Exhibit 10.2
     Execution Copy
COMMON STOCK PURCHASE AGREEMENT
by and between
KINGSBRIDGE CAPITAL LIMITED
and
SOMAXON PHARMACEUTICALS, INC.
dated as of May 21, 2008

 

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TABLE OF CONTENTS

                  ARTICLE I DEFINITIONS     1  
 
                ARTICLE II PURCHASE AND SALE OF COMMON STOCK     5  
 
  Section 2.1   Purchase and Sale of Stock     5  
 
  Section 2.2   Closing     6  
 
  Section 2.3   Registration Statement and Prospectus     6  
 
  Section 2.4   Warrant     6  
 
  Section 2.5   Blackout Shares     6  
 
                ARTICLE III DRAW DOWN TERMS     6  
 
  Section 3.1   Draw Down Notice     6  
 
  Section 3.2   Number of Shares     7  
 
  Section 3.3   Limitation on Draw Downs     7  
 
  Section 3.4   Trading Cushion     7  
 
  Section 3.5   Settlement     7  
 
  Section 3.6   Delivery of Shares; Payment of Draw Down Amount     7  
 
  Section 3.7   Failure to Deliver Shares     7  
 
                ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY     8  
 
  Section 4.1   Organization, Good Standing and Power     8  
 
  Section 4.2   Authorization; Enforcement     9  
 
  Section 4.3   Capitalization     9  
 
  Section 4.4   Issuance of Shares     10  
 
  Section 4.5   No Conflicts     10  
 
  Section 4.6   Commission Documents, Financial Statements     11  
 
  Section 4.7   No Material Adverse Change     11  
 
  Section 4.8   No Undisclosed Liabilities     12  
 
  Section 4.9   No Undisclosed Events or Circumstances     12  
 
  Section 4.10   Actions Pending     12  
 
  Section 4.11   Compliance with Law     12  
 
  Section 4.12   Certain Fees     12  
 
  Section 4.13   Disclosure     13  
 
  Section 4.14   Material Non-Public Information     13  
 
  Section 4.15   Exemption from Registration; Valid Issuances     13  
 
  Section 4.16   No General Solicitation or Advertising in Regard to this
Transaction     13  
 
  Section 4.17   No Integrated Offering     13  
 
  Section 4.18   Acknowledgment Regarding Investor’s Purchase of Shares     13  
 
                ARTICLE V REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
INVESTOR     14  
 
  Section 5.1   Organization and Standing of the Investor     14  

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  Section 5.2   Authorization and Power     14  
 
  Section 5.3   No Conflicts     14  
 
  Section 5.4   Financial Capability     15  
 
  Section 5.5   Information     15  
 
  Section 5.6   Trading Restrictions     15  
 
  Section 5.7   Statutory Underwriter Status     15  
 
  Section 5.8   Not an Affiliate     15  
 
  Section 5.9   Manner of Sale     16  
 
  Section 5.10   Prospectus Delivery     16  
 
                ARTICLE VI COVENANTS OF THE COMPANY     16  
 
  Section 6.1   Securities Compliance     16  
 
  Section 6.2   Reservation of Common Stock     16  
 
  Section 6.3   Registration and Listing     16  
 
  Section 6.4   Registration Statement     17  
 
  Section 6.5   Compliance with Laws     17  
 
  Section 6.6   Other Financing     17  
 
  Section 6.7   Prohibited Transactions     18  
 
  Section 6.8   Corporate Existence     19  
 
  Section 6.9   Non-Disclosure of Non-Public Information     19  
 
  Section 6.10   Notice of Certain Events Affecting Registration; Suspension of
Right to Request a Draw Down     19  
 
  Section 6.11   Amendments to the Registration Statement     19  
 
  Section 6.12   Prospectus Delivery     20  
 
                ARTICLE VII CONDITIONS TO THE OBLIGATION OF THE INVESTOR TO
ACCEPT A DRAW DOWN     20  
 
  Section 7.1   Accuracy of the Company’s Representations and Warranties     20
 
 
  Section 7.2   Performance by the Company     20  
 
  Section 7.3   Compliance with Law     20  
 
  Section 7.4   Effective Registration Statement     20  
 
  Section 7.5   No Knowledge     21  
 
  Section 7.6   No Suspension     21  
 
  Section 7.7   No Injunction     21  
 
  Section 7.8   No Proceedings or Litigation     21  
 
  Section 7.9   Sufficient Shares Registered for Resale     21  
 
  Section 7.10   Warrant     21  
 
  Section 7.11         21  
 
  Section 7.12   Accuracy of Investor’s Representation and Warranties     22  
 
                ARTICLE VIII TERMINATION     22  
 
  Section 8.1   Term     22  
 
  Section 8.2   Other Termination     22  
 
  Section 8.3   Effect of Termination     22  
 
               

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                  ARTICLE IX INDEMNIFICATION     23  
 
  Section 9.1   Indemnification     23  
 
  Section 9.2   Notification of Claims for Indemnification     24  
 
                ARTICLE X MISCELLANEOUS     25  
 
  Section 10.1   Fees and Expenses     25  
 
  Section 10.2   Reporting Entity for the Common Stock     26  
 
  Section 10.3   Brokerage     26  
 
  Section 10.4   Notices     26  
 
  Section 10.5   Assignment     28  
 
  Section 10.6   Amendment; No Waiver     28  
 
  Section 10.7   Entire Agreement     28  
 
  Section 10.8   Severability     28  
 
  Section 10.9   Title and Subtitles     29  
 
  Section 10.10   Counterparts     29  
 
  Section 10.11   Choice of Law     29  
 
  Section 10.12   Specific Enforcement, Consent to Jurisdiction     29  
 
  Section 10.13   Survival     29  
 
  Section 10.14   Publicity     30  
 
  Section 10.15   Further Assurances     30  

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     This COMMON STOCK PURCHASE AGREEMENT (this “Agreement”) is entered into as
of the 21st day of May 2008, by and between Kingsbridge Capital Limited, an
entity organized and existing under the laws of the British Virgin Islands,
whose registered address is Palm Grove House, 2nd Floor, Road Town, Tortola,
British Virgin Islands (the “Investor”) and Somaxon Pharmaceuticals, Inc., a
corporation organized and existing under the laws of the State of Delaware (the
“Company”).
     WHEREAS, the parties desire that, upon the terms and subject to the
conditions and limitations set forth herein, the Company may issue and sell to
the Investor, from time to time as provided herein, and the Investor shall
purchase from the Company, up to $50 million worth of shares of Common Stock (as
defined below); and
     WHEREAS, such investments will be made in reliance upon the provisions of
Section 4(2) (“Section 4(2)”) and Regulation D (“Regulation D”) of the United
States Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder (the “Securities Act”), and/or upon such other exemption
from the registration requirements of the Securities Act as may be available
with respect to any or all of the investments in Common Stock to be made
hereunder; and
     WHEREAS, the parties hereto are concurrently entering into a Registration
Rights Agreement in the form of Exhibit A hereto (the “Registration Rights
Agreement”) pursuant to which the Company shall register the Common Stock issued
and sold to the Investor under this Agreement and issuable under the Warrant (as
defined below), upon the terms and subject to the conditions set forth therein;
and
     WHEREAS, in consideration for the Investor’s execution and delivery of, and
its performance of its obligations under, this Agreement, the Company is
concurrently issuing to the Investor a Warrant in the form of Exhibit B hereto
(the “Warrant”) pursuant to which the Investor may purchase from the Company up
to 165,000 shares of Common Stock, upon the terms and subject to the conditions
set forth therein;
     NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
     As used in this Agreement, the following terms shall have the meanings set
forth below:
     “Alternative Draw Down Amount” means the product of (i) Average Trading
Volume, (ii) the Closing Price on the Trading Day preceding the issuance of the
Draw Down Notice, (iii) eight (8), and (iv) the Liquidity Ratio.
     “Average Trading Volume” means the average trading volume of the twenty
(20) Trading Days during the thirty (30) Trading Days prior to the issuance of
the Draw Down Notice that results from excluding the five (5) Trading Days with
the highest trading volume and the five (5) Trading Days with the lowest trading
volume during such period.

 

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     “Blackout Amount” shall have the meaning assigned to such term in the
Registration Rights Agreement.
     “Blackout Shares” shall have the meaning assigned to such term in the
Registration Rights Agreement.
     “Bylaws” shall have the meaning assigned to such term in Section 4.3 hereof
     “Certificate” shall have the meaning assigned to such term in Section 4.3
hereof.
     “Closing Date” shall have the meaning assigned to such term in Section 2.2
hereof.
     “Closing Price” as of any particular day shall mean the closing price per
share of the Company’s Common Stock as reported by Bloomberg L.P. on such day.
     “Commission” means the United States Securities and Exchange Commission.
     “Commission Documents” means all reports, schedules, forms, statements and
other documents required to be filed by the Company with the Commission pursuant
to the reporting requirements of the Exchange Act, including pursuant to
Section 13(a) or 15(d) of the Exchange Act, including filings incorporated by
reference therein.
     “Commitment Period” means the period commencing on the Effective Date and
expiring on the earliest to occur of (i) the date on which the Investor shall
have purchased Shares pursuant to this Agreement for an aggregate purchase price
equal to the Maximum Commitment Amount, (ii) the date this Agreement is
terminated pursuant to Article VIII hereof, and (iii) the date occurring
thirty-six (36) months from the Effective Date.
     “Common Stock” means the common stock of the Company, par value $0.0001 per
share.
     “Condition Satisfaction Date” shall have the meaning assigned to such term
in Article VII hereof.
     “Damages” means any loss, claim, damage, liability, costs and expenses
(including, without limitation, reasonable attorneys’ fees and expenses and
costs and reasonable expenses of expert witnesses and investigation).
     “Draw Down” shall have the meaning assigned to such term in Section 3.1
hereof.
     “Draw Down Amount” means the actual dollar amount of a Draw Down paid to
the Company.
     “Draw Down Discount Price” means (i) 88% of the VWAP on any Trading Day
during a Draw Down Pricing Period when the VWAP equals or exceeds $1.75 but is
less than or equal to $2.50, (ii) 90% of the VWAP on any Trading Day during the
Draw Down Pricing Period when VWAP exceeds $2.50 but is less than or equal to
$7.75, (iii) 92% of the VWAP on any Trading Day during a Draw Down Pricing
Period when the VWAP exceeds $7.75 but is less than or

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equal to $10.00, or (iv) 94% of the VWAP on any Trading Day during the Draw Down
Pricing Period when VWAP exceeds $10.00.
     “Draw Down Notice” shall have the meaning assigned to such term in
Section 3.1 hereof.
     “Draw Down Pricing Period” shall mean, with respect to each Draw Down, a
period of eight (8) consecutive Trading Days beginning on the first Trading Day
specified in a Draw Down Notice.
     “DTC” shall mean the Depository Trust Company, or any successor thereto.
     “Effective Date” means the first Trading Day immediately following the date
on which the Registration Statement is declared effective by the Commission.
     “Exchange Act” means the United States Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
     “Excluded Merger or Sale” shall have the meaning assigned to such term in
the Warrant.
     “FINRA” means the Financial Industry Regulatory Authority.
     “Knowledge” means the actual knowledge of the Company’s Chief Executive
Officer and Chief Financial Officer.
     “Liquidity Ratio” means fifty percent (50%).
     “Make Whole Amount” shall have the meaning specified in Section 3.7.
     “Market Capitalization” means, as of any Trading Day, the product of
(i) the closing sale price of the Company’s Common Stock as reported by
Bloomberg L.P. using the AQR function and (ii) the number of outstanding shares
of Common Stock of the Company as reported by Bloomberg L.P. using the DES
function.
     “Material Adverse Effect” means any effect that is not negated, corrected,
cured or otherwise remedied within a reasonable period of time on the business,
operations, properties or financial condition of the Company and its
consolidated subsidiaries that is material and adverse to the Company and such
subsidiaries, taken as a whole, and/or any condition, circumstance, or situation
that would prohibit or otherwise interfere with the ability of the Company to
perform any of its obligations under this Agreement, the Registration Rights
Agreement or the Warrant in any material respect; provided, however, that none
of the following shall constitute a “Material Adverse Effect”: (i) the effects
of conditions or events that are generally applicable to the capital, financial,
banking or currency markets or the biotechnology or pharmaceutical industries;
(ii) the effects of conditions or events that are reasonably expected to occur
in the Company’s ordinary course of business (such as, by way of example only,
failed clinical trials, serious adverse events involving the Company’s product
candidates, delays in product development, unfavorable regulatory
determinations, difficulties involving collaborators or intellectual property
disputes); (iii) any changes or effects resulting from the announcement or
consummation of the transactions contemplated by this Agreement, including,
without limitation,

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any changes or effects associated with any particular Draw Down, and
(iv) changes in the market price of the Common Stock.
     “Maximum Commitment Amount” means the lesser of (i) $50 million in
aggregate Draw Down Amounts or (ii) 3,672,098 shares of Common Stock (as
adjusted for stock splits, stock combinations, stock dividends and
recapitalizations that occur on or after the date of this Agreement); provided,
however, that in no event will the Maximum Commitment Amount equal or exceed the
number of shares of Common Stock which would require shareholder approval under
the applicable rules and regulations of the Principal Market.
     “Maximum Draw Down Amount” means 2% of the Company’s Market Capitalization
at the time of the Draw Down, or, at the Company’s option, the lesser of (A) 3%
of the Company’s Market Capitalization at the time of the Draw Down, and (B) the
Alternative Draw Down Amount; provided, however, that in no event may the
Maximum Draw Down Amount exceed $10 million.
     “Permitted Transaction” shall have the meaning assigned to such term in
Section 6.6 hereof.
     “Person” means any individual, corporation, partnership, limited liability
company, association, trust or other entity or organization, including any
government or political subdivision or an agency or instrumentality thereof.
     “Principal Market” means the NASDAQ Capital Market, the NASDAQ Global
Select Market, the NASDAQ Global Market, the American Stock Exchange or the New
York Stock Exchange, whichever is at the time the principal trading exchange or
market for the Common Stock.
     “Prohibited Transaction” shall have the meaning assigned to such term in
Section 6.7 hereof.
     “Prospectus” as used in this Agreement means the prospectus in the form
included in the Registration Statement, as supplemented from time to time
pursuant to Rule 424(b) of the Securities Act.
     “Qualified Financing” is any financing conducted by the Company after the
Effective Date in which the Company receives at least Twenty-Five Million
Dollars ($25,000,000) in funds in exchange for at least Twenty-Five Million
Dollars ($25,000,000) in bona fide indebtedness. A Qualified Financing may
include, but is not limited to, a financing in which a royalty interest in any
of the Company’s products is provided to one or more third parties. .
     “Registrable Securities” means (i) the Shares, (ii) the Warrant Shares, and
(iii) any securities issued or issuable with respect to any of the foregoing by
way of exchange, stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization or otherwise. As to any particular Registrable Securities, once
issued such securities shall cease to be Registrable Securities when (w) the
Registration Statement has been declared effective by the Commission and such
Registrable Securities have been disposed of pursuant to the Registration
Statement, (x) such Registrable Securities have

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been sold under circumstances under which all of the applicable conditions of
Rule 144 (or any similar provision then in force) under the Securities Act
(“Rule 144”) are met, (y) such time as such Registrable Securities have been
otherwise transferred to holders who may trade such shares without restriction
under the Securities Act, and the Company has delivered a new certificate or
other evidence of ownership for such securities not bearing a restrictive legend
or (z) such Registrable Securities may be sold without registration and without
any time, volume or manner limitations pursuant to Rule 144(b) (or any similar
provision then in effect) under the Securities Act.
     “Registration Rights Agreement” shall have the meaning set forth in the
recitals of this Agreement.
     “Registration Statement” shall have the meaning assigned to such term in
the Registration Rights Agreement.
     “Regulation D” shall have the meaning set forth in the recitals of this
Agreement.
     “Section 4(2)” shall have the meaning set forth in the recitals of this
Agreement.
     “Securities Act” shall have the meaning set forth in the recitals of this
Agreement.
     “Settlement Date” shall have the meaning assigned to such term in
Section 3.5 hereof.
     “Shares” means the shares of Common Stock of the Company that are and/or
may be purchased hereunder.
     “Trading Day” means any day other than a Saturday or a Sunday on which the
Principal Market is open for trading in equity securities.
     “VWAP” means the volume weighted average price (the aggregate sales price
of all trades of Common Stock during each Trading Day divided by the total
number of shares of Common Stock traded during such Trading Day) of the Common
Stock during any Trading Day as reported by Bloomberg, L.P. using the AQR
function.
     “Warrant” shall have the meaning set forth in the recitals of this
Agreement.
     “Warrant Shares” means the shares of Common Stock issuable to the Investor
upon exercise of the Warrant.
ARTICLE II
PURCHASE AND SALE OF COMMON STOCK
     Section 2.1 Purchase and Sale of Stock. Upon the terms and subject to the
conditions set forth in this Agreement, the Company shall to the extent it
elects to make Draw Downs in accordance with Article III hereof, issue and sell
to the Investor and the Investor shall purchase Common Stock from the Company
for an aggregate (in Draw Down Amounts) of up to the Maximum Commitment Amount,
consisting of purchases based on Draw Downs in accordance with Article III
hereof.

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     Section 2.2 Closing. In consideration of and in express reliance upon the
representations, warranties, covenants, terms and conditions of this Agreement,
the Company agrees to issue and sell to the Investor, and the Investor agrees to
purchase from the Company, that number of the Shares to be issued in connection
with each Draw Down. The execution and delivery of this Agreement (the
“Closing”) shall take place at the offices of Stroock & Stroock & Lavan LLP, 180
Maiden Lane, New York, NY 10038 at 5:00 p.m. local time on May 21, 2008, or at
such other time and place or on such date as the Investor and the Company may
agree upon (the “Closing Date”). Each party shall deliver at or prior to the
Closing all documents, instruments and writings required to be delivered at the
Closing by such party pursuant to this Agreement.
     Section 2.3 Registration Statement and Prospectus. The Company shall
prepare and file with the Commission the Registration Statement (including the
Prospectus) in accordance with the provisions of the Securities Act and the
Registration Rights Agreement.
     Section 2.4 Warrant. On the Closing Date, the Company shall issue and
deliver the Warrant to the Investor.
     Section 2.5 Blackout Shares. The Company shall deliver any Blackout Amount
or issue and deliver any Blackout Shares to the Investor in accordance with
Section 1.1(e) of the Registration Rights Agreement.
ARTICLE III
DRAW DOWN TERMS
     Subject to the satisfaction of the conditions hereinafter set forth in this
Agreement, the parties agree as follows:
     Section 3.1 Draw Down Notice. During the Commitment Period, the Company
may, in its sole discretion, issue a Draw Down Notice (as hereinafter defined)
which shall specify the dollar amount of Shares the Company elects to sell to
the Investor (each such election, a “Draw Down”) up to a Draw Down Amount equal
to the Maximum Draw Down Amount, which Draw Down the Investor shall be obligated
to accept. The Company shall inform the Investor in writing by sending a duly
completed Draw Down Notice (as hereinafter defined) in the form of Exhibit C
hereto by e-mail to the addresses set forth in Section 10.4, as to such Draw
Down Amount before commencement of trading on the first Trading Day of the
related Draw Down Pricing Period (the “Draw Down Notice”). In addition to the
Draw Down Amount, each Draw Down Notice shall designate the first Trading Day of
the Draw Down Pricing Period. In no event shall any Draw Down Amount exceed the
Maximum Draw Down Amount. Each Draw Down Notice shall be accompanied by a
certificate, signed by the Chief Executive Officer or Chief Financial Officer,
dated as of the date of such Draw Down Notice, in the form of Exhibit D hereof.
     Section 3.2 Number of Shares. Subject to Section 3.6(b), the number of
Shares to be issued in connection with each Draw Down shall be equal to the sum
of the number of shares issuable on each Trading Day of the Draw Down Pricing
Period. The number of shares issuable on a Trading Day during a Draw Down
Pricing Period shall be equal to the quotient of one

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eighth (1/8th) of the Draw Down Amount divided by the Draw Down Discount Price
for such Trading Day.
     Section 3.3 Limitation on Draw Downs. Only one Draw Down shall be permitted
for each Draw Down Pricing Period.
     Section 3.4 Trading Cushion. Unless the parties agree in writing otherwise,
there shall be a minimum of three (3) Trading Days between the expiration of any
Draw Down Pricing Period and the beginning of the next succeeding Draw Down
Pricing Period.
     Section 3.5 Settlement. The number of Shares purchased by the Investor in
any Draw Down shall be determined and settled on two separate dates. Shares
purchased by the Investor during the first four Trading Days of any Draw Down
Pricing Period shall be determined and settled no later than the sixth Trading
Day of such Draw Down Pricing Period. Shares purchased by the Investor during
the second four Trading Days of any Draw Down Pricing Period shall be determined
and settled no later than the second Trading Day after the last Trading Day of
such Draw Down Pricing Period. Each date on which settlement of the purchase and
sale of Shares occurs hereunder being referred to as a “Settlement Date.” The
Investor shall provide the Company with delivery instructions for the Shares to
be issued at each Settlement Date at least two Trading Days in advance of such
Settlement Date. The number of Shares actually issued shall be rounded down to
the nearest whole number of Shares.
     Section 3.6 Delivery of Shares; Payment of Draw Down Amount.
          (a) On each Settlement Date, the Company shall deliver the Shares
purchased by the Investor to the Investor or its designees exclusively via
book-entry through the DTC to an account designated by the Investor, and upon
receipt of the Shares, the Investor shall cause payment thereof to be made to
the Company’s designated account by wire transfer of immediately available
funds, if the Shares are received by the Investor no later than 1:00 p.m.
(Eastern Time), or next day available funds, if the Shares are received
thereafter.
          (b) For each Trading Day during a Draw Down Pricing Period where the
VWAP is less than the greater of (i) 90% of the Closing Price of the Company’s
Common Stock on the Trading Day immediately preceding the commencement of such
Draw Down Pricing Period, or (ii) $1.75, such Trading Day shall not be used in
calculating the number of Shares to be issued in connection with such Draw Down,
and the Draw Down Amount in respect of such Draw Down Pricing Period shall be
reduced by one eighth (1/8th) of the initial Draw Down Amount specified in the
Draw Down Notice. If trading in the Company’s Common Stock is suspended for any
reason for more than three (3) consecutive or non-consecutive hours during any
Trading Day during a Draw Down Pricing Period, such Trading Day shall not be
used in calculating the number of Shares to be issued in connection with such
Draw Down, and the Draw Down Amount in respect of such Draw Down Pricing Period
shall be reduced by one eighth (1/8th) of the initial Draw Down Amount specified
in the Draw Down Notice.
     Section 3.7 Failure to Deliver Shares. If on any Settlement Date, the
Company fails to cause the delivery of the Shares purchased by the Investor, and
such failure is not cured within two (2) Trading Days following such Settlement
Date, the Company shall pay to the Investor on

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demand in cash by wire transfer of immediately available funds to an account
designated by the Investor the “Make Whole Amount;” provided, however, that in
the event that the Company is prevented from delivering Shares in respect of any
such Settlement Date in a timely manner by any fact or circumstance that is not
reasonably within the control of, or directly attributable to, the Company, or
is otherwise reasonably within the control of, or directly attributable to, the
Investor, then such two (2) Trading Day period shall be automatically extended
until such time as such fact or circumstance is cured. As used herein, the Make
Whole Amount shall be an amount equal to the sum of (i) the Draw Down Amount
actually paid by the Investor in respect of such Shares plus (ii) an amount
equal to the actual loss suffered by the Investor in respect of sales to
subsequent purchasers, pursuant to transactions entered into before the
Settlement Date, of the Shares that were required to be delivered by the
Company, which shall be based upon documentation reasonably satisfactory to the
Company demonstrating the difference (if greater than zero) between (A) the
price per share paid by the Investor to purchase such number of shares of Common
Stock necessary for the Investor to meet its share delivery obligations to such
subsequent purchasers minus (B) the average Draw Down Discount Price during the
applicable Draw Down Pricing Period. In the event that the Make Whole Amount is
not paid within two (2) Trading Days following a demand therefor from the
Investor, the Make Whole Amount shall accrue interest per annum compounded daily
at a rate equal to the greater of (i) the prime rate of interest then in effect
as published by the Wall Street Journal plus three percent (3%) and (ii) ten
percent (10%) up to and including the date on which the Make Whole Amount is
actually paid. For the purposes of this Section 3.7 facts or circumstances that
are reasonably within the control of the Company include such facts and
circumstances solely attributable to acts or omissions of the Company, its
officers, directors, employees, agents and representatives, including, without
limitation, any transfer agent(s), accountant(s) and/or attorney(s) engaged by
the Company in connection with the Company’s performance of its obligations
hereunder. Notwithstanding anything to the contrary set forth in this Agreement,
in the event that the Company pays the Make Whole Amount (plus interest, if
applicable) in respect of any Settlement Date in accordance with this
Section 3.7, such payment shall be the Investor’s sole remedy in respect of the
Company’s failure to deliver Shares in respect of such Settlement Date, and the
Company shall not be obligated to deliver such Shares.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
     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 all requisite power and authority to own, lease
and operate its properties and assets and to carry on its business as now being
conducted. Except as set forth in the Commission Documents (as defined below),
the Company does not own more than fifty percent (50%) of the outstanding
capital stock of or control any other business entity, other than any
wholly-owned subsidiary that is not “significant” within the meaning of
Regulation S-X promulgated by the Commission. The Company 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, other than those in which the failure to be so
qualified or be in good standing would not have a Material Adverse Effect.

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     Section 4.2 Authorization; Enforcement. (i) The Company has the requisite
corporate power and authority to enter into and perform its obligations under
this Agreement, the Registration Rights Agreement and the Warrant and to issue
the Shares, the Warrant, the Warrant Shares and any Blackout Shares (except to
the extent that the number of Blackout Shares required to be issued exceeds the
number of authorized shares of Common Stock under the Certificate); (ii) the
execution and delivery of this Agreement and the Registration Rights Agreement,
and the execution, issuance and delivery of the Warrant, by the Company and the
consummation by it of the transactions contemplated hereby and thereby 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 (other than as contemplated by Section 6.5); and
(iii) each of this Agreement and the Registration Rights Agreement has been duly
executed and delivered, and the Warrant has been duly executed, issued 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
(A) as such enforceability may be limited by applicable bankruptcy, securities,
insolvency, or similar laws relating to, or affecting generally the enforcement
of, creditors’ rights and remedies; (B) to the extent that provisions relating
to indemnification or equitable remedies may be restricted or limited by
applicable law, and (C) as affected by other equitable principles of general
application.
     Section 4.3 Capitalization. The authorized capital stock of the Company and
the shares thereof issued and outstanding as of December 31, 2007 are set forth
in the Commission Documents. All of the outstanding shares of the Common Stock
have been duly and validly authorized and issued, and are fully paid and
non-assessable. Except as set forth in this Agreement or in the Commission
Documents, as of December 31, 2007, 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 or giving any right to subscribe for, any shares of capital stock of the
Company, except for stock options issued by the Company to its employees,
directors and consultants. Except as set forth in this Agreement or in the
Commission Documents, as of December 31, 2007, there were no contracts,
commitments, understandings, or arrangements by which the Company is or may
become bound to issue additional shares of the capital stock of the Company or
options, securities or rights convertible into or exchangeable for or giving any
right to subscribe for any shares of capital stock of the Company. Except as
described in the Commission Documents or as previously disclosed to the Investor
on a schedule previously delivered to the Investor (the “Disclosure Schedule”,
as of the date hereof the Company is not a party to any agreement granting
registration rights to any Person with respect to any of its equity or debt
securities. Except as set forth in the Commission Documents, or as previously
disclosed to the Investor in writing, as of the date hereof the Company is not a
party to, and it has no Knowledge of, any agreement restricting the voting or
transfer of any shares of the capital stock of the Company. The offer and sale
of all capital stock, convertible securities, rights, warrants, or options of
the Company issued during the twenty-four month period immediately prior to the
Closing complied in all material respects with all applicable federal and state
securities laws, and no stockholder has a right of rescission or damages with
respect thereto that would have a Material Adverse Effect. The Company has
furnished or made available to the Investor true and correct copies of the
Company’s Amended and Restated Certificate of Incorporation, as amended and in
effect on the date hereof (the

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“Certificate”), and the Company’s Amended and Restated Bylaws, as amended and in
effect on the date hereof (the “Bylaws”).
     Section 4.4 Issuance of Shares. Subject to Section 6.5, the Shares, the
Warrant and the Warrant Shares have been, and any Blackout Shares will be, duly
authorized by all necessary corporate action (except to the extent that the
number of Blackout Shares required to be issued exceeds the number of authorized
shares of Common Stock under the Certificate) and, when issued and paid for in
accordance with the terms of this Agreement, the Registration Rights Agreement
and the Warrant, and subject to, and in reliance on, the representations,
warranties and covenants made herein by the Investor, the Shares and the Warrant
Shares shall be validly issued and outstanding, fully paid and non-assessable,
and the Investor shall be entitled to all rights accorded to a holder of shares
of Common Stock.
     Section 4.5 No Conflicts. The execution, delivery and performance of this
Agreement, the Registration Rights Agreement, the Warrant and any other document
or instrument contemplated hereby or thereby, by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby
do not and shall not, in any material respect: (i) result in the violation of
any provision of the Certificate or Bylaws, (ii) conflict with, or 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 is a party that has not been waived, where such default or
conflict would constitute a Material Adverse Effect, (iii) create or impose a
lien, charge or encumbrance on any property of the Company under any agreement
or any commitment to which the Company is a party or by which the Company is
bound or by which any of its respective properties or assets are bound which
would constitute a Material Adverse Effect, (iv) result in a violation of any
federal, state, local or foreign statute, rule, regulation, order, writ,
judgment or decree (including federal and state securities laws and regulations)
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 where such
violation would constitute a Material Adverse Effect, or (v) require any consent
of any third-party that has not been obtained pursuant to any material contract
to which the Company is subject or to which any of its assets, operations or
management may be subject where the failure to obtain any such consent would
constitute a Material Adverse Effect. The Company is not required under federal,
state or local 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, the Registration Rights Agreement or the Warrant, or issue
and sell the Shares, the Warrant Shares or the Blackout Shares (except to the
extent that the number of Blackout Shares required to be issued exceeds the
number of authorized shares of Common Stock under the Certificate) in accordance
with the terms hereof and thereof (other than any filings that may be required
to be made by the Company with the Commission, the FINRA/NASDAQ or state
securities commissions subsequent to the Closing, and, any registration
statement (including any amendment or supplement thereto) or any other filing or
consent which may be filed pursuant to this Agreement, the Registration Rights
Agreement or the Warrant); provided that, for purposes of the representation
made in this sentence, the Company is assuming and relying upon the accuracy of
the relevant representations and agreements of the Investor herein.

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     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 since April 1, 2007 the Company has timely filed all
Commission Documents. Except as previously disclosed to the Investor in writing,
since April 1, 2007 the Company has maintained all requirements for the
continued listing or quotation of its Common Stock, and such Common Stock is
currently listed or quoted on the NASDAQ Global Market. To the extent not
available on the Commission’s EDGAR filing system, the Company has made
available to the Investor true and complete copies of the Commission Documents
filed with the Commission since April 1, 2007 and prior to the Closing Date. 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 date, the Company’s
Annual Report on Form 10-K for the year ended December 31, 2007 complied in all
material respects with the requirements of the Exchange Act and the rules and
regulations of the Commission promulgated thereunder applicable to such
document, and, as of its date, after giving effect to the information disclosed
and incorporated by reference therein, to the Company’s Knowledge such Annual
Report on Form 10-K 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. As of their respective dates, to the Company’s
Knowledge the financial statements, together with the related notes and
schedules thereto, of the Company included in the Commission Documents filed
with the Commission since April 1, 2007 complied as to form in all material
respects with all applicable accounting requirements and the published rules and
regulations of the Commission or other applicable rules and regulations with
respect thereto. Such financial statements, together with the related notes and
schedules thereto, have been prepared in accordance with generally accepted
accounting principles (“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 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).
          (b) The Company has timely filed with the Commission and made
available to the Investor via EDGAR or otherwise 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.
     Section 4.7 No Material Adverse Change. Except as disclosed in the
Commission Documents or a press release of the Company, since December 31, 2007
no event or series of events has or have occurred that would, individually or in
the aggregate, have a Material Adverse Effect on the Company.

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     Section 4.8 No Undisclosed Liabilities. To the Company’s Knowledge, neither
the Company nor any of its subsidiaries has any liabilities, obligations, claims
or losses (whether liquidated or unliquidated, secured or unsecured, absolute,
accrued, contingent or otherwise) that would be required to be disclosed on a
balance sheet of the Company or any subsidiary (including the notes thereto) in
conformity with GAAP and are not disclosed in the Commission Documents, other
than those incurred in the ordinary course of the Company’s or its subsidiaries
respective businesses since December 31, 2007 or which, individually or in the
aggregate, do not or would not have a Material Adverse Effect on the Company.
     Section 4.9 No Undisclosed Events or Circumstances. Except as previously
disclosed to the Investor in writing, to the Company’s Knowledge, no event or
circumstance has occurred or exists with respect to the Company or its
subsidiaries or their respective businesses, properties, operations or financial
condition, which, under applicable law, rule or regulation, requires public
disclosure or announcement by the Company but which has not been so publicly
announced or disclosed and which, individually or in the aggregate, would have a
Material Adverse Effect on the Company.
     Section 4.10 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 or in the Disclosure Schedule, 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 to the Knowledge of the Company involving
any officers or directors, in their capacity as officers or directors, of the
Company or any of its subsidiaries, including, without limitation, any
securities class action lawsuit or stockholder derivative lawsuit, that would be
reasonably expected to have a Material Adverse Effect on the Company. Except as
set forth in the Commission Documents or as previously disclosed to the Investor
in writing, no judgment, order, writ, injunction or decree or award has been
issued by or, to the Knowledge of the Company, requested of any court,
arbitrator or governmental agency which would be reasonably expected to result
in a Material Adverse Effect.
     Section 4.11 Compliance with Law. The business of the Company and its
subsidiaries have been and are presently being conducted in accordance with all
applicable federal, state, local and foreign (if applicable) governmental laws,
rules, regulations and ordinances, except as set forth in the Commission
Documents or such that would not reasonably be expected to cause a Material
Adverse Effect. Except as set forth in the Commission Documents, the Company and
each of its subsidiaries have all franchises, permits, licenses, consents and
other governmental or regulatory authorizations and approvals necessary for the
conduct of its business as now being conducted by it, except for such
franchises, permits, licenses, consents and other governmental or regulatory
authorizations and approvals, the failure to possess which, individually or in
the aggregate, would not be reasonably expected to have a Material Adverse
Effect.
     Section 4.12 Certain Fees. Except as expressly set forth in this Agreement,
no brokers, finders or financial advisory fees or commissions will be payable by
the Company or any of its subsidiaries in respect of the transactions
contemplated by this Agreement.

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     Section 4.13 Disclosure. To the Company’s Knowledge, neither this Agreement
nor any other documents, certificates or instruments furnished to the Investor
by or on behalf of the Company or any subsidiary in connection with the
transactions contemplated by this Agreement contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements made herein or therein, in the light of the circumstances under which
they were made herein or therein, not misleading.
     Section 4.14 Material Non-Public Information. Except for this Agreement and
the transactions contemplated hereby, and the Disclosure Schedule, neither the
Company nor its employees have disclosed to the Investor, any material
non-public information that, according to applicable law, rule or regulation,
should have been disclosed publicly by the Company prior to the date hereof but
which has not been so disclosed.
     Section 4.15 Exemption from Registration; Valid Issuances. Subject to, and
in reliance on, the representations, warranties and covenants made herein by the
Investor, the issuance and sale of the Shares, the Warrant, the Warrant Shares
and any Blackout Shares in accordance with the terms and on the bases of the
representations and warranties set forth in this Agreement, may and shall be
properly issued pursuant to Section 4(2), Regulation D and/or any other
applicable federal and state securities laws. Neither the sales of the Shares,
the Warrant, the Warrant Shares or any Blackout Shares pursuant to, nor the
Company’s performance of its obligations under, this Agreement, the Registration
Rights Agreement, or the Warrant shall (i) result in the creation or imposition
of any liens, charges, claims or other encumbrances upon the Shares, the Warrant
Shares, any Blackout Shares, or (ii) except as previously disclosed to the
Investor in writing, entitle the holders of any outstanding shares of capital
stock of the Company to preemptive or other rights to subscribe to or acquire
the shares of Common Stock or other securities of the Company.
     Section 4.16 No General Solicitation or Advertising in Regard to this
Transaction.  Except for such registration statements filed as contemplated
herein, Neither the Company nor any of its affiliates or any Person acting on
its or their behalf (i) has conducted any general solicitation (as that term is
used in Rule 502(c) of Regulation D) or general advertising with respect to any
of the Shares, the Warrant, the Warrant Shares or any Blackout Shares or
(ii) has made any offers or sales of any security or solicited any offers to buy
any security under any circumstances that would require registration of the
Shares under the Securities Act.
     Section 4.17 No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, other than pursuant to this Agreement and employee benefit
plans, under circumstances that would require registration under the Securities
Act of shares of the Common Stock issuable hereunder with any other offers or
sales of securities of the Company.
     Section 4.18 Acknowledgment 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 investor 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

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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
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE INVESTOR
     The Investor hereby makes the following representations, warranties and
covenants to the Company:
     Section 5.1 Organization and Standing of the Investor. The Investor is a
company duly organized, validly existing and in good standing under the laws of
the British Virgin Islands.
     Section 5.2 Authorization and Power. The Investor has the requisite power
and authority to enter into and perform its obligations under this Agreement,
the Warrant and the Registration Rights Agreement and to purchase the Shares,
the Warrant and the Warrant Shares in accordance with the terms hereof and
thereof. The execution, delivery and performance of this Agreement, the Warrant
and the Registration Rights Agreement by Investor and the consummation by it of
the transactions contemplated hereby or thereby 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. Each of this
Agreement and the Registration Rights Agreement has been duly executed and
delivered by the Investor and constitutes a valid and binding obligation of the
Investor enforceable against the Investor in accordance with its terms, except
(A) 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, (B) to the extent that provisions relating to
indemnification or equitable remedies may be restricted or limited by applicable
law, and (C) as affected by other equitable principles of general application.
     Section 5.3 No Conflicts. The execution, delivery and performance of this
Agreement, the Registration Rights Agreement, the Warrant and any other document
or instrument contemplated hereby and thereby, by the Investor and the
consummation of the transactions contemplated hereby and thereby do not
(i) violate any provision of the Investor’s charter documents or bylaws,
(ii) conflict with, or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to others 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,
(iii) create or impose a lien, charge or encumbrance on any property of the
Investor under any agreement or any commitment to which the Investor is a party
or by which the Investor is bound or by which any of its respective properties
or assets are bound, (iv) result in a violation of any federal, state, local or
foreign statute, rule, regulation, order, writ, judgment or decree (including
federal and state securities laws and regulations) applicable to the Investor or
by which any property or asset of the Investor are bound or affected, or
(v) require the consent of any third-party that has not been obtained pursuant
to any material contract to which Investor is subject or to which any of its
assets, operations or management may be subject. The Investor

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is not required under federal, state, foreign or local 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 the Registration
Rights Agreement or the Warrant or to purchase the Shares, the Warrant or the
Blackout Shares in accordance with the terms hereof or thereof, provided that,
for purposes of the representation made in this sentence, the Investor is
assuming and relying upon the accuracy of the relevant representations and
agreements of the Company herein.
     Section 5.4 Financial Capability. The Investor has the financial capability
to perform all of its obligations under this Agreement, the Registration Rights
Agreement and the Warrant, including the capability to purchase the Shares, the
Blackout Shares, the Warrant and the Warrant Shares in accordance with the terms
hereof and thereof. The Investor has such knowledge and experience in business
and financial matters that it is capable of evaluating the merits and risks of
an investment in Common Stock and the Warrant. The Investor is an “accredited
investor” as defined in Regulation D. The Investor is a “sophisticated investor”
as described in Rule 506(b)(2)(ii) of Regulation D. The Investor acknowledges
that an investment in the Common Stock and the Warrant is speculative and
involves a high degree of risk.
     Section 5.5 Information. The Investor and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Shares, the
Blackout Shares, the Warrant and the Warrant Shares which have been requested by
the Investor. The Investor has reviewed or received copies of the Commission
Documents. The Investor and its advisors, if any, have been afforded the
opportunity to ask questions 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
Blackout Shares, the Warrant and the Warrant 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.
     Section 5.6 Trading Restrictions. The Investor covenants that neither the
Investor nor any of its affiliates nor any entity managed or controlled by the
Investor will, or cause or assist any Person to, enter into or execute any
“short sale” (as such term is defined in Rule 200 of Regulation SHO, or any
successor regulation, promulgated by the Commission under the Exchange Act) of
any securities of the Company, and that the Investor and its affiliates shall
comply with all other applicable laws.
     Section 5.7 Statutory Underwriter Status. The Investor acknowledges that,
pursuant to the Commission’s current interpretations of the Securities Act, the
Investor will be disclosed as an “underwriter” within the meaning of the
Securities Act in the Registration Statement (and amendments thereto) and in any
Prospectus contained therein to the extent required by applicable law.
     Section 5.8 Not an Affiliate. The Investor is not an officer, director or
“affiliate” (as defined in Rule 405 of the Securities Act) of the Company.

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     Section 5.9 Manner of Sale. At no time was Investor presented with or
solicited by or through any leaflet, public promotional meeting, television
advertisement or any other form of general solicitation or advertising.
     Section 5.10 Prospectus Delivery. The Investor agrees that unless the
Shares and Warrant Shares are eligible for resale pursuant to all the conditions
of Rule 144 without volume or manner of sale limitations, it will resell the
Shares, the Blackout Shares and the Warrant Shares only pursuant to the
Registration Statement, in a manner described under the caption “Plan of
Distribution” in the Registration Statement, and in a manner in compliance with
all applicable securities laws, including, without limitation, any applicable
prospectus delivery requirements of the Securities Act and the insider trading
restrictions of the Exchange Act.
ARTICLE VI
COVENANTS OF THE COMPANY
     The Company covenants with the Investor as follows, which covenants are for
the benefit of the Investor and its permitted assignees (as defined herein):
     Section 6.1 Securities Compliance. The Company shall notify the Commission
and the Principal Market, if and as applicable, in accordance with their
respective rules and regulations, of the transactions contemplated by this
Agreement, and shall use commercially reasonable efforts to take all other
necessary action and proceedings as may be required and permitted by applicable
law, rule and regulation, for the legal and valid issuance of the Shares, the
Warrant Shares and the Blackout Shares, if any, to the Investor. Each Commission
Document to be filed with the Commission after the Closing Date and incorporated
by reference in the Registration Statement and Prospectus, 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; provided that in no
event shall the Company be under any obligation to the Investor to supplement
the Prospectus to reflect the issuance of any Shares pursuant to a Draw Down at
any time prior to the day following the last Settlement Date with respect to
such Draw Down..
     Section 6.2 Reservation of Common Stock. As of the date hereof, the Company
has available and the Company shall reserve and keep available at all times,
free of preemptive rights and other similar contractual rights of stockholders,
shares of Common Stock for the purpose of enabling the Company to satisfy any
obligation to issue the Shares in connection with all Draw Downs contemplated
hereunder and the Warrant Shares. The number of shares so reserved from time to
time, as theretofore increased or reduced as hereinafter provided, may be
reduced by the number of shares actually delivered hereunder.
     Section 6.3 Registration and Listing. During the Commitment Period, the
Company shall use commercially reasonable efforts to: (i) take all action
necessary to cause its Common Stock to continue to be registered under Section
12(b) or 12(g) of the Exchange Act, (ii) comply

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in all respects with its reporting and filing obligations under the Exchange
Act, (iii) prevent the termination or suspension of such registration, or the
termination or suspension of its reporting and filing obligations under the
Exchange Act or Securities Act (except as expressly permitted herein). The
Company shall use commercially reasonable efforts to maintain the listing and
trading of its Common Stock and the listing of the Shares purchased by Investor
hereunder on the Principal Market (including, without limitation, maintaining
sufficient net tangible assets) and will comply in all material respects with
the Company’s reporting, filing and other obligations under the bylaws or rules
of the FINRA and the Principal Market. The Company will not be required to carry
out any action pursuant to this Agreement, the Registration Rights Agreement or
the Warrant that would adversely impact the listing of the Company’s securities
on the Principal Market as now in effect, and as may be changed by the Company
in the future in the Company’s discretion.
     Section 6.4 Registration Statement. Without the prior written consent of
the Investor, the Registration Statement shall be used solely in connection with
the transactions between the Company and the Investor contemplated hereby.
     Section 6.5 Compliance with Laws.
          (a) The Company shall comply, and cause each subsidiary to comply,
with all applicable laws, rules, regulations and orders, noncompliance with
which could reasonably be expected to have a Material Adverse Effect. Without
limiting the generality of the foregoing, neither the Company nor any of its
officers, directors or affiliates will take, directly or indirectly, any action
designed or intended to stabilize or manipulate the price of any security of the
Company, 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,
in each case in contravention of applicable laws, rules, regulations or orders.
          (b) Without the consent of its stockholders in accordance with FINRA
and The NASDAQ Stock Market LLC rules, the Company will not be obligated to
issue, and the Investor will not be obligated to purchase, any Shares or
Blackout Shares which would result in the issuance under this Agreement, the
Warrant and the Registration Rights Agreement of Shares and Blackout Shares
(collectively) representing more than the applicable percentage under the rules
of the FINRA and The NASDAQ Stock Market LLC , including, without limitation,
NASDAQ Marketplace Rule 4350(i), that would require stockholder approval of the
issuance thereof.
     Section 6.6 Other Financing. Nothing in this Agreement shall be construed
to restrict the right of the Company to offer, sell and/or issue securities of
any kind whatsoever, provided such transaction is not a Prohibited Transaction
(as defined below) (any such transaction that is not a Prohibited Transaction is
referred to in this Agreement as a “Permitted Transaction”). Without limiting
the generality of the preceding sentence, the Company may, without the prior
written consent of the Investor, (i) establish stock option or other equity
incentive or award plans or agreements (for directors, employees, consultants
and/or advisors), stock purchase plans and rights plans, and amend such plans or
agreements, including increasing the number of shares available thereunder, or
issue warrants and options (ii) issue equity securities to finance, or otherwise
in connection with, the acquisition, license or sale of one or more other
companies,

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equipment, technologies or lines of business, (iii) issue shares of Common Stock
and/or Preferred Stock in connection with the Company’s option, equity incentive
or award plans or agreements, stock purchase plans, rights plans, warrants or
options, (iv) issue shares of Common Stock and/or Preferred Stock in connection
with the acquisition, license or sale of products, licenses, equipment or other
assets and strategic transactions or joint ventures; (v) issue shares of Common
and/or Preferred Stock to consultants and/or advisors as consideration for
services rendered or to be rendered, (vi) issue and sell equity or debt
securities in a public offering, (vii) issue and sell any equity or debt
securities in a private placement (other than in connection with any Prohibited
Transaction), (viii) issue equity securities to equipment lessors, equipment
vendors, banks or similar lending institutions in connection with leases or
loans, or in connection with strategic commercial or licensing transactions,
(ix) issue securities in connection with any stock split, stock dividend,
recapitalization, reclassification or similar event by the Company, (x) issue
shares of Common Stock to the Investor under any other agreement entered into
between the Investor and the Company and (xi) issue securities in connection
with a Qualified Financing.
     Section 6.7 Prohibited Transactions. Except as set forth on Schedule 6.7 of
the Disclosure Schedule and as permitted by Section 6.6, during the term of this
Agreement, the Company shall not enter into any Prohibited Transaction without
the prior written consent of the Investor, which consent may be withheld at the
sole discretion of the Investor. For the purposes of this Agreement, the term
“Prohibited Transaction” shall refer to the issuance by the Company of any
“future priced securities,” which shall mean the issuance of shares of Common
Stock or securities of any type whatsoever that are, or may become, convertible
or exchangeable into shares of Common Stock where the purchase, conversion or
exchange price for such Common Stock is determined using any floating discount
or other post-issuance adjustable discount to the market price of Common Stock,
including, without limitation, pursuant to any equity line or other financing
that is substantially similar to the financing provided for under this
Agreement; provided that any future issuance by the Company of (i) a convertible
security (including warrants, “Convertible Security”) that (A) contains
provisions that adjust the conversion or exercise price of such Convertible
Security (“Conversion Price”) solely in the event of stock splits, dividends,
distributions, reclassifications of the Company’s Common Stock, whether by
merger, consolidation, sale of assets or reorganization, or similar events shall
not be a Prohibited Transaction for purposes of this Section 6.7 so long as such
Convertible Security does not contain a provision that adjusts the Conversion
Price as a result of any issuances of new securities after the issue date of the
Convertible Security at a price below the then effective Conversion Price of the
Convertible Security, or as a result of any decline in the market price of the
Common Stock after the issue date of the Convertible Security, other than a
decline resulting directly from stock splits, dividends, distributions or
similar events or without limitation, containing other conversion price
adjustments customarily found in a firm commitment Rule 144A offering to
qualified institutional buyers, or (B) is issued in connection with the Company
obtaining debt financing for research and development purposes where the
issuance of Convertible Securities is conditioned upon the Company meeting
certain defined clinical milestones, (ii) a registered direct public offering or
an unregistered private placement of the Company’s securities where the price
per share of such securities is fixed concurrently with the execution of
definitive documentation relating to the offering or placement, as applicable,
(iii) securities issued in connection with a secured debt financing and
(iv) securities issued pursuant to a Qualified Financing shall not be a
Prohibited Transaction for purposes of this Section 6.7.

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     Section 6.8 Corporate Existence. The Company shall take all steps necessary
to preserve and continue the corporate existence of the Company; provided,
however, that nothing in this Agreement shall be deemed to prohibit the Company
from engaging in any Excluded Merger or Sale with another Person in accordance
with the terms and conditions of the Warrant.
     Section 6.9 Non-Disclosure of Non-Public Information. Subject to
Section 6.10 below, except as otherwise expressly provided in this Agreement,
the Registration Rights Agreement or the Warrant, none of the Company, its
officers, directors, employees nor agents shall disclose material non-public
information to the Investor, its advisors or representatives.
     Section 6.10 Notice of Certain Events Affecting Registration; Suspension of
Right to Request a Draw Down. The Company shall promptly notify the Investor
upon the occurrence of any of the following events in respect of the
Registration Statement or the Prospectus related to the offer, issuance and sale
of the Shares and the Warrant Shares hereunder: (i) receipt of any request for
additional information by the Commission or any other federal or state
governmental authority during the period of effectiveness of the Registration
Statement for amendments or supplements to the Registration Statement or the
Prospectus; (ii) the issuance by the Commission or any other federal or state
governmental authority of any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceedings for that purpose;
and (iii) receipt of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose. 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. The Company shall not be required to disclose to
the Investor the substance or specific reasons of any of the events set forth in
clauses (i) through (ii) of the first sentence of this Section 6.10, only that
the event has occurred. The Company shall not request a Draw Down during the
continuation of any of the foregoing events.
     Section 6.11 Amendments to the Registration Statement. When the
Registration Statement is declared effective by the Commission, (a) the Company
shall not file any amendment to the Registration Statement or make any amendment
or supplement to the Prospectus of which the Investor shall not previously have
been advised; provided, however, that the Company shall, to the extent it deems
advisable, and without the prior consent of or notice to Investor, supplement
the Prospectus within two Trading Days following the Settlement Date for each
Draw Down solely to reflect the issuance of Shares with respect to such Draw
Down; and provided, further, that the Company need not advise the Investor
regarding any supplement the purpose of which is to update the Registration
Statement and the Prospectus to include information the Company had previously
filed with the Commission pursuant to Section 13 or 15(d) under the Exchange
Act; and (b) so long as, in the reasonable opinion of counsel for the Investor,
a Prospectus is required to be delivered in connection with sales of the Shares
by the Investor, if the Company files any information, documents or reports that
are incorporated by reference in the Registration Statement pursuant to the
Exchange Act, the Company shall, if requested in writing by the Investor,
deliver a copy of such information, documents or reports to the Investor
promptly following such filing to the extent such information, documents or
reports are not available on the Commission’s EDGAR filing system.

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     Section 6.12 Prospectus Delivery. From time to time for such period as in
the reasonable opinion of counsel for the Investor a prospectus is required by
the Securities Act to be delivered in connection with sales by the Investor, the
Company will expeditiously deliver to the Investor, without charge, as many
copies of the Prospectus (and of any amendment or supplement thereto) as the
Investor may reasonably request. The Company consents to the use of the
Prospectus (and of any amendment or supplement thereto) in accordance with the
provisions of the Securities Act and state securities laws in connection with
the offering and sale of the Shares and the Warrant Shares and for such period
of time thereafter as the Prospectus is required by the Securities Act to be
delivered in connection with sales of the Shares and the Warrant Shares.
Notwithstanding the foregoing, in no event shall the Company be under any
obligation to the Investor to supplement the Prospectus or to reflect the
issuance of any Shares pursuant to a Draw Down or deliver any Prospectus as so
supplemented at any time prior to the Trading Day following the Settlement Date
with respect to such Draw Down.
ARTICLE VII
CONDITIONS TO THE OBLIGATION OF THE INVESTOR
TO ACCEPT A DRAW DOWN
     The obligation of the Investor hereunder to accept a Draw Down Notice and
to acquire and pay for the Shares in accordance therewith is subject to the
satisfaction or waiver, at each Condition Satisfaction Date, of each of the
conditions set forth below. Other than those conditions set forth in
Section 7.12 which are for the Company’s sole benefit and may be waived by the
Company at any time in its sole discretion, the conditions are for the
Investor’s sole benefit and may be waived by the Investor at any time in its
sole discretion. As used in this Agreement, the term “Condition Satisfaction
Date” shall mean, with respect to each Draw Down, the date on which the
applicable Draw Down Notice is delivered to the Investor and each Settlement
Date in respect of the applicable Draw Down Pricing Period.
     Section 7.1 Accuracy of the Company’s Representations and Warranties. Each
of the representations and warranties of the Company shall be true and correct
in all material respects as of the date when made as though made at that time
except for representations and warranties that are expressly made as of a
particular date.
     Section 7.2 Performance by the Company. The Company shall have, in all
material respects, performed, satisfied and complied with all covenants,
agreements and conditions required by this Agreement, the Registration Rights
Agreement and the Warrant to be performed, satisfied or complied with by the
Company.
     Section 7.3 Compliance with Law. The Company shall have complied in all
respects with all applicable federal, state and local governmental laws, rules,
regulations and ordinances in connection with the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby except for any failures to so comply which could not
reasonably be expected to have a Material Adverse Effect.
     Section 7.4 Effective Registration Statement. Upon the terms and subject to
the conditions set forth in the Registration Rights Agreement, the Registration
Statement shall have previously become effective and shall remain effective and
(i) neither the Company nor the

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Investor shall have received notice that the Commission has issued or intends to
issue a stop order with respect to the Registration Statement or that the
Commission otherwise has suspended or withdrawn the effectiveness of the
Registration Statement, either temporarily or permanently, or intends or has
threatened to do so (unless the Commission’s concerns have been addressed and
the Investor is reasonably satisfied that the Commission no longer is
considering or intends to take such action), and (ii) no other suspension of the
use or withdrawal of the effectiveness of the Registration Statement or the
Prospectus shall exist.
     Section 7.5 No Knowledge. The Company shall have no Knowledge of any event
that could reasonably be expected to have the effect of causing the Registration
Statement with respect to the resale of the Registrable Securities by the
Investor to be suspended or otherwise ineffective (which event is reasonably
likely to occur within eight Trading Days following the Trading Day on which a
Draw Down Notice is delivered) as of the Settlement Date.
     Section 7.6 No Suspension. Trading in the Company’s Common Stock shall not
have been suspended by the Commission, the Principal Market or the FINRA and
trading in securities generally as reported on the Principal Market shall not
have been suspended or limited.
     Section 7.7 No Injunction. No statute, rule, regulation, order, decree,
writ, ruling or injunction shall have been enacted, entered, promulgated,
endorsed or, to the Knowledge of the Company, threatened 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.
     Section 7.8 No Proceedings or Litigation. No action, suit or proceeding
before any arbitrator or any court or governmental authority shall have been
commenced or, to the Knowledge of the Company, threatened, and, to the Knowledge
of the Company no inquiry or investigation by any governmental authority shall
have been threatened, against the Company or any subsidiary, or any of the
officers, directors or affiliates of the Company or any subsidiary seeking to
enjoin, prevent or change the transactions contemplated by this Agreement, or
seeking damages in connection with such transactions.
     Section 7.9 Sufficient Shares Registered for Resale. The Company shall have
sufficient Shares, calculated using the closing trade price of the Common Stock
as of the Trading Day immediately preceding such Draw Down Notice, registered
under the Registration Statement to issue and sell such Shares in accordance
with such Draw Down Notice.
     Section 7.10 Warrant. The Warrant shall have been duly executed, delivered
and issued to the Investor, and the Company shall not be in default in any
material respect under any of the provisions thereof, provided that any refusal
by or failure of the Company to issue and deliver Warrant Shares in respect of
any exercise (in whole or in part) thereof shall be deemed to be material for
the purposes of this Section 7.10.
     Section 7.11 Legal Opinion. The Investor shall have received the form of
opinion mutually agreed to between the parties on the date of this Agreement, it
being acknowledged and agreed that such opinion shall be in the form of a
standard corporate opinion applicable to transactions of the type contemplated
hereby.

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     Section 7.12 Accuracy of Investor’s Representation and Warranties. Each of
the representations and warranties of the Investor shall be true and correct in
all material respects as of the date when made as though made at that time
except for representations and warranties that are made as of a particular date.
ARTICLE VIII
TERMINATION
     Section 8.1 Term. Unless otherwise terminated in accordance with
Section 8.2 below, this Agreement shall terminate upon the earlier to occur of
(i) the expiration of the Commitment Period or (ii) the issuance of Shares
pursuant to this Agreement in an amount equal to the Maximum Commitment Amount.
     Section 8.2 Other Termination.
          (a) The Investor may terminate this Agreement upon (x) one
(1) business day’s notice if the Company enters into any Prohibited Transaction
as set forth in Section 6.7 without the Investor’s prior written consent, or
(y) one (1) business day’s notice if the Investor provides written notice of a
Material Adverse Effect to the Company, and such Material Adverse Effect
continues for a period of ten (10) Trading Days after the receipt by the Company
of such notice.
          (b) The Investor may terminate this Agreement upon one (1) business
day’s notice to the Company at any time in the event that the Registration
Statement is not initially declared effective in accordance with the
Registration Rights Agreement, provided, however, that in the event the
Registration Statement is declared effective prior to the delivery of such
notice, the Investor shall thereafter have no right to terminate this Agreement
pursuant to this Section 8.2(b).
          (c) The Company may terminate this Agreement upon one (1) business
day’s notice; provided, however, that the Company shall not terminate this
Agreement pursuant to this Section 8.2(c) during any Draw Down Pricing Period;
provided further, that, in the event of any termination of this Agreement by the
Company hereunder, so long as the Investor owns Shares purchased hereunder
and/or Warrant Shares, unless all of such shares of Common Stock may be resold
by the Investor without registration and without any time, volume or manner
limitations pursuant to Rule 144(b) (or any similar provision then in effect)
under the Securities Act, the Company shall not suspend or withdraw the
Registration Statement or otherwise cause the Registration Statement to become
ineffective, or voluntarily delist the Common Stock from, the Principal Market
without listing the Common Stock on another Principal Market.
          (d) Each of the parties hereto may terminate this Agreement upon one
(1) day’s notice if the other party has breached a material representation,
warranty or covenant to this Agreement and such breach is not remedied within
ten (10) Trading Days after notice of such breach is delivered to the breaching
party.
     Section 8.3 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 and the transactions contemplated by this Agreement shall be
terminated without further action by either party. If

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this Agreement is terminated as provided in Section 8.1 or 8.2 herein, this
Agreement shall become void and of no further force and effect, except as
provided in Section 10.13. Nothing in this Section 8.3 shall be deemed to
release the Company or the Investor from any liability for any breach under this
Agreement occurring prior to such termination, 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 arising prior to such termination.
ARTICLE IX
INDEMNIFICATION
     Section 9.1 Indemnification.
          (a) Except as otherwise provided in this Article IX, unless disputed
as set forth in Section 9.2, the Company agrees to indemnify, defend and hold
harmless the Investor and its affiliates and their respective officers,
directors, agents, employees, subsidiaries, partners, members and controlling
persons (each, an “Investor Indemnified Party”), to the fullest extent permitted
by law from and against any and all Damages directly resulting from or directly
arising out of any breach of any representation or warranty, covenant or
agreement (except as otherwise specifically provided) by the Company in this
Agreement, the Registration Rights Agreement or the Warrant; provided, however,
that the Company shall not be liable under this Article IX to an Investor
Indemnified Party to the extent that such Damages resulted or arose from the
breach by an Investor Indemnified Party of any representation, warranty,
covenant or agreement of an Investor Indemnified Party contained in this
Agreement, the Registration Rights Agreement or the Warrant or the negligence,
recklessness, willful misconduct or bad faith of an Investor Indemnified Party.
The parties intend that any Damages subject to indemnification pursuant to this
Article IX will be net of insurance proceeds (which the Investor agrees to use
commercially reasonable efforts to recover or to cause any Investor Indemnified
Party to recover). Accordingly, the amount which the Company is required to pay
to any Investor Indemnified Party hereunder (a “Company Indemnity Payment”) will
be reduced by any insurance proceeds actually recovered by or on behalf of any
Investor Indemnified Party in reduction of the related Damages. In addition, if
an Investor Indemnified Party receives a Company Indemnity Payment required by
this Article IX in respect of any Damages and subsequently receives any such
insurance proceeds, then the Investor will pay or, as applicable, will use
commercially reasonable efforts to cause the Investor Indemnified Party to pay
to the Company an amount equal to the Company Indemnity Payment received less
the amount of the Company Indemnity Payment that would have been due if the
insurance proceeds had been received, realized or recovered before the Company
Indemnity Payment was made.
          (b) Except as otherwise provided in this Article IX, unless disputed
as set forth in Section 9.2, the Investor agrees to indemnify, defend and hold
harmless the Company and its affiliates and their respective officers,
directors, agents, employees, subsidiaries, partners, members and controlling
persons (each, a “Company Indemnified Party”), to the fullest extent permitted
by law from and against any and all Damages directly resulting from or directly
arising out of any breach of any representation or warranty, covenant or
agreement by the Investor in this Agreement, the Registration Rights Agreement
or the Warrant; provided, however, that the Investor shall not be liable under
this Article IX to a Company Indemnified Party to the extent that such Damages
resulted or arose from the breach by a Company Indemnified Party of any

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representation, warranty, covenant or agreement of a Company Indemnified Party
contained in this Agreement, the Registration Rights Agreement or the Warrant or
the negligence, recklessness, willful misconduct or bad faith of a Company
Indemnified Party. The parties intend that any Damages subject to
indemnification pursuant to this Article IX will be net of insurance proceeds
(which the Company agrees to use commercially reasonable efforts to recover or
to cause any Company Indemnified Party to recover). Accordingly, the amount
which the Investor is required to pay to any Company Indemnified Party hereunder
(an “Investor Indemnity Payment”) will be reduced by any insurance proceeds
theretofore actually recovered by or on behalf of any Company Indemnified Party
in reduction of the related Damages. In addition, if a Company Indemnified Party
receives an Investor Indemnity Payment required by this Article IX in respect of
any Damages and subsequently receives any such insurance proceeds, then the
Company will pay or, as applicable, will use commercially reasonable efforts to
cause the Company Indemnified Party to pay to the Investor an amount equal to
the Investor Indemnity Payment received less the amount of the Investor
Indemnity Payment that would have been due if the insurance proceeds had been
received, realized or recovered before the Investor Indemnity Payment was made.
     Section 9.2 Notification of Claims for Indemnification. Each party entitled
to indemnification under this Article IX (an “Indemnified Party”) shall,
promptly after the receipt of notice of the commencement of any claim against
such Indemnified Party in respect of which indemnity may be sought from the
party obligated to indemnify such Indemnified Party under this Article IX (the
“Indemnifying Party”), notify the Indemnifying Party in writing of the
commencement thereof. Any such notice shall describe the claim in reasonable
detail. The failure of any Indemnified Party to so notify the Indemnifying Party
of any such action shall not relieve the Indemnifying Party from any liability
which it may have to such Indemnified Party (a) other than pursuant to this
Article IX or (b) under this Article IX unless, and only to the extent that,
such failure results in the Indemnifying Party’s forfeiture of substantive
rights or defenses or the Indemnifying Party is prejudiced by such delay. The
procedures listed below shall govern the procedures for the handling of
indemnification claims.
          (a) Any claim for indemnification for Damages that do not result from
a Third Party Claim as defined in the following paragraph, shall be asserted by
written notice given by the Indemnified Party to the Indemnifying Party. Such
Indemnifying Party shall have a period of thirty (30) days after the receipt of
such notice within which to respond thereto. If such Indemnifying Party does not
respond within such thirty (30) day period, such Indemnifying Party shall be
deemed to have refused to accept responsibility to make payment as set forth in
Section 9.1. If such Indemnifying Party does not respond within such thirty
(30) day period or rejects such claim in whole or in part, the Indemnified Party
shall be free to pursue such remedies as specified in this Agreement.
          (b) If an Indemnified Party shall receive notice or otherwise learn of
the assertion by a person or entity not a party to this Agreement of any
threatened legal action or claim (collectively a “Third Party Claim”), with
respect to which an Indemnifying Party may be obligated to provide
indemnification, the Indemnified Party shall give such Indemnifying Party
written notice thereof within twenty (20) days after becoming aware of such
Third Party Claim.

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          (c) An Indemnifying Party may elect to defend (and, unless the
Indemnifying Party has specified any reservations or exceptions, to seek to
settle or compromise) at such Indemnifying Party’s own expense and by such
Indemnifying Party’s own counsel, any Third Party Claim. Within thirty (30) days
after the receipt of notice from an Indemnified Party (or sooner if the nature
of such Third Party Claim so requires), the Indemnifying Party shall notify the
Indemnified Party whether the Indemnifying Party will assume responsibility for
defending such Third Party Claim, which election shall specify any reservations
or exceptions. If such Indemnifying Party does not respond within such thirty
(30) day period or rejects such claim in whole or in part, the Indemnified Party
shall be free to pursue such remedies as specified in this Agreement. In case
any such Third Party Claim shall be brought against any Indemnified Party, and
it shall notify the Indemnifying Party of the commencement thereof, the
Indemnifying Party shall be entitled to assume the defense thereof at its own
expense, with counsel satisfactory to such Indemnified Party in its reasonable
judgment; provided, however, that any Indemnified Party may, at its own expense,
retain separate counsel to participate in such defense at its own expense.
Notwithstanding the foregoing, in any Third Party Claim in which both the
Indemnifying Party, on the one hand, and an Indemnified Party, on the other
hand, are, or are reasonably likely to become, a party, such Indemnified Party
shall have the right to employ separate counsel and to control its own defense
of such claim if, in the reasonable opinion of counsel to such Indemnified
Party, either (x) one or more significant defenses are available to the
Indemnified Party that are not available to the Indemnifying Party or (y) a
conflict or potential conflict exists between the Indemnifying Party, on the one
hand, and such Indemnified Party, on the other hand, that would make such
separate representation advisable; provided, however, that in such circumstances
the Indemnifying Party (i) shall not be liable for the fees and expenses of more
than one counsel to all Indemnified Parties and (ii) shall reimburse the
Indemnified Parties for such reasonable fees and expenses of such counsel
incurred in any such Third Party Claim, as such expenses are incurred, provided
that the Indemnified Parties agree to repay such amounts if it is ultimately
determined that the Indemnifying Party was not obligated to provide
indemnification under this Article IX. The Indemnifying Party agrees that it
shall not, without the prior written consent of the Indemnified Party, settle,
compromise or consent to the entry of any judgment in any pending or threatened
claim relating to the matters contemplated hereby (if any Indemnified Party is a
party thereto or has been actually threatened to be made a party thereto) unless
such settlement, compromise or consent includes an unconditional release of such
Indemnified Party from all liability arising or that may arise out of such
claim. The Indemnifying Party shall not be liable for any settlement of any
claim effected against an Indemnified Party without the Indemnifying Party’s
written consent, which consent shall not be unreasonably withheld, conditioned
or delayed. The rights accorded to an Indemnified Party hereunder shall be in
addition to any rights that any Indemnified Party may have at common law, by
separate agreement or otherwise; provided, however, that notwithstanding the
foregoing or anything to the contrary contained in this Agreement, nothing in
this Article IX shall restrict or limit any rights that any Indemnified Party
may have to seek equitable relief.

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ARTICLE X
MISCELLANEOUS
     Section 10.1 Fees and Expenses.
          (a) Each of the Company and the Investor agrees to pay its own
expenses incident to the performance of its obligations hereunder, except that
the Company shall be solely responsible for (i) all reasonable attorneys fees
and legal expenses incurred by the Investor in connection with the preparation,
negotiation, execution and delivery of this Agreement, the Registration Rights
Agreement and the Warrant, and review of the Registration Statement, and in
connection with any amendments, modifications or waivers of this Agreement,
(ii) subject in all cases to Section 10.1(b) hereof, all reasonable fees and
expenses incurred in connection with the Investor’s enforcement of this
Agreement, including, without limitation, all reasonable attorneys fees and
legal expenses, (iii) due diligence expenses incurred by the Investor during the
term of this Agreement equal to $12,500 per calendar quarter, and (iv) all stamp
or other similar taxes and duties, if any, levied in connection with issuance of
the Shares pursuant hereto; provided, however, that in each of the above
instances the Investor shall provide customary supporting invoices or similar
documentation in reasonable detail describing such expenses (however, the
Investor shall not be obligated to provide detailed time sheets); and provided
further, that the maximum aggregate amount payable by the Company pursuant to
clauses (i) and (ii) above shall be $75,000 and the Investor shall bear all fees
and expenses in excess of $75,000 in connection with the events described in
clauses (i) and (ii) above.
          (b) If any action at law or in equity is necessary to enforce or
interpret the terms of this Agreement, the Registration Rights Agreement or the
Warrant, the prevailing party shall be entitled to reasonable fees, costs and
necessary disbursements in addition to any other relief to which such party may
be entitled.
     Section 10.2 Reporting Entity for the Common Stock. The reporting entity
relied upon for the determination of the trading price or trading volume of the
Common Stock on any given Trading Day for the purposes of this Agreement shall
be Bloomberg, L.P. or any successor thereto. The written mutual consent of the
Investor and the Company shall be required to employ any other reporting entity.
     Section 10.3 Brokerage. Each of the parties hereto represents that it has
had no dealings in connection with this transaction with any finder or broker
who will demand payment of any fee or commission from the other party. The
Company on the one hand, and the Investor, on the other hand, agree to indemnify
the other against and hold the other harmless from any and all liabilities to
any Persons claiming brokerage commissions or finder’s fees on account of
services purported to have been rendered on behalf of the indemnifying party in
connection with this Agreement or the transactions contemplated hereby.
     Section 10.4 Notices. All notices, demands, requests, consents, approvals,
and other communications required or permitted hereunder shall be in writing
and, unless otherwise specified herein, shall be (i) personally served,
(ii) deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice given in accordance herewith, in each case with
a copy to the e-mail address set forth beside the facsimile number for the
addressee below. Any notice or other communication required or permitted to be
given hereunder shall be deemed effective (a) upon hand delivery or delivery by
facsimile, with accurate confirmation generated by the transmitting facsimile

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machine, 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 addresses for such
communications shall be:
If to the Company:
Somaxon Pharmaceuticals, Inc.
3721 Valley Centre Drive, Suite 500
San Diego, California 92130
Attn: Meg M. McGilley, Chief Financial Officer
Fax: (858) 509-1761
Email: mmcgilley@somaxon.com
with a copy (which shall not constitute notice):
Somaxon Pharmaceuticals, Inc.
3721 Valley Centre Drive, Suite 500
San Diego, California 92130
Attn: Matthew W. Onaitis, General Counsel
Fax: (858) 509-1761
Email: monaitis@somaxon.com
and another copy (which shall not constitute notice) to:
Latham & Watkins LLP
12636 High Bluff Drive, Suite 400
San Diego, California 92130
Attn: Cheston J. Larson, Esq.
Fax: (858) 523-5450
Email: cheston.larson@lw.com.
if to the Investor:
Kingsbridge Capital Limited
Attention: Mr. Tony Gardener-Hillman
P.O. Box 1075
Elizabeth House
9 Castle Street
St. Helier
Jersey
JE42QP
Channel Islands
Telephone: 011-44-1534-636-041
Facsimile: 011-44-1534-636-042
Email: admin@kingsbridgecap.com; and adamgurney@kingsbridgecap.com

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with a copy (which shall not constitute notice) to:
Kingsbridge Corporate Services Limited
Kingsbridge House
New Abbey
Kilcullen, County Kildare
Republic of Ireland
Telephone: 011-353-45-481-811
Facsimile: 011-353-45-482-003
Email: adamgurney@kingsbridge.ie; emmagalway@kingsbridge.ie; and
pwhelan@kingsbridge.ie
and another copy (which shall not constitute notice) to:
Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, NY 10038
Facsimile: (212) 806- 9238
Attention: Keith M. Andruschak, Esq. — kandruschak@stroock.com
     Either party hereto may from time to time change its address for notices
under this Section by giving at least ten (10) days’ prior written notice of
such changed address to the other party hereto.
     Section 10.5 Assignment. Neither this Agreement nor any rights of the
Investor or the Company hereunder may be assigned by either party to any other
Person.
     Section 10.6 Amendment; No Waiver. No party shall be liable or bound to any
other party in any manner by any warranties, representations or covenants except
as specifically set forth in this Agreement, the Warrant and the Registration
Rights Agreement. Except as expressly provided in this Agreement, neither this
Agreement nor any term hereof may be amended, waived, discharged or terminated
other than by a written instrument signed by both parties hereto. The failure of
either party to insist on strict compliance with this Agreement, or to exercise
any right or remedy under this Agreement, shall not constitute a waiver of any
rights provided under this Agreement, nor estop the parties from thereafter
demanding full and complete compliance nor prevent the parties from exercising
such a right or remedy in the future.
     Section 10.7 Entire Agreement. This Agreement, the Registration Rights
Agreement and the Warrant set forth the entire agreement and understanding of
the parties relating to the subject matter hereof and supersedes all prior and
contemporaneous agreements, negotiations and understandings between the parties,
both oral and written, relating to the subject matter hereof.
     Section 10.8 Severability. If any provision of this Agreement becomes or is
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall continue in full force and effect without said
provision; provided that, if the severance of such provision materially changes
the economic benefits of this Agreement to either party as such

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benefits are anticipated as of the date hereof, then such party may terminate
this Agreement on five (5) business days prior written notice to the other
party. In such event, the Registration Rights Agreement will terminate
simultaneously with the termination of this Agreement; provided that in the
event that this Agreement is terminated by the Company in accordance with this
Section 10.8 and the Warrant Shares either have not been registered for resale
by the Investor in accordance with the Registration Rights Agreement or are
otherwise not freely tradable (if and when issued) in accordance with applicable
law, then the Registration Rights Agreement in respect of the registration of
the Warrant Shares shall remain in full force and effect.
     Section 10.9 Title and Subtitles. The titles and subtitles used in this
Agreement are used for the convenience of reference and are not to be considered
in construing or interpreting this Agreement.
     Section 10.10 Counterparts. This Agreement may be executed in multiple
counterparts, each of which may be executed by less than all of the parties and
shall be deemed to be an original instrument which shall be enforceable against
the parties actually executing such counterparts and all of which together shall
constitute one and the same instrument.
     Section 10.11 Choice of Law. This Agreement shall be construed under the
laws of the State of New York without regard to principles of conflict of laws
that would result in the application of any law other than the laws of the State
of New York.
     Section 10.12 Specific Enforcement, Consent to Jurisdiction.
          (a) 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 or thereof, this being in addition to any other remedy to
which either party may be entitled by law or equity.
          (b) Each of the Company and the Investor (i) 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
(ii) 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 10.12 shall affect or limit any right to serve process in any other
manner permitted by law.
     Section 10.13 Survival. The representations and warranties of the Company
and the Investor contained in Articles IV and V and the covenants contained in
Articles V, VI and X

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shall survive the execution and delivery hereof and the Closing until the
termination of this Agreement, and the agreements and covenants set forth in
Article VIII and Article IX of this Agreement shall survive the execution and
delivery hereof and the Closing hereunder.
     Section 10.14 Publicity. Except as otherwise required by applicable law or
regulation, or NASDAQ rule or judicial process, prior to the Closing, neither
the Company nor the Investor shall issue any press release or otherwise make any
public statement or announcement with respect to this Agreement or the
transactions contemplated hereby or the existence of this Agreement. In the
event the Company is required by law, regulation, NASDAQ rule or judicial
process, based upon reasonable advice of the Company’s counsel, to issue a press
release or otherwise make a public statement or announcement with respect to
this Agreement prior to the Closing, the Company shall consult with the Investor
on the form and substance of such press release, statement or announcement.
Promptly after the Closing, each party 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; provided
that, prior to issuing any such press release, making any such public statement
or announcement, the party wishing to make such release, statement or
announcement consults and cooperates in good faith with the other party in order
to formulate such press release, public statement or announcement in form and
substance reasonably acceptable to both parties.
     Section 10.15 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 instruments, 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.
[Remainder of this page intentionally left blank]

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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
written.

            KINGSBRIDGE CAPITAL LIMITED
      By:   /s/ Tony Gardner-Hillman         Tony Gardner-Hillman       
Director        SOMAXON PHARMACEUTICALS, INC.
      By:   /s/ Meg M. McGilley         Name:   Meg M. McGilley        Title:  
Vice President and Chief Financial Officer   

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Exhibit A
Form of Registration Rights Agreement

 

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Exhibit B
Form of Warrant

 

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Exhibit C
Form of Draw Down Notice
Kingsbridge Capital Limited
Attention: Mr. Tony Hillman
P.O. Box 1075
Elizabeth House
9 Castle Street
St. Helier
Jersey
JE42QP
Channel Islands
Facsimile: 011-44-1534-636-042
Email: admin@kingsbridgecap.com; and adamgurney@kingsbridgecap.com
Kingsbridge Corporate Services Limited
Kingsbridge House
New Abbey
Kilcullen, County Kildare
Republic of Ireland
Facsimile: 011-353-45-482-003
Email: adamgurney@kingsbridge.ie; and pwhelan@kingsbridge.ie
Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, NY 10038
Facsimile: (212) 806-9238
Attention: Keith M. Andruschak, Esq. — kandruschak@stroock.com
Reference is hereby made to that certain Common Stock Purchase Agreement dated
as of May 21, 2008 (the “Agreement”) by and between Somaxon Pharmaceuticals,
Inc., a corporation organized and existing under the laws of the State of
Delaware (the “Company”), and Kingsbridge Capital Limited, an entity organized
and existing 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 Agreement.
In accordance with and pursuant to Section 3.1 of the Agreement, the Company
hereby issues this Draw Down Notice to the Investor pursuant to the terms set
forth below.
Draw Down Amount: $                    ; and
First Trading Day of Draw Down Pricing Period:                     , 200[ ].

 

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Enclosed with this Draw Down Notice is an executed copy of the Officer’s
Certificate described in Section 3.1 of the Agreement, the base form of which is
attached to such Agreement as Exhibit D.

 

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Exhibit D
Officer’s Certificate
     I, [NAME OF OFFICER], do hereby certify to Kingsbridge Capital Limited (the
“Investor”), with respect to the common stock of Somaxon Pharmaceuticals, Inc.
(the “Company”) issuable in connection with the Draw Down Notice, dated
                                         (the “Notice”) attached hereto and
delivered pursuant to Article III of the Common Stock Purchase Agreement, dated
May 21, 2008 (the “Agreement”), by and between the Company and the Investor, as
follows (capitalized terms used but undefined herein have the meanings given to
such terms in the Agreement):
     1. I am the duly elected [OFFICER] of the Company.
     2. The representations and warranties of the Company set forth in
Article IV of the Agreement are true and correct in all material respects as
though made on and as of the date hereof (except for such representations and
warranties that are made as of a particular date).
     3. The Company has performed in all material respects all covenants and
agreements to be performed by the Company on or prior to the date hereof related
to the Notice and has satisfied each of the conditions to the obligation of the
Investor set forth in Article VII of the Agreement.
     4. Assuming confirmation by the Investor of the representations and
agreements contained in Section 5.10 of the Agreement, the Shares issuable in
respect of the Notice will be delivered without restrictive legend via book
entry through the Depositary Trust Company to an account designated by the
Investor.
     The undersigned has executed this Certificate this                      day
of, 200[ ].

             
 
  Name:  
 
   
 
  Title: