Exhibit 10.1

 

COMMON STOCK PURCHASE AGREEMENT

 

Dated as of December 20, 2010

 

by and between

 

PONIARD PHARMACEUTICALS, INC.

 

and

 

SMALL CAP BIOTECH VALUE, LTD.

 

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TABLE OF CONTENTS

 

 

 

 

Page

ARTICLE I PURCHASE AND SALE OF COMMON STOCK

1

Section 1.1

 

Purchase and Sale of Stock

1

Section 1.2

 

Effective Date; Settlement Dates

1

Section 1.3

 

Reservation of Common Stock

2

Section 1.4

 

Current Report; Prospectus Supplement

2

 

 

 

 

ARTICLE II FIXED REQUEST TERMS; OPTIONAL AMOUNT

3

Section 2.1

 

Fixed Request Notice

3

Section 2.2

 

Fixed Requests

3

Section 2.3

 

Share Calculation

4

Section 2.4

 

Limitation of Fixed Requests

5

Section 2.5

 

Reduction of Commitment

5

Section 2.6

 

Below Threshold Price

5

Section 2.7

 

Settlement

5

Section 2.8

 

Reduction of Pricing Period

5

Section 2.9

 

Optional Amount

7

Section 2.10

 

Calculation of Optional Amount Shares

7

Section 2.11

 

Exercise of Optional Amount

7

Section 2.12

 

Aggregate Limit

7

Section 2.13

 

Commitment Shares

9

Section 2.14

 

Market Regulation

9

 

 

 

 

ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE INVESTOR

9

Section 3.1

 

Organization and Standing of the Investor

9

Section 3.2

 

Authorization and Power

10

Section 3.3

 

No Conflicts

10

Section 3.4

 

Information

10

Section 3.5

 

Status of Investor

11

 

 

 

 

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY

11

Section 4.1

 

Organization, Good Standing and Power

11

Section 4.2

 

Authorization, Enforcement

11

Section 4.3

 

Capitalization

11

Section 4.4

 

Issuance of Securities

12

Section 4.5

 

No Conflicts

12

Section 4.6

 

Commission Documents, Financial Statements

13

Section 4.7

 

Subsidiaries

14

Section 4.8

 

No Material Adverse Effect

14

Section 4.9

 

Indebtedness

14

Section 4.10

 

Title To Assets

15

Section 4.11

 

Actions Pending

15

Section 4.12

 

Compliance With Law

15

 

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Section 4.13

 

Certain Fees

15

Section 4.14

 

Operation of Business

16

Section 4.15

 

Environmental Compliance

18

Section 4.16

 

Material Agreements

18

Section 4.17

 

Transactions With Affiliates

19

Section 4.18

 

Securities Act

19

Section 4.19

 

Employees

21

Section 4.20

 

Use of Proceeds

21

Section 4.21

 

Investment Company Act Status

21

Section 4.22

 

ERISA

21

Section 4.23

 

Taxes

22

Section 4.24

 

Insurance

22

Section 4.25

 

Acknowledgement Regarding Investor’s Acquisition of Securities

22

 

 

 

 

ARTICLE V COVENANTS

22

Section 5.1

 

Securities Compliance; FINRA Filing

22

Section 5.2

 

Registration and Listing

24

Section 5.3

 

Compliance with Laws

24

Section 5.4

 

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

24

Section 5.5

 

Limitations on Holdings and Issuances

25

Section 5.6

 

Other Agreements and Other Financings

25

Section 5.7

 

Stop Orders

27

Section 5.8

 

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

28

Section 5.9

 

Prospectus Delivery

29

Section 5.10

 

Selling Restrictions

29

Section 5.11

 

Effective Registration Statement

30

Section 5.12

 

Non-Public Information

30

Section 5.13

 

Broker/Dealer

30

Section 5.14

 

Disclosure Schedule

30

 

 

 

 

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

31

Section 6.1

 

Issuance of Commitment Shares; Opinion of Counsel; Certificate

31

Section 6.2

 

Conditions Precedent to the Obligation of the Company

31

Section 6.3

 

Conditions Precedent to the Obligation of the Investor

33

 

 

 

 

ARTICLE VII TERMINATION

35

Section 7.1

 

Term, Termination by Mutual Consent

35

Section 7.2

 

Other Termination

36

Section 7.3

 

Effect of Termination

37

 

 

 

 

ARTICLE VIII INDEMNIFICATION

38

Section 8.1

 

General Indemnity

38

Section 8.2

 

Indemnification Procedures

39

 

 

 

 

ARTICLE IX MISCELLANEOUS

41

 

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Section 9.1

 

Fees and Expenses

41

Section 9.2

 

Specific Enforcement, Consent to Jurisdiction, Waiver of Jury Trial

41

Section 9.3

 

Entire Agreement; Amendment

42

Section 9.4

 

Notices

42

Section 9.5

 

Waivers

43

Section 9.6

 

Headings; Construction

43

Section 9.7

 

Successors and Assigns

44

Section 9.8

 

Governing Law

44

Section 9.9

 

Survival

44

Section 9.10

 

Counterparts

44

Section 9.11

 

Publicity

45

Section 9.12

 

Severability

45

Section 9.13

 

No Third Party Beneficiaries

45

Section 9.14

 

Further Assurances

45

 

Annex A.                                             Definitions

 

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COMMON STOCK PURCHASE AGREEMENT

 

This COMMON STOCK PURCHASE AGREEMENT, made and entered into on this  20th day of
December 2010 (this “Agreement”), by and between Small Cap Biotech Value, Ltd.,
a business company incorporated under the laws of the British Virgin Islands
(the “Investor”), and Poniard Pharmaceuticals, Inc., a corporation organized and
existing under the laws of the State of Washington (the “Company”). Capitalized
terms used but not defined herein shall have the meanings ascribed to such terms
in Annex A hereto.

 

RECITALS

 

WHEREAS, the parties desire that, upon the terms and subject to the conditions
contained herein, the Company may issue and sell to the Investor and the
Investor shall thereupon purchase from the Company up to $10,000,000 of newly
issued shares of the Company’s common stock, $0.02 par value (“Common Stock”),
subject, in all cases, to the Trading Market Limit (except as expressly provided
in Section 2.14);

 

WHEREAS, in partial consideration for the Investor’s execution and delivery of
this Agreement, the Company is concurrently causing its transfer agent to issue
to the Investor the Commitment Shares in accordance with the terms and subject
to the conditions of this Agreement; and

 

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

 

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

 

ARTICLE I
PURCHASE AND SALE OF COMMON STOCK

 

Section 1.1                                   Purchase and Sale of Stock.  Upon
the terms and subject to the conditions of this Agreement, during the Investment
Period the Company in its discretion may issue and sell to the Investor up to
$10,000,000 (the “Total Commitment”) of duly authorized, validly issued, fully
paid and non-assessable shares of Common Stock (subject in all cases to the
Trading Market Limit (except as expressly provided in Section 2.14), the
“Aggregate Limit”), by (i) the delivery to the Investor of not more than 24
separate Fixed Request Notices (unless the Investor and the Company mutually
agree that a different number of Fixed Request Notices may be delivered) as
provided in Article II hereof and (ii) the exercise by the Investor of Optional
Amounts, which the Company may in its discretion grant to the Investor and which
may be exercised by the Investor, in whole or in part, as provided in Article II
hereof. The aggregate of all Fixed Request Amounts and Optional Amount Dollar
Amounts shall not exceed the Aggregate Limit.

 

Section 1.2                                   Effective Date; Settlement Dates.
This Agreement shall become effective and binding upon the payment of the fees
required to be paid on or prior to the Effective Date pursuant to Section 9.1,
the delivery of irrevocable instructions to issue the

 

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Commitment Shares to the Investor or its designees as provided in Sections 2.13
and 6.1, the delivery of counterpart signature pages of this Agreement executed
by each of the parties hereto, and the delivery of all other documents,
instruments and writings required to be delivered on the Effective Date, in each
case as provided in Section 6.1 hereof, to the offices of Greenberg Traurig,
LLP, 200 Park Avenue, New York, New York 10166, at 5:00 p.m., New York time, on
the Effective Date.  In consideration of and in express reliance upon the
representations, warranties and covenants, and otherwise upon the terms and
subject to the conditions, of this Agreement, from and after the Effective Date
and during the Investment Period (i) the Company shall issue and sell to the
Investor, and the Investor agrees to purchase from the Company, the Shares in
respect of each Fixed Request and (ii) the Investor may in its discretion elect
to purchase Shares in respect of each Optional Amount.  The issuance and sale of
Shares to the Investor pursuant to any Fixed Request or Optional Amount shall
occur on the applicable Settlement Date in accordance with Sections 2.7 and 2.9
(or on such Trading Day in accordance with Section 2.8, as applicable), provided
in each case that all of the conditions precedent thereto set forth in
Article VI theretofore shall have been fulfilled or (to the extent permitted by
applicable law) waived.

 

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

 

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

 

2

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ARTICLE II
FIXED REQUEST TERMS; OPTIONAL AMOUNT

 

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

 

Section 2.1                                   Fixed Request Notice.  The Company
may, from time to time in its sole discretion, no later than 9:30 a.m. (New York
time) on the second Trading Day immediately preceding the first Trading Day of
the Pricing Period, provide to the Investor a Fixed Request notice,
substantially in the form attached hereto as Exhibit A (the “Fixed Request
Notice”), which Fixed Request Notice shall become effective at 9:30 a.m. (New
York time) on the first Trading Day of the Pricing Period specified in the Fixed
Request Notice. The Fixed Request Notice shall specify the Fixed Amount
Requested, establish the Threshold Price for such Fixed Request, designate the
first and last Trading Day of the Pricing Period and specify the Optional
Amount, if any, that the Company elects to grant to the Investor during the
Pricing Period and the applicable Threshold Price for such Optional Amount (the
“Optional Amount Threshold Price”). The Threshold Price and the Optional Amount
Threshold Price established by the Company in a Fixed Request Notice may be the
same or different, in the Company’s sole discretion. Upon the terms and subject
to the conditions of this Agreement, the Investor is obligated to accept each
Fixed Request Notice prepared and delivered in accordance with the provisions of
this Agreement.

 

Section 2.2                                   Fixed Requests.  From time to time
during the Investment Period, the Company may in its sole discretion deliver to
the Investor a Fixed Request Notice for a specified Fixed Amount Requested, and
the applicable discount price (the “Discount Price”) shall be determined, in
accordance with the price and share amount parameters as set forth below or such
other parameters mutually agreed upon by the Investor and the Company, and upon
the terms and subject to the conditions of this Agreement, the Investor shall
purchase from the Company the Shares subject to such Fixed Request Notice at the
Discount Price; provided, however, that (i) if an ex-dividend date is
established by the Trading Market in respect of the Common Stock on or between
the first Trading Day of the applicable Pricing Period and the applicable
Settlement Date, the Discount Price shall be reduced by the per share dividend
amount and (ii) unless the parties otherwise mutually agree, the Company may not
deliver any single Fixed Request Notice for a Fixed Amount Requested in excess
of the lesser of (a) the amount in the applicable Fixed Amount Requested column
below and (b) 2.5% of the Market Capitalization:

 

Threshold Price

 

Fixed Amount Requested

 

Discount Price

 

 

 

 

 

Equal to or greater than $2.00

 

Not to exceed $2,500,000

 

94.00% of the VWAP

 

 

 

 

 

Equal to or greater than $1.50 and less than $2.00

 

Not to exceed $1,875,000

 

93.75% of the VWAP

 

 

 

 

 

Equal to or greater than $1.00 and less than $1.50

 

Not to exceed $1,250,000

 

93.50% of the VWAP

 

 

 

 

 

Equal to or greater than $0.90 and less than $1.00

 

Not to exceed $1,125,000

 

93.25% of the VWAP

 

 

 

 

 

Equal to or greater than $0.80 and less than $0.90

 

Not to exceed $1,000,000

 

93.00% of the VWAP

 

3

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Equal to or greater than $0.70 and less than $0.80

 

Not to exceed $875,000

 

93.00% of the VWAP

 

 

 

 

 

Equal to or greater than $0.60 and less than $0.70

 

Not to exceed $750,000

 

93.00% of the VWAP

 

 

 

 

 

Equal to or greater than $0.50 and less than $0.60

 

Not to exceed $625,000

 

93.00% of the VWAP

 

 

 

 

 

Equal to or greater than $0.40 and less than $0.50

 

Not to exceed $500,000

 

93.00% of the VWAP

 

 

 

 

 

Equal to or greater than $0.30 and less than $0.40

 

Not to exceed $375,000

 

93.00% of the VWAP

 

 

 

 

 

Equal to or greater than $0.20 and less than $0.30

 

Not to exceed $250,000

 

93.00% of the VWAP

 

Anything to the contrary in this Agreement notwithstanding, unless otherwise
mutually agreed upon by the Investor and the Company, at no time shall the
Investor be required to purchase more than $2,500,000 worth of Common Stock in
respect of any Pricing Period (not including Common Stock subject to any
Optional Amount).  The date on which the Company delivers any Fixed Request
Notice in accordance with this Section 2.2 hereinafter shall be referred to as a
“Fixed Request Exercise Date”.

 

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

 

N =             (A x B)/C, where:

 

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

 

A =            0.125 (the “Multiplier”), provided, however, that if the Company
and the Investor mutually agree prior to the commencement of a Pricing Period
that the number of consecutive Trading Days constituting a Pricing Period shall
be less than eight (8), then the Multiplier correspondingly shall be increased
to equal the decimal equivalent (in 10-millionths) of a fraction, the numerator
of which is one and the denominator of which equals the number of Trading Days
in the reduced Pricing Period (it being hereby acknowledged and agreed that this
proviso shall not apply to any unilateral determination by the Company to reduce
a Pricing Period, but rather, Section 2.8 hereof shall apply),

 

B =              the total Fixed Amount Requested, and

 

C =              the applicable Discount Price.

 

4

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

 

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

 

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

 

Section 2.7                                   Settlement.  The payment for,
against simultaneous delivery of, Shares in respect of each Fixed Request shall
be settled on the second Trading Day next following the last Trading Day of each
Pricing Period, or on such earlier date as the parties may mutually agree (the
“Settlement Date”). On each Settlement Date, the Company shall, or shall cause
its transfer agent to, electronically transfer the Shares purchased by the
Investor by crediting the Investor’s or its designees’ account at DTC through
its Deposit/Withdrawal at Custodian (DWAC) system, which Shares shall be freely
tradable and transferable and without restriction on resale, against
simultaneous payment therefor to the Company’s designated account by wire
transfer of immediately available funds; provided that if the Shares are
received by the Investor later than 1:00 p.m. (New York time), payment therefor
shall be made with next day funds. As set forth in Section 9.1(ii), a failure by
the Company to deliver such Shares shall result in the payment of partial
damages by the Company to the Investor.

 

Section 2.8                                   Reduction of Pricing Period.  If
during a Pricing Period the Company elects to reduce the number of Trading Days
in such Pricing Period (and thereby amend its previously delivered Fixed Request
Notice), the Company shall so notify the Investor before

 

5

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9:00 a.m. (New York time) on any Trading Day during a Pricing Period (a
“Reduction Notice”) and the last Trading Day of such Pricing Period shall be the
Trading Day immediately preceding the Trading Day on which the Investor received
such Reduction Notice; provided, however, that if the Company delivers the
Reduction Notice later than 9:00 a.m. (New York time) on a Trading Day during a
Pricing Period, then the last Trading Day of such Pricing Period instead shall
be the Trading Day on which the Investor received such Reduction Notice.

 

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

 

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

 

D =             (A/B) x (B – C), where:

 

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

 

A =            the Fixed Amount Requested,

 

B =              8 or, for purposes of this Section 2.8, such lesser number of
Trading Days as the parties may mutually agree to, and

 

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

 

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

 

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

 

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

 

6

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Section 2.9                                   Optional Amount.  With respect to
any Pricing Period, the Company may in its sole discretion grant to the Investor
the right to exercise, from time to time during the Pricing Period (but not more
than once on any Trading Day), all or any portion of an Optional Amount.  The
maximum Optional Amount Dollar Amount and the Optional Amount Threshold Price
shall be set forth in the Fixed Request Notice.  If an ex-dividend date is
established by the Trading Market in respect of the Common Stock on or between
the first Trading Day of the applicable Pricing Period and the applicable
Settlement Date, the applicable exercise price in respect of the Optional Amount
shall be reduced by the per share dividend amount.  Each daily Optional Amount
exercise shall be aggregated during the Pricing Period and settled on the next
Settlement Date.  The Optional Amount Threshold Price designated by the Company
in its Fixed Request Notice shall apply to each Optional Amount exercised during
the applicable Pricing Period.

 

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

 

O =             A/(B x C), where:

 

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

 

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

 

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

 

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

 

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

 

Section 2.12                            Aggregate Limit. Notwithstanding
anything to the contrary contained in this Agreement, in no event may the
Company issue a Fixed Request Notice or grant an Optional Amount to the extent
that the sale of Shares pursuant thereto and pursuant to all prior Fixed Request
Notices and Optional Amounts issued hereunder, and as partial damages pursuant
to Section 9.1(ii), would cause the Company to sell or the Investor to purchase
Shares which in the aggregate are in excess of the Aggregate Limit.  If the
Company issues a Fixed Request Notice

 

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or Optional Amount that otherwise would permit the Investor to purchase shares
of Common Stock which would cause the aggregate purchases by Investor hereunder
to exceed the Aggregate Limit, such Fixed Request Notice or Optional Amount
shall be void ab initio to the extent of the amount by which the dollar value of
shares or number of shares, as the case may be, of Common Stock otherwise
issuable pursuant to such Fixed Request Notice or Optional Amount together with
the dollar value of shares or number of shares, as the case may be, of all other
Common Stock purchased by the Investor pursuant hereto, or issued as partial
damages pursuant to Section 9.1(ii), would exceed the Aggregate Limit.  The
Company hereby represents, warrants and covenants that neither it nor any of its
Subsidiaries (i) has effected any transaction or series of transactions, (ii) is
a party to any pending transaction or series of transactions or (iii) shall
enter into any contract, agreement, agreement-in-principle, arrangement or
understanding with respect to, or shall effect, any Other Financing which, in
any of such cases, may be aggregated with the transactions contemplated by this
Agreement for purposes of determining whether approval of the Company’s
stockholders is required under any bylaw, listed securities maintenance
standards or other rules of the Trading Market; provided, however, that the
Company shall be permitted to take any action referred to in clause (iii) above
if (a) the Company has timely provided the Investor with an Integration Notice
as provided in Section 5.6(ii) hereof and (b) unless the Investor has previously
terminated this Agreement pursuant to Section 7.2, the Company obtains any
requisite stockholder approval which may be required for the Company to
consummate such Other Financing described in such Integration Notice.

 

At the Company’s sole discretion, and effective automatically upon delivery of
notice by the Company to the Investor, this Agreement may be amended by the
Company from time to time to reduce the Aggregate Limit by a specified dollar
amount and/or number of shares of Common Stock as shall be determined by the
Company in its sole discretion; provided, however, that any such amendment of
this Agreement (and any such purported amendment) shall be void and of no force
and effect if the effect thereof would restrict, materially delay, conflict with
or impair the ability or right of the Company to perform its obligations under
this Agreement, including, without limitation, the obligation of the Company to
deliver the Commitment Shares to the Investor in accordance with the terms of
Section 2.13 and Section 6.1 of this Agreement, and the obligation of the
Company to deliver the Shares to the Investor in respect of a previously
delivered Fixed Request or Optional Amount on the applicable Settlement Date. 
In the event the Company shall have elected to reduce the Aggregate Limit as
provided in the immediately preceding sentence, at the Company’s sole
discretion, and effective automatically upon delivery of notice by the Company
to the Investor, the Company may subsequently amend this Agreement to increase
the Aggregate Limit up to $10,000,000, subject in all cases to the Trading
Market Limit (except as expressly provided in Section 2.14); provided, however,
that in no event shall the Company be entitled to issue Fixed Requests and grant
Optional Amounts during the remainder of the Investment Period for an aggregate
amount greater than the amount obtained by subtracting (x) the aggregate of all
Fixed Request Amounts and Optional Amount Dollar Amounts (including any amounts
paid as partial damages pursuant to Section 9.1(ii) hereunder) covered by all
Fixed Requests and Optional Amounts theretofore issued or granted by the Company
in respect of which a settlement has occurred pursuant to Section 2.7 from
(y) $10,000,000, subject in all cases to the Trading Market Limit (except as
expressly provided in Section 2.14).

 

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Section 2.13                            Commitment Shares. In consideration for
the Investor’s execution and delivery of this Agreement, concurrently with the
execution and delivery of this Agreement on the Effective Date, the Company
shall deliver irrevocable instructions to its transfer agent to electronically
transfer the Commitment Shares to the Investor, not later than 4:00 p.m. (New
York time) on the second Trading Day immediately following the Effective Date,
by crediting the Investor’s or its designees’ account at DTC through its
Deposit/Withdrawal at Custodian (DWAC) system, which Commitment Shares shall be
issued pursuant to the Registration Statement and without any restriction on
resale, provided that the Investor hereby agrees that it shall not resell or
transfer such Commitment Shares for a period of 90 days immediately following
the Effective Date, except for any transfer to an Affiliate of the Investor. For
the avoidance of doubt, all of the Commitment Shares shall be fully earned as of
the Effective Date, regardless of whether any Fixed Requests are issued by the
Company or settled hereunder.

 

Section 2.14                            Market Regulation. Notwithstanding
anything in this Agreement to the contrary, the Trading Market Limit shall not
be applicable for any purposes of this Agreement or the transactions
contemplated hereby, solely to the extent (and only for so long as) the Average
Discount Price shall equal or exceed the Base Price (it being hereby
acknowledged and agreed that the Trading Market Limit shall be applicable for
all purposes of this Agreement and the transactions contemplated hereby at all
other times during the term of this Agreement); provided, however, that the
Company shall not issue any shares of Common Stock under this Agreement if such
issuance would otherwise breach the Company’s obligations under the rules and
regulations f the Trading Market. “Base Price” shall mean a price per Share
equal to the sum of (i) the Signing Market Price and (ii) $0.011, subject to
(a) upward adjustment (by such amount to be mutually agreed by the Company and
the Investor consistent with the rules and regulations of the Trading Market) in
the event any shares of Common Stock are issued by the Company as partial
damages pursuant to Section 9.1(ii) and (b) adjustment for any stock splits,
stock combinations, stock dividends, recapitalizations and other similar
transactions that occur on or after the date of this Agreement. “Signing Market
Price” shall mean $0.480, representing the consolidated closing bid price of the
Common Stock as reported on the Trading Market on the Effective Date. The
Company hereby represents and warrants to the Investor that the book value per
share of Common Stock on the Effective Date is less than the Signing Market
Price. “Average Discount Price” shall mean a price per Share (rounded to the
nearest tenth of a cent) equal to the quotient obtained by dividing (i) the
total aggregate gross purchase price paid by the Investor for all Shares
purchased pursuant to all Fixed Requests and Optional Amounts under this
Agreement, by (ii) the total aggregate number of Shares issued pursuant to all
Fixed Requests and Optional Amounts under this Agreement. The provisions of this
Section 2.14 shall be implemented in a manner otherwise than in strict
conformity with the terms of this Section 2.14, only if necessary to ensure
compliance with the rules and regulations of the Trading Market.

 

ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE INVESTOR

 

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

 

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

 

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

 

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

 

Section 3.4                                   Information.  All materials
relating to the business, financial condition, management and operations of the
Company and materials relating to the offer and sale of the Securities which
have been requested by the Investor have been furnished or otherwise made
available to the Investor or its advisors (subject to Section 5.12 of this
Agreement).  The Investor and its advisors have been afforded the opportunity to
ask questions of representatives of the Company.  The Investor has sought such
accounting, legal and tax advice as it has considered necessary to make an
informed investment decision with respect to its acquisition of the Securities. 
The Investor understands that it (and not the Company) shall be responsible for
its own tax liabilities that may arise as a result of this investment or the
transactions contemplated by this Agreement.

 

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Section 3.5                                   Status of Investor. The Investor
is not an “affiliate” (as such term is defined under Rule 144(a)(1) promulgated
under the Securities Act) of Azimuth Opportunity Ltd., an international business
company incorporated under the laws of the British Virgin Islands, or Commerce
Court Small Cap Value Fund, Ltd., a business company incorporated under the laws
of the British Virgin Islands.

 

ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

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

 

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

 

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

 

Section 4.3                                   Capitalization.  The authorized
capital stock of the Company and the shares thereof issued and outstanding are
as set forth in the Commission Documents as of the dates reflected therein.  All
of the outstanding shares of Common Stock have been duly authorized and validly
issued, and are fully paid and nonassessable.  Except as set forth in the
Commission Documents, as of the Effective Date, no shares of Common Stock were
entitled to preemptive rights or registration rights and there were no
outstanding options, warrants, scrip, rights to subscribe to, call or
commitments of any character whatsoever relating to, or securities or rights
convertible into or exchangeable for, any shares of capital stock of the
Company, other than those issued or granted in the ordinary course of business.
Except as set forth in the Commission Documents, as of the Effective Date, there
were no contracts, commitments,

 

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understandings, or arrangements by which the Company is or may become bound to
issue additional shares of the capital stock of the Company or options,
securities or rights convertible into or exchangeable for any shares of capital
stock of the Company. Except for customary transfer restrictions contained in
agreements entered into by the Company to sell restricted securities or as set
forth in the Commission Documents, as of the Effective Date, the Company was not
a party to, and it had no knowledge of, any agreement restricting the voting or
transfer of any shares of the capital stock of the Company. Except as set forth
in the Commission Documents, the offer and sale of all capital stock,
convertible or exchangeable securities, rights, warrants or options of the
Company issued prior to the Effective Date complied with all applicable federal
and state securities laws, and no stockholder has any right of rescission or
damages or any “put” or similar right with respect thereto that would have a
Material Adverse Effect. The Company has furnished or made available to the
Investor via the Commission’s Electronic Data Gathering, Analysis and Retrieval
System (“EDGAR”) true and correct copies of the Company’s Articles of
Incorporation as in effect on the Effective Date (the “Charter”), and the
Company’s Bylaws as in effect on the Effective Date (the “Bylaws”).

 

Section 4.4                                   Issuance of Securities.  The
Commitment Shares have been, and the Shares to be issued under this Agreement
have been or will be (prior to the delivery of any Fixed Request Notice to the
Investor hereunder), duly authorized by all necessary corporate action on the
part of the Company. The Commitment Shares, when issued in accordance with the
terms of this Agreement, and the Shares, when issued by the Company against
payment of the Discount Price in accordance with the terms of this Agreement,
shall be validly issued and outstanding, fully paid and nonassessable and free
from all liens, charges, taxes, security interests, encumbrances, rights of
first refusal, preemptive or similar rights and other encumbrances with respect
to the issue thereof.

 

Section 4.5                                   No Conflicts.  The execution,
delivery and performance by the Company of this Agreement and the consummation
by the Company of the transactions contemplated hereby do not and shall not
(i) result in a violation of any provision of the Company’s Charter or Bylaws,
(ii) conflict with, constitute a default (or an event which, with notice or
lapse of time or both, would become a default) under, or give rise to any rights
of termination, amendment, acceleration or cancellation of, any material
agreement, mortgage, deed of trust, indenture, note, bond, license, lease
agreement, instrument or obligation to which the Company or any of its
Significant Subsidiaries is a party or is bound (including, without limitation,
any listing agreement with the Trading Market), (iii) create or impose a lien,
charge or encumbrance on any property of the Company or any of its Significant
Subsidiaries under any agreement or any commitment to which the Company or any
of its Significant Subsidiaries is a party or under which the Company or any of
its Significant Subsidiaries is bound or under which any of their respective
properties or assets are bound, or (iv) result in a violation of any federal,
state, local or foreign statute, rule, regulation, order, judgment or decree
applicable to the Company or any of its Subsidiaries or by which any property or
asset of the Company or any of its Subsidiaries are bound or affected, except,
in the case of clauses (ii), (iii) and (iv), for such conflicts, defaults,
terminations, amendments, acceleration, cancellations, liens, charges,
encumbrances and violations as would not, individually or in the aggregate, have
a Material Adverse Effect.  The Company is not required under federal, state,
local or foreign law, rule or regulation to obtain any consent, authorization or
order of, or make any filing or registration with, any court or governmental
agency in order for it to execute, deliver or perform any of its obligations
under

 

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this Agreement, or to issue and sell the Securities to the Investor in
accordance with the terms hereof (other than any filings which may be required
to be made by the Company with the Commission, the Financial Industry Regulatory
Authority (the “FINRA”) or the Trading Market subsequent to the Effective Date,
including but not limited to a Prospectus Supplement under Sections 1.4 and 5.9
of this Agreement, and any registration statement, prospectus or prospectus
supplement which has been or may be filed pursuant to this Agreement).

 

Section 4.6                                   Commission Documents, Financial
Statements.  (a) The Common Stock is registered pursuant to Section 12(b) or
12(g) of the Exchange Act and, except as disclosed in the Commission Documents,
as of the Effective Date the Company had timely filed (giving effect to
permissible extensions in accordance with Rule 12b-25 under the Exchange Act)
all Commission Documents.  The Company has delivered or made available to the
Investor via EDGAR or otherwise true and complete copies of the Commission
Documents filed with the Commission prior to the Effective Date (including,
without limitation, the 2009 Form 10-K) and has delivered or made available to
the Investor via EDGAR or otherwise true and complete copies of all of the
Commission Documents heretofore incorporated by reference in the Registration
Statement and the Prospectus. The Company has not provided to the Investor any
information which, according to applicable law, rule or regulation, should have
been disclosed publicly by the Company but which has not been so disclosed,
other than with respect to the transactions contemplated by this Agreement.  As
of its filing date, each Commission Document filed with the Commission and
incorporated by reference in the Registration Statement and the Prospectus
(including, without limitation, the 2009 Form 10-K) complied in all material
respects with the requirements of the Securities Act or the Exchange Act, as
applicable, and other federal, state and local laws, rules and regulations
applicable to it, and, as of its filing date (or, if amended or superseded by a
filing prior to the Effective Date, on the date of such amended or superseded
filing), such Commission Document did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.  Each Commission Document to be
filed with the Commission after the Effective Date and incorporated by reference
in the Registration Statement, the Prospectus and any Prospectus Supplement
required to be filed pursuant to Sections 1.4 and 5.9 hereof during the
Investment Period (including, without limitation, the Current Report), when such
document becomes effective or is filed with the Commission, as the case may be,
shall comply in all material respects with the requirements of the Securities
Act or the Exchange Act, as applicable, and other federal, state and local laws,
rules and regulations applicable to it, and shall not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.

 

(b)                                 The financial statements, together with the
related notes and schedules, of the Company included in the Commission Documents
comply as to form in all material respects with all applicable accounting
requirements and the published rules and regulations of the Commission and all
other applicable rules and regulations with respect thereto.  Such financial
statements, together with the related notes and schedules, have been prepared in
accordance with GAAP applied on a consistent basis during the periods involved
(except (i) as may be otherwise indicated in such financial statements or the
notes thereto or (ii) in the case of unaudited interim statements, to the extent
they may not include footnotes or may be condensed or summary

 

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statements and are subject to normal year-end audit adjustments), and fairly
present in all material respects the financial condition of the Company and its
consolidated Subsidiaries as of the dates thereof and the results of operations
and cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments).

 

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

 

(d)                                 KPMG LLP and Ernst & Young, LLP, who have
expressed their opinions on the audited financial statements and related
schedules included or incorporated by reference in the Registration Statement
and the Base Prospectus are, with respect to the Company, independent public
accountants as required by the Securities Act and are independent registered
public accounting firms within the meaning of SOXA as required by the rules of
the Public Company Accounting Oversight Board.

 

Section 4.7                                   Subsidiaries.  NeoRx Manufacturing
Group, Inc. (“NMG”), a corporation organized under the laws of the State of
Washington, is the only Subsidiary of the Company as of the Effective Date.

 

Section 4.8                                   No Material Adverse Effect. 
Since        December 31, 2009, the Company has not experienced or suffered any
Material Adverse Effect, and there exists no current state of facts, condition
or event which would have a Material Adverse Effect, except (i) as disclosed in
any Commission Documents filed since December 31, 2009 or (ii) continued losses
from operations.

 

Section 4.9                                   Indebtedness.  The Company’s
Quarterly Report on Form 10-Q for its fiscal quarter ended September 30, 2010
sets forth, as of September 30, 2010, all outstanding secured and unsecured
Indebtedness of the Company or any Subsidiary, or for which the Company or any
Subsidiary has commitments through such date.  For the purposes of this
Agreement, “Indebtedness” shall mean (a) any liabilities for borrowed money or
amounts owed in excess of $10,000,000 (other than trade accounts payable
incurred in the ordinary course of business), (b) all guaranties, endorsements,
indemnities and other contingent obligations in respect of Indebtedness of
others in excess of $10,000,000, whether or not the same are or should be
reflected in the Company’s balance sheet (or the notes thereto), except
guaranties by endorsement of negotiable instruments for deposit or collection or
similar transactions in the ordinary course of business; and (c) the present
value of any lease payments in excess of

 

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$10,000,000 due under leases required to be capitalized in accordance with GAAP.
There is no existing or continuing default or event of default in respect of any
Indebtedness of the Company or any of its Subsidiaries.

 

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

 

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

 

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

 

Section 4.13                            Certain Fees.  Except for the placement
fee payable by the Company to Reedland Capital Partners, an Institutional
Division of Financial West Group, Member FINRA/SIPC (“Reedland”), which shall be
set forth in a separate engagement letter between the Company and Reedland (a
true and complete fully executed copy of which has heretofore been provided to
the Investor), no brokers, finders or financial advisory fees or commissions
shall be payable by the Company or any Subsidiary (or any of their respective
affiliates) with respect to the transactions contemplated by this Agreement.
Except as set forth in this Section 4.13 or as disclosed in Section 4.13 of the
Disclosure Schedule or in the Registration Statement, the Prospectus or the
Current Report, there are no contracts, agreements or understandings between the
Company and any person that would give rise to a valid claim against the
Company, the Investor or the Broker-Dealer for a brokerage commission, finder’s
fee or other like payment in connection with the transactions contemplated by
this Agreement or, to the Company’s knowledge, any arrangements, agreements,
understandings, payments or issuance with respect to the Company or any of its
officers, directors, stockholders, partners, employees, Subsidiaries or
Affiliates that may affect the FINRA’s determination of the amount of
compensation to be received by any FINRA member (including, without limitation,
those FINRA members set forth on Schedule 4.13 of the Disclosure Schedule) or
person associated with any FINRA member in connection with the transactions
contemplated by this Agreement.  Except as set forth in this

 

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Section 4.13 or as disclosed in Section 4.13 of the Disclosure Schedule or in
the Registration Statement, the Prospectus or the Current Report, no “items of
value” (within the meaning of FINRA Rule 5110) have been received, and no
arrangements have been entered into for the future receipt of any items of
value, from the Company or any of its officers, directors, stockholders,
partners, employees, Subsidiaries or Affiliates by any FINRA member (including,
without limitation, those FINRA members set forth on Schedule 4.13 of the
Disclosure Schedule) or person associated with any FINRA member, during the
period commencing 180 days immediately preceding the Effective Date and ending
on the date this Agreement is terminated in accordance with Article VII, that
may affect the FINRA’s determination of the amount of compensation to be
received by any FINRA member or person associated with any FINRA member in
connection with the transactions contemplated by this Agreement.

 

Section 4.14                            Operation of Business. (a) The Company
or one or more of its Subsidiaries possesses such permits, licenses, approvals,
consents and other authorizations (including licenses, accreditation and other
similar documentation or approvals of any local health departments)
(collectively, “Governmental Licenses”) issued by the appropriate federal,
state, local or foreign regulatory agencies or bodies, including, without
limitation, the United States Food and Drug Administration (“FDA”), necessary to
conduct the business now operated by it, except where the failure to possess
such Governmental Licenses, individually or in the aggregate, would not have a
Material Adverse Effect.  The Company and its Subsidiaries are in compliance
with the terms and conditions of all such Governmental Licenses and all
applicable FDA rules and regulations, guidelines and policies, and all
applicable rules and regulations, guidelines and policies of any governmental
authority exercising authority comparable to that of the FDA (including any
non-governmental authority whose approval or authorization is required under
foreign law comparable to that administered by the FDA), except where the
failure to so comply, individually or in the aggregate, would not have a
Material Adverse Effect.  All of the Governmental Licenses are valid and in full
force and effect, except where the invalidity of such Governmental Licenses or
the failure of such Governmental Licenses to be in full force and effect,
individually or in the aggregate, would not have a Material Adverse Effect.  As
to each product that is subject to FDA regulation or similar legal provisions in
any foreign jurisdiction that is developed, manufactured, tested, packaged,
labeled, marketed, sold, distributed and/or commercialized by the Company or any
of its Subsidiaries, each such product is being developed, manufactured, tested,
packaged, labeled, marketed, sold, distributed and/or commercialized in
compliance with all applicable requirements of the FDA (and any non-governmental
authority whose approval or authorization is required under foreign law
comparable to that administered by the FDA), including, but not limited to,
those relating to investigational use, investigational device exemption,
premarket notification, premarket approval, good clinical practices, good
manufacturing practices, record keeping, filing of reports, and patient privacy
and medical record security, except where such non-compliance, individually or
in the aggregate, would not have a Material Adverse Effect.  As to each product
or product candidate of the Company or any of its Subsidiaries subject to FDA
regulation or similar legal provision in any foreign jurisdiction, all
manufacturing facilities of the Company and its Subsidiaries are operated in
compliance with the FDA’s Quality System Regulation requirements at 21 C.F.R.
Part 820, as applicable, except where such non-compliance, individually or in
the aggregate, would not have a Material Adverse Effect. Except as set forth in
the Commission Documents or the Registration Statement, neither the Company nor
any of its Subsidiaries has received any notice of proceedings relating to the
revocation or modification of any such

 

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Governmental Licenses or relating to a potential violation of, failure to comply
with, or request to produce additional information under, any FDA rules and
regulations, guidelines or policies which, if the subject of any unfavorable
decision, ruling or finding, individually or in the aggregate, would have a
Material Adverse Effect.  Except as set forth in the Commission Documents or the
Registration Statement, neither the Company nor any of its Subsidiaries has
received any correspondence, notice or request from the FDA, including, without
limitation, notice that any one or more products or product candidates of the
Company or any of its Subsidiaries failed to receive approval from the FDA for
use for any one or more indications.  This Section 4.14 does not relate to
environmental matters, such items being the subject of Section 4.15.

 

(b)           Except as set forth in the Commission Documents, the Company or
one or more of its Subsidiaries owns or possesses adequate patents, patent
rights, licenses, inventions, copyrights, know-how (including trade secrets and
other unpatented and/or unpatentable proprietary or confidential information,
systems or procedures), trademarks, service marks, trade names, trade dress,
logos, copyrights and other intellectual property, including, without
limitation, all of the intellectual property described in the Commission
Documents as being owned or licensed by the Company (collectively, “Intellectual
Property”), necessary to carry on the business now operated by it, except where
the failure to own, license, or have such rights would not, individually or in
the aggregate, have a Material Adverse Effect.  Except as set forth in the
Commission Documents, there are no actions, suits or judicial proceedings
pending, or to the Company’s knowledge threatened, relating to patents or
proprietary information to which the Company or any of its Subsidiaries is a
party or of which any property of the Company or any of its Subsidiaries is
subject, and neither the Company nor any of its Subsidiaries has received any
notice or is otherwise aware of any infringement of or conflict with asserted
rights of others with respect to any Intellectual Property or of any facts or
circumstances which would render any Intellectual Property invalid or inadequate
to protect the interest of the Company and its Subsidiaries therein, and which
infringement or conflict (if the subject of any unfavorable decision, ruling or
finding) or invalidity or inadequacy, individually or in the aggregate, would
have a Material Adverse Effect.

 

(c)           All pre-clinical and clinical trials conducted by, or on behalf
of, the Company or any of its Subsidiaries, or in which the Company or any of
its Subsidiaries has participated that are described in the Registration
Statement or the Commission Documents, or the results of which are referred to
in the Registration Statement or the Commission Documents, if any, are the only
pre-clinical and clinical trials currently being conducted by or on behalf of
the Company and its Subsidiaries. To the Company’s knowledge, all such
pre-clinical and clinical trials have been conducted in material compliance with
all applicable federal, state, local and foreign laws, and the regulations and
requirements of any applicable governmental entity, including, but not limited
to, FDA good clinical practice and good laboratory practice requirements (or the
foreign equivalent requirements).  Except as set forth in the Registration
Statement or the Commission Documents or as would not likely result in a
Material Adverse Effect, neither the Company nor any of its Subsidiaries has
received any notices or correspondence from the FDA or any other governmental
agency requiring the termination, suspension, delay or modification of any
pre-clinical or clinical trials conducted by, or on behalf of, the Company or
any of its Subsidiaries or in which the Company or any of its Subsidiaries has
participated that are described in the Registration Statement or the Commission
Documents,

 

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if any, or the results of which are referred to in the Registration Statement or
the Commission Documents. To the Company’s knowledge, all pre-clinical and
clinical trials previously conducted by, or on behalf of, the Company or any of
its Subsidiaries while conducted by or on behalf of the Company or any of its
Subsidiaries, were conducted in material compliance with all applicable federal,
state, local and foreign laws, and the regulations and requirements of any
applicable governmental entity, including, but not limited to, FDA good clinical
practice and good laboratory practice requirements (or the foreign equivalent
requirements).

 

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

 

Section 4.16         Material Agreements.  Except as set forth in the Commission
Documents, neither the Company nor any Subsidiary of the Company is a party to
any written or oral contract, instrument, agreement commitment, obligation, plan
or arrangement, a copy of which would be required to be filed with the
Commission as an exhibit to an annual report on Form 10-K (collectively,
“Material Agreements”). Except as set forth in the Commission Documents, the
Company and each of its Subsidiaries have performed in all material respects all
the obligations required to be performed by them under the Material Agreements,
have received no notice of default or an event of default by the Company or any
of its Subsidiaries thereunder and are not aware of any basis for the assertion
thereof, and neither the Company or any of its Subsidiaries nor, to the
knowledge of the Company, any other contracting party thereto are in default
under any Material Agreement now in effect, the result of which would have a
Material Adverse Effect.  Each of the Material Agreements is in full force and
effect, and constitutes a legal, valid and binding obligation enforceable in
accordance with its terms against the Company and/or any of its Subsidiaries
and, to the knowledge of the Company, each other contracting

 

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party thereto, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation,
conservatorship, receivership or similar laws relating to, or affecting
generally the enforcement of, creditor’s rights and remedies or by other
equitable principles of general application.

 

Section 4.17         Transactions With Affiliates.  Except as set forth in the
Commission Documents, there are no loans, leases, agreements, contracts, royalty
agreements, management contracts, service arrangements or other continuing
transactions exceeding $120,000 between (a) the Company or any Subsidiary, on
the one hand, and (b) any person or entity who would be covered by Item
404(a) of Regulation S-K, on the other hand.  Except as disclosed in the
Commission Documents, there are no outstanding amounts payable to or receivable
from, or advances by the Company or any of its Subsidiaries to, and neither the
Company nor any of its Subsidiaries is otherwise a creditor of or debtor to, any
beneficial owner of more than 5% of the outstanding shares of Common Stock, or
any director, employee or Affiliate of the Company or any of its Subsidiaries,
other than (i) reimbursement for reasonable expenses incurred on behalf of the
Company or any of its Subsidiaries or (ii) as part of the normal and customary
terms of such persons’ employment or service as a director with the Company or
any of its Subsidiaries.

 

Section 4.18         Securities Act.  The Company has complied with all
applicable federal and state securities laws in connection with the offer,
issuance and sale of the Securities contemplated by this Agreement.

 

(i)            The Company has prepared and filed with the Commission in
accordance with the provisions of the Securities Act the Registration Statement,
including a base prospectus relating to the Securities.  The Registration
Statement was declared effective by order of the Commission on June 2, 2009. As
of the date hereof, no stop order suspending the effectiveness of the
Registration Statement has been issued by the Commission or is continuing in
effect under the Securities Act and no proceedings therefor are pending before
or, to the Company’s knowledge, threatened by the Commission.  No order
preventing or suspending the use of the Prospectus or any Permitted Free Writing
Prospectus has been issued by the Commission.

 

(ii)           As of the Effective Date, the Company satisfies all of the
requirements for the use of Form S-3 under the Securities Act for the offering
and sale of the Securities contemplated by this Agreement (without reliance on
General Instruction I.B.6. of Form S-3). If, during the term of this Agreement,
the Company becomes subject to General Instruction I.B.6. of Form S-3, the
Company hereby confirms that for as long as the Company is subject to General
Instruction I.B.6. of Form S-3 during the term of this Agreement, the Company
shall not offer or sell any securities in reliance on General Instruction I.B.6.
of Form S-3 to the extent the aggregate market value of such securities, when
aggregated with the aggregate market value of all of the Securities that have
been sold pursuant to this Agreement in the 12 calendar months immediately prior
to and including such sale in reliance on General Instruction I.B.6. of
Form S-3, exceeds the aggregate market value limitations imposed by General
Instruction I.B.6 of Form S-3, calculated in accordance with Instructions 1 and
2 to General Instruction I.B.6 of Form S-3. The Company is not, and has not
previously been at any time, a “shell company” (as such term is defined in
Rule 405 under the Securities Act).

 

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(iii)          The Commission has not notified the Company of any objection to
the use of the form of the Registration Statement pursuant to
Rule 401(g)(1) under the Securities Act. The Registration Statement complied in
all material respects on the date on which it was declared effective by the
Commission, and will comply in all material respects at each deemed effective
date with respect to the Investor pursuant to Rule 430B(f)(2) of the Securities
Act, with the requirements of the Securities Act, and the Registration Statement
(including the documents incorporated by reference therein) did not on the date
it was declared effective by the Commission, and shall not at each deemed
effective date with respect to the Investor pursuant to Rule 430B(f)(2) of the
Securities Act, contain an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading; provided that this representation and
warranty does not apply to statements in or omissions from the Registration
Statement made in reliance upon and in conformity with information relating to
the Investor furnished to the Company in writing by or on behalf of the Investor
expressly for use therein. The Registration Statement, as of the Effective Date,
meets the requirements set forth in Rule 415(a)(1)(x) under the Securities Act. 
The Base Prospectus complied in all material respects on its date and on the
Effective Date, and will comply in all material respects on each applicable
Fixed Request Exercise Date and, when taken together with the applicable
Prospectus Supplement and any applicable Permitted Free Writing Prospectus, on
each applicable Settlement Date, with the requirements of the Securities Act and
did not on its date and on the Effective Date and shall not on each applicable
Fixed Request Exercise Date and, when taken together with the applicable
Prospectus Supplement and any applicable Permitted Free Writing Prospectus, on
each applicable Settlement Date contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading; provided that this representation and warranty does
not apply to statements in or omissions from the Base Prospectus made in
reliance upon and in conformity with information relating to the Investor
furnished to the Company in writing by or on behalf of the Investor expressly
for use therein.

 

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

 

(v)           At the earliest time after the filing of the Registration
Statement that the Company or another offering participant made a bona fide
offer (within the meaning of Rule 164(h)(2) under the Securities Act) relating
to the Securities, the Company was not and is not an “ineligible issuer” (as
defined in Rule 405 under the Securities Act).  Each Permitted Free Writing
Prospectus (a) shall conform in all material respects to the requirements of the
Securities Act on the date of its first use, (b) when considered together with
the Prospectus on each applicable Fixed Request Exercise Date and on each
applicable Settlement Date, shall not

 

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contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they are made, not misleading, and
(c) shall not include any information that conflicts with the information
contained in the Registration Statement, including any document incorporated by
reference therein and any Prospectus Supplement deemed to be a part thereof that
has not been superseded or modified.  The immediately preceding sentence does
not apply to statements in or omissions from any Permitted Free Writing
Prospectus made in reliance upon and in conformity with information relating to
the Investor furnished to the Company in writing by or on behalf of the Investor
expressly for use therein.

 

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

 

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

 

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

 

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

 

Section 4.22         ERISA.  No liability to the Pension Benefit Guaranty
Corporation has been incurred with respect to any Plan by the Company or any of
its Subsidiaries which has had or would have a Material Adverse Effect.  No
“prohibited transaction” (as defined in Section 406 of ERISA or Section 4975 of
the Code) or “accumulated funding deficiency” (as defined in Section 203 of
ERISA) or any of the events set forth in Section 4043(b) of ERISA has occurred
with respect to any Plan which has had or would have a Material Adverse Effect,
and the execution and delivery of this Agreement and the issuance and sale of
the Shares hereunder shall not result in any of the foregoing events.  Each Plan
is in compliance in all material respects with applicable law, including ERISA
and the Code; the Company has not incurred and does not expect to incur
liability under Title IV of ERISA with respect to the termination of, or
withdrawal from, any Plan; and each Plan for which the Company would have any
liability that

 

21

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is intended to be qualified under Section 401(a) of the Code is so qualified in
all material respects and nothing has occurred, whether by action or failure to
act, which would cause the loss of such qualifications.  As used in this
Section 4.22, the term “Plan” shall mean an “employee pension benefit plan” (as
defined in Section 3 of ERISA) which is or has been established or maintained,
or to which contributions are or have been made, by the Company or any
Subsidiary or by any trade or business, whether or not incorporated, which,
together with the Company or any Subsidiary, is under common control, as
described in Section 414(b) or (c) of the Code.

 

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

 

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

 

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

 

ARTICLE V

COVENANTS

 

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

 

Section 5.1            Securities Compliance; FINRA Filing.

 

(i)            The Company shall notify the Trading Market, as necessary, in
accordance with its rules and regulations, of the transactions contemplated by
this Agreement, and shall take all necessary action, undertake all proceedings
and obtain all registrations, permits, consents and approvals for the legal and
valid issuance of the Securities to the Investor in accordance with the terms of
this Agreement.

 

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(ii)           The Company shall (with the Investor’s assistance) assist
Reedland with the preparation and filing with the FINRA’s Corporate Financing
Department via CobraDesk (not later than 24 hours after the Effective Date) of
all documents and information required to be filed with the FINRA pursuant to
FINRA Rule 5110 with regard to the transactions contemplated by this Agreement
(the “FINRA Filing”). In connection therewith, on the Effective Date, the
Company shall pay to the FINRA by wire transfer of immediately available funds
the applicable filing fee with respect to the FINRA Filing, and the Company
shall be solely responsible for payment of such fee.  The parties hereby agree
to provide each other and Reedland all requisite information and otherwise to
assist each other and Reedland in a timely fashion in order for Reedland to
complete the preparation and submission of the FINRA Filing in accordance with
this Section 5.1(ii) and to assist Reedland in promptly responding to any
inquiries or requests from FINRA or its staff. Each party hereto shall
(A) promptly notify the other party and Reedland of any communication to that
party or its affiliates from the FINRA, including, without limitation, any
request from the FINRA or its staff for amendments or supplements to or
additional information in respect of the FINRA Filing and permit the other party
and Reedland to review in advance any proposed written communication to the
FINRA and (B) furnish the other party and Reedland with copies of all written
correspondence, filings and communications between them and their affiliates and
their respective representatives and advisors, on the one hand, and the FINRA or
members of its staff, on the other hand, with respect to this Agreement or the
transactions contemplated hereby. Each of the parties hereto agrees to use its
commercially reasonable efforts to take, or cause to be taken, all actions, and
to do, or cause to be done, and to assist and cooperate with the other party and
Reedland in doing, all things necessary, proper or advisable to obtain as
promptly as practicable (but in no event later than 60 days after the Effective
Date) written confirmation from the FINRA to the effect that the FINRA’s
Corporate Financing Department has determined not to raise any objection with
respect to the fairness and reasonableness of the terms of the transactions
contemplated by this Agreement; provided, however, that the Investor shall have
no responsibility for the compliance or non-compliance of any Broker-Dealer with
FINRA Rule 5110 and shall not be required to (x) disclose to the FINRA or to any
other governmental agency, person or entity any business, financial or other
information that the Investor deems, in its sole and absolute discretion, to be
proprietary, confidential or otherwise sensitive information, (y) amend, modify
or change any of the terms or conditions of this Agreement or (z) otherwise take
any other action, including, without limitation, modifying the Discount Price
thresholds referred to in Section 2.2, the number of Commitment Shares or the
amount of fees and commissions to be paid to the Broker-Dealer in connection
with the transactions contemplated by this Agreement, in each case, in such a
manner that would, in the Investor’s sole and absolute discretion, render the
terms and conditions of this Agreement or the transactions contemplated hereby
to be no longer advisable to the Investor. Notwithstanding anything to the
contrary contained in this Agreement, the Company shall not be permitted to
deliver any Fixed Request Notice to the Investor, and the Investor shall not be
obligated to purchase any Shares pursuant to a Fixed Request Notice, unless and
until the parties hereto and Reedland shall have received written confirmation
from the FINRA to the effect that the FINRA’s Corporate Financing Department has
determined not to raise any objection with respect to the fairness and
reasonableness of the terms of the transactions contemplated by this Agreement.

 

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Section 5.2            Registration and Listing.  The Company shall take all
action necessary to cause the Common Stock to continue to be registered as a
class of securities under Sections 12(b) or 12(g) of the Exchange Act, shall
comply with its reporting and filing obligations under the Exchange Act, and
shall not take any action or file any document (whether or not permitted by the
Securities Act) to terminate or suspend such registration or to terminate or
suspend its reporting and filing obligations under the Exchange Act or
Securities Act, except as permitted herein. The Company shall take all action
necessary to continue the listing and trading of its Common Stock and the
listing of the Commitment Shares and the Shares acquired or purchased by the
Investor hereunder on the Trading Market (including, without limitation,
maintaining sufficient tangible net assets), and shall comply with the Company’s
reporting, filing and other obligations under the bylaws, listed securities
maintenance standards and other rules and regulations of the FINRA and the
Trading Market. The Company shall not take any action which would reasonably be
expected to result in the delisting or suspension of the Common Stock on the
Trading Market.

 

Section 5.3            Compliance with Laws.

 

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

 

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

 

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

 

(i)            The Company shall keep and cause each Subsidiary to keep adequate
records and books of account, in which complete entries shall be made in
accordance with GAAP consistently applied, reflecting all financial transactions
of the Company and its Subsidiaries, and in which, for each fiscal year, all
proper reserves for depreciation, depletion, obsolescence, amortization, taxes,
bad debts and other purposes in connection with its business shall be made.  The
Company shall maintain a system of internal accounting controls that (a) pertain
to the maintenance of records that in reasonable detail accurately and fairly
reflect the transactions and dispositions of the assets of the Company;
(b) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the Company are
being made only in accordance with authorizations of management and directors of

 

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the Company; and (c) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of the Company’s
assets that would likely have a material effect on the Company’s financial
statements.

 

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

 

(iii)          Subject to the requirements of Section 5.12 of this Agreement,
from time to time from and after the period beginning with the third Trading Day
immediately preceding each Fixed Request Exercise Date through and including the
applicable Settlement Date, the Company shall make available for inspection and
review by the Investor, customary documentation allowing the Investor and/or its
appointed counsel or advisors to conduct due diligence.

 

Section 5.5            Limitations on Holdings and Issuances. Notwithstanding
any other provision of this Agreement, the Company shall not issue and the
Investor shall not purchase any shares of Common Stock which, when aggregated
with all other shares of Common Stock then beneficially owned (as calculated
pursuant to Section 13(d) of the Exchange Act and Rule 13d-3 promulgated
thereunder) by the Investor and its Affiliates, would result in the beneficial
ownership by the Investor of more than 9.9% of the then issued and outstanding
shares of Common Stock.

 

Section 5.6            Other Agreements and Other Financings.

 

(i)            The Company shall not enter into, announce or recommend to its
stockholders any agreement, plan, arrangement or transaction in or of which the
terms thereof would restrict, materially delay, conflict with or impair the
ability or right of the Company or any Subsidiary to perform its obligations
under this Agreement, including, without limitation, the obligation of the
Company to deliver the Commitment Shares to the Investor not later than
4:00 p.m. (New York time) on the second Trading Day immediately following the
Effective Date, and the obligation of the Company to deliver the Shares to the
Investor in respect of a Fixed Request or Optional Amount on the applicable
Settlement Date.

 

(ii)           If the Company enters into any agreement, plan, arrangement or
transaction with a third party or seeks to utilize any existing agreement, plan
or arrangement with a third party, in each case the principal purpose of which
is to implement, effect or consummate, at any time during the period beginning
on the first Trading Day of any Pricing Period and ending on the second Trading
Day next following the applicable Settlement Date (the “Reference Period”), an
Other Financing that does not constitute an Acceptable Financing, the Company
shall provide prompt notice thereof (an “Other Financing Notice”) to the
Investor; provided,

 

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however, that such Other Financing Notice must be received by the Investor not
later than the earlier of (a) 48 hours after the Company’s execution of any
agreement, plan, arrangement or transaction relating to such Other Financing
(or, with respect to any existing agreement, plan or arrangement, 48 hours after
the Company has determined to utilize any such existing agreement, plan or
arrangement to implement, effect or consummate such Other Financing) and (b) the
second Trading Day immediately preceding the applicable Settlement Date with
respect to the applicable Fixed Request Notice; provided, further, that the
Company shall notify the Investor within 24 hours (an “Integration Notice”) if
it enters into any agreement, plan, arrangement or transaction with a third
party, the principal purpose of which is to obtain at any time during the
Investment Period an Other Financing that may be aggregated with the
transactions contemplated by this Agreement for purposes of determining whether
approval of the Company’s stockholders is required under any bylaw, listed
securities maintenance standards or other rules of the Trading Market and, if
required under applicable law, including, without limitation, Regulation FD
promulgated by the Commission, or under the applicable rules and regulations of
the Trading Market, the Company shall publicly disclose such information in
accordance with Regulation FD and the applicable rules and regulations of the
Trading Market. For purposes of this Section 5.6(ii), any press release issued
by, or Commission Document filed by, the Company shall constitute sufficient
notice, provided that it is issued or filed, as the case may be, within the time
requirements set forth in the first sentence of this Section 5.6(ii) for an
Other Financing Notice or an Integration Notice, as applicable. With respect to
any Pricing Period for which the Company is required to provide an Other
Financing Notice pursuant to the first sentence (including the provisos thereto)
of this Section 5.6(ii), the Investor shall (i) have the option to purchase the
Shares subject to the Fixed Request at (x) the price therefor in accordance with
the terms of this Agreement or (y) the third party’s per share purchase price in
connection with the Other Financing, net of such third party’s discounts,
Warrant Value and fees, or (ii) the Investor may elect to not purchase any
Shares subject to the Fixed Request for that Pricing Period. An “Other
Financing” shall mean (w) the issuance of Common Stock for a purchase price less
than, or the issuance of securities convertible into or exchangeable for Common
Stock at an exercise or conversion price (as the case may be) less than, the
then Current Market Price of the Common Stock (including, without limitation,
pursuant to any “equity line” or other financing that is substantially similar
to the financing provided for under this Agreement, or pursuant to any other
transaction in which the purchase, conversion or exchange price for such Common
Stock is determined using a floating discount or other post-issuance adjustable
discount to the then Current Market Price (any such transaction, a “Similar
Financing”)), in each case, after all fees, discounts, Warrant Value and
commissions associated with the transaction (a “Below Market Offering”); (x) an
“at-the-market” offering of Common Stock or securities convertible into or
exchangeable for Common Stock pursuant to Rule 415(a)(4) under the Securities
Act (an “ATM”); (y) the implementation by the Company of any mechanism in
respect of any securities convertible into or exchangeable for Common Stock for
the reset of the purchase price of the Common Stock to below the then Current
Market Price of the Common Stock (including, without limitation, any
antidilution or similar adjustment provisions in respect of any Company
securities, but specifically excluding customary adjustments for stock splits,
stock dividends, stock combinations and similar events) (a “Price Reset
Provision”); or (z) the issuance of options, warrants or similar rights of
subscription in each case not constituting an Acceptable Financing. “Acceptable
Financing” shall mean the issuance by the Company of: (1) debt securities or any
class or series of preferred stock of the Company, in each case that are not

 

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convertible into or exchangeable for Common Stock or securities convertible into
or exchangeable for Common Stock; (2) shares of Common Stock or securities
convertible into or exchangeable for Common Stock (including, without
limitation, convertible debt securities) other than in connection with a Below
Market Offering or an ATM and the issuance of shares of Common Stock upon the
conversion, exercise or exchange thereof; (3) shares of Common Stock or
securities convertible into or exchangeable for Common Stock (including, without
limitation, convertible debt securities) in connection with an underwritten
public offering of securities of the Company or a registered direct public
offering of securities of the Company, in each case where the price per share of
such Common Stock (or the conversion or exercise price of such securities, as
applicable) is fixed concurrently with the execution of definitive documentation
relating to such offering, and the issuance of shares of Common Stock upon the
conversion, exercise or exchange thereof; (4) shares of Common Stock or
securities convertible into or exchangeable for Common Stock in connection with
awards under the Company’s benefit and equity plans and arrangements or pursuant
to consulting or other vendor agreements and the issuance of shares of Common
Stock upon the conversion, exercise or exchange thereof; (5) shares of Common
Stock issuable upon the conversion, exercise or exchange of equity awards or
convertible, exercisable or exchangeable securities (including, without
limitation, convertible debt securities) outstanding as of the Effective Date,
and the issuance thereof upon such conversion, exercise or exchange; (6) shares
of Common Stock or securities convertible into or exercisable or exchangeable
for Common Stock (including, without limitation, convertible debt securities)
issued in connection with the acquisition, license or sale of one or more other
companies, equipment, technologies or lines of business, and the issuance of
shares of Common Stock upon the conversion, exercise or exchange thereof;
(7) shares of Common Stock or securities convertible into or exchangeable for
Common Stock (including, without limitation, convertible debt securities) or
similar rights to subscribe for the purchase of shares of Common Stock in
connection with technology sharing, licensing, research and joint development,
marketing, manufacturing supply or other similar strategic or collaborative
agreements or arrangements (or amendments thereto) with third parties, and the
issuance of shares of Common Stock upon the conversion, exercise or exchange
thereof; and (8) shares of Common Stock and/or warrants or similar rights to
subscribe for the purchase of shares of Common Stock issued in connection with
commercial credit arrangements, equipment financings and/or real property leases
or service agreements (or amendments thereto) and the issuance of shares of
Common Stock upon the exercise thereof.

 

Section 5.7            Stop Orders.  The Company shall advise the Investor
promptly (but in no event later than 24 hours) and shall confirm such advice in
writing: (i) of the Company’s receipt of notice of any request by the Commission
for amendment of or a supplement to the Registration Statement, the Prospectus,
any Permitted Free Writing Prospectus or for any additional information; (ii) of
the Company’s receipt of notice of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement or prohibiting
or suspending the use of the Prospectus or any Prospectus Supplement, or of the
suspension of qualification of the Securities for offering or sale in any
jurisdiction, or the initiation or contemplated initiation of any proceeding for
such purpose; and (iii) of the Company becoming aware of the happening of any
event, which makes any statement of a material fact made in the Registration
Statement, the Prospectus or any Permitted Free Writing Prospectus untrue or
which requires the making of any additions to or changes to the statements then
made in the Registration Statement, the Prospectus or any Permitted Free Writing
Prospectus in order to state a material fact required by the Securities Act to
be stated therein or necessary in order to

 

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make the statements then made therein (in the case of the Prospectus, in light
of the circumstances under which they were made) not misleading, or of the
necessity to amend the Registration Statement or supplement the Prospectus or
any Permitted Free Writing Prospectus to comply with the Securities Act or any
other law. The Company shall not be required to disclose to the Investor the
substance or specific reasons of any of the events set forth in clauses
(i) through (iii) of the immediately preceding sentence, but rather, shall only
be required to disclose that the event has occurred.  The Company shall not
issue any Fixed Request during the continuation of any of the foregoing events.
If at any time the Commission shall issue any stop order suspending the
effectiveness of the Registration Statement or prohibiting or suspending the use
of the Prospectus or any Prospectus Supplement, the Company shall use
commercially reasonable efforts to obtain the withdrawal of such order at the
earliest possible time. The Company shall also advise the Investor promptly (but
in no event later than 24 hours) and shall confirm such advice in writing of the
Company becoming aware of the happening of any event, which makes any statement
made in the FINRA Filing untrue or which requires the making of any additions to
or changes to the statements then made in the FINRA Filing in order to comply
with FINRA Rule 5110.

 

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

 

(i)            Except as provided in this Agreement and other than periodic and
current reports required to be filed pursuant to the Exchange Act, the Company
shall not file with the Commission any amendment to the Registration Statement
that relates to the Investor, this Agreement or the transactions contemplated
hereby or file with the Commission any Prospectus Supplement that relates to the
Investor, this Agreement or the transactions contemplated hereby with respect to
which (a) the Investor shall not previously have been advised, (b) the Company
shall not have given due consideration to any comments thereon received from the
Investor or its counsel, or (c) the Investor shall reasonably object after being
so advised, unless the Company reasonably has determined that it is necessary to
amend the Registration Statement or make any supplement to the Prospectus to
comply with the Securities Act or any other applicable law or regulation, in
which case the Company shall promptly (but in no event later than 24 hours) so
inform the Investor, the Investor shall be provided with a reasonable
opportunity to review and comment upon any disclosure relating to the Investor
and the Company shall expeditiously furnish to the Investor an electronic copy
thereof. In addition, for so long as, in the reasonable opinion of counsel for
the Investor, the Prospectus (or in lieu thereof, the notice referred to in
Rule 173(a) under the Securities Act) is required to be delivered in connection
with any acquisition or sale of Securities by the Investor, the Company shall
not file any Prospectus Supplement with respect to the Securities without
delivering or making available a copy of such Prospectus Supplement, together
with the Base Prospectus, to the Investor promptly.

 

(ii)           The Company has not made, and agrees that unless it obtains the
prior written consent of the Investor it will not make, an offer relating to the
Securities that would constitute an Issuer Free Writing Prospectus or that would
otherwise constitute a Free Writing Prospectus required to be filed by the
Company or the Investor with the Commission or retained by the Company or the
Investor under Rule 433 under the Securities Act.  The Investor has not made,
and agrees that unless it obtains the prior written consent of the Company it
will not make, an offer relating to the Securities that would constitute a Free
Writing Prospectus required to be

 

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filed by the Company with the Commission or retained by the Company under
Rule 433 under the Securities Act.  Any such Issuer Free Writing Prospectus or
other Free Writing Prospectus consented to by the Investor or the Company is
referred to in this Agreement as a “Permitted Free Writing Prospectus.”  The
Company agrees that (x) it has treated and will treat, as the case may be, each
Permitted Free Writing Prospectus as an Issuer Free Writing Prospectus and
(y) it has complied and will comply, as the case may be, with the requirements
of Rules 164 and 433 under the Securities Act applicable to any Permitted Free
Writing Prospectus, including in respect of timely filing with the Commission,
legending and record keeping.

 

Section 5.9            Prospectus Delivery.  The Company shall file with the
Commission a Prospectus Supplement pursuant to Rule 424(b) under the Securities
Act on the first Trading Day immediately following the last Trading Day of each
Pricing Period.  The Company shall provide the Investor a reasonable opportunity
to comment on a draft of each such Prospectus Supplement and any Issuer Free
Writing Prospectus, shall give due consideration to all such comments and,
subject to the provisions of Section 5.8 hereof, shall deliver or make available
to the Investor, without charge, an electronic copy of each form of Prospectus
Supplement, together with the Base Prospectus, and any Permitted Free Writing
Prospectus on each applicable Settlement Date.  The Company consents to the use
of the Prospectus (and of any Prospectus Supplement thereto) in accordance with
the provisions of the Securities Act and with the securities or “blue sky” laws
of the jurisdictions in which the Securities may be sold by the Investor, in
connection with the offering and sale of the Securities and for such period of
time thereafter as the Prospectus (or in lieu thereof, the notice referred to in
Rule 173(a) under the Securities Act) is required by the Securities Act to be
delivered in connection with sales of the Securities. If during such period of
time any event shall occur that in the judgment of the Company and its counsel
is required to be set forth in the Registration Statement or the Prospectus or
any Permitted Free Writing Prospectus or should be set forth therein in order to
make the statements made therein (in the case of the Prospectus, in light of the
circumstances under which they were made) not misleading, or if it is necessary
to amend the Registration Statement or supplement or amend the Prospectus or any
Permitted Free Writing Prospectus to comply with the Securities Act or any other
applicable law or regulation, the Company shall forthwith prepare and, subject
to Section 5.8 above, file with the Commission an appropriate amendment to the
Registration Statement or Prospectus Supplement to the Prospectus (or supplement
to the Permitted Free Writing Prospectus) and shall expeditiously furnish or
make available to the Investor an electronic copy thereof.

 

Section 5.10         Selling Restrictions.

 

(i)            Except as expressly set forth below, the Investor covenants that
from and after the date hereof through and including the 90th day next following
the termination of this Agreement (the “Restricted Period”), neither the
Investor nor any of its Affiliates nor any entity managed or controlled by the
Investor (collectively, the “Restricted Persons” and each of the foregoing is
referred to herein as a “Restricted Person”) shall, directly or indirectly,
(i) intentionally engage in any Short Sales involving the Company’s securities
or (ii) grant any option to purchase, or acquire any right to dispose of or
otherwise dispose for value of, any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for any shares of Common Stock,
or enter into any swap, hedge or other similar agreement that transfers, in
whole or in part, the economic risk of ownership of the Common Stock.

 

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Notwithstanding the foregoing, it is expressly understood and agreed that
nothing contained herein shall (without implication that the contrary would
otherwise be true) prohibit any Restricted Person during the Restricted Period
from: (1) selling “long” (as defined under Rule 200 promulgated under Regulation
SHO) the Commitment Shares or the Shares; or (2) selling a number of shares of
Common Stock equal to the number of Shares that such Restricted Person is or may
be obligated to purchase under a pending Fixed Request Notice but has not yet
taken possession of so long as such Restricted Person (or the Broker-Dealer, as
applicable) delivers the Shares purchased pursuant to such Fixed Request Notice
to the purchaser thereof or the applicable Broker-Dealer; provided, however,
such Restricted Person (or the applicable Broker-Dealer, as applicable) shall
not be required to so deliver any such Shares subject to such Fixed Request
Notice if (a) such Fixed Request is terminated by mutual agreement of the
Company and the Investor and, as a result of such termination, no such Shares
are delivered to the Investor under this Agreement or (b) the Company otherwise
fails to deliver such Shares to the Investor on the applicable Settlement Date
upon the terms and subject to the provisions of this Agreement.

 

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

 

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

 

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

 

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

 

Section 5.14         Disclosure Schedule.

 

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

 

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(ii)           Notwithstanding anything to the contrary contained in the
Disclosure Schedule or in this Agreement, the information and disclosure
contained in any Schedule of the Disclosure Schedule shall be deemed to be
disclosed and incorporated by reference in any other Schedule of the Disclosure
Schedule as though fully set forth in such Schedule for which applicability of
such information and disclosure is readily apparent on its face. The fact that
any item of information is disclosed in the Disclosure Schedule shall not be
construed to mean that such information is required to be disclosed by this
Agreement.  Except as expressly set forth in this Agreement, such information
and the thresholds (whether based on quantity, qualitative characterization,
dollar amounts or otherwise) set forth herein shall not be used as a basis for
interpreting the terms “material” or “Material Adverse Effect” or other similar
terms in this Agreement.

 

ARTICLE VI

OPINION OF COUNSEL AND CERTIFICATE;

CONDITIONS TO THE SALE AND PURCHASE OF THE SHARES

 

Section 6.1            Issuance of Commitment Shares; Opinion of Counsel;
Certificate.  On the Effective Date, the Company shall deliver irrevocable
instructions to its transfer agent to electronically transfer the Commitment
Shares to the Investor, not later than 4:00 p.m. (New York time) on the second
Trading Day immediately following the Effective Date, by crediting the
Investor’s or its designees’ account at DTC through its Deposit/Withdrawal at
Custodian (DWAC) system, which Commitment Shares shall be issued pursuant to the
Registration Statement and without any restriction on resale (except as
expressly provided in the proviso to clause (i) of Section 2.13). For the
avoidance of doubt, all of the Commitment Shares shall be fully earned as of the
Effective Date, regardless of whether any Fixed Requests are issued by the
Company or settled hereunder. Simultaneously with the execution and delivery of
this Agreement, the Investor’s counsel has received (a) an opinion of outside
counsel to the Company, dated the Effective Date, in the form mutually agreed to
by the parties hereto, (b) a certificate from the Company, dated the Effective
Date, in the form of Exhibit C hereto, and (c) a copy of the irrevocable
instructions to the transfer agent regarding the Commitment Shares.

 

Section 6.2            Conditions Precedent to the Obligation of the Company. 
The obligation hereunder of the Company to issue and sell the Shares to the
Investor under any Fixed Request or Optional Amount is subject to the
satisfaction or (to the extent permitted by applicable law) waiver of each of
the conditions set forth below. These conditions are for the Company’s sole
benefit and (to the extent permitted by applicable law) may be waived by the
Company at any time in its sole discretion.

 

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

 

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such representations and warranties shall be true and correct in all material
respects as of such other date and (b) that are qualified by “materiality” shall
have been true and correct when made and shall be true and correct as of the
applicable Fixed Request Exercise Date and the applicable Settlement Date with
the same force and effect as if made on such dates, except to the extent such
representations and warranties are as of another date, in which case, such
representations and warranties shall be true and correct as of such other date.

 

(ii)           Registration Statement.  The Registration Statement is effective
and neither the Company nor the Investor shall have received notice that the
Commission has issued or intends to issue a stop order with respect to the
Registration Statement.  The Company shall have a maximum dollar amount certain
of Common Stock registered under the Registration Statement which (A) as of the
Effective Date, is sufficient to issue to the Investor not less than (1) the
Total Commitment plus (2) the Commitment Shares and (B) as of the applicable
Fixed Request Exercise Date and the applicable Settlement Date, is sufficient to
issue to the Investor not less than the maximum dollar amount worth of Shares
issuable pursuant to the applicable Fixed Request Notice and applicable Optional
Amount, if any. The Current Report shall have been filed with the Commission, as
required pursuant to Section 1.4, and all Prospectus Supplements shall have been
filed with the Commission, as required pursuant to Sections 1.4 and 5.9 hereof,
to disclose the sale of the Shares prior to each Settlement Date, as applicable.
Any other material required to be filed by the Company or any other offering
participant pursuant to Rule 433(d) under the Securities Act shall have been
filed with the Commission within the applicable time periods prescribed for such
filings by Rule 433 under the Securities Act.

 

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

 

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

 

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

 

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

 

(vii)         Aggregate Limit.  The issuance and sale of the Shares issuable
pursuant to such Fixed Request Notice or Optional Amount shall not violate
Sections 2.2, 2.12, 2.14, 4.18(ii) and 5.5 hereof.

 

(viii)        No Unresolved FINRA Objection. There shall not exist any
unresolved objection raised by the FINRA’s Corporate Financing Department with
respect to the fairness and reasonableness of the terms of the transactions
contemplated by this Agreement, and the parties hereto and Reedland shall have
obtained written confirmation thereof from the FINRA.

 

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

 

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

 

(ii)           Registration Statement. The Registration Statement is effective
and neither the Company nor the Investor shall have received notice that the
Commission has issued or intends to issue a stop order with respect to the
Registration Statement. The Company shall have a maximum dollar amount certain
of Common Stock registered under the Registration Statement which (A) as of the
Effective Date, is sufficient to issue to the Investor not less than (1) the
Total Commitment plus (2) the Commitment Shares and (B) as of the applicable
Fixed Request Exercise Date and the applicable Settlement Date, is sufficient to
issue to the Investor not less than the maximum dollar amount worth of Shares
issuable pursuant to the applicable Fixed Request Notice and applicable Optional
Amount, if any. As of the Effective Date, the

 

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applicable Fixed Request Exercise Date and the applicable Settlement Date, the
Investor shall be permitted to utilize the Prospectus to resell all of the
Securities it then owns or has the right to acquire pursuant to all Fixed
Request Notices issued pursuant to this Agreement (subject, in the case of the
Commitment Shares, to the proviso to clause (i) of Section 2.13). The Current
Report shall have been filed with the Commission, as required pursuant to
Section 1.4, and all Prospectus Supplements shall have been filed with the
Commission, as required pursuant to Sections 1.4 and 5.9 hereof, to disclose the
sale of the Shares prior to each Settlement Date, as applicable, and an
electronic copy of each such Prospectus Supplement together with the Base
Prospectus shall have been delivered or made available to the Investor in
accordance with Section 5.9 hereof. Any other material required to be filed by
the Company or any other offering participant pursuant to Rule 433(d) under the
Securities Act shall have been filed with the Commission within the applicable
time periods prescribed for such filings by Rule 433 under the Securities Act.

 

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

 

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

 

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

 

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

 

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(vii)         Aggregate Limit.  The issuance and sale of the Shares issuable
pursuant to such Fixed Request Notice or Optional Amount shall not violate
Sections 2.2, 2.12, 2.14, 4.18(ii) and 5.5 hereof.

 

(viii)        Shares Authorized and Delivered. The Shares issuable pursuant to
such Fixed Request Notice or Optional Amount shall have been duly authorized by
all necessary corporate action of the Company. The Company shall have delivered
all Shares relating to all prior Fixed Request Notices and Optional Amounts, as
applicable.

 

(ix)           Listing of Shares and Commitment Shares. All Commitment Shares
shall have been approved for listing or quotation on the Trading Market as of
the Effective Date. The Company shall have submitted to the Trading Market, at
or prior to the applicable Fixed Request Exercise Date, a notification form of
listing of additional shares related to the Shares issuable pursuant to such
Fixed Request and Optional Amount, in accordance with the bylaws, listed
securities maintenance standards and other rules of the Trading Market and,
prior to the applicable Settlement Date, such Shares shall have been approved
for listing or quotation on the Trading Market, subject only to notice of
issuance.

 

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

 

(xi)           No Unresolved FINRA Objection.  There shall not exist any
unresolved objection raised by the FINRA’s Corporate Financing Department with
respect to the fairness and reasonableness of the terms of the transactions
contemplated by this Agreement, and the parties hereto and Reedland shall have
obtained written confirmation thereof from the FINRA.

 

(xii)          Payment of Investor’s Counsel Fees.  On the Effective Date, the
Company shall have paid by wire transfer of immediately available funds to an
account designated by the Investor’s counsel, the fees and expenses of the
Investor’s counsel in accordance with clause (B) of the proviso to the first
sentence of Section 9.1(i) of this Agreement.

 

ARTICLE VII

TERMINATION

 

Section 7.1            Term, Termination by Mutual Consent.  Unless earlier
terminated as provided hereunder, this Agreement shall terminate automatically
on the earliest of (i) the first day of the month next following the 18-month
anniversary of the Effective Date (the “Investment Period”), (ii) the date that
the entire dollar amount of Common Stock registered under the Registration
Statement have been issued and sold and (iii) the date the Investor shall have
purchased the Total Commitment of shares of Common Stock (subject in all cases
to the Trading Market Limit, except as expressly provided in Section 2.14).
Subject to Section 7.3, this Agreement may be terminated at any time (A) by the
mutual written consent of the parties,

 

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effective as of the date of such mutual written consent unless otherwise
provided in such written consent, it being hereby acknowledged and agreed that
the Investor may not consent to such termination during a Pricing Period or
prior to a Settlement Date in the event the Investor has instructed the
Broker-Dealer to effect an open-market sale of Shares which are subject to a
pending Fixed Request Notice but which have not yet been physically delivered by
the Company (and/or credited by book-entry) to the Investor in accordance with
the terms and subject to the conditions of this Agreement, or (B) by either the
Company or the Investor effective upon written notice to the other party under
Section 9.4, if the FINRA’s Corporate Financing Department has raised any
objection with respect to the fairness and reasonableness of the terms of the
transactions contemplated by this Agreement, or has otherwise failed to confirm
in writing that it has determined not to raise any such objection, and such
objection shall not have been resolved, or such confirmation of no objection
shall not have been obtained, prior to (1) the 60th day immediately following
the Effective Date, in the case of an objection raised or confirmation failure
occurring prior to the first Fixed Request Exercise Date, or (2) prior to the
60th day immediately following the receipt by the Company or the Investor of
notice of such objection, in the case of an objection raised after the first
Fixed Request Exercise Date; provided however, that (x) the party seeking to
terminate this Agreement pursuant to this clause (B) of Section 7.1 shall have
used its commercially reasonable efforts to resolve such objection and/or to
obtain such confirmation of no objection in accordance with and subject to the
provisions of Section 5.1(ii) of this Agreement and (y) the right to terminate
this Agreement pursuant to this clause (B) of Section 7.1 shall not be available
to any party whose action or failure to act has been a principal cause of, or
has resulted in, such objection or confirmation failure and such action or
failure to act constitutes a breach of this Agreement. Subject to Section 7.3,
the Company may terminate this Agreement effective upon three Trading Days’
prior written notice to the Investor delivered in accordance with Section 9.4;
provided, however, that (i) such termination shall not occur during a Pricing
Period or, subsequent to the issuance of a Fixed Request Notice, prior to the
Settlement Date related to such Fixed Request Notice, and (ii) prior to issuing
any press release, or making any public statement or announcement, with respect
to such termination, the Company shall consult with the Investor and shall
obtain the Investor’s consent to the form and substance of such press release or
other disclosure, which consent shall not be unreasonably delayed or withheld.

 

Section 7.2            Other Termination.  If the Company provides the Investor
with an Other Financing Notice or an Integration Notice, in each case pursuant
to Section 5.6(ii) of this Agreement, or if the Company otherwise enters into
any agreement, plan, arrangement or transaction with a third party or determines
to utilize any existing agreement, plan or arrangement with a third party, in
each case the principal purpose of which is to implement, effect or consummate
outside a Pricing Period, but otherwise during the Investment Period, a Similar
Financing, an ATM or a Price Reset Provision (in which case the Company shall so
notify the Investor within 48 hours thereof), then in all such cases, subject to
Section 7.3, the Investor shall have the right to terminate this Agreement
within the subsequent 30-day period (the “Event Period”), effective upon one
Trading Day’s prior written notice delivered to the Company in accordance with
Section 9.4 at any time during the Event Period.  The Company shall promptly
(but in no event later than 24 hours) notify the Investor (and, if required
under applicable law, including, without limitation, Regulation FD promulgated
by the Commission, or under the applicable rules and regulations of the Trading
Market, the Company shall publicly disclose such information in accordance with
Regulation FD and the applicable rules and

 

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regulations of the Trading Market), and, subject to Section 7.3, the Investor
shall have the right to terminate this Agreement at any time after receipt of
such notification, if: (i) any condition, occurrence, state of facts or event
constituting a Material Adverse Effect has occurred; (ii) a Fundamental
Transaction has occurred or the Company enters into a definitive agreement
providing for a Fundamental Transaction; or (iii) a default or event of default
has occurred and is continuing under the terms of any agreement, contract, note
or other instrument to which the Company or any of its Subsidiaries is a party
with respect to any indebtedness for borrowed money representing more than 10%
of the Company’s consolidated assets, in any such case, upon one Trading Day’s
prior written notice delivered to the Company in accordance with Section 9.4
hereof.

 

Section 7.3            Effect of Termination.  In the event of termination by
the Company or the Investor pursuant to Section 7.1 or 7.2, as applicable,
written notice thereof shall forthwith be given to the other party as provided
in Section 9.4 and the transactions contemplated by this Agreement shall be
terminated without further action by either party. If this Agreement is
terminated as provided in Section 7.1 or 7.2 herein, this Agreement shall become
void and of no further force and effect, except that (i) the provisions of
Article VIII (Indemnification), Section 9.1 (Fees and Expenses), Section 9.2
(Specific Enforcement, Consent to Jurisdiction, Waiver of Jury Trial),
Section 9.4 (Notices), Section 9.8 (Governing Law), Section 9.9 (Survival),
Section 9.11 (Publicity), Section 9.12 (Severability) and this Article VII
(Termination) shall remain in full force and effect notwithstanding such
termination, (ii) if the Investor owns any Securities at the time of such
termination, the covenants and agreements of the Company and the Investor, as
applicable, contained in Section 5.1(i) (Securities Compliance; FINRA Filing),
Section 5.3 (Compliance with Laws), Section 5.7 (Stop Orders), Section 5.8
(Amendments to the Registration Statement; Prospectus Supplements; Free Writing
Prospectuses), Section 5.9 (Prospectus Delivery), Section 5.11 (Effective
Registration Statement), Section 5.12 (Non-Public Information) and 5.13
(Broker/Dealer) shall remain in full force and effect notwithstanding such
termination for a period of six months following such termination, (iii) the
covenants and agreements of the Investor contained in Section 5.10 (Selling
Restrictions) shall remain in full force and effect notwithstanding such
termination for a period of 90 days following such termination, and (iv) if the
Investor owns any Securities at the time of such termination, the covenants and
agreements of the Company contained in Section 5.2 (Registration and Listing)
shall remain in full force and effect notwithstanding such termination for a
period of 30 days following such termination. Notwithstanding anything in this
Agreement to the contrary, no termination of this Agreement by any party shall
(a) affect any Commitment Shares, or any rights of any holder thereof (it being
hereby acknowledged and agreed that all of the Commitment Shares shall be fully
earned as of the Effective Date, regardless of whether any Fixed Requests are
issued by the Company or settled hereunder), or (b) affect any cash fees paid to
the Investor or its counsel pursuant to Section 9.1, in each case all of which
fees shall be non-refundable, regardless of whether any Fixed Requests are
issued by the Company or settled hereunder. Nothing in this Section 7.3 shall be
deemed to release the Company or the Investor from any liability for any breach
under this Agreement or to impair the rights of the Company and the Investor to
compel specific performance by the other party of its obligations under this
Agreement.

 

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ARTICLE VIII
INDEMNIFICATION

 

Section 8.1            General Indemnity.

 

(i)            Indemnification by the Company.  The Company shall indemnify and
hold harmless the Investor, each Affiliate, employee, representative and advisor
of and to the Investor, and each person, if any, who controls the Investor
within the meaning of Section 15 of the Securities Act or Section 20(a) of the
Exchange Act from and against all losses, claims, damages, liabilities and
expenses (including reasonable costs of defense and investigation and all
attorneys’ fees) to which the Investor and each such other person may become
subject, under the Securities Act or otherwise, insofar as such losses, claims,
damages, liabilities and expenses (or actions in respect thereof) arise out of
or are based upon (a) any violation of United States federal or state securities
laws or the rules and regulations of the Trading Market in connection with the
transactions contemplated by this Agreement by the Company or any of its
Subsidiaries, affiliates, officers, directors or employees, (b) any untrue
statement or alleged untrue statement of a material fact contained, or
incorporated by reference, in the Registration Statement or any amendment
thereto or any omission or alleged omission to state therein, or in any document
incorporated by reference therein, a material fact required to be stated therein
or necessary to make the statements therein not misleading, or (c) any untrue
statement or alleged untrue statement of a material fact contained, or
incorporated by reference, in the Prospectus, any Issuer Free Writing
Prospectus, or in any amendment thereof or supplement thereto, or in any “issuer
information” (as defined in Rule 433 under the Securities Act) of the Company,
which “issuer information” is required to be, or is, filed with the Commission
or otherwise contained in any Free Writing Prospectus, or any amendment or
supplement thereto, or any omission or alleged omission to state therein, or in
any document incorporated by reference therein, a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided, however,
that (A) the Company shall not be liable under this Section 8.1(i) to the extent
that a court of competent jurisdiction shall have determined by a final judgment
(from which no further appeals are available) that such loss, claim, damage,
liability or expense resulted directly and solely from any such acts or failures
to act, undertaken or omitted to be taken by the Investor or such person through
its bad faith or willful misconduct, (B) the foregoing indemnity shall not apply
to any loss, claim, damage, liability or expense to the extent, but only to the
extent, arising out of or based upon any untrue statement or alleged untrue
statement or omission or alleged omission made in reliance upon and in
conformity with written information furnished to the Company by the Investor
expressly for use in the Current Report or any Prospectus Supplement or
Permitted Free Writing Prospectus, or any amendment thereof or supplement
thereto, and (C) with respect to the Prospectus, the foregoing indemnity shall
not inure to the benefit of the Investor or any such person from whom the person
asserting any loss, claim, damage, liability or expense purchased Common Stock,
if copies of all Prospectus Supplements required to be filed pursuant to
Section 1.4 and 5.9, together with the Base Prospectus, were timely delivered or
made available to the Investor pursuant hereto and a copy of the Base
Prospectus, together with a Prospectus Supplement (as applicable), was not sent
or given by or on behalf of the Investor or any such person to such person, if
required by law to have been delivered, at or prior to the written confirmation
of the sale of the Common Stock to such person, and if delivery of the Base
Prospectus, together with a Prospectus Supplement (as applicable), would have
cured the defect giving rise to such loss, claim, damage, liability or expense.

 

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

 

(ii)           Indemnification by the Investor. The Investor shall indemnify and
hold harmless the Company, each of its directors and officers, and each person,
if any, who controls the Company within the meaning of Section 15 of the
Securities Act or Section 20(a) of the Exchange Act from and against all losses,
claims, damages, liabilities and expenses (including reasonable costs of defense
and investigation and all attorneys fees) to which the Company and each such
other person may become subject, under the Securities Act or otherwise, insofar
as such losses, claims, damages, liabilities and expenses (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the Current Report or any Prospectus
Supplement or Permitted Free Writing Prospectus, or in any amendment thereof or
supplement thereto, or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, in each case, to the extent, but only to the extent, the untrue
statement, alleged untrue statement, omission or alleged omission was made in
reliance upon, and in conformity with, written information furnished by the
Investor to the Company expressly for inclusion in the Current Report or such
Prospectus Supplement or Permitted Free Writing Prospectus, or any amendment
thereof or supplement thereto.

 

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

 

Section 8.2            Indemnification Procedures.  Promptly after a person
receives notice of a claim or the commencement of an action for which the person
intends to seek indemnification under Section 8.1, the person will notify the
indemnifying party in writing of the claim or commencement of the action, suit
or proceeding; provided, however, that failure to notify the indemnifying party
will not relieve the indemnifying party from liability under Section 8.1, except
to the extent it has been materially prejudiced by the failure to give notice. 
The indemnifying party will be entitled to participate in the defense of any
claim, action, suit or proceeding as to which indemnification is being sought,
and if the indemnifying party acknowledges in writing the obligation to
indemnify the party against whom the claim or action is brought, the
indemnifying party may (but will not be required to) assume the defense against
the claim, action, suit or proceeding with counsel satisfactory to it.  After an
indemnifying party notifies an indemnified party that the indemnifying party
wishes to assume the defense of a claim, action, suit or proceeding, the
indemnifying party will not be liable for any legal or other expenses incurred
by the indemnified party in connection with the defense against the claim,

 

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action, suit or proceeding except that if, in the opinion of counsel to the
indemnifying party, one or more of the indemnified parties should be separately
represented in connection with a claim, action, suit or proceeding, the
indemnifying party will pay the reasonable fees and expenses of one separate
counsel for the indemnified parties.  Each indemnified party, as a condition to
receiving indemnification as provided in Section 8.1, will cooperate in all
reasonable respects with the indemnifying party in the defense of any action or
claim as to which indemnification is sought.  No indemnifying party will be
liable for any settlement of any action effected without its prior written
consent.  Notwithstanding the foregoing sentence, if at any time an indemnified
party shall have requested (by written notice provided in accordance with
Section 9.4) an indemnifying party to reimburse the indemnified party for fees
and expenses of counsel, such indemnifying party agrees that it shall be liable
for any settlement of the nature contemplated hereby effected without its
written consent if (i) such settlement is entered into more than 45 days after
receipt by such indemnifying party of the aforesaid request, (ii) such
indemnifying party shall have received written notice of the terms of such
settlement at least 30 days prior to such settlement being entered into and
(iii) such indemnifying party shall not have reimbursed such indemnified party
in accordance with such request prior to the date of such settlement.  No
indemnifying party will, without the prior written consent of the indemnified
party, effect any settlement of a pending or threatened action with respect to
which an indemnified party is, or is informed that it may be, made a party and
for which it would be entitled to indemnification, unless the settlement
includes an unconditional release of the indemnified party from all liability
and claims which are the subject matter of the pending or threatened action.

 

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

 

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

 

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ARTICLE IX
MISCELLANEOUS

 

Section 9.1            Fees and Expenses.

 

(i)            Each party shall bear its own fees and expenses related to the
transactions contemplated by this Agreement; provided, however, that the Company
shall pay, on the Effective Date, by wire transfer of immediately available
funds (A) to the FINRA, the applicable filing fee with respect to the FINRA
Filing and (B) to an account designated by the Investor’s counsel, promptly
following the receipt of an invoice therefor, all reasonable attorneys’ fees and
expenses (exclusive of disbursements and out-of-pocket expenses) incurred by the
Investor, up to $25,000, in connection with the preparation, negotiation,
execution and delivery of this Agreement, legal due diligence of the Company and
review of the Registration Statement, the Base Prospectus, the Current Report,
any Permitted Free Writing Prospectus and all other related transaction
documentation. The Company shall pay all U.S. federal, state and local stamp and
other similar transfer and other taxes and duties levied in connection with
issuance of the Securities pursuant hereto. For the avoidance of doubt, all of
the fees payable to the Investor or its counsel pursuant to this Section 9.1
shall be non-refundable, regardless of whether any Fixed Requests are issued by
the Company or settled hereunder.

 

(ii)           If the Company issues a Fixed Request Notice and fails to deliver
the Shares (which have been approved for listing or quotation on the Trading
Market) to the Investor on the applicable Settlement Date and such failure
continues for 10 Trading Days, the Company shall pay the Investor, in cash (or,
at the option of the Investor, in shares of Common Stock which have not been
registered under the Securities Act valued at the applicable Discount Price of
the Shares failed to be delivered; provided that the issuance thereof by the
Company would not violate the Securities Act or any applicable U.S. state
securities laws), as partial damages for such failure and not as a penalty, an
amount equal to 2.0% of the payment required to be paid by the Investor on such
Settlement Date (i.e., the sum of the Fixed Amount Requested and the Optional
Amount Dollar Amount) for the initial 30 days following such Settlement Date
until the Shares (which have been approved for listing or quotation on the
Trading Market) have been delivered, and an additional 2.0% for each additional
30-day period thereafter until the Shares (which have been approved for listing
or quotation on the Trading Market) have been delivered, which amount shall be
prorated for such periods less than 30 days (subject in all cases to the Trading
Market Limit, except as expressly provided in Section 2.14). Nothing in this
Section 9.1(ii) shall be deemed to release the Company from any liability for
any breach under this Agreement, or to impair the rights of the Investor to
compel specific performance by the Company of its obligations under this
Agreement.

 

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

 

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

 

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(ii)           Each of the Company and the Investor (a) hereby irrevocably
submits to the jurisdiction of the United States District Court and other courts
of the United States sitting in the City and State of New York, Borough of
Manhattan, for the purposes of any suit, action or proceeding arising out of or
relating to this Agreement, and (b) hereby waives, and agrees not to assert in
any such suit, action or proceeding, any claim that it is not personally subject
to the jurisdiction of such court, that the suit, action or proceeding is
brought in an inconvenient forum or that the venue of the suit, action or
proceeding is improper. Each of the Company and the Investor consents to process
being served in any such suit, action or proceeding by mailing a copy thereof to
such party at the address in effect for notices to it under this Agreement and
agrees that such service shall constitute good and sufficient service of process
and notice thereof. Nothing in this Section 9.2 shall affect or limit any right
to serve process in any other manner permitted by law.

 

(iii)          EACH OF THE COMPANY AND THE INVESTOR HEREBY WAIVES TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN
RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
DISPUTES RELATING HERETO. EACH OF THE COMPANY AND THE INVESTOR (A) CERTIFIES
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT
AND THE OTHER PARTIES HERETO HAVE BEEN TO ENTER INTO THIS AGREEMENT BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.2.

 

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

 

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

 

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If to the Company:

Poniard Pharmaceuticals, Inc.

 

750 Battery Street, Suite 330

 

San Francisco, California 94111

 

Telephone Number: (650) 583-3774

 

Fax: (650) 583-3789

 

Attention: Chief Financial Officer

 

 

With copies to:

Perkins Coie LLP

 

1201 Third Avenue, Suite 4800

 

Seattle, Washington 98101-3099

 

Telephone Number: (206) 359-8000

 

Fax: (206) 359-9000

 

Attention: Faith M. Wilson, Esq.

 

 

If to the Investor:

Small Cap Biotech Value, Ltd.

 

4th Floor, Rodus Building

 

Road Reef

 

Road Town, Tortola

 

British Virgin Islands

 

Telephone Number: (284) 494-8086

 

Fax: (284) 494-9474

 

Attention: Peter W. Poole

 

 

With copies to:

Greenberg Traurig, LLP

 

The MetLife Building

 

200 Park Avenue

 

New York, NY 10166

 

Telephone Number: (212) 801-9200

 

Fax: (212) 801-6400

 

Attention: Anthony J. Marsico, Esq.

 

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

 

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

 

Section 9.6            Headings; Construction.  The article, section and
subsection headings in this Agreement are for convenience only and shall not
constitute a part of this Agreement for any other purpose and shall not be
deemed to limit or affect any of the provisions hereof. Unless the context
clearly indicates otherwise, each pronoun herein shall be deemed to include the
masculine, feminine, neuter, singular and plural forms thereof. The terms
“including,”

 

43

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“includes,” “include” and words of like import shall be construed broadly as if
followed by the words “without limitation.”  The terms “herein,” “hereunder,”
“hereof” and words of like import refer to this entire Agreement instead of just
the provision in which they are found. The parties agree that each of them and
their respective counsel has reviewed and had an opportunity to revise this
Agreement and, therefore, the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of this Agreement. In addition, each and every reference
to share prices and shares of Common Stock in this Agreement shall be subject to
adjustment for any stock splits, stock combinations, stock dividends,
recapitalizations and other similar transactions that occur on or after the date
of this Agreement.

 

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

 

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

 

Section 9.9            Survival.  The representations, warranties, covenants and
agreements of the Company and the Investor contained in this Agreement shall
survive the execution and delivery hereof until the termination of this
Agreement; provided, however, that (i) the provisions of Article VII
(Termination), Article VIII (Indemnification), Section 9.1 (Fees and Expenses),
Section 9.2 (Specific Enforcement, Consent to Jurisdiction, Waiver of Jury
Trial), Section 9.4 (Notices), Section 9.8 (Governing Law), Section 9.11
(Publicity), Section 9.12 (Severability) and this Section 9.9 (Survival) shall
remain in full force and effect notwithstanding such termination, (ii) if the
Investor owns any Securities at the time of such termination, the covenants and
agreements of the Company and the Investor, as applicable, contained in
Section 5.1(i) (Securities Compliance; FINRA Filing), Section 5.3 (Compliance
with Laws), Section 5.7 (Stop Orders), Section 5.8 (Amendments to the
Registration Statement; Prospectus Supplements; Free Writing Prospectuses),
Section 5.9 (Prospectus Delivery), Section 5.11 (Effective Registration
Statement), Section 5.12 (Non-Public Information) and 5.13 (Broker/Dealer) shall
remain in full force and effect notwithstanding such termination for a period of
six months following such termination, (iii) the covenants and agreements of the
Investor contained in Section 5.10 (Selling Restrictions) shall remain in full
force and effect notwithstanding such termination for a period of 90 days
following such termination, and (iv) if the Investor owns any Securities at the
time of such termination, the covenants and agreements of the Company contained
in Section 5.2 (Registration and Listing) shall remain in full force and effect
notwithstanding such termination for a period of 30 days following such
termination.

 

Section 9.10         Counterparts.  This Agreement may be executed in
counterparts, all of which taken together shall constitute one and the same
original and binding instrument and shall become effective when all counterparts
have been signed by each party and delivered to the other parties hereto, it
being understood that all parties hereto need not sign the same counterpart. In

 

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the event any signature is delivered by facsimile, digital or electronic
transmission, such transmission shall constitute delivery of the manually
executed original and the party using such means of delivery shall thereafter
cause four additional executed signature pages to be physically delivered to the
other parties within five days of the execution and delivery hereof.  Failure to
provide or delay in the delivery of such additional executed signature
pages shall not adversely affect the efficacy of the original delivery.

 

Section 9.11         Publicity.  The Investor shall have the right to approve,
prior to issuance or filing, any press release, Commission filing or any other
public disclosure made by or on behalf of the Company relating to the Investor,
its purchases hereunder or any aspect of this Agreement or the transactions
contemplated hereby (unless the same disclosure has been previously reviewed and
approved by the Investor); provided, however, that except as otherwise provided
in this Agreement, the Company shall be entitled, without the prior approval of
the Investor, to make any press release or other public disclosure (including
any filings with the Commission) with respect thereto as is required by
applicable law and regulations (including the regulations of the Trading
Market), so long as prior to making any such press release or other public
disclosure, if reasonably practicable, the Company and its counsel shall have
provided the Investor and its counsel with a reasonable opportunity to review
and comment upon, and shall have consulted with the Investor and its counsel on
the form and substance of, such press release or other disclosure.

 

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

 

Section 9.13         No Third Party Beneficiaries. Except as expressly provided
in Article VIII, this Agreement is intended only for the benefit of the parties
hereto and their respective permitted successors and assigns, and is not for the
benefit of, nor may any provision hereof be enforced by, any other person.

 

Section 9.14         Further Assurances.  From and after the date of this
Agreement, upon the request of the Investor or the Company, each of the Company
and the Investor shall execute and deliver such instrument, documents and other
writings as may be reasonably necessary or desirable to confirm and carry out
and to effectuate fully the intent and purposes of this Agreement.

 

[Signature Page Follows]

 

45

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

 

 

 

PONIARD PHARMACEUTICALS, INC.:

 

 

 

 

 

 

 

By:

/s/ Michael K. Jackson

 

 

Name: Michael K. Jackson

 

 

Title: Interim Chief Financial Officer

 

 

 

 

 

 

 

SMALL CAP BIOTECH VALUE, LTD.:

 

 

 

 

 

 

 

By:

/s/ Peter W. Poole

 

 

Name: Peter W. Poole

 

 

Title: Director

 

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ANNEX A TO THE
COMMON STOCK PURCHASE AGREEMENT
DEFINITIONS

 

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

 

“Affiliate” shall have the meaning assigned to such term in Rule 12b-2 under the
Exchange Act.

 

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

 

“Agreement” shall have the meaning assigned to such term in the Preamble.

 

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

 

“Average Discount Price” shall have the meaning assigned to such term in
Section 2.14 hereof.

 

“Base Price” shall have the meaning assigned to such term in Section 2.14
hereof.

 

“Base Prospectus” shall mean the Company’s prospectus, dated February 23, 2010,
a preliminary form of which is included in the Registration Statement, including
the documents incorporated by reference therein.

 

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

 

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

 

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

 

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

 

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

 

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

 

“Commission Documents” shall mean (1) all reports, schedules, registrations,
forms, statements, information and other documents filed by the Company with the
Commission pursuant to the reporting requirements of the Exchange Act, including
all material filed pursuant to Section 13(a) or 15(d) of the Exchange Act, which
have been filed by the Company since December 31, 2009 and which hereafter shall
be filed by the Company during the Investment Period, including, without
limitation, the Current Report and the Form 10-K filed by the Company for its
fiscal year ended December 31, 2009 (the “2009 Form 10-K”), (2) the Registration
Statement, as the same may be amended from time to time, the Prospectus and each
Prospectus Supplement, and each Permitted Free Writing Prospectus and (3) all
information

 

A-1

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contained in such filings and all documents and disclosures that have been and
heretofore shall be incorporated by reference therein.

 

“Commitment Shares” means 221,218 shares of duly authorized, validly issued,
fully paid and non-assessable shares of Common Stock which, concurrently with
the execution and delivery of this Agreement on the Effective Date, the Company
has caused its transfer agent to electronically transfer to the Investor not
later than 4:00 p.m. (New York time) on the second Trading Day immediately
following the Effective Date.

 

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

 

“Company” shall have the meaning assigned to such term in the Preamble.

 

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

 

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

 

“Disclosure Schedule” shall have the meaning assigned to such term in Article IV
hereof.

 

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

 

“EDGAR” shall have the meaning assigned to such term in Section 4.3 hereof.

 

“Effective Date” shall mean the date of this Agreement.

 

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

 

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

 

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

 

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

 

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

 

“FINRA” shall have the meaning assigned to such term in Section 4.5 hereof.

 

“FINRA Filing” shall have the meaning assigned to such term in Section 5.1
hereof.

 

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

 

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

 

A-2

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

 

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

 

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

 

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

 

“Fundamental Transaction” means any one or more of the following: (i) the
Company shall, directly or indirectly, in one or more related transactions,
(1) consolidate or merge with or into (whether or not the Company is the
surviving corporation) another Person, with the result that the holders of the
Company’s capital stock immediately prior to such consolidation or merger
together beneficially own less than 50% of the outstanding voting power of the
surviving or resulting corporation, or (2) sell, lease, license, assign,
transfer, convey or otherwise dispose of all or substantially all of the
properties or assets of the Company to another Person, or (3) allow another
Person to make a purchase, tender or exchange offer that is accepted by the
holders of more than 50% of the outstanding shares of Common Stock (not
including any shares of Common Stock held by the Person or Persons making or
party to, or associated or affiliated with the Persons making or party to, such
purchase, tender or exchange offer), or (4) consummate a stock or share purchase
agreement or other business combination (including, without limitation, a
reorganization, recapitalization, spin-off or scheme of arrangement) with
another Person whereby such other Person acquires more than 50% of the
outstanding shares of Common Stock (not including any shares of Common Stock
held by the other Person or other Persons making or party to, or associated or
affiliated with the other Persons making or party to, such stock or share
purchase agreement or other business combination), or (5) reorganize,
recapitalize or reclassify its Common Stock, or (ii) any “person” or “group” (as
these terms are used for purposes of Sections 13(d) and 14(d) of the Exchange
Act) is or shall become the “beneficial owner” (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of 50% of the aggregate ordinary
voting power represented by issued and outstanding Common Stock.

 

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

 

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

 

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

 

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

 

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

 

A-3

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

 

“Investor” shall have the meaning assigned to such term in the Preamble.

 

“Issuer Free Writing Prospectus” shall mean an “issuer free writing prospectus,”
as defined in Rule 433 promulgated under the Securities Act, relating to the
Securities that (i) is required to be filed with the Commission by the Company
or (ii) is exempt from filing pursuant to Rule 433(d)(5)(i) under the Securities
Act, in each case, in the form filed or required to be filed with the Commission
or, if not required to be filed, in the form retained in the Company’s records
pursuant to Rule 433(g) under the Securities Act.

 

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

 

“Material Adverse Effect” shall mean any condition, occurrence, state of facts
or event having, or insofar as reasonably can be foreseen would reasonably be
expected to have, any effect on the business, operations, properties or
condition (financial or otherwise) of the Company that is material and adverse
to the Company and its Subsidiaries, taken as a whole, and/or any condition,
occurrence, state of facts or event that would prohibit or otherwise materially
interfere with or delay the ability of the Company to perform any of its
obligations under this Agreement; provided, however, that none of the following,
individually or in the aggregate, shall be taken into account in determining
whether a Material Adverse Effect has occurred or insofar as reasonably can be
foreseen would reasonably be expected to occur: (i) changes in conditions in the
U.S. or global capital, credit or financial markets generally, including changes
in the availability of capital or currency exchange rates, provided such changes
shall not have affected the Company in a materially disproportionate manner as
compared to other similarly situated companies; (ii) changes generally affecting
the biotechnology or pharmaceutical industries, provided such changes shall not
have affected the Company in a materially disproportionate manner as compared to
other similarly situated companies; and (iii) any effect of the announcement of
this Agreement or the consummation of the transactions contemplated by this
Agreement on the Company’s relationships, contractual or otherwise, with
customers, suppliers, vendors, bank lenders, strategic venture partners or
employees.

 

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

 

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

 

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

 

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

 

A-4

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

 

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

 

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

 

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

 

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

 

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

 

“Price Reset Provision” shall have the meaning assigned to such term in
Section 5.6(ii) hereof.

 

“Pricing Period” shall mean a period of eight (8) consecutive Trading Days
commencing on the Pricing Period start date set forth in the Fixed Request
Notice, or such other period mutually agreed upon by the Investor and the
Company.

 

“Prospectus” shall mean the Base Prospectus, as supplemented by any Prospectus
Supplement, including the documents incorporated by reference therein, together
with any Permitted Free Writing Prospectus.

 

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

 

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

 

“Reedland” shall have the meaning assigned to such term in Section 4.13 hereof.

 

“Reference Period” shall have the meaning assigned to such term in
Section 5.6(ii) hereof.

 

“Registration Statement” shall mean the registration statement on Form S 3,
Commission File Number 333-159253, filed by the Company with the Commission
under the Securities Act for the registration of the Shares, as such
Registration Statement may be amended and supplemented from time to time
(including any related registration statement filed pursuant to
Rule 462(b) under the Securities Act), including all documents filed as part
thereof or incorporated by reference therein, and including all information
deemed to be a part thereof at the time of effectiveness pursuant to Rule 430A,
Rule 430B or Rule 430C under the Securities Act.

 

A-5

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

 

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

 

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

 

“Securities” shall mean, collectively, the Shares and the Commitment Shares.

 

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

 

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

 

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

 

“Short Sales” means “short sales” as defined in Rule 200 promulgated under
Regulation SHO under the Exchange Act.

 

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

 

“Signing Market Price” shall have the meaning assigned to such term in
Section 2.14 hereof.

 

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

 

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

 

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

 

“Threshold Price” is the lowest price (except to the extent otherwise provided
in Section 2.6) at which the Company may sell Shares during the applicable
Pricing Period as set forth in a Fixed Request Notice (not taking into account
the applicable percentage discount during such Pricing Period determined in
accordance with Section 2.2); provided, however, that at no time shall the
Threshold Price be lower than $0.20 per share unless the Company and the
Investor shall mutually agree.

 

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

 

A-6

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

 

“Trading Market” means the Nasdaq Stock Market (or any successors thereto).

 

“Trading Market Limit” means, at any time, 9,444,116 shares of duly authorized,
validly issued, fully paid and non-assessable shares of Common Stock (as
adjusted for any stock splits, stock combinations, stock dividends,
recapitalizations and other similar transactions that occur on or after the date
of this Agreement); provided, however, that the Trading Market Limit shall not
exceed under any circumstances that number of shares of Common Stock that the
Company may issue pursuant to this Agreement and the transactions contemplated
hereby without (a) breaching the Company’s obligations under the rules and
regulations of the Trading Market or (b) obtaining stockholder approval under
the applicable rules and regulations of the Trading Market.

 

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

 

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

 

A-7

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EXHIBIT A TO THE
COMMON STOCK PURCHASE AGREEMENT
FORM OF FIXED REQUEST NOTICE

 

Reference is made to the Common Stock Purchase Agreement dated as of
December 20, 2010, (the “Purchase Agreement”) between Poniard
Pharmaceuticals, Inc., a corporation organized and existing under the laws of
the State of Washington (the “Company”), and Small Cap Biotech Value, Ltd., a
business company incorporated under the laws of the British Virgin Islands.
Capitalized terms used and not otherwise defined herein shall have the meanings
given such terms in the Purchase Agreement.

 

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

 

Fixed Amount Requested:

 

 

 

 

 

Optional Amount Dollar Amount:

 

 

 

 

 

Pricing Period start date:

 

 

 

 

 

Pricing Period end date:

 

 

 

 

 

Settlement Date:

 

 

 

 

 

Fixed Request Threshold Price:

 

 

 

 

 

Optional Amount Threshold Price:

 

 

 

 

 

Dollar Amount of Common Stock Currently Unissued under the Registration
Statement

 

 

 

 

 

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

 

 

 

 

 

 

Dated:

 

 

 

By:

 

 

 

 

 

Name:

 

 

 

 

Title:

 

 

 

 

 

 

 

 

 

Address:

 

 

 

 

Facsimile No.:

 

AGREED AND ACCEPTED

 

By:

 

 

 

Name:

 

 

Title:

 

 

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EXHIBIT B TO THE
COMMON STOCK PURCHASE AGREEMENT
FORM OF OPTIONAL AMOUNT NOTICE

 

To:

 

 

 

Fax#:

 

 

 

 

Reference is made to the Common Stock Purchase Agreement dated as of
December 20, 2010 (the “Purchase Agreement”) between Poniard
Pharmaceuticals, Inc., a corporation organized and existing under the laws of
the State of Washington (the “Company”), and Small Cap Biotech Value, Ltd., a
business company incorporated under the laws of the British Virgin Islands (the
“Investor”). Capitalized terms used and not otherwise defined herein shall have
the meanings given such terms in the Purchase Agreement.

 

In accordance with and pursuant to Section 2.11 of the Purchase Agreement, the
Investor hereby issues this Optional Amount Notice to exercise an Optional
Amount for the Optional Amount Dollar Amount indicated below.

 

Optional Amount Dollar Amount Exercised

 

 

 

 

 

Number of Shares to be purchased

 

 

 

 

 

VWAP on the date hereof:

 

 

 

 

 

Discount Price:

 

 

 

 

 

Settlement Date:

 

 

 

 

 

Threshold Price:

 

 

 

 

 

Dated:

 

 

 

By:

 

 

 

 

 

Name:

 

 

 

 

Title:

 

 

 

 

 

 

 

 

 

Address:

 

 

 

 

Facsimile No.:

 

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EXHIBIT C TO THE
COMMON STOCK PURCHASE AGREEMENT
CERTIFICATE OF THE COMPANY

 

CLOSING CERTIFICATE

 

                   201

 

The undersigned, the [                      ] of Poniard Pharmaceuticals, Inc.,
a corporation organized and existing under the laws of the State of Washington
(the “Company”), delivers this certificate in connection with the Common Stock
Purchase Agreement, dated as of December 20, 2010 (the “Agreement”), by and
between the Company and Small Cap Biotech Value, Ltd., a business company
incorporated under the laws of the British Virgin Islands (the “Investor”), and
hereby certifies on the date hereof that (capitalized terms used herein without
definition have the meanings assigned to them in the Agreement):

 

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

 

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

 

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

 

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

 

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

 

 

 

 

By:

 

Title:

 

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EXHIBIT D TO THE
COMMON STOCK PURCHASE AGREEMENT
COMPLIANCE CERTIFICATE

 

In connection with the issuance of shares of common stock of Poniard
Pharmaceuticals, Inc., a corporation organized and existing under the laws of
the State of Washington (the “Company”), pursuant to the Fixed Request Notice,
dated [                          ], delivered by the Company to Small Cap
Biotech Value, Ltd. (the “Investor”) pursuant to Article II of the Common Stock
Purchase Agreement, dated as of December 20, 2010, by and between the Company
and the Investor (the “Agreement”), the undersigned hereby certifies as follows:

 

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

 

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

 

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

 

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

 

The undersigned has executed this Certificate this [      ] day of
[                      ], 201[    ].

 

 

By:

 

 

 

 

 

Name:

 

 

 

 

 

Title:

 

 

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DISCLOSURE SCHEDULE
RELATING TO THE COMMON STOCK
PURCHASE AGREEMENT, DATED AS OF DECEMBER 20, 2010
BETWEEN PONIARD PHARMACEUTICALS, INC. AND SMALL CAP BIOTECH VALUE, LTD.

 

This disclosure schedule is made and given pursuant to Article IV of the Common
Stock Purchase Agreement, dated as of December 20, 2010 (the “Agreement”), by
and between Poniard Pharmaceuticals, Inc., a Washington corporation (the
“Company”), and Small Cap Biotech Value, Ltd., a business company incorporated
under the laws of the British Virgin Islands.  Unless the context otherwise
requires, all capitalized terms are used herein as defined in the Agreement. 
The numbers below correspond to the section numbers of representations and
warranties in the Agreement most directly modified by the below exceptions.

 

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