Exhibit 10.1

COMMON STOCK PURCHASE AGREEMENT

Dated November 20, 2006

by and between

SYNTROLEUM CORPORATION

and

AZIMUTH OPPORTUNITY LTD.

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TABLE OF CONTENTS

 

          Page Article I PURCHASE AND SALE OF COMMON STOCK    1

Section 1.1

   Purchase and Sale of Stock    1

Section 1.2

   Effective Date; Settlement Dates    1

Section 1.3

   The Shares    2

Section 1.4

   Current Report; Prospectus Supplement    2 Article II FIXED REQUEST TERMS;
OPTIONAL AMOUNT    2

Section 2.1

   Fixed Request Notice    2

Section 2.2

   Fixed Requests    3

Section 2.3

   Share Calculation    4

Section 2.4

   Limitation of Fixed Requests    4

Section 2.5

   Reduction of Commitment    4

Section 2.6

   Below Threshold Price    5

Section 2.7

   Settlement    5

Section 2.8

   Reduction of Pricing Period    5

Section 2.9

   Optional Amount    6

Section 2.10

   Calculation of Optional Amount Shares    7

Section 2.11

   Exercise of Optional Amount    7

Section 2.12

   Aggregate Limit    7 Article III REPRESENTATIONS AND WARRANTIES OF THE
INVESTOR    8

Section 3.1

   Organization and Standing of the Investor    8

Section 3.2

   Authorization and Power    8

Section 3.3

   No Conflicts    8

Section 3.4

   Information    9 Article IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY   
9

Section 4.1

   Organization, Good Standing and Power    9

Section 4.2

   Authorization, Enforcement    9

Section 4.3

   Capitalization    10

Section 4.4

   Issuance of Shares    10

Section 4.5

   No Conflicts    10

Section 4.6

   Commission Documents, Financial Statements    11

Section 4.7

   Subsidiaries    12

Section 4.8

   No Material Adverse Effect    13

Section 4.9

   Indebtedness    13

Section 4.10

   Title To Assets    13

Section 4.11

   Actions Pending    13

Section 4.12

   Compliance With Law    13

Section 4.13

   Certain Fees    14

Section 4.14    

   Operation of Business    14

 

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Section 4.15

   Environmental Compliance    15

Section 4.16

   Material Agreements    15

Section 4.17

   Transactions With Affiliates    15

Section 4.18

   Securities Act; NASD Conduct Rules    16

Section 4.19

   Employees    18

Section 4.20

   Use of Proceeds    18

Section 4.21

   Public Utility Holding Company Act and Investment Company Act Status    18

Section 4.22

   ERISA    18

Section 4.23

   Taxes    19

Section 4.24

   Insurance    19

Section 4.25

   Acknowledgement Regarding Investor’s Purchase of Shares    19 Article V
COVENANTS    19

Section 5.1

   Securities Compliance    19

Section 5.2

   Registration and Listing    19

Section 5.3

   Compliance with Laws    20

Section 5.4

   Keeping of Records and Books of Account; Foreign Corrupt Practices Act    20

Section 5.5

   Limitations on Holdings and Issuances    21

Section 5.6

   Other Agreements and Other Financings    21

Section 5.7

   Stop Orders    22

Section 5.8

   Amendments to the Registration Statement; Prospectus Supplements; Free
Writing Prospectuses    23

Section 5.9

   Prospectus Delivery    23

Section 5.10

   Selling Restrictions    24

Section 5.11

   Effective Registration Statement    25

Section 5.12

   Non-Public Information    25

Section 5.13    

   Broker/Dealer    25

Section 5.14

   Update of Disclosure Schedule    25

Article VI OPINION OF COUNSEL AND CERTIFICATE; CONDITIONS TO THE SALE AND
PURCHASE OF THE SHARES

   25

Section 6.1

   Opinion of Counsel and Certificate    25

Section 6.2

   Conditions Precedent to the Obligation of the Company    25

Section 6.3

   Conditions Precedent to the Obligation of the Investor    27 Article VII
TERMINATION    29

Section 7.1

   Term, Termination by Mutual Consent    29

Section 7.2

   Other Termination    30

Section 7.3

   Effect of Termination    30 Article VIII INDEMNIFICATION    30

Section 8.1

   General Indemnity    30

Section 8.2

   Indemnification Procedures    32

Article IX MISCELLANEOUS

   33

Section 9.1

   Fees and Expenses    33

 

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Section 9.2

   Specific Enforcement, Consent to Jurisdiction, Waiver of Jury Trial    34

Section 9.3

   Entire Agreement; Amendment    35

Section 9.4

   Notices    35

Section 9.5

   Waivers    36

Section 9.6

   Headings    36

Section 9.7

   Successors and Assigns    36

Section 9.8

   Governing Law    36

Section 9.9

   Survival    36

Section 9.10

   Counterparts    37

Section 9.11

   Publicity    37

Section 9.12

   Severability    37

Section 9.13    

   Further Assurances    37 Annex A.    Definitions   

 

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COMMON STOCK PURCHASE AGREEMENT

This COMMON STOCK PURCHASE AGREEMENT, made and entered into on this 20th day of
November 2006 (this “Agreement”), by and between Azimuth Opportunity Ltd., an
international business company incorporated under the laws of the British Virgin
Islands (the “Investor”), and Syntroleum Corporation, a corporation organized
and existing under the laws of the State of Delaware (the “Company”).

RECITALS

WHEREAS, the parties desire that, upon the terms and subject to the conditions
contained herein, the Company may issue and sell to the Investor and the
Investor shall thereupon purchase from the Company up to $40,000,000 worth of
newly issued shares of the Company’s common stock, $.01 par value (“Common
Stock”), subject, in all cases, to the Trading Market Limit; and

WHEREAS, the offer and sale of the shares of Common Stock hereunder have been
registered by the Company in the Registration Statement, which has been declared
effective by order of the Commission under the Securities Act;

NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree
as follows:

ARTICLE I

PURCHASE AND SALE OF COMMON STOCK

Section 1.1 Purchase and Sale of Stock. Upon the terms and subject to the
conditions of this Agreement, during the Investment Period the Company in its
discretion may issue and sell to the Investor up to $40,000,000 (the “Total
Commitment”) worth of duly authorized, validly issued, fully paid and
non-assessable shares of Common Stock (subject in all cases to the Trading
Market Limit, the “Aggregate Limit”), by (i) the delivery to the Investor of not
more than 24 separate Fixed Request Notices (unless the Investor and the Company
mutually agree in writing that a different number of Fixed Request Notices may
be delivered) as provided in Article II hereof and (ii) the exercise by the
Investor of Optional Amounts, which the Company may in its discretion grant to
the Investor and which may be exercised by the Investor, in whole or in part, as
provided in Article II hereof. The aggregate of all Fixed Request Amounts and
Optional Amount Dollar Amounts shall not exceed the Aggregate Limit.

Section 1.2 Effective Date; Settlement Dates. This Agreement shall become
effective and binding upon delivery of counterpart signature pages of this
Agreement executed by each of the parties hereto, and by delivery of an opinion
of counsel and a certificate of the Company as provided in Section 6.1 hereof,
to the offices of Greenberg Traurig, LLP, 200 Park Avenue, New York, New York
10166, at l0:00 a.m., New York time, on the Effective Date. In consideration of
and in express reliance upon the representations, warranties and covenants, and
otherwise upon the terms and subject to the conditions, of this Agreement, from
and after the Effective Date and during the Investment Period (i) the Company
shall issue and sell to the Investor, and the Investor agrees to purchase from
the Company, the Shares in respect of each Fixed Request and (ii) the Investor
may in its discretion elect to purchase Shares in respect of

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each Optional Amount. The issuance and sale of Shares to the Investor pursuant
to any Fixed Request or Optional Amount shall occur on the applicable Settlement
Date in accordance with Sections 2.7 and 2.9 (or on such Trading Day in
accordance with Section 2.8, as applicable), provided in each case that all of
the conditions precedent thereto set forth in Article VI theretofore shall have
been fulfilled or (to the extent permitted by applicable law) waived.

Section 1.3 The Shares. The Company has duly authorized and reserved for
issuance, and covenants to continue to reserve for issuance, free of all
preemptive and other similar rights, at all times during the Investment Period,
the requisite aggregate number of authorized but unissued shares of its Common
Stock to timely effect the issuance, sale and delivery in full to the Investor
of all Shares to be issued in respect of all Fixed Requests and Optional Amounts
under this Agreement.

Section 1.4 Current Report; Prospectus Supplement. As soon as practicable, but
in any event not later than 5:30 p.m. (New York time) on the first Trading Day
immediately following the Effective Date, the Company shall file with the
Commission a report on Form 8-K relating to the transactions contemplated by,
and briefly describing the material terms and conditions of, this Agreement and
disclosing all information relating to the transactions contemplated hereby
required to be disclosed in the Registration Statement and the Base Prospectus
(but which permissibly has been omitted therefrom in accordance with the
Securities Act), including, without limitation, information required to be
disclosed in the section captioned “Plan of Distribution” in the Base Prospectus
(the “Current Report”). The Current Report shall include a copy of this
Agreement as an exhibit. To the extent applicable, the Current Report shall be
incorporated by reference in the Registration Statement in accordance with the
provisions of Rule 430B under the Securities Act. The Company heretofore has
provided the Investor a reasonable opportunity to comment on a draft of such
Current Report and has given due consideration to such comments. If required
under the Securities Act, the Company shall file a final Base Prospectus
pursuant to Rule 424(b) under the Securities Act on or prior to the second
Trading Day immediately following the Effective Date. Pursuant to Section 5.9
and subject to the provisions of Section 5.8, on the first Trading Day
immediately following the last Trading Day of each Pricing Period, the Company
shall file with the Commission a Prospectus Supplement pursuant to Rule 424(b)
under the Securities Act disclosing the number of Shares to be issued and sold
to the Investor thereunder, the total purchase price therefor and the net
proceeds to be received by the Company therefrom and, to the extent required by
the Securities Act, identifying the Current Report.

ARTICLE II

FIXED REQUEST TERMS; OPTIONAL AMOUNT

Subject to the satisfaction of the conditions set forth in this Agreement, the
parties agree (unless otherwise mutually agreed upon by the parties in writing)
as follows:

Section 2.1 Fixed Request Notice. Upon two Trading Days’ prior written notice to
the Investor, the Company may, from time to time in its sole discretion, provide
a notice to the Investor of a Fixed Request before 9:30 a.m. (New York time) on
the first Trading Day of the Pricing Period (the “Fixed Request Notice”),
substantially in the form attached hereto as Exhibit A.

 

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The Fixed Request Notice shall specify the Fixed Amount Requested, establish the
Threshold Price for such Fixed Request, designate the first Trading Day of the
Pricing Period and specify the Optional Amount, if any, that the Company elects
to grant to the Investor during the Pricing Period and the applicable Threshold
Price for such Optional Amount (the “Optional Amount Threshold Price”). The
Threshold Price and the Optional Amount Threshold Price established by the
Company in a Fixed Request Notice may be the same or different, in the Company’s
sole discretion. Upon the terms and subject to the conditions of this Agreement,
the Investor is obligated to accept each Fixed Request Notice prepared and
delivered in accordance with the provisions of this Agreement.

Section 2.2 Fixed Requests. From time to time during the Investment Period, the
Company may in its sole discretion deliver to the Investor a Fixed Request
Notice for a specified Fixed Amount Requested, and the applicable discount price
(the “Discount Price”) shall be determined, in accordance with the price and
share amount parameters as set forth below or such other parameters mutually
agreed upon in writing by the Investor and the Company, and upon the terms and
subject to the conditions of this Agreement, the Investor shall purchase from
the Company the Shares subject to such Fixed Request Notice; provided, however,
that the Company may not deliver any single Fixed Request Notice for a Fixed
Amount Requested in excess of the lesser of: (i) the amount in the applicable
Fixed Amount Requested column below and (ii) 2.5% of the Market Capitalization:

 

Threshold Price

  

Fixed Amount Requested

  

Discount Price

Equal to or greater than $15.00    Not to exceed $9,000,000           
96.875% of the VWAP         Equal to or greater than $14.00 and less than $15.00
   Not to exceed $8,500,000    96.875% of the VWAP Equal to or greater than
$13.00 and less than $14.00    Not to exceed $8,000,000    96.625% of the VWAP
Equal to or greater than $12.00 and less than $13.00    Not to exceed $7,500,000
   96.375% of the VWAP Equal to or greater than $11.00 and less than $12.00   
Not to exceed $7,000,000    96.375% of the VWAP Equal to or greater than $10.00
and less than $11.00    Not to exceed $6,500,000    96.125% of the VWAP Equal to
or greater than $9.00 and less than $10.00    Not to exceed $6,000,000   
96.125% of the VWAP Equal to or greater than $8.00 and less than $9.00    Not to
exceed $5,500,000    95.875% of the VWAP Equal to or greater than $7.00 and less
than $8.00    Not to exceed $5,000,000    95.625% of the VWAP Equal to or
greater than $6.00 and less than $7.00    Not to exceed $4,500,000    95.125% of
the VWAP Equal to or greater than $5.00 and less than $6.00    Not to exceed
$4,000,000    94.875% of the VWAP Equal to or greater than $4.00 and less than
$5.00    Not to exceed $3,500,000    94.625% of the VWAP Equal to or greater
than $3.00 and less than $4.00    Not to exceed $3,000,000    94.375% of the
VWAP Equal to or greater than $2.00 and less than $3.00    Not to exceed
$2,500,000    94.125% of the VWAP Equal to or greater than $1.50 and less than
$2.00    Not to exceed $2,250,000    93.875% of the VWAP Equal to or greater
than $1.37 and less than $1.50    Not to exceed $2,000,000    93.750% of the
VWAP

 

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Anything to the contrary in this Agreement notwithstanding, at no time shall the
Investor be required to purchase more than $9,000,000 worth of Common Stock in
respect of any Pricing Period (not including Common Stock subject to any
Optional Amount). The date on which the Company delivers any Fixed Request
Notice in accordance with this Section 2.2 hereinafter shall be referred to as a
“Fixed Request Exercise Date”.

Section 2.3 Share Calculation. Subject to Section 2.6, the number of Shares to
be issued by the Company to the Investor pursuant to a Fixed Request shall equal
the aggregate sum of each quotient (calculated for each Trading Day during the
applicable Pricing Period for which the VWAP equals or exceeds the Threshold
Price) determined pursuant to the following equation (rounded to the nearest
whole Share):

 

N = (A x B)/C, where:

 

N = the number of Shares to be issued by the Company to the Investor in respect
of a Trading Day during the applicable Pricing Period for which the VWAP equals
or exceeds the Threshold Price,

 

A = 0.09 (the “Multiplier”); provided, however, that if the number of Trading
Days constituting a Pricing Period is decreased as set forth in Section 2.8
hereof, then the Multiplier correspondingly shall be increased to equal the
decimal equivalent (in 10-millionths) of a fraction, the numerator of which is
one and the denominator of which equals the number of Trading Days in the
Pricing Period as so decreased,

 

B = the Fixed Amount Requested, and

 

C = the applicable Discount Price.

Section 2.4 Limitation of Fixed Requests. The Company shall not make more than
one Fixed Request in each Pricing Period. Not less than five Trading Days shall
elapse between the end of one Pricing Period and the commencement of any other
Pricing Period during the Investment Period. There shall be permitted a maximum
of 24 Fixed Requests during the Investment Period. Each Fixed Request
automatically shall expire immediately following the last Trading Day of each
Pricing Period.

Section 2.5 Reduction of Commitment. On the last Trading Day of each Pricing
Period, the Investor’s Total Commitment under this Agreement automatically (and
without the need for any amendment to this Agreement) shall be reduced, on a
dollar-for-dollar basis, by the total amount of the Fixed Request Amount and the
Optional Amount Dollar Amount, if any, for such Pricing Period.

 

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Section 2.6 Below Threshold Price. If the VWAP on any Trading Day in a Pricing
Period is lower than the Threshold Price, then for each such Trading Day the
total amount of the Fixed Amount Requested shall be reduced, on a
dollar-for-dollar basis, by an amount equal to the product of (x) the Multiplier
and (y) the original Fixed Amount Requested, and no Shares shall be purchased or
sold with respect to such Trading Day, except as provided below. If trading in
the Common Stock on NASDAQ (or any national securities exchange on which the
Common Stock is then listed) is suspended for any reason for more than three
hours on any Trading Day, the Investor may at its option deem the price of the
Common Stock to be lower than the Threshold Price for such Trading Day and, for
each such Trading Day, the total amount of the Fixed Amount Requested shall be
reduced as provided in the immediately preceding sentence, and no Shares shall
be purchased or sold with respect to such Trading Day, except as provided below.
For each Trading Day during a Pricing Period on which the VWAP is (or is deemed
to be) lower than the Threshold Price, the Investor may in its sole discretion
elect to purchase such U.S. dollar amount of Shares equal to the amount by which
the Fixed Amount Requested has been reduced in accordance with this Section 2.6,
at the Threshold Price multiplied by the applicable percentage determined in
accordance with the price and share amount parameters set forth in Section 2.2.
The Investor shall inform the Company via facsimile transmission not later than
8:00 p.m. (New York time) on the last Trading Day of such Pricing Period as to
the number of Shares, if any, the Investor elects to purchase as provided in
this Section 2.6.

Section 2.7 Settlement. The payment for, against simultaneous delivery of,
Shares in respect of each Fixed Request shall be settled on the second Trading
Day next following the last Trading Day of each Pricing Period (the “Settlement
Date”). On each Settlement Date, the Company shall deliver the Shares purchased
by the Investor to the Investor or its designees via DTC’s Deposit Withdrawal
Agent Commission (DWAC) system, against simultaneous payment therefor to the
Company’s designated account by wire transfer of immediately available funds,
provided that if the Shares are received by the Investor later than 1:00 p.m.
(New York time), payment therefor shall be made with next day funds. As set
forth in Section 9.1(ii), a failure by the Company to deliver such Shares shall
result in the payment of liquidated damages by the Company to the Investor.

Section 2.8 Reduction of Pricing Period. If during a Pricing Period the Company
elects to reduce the number of Trading Days in such Pricing Period (and thereby
amend its previously delivered Fixed Request Notice), the Company shall so
notify the Investor before 9:00 a.m. (New York time) on any Trading Day during a
Pricing Period (a “Reduction Notice”) and the last Trading Day of such Pricing
Period shall be the Trading Day immediately preceding the Trading Day on which
the Investor received such Reduction Notice; provided, however, that if the
Company delivers the Reduction Notice later than 9:00 a.m. (New York time) on a
Trading Day during a Pricing Period, then the last Trading Day of such Pricing
Period instead shall be the Trading Day on which the Investor received such
Reduction Notice.

 

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Upon receipt of a Reduction Notice, the Investor (i) shall purchase the Shares
in respect of each Trading Day in such reduced Pricing Period for which the VWAP
equals or exceeds the Threshold Price in accordance with Section 2.3 hereof;
(ii) may elect to purchase the Shares in respect of any Trading Day in such
reduced Pricing Period for which the VWAP is (or is deemed to be) lower than the
Threshold Price in accordance with Section 2.6 hereof; and (iii) may elect to
exercise all or any portion of an Optional Amount on any Trading Day during such
reduced Pricing Period in accordance with Sections 2.10 and 2.11 hereof.

In addition, upon receipt of a Reduction Notice, the Investor may elect to
purchase such U.S. dollar amount of additional Shares equal to the quotient
determined pursuant to the following equation:

 

D = A x 1/B x (B – C), where:

 

D = the U.S. dollar amount of additional Shares to be purchased,

 

A = the Fixed Amount Requested,

 

B = 11 or, for purposes of this Section 2.8, such lesser number of Trading Days
as the parties may mutually agree to, and

 

C = the number of Trading Days in the reduced Pricing Period,

at a per Share price equal to (x) the Fixed Amount Requested attributable to the
reduced Pricing Period divided by (y) the number of Shares to be purchased
during such reduced Pricing Period pursuant to clause (i) of the immediately
preceding paragraph.

The Investor may also elect to exercise any portion of the applicable Optional
Amount which was unexercised during the reduced Pricing Period by issuing an
Optional Amount Notice to the Company not later than 10:00 a.m. (New York time)
on the first Trading Day next following the last Trading Day of the reduced
Pricing Period. The number of Shares to be issued upon exercise of such Optional
Amount shall be calculated pursuant to the equation set forth in Section 2.10
hereof, except that “C” shall equal the greater of (i) the VWAP for the Common
Stock on the last Trading Day of the reduced Pricing Period or (ii) the Optional
Amount Threshold Price.

The payment for, against simultaneous delivery of, Shares to be purchased and
sold in accordance with this Section 2.8 shall be settled on the second Trading
Day next following the Trading Day on which the Investor receives a Reduction
Notice.

Section 2.9 Optional Amount. With respect to any Pricing Period, the Company may
in its sole discretion grant to the Investor the right to exercise, from time to
time during the Pricing Period (but not more than once on any Trading Day), all
or any portion of an Optional Amount. The maximum Optional Amount Dollar Amount
and the Optional Amount Threshold Price shall be set forth in the Fixed Request
Notice. Each daily Optional Amount exercise shall be aggregated during the
Pricing Period and settled on the next Settlement Date. The Optional Amount
Threshold Price designated by the Company in its Fixed Request Notice shall
apply to each Optional Amount during the applicable Pricing Period.

 

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Section 2.10 Calculation of Optional Amount Shares. The number of shares of
Common Stock to be issued in connection with the exercise of an Optional Amount
shall be the quotient determined pursuant to the following equation (rounded to
the nearest whole Share):

 

O = A/(B x C), where:

 

O = the number of shares of Common Stock to be issued in connection with such
Optional Amount exercise,

 

A = the Optional Amount Dollar Amount with respect to which the Investor has
delivered an Optional Amount Notice,

 

B = the applicable percentage determined in accordance with the price and shares
amount parameters set forth in Section 2.2 (with the Optional Amount Threshold
Price serving as the Threshold Price for such purposes), and

 

C = the greater of (i) the VWAP for the Common Stock on the day the Investor
delivers the Optional Amount Notice or (ii) the Optional Amount Threshold Price.

Section 2.11 Exercise of Optional Amount. If granted by the Company to the
Investor with respect to a Pricing Period, all or any portion of the Optional
Amount may be exercised by the Investor on any Trading Day during the Pricing
Period, subject to the limitations set forth in Section 2.9. As a condition to
each exercise of an Optional Amount pursuant to this Section 2.11, the Investor
shall issue an Optional Amount Notice to the Company no later than 8:00 p.m.
(New York time) on the day of such Optional Amount exercise. If the Investor
does not exercise an Optional Amount in full by 8:00 p.m. (New York time) on the
last Trading Day of the applicable Pricing Period, such unexercised portion of
the Investor’s Optional Amount with respect to that Pricing Period automatically
shall lapse and terminate.

Section 2.12 Aggregate Limit. Notwithstanding anything to the contrary contained
in this Agreement, in no event may the Company issue a Fixed Request Notice or
grant an Optional Amount to the extent that the sale of Shares pursuant thereto
and pursuant to all prior Fixed Request Notices or Optional Amounts issued
hereunder would cause the Company to sell or the Investor to purchase Shares
which in the aggregate are in excess of the Aggregate Limit. If the Company
issues a Fixed Request Notice or Optional Amount that otherwise would permit the
Investor to purchase shares of Common Stock which would cause the aggregate
purchases by Investor hereunder to exceed the Aggregate Limit, such Fixed
Request Notice or Optional Amount shall be void ab initio to the extent of the
amount by which the dollar value of shares or number of shares, as the case may
be, of Common Stock otherwise issuable pursuant to such Fixed Request Notice or
Optional Amount together with the dollar value of shares or number of shares, as
the case may be, of all other Common Stock purchased by the Investor pursuant
hereto would exceed the Aggregate Limit. The Company hereby represents, warrants
and covenants that neither it nor any of its Subsidiaries (i) has effected any
transaction or series of transactions, (ii) is a party to any pending
transaction or series of transactions or (iii) shall enter into any

 

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contract, agreement, agreement-in-principle, arrangement or understanding with
respect to, or shall effect, any Other Financing which, in any of such cases,
may be integrated with the transactions contemplated by this Agreement for
purposes of determining whether approval of the Company’s stockholders is
required under any bylaw, listed securities maintenance standards or other rules
of the Trading Market; provided, however, that the Company shall be permitted to
take any action referred to in clause (iii) above if the Company has timely
provided the Investor with an Integration Notice as provided in Section 5.6(ii)
hereof.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE INVESTOR

The Investor hereby makes the following representations and warranties to the
Company:

Section 3.1 Organization and Standing of the Investor. The Investor is an
international business company duly organized, validly existing and in good
standing under the laws of the British Virgin Islands.

Section 3.2 Authorization and Power. The Investor has the requisite corporate
power and authority to enter into and perform its obligations under this
Agreement and to purchase the Shares in accordance with the terms hereof. The
execution, delivery and performance of this Agreement by the Investor and the
consummation by it of the transactions contemplated hereby have been duly
authorized by all necessary corporate action, and no further consent or
authorization of the Investor, its Board of Directors or stockholders is
required. This Agreement has been duly executed and delivered by the Investor.
This Agreement constitutes a valid and binding obligation of the Investor
enforceable against it in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation, conservatorship, receivership, or
similar laws relating to, or affecting generally the enforcement of, creditor’s
rights and remedies or by other equitable principles of general application.

Section 3.3 No Conflicts. The execution, delivery and performance by the
Investor of this Agreement and the consummation by the Investor of the
transactions contemplated herein do not and shall not (i) result in a violation
of such Investor’s charter documents, bylaws or other applicable organizational
instruments, (ii) conflict with, constitute a default (or an event which, with
notice or lapse of time or both, would become a default) under, or give rise to
any rights of termination, amendment, acceleration or cancellation of, any
material agreement, mortgage, deed of trust, indenture, note, bond, license,
lease agreement, instrument or obligation to which the Investor is a party or is
bound, (iii) create or impose any lien, charge or encumbrance on any property of
the Investor under any agreement or any commitment to which the Investor is
party or under which the Investor is bound or under which any of its properties
or assets are bound, or (iv) result in a violation of any federal, state, local
or foreign statute, rule, or regulation, or any order, judgment or decree of any
court or governmental agency applicable to the Investor or by which any of its
properties or assets are bound or affected, except, in the case of clauses (ii),
(iii) and (iv), for such conflicts, defaults, terminations, amendments,
acceleration, cancellations and violations as would not, individually or in the
aggregate, prohibit or otherwise interfere with the ability of the Investor to
enter into and perform its obligations under this Agreement in any

 

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material respect. The Investor is not required under federal, state, local or
foreign law, rule or regulation to obtain any consent, authorization or order
of, or make any filing or registration with, any court or governmental agency in
order for it to execute, deliver or perform any of its obligations under this
Agreement or to purchase the Shares in accordance with the terms hereof.

Section 3.4 Information. The Investor and its advisors have been furnished with
all materials relating to the business, financial condition, management and
operations of the Company and materials relating to the offer and sale of the
Shares which have been requested by the Investor. The Investor and its advisors
have been afforded the opportunity to ask questions of representatives of the
Company. The Investor has sought such accounting, legal and tax advice as it has
considered necessary to make an informed investment decision with respect to its
acquisition of the Shares. The Investor understands that it (and not the
Company) shall be responsible for its own tax liabilities that may arise as a
result of this investment or the transactions contemplated by this Agreement.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

Except as set forth in the disclosure schedule delivered by the Company to the
Investor (which is hereby incorporated by reference in, and constitutes an
integral part of, this Agreement) (the “Disclosure Schedule”), the Company
hereby makes the following representations and warranties to the Investor:

Section 4.1 Organization, Good Standing and Power. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has the requisite corporate power and authority to own,
lease and operate its properties and assets and to conduct its business as it is
now being conducted. The Company and each such Subsidiary is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which the nature of the business conducted or property owned by it makes such
qualification necessary, except for any jurisdiction in which the failure to be
so qualified would not have a Material Adverse Effect.

Section 4.2 Authorization, Enforcement. The Company has the requisite corporate
power and authority to enter into and perform this Agreement and to issue and
sell the Shares in accordance with the terms hereof. Except for approvals of the
Company’s Board of Directors or a committee thereof as may be required in
connection with any issuance and sale of Shares to the Investor hereunder (which
approvals shall be obtained prior to the delivery of any Fixed Request Notice),
the execution, delivery and performance by the Company of this Agreement and the
consummation by it of the transactions contemplated hereby have been duly and
validly authorized by all necessary corporate action and no further consent or
authorization of the Company or its Board of Directors or stockholders is
required This Agreement has been duly executed and delivered by the Company and
constitutes a valid and binding obligation of the Company enforceable against
the Company in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation, conservatorship, receivership or similar laws relating to, or
affecting generally the enforcement of, creditor’s rights and remedies or by
other equitable principles of general application.

 

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Section 4.3 Capitalization. The authorized capital stock of the Company and the
shares thereof issued and outstanding as of the Effective Date are as set forth
in the Commission Documents, except for issued and outstanding shares of capital
stock resulting from the issuance of equity awards under the Company’s benefit
and equity plans and arrangements or the exercise or conversion, as the case may
be, of exercisable or convertible securities outstanding as of the Effective
Date or issued in connection with an Acceptable Financing. All of the
outstanding shares of Common Stock have been duly authorized and validly issued,
and are fully paid and nonassessable. Except as set forth in the Commission
Documents, as of the Effective Date, no shares of Common Stock were entitled to
preemptive rights or registration rights and there were no outstanding options,
warrants, scrip, rights to subscribe to, call or commitments of any character
whatsoever relating to, or securities or rights convertible into or exchangeable
for, any shares of capital stock of the Company. Except as set forth in the
Commission Documents, there were no contracts, commitments, understandings, or
arrangements by which the Company is or may become bound to issue a substantial
number of additional shares of the capital stock of the Company or options,
securities or rights convertible into or exchangeable for any shares of capital
stock of the Company, other than in connection with the issuance of equity
awards under the Company’s benefit and equity plans and arrangements existing on
the date hereof or other than in connection with an Acceptable Financing. Except
for customary transfer restrictions contained in agreements entered into by the
Company to sell restricted securities or as set forth in the Commission
Documents, as of the Effective Date, the Company was not a party to, and it had
no knowledge of, any agreement restricting the voting or transfer of any shares
of the capital stock of the Company. Except as set forth in the Commission
Documents, the offer and sale of all capital stock, convertible or exchangeable
securities, rights, warrants or options of the Company issued prior to the
Effective Date complied with all applicable federal and state securities laws,
and no stockholder has any right of rescission or damages or any “put” or
similar right with respect thereto which would have a Material Adverse Effect.
The Company has furnished or made available to the Investor true and correct
copies of the Company’s Certificate of Incorporation as in effect on the
Effective Date (the “Charter”), and the Company’s Bylaws as in effect on the
Effective Date (the “Bylaws”), and true and correct copies (redacted as
appropriate) of all executed resolutions of the Company’s Board of Directors
(and committees thereof) relating to the capital stock of the Company (and
transactions in respect thereof) since December 31, 2004 (except with respect to
issuances of shares of capital stock of the Company to directors or employees of
the Company as fees or compensation that were duly approved by the Company’s
Board of Directors or a committee thereof).

Section 4.4 Issuance of Shares. The Shares to be issued under this Agreement
have been or will be duly authorized by all necessary corporate action and, when
paid for or issued in accordance with the terms hereof, the Shares shall be
validly issued and outstanding, fully paid and nonassessable, and the Investor
shall be entitled to all rights accorded to a holder and beneficial owner of
Common Stock.

Section 4.5 No Conflicts. The execution, delivery and performance by the Company
of this Agreement and the consummation by the Company of the transactions
contemplated

 

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herein do not and shall not (i) result in a violation of any provision of the
Company’s Charter or Bylaws, (ii) conflict with, constitute a default (or an
event which, with notice or lapse of time or both, would become a default)
under, or give rise to any rights of termination, amendment, acceleration or
cancellation of, any material agreement, mortgage, deed of trust, indenture,
note, bond, license, lease agreement, instrument or obligation to which the
Company or any of its Significant Subsidiaries is a party or is bound
(including, without limitation, any listing agreement with the Trading Market),
(iii) create or impose a lien, charge or encumbrance on any property of the
Company or any of its Significant Subsidiaries under any agreement or any
commitment to which the Company or any of its Significant Subsidiaries is a
party or under which the Company or any of its Significant Subsidiaries is bound
or under which any of their respective properties or assets are bound, or
(iv) result in a violation of any federal, state, local or foreign statute,
rule, regulation, order, judgment or decree applicable to the Company or any of
its Subsidiaries or by which any property or asset of the Company or any of its
Subsidiaries are bound or affected, except, in the case of clauses (ii),
(iii) and (iv), for such conflicts, defaults, terminations, amendments,
acceleration, cancellations and violations as would not, individually or in the
aggregate, have a Material Adverse Effect. The Company is not required under
federal, state, local or foreign law, rule or regulation to obtain any consent,
authorization or order of, or make any filing or registration with, any court or
governmental agency in order for it to execute, deliver or perform any of its
obligations under this Agreement, or to issue and sell the Shares to the
Investor in accordance with the terms hereof (other than any filings which may
be required to be made by the Company with the Commission or the Trading Market
subsequent to the Effective Date, including but not limited to a Prospectus
Supplement under Sections 1.4 and 5.9 of this Agreement, and any registration
statement, prospectus or prospectus supplement which has been or may be filed
pursuant to this Agreement).

Section 4.6 Commission Documents, Financial Statements. (a) The Common Stock is
registered pursuant to Section 12(b) or 12(g) of the Exchange Act and, except as
disclosed in the Commission Documents, as of the Effective Date the Company had
timely filed (giving effect to permissible extensions in accordance with Rule
12b-25 under the Exchange Act) all Commission Documents. The Company has
delivered or made available (by filing on the Commission’s electronic data
gathering and retrieval system (“EDGAR”) to the Investor true and complete
copies of the Commission Documents filed with the Commission prior to the
Effective Date (including, without limitation, the 2005 Form 10-K) and has
delivered or made available (by filing on EDGAR) to the Investor true and
complete copies of all of the Commission Documents heretofore incorporated by
reference in the Registration Statement and the Prospectus. The Company has not
provided to the Investor any information which, according to applicable law,
rule or regulation, should have been disclosed publicly by the Company but which
has not been so disclosed, other than with respect to the transactions
contemplated by this Agreement. As of its filing date, each Commission Document
filed with the Commission and incorporated by reference in the Registration
Statement and the Prospectus (including, without limitation, the 2005 Form 10-K)
complied in all material respects with the requirements of the Securities Act or
the Exchange Act, as applicable, and other federal, state and local laws, rules
and regulations applicable to it, and, as of its filing date, such Commission
Document did 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, in light of the circumstances under which they were
made, not misleading. Each Commission Document to be filed with the

 

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Commission after the Effective Date and incorporated by reference in the
Registration Statement, the Prospectus and any Prospectus Supplement required to
be filed pursuant to Sections 1.4 and 5.9 hereof during the Investment Period
(including, without limitation, the Current Report), when such document becomes
effective or is filed with the Commission, as the case may be, shall comply in
all material respects with the requirements of the Securities Act or the
Exchange Act, as applicable, and other federal, state and local laws, rules and
regulations applicable to it, and shall 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, in light of the circumstances
under which they were made, not misleading.

(b) The financial statements, together with the related notes and schedules, of
the Company included in the Commission Documents comply as to form in all
material respects with all applicable accounting requirements and the published
rules and regulations of the Commission and all other applicable rules and
regulations with respect thereto. Such financial statements, together with the
related notes and schedules, have been prepared in accordance with GAAP applied
on a consistent basis during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto or (ii) in
the case of unaudited interim statements, to the extent they may not include
footnotes or may be condensed or summary statements), and fairly present in all
material respects the financial condition of the Company and its consolidated
Subsidiaries as of the dates thereof and the results of operations and cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments).

(c) The Company has timely filed with the Commission and made available (by
filing on EDGAR) to the Investor all certifications and statements required by
(x) Rule 13a-14 or Rule 15d-14 under the Exchange Act or (y) 18 U.S.C.
Section 1350 (Section 906 of the Sarbanes-Oxley Act of 2002 (“SOXA”)) with
respect to all relevant Commission Documents. The Company is in compliance in
all material respects with the provisions of SOXA applicable to it as of the
date hereof. The Company maintains disclosure controls and procedures required
by Rule 13a-15 or Rule 15d-15 under the Exchange Act; such controls and
procedures are effective to ensure that all material information concerning the
Company and its Subsidiaries is made known on a timely basis to the individuals
responsible for the timely and accurate preparation of the Company’s Commission
filings and other public disclosure documents. As used in this Section 4.6(c),
the term “file” shall be broadly construed to include any manner in which a
document or information is furnished, supplied or otherwise made available to
the Commission.

(d) Grant Thornton LLP, who have expressed their audit opinions on the Company’s
audited financial statements and related schedules included or incorporated by
reference in the Registration Statement and the Base Prospectus is, with respect
to the Company, an independent registered public accounting firm as required by
the rules of the Public Company Accounting Oversight Board.

Section 4.7 Subsidiaries. The 2005 Form 10-K sets forth each Subsidiary of the
Company as of the Effective Date, showing its jurisdiction of incorporation or
organization and the percentage of the Company’s ownership of the outstanding
capital stock or other ownership interests of such Subsidiary, and the Company
does not have any other Subsidiaries as of the Effective Date.

 

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Section 4.8 No Material Adverse Effect. Since December 31, 2005, the Company has
not experienced or suffered any Material Adverse Effect, and there exists no
current state of facts, condition or event which would have a Material Adverse
Effect, except (i) as disclosed in any Commission Documents filed since
September 30, 2006 or (ii) continued losses from operations.

Section 4.9 Indebtedness. The Company’s Quarterly Report on Form 10-Q for the
fiscal quarter ended September 30, 2006 sets forth, as of September 30, 2006,
all outstanding secured and unsecured Indebtedness of the Company or any
Subsidiary, or for which the Company or any Subsidiary has commitments through
such date. For the purposes of this Agreement, “Indebtedness” shall mean (a) any
liabilities for borrowed money or amounts owed in excess of $10,000,000 (other
than trade accounts payable incurred in the ordinary course of business),
(b) all guaranties, endorsements, indemnities and other contingent obligations
in respect of Indebtedness of others in excess of $10,000,000, whether or not
the same are or should be reflected in the Company’s balance sheet (or the notes
thereto), except guaranties by endorsement of negotiable instruments for deposit
or collection or similar transactions in the ordinary course of business; and
(c) the present value of any lease payments in excess of $10,000,000 due under
leases required to be capitalized in accordance with GAAP. There is no existing
or continuing default or event of default in respect of any Indebtedness of the
Company or any of its Subsidiaries.

Section 4.10 Title To Assets. Each of the Company and its Subsidiaries has good
and marketable title to all of their respective real and personal property
reflected in the Commission Documents, free of mortgages, pledges, charges,
liens, security interests or other encumbrances, except for those indicated in
the Commission Documents or those that would not have a Material Adverse Effect.
All real property leases of the Company are valid and subsisting and in full
force and effect in all material respects.

Section 4.11 Actions Pending. There is no action, suit, claim, investigation or
proceeding pending, or to the knowledge of the Company threatened, against the
Company or any Subsidiary which questions the validity of this Agreement or the
transactions contemplated hereby or any action taken or to be taken pursuant
hereto or thereto. Except as set forth in the Commission Documents, there is no
action, suit, claim, investigation or proceeding pending, or to the knowledge of
the Company threatened, against or involving the Company, any Subsidiary or any
of their respective properties or assets, or involving any officers or directors
of the Company or any of its Subsidiaries, including, without limitation, any
securities class action lawsuit or stockholder derivative lawsuit, in each case
which, if determined adversely to the Company, its Subsidiary or any officer or
director of the Company or its Subsidiaries, would have a Material Adverse
Effect.

Section 4.12 Compliance With Law. The business of the Company and the
Subsidiaries has been and is presently being conducted in compliance with all
applicable federal, state, local and foreign governmental laws, rules,
regulations and ordinances, except as set forth in the Commission Documents and
except for such non-compliance which, individually or in the aggregate, would
not have a Material Adverse Effect.

 

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Section 4.13 Certain Fees. Except for the placement fee payable by the Company
to Reedland Capital Partners, an Institutional Division of the Financial West
Group, Member NASD/SIPC (“Reedland”), which shall be set forth in a separate
placement agency agreement between the Company and Reedland (a true and complete
fully executed copy of which has heretofore been provided to the Investor), no
brokers, finders or financial advisory fees or commissions shall be payable by
the Company or any Subsidiary (or any of their respective affiliates) with
respect to the transactions contemplated by this Agreement.

Section 4.14 Operation of Business. (a) The Company or one or more of its
Subsidiaries possesses such permits, licenses, approvals, consents and other
authorizations (collectively, “Governmental Licenses”) issued by the appropriate
federal, state, local or foreign regulatory agencies or bodies necessary to
conduct the business now operated by it, except where the failure to possess
such Governmental Licenses, individually or in the aggregate, would not have a
Material Adverse Effect. The Company and its Subsidiaries are in compliance with
the terms and conditions of all such Governmental Licenses, except where the
failure to so comply, individually or in the aggregate, would not have a
Material Adverse Effect. All of the Governmental Licenses are valid and in full
force and effect, except where the invalidity of such Governmental Licenses or
the failure of such Governmental Licenses to be in full force and effect,
individually or in the aggregate, would not have a Material Adverse Effect. This
Section 4.14 does not relate to environmental matters, such items being the
subject of Section 4.15.

(b) The Company or one or more of its Subsidiaries owns or possesses the
patents, patent rights, licenses, inventions, copyrights, know-how (including
trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures), trademarks, service marks,
trade names, trade dress, logos, copyrights and other intellectual property,
including, without limitation, all of the intellectual property described in the
Commission Documents as being owned or licensed by the Company (collectively,
“Intellectual Property”), necessary to carry on the business now operated by it,
except where the failure to so own or possess, individually or in the aggregate,
would not have a Material Adverse Effect. Except as set forth in the Commission
Documents, there are no actions, suits or judicial proceedings pending, or to
the Company’s knowledge threatened, relating to patents or proprietary
information to which the Company or any of its Subsidiaries is a party or of
which any property of the Company or any of its Subsidiaries is subject, and,
except as set forth in the Commission Documents, neither the Company nor any of
its Subsidiaries has received any notice or is otherwise aware of any
infringement of or conflict with asserted rights of others with respect to any
Intellectual Property or of any facts or circumstances which could render any
Intellectual Property invalid or inadequate to protect the interest of the
Company and its Subsidiaries therein, and which infringement or conflict (if the
subject of any unfavorable decision, ruling or finding) or invalidity or
inadequacy, individually or in the aggregate, would have a Material Adverse
Effect. Nothing contained in this Section 4.14 shall apply to any proceedings
relating to new patents that as of the Effective Date have not been issued to
the Company.

 

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Section 4.15 Environmental Compliance. Except as disclosed in the Commission
Documents, the Company and each of its Subsidiaries have obtained all material
approvals, authorization, certificates, consents, licenses, orders and permits
or other similar authorizations of all governmental authorities, or from any
other person, that are required under any Environmental Laws, except for any
approvals, authorization, certificates, consents, licenses, orders and permits
or other similar authorizations the failure of which to obtain does not or would
not have a Material Adverse Effect. “Environmental Laws” shall mean all
applicable laws relating to the protection of the environment including, without
limitation, all requirements pertaining to reporting, licensing, permitting,
controlling, investigating or remediating emissions, discharges, releases or
threatened releases of hazardous substances, chemical substances, pollutants,
contaminants or toxic substances, materials or wastes, whether solid, liquid or
gaseous in nature, into the air, surface water, groundwater or land, or relating
to the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of hazardous substances, chemical substances, pollutants,
contaminants or toxic substances, material or wastes, whether solid, liquid or
gaseous in nature. Except for such instances as would not, individually or in
the aggregate, have a Material Adverse Effect, to the best of the Company’s
knowledge, there are no past or present events, conditions, circumstances,
incidents, actions or omissions relating to or in any way affecting the Company
or its Subsidiaries that violate or could reasonably be expected to violate any
Environmental Law after the Effective Date or that could reasonably be expected
to give rise to any environmental liability, or otherwise form the basis of any
claim, action, demand, suit, proceeding, hearing, study or investigation
(i) under any Environmental Law, or (ii) based on or related to the manufacture,
processing, distribution, use, treatment, storage (including without limitation
underground storage tanks), disposal, transport or handling, or the emission,
discharge, release or threatened release of any hazardous substance.

Section 4.16 Material Agreements. Except as set forth or described in the
Commission Documents, neither the Company nor any Subsidiary of the Company is a
party to any written or oral contract, instrument, agreement commitment,
obligation, plan or arrangement, a copy of which would be required to be filed
with the Commission as an exhibit to an annual report on Form 10-K
(collectively, “Material Agreements”). The Company and each of its Subsidiaries
have performed in all material respects all the obligations required to be
performed by them under the Material Agreements, have received no notice of
default or an event of default by the Company or any of its Subsidiaries
thereunder and the Company has no knowledge of any basis for the assertion
thereof, and neither the Company or any of its Subsidiaries nor, to the best
knowledge of the Company, any other contracting party thereto are in default
under any Material Agreement now in effect, the result of which would have a
Material Adverse Effect. Each of the Material Agreements is in full force and
effect, and constitutes a legal, valid and binding obligation enforceable in
accordance with its terms against the Company and/or any of its Subsidiaries
and, to the best knowledge of the Company, each other contracting party thereto,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation, conservatorship,
receivership or similar laws relating to, or affecting generally the enforcement
of, creditor’s rights and remedies or by other equitable principles of general
application.

Section 4.17 Transactions With Affiliates. Except as set forth in the Commission
Documents, there are no loans, leases, agreements, contracts, royalty
agreements, management

 

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contracts, service arrangements or other continuing transactions exceeding
$120,000 between (a) the Company or any Subsidiary, on the one hand, and (b) any
person or entity who would be covered by Item 404(a) of Regulation S-K, on the
other hand. Except as disclosed in the Commission Documents, there are no
outstanding amounts payable to or receivable from, or advances by the Company or
any of its Subsidiaries to, and neither the Company nor any of its Subsidiaries
is otherwise a creditor of or debtor to, any beneficial owner of more than 5% of
the outstanding shares of Common Stock, or any director, employee or affiliate
of the Company or any of its Subsidiaries, other than (i) reimbursement for
reasonable expenses incurred on behalf of the Company or any of its Subsidiaries
or (ii) as part of the normal and customary terms of such persons’ employment or
service as a director with the Company or any of its Subsidiaries.

Section 4.18 Securities Act; NASD Conduct Rules. The Company has complied with
all applicable federal and state securities laws in connection with the offer,
issuance and sale of the Shares hereunder.

(i) The Company has prepared and filed with the Commission in accordance with
the provisions of the Securities Act the Registration Statement, including the
Base Prospectus, relating to the Shares. The Registration Statement was declared
effective by order of the Commission on June 6, 2001. As of the date hereof, no
stop order suspending the effectiveness of the Registration Statement has been
issued by the Commission or is continuing in effect under the Securities Act and
no proceedings therefor are pending before or, to the Company’s knowledge,
threatened by the Commission. No order preventing or suspending the use of the
Prospectus or any Permitted Free Writing Prospectus has been issued by the
Commission.

(ii) The Company meets the requirements for the use of Form S-3 under the
Securities Act. The Commission has not notified the Company of any objection to
the use of the form of the Registration Statement. The Registration Statement
complied in all material respects on the date on which it was declared effective
by the Commission and on the Effective Date of this Agreement, and will comply
in all material respects on each applicable Fixed Request Exercise Date and on
each applicable Settlement Date, with the requirements of the Securities Act and
the Registration Statement (including the documents incorporated by reference
therein) did not on the date it was declared effective by the Commission and on
the Effective Date of this Agreement and shall not on each applicable Fixed
Request Exercise Date and on each applicable Settlement Date 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;
provided that this representation and warranty does not apply to statements in
or omissions from the Registration Statement made in reliance upon and in
conformity with information relating to the Investor furnished to the Company in
writing by or on behalf of the Investor expressly for use therein. The
Registration Statement, as of the Effective Date, meets the requirements set
forth in Rule 415(a)(1)(x) under the Securities Act. The Base Prospectus
complied in all material respects on its date and on the Effective Date, and
will comply in all material respects on each applicable Fixed Request Exercise
Date and on each applicable Settlement Date, with the requirements of the
Securities Act and did not on its date and on the Effective Date and shall not
on each applicable Fixed Request Exercise Date and on each applicable Settlement
Date contain an untrue statement of a material fact or omit to state a material
fact required to be stated

 

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therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided that this
representation and warranty does not apply to statements in or omissions from
the Base Prospectus made in reliance upon and in conformity with information
relating to the Investor furnished to the Company in writing by or on behalf of
the Investor expressly for use therein.

(iii) In accordance with Rule 2710(b)(7)(C)(i) of the Conduct Rules of the
National Association of Securities Dealers, Inc., the offering of the Shares
pursuant to this Agreement has been registered with the Commission on Form S-3
under the Securities Act pursuant to the standards for Form S-3 in effect prior
to October 21, 1992, and the Shares are being offered pursuant to Rule 415
promulgated under the Securities Act.

(iv) Each Prospectus Supplement required to be filed pursuant to Sections 1.4
and 5.9 hereof, on its date and on the applicable Settlement Date, shall comply
in all material respects with the provisions of the Securities Act and shall not
on its date and on the applicable Settlement Date 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 the light of the circumstances
under which they are made, not misleading, except that this representation and
warranty does not apply to statements in or omissions from any Prospectus
Supplement made in reliance upon and in conformity with information relating to
the Investor furnished to the Company in writing by or on behalf of the Investor
expressly for use therein.

(v) At the earliest time after the filing of the Registration Statement that the
Company or another offering participant made a bona fide offer (within the
meaning of Rule 164(h)(2) under the Securities Act) relating to the Shares, the
Company was not and is not an Ineligible Issuer (as defined in Rule 405 under
the Securities Act), without taking account of any determination by the
Commission pursuant to Rule 405 that it is not necessary that the Company be
considered an Ineligible Issuer. Each Permitted Free Writing Prospectus
(a) shall conform in all material respects to the requirements of the Securities
Act on the date of its first use, (b) when considered together with the
Prospectus on each applicable Fixed Request Exercise Date and on each applicable
Settlement Date, shall 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 the light of the circumstances under which they are
made, not misleading, and (c) shall not include any information that conflicts
with the information contained in the Registration Statement, including any
document incorporated by reference therein and any Prospectus Supplement deemed
to be a part thereof that has not been superseded or modified. The immediately
preceding sentence does not apply to statements in or omissions from any
Permitted Free Writing Prospectus made in reliance upon and in conformity with
information relating to the Investor furnished to the Company in writing by or
on behalf of the Investor expressly for use therein.

(vi) Prior to the Effective Date, the Company has not distributed any offering
material in connection with the offering and sale of the Shares. From and after
the Effective Date and prior to the completion of the distribution of the
Shares, the Company shall not distribute any offering material in connection
with the offering and sale of the Shares, other than the Registration Statement,
the Base Prospectus as supplemented by any Prospectus Supplement or a Permitted
Free Writing Prospectus.

 

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Section 4.19 Employees. As of the Effective Date, neither the Company nor any
Subsidiary of the Company has any collective bargaining arrangements or
agreements covering any of its employees, except as set forth in the Commission
Documents. As of the Effective Date, except as disclosed in the Registration
Statement or the Commission Documents, no officer, consultant or key employee of
the Company or any Subsidiary whose termination, either individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect, has
terminated or, to the knowledge of the Company, has any present intention of
terminating his or her employment or engagement with the Company or any
Subsidiary.

Section 4.20 Use of Proceeds. The proceeds from the sale of the Shares shall be
used by the Company and its Subsidiaries as set forth in the Base Prospectus and
any Prospectus Supplement filed pursuant to Sections 1.4 and 5.9.

Section 4.21 Public Utility Holding Company Act and Investment Company Act
Status. The Company is not a “holding company” or a “public utility company” as
such terms are defined in the Public Utility Holding Company Act of 1935, as
amended. The Company is not, and as a result of the consummation of the
transactions contemplated by this Agreement and the application of the proceeds
from the sale of the Shares as set forth in the Base Prospectus and any
Prospectus Supplement shall not be, an “investment company” or a company
“controlled” by an “investment company,” within the meaning of the Investment
Company Act of 1940, as amended.

Section 4.22 ERISA. No liability to the Pension Benefit Guaranty Corporation has
been incurred with respect to any Plan by the Company or any of its Subsidiaries
which has had or would have a Material Adverse Effect. No “prohibited
transaction” (as defined in Section 406 of ERISA or Section 4975 of the Code) or
“accumulated funding deficiency” (as defined in Section 203 of ERISA) or any of
the events set forth in Section 4043(b) of ERISA has occurred with respect to
any Plan which has had or would have a Material Adverse Effect, and the
execution and delivery of this Agreement and the issuance and sale of the Shares
hereunder shall not result in any of the foregoing events. Each Plan is in
compliance in all material respects with applicable law, including ERISA and the
Code; the Company has not incurred and does not expect to incur liability under
Title IV of ERISA with respect to the termination of, or withdrawal from, any
Plan; and each Plan for which the Company would have any liability that is
intended to be qualified under Section 401(a) of the Code is so qualified in all
material respects and nothing has occurred, whether by action or failure to act,
which would cause the loss of such qualifications. As used in this Section 4.22,
the term “Plan” shall mean an “employee pension benefit plan” (as defined in
Section 3 of ERISA) which is or has been established or maintained, or to which
contributions are or have been made, by the Company or any Subsidiary or by any
trade or business, whether or not incorporated, which, together with the Company
or any Subsidiary, is under common control, as described in Section 414(b) or
(c) of the Code.

 

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Section 4.23 Taxes. The Company (i) has filed all necessary federal, state and
foreign income and franchise tax returns or has duly requested extensions
thereof, except for those the failure of which to file would not have a Material
Adverse Effect, (ii) has paid all federal, state, local and foreign taxes due
and payable for which it is liable, except to the extent that any such taxes are
being contested in good faith and by appropriate proceedings, except for such
taxes the failure of which to pay would not have a Material Adverse Effect, and
(iii) does not have any tax deficiency or claims outstanding or assessed or, to
the best of the Company’s knowledge, proposed against it which would have a
Material Adverse Effect.

Section 4.24 Insurance. The Company carries, or is covered by, insurance in such
amounts and covering such risks as is adequate for the conduct of its and its
Subsidiaries’ businesses and the value of their respective properties and as is
customary for companies engaged in similar businesses in similar industries.

Section 4.25 Acknowledgement Regarding Investor’s Purchase of Shares. The
Company acknowledges and agrees that the Investor is acting solely in the
capacity of an arm’s length purchaser with respect to this Agreement and the
transactions contemplated hereunder. The Company further acknowledges that the
Investor is not acting as a financial advisor or fiduciary of the Company (or in
any similar capacity) with respect to this Agreement and the transactions
contemplated hereunder, and any advice given by the Investor or any of its
representatives or agents in connection with this Agreement and the transactions
contemplated hereunder is merely incidental to the Investor’s purchase of the
Shares.

ARTICLE V

COVENANTS

The Company covenants with the Investor, and the Investor covenants with the
Company, as follows, which covenants of one party are for the benefit of the
other party, during the Investment Period:

Section 5.1 Securities Compliance. The Company shall notify the Commission and
the Trading Market, as applicable, in accordance with their respective rules and
regulations, of the transactions contemplated by this Agreement, and shall take
all necessary action, undertake all proceedings and obtain all registrations,
permits, consents and approvals for the legal and valid issuance of the Shares
to the Investor in accordance with the terms of this Agreement.

Section 5.2 Registration and Listing. The Company shall take all action
necessary to cause the Common Stock to continue to be registered as a class of
securities under Sections 12(b) or 12(g) of the Exchange Act, shall comply with
its reporting and filing obligations under the Exchange Act, and shall not take
any action or file any document (whether or not permitted by the Securities Act)
to terminate or suspend such registration or to terminate or suspend its
reporting and filing obligations under the Exchange Act or Securities Act,
except as permitted herein. The Company shall take all action necessary to
continue the listing and trading of its Common Stock and the listing of the
Shares purchased by Investor hereunder on the Trading Market, and shall comply
with the Company’s reporting, filing and other obligations under the bylaws,
listed securities maintenance standards and other rules of the Trading Market.

 

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Section 5.3 Compliance with Laws.

(i) The Company shall comply, and cause each Subsidiary to comply, (a) with all
laws, rules, regulations and orders applicable to the business and operations of
the Company and its Subsidiaries except as would not have a Material Adverse
Effect and (b) with all applicable provisions of the Securities Act, the
Exchange Act and the listing standards of the Trading Market. Without limiting
the generality of the foregoing, neither the Company nor any of its officers,
directors or affiliates has taken or will take, directly or indirectly, any
action designed or intended to stabilize or manipulate the price of any security
of the Company, or which caused or resulted in, or which would in the future
reasonably be expected to cause or result in, stabilization or manipulation of
the price of any security of the Company.

(ii) The Investor shall comply with all laws, rules, regulations and orders
applicable to the performance by it of its obligations under this Agreement and
its investment in the Shares, except as would not, individually or in the
aggregate, prohibit or otherwise interfere with the ability of the Investor to
enter into and perform its obligations under this Agreement in any material
respect. Without limiting the foregoing, the Investor shall comply with all
applicable provisions of the Securities Act and the Exchange Act.

Section 5.4 Keeping of Records and Books of Account; Foreign Corrupt Practices
Act.

(i) The Company shall keep and cause each Subsidiary to keep adequate records
and books of account, in which complete entries shall be made in accordance with
GAAP consistently applied, reflecting all financial transactions of the Company
and its Subsidiaries, and in which, for each fiscal year, all proper reserves
for depreciation, depletion, obsolescence, amortization, taxes, bad debts and
other purposes in connection with its business shall be made. The Company shall
maintain a system of internal accounting controls which are sufficient to
provide reasonable assurance that (a) transactions are executed with
management’s authorization; (b) transactions are recorded as necessary to permit
preparation of the consolidated financial statements of the Company and to
maintain accountability for the Company’s consolidated assets; (c) access to the
Company’s assets is permitted only in accordance with management’s
authorization; and (d) the reporting of the Company’s assets is compared with
existing assets at regular intervals.

(ii) Neither the Company, nor any of its Subsidiaries, nor to the knowledge of
the Company, any of their respective directors, officers, agents, employees or
any other persons acting on their behalf shall, in connection with the operation
of their respective businesses, (a) use any corporate funds for unlawful
contributions, payments, gifts or entertainment or to make any unlawful
expenditures relating to political activity to government officials, candidates
or members of political parties or organizations, (b) pay, accept or receive any
unlawful contributions, payments, expenditures or gifts, or (c) violate or
operate in noncompliance with any export restrictions, anti-boycott regulations,
embargo regulations or other applicable domestic or foreign laws and
regulations.

 

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(iii) From time to time from and after the period beginning with the second
Trading Day immediately preceding each Fixed Request Exercise Date through and
including the applicable Settlement Date, the Company shall make available for
inspection and review by the Investor, customary documentation allowing the
Investor and/or its appointed counsel or advisors to conduct due diligence.

Section 5.5 Limitations on Holdings and Issuances. At no time during the term of
this Agreement shall the Investor directly or indirectly own more than 9.9% of
the then issued and outstanding shares of Common Stock. The Company shall not be
obligated to issue and the Investor shall not be obligated to purchase any
shares of Common Stock which would result in the issuance under this Agreement
to the Investor at any time of Shares which, when aggregated with all other
shares of Common Stock then owned beneficially by the Investor, would result in
the beneficial ownership by the Investor of more than 9.9% of the then issued
and outstanding shares of the Common Stock.

Section 5.6 Other Agreements and Other Financings.

(i) The Company shall not enter into, announce or recommend to its stockholders
any agreement, plan, arrangement or transaction in or of which the terms thereof
would restrict, materially delay, conflict with or impair the ability or right
of the Company or any Subsidiary to perform their obligations under this
Agreement, including, without limitation, the obligation of the Company to
deliver Shares to the Investor in respect of a Fixed Request on the applicable
Settlement Date.

(ii) The Company shall notify the Investor, within 48 hours (excluding
Saturdays, Sundays and public holidays), if it enters into any agreement, plan,
arrangement or transaction with a third party, the principal purpose of which is
to obtain during a Pricing Period an Other Financing not constituting an
Acceptable Financing (an “Other Financing Notice”); provided, however, that the
Company shall notify the Investor immediately (an “Integration Notice”) if it
enters into any agreement, plan, arrangement or transaction with a third party,
the principal purpose of which is to obtain an Other Financing which would
likely be integrated with the transactions contemplated by this Agreement for
purposes of determining whether approval of the Company’s stockholders is
required under any bylaw, listed securities maintenance standards or other rules
of the Trading Market and, if required under applicable law, including, without
limitation, Regulation FD promulgated by the Commission, or under the applicable
rules and regulations of the Trading Market, the Company shall simultaneously
publicly disclose such information in accordance with Regulation FD and the
applicable rules and regulations of the Trading Market. For purposes of this
Section 5.6(ii), any press release issued by, or Commission Document filed by,
the Company shall constitute sufficient notice, provided that it is issued or
filed, as the case may be, within the time requirements set forth in the first
sentence of this Section 5.6(ii) for an Other Financing Notice or an Integration
Notice, as applicable. During any Pricing Period in which the Company is
required to provide an Other Financing Notice pursuant to the first sentence of
this Section 5.6(ii), the Investor shall (i) have the option to purchase the
Shares subject to the Fixed Request at (x) the price therefor in accordance with
the terms of this Agreement or (y) the third party’s per share purchase price in
connection with the Other Financing, net of such third party’s discounts,
Warrant Value and fees, or (ii) the Investor may

 

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elect to not purchase any Shares subject to the Fixed Request for that Pricing
Period. An “Other Financing” shall mean (x) the issuance of Common Stock for a
purchase price less than, or the issuance of securities convertible into or
exchangeable for Common Stock at an exercise or conversion price (as the case
may be) less than, the then Current Market Price of the Common Stock (in each
case, after all fees, discounts, Warrant Value and commissions associated with
the transaction) (a “Below Market Offering”); (y) the implementation by the
Company of any mechanism in respect of any securities convertible into or
exchangeable for Common Stock for the reset of the purchase price of the Common
Stock to below the then Current Market Price of the Common Stock (including,
without limitation, any antidilution or similar adjustment provisions in respect
of any Company securities, but specifically excluding customary adjustments for
stock splits, stock dividends, stock combinations and similar events); or
(z) the issuance of options, warrants or similar rights of subscription in each
case not constituting an Acceptable Financing. “Acceptable Financing” shall mean
the issuance by the Company of: (1) shares of Common Stock or securities
convertible into or exchangeable for Common Stock other than in connection with
a Below Market Offering; (2) shares of Common Stock or securities convertible
into or exchangeable for Common Stock in connection with awards under the
Company’s benefit and equity plans and arrangements or shareholder rights plan
and the issuance of shares of Common Stock upon the conversion, exercise or
exchange thereof; (3) shares of Common Stock issuable upon the conversion or
exchange of equity awards or convertible or exchangeable securities outstanding
as of the Effective Date; (4) shares of Common Stock and/or warrants or similar
rights to subscribe for the purchase of shares of Common Stock in connection
with technology sharing, licensing, research and joint development agreements
(or amendments thereto) with third parties, and the issuance of shares of Common
Stock upon the exercise thereof; and (5) shares of Common Stock and/or warrants
or similar rights to subscribe for the purchase of shares of Common Stock issued
in connection with equipment financings and/or real property leases (or
amendments thereto) and the issuance of shares of Common Stock upon the exercise
thereof.

Section 5.7 Stop Orders. The Company shall advise the Investor immediately and
shall confirm such advice in writing: (i) of the Company’s receipt of notice of
any request by the Commission for amendment of or a supplement to the
Registration Statement, the Prospectus, any Permitted Free Writing Prospectus or
for any additional information with respect thereto; (ii) of the Company’s
receipt of notice of the issuance by the Commission of any stop order suspending
the effectiveness of the Registration Statement or of the suspension of
qualification of the Shares for offering or sale in any jurisdiction or the
initiation of any proceeding for such purpose; and (iii) of the Company becoming
aware of the happening of any event, which makes any statement of a material
fact made in the Prospectus or any Permitted Free Writing Prospectus untrue or
which requires the making of any additions to or changes to the statements then
made in the Prospectus or any Permitted Free Writing Prospectus in order to
state a material fact required by the Securities Act to be stated therein or
necessary in order to make the statements then made therein, in light of the
circumstances under which they were made, not misleading, or of the necessity to
amend the Registration Statement or supplement the Prospectus or any Permitted
Free Writing Prospectus to comply with the Securities Act or any other law. If
at any time the Commission shall issue any stop order suspending the
effectiveness of the Registration Statement, the Company shall use commercially
reasonable efforts to obtain the withdrawal of such order at the earliest
possible time.

 

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Section 5.8 Amendments to the Registration Statement; Prospectus Supplements;
Free Writing Prospectuses.

(i) Except as provided in this Agreement and other than periodic reports
required to be filed pursuant to the Exchange Act, the Company shall not file
with the Commission any amendment to the Registration Statement that relates to
the Investor, the Agreement or the transactions contemplated hereby or file with
the Commission any Prospectus Supplement that relates to the Investor, this
Agreement or the transactions contemplated hereby with respect to which (a) the
Investor shall not previously have been advised, (b) the Company shall not have
given due consideration to any comments thereon received from the Investor or
its counsel, or (c) the Investor shall reasonably object after being so advised,
unless it is necessary to amend the Registration Statement or make any
supplement to the Prospectus to comply with the Securities Act or any other
applicable law or regulation, in which case the Company shall immediately so
inform the Investor, the Investor shall be provided with a reasonable
opportunity to review and comment upon any disclosure relating to the Investor
and the Company shall expeditiously furnish to the Investor an electronic copy
thereof. In addition, for so long as, in the reasonable opinion of counsel for
the Investor, the Prospectus (or in lieu thereof, the notice referred to in Rule
173(a) under the Securities Act) is required to be delivered in connection with
any purchase of Shares by the Investor, the Company shall not file any
Prospectus Supplement with respect to the Shares without delivering or making
available a copy of such Prospectus Supplement, together with the Base
Prospectus, to the Investor promptly.

(ii) The Company agrees that, unless it obtains the prior written consent of the
Investor, it has not made and will not make an offer relating to the Shares that
would constitute an Issuer Free Writing Prospectus or that would otherwise
constitute a Free Writing Prospectus required to be filed by the Company or the
Investor with the Commission or retained by the Company or the Investor under
Rule 433 under the Securities Act. The Investor agrees that, unless it obtains
the prior written consent of the Company, it has not made and will not make an
offer relating to the Shares that would constitute a Free Writing Prospectus
required to be filed by the Company with the Commission or retained by the
Company under Rule 433 under the Securities Act. Any such Issuer Free Writing
Prospectus or other Free Writing Prospectus consented to by the Investor or the
Company is referred to in this Agreement as a “Permitted Free Writing
Prospectus.” The Company agrees that (x) it has treated and will treat, as the
case may be, each Permitted Free Writing Prospectus as an Issuer Free Writing
Prospectus and (y) it has complied and will comply, as the case may be, with the
requirements of Rules 164 and 433 under the Securities Act applicable to any
Permitted Free Writing Prospectus, including in respect of timely filing with
the Commission, legending and record keeping.

Section 5.9 Prospectus Delivery. The Company shall file with the Commission a
Prospectus Supplement pursuant to Rule 424(b) under the Securities Act on the
first Trading Day immediately following the last Trading Day of each Pricing
Period. The Company shall provide the Investor a reasonable opportunity to
comment on a draft of each such Prospectus Supplement and any Issuer Free
Writing Prospectus, shall give due consideration to all such comments and,
subject to the provisions of Section 5.8 hereof, shall deliver or make available
to the Investor, without charge, an electronic copy of each form of Prospectus
Supplement, together with the Base Prospectus, and any Permitted Free Writing
Prospectus on each applicable Settlement Date.

 

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The Company consents to the use of the Prospectus (and of any Prospectus
Supplement thereto) in accordance with the provisions of the Securities Act and
with the securities or “blue sky” laws of the jurisdictions in which the Shares
may be sold by the Investor, in connection with the offering and sale of the
Shares and for such period of time thereafter as the Prospectus (or in lieu
thereof, the notice referred to in Rule 173(a) under the Securities Act) is
required by the Securities Act to be delivered in connection with sales of the
Shares. If during such period of time any event shall occur that in the judgment
of the Company and its counsel is required to be set forth in the Prospectus or
any Permitted Free Writing Prospectus or should be set forth therein in order to
make the statements made therein, in the light of the circumstances under which
they were made, not misleading, or if it is necessary to supplement or amend the
Prospectus or any Permitted Free Writing Prospectus to comply with the
Securities Act or any other applicable law or regulation, the Company shall
forthwith prepare and, subject to Section 5.8 above, file with the Commission an
appropriate Prospectus Supplement to the Prospectus (or supplement to the
Permitted Free Writing Prospectus) and shall expeditiously furnish or make
available to the Investor an electronic copy thereof.

Section 5.10 Selling Restrictions.

(i) The Investor covenants that from and after the date hereof through and
including the 90th day next following the termination of this Agreement (the
“Restricted Period”), neither the Investor nor any of its affiliates (within the
meaning of the Exchange Act) nor any entity managed by the Investor shall,
directly or indirectly, sell any securities of the Company, except the Shares
that it owns or has the right to purchase as provided in a Fixed Request Notice.
During the Restricted Period, neither the Investor or any of its affiliates nor
any entity managed by the Investor shall sell any shares of Common Stock of the
Company it does not “own” or have the unconditional right to receive under the
terms of this Agreement (within the meaning of Rule 200 of Regulation SHO
promulgated by the Commission under the Exchange Act), including Shares in any
account of the Investor or in any account directly or indirectly managed by the
Investor or any of its affiliates or any entity managed by the Investor. Without
limiting the generality of the foregoing, prior to and during the Restricted
Period, neither the Investor nor any of its affiliates nor any entity managed by
the Investor or any of its affiliates shall enter into a short position with
respect to shares of Common Stock of the Company, including in any account of
the Investor’s or in any account directly or indirectly managed by the Investor
or any of its Affiliates or any entity managed by the Investor, except that the
Investor may sell Shares that it is obligated to purchase under a pending Fixed
Request Notice but has not yet taken possession of so long as the Investor (or
the Broker-Dealer, as applicable) covers any such sales with the Shares
purchased pursuant to such Fixed Request Notice; provided, however, that the
Investor (or the Broker-Dealer, as applicable) shall not be required to cover
any such sales with the Shares purchased pursuant to such Fixed Request Notice
if (a) the Fixed Request is terminated by mutual agreement of the Company and
the Investor and, as a result of such termination, no Shares are delivered to
the Investor under this Agreement or (b) the Company otherwise fails to deliver
such Shares to the Investor on the applicable Settlement Date upon the terms and
subject to the provisions of this Agreement. Prior to and during the Restricted
Period, the Investor shall not grant any option to purchase or acquire any right
to dispose or otherwise dispose for value of any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for, or warrants to
purchase, any shares

 

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of Common Stock, or enter into any swap, hedge or other agreement that
transfers, in whole or in part, the economic risk of ownership of the Common
Stock, except for such sales expressly permitted by this Section 5.10(i).

(ii) In addition to the foregoing, in connection with any sale of the Company’s
securities (including any sale permitted by paragraph (i) above), the Investor
shall comply in all respects with all applicable laws, rules, regulations and
orders, including, without limitation, the requirements of the Securities Act
and the Exchange Act.

Section 5.11 Effective Registration Statement. During the Investment Period, the
Company shall use its best efforts to maintain the continuous effectiveness of
the Registration Statement under the Securities Act.

Section 5.12 Non-Public Information. Neither the Company nor any of its
directors, officers or agents shall disclose any material non-public information
about the Company to the Investor, unless a simultaneous public announcement
thereof is made by the Company in the manner contemplated by Regulation FD.

Section 5.13 Broker/Dealer. The Investor shall use one or more broker-dealers to
effectuate all sales, if any, of the Shares that it may purchase from the
Company pursuant to this Agreement which (or whom) shall be unaffiliated with
the Investor and not then currently engaged or used by the Company
(collectively, the “Broker-Dealer”). The Investor shall provide the Company with
all information regarding the Broker-Dealer reasonably requested by the Company.
The Investor shall be solely responsible for all fees and commissions of the
Broker-Dealer.

Section 5.14 Update of Disclosure Schedule. During the Investment Period, the
Company shall from time to time update the Disclosure Schedule as may be
required to satisfy the condition set forth in Section 6.3(i). For purposes of
this Section 5.14, any disclosure made in a schedule to the Compliance
Certificate shall be deemed to be an update of the Disclosure Schedule.
Notwithstanding anything in this Agreement to the contrary, no update to the
Disclosure Schedule pursuant to this Section 5.14 shall cure any breach of a
representation or warranty of the Company contained in this Agreement and shall
not affect any of the Investor’s remedies with respect thereto.

ARTICLE VI

OPINION OF COUNSEL AND CERTIFICATE; CONDITIONS TO THE SALE AND

PURCHASE OF THE SHARES

Section 6.1 Opinion of Counsel and Certificate. Simultaneously with the
execution and delivery of this Agreement, the Investor has received and relied
upon (i) an opinion of outside counsel to the Company, dated the Effective Date,
in the form mutually agreed to by the parties hereto, and (ii) a certificate
from the Company, dated the Effective Date, in the form of Exhibit C hereto.

Section 6.2 Conditions Precedent to the Obligation of the Company. The
obligation hereunder of the Company to issue and sell the Shares to the Investor
under any Fixed

 

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Request Notice or Optional Amount is subject to the satisfaction or (to the
extent permitted by applicable law) waiver of each of the conditions set forth
below. These conditions are for the Company’s sole benefit and (to the extent
permitted by applicable law) may be waived by the Company at any time in its
sole discretion.

(i) Accuracy of the Investor’s Representations and Warranties. The
representations and warranties of the Investor contained in Article III of this
Agreement (i) that are not qualified by “materiality” shall have been true and
correct in all material respects when made and shall be true and correct in all
material respects as of the applicable Fixed Request Exercise Date and the
applicable Settlement Date with the same force and effect as if made on such
dates, except to the extent such representations and warranties are as of
another date, in which case, such representations and warranties shall be true
and correct in all material respects as of such other date and (ii) that are
qualified by “materiality” shall have been true and correct when made and shall
be true and correct as of the applicable Fixed Request Exercise Date and the
applicable Settlement Date with the same force and effect as if made on such
dates, except to the extent such representations and warranties are as of
another date, in which case, such representations and warranties shall be true
and correct as of such other date.

(ii) Registration Statement. The Registration Statement is effective and neither
the Company nor the Investor shall have received notice that the Commission has
issued or intends to issue a stop order with respect to the Registration
Statement. The Company shall have a maximum dollar amount of Shares registered
under the Registration Statement which are in an amount (A) as of the Effective
Date, not less than the maximum dollar amount worth of Shares issuable pursuant
to all Fixed Request Notices and Optional Amounts during the Investment Period
and (B) as of the applicable Fixed Request Exercise Date, not less than the
maximum dollar amount worth of Shares issuable pursuant to the applicable Fixed
Request Notice and applicable Optional Amount, if any. The Current Report shall
have been filed with the Commission, as required pursuant to Section 1.4, and
all Prospectus Supplements shall have been filed with the Commission, as
required pursuant to Sections 1.4 and 5.9 hereof, to disclose the sale of the
Shares prior to each Settlement Date, as applicable. Any other material required
to be filed by the Company or any other offering participant pursuant to Rule
433(d) under the Securities Act shall have been filed with the Commission within
the applicable time periods prescribed for such filings by Rule 433 under the
Securities Act.

(iii) Performance by the Investor. The Investor shall have performed, satisfied
and complied in all material respects with all covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied
with by the Investor at or prior to the applicable Fixed Request Exercise Date
and the applicable Settlement Date.

(iv) No Injunction. No statute, regulation, order, decree, writ, ruling or
injunction shall have been enacted, entered, promulgated, threatened or endorsed
by any court or governmental authority of competent jurisdiction which prohibits
the consummation of or which would materially modify or delay any of the
transactions contemplated by this Agreement.

(v) No Suspension, Etc. Trading in the Common Stock shall not have been
suspended by the Commission or the Trading Market (except for any suspension of
trading of

 

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limited duration agreed to by the Company, which suspension shall be terminated
prior to the applicable Fixed Request Exercise Date and applicable Settlement
Date), and, at any time prior to the applicable Fixed Request Exercise Date and
applicable Settlement Date, none of the events described in clauses (i),
(ii) and (iii) of Section 5.7 shall have occurred, trading in securities
generally as reported on the Trading Market shall not have been suspended or
limited, nor shall a banking moratorium have been declared either by the United
States or New York State authorities, nor shall there have occurred any material
outbreak or escalation of hostilities or other national or international
calamity or crisis of such magnitude in its effect on, or any material adverse
change in, any financial market which, in each case, in the reasonable judgment
of the Company, makes it impracticable or inadvisable to issue the Shares.

(vi) No Proceedings or Litigation. No action, suit or proceeding before any
arbitrator or any court or governmental authority shall have been commenced or
threatened, and no inquiry or investigation by any governmental authority shall
have been commenced or threatened, against the Company or any Subsidiary, or any
of the officers, directors or affiliates of the Company or any Subsidiary,
seeking to restrain, prevent or change the transactions contemplated by this
Agreement, or seeking damages in connection with such transactions.

(vii) Aggregate Limit. The issuance and sale of the Shares issuable pursuant to
such Fixed Request Notice or Optional Amount shall not violate Sections 2.2,
2.12 and 5.5 hereof.

Section 6.3 Conditions Precedent to the Obligation of the Investor. The
obligation hereunder of the Investor to accept a Fixed Request or Optional
Amount grant and to acquire and pay for the Shares is subject to the
satisfaction or (to the extent permitted by applicable law) waiver, at or before
each Fixed Request Exercise Date and each Settlement Date, of each of the
conditions set forth below. These conditions are for the Investor’s sole benefit
and (to the extent permitted by applicable law) may be waived by the Investor at
any time in its sole discretion.

(i) Accuracy of the Company’s Representations and Warranties. The
representations and warranties of the Company contained in Article IV of this
Agreement (i) that are not qualified by “materiality” or “Material Adverse
Effect” shall have been true and correct in all material respects when made and
shall be true and correct in all material respects as of the applicable Fixed
Request Exercise Date and the applicable Settlement Date with the same force and
effect as if made on such dates, except to the extent such representations and
warranties are as of another date, in which case, such representations and
warranties shall be true and correct in all material respects as of such other
date and (ii) that are qualified by “materiality” or “Material Adverse Effect”
shall have been true and correct when made and shall be true and correct as of
the applicable Fixed Request Exercise Date and the applicable Settlement Date
with the same force and effect as if made on such dates, except to the extent
such representations and warranties are as of another date, in which case, such
representations and warranties shall be true and correct as of such other date.

(ii) Registration Statement. The Registration Statement is effective and neither
the Company nor the Investor shall have received notice that the Commission has
issued or intends to issue a stop order with respect to the Registration
Statement. The Company shall

 

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have a maximum dollar amount of Shares registered under the Registration
Statement which are in an amount (A) as of the Effective Date, not less than the
maximum dollar amount worth of Shares issuable pursuant to all Fixed Request
Notices and Optional Amounts during the Investment Period and (B) as of the
applicable Fixed Request Exercise Date, not less than the maximum dollar amount
worth of Shares issuable pursuant to the applicable Fixed Request Notice and
applicable Optional Amount, if any. The Current Report shall have been filed
with the Commission, as required pursuant to Section 1.4, and all Prospectus
Supplements shall have been filed with the Commission, as required pursuant to
Sections 1.4 and 5.9 hereof, to disclose the sale of the Shares prior to each
Settlement Date, as applicable, and an electronic copy of each such Prospectus
Supplement together with the Base Prospectus shall have been delivered or made
available to the Investor in accordance with Section 5.9 hereof. Any other
material required to be filed by the Company or any other offering participant
pursuant to Rule 433(d) under the Securities Act shall have been filed with the
Commission within the applicable time periods prescribed for such filings by
Rule 433 under the Securities Act.

(iii) No Suspension. Trading in the Common Stock shall not have been suspended
by the Commission or the Trading Market (except for any suspension of trading of
limited duration agreed to by the Company, which suspension shall be terminated
prior to the applicable Fixed Request Exercise Date and applicable Settlement
Date), and, at any time prior to the applicable Fixed Request Exercise Date and
applicable Settlement Date, none of the events described in clauses (i),
(ii) and (iii) of Section 5.7 shall have occurred, trading in securities
generally as reported on the Trading Market shall not have been suspended or
limited, nor shall a banking moratorium have been declared either by the United
States or New York State authorities, nor shall there have occurred any material
outbreak or escalation of hostilities or other national or international
calamity or crisis of such magnitude in its effect on, or any material adverse
change in, any financial market which, in each case, in the reasonable judgment
of the Investor, makes it impracticable or inadvisable to purchase the Shares.

(iv) Performance of the Company. The Company shall have performed, satisfied and
complied in all material respects with all covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the
Company at or prior to the applicable Fixed Request Exercise Date and the
applicable Settlement Date and shall have delivered to the Investor on the
applicable Settlement Date the Compliance Certificate substantially in the form
attached hereto as Exhibit D.

(v) No Injunction. No statute, rule, regulation, order, decree, writ, ruling or
injunction shall have been enacted, entered, promulgated, threatened or endorsed
by any court or governmental authority of competent jurisdiction which prohibits
the consummation of or which would materially modify or delay any of the
transactions contemplated by this Agreement.

(vi) No Proceedings or Litigation. No action, suit or proceeding before any
arbitrator or any court or governmental authority shall have been commenced or
threatened, and no inquiry or investigation by any governmental authority shall
have been commenced or threatened, against the Company or any Subsidiary, or any
of the officers, directors or affiliates of the Company or any Subsidiary,
seeking to restrain, prevent or change the transactions contemplated by this
Agreement, or seeking damages in connection with such transactions.

 

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(vii) Aggregate Limit. The issuance and sale of the Shares issuable pursuant to
such Fixed Request Notice or Optional Amount shall not violate Sections 2.2,
2.12 and 5.5 hereof.

(viii) Shares Authorized. The Shares issuable pursuant to such Fixed Request
Notice or Optional Amount shall have been duly authorized by all necessary
corporate action of the Company.

(ix) Notification of Listing of Shares. The Company shall have submitted to the
Trading Market a notification form of listing of additional shares related to
the Shares issuable pursuant to such Fixed Request or Optional Amount in
accordance with the bylaws, listed securities maintenance standards and other
rules of the Trading Market.

(x) Opinions of Counsel; Bring-Down. Subsequent to the filing of the Current
Report pursuant to Section 1.4 and prior to the first Fixed Request Exercise
Date, the Investor shall have received an opinion from outside counsel to the
Company in the form mutually agreed to by the parties hereto and an opinion from
in-house counsel to the Company in the form mutually agreed to by the parties
hereto. On each Settlement Date, the Investor shall have received an opinion
“bring down” from outside counsel to the Company in the form mutually agreed to
by the parties hereto and an opinion “bring down” from in-house counsel to the
Company in the form mutually agreed to by the parties hereto.

(xi) Payment of Investor’s Counsel Fees; Due Diligence Expenses. On the
Effective Date, the Company shall have paid by wire transfer of immediately
available funds to an account designated by the Investor’s counsel, the fees and
expenses of the Investor’s counsel in accordance with the proviso to the first
sentence of Section 9.1(i) of this Agreement. On the 30th day of the third month
in each calendar quarter during the Investment Period, the Company shall have
paid by wire transfer of immediately available funds (a) to an account
designated by the Investor, the due diligence expenses incurred by the Investor
and (b) to an account designated by the Investor’s counsel, the fees and
expenses of the Investor’s counsel, in each case, in accordance with the
provisions of the second sentence of Section 9.1(i) of this Agreement.

ARTICLE VII

TERMINATION

Section 7.1 Term, Termination by Mutual Consent. Unless earlier terminated as
provided hereunder, this Agreement shall terminate automatically on the earliest
of (i) the first day of the month next following the 24-month anniversary of the
Effective Date (the “Investment Period”), (ii) the date that the entire dollar
amount of Shares registered under the Registration Statement have been issued
and sold and (iii) the date the Investor shall have purchased the Total
Commitment of shares of Common Stock (subject in all cases to the Trading Market
Limit). The Company may terminate this Agreement effective upon three Trading
Days’ prior written notice to the Investor under Section 9.4; provided, however,
that such termination shall not occur during a Pricing Period or prior to a
Settlement Date. This Agreement may be terminated at any time by the mutual
written consent of the parties, effective as of the date of such mutual written
consent unless otherwise provided in such written consent, it being hereby
acknowledged and

 

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agreed that the Investor may not consent to such termination during a Pricing
Period or prior to a Settlement Date in the event the Investor has instructed
the Broker-Dealer to effect an open-market sale of Shares which are subject to a
pending Fixed Request Notice but which have not yet been physically delivered by
the Company (and/or credited by book-entry) to the Investor in accordance with
the terms and subject to the conditions of this Agreement.

Section 7.2 Other Termination. If the Company provides the Investor with an
Other Financing Notice (other than in respect of an underwritten public offering
or an Acceptable Financing) or an Integration Notice, the Investor shall have
the right to terminate this Agreement within the subsequent 30-day period (the
“Event Period”), effective upon one Trading Day’s prior written notice delivered
to the Company in accordance with Section 9.4 at any time during the Event
Period. The Company shall notify the Investor and the Investor shall have the
right to terminate this Agreement at any time if: (i) any condition, occurrence,
state of facts or event constituting a Material Adverse Effect has occurred and
is continuing; (ii) a Material Change in Ownership has occurred; or (iii) a
default or event of default has occurred and is continuing under the terms of
any agreement, contract, note or other instrument to which the Company or any of
its Subsidiaries is a party with respect to any indebtedness for borrowed money
representing more than 10% of the Company’s consolidated assets, in any such
case, upon one Trading Day’s prior written notice delivered to the Company in
accordance with Section 9.4 hereof.

Section 7.3 Effect of Termination. In the event of termination by the Company or
the Investor, written notice thereof shall forthwith be given to the other party
as provided in Section 9.4 and the transactions contemplated by this Agreement
shall be terminated without further action by either party. If this Agreement is
terminated as provided in Section 7.1 or 7.2 herein, this Agreement shall become
void and of no further force and effect, except as provided in Section 9.9
hereof. Nothing in this Section 7.3 shall be deemed to release the Company or
the Investor from any liability for any breach under this Agreement, or to
impair the rights of the Company and the Investor to compel specific performance
by the other party of its obligations under this Agreement.

ARTICLE VIII

INDEMNIFICATION

Section 8.1 General Indemnity.

(i) Indemnification by the Company. The Company shall indemnify and hold
harmless the Investor, the Broker-Dealer, each affiliate, employee,
representative and advisor of and to the Investor and the Broker-Dealer, and
each person, if any, who controls the Investor or the Broker-Dealer within the
meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act
from and against all losses, claims, damages, liabilities and expenses
(including reasonable costs of defense and investigation and all attorneys’
fees) to which the Investor, the Broker-Dealer and each such other person may
become subject, under the Securities Act or otherwise, insofar as such losses,
claims, damages, liabilities and expenses (or actions in respect thereof) arise
out of or are based upon (i) any violation of law (including United States
federal securities laws) in connection with the transactions contemplated by
this Agreement by

 

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the Company or any of its Subsidiaries, affiliates, officers, directors or
employees, (ii) any untrue statement or alleged untrue statement of a material
fact contained, or incorporated by reference, in the Registration Statement or
any amendment thereto or any omission or alleged omission to state therein, or
in any document incorporated by reference therein, a material fact required to
be stated therein or necessary to make the statements therein not misleading, or
(iii) any untrue statement or alleged untrue statement of a material fact
contained, or incorporated by reference, in the Prospectus, any Issuer Free
Writing Prospectus, or in any amendment thereof or supplement thereto, or in any
“issuer information” (as defined in Rule 433 under the Securities Act) of the
Company, which “issuer information” is required to be, or is, filed with the
Commission or otherwise contained in any Free Writing Prospectus, or any
amendment or supplement thereto, or any omission or alleged omission to state
therein, or in any document incorporated by reference therein, 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 (A) the Company shall not be liable under this Section 8.1(i) to
the extent that a court of competent jurisdiction shall have determined by a
final judgment (from which no further appeals are available) that such loss,
claim, damage, liability or expense resulting directly and solely from any such
acts or failures to act, undertaken or omitted to be taken by the Investor or
such person through its bad faith or willful misconduct, (B) the foregoing
indemnity shall not apply to any loss, claim, damage, liability or expense to
the extent, but only to the extent, arising out of or based upon any untrue
statement or alleged untrue statement or omission or alleged omission made in
reliance upon and in conformity with written information furnished to the
Company by the Investor expressly for use in the Current Report or any
Prospectus Supplement or Permitted Free Writing Prospectus, or any amendment
thereof or supplement thereto, and (C) with respect to the Prospectus, the
foregoing indemnity shall not inure to the benefit of the Investor or any such
person from whom the person asserting any loss, claim, damage, liability or
expense purchased Common Stock, if copies of all Prospectus Supplements required
to be filed pursuant to Section 1.4 and 5.9, together with the Base Prospectus,
were timely delivered or made available to the Investor pursuant hereto and a
copy of the Base Prospectus, together with a Prospectus Supplement (as
applicable), was not sent or given by or on behalf of the Investor or any such
person to such person, if required by law to have been delivered, at or prior to
the written confirmation of the sale of the Common Stock to such person, and if
delivery of the Base Prospectus, together with a Prospectus Supplement (as
applicable), would have cured the defect giving rise to such loss, claim,
damage, liability or expense.

The Company shall reimburse the Investor, the Broker-Dealer and each such
controlling person promptly upon demand (with accompanying presentation of
documentary evidence) for all legal and other costs and expenses reasonably
incurred by the Investor, the Broker-Dealer or such indemnified persons in
investigating, defending against, or preparing to defend against any such claim,
action, suit or proceeding with respect to which it is entitled to
indemnification.

(ii) Indemnification by the Investor. The Investor shall indemnify and hold
harmless the Company, each of its directors and officers, and each person, if
any, who controls the Company within the meaning of Section 15 of the Securities
Act or Section 20(a) of the Exchange Act from and against all losses, claims,
damages, liabilities and expenses (including reasonable costs of defense and
investigation and all attorneys fees) to which the Company and

 

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each such other person may become subject, under the Securities Act or
otherwise, insofar as such losses, claims, damages, liabilities and expenses (or
actions in respect thereof) arise out of or are based upon (i) any violation of
law (including United States federal securities laws) in connection with the
transactions contemplated by this Agreement by the Investor or any of its
affiliates, officers, directors or employees, or (ii) any untrue statement or
alleged untrue statement of a material fact contained in the Current Report or
any Prospectus Supplement or Permitted Free Writing Prospectus, or in any
amendment thereof or supplement thereto, or any omission or alleged omission to
state therein 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, in each case, to the extent, but only to the extent, the
untrue statement, alleged untrue statement, omission or alleged omission was
made in reliance upon, and in conformity with, written information furnished by
the Investor to the Company expressly for inclusion in the Current Report or
such Prospectus Supplement or Permitted Free Writing Prospectus, or any
amendment thereof or supplement thereto.

The Investor shall reimburse the Company and each such director, officer or
controlling person promptly upon demand for all legal and other costs and
expenses reasonably incurred by the Company or such indemnified persons in
investigating, defending against, or preparing to defend against any such claim,
action, suit or proceeding with respect to which it is entitled to
indemnification.

Section 8.2 Indemnification Procedures. Promptly after a person receives notice
of a claim or the commencement of an action for which the person intends to seek
indemnification under Section 8.1, the person will notify the indemnifying party
in writing of the claim or commencement of the action, suit or proceeding;
provided, however, that failure to notify the indemnifying party will not
relieve the indemnifying party from liability under Section 8.1, except to the
extent it has been materially prejudiced by the failure to give notice. The
indemnifying party will be entitled to participate in the defense of any claim,
action, suit or proceeding as to which indemnification is being sought, and if
the indemnifying party acknowledges in writing the obligation to indemnify the
party against whom the claim or action is brought, the indemnifying party may
(but will not be required to) assume the defense against the claim, action, suit
or proceeding with counsel satisfactory to it. After an indemnifying party
notifies an indemnified party that the indemnifying party wishes to assume the
defense of a claim, action, suit or proceeding, the indemnifying party will not
be liable for any legal or other expenses incurred by the indemnified party in
connection with the defense against the claim, action, suit or proceeding except
that if, in the opinion of counsel to the indemnifying party, one or more of the
indemnified parties should be separately represented in connection with a claim,
action, suit or proceeding, the indemnifying party will pay the reasonable fees
and expenses of one separate counsel for the indemnified parties. Each
indemnified party, as a condition to receiving indemnification as provided in
Section 8.1, will cooperate in all reasonable respects with the indemnifying
party in the defense of any action or claim as to which indemnification is
sought. No indemnifying party will be liable for any settlement of any action
effected without its prior written consent. Notwithstanding the foregoing
sentence, if at any time an indemnified party shall have requested (by written
notice provided in accordance with Section 9.4) an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel, such
indemnifying party agrees that it shall be liable for any settlement of the
nature contemplated

 

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hereby effected without its written consent if (i) such settlement is entered
into more than 45 days after receipt by such indemnifying party of the aforesaid
request, (ii) such indemnifying party shall have received written notice of the
terms of such settlement at least 30 days prior to such settlement being entered
into, (iii) such indemnifying party shall not have reimbursed such indemnified
party in accordance with such request prior to the date of such settlement,
(iv) such settlement includes an unconditional release of the indemnifying party
from all further liability for losses arising out of such action or claim,
(v) such settlement does not include an injunction that will materially
adversely affect any indemnifying party, and (vi) such settlement does not admit
liability or fault on the part of any indemnifying party. No indemnifying party
will, without the prior written consent of the indemnified party, effect any
settlement of a pending or threatened action with respect to which an
indemnified party is, or is informed that it may be, made a party and for which
it would be entitled to indemnification, unless the settlement includes an
unconditional release of the indemnified party from all liability and claims
which are the subject matter of the pending or threatened action.

If for any reason the indemnification provided for in this Agreement is not
available to, or is not sufficient to hold harmless, an indemnified party in
respect of any loss or liability referred to in Section 8.1 as to which such
indemnified party is entitled to indemnification thereunder, each indemnifying
party shall, in lieu of indemnifying the indemnified party, contribute to the
amount paid or payable by the indemnified party as a result of such loss or
liability, (i) in the proportion which is appropriate to reflect the relative
benefits received by the indemnifying party, on the one hand, and by the
indemnified party, on the other hand, from the sale of Shares which is the
subject of the claim, action, suit or proceeding which resulted in the loss or
liability or (ii) if the allocation provided by clause (i) is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above, but also the relative fault
of the indemnifying party, on the one hand, and the indemnified party, on the
other hand, with respect to the statements or omissions which are the subject of
the claim, action, suit or proceeding that resulted in the loss or liability, as
well as any other relevant equitable considerations.

The remedies provided for in Section 8.1 and this Section 8.2 are not exclusive
and shall not limit any rights or remedies which may otherwise be available to
any Indemnified Person at law or in equity.

ARTICLE IX

MISCELLANEOUS

Section 9.1 Fees and Expenses.

(i) Each party shall bear its own fees and expenses related to the transactions
contemplated by this Agreement; provided, however, that the Company shall pay,
on the Effective Date, by wire transfer of immediately available funds to an
account designated by the Investor’s counsel, all reasonable attorneys’ fees and
expenses (exclusive of disbursements and out-of-pocket expenses) incurred by the
Investor, up to $35,000, in connection with the preparation, negotiation,
execution and delivery of this Agreement, legal due diligence of the Company and
review of the Registration Statement, the Base Prospectus, the Current Report,
any

 

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Permitted Free Writing Prospectus. In addition, the Company shall pay, on the
30th day of the third month in each calendar quarter during the Investment
Period, up to $12,500, representing (x) the due diligence expenses incurred by
the Investor during the Investment Period and (y) the attorneys’ fees and
expenses incurred by the Investor in connection with ongoing legal due diligence
of the Company, any amendments, modifications or waivers of this Agreement and
review of Prospectus Supplements, Permitted Free Writing Prospectuses, opinion
“bring downs” and all other related documents to be delivered by the Company and
its counsel in connection with a Fixed Request Exercise Date and the applicable
Settlement Date. The Company shall pay all U.S. federal, state and local stamp
and other similar transfer and other taxes and duties levied in connection with
issuance of the Shares pursuant hereto. Notwithstanding the foregoing, the
Company shall not be responsible for any such amounts based on the income or
capital gains of the Investor.

(ii) If the Company issues a Fixed Request Notice and fails to deliver the
Shares to the Investor on the applicable Settlement Date and such failure
continues for 10 Trading Days, the Company shall pay the Investor, in cash (or,
at the option of the Investor, in shares of Common Stock which have not been
registered under the Securities Act), as liquidated damages for such failure and
not as a penalty, an amount equal to 2.0% of the payment required to be paid by
the Investor on such Settlement Date (i.e., the sum of the Fixed Amount
Requested and the Optional Amount Dollar Amount) for the initial 30 days
following such Settlement Date until the Shares have been delivered, and an
additional 2.0% for each additional 30-day period thereafter until the Shares
have been delivered, which amount shall be prorated for such periods less than
thirty 30 days.

Section 9.2 Specific Enforcement, Consent to Jurisdiction, Waiver of Jury Trial.

(i) The Company and the Investor acknowledge and agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that either party shall be entitled to an injunction or
injunctions to prevent or cure breaches of the provisions of this Agreement by
the other party and to enforce specifically the terms and provisions hereof this
being in addition to any other remedy to which either party may be entitled by
law or equity.

(ii) Each of the Company and the Investor (a) hereby irrevocably submits to the
jurisdiction of the United States District Court and other courts of the United
States sitting in the State of New York for the purposes of any suit, action or
proceeding arising out of or relating to this Agreement, and (b) hereby waives,
and agrees not to assert in any such suit, action or proceeding, any claim that
it is not personally subject to the jurisdiction of such court, that the suit,
action or proceeding is brought in an inconvenient forum or that the venue of
the suit, action or proceeding is improper. Each of the Company and the Investor
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof 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 in this Section 9.2
shall affect or limit any right to serve process in any other manner permitted
by law.

 

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(iii) Each of the Company and the Investor hereby waives to the fullest extent
permitted by applicable law, any right it may have to a trial by jury in respect
to any litigation directly or indirectly arising out of, under or in connection
with this Agreement or the transactions contemplated hereby or disputes relating
hereto. Each of the Company and the Investor (a) certifies that no
representative, agent or attorney of any other party has represented, expressly
or otherwise, that such other party would not, in the event of litigation, seek
to enforce the foregoing waiver and (b) acknowledges that it and the other
parties hereto have been induced to enter into this Agreement by, among other
things, the mutual waivers and certifications in this Section 9.2.

Section 9.3 Entire Agreement; Amendment. This Agreement, together with the
exhibits referred to herein and the Disclosure Schedule, represents the entire
agreement of the parties with respect to the subject matter hereof, and there
are no promises, undertakings, representations or warranties by either party
relative to subject matter hereof not expressly set forth herein. No provision
of this Agreement may be amended other than by a written instrument signed by
both parties hereto. The Disclosure Schedule and all exhibits to this Agreement
are hereby incorporated by reference in, and made a part of, this Agreement as
if set forth in full herein.

Section 9.4 Notices. Any notice, demand, request, waiver or other communication
required or permitted to be given hereunder shall be in writing and shall be
effective (a) upon hand delivery or facsimile (with facsimile machine
confirmation of delivery received) at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The address for
such communications shall be:

 

If to the Company:    Syntroleum Corporation    4322 South 49th West Avenue   
Tulsa, Oklahoma    Telephone Number: (918) 592-7900    Fax: (918) 592-7979   
Attention: Richard Edmonson With copies to:    Baker Botts L.L.P.    910
Louisiana St.    Houston, TX 77002    Telephone Number: (713) 229-1113    Fax:
(713) 229-2713    Attention: John Geddes, Esq.

 

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If to the Investor:    Azimuth Opportunity Ltd.    c/o Fortis Prime Fund
Solutions (BVI) Limited    P.O. Box 761, 1st Floor    James Frett Building   
Road Town, Tortola    British Virgin Islands    Telephone Number: (284) 494-6046
   Fax: (284) 494-6898    Attention: Becky McGinnis With copies to:    Greenberg
Traurig, LLP    The MetLife Building    200 Park Avenue    New York, NY 10166   
Telephone Number: (212) 801-9200    Fax: (212) 801-6400    Attention: Clifford
E. Neimeth, Esq.                        Anthony J. Marsico, Esq.

Either party hereto may from time to time change its address for notices by
giving at least 10 days advance written notice of such changed address to the
other party hereto.

Section 9.5 Waivers. No waiver by either party of any default with respect to
any provision, condition or requirement of this Agreement shall be deemed to be
a continuing waiver in the future or a waiver of any other provisions, condition
or requirement hereof nor shall any delay or omission of any party to exercise
any right hereunder in any manner impair the exercise of any such right accruing
to it thereafter. No provision of this Agreement may be waived other than in a
written instrument signed by the party against whom enforcement of such waiver
is sought.

Section 9.6 Headings. The article, section and subsection headings in this
Agreement are for convenience only and shall not constitute a part of this
Agreement for any other purpose and shall not be deemed to limit or affect any
of the provisions hereof.

Section 9.7 Successors and Assigns. The Investor may not assign this Agreement
to any person without the prior consent of the Company, in the Company’s sole
discretion. This Agreement shall be binding upon and inure to the benefit of the
parties and their successors and assigns. The assignment by a party to this
Agreement of any rights hereunder shall not affect the obligations of such party
under this Agreement.

Section 9.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the internal procedural and substantive laws of the State of New
York, without giving effect to the choice of law provisions of such state.

Section 9.9 Survival. The representations and warranties of the Company and the
Investor contained in Articles III and IV and the covenants contained in Article
V shall survive the execution and delivery hereof until the termination of this
Agreement, and the agreements and covenants set forth in Article VIII of this
Agreement shall survive the execution and delivery hereof.

 

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Section 9.10 Counterparts. This Agreement may be executed in counterparts, all
of which taken together shall constitute one and the same original and binding
instrument and shall become effective when all counterparts have been signed by
each party and delivered to the other parties hereto, it being understood that
all parties hereto need not sign the same counterpart. In the event any
signature is delivered by facsimile transmission, the party using such means of
delivery shall cause four additional executed signature pages to be physically
delivered to the other parties within five days of the execution and delivery
hereof.

Section 9.11 Publicity. On or after the Effective Date, the Company may issue a
press release or otherwise make a public statement or announcement with respect
to this Agreement or the transactions contemplated hereby or the existence of
this Agreement (including, without limitation, by filing a copy of this
Agreement with the Commission); provided, however, that prior to issuing any
such press release, or making any such public statement or announcement, the
Company shall consult with the Investor on the form and substance of such press
release or other disclosure.

Section 9.12 Severability. The provisions of this Agreement are severable and,
in the event that any court of competent jurisdiction shall determine that any
one or more of the provisions or part of the provisions contained in this
Agreement shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provision or part of a provision of this Agreement, and this Agreement
shall be reformed and construed as if such invalid or illegal or unenforceable
provision, or part of such provision, had never been contained herein, so that
such provisions would be valid, legal and enforceable to the maximum extent
possible.

Section 9.13 Further Assurances. From and after the date of this Agreement, upon
the request of the Investor or the Company, each of the Company and the Investor
shall execute and deliver such instrument, documents and other writings as may
be reasonably necessary or desirable to confirm and carry out and to effectuate
fully the intent and purposes of this Agreement.

[Signature Page Follows]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officer as of the date first above
written.

 

SYNTROLEUM CORPORATION: By:  

/s/ Greg G. Jenkins

Name:   Greg G. Jenkins Title:  

Executive Vice President and Chief

Financial Officer

AZIMUTH OPPORTUNITY LTD.: By:  

/s/ Peter W. Poole

Name:   Peter W. Poole Title:   Director

 

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ANNEX A TO THE

COMMON STOCK PURCHASE AGREEMENT

DEFINITIONS

(a) “Acceptable Financing” shall have the meaning assigned to such term in
Section 5.6(ii) hereof.

(b) “Aggregate Limit” shall have the meaning assigned to such term in
Section 1.1 hereof.

(c) “Base Prospectus” shall mean the Company’s prospectus, dated November 20,
2006, a preliminary form of which is included in the Registration Statement,
including the documents incorporated by reference therein.

(d) “Below Market Offering” shall have the meaning assigned to such term in
Section 5.6(ii) hereof.

(e) “Broker-Dealer” shall have the meaning assigned to such term in Section 5.13
hereof.

(f) “Bylaws” shall have the meaning assigned to such term in Section 4.3 hereof.

(g) “Charter” shall have the meaning assigned to such term in Section 4.3
hereof.

(h) “Code” shall mean the Internal Revenue Code of 1986, as amended.

(i) “Commission” shall mean the Securities and Exchange Commission or any
successor entity.

(j) “Commission Documents” shall mean (1) all reports, schedules, registrations,
forms, statements, information and other documents filed by the Company with the
Commission pursuant to the reporting requirements of the Exchange Act, including
all material filed pursuant to Section 13(a) or 15(d) of the Exchange Act, which
have been filed by the Company since January 1, 2006 and which hereafter shall
be filed by the Company during the Investment Period, including, without
limitation, the Current Report and the Form 10-K filed by the Company for its
fiscal year ended December 31, 2005 (the “2005 Form 10-K”), (2) the Registration
Statement, as the same may be amended from time to time, the Prospectus and each
Prospectus Supplement, and each Permitted Free Writing Prospectus and (3) all
information contained in such filings and all documents and disclosures that
have been and heretofore shall be incorporated by reference therein.

(k) “Common Stock” shall have the meaning assigned to such term in the Recitals.

(l) “Current Market Price” means, with respect to any particular measurement
date, the closing price of a share of Common Stock as reported on the Trading
Market for the Trading Day immediately preceding such measurement date.

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(m) “Current Report” shall have the meaning assigned to such term in Section 1.4
hereof.

(n) “Discount Price” shall have the meaning assigned to such term in Section 2.2
hereof.

(o) “Effective Date” shall mean November 20, 2006.

(p) “Environmental Laws” shall have the meaning assigned to such term in
Section 4.15 hereof.

(q) “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as
amended.

(r) “Event Period” shall have the meaning assigned to such term in Section 7.2
hereof.

(s) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Commission thereunder.

(t) “Fixed Amount Requested” shall mean the amount of a Fixed Request requested
by the Company in a Fixed Request Notice delivered pursuant to Section 2.1
hereof.

(u) “Fixed Request” means the transactions contemplated under Sections 2.1
through 2.8 of this Agreement.

(v) “Fixed Request Amount” means the actual amount of proceeds received by the
Company pursuant to a Fixed Request under this Agreement.

(w) “Fixed Request Exercise Date” shall have the meaning assigned to such term
in Section 2.2 hereof.

(x) “Fixed Request Notice” shall have the meaning assigned to such term in
Section 2.1 hereof.

(y) “Free Writing Prospectus” shall mean a “free writing prospectus” as defined
in Rule 405 promulgated under the Securities Act.

(z) “GAAP” shall mean generally accepted accounting principles in the United
States of America as applied by the Company.

(aa) “Governmental Licenses” shall have the meaning assigned to such term in
Section 4.14(a) hereof.

(bb) “Indebtedness” shall have the meaning assigned to such term in Section 4.9
hereof.

(cc) “Integration Notice” shall have the meaning assigned to such term in
Section 5.6(ii) hereof.

 

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(dd) “Intellectual Property” shall have the meaning assigned to such term in
Section 4.14(b) hereof.

(ee) “Investment Period” shall have the meaning assigned to such term in
Section 7.1 hereof.

(ff) “Issuer Free Writing Prospectus” shall mean an “issuer free writing
prospectus” as defined in Rule 433 promulgated under the Securities Act.

(gg) “Market Capitalization” shall be calculated on the Trading Day preceding
the applicable Pricing Period and shall be the product of (x) the number of
shares of Common Stock outstanding and (y) the closing bid price of the Common
Stock, both as determined by Bloomberg Financial LP using the DES and HP
functions.

(hh) “Material Adverse Effect” shall mean any condition, occurrence, state of
facts or event having, or insofar as reasonably can be foreseen would likely
have, any effect on the business, operations, properties or condition (financial
or otherwise) of the Company that is material and adverse to the Company and its
Subsidiaries, taken as a whole, and/or any condition, occurrence, state of facts
or event that would prohibit or otherwise materially interfere with or delay the
ability of the Company to perform any of its obligations under this Agreement;
provided, however, that in no event shall any of the following changes, in and
of themselves, constitute a “Material Adverse Effect”: (i) any change resulting
from the announcement of any of the transactions contemplated in this Agreement;
or (ii) any change resulting from compliance by the Company with the terms of,
or the taking of any action contemplated by, this Agreement.

(ii) “Material Agreements” shall have the meaning assigned to such term in
Section 4.16 hereof.

(jj) “Material Change in Ownership” shall mean the occurrence of any one or more
of the following: (i) the acquisition by any person, including any syndicate or
group deemed to be a “person” under Section 13(d)(3) of the Exchange Act, of
beneficial ownership, directly or indirectly, through a purchase, merger or
other acquisition transaction or series of transactions, of shares of capital
stock or other securities of the Company entitling such person to exercise, upon
an event of default or default or otherwise, 50% or more of the total voting
power of all series and classes of capital stock and other securities of the
Company entitled to vote generally in the election of directors, other than any
such acquisition by the Company, any Subsidiary of the Company or any employee
benefit plan of the Company; (ii) any consolidation or merger of the Company
with or into any other person, any merger of another person into the Company, or
any conveyance, transfer, sale, lease or other disposition of all or
substantially all of the properties and assets of the Company to another person,
other than (a) any such transaction (x) that does not result in any
reclassification, conversion, exchange or cancellation of outstanding shares of
capital stock of the Company and (y) pursuant to which holders of capital stock
of the Company immediately prior to such transaction have the entitlement to
exercise, directly or indirectly, 50% or more of the total voting power of all
shares of capital stock of the Company entitled to vote generally in the
election of directors of the continuing or surviving person immediately after
such transaction or (b) any merger which is effected solely to change the
jurisdiction of incorporation of the Company and results in a reclassification,
conversion or exchange of outstanding shares of

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Common Stock solely into shares of common stock of the surviving entity;
(iii) during any consecutive two-year period, individuals who at the beginning
of that two-year period constituted the Board of Directors (together with any
new directors whose election to the Board of Directors, or whose nomination for
election by the stockholders of the Company, was approved by a vote of a
majority of the directors then still in office who were either directors at the
beginning of such period or whose elections or nominations for election were
previously so approved) cease for any reason to constitute a majority of the
Board of Directors then in office; or (iv) the Company is liquidated or
dissolved or a resolution is passed by the Company’s stockholders approving a
plan of liquidation or dissolution of the Company. Beneficial ownership shall be
determined in accordance with Rule 13d-3 promulgated by the SEC under the
Exchange Act. The term “person” shall include any syndicate or group which would
be deemed to be a “person” under Section 13(d)(3) of the Exchange Act.

(kk) “Multiplier” shall have the meaning assigned to such term in Section 2.3
hereof.

(ll) “NASDAQ” means the NASDAQ Global Market or any successor thereto.

(mm) “Optional Amount” means the transactions contemplated under Sections 2.9
through 2.11 of this Agreement.

(nn) “Optional Amount Dollar Amount” shall mean the actual amount of proceeds
received by the Company pursuant to the exercise of an Optional Amount under
this Agreement.

(oo) “Optional Amount Notice” shall mean a notice sent to the Company with
regard to the Investor’s election to exercise all or any portion of an Optional
Amount, as provided in Section 2.11 hereof and substantially in the form
attached hereto as Exhibit B.

(pp) “Optional Amount Threshold Price” shall have the meaning assigned to such
term in Section 2.1 hereof.

(qq) “Other Financing” shall have the meaning assigned to such term in
Section 5.6(ii) hereof.

(rr) “Other Financing Notice” shall have the meaning assigned to such term in
Section 5.6(ii) hereof.

(ss) “Permitted Free Writing Prospectus” shall have the meaning assigned to such
term in Section 5.8(ii) hereof.

(tt) “Plan” shall have the meaning assigned to such term in Section 4.22 hereof.

(uu) “Pricing Period shall mean a period of 11 consecutive Trading Days
commencing on the day of delivery of a Fixed Request Notice (or, if the Fixed
Request Notice is delivered after 9:30 a.m. (New York time), on the next Trading
Day), or such other period mutually agreed upon by the Investor and the Company.

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(vv) “Prospectus” shall mean the Base Prospectus, together with any final
prospectus filed with the Commission pursuant to Rule 424(b), as supplemented by
any Prospectus Supplement, including the documents incorporated by reference
therein.

(ww) “Prospectus Supplement” shall mean any prospectus supplement to the Base
Prospectus filed with the Commission pursuant to Rule 424(b) under the
Securities Act, including the documents incorporated by reference therein.

(xx) “Reduction Notice” shall have the meaning assigned to such term in
Section 2.8 hereof.

(yy) “Registration Statement” shall mean the registration statement on Form S-3,
Commission File Number 333-62290, filed by the Company with the Commission under
the Securities Act for the registration of the Shares, as such Registration
Statement may be amended and supplemented from time to time, including the
documents incorporated by reference therein and the information deemed to be a
part thereof at the time of effectiveness pursuant to Rule 430A or Rule 430B
under the Securities Act.

(zz) “Restricted Period” shall have the meaning assigned to such term in
Section 5.10 hereof.

(aaa) “Securities Act” shall mean the Securities Act of 1933, as amended, and
the rules and regulations of the Commission thereunder.

(bbb) “Settlement Date” shall have the meaning assigned to such term in
Section 2.7 hereof.

(ccc) “Shares” shall mean shares of Common Stock issuable to the Investor upon
exercise of a Fixed Request and shares of Common Stock issuable to the Investor
upon exercise of an Optional Amount.

(ddd) “Significant Subsidiary” means any Subsidiary of the Company that would
constitute a Significant Subsidiary of the Company within the meaning of Rule
1-02 of Regulation S-X of the Commission.

(eee) “SOXA” shall have the meaning assigned to such term in Section 4.6(c)
hereof.

(fff) “Subsidiary” shall mean any corporation or other entity of which at least
a majority of the securities or other ownership interest having ordinary voting
power (absolutely or contingently) for the election of directors or other
persons performing similar functions are at the time owned directly or
indirectly by the Company and/or any of its other Subsidiaries.

(ggg) “Total Commitment” shall have the meaning assigned to such term in
Section 1.1 hereof.

(hhh) “Threshold Price” is the lowest price (except to the extent otherwise
provided in Section 2.6) at which the Company may sell Shares during the
applicable Pricing Period as set forth in a Fixed Request Notice (not taking
into account the applicable percentage discount

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during such Pricing Period determined in accordance with Section 2.2); provided,
however, that at no time shall the Threshold Price be lower than $1.37 per share
unless the Company and the Investor mutually shall otherwise agree in writing.

(iii) “Trading Day” shall mean a full trading day (beginning at 9:30 a.m., New
York City time, and ending at 4:00 p.m., New York City time) on the NASDAQ.

(jjj) “Trading Market” means the following markets or exchanges on which the
Common Stock is listed or quoted for trading on the date in question: the
American Stock Exchange, the New York Stock Exchange or the NASDAQ.

(kkk) “Trading Market Limit” means that number of shares which is one less than
20.0% of the issued and outstanding shares of the Common Stock as of the
Effective Date.

(lll) “VWAP” shall mean the daily volume weighted average price (based on a
Trading Day from 9:30 p.m. to 4:00 p.m. (New York time)) of the Company on the
NASDAQ as reported by Bloomberg Financial L.P. using the AQR function.

(mmm) “Warrant Value” shall mean the fair value of all warrants, options and
other similar rights issued to a third party in connection with an Other
Financing, determined by using a standard Black-Scholes option-pricing model
using an expected volatility percentage as shall be mutually agreed by the
Investor and the Company. In the case of a dispute relating to such expected
volatility assumption, the Investor shall obtain applicable volatility data from
three investment banking firms of nationally recognized reputation, and the
parties hereto shall use the average thereof for purposes of determining the
expected volatility percentage in connection with the Black-Scholes calculation
referred to in the immediately preceding sentence.

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EXHIBIT A TO THE

COMMON STOCK PURCHASE AGREEMENT

FORM OF FIXED REQUEST NOTICE

Reference is made to the Common Stock Purchase Agreement dated as of
November 20, 2006, (the “Purchase Agreement”) between Syntroleum Corporation, a
corporation organized and existing under the laws of the State of Delaware (the
“Company”), and Azimuth Opportunity Ltd., an international business company
incorporated under the laws of the British Virgin Islands. Capitalized terms
used and not otherwise defined herein shall have the meanings given such terms
in the Purchase Agreement.

In accordance with and pursuant to Section 2.1 of the Purchase Agreement, the
Company hereby issues this Fixed Request Notice to exercise a Fixed Request for
the Fixed Request Amount indicated below.

 

Fixed Amount Requested:   

 

Optional Amount Dollar Amount:   

 

Pricing Period start date:   

 

Pricing Period end date:   

 

Settlement Date:   

 

Fixed Request Threshold Price:   

 

Optional Amount Threshold Price:   

 

Dollar Amount and Number of Shares of Common Stock Currently Unissued under the
Registration Statement;   

 

Dollar Amount and Number of Shares of Common Stock Currently Available under the
Aggregate Limit:   

 

Dated:                        By:   

 

  

Name

Title:

  

Address:

Facsimile No.

 

AGREED AND ACCEPTED By:  

 

Name   Title:  

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EXHIBIT B TO THE

COMMON STOCK PURCHASE AGREEMENT

FORM OF OPTIONAL AMOUNT NOTICE

To:                                         

Fax#:                                    

Reference is made to the Common Stock Purchase Agreement dated as of
November 20, 2006 (the “Purchase Agreement”) between Syntroleum Corporation, a
corporation organized and existing under the laws of the State of Delaware (the
“Company”), and Azimuth Opportunity Ltd., an international business company
incorporated under the laws of the British Virgin Islands (the “Investor”).
Capitalized terms used and not otherwise defined herein shall have the meanings
given such terms in the Purchase Agreement.

In accordance with and pursuant to Section 2.1 of the Purchase Agreement, the
Investor hereby issues this Optional Amount Notice to exercise an Optional
Amount for the Optional Amount Dollar Amount indicated below.

 

Optional Amount Dollar Amount Exercised  

 

Number of Shares to be purchased  

 

VWAP on the date hereof:  

 

Discount Price:  

 

Settlement Date:  

 

Threshold Price:  

 

Dated:                       By:  

 

 

Name

Title:

 

Address:

Facsimile No.

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EXHIBIT C TO THE

COMMON STOCK PURCHASE AGREEMENT

CERTIFICATE OF THE COMPANY

CLOSING CERTIFICATE

                     200    

The undersigned, the [                    ] of Syntroleum Corporation, a
corporation organized and existing under the laws of the State of Delaware (the
“Company”), delivers this certificate in connection with the Common Stock
Purchase Agreement, dated as of November 20, 2006 (the “Agreement”), by and
between the Company and Azimuth Opportunity Ltd., an international business
company incorporated under the laws of the British Virgin Islands (the
“Investor”), and hereby certifies on the date hereof that (capitalized terms
used herein without definition have the meanings assigned to them in the
Agreement):

1. Attached hereto as Exhibit A is a true, complete and correct copy of the
Certificate of Incorporation of the Company as filed with the Secretary of State
of the State of Delaware. The Certificate of Incorporation of the Company has
not been further amended or restated, and no document with respect to any
amendment to the Certificate of Incorporation of the Company has been filed in
the office of the Secretary of State of the State of Delaware since the date
shown on the face of the state certification relating to the Company’s
Certificate of Incorporation, which is in full force and effect on the date
hereof, and no action has been taken by the Company in contemplation of any such
amendment or the dissolution, merger or consolidation of the Company.

2. Attached hereto as Exhibit B is a true and complete copy of the Bylaws of the
Company, as amended and restated through, and as in full force and effect on,
the date hereof, and no proposal for any amendment, repeal or other modification
to the Bylaws of the Company has been taken or is currently pending before the
Board of Directors or stockholders of the Company.

3. The Board of Directors of the Company has approved the transactions
contemplated by the Agreement; said approval has not been amended, rescinded or
modified and remains in full force and effect as of the date hereof.

4. Each person who, as an officer of the Company, or as attorney-in-fact of an
officer of the Company, signed (i) the Agreement and (ii) any other document
delivered prior hereto or on the date hereof in connection with the transactions
contemplated by the Agreement, was duly elected, qualified and acting as such
officer or duly appointed and acting as such attorney-in-fact, and the signature
of each such person appearing on any such document is his genuine signature.

IN WITNESS WHEREOF, I have signed my name as of the date first above written.

 

 

By: Title:

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EXHIBIT D TO THE

COMMON STOCK PURCHASE AGREEMENT

COMPLIANCE CERTIFICATE

In connection with the issuance of shares of common stock of Syntroleum
Corporation, a corporation organized and existing under the laws of the State of
Delaware (the “Company”), pursuant to the Fixed Request Notice, dated
[                    ], delivered by the Company to Azimuth Opportunity Ltd.
(the “Investor”) pursuant to Article II of the Common Stock Purchase Agreement,
dated November 20, 2006, by and between the Company and the Investor (the
“Agreement”), the undersigned hereby certifies as follows:

1. The undersigned is the duly elected [                    ] of the Company.

2. Except as set forth in the attached Schedule, the representations and
warranties of the Company set forth in Article IV of the Agreement (i) that are
not qualified by “materiality” or “Material Adverse Effect” are true and correct
in all material respects as of [insert Fixed Request Exercise Date] and as of
the date hereof with the same force and effect as if made on such dates, except
to the extent such representations and warranties are as of another date, in
which case, such representations and warranties are true and correct in all
material respects as of such other date and (ii) that are qualified by
“materiality” or “Material Adverse Effect” are true and correct as of [insert
Fixed Request Exercise Date] and as of the date hereof with the same force and
effect as if made on such dates, except to the extent such representations and
warranties are as of another date, in which case, such representations and
warranties are true and correct as of such other date.

3. The Company has performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required by the Agreement to be
performed, satisfied or complied with by the Company at or prior to [insert
Fixed Request Exercise Date] and the date hereof.

Capitalized terms used but not otherwise defined herein shall have the meanings
assigned to them in the Agreement.

The undersigned has executed this Certificate this [    ] day of
[                    ], 200[    ].

 

By:  

 

Name:  

 

Title: