Exhibit 10.1

TOCAGEN INC.

$30,000,000.00

Common Stock

($0.001 par value)

Equity Distribution Agreement

November 21, 2018

Citigroup Global Markets Inc.

388 Greenwich Street

New York, New York, 10013

Ladies and Gentlemen:

Tocagen Inc., a corporation organized under the laws of Delaware (the
“Company”), confirms its agreement (this “Agreement”) with Citigroup Global
Markets Inc. (the “Manager”) as follows:

1.    Description of Shares. The Company proposes to issue and sell through or
to the Manager, as sales agent and/or principal, shares of the Company’s common
stock, $0.001 par value (“Common Stock”), having an aggregate gross sales price
of up to $30,000,000.00 (the “Shares”), from time to time during the term of
this Agreement and on the terms set forth in Section 3 of this Agreement. For
purposes of selling the Shares through the Manager, the Company hereby appoints
the Manager as exclusive agent of the Company for the purpose of soliciting
purchases of the Shares from the Company pursuant to this Agreement and the
Manager agrees to use its reasonable efforts to solicit purchases of the Shares
on the terms and subject to the conditions stated herein. The Company agrees
that whenever it determines to sell the Shares directly to the Manager as
principal, it will enter into a separate agreement (each, a “Terms Agreement”)
in substantially the form of Annex I hereto, relating to such sale in accordance
with Section 3 of this Agreement. Certain terms used herein are defined in
Section 19 hereof.

2.    Representations and Warranties. The Company represents and warrants to,
and agrees with, the Manager at the Execution Time and on each such time the
following representations and warranties are repeated or deemed to be made
pursuant to this Agreement, as set forth below. In the event that the Company
does not have any subsidiaries, then all references herein to “subsidiaries” or
“a subsidiary” of the Company shall be disregarded, mutatis mutandis. In the
event that the Company only has one subsidiary, then all references herein to
“subsidiaries” of the Company shall be deemed to refer to such one subsidiary of
the Company, mutatis mutandis.

(a)    The Company meets the requirements for use of Form S-3 under the
Securities Act and has prepared and filed with the Commission a registration
statement

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(File Number 333-224880) on Form S-3, including a related Base Prospectus, for
registration under the Securities Act of the offering and sale of the Shares.
Such Registration Statement, including any amendments thereto filed prior to the
Execution Time or prior to any such time this representation is repeated or
deemed to be made, has become effective. The Company has filed or will file with
the Commission the Prospectus Supplement relating to the Shares in accordance
with Rule 424(b). As filed, the Prospectus contains all information required by
the Securities Act and the rules thereunder, and, except to the extent the
Manager shall agree in writing to a modification, shall be in all substantive
respects in the form furnished to the Manager prior to the Execution Time or
prior to any such time this representation is repeated or deemed to be made. The
Registration Statement, at the Execution Time, each such time this
representation is repeated or deemed to be made, and at all times during which a
prospectus is required by the Securities Act to be delivered (whether physically
or through compliance with Rule 172 or any similar rule) in connection with any
offer or sale of Shares, meets the requirements set forth in Rule 415(a)(1)(x).
The initial Effective Date of the Registration Statement was not earlier than
the date three years before the Execution Time. Any reference herein to the
Registration Statement, the Base Prospectus, the Prospectus Supplement, any
Interim Prospectus Supplement or the Prospectus shall be deemed to refer to and
include the documents incorporated by reference therein pursuant to Item 12 of
Form S-3 which were filed under the Exchange Act on or before the Effective Date
of the Registration Statement or the issue date of the Base Prospectus, the
Prospectus Supplement, any Interim Prospectus Supplement or the Prospectus, as
the case may be; and any reference herein to the terms “amend,” “amendment” or
“supplement” with respect to the Registration Statement, the Base Prospectus,
the Prospectus Supplement, any Interim Prospectus Supplement or the Prospectus
shall be deemed to refer to and include the filing of any document under the
Exchange Act after the Effective Date of the Registration Statement or the issue
date of the Base Prospectus, the Prospectus Supplement, any Interim Prospectus
Supplement or the Prospectus, as the case may be, deemed to be incorporated
therein by reference.

(b)    To the extent that the Registration Statement is not available for sales
of the Shares as contemplated by this Agreement, the Company shall, before
requesting the sale of such Shares pursuant to this Agreement, file a new
registration statement with respect to any additional shares of Common Stock
necessary to complete such sales of the Shares and shall cause such registration
statement to become effective as promptly as practicable. After the
effectiveness of any such registration statement, all references to
“Registration Statement” included in this Agreement shall be deemed to include
such new registration statement, including all documents incorporated by
reference therein pursuant to Item 12 of Form S-3, and all references to “Base
Prospectus” included in this Agreement shall be deemed to include the final form
of prospectus, including all documents incorporated therein by reference,
included in any such registration statement at the time such registration
statement became effective.

(c)    On each Effective Date, at the Execution Time, at each Applicable Time,
at each Settlement Date (as defined in Section 3(a)) and at all times during
which a prospectus is required by the Securities Act to be delivered (whether
physically or through compliance

 

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with Rule 172 or any similar rule) in connection with any offer or sale of
Shares, the Registration Statement complied and will comply in all material
respects with the applicable requirements of the Securities Act and the Exchange
Act and the respective rules thereunder and did not and will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein not
misleading; and on the date of any filing pursuant to Rule 424(b), at the
Execution Time, at each Applicable Time, on each Settlement Date and at all
times during which a prospectus is required by the Securities Act to be
delivered (whether physically or through compliance with Rule 172 or any similar
rule) in connection with any offer or sale of Shares, the Prospectus (together
with any supplement thereto) complied and will comply in all material respects
with the applicable requirements of the Securities Act and the Exchange Act and
the respective rules thereunder and did not and will not include any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading; provided, however, that the Company makes no
representations or warranties as to the information contained in or omitted from
the Registration Statement or the Prospectus (or any supplement thereto) in
reliance upon and in conformity with information furnished in writing to the
Company by the Manager specifically for inclusion in the Registration Statement
or the Prospectus (or any supplement thereto), it being understood and agreed
that the only such information furnished by or on behalf of the Manager consists
of the information described as such in Section 7(a) hereof.

(d)    (i) At the earliest time after the filing of the Registration Statement
that the Company or another offering participant made a bona fide offer (within
the meaning of Rule 164(h)(2)) of the Shares and (ii) as of the Execution Time
and on each such time this representation is repeated or deemed to be made (with
such date being used as the determination date for purposes of this clause
(ii)), the Company was not and is not an Ineligible Issuer (as defined in Rule
405), without taking account of any determination by the Commission pursuant to
Rule 405 that it is not necessary that the Company be considered an Ineligible
Issuer.

(e)    From the time of filing of the Registration Statement through the date
hereof, the Company has been and is an “emerging growth company,” as defined in
Section 2(a) of the Securities Act.

(f)    Each Issuer Free Writing Prospectus does not include any information that
conflicts with the information contained in the Registration Statement,
including any document incorporated therein by reference and any prospectus
supplement deemed to be a part thereof that has not been superseded or modified.
The foregoing sentence does not apply to statements in or omissions from any
Issuer Free Writing Prospectus based upon and in conformity with written
information furnished to the Company by the Manager specifically for use
therein.

(g)    The Registration Statement is not the subject of a pending proceeding or
examination under Section 8(d) or 8(e) of the Securities Act, and the Company is
not the subject of a pending proceeding under Section 8A of the Securities Act
in connection with the offering of the Shares.

 

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(h)    The Common Stock is an “actively-traded security” exempted from the
requirements of Rule 101 of Regulation M under the Exchange Act by
subsection (c)(1) of such rule.

(i)    The Company has not entered into any other sales agency agreements or
other similar arrangements with any agent or any other representative in respect
of at the market offerings of the Shares in accordance with Rule 415(a)(4) of
the Securities Act.

(j)    The interactive data in the eXtensible Business Reporting Language
included as an exhibit to the Registration Statement or the documents
incorporated by reference therein fairly presents the information called for in
all material respects and has been prepared in accordance with the Commission’s
rules and guidelines applicable thereto.

(k)    The financial statements of the Company (including all notes and
schedules thereto) included or incorporated by reference in the Registration
Statement and the Prospectus, present fairly, in all material respects, the
financial position of the Company and its consolidated subsidiaries at the dates
indicated and the statement of operations, stockholders’ equity and cash flows
of the Company and its consolidated subsidiaries for the periods specified; and
such financial statements and related schedules and notes thereto, and the
unaudited financial information filed with the Commission as part of the
Registration Statement, have been prepared in conformity with generally accepted
accounting principles, consistently applied throughout the periods involved
(provided that non-year-end financial statements are subject to normal recurring
year-end audit adjustments that are not expected to be material in the aggregate
and do not contain all footnotes required by generally accepted accounting
principles); and the supporting schedules included or incorporated by reference
in the Registration Statement present fairly the information required to be
stated therein. The selected financial data included in the Prospectus present
fairly, in all material respects, the information shown therein as at the
respective dates and for the respective periods specified and have been
presented on a basis consistent with the consolidated financial statements set
forth in the Prospectus and other financial information.

(l)    There has not occurred any material adverse change in the condition,
financial or otherwise, or in the earnings, business or operations or prospects
of the Company, from that set forth in the Prospectus.

(m)    Ernst & Young LLP (the “Accountants”), whose reports are filed with the
Commission as a part of the Registration Statement, is and, during the periods
covered by its reports, was an independent registered public accounting firm as
required by the Securities Act.

(n)    The Company and each of its subsidiaries is duly organized, validly
existing and in good standing under the laws of their respective jurisdictions
of incorporation or

 

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organization. The Company and each of its subsidiaries is duly qualified to do
business and is in good standing as a foreign corporation in each jurisdiction
in which the nature of the business conducted by it or location of the assets or
properties owned, leased or licensed by it requires such qualification, except
for such jurisdictions where the failure to so qualify or be in good standing,
individually or in the aggregate, would not reasonably be expected to have a
material adverse effect on the assets, properties, condition, financial or
otherwise, or in the results of operations or business affairs or business
prospects of the Company and its subsidiaries considered as a whole (a “Material
Adverse Effect”); and to the Company’s knowledge, no proceeding has been
instituted in any such jurisdiction revoking, limiting or curtailing, or seeking
to revoke, limit or curtail, such power and authority or qualification.

(o)     Except as set forth in the Prospectus, the Company and each of its
subsidiaries has all requisite corporate power and authority, and all necessary
authorizations, exemptions, approvals, consents, orders, licenses,
registrations, certificates and permits of and from all governmental or
regulatory bodies or any other person or entity (collectively, the “Permits”),
to own, lease and license its assets and properties and conduct its business,
all of which are valid and in full force and effect, except where the lack of
such Permits, individually or in the aggregate, would not reasonably be expected
to have a Material Adverse Effect. The Company and each of its subsidiaries has
fulfilled and performed in all material respects all of its material obligations
with respect to such Permits and, to the Company’s knowledge, no event has
occurred that allows, or after notice or lapse of time would allow, revocation
or termination thereof or results in any other material impairment of the rights
of the Company thereunder. Except as may be required under the Securities Act
and state and foreign Blue Sky laws, no other Permits are required to enter
into, deliver and perform this Agreement and to issue and sell the Shares. All
of the descriptions in the Registration Statement and the Prospectus of the
legal and governmental procedures and requirements of the United States Food and
Drug Administration (the “FDA”) or any foreign, state or local governmental body
exercising comparable authority are accurate in all material respects.

(p)    Except as set forth in the Prospectus, the Company owns or has valid,
binding and enforceable licenses or other rights under the patents, patent
applications, licenses, inventions, copyrights, know how (including trade
secrets and other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures), trademarks, service marks, trade names or
other intellectual property (collectively, “Intellectual Property”) reasonably
necessary for, or used in the conduct, or the proposed conduct, of the business
of the Company in the manner described in the Registration Statement and the
Prospectus; the patents, trademarks, and copyrights, if any, included within the
Intellectual Property owned or licensed by the Company (the “Company
Intellectual Property”) are valid, enforceable, and subsisting; other than as
disclosed in the Registration Statement and the Prospectus, (i) the Company is
not obligated to pay a material royalty, grant a license to, or provide other
material consideration to any third party in connection with the Company
Intellectual Property, (ii) the Company has not received any notice of any claim
of infringement, misappropriation or conflict with any asserted rights of others
with respect to any of the Company’s product candidates, services,

 

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processes or the Company Intellectual Property, other than those that, singly or
in the aggregate, would not reasonably be expected to result in a Material
Adverse Effect, (iii) to the knowledge of the Company, neither the sale nor use
of any of the discoveries, inventions, product candidates, services or processes
of the Company referred to in the Registration Statement or the Prospectus do or
will, to the knowledge of the Company, infringe, misappropriate or violate any
right or valid patent claim of any third party, (iv) none of the technology
employed by the Company has been obtained or is being used by the Company in
material violation of any contractual obligation binding on the Company or, to
the Company’s knowledge, upon any of its officers, directors or employees or
otherwise in violation of the rights of any persons, (v) each person who is or
was an employee or contractor of the Company and who is or was involved in the
creation or development of any Company Intellectual Property has signed an
agreement containing an assignment to the Company of such person’s rights in and
to such Company Intellectual Property, (vi) to the knowledge of the Company, no
third party has any ownership right in or to any Intellectual Property that is
claimed to be owned by the Company, other than any co-owner of any patent
constituting Intellectual Property who is listed on the records of the U.S.
Patent and Trademark Office (the “USPTO”) or any foreign or international patent
authority and any co-owner of any patent application constituting Intellectual
Property who is named in such patent application, and, to the knowledge of the
Company, no third party has any ownership right in or to any Intellectual
Property in any field of use that is exclusively licensed to the Company, other
than any licensor to the Company of such Intellectual Property, (vii) there is
no material infringement by third parties of any Company Intellectual Property,
(viii) there is no pending or, to the Company’s knowledge, threatened action,
suit, proceeding or claim by others challenging the Company’s rights in or to
the Company Intellectual Property, and (ix) there is no pending or, to the
Company’s knowledge, threatened action, suit, proceeding or claim by others
challenging the validity or scope of any Company Intellectual Property. The
Company is in compliance in all material respects with the terms of each
agreement pursuant to which Intellectual Property has been licensed to the
Company, and all such agreements are in full force and effect.

(q)    All patents and patent applications owned by or licensed to the Company
or under which the Company has rights have, to the knowledge of the Company,
been duly and properly filed and maintained in all material respects; to the
knowledge of the Company, the parties prosecuting such patent applications have
complied with their duty of candor and disclosure to the USPTO or any foreign or
international patent authority in connection with such applications; and the
Company is not aware of any facts required to be disclosed to the USPTO or any
foreign or international patent authority that were not disclosed to the USPTO
or any foreign or international patent authority and which would preclude the
grant of a patent in connection with any such application or would reasonably be
expected to form the basis of a finding of invalidity with respect to any
patents that have issued with respect to such applications.

(r)    The Company and each of its subsidiaries has good and marketable title in
fee simple to all real property owned by it, and good and marketable title to
all personal property owned by it, in each case free and clear of all liens,
encumbrances and defects, except as are described in the Prospectus or such as
do not materially affect the value of

 

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such property and do not materially interfere with the use made or proposed to
be made of such property by the Company and its subsidiaries. All property held
under lease by the Company and its subsidiaries is held by them under valid,
existing and enforceable leases, with only such exceptions as are not material
and do not materially interfere with the use made or proposed to be made of such
property by the Company and its subsidiaries. Subsequent to the respective dates
as of which information is given in the Registration Statement and the
Prospectus, (i) there has not been any Material Adverse Effect; (ii) neither the
Company nor any of its subsidiaries has sustained any loss or interference with
its assets, businesses or properties (whether owned or leased) from fire,
explosion, earthquake, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or any court or legislative or other
governmental action, order or decree which would reasonably be expected to have
a Material Adverse Effect; and (iii) since the date of the latest balance sheet
included or incorporated by reference in the Registration Statement and the
Prospectus, except as otherwise disclosed in the Prospectus, neither the Company
nor its subsidiaries has (A) incurred any liability or obligation, direct or
contingent, for borrowed money, except such liabilities or obligations incurred
in the ordinary course of business, (B) entered into any transaction not in the
ordinary course of business or (C) declared or paid any dividend or made any
distribution on any shares of its stock or redeemed, purchased or otherwise
acquired or agreed to redeem, purchase or otherwise acquire any shares of its
capital stock.

(s)    There is no document, contract or other agreement required to be
described in the Registration Statement or the Prospectus or to be filed as an
exhibit to the Registration Statement which is not described or filed as
required by the Securities Act or incorporated therein by reference as permitted
by the Securities Act. Each description of a contract, document or other
agreement in the Registration Statement and the Prospectus accurately reflects
in all material respects the terms of the underlying contract, document or other
agreement. Each contract, document or other agreement described in the
Registration Statement, or the Prospectus or listed in the exhibits to the
Registration Statement or incorporated by reference is, except as otherwise
disclosed in the Prospectus, in full force and effect and is valid and
enforceable by and against the Company or any of its subsidiaries, as the case
may be, in accordance with its terms. Except as set forth in the Prospectus,
neither the Company nor any of its subsidiaries, if a subsidiary is a party, nor
to the Company’s knowledge, any other party, is in default in the observance or
performance of any term or obligation to be performed by it under any such
agreement, and no event has occurred which with notice or lapse of time or both
would constitute such a default, in any such case which default or event,
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect. Except as set forth in the Prospectus, no default
exists, and no event has occurred which with notice or lapse of time or both
would constitute a default, in the due performance and observance of any term,
covenant or condition, by the Company or its subsidiaries, if a subsidiary is a
party thereto, of any other agreement or instrument to which the Company or any
of its subsidiaries is a party or by which the Company or its properties or
business of a subsidiary or its properties or business may be bound or affected
which default or event, individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect.

 

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(t)    The scientific (other than the Company’s clinical trial results),
statistical and market related data included in the Registration Statement and
the Prospectus are based on or derived from sources that are credible and which
the Company believes to be reliable and accurate.

(u)    Neither the Company nor any of its subsidiaries is in violation of any
term or provision of (i) its charter or by-laws or (ii) of any franchise,
license, permit, judgment, decree, order, statute, rule or regulation, except,
with respect to subsection (ii), where the consequences of such violation,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect.

(v)    This Agreement has been duly and validly authorized, executed and
delivered by the Company.

(w)    Neither the execution, delivery and performance of this Agreement by the
Company nor the consummation of any of the transactions contemplated hereby by
the Company (including, without limitation, the issuance and sale by the Company
of the Shares) will give rise to a right to terminate or accelerate the due date
of any payment due under, or conflict with or result in the breach of any term
or provision of, or constitute a default (or an event which with notice or lapse
of time or both would constitute a default) under, or require any consent or
waiver under, or result in the execution or imposition of any lien, charge or
encumbrance upon any properties or assets of the Company or its subsidiaries
pursuant to the terms of, any indenture, mortgage, deed of trust or other
agreement or instrument to which the Company or any of its subsidiaries is a
party or by which either the Company or its subsidiaries or any of their
properties or businesses is bound, or any franchise, license, permit, judgment,
decree, order, statute, rule or regulation applicable to the Company or any of
its subsidiaries, except as disclosed in the Prospectus or where it would not
reasonably be expected to have a Material Adverse Effect, or violate any
provisions of the charter or by-laws of the Company or any of its subsidiaries,
except for such consents or waivers which have already been obtained and are in
full force and effect.

(x)    The Company had the authorized and outstanding capital stock as set forth
in the Registration Statement and the Prospectus as of the dates for which such
information is given therein. All of the issued and outstanding shares of Common
Stock have been duly and validly issued and are fully paid and nonassessable.
There are no statutory preemptive or other similar rights granted by the Company
to subscribe for or to purchase or acquire any shares of Common Stock of the
Company or any of its subsidiaries or any such rights pursuant to its charter or
by-laws or any agreement or instrument to or by which the Company or any of its
subsidiaries is a party or bound. All grants of options to acquire Common Stock
(each, a “Company Stock Option”) were validly issued and approved by the Board
of Directors of the Company (the “Board”), a committee thereof or an individual
with authority duly delegated by the Board or a committee thereof. Grants of
Company Stock Options were (i) made in material compliance with all applicable
laws and (ii) as a whole, made in material compliance with the terms of the
plans under which such Company Stock Options were issued. There is no and has
been no policy or practice of the Company to coordinate the grant of Company
Stock Options with the release or other public

 

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announcement of material information regarding the Company or its results of
operations or prospects to minimize the exercise price of such Company Stock
Options. The Shares, when issued and sold pursuant to this Agreement, will be
duly and validly issued, fully paid and nonassessable and none of them will be
issued in violation of any preemptive or other similar right granted by the
Company. Except as disclosed in the Registration Statement and the Prospectus,
there is no outstanding option, warrant or other right calling for the issuance
by the Company of, and there is no commitment, plan or arrangement by the
Company to issue, any share of stock of the Company or any security convertible
into, or exercisable or exchangeable for, such stock. The Common Stock and the
Shares conform in all material respects to all statements in relation thereto
contained in the Registration Statement and the Prospectus. All outstanding
shares of capital stock of each of the Company’s subsidiaries have been duly
authorized and validly issued and are fully paid and nonassessable and are owned
directly by the Company or by another wholly owned subsidiary of the Company
free and clear of any security interests, liens, encumbrances, equities or
claims, other than those described in the Prospectus.

(y)    No holder of any security of the Company has any right granted by the
Company, which has not been waived or previously satisfied, to have any security
owned by such holder included in the Registration Statement or, except as
described in the Prospectus, to demand registration of the sale of any security
owned by such holder.

(z)    To the knowledge of the Company and except as described in the
Prospectus, there are no legal or governmental proceedings pending to which the
Company or any of its subsidiaries is a party or of which any property of the
Company or any of its subsidiaries is the subject which, if determined adversely
to the Company or any of its subsidiaries would reasonably be expected to
individually or in the aggregate have a Material Adverse Effect; and, to the
knowledge of the Company, no such proceedings are threatened by governmental
authorities or others that, if determined adversely to the Company or any of its
subsidiaries, would reasonably be expected to have a Material Adverse Effect.

(aa)    All necessary corporate action has been duly and validly taken by the
Company to authorize the execution, delivery and performance of this Agreement
and the issuance and sale of the Shares by the Company. This Agreement has been
duly and validly authorized, executed and delivered by the Company and
constitutes and will constitute the legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its respective terms,
except as the enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors’ rights generally and by general equitable principles.

(bb)    Neither the Company nor any of its subsidiaries is involved in any labor
dispute nor, to the knowledge of the Company, is any such dispute threatened,
which dispute would reasonably be expected to have a Material Adverse Effect.
The Company is not aware of any existing or imminent labor disturbance by the
employees of any of its principal suppliers or contractors which would
reasonably be expected to have a Material Adverse Effect. The Company is not
aware of any threatened or pending litigation between the Company or its
subsidiaries and any of its executive officers which, if adversely determined,
would reasonably be expected to have a Material Adverse Effect.

 

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(cc)    No transaction has occurred between or among the Company and any of its
officers or directors, stockholders or any affiliate or affiliates of any such
officer or director or stockholder that is required to be described in and is
not described in the Registration Statement and the Prospectus.

(dd)    The Company has not taken, nor will it take, directly or indirectly, any
action designed to or which would reasonably be expected to cause or result in,
or which has constituted or which might reasonably be expected to constitute,
the stabilization or manipulation of the price of the Common Stock to facilitate
the sale or resale of any of the Shares, in each case contrary to applicable
law.

(ee)    Except as any failure to comply with the following would not reasonably
be expected to have a Material Adverse Effect, the Company and each of its
subsidiaries has accurately prepared and filed all material Federal, state,
local and foreign tax returns which are required to be filed through the date
hereof, or has received timely extensions thereof, and has paid all taxes shown
on such returns and all assessments received by it to the extent that the same
are material and have become due. Except as disclosed in the Prospectus or as
would not reasonably be expected to have a Material Adverse Effect, to the
Company’s knowledge, there are no tax audits or investigations pending; nor to
the Company’s knowledge are there any material proposed additional tax
assessments against the Company or any of its subsidiaries.

(ff)    The Common Stock is registered pursuant to Section 12(b) of the Exchange
Act and the Shares have been duly authorized for listing on the Nasdaq Stock
Market LLC’s Global Select Market (“Nasdaq”).

(gg)    The Company has taken no action designed to, or to the Company’s
knowledge is likely to have the effect of, terminating the registration of the
Common Stock under the Exchange Act or the listing of the Common Stock on
Nasdaq, nor, except as disclosed in the Prospectus, has the Company received any
notification that the Commission or Nasdaq is contemplating terminating such
registration or listing. The Company has complied in all material respects with
the applicable requirements of Nasdaq for maintenance of inclusion of the Common
Stock thereon.

(hh)    The Company and its subsidiaries make and keep accurate books, records
and accounts. Except as otherwise set forth in the Prospectus, the Company and
its subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurances 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
accordance with generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in accordance with
management’s general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences; the
principal executive officer

 

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and the principal financial officer of the Company have made all certifications
required by the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) and any
related rules and regulations promulgated by the Commission, and the statements
contained in any such certification were complete and correct as of the dates on
which they were made; the Company and each of its subsidiaries is otherwise in
compliance in all material respects with all applicable effective provisions of
the Sarbanes-Oxley Act.

(ii)    The Company and its subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as
are customary in the businesses in which they are engaged or propose to engage
immediately after giving effect to the offering of the Shares as described in
the Prospectus; all policies of insurance insuring the Company or its
subsidiaries are in full force and effect. The Company and each of its
subsidiaries are in compliance with the terms of such policies and instruments
in all material respects.

(jj)    Each approval, consent, order, authorization, designation, declaration
or filing of, by or with any regulatory, administrative or other governmental
body necessary in connection with the execution and delivery by the Company of
this Agreement and the consummation of the transactions herein contemplated
required to be obtained or performed by the Company (except such additional
steps as may be required by the Financial Industry Regulatory Authority
(“FINRA”) or may be necessary to qualify the Shares for public offering by the
Manager under the state securities or Blue Sky laws) has been obtained or made
and is in full force and effect.

(kk)    All of the information provided to the Manager or to counsel for the
Manager by the Company, its officers and directors and the holders of any
securities (debt or equity) or options to acquire any securities of the Company
in connection with letters, filings or other supplemental information provided
to FINRA pursuant to FINRA Rules 5110, 5190 and 5121 is true, complete and
correct. Neither the Company nor any of its affiliates directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or is under
common control with, or is a person associated with any member firm of FINRA.

(ll)    Except as otherwise set forth in the Prospectus, (i) neither the Company
nor any of its subsidiaries are in violation of any applicable rules, laws and
regulation relating to the use, treatment, storage and disposal of toxic
substances and protection of health or the environment (“Environmental Law”)
which are applicable to its business, except for any violation which would not
reasonably be expected to have a Material Adverse Effect; (ii) neither the
Company nor its subsidiaries has received any notice from any governmental
authority or third party of a material asserted claim under Environmental Laws;
(iii) each of the Company and each of its subsidiaries has received all permits,
licenses or other approvals required of it under applicable Environmental Laws
material to the conduct of its business and is in compliance with all terms and
conditions of any such permit, license or approval, except for where
non-compliance would not reasonably be expected to have a Material Adverse
Effect; (iv) to the Company’s knowledge, no facts currently exist that will
require the Company or any of its subsidiaries to make future material capital
expenditures to comply with Environmental Laws; and (v) no property

 

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which is or has been owned, or to the Company’s knowledge, leased or occupied by
the Company or its subsidiaries has been designated as a Superfund site pursuant
to the Comprehensive Environmental Response, Compensation of Liability Act of
1980, as amended (42 U.S.C. Section 9601, et. seq.) (“CERCLA”) or otherwise
designated as a contaminated site under applicable state or local law. To the
Company’s knowledge, neither the Company nor any of its subsidiaries has been
named as a “potentially responsible party” under CERCLA.

(mm)    In the ordinary course of its business, the Company periodically reviews
the effect of Environmental Laws on the business, operations and properties of
the Company and its subsidiaries, in the course of which the Company identifies
and evaluates associated costs and liabilities (including, without limitation,
any capital or operating expenditures required for clean-up, closure of
properties or compliance with Environmental Laws, or any permit, license or
approval, any related constraints on operating activities and any potential
liabilities to third parties). On the basis of such review, the Company has
reasonably concluded that such associated costs and liabilities would not,
singly or in the aggregate, have a Material Adverse Effect.

(nn)    The Company is not and, after giving effect to the offering and sale of
the Shares and the application of the net proceeds therefrom as described in the
Prospectus, will not be subject to registration as an “investment company”
within the meaning of the Investment Company Act of 1940, as amended.

(oo)    Neither the Company nor any other person associated with or acting on
behalf of the Company including, without limitation, any director, officer,
agent or employee of the Company or its subsidiaries, has, while acting on
behalf of the Company or its subsidiaries (i) used any corporate funds for
unlawful contributions, gifts, entertainment or other unlawful expenses relating
to political activity; (ii) made any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic political parties or
campaigns from corporate funds; (iii) violated any provision of the Foreign
Corrupt Practices Act of 1977 or the U.K. Bribery Act 2010, each as amended, or
similar law of any relevant jurisdiction, or the rules or regulations
thereunder; or (iv) made any other unlawful payment.

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

(qq)    Neither the Company nor any of its subsidiaries nor, to the knowledge of
the Company, any director, officer, agent, employee or affiliate of the Company
or any of

 

12

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its subsidiaries (i) is, or is controlled or 50% or more owned in the aggregate
by or is acting on behalf of, one or more individuals or entities that are
currently the subject of any sanctions administered or enforced by the United
States (including any administered or enforced by the Office of Foreign Assets
Control of the U.S. Department of the Treasury, the U.S. Department of State or
the Bureau of Industry and Security of the U.S. Department of Commerce), the
United Nations Security Council, the European Union, a member state of the
European Union (including sanctions administered or enforced by Her Majesty’s
Treasury of the United Kingdom) or other relevant sanctions authority
(collectively, “Sanctions” and such persons, “Sanctioned Persons” and each such
person, a “Sanctioned Person”), (ii) is located, organized or resident in a
country or territory that is, or whose government is, the subject of Sanctions
that broadly prohibit dealings with that country or territory (collectively,
“Sanctioned Countries” and each, a “Sanctioned Country”) or (iii) will, directly
or indirectly, use the proceeds of the offering of the Shares, or lend,
contribute or otherwise make available such proceeds to any subsidiary, joint
venture partner or other individual or entity in any manner that would result in
a violation of any Sanctions by, or would result in the imposition of Sanctions
against, any individual or entity (including any individual or entity
participating in the offering, whether as underwriter, advisor, investor or
otherwise). Neither the Company nor any of its subsidiaries has engaged in any
dealings or transactions with or for the benefit of a Sanctioned Person, or with
or in a Sanctioned Country, in the preceding 3 years, nor does the Company or
any of its subsidiaries have any plans to engage in dealings or transactions
with or for the benefit of a Sanctioned Person, or with or in a Sanctioned
Country.

(rr)    Except as described in the Prospectus, the Company has not sold or
issued any shares of Common Stock during the six-month period preceding the date
of the Prospectus, including any sales pursuant to Rule 144A under, or
Regulations D or S of, the Securities Act, other than shares issued pursuant to
equity incentive plans or other employee compensation plans or pursuant to
outstanding options, rights or warrants.

(ss)    The Company has fulfilled its obligations, if any, in all material
respects under the minimum funding standards of Section 302 of the U.S. Employee
Retirement Income Security Act of 1974 (“ERISA”) and the regulations and
published interpretations thereunder with respect to each “plan” as defined in
Section 3(3) of ERISA and such regulations and published interpretations in
which its employees are eligible to participate and each such plan is in
compliance in all material respects with the presently applicable provisions of
ERISA and such regulations and published interpretations. No “Reportable Event”
(as defined in 12 ERISA) has occurred with respect to any “Pension Plan” (as
defined in ERISA) for which the Company would have any material liability.

(tt)    The Company has established and maintains disclosure controls and
procedures (as such term in defined in Rule 13a-15 under the Exchange Act),
which (i) are designed to ensure that material information relating to the
Company is made known to the Company’s principal executive officer and its
principal financial officer by others within the Company, particularly during
the periods in which the periodic reports required under the Exchange Act are
being prepared; (ii) provide for the periodic evaluation of the effectiveness of
such disclosure controls and procedures as required by the Exchange Act;

 

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and (iii) except as otherwise set forth in the Prospectus, are effective in all
material respects to perform the functions for which they were established.
Based on the evaluation of its disclosure controls and procedures and except as
otherwise set forth in the Prospectus, the Company is not aware of (i) any
significant deficiency in design or operation of internal controls that would
adversely affect the Company’s ability to record, process, summarize and report
financial data or any material weaknesses to internal controls; or (ii) any
fraud, whether or not material, that involves management or other employees who
have a significant role in the Company’s internal controls. Except as otherwise
set forth in the Prospectus, since the date of the most recent evaluation of
such disclosure controls and procedures, there have been no changes that have
materially affected, or are reasonably likely to materially affect, the
Company’s internal control over financial reporting, including any corrective
actions with regard to significant deficiencies and material weaknesses.

(uu)    There are no material off-balance sheet arrangements (as defined in Item
303 of Regulation S-K) that have or are reasonably likely to have a material
current or future effect on the Company’s financial condition, revenues or
expenses, changes in financial condition, results of operations, liquidity,
capital expenditures or capital resources that are required to be disclosed in
the Prospectus and have not been so disclosed.

(vv)    The Board has validly appointed an audit committee whose composition
satisfies the requirements of Rule 5605(c)(2) of the Nasdaq Stock Market Rules
and the Board and/or the audit committee has adopted a charter that satisfied
the requirements of Rule 5605(c)(1) of the Nasdaq Stock Market Rules. The audit
committee has reviewed the adequacy of its charters within the past twelve
months.

(ww)    (i) All audit and non-audit services performed by the Accountants have
been preapproved in accordance with the requirements set forth in Section 10A of
the Exchange Act and (ii) the Accountants have not engaged and as of the date
hereof are not engaging in any “prohibited activities” (as defined in
Section 10A of the Exchange Act) on behalf of the Company.

(xx)    Except as described in the Registration Statement and the Prospectus,
the Company: (i) has not received any FDA Form 483, notice of adverse finding,
warning letter, untitled letter or other correspondence or notice from the FDA
or any arbitrator, court, governmental body, regulatory body, administrative
agency or other authority, body or agency having jurisdiction over the Company
or any of its properties, assets or operations (each, a “Governmental Entity”)
alleging or asserting material noncompliance with any Health Care Laws (as
defined below) or any Permits required by any such Health Care Laws
(“Authorizations”); (ii) possesses all material Authorizations and such
Authorizations are valid and in full force and effect and the Company is not in
material violation of any term of any such Authorizations; (iii) has not
received notice that the FDA or any Governmental Entity has taken, is taking or
intends to take action to limit, suspend, modify or revoke any material
Authorizations and has no knowledge that the FDA or any Governmental Entity is
considering such action; and (iv) has filed, obtained, maintained or submitted
all material reports, documents, forms, notices, applications, records, claims,
submissions and supplements or amendments as required by any Health Care Laws or
Authorizations and that all such material reports, documents, forms, notices,
applications, records, claims, submissions and supplements or amendments were
materially complete and correct on the date filed (or were corrected or
supplemented by a subsequent submission).

 

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(yy)    The Company has operated and currently is in compliance in all material
respects with all applicable Health Care Laws, rules and regulations, including,
without limitation, (i) the Federal Food, Drug and Cosmetic Act (21 U.S.C. §§
301 et seq.) (the “FFDCA”); (ii) all applicable federal, state, local and all
applicable foreign healthcare related fraud and abuse laws, including, without
limitation, the federal Anti-Kickback Statute (42 U.S.C. § 1320a-7b(b)), the
U.S. Physician Payments Sunshine Act (42 U.S.C. § 1320a-7h), the civil False
Claims Act (31 U.S.C. §§ 3729 et seq.), the criminal False Claims Law (42 U.S.C.
§ 1320a-7b(a)), all criminal laws relating to healthcare fraud and abuse,
including but not limited to 18 U.S.C. Sections 286 and 287, the healthcare
fraud criminal provisions under the U.S. Health Insurance Portability and
Accountability Act of 1996 (“HIPAA”) (42 U.S.C. §§ 1320d et seq.), the exclusion
laws (42 U.S.C. § 1320a-7), and the civil monetary penalties law (42 U.S.C. §
1320a-7a), (iii) Medicare (Title XVIII of the Social Security Act), and Medicaid
(Title XIX of the Social Security Act); (iv) HIPAA, as amended by the Health
Information Technology for Economic and Clinical Health Act of 2009 (42 U.S.C.
§§ 17921 et seq.); (v) the Public Health Service Act (42 U.S.C. §§ 201 et seq.);
(vi) the regulations promulgated pursuant to such laws; and (vii) any other
similar local, state, federal, or foreign laws (collectively, the “Health Care
Laws”). Neither the Company, nor any of its officers or directors, nor, to the
knowledge of the Company, its employees or agents have engaged in activities
which are, as applicable, cause for false claims liability, civil penalties, or
mandatory or permissive exclusion from Medicare, Medicaid, or any other state or
federal healthcare program. The Company has not received notice or other
correspondence of any claim, action, suit, audit, survey, proceeding, hearing,
enforcement, investigation, arbitration or other action (“Action”) from any
court or arbitrator or Governmental Entity or third party alleging or asserting
noncompliance with any Health Care Law applicable to the Company or
Authorizations, and, to the Company’s knowledge, no such Action is threatened.
The Company is not a party to and does not have any ongoing reporting
obligations pursuant to any corporate integrity agreement, deferred prosecution
agreement, monitoring agreement, consent decree, settlement order, plan of
correction or similar agreement with or imposed by any governmental or
regulatory authority. Additionally, neither the Company, nor any of its officers
or directors, nor, to the knowledge of the Company, its employees, has been
excluded, suspended or debarred from participation in any U.S. state or federal
health care program or human clinical research or is subject to a governmental
inquiry, investigation, proceeding, or other any other Action that could
reasonably be expected to result in debarment, suspension, or exclusion.

(zz)    The studies, tests and preclinical and clinical trials conducted by or
on behalf of the Company were and, if still ongoing, are being conducted in all
material respects in accordance with experimental protocols, procedures and
controls pursuant to accepted professional scientific standards and all
Authorizations and Health Care Laws, including, without limitation, the FFDCA
and 21 C.F.R. Parts 50, 54, 56, 58, and 312; the

 

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descriptions of the results of such studies, tests and trials contained in the
Registration Statement and the Prospectus are accurate and complete in all
material respects and fairly present the data derived from such studies, tests
and trials; except to the extent disclosed in the Registration Statement and the
Prospectus, the Company is not aware of any studies, tests or trials, the
results of which the Company believes reasonably call into question the study,
test, or trial results described or referred to in the Registration Statement
and the Prospectus; and, except to the extent disclosed in the Registration
Statement or the Prospectus, the Company has not received any notices or
correspondence from the FDA or Governmental Entity requiring the termination or
suspension of any studies, tests or preclinical or clinical trials that are
described in the Registration Statement or the Prospectus, other than ordinary
course communications with respect to modifications in connection with the
design and implementation of such trials, copies of which communications have
been made available to the Manager.

(aaa)    The Company has not, directly or indirectly, extended or maintained
credit, or arranged for the extension of credit, or renewed an extension of
credit, in the form of a personal loan to or for any of its directors or
executive officers in violation of applicable laws, including Section 402 of the
Sarbanes-Oxley Act.

(bbb)    Other than as contemplated by this Agreement, the Company has not
incurred any liability for any brokerage commission, finder’s fee or like
payment in connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby.

(ccc)    Except as disclosed in the Registration Statement and the Prospectus,
the Company (i) does not have any material lending or other relationship with
any bank or lending affiliate of Citigroup Global Markets Holdings Inc. and
(ii) does not intend to use any of the proceeds from the sale of the Shares
hereunder to repay any outstanding debt owed to any affiliate of Citigroup
Global Markets Holdings Inc.

(ddd)    Subject to any restrictions under applicable law, no subsidiary of the
Company is currently prohibited, directly or indirectly, from paying any
dividends to the Company, from making any other distribution on such
subsidiary’s capital stock, from repaying to the Company any loans or advances
to such subsidiary from the Company or from transferring any of such
subsidiary’s property or assets to the Company or any other subsidiary of the
Company, except as described in or contemplated by the Prospectus (exclusive of
any supplement thereto) or except as would not reasonably be expected to have a
Material Adverse Effect.

Any certificate signed by any officer of the Company and delivered to the
Manager or counsel for the Manager in connection with this Agreement or any
Terms Agreement shall be deemed a representation and warranty by the Company, as
to matters covered thereby, to the Manager.

 

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3.    Sale and Delivery of Shares.

(a)    Subject to the terms and conditions and in reliance upon the
representations and warranties herein set forth, the Company agrees to issue and
sell Shares from time to time through the Manager (each a “Placement”), acting
as sales agent, and the Manager agrees to use its reasonable efforts to sell, as
sales agent for the Company, the Shares on the following terms.

(i)    The Shares are to be sold on a daily basis or otherwise as shall be
agreed to by the Company and the Manager on any day that (A) is a trading day
for Nasdaq (B) the Company has instructed the Manager by telephone (confirmed
promptly by electronic mail) to make such sales and (C) the Company has
satisfied its obligations under Section 6 of this Agreement. The Company will
designate the maximum amount of the Shares to be sold by the Manager daily as
agreed to by the Manager (in any event not in excess of the amount available for
issuance under the Prospectus and the currently effective Registration
Statement) and the minimum price per Share at which such Shares may be sold.
Subject to the terms and conditions hereof, the Manager shall use its reasonable
efforts to sell on a particular day all of the Shares designated for the sale by
the Company on such day. The gross sales price of the Shares sold under this
Section 3(a) shall be the market price for shares of the Company’s Common Stock
sold by the Manager under this Section 3(a) on Nasdaq at the time of sale of
such Shares.

(ii)    The Company acknowledges and agrees that (A) there can be no assurance
that the Manager will be successful in selling the Shares, (B) the Manager will
incur no liability or obligation to the Company or any other person or entity if
it does not sell Shares for any reason other than a failure by the Manager to
use its reasonable efforts consistent with its normal trading and sales
practices and applicable law and regulations to sell such Shares as required
under this Agreement, and (C) the Manager shall be under no obligation to
purchase Shares on a principal basis pursuant to this Agreement, except as
otherwise specifically agreed by the Manager and the Company.

(iii)    The Company shall not authorize the issuance and sale of, and the
Manager shall not be obligated to use its reasonable efforts to sell, any Share
at a price lower than the minimum price therefor designated from time to time by
the Board, or a duly authorized committee thereof, and notified to the Manager
in writing. The Company or the Manager may, upon notice to the other party
hereto by telephone (confirmed promptly by electronic mail), suspend the
offering of the Shares for any reason and at any time; provided, however, that
such suspension or termination shall not affect or impair the parties’
respective obligations with respect to the Shares sold hereunder prior to the
giving of such notice.

(iv)    The Manager hereby covenants and agrees not to make any sales of the
Shares on behalf of the Company, pursuant to this Section 3(a), other than
(A) by means of ordinary brokers’ transactions between members of the Nasdaq
Stock Market LLC that qualify for delivery of a Prospectus to the Nasdaq Stock
Market LLC in accordance with Rule 153 (such transactions are hereinafter
referred to as “Continuous Offerings”) and (B) such other sales of the Shares on
behalf of the Company in its capacity as agent of the Company as shall be agreed
by the Company and the Manager pursuant to a Terms Agreement.

 

17

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(v)    The compensation to the Manager for sales of the Shares with respect to
which the Manager acts as sales agent under this Agreement shall be up to 3% of
the gross sales price of the Shares sold pursuant to this Section 3(a) and
payable as described in the succeeding subsection (vi) below. The foregoing rate
of compensation shall not apply when the Manager acts as principal, in which
case the Company may sell Shares to the Manager as principal at a price agreed
upon at the relevant Applicable Time pursuant to a Terms Agreement. The
remaining proceeds, after further deduction for any transaction fees imposed by
any governmental or self-regulatory organization in respect of such sales (the
“Transaction Fees”), shall constitute the net proceeds to the Company for such
Shares (the “Net Proceeds”).

(vi)    The Manager shall provide written confirmation (which may be by
facsimile or electronic mail) to the Company following the close of trading on
Nasdaq each day in which the Shares are sold under this Section 3(a) setting
forth the number of the Shares sold on such day, the aggregate gross sales
proceeds and the Net Proceeds to the Company, and the compensation payable by
the Company to the Manager with respect to such sales. Such compensation shall
be set forth and invoiced in periodic statements from the Manager to the
Company, with payment to be made by the Company promptly after its receipt
thereof.

(vii)    Settlement for sales of the Shares pursuant to this Section 3(a) will
occur on the second business day following the date on which such sales are made
(each such day, a “Settlement Date”). On each Settlement Date, the Shares sold
through the Manager for settlement on such date shall be issued and delivered by
the Company to the Manager against payment of the aggregate gross sales proceeds
less any Transaction Fees for the sale of such Shares. Settlement for all such
Shares shall be effected by free delivery of the Shares to the Manager’s account
at The Depository Trust Company (“DTC”) in return for payments in same day funds
delivered to the account designated by the Company. If the Company or its
transfer agent (if applicable) shall default on its obligation to deliver the
Shares on any Settlement Date, the Company shall (A) indemnify and hold the
Manager harmless against any loss, claim or damage arising from or as a result
of such default by the Company and (B) pay the Manager any commission to which
it would otherwise be entitled absent such default. If the Manager breaches this
Agreement by failing to deliver the aggregate gross sales proceeds less any
Transaction Fees to the Company on any Settlement Date for the Shares delivered
by the Company, the Manager will pay the Company interest based on the effective
overnight federal funds rate on such unpaid amount less any compensation due to
the Manager.

(viii)    At each Applicable Time, Settlement Date and Representation Date (as
defined in Section 4(k)), the Company shall be deemed to have affirmed each
representation and warranty contained in this Agreement as if such
representation and warranty were made as of such date, modified as necessary to
relate to the

 

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Registration Statement and the Prospectus as amended as of such date. Any
obligation of the Manager to use its reasonable efforts to sell the Shares on
behalf of the Company shall be subject to the continuing accuracy of the
representations and warranties of the Company herein, to the performance by the
Company of its obligations hereunder and to the continuing satisfaction of the
additional conditions specified in Section 6 of this Agreement.

(b)    If the Company wishes to issue and sell the Shares pursuant to this
Agreement but other than as set forth in Section 3(a) of this Agreement, it will
notify the Manager of the proposed terms of such Placement. If the Manager,
acting as principal, wishes to accept such proposed terms (which it may decline
to do for any reason in its sole discretion) or, following discussions with the
Company wishes to accept amended terms, the Manager and the Company will enter
into a Terms Agreement setting forth the terms of such Placement. The terms set
forth in a Terms Agreement will not be binding on the Company or the Manager
unless and until the Company and the Manager have each executed such Terms
Agreement accepting all of the terms of such Terms Agreement. In the event of a
conflict between the terms of this Agreement and the terms of a Terms Agreement,
the terms of such Terms Agreement will control.

(c)    Each sale of the Shares to the Manager shall be made in accordance with
the terms of this Agreement and, if applicable, a Terms Agreement, which will
provide for the sale of such Shares to, and the purchase thereof by, the
Manager. A Terms Agreement may also specify certain provisions relating to the
reoffering of such Shares by the Manager. The commitment of the Manager to
purchase the Shares pursuant to any Terms Agreement shall be deemed to have been
made on the basis of the representations and warranties of the Company herein
contained and shall be subject to the terms and conditions herein set forth.
Each Terms Agreement shall specify the number of the Shares to be purchased by
the Manager pursuant thereto, the price to be paid to the Company for such
Shares, any provisions relating to rights of, and default by, underwriters
acting together with the Manager in the reoffering of the Shares, and the time
and date (each such time and date being referred to herein as a “Time of
Delivery”) and place of delivery of and payment for such Shares. Such Terms
Agreement shall also specify any requirements for opinions of counsel,
accountants’ letters and officers’ certificates pursuant to Section 6 of this
Agreement and any other information or documents required by the Manager.

(d)    Under no circumstances shall the number and aggregate amount of the
Shares sold pursuant to this Agreement and any Terms Agreement exceed (i) the
aggregate amount set forth in Section 1, (ii) the number of shares of the Common
Stock available for issuance under the currently effective Registration
Statement or (iii) the number and aggregate amount of the Shares authorized from
time to time to be issued and sold under this Agreement by the Board, or a duly
authorized committee thereof, and notified to the Manager in writing.

(e)    If either party has reason to believe that the exemptive provisions set
forth in Rule 101(c)(1) of Regulation M under the Exchange Act are not satisfied
with respect to the Shares, it shall promptly notify the other party and sales
of the Shares under this Agreement and any Terms Agreement shall be suspended
until that or other exemptive provisions have been satisfied in the judgment of
each party.

 

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(f)    Notwithstanding any other provision of this Agreement the Company shall
not request the sale of any Shares that would be sold, and the Manager shall not
be obligated to sell, during any period in which the Company is, or would
reasonably be deemed to be, in possession of material non-public information.

4.    Agreements. The Company agrees with the Manager that:

(a)    During any period when the delivery of a prospectus relating to the
Shares is required (including in circumstances where such requirement may be
satisfied pursuant to Rule 172 or any similar rule) to be delivered under the
Securities Act, the Company will not file any amendment of the Registration
Statement or supplement (including the Prospectus Supplement or any Interim
Prospectus Supplement) to the Base Prospectus or any Rule 462(b) Registration
Statement (other than an amendment or supplement relating to an offering of the
Company’s securities which is unrelated to the offering of Shares hereunder or
any amendment pursuant to Section 10(a)(3) of the Securities Act deemed effected
pursuant to the filing of an Annual Report on Form 10-K by the Company) unless
the Company has furnished to the Manager a copy for its review prior to filing
and will not file any such proposed amendment or supplement to which the Manager
reasonably objects. The Company has properly completed the Prospectus, in a form
approved by the Manager, and filed such Prospectus, as amended at the Execution
Time, with the Commission pursuant to the applicable paragraph of Rule 424(b) by
the Execution Time and will cause any supplement to the Prospectus to be
properly completed, in a form approved by the Manager, and will file such
supplement with the Commission pursuant to the applicable paragraph of
Rule 424(b) within the time period prescribed thereby and will provide evidence
satisfactory to the Manager of such timely filing. The Company will promptly
advise the Manager (i) when the Prospectus, and any supplement thereto, shall
have been filed (if required) with the Commission pursuant to Rule 424(b) or
when any Rule 462(b) Registration Statement shall have been filed with the
Commission, (ii) when, during any period when the delivery of a prospectus
(whether physically or through compliance with Rule 172 or any similar rule) is
required under the Securities Act in connection with the offering or sale of the
Shares, any amendment to the Registration Statement shall have been filed or
become effective, (iii) of any request by the Commission or its staff for any
amendment of the Registration Statement, or any Rule 462(b) Registration
Statement, or for any supplement to the Prospectus or for any additional
information, (iv) of the issuance by the Commission of any stop order suspending
the effectiveness of the Registration Statement or of any notice objecting to
its use or the institution or threatening of any proceeding for that purpose,
and (v) of the receipt by the Company of any notification with respect to the
suspension of the qualification of the Shares for sale in any jurisdiction or
the institution or threatening of any proceeding for such purpose.
Notwithstanding the foregoing, the Company shall not be obligated to provide
notice of or furnish copies of any report or statement filed with the Commission
to the extent it is available on the Commission’s Electronic Data Gathering,
Analysis, and Retrieval System. The Company will use its best efforts to prevent
the issuance of any

 

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such stop order or the occurrence of any such suspension or objection to the use
of the Registration Statement and, upon such issuance, occurrence or notice of
objection, to obtain as soon as possible the withdrawal of such stop order or
relief from such occurrence or objection, including, if necessary, by filing an
amendment to the Registration Statement or a new registration statement and
using its best efforts to have such amendment or new registration statement
declared effective as soon as practicable.

(b)    If, at any time on or after an Applicable Time but prior to the related
Settlement Date or Time of Delivery, any event occurs as a result of which the
Prospectus would include any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements therein in the
light of the circumstances under which they were made or the circumstances then
prevailing not misleading, the Company will (i) notify promptly the Manager so
that any use of the Prospectus may cease until it is amended or supplemented;
(ii) amend or supplement the Prospectus to correct such statement or omission;
and (iii) supply any amendment or supplement to the Manager in such quantities
as the Manager may reasonably request.

(c)    During any period when the delivery of a prospectus relating to the
Shares is required (including in circumstances where such requirement may be
satisfied pursuant to Rule 172 or any similar rule) to be delivered under the
Securities Act, any event occurs as a result of which the Prospectus as then
supplemented would include any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements therein in the
light of the circumstances under which they were made at such time not
misleading, or if it shall be necessary to amend the Registration Statement,
file a new registration statement or supplement the Prospectus to comply with
the Securities Act or the Exchange Act or the respective rules thereunder,
including in connection with use or delivery of the Prospectus, the Company
promptly will (i) notify the Manager of any such event, (ii) prepare and file
with the Commission, subject to the second sentence of paragraph (a) of this
Section 4, an amendment or supplement or new registration statement which will
correct such statement or omission or effect such compliance, (iii) use its best
efforts to have any amendment to the Registration Statement or new registration
statement declared effective as soon as practicable in order to avoid any
disruption in use of the Prospectus and (iv) supply any supplemented Prospectus
to the Manager in such quantities as the Manager may reasonably request.

(d)    As soon as practicable, the Company will make generally available to its
security holders and to the Manager an earnings statement or statements of the
Company and its subsidiaries, if any, which will satisfy the provisions of
Section 11(a) of the Securities Act and Rule 158.

(e)    The Company will furnish to the Manager and counsel for the Manager,
without charge, signed copies of the Registration Statement (including exhibits
thereto) and, so long as delivery of a prospectus by the Manager or dealer may
be required by the Securities Act (including in circumstances where such
requirement may be satisfied pursuant to Rule 172 or any similar rule), as many
copies of the Prospectus and each Issuer Free Writing Prospectus and any
supplement thereto as the Manager may reasonably request. The Company will pay
the expenses of printing or other production of all documents relating to the
offering.

 

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(f)    The Company will arrange, if necessary, for the qualification of the
Shares for sale under the laws of such jurisdictions as the Manager may
designate and will maintain such qualifications in effect so long as required
for the distribution of the Shares; provided that in no event shall the Company
be obligated to qualify to do business in any jurisdiction where it is not now
so qualified or to take any action that would subject it to service of process
in suits, other than those arising out of the offering or sale of the Shares, in
any jurisdiction where it is not now so subject.

(g)    The Company agrees that, unless it has or shall have obtained the prior
written consent of the Manager, and the Manager agrees with the Company that,
unless it has or shall have obtained, as the case may be, the prior written
consent of the Company, it has not made and will not make any offer relating to
the Shares that would constitute an Issuer Free Writing Prospectus or that would
otherwise constitute a “free writing prospectus” (as defined in Rule 405)
required to be filed by the Company with the Commission or retained by the
Company under Rule 433; provided that the prior written consent of the parties
hereto shall be deemed to have been given in respect of the Free Writing
Prospectuses included in Schedule I hereto. Any such free writing prospectus
consented to by the Manager or the Company is hereinafter referred to as a
“Permitted Free Writing Prospectus.” The Company agrees that (i) it has treated
and will treat, as the case may be, each Permitted Free Writing Prospectus as an
Issuer Free Writing Prospectus and (ii) it has complied and will comply, as the
case may be, with the requirements of Rules 164 and 433 applicable to any
Permitted Free Writing Prospectus, including in respect of timely filing with
the Commission, legending and record keeping.

(h)    While a Placement is in effect, the Company will not offer, sell,
contract to sell, pledge, or otherwise dispose of, or file a registration
statement with the Commission in respect of (other than any Registration
Statement on Form S-8 or Form S-4, or any successors to such forms), any other
shares of Common Stock or any securities convertible into, or exercisable, or
exchangeable for, shares of Common Stock, or publicly announce an intention to
effect any such transaction, without giving the Manager at least five Business
Days’ prior written notice specifying the nature of the proposed transaction and
the date of such proposed transaction; provided, however, that the Company may,
without giving such notice, issue and sell (i) Common Stock pursuant to this
Agreement or any Terms Agreement, (ii) Common Stock pursuant to any equity
incentive plan, inducement plan, employee stock purchase plan, stock ownership
plan or dividend reinvestment plan of the Company approved by the Board,
(iii) Common Stock upon the exercise or conversion of any warrants, options, or
other derivative securities, and (iv) Common Stock or securities convertible
into or exchangeable for Common Stock as consideration for mergers,
acquisitions, other business combinations, joint ventures or strategic alliances
occurring after the date of this Agreement which are not used for capital
raising purposes.

(i)    The Company will not (i) take, directly or indirectly, any action
designed to or that would constitute or that might reasonably be expected to
cause or result in, under the Exchange Act or otherwise, stabilization or
manipulation of the price of any security of the Company to facilitate the sale
or resale of the Shares or (ii) sell, bid for, purchase Common Stock in
violation of Regulation M or pay any person (other than as contemplated by this
Agreement or any Terms Agreement) any compensation for soliciting purchases of
the Shares.

 

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(j)    The Company will, at any time during the term of this Agreement, as
supplemented from time to time, advise the Manager immediately after it shall
have received notice or obtain knowledge thereof, of any information or fact
that would alter or affect any opinion, certificate, letter and other document
provided to the Manager pursuant to Section 6 herein.

(k)    On the date the Company first requests a Placement (and upon the
recommencement of the offering of the Shares under this Agreement following the
termination of a suspension of sales hereunder), and each time that (i) the
Registration Statement or the Prospectus shall be amended or supplemented (other
than an Interim Prospectus Supplement filed pursuant to Rule 424(b) pursuant to
Section 4(x) of this Agreement, a prospectus supplement relating solely to the
offering of securities other than the Shares or an amendment or supplement
effected by the filing with the Commission of any document incorporated by
reference therein), (ii) the Company files an Annual Report on Form 10-K, a
Quarterly Report on Form 10-Q or a Current Report on Form 8-K containing amended
financial information (other than information “furnished” pursuant to Items 2.02
or 7.01 of Form 8-K or to provide disclosure pursuant to Item 8.01 of Form 8-K
relating to the reclassification of certain properties as discontinued
operations in accordance with Statement of Financial Accounting Standards
No. 144) under the Exchange Act, (iii) the Shares are delivered to the Manager
as principal at the Time of Delivery pursuant to a Terms Agreement, or
(iv) there occurs an event that would reasonably be expected to materially
affect the Company and its subsidiaries, if any, taken as a whole, and the
Manager reasonably requests (the date on which the Company first requests a
Placement and each such date referred to in (i), (ii), (iii) and (iv) above, a
“Representation Date”), the Company shall furnish or cause to be furnished to
the Manager forthwith a certificate dated and delivered the date of such
Placement, effectiveness of such amendment, the date of filing with the
Commission of such supplement or other document, the Time of Delivery, or
promptly upon request, as the case may be, in form reasonably satisfactory to
the Manager to the effect that the statements contained in the certificate
referred to in Section 6(d) of this Agreement which were last furnished to the
Manager are true and correct at the time of such commencement or recommencement,
amendment, supplement, filing, or delivery, as the case may be, as though made
at and as of such time (except that such statements shall be deemed to relate to
the Registration Statement and the Prospectus as amended and supplemented to
such time) or, in lieu of such certificate, a certificate of the same tenor as
the certificate referred to in said Section 6(d), modified as necessary to
relate to the Registration Statement and the Prospectus as amended and
supplemented to the time of delivery of such certificate; provided, however, the
requirement to deliver a certificate under this Section 4(k) shall be waived for
any Representation Date occurring at a time at which no Placement is pending or
no Terms Agreement is in effect (each, a “Waiver”), which Waiver, in each case,
shall continue until such time as the Company delivers its next Placement or
enters into a Terms Agreement.

 

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(l)    On or prior to the date the Company first requests a Placement, the
Company shall cause to be furnished to the Manager a written opinion and letter
of Cooley LLP, or such other counsel to the Company reasonably satisfactory to
the Manager (“Company Counsel”), covering opinions and statements substantially
in the forms attached hereto as Annex II-A and Annex II-B. Thereafter, at each
Representation Date, the Company shall cause to be furnished to the Manager a
letter of Company Counsel in the form attached hereto as Annex II-B, dated and
delivered the date of such Representation Date, in form and substance reasonably
satisfactory to the Manager, but modified as necessary to relate to the
Registration Statement and the Prospectus as amended and supplemented to the
time of delivery of such letter; provided, however, the Company shall not be
required to furnish such letter at any time a Waiver is in effect until such
time as the Company delivers its next Placement or enters into a Terms
Agreement.

(m)    On or prior to the date the Company first requests a Placement and each
time the Company files an Annual Report on Form 10-K and requests a Placement
thereafter, or at the Manager’s request and upon notice to the Company, if the
Company files a Quarterly Report on Form 10-Q or a Current Report on Form 8-K
that includes material changes in the intellectual property disclosure from the
most recently filed Annual Report on Form 10-K and the Company requests a
Placement thereafter, the Company shall furnish or cause to be furnished
forthwith to the Manager a written opinion of intellectual property counsel or
counsels to the Company (“IP Counsel”) satisfactory to the Manager, dated and
delivered prior to such Placement request.

(n)    On or prior to the date the Company first requests a Placement, and each
time that (i) the Registration Statement or the Prospectus shall be amended or
supplemented to include additional amended financial information, (ii) the
Shares are delivered to the Manager as principal at a Time of Delivery pursuant
to a Terms Agreement, (iii) the Company files a Quarterly Report on Form 10-Q or
an Annual Report on Form 10-K, or (iv) at the Manager’s request and upon notice
to the Company, there is filed with the Commission a Current Report on Form 8-K
containing amended financial information (other than information “furnished”
pursuant to Items 2.02 or 7.01 of Form 8-K or to provide disclosure pursuant to
Item 8.01 of Form 8-K relating to the reclassification of certain properties as
discontinued operations in accordance with Statement of Financial Accounting
Standards No. 144) incorporated by reference into the Prospectus, the Company
shall cause the Accountants, or other independent accountants reasonably
satisfactory to the Manager forthwith, to furnish the Manager a letter, dated
the date of commencement or recommencement, effectiveness of such amendment, the
date of filing of such supplement or other document with the Commission, or the
Time of Delivery, as the case may be, in form reasonably satisfactory to the
Manager, of the same tenor as the letter referred to in Section 6(e) of this
Agreement but modified to relate to the Registration Statement and the
Prospectus, as amended and supplemented to the date of such letter. Further,
notwithstanding the foregoing, the Company shall not be required to furnish or
cause to be furnished any such letter at any time a Waiver is in effect until
such time as the Company delivers its next Placement Notice or enters into a
Terms Agreement; provided, however, that such letter shall then be required to
be furnished to the Manager prior to any further sales of Shares under this
Agreement covering the period which would most recently have been required but
for this sentence.

 

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(o)    Upon commencement of the offering of the Shares under this Agreement (and
upon the recommencement of the offering of the Shares under this Agreement
following the termination of a suspension of sales hereunder), and at each
Representation Date, the Company will conduct a due diligence session, in form
and substance reasonably satisfactory to the Manager, which shall include
representatives of the management and the independent accountants of the
Company. The Company shall cooperate timely with any reasonable due diligence
request from or review conducted by the Manager or its agents from time to time
in connection with the transactions contemplated by this Agreement, including,
without limitation, providing information and available documents and access to
appropriate corporate officers and the Company’s agents during regular business
hours and at the Company’s principal offices, and timely furnishing or causing
to be furnished such certificates, letters and opinions from the Company, its
officers and its agents, as the Manager may reasonably request, to the extent
permitted by applicable law.

(p)    The Company consents to the Manager trading in the Common Stock for the
Manager’s own account and for the account of its clients at the same time as
sales of the Shares occur pursuant to this Agreement or pursuant to a Terms
Agreement.

(q)    The Company will disclose in its Annual Reports on Form 10-K and
Quarterly Reports on Form 10-Q, as applicable, the number of Shares sold through
the Agent under this Agreement, the Net Proceeds to the Company and the
compensation paid by the Company with respect to sales of Shares pursuant to
this Agreement during the relevant quarter.

(r)    If to the knowledge of the Company, the conditions set forth in
Section 6(a), 6(f) or 6(g) shall not be true and correct on the applicable
Settlement Date, the Company will promptly notify the Manager of any such
condition that is not true or correct.

(s)    Each acceptance by the Company of an offer to purchase the Shares
hereunder, and each execution and delivery by the Company of a Terms Agreement,
shall be deemed to be an affirmation to the Manager that the representations and
warranties of the Company contained in or made pursuant to this Agreement are
true and correct as of the date of such acceptance or of such Terms Agreement as
though made at and as of such date, and an undertaking that such representations
and warranties will be true and correct as of the Settlement Date for the Shares
relating to such acceptance or as of the Time of Delivery relating to such sale,
as the case may be, as though made at and as of such date (except that such
representations and warranties shall be deemed to relate to the Registration
Statement and the Prospectus as amended and supplemented relating to such
Shares).

(t)    The Company shall ensure that there are at all times sufficient shares of
Common Stock to provide for the issuance, free of any preemptive rights, out of
its authorized but unissued shares of Common Stock or shares of Common Stock
held in treasury, of the maximum aggregate number of Shares authorized for
issuance by the Board pursuant to the terms of this Agreement. The Company will
use its commercially reasonable efforts to cause the Shares to be listed for
trading on Nasdaq and to maintain such listing.

 

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(u)    During any period when the delivery of a prospectus relating to the
Shares is required (including in circumstances where such requirement may be
satisfied pursuant to Rule 172 or any similar rule) to be delivered under the
Securities Act, the Company will file all documents required to be filed with
the Commission pursuant to the Exchange Act within the time periods required by
the Exchange Act and the regulations thereunder.

(v)    The Company shall cooperate with Manager and use its reasonable efforts
to permit the Shares to be eligible for clearance and settlement through the
facilities of DTC.

(w)    The Company will apply the Net Proceeds from the sale of the Shares in
the manner set forth in the Prospectus.

(x)    The Company will file a prospectus supplement with the Commission under
the applicable paragraph of Rule 424(b) on such dates as the Securities Act
shall require, which prospectus supplement will set forth, within the relevant
period, the number of the Shares sold through the Manager as agent pursuant to
Section 3(a) of this Agreement in Continuous Offerings, the Net Proceeds to the
Company and the compensation paid by the Company with respect to such sales of
the Shares pursuant to Section 3(a) of this Agreement and deliver such number of
copies of each such prospectus supplement to Nasdaq as are required by such
exchange.

5.    Payment of Expenses.

(a)    The Company agrees to pay the costs and expenses incident to the
performance of its obligations under this Agreement, whether or not the
transactions contemplated hereby are consummated, including without limitation:
(i) the preparation, printing or reproduction and filing with the Commission of
the Registration Statement (including financial statements and exhibits
thereto), the Prospectus and each Issuer Free Writing Prospectus, and each
amendment or supplement to any of them; (ii) the printing (or reproduction) and
delivery (including postage, air freight charges and charges for counting and
packaging) of such copies of the Registration Statement, the Prospectus, and
each Issuer Free Writing Prospectus, and all amendments or supplements to any of
them, as may, in each case, be reasonably requested for use in connection with
the offering and sale of the Shares; (iii) the preparation, printing,
authentication, issuance and delivery of certificates for the Shares, including
any stamp or transfer taxes in connection with the original issuance and sale of
the Shares; (iv) the printing (or reproduction) and delivery of this Agreement,
any blue sky memorandum and all other agreements or documents printed (or
reproduced) and delivered in connection with the offering of the Shares; (v) the
registration of the Shares under the Exchange Act and the listing of the Shares
on Nasdaq; (vi) any registration or qualification of the Shares for offer and
sale under the securities or blue sky laws of the several states (including
filing fees and the reasonable fees and expenses of counsel for the Manager
relating to such registration and qualification);

 

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(vii) any filings required to be made with FINRA (including filing fees and the
reasonable fees and expenses of counsel for the Manager relating to such
filings); (viii) the transportation and other expenses incurred by or on behalf
of Company representatives in connection with presentations to prospective
purchasers of the Shares; (ix) the fees and expenses of the Company’s
accountants and the fees and expenses of counsel (including local and special
counsel) for the Company; (x) the reasonable documented out-of-pocket expenses
of the Manager, including the reasonable fees, disbursements and expenses of
counsel for the Manager in connection with this Agreement and the Registration
Statement and ongoing services in connection with the transactions contemplated
hereunder, including the fees set forth in clause (vii) above, payable upon the
execution of this Agreement, in an amount not to exceed $50,000; and (xi) all
other costs and expenses incident to the performance by the Company of its
obligations hereunder.

6.    Conditions to the Obligations of the Manager. The obligations of the
Manager under this Agreement and any Terms Agreement shall be subject to (i) the
accuracy of the representations and warranties on the part of the Company
contained herein as of the Execution Time, each Representation Date, and as of
each Applicable Time, Settlement Date and Time of Delivery, (ii) to the
performance by the Company of its obligations hereunder and (iii) the following
additional conditions:

(a)    The Prospectus, and any supplement thereto, required by Rule 424 to be
filed with the Commission have been filed in the manner and within the time
period required by Rule 424(b) with respect to any sale of Shares; each Interim
Prospectus Supplement shall have been filed in the manner required by Rule
424(b) within the time period required by Section 4(x) of this Agreement; any
other material required to be filed by the Company pursuant to Rule 433(d) under
the Securities Act, shall have been filed with the Commission within the
applicable time periods prescribed for such filings by Rule 433; and no stop
order suspending the effectiveness of the Registration Statement or any notice
objecting to its use shall have been issued and no proceedings for that purpose
shall have been instituted or threatened.

(b)     The Manager shall have received the opinions of Company Counsel required
to be delivered pursuant to Section 4(l) on or before the date on which such
delivery of such opinions are required pursuant to Section 4(l).

(c)    The Manager shall have received the opinion of IP Counsel or officer’s
certificate required to be delivered pursuant to Section 4(m) on or before each
date on which such delivery of such opinion or officer’s certificate is required
pursuant to Section 4(m).

 

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(d)    The Company shall have furnished or caused to be furnished to the
Manager, on every date specified in Section 4(k) of this Agreement, a
certificate of the Company, signed by the Chairman of the Board or the Chief
Executive Officer and the principal financial or accounting officer of the
Company, dated as of such date, to the effect that the signers of such
certificate have carefully examined the Registration Statement and the
Prospectus and any supplements or amendments thereto and this Agreement and
that:

(i)    the representations and warranties of the Company in this Agreement are
true and correct on and as of such date with the same effect as if made on such
date and the Company has complied with all the agreements and satisfied all the
conditions on its part to be performed or satisfied at or prior to such date;

(ii)    no stop order suspending the effectiveness of the Registration Statement
or any notice objecting to its use has been issued and no proceedings for that
purpose have been instituted or, to the Company’s knowledge, threatened; and

(iii)    since the date of the most recent financial statements included in the
Prospectus, there has been no material adverse effect on the condition
(financial or otherwise), business prospects, earnings, business or properties
of the Company and its subsidiaries, if any, taken as a whole, whether or not
arising from transactions in the ordinary course of business, except as set
forth in or contemplated in the Prospectus.

(e)     The Company shall have requested and caused the Accountants to have
furnished to the Manager, on every date specified in Section 4 (n) hereof,
letters (which may refer to letters previously delivered to the Manager), dated
as of such date, in form and substance reasonably satisfactory to the Manager,
confirming that they are independent accountants within the meaning of the
Securities Act and the Exchange Act and the respective applicable rules and
regulations adopted by the Commission thereunder and that they have performed a
review of any unaudited interim financial information of the Company included or
incorporated by reference in the Registration Statement and the Prospectus in
accordance with Statement on Auditing Standards No. 100.

(f)    Since the respective dates as of which information is disclosed in the
Registration Statement and the Prospectus, except as otherwise stated therein,
there shall not have been any change, or any development involving a prospective
change, in or affecting the condition (financial or otherwise), earnings,
business or properties of the Company and its subsidiaries, if any, taken as a
whole, whether or not arising from transactions in the ordinary course of
business, except as set forth in or contemplated in the Prospectus (exclusive of
any amendment or supplement thereto) the effect of which is, in the sole
judgment of the Manager, so material and adverse as to make it impractical or
inadvisable to proceed with the offering or delivery of the Shares as
contemplated by the Registration Statement (exclusive of any amendment thereof)
and the Prospectus (exclusive of any amendment or supplement thereto).

(g)    Between the Execution Time and the time of any sale of Shares through the
Manager, there shall not have been any decrease in the rating of any of the
Company’s debt securities by any “nationally recognized statistical rating
organization” (as defined for purposes of Rule 436 (g) under the Securities Act)
or any notice given of any intended or potential decrease in any such rating or
of a possible change in any such rating that does not indicate the direction of
the possible change.

 

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(h)    FINRA shall not have raised any objection with respect to the fairness
and reasonableness of the terms and arrangements under this Agreement.

(i)    The Shares shall have been listed and admitted and authorized for trading
on Nasdaq, and satisfactory evidence of such actions shall have been provided to
the Manager.

(j)    Prior to each Settlement Date and Time of Delivery, as applicable, the
Company shall have furnished to the Manager such further information,
certificates and documents as the Manager may reasonably request.

The documents required to be delivered by this Section 6 shall be delivered at
the office of Latham & Watkins LLP, counsel for the Manager, at 12670 High Bluff
Drive, San Diego, California 92130, on each such date as provided in this
Agreement.

7.    Indemnification and Contribution.

(a)    The Company agrees to indemnify and hold harmless the Manager, the
directors, officers, employees, affiliates and agents of the Manager and each
person who controls the Manager within the meaning of either the Securities Act
or the Exchange Act against any and all losses, claims, damages or liabilities,
joint or several, to which they or any of them may become subject under the
Securities Act, the Exchange Act or other Federal or state statutory law or
regulation, at common law or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of a material fact contained in
the registration statement for the registration of the Shares as originally
filed or in any amendment thereof, or in the Prospectus, or any Issuer Free
Writing Prospectus or in any amendment thereof or supplement thereto or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary in order to make the
statements therein not misleading, and agrees to reimburse each such indemnified
party, as incurred, for any documented legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the Company will not
be liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon any such untrue statement or alleged
untrue statement or omission or alleged omission made therein in reliance upon
and in conformity with written information furnished to the Company by the
Manager specifically for inclusion therein. This indemnity agreement will be in
addition to any liability that the Company may otherwise have. The Company
acknowledges that the last sentence of the first paragraph under the heading
“Plan of Distribution” and the paragraph under the heading “Plan of Distribution
– Other Relationships” in the Prospectus Supplement constitute the only
information furnished in writing by or on behalf of the Manager for inclusion in
the Prospectus Supplement, the Prospectus or any Issuer Free Writing Prospectus.

(b)    The Manager agrees to indemnify and hold harmless the Company, each of
its directors, each of its officers who signs the Registration Statement, and
each person who controls the Company within the meaning of either the Securities
Act or the Exchange Act,

 

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to the same extent as the foregoing indemnity from the Company to the Manager,
but only with reference to written information relating to the Manager furnished
to the Company by the Manager specifically for inclusion in the documents
referred to in the foregoing indemnity. This indemnity agreement will be in
addition to any liability which the Manager may otherwise have.

(c)    Promptly after receipt by an indemnified party under this Section 7 of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 7, notify the indemnifying party in writing of the commencement thereof;
but the failure so to notify the indemnifying party (i) will not relieve it from
liability under paragraph (a) or (b) above unless and to the extent it did not
otherwise learn of such action and such failure results in the forfeiture by the
indemnifying party of substantial rights and defenses and (ii) will not, in any
event, relieve the indemnifying party from any obligations to any indemnified
party other than the indemnification obligation provided in paragraph (a) or
(b) above. The indemnifying party shall be entitled to appoint counsel of the
indemnifying party’s choice at the indemnifying party’s expense to represent the
indemnified party in any action for which indemnification is sought (in which
case the indemnifying party shall not thereafter be responsible for the fees and
expenses of any separate counsel retained by the indemnified party or parties
except as set forth below); provided, however, that such counsel shall be
reasonably satisfactory to the indemnified party. Notwithstanding the
indemnifying party’s election to appoint counsel to represent the indemnified
party in an action, the indemnified party shall have the right to employ
separate counsel (including local counsel), and the indemnifying party shall
bear the reasonable fees, costs and expenses of such separate counsel if (i) the
use of counsel chosen by the indemnifying party to represent the indemnified
party would, based on the advice of counsel, present such counsel with a
conflict of interest, (ii) the actual or potential defendants in, or targets of,
any such action include both the indemnified party and the indemnifying party
and the indemnified party shall have reasonably concluded, based on the advice
of counsel, that there may be legal defenses available to it and/or other
indemnified parties which are different from or additional to those available to
the indemnifying party, (iii) the indemnifying party shall not have employed
counsel reasonably satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after notice of the institution of
such action or (iv) the indemnifying party shall authorize the indemnified party
to employ separate counsel at the expense of the indemnifying party. An
indemnifying party will not, without the prior written consent of the
indemnified parties (such consent not to be unreasonably withheld, conditioned
or delayed), settle or compromise or consent to the entry of any judgment with
respect to any pending or threatened claim, action, suit or proceeding in
respect of which indemnification or contribution may be sought hereunder
(whether or not the indemnified parties are actual or potential parties to such
claim or action) unless such settlement, compromise or consent: (i) includes an
unconditional release of each indemnified party from all liability arising out
of such claim, action, suit or proceeding and (ii) does not include an admission
of fault.

(d)    In the event that the indemnity provided in paragraph (a), (b) or (c) of
this Section 7 is unavailable to or insufficient to hold harmless an indemnified
party for any

 

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reason, the Company and the Manager agree to contribute to the aggregate losses,
claims, damages and liabilities (including legal or other expenses reasonably
incurred in connection with investigating or defending the same) (collectively
“Losses”) to which the Company and the Manager may be subject in such proportion
as is appropriate to reflect the relative benefits received by the Company on
the one hand and by the Manager on the other from the offering of the Shares. If
the allocation provided by the immediately preceding sentence is unavailable for
any reason, the Company and the Manager severally shall contribute in such
proportion as is appropriate to reflect not only such relative benefits but also
the relative fault of the Company on the one hand and of the Manager on the
other in connection with the statements or omissions which resulted in such
Losses as well as any other relevant equitable considerations. Benefits received
by the Company shall be deemed to be equal to the total net proceeds from the
offering (before deducting expenses) received by it, and benefits received by
the Manager shall be deemed to be equal to the total gross compensation from the
offering (before deducting expenses) received by it, in each case as determined
by this Agreement or any applicable Terms Agreement. Relative fault shall be
determined by reference to, among other things, whether any untrue or any
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information provided by the Company on the
one hand or the Manager on the other, the intent of the parties and their
relative knowledge, access to information and opportunity to correct or prevent
such untrue statement or omission. The Company and the Manager agree that it
would not be just and equitable if contribution were determined by pro rata
allocation or any other method of allocation which does not take account of the
equitable considerations referred to above. Notwithstanding the foregoing
provisions of this paragraph (d), in no event shall the Manager be required to
contribute any amount in excess of the amount of gross compensation (before
deducting expenses) received by the Manager under this Agreement. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. For purposes of this Section 7,
each person who controls the Manager within the meaning of either the Securities
Act or the Exchange Act and each director, officer, employee, affiliate and
agent of the Manager shall have the same rights to contribution as the Manager,
and each person who controls the Company within the meaning of either the
Securities Act or the Exchange Act, each officer of the Company who shall have
signed the Registration Statement and each director of the Company shall have
the same rights to contribution as the Company, subject in each case to the
applicable terms and conditions of this paragraph (d).

8.    Termination.

(a)    The Company shall have the right, by giving written notice as hereinafter
specified, to terminate the provisions of this Agreement relating to the
solicitation of offers to purchase the Shares in its sole discretion at any
time. Any such termination shall be without liability of any party to any other
party except that (i) if Shares have been sold through the Manager for the
Company, then Section 4(t) shall remain in full force and effect, (ii) with
respect to any sale of Shares through the Manager for the Company completed
prior to the Company giving written notice of termination, the obligations of
the Company, including in respect of compensation of the Manager, shall remain
in full force and effect notwithstanding the termination and (iii) the
provisions of Sections 2, 5, 7, 9, 10, 12 and 15 of this Agreement shall remain
in full force and effect notwithstanding such termination.

 

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(b)    The Manager shall have the right, by giving written notice as hereinafter
specified, to terminate the provisions of this Agreement relating to the
solicitation of offers to purchase the Shares in its sole discretion at any
time. Any such termination shall be without liability of any party to any other
party except that the provisions of Sections 2, 5, 7, 9, 10, 12 and 15 of this
Agreement shall remain in full force and effect notwithstanding such
termination.

(c)    This Agreement shall remain in full force and effect unless terminated
pursuant to Sections 8(a) or (b) above or otherwise by mutual agreement of the
parties; provided that any such termination by mutual agreement shall in all
cases be deemed to provide that Sections 2, 5, 7 and 9 shall remain in full
force and effect.

(d)    Any termination of this Agreement shall be effective on the date
specified in such notice of termination; provided that such termination shall
not be effective until the close of business on the date of receipt of such
notice by the Manager or the Company, as the case may be. If such termination
shall occur prior to the Settlement Date or Time of Delivery for any sale of the
Shares, such sale shall settle in accordance with the provisions of
Section 3(a)(vii) of this Agreement.

(e)    In the case of any purchase of Shares by the Manager pursuant to a Terms
Agreement, the obligations of the Manager pursuant to such Terms Agreement shall
be subject to termination, in the absolute discretion of the Manager, by notice
given to the Company prior to the Time of Delivery relating to such Shares, if
at any time prior to such delivery and payment (i) trading in the Company’s
Common Stock shall have been suspended by the Commission or Nasdaq or trading in
securities generally on the NYSE or Nasdaq shall have been suspended or limited
or minimum prices shall have been established on either of such exchanges,
(ii) a banking moratorium shall have been declared either by Federal or New York
State authorities or (iii) there shall have occurred any outbreak or escalation
of hostilities, declaration by the United States of a national emergency or war,
or other calamity or crisis the effect of which on financial markets is such as
to make it, in the sole judgment of the Manager, impractical or inadvisable to
proceed with the offering or delivery of the Shares as contemplated by the
Prospectus (exclusive of any amendment or supplement thereto).

9.    Representations and Indemnities to Survive. The respective agreements,
representations, warranties, indemnities and other statements of the Company or
its officers and of the Manager set forth in or made pursuant to this Agreement
will remain in full force and effect, regardless of any investigation made by
the Manager or the Company or any of the officers, directors, employees,
affiliates, agents or controlling persons referred to in Section 7 hereof, and
will survive delivery of and payment for the Shares.

 

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10.    Notices. All communications hereunder will be in writing and effective
only on receipt, and, if sent to the Manager, will be mailed, delivered or
telefaxed to the Citigroup Global Markets Inc. General Counsel (fax no.:
(646) 291-1469) and confirmed to the General Counsel, Citigroup Global Markets
Inc., at 388 Greenwich Street, New York, New York, 10013, Attention: General
Counsel; or, if sent to the Company, will be mailed or delivered to it at
Tocagen Inc., 4242 Campus Point Court, Suite 500, San Diego, California, 92121
attention of the Legal Department, with a copy sent via email to Karen Deschaine
Anderson, Cooley LLP, at kanderson@cooley.com.

11.    Successors. This Agreement will inure to the benefit of and be binding
upon the parties hereto and their respective successors and the officers,
directors, employees, agents and controlling persons referred to in Section 7
hereof, and no other person will have any right or obligation hereunder.

12.    No fiduciary duty. The Company hereby acknowledges that (a) the purchase
and sale of the Shares pursuant to this Agreement is an arm’s-length commercial
transaction between the Company, on the one hand, and the Manager and any
affiliate through which it may be acting, on the other, (b) the Manager is
acting solely as sales agent and/or principal in connection with the purchase
and sale of the Company’s securities and not as a fiduciary of the Company and
(c) the Company’s engagement of the Manager in connection with the offering and
the process leading up to the offering is as independent contractors and not in
any other capacity. Furthermore, the Company agrees that it is solely
responsible for making its own judgments in connection with the offering
(irrespective of whether the Manager has advised or is currently advising the
Company on related or other matters). The Company agrees that it will not claim
that the Manager has rendered advisory services of any nature or respect, or owe
an agency, fiduciary or similar duty to the Company, in connection with such
transaction or the process leading thereto.

13.    Jurisdiction. The Company agrees that any suit, action or proceeding
against the Company brought by the Manager, the directors, officers, employees,
affiliates and agents of the Manager, or by any person who controls the Manager,
arising out of or based upon this Agreement or the transactions contemplated
hereby may be instituted in any State or U.S. federal court in The City of New
York and County of New York, and waives any objection which it may now or
hereafter have to the laying of venue of any such proceeding, and irrevocably
submits to the non-exclusive jurisdiction of such courts in any suit, action or
proceeding. The Company hereby appoints the General Counsel of the Company as
its authorized agent (the “Authorized Agent”) upon whom process may be served in
any suit, action or proceeding arising out of or based upon this Agreement or
the transactions contemplated herein that may be instituted in any State or U.S.
federal court in The City of New York and County of New York, by the Manager,
the directors, officers, employees, affiliates and agents of the Manager, or by
any person who controls the Manager, and expressly accepts the non-exclusive
jurisdiction of any such court in respect of any such suit, action or
proceeding. The Company hereby represents and warrants that the Authorized Agent
has accepted such appointment and has agreed to act as said agent for service of
process, and the Company agrees to take any and all action, including the filing
of any and all documents that may be necessary to continue such appointment in
full force and effect as aforesaid. Service of process upon the Authorized Agent
shall be deemed, in every respect, effective service of process upon the
Company. Notwithstanding the foregoing, any action arising out of or based upon
this Agreement may be instituted by the Manager, the directors, officers,
employees, affiliates and agents of the Manager, or by any person who controls
the Manager, in any court of competent jurisdiction in Delaware.

 

33

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14.    Integration. This Agreement and any Terms Agreement supersede all prior
agreements and understandings (whether written or oral) between the Company and
the Manager with respect to the subject matter hereof. For the avoidance of
doubt, neither this Agreement nor any Terms Agreement will supersede, terminate
or otherwise relieve either party of its obligations under any non-disclosure,
confidentiality or similar agreement between the parties.

15.    Applicable Law. This Agreement and any Terms Agreement will be governed
by and construed in accordance with the laws of the State of New York applicable
to contracts made and to be performed within the State of New York.

16.    Waiver of Jury Trial. The Company 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, any Terms
Agreement or the transactions contemplated hereby or thereby.

17.    Counterparts. This Agreement and any Terms Agreement may be signed in one
or more counterparts, each of which shall constitute an original and all of
which together shall constitute one and the same agreement.

18.    Headings. The section headings used in this Agreement and any Terms
Agreement are for convenience only and shall not affect the construction hereof.

19.    Definitions. The terms that follow, when used in this Agreement and any
Terms Agreement, shall have the meanings indicated.

“Applicable Time” shall mean, with respect to any Shares, the time of sale of
such Shares pursuant to this Agreement or any relevant Terms Agreement.

“Base Prospectus” shall mean the base prospectus referred to in Section 2(a)
above contained in the Registration Statement at the Execution Time.

“Business Day” shall mean any day other than a Saturday, a Sunday or a legal
holiday or a day on which banking institutions or trust companies are authorized
or obligated by law to remain closed in New York City.

“Commission” shall mean the Securities and Exchange Commission.

“Effective Date” shall mean each date and time that the Registration Statement,
any post-effective amendment or amendments thereto and any Rule 462(b)
Registration Statement became or becomes effective.

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.

 

34

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“Execution Time” shall mean the date and time that this Agreement is executed
and delivered by the parties hereto.

“Free Writing Prospectus” shall mean a free writing prospectus, as defined in
Rule 405.

“Interim Prospectus Supplement” shall mean the prospectus supplement relating to
the Shares prepared and filed pursuant to Rule 424(b) from time to time as
provided by Section 4(x) of this Agreement.

“Issuer Free Writing Prospectus” shall mean an issuer free writing prospectus,
as defined in Rule 433.

“Prospectus” shall mean the Base Prospectus, as supplemented by the Prospectus
Supplement and the most recently filed Interim Prospectus Supplement (if any).

“Prospectus Supplement” shall mean the most recent prospectus supplement
relating to the Shares that was first filed pursuant to Rule 424 (b) at or prior
to the Execution Time.

“Registration Statement” shall mean the registration statement referred to in
Section 2(a) above, including exhibits and financial statements and any
prospectus supplement relating to the Shares that is filed with the Commission
pursuant to Rule 424(b) and deemed part of such registration statement pursuant
to Rule 430B, as amended on each Effective Date and, in the event any
post-effective amendment thereto or any Rule 462(b) Registration Statement
becomes effective, shall also mean such registration statement as so amended or
such Rule 462(b) Registration Statement, as the case may be.

“Rule 153”, “Rule 158”, “Rule 164”, “Rule 172”, “Rule 405”, “Rule 415”,
“Rule 424”, “Rule 430B”, “Rule 433” and “Rule 462” refer to such rules under the
Securities Act.

“Rule 462(b) Registration Statement” shall mean a registration statement and any
amendments thereto filed pursuant to Rule 462(b) relating to the offering
covered by the registration statement referred to in Section 1(a) hereof.

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

 

35

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If the foregoing is in accordance with your understanding of our agreement,
please sign and return to us the enclosed duplicate hereof, whereupon this
letter and your acceptance shall represent a binding agreement among the Company
and the Manager.

 

Very truly yours,

Tocagen Inc.

By:   /s/ Mark G. Foletta  

Name: Mark G. Foletta

 

Title: EVP; CFO

 

The foregoing Agreement is

hereby confirmed and accepted

as of the date first written above.

By:

 

Citigroup Global Markets Inc.

By:   /s/ Bradley B. Wolff  

Name: Bradley B. Wolff

 

Title: Managing Director - Healthcare Group

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SCHEDULE I

Free Writing Prospectuses

None.

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[Form of Terms Agreement]    ANNEX I

TOCAGEN INC.

Common Stock

TERMS AGREEMENT

                     , 20    

Citigroup Global Markets Inc.

388 Greenwich Street

New York, New York, 10013

Dear Sirs:

Tocagen Inc. (the “Company”) proposes, subject to the terms and conditions
stated herein and in the Equity Distribution Agreement, dated November 21, 2018
(the “Equity Distribution Agreement”), between the Company and Citigroup Global
Markets Inc., to issue and sell to Citigroup Global Markets Inc. the securities
specified in the Schedule I hereto (the “Purchased Shares”).

Each of the provisions of the Equity Distribution Agreement not specifically
related to the solicitation by Citigroup Global Markets Inc., as agent of the
Company, of offers to purchase securities is incorporated herein by reference in
its entirety, and shall be deemed to be part of this Terms Agreement to the same
extent as if such provisions had been set forth in full herein. Each of the
representations and warranties set forth therein shall be deemed to have been
made at and as of the date of this Terms Agreement and the Time of Delivery,
except that each representation and warranty in Section 2 of the Equity
Distribution Agreement which makes reference to the Prospectus (as therein
defined) shall be deemed to be a representation and warranty as of the date of
the Equity Distribution Agreement in relation to the Prospectus, and also a
representation and warranty as of the date of this Terms Agreement and the Time
of Delivery in relation to the Prospectus as amended and supplemented to relate
to the Purchased Shares.

An amendment to the Registration Statement (as defined in the Equity
Distribution Agreement), or a supplement to the Prospectus, as the case may be,
relating to the Purchased Shares, in the form heretofore delivered to the
Manager is now proposed to be filed with the Securities and Exchange Commission.

Subject to the terms and conditions set forth herein and in the Equity
Distribution Agreement which are incorporated herein by reference, the Company
agrees to issue and sell to Citigroup Global Markets Inc. and the latter agrees
to purchase from the Company the number of shares of the Purchased Shares at the
time and place and at the purchase price set forth in the Schedule I hereto.

[Signatures appear on next page]

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If the foregoing is in accordance with your understanding, please sign and
return to us a counterpart hereof, whereupon this Terms Agreement, including
those provisions of the Equity Distribution Agreement incorporated herein by
reference, shall constitute a binding agreement between the Manager and the
Company.

 

Tocagen Inc.

By:      

Name:

 

Title:

ACCEPTED as of the date

first written above.

 

    Citigroup Global Markets Inc.

    By:      

Name:

 

Title:

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

Title of Purchased Shares

Common Stock, par value $0.001 per share

Number of Shares of Purchased Shares:

[Price to Public:]

Purchase Price by Citigroup Global Markets Inc.:

Method of and Specified Funds for Payment of Purchase Price:

By wire transfer to a bank account specified by the Company in same day funds.

Method of Delivery:

Free delivery of the Shares to the Manager’s account at The Depository Trust
Company in return for payment of the purchase price.

Time of Delivery:

Closing Location:

Documents to be Delivered:

The following documents referred to in the Equity Distribution Agreement shall
have been delivered as a condition to the closing at the Time of Delivery:

(1) The opinions referred to in Section 4(l).

(2) The opinion referred to in Section 4(m).

(3) The accountants’ letter referred to in Section 4(n).

(4) The officers’ certificate referred to in Section 4(k).

(5) Such other documents as the Manager shall reasonably request.