EXHIBIT 10.1
SECURITIES PURCHASE AGREEMENT
     This Securities Purchase Agreement (this “Agreement”) is dated as of
December 19, 2007, by and among Ardea Biosciences, Inc., a Delaware corporation
(the “Company”), and each purchaser identified on the signature pages hereto
(each, including its successors and assigns, a “Purchaser” and collectively, the
“Purchasers”).
RECITALS
          A. The Company and each Purchaser is executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Section 4(2) of the Securities Act of 1933, as amended (the “Securities
Act”), and Rule 506 of Regulation D (“Regulation D”) as promulgated by the
United States Securities and Exchange Commission (the “Commission”) under the
Securities Act.
          B. Each Purchaser, severally and not jointly, wishes to purchase, and
the Company wishes to sell, upon the terms and conditions stated in this
Agreement, that aggregate number of shares of common stock, par value $0.001 per
share (the “Common Stock”), of the Company, set forth below such Purchaser’s
name on the signature page of this Agreement (which aggregate amount for all
Purchasers together shall be 3,018,868 shares of Common Stock and shall be
collectively referred to herein as the “Shares”).
          C. The Company has engaged Piper Jaffray & Co. as lead placement agent
(the “Lead Placement Agent”) and Cowen Group and Oppenheimer & Co. Inc. as
co-placement agents (each a “Co-Placement Agent” and together with the Lead
Placement Agent, the “Placement Agents”) for the offering of the Shares on a
“best efforts” basis.
          D. Contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Registration Rights
Agreement, substantially in the form attached hereto as Exhibit A (the
“Registration Rights Agreement”), pursuant to which, among other things, the
Company will agree to provide certain registration rights with respect to the
Shares under the Securities Act and the rules and regulations promulgated
thereunder and applicable state securities laws.
     NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Company and the Purchasers hereby
agree as follows:
ARTICLE I.
DEFINITIONS
     1.1 Definitions. In addition to the terms defined elsewhere in this
Agreement, for all purposes of this Agreement, the following terms shall have
the meanings indicated in this Section 1.1:
          “Action” means any action, suit, inquiry, notice of violation,
proceeding (including any partial proceeding such as a deposition) or
investigation pending or, to the Company’s Knowledge, threatened in writing
against the Company, any Subsidiary or any of their respective properties or any
officer, director or employee of the Company or any Subsidiary acting in his or
her capacity as an officer, director or employee before or by any federal,
state, county, local or foreign court, arbitrator, governmental or
administrative agency, regulatory authority, stock market, stock exchange or
trading facility.

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          “Affiliate” means, with respect to any Person, any other Person that,
directly or indirectly through one or more intermediaries, Controls, is
controlled by or is under common control with such Person, as such terms are
used in and construed under Rule 144. With respect to a Purchaser, any
investment fund or managed account that is managed on a discretionary basis by
the same investment manager as such Purchaser will be deemed to be an Affiliate
of such Purchaser.
          “Agreement” shall have the meaning ascribed to such term in the
Preamble.
          “Business Day” means a day, other than a Saturday or Sunday, on which
banks in New York City are open for the general transaction of business.
          “Buy-In” has the meaning set forth in Section 4.1(f).
          “Buy-In Price” has the meaning set forth in Section 4.1(f).
          “Closing” means the closing of the purchase and sale of the Shares
pursuant to this Agreement.
          “Closing Bid Price” means, for any security as of any date, the last
closing price for such security on the Principal Trading Market, as reported by
Bloomberg, or, if the Principal Trading Market begins to operate on an extended
hours basis and does not designate the closing bid price then the last bid price
of such security prior to 4:00:00 p.m., New York City Time, as reported by
Bloomberg, or, if the Principal Trading Market is not the principal securities
exchange or trading market for such security, the last closing price of such
security on the principal securities exchange or trading market where such
security is listed or traded as reported by Bloomberg, or if the foregoing do
not apply, the last closing price of such security in the over-the-counter
market on the electronic bulletin board for such security as reported by
Bloomberg, or, if no closing bid price is reported for such security by
Bloomberg, the average of the bid prices of any market makers for such security
as reported in the “pink sheets” by Pink Sheets LLC (formerly the National
Quotation Bureau, Inc.). If the Closing Bid Price cannot be calculated for a
security on a particular date on any of the foregoing bases, the Closing Bid
Price of such security on such date shall be the fair market value as mutually
determined by the Company and the holder. If the Company and the holder are
unable to agree upon the fair market value of such security, then the Company
shall, within two business days submit via facsimile (a) the disputed
determination to an independent, reputable investment bank selected by the
Company and approved by the holder or (b) the disputed arithmetic calculation to
the Company’s independent, outside accountant. The Company shall cause at its
expense the investment bank or the accountant, as the case may be, to perform
the determinations or calculations and notify the Company and the holder of the
results no later than ten business days from the time it receives the disputed
determinations or calculations. Such investment bank’s or accountant’s
determination or calculation, as the case may be, shall be binding upon all
parties absent demonstrable error. All such determinations shall be
appropriately adjusted for any stock dividend, stock split, stock combination or
other similar transaction during the applicable calculation period.
          “Closing Date” means the Trading Day when all of the Transaction
Documents have been executed and delivered by the applicable parties thereto,
and all of the conditions set forth in Sections 2.1, 2.2, 5.1 and 5.2 hereof are
satisfied, or such other date as the parties may agree.
          “Commission” has the meaning set forth in the Recitals.
          “Common Stock” has the meaning set forth in the Recitals, and also
includes any securities into which the Common Stock may hereafter be
reclassified or changed.

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          “Common Stock Equivalents” means any securities of the Company or any
Subsidiary which would entitle the holder thereof to acquire at any time Common
Stock, including, without limitation, any debt, preferred stock, rights,
options, warrants or other instrument that is at any time convertible into or
exchangeable for, or otherwise entitles the holder thereof to receive, Common
Stock or other securities that entitle the holder to receive, directly or
indirectly, Common Stock.
          “Company Counsel” means Cooley Godward Kronish LLP.
          “Company Deliverables” has the meaning set forth in Section 2.2(a).
          “Company’s Knowledge” means with respect to any statement made to the
knowledge of the Company, that the statement is based upon the actual knowledge
of the executive officers of the Company having responsibility for the matter or
matters that are the subject of the statement.
          “Control” (including the terms “controlling”, “controlled by” or
“under common control with”) means the possession, direct or indirect, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise.
          “Disclosure Materials” has the meaning set forth in Section 3.1(h).
          “Effective Date” means the date on which the initial Registration
Statement required by Section 2(a) of the Registration Rights Agreement is first
declared effective by the Commission.
          “Effectiveness Deadline” means the date on which the initial
Registration Statement is required to be declared effective by the Commission
under the terms of the Registration Rights Agreement.
          “Environmental Laws” has the meaning set forth in Section 3.1(l).
          “Exchange Act” means the Securities Exchange Act of 1934, as amended,
or any successor statute, and the rules and regulations promulgated thereunder.
          “GAAP” means U.S. generally accepted accounting principles, as applied
by the Company.
          “Indemnified Person” has the meaning set forth in Section 4.9(b).
          “Intellectual Property” has the meaning set forth in Section 3.1(r).
          “Irrevocable Transfer Agent Instructions” means, with respect to the
Company, the Irrevocable Transfer Agent Instructions, in the form of Exhibit E,
executed by the Company and delivered to and acknowledged in writing by the
Transfer Agent.
          “Lien” means any lien, charge, claim, encumbrance, security interest,
right of first refusal, preemptive right or other restrictions of any kind.
          “Material Adverse Effect” means a material adverse effect on the
results of operations, assets, business or financial condition of the Company,
except that any of the following, either alone or in combination, shall not be
deemed a Material Adverse Effect: (i) effects caused by changes or circumstances
affecting general market conditions in the U.S. economy or which are generally
applicable to the industry in which the Company operates, (ii) effects resulting
from or relating to the announcement or disclosure of the sale of the Securities
or other transactions contemplated by this Agreement, or (iii) effects caused by
any

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event, occurrence or condition resulting from or relating to the taking of any
action in accordance with this Agreement.
          “Material Contract” means any contract of the Company that was filed
as an exhibit to the SEC Reports pursuant to Item 601(b)(4) or Item 601(b)(10)
of Regulation S-K.
          “Material Permits” has the meaning set forth in Section 3.1(p).
          “New York Courts” means the state and federal courts sitting in the
City of New York, Borough of Manhattan.
          “Outside Date” means the thirtieth day following the date of this
Agreement.
          “Person” means an individual, corporation, partnership, limited
liability company, trust, business trust, association, joint stock company,
joint venture, sole proprietorship, unincorporated organization, governmental
authority or any other form of entity not specifically listed herein.
          “Principal Trading Market” means the Trading Market on which the
Common Stock is primarily listed on and quoted for trading, which, as of the
date of this Agreement and the Closing Date, shall be the NASDAQ Capital Market.
          “Proceeding” means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.
          “Purchase Price” means $13.25 per share.
          “Purchaser Deliverables” has the meaning set forth in Section 2.2(b).
          “Purchaser Party” has the meaning set forth in Section 4.9(a).
          “Registration Rights Agreement” has the meaning set forth in the
Recitals.
          “Registration Statement” means a registration statement meeting the
requirements set forth in the Registration Rights Agreement and covering the
resale by the Purchasers of the Registrable Securities (as defined in the
Registration Rights Agreement).
          “Required Approvals” has the meaning set forth in Section 3.1(e).
          “Rule 144” means Rule 144 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
          “SEC Reports” has the meaning set forth in Section 3.1(h).
          “Secretary’s Certificate” has the meaning set forth in
Section 2.2(a)(vi).
          “Securities Act” means the Securities Act of 1933, as amended.
          “Short Sales” include, without limitation, all “short sales” as
defined in Rule 200 promulgated under Regulation SHO under the Exchange Act,
whether or not against the box, and all types of direct and indirect stock
pledges, forward sale contracts, options, puts, calls, short sales, swaps, “put
equivalent positions” (as defined in Rule 16a-1(h) under the Exchange Act) and
similar arrangements

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(including on a total return basis), and sales and other transactions through
non-U.S. broker dealers or foreign regulated brokers.
          “Subscription Amount” means with respect to each Purchaser, the
aggregate amount to be paid for the Shares purchased hereunder as indicated on
such Purchaser’s signature page to this Agreement next to the heading “Aggregate
Purchase Price (Subscription Amount)”.
          “Subsidiary” means any entity in which the Company, directly or
indirectly, owns capital stock or holds an equity or similar interest.
          “Trading Affiliate” has the meaning set forth in Section 3.2(h).
          “Trading Day” means (i) a day on which the Common Stock is listed or
quoted and traded on its Principal Trading Market (other than the OTC Bulletin
Board), or (ii) if the Common Stock is not listed on a Trading Market (other
than the OTC Bulletin Board), a day on which the Common Stock is traded in the
over-the-counter market, as reported by the OTC Bulletin Board, or (iii) if the
Common Stock is not quoted on any Trading Market, a day on which the Common
Stock is quoted in the over-the-counter market as reported in the “pink sheets”
by Pink Sheets LLC (or any similar organization or agency succeeding to its
functions of reporting prices); provided, that in the event that the Common
Stock is not listed or quoted as set forth in (i), (ii) and (iii) hereof, then
Trading Day shall mean a Business Day.
          “Trading Market” means whichever of the New York Stock Exchange, the
American Stock Exchange, the NASDAQ Global Select Market, the NASDAQ Global
Market, the NASDAQ Capital Market or the OTC Bulletin Board on which the Common
Stock is listed or quoted for trading on the date in question.
          “Transaction Documents” means this Agreement, the schedules and
exhibits attached hereto, the Registration Rights Agreement, the Irrevocable
Transfer Agent Instructions and any other documents or agreements executed in
connection with the transactions contemplated hereunder.
          “Transfer Agent” means Computershare Trust Company N.A., or any
successor transfer agent for the Company.
ARTICLE II.
PURCHASE AND SALE
     2.1 Closing.
          (a) Amount. Subject to the terms and conditions set forth in this
Agreement, at the Closing, the Company shall issue and sell to each Purchaser,
and each Purchaser shall, severally and not jointly, purchase from the Company,
such number of Shares equal to the quotient resulting from dividing (i) the
Subscription Amount for such Purchaser by (ii) the Purchase Price, rounded down
to the nearest whole Share.
          (b) Closing. The Closing of the purchase and sale of the Shares shall
take place at the offices of Lowenstein Sandler PC, 1251 Avenue of the Americas,
New York, New York on the Closing Date or at such other locations or remotely by
facsimile transmission or other electronic means as the parties may mutually
agree.
          (c) Form of Payment. On the Closing Date (i) the Company and the Lead
Placement Agent shall instruct the Escrow Agent to wire the Escrow Amount in
accordance with the terms of Section 2.1(d), (ii) each Purchaser that has agreed
to wire funds directly to the Company shall wire such Purchaser’s

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Subscription Amount to the Company in accordance with the written directions
from the Company, and (iii) the Company shall irrevocably instruct the Transfer
Agent to deliver to each Purchaser one or more stock certificates, free and
clear of all restrictive and other legends (except as expressly provided in
Section 4.1(b) hereof), evidencing the number of Shares such Purchaser is
purchasing as is set forth on such Purchaser’s signature page to this Agreement
next to the heading “Number of Shares to be Acquired”, within three (3) Business
Days after the Closing, duly executed on behalf of the Company and registered in
the name of such Purchaser.
          (d) Escrow. With respect to each Purchaser that has not agreed to wire
its Subscription Amount directly to the Company:
               (i) Simultaneously with the execution and delivery of this
Agreement by such Purchaser, such Purchaser shall promptly cause a wire transfer
of immediately available funds (U.S. dollars) in an amount representing such
Purchaser’s Subscription Amount to be paid to a non-interest bearing escrow
account of Lowenstein Sandler PC (the “Escrow Agent”) set forth on Exhibit G
attached hereto (the aggregate amounts received being held in escrow by the
Escrow Agent are referred to herein as the “Escrow Amount”). The Escrow Agent
shall hold the Escrow Amount in escrow in accordance with Section 2.1(d)(ii)
below.
               (ii) The Escrow Agent shall continue to hold the Escrow Amount in
escrow in accordance with and subject to this Agreement, from the date of its
receipt of the funds constituting the Escrow Amount until the soonest of:
                    (A) in the case of the termination of this Agreement in
accordance with Section 6.17, in which case, if the Escrow Agent then holds any
portion of the Escrow Amount, then: (1) in the event of a termination by the
Company, the Escrow Agent shall return the portion of the Escrow Amount received
from each Purchaser which it then holds, to each such Purchaser, and in the
event of a termination by a Purchaser, the Escrow Agent shall return the portion
of the Escrow Amount received from such Purchaser which it then holds, to such
Purchaser, in accordance with written wire transfer instructions received from
the Purchaser; and (2) if the Escrow Agent has not received written wire
transfer instructions from any Purchaser before the 30th day after such
termination date, then the Escrow Agent may, in its sole and absolute
discretion, either (x) deposit that portion of the Escrow Amount to be returned
to such Purchaser in a court of competent jurisdiction on written notice to such
Purchaser, and the Escrow Agent shall thereafter have no further liability with
respect to such deposited funds, or (y) continue to hold such portion of the
Escrow Amount pending receipt of written wire transfer instructions from such
Purchaser or an order from a court of competent jurisdiction; OR
                    (B) in the case of the Closing, receipt of written
instructions from the Company and the Lead Placement Agent that the Closing
shall have been consummated, in which case, the Escrow Agent shall release the
Escrow Amount constituting the aggregate purchase price as follows: (1) to the
Placement Agents, the fees payable to such Placement Agents (which fees shall be
set forth in such instructions), and (2) the balance of the aggregate purchase
price to the Company.
               (iii) The Company and the Purchasers contributing to the Escrow
Amount acknowledge and agree for the benefit of the Escrow Agent (which shall be
deemed to be a third party beneficiary of this Section 2.1(d)) as follows:
                    (A) The Escrow Agent: (i) is not responsible for the
performance by the Company, the Purchasers or Placement Agents of this Agreement
or any of the Transaction Documents or for determining or compelling compliance
therewith; (ii) is only responsible for (A) holding the Escrow Amount in escrow
pending receipt of written instructions from the Company and the Lead Placement
Agent directing

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the release of the Escrow Amount, and (B) disbursing the Escrow Amount in
accordance with the written instructions from the Company and the Lead Placement
Agent, each of the responsibilities of the Escrow Agent in clause (A) and (B) is
ministerial in nature, and no implied duties or obligations of any kind shall be
read into this Agreement against or on the part of the Escrow Agent
(collectively, the “Escrow Agent Duties”); (iii) shall not be obligated to take
any legal or other action hereunder which might in its judgment involve or cause
it to incur any expense or liability unless it shall have been furnished with
indemnification acceptable to it, in its sole discretion; (iv) may rely on and
shall be protected in acting or refraining from acting upon any written notice,
instruction (including, without limitation, wire transfer instructions, whether
incorporated herein or provided in a separate written instruction), instrument,
statement, certificate, request or other document furnished to it hereunder and
believed by it to be genuine and to have been signed or presented by the proper
Person, and shall have no responsibility for making inquiry as to, or for
determining, the genuineness, accuracy or validity thereof, or of the authority
of the Person signing or presenting the same; and (v) may consult counsel
satisfactory to it, and the opinion or advice of such counsel in any instance
shall be full and complete authorization and protection in respect of any action
taken, suffered or omitted by it hereunder in good faith and in accordance with
the opinion or advice of such counsel. Documents and written materials referred
to in this Section 2.1(d)(iii)(A) include, without limitation, e-mail and other
electronic transmissions capable of being printed, whether or not they are in
fact printed; and any such e-mail or other electronic transmission may be deemed
and treated by the Escrow Agent as having been signed or presented by a Person
if it bears, as sender, the Person’s e-mail address.
                    (B) The Escrow Agent shall not be liable to anyone for any
action taken or omitted to be taken by it hereunder, except in the case of
Escrow Agent’s gross negligence or willful misconduct in breach of the Escrow
Agent Duties. IN NO EVENT SHALL THE ESCROW AGENT BE LIABLE FOR INDIRECT,
PUNITIVE, SPECIAL OR CONSEQUENTIAL DAMAGE OR LOSS (INCLUDING BUT NOT LIMITED TO
LOST PROFITS) WHATSOEVER, EVEN IF THE ESCROW AGENT HAS BEEN INFORMED OF THE
LIKELIHOOD OF SUCH LOSS OR DAMAGE AND REGARDLESS OF THE FORM OF ACTION.
                    (C) The Company hereby indemnifies and holds harmless the
Escrow Agent from and against any and all loss, liability, cost, damage and
expense, including, without limitation, reasonable counsel fees and expenses,
which the Escrow Agent may suffer or incur by reason of any action, claim or
proceeding brought against the Escrow Agent arising out of or relating to the
performance of the Escrow Agent Duties, except to the extent such action, claim
or proceeding is exclusively the result of the willful misconduct, bad faith or
gross negligence of the Escrow Agent.
                    (D) The Escrow Agent has acted as legal counsel to the
Placement Agents in connection with this Agreement and the other Transaction
Documents, is merely acting as a stakeholder under this Agreement and is,
therefore, hereby authorized to continue acting as legal counsel to the
Placement Agents including, without limitation, with regard to any dispute
arising out of this Agreement, the other Transaction Documents, the Escrow
Amount or any other matter. The Purchasers hereby expressly consent to permit
the Escrow Agent to represent the Placement Agents in connection with all
matters relating to this Agreement, including, without limitation, with regard
to any dispute arising out of this Agreement, the other Transaction Documents,
the Escrow Amount or any other matter, and hereby waives any conflict of
interest or appearance of conflict or impropriety with respect to such
representation. Each of the Purchasers has consulted with its own counsel
specifically about this Section 2.1(d) to the extent they deemed necessary, and
has entered into this Agreement after being satisfied with such advice.
                    (E) The Escrow Agent shall have the right at any time to
resign for any reason and be discharged of its duties as escrow agent hereunder
(including without limitation the Escrow Agent Duties) by giving written notice
of its resignation to the Company, the Placement Agents and the Purchasers at
least ten (10) calendar days prior to the specified effective date of such
resignation. All

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obligations of the Escrow Agent hereunder shall cease and terminate on the
effective date of its resignation and its sole responsibility thereafter shall
be to hold the Escrow Amount, for a period of ten (10) calendar days following
the effective date of resignation, at which time,
                    (I) if a successor escrow agent shall have been appointed
and have accepted such appointment in a writing to both the Company and the
Purchasers, then upon written notice thereof given to each of the Purchasers,
the Escrow Agent shall deliver the Escrow Amount to the successor escrow agent,
and upon such delivery, the Escrow Agent shall have no further liability or
obligation; or
                    (II) if a successor escrow agent shall not have been
appointed, for any reason whatsoever, the Escrow Agent shall at its option in
its sole discretion, either (A) deliver the Escrow Amount to a court of
competent jurisdiction selected by the Escrow Agent and give written notice
thereof to the Company, the Placement Agents and the Purchasers, or (B) continue
to hold the Escrow Amount in escrow pending written direction from the Company
and the Lead Placement Agent in form and formality satisfactory to the Escrow
Agent.
                    (F) In the event that the Escrow Agent shall be uncertain as
to its duties or rights hereunder or shall receive instructions with respect to
the Escrow Amount or any portion thereunder which, in its sole discretion, are
in conflict either with other instructions received by it or with any provision
of this Agreement, the Escrow Agent shall have the absolute right to suspend all
further performance of its duties under this Agreement (except for the
safekeeping of such Escrow Amount) until such uncertainty or conflicting
instructions have been resolved to the Escrow Agent’s sole satisfaction by final
judgment of a court of competent jurisdiction, joint written instructions from
the Company, the Lead Placement Agent and all of the Purchasers, or otherwise.
In the event that any controversy arises between the Company and one or more of
the Purchasers or any other party with respect to this Agreement or the Escrow
Amount, the Escrow Agent shall not be required to determine the proper
resolution of such controversy or the proper disposition of the Escrow Amount,
and shall have the absolute right, in its sole discretion, to deposit the Escrow
Amount with the clerk of a court selected by the Escrow Agent and file a suit in
interpleader in that court and obtain an order from that court requiring all
parties involved to litigate in that court their respective claims arising out
of or in connection with the Escrow Amount. Upon the deposit by the Escrow Agent
of the Escrow Amount with the clerk of such court in accordance with this
provision, the Escrow Agent shall thereupon be relieved of all further
obligations and released from all liability hereunder.
                    (G) The provisions of this Section 2.1(d) shall survive any
termination of this Agreement.
     2.2 Closing Deliveries.   
          (a) On or prior to the Closing, the Company shall issue, deliver or
cause to be delivered to each Purchaser the following (the “Company
Deliverables”):
               (i) this Agreement, duly executed by the Company;
               (ii) facsimile copies of one or more stock certificates, free and
clear of all restrictive and other legends (except as provided in Section 4.1(b)
hereof), evidencing the Shares subscribed for by Purchaser hereunder, registered
in the name of such Purchaser as set forth on the Stock Certificate
Questionnaire included as Exhibit B-2 hereto (the “Stock Certificates”), with
the original Stock Certificates sent within three (3) Business Days of Closing;

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               (iii) a legal opinion of Company Counsel, dated as of the Closing
Date and in the form attached hereto as Exhibit C, executed by such counsel and
addressed to the Purchasers;
               (iv) the Registration Rights Agreement, duly executed by the
Company;
               (v) duly executed Irrevocable Transfer Agent Instructions
acknowledged in writing by the Transfer Agent;
               (vi) a certificate of the Secretary of the Company (the
“Secretary’s Certificate”), dated as of the Closing Date, (a) certifying the
resolutions adopted by the Board of Directors of the Company or a duly
authorized committee thereof approving the transactions contemplated by this
Agreement and the other Transaction Documents and the issuance of the Shares,
(b) certifying the current versions of the certificate or articles of
incorporation, as amended, and by-laws of the Company and (c) certifying as to
the signatures and authority of persons signing the Transaction Documents and
related documents on behalf of the Company, in the form attached hereto as
Exhibit E;
               (vii) the Compliance Certificate referred to in Section 5.1(g);
               (viii) a certificate evidencing the formation and good standing
of the Company in its jurisdiction of formation issued by the Secretary of State
(or comparable office) of such jurisdiction, as of a date within five
(5) Business Days of the Closing Date;
               (ix) a certificate evidencing the Company’s qualification as a
foreign corporation and good standing issued by the Secretary of State of the
State of California, as of a date within ten (10) Business Days of the Closing
Date; and
               (x) a certified copy of the Certificate of Incorporation, as
certified by the Secretary of State of the State (or comparable office) of such
entity’s jurisdiction of formation, as of a date within ten (10) Business Days
of the Closing Date.
          (b) On or prior to the Closing, each Purchaser shall deliver or cause
to be delivered to the Company the following (the “Purchaser Deliverables”):
               (i) this Agreement, duly executed by such Purchaser;
               (ii) its Subscription Amount, in United States dollars and in
immediately available funds, in the amount set forth as the “Purchase Price”
indicated below such Purchaser’s name on the applicable signature page hereto
under the heading “Aggregate Purchase Price (Subscription Amount)” by wire
transfer to the escrow account set forth on Exhibit G attached hereto or to the
account of the Company pursuant to Section 2.1(c);
               (iii) the Registration Rights Agreement, duly executed by such
Purchaser;
               (iv) a fully completed and duly executed Selling Stockholder
Questionnaire in the form attached as Annex B to the Registration Rights
Agreement; and
               (v) a fully completed and duly executed Accredited Investor
Questionnaire, reasonably satisfactory to the Company, and Stock Certificate
Questionnaire in the forms attached hereto as Exhibits B-1 and B-2,
respectively.

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ARTICLE III.
REPRESENTATIONS AND WARRANTIES
     3.1 Representations and Warranties of the Company. The Company hereby
represents and warrants as of the date hereof and the Closing Date (except for
the representations and warranties that speak as of a specific date, which shall
be made as of such date), to each of the Purchasers and to the Placement Agents
that, except as set forth in the Schedules delivered herewith or disclosed in
the SEC Reports:
          (a) Subsidiaries. The Company has no direct or indirect Subsidiaries
other than those listed in Schedule 3.1(a) hereto. Except as disclosed in
Schedule 3.1(a) hereto, the Company owns, directly or indirectly, all of the
capital stock or comparable equity interests of each Subsidiary free and clear
of any and all Liens which could reasonably be expected to have a Material
Adverse Effect, and all the issued and outstanding shares of capital stock or
comparable equity interest of each Subsidiary are validly issued and are fully
paid, non-assessable and free of preemptive and similar rights to subscribe for
or purchase securities.
          (b) Organization and Qualification. The Company and each of its
Subsidiaries is an entity duly incorporated or otherwise organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization (as applicable), with the requisite corporate
power and authority to own or lease and use its properties and assets and to
carry on its business as currently conducted. Neither the Company nor any
Subsidiary is in violation of any of the provisions of its respective
certificate or articles of incorporation, bylaws or other organizational or
charter documents. The Company and each of its Subsidiaries is duly qualified to
conduct business and is in good standing as a foreign corporation or other
entity in each jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary, except where the
failure to be so qualified or in good standing, as the case may be, would not
have a Material Adverse Effect.
          (c) Authorization; Enforcement; Validity. The Company has the
requisite corporate power and authority to enter into and to consummate the
transactions contemplated by each of the Transaction Documents to which it is a
party and otherwise to carry out its obligations hereunder and thereunder. The
Company’s execution and delivery of each of the Transaction Documents to which
it is a party and the consummation by it of the transactions contemplated hereby
and thereby (including, but not limited to, the sale and delivery of the Shares)
have been duly authorized by all necessary corporate action on the part of the
Company, and no further corporate action is required by the Company, its Board
of Directors or its stockholders in connection therewith other than in
connection with the Required Approvals. Each of the Transaction Documents to
which it is a party has been (or upon delivery will have been) duly executed by
the Company and is, or when delivered in accordance with the terms hereof, will
constitute the legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, except (i) as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of, creditors’ rights and remedies or by
other equitable principles of general , (ii) as limited by laws relating to the
availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions may be
limited by applicable law. Except for Material Contracts and as set forth on
Schedule 3.1(c) hereto, there are no stockholder agreements, voting agreements,
or other similar arrangements with respect to the Company’s capital stock to
which the Company is a party or, to the Company’s Knowledge, between or among
any of the Company’s stockholders.
          (d) No Conflicts. The execution, delivery and performance by the
Company of the Transaction Documents to which it is a party and the consummation
by the Company of the transactions contemplated hereby or thereby (including,
without limitation, the issuance of the Shares) do not and will not (i) conflict
with or violate any provisions of the Company’s or any Subsidiary’s certificate
or articles of incorporation, bylaws or otherwise result in a violation of the
organizational documents of the Company, (ii)

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conflict with, or constitute a default (or an event that with notice or lapse of
time or both would result in a default) under, result in the creation of any
Lien upon any of the properties or assets of the Company or give to others any
rights of termination, amendment, acceleration or cancellation (with or without
notice, lapse of time or both) of, any Material Contract, or (iii) subject to
the Required Approvals, conflict with or result in a violation of any law, rule,
regulation, order, judgment, injunction, decree or other restriction of any
court or governmental authority to which the Company is subject (including
federal and state securities laws and regulations and the rules and regulations,
assuming the correctness of the representations and warranties made by the
Purchasers herein, of any self-regulatory organization to which the Company or
its securities are subject, including all applicable Trading Markets), or by
which any property or asset of the Company is bound or affected, except in the
case of clauses (ii) and (iii) such as would not, individually or in the
aggregate, have a Material Adverse Effect.
          (e) Filings, Consents and Approvals. Neither the Company nor any of
its Subsidiaries is required to obtain any consent, waiver, authorization or
order of, give any notice to, or make any filing or registration with, any court
or other federal, state, local or other governmental authority or other Person
in connection with the execution, delivery and performance by the Company of the
Transaction Documents (including the issuance of the Shares), other than (i) the
filing with the Commission of one or more Registration Statements in accordance
with the requirements of the Registration Rights Agreement, (ii) filings
required by applicable state securities laws, (iii) the filing of a Notice of
Sale of Securities on Form D with the Commission under Regulation D of the
Securities Act, (iv) the filing of any requisite notices and/or application(s)
to the Principal Trading Market for the issuance and sale of the Common Stock
and the listing of the Common Stock for trading or quotation, as the case may
be, thereon in the time and manner required thereby, (v) the filings required in
accordance with Section 4.7 of this Agreement and (vi) those that have been made
or obtained prior to the date of this Agreement (collectively, the “Required
Approvals”).
          (f) Issuance of the Shares. The Shares have been duly authorized and,
when issued and paid for in accordance with the terms of the Transaction
Documents, will be duly and validly issued, fully paid and nonassessable and
free and clear of all Liens, other than restrictions on transfer provided for in
the Transaction Documents or imposed by applicable securities laws, and shall
not be subject to preemptive or similar rights. Assuming the accuracy of the
representations and warranties of the Purchasers in this Agreement, the Shares
will be issued in compliance with all applicable federal and state securities
laws.
          (g) Capitalization. The number of shares and type of all authorized,
issued and outstanding capital stock, options and other securities of the
Company (whether or not presently convertible into or exercisable or
exchangeable for shares of capital stock of the Company) has been set forth in
the SEC Reports and has changed since the date of such SEC Reports only due to
stock grants or other equity awards or stock option and warrant exercises that
do not, individually or in the aggregate, have a material effect on the issued
and outstanding capital stock, options and other securities. All of the
outstanding shares of capital stock of the Company are duly authorized, validly
issued, fully paid and non-assessable, have been issued in compliance in all
material respects with all applicable federal and state securities laws, and
none of such outstanding shares was issued in violation of any preemptive rights
or similar rights to subscribe for or purchase any capital stock of the Company.
Except as specified in the SEC Reports: (i) no shares of the Company’s
outstanding capital stock are subject to preemptive rights or any other similar
rights; (ii) there are no outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, or exercisable or exchangeable for, any
shares of capital stock of the Company, or contracts, commitments,
understandings or arrangements by which the Company is or may become bound to
issue additional shares of capital stock of the Company or options, warrants,
scrip, rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, or exercisable or
exchangeable for, any shares of capital stock of the Company, other than those
issued or granted pursuant to Material Contracts or equity or incentive plans or
arrangements described in the SEC Reports; (iii) there are no material
outstanding debt securities, notes,

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credit agreements, credit facilities or other agreements, documents or
instruments evidencing indebtedness of the Company or by which the Company is
bound; (iv) to the Company’s Knowledge, there are no financing statements
securing obligations in any material amounts, either singly or in the aggregate,
filed in connection with the Company; (v) there are no agreements or
arrangements under which the Company is obligated to register the sale of any of
their securities under the Securities Act (except the Registration Rights
Agreement); (vi) there are no outstanding securities or instruments of the
Company or which contain any redemption or similar provisions, and there are no
contracts, commitments, understandings or arrangements by which the Company is
or may become bound to redeem a security of the Company; (vii) there are no
securities or instruments containing anti-dilution or similar provisions that
will be triggered by the issuance of the Shares; (viii) the Company does not
have any stock appreciation rights or “phantom stock” plans or agreements or any
similar plan or agreement; and (ix) the Company has no liabilities or
obligations required to be disclosed in the SEC Reports but not so disclosed in
the SEC Reports, other than those incurred in the ordinary course of the
Company’s businesses and which, individually or in the aggregate, do not or
would not have a Material Adverse Effect.
          (h) SEC Reports. The Company has filed all reports, schedules, forms,
statements and other documents required to be filed by it under the Exchange
Act, including pursuant to Section 13(a) or 15(d) thereof, for the twelve months
preceding the date hereof (or such shorter period as the Company was required by
law or regulation to file such material) (the foregoing materials, including the
exhibits thereto and documents incorporated by reference therein, being
collectively referred to herein as the “SEC Reports” and together with this
Agreement and the Schedules to this Agreement (if any), the “Disclosure
Materials”), on a timely basis or has received a valid extension of such time of
filing and has filed any such SEC Reports prior to the expiration of any such
extension. As of their respective filing dates, or to the extent corrected by a
subsequent restatement, the SEC Reports complied in all material respects with
the requirements of the Securities Act and the Exchange Act and the rules and
regulations of the Commission promulgated thereunder, and none of the SEC
Reports, when filed, contained any untrue statement of a material fact or
omitted 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.
          (i) Financial Statements. The financial statements of the Company
included in the SEC Reports comply in all material respects with applicable
accounting requirements and the rules and regulations of the Commission with
respect thereto as in effect at the time of filing (or to the extent corrected
by a subsequent restatement). Such financial statements have been prepared in
accordance with GAAP applied on a consistent basis during the periods involved,
except as may be otherwise specified in such financial statements or the notes
thereto and except that unaudited financial statements may not contain all
footnotes required by GAAP, and fairly present in all material respects the
financial position of the Company and its consolidated subsidiaries taken as a
whole as of and for 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.
          (j) Tax Matters. The Company (i) has prepared and filed all foreign,
federal and state income and all other tax returns, reports and declarations
required by any jurisdiction to which it is subject, (ii) has paid all taxes and
other governmental assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith, with respect to which adequate reserves have been
set aside on the books of the Company and (iii) has set aside on its books
provisions reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or declarations apply,
except, in the case of clauses (i) and (ii) above, where the failure to so pay
or file any such tax, assessment, charge or return would not have a Material
Adverse Effect.

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          (k) Material Changes. Since the date of the latest financial
statements included within the SEC Reports, except as specifically disclosed in
the SEC Reports or as set forth in Schedule 3.1(k) hereto, (i) there have been
no events, occurrences or developments that have had or would reasonably be
expected to have, either individually or in the aggregate, a Material Adverse
Effect, (ii) the Company has not incurred any material liabilities (contingent
or otherwise) other than (A) trade payables, accrued expenses and other
liabilities incurred in the ordinary course of business consistent with past
practice and (B) liabilities not required to be reflected in the Company’s
financial statements pursuant to GAAP or required to be disclosed in filings
made with the Commission, (iii) the Company has not altered materially its
method of accounting or the manner in which it keeps its accounting books and
records, (iv) the Company has not declared or made any dividend or distribution
of cash or other property to its stockholders or purchased, redeemed or made any
agreements to purchase or redeem any shares of its capital stock (other than in
connection with repurchases of unvested stock issued to employees of the
Company), (v) the Company has not issued any equity securities to any officer,
director or Affiliate, except Common Stock issued in the ordinary course as
dividends on outstanding preferred stock or issued pursuant to existing Company
stock option or stock purchase plans or executive and director corporate
arrangements disclosed in the SEC Reports and (vi) there has not been any
material change or amendment to, or any waiver of any material right by the
Company under, any Material Contract under which the Company or any of its
Subsidiaries is bound or subject. Except for the transactions contemplated by
this Agreement or as set forth in Schedule 3.1(k) hereto, no event, liability or
development has occurred or exists with respect to the Company or its
Subsidiaries or their respective business, properties, operations or financial
condition that would be required to be disclosed by the Company under applicable
securities laws at the time this representation is made that has not been
publicly disclosed at least one Trading Day prior to the date that this
representation is made.
          (l) Environmental Matters. To the Company’s Knowledge, neither the
Company nor any of its Subsidiaries (i) is in violation of any statute, rule,
regulation, decision or order of any governmental agency or body or any court,
domestic or foreign, relating to the use, disposal or release of hazardous or
toxic substances or relating to the protection or restoration of the environment
or human exposure to hazardous or toxic substances (collectively, “Environmental
Laws”), (ii) owns or operates any real property contaminated with any substance
that is in violation of any Environmental Laws, (iii) is liable for any off-site
disposal or contamination pursuant to any Environmental Laws, or (iv) is subject
to any claim relating to any Environmental Laws; which violation, contamination,
liability or claim has had or would have, individually or in the aggregate, a
Material Adverse Effect; and, to the Company’s Knowledge, there is no pending or
threatened investigation that might lead to such a claim.
          (m) Litigation. To the Company’s Knowledge, there is no Action which
(i) adversely affects or challenges the legality, validity or enforceability of
any of the Transaction Documents or the Shares or (ii) except as specifically
disclosed in the SEC Reports, could, if there were an unfavorable decision,
individually or in the aggregate, have a Material Adverse Effect. The Commission
has not issued any stop order or other order suspending the effectiveness of any
registration statement filed by the Company or any of its Subsidiaries under the
Exchange Act or the Securities Act.
          (n) Employment Matters. No material labor dispute exists or, to the
Company’s Knowledge, is imminent with respect to any of the employees of the
Company which would have a Material Adverse Effect. None of the Company’s
employees is a member of a union that relates to such employee’s relationship
with the Company, and neither the Company nor any of its Subsidiaries is a party
to a collective bargaining agreement, and the Company and each Subsidiary
believes that its relationship with its employees is good. No executive officer
of the Company (as defined in Rule 501(f) of the 1933 Act) has notified the
Company that such officer intends to leave the Company or otherwise terminate
such officer’s employment with the Company. To the Company’s Knowledge, it is in
compliance with all U.S. federal, state, local and foreign laws and regulations
relating to employment and employment practices, terms and conditions of

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employment and wages and hours, except where the failure to be in compliance
would not, individually or in the aggregate, have a Material Adverse Effect.
          (o) Compliance. Neither the Company nor any of its Subsidiaries (i) is
in default under or in violation of (and no event has occurred that has not been
waived that, with notice or lapse of time or both, would result in a default by
the Company or any of its Subsidiaries under), nor has the Company or any of its
Subsidiaries received written notice of a claim that it is in default under or
that it is in violation of, any Material Contract (whether or not such default
or violation has been waived), (ii) is in violation of any order of which the
Company has been made aware in writing of any court, arbitrator or governmental
body having jurisdiction over the Company or its properties or assets, or
(iii) is in violation of, or in receipt of written notice that it is in
violation of, any statute, rule or regulation of any governmental authority
applicable to the Company, except in each case as would not, individually or in
the aggregate, have a Material Adverse Effect.
          (p) Regulatory Permits. The Company possesses or has applied for all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct its business
as currently conducted and as described in the SEC Reports, except where the
failure to possess such permits, individually or in the aggregate, has not and
would not have, individually or in the aggregate, a Material Adverse Effect
(“Material Permits”), and (i) neither the Company nor any of its Subsidiaries
has received any notice in writing of proceedings relating to the revocation or
material adverse modification of any such Material Permits and (ii) the Company
is unaware of any facts or circumstances that would give rise to the revocation
or material adverse modification of any Material Permits.
          (q) Title to Assets. The Company and its Subsidiaries do not own any
real property. The Company and its Subsidiaries have good and marketable title
to all tangible personal property owned by them which is material to the
business of the Company and its Subsidiaries, taken as whole, in each case free
and clear of all Liens except such as do not materially affect the value of such
property and do not interfere with the use made and proposed to be made of such
property by the Company and any of its Subsidiaries. Any real property and
facilities held under lease by the Company and any of its Subsidiaries are held
by them under valid, subsisting and enforceable leases with such exceptions as
are not material and do not interfere with the use made and proposed to be made
of such property and buildings by the Company and its Subsidiaries.
          (r) Patents and Trademarks. To the Company’s Knowledge, the Company
and its Subsidiaries own, possess, license or have other rights to use all
foreign and domestic patents, patent applications, trade and service marks,
trade and service mark registrations, trade names, copyrights, inventions, trade
secrets, technology, Internet domain names, know-how and other intellectual
property (collectively, the “Intellectual Property”) necessary for the conduct
of their respective businesses as now conducted or as proposed to be conducted.
Except as set forth in the SEC Reports and except where such violations or
infringements would not have, either individually or in the aggregate, a
Material Adverse Effect, (a) to the Company’s Knowledge, there are no rights of
third parties to any such Intellectual Property; (b) to the Company’s Knowledge,
there is no infringement by third parties of any such Intellectual Property;
(c) to the Company’s Knowledge, there is no pending or threatened action, suit,
proceeding or claim by others challenging the Company’s and its Subsidiaries’
rights in or to any such Intellectual Property; (d) to the Company’s Knowledge,
there is no pending or threatened action, suit, proceeding or claim by others
challenging the validity or scope of any such Intellectual Property; and (e) to
the Company’s Knowledge, there is no pending or threatened action, suit,
proceeding or claim by others that the Company and/or any Subsidiary infringes
or otherwise violates any patent, trademark, copyright, trade secret or other
proprietary rights of others.

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          (s) Insurance. The Company and each of the Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as the Company believes to be prudent and customary in the
businesses and locations in which the Company and the Subsidiaries are engaged.
Neither the Company nor any of its Subsidiaries has received any notice of
cancellation of any such insurance, nor, to the Company’s Knowledge, will it or
any Subsidiary be unable to renew their respective existing insurance coverage
as and when such coverage expires or to obtain similar coverage from similar
insurers as may be necessary to continue its business.
          (t) Transactions With Affiliates and Employees. Except as set forth in
the SEC Reports and other than the grant of stock options or other equity awards
that are not individually or in the aggregate material in amount, none of the
officers or directors of the Company and, to the Company’s Knowledge, none of
the employees of the Company, is presently a party to any transaction with the
Company or to a presently contemplated transaction (other than for services as
employees, officers and directors) that would be required to be disclosed
pursuant to Item 404 of Regulation S-K promulgated under the Securities Act.
          (u) Internal Accounting Controls. The Company maintains a system of
internal accounting controls sufficient to provide reasonable assurance that
(i) transactions are executed in accordance with management’s general or
specific authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
asset and liability accountability, (iii) access to assets or incurrence of
liabilities is permitted only in accordance with management’s general or
specific authorization, and (iv) the recorded accountability for assets and
liabilities is compared with the existing assets and liabilities at reasonable
intervals and in the Company’s good faith judgment appropriate action is taken
with respect to any differences.
          (v) Sarbanes-Oxley; Disclosure Controls. To the Company’s Knowledge,
the Company is in compliance in all material respects with all of the provisions
of the Sarbanes-Oxley Act of 2002 which are applicable to it, except where such
noncompliance would not have, individually or in the aggregate, a Material
Adverse Effect. The Company maintains disclosure controls and procedures (as
such term is defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act).
          (w) Certain Fees. No person or entity will have, as a result of the
transactions contemplated by this Agreement, any valid right, interest or claim
against or upon the Company or a Purchaser for any commission, fee or other
compensation pursuant to any agreement, arrangement or understanding entered
into by or on behalf of the Company, other than the Placement Agents with
respect to the offer and sale of the Shares (which placement agent fees are
being paid by the Company). The Company shall indemnify, pay, and hold each
Purchaser harmless against, any liability, loss or expense (including, without
limitation, attorneys’ fees and out-of-pocket expenses) arising in connection
with any such right, interest or claim.
          (x) Private Placement. Assuming the accuracy of the Purchasers’
representations and warranties set forth in Section 3.2 of this Agreement and
the accuracy of the information disclosed in the Accredited Investor
Questionnaires, no registration under the Securities Act is required for the
offer and sale of the Shares by the Company to the Purchasers under the
Transaction Documents.
          (y) Registration Rights. Other than as set forth in the SEC Reports
and other than each of the Purchasers or as set forth in Schedule 3.1(y) hereto,
no Person has any right to cause the Company to effect the registration under
the Securities Act of any securities of the Company other than those securities
which are currently registered on an effective registration statement on file
with the Commission.
          (z) No Integrated Offering. Assuming the accuracy of the Purchasers’
representations and warranties set forth in Section 3.2, none of the Company,
its Subsidiaries nor, to the Company’s

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Knowledge, any of its Affiliates or any Person acting on its behalf has,
directly or indirectly, at any time within the past six months, made any offers
or sales of any Company security or solicited any offers to buy any security
under circumstances that would (i) eliminate the availability of the exemption
from registration under Regulation D under the Securities Act in connection with
the offer and sale by the Company of the Shares as contemplated hereby or (ii)
cause the offering of the Shares pursuant to the Transaction Documents to be
integrated with prior offerings by the Company for purposes of any applicable
law, regulation or stockholder approval provisions, including, without
limitation, under the rules and regulations of any Trading Market on which any
of the securities of the Company are listed or designated.
          (aa) Listing and Maintenance Requirements. The Company’s Common Stock
is registered pursuant to Section 12(b) or 12(g) of the Exchange Act, and the
Company has taken no action designed to terminate the registration of the Common
Stock under the Exchange Act nor has the Company received any notification that
the Commission is contemplating terminating such registration. The Company has
not, in the 12 months preceding the date hereof, received written notice from
any Trading Market on which the Common Stock is listed or quoted to the effect
that the Company is not in compliance with the listing or maintenance
requirements of such Trading Market. The Company is in compliance in all
material respects with the listing and maintenance requirements for continued
trading of the Common Stock on the Principal Trading Market.
          (bb) Investment Company. Neither the Company nor any of its
Subsidiaries is required to be registered as, and is not an Affiliate of, and
immediately following the Closing will not be required to register as, an
“investment company” within the meaning of the Investment Company Act of 1940,
as amended.
          (cc) Questionable Payments. To the Company’s Knowledge, neither the
Company nor any of its Subsidiaries, nor any directors, officers, employees,
agents or other Persons acting at the direction of the Company has, in the
course of its actions for, or on behalf of, the Company: (a) directly or
indirectly, used any material corporate funds for unlawful contributions, gifts,
entertainment or other unlawful expenses relating to foreign or domestic
political activity; (b) made any material direct or indirect unlawful payments
to any foreign or domestic governmental officials or employees or to any foreign
or domestic political parties or campaigns from corporate funds; (c) violated in
any material respect any provision of the Foreign Corrupt Practices Act of 1977,
as amended, or (d) made any other material unlawful bribe, rebate, payoff,
influence payment, kickback or other material unlawful payment to any foreign or
domestic government official or employee.
          (dd) Application of Takeover Protections; Rights Agreements. The
Company and its board of directors have taken all necessary action, if any, in
order to render inapplicable any control share acquisition, business
combination, poison pill (including any distribution under a rights agreement)
or other similar anti-takeover provision under the Company’s charter documents
or the laws of its state of incorporation that is applicable to any of the
Purchasers as a result of the Purchasers and the Company fulfilling their
obligations or exercising their rights under the Transaction Documents,
including, without limitation, the Company’s issuance of the Shares and the
Purchasers’ ownership of the Shares. The Company has not adopted a stockholder
rights plan or similar arrangement relating to accumulations of beneficial
ownership of Common Stock or a change in control of the Company.
          (ee) Disclosure. To the Company’s Knowledge, no event or circumstance
has occurred or information exists with respect to the Company or any of its
Subsidiaries or its or their business, properties, operations or financial
conditions, 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 (assuming for this purpose that the Company’s reports
filed under the Exchange Act are being incorporated into an effective
registration statement filed by the Company under the Securities Act), except
for the

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announcement of this Agreement and related transactions and as may be disclosed
on the Form 8-K filed pursuant to Section 4.6.
          (ff) Off Balance Sheet Arrangements. There is no transaction,
arrangement, or other relationship between the Company (or any Subsidiary) and
an unconsolidated or other off balance sheet entity that is required to be
disclosed by the Company in its Exchange Act filings and is not so disclosed and
would have a Material Adverse Effect.
          (gg) Acknowledgment Regarding Purchasers’ Purchase of Shares.  The
Company acknowledges and agrees that each of the Purchasers is acting solely in
the capacity of an arm’s length purchaser with respect to the Transaction
Documents and the transactions contemplated hereby and thereby.  The Company
further acknowledges that no Purchaser is acting as a financial advisor or
fiduciary of the Company (or in any similar capacity) with respect to the
Transaction Documents and the transactions contemplated thereby and any advice
given by any Purchaser or any of their respective representatives or agents in
connection with the Transaction Documents and the transactions contemplated
thereby is merely incidental to the Purchasers’ purchase of the Shares. 
          (hh) Regulation M Compliance.  In the last thirty days, the Company
has not, and to the Company’s Knowledge no one acting on its behalf has,
(i) taken, directly or indirectly, any action designed to cause or to result in
the stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of any of the Shares, (ii) sold, bid for,
purchased, or paid any compensation for soliciting purchases of, any of the
securities of the Company or (iii) paid or agreed to pay to any Person any
compensation for soliciting another to purchase any other securities of the
Company, other than, in the case of clauses (ii) and (iii) compensation paid to
the Placement Agents in connection with the placement of the Shares.
          (ii) OFAC. Neither the Company nor any Subsidiary nor, to the
Company’s Knowledge, any director, officer, agent, employee, Affiliate or Person
acting on behalf of the Company or any Subsidiary is currently subject to any
U.S. sanctions administered by the Office of Foreign Assets Control of the U.S.
Treasury Department (“OFAC”); and the Company will not knowingly directly or
indirectly use the proceeds of the sale of the Shares, or lend, contribute or
otherwise make available such proceeds to any Subsidiary, joint venture partner
or other Person or entity, towards any sales or operations in Cuba, Iran, Syria,
Sudan, Myanmar or any other country sanctioned by OFAC or for the purpose of
financing the activities of any Person currently subject to any U.S. sanctions
administered by OFAC.
          (jj) Money Laundering Laws. To the Company’s Knowledge, the operations
of each of the Company and any Subsidiary are and have been conducted at all
times in compliance with the money laundering statutes of applicable
jurisdictions, the rules and regulations thereunder and any related or similar
rules, regulations or guidelines, issued, administered or enforced by any
applicable governmental agency (collectively, the “Money Laundering Laws”) and
to the Company’s Knowledge, no action, suit or proceeding by or before any court
or governmental agency, authority or body or any arbitrator involving the
Company and/or any Subsidiary with respect to the Money Laundering Laws is
pending or threatened.
          (kk) FDA.   To the Company’s Knowledge, there is no pending, completed
or threatened, action (including any lawsuit, arbitration, or legal or
administrative or regulatory proceeding, charge, complaint, or investigation)
against the Company or any of its Subsidiaries, and none of the Company or any
of its Subsidiaries has received any notice, warning letter or other
communication from the U.S. Food and Drug Administration (“FDA”) or any other
governmental entity, which (i) contests the premarket clearance, licensure,
registration, or approval of, the uses of, the distribution of, the
manufacturing or packaging of, the testing of, the sale of, or the labeling and
promotion of any product subject to the jurisdiction of the FDA under the
Federal Food, Drug and Cosmetic Act, as amended, and the regulations

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thereunder that is manufactured, packaged, labeled, tested, distributed, sold,
and/or marketed by the Company or any of its Subsidiaries (each such product, a
“Pharmaceutical Product”), (ii) imposes a clinical hold on any clinical
investigation by the Company or any of its Subsidiaries, (iii) enjoins
production at any facility of the Company or any of its Subsidiaries,
(iv) enters or proposes to enter into a consent decree of permanent injunction
with the Company or any of its Subsidiaries, or (v) otherwise alleges any
violation of any laws, rules or regulations by the Company or any of its
Subsidiaries, and which, either individually or in the aggregate, would have a
Material Adverse Effect.  The Company has not been informed in writing by the
FDA that the FDA will prohibit the marketing, sale, license or use in the United
States of any product proposed to be developed, produced or marketed by the
Company.
          (ll) No Additional Agreements. The Company does not have any agreement
or understanding with any Purchaser with respect to the transactions
contemplated by the Transaction Documents other than as specified in the
Transaction Documents.
     3.2 Representations and Warranties of the Purchasers. Each Purchaser
hereby, for itself and for no other Purchaser, represents and warrants as of the
date hereof and as of the Closing Date to the Company as follows:
          (a) Organization; Authority. Such Purchaser is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite corporate or partnership
power and authority to enter into and to consummate the transactions
contemplated by the applicable Transaction Documents and otherwise to carry out
its obligations hereunder and thereunder. The execution, delivery and
performance by such Purchaser of the transactions contemplated by this Agreement
have been duly authorized by all necessary corporate or, if such Purchaser is
not a corporation, such partnership, limited liability company or other
applicable like action, on the part of such Purchaser. Each of this Agreement
and the Registration Rights Agreement has been duly executed by such Purchaser,
and when delivered by such Purchaser in accordance with the terms hereof, will
constitute the valid and legally binding obligation of such Purchaser,
enforceable against it in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of, creditors’ rights and remedies or by
other equitable principles of general application.
          (b) No Conflicts. The execution, delivery and performance by such
Purchaser of this Agreement and the Registration Rights Agreement and the
consummation by such Purchaser of the transactions contemplated hereby and
thereby will not (i) result in a violation of the organizational documents of
such Purchaser, (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 agreement, indenture or instrument to which such Purchaser is a party, or
(iii) result in a violation of any law, rule, regulation, order, judgment or
decree (including federal and state securities laws) applicable to such
Purchaser, except in the case of clauses (ii) and (iii) above, for such
conflicts, defaults, rights or violations which would not, individually or in
the aggregate, reasonably be expected to have a material adverse effect on the
ability of such Purchaser to perform its obligations hereunder.
          (c) Investment Intent. Such Purchaser understands that the Shares are
“restricted securities” and have not been registered under the Securities Act or
any applicable state securities law and is acquiring the Shares as principal for
its own account and not with a view to, or for distributing or reselling such
Shares or any part thereof in violation of the Securities Act or any applicable
state securities laws, provided, however, that by making the representations
herein, such Purchaser does not agree to hold any of the Shares for any minimum
period of time and reserves the right, subject to the provisions of this
Agreement and the Registration Rights Agreement, at all times to sell or
otherwise dispose of all or any part of such

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Shares pursuant to an effective registration statement under the Securities Act
or under an exemption from such registration and in compliance with applicable
federal and state securities laws. Such Purchaser is acquiring the Shares
hereunder in the ordinary course of its business. Such Purchaser does not
presently have any agreement, plan or understanding, directly or indirectly,
with any Person to distribute or effect any distribution of any of the Shares
(or any securities which are derivatives thereof) to or through any person or
entity; such Purchaser is not a registered broker-dealer under Section 15 of the
Exchange Act or an entity engaged in a business that would require it to be so
registered as a broker-dealer.
          (d) Purchaser Status. At the time such Purchaser was offered the
Shares, it was, and at the date hereof it is, an “accredited investor” as
defined in Rule 501(a) under the Securities Act.
          (e) General Solicitation. Such Purchaser is not purchasing the Shares
as a result of any advertisement, article, notice or other communication
regarding the Shares published in any newspaper, magazine or similar media or
broadcast over television or radio or presented at any seminar or any other
general advertisement.
          (f) Experience of Such Purchaser. Such Purchaser, either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Shares, and has so
evaluated the merits and risks of such investment. Such Purchaser is able to
bear the economic risk of an investment in the Shares and, at the present time,
is able to afford a complete loss of such investment.
          (g) Access to Information. Such Purchaser acknowledges that it has had
the opportunity to review the Disclosure Materials and has been afforded (i) the
opportunity to ask such questions as it has deemed necessary of, and to receive
answers from, representatives of the Company concerning the terms and conditions
of the offering of the Shares and the merits and risks of investing in the
Shares; (ii) access to information about the Company and the Subsidiaries and
their respective financial condition, results of operations, business,
properties, management and prospects sufficient to enable it to evaluate its
investment; and (iii) the opportunity to obtain such additional information that
the Company possesses or can acquire without unreasonable effort or expense that
is necessary to make an informed investment decision with respect to the
investment. Neither such inquiries nor any other investigation conducted by or
on behalf of such Purchaser or its representatives or counsel shall modify,
amend or affect such Purchaser’s right to rely on the truth, accuracy and
completeness of the Disclosure Materials and the Company’s representations and
warranties contained in the Transaction Documents. Such Purchaser has sought
such accounting, legal and tax advice as it has considered necessary to make an
informed decision with respect to its acquisition of the Shares.
          (h) Certain Trading Activities. Other than with respect to the
transactions contemplated herein, since the time that such Purchaser was first
contacted by the Company, the Placement Agents or any other Person regarding the
transactions contemplated hereby, neither the Purchaser nor any Affiliate of
such Purchaser which (x) had knowledge of the transactions contemplated hereby,
(y) has or shares discretion relating to such Purchaser’s investments or trading
or information concerning such Purchaser’s investments, including in respect of
the Shares, and (z) is subject to such Purchaser’s review or input concerning
such Affiliate’s investments or trading (collectively, “Trading Affiliates”) has
directly or indirectly, nor has any Person acting on behalf of or pursuant to
any understanding with such Purchaser or Trading Affiliate, effected or agreed
to effect any purchases or sales of the securities of the Company (including,
without limitation, any Short Sales involving the Company’s securities).
Notwithstanding the foregoing, in the case of a Purchaser and/or Trading
Affiliate that is, individually or collectively, a multi-managed investment bank
or vehicle whereby separate portfolio managers manage separate portions of such
Purchaser’s or Trading Affiliate’s assets and the portfolio managers have no
direct knowledge of the investment decisions made by the portfolio managers
managing other portions of such Purchaser’s or Trading Affiliate’s assets, the

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representation set forth above shall apply only with respect to the portion of
assets managed by the portfolio manager that have knowledge about the financing
transaction contemplated by this Agreement. Other than to other Persons party to
this Agreement, such Purchaser has maintained the confidentiality of all
disclosures made to it in connection with this transaction (including the
existence and terms of this transaction). Notwithstanding the foregoing, except
as provided in Section 4.11, no Purchaser makes any representation, warranty or
covenant hereby that it will not engage in Short Sales in the securities of the
Company after the time that the Registration Statement becomes effective.
          (i) Brokers and Finders. No Person will have, as a result of the
transactions contemplated by this Agreement, any valid right, interest or claim
against or upon the Company or any Purchaser for any commission, fee or other
compensation pursuant to any agreement, arrangement or understanding entered
into by or on behalf of the Purchaser.
          (j) Independent Investment Decision. Such Purchaser has independently
evaluated the merits of its decision to purchase Shares pursuant to the
Transaction Documents, and such Purchaser confirms that it has not relied on the
advice of any other Purchaser’s business and/or legal counsel in making such
decision. Such Purchaser understands that nothing in this Agreement or any other
materials presented by or on behalf of the Company to the Purchaser in
connection with the purchase of the Shares constitutes legal, tax or investment
advice. Such Purchaser has consulted such legal, tax and investment advisors as
it, in its sole discretion, has deemed necessary or appropriate in connection
with its purchase of the Shares. Such Purchaser understands that each of the
Placement Agents has acted solely as the agent of the Company in this placement
of the Shares and such Purchaser has not relied on the business or legal advice
of the Placement Agents or any of their agents, counsel or Affiliates in making
its investment decision hereunder, and confirms that none of such Persons has
made any representations or warranties to such Purchaser in connection with the
transactions contemplated by the Transaction Documents.
          (k) Reliance on Exemptions. Such Purchaser understands that the Shares
being offered and sold to it in reliance on specific exemptions from the
registration requirements of United States federal and state securities laws and
that the Company is relying in part upon the truth and accuracy of, and such
Purchaser’s compliance with, the representations, warranties, agreements,
acknowledgements and understandings of such Purchaser set forth herein in order
to determine the availability of such exemptions and the eligibility of such
Purchaser to acquire the Shares.
          (l) No Governmental Review. Such Purchaser understands that no United
States federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Shares or the
fairness or suitability of the investment in the Shares nor have such
authorities passed upon or endorsed the merits of the offering of the Shares.
          (m) Regulation M. Such Purchaser is aware that the anti-manipulation
rules of Regulation M under the Exchange Act may apply to sales of Common Stock
and other activities with respect to the Common Stock by the Purchasers.
          (n) Residency. Such Purchaser’s residence (if an individual) or office
in which its investment decision with respect to the Shares was made (if an
entity) are located at the address immediately below such Purchaser’s name on
its signature page hereto.
The Company and each of the Purchasers acknowledge and agree that no party to
this Agreement has made or makes any representations or warranties with respect
to the transactions contemplated hereby other than those specifically set forth
in this Article III and the Transaction Documents.

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ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
     4.1 Transfer Restrictions.
          (a) Compliance with Laws. Notwithstanding any other provision of this
Article IV, each Purchaser covenants that the Shares may be disposed of only
pursuant to an effective registration statement under, and in compliance with
the requirements of, the Securities Act, or pursuant to an available exemption
from, or in a transaction not subject to, the registration requirements of the
Securities Act, and in compliance with any applicable state and federal
securities laws. In connection with any transfer of the Shares other than
(i) pursuant to an effective registration statement, (ii) to the Company,
(iii) pursuant to Rule 144 (provided that the Purchaser provides the Company
with reasonable assurances (in the form of seller and broker representation
letters) that the securities may be sold pursuant to such rule) or Rule 144A,
(iv) pursuant to Rule 144(k) (or any successor thereto) following the applicable
holding period or (v) in connection with a bona fide pledge, the Company may
require the transferor thereof to provide to the Company and the Transfer Agent
an opinion of counsel selected by the transferor and reasonably acceptable to
the Company and the Transfer Agent, the form and substance of which opinion
shall be reasonably satisfactory to the Company and the Transfer Agent, to the
effect that such transfer does not require registration of such transferred
Shares under the Securities Act. As a condition of transfer, any such transferee
shall agree in writing to be bound by the terms of this Agreement and shall have
the rights of a Purchaser under this Agreement and the Registration Rights
Agreement.
          (b) Legends. Certificates evidencing the Shares shall bear any legend
as required by the “blue sky” laws of any state and a restrictive legend in
substantially the following form, until such time as they are not required under
Section 4.1(c):
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES ACT”), OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED EXCEPT AS
PROVIDED BY SECTION 4 OF THAT CERTAIN SECURITIES PURCHASE AGREEMENT, DATED AS OF
DECEMBER 19, 2007, BY AND AMONG ARDEA BIOSCIENCES, INC. AND EACH PURCHASER
IDENTIFIED ON THE SIGNATURE PAGES THERETO.
          (c) Removal of Legends. The legend set forth in Section 4.1(b) above
shall be removed and the Company shall issue a certificate without such legend
or any other legend to the holder of the applicable Shares upon which it is
stamped or issue to such holder by electronic delivery at the applicable balance
account at the Depository Trust Company (“DTC”), if (i) such Shares are
registered for resale under the Securities Act (provided that the Purchaser
agrees to only sell such Shares when, and as permitted, by the effective
registration statement permitting such resale), (ii) such Shares are sold or
transferred pursuant to Rule 144 (if the transferor is not an Affiliate of the
Company), or (iii) such Shares are eligible for sale under Rule 144(k), or any
successor thereto. Any fees (with respect to the Transfer Agent, Company Counsel
or otherwise) associated with the removal of such legend shall be borne by the
Company. Following the Effective Date, or at such earlier time as a legend is no
longer required for certain Shares, the Company will no later than three
(3) Trading Days following the delivery by a Purchaser to the Company or the
Transfer Agent (with notice to the Company) of a legended certificate
representing such Shares (endorsed or with stock powers attached, signatures
guaranteed, and otherwise in form necessary to affect the reissuance and/or
transfer) and an opinion of counsel to the extent required by Section 4.1(a)
(such third Trading Day, the “Legend Removal Date”), deliver or cause to be
delivered to such Purchaser or the transferee of such Purchaser, as applicable,
a certificate representing such Shares that is free from all restrictive and
other

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legends. The Company may not make any notation on its records or give
instructions to the Transfer Agent that enlarge the restrictions on transfer set
forth in this Section. Certificates for Shares subject to legend removal
hereunder may be transmitted by the Transfer Agent to the Purchasers by
crediting the account of the Purchaser’s prime broker with DTC.
          (d) Irrevocable Transfer Agent Instructions. The Company shall issue
irrevocable instructions to its Transfer Agent, and any subsequent transfer
agent in the form of Exhibit D attached hereto (the “Irrevocable Transfer Agent
Instructions”). The Company represents and warrants that no instruction other
than the Irrevocable Transfer Agent Instructions referred to in this
Section 4.1(d) or instructions that are not contradictory therewith will be
given by the Company to its transfer agent in connection with this Agreement,
and that the Shares shall otherwise be freely transferable on the books and
records of the Company as and to the extent provided in this Agreement and the
other Transaction Documents and applicable law. The Company acknowledges that a
breach by it of its obligations under this Section 4.1(d) will cause irreparable
harm to a Purchaser. Accordingly, the Company acknowledges that the remedy at
law for a breach of its obligations under this Section 4.1(d) will be inadequate
and agrees, in the event of a breach or threatened breach by the Company of the
provisions of this Section 4.1(d), that a Purchaser shall be entitled, in
addition to all other available remedies, to an order and/or injunction
restraining any breach and requiring immediate issuance and transfer, without
the necessity of showing economic loss and without any bond or other security
being required.
          (e) Acknowledgement. Each Purchaser hereunder acknowledges its primary
responsibilities under the Securities Act and accordingly will not sell or
otherwise transfer the Shares or any interest therein without complying with the
requirements of the Securities Act. Except as otherwise provided below, while
the above-referenced registration statement remains effective, each Purchaser
hereunder may sell the Shares in accordance with the plan of distribution
contained in the registration statement and if it does so it will comply
therewith and with the related prospectus delivery requirements unless an
exemption therefrom is available. Each Purchaser, severally and not jointly with
the other Purchasers, agrees that if it is notified by the Company in writing at
any time that the registration statement registering the resale of the Shares is
not effective or that the prospectus included in such registration statement no
longer complies with the requirements of Section 10 of the Securities Act, the
Purchaser will refrain from selling such Shares until such time as the Purchaser
is notified by the Company that such registration statement is effective or such
prospectus is compliant with Section 10 of the Exchange Act, unless such
Purchaser is able to, and does, sell such Shares pursuant to an available
exemption from the registration requirements of Section 5 of the Securities Act.
Both the Company and its Transfer Agent, and their respective directors,
officers, employees and agents, may rely on this subsection (e) and each
Purchaser hereunder will indemnify and hold harmless each of such persons from
any breaches or violations of this paragraph.
          (f) Buy-In. If the Company shall fail for any reason or for no reason
to issue to a Purchaser unlegended certificates within three (3) Business Days
of receipt of all documents necessary for the removal of the legend set forth
above (the “Deadline Date”), then, in addition to all other remedies available
to such Purchaser, if on or after the Business Day immediately following such
three (3) Business Day period, such Purchaser purchases (in an open market
transaction or otherwise) shares of Common Stock to deliver in satisfaction of a
sale by the holder of shares of Common Stock that such Purchaser anticipated
receiving from the Company without any restrictive legend (a “Buy-In”), then the
Company shall, within three (3) Business Days after such Purchaser’s request and
in such Purchaser’s sole discretion, either (i) pay cash to the Purchaser in an
amount equal to such Purchaser’s total purchase price (including brokerage
commissions, if any) for the shares of Common Stock so purchased (the “Buy-In
Price”), at which point the Company’s obligation to deliver such certificate
(and to issue such shares of Common Stock) shall terminate, or (ii) promptly
honor its obligation to deliver to such Purchaser a certificate or certificates
representing such shares of Common Stock and pay cash to the Purchaser in an
amount equal to the excess (if any) of the Buy-

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In Price over the product of (a) such number of shares of Common Stock, times
(b) the Closing Bid Price on the Deadline Date.
     4.2 Acknowledgment of Dilution.  The Company acknowledges that the issuance
of the Shares may result in dilution of the outstanding shares of Common Stock. 
The Company further acknowledges that its obligations under the Transaction
Documents, including without limitation its obligation to issue the Shares
pursuant to the Transaction Documents, are unconditional and absolute and not
subject to any right of set off, counterclaim, delay or reduction, regardless of
the effect of any such dilution or any claim the Company may have against any
Purchaser and regardless of the dilutive effect that such issuance may have on
the ownership of the other stockholders of the Company.
     4.3 Furnishing of Information. In order to enable the Purchasers to sell
the Shares under Rule 144 of the Securities Act, for a period of one year from
the Closing, the Company shall use its commercially reasonable efforts to timely
file (or obtain extensions in respect thereof and file within the applicable
grace period) all reports required to be filed by the Company after the date
hereof pursuant to the Exchange Act. During such one year period, if the Company
is not required to file reports pursuant to such laws, it will prepare and
furnish to the Purchasers and make publicly available in accordance with Rule
144(c) such information as is required for the Purchasers to sell the Shares
under Rule 144.
     4.4 Form D and Blue Sky. The Company agrees to timely file a Form D with
respect to the Shares as required under Regulation D. The Company, on or before
the Closing Date, shall take such action as the Company shall reasonably
determine is necessary in order to obtain an exemption for or to qualify the
Shares for sale to the Purchasers at the Closing pursuant to this Agreement
under applicable securities or “Blue Sky” laws of the states of the United
States (or to obtain an exemption from such qualification). The Company shall
make all filings and reports relating to the offer and sale of the Shares
required under applicable securities or “Blue Sky” laws of the states of the
United States following the Closing Date.
     4.5 No Integration. The Company shall not, and shall use its commercially
reasonable efforts to ensure that no Affiliate of the Company shall, sell, offer
for sale or solicit offers to buy or otherwise negotiate in respect of any
security (as defined in Section 2 of the Securities Act) that will be integrated
with the offer or sale of the Shares in a manner that would require the
registration under the Securities Act of the sale of the Shares to the
Purchasers, or that will be integrated with the offer or sale of the Shares for
purposes of the rules and regulations of any Trading Market such that it would
require stockholder approval prior to the closing of such other transaction
unless stockholder approval is obtained before the closing of such subsequent
transaction.
     4.6 Securities Laws Disclosure; Publicity. By 9:00 a.m., New York City
time, on the Trading Day immediately following the execution of this Agreement,
the Company shall issue a press release (the “Press Release”) reasonably
acceptable to the Lead Placement Agent disclosing all material terms of the
transactions contemplated hereby. On or before 9:00 a.m., New York City time, on
the Trading Day immediately following the execution of this Agreement, the
Company will file a Current Report on Form 8-K with the Commission describing
the terms of the Transaction Documents (and including as exhibits to such
Current Report on Form 8-K the material Transaction Documents (including,
without limitation, this Agreement and the Registration Rights Agreement)).
Notwithstanding the foregoing, the Company shall not publicly disclose the name
of any Purchaser or an Affiliate of any Purchaser, or include the name of any
Purchaser or an Affiliate of any Purchaser in any press release or filing with
the Commission (other than the Registration Statement) or any regulatory agency
or Trading Market, without the prior written consent of such Purchaser, except
(i) as required by federal securities law in connection with (A) any
registration statement contemplated by the Registration Rights Agreement and
(B) the filing of final Transaction Documents (including signature pages
thereto) with the Commission and (ii) to the extent such disclosure is required
by law, request of the Staff of the Commission or Trading Market regulations, in
which case the

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Company shall provide the Purchasers with prior written notice of such
disclosure permitted under this subclause (ii). From and after the issuance of
the Press Release, no Purchaser shall be in possession of any material,
non-public information received from the Company, any Subsidiary or any of their
respective officers, directors, employees or agents, that is not disclosed in
the Press Release unless a Purchaser shall have executed a written agreement
regarding the confidentiality and use of such information. Each Purchaser,
severally and not jointly with the other Purchasers, covenants that until such
time as the transactions contemplated by this Agreement are publicly disclosed
by the Company as described in this Section 4.6, such Purchaser will maintain
the confidentiality of all disclosures made to it in connection with this
transaction (including the existence and terms of this transaction).
     4.7 Non-Public Information. Except with respect to the material terms and
conditions of the transactions contemplated by the Transaction Documents, and
except with the express written consent of such Purchaser and unless prior
thereto such Purchaser shall have executed a written agreement regarding the
confidentiality and use of such information the Company shall not, and shall
cause each Subsidiary and each of their respective officers, directors,
employees and agents, not to, and each Purchaser shall not directly solicit the
Company, any of its Subsidiaries or any of their respective officers, directors,
employees or agents to provide any Purchaser with any material, non-public
information regarding the Company or any of its Subsidiaries from and after the
filing of the Press Release.
     4.8 Indemnification.
          (a) Indemnification of Purchasers. In addition to the indemnity
provided in the Registration Rights Agreement, the Company will indemnify and
hold each Purchaser and its directors, officers, stockholders, members,
partners, employees and agents (and any other Persons with a functionally
equivalent role of a Person holding such titles notwithstanding a lack of such
title or any other title), each Person who controls such Purchaser (within the
meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act),
and the directors, officers, stockholders, agents, members, partners or
employees (and any other Persons with a functionally equivalent role of a Person
holding such titles notwithstanding a lack of such title or any other title) of
such controlling person (each, a “Purchaser Party”) harmless from any and all
losses, liabilities, obligations, claims, contingencies, damages, costs and
expenses, including all judgments, amounts paid in settlements, court costs and
reasonable attorneys’ fees and costs of investigation that any such Purchaser
Party may suffer or incur as a result of any breach of any of the
representations, warranties, covenants or agreements made by the Company in this
Agreement or in the other Transaction Documents; provided that such a claim for
indemnification relating to any breach of any of the representations or
warranties made by the Company in this Agreement is made within one year from
Closing.  The Company will not be liable to any Purchaser Party under this
Agreement to the extent, but only to the extent that a loss, claim, damage or
liability is attributable to any Purchaser Party’s breach of any of the
representations, warranties, covenants or agreements made by such Purchaser
Party in this Agreement or in the other Transaction Documents.
          (b) Conduct of Indemnification Proceedings. Promptly after receipt by
any Person (the "Indemnified Person”) of notice of any demand, claim or
circumstances which would or might give rise to a claim or the commencement of
any action, proceeding or investigation in respect of which indemnity may be
sought pursuant to Section 4.8(a), such Indemnified Person shall promptly notify
the Company in writing and the Company shall assume the defense thereof,
including the employment of counsel reasonably satisfactory to such Indemnified
Person, and shall assume the payment of all fees and expenses; provided,
however, that the failure of any Indemnified Person so to notify the Company
shall not relieve the Company of its obligations hereunder except to the extent
that the Company is actually and materially prejudiced by such failure to
notify. In any such proceeding, any Indemnified Person shall have the right to
retain its own counsel, but the fees and expenses of such counsel shall be at
the expense of such Indemnified Person unless: (i) the Company and the
Indemnified Person shall have mutually agreed to the retention of such counsel;
(ii)

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the Company shall have failed promptly to assume the defense of such proceeding
and to employ counsel reasonably satisfactory to such Indemnified Person in such
proceeding; or (iii) in the reasonable judgment of counsel to such Indemnified
Person, representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them. The
Company shall not be liable for any settlement of any proceeding effected
without its written consent, which consent shall not be unreasonably withheld,
delayed or conditioned. Without the prior written consent of the Indemnified
Person, which consent shall not be unreasonably withheld, delayed or
conditioned, the Company shall not effect any settlement of any pending or
threatened proceeding in respect of which any Indemnified Person is or could
have been a party and indemnity could have been sought hereunder by such
Indemnified Party, unless such settlement includes an unconditional release of
such Indemnified Person from all liability arising out of such proceeding.
     4.9 Listing of Shares. In the time and manner required by the Principal
Trading Market, the Company shall prepare and file with such Trading Market an
additional shares listing application covering all of the Shares and shall use
its commercially reasonable efforts to take all steps necessary to cause the
Shares to be approved for listing on the Principal Trading Market as soon as
possible thereafter.
     4.10 Use of Proceeds. The Company intends to use the net proceeds from the
sale of the Shares hereunder for working capital and general corporate purposes.
     4.11 Dispositions After The Date Hereof. Each Purchaser shall not, and
shall cause its Trading Affiliates not to, prior to the effectiveness of the
Registration Statement: (a) sell, offer to sell, solicit offers to buy, dispose
of, loan, pledge or grant any right with respect to (collectively, a
“Disposition") the Shares unless pursuant to an exemption from the registration
requirements under the Securities Act; or (b) engage in any hedging or other
transaction which is designed or could reasonably be expected to lead to or
result in a Disposition of the Shares by such Purchaser or an Affiliate. In
addition, Purchaser agrees that for so long as it owns any Common Stock, it will
not enter into any short sale of Shares executed at a time when the Purchaser
has no equivalent offsetting long position in the Common Stock. For purposes of
determining whether the Purchaser has an equivalent offsetting long position in
the Common Stock, shares that the Purchaser is entitled to receive within sixty
(60) days (whether pursuant to contract or upon conversion or exercise of
convertible securities) will be included as if held long by the Purchaser. Such
Purchaser covenants that neither it nor any Person acting on its behalf or
pursuant to any understanding with it will engage in any transactions in the
Company’s securities (including, without limitation, any Short Sales involving
the Company’s securities) during the period from the date hereof until the
earlier of such time as (i) the transactions contemplated by this Agreement are
first publicly announced as described in Section 4.6 or (ii) this Agreement is
terminated in full pursuant to Section 6.17. Notwithstanding the foregoing, in
the case of a Purchaser that is a multi-managed investment vehicle whereby
separate portfolio managers manage separate portions of such Purchaser’s assets
and the portfolio managers have no direct knowledge of the investment decisions
made by the portfolio managers managing other portions of such Purchaser’s
assets, the representation set forth above shall apply only with respect to the
portion of assets managed by the portfolio manager that have knowledge about the
financing transaction contemplated by this Agreement. Each Purchaser understands
and acknowledges, severally and not jointly with any other Purchaser, that the
Commission currently takes the position that covering a short position
established prior to effectiveness of a resale registration statement with
shares included in such registration statement would be a violation of Section 5
of the Securities Act, as set forth in Item 65, Section 5 under Section A, of
the Manual of Publicly Available Telephone Interpretations, dated July 1997,
compiled by the Office of Chief Counsel, Division of Corporation Finance.
 

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ARTICLE V.
CONDITIONS PRECEDENT TO CLOSING
     5.1 Conditions Precedent to the Obligations of the Purchasers to Purchase
Shares. The obligation of each Purchaser to acquire Shares at the Closing is
subject to the fulfillment to such Purchaser’s satisfaction, on or prior to the
Closing Date, of each of the following conditions, any of which may be waived by
such Purchaser (as to itself only):
          (a) Representations and Warranties. The representations and warranties
of the Company contained herein shall be true and correct in all material
respects (except for those representations and warranties which are qualified as
to materiality, in which case such representations and warranties shall be true
and correct in all respects) as of the date when made and as of the Closing
Date, as though made on and as of such date, except for such representations and
warranties that speak as of a specific date.
          (b) Performance. The Company shall have performed, satisfied and
complied in all material respects with all covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or complied
with by it at or prior to the Closing.
          (c) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction that
prohibits the consummation of any of the transactions contemplated by the
Transaction Documents.
          (d) Consents. The Company shall have obtained in a timely fashion any
and all consents, permits, approvals, registrations and waivers necessary for
consummation of the purchase and sale of the Shares at the Closing (including
all Required Approvals), all of which shall be and remain so long as necessary
in full force and effect.
          (e) No Suspensions of Trading in Common Stock; Listing. The Common
Stock (i) shall be designated for quotation or listed on the Principal Trading
Market and (ii) shall not have been suspended, as of the Closing Date, by the
Commission or the Principal Trading Market from trading on the Principal Trading
Market nor shall suspension by the Commission or the Principal Trading Market
have been threatened, as of the Closing Date, either (A) in writing by the
Commission or the Principal Trading Market or (B) by falling below the minimum
listing maintenance requirements of the Principal Trading Market.
          (f) Company Deliverables. The Company shall have delivered the Company
Deliverables in accordance with Section 2.2(a).
          (g) Compliance Certificate. The Company shall have delivered to each
Purchaser a certificate, dated as of the Closing Date and signed by its Chief
Executive Officer or its Chief Financial Officer, dated as of the Closing Date,
certifying to the fulfillment of the conditions specified in Sections 5.1(a) and
(b) in the form attached hereto as Exhibit F.
          (h) Termination. This Agreement shall not have been terminated as to
such Purchaser in accordance with Section 6.17 herein.
     5.2 Conditions Precedent to the Obligations of the Company to sell Shares.
The Company’s obligation to sell and issue the Shares at the Closing is subject
to the fulfillment to the satisfaction of the Company on or prior to the Closing
Date of the following conditions, any of which may be waived by the Company:

26

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          (a) Representations and Warranties. The representations and warranties
made by the Purchaser in Section 3.2 hereof shall be true and correct in all
material respects as of the date when made, and as of the Closing Date as though
made on and as of such date, except for representations and warranties that
speak as of a specific date.
          (b) Performance. Such Purchaser shall have performed, satisfied and
complied in all material respects with all covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or complied
with by such Purchaser at or prior to the Closing Date.
          (c) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction that
prohibits the consummation of any of the transactions contemplated by the
Transaction Documents.
          (d) Consents. The Company shall have obtained in a timely fashion any
and all consents, permits, approvals, registrations and waivers necessary for
consummation of the purchase and sale of the Shares, all of which shall be and
remain so long as necessary in full force and effect.
          (e) Purchasers Deliverables. Such Purchaser shall have delivered its
Purchaser Deliverables in accordance with Section 2.2(b).
          (f) Termination. This Agreement shall not have been terminated as to
such Purchaser in accordance with Section 6.17 herein.
ARTICLE VI.
MISCELLANEOUS
     6.1 Fees and Expenses. Except as otherwise expressly set forth in the
Company’s engagement letter with the Placement Agents, the Company and the
Purchasers shall each pay the fees and expenses of their respective advisers,
counsel, accountants and other experts, if any, and all other expenses incurred
by such party in connection with the negotiation, preparation, execution,
delivery and performance of this Agreement. The Company shall pay all Transfer
Agent fees, stamp taxes and other taxes and duties levied in connection with the
sale and issuance of the Shares to the Purchasers. Each party acknowledges that
Lowenstein Sandler PC has rendered legal advice to the Placement Agents and not
to such party in connection with the transactions contemplated hereby, and that
such party has relied for such matters on the advice of its own respective
counsel.
     6.2 Entire Agreement. The Transaction Documents, together with the Exhibits
and Schedules thereto, contain the entire understanding of the parties with
respect to the subject matter hereof and supersede all prior agreements,
understandings, discussions and representations, oral or written, with respect
to such matters, which the parties acknowledge have been merged into such
documents, exhibits and schedules. At or after the Closing, and without further
consideration, the Company and the Purchasers will execute and deliver to the
other such further documents as may be reasonably requested in order to give
practical effect to the intention of the parties under the Transaction
Documents.
     6.3 Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of transmission, if
such notice or communication is delivered via facsimile (provided the sender
receives a machine-generated confirmation of successful transmission) at the
facsimile number specified in this Section prior to 5:00 p.m., New York City
time, on a Trading Day, (b) the next Trading Day after the date of

27

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transmission, if such notice or communication is delivered via facsimile at the
facsimile number specified in this Section on a day that is not a Trading Day or
later than 5:00 p.m., New York City time, on any Trading Day, (c) the Trading
Day following the date of mailing, if sent by U.S. nationally recognized
overnight courier service with next day delivery specified, or (d) upon actual
receipt by the party to whom such notice is required to be given. The address
for such notices and communications shall be as follows:

         
 
  If to the Company:   Ardea Biosciences, Inc.
 
      2131 Palomar Airport Road, Suite 300
 
      Carlsbad, CA 92011
 
      Telephone No.: (760) 702-8422
 
      Facsimile No.: (760) 602-9018
 
      Attention: Barry D. Quart
 
      E-mail: bquart@ardeabiosciences.com
 
       
 
  With a copy to:   Cooley Godward Kronish LLP
 
      4401 Eastgate Mall
 
      San Diego, CA 92121-1909
 
      Telephone No.: (858) 550-6067
 
      Facsimile No.: (858) 550-6420
 
      Attention: Ethan Christensen
 
      E-mail: echristensen@cooley.com  

  If to a Purchaser:   To the address set forth under such Purchaser’s name on
the signature page hereof;

or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
     6.4 Amendments; Waivers; No Additional Consideration. No provision of this
Agreement may be waived or amended except in a written instrument signed, in the
case of an amendment, by the Company and each of the Purchasers holding or
having the right to acquire a majority of the Shares on a fully-diluted basis at
the time of such amendment or, in the case of a waiver, by the party against
whom enforcement of any such waiver is sought. No waiver of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of either party to exercise any right hereunder in
any manner impair the exercise of any such right. No consideration shall be
offered or paid to any Purchaser to amend or consent to a waiver or modification
of any provision of any Transaction Document unless the same consideration is
also offered to all Purchasers who then hold Shares.
     6.5 Construction. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party. This Agreement
shall be construed as if drafted jointly by the parties, and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provisions of this Agreement or any of the Transaction
Documents.
     6.6 Successors and Assigns. The provisions of this Agreement shall inure to
the benefit of and be binding upon the parties and their successors and
permitted assigns. This Agreement, or any rights or obligations hereunder, may
not be assigned by the Company without the prior written consent of the
Purchasers. Any Purchaser may assign its rights hereunder in whole or in part to
any Person to whom such Purchaser assigns or transfers any Shares in compliance
with the Transaction Documents and applicable law,

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provided such transferee shall agree in writing to be bound, with respect to the
transferred Shares, by the terms and conditions of this Agreement that apply to
the “Purchasers”.
     6.7 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except (i) each of the Placement Agents is an intended
third party beneficiary of Article III hereof and (ii) the Escrow Agent is an
intended third party beneficiary of Section 2.1(d), and each of the Placement
Agents or the Escrow Agent, as the case may be, may enforce the provisions of
such Section directly against the parties with obligations thereunder.
     6.8 Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflicts of law thereof. Each party
agrees that all Proceedings concerning the interpretations, enforcement and
defense of the transactions contemplated by this Agreement and any other
Transaction Documents (whether brought against a party hereto or its respective
Affiliates, employees or agents) shall be commenced exclusively in the New York
Courts. Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the New York Courts for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein (including with respect to the enforcement of any of the
Transaction Documents), and hereby irrevocably waives, and agrees not to assert
in any Proceeding, any claim that it is not personally subject to the
jurisdiction of any such New York Court, or that such Proceeding has been
commenced in an improper or inconvenient forum. Each party hereto hereby
irrevocably waives personal service of process and consents to process being
served in any such Proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. EACH PARTY HERETO HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND
ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
     6.9 Survival. Subject to applicable statute of limitations, the
representations, warranties, agreements and covenants contained herein shall
survive the Closing and the delivery of the Shares, except that the
representations and warranties contained herein shall terminate upon the one
year anniversary of the Closing Date.
     6.10 Execution. This Agreement may be executed in two or more counterparts,
all of which when taken together shall be considered one and the same agreement
and shall become effective when counterparts have been signed by each party and
delivered to the other party, it being understood that both parties need not
sign the same counterpart. In the event that any signature is delivered by
facsimile transmission, or by e-mail delivery of a “.pdf” format data file, such
signature shall create a valid and binding obligation of the party executing (or
on whose behalf such signature is executed) with the same force and effect as if
such facsimile signature page were an original thereof.
     6.11 Severability. If any provision of this Agreement is held to be invalid
or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.

29

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     6.12 Replacement of Shares. If any certificate or instrument evidencing any
Shares is mutilated, lost, stolen or destroyed, the Company shall issue or cause
to be issued in exchange and substitution for and upon cancellation thereof, or
in lieu of and substitution therefor, a new certificate or instrument, but only
upon receipt of evidence reasonably satisfactory to the Company and the Transfer
Agent of such loss, theft or destruction and the execution by the holder thereof
of a customary lost certificate affidavit of that fact and an agreement to
indemnify and hold harmless the Company and the Transfer Agent for any losses in
connection therewith or, if required by the Transfer Agent, a bond in such form
and amount as is required by the Transfer Agent. The applicants for a new
certificate or instrument under such circumstances shall also pay any reasonable
third-party costs associated with the issuance of such replacement Shares. If a
replacement certificate or instrument evidencing any Shares is requested due to
a mutilation thereof, the Company may require delivery of such mutilated
certificate or instrument as a condition precedent to any issuance of a
replacement.
     6.13 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Purchasers and the Company will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agree to waive in any
action for specific performance of any such obligation (other than in connection
with any action for a temporary restraining order) the defense that a remedy at
law would be adequate.
     6.14 Payment Set Aside. To the extent that the Company makes a payment or
payments to any Purchaser pursuant to any Transaction Document or a Purchaser
enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.
     6.15 Adjustments in Share Numbers and Prices. In the event of any stock
split, subdivision, dividend or distribution payable in shares of Common Stock
(or other securities or rights convertible into, or entitling the holder thereof
to receive directly or indirectly shares of Common Stock), combination or other
similar recapitalization or event occurring after the date hereof and prior to
the Closing, each reference in any Transaction Document to a number of shares or
a price per share shall be deemed to be amended to appropriately account for
such event.
     6.16 Independent Nature of Purchasers’ Obligations and Rights. The
obligations of each Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. The decision of each Purchaser to
purchase Shares pursuant to the Transaction Documents has been made by such
Purchaser independently of any other Purchaser and independently of any
information, materials, statements or opinions as to the business, affairs,
operations, assets, properties, liabilities, results of operations, condition
(financial or otherwise) or prospects of the Company or any Subsidiary which may
have been made or given by any other Purchaser or by any agent or employee of
any other Purchaser, and no Purchaser and any of its agents or employees shall
have any liability to any other Purchaser (or any other Person) relating to or
arising from any such information, materials, statement or opinions. Nothing
contained herein or in any Transaction Document, and no action taken by any
Purchaser pursuant thereto, shall be deemed to constitute the Purchasers as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Purchasers are in any

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way acting in concert or as a group with respect to such obligations or the
transactions contemplated by the Transaction Documents. Each Purchaser
acknowledges that no other Purchaser has acted as agent for such Purchaser in
connection with making its investment hereunder and that no Purchaser will be
acting as agent of such Purchaser in connection with monitoring its investment
in the Shares or enforcing its rights under the Transaction Documents. Each
Purchaser shall be entitled to independently protect and enforce its rights,
including without limitation the rights arising out of this Agreement or out of
the other Transaction Documents, and it shall not be necessary for any other
Purchaser to be joined as an additional party in any proceeding for such
purpose. The Company acknowledges that each of the Purchasers has been provided
with the same Transaction Documents for the purpose of closing a transaction
with multiple Purchasers and not because it was required or requested to do so
by any Purchaser. The Company’s obligations to each Purchaser under this
Agreement are identical to its obligations to each other Purchaser other than
such differences resulting solely from the number of Shares purchased by such
Purchaser, but regardless of whether such obligations are memorialized herein or
in another agreement between the Company and a Purchaser.
     6.17 Termination. This Agreement may be terminated and the sale and
purchase of the Shares abandoned at any time prior to the Closing by either the
Company or any Purchaser (with respect to itself only) upon written notice to
the other, if the Closing has not been consummated on or prior to 5:00 p.m., New
York City time, on the Outside Date; provided, however, that the right to
terminate this Agreement under this Section 6.17 shall not be available to any
Person whose failure to comply with its obligations under this Agreement has
been the cause of or resulted in the failure of the Closing to occur on or
before such time. Nothing in this Section 6.17 shall be deemed to release any
party from any liability for any breach by such party of the terms and
provisions of this Agreement or the other Transaction Documents or to impair the
right of any party to compel specific performance by any other party of its
obligations under this Agreement or the other Transaction Documents. In the
event of a termination pursuant to this Section, the Company shall promptly
notify all non-terminating Purchasers and the Escrow Agent. Upon a termination
in accordance with this Section, the Company and the terminating Purchaser(s)
shall not have any further obligation or liability (including arising from such
termination) to the other, and no Purchaser will have any liability to any other
Purchaser under the Transaction Documents as a result therefrom.
     6.18 Waiver of Conflicts. Each party to this Agreement acknowledges that
Company Counsel, outside general counsel to the Company, has in the past
performed and is or may now or in the future represent one or more Purchasers or
their affiliates in matters unrelated to the transactions contemplated by the
Transaction Documents, including representation of such Purchasers or their
affiliates in matters of a similar nature to the transactions contemplated by
the Transaction Documents. The applicable rules of professional conduct require
that Company Counsel inform the parties hereunder of this representation and
obtain their consent. Company Counsel has served as outside general counsel to
the Company and has negotiated the terms of the transactions contemplated by the
Transaction Documents solely on behalf of the Company. The Company and each
Purchaser hereby (a) acknowledge that they have had an opportunity to ask for
and have obtained information relevant to such representation, including
disclosure of the reasonably foreseeable adverse consequences of such
representation; (b) acknowledge that with respect to the transactions
contemplated by the Transaction Documents, Company Counsel has represented
solely the Company, and not any Purchaser or any stockholder, director or
employee of the Company or any Purchaser; and (c) gives its informed consent to
Company Counsel’s representation of the Company in the transactions contemplated
by the Transaction Documents.

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

                  ARDEA BIOSCIENCES, INC.
 
           
 
  By:   /s/ Barry D. Quart, Pharm.D.
 
   
 
           
 
  Name:   Barry D. Quart, Pharm.D.    
 
           
 
  Title:   President and Chief Executive Officer    

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
[SIGNATURE PAGES FOR PURCHASERS FOLLOW]

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                  NAME OF PURCHASER: Baker Bros. Investments II, L.P.    
 
                By: Baker Bros. Capital, L.P. (general partner)         By:
Baker Bros. Capital (GP), LLC, (general partner)         By: Julian Baker,
Managing Member    
 
           
 
  By:   /s/ Julian Baker    
 
                Name: Julian Baker         Title: Managing Member    
 
                Aggregate Purchase Price (Subscription Amount): $27,281.75    
 
                Number of Shares to be Acquired: 2,059.0    
 
                Tax ID No.:    
 
                Address for Notice:    
 
                667 Madison Avenue, 17th Fl.
New York, NY 10065    
 
                Telephone No.: 212-339-5633    
 
                Facsimile No.: 212-339-5688    
 
                E-mail Address: lkirby@bbinvestments.com    
 
                Attention: Leo Kirby    

Delivery Instructions:
(if different than above)

         
c/o
       
 
       
 
       
Street:
       
 
       
 
       
City/State/Zip:
       
 
       
 
       
Attention:
       
 
       
 
       
Telephone No.:
       
 
       

 

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                  NAME OF PURCHASER: Baker/Tisch Investments, L.P.    
 
                By: Baker/Tisch Capital, L.P. (general partner)         By:
Baker/Tisch Capital (GP), LLC, (general partner)         By: Julian Baker,
Managing Member    
 
           
 
  By:  /s/ Julian Baker    
 
              Name: Julian Baker         Title: Managing Member    
 
                Aggregate Purchase Price (Subscription Amount): $208,740.50    
 
                Number of Shares to be Acquired:  Cert.#1: 8,876 shs
Cert.#2: 6,878 shs    
 
                Tax ID No.:    
 
                Address for Notice:    
 
                667 Madison Avenue, 17th Fl.         New York, NY 10065    
 
                Telephone No.: 212-339-5633    
 
                Facsimile No.: 212-339-5688    
 
                E-mail Address: lkirby@bbinvestments.com    
 
                Attention: Leo Kirby    

Delivery Instructions:
(if different than above)

         
c/o
       
 
       
 
       
Street:
       
 
       
 
       
City/State/Zip:
       
 
       
 
       
Attention:
       
 
       
 
       
Telephone No.:
       
 
       

 

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                  NAME OF PURCHASER: Baker Biotech Fund I, L.P.    
 
                By: Baker Biotech Capital, L.P. (general partner)         By:
Baker Biotech Capital (GP), LLC, (general partner)         By: Julian Baker,
Managing Member    
 
           
 
  By: /s/ Julian Baker    
 
              Name: Julian Baker         Title: Managing Member    
 
                Aggregate Purchase Price (Subscription Amount): $3,949,030.00  
 
 
                Number of Shares to be Acquired:  Cert.#1: 177,992 shs
Cert.#2: 120,048 shs    
 
                Tax ID No.:    
 
                Address for Notice:    
 
                667 Madison Avenue, 17th Fl.         New York, NY 10065    
 
                Telephone No.: 212-339-5633    
 
                Facsimile No.: 212-339-5688    
 
                E-mail Address: lkirby@bbinvestments.com    
 
                Attention: Leo Kirby    

Delivery Instructions:
(if different than above)

         
c/o
       
 
       
 
       
Street:
       
 
       
 
       
City/State/Zip:
       
 
       
 
       
Attention:
       
 
       
 
       
Telephone No.:
       
 
       

 

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                  NAME OF PURCHASER: Baker Bros. Life Sciences, L.P.    
 
                By: Baker Bros. Life Sciences Capital, L.P. (general partner)  
      By: Baker Bros. Life Sciences Capital (GP), LLC, (general partner)        
By: Julian Baker, Managing Member    
 
           
 
  By:   /s/ Julian Baker    
 
                Name: Julian Baker    
 
  Title:   Managing Member    
 
                Aggregate Purchase Price (Subscription Amount): $9,997,376.75  
 
 
                Number of Shares to be Acquired: 754,519 shs    
 
                Tax ID No.:    
 
                Address for Notice:    
 
                667 Madison Avenue, 17th Fl.
New York, NY 10065    
 
                Telephone No.: 212-339-5633    
 
                Facsimile No.: 212-339-5688    
 
                E-mail Address: lkirby@bbinvestments.com    
 
                Attention: Leo Kirby    

Delivery Instructions:
(if different than above)

         
c/o
       
 
       
 
       
Street:
       
 
       
 
       
City/State/Zip:
       
 
       
 
       
Attention:
       
 
       
 
       
Telephone No.:
       
 
       

 

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                  NAME OF PURCHASER: 14159, L.P.    
 
                By: 14159 Capital, L.P. (general partner)         By: 14159
Capital (GP), LLC, (general partner)         By: Julian Baker, Managing Member  
 
 
           
 
  By:   /s/ Julian Baker    
 
                Name: Julian Baker         Title: Managing Member    
 
                Aggregate Purchase Price (Subscription Amount): $317,576.00    
 
                Number of Shares to be Acquired: 23,968 shs    
 
                Tax ID No.:    
 
                Address for Notice:    
 
                667 Madison Avenue, 17th Fl.
New York, NY 10065    
 
                Telephone No.: 212-339-5633    
 
                Facsimile No.: 212-339-5688    
 
                E-mail Address: lkirby@bbinvestments.com    
 
                Attention: Leo Kirby    

Delivery Instructions:
(if different than above)

         
c/o
       
 
       
 
       
Street:
       
 
       
 
       
City/State/Zip:
       
 
       
 
       
Attention:
       
 
       
 
       
Telephone No.:
       
 
       

 

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                  NAME OF PURCHASER: Jennison Health Sciences Fund, a series of
Jennison Sector Funds, Inc.    
 
                By: Jennison Associates LLC, as sub-advisor to the Fund    
 
           
 
  By:   /s/ David Chan    
 
                Name: David Chan         Title:  Managing Director of Jennison
and Portfolio Manager to the Fund    
 
                Aggregate Purchase Price (Subscription Amount): $5,500,008.75
(at $13.25 per share)    
 
                Number of Shares to be Acquired: 415,095    
 
                Tax ID No.:    
 
                Address for Notice:    
 
                c/o Jennison Associates LLC
466 Lexington Avenue
New York, NY 10017    
 
                Telephone No.: (212) 833-0476    
 
                Facsimile No.: (212) 986-6138    
 
                E-mail Address: DCHAN@JENNISON.COM    
 
                Attention: David Chan*    

Delivery Instructions:
(if different than above)
c/o The Bank of New York

Street:   One Wall Street – 3rd Floor
Window A

City/State/Zip: New York, NY 10286
Attention: Jennison Health Sciences Fund #296227
Contact Person: Leif Hines
Telephone No.: (407) 833-0476
Email: LHINES@BANKOFNY.COM
 
*See attached Schedule A for additional contacts

 

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

 

SCHEDULE A
Additional contacts:
For Operational Matters:
Jennison Associates LLC
ATTN: Michael Ryan / Spiro Kartsonis
466 Lexington Avenue
New York, NY 10017
E-mail: mryan@jennison.com / skartsonis@jennison.com
Telephone: (212) 833-0618 / (212) 833-0484
Fax: (212) 949-9753
For Legal Matters:
Jennison Associates LLC
ATTN: Lisa K. Price, Esq.
466 Lexington Avenue
New York, NY 10017
E-mail: Lprice@jennison.com
Telephone: (212) 833-0702
Fax: (212) 682-9831

 

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                  NAME OF PURCHASER: Visium Long Bias Fund, LP
 
           
 
  By:
Name:   /s/ Mark Gottlieb
 
Mark Gottlieb    
 
  Title:   CEO    
 
                Aggregate Purchase Price (Subscription Amount): $6,250,025.00
 
                Number of Shares to be Acquired: 471,700
 
                Tax ID No.:
 
                Address for Notice:
 
                950 Third Avenue, 29th Fl.     New York, NY 10026
 
                Telephone No.: 646-840-5800
 
                Facsimile No.: 646-840-5801
 
                E-mail Address: mgottlieb@visiumfunds.com
 
                Attention: Mark Gottlieb

          Delivery Instructions:     (if different than above) [see attached]  
 
 
       
c/o
       
 
 
 
   
Street:
       
 
 
 
   
City/State/Zip:
       
 
 
 
   
Attention:
       
 
 
 
   
Telephone No.:
       
 
 
 
   

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

 

                  NAME OF PURCHASER: MILLENNIUM PARTNERS, L.P.

 
           
 
  By:   Millennium Management LLC    
 
           
 
  By:
Name:   /s/ Terry Feeney
 
Terry Feeney    
 
  Title:   Chief Operating Officer    
 
                Aggregate Purchase Price (Subscription Amount): $6,250,025
 
                Number of Shares to be Acquired: 471,700 Shares of Common Stock
 
                Tax ID No.:
 
                Address for Notice:
 
                c/o: Millennium Management LLC     666 Fifth Avenue, 8th Floor
    New York, NY 10103
 
                Telephone No.: (212) 841-4100
 
                Facsimile No.: (212) 841-4141
 
                E-mail Address: tfeeney@mlp.com
 
                Attention: Terry Feeney

Delivery Instructions:
(if different than above)
Same as Above
Attention: Lisa Halustick
Telephone No.: (212) 841-4102

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                  NAME OF PURCHASER: RA Capital Biotech Fund, LP
 
           
 
  By:
Name:   /s/ Peter Kolchinsky
 
Peter Kolchinsky    
 
  Title:   Manager    
 
                Aggregate Purchase Price (Subscription Amount): $3,947,996.50
 
                Number of Shares to be Acquired: 297,962
 
                Tax ID No.:
 
                Address for Notice:
 
                111 Huntington Avenue, Suite 610     Boston, MA 02199
 
                Telephone No.: 617/778-2509
 
                Facsimile No.: 617/778-2510
 
                E-mail Address: pkolchinsky@racap.com
 
                Attention: Amanda Daniels

          Delivery Instructions:     (if different than above)    
 
       
c/o
       
 
 
 
   
Street:
       
 
 
 
   
City/State/Zip:
       
 
 
 
   
Attention:
       
 
 
 
   
Telephone No.:
       
 
 
 
   

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

 

                  NAME OF PURCHASER: RA Capital Biotech Fund II, LP
 
           
 
  By:
Name:   /s/ Peter Kolchinsky
 
Peter Kolchinsky    
 
  Title:   Manager    
 
                Aggregate Purchase Price (Subscription Amount): $52,006.25
 
                Number of Shares to be Acquired: 3,925
 
                Tax ID No.:
 
                Address for Notice:
 
                111 Huntington Avenue, Suite 610     Boston, MA 02199
 
                Telephone No.: 617/778-2509
 
                Facsimile No.: 617-778-2510
 
                E-mail Address: pkolchinsky@racap.com
 
                Attention: Amanda Daniels

          Delivery Instructions:     (if different than above)    
 
       
c/o
       
 
 
 
   
Street:
       
 
 
 
   
City/State/Zip:
       
 
 
 
   
Attention:
       
 
 
 
   
Telephone No.:
       
 
 
 
   

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

 

                  NAME OF PURCHASER: Boxer Capital LLC
 
           
 
  By:
Name:   /s/ Aaron Davis
 
Aaron Davis    
 
  Title:   Principal    
 
                Aggregate Purchase Price (Subscription Amount): $2,999,998.75
 
                Number of Shares to be Acquired: 226,415
 
                Tax ID No.:
 
                Address for Notice:
 
                9381 Judicial Drive, Suite 200     San Diego, CA 92121
 
                Telephone No.: 858-964-2006
 
                Facsimile No.: 858-225-0413
 
                E-mail Address: adavis@tavistock.com
 
                Attention: Aaron Davis

          Delivery Instructions:     (if different than above)    
 
       
c/o
       
 
 
 
   
Street:
       
 
 
 
   
City/State/Zip:
       
 
 
 
   
Attention:
       
 
 
 
   
Telephone No.:
       
 
 
 
   

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                  NAME OF PURCHASER: TANG CAPITAL PARTNERS, L.P.
 
           
 
  By:
Name:   /s/ Kevin C. Tang
 
Kevin C. Tang    
 
  Title:   Managing Director    
 
                Aggregate Purchase Price (Subscription Amount): $499,935.75
 
                Number of Shares to be Acquired: 37,731
 
                Tax ID No.:
 
                Address for Notice:
 
                4401 Eastgate Mall     San Diego, CA 92121
 
                Telephone No.: 858-200-3830
 
                Facsimile No.: 858-200-3837
 
                E-mail Address: jlemkey@tangcapital.com
 
                Attention: John Lemkey

          Delivery Instructions:     (if different than above)    
 
       
c/o
       
 
 
 
   
Street:
       
 
 
 
   
City/State/Zip:
       
 
 
 
   
Attention:
       
 
 
 
   
Telephone No.:
       
 
 
 
   

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EXHIBITS:

     
A:
  Form of Registration Rights Agreement
 
   
B-1:
  Accredited Investor Questionnaire
 
   
B-2:
  Stock Certificate Questionnaire
 
   
C:
  Form of Opinion of Company Counsel
 
   
D:
  Irrevocable Transfer Agent Instructions
 
   
E:
  Form of Secretary’s Certificate
 
   
F:
  Form of Officer’s Certificate

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EXHIBIT A
Form of Registration Rights Agreement

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

 

Instruction Sheet
(to be read in conjunction with the entire Securities Purchase Agreement and
Registration Rights Agreement)
A. Complete the following items in the Securities Purchase Agreement and/or
Registration Rights Agreement:

  1.   Provide the information regarding the Purchaser requested on the
signature page. The Securities Purchase Agreement and the Registration Rights
Agreement must be executed by an individual authorized to bind the Purchaser.  
  2.   Exhibit B-1 — Accredited Investor Questionnaire:         Provide the
information requested by the Accredited Investor Questionnaire     3.  
Exhibit B-2 Stock Certificate Questionnaire:         Provide the information
requested by the Stock Certificate Questionnaire     4.   Annex B to the
Registration Rights Agreement — Selling Securityholder Notice and Questionnaire
        Provide the information requested by the Selling Securityholder Notice
and Questionnaire     5.   Return the signed Securities Purchase Agreement and
Registration Rights Agreement to:

David W. Stadinski
Piper Jaffray & Co.
150 East 42nd Street, 35th Floor
New York, New York 10017
Tel: (212) 284-9572
Fax: (212) 658-9604
Email: david.w.stadinski@pjc.com

B.   Instructions regarding the transfer of funds for the purchase of Shares is
set forth on Exhibit G to the Securities Purchase Agreement.

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EXHIBIT B-1
ACCREDITED INVESTOR QUESTIONNAIRE
(ALL INFORMATION WILL BE TREATED CONFIDENTIALLY)
To: Ardea Biosciences, Inc.
This Investor Questionnaire (“Questionnaire”) must be completed by each
potential investor in connection with the offer and sale of the shares of the
common stock, par value $0.001 per share (the “Securities”), of Ardea
Biosciences, Inc., a Delaware corporation (the “Corporation”). The Securities
are being offered and sold by the Corporation without registration under the
Securities Act of 1933, as amended (the “Act”), and the securities laws of
certain states, in reliance on the exemptions contained in Section 4(2) of the
Act and on Regulation D promulgated thereunder and in reliance on similar
exemptions under applicable state laws. The Corporation must determine that a
potential investor meets certain suitability requirements before offering or
selling Securities to such investor. The purpose of this Questionnaire is to
assure the Corporation that each investor will meet the applicable suitability
requirements. The information supplied by you will be used in determining
whether you meet such criteria, and reliance upon the private offering
exemptions from registration is based in part on the information herein
supplied.
This Questionnaire does not constitute an offer to sell or a solicitation of an
offer to buy any security. Your answers will be kept strictly confidential.
However, by signing this Questionnaire, you will be authorizing the Corporation
to provide a completed copy of this Questionnaire to such parties as the
Corporation deems appropriate in order to ensure that the offer and sale of the
Securities will not result in a violation of the Act or the securities laws of
any state and that you otherwise satisfy the suitability standards applicable to
purchasers of the Securities. All potential investors must answer all applicable
questions and complete, date and sign this Questionnaire. Please print or type
your responses and attach additional sheets of paper if necessary to complete
your answers to any item.
PART A. BACKGROUND INFORMATION
Name of Beneficial Owner of the Securities:                                    
                            
Business Address:                                                 
                                                                   
                                                                            
(Number and Street)

            (City)   (State)   (Zip Code)

Telephone Number: (                     )                        
                                                                           
                                                                    
                                    
If a corporation, partnership, limited liability company, trust or other entity:
Type of entity:                                                 
                                                                         
State of formation:                                         Approximate Date of
formation:                                          
Set forth in the space provided below the (i) state(s), if any, in the United
States in which you maintained your principal office during the past two years
and the dates during which you maintained your office in each state, and
(ii) state(s), if any, in which you pay income taxes:

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

 

                                                               
                                                               
                                                               
Were you formed for the purpose of investing in the securities being offered?
     Yes                        No                      
If an individual:
Residence Address:                                                             
                                                                              
                                                     
(Number and Street)

            (City)   (State)   (Zip Code)

Telephone Number: (                     )                                
                                                                            
                                                                  
                  
Age:                                            Citizenship:         
                                    Where registered to vote:          
                                
Set forth in the space provided below the state(s), if any, in the United States
in which you maintained your residence during the past two years and the dates
during which you resided in each state:
Are you a director or executive officer of the Corporation?
     Yes                      No                     
Social Security or Taxpayer Identification No.
PART B. ACCREDITED INVESTOR QUESTIONNAIRE
     In order for the Company to offer and sell the Securities in conformance
with state and federal securities laws, the following information must be
obtained regarding your investor status. Please initial each category applicable
to you as a Purchaser of Securities of the Company.

         
 
                      (1)   A bank as defined in Section 3(a)(2) of the
Securities Act, or any savings and loan association or other institution as
defined in Section 3(a)(5)(A) of the Securities Act whether acting in its
individual or fiduciary capacity;
 
       
 
                      (2)   A broker or dealer registered pursuant to Section 15
of the Securities Exchange Act of 1934;
 
       
 
                      (3)   An insurance company as defined in Section 2(13) of
the Securities Act;
 
       
 
                      (4)   An investment company registered under the
Investment Company Act of 1940 or a business development company as defined in
Section 2(a)(48) of that Act;
 
       
 
                      (5)   A Small Business Investment Company licensed by the
U.S. Small Business Administration under Section 301(c) or (d) of the Small
Business Investment Act of 1958;

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

 

         
 
                      (6)   A plan established and maintained by a state, its
political subdivisions, or any agency or instrumentality of a state or its
political subdivisions, for the benefit of its employees, if such plan has total
assets in excess of $5,000,000;
 
       
 
                      (7)   An employee benefit plan within the meaning of the
Employee Retirement Income Security Act of 1974, if the investment decision is
made by a plan fiduciary, as defined in Section 3(21) of such act, which is
either a bank, savings and loan association, insurance company, or registered
investment adviser, or if the employee benefit plan has total assets in excess
of $5,000,000 or, if a self-directed plan, with investment decisions made solely
by persons that are accredited investors;
 
       
 
                      (8)   A private business development company as defined in
Section 202(a)(22) of the Investment Advisers Act of 1940;
 
       
 
                      (9)   An organization described in Section 501(c)(3) of
the Internal Revenue Code, a corporation, Massachusetts or similar business
trust, or partnership, not formed for the specific purpose of acquiring the
Securities, with total assets in excess of $5,000,000;
 
       
 
                      (10)   A trust, with total assets in excess of $5,000,000,
not formed for the specific purpose of acquiring the Securities, whose purchase
is directed by a sophisticated person who has such knowledge and experience in
financial and business matters that such person is capable of evaluating the
merits and risks of investing in the Company;
 
       
 
                      (11)   A natural person whose individual net worth, or
joint net worth with that person’s spouse, at the time of his purchase exceeds
$1,000,000;
 
       
 
                      (12)   A natural person who had an individual income in
excess of $200,000 in each of the two most recent years, or joint income with
that person’s spouse in excess of $300,000, in each of those years, and has a
reasonable expectation of reaching the same income level in the current year;
 
       
 
                      (13)   An executive officer or director of the Company;
 
       
 
                      (14)   An entity in which all of the equity owners qualify
under any of the above subparagraphs. If the undersigned belongs to this
investor category only, list the equity owners of the undersigned, and the
investor category which each such equity owner satisfies.

A.          FOR EXECUTION BY AN INDIVIDUAL:

                 
 
          By    
 
               
 
  Date            
 
          Print Name:    
 
               

B.          FOR EXECUTION BY AN ENTITY:

                 
 
          Entity Name:    
 
               
 
               
 
          By    
 
               
 
  Date            
 
               
 
          Print Name:    
 
               
 
          Title:    
 
               

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

 

C.          ADDITIONAL SIGNATURES (if required by partnership, corporation or
trust document):

                 
 
          Entity Name:    
 
               
 
               
 
          By    
 
               
 
  Date            
 
               
 
          Print Name:    
 
               
 
          Title:    
 
               
 
               
 
          Entity Name:    
 
               
 
               
 
          By    
 
               
 
  Date            
 
               
 
          Print Name:    
 
               
 
          Title:    
 
               

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

 

EXHIBIT B-2
Stock Certificate Questionnaire
Pursuant to Section 2.2(b) of the Agreement, please provide us with the
following information:

         
1.
  The exact name that the Shares are to be registered in (this is the name that
will appear on the stock certificate(s)). You may use a nominee name if
appropriate:    
 
       
 
       
2.
  The relationship between the Purchaser of the Shares and the Registered Holder
listed in response to Item 1 above:    
 
       
 
       
3.
  The mailing address, telephone and telecopy number of the Registered Holder
listed in response to Item 1 above:    
 
       
 
       
 
       
 
       
 
       
 
       
 
       
 
       
 
       
 
       
4.
  The Tax Identification Number (or, if an individual, the Social Security
Number) of the Registered Holder listed in response to Item 1 above:    
 
       

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

 

EXHIBIT C
Form of Opinion of Company Counsel
1. The Company has been duly incorporated and is a validly existing corporation
in good standing under the laws of the State of Delaware.
2. The Company has the requisite corporate power to own its property and assets
and to conduct its business as it is currently being conducted.
3. The Company is duly qualified to do business as a foreign corporation and is
in good standing under the laws of the State of California.
4. The Company has the requisite corporate power to execute, deliver and perform
its obligations under the Financing Agreements, including, without limitation,
to issue, sell and deliver the Shares under the Purchase Agreement.
5. Each of the Financing Agreements has been duly and validly authorized,
executed and delivered by the Company and each such agreement constitutes a
valid and binding agreement of the Company enforceable against the Company in
accordance with its terms.
6. The Company’s authorized capital stock consists of 70,000,000 shares of
Common Stock, par value $0.001 per share, and 5,000,000 shares of Preferred
Stock, par value $0.001 per share. The Shares have been duly authorized, and
upon issuance and delivery against payment therefor in accordance with the terms
of the Purchase Agreement, the Shares will be validly issued, outstanding, fully
paid and nonassessable, and free of any preemptive right or similar rights
contained in the Company’s Certificate of Incorporation or Bylaws or any
Material Agreement.
7. The execution and delivery of the Financing Agreements by the Company and the
issuance of the Shares pursuant thereto do not violate any provision of the
Company’s Certificate of Incorporation or Bylaws, do not constitute a default
under or a material breach of any Material Agreement, and do not violate (a) any
governmental statute, rule or regulation which in our experience is typically
applicable to transactions of the nature contemplated by the Financing
Agreements or (b) any order, writ, judgment, injunction, decree, determination
or award which has been entered against the Company and of which we are aware,
in each case to the extent the violation of which would materially and adversely
affect the Company and its subsidiaries, taken as a whole.
8. To our knowledge, there is no action, proceeding or investigation pending or
overtly threatened against the Company before any court or administrative agency
that questions the validity or enforceability of the Financing Agreements, or
seeks to enjoin the performance of the Financing Agreements or that could
reasonably be expected to result, either individually or in the aggregate, in a
Material Adverse Effect on the Company and its subsidiaries, taken as a whole.
9. All consents, approvals, authorizations, or orders of, and filings,
registrations, and qualifications with any U.S. Federal or California regulatory
authority or governmental body or the under the DGCL required for the issuance
of the Shares, have been made or obtained, except (a) for the filing of a Form D
pursuant to Securities and Exchange Commission Regulation D, and (b) for the
filing of the notice to be filed under California Corporations Code
Section 25102.1(d).
10. The offer and sale of the Shares are exempt from the registration
requirements of the Securities Act of 1933, as amended, subject to the timely
filing of a Form D pursuant to Securities and Exchange Commission Regulation D.
11. To our knowledge, there are no written contracts, agreements or
understandings between the Company and any person granting such person the right
(other than rights which have been waived in writing or otherwise satisfied) to
require the Company to include any securities of the Company in any registration
statement contemplated by Section 2 of the Registration Rights Agreement.

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EXHIBIT D
Form of Irrevocable Transfer Agent Instructions
As of                     ,                     
Computershare Trust Company N.A.
[Address]
[Address]
Attn:                                         
Ladies and Gentlemen:
     Reference is made to that certain Securities Purchase Agreement, dated as
of December 19, 2007 (the “Agreement”), by and among Ardea Biosciences, Inc., a
Delaware corporation (the “Company”), and the purchasers named on the signature
pages thereto (collectively, and including permitted transferees, the
“Holders”), pursuant to which the Company is issuing to the Holders shares (the
“Shares”) of Common Stock of the Company, par value $0.001 per share (the
“Common Stock”).
     This letter shall serve as our irrevocable authorization and direction to
you (provided that you are the transfer agent of the Company at such time and
the conditions set forth in this letter are satisfied), subject to any stop
transfer instructions that we may issue to you from time to time, if any, to
issue certificates representing shares of Common Stock upon transfer or resale
of the Shares.
     You acknowledge and agree that so long as you have received (a) written
confirmation from the Company that either (1) a registration statement covering
resales of the Shares has been declared effective by the Securities and Exchange
Commission (the “Commission”) under the Securities Act of 1933, as amended (the
“Securities Act”), or (2) the Shares have been sold in conformity with Rule 144
under the Securities Act (“Rule 144”) or are eligible for sale under
Rule 144(k), or any successor thereto and (b) if applicable, a copy of such
registration statement, then, unless otherwise required by law, within three
(3) business days of your receipt of a notice of transfer, you shall issue the
certificates representing the Shares registered in the names of such Holders or
transferees, as the case may be, and such certificates shall not bear any legend
restricting transfer of the Shares thereby and should not be subject to any
stop-transfer restriction; provided, however, that if such Shares are not
registered for resale under the Securities Act or able to be sold under
Rule 144, then the certificates for such Shares shall bear the following legend:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES ACT”), OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED EXCEPT AS
PROVIDED BY SECTION 4 OF THAT CERTAIN SECURITIES PURCHASE AGREEMENT, DATED AS OF
DECEMBER 19, 2007, BY AND AMONG ARDEA BIOSCIENCES, INC. AND EACH PURCHASER
IDENTIFIED ON THE SIGNATURE PAGES THERETO.
     A form of written confirmation from the Company’s outside legal counsel
that a registration statement covering resales of the Shares has been declared
effective by the Commission under the Securities Act is attached hereto as Annex
I.
     Please be advised that the Holders are relying upon this letter as an
inducement to enter into the Agreement and, accordingly, each Holder is a third
party beneficiary to these instructions.

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     Please execute this letter in the space indicated to acknowledge your
agreement to act in accordance with these instructions.

                              Very truly yours,
 
                            ARDEA BIOSCIENCES, INC.
 
               
 
          By:    
 
               
 
          Name:    
 
               
 
          Title:    
 
               
 
                Acknowledged and Agreed:            
 
                COMPUTERSHARE TRUST COMPANY N.A.            
 
               
By:
               
 
               
Name:
               
 
               
Title:
               
 
                 
Date:
                      ,                                 

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Annex I
FORM OF NOTICE OF EFFECTIVENESS OF REGISTRATION STATEMENT
Computershare Trust Company N.A.
[Address]
[Address]
Attn:                                         
     Re: Ardea Biosciences, Inc.
Ladies and Gentlemen:
     Reference is made to that certain Securities Purchase Agreement, dated as
of December 19, 2007, entered into by and among Ardea Biosciences, Inc. (the
“Company”) and the buyers named therein (collectively, the “Purchasers”)
pursuant to which the Company issued to the Purchasers shares of the Company’s
common stock, $0.001 par value per share (the “Common Stock”). Pursuant to that
certain Registration Rights Agreement of even date, the Company agreed to
register the resale of the Common Stock (the “Registrable Securities”), under
the Securities Act of 1933, as amended (the “Securities Act”). In connection
with the Company’s obligations under the Registration Rights Agreement, on
                                        ,                     , the Company
filed a Registration Statement on Form [S-1] (File No. 333-
                                        ) (the “Registration Statement”) with
the Securities and Exchange Commission (the “Commission”) relating to the
Registrable Securities which names each of the Purchasers as a selling
stockholder thereunder.
     In connection with the foregoing, we advise you that a member of the
Commission’s staff has advised us by telephone that the Commission has entered
an order declaring the Registration Statement effective under the Securities Act
at                      [a.m.][p.m.] on                     ,
                    .

              Very truly yours,
 
            Ardea Biosciences, Inc.
 
       
 
  By:    
 
       

CC:   Purchasers
Piper Jaffray & Co.

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EXHIBIT E
Form of Secretary’s Certificate
The undersigned hereby certifies that he is the duly elected, qualified and
acting Secretary of Ardea Biosciences, Inc., a Delaware corporation (the
“Company”), and that as such he is authorized to execute and deliver this
certificate in the name and on behalf of the Company and in connection with the
Securities Purchase Agreement, dated as of December 19, 2007, by and among the
Company and the investors party thereto (the “Securities Purchase Agreement"),
and further certifies in his official capacity, in the name and on behalf of the
Company, the items set forth below. Capitalized terms used but not otherwise
defined herein shall have the meaning set forth in the Securities Purchase
Agreement.

1.   Attached hereto as Exhibit A is a true, correct and complete copy of the
resolutions duly adopted by the Board of Directors of the Company or the Pricing
Committee of the Board of Directors of the Company, as applicable, at meetings
held on                     , 2007. Such resolutions have not in any way been
amended, modified, revoked or rescinded, have been in full force and effect
since their adoption to and including the date hereof and are now in full force
and effect.   2.   Attached hereto as Exhibit B is a true, correct and complete
copy of the Certificate of Incorporation of the Company, together with any and
all amendments thereto currently in effect, and no action has been taken to
further amend, modify or repeal such Certificate of Incorporation, the same
being in full force and effect in the attached form as of the date hereof.   3.
  Attached hereto as Exhibit C is a true, correct and complete copy of the
Bylaws of the Company and any and all amendments thereto currently in effect,
and no action has been taken to further amend, modify or repeal such Bylaws, the
same being in full force and effect in the attached form as of the date hereof.
  4.   Each person listed below has been duly elected or appointed to the
position(s) indicated opposite his name and is duly authorized to sign the
Securities Purchase Agreement and each of the Transaction Documents on behalf of
the Company, and the signature appearing opposite such person’s name below is
such person’s genuine signature.

          Name   Position   Signature  
Barry D. Quart, Pharm.D
  President and Chief Executive Officer    
 
       
 
       
Christopher W. Krueger, J.D.
  Secretary    
 
       

IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of this ___day
of December, 2007.

     
 
   
 
  Secretary

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I, Barry D. Quart, Pharm.D, President and Chief Executive Officer, hereby
certify that Christopher W. Krueger, J.D. is the duly elected, qualified and
acting Secretary of the Company and that the signature set forth above is his
true signature.

       
 
   
 
  Barry D. Quart, Pharm.D
 
  President and Chief Executive Officer

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EXHIBIT A
Resolutions

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EXHIBIT B
Certificate of Incorporation

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EXHIBIT C
Bylaws

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EXHIBIT F
Form of Officer’s Certificate
The undersigned, the President and Chief Executive Officer of Ardea Biosciences,
Inc., a Delaware corporation (the “Company”), pursuant to Section 5.1(g) of the
Securities Purchase Agreement, dated as of December 19, 2007, by and among the
Company and the investors signatory thereto (the “Securities Purchase
Agreement”), hereby represents, warrants and certifies as follows (capitalized
terms used but not otherwise defined herein shall have the meaning set forth in
the Securities Purchase Agreement):

  1.   The representations and warranties of the Company contained in the
Securities Purchase Agreement are true and correct in all material respects as
of the date when made and as of the Closing Date, as though made on and as of
such date, except for such representations and warranties that speak as of a
specific date.

  2.   The Company has performed, satisfied and complied in all material
respects with all covenants, agreements and conditions required by the
Transaction Documents to be performed, satisfied or complied with by it at or
prior to the Closing.

IN WITNESS WHEREOF, the undersigned has executed this certificate this ___day of
December, 2007.

     
 
   
 
  Barry D. Quart, Pharm.D
 
  President and Chief Executive Officer

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EXHIBIT G
Wire Instructions

     
Wire Room of:
 PNC Bank New Jersey
 
 Caldwell, NJ

ABA No.: 031207607

         
For credit to:
Lowenstein Sandler PC
 
Special Trust Account I
Account No.:
8025720174   For International wires please use SWIFT Code: PNCCUS33