Exhibit 10.1

Execution Copy
 
COMMON SHARE PURCHASE AGREEMENT
 
Dated July 23, 2010
 
by and between
 
XOMA LTD.
 
and
 
AZIMUTH OPPORTUNITY LTD.
 

 
 

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

 

TABLE OF CONTENTS
 
Page
 
Article I
PURCHASE AND SALE OF COMMON SHARES
   
Section 1.1
Purchase and Sale of Stock
1
 
Section 1.2
Effective Date; Settlement Dates
1
 
Section 1.3
The Shares
2
 
Section 1.4
Current Report; Prospectus Supplement
2
     
Article II
FIXED REQUEST TERMS; OPTIONAL AMOUNT3
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
4
 
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
8
     
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
9
 
Section 3.3
No Conflicts
9
 
Section 3.4
Information
10
 
Section 3.5
Financial Capability
10
     
Article IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY10
   
Section 4.1
Organization, Good Standing and Power
10
 
Section 4.2
Authorization, Enforcement
10
 
Section 4.3
Capitalization
11
 
Section 4.4
Issuance of Securities
11
 
Section 4.5
No Conflicts
11
 
Section 4.6
Commission Documents, Financial Statements
12
 
Section 4.7
Subsidiaries
13
 
Section 4.8
No Material Adverse Effect
13
 
Section 4.9
Indebtedness
14
 
Section 4.10
Title To Assets
14
 
Section 4.11
Actions Pending
14
 
Section 4.12
Compliance With Law
14

 
 
 
-i-

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

 
 

 
Section 4.13
Certain Fees
15
 
Section 4.14
Operation of Business
15
 
Section 4.15
Environmental Compliance
17
 
Section 4.16
Material Agreements
17
 
Section 4.17
Transactions With Affiliates.
18
 
Section 4.18
Securities Act; FINRA Conduct Rules
18
 
Section 4.19
Employees
20
 
Section 4.20
Use of Proceeds
20
 
Section 4.21
Investment Company Act Status
20
 
Section 4.22
ERISA
20
 
Section 4.23
Taxes
20
 
Section 4.24
Insurance
21
 
Section 4.25
Acknowledgement Regarding Investor’s Purchase of Securities
21
     
Article V
COVENANTS
21
 
Section 5.1
Securities Compliance
21
 
Section 5.2
Registration and Listing
21
 
Section 5.3
Compliance with Laws.
21
 
Section 5.4
Keeping of Records and Books of Account; Foreign Corrupt Practices Act
22
 
Section 5.5
Limitations on Holdings and Issuances
23
 
Section 5.6
Other Agreements and Other Financings.
23
 
Section 5.7
Stop Orders
25
 
Section 5.8
Amendments to the Registration Statement; Prospectus Supplements; Free Writing
Prospectuses
25
 
Section 5.9
Prospectus Delivery
26
 
Section 5.10
Selling Restrictions.
27
 
Section 5.11
Effective Registration Statement
27
 
Section 5.12
Non-Public Information
28
 
Section 5.13
Broker/Dealer
28
 
Section 5.14
Disclosure Schedule
28
     
Article VI
OPINION OF COUNSEL AND CERTIFICATE; CONDITIONS TO THE SALE AND PURCHASE OF THE
SHARES
28
 
Section 6.1
Issuance of Commitment Shares; Opinion of Counsel; Certificate
28
 
Section 6.2
Conditions Precedent to the Obligation of the Company
29
 
Section 6.3
Conditions Precedent to the Obligation of the Investor
30
     
Article VII
TERMINATION
33
 
Section 7.1
Term, Termination by Mutual Consent
33
 
Section 7.2
Other Termination
33
 
Section 7.3
Effect of Termination
34
     
Article VIII
INDEMNIFICATION
34
 
Section 8.1
General Indemnity.
34
 
Section 8.2
Indemnification Procedures
36
     

 
 
 
-ii-

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

 
 
Article IX
MISCELLANEOUS
37
 
Section 9.1
Fees and Expenses.
37
 
Section 9.2
Specific Enforcement, Consent to Jurisdiction, Waiver of Jury Trial
38
 
Section 9.3
Entire Agreement; Amendment
39
 
Section 9.4
Notices
39
 
Section 9.5
Waivers
40
 
Section 9.6
Headings
40
 
Section 9.7
Successors and Assigns
40
 
Section 9.8
Governing Law
41
 
Section 9.9
Survival
41
 
Section 9.10
Counterparts
41
 
Section 9.11
Publicity
41
 
Section 9.12
Severability
42
 
Section 9.13
Further Assurances
42
       
Annex A
Definitions
   

 
-iii-

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

 

COMMON SHARE PURCHASE AGREEMENT
 
This COMMON SHARE PURCHASE AGREEMENT, made and entered into on this 23rd day of
July 2010 (this “Agreement”), by and between Azimuth Opportunity Ltd., an
international business company incorporated under the laws of the British Virgin
Islands (the “Investor”), and XOMA Ltd., a company organized and existing under
the laws of Bermuda (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 $30,000,000 of newly
issued common shares of the Company, U.S. $0.0005 par value per share (“Common
Shares”), subject, in all cases, to the Trading Market Limit; and
 
WHEREAS, the offer and sale of the Common 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;
 
WHEREAS, in consideration for the Investor’s execution and delivery of this
Agreement, the Company is concurrently issuing to the Investor the Commitment
Shares, upon the terms and subject to the conditions set forth in this
Agreement;
 
NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree
as follows:
 
ARTICLE I
PURCHASE AND SALE OF COMMON SHARES
 
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 $30,000,000
(the “Total Commitment”) of duly authorized, validly issued, fully paid and
non-assessable Common Shares (subject in all cases to the Trading Market Limit,
the “Aggregate Limit”), by (i) the delivery to the Investor of not more than 18
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 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 8:00 a.m., New York time, on the Effective Date.  In consideration of
and in express reliance upon the representations, warranties and covenants, and
otherwise upon the terms and subject to the conditions, of this Agreement, from
and after the Effective Date and during the Investment Period (i) the Company
shall issue and sell to the Investor, and the Investor agrees to purchase from
the Company, the Shares in respect of each Fixed Request and (ii) the Investor
may in its discretion elect to purchase Shares in respect of each Optional
Amount.  The issuance and sale of Shares to the Investor pursuant to any Fixed
Request or Optional Amount shall occur on the applicable Settlement Date in
accordance with Sections 2.7 and 2.9 (or on such Trading Day in accordance with
Section 2.8, as applicable), provided in each case that all of the conditions
precedent thereto set forth in Article VI theretofore shall have been fulfilled
or (to the extent permitted by applicable law) waived.
 
Section 1.3                      The Shares.  The Company has 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 Common Shares 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 a report on Form 8-K relating to the transactions
contemplated by, and describing the material terms and conditions of, this
Agreement (including, the issuance of the Commitment Shares to the Investor) and
disclosing all information relating to the transactions contemplated hereby
required to be disclosed in the Registration Statement and the Base Prospectus
(but which permissibly has been omitted therefrom in accordance with the
Securities Act), including, without limitation, information required to be
disclosed in the section captioned “Plan of Distribution” in the Base Prospectus
(the “Current Report”).  The Current Report shall include a copy of this
Agreement as an exhibit.  To the extent applicable, the Current Report shall be
incorporated by reference in the Registration Statement in accordance with the
provisions of Rule 430B under the Securities Act.  The Company heretofore has
provided the Investor a reasonable opportunity to comment on a draft of such
Current Report and has given due consideration to such comments.  The Company
shall file a final Base Prospectus pursuant to Rule 424(b) under the Securities
Act on or prior to the second Trading Day immediately following the Effective
Date. Pursuant to Section 5.9 and subject to the provisions of Section 5.8, on
the first Trading Day immediately following the last Trading Day of each Pricing
Period, the Company shall file with the Commission a Prospectus Supplement
pursuant to Rule 424(b) under the Securities Act disclosing the number of Shares
to be issued and sold to the Investor thereunder, the total purchase price
therefor and the net proceeds to be received by the Company therefrom and, to
the extent required by the Securities Act, identifying the Current Report.
 

 
2

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

 

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 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; provided, however, that if the Company
delivers the Fixed Request Notice to the Investor later than 9:30 a.m. (New York
time) on a Trading Day, then the first Trading Day of such Pricing Period shall
not be the Trading Day on which the Investor received such Fixed Request Notice,
but rather shall be the next Trading Day (unless a subsequent Trading Day is
therein specified). 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 Shares 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 $1.75
Not to exceed $10,937,500
96.00% of the VWAP
Equal to or greater than $1.50 and less than $1.75
Not to exceed $9,375,000
95.50% of the VWAP
Equal to or greater than $1.25 and less than $1.50
Not to exceed $7,812,500
95.00% of the VWAP
Equal to or greater than $1.00 and less than $1.25
Not to exceed $6,250,000
94.50% of the VWAP
Equal to or greater than $0.85 and less than $1.00
Not to exceed $5,312,500
94.00% of the VWAP
Equal to or greater than $0.70 and less than $0.85
Not to exceed $4,375,000
94.00% of the VWAP
Equal to or greater than $0.55 and less than $0.70
Not to exceed $3,437,500
94.00% of the VWAP
Equal to or greater than $0.40 and less than $0.55
Not to exceed $2,500,000
94.00% of the VWAP
Equal to or greater than $0.25 and less than $0.40
Not to exceed $1,562,500
94.00% of the VWAP
 

Anything to the contrary in this Agreement notwithstanding, at no time shall the
Investor be required to purchase more than $10,937,500 worth of Common Shares in
respect of any Pricing Period (not including Common Shares 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 = 0.10 (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 10, 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.

 
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 18 Fixed Requests during the
Investment Period.  Each Fixed Request automatically shall expire immediately
following the last Trading Day of each Pricing Period.
 

 
3

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

 

 
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 Shares on NASDAQ (or any other U.S. national securities exchange on
which the Common Shares are then listed) is suspended for any reason for more
than three hours on any Trading Day, the Investor may at its option deem the
price of the Common Shares 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 9:00 a.m. (New York
time) on any Trading Day during a Pricing Period (a “Reduction Notice”)
 

 
4

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

 

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 = 10 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 (provided that
such portion of the applicable Optional Amount, when combined with the portion
of the Optional Amount exercised during the reduced Pricing Period, does not
exceed the total Optional Amount set forth in the Fixed Request Notice) 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 Shares 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.
 

 
5

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

 

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 Shares 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 Common Shares 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 Common Shares 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 Shares 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
 

 
6

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

 

or Optional Amount that otherwise would permit the Investor to purchase Common
Shares 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 or number, as
the case may be, of Common Shares otherwise issuable pursuant to such Fixed
Request Notice or Optional Amount together with the dollar value or number, as
the case may be, of all other Common Shares 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, would be aggregated
with the transactions contemplated by this Agreement for purposes of determining
whether approval of the Company’s shareholders 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 shareholder 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 receipt by
the Investor of notice thereof from the Company, this Agreement may be amended
by the Company from time to time to reduce the Aggregate Limit by a specified
dollar amount of Common Shares which shall be no greater than is required to
enable the Company to utilize the Registration Statement to consummate an
underwritten public offering of Common Shares or a registered direct public
offering of Common Shares during the Investment Period; 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 Shares to the Investor in respect of a
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 receipt by the Investor of notice thereof from the
Company, the Company may subsequently amend this Agreement to increase the
Aggregate Limit up to $30,000,000; 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) $30,000,000,
subject in all cases to the Trading Market Limit.
 
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
 

 
7

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

 

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. 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.
 
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE INVESTOR
 
The Investor hereby makes the following representations and warranties to the
Company:
 
Section 3.1                      Organization and Standing of the Investor.  The
Investor is an international business company duly organized, validly existing
and in good standing under the laws of the British Virgin Islands.
 
Section 3.2                      Authorization and Power.  The Investor has the
requisite corporate power and authority to enter into and perform its
obligations under this Agreement and to purchase the Securities 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 shareholders 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, bye-laws 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
 

 
8

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

 

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 Securities in accordance with the terms hereof.
 
Section 3.4                      Information.  The Investor and its advisors
have been furnished with all materials relating to the business, financial
condition, management and operations of the Company and materials relating to
the offer and sale of the Securities which have been requested by the
Investor.  The Investor and its advisors have been afforded the opportunity to
ask questions of representatives of the Company.  The Investor has sought such
accounting, legal and tax advice as it has considered necessary to make an
informed investment decision with respect to its acquisition of the
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.
 
Section 3.5                      Financial Capability.  The Investor has the
financial capability to perform all of its obligations under this Agreement,
including the capability to purchase the Securities in accordance with the terms
hereof.
 
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 duly continued to, validly existing and in good standing under the
laws of Bermuda 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 the United States 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
Securities 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 shareholders 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
 

 
9

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

 

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 share capital
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 issued
and outstanding Common Shares 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 Common Shares 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 share capital of the Company, other than those issued or granted in the
ordinary course of business and consistent with past practice.  Except as set
forth in the Commission Documents, there were no contracts, commitments,
understandings, or arrangements by which the Company is or may become bound to
issue additional share capital of the Company or options, securities or rights
convertible into or exchangeable for any share capital 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 of the
share capital of the Company.  Except as set forth in the Commission Documents,
the offer and sale of all share capital, 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
shareholder 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 Memorandum of Continuance as in effect on the Effective Date (the
“Charter”), and the Company’s Bye-laws as in effect on the Effective Date (the
“Bye-laws”).
 
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 paid for 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 herein do not and shall not (i) result in a
violation of any provision of the Company’s Charter or Bye-laws, (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
 

 
10

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

 

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 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 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 Shares are 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
 

 
11

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

 

material respects with the requirements of the Securities Act or the Exchange
Act, as applicable, and other federal, state and local laws, rules and
regulations applicable to it, and shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
 
(b)           The financial statements, together with the related notes and
schedules, of the Company included in the Commission Documents comply as to form
in all material respects with all applicable accounting requirements and the
published rules and regulations of the Commission and all other applicable rules
and regulations with respect thereto.  Such financial statements, together with
the related notes and schedules, have been prepared in accordance with GAAP
applied on a consistent basis during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto or (ii) in
the case of unaudited interim statements, to the extent they may not include
footnotes or may be condensed or summary statements), and fairly present in all
material respects the financial condition of the Company and its consolidated
Subsidiaries as of the dates thereof and the results of operations and cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments).
 
(c)           The Company has timely filed with the Commission and made
available 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)           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 is an independent registered public accounting firm within
the meaning of SOXA as required by the rules of the Public Company Accounting
Oversight Board.
 
Section 4.7                      Subsidiaries.  The 2009 Form 10-K sets forth
each Subsidiary of the Company as of the Effective Date, showing its
jurisdiction of incorporation or organization, and the Company owns all of the
outstanding capital stock or other ownership interests of each such Subsidiary
and does not have any other Subsidiaries 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
 

 
12

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

 

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 March 31, 2010 sets forth, as of March
31, 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 $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 in writing, 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 shareholder 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.  With respect to each of
those certain actions under the caption “Item 3. Legal Proceedings” in the 2009
Form 10-K, there has been no event or change required to be disclosed in a
filing under the Exchange Act that has not been so disclosed.
 
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.
 

 
13

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

 

               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.
 
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 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
 

 
14

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

 

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,
and neither the Company nor any of its Subsidiaries knows of any basis
therefor.  This Section 4.14 does not relate to environmental matters, such
items being the subject of Section 4.15.
 
(b)           The Company or one or more of its Subsidiaries owns or possesses
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 as set forth in the Commission Documents or on Schedule 4.14(b)
hereto, 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
could render any Intellectual Property invalid or inadequate to protect the
interest of the Company and its Subsidiaries therein, and which infringement or
conflict (if the subject of any unfavorable decision, ruling or finding) or
invalidity or inadequacy, individually or in the aggregate, would have a
Material Adverse Effect.
 
(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 conducted, supervised or monitored by, or on
behalf of, the Company or any of its Subsidiaries have been conducted in
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.  Except as set forth in the Registration Statement or the
Commission Documents or as would not be likely to 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, 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,
 

 
15

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

 

were conducted in 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.
 
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 could reasonably
be expected to violate any Environmental Law after the Effective Date or that
could reasonably be expected to give rise to any environmental liability, or
otherwise form the basis of any claim, action, demand, suit, proceeding,
hearing, study or investigation (i) under any Environmental Law, or (ii) based
on or related to the manufacture, processing, distribution, use, treatment,
storage (including without limitation underground storage tanks), disposal,
transport or handling, or the emission, discharge, release or threatened release
of any hazardous substance.
 
Section 4.16                      Material Agreements.  Except as set forth 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.  Except as set forth in the
Commission Documents, 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 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
 

 
16

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

 

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 Common Shares, 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; FINRA Conduct Rules.  The
Company has complied with all applicable federal and state securities laws in
connection with the offer, issuance and sale of the Securities hereunder.
 
(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 May 29, 2008.  As
of the date hereof, no stop order suspending the effectiveness of the
Registration Statement has been issued by the Commission or is continuing in
effect under the Securities Act and no proceedings therefor are pending before
or, to the Company’s knowledge, threatened by the Commission.  No order
preventing or suspending the use of the Prospectus or any Permitted Free Writing
Prospectus has been issued by the Commission.
 
(ii)           The Company 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).  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
 

 
17

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

 

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.
 
(iii)           The offering of the Securities pursuant to this Agreement
qualifies for the exemption from the filing requirements of Rule 5110 of the
Financial Industry Regulatory Authority (the “FINRA”) afforded by FINRA Rule
5110(b)(7)(C)(i).
 
(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 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
 

 
18

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

 

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.  Except as would not be likely to
result in a Material Adverse Effect, (i) no liability to the Pension Benefit
Guaranty Corporation has been incurred with respect to any Plan by the Company
or any of its Subsidiaries, (ii) 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, and the
execution and delivery of this Agreement and the issuance and sale of the
Securities hereunder shall not result in any of the foregoing events and (iii)
each Plan is in compliance in all material respects with applicable law,
including ERISA and the Code; the Company has not incurred and does not expect
to incur liability under Title IV of ERISA with respect to the termination of,
or withdrawal from, any Plan; and each Plan for which the Company would have any
liability that is intended to be qualified under Section 401(a) of the Code is
so qualified in all material respects and nothing has occurred, whether by
action or failure to act, which would cause the loss of such qualifications.  As
used in this Section 4.22, the term “Plan” shall mean an “employee pension
benefit plan” (as defined in Section 3 of ERISA) which is or has been
established or maintained, or to which contributions are or have been made, by
the Company or any Subsidiary or by any trade or business, whether or not
incorporated, which, together with the Company or any Subsidiary, is under
common control, as described in Section 414(b) or (c) of the Code.
 
Section 4.23                      Taxes.  Except as would not be likely to
result in a Material Adverse Effect, the Company (i) has filed all necessary
federal, state and foreign income and franchise tax returns or has duly
requested extensions thereof, (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
 

 
19

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

 

being contested in good faith and by appropriate proceedings and (iii) does not
have any tax deficiency or claims outstanding or assessed or, to the Company’s
knowledge, proposed against it.
 
Section 4.24                      Insurance.  The Company carries, or is covered
by, insurance in such amounts and covering such risks as is adequate for the
conduct of its and its Subsidiaries’ businesses and the value of their
respective properties and as is customary for companies engaged in similar
businesses in similar industries.
 
Section 4.25                      Acknowledgement Regarding Investor’s Purchase
of 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 hereunder. The Company further
acknowledges that the Investor is not acting as a financial advisor or fiduciary
of the Company (or in any similar capacity) with respect to this Agreement and
the transactions contemplated hereunder, and any advice given by the Investor or
any of its representatives or agents in connection with this Agreement and the
transactions contemplated hereunder is merely incidental to the Investor’s
purchase of the 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.  The Company shall
notify the Commission and the Trading Market, as applicable, in accordance with
their respective rules and regulations, of the transactions contemplated by this
Agreement, and shall take all necessary action, undertake all proceedings and
obtain all registrations, permits, consents and approvals for the legal and
valid issuance of the Securities to the Investor in accordance with the terms of
this Agreement.
 
Section 5.2                      Registration and Listing.  The Company shall
take all action necessary to cause the Common Shares 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 Shares and the
listing of the Commitment Shares and the Shares acquired or purchased by the
Investor hereunder on the Trading Market, and shall comply with the Company’s
reporting, filing and other obligations under the bylaws, listed securities
maintenance standards and other rules of the Trading Market. The Company shall
not take any action which could reasonably be expected to result in the
delisting or suspension of the Common Stock on the Trading Market.
 
 

 
20

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

 

Section 5.3                      Compliance with Laws.
 
               (i)           The Company shall comply, and cause each Subsidiary
to comply, (a) with all laws, rules, regulations and orders applicable to the
business and operations of the Company and its Subsidiaries except as would not
have a Material Adverse Effect and (b) with all applicable provisions of the
Securities Act, the Exchange Act and the listing standards of the Trading
Market.  Without limiting the generality of the foregoing, neither the Company
nor any of its officers, directors or affiliates has taken or will take,
directly or indirectly, any action designed or intended to stabilize or
manipulate the price of any security of the Company, or which caused or resulted
in, or which would in the future reasonably be expected to cause or result in,
stabilization or manipulation of the price of any security of the Company.
 
(ii)           The Investor shall comply with all laws, rules, regulations and
orders applicable to the performance by it of its obligations under this
Agreement and its investment in the Shares, except as would not, individually or
in the aggregate, prohibit or otherwise interfere with the ability of the
Investor to enter into and perform its obligations under this Agreement in any
material respect. Without limiting the foregoing, the Investor shall comply with
all applicable provisions of the Securities Act and the Exchange Act.
 
Section 5.4                      Keeping of Records and Books of Account;
Foreign Corrupt Practices Act.
 
(i)           The Company shall keep and cause each Subsidiary to keep adequate
records and books of account, in which complete entries shall be made in
accordance with GAAP consistently applied, reflecting all financial transactions
of the Company and its Subsidiaries, and in which, for each fiscal year, all
proper reserves for depreciation, depletion, obsolescence, amortization, taxes,
bad debts and other purposes in connection with its business shall be made.  The
Company shall maintain a system of internal accounting controls 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
the Company; and (c) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of the Company’s
assets that could 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
applicable domestic or foreign laws and regulations.
 

 
21

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

 

(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 Common Shares which, when
aggregated with all other Common Shares 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
Common Shares.
 
Section 5.6                      Other Agreements and Other Financings.
 
(i)           The Company shall not enter into, announce or recommend to its
shareholders 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 Notice or Optional Amount on the
applicable Settlement Date.
 
(ii)           If the Company enters into any agreement, plan, arrangement or
transaction with a third party, 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, 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 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 shareholders 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
 

 
22

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

 

requirements set forth in the first sentence (including the provisos thereto) 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 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 Shares for a purchase price
less than, or the issuance of securities convertible into or exchangeable for
Common Shares at an exercise or conversion price (as the case may be) less than,
the then Current Market Price of the Common Shares (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 Shares 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 Shares or securities
convertible into or exchangeable for Common Shares 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 Shares for the reset of the purchase price of the Common Shares to below
the then Current Market Price of the Common Shares (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
convertible into or exchangeable for Common Shares or securities convertible
into or exchangeable for Common Shares; (2) shares of Common Shares or
securities convertible into or exchangeable for Common Shares (including,
without limitation, convertible debt securities) other than in connection with a
Below Market Offering or an ATM; (3) Common Shares or securities convertible
into or exchangeable for Common Shares (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 Common Share (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 Common Shares upon the conversion, exercise or
exchange thereof; (4) Common Shares or securities convertible into or
exchangeable for Common Shares in connection with awards under the Company’s
benefit and equity plans and arrangements or shareholder rights plan and the
issuance of Common Shares upon the conversion, exercise or exchange thereof; (5)
Common Shares issuable upon the conversion or exchange of equity awards or
convertible or exchangeable securities (including, without limitation,
convertible debt securities) outstanding as of the Effective Date; (6) Common
Shares or securities convertible into or exchangeable for Common Shares
(including, without limitation, convertible debt securities) issued in
connection with the acquisition, license or sale of one or more other companies,
 

 
23

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

 

equipment, technologies or lines of business, and the issuance of Common Shares
upon the conversion, exercise or exchange thereof; (7) Common Shares or
securities convertible into or exchangeable for Common Shares (including,
without limitation, convertible debt securities) or similar rights to subscribe
for the purchase of Common Shares in connection with technology sharing,
licensing, research and joint development agreements (or amendments thereto)
with third parties, and the issuance of Common Shares upon the conversion,
exercise or exchange thereof; and (8) Common Shares and/or warrants or similar
rights to subscribe for the purchase of Common Shares issued in connection with
equipment financings and/or real property leases (or amendments thereto) and the
issuance of Common Shares 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 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.
 
Section 5.8                      Amendments to the Registration Statement;
Prospectus Supplements; Free Writing Prospectuses.
 
(i)           Except as provided in this Agreement and other than periodic
reports required to be filed pursuant to the Exchange Act, the Company shall not
file with the Commission any amendment to the Registration Statement that
relates to the Investor, the Agreement or the transactions contemplated hereby
or file with the Commission any Prospectus Supplement that relates to the
Investor, this Agreement or the transactions contemplated hereby with respect to
which (a) the Investor shall not previously have been advised, (b) the Company
shall not have given due consideration to any comments thereon received from the
Investor or its
 

 
24

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

 

counsel, or (c) the Investor shall reasonably object after being so advised,
unless the Company 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
immediately so inform the Investor, the Investor shall be provided with a
reasonable opportunity to review and comment upon any disclosure relating to the
Investor and the Company shall expeditiously furnish to the Investor an
electronic copy thereof. In addition, for so long as, in the reasonable opinion
of counsel for the Investor, the Prospectus (or in lieu thereof, the notice
referred to in Rule 173(a) under the Securities Act) is required to be delivered
in connection with any purchase of Shares by the Investor, the Company shall not
file any Prospectus Supplement with respect to the Shares without delivering or
making available a copy of such Prospectus Supplement, together with the Base
Prospectus, to the Investor promptly.
 
(ii)           The Company 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
Shares that would constitute an Issuer Free Writing Prospectus or that would
otherwise constitute a Free Writing Prospectus required to be filed by the
Company or the Investor with the Commission or retained by the Company or the
Investor under Rule 433 under the Securities Act.  The Investor 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 Shares that would constitute a Free
Writing Prospectus required to be filed by the Company with the Commission or
retained by the Company under Rule 433 under the Securities Act.  Any such
Issuer Free Writing Prospectus or other Free Writing Prospectus consented to by
the Investor or the Company is referred to in this Agreement as a “Permitted
Free Writing Prospectus.”  The Company agrees that (x) it has treated and will
treat, as the case may be, each Permitted Free Writing Prospectus as an Issuer
Free Writing Prospectus and (y) it has complied and will comply, as the case may
be, with the requirements of Rules 164 and 433 under the Securities Act
applicable to any Permitted Free Writing Prospectus, including in respect of
timely filing with the Commission, legending and record keeping.
 
Section 5.9                      Prospectus Delivery.  The Company shall file
with (i) the Commission pursuant to Rule 424(b) under the Securities Act and
(ii) if applicable, the Registrar of Companies in Bermuda a Prospectus
Supplement 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
 

 
25

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

 

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)           The Investor covenants that from and after the date hereof through
and including the 90th day next following the termination of this Agreement (the
“Restricted Period”), neither the Investor nor any of its affiliates (within the
meaning of the Exchange Act) nor any entity managed or controlled by the
Investor shall, directly or indirectly, sell any securities of the Company,
except the Shares that it owns or has the right to purchase as provided in a
Fixed Request Notice and the Commitment Shares.  During the Restricted Period,
neither the Investor or any of its affiliates nor any entity managed or
controlled by the Investor shall sell any Common Shares of the Company it does
not “own” or have the unconditional right to receive under the terms of this
Agreement (within the meaning of Rule 200 of Regulation SHO promulgated by the
Commission under the Exchange Act), including Shares in any account of the
Investor or in any account directly or indirectly managed or controlled by the
Investor or any of its affiliates or any entity managed or controlled by the
Investor.  Without limiting the generality of the foregoing, prior to and during
the Restricted Period, neither the Investor nor any of its affiliates nor any
entity managed or controlled by the Investor or any of its affiliates shall
enter into a short position with respect to Common Shares of the Company,
including in any account of the Investor’s or in any account directly or
indirectly managed or controlled by the Investor or any of its Affiliates or any
entity managed or controlled by the Investor, except that the Investor may sell
Shares that it is obligated to purchase under a pending Fixed Request Notice but
has not yet taken possession of so long as the Investor (or the Broker-Dealer,
as applicable) covers any such sales with the Shares purchased pursuant to such
Fixed Request Notice; provided, however, that the Investor (or the
Broker-Dealer, as applicable) shall not be required to cover any such sales with
the Shares purchased pursuant to such Fixed Request Notice if (a) the Fixed
Request is terminated by mutual agreement of the Company and the Investor and,
as a result of such termination, no Shares are delivered to the Investor under
this Agreement or (b) the Company otherwise fails to deliver such Shares to the
Investor on the applicable Settlement Date upon the terms and subject to the
provisions of this Agreement.  Prior to and during the Restricted Period, the
Investor shall not grant any option to purchase or acquire any right to dispose
or otherwise dispose for value of any Common Shares or any securities
convertible into or exercisable or exchangeable for, or warrants to purchase,
any Common Shares, or enter into any swap, hedge or other agreement that
transfers, in whole or in part, the economic risk of ownership of the Common
Shares, except for such sales expressly permitted by this Section 5.10(i).
 
(ii)           In addition to the foregoing, in connection with any sale of the
Company’s securities (including any sale permitted by paragraph (i) above), the
Investor shall comply in all
 

 
26

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

 

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 reasonable 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 public
announcement thereof is made by the Company in the manner contemplated by
Regulation FD.
 
Section 5.13                      Broker/Dealer.  The Investor shall use one or
more broker-dealers to effectuate all sales, if any, of the Shares that it may
purchase from the Company pursuant to this Agreement which (or whom) shall be
unaffiliated with the Investor and not then currently engaged or used by the
Company (collectively, the “Broker-Dealer”).  The Investor shall provide the
Company with all information regarding the Broker-Dealer reasonably requested by
the Company.  The Investor shall be solely responsible for all fees and
commissions of the Broker-Dealer, 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.
 
(ii)           Notwithstanding anything to the contrary contained in the
Disclosure Schedules or in this Agreement, the information and disclosure
contained in any Schedule of the Disclosure Schedules shall be deemed to be
disclosed and incorporated by reference in any other Schedule of the Disclosure
Schedules 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 Schedules 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.
 

 
27

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

 

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. 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 has received (a) opinions from outside counsel to
the Company, dated the Effective Date, in the forms mutually agreed to by the
parties hereto, and an opinion from in-house 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 (i)
that are not qualified by “materiality” shall have been true and correct in all
material respects when made and shall be true and correct in all material
respects as of the applicable Fixed Request Exercise Date and the applicable
Settlement Date with the same force and effect as if made on such dates, except
to the extent such representations and warranties are as of another date, in
which case, such representations and warranties shall be true and correct in all
material respects as of such other date and (ii) that are qualified by
“materiality” shall have been true and correct when made and shall be true and
correct as of the applicable Fixed Request Exercise Date and the applicable
Settlement Date with the same force and effect as if made on such dates, except
to the extent such representations and warranties are as of another date, in
which case, such representations and warranties shall be true and correct as of
such other date.
 
(ii)           Registration Statement.  The Registration Statement is effective
and neither the Company nor the Investor shall have received notice that the
Commission has issued or intends to issue a stop order with respect to the
Registration Statement.  The Company shall have a maximum dollar amount certain
of Common Shares 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
 

 
28

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

 

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 Shares shall not have
been suspended by the Commission or the Trading Market (except for any
suspension of trading of limited duration agreed to by the Company, which
suspension shall be terminated prior to the applicable Fixed Request Exercise
Date and applicable Settlement Date), and, at any time prior to the applicable
Fixed Request Exercise Date and applicable Settlement Date, none of the events
described in clauses (i), (ii) and (iii) of Section 5.7 shall have occurred,
trading in securities generally as reported on the Trading Market shall not have
been suspended or limited, nor shall a banking moratorium have been declared
either by the United States or New York State authorities, nor shall there have
occurred any material outbreak or escalation of hostilities or other national or
international calamity or crisis of such magnitude in its effect on, or any
material adverse change in, any financial, credit or securities market which, in
each case, in the reasonable judgment of the Company, makes it impracticable or
inadvisable to issue the Shares.
 
(vi)           No Proceedings or Litigation.  No action, suit or proceeding
before any arbitrator or any court or governmental authority shall have been
commenced or threatened, and no inquiry or investigation by any governmental
authority shall have been commenced or threatened, against the Company or any
Subsidiary, or any of the officers, directors or affiliates of the Company or
any Subsidiary, seeking to restrain, prevent or change the transactions
contemplated by this Agreement, or seeking damages in connection with such
transactions.
 
(vii)           Aggregate Limit.  The issuance and sale of the Shares issuable
pursuant to such Fixed Request Notice or Optional Amount shall not violate
Sections 2.2, 2.12 and 5.5 hereof.
 
Section 6.3                      Conditions Precedent to the Obligation of the
Investor.  The obligation hereunder of the Investor to accept a Fixed Request
Notice or Optional Amount grant and to acquire and pay for the Shares is subject
to the satisfaction or (to the extent permitted by
 

 
29

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

 

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 (i)
that are not qualified by “materiality” or “Material Adverse Effect” shall have
been true and correct in all material respects when made and shall be true and
correct in all material respects as of the applicable Fixed Request Exercise
Date and the applicable Settlement Date with the same force and effect as if
made on such dates, except to the extent such representations and warranties are
as of another date, in which case, such representations and warranties shall be
true and correct in all material respects as of such other date and (ii) that
are qualified by “materiality” or “Material Adverse Effect” shall have been true
and correct when made and shall be true and correct as of the applicable Fixed
Request Exercise Date and the applicable Settlement Date with the same force and
effect as if made on such dates, except to the extent such representations and
warranties are as of another date, in which case, such representations and
warranties shall be true and correct as of such other date.
 
(ii)           Registration Statement. The Registration Statement is effective
and neither the Company nor the Investor shall have received notice that the
Commission has issued or intends to issue a stop order with respect to the
Registration Statement. The Company shall have a maximum dollar amount certain
of Common Shares 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 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. 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 Shares 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
 

 
30

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

 

Exercise Date and applicable Settlement Date, none of the events described in
clauses (i), (ii) and (iii) of Section 5.7 shall have occurred, trading in
securities generally as reported on the Trading Market shall not have been
suspended or limited, nor shall a banking moratorium have been declared either
by the United States or New York State authorities, nor shall there have
occurred any material outbreak or escalation of hostilities or other national or
international calamity or crisis of such magnitude in its effect on, or any
material adverse change in, any financial, 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 and shall have delivered to the Investor on
the applicable Settlement Date the Compliance Certificate substantially in the
form attached hereto as Exhibit D.
 
(v)           No Injunction. No statute, rule, regulation, order, decree, writ,
ruling or injunction shall have been enacted, entered, promulgated, threatened
or endorsed by any court or governmental authority of competent jurisdiction
which prohibits the consummation of or which would materially modify or delay
any of the transactions contemplated by this Agreement.
 
(vi)           No Proceedings or Litigation.  No action, suit or proceeding
before any arbitrator or any court or governmental authority shall have been
commenced or threatened, and no inquiry or investigation by any governmental
authority shall have been commenced or threatened, against the Company or any
Subsidiary, or any of the officers, directors or affiliates of the Company or
any Subsidiary, seeking to restrain, prevent or change the transactions
contemplated by this Agreement, or seeking damages in connection with such
transactions.
 
(vii)           Aggregate Limit.  The issuance and sale of the Shares issuable
pursuant to such Fixed Request Notice or Optional Amount shall not violate
Sections 2.2, 2.12 and 5.5 hereof.
 
(viii)           Shares Authorized 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 Securities.  All Commitment Shares shall have been
approved for listing or quotation on the Trading Market as of the Effective Date
(if such approval is required for the listing or quotation thereof on the
Trading Market). 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 (if such approval is required for
the listing or quotation thereof on the Trading Market), subject only to notice
of issuance.
 

 
31

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

 

(x)           Opinions of Counsel; Bring-Down. The Investor shall have received
opinions from outside counsel to the Company in the forms mutually agreed to by
the parties hereto and an opinion from in-house counsel to the Company in the
form mutually agreed to by the parties hereto.  On each Settlement Date, the
Investor shall have received opinion “bring downs” from outside counsel to the
Company in the forms mutually agreed to by the parties hereto and an opinion
“bring down” from in-house counsel to the Company in the form mutually agreed to
by the parties hereto.
 
(xi)           Payment of Investor’s Counsel Fees; Due Diligence Expenses.  On
the Effective Date, the Company shall have paid by wire transfer of immediately
available funds to an account designated by the Investor’s counsel, the fees and
expenses of the Investor’s counsel in accordance with the proviso to the first
sentence of Section 9.1(i) of this Agreement.  On the 30th day of the third
month in each calendar quarter during the Investment Period, the Company shall
have paid by wire transfer of immediately available funds to an account
designated by the Investor, the due diligence expenses incurred by the Investor
in accordance with the provisions of the second sentence of Section 9.1(i) of
this Agreement.
 
ARTICLE VII
TERMINATION
 
Section 7.1                      Term, Termination by Mutual Consent.  Unless
earlier terminated as provided hereunder, this Agreement shall terminate
automatically on the earliest of (i) the first day of the month next following
the 12-month anniversary of the Effective Date (the “Investment Period”), (ii)
the date that the entire dollar amount of Shares registered under the
Registration Statement have been issued and sold and (iii) the date the Investor
shall have purchased the Total Commitment of Common Shares (subject in all cases
to the Trading Market Limit). 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 (x)
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, (y) 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, (z) the Company shall have paid
all fees and amounts and issued all Commitment Shares owed to the Investor or
its counsel, as applicable, prior to such termination.  Subject to Section 7.3,
this Agreement may be terminated at any time by the mutual written consent of
the parties, effective as of the date of such mutual written consent unless
otherwise provided in such written consent, it being hereby acknowledged and
agreed that the Investor may not consent to such termination during a Pricing
Period or prior to a Settlement Date in the event the Investor has instructed
the Broker-Dealer to effect an open-market sale of Shares which are subject to a
pending Fixed Request Notice but which have not yet been physically delivered by
the Company (and/or credited by book-entry) to the Investor in accordance with
the terms and subject to the conditions of this Agreement.
 
Section 7.2                      Other Termination.  If the Company provides the
Investor with an Other Financing Notice 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
 

 
32

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

 

 
transaction with a third party, the principal purpose of which is to implement,
effect or consummate at any time outside of 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 notify the Investor promptly but in
no event later than 24 hours (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), 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
Material Change in Ownership has occurred or the Company enters into a
definitive agreement providing for a Material Change in Ownership; 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 indefinitely notwithstanding such
termination, (ii) the covenants and agreements contained in Section 5.1
(Securities Compliance), 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) 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 previously issued or delivered 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
 

 
33

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

 

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.
 
ARTICLE VIII
INDEMNIFICATION
 
Section 8.1                      General Indemnity.
 
(i)           Indemnification by the Company.  The Company shall indemnify and
hold harmless the Investor, the Broker-Dealer, each affiliate, employee,
representative and advisor of and to the Investor and the Broker-Dealer, and
each person, if any, who controls the Investor or the Broker-Dealer within the
meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act
from and against all losses, claims, damages, liabilities and expenses
(including reasonable costs of defense and investigation and all attorneys’
fees) to which the Investor, the Broker-Dealer and each such other person may
become subject, under the Securities Act or otherwise, insofar as such losses,
claims, damages, liabilities and expenses (or actions in respect thereof) arise
out of or are based upon (a) any violation of law (including United States
federal or state securities laws) or the rules, regulations and listing
requirements 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, any Broker-Dealer 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 or any Broker-Dealer 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
 

 
34

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

 

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 Shares, 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
Shares to such person, and if delivery of the Base Prospectus, together with a
Prospectus Supplement (as applicable), would have cured the defect giving rise
to such loss, claim, damage, liability or expense.
 
The Company shall reimburse the Investor, the Broker-Dealer and each such
controlling person promptly upon demand (with accompanying presentation of
documentary evidence) for all legal and other costs and expenses reasonably
incurred by the Investor, the Broker-Dealer or such indemnified persons in
investigating, defending against, or preparing to defend against any such claim,
action, suit or proceeding with respect to which it is entitled to
indemnification.
 
(ii)           Indemnification by the Investor. The Investor shall indemnify and
hold harmless the Company, each of its directors and officers, and each person,
if any, who controls the Company within the meaning of Section 15 of the
Securities Act or Section 20(a) of the Exchange Act from and against all losses,
claims, damages, liabilities and expenses (including reasonable costs of defense
and investigation and all attorneys fees) to which the Company and 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
 

 
35

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

 

indemnifying party will be entitled to participate in the defense of any claim,
action, suit or proceeding as to which indemnification is being sought, and if
the indemnifying party acknowledges in writing the obligation to indemnify the
party against whom the claim or action is brought, the indemnifying party may
(but will not be required to) assume the defense against the claim, action, suit
or proceeding with counsel satisfactory to it.  After an indemnifying party
notifies an indemnified party that the indemnifying party wishes to assume the
defense of a claim, action, suit or proceeding, the indemnifying party will not
be liable for any legal or other expenses incurred by the indemnified party in
connection with the defense against the claim, action, suit or proceeding except
that if, in the opinion of counsel to the indemnifying party, one or more of the
indemnified parties should be separately represented in connection with a claim,
action, suit or proceeding, the indemnifying party will pay the reasonable fees
and expenses of one separate counsel for the indemnified parties.  Each
indemnified party, as a condition to receiving indemnification as provided in
Section 8.1, will cooperate in all reasonable respects with the indemnifying
party in the defense of any action or claim as to which indemnification is
sought.  No indemnifying party will be liable for any settlement of any action
effected without its prior written consent.  Notwithstanding the foregoing
sentence, if at any time an indemnified party shall have requested (by written
notice provided in accordance with Section 9.5) 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 (other than by
virtue of the application of clauses (i)(A), (B) or (C) of Section 8.1 above),
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.
 

 
36

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

 

The remedies provided for in Section 8.1 and this Section 8.2 are not exclusive
and shall not limit any rights or remedies which may otherwise be available to
any indemnified person at law or in equity.
 
ARTICLE IX
 
MISCELLANEOUS
 
Section 9.1                      Fees and Expenses.
 
(i)           Each party shall bear its own fees and expenses related to the
transactions contemplated by this Agreement; provided, however, that the Company
shall pay, on the Effective Date, by wire transfer of immediately available
funds to an account designated by the Investor’s counsel, 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 $50,000, 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. In addition, the Company shall pay, on the 30th day of the third
month in each calendar quarter during the Investment Period, promptly following
the receipt of an invoice therefor, up to $12,500, representing the due
diligence expenses incurred by the Investor during the Investment Period and
expenses relating to the Investor’s review of Prospectus Supplements, Permitted
Free Writing Prospectuses, opinion “bring downs” and all other related documents
to be delivered by the Company and its counsel in connection with a Fixed
Request Exercise Date and the applicable Settlement Date. The Company shall pay
all U.S. federal, state and local stamp and other similar transfer and other
taxes and duties levied in connection with issuance of the 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 Common Shares 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). 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.
 

 
37

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

 

Section 9.2                      Specific Enforcement, Consent to Jurisdiction,
Waiver of Jury Trial.
 
(i)  The Company and the Investor acknowledge and agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that either party shall be entitled to an injunction or
injunctions to prevent or cure breaches of the provisions of this Agreement by
the other party and to enforce specifically the terms and provisions hereof this
being in addition to any other remedy to which either party may be entitled by
law or equity.
 
(ii)           Each of the Company and the Investor (a) hereby irrevocably
submits to the jurisdiction of the United States District Court and other courts
of the United States sitting in the State of New York for the purposes of any
suit, action or proceeding arising out of or relating to this Agreement, and (b)
hereby waives, and agrees not to assert in any such suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of such court,
that the suit, action or proceeding is brought in an inconvenient forum or that
the venue of the suit, action or proceeding is improper. Each of the Company and
the Investor consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address in effect for
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing in this
Section 9.2 shall affect or limit any right to serve process in any other manner
permitted by law.
 
(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
 

 
38

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

 

hand delivery or facsimile (with facsimile machine confirmation of delivery
received) at the address or number designated below (if delivered on a business
day during normal business hours where such notice is to be received), or the
first business day following such delivery (if delivered other than on a
business day during normal business hours where such notice is to be received)
or (b) on the second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon actual
receipt of such mailing, whichever shall first occur. The address for such
communications shall be:
 
 
If to the Company:
XOMA Ltd.

 
2910 Seventh Street

 
Berkeley, California 94710

 
Telephone Number: (510) 204-7200

 
Fax: (510) 649-7571

 
Attention: Christopher J. Margolin, Esq.

 
With copies to:
Cahill Gordon & Reindel LLP

 
80 Pine Street

 
New York, New York 10005

 
Telephone Number: (212) 701-3000

 
Fax: (212) 269-5420

 
Attention:  Geoffrey E. Liebmann, Esq.

 
If to the Investor:
Azimuth Opportunity Ltd.

 
c/o Folio Administrators Limited

Folio House
P.O. Box 800
Road Town, Tortola VG1110
British Virgin Islands
Telephone Number: (284) 494-7065 Ext. 250
Fax:  (284) 494-8356/7422
Attention: Tamara Singh

 
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
 

 
39

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

 

of any such right accruing to it thereafter. No provision of this Agreement may
be waived other than in a written instrument signed by the party against whom
enforcement of such waiver is sought.
 
Section 9.6                      Headings.  The article, section and subsection
headings in this Agreement are for convenience only and shall not constitute a
part of this Agreement for any other purpose and shall not be deemed to limit or
affect any of the provisions hereof.
 
Section 9.7                      Successors and Assigns.  The Investor may not
assign this Agreement to any person without the prior consent of the Company, in
the Company’s sole discretion. This Agreement shall be binding upon and inure to
the benefit of the parties and their successors and assigns. The assignment by a
party to this Agreement of any rights hereunder shall not affect the obligations
of such party under this Agreement.
 
Section 9.8                      Governing Law.  This Agreement shall be
governed by and construed in accordance with the internal procedural and
substantive laws of the State of New York, without giving effect to the choice
of law provisions of such state  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 indefinitely notwithstanding such termination,
(ii) the covenants and agreements contained in Section 5.1 (Securities
Compliance), 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) 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
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
 

 
40

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

 

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.  On or after the Effective Date,
the Company may issue a press release or otherwise make a public statement or
announcement with respect to this Agreement or the transactions contemplated
hereby or the existence of this Agreement (including, without limitation, by
filing a copy of this Agreement with the Commission); provided, however, that
prior to issuing any such press release, or making any such public statement or
announcement, the Company shall consult with the Investor on the form and
substance of such press release or other disclosure.
 
Section 9.12                      Severability.  The provisions of this
Agreement are severable and, in the event that any court of competent
jurisdiction shall determine that any one or more of the provisions or part of
the provisions contained in this Agreement shall, for any reason, be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision or part of a provision of
this Agreement, and this Agreement shall be reformed and construed as if such
invalid or illegal or unenforceable provision, or part of such provision, had
never been contained herein, so that such provisions would be valid, legal and
enforceable to the maximum extent possible.
 
Section 9.13                      Further Assurances.  From and after the date
of this Agreement, upon the request of the Investor or the Company, each of the
Company and the Investor shall execute and deliver such instrument, documents
and other writings as may be reasonably necessary or desirable to confirm and
carry out and to effectuate fully the intent and purposes of this Agreement.
 

 
[Signature Page Follows]
 

 
41

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

 

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.
 
 
XOMA LTD.:
 
 
 
By:
/s/ Fred Kurland
Name: Fred Kurland
Title: Vice President, Finance and Chief Financial Officer
 

 
 
AZIMUTH OPPORTUNITY LTD.:
 
 
 
By:
/s/ Deirdre M. McCoy
Name: Deirdre M. McCoy
Title: Corporate Secretary
    

 
 
 
 
42

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

 

ANNEX A TO THE
COMMON SHARE PURCHASE AGREEMENT
DEFINITIONS
 
(a)           “Acceptable Financing” shall have the meaning assigned to such
term in Section 5.6(ii) hereof.
 
(b)           “Aggregate Limit” shall have the meaning assigned to such term in
Section 1.1 hereof.
 
(c)           “ATM” shall have the meaning assigned to such term in Section
5.6(ii) hereof.
 
(d)           “Base Prospectus” shall mean the Company’s prospectus, dated July
23, 2010, a preliminary form of which is included in the Registration Statement,
including the documents incorporated by reference therein.
 
(e)           “Below Market Offering” shall have the meaning assigned to such
term in Section 5.6(ii) hereof.
 
(f)           “Broker-Dealer” shall have the meaning assigned to such term in
Section 5.13 hereof.
 
(g)           “Bye-laws” shall have the meaning assigned to such term in Section
4.3 hereof.
 
(h)           “Charter” shall have the meaning assigned to such term in Section
4.3 hereof.
 
(i)           “Code” shall mean the Internal Revenue Code of 1986, as amended.
 
(j)           “Commission” shall mean the Securities and Exchange Commission or
any successor entity.
 
(k)           “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, as amended (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 contained in such filings and all
documents and disclosures that have been and heretofore shall be incorporated by
reference therein.
 
(l)           “Commitment Shares” means 1,666,666 shares of duly authorized,
validly issued, fully paid and non-assessable Common Shares 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.
 
(m)           “Common Shares” shall have the meaning assigned to such term in
the Recitals.
 
(n)           “Current Market Price” means, with respect to any particular
measurement date, the closing price of a Common Share as reported on the Trading
Market for the Trading Day immediately preceding such measurement date.
 
(o)           “Current Report” shall have the meaning assigned to such term in
Section 1.4 hereof.
 
(p)           “Discount Price” shall have the meaning assigned to such term in
Section 2.2 hereof.
 
(q)           “EDGAR” shall have the meaning assigned to such term in
Section 4.3 hereof.
 
(r)           “Effective Date” shall mean the date of this Agreement.
 
(s)           “Environmental Laws” shall have the meaning assigned to such term
in Section 4.15 hereof.
 
(t)           “ERISA” shall mean the Employee Retirement Income Security Act of
1974, as amended.
 
(u)           “Event Period” shall have the meaning assigned to such term in
Section 7.2 hereof.
 
(v)           “Exchange Act” shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission thereunder.
 
(w)           “FDA” shall have the meaning assigned to such term in Section
4.14(a) hereof.
 
(x)           “FINRA” shall have the meaning assigned to such term in Section
4.18 hereof.
 
(y)           “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.
 
(z)           “Fixed Request” means the transactions contemplated under Sections
2.1 through 2.8 of this Agreement.
 
(aa)           “Fixed Request Amount” means the actual amount of proceeds
received by the Company pursuant to a Fixed Request under this Agreement.
 
(bb)           “Fixed Request Exercise Date” shall have the meaning assigned to
such term in Section 2.2 hereof.
 
(cc)           “Fixed Request Notice” shall have the meaning assigned to such
term in Section 2.1 hereof.
 
(dd)           “Free Writing Prospectus” shall mean a “free writing prospectus”
as defined in Rule 405 promulgated under the Securities Act.
 
(ee)           “GAAP” shall mean generally accepted accounting principles in the
United States of America as applied by the Company.
 
(ff)           “Governmental Licenses” shall have the meaning assigned to such
term in Section 4.14(a) hereof.
 
(gg)           “Indebtedness” shall have the meaning assigned to such term in
Section 4.9 hereof.
 
(hh)           “Integration Notice” shall have the meaning assigned to such term
in Section 5.6(ii) hereof.
 
(ii)           “Intellectual Property” shall have the meaning assigned to such
term in Section 4.14(b) hereof.
 
(jj)           “Investment Period” shall have the meaning assigned to such term
in Section 7.1 hereof.
 
(kk)           “Issuer Free Writing Prospectus” shall mean an “issuer free
writing prospectus,” as defined in Rule 433 promulgated under the Securities
Act, relating to the Shares 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.
 
(ll)           “Market Capitalization” shall be calculated on the Trading Day
preceding the applicable Pricing Period and shall be the product of (x) the
number of Common Shares outstanding and (y) the closing bid price of the Common
Shares, both as determined by Bloomberg Financial LP using the DES and HP
functions.
 
(mm)           “Material Adverse Effect” shall mean any condition, occurrence,
state of facts or event having, or insofar as reasonably can be foreseen would
likely have, any effect on the business, operations, properties or condition
(financial or otherwise) of the Company that is material and adverse to the
Company and its Subsidiaries, taken as a whole, and/or any condition,
occurrence, state of facts or event that would prohibit or otherwise materially
interfere with or delay the ability of the Company to perform any of its
obligations under this Agreement.
 
(nn)           “Material Agreements” shall have the meaning assigned to such
term in Section 4.16 hereof.
 
(oo)           “Material Change in Ownership” shall mean the occurrence of any
one or more of the following: (i) the acquisition by any person, including any
syndicate or group deemed to be a “person” under Section 13(d)(3) of the
Exchange Act, of beneficial ownership, directly or indirectly, through a
purchase, amalgamation, merger or other acquisition transaction or series of
transactions, of share capital or other securities of the Company entitling such
person to exercise, upon an event of default or default or otherwise, 50% or
more of the total voting power of all series and classes of share capital and
other securities of the Company entitled to vote generally in the election of
directors, other than any such acquisition by the Company, any Subsidiary of the
Company or any employee benefit plan of the Company; (ii) any amalgamation,
consolidation or merger of the Company with or into any other person, any
amalgamation or merger of another person into the Company, or any conveyance,
transfer, sale, lease or other disposition of all or substantially all of the
properties and assets of the Company to another person, other than (a) any such
transaction (x) that does not result in any reclassification, conversion,
exchange or cancellation of outstanding share capital of the Company and (y)
pursuant to which holders of share capital of the Company immediately prior to
such transaction have the entitlement to exercise, directly or indirectly, 50%
or more of the total voting power of all share capital of the Company entitled
to vote generally in the election of directors of the continuing or surviving
person immediately after such transaction or (b) any amalgamation or merger
which is effected solely to change the jurisdiction of organization of the
Company and results in a reclassification, conversion or exchange of outstanding
Common Shares solely into shares of the surviving entity; (iii) during any
consecutive two-year period, individuals who at the beginning of that two-year
period constituted the Board of Directors (together with any new directors whose
election to the Board of Directors, or whose nomination for election by the
shareholders of the Company, was approved by a vote of a majority of the
directors then still in office who were either directors at the beginning of
such period or whose elections or nominations for election were previously so
approved) cease for any reason to constitute a majority of the Board of
Directors then in office; or (iv) the Company is liquidated or dissolved or a
resolution is passed by the Company’s shareholders approving a plan of
liquidation or dissolution of the Company. Beneficial ownership shall be
determined in accordance with Rule 13d-3 promulgated by the SEC under the
Exchange Act. The term “person” shall include any syndicate or group which would
be deemed to be a “person” under Section 13(d)(3) of the Exchange Act.
 
(pp)           “Multiplier” shall have the meaning assigned to such term in
Section 2.3 hereof.
 
(qq)           “NASDAQ” means the NASDAQ Global Market or any successor thereto.
 
(rr)           “Optional Amount” means the transactions contemplated under
Sections 2.9 through 2.11 of this Agreement.
 
(ss)           “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.
 
(tt)           “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.
 
(uu)           “Optional Amount Threshold Price” shall have the meaning assigned
to such term in Section 2.1 hereof.
 
(vv)           “Other Financing” shall have the meaning assigned to such term in
Section 5.6(ii) hereof.
 
(ww)           “Other Financing Notice” shall have the meaning assigned to such
term in Section 5.6(ii) hereof.
 
(xx)           “Permitted Free Writing Prospectus” shall have the meaning
assigned to such term in Section 5.8(ii) hereof.
 
(yy)           “Plan” shall have the meaning assigned to such term in Section
4.22 hereof.
 
(zz)           “Price Reset Provision” shall have the meaning assigned to such
term in Section 5.6(ii) hereof.
 
(aaa)           “Pricing Period shall mean a period of 10 consecutive Trading
Days commencing on the day of delivery of a Fixed Request Notice (or, if the
Fixed Request Notice is delivered after 9:30 a.m. (New York time), on the next
Trading Day), or such other period mutually agreed upon by the Investor and the
Company.
 
(bbb)           “Prospectus” shall mean the Base Prospectus, together with any
final prospectus filed with the Commission pursuant to Rule 424(b) under the
Securities Act, as supplemented by any Prospectus Supplement, including the
documents incorporated by reference therein, together with any Permitted Free
Writing Prospectus.
 
(ccc)           “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.
 
(ddd)           “Reduction Notice” shall have the meaning assigned to such term
in Section 2.8 hereof.
 
(eee)           “Reedland” shall have the meaning assigned to such term in
Section 4.13 hereof.
 
(fff)           “Registration Statement” shall mean the registration statement
on Form S-3, Commission File Number 333-148342, 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 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.
 
(ggg)           “Restricted Period” shall have the meaning assigned to such term
in Section 5.10 hereof.
 
(hhh)           “Securities” means, collectively, the Shares and the Commitment
Shares.
 
(iii)           “Securities Act” shall mean the Securities Act of 1933, as
amended, and the rules and regulations of the Commission thereunder.
 
(jjj)           “Settlement Date” shall have the meaning assigned to such term
in Section 2.7 hereof.
 
(kkk)           “Shares” shall mean Common Shares issuable to the Investor upon
exercise of a Fixed Request and Common Shares issuable to the Investor upon
exercise of an Optional Amount and do not include the Commitment Shares.
 
(lll)           “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.
 
(mmm)                      “Similar Financing” shall have the meaning assigned
to such term in Section 5.6(ii) hereof.
 
(nnn)           “SOXA” shall have the meaning assigned to such term in Section
4.6(c) hereof.
 
(ooo)           “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.
 
(ppp)           “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 $0.25 per share unless the Company and
the Investor mutually shall agree.
 
(qqq)           “Total Commitment” shall have the meaning assigned to such term
in Section 1.1 hereof.
 
(rrr)            “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.
 
(sss)           “Trading Market” means the following markets or exchanges on
which the Common Stock is listed or quoted for trading on the date in question:
the NYSE Amex Equities, the Nasdaq Capital Market, the Nasdaq Global Market, the
Nasdaq Global Select Market, the New York Stock Exchange or the over-the-counter
market on the electronic bulletin board as reported by Bloomberg Financial L.P.
(or any successors to any of the foregoing), whichever is at the time the
principal trading exchange or market for the Common Stock.
 
(ttt)           “Trading Market Limit” means, at any time, 51,321,110 shares of
duly authorized, validly issued, fully paid and non-assessable Common Shares (as
adjusted for any share splits, share combinations, share 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 Common Shares 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 shareholder approval under the applicable
rules and regulations of the Trading Market.
 
(uuu)           “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 NASDAQ as reported by Bloomberg Financial L.P. using the AQR function.
 
(vvv)           “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.
 
 

 
43

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

 

EXHIBIT A TO THE
COMMON SHARE PURCHASE AGREEMENT
FORM OF FIXED REQUEST NOTICE
 
Reference is made to the Common Share Purchase Agreement dated as of July 23,
2010, (the  “Purchase Agreement”) between XOMA Ltd., a company organized and
existing under the laws of Bermuda (the “Company”), and Azimuth Opportunity
Ltd., an international business company incorporated under the laws of the
British Virgin Islands. Capitalized terms used and not otherwise defined herein
shall have the meanings given such terms in the Purchase Agreement.
 
In accordance with and pursuant to Section 2.1 of the Purchase Agreement, the
Company hereby issues this Fixed Request Notice to exercise a Fixed Request for
the Fixed 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 Shares Currently Unissued under the Registration Statement;
 
Dollar Amount of
Common Shares Currently Available under the Aggregate Limit:
     
Dated:                                                   
By:                                                       
Name
Title:
     
Address:
Facsimile No.

AGREED AND ACCEPTED
 
By:__________________ 
Name
Title:
   

 
 
 
 
 

 
44

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

 

EXHIBIT B TO THE
COMMON SHARE PURCHASE AGREEMENT
FORM OF OPTIONAL AMOUNT NOTICE
 
To:                                          
Fax#:                                          
 
Reference is made to the Common Share Purchase Agreement dated as of July 23,
2010 (the “Purchase Agreement”) between XOMA Ltd., a company organized and
existing under the laws of Bermuda (the “Company”), and Azimuth Opportunity
Ltd., an international business company incorporated under the laws of the
British Virgin Islands (the “Investor”). Capitalized terms used and not
otherwise defined herein shall have the meanings given such terms in the
Purchase Agreement.
 
In accordance with and pursuant to Section 2.1 of the Purchase Agreement, the
Investor hereby issues this Optional Amount Notice to exercise an Optional
Amount for the Optional Amount Dollar Amount indicated below.
 
Optional Amount Dollar Amount Exercised
 
Number of Shares to be purchased
 
VWAP on the date hereof:
 
Discount Price:
 
Settlement Date:
 
Threshold Price:
         
Dated:                                                   
By:                                                             
Name
Title:
     
Address:
Facsimile No.

 
45

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

 

EXHIBIT C TO THE
COMMON SHARE PURCHASE AGREEMENT
CERTIFICATE OF THE COMPANY
 
CLOSING CERTIFICATE
 
_________ 20__
 
The undersigned, the [___________] of XOMA Ltd., a company continued into and
existing under the laws of Bermuda (the “Company”), delivers this certificate in
connection with the Common Share Purchase Agreement, dated as of July 23, 2010
(the “Agreement”), by and between the Company and Azimuth Opportunity Ltd., an
international business company incorporated under the laws of the British Virgin
Islands (the “Investor”), and hereby certifies on the date hereof that
(capitalized terms used herein without definition have the meanings assigned to
them in the Agreement):
 
1.           Attached hereto as Exhibit A is a true, complete and correct copy
of the Memorandum of Continuance of the Company as filed with the Registrar of
Companies in Bermuda. The Memorandum of Continuance of the Company has not been
further amended or restated, and no document with respect to any amendment to
the Memorandum of Continuance of the Company has been filed with the Registrar
of Companies in Bermuda since the date shown on the face of the Company’s
Memorandum of Continuance, 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
Bye-laws 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 Bye-laws 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:

 
46

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

 

EXHIBIT D TO THE
COMMON SHARE PURCHASE AGREEMENT
COMPLIANCE CERTIFICATE
 
In connection with the issuance of common shares of XOMA Ltd., a company
continued into and existing under the laws of Bermuda (the “Company”), pursuant
to the Fixed Request Notice, dated [_____________], delivered by the Company to
Azimuth Opportunity Ltd. (the “Investor”) pursuant to Article II of the Common
Share Purchase Agreement, dated July 23, 2010, by and between the Company and
the Investor (the “Agreement”), the undersigned hereby certifies, on behalf of
the Company and not in his individual capacity, 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 [___________],
20[__].
 
 
By:______________________
 
Name:____________________
 
Title:_____________________
 

 

 
47

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