONAL INFORMATION, (II) THE
COMPANY WILL PREPARE AND FILE WITH THE COMMISSION, PROMPTLY UPON EITHER AGENT’S
REQUEST, ANY AMENDMENTS OR SUPPLEMENTS TO THE REGISTRATION STATEMENT OR
PROSPECTUS THAT, IN SUCH AGENT’S REASONABLE OPINION, MAY BE NECESSARY OR
ADVISABLE IN CONNECTION WITH THE DISTRIBUTION OF THE PLACEMENT SHARES BY AGENTS
(PROVIDED, HOWEVER, THAT THE FAILURE OF EITHER AGENT TO MAKE SUCH REQUEST SHALL
NOT RELIEVE THE COMPANY OF ANY OBLIGATION OR LIABILITY HEREUNDER, OR AFFECT
EITHER AGENT’S RIGHT TO RELY ON THE REPRESENTATIONS AND WARRANTIES MADE BY THE
COMPANY IN THIS AGREEMENT AND PROVIDED, FURTHER, THAT THE ONLY REMEDY AGENTS
SHALL HAVE WITH RESPECT TO THE FAILURE TO MAKE SUCH FILING SHALL BE TO CEASE
MAKING SALES UNDER THIS AGREEMENT UNTIL SUCH AMENDMENT OR SUPPLEMENT IS FILED);
(III) THE COMPANY WILL NOT FILE ANY AMENDMENT OR SUPPLEMENT TO THE REGISTRATION
STATEMENT OR PROSPECTUS RELATING TO THE PLACEMENT SHARES OR A SECURITY
CONVERTIBLE INTO THE PLACEMENT SHARES UNLESS A COPY THEREOF HAS BEEN SUBMITTED
TO AGENTS WITHIN A REASONABLE PERIOD OF TIME BEFORE THE FILING AND NEITHER AGENT
HAS OBJECTED THERETO (PROVIDED, HOWEVER, THAT THE FAILURE OF EITHER AGENT TO
MAKE SUCH OBJECTION SHALL NOT RELIEVE THE COMPANY OF ANY OBLIGATION OR LIABILITY
HEREUNDER, OR AFFECT EITHER AGENT’S RIGHT TO RELY ON THE REPRESENTATIONS AND
WARRANTIES MADE BY THE COMPANY IN THIS AGREEMENT AND PROVIDED, FURTHER, THAT THE
ONLY REMEDY AGENTS SHALL HAVE WITH RESPECT TO THE FAILURE TO BY THE COMPANY TO
OBTAIN SUCH CONSENT SHALL BE TO CEASE MAKING SALES UNDER THIS AGREEMENT) AND THE
COMPANY WILL FURNISH TO AGENTS AT THE TIME OF FILING THEREOF A COPY OF ANY
DOCUMENT THAT UPON FILING IS DEEMED TO BE INCORPORATED BY REFERENCE INTO THE
REGISTRATION STATEMENT OR PROSPECTUS, EXCEPT FOR THOSE DOCUMENTS AVAILABLE VIA
EDGAR; AND (IV) THE COMPANY WILL CAUSE EACH AMENDMENT OR SUPPLEMENT TO THE
PROSPECTUS TO BE FILED WITH THE COMMISSION AS REQUIRED PURSUANT TO THE
APPLICABLE PARAGRAPH OF RULE 424(B) OF THE SECURITIES ACT OR, IN THE CASE OF ANY
DOCUMENT TO BE INCORPORATED THEREIN BY REFERENCE, TO BE FILED WITH THE
COMMISSION AS REQUIRED PURSUANT TO THE EXCHANGE ACT, WITHIN THE TIME PERIOD
PRESCRIBED (THE DETERMINATION TO FILE OR NOT FILE ANY AMENDMENT OR SUPPLEMENT
WITH THE COMMISSION UNDER THIS SECTION 7(A), BASED ON THE COMPANY’S REASONABLE
OPINION OR REASONABLE OBJECTIONS, SHALL BE MADE EXCLUSIVELY BY THE COMPANY).

 

(B)                                 NOTICE OF COMMISSION STOP ORDERS.  THE
COMPANY WILL ADVISE AGENTS, PROMPTLY AFTER IT RECEIVES NOTICE OR OBTAINS
KNOWLEDGE THEREOF, OF THE ISSUANCE OR THREATENED ISSUANCE BY THE COMMISSION OF
ANY STOP ORDER SUSPENDING THE EFFECTIVENESS OF THE REGISTRATION STATEMENT, OF
THE SUSPENSION OF THE QUALIFICATION OF THE PLACEMENT SHARES FOR OFFERING OR SALE
IN ANY JURISDICTION, OR OF THE INITIATION OR THREATENING OF ANY PROCEEDING FOR
ANY SUCH PURPOSE; AND IT WILL PROMPTLY USE ITS COMMERCIALLY REASONABLE EFFORTS
TO PREVENT THE ISSUANCE OF ANY STOP ORDER OR TO OBTAIN ITS WITHDRAWAL IF SUCH A
STOP ORDER SHOULD BE ISSUED.  THE COMPANY WILL ADVISE AGENTS

 

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PROMPTLY AFTER IT RECEIVES ANY REQUEST BY THE COMMISSION FOR ANY AMENDMENTS TO
THE REGISTRATION STATEMENT OR ANY AMENDMENT OR SUPPLEMENTS TO THE PROSPECTUS OR
ANY ISSUER FREE WRITING PROSPECTUS OR FOR ADDITIONAL INFORMATION RELATED TO THE
OFFERING OF THE SHARES OR FOR ADDITIONAL INFORMATION RELATED TO THE REGISTRATION
STATEMENT, THE PROSPECTUS OR ANY ISSUER FREE WRITING PROSPECTUS.

 

(C)                                  DELIVERY OF PROSPECTUS; SUBSEQUENT
CHANGES.  DURING ANY PERIOD IN WHICH A PROSPECTUS RELATING TO THE PLACEMENT
SHARES IS REQUIRED TO BE DELIVERED BY AGENTS UNDER THE SECURITIES ACT WITH
RESPECT TO THE OFFER AND SALE OF THE PLACEMENT SHARES, (INCLUDING IN
CIRCUMSTANCES WHERE SUCH REQUIREMENT MAY BE SATISFIED PURSUANT TO RULE 172 UNDER
THE SECURITIES ACT), THE COMPANY WILL COMPLY WITH ALL REQUIREMENTS IMPOSED UPON
IT BY THE SECURITIES ACT, AS FROM TIME TO TIME IN FORCE, AND TO FILE ON OR
BEFORE THEIR RESPECTIVE DUE DATES ALL REPORTS AND ANY DEFINITIVE PROXY OR
INFORMATION STATEMENTS REQUIRED TO BE FILED BY THE COMPANY WITH THE COMMISSION
PURSUANT TO SECTIONS 13(A), 13(C), 14, 15(D) OR ANY OTHER PROVISION OF OR UNDER
THE EXCHANGE ACT.  IF THE COMPANY HAS OMITTED ANY INFORMATION FROM THE
REGISTRATION STATEMENT PURSUANT TO RULE 430A UNDER THE ACT, IT WILL USE ITS BEST
EFFORTS TO COMPLY WITH THE PROVISIONS OF AND MAKE ALL REQUISITE FILINGS WITH THE
COMMISSION PURSUANT TO SAID RULE 430A AND TO NOTIFY AGENTS PROMPTLY OF ALL SUCH
FILINGS.  IF DURING SUCH PERIOD ANY EVENT OCCURS AS A RESULT OF WHICH THE
PROSPECTUS AS THEN AMENDED OR SUPPLEMENTED WOULD INCLUDE AN UNTRUE STATEMENT OF
A MATERIAL FACT OR OMIT TO STATE A MATERIAL FACT NECESSARY TO MAKE THE
STATEMENTS THEREIN, IN THE LIGHT OF THE CIRCUMSTANCES THEN EXISTING, NOT
MISLEADING, OR IF DURING SUCH PERIOD IT IS NECESSARY TO AMEND OR SUPPLEMENT THE
REGISTRATION STATEMENT OR PROSPECTUS TO COMPLY WITH THE SECURITIES ACT, THE
COMPANY WILL PROMPTLY NOTIFY AGENTS TO SUSPEND THE OFFERING OF PLACEMENT SHARES
DURING SUCH PERIOD AND THE COMPANY WILL PROMPTLY AMEND OR SUPPLEMENT THE
REGISTRATION STATEMENT OR PROSPECTUS (AT THE EXPENSE OF THE COMPANY) SO AS TO
CORRECT SUCH STATEMENT OR OMISSION OR EFFECT SUCH COMPLIANCE.

 

(D)                                 LISTING OF PLACEMENT SHARES.  DURING ANY
PERIOD IN WHICH THE PROSPECTUS RELATING TO THE PLACEMENT SHARES IS REQUIRED TO
BE DELIVERED BY AGENTS UNDER THE SECURITIES ACT WITH RESPECT TO THE OFFER AND
SALE OF THE PLACEMENT SHARES, THE COMPANY WILL USE ITS REASONABLE BEST EFFORTS
TO CAUSE THE PLACEMENT SHARES TO BE LISTED ON THE EXCHANGE AND TO QUALIFY THE
PLACEMENT SHARES FOR SALE UNDER THE SECURITIES LAWS OF SUCH JURISDICTIONS AS
AGENTS REASONABLY DESIGNATE AND TO CONTINUE SUCH QUALIFICATIONS IN EFFECT SO
LONG AS REQUIRED FOR THE DISTRIBUTION OF THE PLACEMENT SHARES; PROVIDED,
HOWEVER, THAT THE COMPANY SHALL NOT BE REQUIRED IN CONNECTION THEREWITH TO
QUALIFY AS A FOREIGN CORPORATION OR DEALER IN SECURITIES OR FILE A GENERAL
CONSENT TO SERVICE OF PROCESS IN ANY JURISDICTION.

 

(E)                                  DELIVERY OF REGISTRATION STATEMENT AND
PROSPECTUS.  THE COMPANY WILL FURNISH TO AGENTS AND THEIR RESPECTIVE COUNSEL (AT
THE EXPENSE OF THE COMPANY) COPIES OF THE REGISTRATION STATEMENT, THE PROSPECTUS
(INCLUDING ALL DOCUMENTS INCORPORATED BY REFERENCE THEREIN) AND ALL AMENDMENTS
AND SUPPLEMENTS TO THE REGISTRATION STATEMENT OR PROSPECTUS THAT ARE FILED WITH
THE COMMISSION DURING ANY PERIOD IN WHICH A PROSPECTUS RELATING TO THE PLACEMENT
SHARES IS REQUIRED TO BE DELIVERED UNDER THE SECURITIES ACT (INCLUDING ALL
DOCUMENTS FILED WITH THE COMMISSION DURING SUCH PERIOD THAT ARE DEEMED TO BE
INCORPORATED BY REFERENCE THEREIN), IN EACH CASE AS SOON AS REASONABLY
PRACTICABLE AND IN SUCH QUANTITIES AS AGENTS MAY FROM TIME TO TIME REASONABLY
REQUEST AND, AT EITHER AGENT’S REQUEST, WILL ALSO FURNISH COPIES OF THE
PROSPECTUS TO EACH EXCHANGE OR MARKET ON WHICH SALES OF THE PLACEMENT SHARES MAY
BE MADE; PROVIDED,

 

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HOWEVER, THAT THE COMPANY SHALL NOT BE REQUIRED TO FURNISH ANY DOCUMENT (OTHER
THAN THE PROSPECTUS) TO EITHER AGENT TO THE EXTENT SUCH DOCUMENT IS AVAILABLE ON
EDGAR.

 

(F)                                   EARNINGS STATEMENT.  THE COMPANY WILL MAKE
GENERALLY AVAILABLE TO ITS SECURITY HOLDERS AS SOON AS PRACTICABLE, BUT IN ANY
EVENT NOT LATER THAN 15 MONTHS AFTER THE END OF THE COMPANY’S CURRENT FISCAL
QUARTER, AN EARNINGS STATEMENT COVERING A 12-MONTH PERIOD THAT SATISFIES THE
PROVISIONS OF SECTION 11(A) AND RULE 158 OF THE SECURITIES ACT.

 

(G)                                  EXPENSES.  THE COMPANY, WHETHER OR NOT THE
TRANSACTIONS CONTEMPLATED HEREUNDER ARE CONSUMMATED OR THIS AGREEMENT IS
TERMINATED, IN ACCORDANCE WITH THE PROVISIONS OF SECTION 12 HEREUNDER, WILL PAY
ALL EXPENSES INCIDENT TO THE PERFORMANCE OF ITS OBLIGATIONS HEREUNDER,
INCLUDING, BUT NOT LIMITED TO, EXPENSES RELATING TO (I) THE PREPARATION,
PRINTING AND FILING OF THE REGISTRATION STATEMENT AND EACH AMENDMENT AND
SUPPLEMENT THERETO, OF EACH PROSPECTUS AND OF EACH AMENDMENT AND SUPPLEMENT
THERETO, (II) THE PREPARATION, ISSUANCE AND DELIVERY OF THE PLACEMENT SHARES,
(III) THE QUALIFICATION OF THE PLACEMENT SHARES UNDER SECURITIES LAWS IN
ACCORDANCE WITH THE PROVISIONS OF SECTION 7(D) OF THIS AGREEMENT, INCLUDING
FILING FEES, (IV) THE PRINTING AND DELIVERY TO AGENTS OF COPIES OF THE
PROSPECTUS AND ANY AMENDMENTS OR SUPPLEMENTS THERETO, AND OF THIS AGREEMENT,
(V) THE FEES AND EXPENSES INCURRED IN CONNECTION WITH THE LISTING OR
QUALIFICATION OF THE PLACEMENT SHARES FOR TRADING ON THE EXCHANGE, (VI) FILING
FEES AND EXPENSES, IF ANY, OF THE COMMISSION AND THE FINRA CORPORATE FINANCING
DEPARTMENT.  THE COMPANY SHALL PROMPTLY REIMBURSE AGENTS FOR DOCUMENTED FEES AND
EXPENSES ON PART OF ONE LEGAL COUNSEL SELECTED BY AGENTS IN AN AGGREGATE AMOUNT
NOT TO EXCEED $25,000.

 

(H)                                 USE OF PROCEEDS.  THE COMPANY WILL USE THE
NET PROCEEDS AS DESCRIBED IN THE PROSPECTUS IN THE SECTION ENTITLED “USE OF
PROCEEDS.”

 

(I)                                     NOTICE OF OTHER SALES.  WITHOUT THE
PRIOR WRITTEN CONSENT OF BOTH AGENTS, THE COMPANY WILL NOT, DIRECTLY OR
INDIRECTLY, OFFER TO SELL, SELL, CONTRACT TO SELL, GRANT ANY OPTION TO SELL OR
OTHERWISE DISPOSE OF ANY SHARES OF COMMON STOCK (OTHER THAN THE SHARES OFFERED
PURSUANT TO THE PROVISIONS OF THIS AGREEMENT) OR SECURITIES CONVERTIBLE INTO OR
EXCHANGEABLE FOR COMMON STOCK, WARRANTS OR ANY RIGHTS TO PURCHASE OR ACQUIRE,
COMMON STOCK DURING THE PERIOD BEGINNING ON THE FIFTH (5TH) TRADING DAY
IMMEDIATELY PRIOR TO THE DATE ON WHICH ANY PLACEMENT NOTICE IS DELIVERED TO
AGENTS HEREUNDER AND ENDING ON THE FIFTH (5TH) TRADING DAY IMMEDIATELY FOLLOWING
THE FINAL SETTLEMENT DATE WITH RESPECT TO PLACEMENT SHARES SOLD PURSUANT TO SUCH
PLACEMENT NOTICE (OR, IF THE PLACEMENT NOTICE HAS BEEN TERMINATED OR SUSPENDED
PRIOR TO THE SALE OF ALL SHARES COVERED BY A PLACEMENT NOTICE, THE DATE OF SUCH
SUSPENSION OR TERMINATION); AND WILL NOT DIRECTLY OR INDIRECTLY IN ANY OTHER
“AT-THE-MARKET” OR CONTINUOUS EQUITY TRANSACTION OFFER TO SELL, SELL, CONTRACT
TO SELL, GRANT ANY OPTION TO SELL OR OTHERWISE DISPOSE OF ANY SHARES OF COMMON
STOCK (OTHER THAN THE SHARES OFFERED PURSUANT TO THE PROVISIONS OF THIS
AGREEMENT) OR SECURITIES CONVERTIBLE INTO OR EXCHANGEABLE FOR COMMON STOCK,
WARRANTS OR ANY RIGHTS TO PURCHASE OR ACQUIRE, COMMON STOCK PRIOR TO THE LATER
OF THE TERMINATION OF THIS AGREEMENT AND THE SIXTIETH (60TH) DAY IMMEDIATELY
FOLLOWING THE FINAL SETTLEMENT DATE WITH RESPECT TO PLACEMENT SHARES SOLD
PURSUANT TO SUCH PLACEMENT NOTICE; PROVIDED, HOWEVER, THAT SUCH RESTRICTIONS
WILL NOT BE REQUIRED IN CONNECTION WITH THE COMPANY’S ISSUANCE OR SALE OF
(I) COMMON STOCK, OPTIONS TO PURCHASE SHARES OF COMMON STOCK OR COMMON STOCK
ISSUABLE UPON THE EXERCISE OF OPTIONS, PURSUANT TO ANY EMPLOYEE OR DIRECTOR
STOCK OPTION OR BENEFITS PLAN, STOCK OWNERSHIP PLAN OR DIVIDEND REINVESTMENT
PLAN (BUT NOT SHARES SUBJECT TO A WAIVER TO EXCEED PLAN LIMITS IN ITS

 

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DIVIDEND REINVESTMENT PLAN) OF THE COMPANY WHETHER NOW IN EFFECT OR HEREAFTER
IMPLEMENTED, AND (II) COMMON STOCK ISSUABLE UPON CONVERSION OF SECURITIES OR THE
EXERCISE OF WARRANTS, OPTIONS OR OTHER RIGHTS IN EFFECT OR OUTSTANDING, AND
DISCLOSED IN FILINGS BY THE COMPANY AVAILABLE ON EDGAR OR OTHERWISE IN WRITING
TO AGENTS.

 

(J)                                    CHANGE OF CIRCUMSTANCES.  THE COMPANY
WILL, AT ANY TIME DURING THE PENDENCY OF A PLACEMENT NOTICE ADVISE AGENTS
PROMPTLY AFTER IT SHALL HAVE RECEIVED NOTICE OR OBTAINED KNOWLEDGE THEREOF, OF
ANY INFORMATION OR FACT THAT WOULD ALTER OR AFFECT IN ANY MATERIAL RESPECT ANY
OPINION, CERTIFICATE, LETTER OR OTHER DOCUMENT REQUIRED TO BE PROVIDED TO EITHER
AGENT PURSUANT TO THIS AGREEMENT.

 

(K)                                 DUE DILIGENCE COOPERATION.  THE COMPANY WILL
COOPERATE WITH ANY REASONABLE DUE DILIGENCE REVIEW CONDUCTED BY EITHER AGENT OR
ITS REPRESENTATIVES IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED HEREBY,
INCLUDING, WITHOUT LIMITATION, PROVIDING INFORMATION AND MAKING AVAILABLE
DOCUMENTS AND SENIOR CORPORATE OFFICERS, DURING REGULAR BUSINESS HOURS AND AT
THE COMPANY’S PRINCIPAL OFFICES, AS SUCH AGENT MAY REASONABLY REQUEST.

 

(L)                                     REQUIRED FILINGS RELATING TO PLACEMENT
OF PLACEMENT SHARES.  THE COMPANY AGREES THAT ON SUCH DATES AS THE SECURITIES
ACT SHALL REQUIRE, THE COMPANY WILL (I) FILE A PROSPECTUS SUPPLEMENT WITH THE
COMMISSION UNDER THE APPLICABLE PARAGRAPH OF RULE 424(B) UNDER THE SECURITIES
ACT (EACH AND EVERY FILING UNDER RULE 424(B), A “FILING DATE”), WHICH PROSPECTUS
SUPPLEMENT WILL SET FORTH, WITHIN THE RELEVANT PERIOD, THE AMOUNT OF PLACEMENT
SHARES SOLD THROUGH AGENTS, THE NET PROCEEDS TO THE COMPANY AND THE COMPENSATION
PAYABLE BY THE COMPANY TO AGENTS WITH RESPECT TO SUCH PLACEMENT SHARES, AND
(II) DELIVER SUCH NUMBER OF COPIES OF EACH SUCH PROSPECTUS SUPPLEMENT TO EACH
EXCHANGE OR MARKET ON WHICH SUCH SALES WERE EFFECTED AS MAY BE REQUIRED BY THE
RULES OR REGULATIONS OF SUCH EXCHANGE OR MARKET.

 

(M)                             REPRESENTATION DATES; CERTIFICATE.  DURING THE
TERM OF THIS AGREEMENT, ON THE DATE OF EACH PLACEMENT NOTICE GIVEN HEREUNDER AND
EACH TIME THE COMPANY (I) FILES THE PROSPECTUS RELATING TO THE PLACEMENT SHARES
OR AMENDS OR SUPPLEMENTS THE REGISTRATION STATEMENT OR THE PROSPECTUS RELATING
TO THE PLACEMENT SHARES (OTHER THAN A PROSPECTUS SUPPLEMENT FILED IN ACCORDANCE
WITH SECTION 7(L) OF THIS AGREEMENT) BY MEANS OF A POST-EFFECTIVE AMENDMENT,
STICKER, OR SUPPLEMENT BUT NOT BY MEANS OF INCORPORATION OF DOCUMENT(S) BY
REFERENCE TO THE REGISTRATION STATEMENT OR THE PROSPECTUS RELATING TO THE
PLACEMENT SHARES; (II) FILES AN ANNUAL REPORT ON FORM 10-K UNDER THE EXCHANGE
ACT; (III) FILES ITS QUARTERLY REPORTS ON FORM 10-Q UNDER THE EXCHANGE ACT;
(IV) FILES A REPORT ON FORM 8-K CONTAINING AMENDED FINANCIAL INFORMATION (OTHER
THAN AN EARNINGS RELEASE, TO “FURNISH” INFORMATION PURSUANT TO ITEMS 2.02 OR
7.01 OF FORM 8-K OR TO PROVIDE DISCLOSURE PURSUANT TO ITEM 8.01 OF FORM 8-K
RELATING TO THE RECLASSIFICATIONS OF CERTAIN PROPERTIES AS DISCONTINUED
OPERATIONS IN ACCORDANCE WITH STATEMENT OF FINANCIAL ACCOUNTING STANDARDS
NO. 144) UNDER THE EXCHANGE ACT OR (V) FILES A FORM 8-K UNDER THE EXCHANGE ACT
FOR ANY OTHER PURPOSE (OTHER THAN TO “FURNISH” INFORMATION PURSUANT TO ITEMS
2.02 OR 7.01 OF REVISED FORM 8-K) (EACH DATE OF FILING OF ONE OR MORE OF THE
DOCUMENTS REFERRED TO IN CLAUSES (I) THROUGH (V) SHALL BE A “REPRESENTATION
DATE”); THE COMPANY SHALL FURNISH AGENTS (BUT IN THE CASE OF CLAUSE (V) ABOVE
ONLY IF EITHER AGENT REASONABLY DETERMINES THAT THE INFORMATION CONTAINED IN
SUCH FORM 8-K IS MATERIAL) WITH A CERTIFICATE, IN THE FORM ATTACHED HERETO AS
EXHIBIT 7(M).  THE REQUIREMENT TO PROVIDE A CERTIFICATE UNDER THIS
SECTION 7(M) SHALL BE WAIVED FOR ANY REPRESENTATION DATE OCCURRING AT A TIME AT
WHICH NO PLACEMENT

 

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NOTICE IS PENDING, WHICH WAIVER SHALL CONTINUE UNTIL THE EARLIER TO OCCUR OF THE
DATE THE COMPANY DELIVERS A PLACEMENT NOTICE HEREUNDER (WHICH FOR SUCH CALENDAR
QUARTER SHALL BE CONSIDERED A REPRESENTATION DATE) AND THE NEXT OCCURRING
REPRESENTATION DATE; PROVIDED, HOWEVER, THAT SUCH WAIVER SHALL NOT APPLY FOR ANY
REPRESENTATION DATE ON WHICH THE COMPANY FILES ITS ANNUAL REPORT ON FORM 10-K. 
NOTWITHSTANDING THE FOREGOING, IF THE COMPANY SUBSEQUENTLY DECIDES TO SELL
PLACEMENT SHARES FOLLOWING A REPRESENTATION DATE WHEN THE COMPANY RELIED ON SUCH
WAIVER AND DID NOT PROVIDE AGENTS WITH A CERTIFICATE UNDER THIS SECTION 7(M),
THEN BEFORE THE COMPANY DELIVERS THE PLACEMENT NOTICE OR EITHER AGENT SELLS ANY
PLACEMENT SHARES, THE COMPANY SHALL PROVIDE AGENTS WITH A CERTIFICATE, IN THE
FORM ATTACHED HERETO AS EXHIBIT 7(M), DATED THE DATE OF THE PLACEMENT NOTICE.

 

(N)                                 LEGAL OPINION.  ON OR BEFORE THE DATE OF THE
INITIAL PLACEMENT NOTICE GIVEN HEREUNDER AND, THEREAFTER, WITHIN TEN TRADING
DAYS FOLLOWING EACH DATE THAT THE COMPANY FILES AN ANNUAL REPORT ON FORM 10-K
UNDER THE EXCHANGE ACT OR A QUARTERLY REPORT ON FORM 10-Q UNDER THE EXCHANGE ACT
DURING THE TERM OF THIS AGREEMENT, THE COMPANY SHALL CAUSE TO BE FURNISHED TO
AGENTS A WRITTEN OPINION OF COOLEY LLP (“COMPANY COUNSEL”), IN FORM AND
SUBSTANCE SATISFACTORY TO AGENTS AND THEIR RESPECTIVE COUNSEL, MODIFIED, AS
NECESSARY, TO RELATE TO THE REGISTRATION STATEMENT AND THE PROSPECTUS AS THEN
AMENDED OR SUPPLEMENTED; PROVIDED, HOWEVER, THE COMPANY SHALL BE REQUIRED TO
FURNISH TO AGENTS NO MORE THAN ONE OPINION HEREUNDER PER CALENDAR QUARTER;
PROVIDED, FURTHER, THAT IN LIEU OF SUCH OPINIONS FOR SUBSEQUENT PERIODIC FILINGS
UNDER THE EXCHANGE ACT, COUNSEL MAY FURNISH AGENTS WITH A LETTER (A “RELIANCE
LETTER”) TO THE EFFECT THAT AGENTS MAY RELY ON A PRIOR OPINION DELIVERED UNDER
THIS SECTION 7(N) TO THE SAME EXTENT AS IF IT WERE DATED THE DATE OF SUCH LETTER
(EXCEPT THAT STATEMENTS IN SUCH PRIOR OPINION SHALL BE DEEMED TO RELATE TO THE
REGISTRATION STATEMENT AND THE PROSPECTUS AS AMENDED OR SUPPLEMENTED AS OF THE
DATE OF THE RELIANCE LETTER).

 

(O)                                 COMFORT LETTER.  ON OR BEFORE THE DATE OF
THE INITIAL PLACEMENT NOTICE GIVEN HEREUNDER AND, THEREAFTER, WITHIN TEN TRADING
DAYS FOLLOWING EACH DATE THE COMPANY FILES AN ANNUAL REPORT ON FORM 10-K UNDER
THE EXCHANGE ACT, DURING ANY PERIOD IN WHICH THE PROSPECTUS RELATING TO THE
PLACEMENT SHARES IS REQUIRED TO BE DELIVERED BY AGENTS (INCLUDING IN
CIRCUMSTANCES WHERE SUCH REQUIREMENT MAY BE SATISFIED PURSUANT TO RULE 172 UNDER
THE ACT) AND WITH RESPECT TO WHICH THE COMPANY IS OBLIGATED TO DELIVER A
CERTIFICATE IN THE FORM ATTACHED HERETO AS EXHIBIT 7(M) FOR WHICH NO WAIVER IS
APPLICABLE, THE COMPANY SHALL CAUSE ITS INDEPENDENT ACCOUNTANTS TO FURNISH
AGENTS LETTERS (THE “COMFORT LETTERS”), DATED THE DATE THE COMFORT LETTER IS
DELIVERED; PROVIDED, THAT IF REQUESTED BY EITHER AGENT, THE COMPANY SHALL CAUSE
A COMFORT LETTER TO BE FURNISHED TO AGENTS WITHIN TEN TRADING DAYS OF THE DATE
OF OCCURRENCE OF ANY MATERIAL TRANSACTION OR EVENT, INCLUDING THE RESTATEMENT OF
THE COMPANY’S FINANCIAL STATEMENTS.  THE COMFORT LETTER FROM THE COMPANY’S
INDEPENDENT ACCOUNTANTS SHALL BE IN A FORM AND SUBSTANCE SATISFACTORY TO AGENTS,
(I) CONFIRMING THAT THEY ARE AN INDEPENDENT PUBLIC ACCOUNTING FIRM WITHIN THE
MEANING OF THE SECURITIES ACT AND THE PCAOB, (II) STATING, AS OF SUCH DATE, THE
CONCLUSIONS AND FINDINGS OF SUCH FIRM WITH RESPECT TO THE FINANCIAL INFORMATION
AND OTHER MATTERS ORDINARILY COVERED BY ACCOUNTANTS’ “COMFORT LETTERS” TO
UNDERWRITERS IN CONNECTION WITH REGISTERED PUBLIC OFFERINGS (THE FIRST SUCH
LETTER, THE “INITIAL COMFORT LETTER”) AND (III) 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 AND THE PROSPECTUS, AS AMENDED AND SUPPLEMENTED TO THE
DATE OF SUCH LETTER.

 

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(P)                                 MARKET ACTIVITIES.  THE COMPANY WILL NOT,
DIRECTLY OR INDIRECTLY, (I) TAKE ANY ACTION DESIGNED TO CAUSE OR RESULT IN, OR
THAT CONSTITUTES OR MIGHT REASONABLY BE EXPECTED TO CONSTITUTE, THE
STABILIZATION OR MANIPULATION OF THE PRICE OF ANY SECURITY OF THE COMPANY TO
FACILITATE THE SALE OR RESALE OF THE SHARES OR (II) SELL, BID FOR, OR PURCHASE
THE SHARES, OR PAY ANYONE ANY COMPENSATION FOR SOLICITING PURCHASES OF THE
SHARES OTHER THAN AGENTS.

 

(Q)                                 INVESTMENT COMPANY ACT.  THE COMPANY WILL
CONDUCT ITS AFFAIRS IN SUCH A MANNER SO AS TO REASONABLY ENSURE THAT NEITHER IT
NOR THE SUBSIDIARY WILL BE OR BECOME, AT ANY TIME PRIOR TO THE TERMINATION OF
THIS AGREEMENT, AN “INVESTMENT COMPANY,” AS SUCH TERM IS DEFINED IN THE
INVESTMENT COMPANY ACT, ASSUMING NO CHANGE IN THE COMMISSION’S CURRENT
INTERPRETATION AS TO ENTITIES THAT ARE NOT CONSIDERED AN INVESTMENT COMPANY.

 

(R)                                    NO OFFER TO SELL.  OTHER THAN AN ISSUER
FREE WRITING PROSPECTUS APPROVED IN ADVANCE BY THE COMPANY AND BOTH AGENTS IN
THEIR CAPACITY AS AGENT HEREUNDER, NEITHER OF THE AGENTS NOR THE COMPANY
(INCLUDING ITS AGENTS AND REPRESENTATIVES, OTHER THAN AGENTS IN THEIR CAPACITY
AS SUCH) WILL MAKE, USE, PREPARE, AUTHORIZE, APPROVE OR REFER TO ANY WRITTEN
COMMUNICATION (AS DEFINED IN RULE 405 UNDER THE ACT), REQUIRED TO BE FILED WITH
THE COMMISSION, THAT CONSTITUTES AN OFFER TO SELL OR SOLICITATION OF AN OFFER TO
BUY SHARES HEREUNDER.

 

(S)                                   SARBANES-OXLEY ACT.  THE COMPANY AND THE
SUBSIDIARY WILL MAINTAIN AND KEEP ACCURATE BOOKS AND RECORDS REFLECTING THEIR
ASSETS AND MAINTAIN INTERNAL ACCOUNTING CONTROLS IN A MANNER DESIGNED TO PROVIDE
REASONABLE ASSURANCE REGARDING THE RELIABILITY OF FINANCIAL REPORTING AND THE
PREPARATION OF FINANCIAL STATEMENTS FOR EXTERNAL PURPOSES IN ACCORDANCE WITH
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AND INCLUDING THOSE POLICIES AND
PROCEDURES THAT (I) PERTAIN TO THE MAINTENANCE OF RECORDS THAT IN REASONABLE
DETAIL ACCURATELY AND FAIRLY REFLECT THE TRANSACTIONS AND DISPOSITIONS OF THE
ASSETS OF THE COMPANY, (II) PROVIDE REASONABLE ASSURANCE THAT TRANSACTIONS ARE
RECORDED AS NECESSARY TO PERMIT THE PREPARATION OF THE COMPANY’S CONSOLIDATED
FINANCIAL STATEMENTS IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING
PRINCIPALS, (III) THAT RECEIPTS AND EXPENDITURES OF THE COMPANY ARE BEING MADE
ONLY IN ACCORDANCE WITH MANAGEMENT’S AND THE COMPANY’S DIRECTORS’ AUTHORIZATION,
AND (IV) PROVIDE REASONABLE ASSURANCE REGARDING PREVENTION OR TIMELY DETECTION
OF UNAUTHORIZED ACQUISITION, USE OR DISPOSITION OF THE COMPANY’S ASSETS THAT
COULD HAVE A MATERIAL EFFECT ON ITS FINANCIAL STATEMENTS.  THE COMPANY AND THE
SUBSIDIARY WILL MAINTAIN SUCH CONTROLS AND OTHER PROCEDURES, INCLUDING, WITHOUT
LIMITATION, THOSE REQUIRED BY SECTIONS 302 AND 906 OF THE SARBANES-OXLEY ACT,
AND THE APPLICABLE REGULATIONS THEREUNDER THAT ARE 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,
INCLUDING, WITHOUT LIMITATION, CONTROLS AND PROCEDURES 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 ACCUMULATED AND COMMUNICATED TO THE
COMPANY’S MANAGEMENT, INCLUDING ITS CHIEF EXECUTIVE OFFICER AND PRINCIPAL
FINANCIAL OFFICER, OR PERSONS PERFORMING SIMILAR FUNCTIONS, AS APPROPRIATE TO
ALLOW TIMELY DECISIONS REGARDING REQUIRED DISCLOSURE AND TO ENSURE THAT MATERIAL
INFORMATION RELATING TO THE COMPANY OR THE SUBSIDIARY IS MADE KNOWN TO THEM BY
OTHERS WITHIN THOSE ENTITIES, PARTICULARLY DURING THE PERIOD IN WHICH SUCH
PERIODIC REPORTS ARE BEING PREPARED.

 

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8.                                      COVENANTS OF AGENTS.  EACH AGENTS
COVENANTS AND AGREES THAT IT IS DULY REGISTERED AS A BROKER-DEALER UNDER FINRA,
THE EXCHANGE ACT AND THE APPLICABLE STATUTES AND REGULATIONS OF EACH STATE IN
WHICH THE SHARES WILL BE OFFERED AND SOLD, EXCEPT SUCH STATES IN WHICH SUCH
AGENT IS EXEMPT FROM REGISTRATION OR SUCH REGISTRATION IS NOT OTHERWISE
REQUIRED.  EACH AGENT SHALL CONTINUE, FOR THE TERM OF THIS AGREEMENT, TO BE DULY
REGISTERED AS A BROKER-DEALER UNDER FINRA, THE EXCHANGE ACT AND THE APPLICABLE
STATUTES AND REGULATIONS OF EACH STATE IN WHICH THE SHARES WILL BE OFFERED AND
SOLD, EXCEPT SUCH STATES IN WHICH SUCH AGENT IS EXEMPT FROM REGISTRATION OR SUCH
REGISTRATION IS NOT OTHERWISE REQUIRED, DURING THE TERM OF THIS AGREEMENT.

 

9.                                      CONDITIONS TO EACH AGENT’S OBLIGATIONS. 
THE OBLIGATIONS OF AGENTS HEREUNDER WITH RESPECT TO A PLACEMENT WILL BE SUBJECT
TO THE CONTINUING ACCURACY AND COMPLETENESS OF THE REPRESENTATIONS AND
WARRANTIES MADE BY THE COMPANY HEREIN, TO THE DUE PERFORMANCE BY THE COMPANY OF
ITS OBLIGATIONS HEREUNDER, TO THE COMPLETION BY EACH AGENT OF A DUE DILIGENCE
REVIEW SATISFACTORY TO IT IN ITS REASONABLE JUDGMENT, AND TO THE CONTINUING
SATISFACTION (OR WAIVER BY EACH AGENT IN ITS SOLE DISCRETION) OF THE FOLLOWING
ADDITIONAL CONDITIONS:

 

(A)                                 REGISTRATION STATEMENT EFFECTIVE.  THE
REGISTRATION STATEMENT SHALL HAVE BECOME EFFECTIVE AND SHALL BE AVAILABLE FOR
THE (I) RESALE OF ALL PLACEMENT SHARES ISSUED TO AGENTS AND NOT YET SOLD BY
AGENTS AND (II) THE SALE OF ALL PLACEMENT SHARES CONTEMPLATED TO BE ISSUED BY
ANY PLACEMENT NOTICE.

 

(B)                                 NO MATERIAL NOTICES.  NONE OF THE FOLLOWING
EVENTS SHALL HAVE OCCURRED AND BE CONTINUING: (I) RECEIPT BY THE COMPANY OF ANY
REQUEST FOR ADDITIONAL INFORMATION FROM THE COMMISSION OR ANY OTHER FEDERAL OR
STATE GOVERNMENTAL AUTHORITY DURING THE PERIOD OF EFFECTIVENESS OF THE
REGISTRATION STATEMENT, THE RESPONSE TO WHICH WOULD REQUIRE ANY POST-EFFECTIVE
AMENDMENTS OR SUPPLEMENTS TO THE REGISTRATION STATEMENT OR THE PROSPECTUS;
(II) THE ISSUANCE BY THE COMMISSION OR ANY OTHER FEDERAL OR STATE GOVERNMENTAL
AUTHORITY OF ANY STOP ORDER SUSPENDING THE EFFECTIVENESS OF THE REGISTRATION
STATEMENT OR THE INITIATION OF ANY PROCEEDINGS FOR THAT PURPOSE; (III) RECEIPT
BY THE COMPANY OF ANY NOTIFICATION WITH RESPECT TO THE SUSPENSION OF THE
QUALIFICATION OR EXEMPTION FROM QUALIFICATION OF ANY OF THE PLACEMENT SHARES FOR
SALE IN ANY JURISDICTION OR THE INITIATION OR THREATENING OF ANY PROCEEDING FOR
SUCH PURPOSE; OR (IV) THE OCCURRENCE OF ANY EVENT THAT MAKES ANY MATERIAL
STATEMENT MADE IN THE REGISTRATION STATEMENT OR THE PROSPECTUS OR ANY MATERIAL
DOCUMENT INCORPORATED OR DEEMED TO BE INCORPORATED THEREIN BY REFERENCE UNTRUE
IN ANY MATERIAL RESPECT OR THAT REQUIRES THE MAKING OF ANY CHANGES IN THE
REGISTRATION STATEMENT, RELATED PROSPECTUS OR DOCUMENTS SO THAT, IN THE CASE OF
THE REGISTRATION STATEMENT, IT WILL NOT CONTAIN ANY MATERIALLY 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 AND, THAT IN
THE CASE OF THE PROSPECTUS, IT WILL NOT CONTAIN ANY MATERIALLY 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.

 

(C)                                  NO MISSTATEMENT OR MATERIAL OMISSION. 
NEITHER AGENT SHALL HAVE ADVISED THE COMPANY THAT THE REGISTRATION STATEMENT OR
PROSPECTUS, OR ANY AMENDMENT OR SUPPLEMENT THERETO, CONTAINS AN UNTRUE STATEMENT
OF FACT THAT IN SUCH AGENT’S REASONABLE OPINION IS MATERIAL, OR OMITS TO STATE A
FACT THAT IN SUCH AGENT’S OPINION IS MATERIAL AND IS REQUIRED TO BE STATED
THEREIN OR IS NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING.

 

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(D)                                 MATERIAL CHANGES.  EXCEPT AS CONTEMPLATED IN
THE PROSPECTUS, OR DISCLOSED IN THE COMPANY’S REPORTS FILED WITH THE COMMISSION,
THERE SHALL NOT HAVE BEEN ANY MATERIAL ADVERSE CHANGE, ON A CONSOLIDATED BASIS,
IN THE AUTHORIZED CAPITAL STOCK OF THE COMPANY OR ANY MATERIAL ADVERSE EFFECT,
OR ANY DEVELOPMENT THAT COULD REASONABLY BE EXPECTED TO CAUSE A MATERIAL ADVERSE
EFFECT, OR A DOWNGRADING IN OR WITHDRAWAL OF THE RATING ASSIGNED TO ANY OF THE
COMPANY’S SECURITIES (OTHER THAN ASSET BACKED SECURITIES) BY ANY RATING
ORGANIZATION OR A PUBLIC ANNOUNCEMENT BY ANY RATING ORGANIZATION THAT IT HAS
UNDER SURVEILLANCE OR REVIEW ITS RATING OF ANY OF THE COMPANY’S SECURITIES
(OTHER THAN ASSET BACKED SECURITIES), THE EFFECT OF WHICH, IN THE CASE OF ANY
SUCH ACTION BY A RATING ORGANIZATION DESCRIBED ABOVE, IN THE REASONABLE JUDGMENT
OF EITHER AGENT (WITHOUT RELIEVING THE COMPANY OF ANY OBLIGATION OR LIABILITY IT
MAY OTHERWISE HAVE), IS SO MATERIAL AS TO MAKE IT IMPRACTICABLE OR INADVISABLE
TO PROCEED WITH THE OFFERING OF THE PLACEMENT SHARES ON THE TERMS AND IN THE
MANNER CONTEMPLATED IN THE PROSPECTUS.

 

(E)                                  LEGAL OPINION.  AGENTS SHALL HAVE RECEIVED
THE OPINIONS OF COMPANY COUNSEL REQUIRED TO BE DELIVERED PURSUANT
SECTION 7(N) ON OR BEFORE THE DATE ON WHICH SUCH DELIVERY OF SUCH OPINION IS
REQUIRED PURSUANT TO SECTION 7(N).

 

(F)                                   COMFORT LETTER.  AGENTS SHALL HAVE
RECEIVED THE COMFORT LETTER REQUIRED TO BE DELIVERED PURSUANT SECTION 7(O) ON OR
BEFORE THE DATE ON WHICH SUCH DELIVERY OF SUCH OPINION IS REQUIRED PURSUANT TO
SECTION 7(O).

 

(G)                                  REPRESENTATION CERTIFICATE.  AGENTS SHALL
HAVE RECEIVED THE CERTIFICATE REQUIRED TO BE DELIVERED PURSUANT TO
SECTION 7(M) ON OR BEFORE THE DATE ON WHICH DELIVERY OF SUCH CERTIFICATE IS
REQUIRED PURSUANT TO SECTION 7(M).

 

(H)                                 NO SUSPENSION.  TRADING IN THE SHARES SHALL
NOT HAVE BEEN SUSPENDED ON THE EXCHANGE.

 

(I)                                     OTHER MATERIALS.  ON EACH DATE ON WHICH
THE COMPANY IS REQUIRED TO DELIVER A CERTIFICATE PURSUANT TO SECTION 7(M), THE
COMPANY SHALL HAVE FURNISHED TO AGENTS SUCH APPROPRIATE FURTHER INFORMATION,
CERTIFICATES AND DOCUMENTS AS AGENTS MAY REASONABLY REQUEST.  ALL SUCH OPINIONS,
CERTIFICATES, LETTERS AND OTHER DOCUMENTS WILL BE IN COMPLIANCE WITH THE
PROVISIONS HEREOF.  THE COMPANY WILL FURNISH AGENTS WITH SUCH CONFORMED COPIES
OF SUCH OPINIONS, CERTIFICATES, LETTERS AND OTHER DOCUMENTS AS AGENTS SHALL
REASONABLY REQUEST.

 

(J)                                    SECURITIES ACT FILINGS MADE.  ALL FILINGS
WITH THE COMMISSION REQUIRED BY RULE 424 UNDER THE SECURITIES ACT TO HAVE BEEN
FILED PRIOR TO THE ISSUANCE OF ANY PLACEMENT NOTICE HEREUNDER SHALL HAVE BEEN
MADE WITHIN THE APPLICABLE TIME PERIOD PRESCRIBED FOR SUCH FILING BY RULE 424.

 

(K)                                 APPROVAL FOR LISTING.  THE PLACEMENT SHARES
SHALL EITHER HAVE BEEN APPROVED FOR LISTING ON THE EXCHANGE, SUBJECT ONLY TO
NOTICE OF ISSUANCE, OR THE COMPANY SHALL HAVE FILED AN APPLICATION FOR LISTING
OF THE PLACEMENT SHARES ON THE EXCHANGE AT, OR PRIOR TO, THE ISSUANCE OF ANY
PLACEMENT NOTICE.

 

(L)                                     NO TERMINATION EVENT.  THERE SHALL NOT
HAVE OCCURRED ANY EVENT THAT WOULD PERMIT EITHER AGENT TO TERMINATE THIS
AGREEMENT PURSUANT TO SECTION 12(A).

 

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10.                               INDEMNIFICATION AND CONTRIBUTION.

 

(A)                                 COMPANY INDEMNIFICATION.  THE COMPANY AGREES
TO INDEMNIFY AND HOLD HARMLESS EACH AGENT, THE RESPECTIVE DIRECTORS, OFFICERS,
PARTNERS, EMPLOYEES AND AGENTS OF EACH AGENT AND EACH PERSON, IF ANY, WHO
(I) CONTROLS EITHER AGENT WITHIN THE MEANING OF SECTION 15 OF THE SECURITIES ACT
OR SECTION 20 OF THE EXCHANGE ACT, OR (II) IS CONTROLLED BY OR IS UNDER COMMON
CONTROL WITH EITHER AGENT FROM AND AGAINST ANY AND ALL LOSSES, CLAIMS,
LIABILITIES, EXPENSES AND DAMAGES (INCLUDING, BUT NOT LIMITED TO, ANY AND ALL
REASONABLE INVESTIGATIVE, LEGAL AND OTHER EXPENSES INCURRED IN CONNECTION WITH,
AND ANY AND ALL AMOUNTS PAID IN SETTLEMENT (IN ACCORDANCE WITH SECTION 10(C))
OF, ANY ACTION, SUIT OR PROCEEDING BETWEEN ANY OF THE INDEMNIFIED PARTIES AND
ANY INDEMNIFYING PARTIES OR BETWEEN ANY INDEMNIFIED PARTY AND ANY THIRD PARTY,
OR OTHERWISE, OR ANY CLAIM ASSERTED), AS AND WHEN INCURRED, TO WHICH SUCH AGENT,
OR ANY SUCH PERSON, MAY BECOME SUBJECT UNDER THE SECURITIES ACT, THE EXCHANGE
ACT OR OTHER FEDERAL OR STATE STATUTORY LAW OR REGULATION, AT COMMON LAW OR
OTHERWISE, INSOFAR AS SUCH LOSSES, CLAIMS, LIABILITIES, EXPENSES OR DAMAGES
ARISE OUT OF OR ARE BASED, DIRECTLY OR INDIRECTLY, ON (I) ANY UNTRUE STATEMENT
OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT CONTAINED IN THE REGISTRATION
STATEMENT OR THE PROSPECTUS OR ANY AMENDMENT OR SUPPLEMENT TO THE REGISTRATION
STATEMENT OR THE PROSPECTUS OR IN ANY ISSUER FREE WRITING PROSPECTUS OR IN ANY
APPLICATION OR OTHER DOCUMENT EXECUTED BY OR ON BEHALF OF THE COMPANY OR BASED
ON WRITTEN INFORMATION FURNISHED BY OR ON BEHALF OF THE COMPANY FILED IN ANY
JURISDICTION IN ORDER TO QUALIFY THE SHARES UNDER THE SECURITIES LAWS THEREOF OR
FILED WITH THE COMMISSION, (II) THE OMISSION OR ALLEGED OMISSION TO STATE IN ANY
SUCH DOCUMENT A MATERIAL FACT REQUIRED TO BE STATED IN IT OR NECESSARY TO MAKE
THE STATEMENTS IN IT NOT MISLEADING OR (III) ANY BREACH BY ANY OF THE
INDEMNIFYING PARTIES OF ANY OF THEIR RESPECTIVE REPRESENTATIONS, WARRANTIES AND
AGREEMENTS CONTAINED IN THIS AGREEMENT; PROVIDED, HOWEVER, THAT THIS INDEMNITY
AGREEMENT SHALL NOT APPLY TO THE EXTENT THAT SUCH LOSS, CLAIM, LIABILITY,
EXPENSE OR DAMAGE ARISES FROM THE SALE OF THE PLACEMENT SHARES PURSUANT TO THIS
AGREEMENT AND IS CAUSED DIRECTLY OR INDIRECTLY BY AN UNTRUE STATEMENT OR
OMISSION MADE IN RELIANCE ON AND IN CONFORMITY WITH INFORMATION RELATING TO
EITHER AGENT.  THIS INDEMNITY AGREEMENT WILL BE IN ADDITION TO ANY LIABILITY
THAT THE COMPANY MIGHT OTHERWISE HAVE.

 

(B)                                 AGENT INDEMNIFICATION.  EACH AGENT AGREES
TO, SEVERALLY AND NOT JOINTLY, INDEMNIFY AND HOLD HARMLESS THE COMPANY AND ITS
DIRECTORS AND EACH OFFICER OF THE COMPANY WHO SIGNED THE REGISTRATION STATEMENT,
AND EACH PERSON, IF ANY, WHO (I) CONTROLS THE COMPANY WITHIN THE MEANING OF
SECTION 15 OF THE SECURITIES ACT OR SECTION 20 OF THE EXCHANGE ACT OR (II) IS
CONTROLLED BY OR IS UNDER COMMON CONTROL WITH THE COMPANY AGAINST ANY AND ALL
LOSS, LIABILITY, CLAIM, DAMAGE AND EXPENSE DESCRIBED IN THE INDEMNITY CONTAINED
IN SECTION 10(C), AS INCURRED, BUT ONLY WITH RESPECT TO UNTRUE STATEMENTS OR
OMISSIONS, OR ALLEGED UNTRUE STATEMENTS OR OMISSIONS, MADE IN THE REGISTRATION
STATEMENT (OR ANY AMENDMENTS THERETO) OR THE PROSPECTUS (OR ANY AMENDMENT OR
SUPPLEMENT THERETO) IN RELIANCE UPON AND IN CONFORMITY WITH INFORMATION RELATING
TO SUCH AGENT AND FURNISHED TO THE COMPANY BY SUCH AGENT.

 

(C)                                  PROCEDURE.  ANY PARTY THAT PROPOSES TO
ASSERT THE RIGHT TO BE INDEMNIFIED UNDER THIS SECTION 10 WILL, PROMPTLY AFTER
RECEIPT OF NOTICE OF COMMENCEMENT OF ANY ACTION AGAINST SUCH PARTY IN RESPECT OF
WHICH A CLAIM IS TO BE MADE AGAINST AN INDEMNIFYING PARTY OR PARTIES UNDER THIS
SECTION 10, NOTIFY EACH SUCH INDEMNIFYING PARTY OF THE COMMENCEMENT OF SUCH
ACTION, ENCLOSING A COPY OF ALL PAPERS SERVED, BUT THE OMISSION SO TO NOTIFY
SUCH INDEMNIFYING PARTY WILL NOT RELIEVE THE INDEMNIFYING PARTY FROM (I) ANY
LIABILITY THAT IT MIGHT HAVE TO ANY

 

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INDEMNIFIED PARTY OTHERWISE THAN UNDER THIS SECTION 10 AND (II) ANY LIABILITY
THAT IT MAY HAVE TO ANY INDEMNIFIED PARTY UNDER THE FOREGOING PROVISION OF THIS
SECTION 10 UNLESS, AND ONLY TO THE EXTENT THAT, SUCH OMISSION RESULTS IN THE
FORFEITURE OF SUBSTANTIVE RIGHTS OR DEFENSES BY THE INDEMNIFYING PARTY.  IF ANY
SUCH ACTION IS BROUGHT AGAINST ANY INDEMNIFIED PARTY AND IT NOTIFIES THE
INDEMNIFYING PARTY OF ITS COMMENCEMENT, THE INDEMNIFYING PARTY WILL BE ENTITLED
TO PARTICIPATE IN AND, TO THE EXTENT THAT IT ELECTS BY DELIVERING WRITTEN NOTICE
TO THE INDEMNIFIED PARTY PROMPTLY AFTER RECEIVING NOTICE OF THE COMMENCEMENT OF
THE ACTION FROM THE INDEMNIFIED PARTY, JOINTLY WITH ANY OTHER INDEMNIFYING PARTY
SIMILARLY NOTIFIED, TO ASSUME THE DEFENSE OF THE ACTION, WITH COUNSEL REASONABLY
SATISFACTORY TO THE INDEMNIFIED PARTY, AND AFTER NOTICE FROM THE INDEMNIFYING
PARTY TO THE INDEMNIFIED PARTY OF ITS ELECTION TO ASSUME THE DEFENSE, THE
INDEMNIFYING PARTY WILL NOT BE LIABLE TO THE INDEMNIFIED PARTY FOR ANY LEGAL OR
OTHER EXPENSES EXCEPT AS PROVIDED BELOW AND EXCEPT FOR THE REASONABLE COSTS OF
INVESTIGATION SUBSEQUENTLY INCURRED BY THE INDEMNIFIED PARTY IN CONNECTION WITH
THE DEFENSE.  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 (1) THE
EMPLOYMENT OF COUNSEL BY THE INDEMNIFIED PARTY HAS BEEN AUTHORIZED IN WRITING BY
THE INDEMNIFYING PARTY, (2) THE INDEMNIFIED PARTY HAS REASONABLY 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, (3) 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 (4) THE INDEMNIFYING PARTY HAS NOT IN FACT EMPLOYED COUNSEL 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.  IT IS UNDERSTOOD THAT THE INDEMNIFYING PARTY OR
PARTIES SHALL NOT, IN CONNECTION WITH ANY PROCEEDING OR RELATED PROCEEDINGS IN
THE SAME JURISDICTION, BE LIABLE FOR THE REASONABLE FEES, DISBURSEMENTS AND
OTHER CHARGES OF MORE THAN ONE SEPARATE FIRM ADMITTED TO PRACTICE IN SUCH
JURISDICTION AT ANY ONE TIME FOR ALL SUCH INDEMNIFIED PARTY OR PARTIES.  ALL
SUCH FEES, DISBURSEMENTS AND OTHER CHARGES WILL BE REIMBURSED BY THE
INDEMNIFYING PARTY PROMPTLY AS THEY ARE INCURRED.  AN INDEMNIFYING PARTY WILL
NOT, IN ANY EVENT, BE LIABLE FOR ANY SETTLEMENT OF ANY ACTION OR CLAIM EFFECTED
WITHOUT ITS WRITTEN CONSENT.  NO INDEMNIFYING PARTY SHALL, WITHOUT THE PRIOR
WRITTEN CONSENT OF EACH INDEMNIFIED PARTY, SETTLE OR COMPROMISE OR CONSENT TO
THE ENTRY OF ANY JUDGMENT IN ANY PENDING OR THREATENED CLAIM, ACTION OR
PROCEEDING RELATING TO THE MATTERS CONTEMPLATED BY THIS SECTION 10 (WHETHER OR
NOT ANY INDEMNIFIED PARTY IS A PARTY THERETO), UNLESS SUCH SETTLEMENT,
COMPROMISE OR CONSENT INCLUDES AN UNCONDITIONAL RELEASE OF EACH INDEMNIFIED
PARTY FROM ALL LIABILITY ARISING OR THAT MAY ARISE OUT OF SUCH CLAIM, ACTION OR
PROCEEDING.

 

(D)                                 CONTRIBUTION.  IN ORDER TO PROVIDE FOR JUST
AND EQUITABLE CONTRIBUTION IN CIRCUMSTANCES IN WHICH THE INDEMNIFICATION
PROVIDED FOR IN THE FOREGOING PARAGRAPHS OF THIS SECTION 10 IS APPLICABLE IN
ACCORDANCE WITH ITS TERMS BUT FOR ANY REASON IS HELD TO BE UNAVAILABLE FROM THE
COMPANY OR EITHER AGENT, THE COMPANY AND EACH AGENT WILL CONTRIBUTE TO THE TOTAL
LOSSES, CLAIMS, LIABILITIES, EXPENSES AND DAMAGES (INCLUDING ANY INVESTIGATIVE,
LEGAL AND OTHER EXPENSES REASONABLY INCURRED IN CONNECTION WITH, AND ANY AMOUNT
PAID IN SETTLEMENT OF, ANY ACTION, SUIT OR PROCEEDING OR ANY CLAIM ASSERTED, BUT
AFTER DEDUCTING ANY CONTRIBUTION RECEIVED BY THE COMPANY FROM PERSONS OTHER THAN
EITHER AGENT, SUCH AS PERSONS WHO CONTROL THE COMPANY WITHIN THE MEANING OF THE
SECURITIES ACT, OFFICERS OF THE COMPANY WHO SIGNED THE REGISTRATION

 

25

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STATEMENT AND DIRECTORS OF THE COMPANY, WHO ALSO MAY BE LIABLE FOR CONTRIBUTION)
TO WHICH THE COMPANY AND EITHER AGENT MAY BE SUBJECT IN SUCH PROPORTION AS SHALL
BE APPROPRIATE TO REFLECT THE RELATIVE BENEFITS RECEIVED BY THE COMPANY ON THE
ONE HAND AND EACH AGENT ON THE OTHER.  THE RELATIVE BENEFITS RECEIVED BY THE
COMPANY ON THE ONE HAND AND EACH AGENT ON THE OTHER HAND SHALL BE DEEMED TO BE
IN THE SAME PROPORTION AS THE TOTAL NET PROCEEDS FROM THE SALE OF THE PLACEMENT
SHARES (BEFORE DEDUCTING EXPENSES) RECEIVED BY THE COMPANY BEAR TO THE TOTAL
COMPENSATION RECEIVED BY AGENTS (BEFORE DEDUCTING EXPENSES) FROM THE SALE OF
PLACEMENT SHARES ON BEHALF OF THE COMPANY.  IF, BUT ONLY IF, THE ALLOCATION
PROVIDED BY THE FOREGOING SENTENCE IS NOT PERMITTED BY APPLICABLE LAW, THE
ALLOCATION OF CONTRIBUTION SHALL BE MADE IN SUCH PROPORTION AS IS APPROPRIATE TO
REFLECT NOT ONLY THE RELATIVE BENEFITS REFERRED TO IN THE FOREGOING SENTENCE BUT
ALSO THE RELATIVE FAULT OF THE COMPANY, ON THE ONE HAND, AND EACH AGENT, ON THE
OTHER, WITH RESPECT TO THE STATEMENTS OR OMISSION THAT RESULTED IN SUCH LOSS,
CLAIM, LIABILITY, EXPENSE OR DAMAGE, OR ACTION IN RESPECT THEREOF, AS WELL AS
ANY OTHER RELEVANT EQUITABLE CONSIDERATIONS WITH RESPECT TO SUCH OFFERING.  SUCH
RELATIVE FAULT SHALL BE DETERMINED BY REFERENCE TO, AMONG OTHER THINGS, WHETHER
THE UNTRUE OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT OR OMISSION OR ALLEGED
OMISSION TO STATE A MATERIAL FACT RELATES TO INFORMATION SUPPLIED BY THE COMPANY
OR AGENTS, THE INTENT OF THE PARTIES AND THEIR RELATIVE KNOWLEDGE, ACCESS TO
INFORMATION AND OPPORTUNITY TO CORRECT OR PREVENT SUCH STATEMENT OR OMISSION. 
THE COMPANY AND AGENTS AGREE THAT IT WOULD NOT BE JUST AND EQUITABLE IF
CONTRIBUTIONS PURSUANT TO THIS SECTION 10(D) WERE TO BE DETERMINED BY PRO RATA
ALLOCATION OR BY ANY OTHER METHOD OF ALLOCATION THAT DOES NOT TAKE INTO ACCOUNT
THE EQUITABLE CONSIDERATIONS REFERRED TO HEREIN.  THE AMOUNT PAID OR PAYABLE BY
AN INDEMNIFIED PARTY AS A RESULT OF THE LOSS, CLAIM, LIABILITY, EXPENSE, OR
DAMAGE, OR ACTION IN RESPECT THEREOF, REFERRED TO ABOVE IN THIS
SECTION 10(D) SHALL BE DEEMED TO INCLUDE, FOR THE PURPOSE OF THIS SECTION 10(D),
ANY LEGAL OR OTHER EXPENSES REASONABLY INCURRED BY SUCH INDEMNIFIED PARTY IN
CONNECTION WITH INVESTIGATING OR DEFENDING ANY SUCH ACTION OR CLAIM TO THE
EXTENT CONSISTENT WITH SECTION 10(C) HEREOF.  NOTWITHSTANDING THE FOREGOING
PROVISIONS OF THIS SECTION 10(D), NEITHER AGENT SHALL BE REQUIRED TO CONTRIBUTE
ANY AMOUNT IN EXCESS OF THE COMMISSIONS RECEIVED BY IT UNDER THIS AGREEMENT AND
NO PERSON FOUND GUILTY OF FRAUDULENT MISREPRESENTATION (WITHIN THE MEANING OF
SECTION 11(F) OF THE SECURITIES ACT) WILL BE ENTITLED TO CONTRIBUTION FROM ANY
PERSON WHO WAS NOT GUILTY OF SUCH FRAUDULENT MISREPRESENTATION.  FOR PURPOSES OF
THIS SECTION 10(D), ANY PERSON WHO CONTROLS A PARTY TO THIS AGREEMENT WITHIN THE
MEANING OF THE SECURITIES ACT, AND ANY OFFICERS, DIRECTORS, PARTNERS, EMPLOYEES
OR AGENTS OF EITHER AGENT, WILL HAVE THE SAME RIGHTS TO CONTRIBUTION AS THAT
PARTY, AND EACH OFFICER OF THE COMPANY WHO SIGNED THE REGISTRATION STATEMENT
WILL HAVE THE SAME RIGHTS TO CONTRIBUTION AS THE COMPANY, SUBJECT IN EACH CASE
TO THE PROVISIONS HEREOF.  ANY PARTY ENTITLED TO CONTRIBUTION, PROMPTLY AFTER
RECEIPT OF NOTICE OF COMMENCEMENT OF ANY ACTION AGAINST SUCH PARTY IN RESPECT OF
WHICH A CLAIM FOR CONTRIBUTION MAY BE MADE UNDER THIS SECTION 10(D), WILL NOTIFY
ANY SUCH PARTY OR PARTIES FROM WHOM CONTRIBUTION MAY BE SOUGHT, BUT THE OMISSION
TO SO NOTIFY WILL NOT RELIEVE THAT PARTY OR PARTIES FROM WHOM CONTRIBUTION MAY
BE SOUGHT FROM ANY OTHER OBLIGATION IT OR THEY MAY HAVE UNDER THIS
SECTION 10(D) EXCEPT TO THE EXTENT THAT THE FAILURE TO SO NOTIFY SUCH OTHER
PARTY MATERIALLY PREJUDICED THE SUBSTANTIVE RIGHTS OR DEFENSES OF THE PARTY FROM
WHOM CONTRIBUTION IS SOUGHT.  EXCEPT FOR A SETTLEMENT ENTERED INTO PURSUANT TO
THE LAST SENTENCE OF SECTION 10(C) HEREOF, NO PARTY WILL BE LIABLE FOR
CONTRIBUTION WITH RESPECT TO ANY ACTION OR CLAIM SETTLED WITHOUT ITS WRITTEN
CONSENT IF SUCH CONSENT IS REQUIRED PURSUANT TO SECTION 10(C) HEREOF.

 

11.                               REPRESENTATIONS AND AGREEMENTS TO SURVIVE
DELIVERY.  THE INDEMNITY AND CONTRIBUTION AGREEMENTS CONTAINED IN SECTION 10 OF
THIS AGREEMENT AND ALL REPRESENTATIONS AND

 

26

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WARRANTIES OF THE COMPANY HEREIN OR IN CERTIFICATES DELIVERED PURSUANT HERETO
SHALL SURVIVE, AS OF THEIR RESPECTIVE DATES, REGARDLESS OF (I) ANY INVESTIGATION
MADE BY OR ON BEHALF OF EITHER AGENT, ANY CONTROLLING PERSONS, OR THE COMPANY
(OR ANY OF THEIR RESPECTIVE OFFICERS, DIRECTORS OR CONTROLLING PERSONS),
(II) DELIVERY AND ACCEPTANCE OF THE PLACEMENT SHARES AND PAYMENT THEREFOR OR
(III) ANY TERMINATION OF THIS AGREEMENT.

 

12.                               TERMINATION.

 

(A)                                 EACH AGENT SHALL HAVE THE RIGHT BY GIVING
NOTICE AS HEREINAFTER SPECIFIED AT ANY TIME TO TERMINATE THIS AGREEMENT IF
(I) ANY MATERIAL ADVERSE EFFECT, OR ANY DEVELOPMENT THAT HAS ACTUALLY OCCURRED
AND THAT IS REASONABLY EXPECTED TO CAUSE A MATERIAL ADVERSE EFFECT HAS OCCURRED
THAT, IN THE REASONABLE JUDGMENT OF SUCH AGENT, MAY MATERIALLY IMPAIR THE
ABILITY OF SUCH AGENT TO SELL THE PLACEMENT SHARES HEREUNDER, (II) THE COMPANY
SHALL HAVE FAILED, REFUSED OR BEEN UNABLE TO PERFORM ANY AGREEMENT ON ITS PART
TO BE PERFORMED HEREUNDER; PROVIDED, HOWEVER, IN THE CASE OF ANY FAILURE OF THE
COMPANY TO DELIVER (OR CAUSE ANOTHER PERSON TO DELIVER) ANY CERTIFICATION,
OPINION, OR LETTER REQUIRED UNDER SECTIONS 7(M), 7(N), OR 7(O), SUCH AGENT’S
RIGHT TO TERMINATE SHALL NOT ARISE UNLESS SUCH FAILURE TO DELIVER (OR CAUSE TO
BE DELIVERED) CONTINUES FOR MORE THAN THIRTY DAYS FROM THE DATE SUCH DELIVERY
WAS REQUIRED; OR (III) ANY OTHER CONDITION OF SUCH AGENT’S MATERIAL OBLIGATIONS
HEREUNDER IS NOT FULFILLED, OR (IV), ANY SUSPENSION OR LIMITATION OF TRADING IN
THE PLACEMENT SHARES OR IN SECURITIES GENERALLY ON THE EXCHANGE SHALL HAVE
OCCURRED.  ANY SUCH TERMINATION SHALL BE WITHOUT LIABILITY OF ANY PARTY TO ANY
OTHER PARTY EXCEPT THAT THE PROVISIONS OF SECTION 7(G) (EXPENSES), SECTION 10
(INDEMNIFICATION), SECTION 11 (SURVIVAL OF REPRESENTATIONS), SECTION 17
(APPLICABLE LAW; CONSENT TO JURISDICTION) AND SECTION 18 (WAIVER OF JURY TRIAL)
HEREOF SHALL REMAIN IN FULL FORCE AND EFFECT NOTWITHSTANDING SUCH TERMINATION. 
IF EITHER AGENT ELECTS TO TERMINATE THIS AGREEMENT AS PROVIDED IN THIS
SECTION 12(A), SUCH AGENT SHALL PROVIDE THE REQUIRED NOTICE AS SPECIFIED IN
SECTION 13 (NOTICES).

 

(B)                                 THE COMPANY SHALL HAVE THE RIGHT, BY GIVING
TEN DAYS NOTICE AS HEREINAFTER SPECIFIED TO TERMINATE THIS AGREEMENT IN ITS SOLE
DISCRETION AT ANY TIME AFTER THE DATE OF THIS AGREEMENT.  ANY SUCH TERMINATION
SHALL BE WITHOUT LIABILITY OF ANY PARTY TO ANY OTHER PARTY EXCEPT THAT THE
PROVISIONS OF SECTION 7(G), SECTION 10, SECTION 11, SECTION 17 AND SECTION 18
HEREOF SHALL REMAIN IN FULL FORCE AND EFFECT NOTWITHSTANDING SUCH TERMINATION.

 

(C)                                  EACH AGENT SHALL HAVE THE RIGHT, BY GIVING
TEN DAYS NOTICE AS HEREINAFTER SPECIFIED TO TERMINATE THIS AGREEMENT IN ITS SOLE
DISCRETION AT ANY TIME AFTER THE DATE OF THIS AGREEMENT.  ANY SUCH TERMINATION
SHALL BE WITHOUT LIABILITY OF ANY PARTY TO ANY OTHER PARTY EXCEPT THAT THE
PROVISIONS OF SECTION 7(G), SECTION 10, SECTION 11, SECTION 17 AND SECTION 18
HEREOF SHALL REMAIN IN FULL FORCE AND EFFECT NOTWITHSTANDING SUCH TERMINATION.

 

(D)                                 UNLESS EARLIER TERMINATED PURSUANT TO THIS
SECTION 12, THIS AGREEMENT SHALL AUTOMATICALLY TERMINATE UPON THE ISSUANCE AND
SALE OF ALL OF THE PLACEMENT SHARES THROUGH AGENTS ON THE TERMS AND SUBJECT TO
THE CONDITIONS SET FORTH HEREIN; PROVIDED THAT THE PROVISIONS OF SECTION 7(G),
SECTION 10, SECTION 11, SECTION 17 AND SECTION 18 HEREOF SHALL REMAIN IN FULL
FORCE AND EFFECT NOTWITHSTANDING SUCH TERMINATION.

 

(E)                                  THIS AGREEMENT SHALL REMAIN IN FULL FORCE
AND EFFECT UNLESS TERMINATED PURSUANT TO SECTIONS 12(A), (B), (C), OR (D) ABOVE
OR OTHERWISE BY MUTUAL AGREEMENT OF THE PARTIES;

 

27

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

 

PROVIDED, HOWEVER, THAT ANY SUCH TERMINATION BY MUTUAL AGREEMENT SHALL IN ALL
CASES BE DEEMED TO PROVIDE THAT SECTION 7(G), SECTION 10, SECTION 11, SECTION 17
AND SECTION 18 SHALL REMAIN IN FULL FORCE AND EFFECT.

 

(F)                                   ANY TERMINATION OF THIS AGREEMENT SHALL BE
EFFECTIVE ON THE DATE SPECIFIED IN SUCH NOTICE OF TERMINATION; PROVIDED,
HOWEVER, THAT SUCH TERMINATION SHALL NOT BE EFFECTIVE UNTIL THE CLOSE OF
BUSINESS ON THE DATE OF RECEIPT OF SUCH NOTICE BY AGENTS OR THE COMPANY, AS THE
CASE MAY BE.  IF SUCH TERMINATION SHALL OCCUR PRIOR TO THE SETTLEMENT DATE FOR
ANY SALE OF PLACEMENT SHARES, SUCH PLACEMENT SHARES SHALL SETTLE IN ACCORDANCE
WITH THE PROVISIONS OF THIS AGREEMENT.

 

13.                               NOTICES.  ALL NOTICES OR OTHER COMMUNICATIONS
REQUIRED OR PERMITTED TO BE GIVEN BY ANY PARTY TO ANY OTHER PARTY PURSUANT TO
THE TERMS OF THIS AGREEMENT SHALL BE IN WRITING, UNLESS OTHERWISE SPECIFIED, AND
IF SENT TO AGENTS, SHALL BE DELIVERED TO:

 

MCNICOLL, LEWIS & VLAK LLC
420 LEXINGTON AVE., SUITE 628
NEW YORK, NY 10170
ATTENTION:                                         PATRICE MCNICOLL
FACSIMILE:                                         646-417-7205

 

AND

 

WM SMITH & CO.

1700 LINCOLN STREET, SUITE 2545

DENVER, CO  80203

ATTENTION:                                         WILLIAM S. SMITH

FACSIMILE:                                         303-831-0881

 

WITH A COPY TO:

 

Holme Roberts & Owen LLP

1700 Lincoln Street, Suite 4100

Denver, CO  80203

Attention:                                         Garth B. Jensen

Facsimile:                                         303-866-0200

and if to the Company, shall be delivered to:

 

ARYX THERAPEUTICS, INC.

6300 DUMBARTON CIRCLE

FREMONT, CA 94555

ATTENTION:                                         PAUL GODDARD, PH.D.

FACSIMILE:                                         510-585-2202

 

28

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WITH A COPY TO (WHICH SHALL NOT CONSTITUTE NOTICE):

 

COOLEY LLP

3175 HANOVER STREET

PALO ALTO, CA  94304-1130
ATTENTION:                                         JIM F. FULTON

FACSIMILE:                                         650-849-7400

 

Each party to this Agreement may change such address for notices by sending to
the parties to this Agreement written notice of a new address for such purpose. 
Each such notice or other communication shall be deemed given (i) when delivered
personally or by verifiable facsimile transmission (with an original to follow)
on or before 4:30 p.m., New York City time, on a Business Day or, if such day is
not a Business Day, on the next succeeding Business Day, (ii) on the next
Business Day after timely delivery to a nationally-recognized overnight courier
and (iii) on the Business Day actually received if deposited in the U.S. mail
(certified or registered mail, return receipt requested, postage prepaid).  For
purposes of this Agreement, “Business Day” shall mean any day on which the
Exchange and commercial banks in the City of New York are open for business.

 

An electronic communication (“Electronic Notice”) shall be deemed written notice
for purposes of this Section 13 if sent to the electronic mail address specified
by the receiving party under separate cover.  Electronic Notice shall be deemed
received at the time the party sending Electronic Notice receives verification
of receipt by the receiving party.  Any party receiving Electronic Notice may
request and shall be entitled to receive the notice on paper, in a nonelectronic
form (“Nonelectronic Notice”) which shall be sent to the requesting party within
ten (10) days of receipt of the written request for Nonelectronic Notice.

 

14.                               SUCCESSORS AND ASSIGNS.  THIS AGREEMENT SHALL
INURE TO THE BENEFIT OF AND BE BINDING UPON THE COMPANY AND EACH AGENT AND THEIR
RESPECTIVE SUCCESSORS AND THE AFFILIATES, CONTROLLING PERSONS, OFFICERS AND
DIRECTORS REFERRED TO IN SECTION 10 HEREOF.  REFERENCES TO ANY OF THE PARTIES
CONTAINED IN THIS AGREEMENT SHALL BE DEEMED TO INCLUDE THE SUCCESSORS AND
PERMITTED ASSIGNS OF SUCH PARTY.  NOTHING IN THIS AGREEMENT, EXPRESS OR IMPLIED,
IS INTENDED TO CONFER UPON ANY PARTY OTHER THAN THE PARTIES HERETO OR THEIR
RESPECTIVE SUCCESSORS AND PERMITTED ASSIGNS ANY RIGHTS, REMEDIES, OBLIGATIONS OR
LIABILITIES UNDER OR BY REASON OF THIS AGREEMENT, EXCEPT AS EXPRESSLY PROVIDED
IN THIS AGREEMENT.  NEITHER PARTY MAY ASSIGN ITS RIGHTS OR OBLIGATIONS UNDER
THIS AGREEMENT WITHOUT THE PRIOR WRITTEN CONSENT OF THE OTHER PARTY; PROVIDED,
HOWEVER, THAT EACH AGENT MAY ASSIGN ITS RIGHTS AND OBLIGATIONS HEREUNDER TO AN
AFFILIATE THEREOF WITHOUT OBTAINING THE COMPANY’S CONSENT.

 

15.                               ADJUSTMENTS FOR STOCK SPLITS.  THE PARTIES
ACKNOWLEDGE AND AGREE THAT ALL SHARE-RELATED NUMBERS CONTAINED IN THIS AGREEMENT
SHALL BE ADJUSTED TO TAKE INTO ACCOUNT ANY STOCK SPLIT, STOCK DIVIDEND OR
SIMILAR EVENT EFFECTED WITH RESPECT TO THE SHARES.

 

16.                               ENTIRE AGREEMENT; AMENDMENT; SEVERABILITY. 
THIS AGREEMENT (INCLUDING ALL SCHEDULES AND EXHIBITS ATTACHED HERETO AND
PLACEMENT NOTICES ISSUED PURSUANT HERETO) CONSTITUTES THE ENTIRE AGREEMENT AND
SUPERSEDES ALL OTHER PRIOR AND CONTEMPORANEOUS AGREEMENTS AND UNDERTAKINGS, BOTH
WRITTEN AND ORAL, AMONG THE PARTIES HERETO WITH REGARD TO THE SUBJECT MATTER
HEREOF.  NEITHER THIS AGREEMENT NOR ANY TERM HEREOF MAY BE AMENDED EXCEPT
PURSUANT TO A WRITTEN INSTRUMENT EXECUTED BY THE COMPANY AND EACH AGENT.  IN THE
EVENT THAT ANY ONE OR MORE

 

29

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OF THE PROVISIONS CONTAINED HEREIN, OR THE APPLICATION THEREOF IN ANY
CIRCUMSTANCE, IS HELD INVALID, ILLEGAL OR UNENFORCEABLE AS WRITTEN BY A COURT OF
COMPETENT JURISDICTION, THEN SUCH PROVISION SHALL BE GIVEN FULL FORCE AND EFFECT
TO THE FULLEST POSSIBLE EXTENT THAT IT IS VALID, LEGAL AND ENFORCEABLE, AND THE
REMAINDER OF THE TERMS AND PROVISIONS HEREIN SHALL BE CONSTRUED AS IF SUCH
INVALID, ILLEGAL OR UNENFORCEABLE TERM OR PROVISION WAS NOT CONTAINED HEREIN,
BUT ONLY TO THE EXTENT THAT GIVING EFFECT TO SUCH PROVISION AND THE REMAINDER OF
THE TERMS AND PROVISIONS HEREOF SHALL BE IN ACCORDANCE WITH THE INTENT OF THE
PARTIES AS REFLECTED IN THIS AGREEMENT.

 

17.                               APPLICABLE LAW; CONSENT TO JURISDICTION.  THIS
AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL
LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF
LAWS.  EACH PARTY HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION
OF THE STATE AND FEDERAL COURTS SITTING IN NEW YORK, NEW YORK, FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH ANY TRANSACTION
CONTEMPLATED HEREBY, AND HEREBY IRREVOCABLY WAIVES, AND AGREES NOT TO ASSERT IN
ANY SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO
THE JURISDICTION OF ANY SUCH COURT, THAT SUCH SUIT, ACTION OR PROCEEDING IS
BROUGHT IN AN INCONVENIENT FORUM OR THAT THE VENUE OF SUCH SUIT, ACTION OR
PROCEEDING IS IMPROPER.  EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE
OF PROCESS AND CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR
PROCEEDING BY MAILING A COPY THEREOF (CERTIFIED OR REGISTERED MAIL, RETURN
RECEIPT REQUESTED) TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES TO IT
UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD AND
SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF.  NOTHING CONTAINED HEREIN
SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER
PERMITTED BY LAW.

 

18.                               WAIVER OF JURY TRIAL.  THE COMPANY AND EACH
AGENT EACH HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY CLAIM BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY
TRANSACTION CONTEMPLATED HEREBY.

 

19.                               COUNTERPARTS.  THIS AGREEMENT MAY BE EXECUTED
IN TWO OR MORE COUNTERPARTS, EACH OF WHICH SHALL BE DEEMED AN ORIGINAL, BUT ALL
OF WHICH TOGETHER SHALL CONSTITUTE ONE AND THE SAME INSTRUMENT.  DELIVERY OF AN
EXECUTED AGREEMENT BY ONE PARTY TO THE OTHER MAY BE MADE BY FACSIMILE
TRANSMISSION.

 

[Remainder of Page Intentionally Blank]

 

30

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If the foregoing correctly sets forth the understanding between the Company, MLV
and Wm Smith, please so indicate in the space provided below for that purpose,
whereupon this letter shall constitute a binding agreement between the Company,
MLV and Wm Smith.

 

 

Very truly yours,

 

 

 

 

 

ARYX THERAPEUTICS, INC.

 

 

 

 

 

 

By:

/s/ Paul Goddard

 

 

Name:

Paul Goddard, Ph.D.

 

 

Title:

Chairman of the Board and

Chief Executive Officer

 

 

 

 

 

 

 

 

 

ACCEPTED as of the date
first-above written:

 

 

 

 

 

 

 

McNICOLL, LEWIS & VLAK LLC

 

 

 

 

 

By:

/s/  Patrice McNicoll

 

 

Name:  Patrice McNicoll

 

 

Title:  President

 

 

 

 

 

 

 

WM SMITH & CO.

 

 

 

 

 

 

By:

/s/  William S. Smith

 

 

Name:  William S. Smith

 

 

Title:  President

 

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

 

SCHEDULE 1

 

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

 

FORM OF PLACEMENT NOTICE

 

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

 

From:                                                                  ARYx
Therapeutics, Inc.

 

To:                                                                             
McNicoll, Lewis & Vlak LLC
                                                                                               
Attention:  Patrice McNicoll

 

Subject:     At Market Issuance—Placement Notice

 

Gentlemen:

 

Pursuant to the terms and subject to the conditions contained in the At Market
Issuance Sales Agreement between ARYx Therapeutics, Inc., a Delaware corporation
(the “Company”), McNicoll, Lewis & Vlak LLC, a Delaware limited liability
company (“MLV”), and Wm Smith & Co., a Colorado corporation (“Wm Smith”), dated
May 20, 2010, the Company hereby requests that MLV and Wm Smith sell up to
                         shares of the Company’s common stock, par value $0.001
per share, at a minimum market price of $               per share, during the
time period beginning [month, day, time] and ending [month, day, time].

 

The aggregate market value of securities sold by or on behalf of the Company
pursuant to Instruction I.B.6. of Form S-3 during the 12 calendar month-period
immediately prior to the sale contemplated by the previous paragraph, together
with the aggregate market value of securities to be sold in the sale
contemplated by the previous paragraph, will not exceed one-third of the
aggregate market value of the voting and non-voting common equity held by
non-affiliates of the Company, as measured immediately prior to the sale
contemplated by the previous paragraph.

 

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

 

SCHEDULE 2

 

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

 

Compensation

 

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

 

The Company shall pay to each Agent in cash, upon each sale of Shares pursuant
to this Agreement (no matter which Agent actually sold such Shares), an amount
equal to 1.5% of the gross proceeds from each sale of Shares (totaling 3.0% for
both Agents).

 

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

 

SCHEDULE 3

 

PAUL GODDARD, PH.D.

Chairman of the Board and Chief Executive Officer

 

JOHN VARIAN

Chief Operating Officer and Chief Financial Officer

 

DAVID NAGLER

Vice President, Corporate Affairs and Secretary

 

JASON BARKER

Senior Finance Director, Chief Accounting Officer

 

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

 

EXHIBIT 7(m)

 

Form of Representation Date Certificate

 

 

This Officers Certificate (this “Certificate”) is executed and delivered in
connection with Section 7(m) of the At Market Issuance Sales Agreement (the
“Agreement”), dated May 20, 2010, and entered into between ARYx
Therapeutics, Inc. (the “Company”), McNicoll, Lewis & Vlak LLC and Wm Smith &
Co.  All capitalized terms used but not defined herein shall have the meanings
given to such terms in the Agreement

 

The undersigned, a duly appointed and authorized officer of the Company, having
made all necessary inquiries to establish the accuracy of the statements below
and having been authorized by the Company to execute this certificate, hereby
certifies as follows:

 

                                               
1.                                       As of the date of this Certificate,
(i) the Registration Statement does not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein not misleading and
(ii) neither the Prospectus nor the Pricing Disclosure Materials contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading and (iii) no
event has occurred as a result of which it is necessary to amend or supplement
the Prospectus in order to make the statements therein not untrue or misleading.

 

                                               
2.                                       Each of the representations and
warranties of the Company contained in the Agreement were, when originally made,
and are, as of the date of this Certificate, true and correct in all material
respects.

 

                                               
3.                                       Each of the covenants required to be
performed by the Company in the Agreement on or prior to the date of the
Agreement, this Representation Date, and each such other date as set forth in
the Agreement, has been duly, timely and fully performed in all material
respects and each condition required to be complied with by the Company on or
prior to the date of the Agreement, this Representation Date, and each such
other date as set forth in the Agreement or in the Waivers has been duly, timely
and fully complied with in all material respects.

 

                                               
4.                                       Subsequent to the date of the most
recent financial statements in the Prospectus, there has been no material
adverse change.

 

                                               
5.                                       No stop order suspending the
effectiveness of the Registration Statement or of any part thereof has been
issued, and no proceedings for that purpose have been instituted or are pending
or threatened by any securities or other governmental authority (including,
without limitation, the Commission).

 

                                               
6.                                       No order suspending the effectiveness
of the Registration Statement or the qualification or registration of the Shares
under the securities or Blue Sky laws of any jurisdiction are in effect and no
proceeding for such purpose is pending before, or threatened, to

 

35

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the Company’s knowledge or in writing by, any securities or other governmental
authority (including, without limitation, the Commission).

 

                                                The undersigned has executed
this Officer’s Certificate as of the date first written above.

 

 

 

 

 

 

 

Name:

 

 

 

 

 

Title:

 

 

36

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