Exhibit 10.1

CONSENT AND AMENDMENT AGREEMENT

This CONSENT AND AMENDMENT AGREEMENT (this “Agreement”), entered into as of the
19th day of January, 2012 (the “Effective Date”), is made by and among La Jolla
Pharmaceutical Company, a Delaware corporation (the “Company”), and the
undersigned parties (each a “Holder” and collectively the “Holders”).

WHEREAS, the Company and Holders entered into a Securities Purchase Agreement
dated as of May 24, 2010 (the “Securities Purchase Agreement”);

WHEREAS, the Company and the Holders entered into a Consent and Amendment
Agreement dated as of March 29, 2011 (the “Consent and Amendment Agreement”),
amending certain of the rights and obligations of the parties arising under the
Securities Purchase Agreement;

WHEREAS, the Company and the Holders entered into an Amendment Agreement dated
as of June 30, 2011 (the “First Amendment Agreement”), amending certain of the
rights and obligations of the parties arising under the Securities Purchase
Agreement and New Certificate of Designations (as defined in the Consent and
Amendment Agreement);

WHEREAS, the Company and the Holders entered into an Amendment Agreement dated
as of August 24, 2011 (the “Second Amendment Agreement”), amending certain of
the rights and obligations of the parties arising under the Securities Purchase
Agreement and New Certificate of Designations (as defined in the Consent and
Amendment Agreement);

WHEREAS, the Company, desires to acquire certain assets of Solana Therapeutics,
Inc. (“Solana”) pursuant to an asset purchase agreement, dated January 19, 2012,
(the “Asset Purchase Agreement”) through which the Company will acquire certain
of Solana’s patent rights by assignment, study drug supplies, study data,
contract rights and certain related regulatory records and assets;

WHEREAS, in order to facilitate the consummation of the Asset Purchase Agreement
and in consideration of the Holders’ consent to the Asset Purchase Agreement the
parties desire to enter into this Agreement;

WHEREAS, the parties are in agreement that it is in the best interest of the
Company and the Holders to effect a reverse split of the Company’s outstanding
Common Stock at a ratio of 1-for-100;

WHEREAS, in connection with the Asset Purchase Agreement, certain Holders that
are parties to the Securities Purchase Agreement have agreed to amend certain
provisions of the Securities Purchase Agreement, Warrants and Certificate of
Designations (each as defined in the Securities Purchase Agreement) as set forth
below; and

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WHEREAS, the undersigned Holders represent the required threshold to amend each
of the following provisions of each of the Certificate of Designations, the
Warrants and the Securities Purchase Agreement.

NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:

1. Capitalized Terms. Capitalized terms used and not otherwise defined herein
shall have the meanings ascribed to such terms in the Securities Purchase
Agreement.

2. Representations and Warranties of the Company. The Company hereby represents
and warrants that all representations and warranties of the Company made
pursuant to the Securities Purchase Agreement not herein amended, or previously
amended, are true and accurate in all material respects as if made as of the
date hereof, except with respect to those representations and warranties in the
Securities Purchase Agreement that speak as of an earlier date, which shall be
true and accurate in all material respects as of such earlier date.

3. Representations and Warranties of the Holders. Each of the Holders hereby
represents and warrants to the Company that, with respect solely to itself and
not with respect to any other Holder, each Holder has the requisite power and
authority to enter into and perform the Agreement, and if the Holder is an
entity, such Holder is a corporation, limited liability company or partnership
duly incorporated or organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation or organization.

4. Amendments to the Securities Purchase Agreement. The Securities Purchase
Agreement is amended such that Section 4.3 of the Securities Purchase Agreement
is hereby deleted in its entirety. Additionally, the term “Requisite Holders”,
as defined in Section 1.3(a) of the Securities Purchase Agreement shall be
redefined to mean “80% of the then outstanding Preferred Stock and Warrants held
by all holders of Preferred Stock, with any shares of Preferred Stock issuable
upon exercise of any Warrants to be included in the Requisite Holders
calculation, even if such Warrant has not been exercised at the time of the
calculation.”

5. Amendments to the Form of Cash Warrants. The outstanding Cash Warrants issued
pursuant to the Securities Purchase Agreement are hereby amended such that
Section 1(d) of each of the Cash Warrants is hereby deleted in its entirety.

6. Amendments to the Form of the Cash Warrants and Cashless Warrants. The
Termination Date (as defined in each of the Cash Warrants and the Cashless
Warrants) shall be amended such that the Termination Date is the date that is
three (3) years following the Closing (as defined in the Asset Purchase
Agreement).

7. Adoption of Certificate of Designations; Exchange of Shares.

(a) The Certificate of Designations establishing the rights, preferences and
privileges for the Company’s Series C-12 Convertible Preferred Stock (the
“Series C-12 Preferred”), Series C-22 Convertible Preferred Stock (the “Series
C-22 Preferred”), Series D-12 Convertible Preferred Stock (the “Series D-12
Preferred”) and Series D-22 Convertible Preferred Stock (the “Series D-22
Preferred”), in the form attached hereto as Exhibit A (the

 

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“New Certificate of Designations”) is hereby approved by the Requisite Holders
pursuant to Article XII of the New Certificate of Designations. The Company
shall file the New Certificate of Designations with the Delaware Secretary of
State on the Closing (as defined in the Asset Purchase Agreement).

(b) The undersigned holders of Series C-11 Preferred hereby agree to exchange
each share (including fractional shares) of Series C-11 Preferred for an equal
number of shares of Series C-12 Preferred, with such exchange to take place
immediately after the filing of the New Certificate of Designations (the
“Exchange”). The parties hereto agree that the Exchange is being effected
pursuant to Section 3(a)(9) of the Securities Act of 1933, as amended (the
“Securities Act”) and that the holders of Series C-12 Preferred shall be
entitled to “tack” their holding periods of the Series C-11 Preferred pursuant
to Rule 144(d)(3)(ii) under the Securities Act.

(c) Promptly after the receipt of (i) a letter of transmittal from a holder of
Series C-11 Preferred, which shall include stockholder representations regarding
title to the tendered shares and state that the tendered shares are delivered
free of encumbrances, and (ii) original stock certificate(s), properly endorsed
or otherwise in proper form for transfer, representing shares of Series C-11
Preferred, the Company shall, within three Trading Days issue a certificate to
such undersigned holder for an equal number of shares of Series C-12 Preferred,
with the same restrictive legends, if any, as may be imprinted on the
certificates representing the Series C-11 Preferred.

(d) From and after the Closing (as defined in the Asset Purchase Agreement), all
references in the Securities Purchase Agreement and the Warrants (as defined in
the Certificate of Designations) to the Series C-11 Preferred, Series C-21
Preferred, Series D-11 Preferred and Series D-21 Preferred shall thereafter
change to become references to the Series C-12 Preferred, Series C-22 Preferred,
Series D-12 Preferred and Series D-22 Preferred, respectively.

(e) Promptly after the filing of the New Certificate of Designations and the
completion of the Exchange, the Company shall file a Certificate of Elimination
for the Series C-11 Preferred, Series C-21 Preferred, Series D-11 Preferred and
Series D-21 Preferred, whereupon references herein to the “Certificate of
Designations” shall thereafter, unless the context clearly requires otherwise,
refer to the “New Certificate of Designations.”

 

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8. Consent of Holders:

(a) Approval of Asset Purchase Agreement. Pursuant to Article XII of the
Certificate of Designations, the undersigned Holders, constituting the Requisite
Holders, hereby irrevocably approve, for all purposes and in all respects, the
Asset Purchase Agreement and the “Ancillary Agreements” (as defined in the Asset
Purchase Agreement), and the consummation of the transactions contemplated
therein, including without limitation the Repurchase Right (as defined in the
Asset Purchase Agreement).

(b) Designation as Strategic Transaction. Upon the Closing (as defined in the
Asset Purchase Agreement), the acquisition of the Purchased Assets (as defined
in the Asset Purchase Agreement) under the Asset Purchase Agreement shall be
deemed to be the completion of a Strategic Transaction, as contemplated under
the Certificate of Designations, and any Redemption Events (as defined in the
Certificate of Designations) triggered by Article VII(A)(xii) of the Certificate
of Designations then in existence, and before the filing of the New Certificate
of Designations and the completion of the Exchange, shall be irrevocably waived.

(c) Approval of Reverse Stock Split. Pursuant to Article XII of the Certificate
of Designations, the undersigned Holders, constituting the Requisite Holders,
hereby irrevocably approve, and for all purposes and in all respects authorize
the Company’s Board of Directors to effect a reverse stock split of the
Company’s outstanding Common Stock at an exchange ratio of 1-for-100. The
Company’s Board of Directors shall use their reasonable best efforts to cause
the reverse stock split to become effective on the date that is two weeks from
the Closing (as defined in the Asset Purchase Agreement), but in any event shall
cause the reverse stock split to be effected not later than eight weeks from the
Closing.

(d) Increase in Authorized Common Stock. In the event the Company notifies the
undersigned Holders the Company has less than the number of shares sufficient to
provide for conversion of the New Preferred Stock (as defined in the New
Certificate of Designations) in accordance with Article VI.A of the New
Certificate of Designations, each Holder shall vote all of the shares of Common
Stock held by such Holder in favor of an amendment to the Certificate of
Incorporation to increase the number of authorized but unissued shares of Common
Stock to the amount of authorized but unissued shares of Common Stock requested
by the Company.

(e) Approval of Option Grants. Pursuant to Article XII of the Certificate of
Designations, the undersigned Holders, constituting the Requisite Holders,
hereby irrevocably approve, and for all purposes and in all respects authorize
the Company’s Board of Directors to grant the following options to purchase
Common Stock of the Company subject to the terms and conditions as determined by
the Company’s Board of Directors: (i) on the date that is four weeks following
the Conversion Price Adjustment Date, an option to George Tidmarsh to purchase
the number of shares of Common Stock of the Company equal to 7.5% of the
Company’s fully diluted shares (on an as-converted to Common Stock basis)
outstanding at the time of such grant (the “First Option”); (ii) on the two-year
anniversary of George Tidmarsh’s employment with the Company, a second option to
George Tidmarsh to purchase the number of shares of Common Stock of the Company
equal to 7.5% of the Company’s fully diluted shares (on an as-converted to
Common Stock basis) outstanding at such time, less the number of shares subject
to the First Option at the time of the grant of the First Option (the “Second
Option”); and (iii) on the date that is four weeks following the Conversion
Price Adjustment Date, an option to

 

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Saiid Zarrabian to purchase the number of shares of Common Stock of the Company
equal to 0.45% of the Company’s fully-diluted shares (on an as-converted to
Common Stock basis) outstanding at such time (the “Third Option”). The
undersigned Holders hereby irrevocably approve any issuances of Common Stock by
the Company upon the exercise of all or any portion of the First Option, Second
Option or Third Option.

9. Fees and Expenses. Each party shall pay the fees and expenses of its
advisors, counsel, accountants and other experts, if any, and all other
expenses, incurred by such party incident to the negotiation, preparation,
execution, delivery and performance of this Agreement and the transactions
contemplated hereby.

10. Specific Performance; Consent to Jurisdiction; Venue.

(a) The Company and the Holders acknowledge and agree that irreparable damage
would occur in the event that any of the provisions of this Agreement (including
the agreements and instruments amended hereby) (collectively, the “Asset
Purchase Transaction Documents”) were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent or cure
breaches of the provisions of this Agreement or the other Asset Purchase
Transaction Documents and to enforce specifically the terms and provisions
hereof or thereof without the requirement of posting a bond or providing any
other security, this being in addition to any other remedy to which any of them
may be entitled by law or equity.

(b) The parties agree that venue for any dispute arising under this Agreement
will lie exclusively in the state or federal courts located in San Diego,
California, and the parties irrevocably waive any right to raise forum non
conveniens or any other argument that California is not the proper venue. The
parties irrevocably consent to personal jurisdiction in the state and federal
courts of the state of California. The Company and each Holder consent to
process being served in any such suit, action or proceeding by mailing a copy
thereof to such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing in this Section 10 shall affect
or limit any right to serve process in any other manner permitted by law. The
parties hereby waive all rights to a trial by jury. In addition, the prevailing
party in any dispute arising under this Agreement shall be entitled to recover
its fees and expenses, including, without limitation, all reasonable attorneys’
fees and expenses.

11. Entire Agreement; Amendment. This Agreement, including the schedules and
exhibits attached hereto, and the Asset Purchase Transaction Documents contain
the entire understanding and agreement of the parties with respect to the
matters covered hereby and, except as specifically set forth herein or in the
other Asset Purchase Transaction Documents, neither the Company nor any Holder
make any representation, warranty, covenant or undertaking with respect to such
matters, and they supersede all prior understandings and agreements with respect
to said subject matter, all of which are merged herein. No provision of this
Agreement may be waived or amended on behalf of all Holders other than by a
written instrument signed by the Company and the Requisite Holders. In addition
to the foregoing, no provision of this Agreement may be amended to increase the
financial obligations of any Holder under this Agreement other than by a written
instrument signed by such Holder. Nothing provided in this Section 11 shall
limit an individual Holder’s right to waive or amend any provision of this

 

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Agreement on its own behalf. The Holders acknowledge that any waiver effected in
accordance with this Section 11 shall be binding upon each Holder (and their
permitted assigns) and the Company, including, without limitation, a waiver that
has an adverse effect on any or all Holders.

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

 

If to the Company or its Subsidiaries:   

La Jolla Pharmaceutical Company

4370 La Jolla Village Drive, Suite 400

San Diego, CA 92122

Attention: Chief Executive Officer

Telephone No.: (858) 452-6600

Email address:

with copies to:   

Ropes & Gray LLP

Three Embarcadero Center

San Francisco, CA 94111

Attention: Ryan Murr

Telephone No.: (415) 315-6395

Facsimile No.: (415) 315-6026

Email address: Ryan.Murr@ropesgray.com

If to any Holder:   

At the address of such Holder set forth on the

signature page to this Agreement, with copies to

Holder’s counsel, if any, as set forth on the signature

page or as specified in writing by such Holder.

Any party hereto may from time to time change its address for notices by giving
written notice of such changed address to the other party hereto.

13. 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 provision, condition or
requirement hereof, nor shall any delay or omission of any party to exercise any
right hereunder in any manner impair the exercise of any such right accruing to
it thereafter.

14. Headings. The article, section and subsection headings in this Agreement are
for convenience only and shall not constitute a part of this Securities Purchase
Agreement for any other purpose and shall not be deemed to limit or affect any
of the provisions hereof.

 

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15. Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties and their successors and assigns. Subject to the
limitations set forth in Article 4 of this Agreement, the Holders may assign the
Securities and its rights under this Agreement and the other Asset Purchase
Transaction Documents and any other rights hereto and thereto without the
consent of the Company.

16. No Third Party Beneficiaries. This Agreement is intended for the benefit of
the parties hereto and their respective permitted successors and assigns and is
not for the benefit of, nor may any provision hereof be enforced by, any other
person.

17. Governing Law. To the fullest extent permitted by law, this Agreement shall
be governed by and construed in accordance with the internal laws of the State
of California, without giving effect to any of the conflicts of law principles
which would result in the application of the substantive law of another
jurisdiction. This Agreement shall not be interpreted or construed with any
presumption against the party causing this Agreement to be drafted.

18. Survival. The representations and warranties of the Company and the Holders
shall terminate upon the Closing (as defined in the Asset Purchase Agreement);
provided, however, that such termination shall have no affect on the rights of
the Holders under Section 7 of the Securities Purchase Agreement or Article VII
of the Certificate of Designations. The agreements and covenants set forth in
Articles 1, 3, 4, 6, 7 and 8 of the Securities Purchase Agreement shall survive
the Closing (as defined in the Asset Purchase Agreement) for the duration of the
applicable statute of limitations.

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

20. Publicity. Except as contemplated in Section 21, the Company agrees that it
will not disclose, and will not include in any public announcement, the names of
the Holders without the consent of the Holders, or unless and until such
disclosure is required by law, rule or applicable regulation, and then only to
the extent of such requirement. Notwithstanding the foregoing, the Holders
consent to being identified in any filings the Company makes with the SEC to the
extent required by law or the rules and regulations of the SEC.

21. Disclosure of Transaction. The Company shall issue a press release
describing the material terms of the transactions contemplated hereby and under
the Asset Purchase Agreement and file with the SEC a Current Report on Form 8-K
describing the material terms of the transactions contemplated hereby and
thereby, with the filing of the Form 8-K to be made as close in time as
practicable to the issuance of the press release, and with such disclosures to
be made no later than 7:00 a.m. (Eastern Time) on the first Business Day
following the date of this Agreement. The Company will provide representatives
from Tang Capital Partners, LP and Boxer Capital, LLC with the opportunity to
review and approve the press release and Form 8-K prior to issuance and filing,
respectively, which approval will not be unreasonably withheld.

 

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22. 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.

23. Further Assurances. From and after the date of this Agreement, upon the
request of the Holders or the Company, the Company and each Holder shall execute
and deliver such instruments, documents and other writings as may be reasonably
necessary or desirable to confirm and carry out and to effectuate fully the
intent and purposes of this Agreement and the other Asset Purchase Transaction
Documents

24. Independent Nature of Holders’ Obligations and Rights. The obligations of
each Holder under any Asset Purchase Transaction Documents are several and not
joint with the obligations of any other Holder, and no Holder shall be
responsible in any way for the performance of the obligations of any other
Holder under any Asset Purchase Transaction Documents. Nothing contained herein
or in any other Asset Purchase Transaction Documents, and no action taken by any
Holder pursuant hereto or thereto, shall be deemed to constitute the Holder as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Holders are in any way acting in concert or as a
group with respect to such obligations or the transactions contemplated by the
Asset Purchase Transaction Documents. Each Holder confirms that it has
independently participated in the negotiation of the transaction contemplated
hereby with the advice of its own counsel and advisors. Each Holder shall be
entitled to independently protect and enforce its rights, including, without
limitation, the rights arising out of this Agreement or out of any other Asset
Purchase Transaction Documents, and it shall not be necessary for any other
Holder to be joined as an additional party in any proceeding for such purpose.

25. Force Majeure. Notwithstanding any provision herein to the contrary, the
failure of any party to timely satisfy obligations hereunder shall be excused to
the extent that (i) such failure follows the occurrence of a Force Majeure Event
(defined below), and (ii) such Force Majeure Event has materially adversely
affected the ability of such party (or its agents, including banks, transfer
agents, and clearinghouses) to perform hereunder. A failure to perform shall be
excused only for so long as the Force Majeure Event continues to materially
adversely affect such person’s ability to perform. For purposes of this Section,
“Force Majeure Event” shall mean the occurrence of any of the following events:
(a) trading in securities generally on either the Nasdaq Stock Market or the New
York Stock Exchange shall have been suspended or limited, or minimum or maximum
prices shall have been generally established on any of such stock exchanges by
the SEC or FINRA; (b) a general banking moratorium shall have been declared by
any of federal, New York or California authorities; (c) an act of war, terrorism
or hostility shall have occurred, or (d) a strike, fire, flood, earthquake,
accident or other calamity or Act of God shall have occurred.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

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

 

LA JOLLA PHARMACEUTICAL COMPANY By:  

/s/ Deirdre Y. Gillespie

  Name: Deirdre Y. Gillespie   Title: President and Chief Executive Officer

[SIGNATURE PAGES CONTINUE]

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[HOLDER SIGNATURE PAGES TO CONSENT AND AMENDMENT AGREEMENT]

IN WITNESS WHEREOF, the undersigned have caused this Consent and Amendment
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.

Name of Holder: Tang Capital Partners, L.P.

Signature of Authorized Signatory of Holder: /s/ Kevin Tang

Name of Authorized Signatory: Kevin Tang

Title of Authorized Signatory: Managing Director

Email Address of Holder: kevin@tangcapital.com

Fax Number of Holder: 858 200 3837

Address for Notice of Holder:

4747 Executive Drive, Suite 510

San Diego, CA 92121

Address for Delivery of Securities for Holder (if not same as address for
notice):

_______________________________________________________________________________________________________

_______________________________________________________________________________________________________

EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]

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[HOLDER SIGNATURE PAGES TO CONSENT AND AMENDMENT AGREEMENT]

IN WITNESS WHEREOF, the undersigned have caused this Consent and Amendment
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.

Name of Holder: The Haeyoung and Kevin Tang Foundation, Inc.

Signature of Authorized Signatory of Holder: /s/ Kevin Tang

Name of Authorized Signatory: Kevin Tang

Title of Authorized Signatory: President

Email Address of Holder: kevin@tangcapital.com

Fax Number of Holder: 858 200 3837

Address for Notice of Holder:

4747 Executive Drive, Suite 510

San Diego, CA 92121

Address for Delivery of Securities for Holder (if not same as address for
notice):

_______________________________________________________________________________________________________

_______________________________________________________________________________________________________

EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]

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[HOLDER SIGNATURE PAGES TO CONSENT AND AMENDMENT AGREEMENT]

IN WITNESS WHEREOF, the undersigned have caused this Consent and Amendment
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.

Name of Holder: Boxer Capital, LLC

Signature of Authorized Signatory of Holder: /s/ Chris Fuglesang

Name of Authorized Signatory: Chris Fuglesang

Title of Authorized Signatory: Member

Email Address of Holder: cfuglesang@tavistock.com

Fax Number of Holder: 858 400 3101

Address for Notice of Holder:

440 Stevens Ave., Suite 100

Solana Beach, CA 92075

Address for Delivery of Securities for Holder (if not same as address for
notice):

_______________________________________________________________________________________________________

_______________________________________________________________________________________________________

EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]

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[HOLDER SIGNATURE PAGES TO CONSENT AND AMENDMENT AGREEMENT]

IN WITNESS WHEREOF, the undersigned have caused this Consent and Amendment
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.

Name of Holder: MVA Investors, LLC

Signature of Authorized Signatory of Holder: /s/ Chris Fuglesang

Name of Authorized Signatory: Chris Fuglesang

Title of Authorized Signatory: President

Email Address of Holder: cfuglesang@tavistock.com

Fax Number of Holder: 858 400 3101

Address for Notice of Holder:

440 Stevens Ave, Suite 100

Solana Beach, CA 92075

Address for Delivery of Securities for Holder (if not same as address for
notice):

_______________________________________________________________________________________________________

_______________________________________________________________________________________________________

EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]

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[HOLDER SIGNATURE PAGES TO CONSENT AND AMENDMENT AGREEMENT]

IN WITNESS WHEREOF, the undersigned have caused this Consent and Amendment
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.

Name of Holder: RTW Investments, LLC

Signature of Authorized Signatory of Holder: /s/ Roderick Wong

Name of Authorized Signatory: Roderick Wong

Title of Authorized Signatory: Managing Member

Email Address of Holder: rwong@rtwfunds.com

Fax Number of Holder: 646 597 6998

Address for Notice of Holder:

1350 Avenue of the Americas, 28th Floor

New York, NY 10019

Address for Delivery of Securities for Holder (if not same as address for
notice):

_______________________________________________________________________________________________________

_______________________________________________________________________________________________________

EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]

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Exhibit A

CERTIFICATE OF DESIGNATIONS,

PREFERENCES AND RIGHTS

of

SERIES C-12 CONVERTIBLE PREFERRED STOCK, SERIES C-22 CONVERTIBLE

PREFERRED STOCK, SERIES D-12

CONVERTIBLE PREFERRED STOCK AND SERIES D-22 CONVERTIBLE

PREFERRED STOCK

of

LA JOLLA PHARMACEUTICAL COMPANY

Pursuant to Section 151 of the

Delaware General Corporation Law

The undersigned, being an authorized officer of La Jolla Pharmaceutical Company
(the “Corporation”), a corporation organized and existing under the laws of the
State of Delaware, in accordance with the provisions of Section 151(g) of the
Delaware General Corporation Law (“DGCL”), does hereby certify that:

Pursuant to the authority vested in the Board of Directors of the Corporation by
the Certificate of Incorporation and Bylaws of the Corporation, each as amended
and restated through the date hereof, the Board of Directors of the Corporation,
in accordance with DGCL Section 151, duly adopted the following resolution on
January 13, 2012, which authorizes four series of the Corporation’s previously
authorized Preferred Stock, par value $0.0001 per share (the “Preferred Stock”):

RESOLVED, that pursuant to the authority vested in the Board of Directors of the
Corporation (the “Board of Directors”) by the Certificate of Incorporation and
Bylaws of the Corporation, the Board of Directors hereby establishes a Series
C-12 Convertible Preferred Stock, Series C-22 Convertible Preferred Stock,
Series D-12 Convertible Preferred Stock and Series D-22 Convertible Preferred
Stock of the Corporation, each with par value $0.0001 per share, and hereby
states the number of shares and fixes the powers, designations, preferences and
relative, participating, optional and other rights, and the qualifications,
limitations and restrictions thereof, of each such series of shares as follows:

I. DESIGNATION AND AMOUNT

The designation of the first new series, which consists of 11,000 shares of
Preferred Stock, is the Series C-12 Convertible Preferred Stock (the
“Series C-12 Preferred Stock”). The designation of the second new series, which
consists of 22,000 shares of Preferred Stock, is the

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Series C-22 Convertible Preferred Stock (the “Series C-22 Preferred Stock” and
together with the Series C-12 Preferred Stock, the “Series C Preferred Stock”).
The designation of the third new series, which consists of 5,134 shares of
Preferred Stock, is the Series D-12 Convertible Preferred Stock (the
“Series D-12 Preferred Stock”). The designation of the fourth new series, which
consists of 10,868 shares of Preferred Stock, is the Series D-22 Convertible
Preferred Stock (the “Series D-22 Preferred Stock” and, together with the Series
C Preferred Stock and Series D-12 Preferred Stock, the “New Preferred Stock”).

II. CERTAIN DEFINITIONS

For purposes of this Certificate of Designations, the following terms shall have
the following meanings:

A. “Asset Purchase Agreement” means the Asset Purchase Agreement, dated as of
January 19, 2012, by and between the Corporation and the seller named therein,
as the same may be amended from time to time.

B. “Change of Control” means the following, provided, however, that in no event
shall a Strategic Transaction that is approved by the Requisite Holders also be
deemed to constitute a Change of Control:

(i) the consolidation, merger or other business combination of the Corporation
with or into another entity (other than a consolidation, merger or other
business combination in which holders of the Corporation’s voting power
immediately prior to the transaction continue after the transaction to hold,
directly or indirectly, in substantially the same proportion as immediately
preceding the transaction, the voting power of the surviving entity or entities
necessary to elect a majority of the members of the board of directors (or their
equivalent if other than a corporation) of such entity or entities);

(ii) the sale, lease, transfer, exclusive license or other disposition, in a
single transaction or series of related transactions, by the Corporation or any
subsidiary of the Corporation (including, without limitation, any such action
effected by the Corporation or any subsidiary of the Corporation by merger,
consolidation or otherwise) of all or substantially all of the intellectual
property or assets of the Corporation and its subsidiaries, taken as a whole, or
the sale or disposition (including, without limitation, any such action effected
by the Corporation or any subsidiary of the Corporation by merger, consolidation
or otherwise) of one or more subsidiaries of the Corporation if substantially
all of the assets of the Corporation and its subsidiaries taken as a whole are
held by such subsidiary or subsidiaries; or

(iii) the consolidation, merger or other business combination of the Corporation
with or into another entity that results in the cancellation of shares of any
one or more series of New Preferred Stock or that results in the conversion of
shares of any one or more series of New Preferred Stock into: (1) shares of any
other class or series of capital stock of the Corporation; (2) securities of the
Corporation or any other person (or the right to receive any such securities);
(3) any property (including, without limitation, cash and the right to receive
cash or other property); or (4) any combination of the foregoing.

 

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C. “Closing Date” means 11:59 p.m. on the date of the closing under the
Securities Purchase Agreement dated May 24, 2010 by and among the Corporation
and the purchasers named therein, as the same may be amended from time to time
(the “Securities Purchase Agreement”).

D. “Closing Sales Price” means, on any particular date: (i) the last trading
price per share of the Common Stock on such date during regular trading hours on
the principal Trading Market on which the Common Stock is then listed as
reported by Bloomberg Financial L.P (or a comparable reporting service of
national reputation selected by the Corporation and reasonably acceptable to the
Requisite Holders, if Bloomberg Financial L.P. is not then reporting closing
sales prices of the Common Stock) (collectively, “Bloomberg”), or if there is no
such price on such date, then the last trading price during regular trading
hours on such Trading Market on the date nearest preceding such date as reported
by Bloomberg; or (ii) if the Common Stock is not listed then on a Trading
Market, the last trading price for a share of Common Stock in the
over-the-counter market during regular trading hours, as reported in the
National Quotation Bureau Incorporated or similar organization or agency
succeeding to its functions of reporting prices at the close of business on such
date; or (iii) if the Common Stock is not then reported by the National
Quotation Bureau Incorporated (or similar organization or agency succeeding to
its functions of reporting prices), then the average of the “Pink Sheet” quotes
on such date, as determined in good faith by the Holder; or (iv) if the Common
Stock is not then publicly traded, the fair market value of a share of Common
Stock as determined by the Corporation and reasonably acceptable to the
Requisite Holders.

E. “Common Stock” means the Corporation’s common stock, par value $0.0001 per
share, and stock of any other class of securities into which such securities may
hereafter be reclassified or changed into.

F. “Common Stock Equivalents” means any securities of the Corporation or of any
subsidiary of the Corporation that would entitle the holder thereof to acquire,
directly or indirectly, at any time, Common Stock or any security of any
subsidiary of the Corporation, including, without limitation, any debt,
preferred stock, right, option, warrant or other agreement, document or
instrument that is at any time convertible into, exercisable for or exchangeable
for, or otherwise entitles the holder thereof to receive, directly or
indirectly, Common Stock or any security of any subsidiary of the Corporation.

G. “Conversion Date” means, for any Optional Conversion (as defined in
Article IV.A.), the date specified in the notice of conversion in the form
attached hereto (the “Notice of Conversion”), so long as a copy of the Notice of
Conversion is delivered via electronic mail resulting in notice to the
Corporation before 11:59 p.m., New York City time, on the Conversion Date
indicated in the Notice of Conversion; provided, however, that if the Notice of
Conversion is not so e-mailed before such time, then the Conversion Date shall
be the date the holder e-mails the Notice of Conversion to the Corporation.

H. “Conversion Price” means the price obtained by dividing $1,000 by
166,666.667, and shall be subject to adjustment as set forth in Article X below.

 

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I. “Face Amount” means, with respect to the New Preferred Stock, $1,000.00 per
share, as adjusted (i) for stock splits, stock dividends, combinations,
recapitalizations, reclassifications or the like and (ii) with respect to any
given share or shares of New Preferred Stock, to account for any accretion in
the Face Amount as a result of accrued but unpaid dividends or any other
increase provided for in this Certificate of Designations.

J. “Measurement Date” means for purposes of any issuance of securities, the date
of issuance thereof.

K. “Net Cash” means (i) the sum of the Corporation’s unrestricted, consolidated
(x) cash, (y) cash equivalents and (z) short term investments, available for
sale; less (ii) the amount of the Corporation’s liabilities that may be settled
in cash, including any off-balance sheet obligations that may be settled in
cash.

L. “Original Issue Date” means, with respect to each share of Series C-12
Preferred Stock or Series C-22 Preferred Stock, the date of issuance of such
share.

M. “Other Stock” means (i) any class or series of preferred stock or other
capital stock of the Corporation, other than Common Stock, Common Stock
Equivalents and New Preferred Stock and (ii) any securities of the Corporation
or of any subsidiary of the Corporation that would entitle the holder thereof to
acquire, directly or indirectly, at any time any capital stock listed in clause
(i), including, without limitation, any debt, preferred stock, right, option,
warrant or other agreement, document or instrument that is at any time
convertible into, exercisable for or exchangeable for, or otherwise entitles the
holder thereof to receive, directly or indirectly, any capital stock listed in
clause (i).

N. Unless otherwise expressly provided in this Certificate of Designations, each
reference to a “person” refers to any individual, entity or association,
including, without limitation, any corporation, limited partnership, general
partnership, joint stock company, joint venture, association, company, trust,
bank, trust company, and trust, business trust or other organization, whether or
not a legal entity, or a government or agency or any political subdivision
thereof.

O. “Requisite Holders” means the holders of at least 80% of the then outstanding
shares of New Preferred Stock and any shares of New Preferred Stock issuable
upon exercise of any Warrants, voting together as one class. Any shares of New
Preferred Stock issuable upon exercise of any Warrants shall be included in the
Requisite Holders calculation even if such Warrant has not been exercised at the
time of the calculation.

P. “Strategic Transaction” means: (i) any joint venture, partnership,
development agreement, research agreement, marketing agreement or license
agreement, in each case relating to any drug or drug candidate, medical device
or diagnostic; (ii) any disposition of any material asset of the Corporation or
any subsidiary, in each case whether by sale, lease, license, exchange, transfer
or otherwise; (iii) any material acquisition of any stock or assets of a third
party by the Corporation or any subsidiary; or (iv) a resolution of the Board of
Directors authorizing the further development of the Corporation’s drug
candidate Riquent in future human clinical trials, but only if such further
development is first approved by the Requisite Holders.

 

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Q. “Trading Day” means, except as set forth below, a day on which the
Corporation’s securities are traded on a Trading Market; provided, however, that
in the event that the Corporation’s securities are not traded on a Trading
Market, then Trading Day shall mean any day except Saturday, Sunday and any day
on which banking institutions in the State of New York are authorized or
required by law or other government action to close. Notwithstanding the
foregoing, the following shall not be deemed Trading Days:

 

  •  

December 24 to January 2;

 

  •  

The Fridays immediately before Memorial Day and immediately before Labor Day;

 

  •  

The weekday immediately before and the weekday immediately after Independence
Day, provided that if Independence Day is on a Wednesday, then the two following
weekdays;

 

  •  

Columbus Day; or

 

  •  

The Friday immediately after Thanksgiving.

R. “Trading Market” means the OTC Bulletin Board or the Pink Sheets, the NASDAQ
Global Select Market, the NASDAQ Global Market, the NASDAQ Capital Market, the
New York Stock Exchange (“NYSE”) or the NYSE Amex, or any successor markets
thereto.

S. “VWCP” means, for any specified period of consecutive Trading Days, the
quotient of: (i) the sum of the individual products, calculated for each Trading
Day within such period, of (A) the Closing Sales Price for such Trading Day in
such specified period (as reported by Bloomberg) multiplied by (B) the trading
volume for the Common Stock for such Trading Day in such specified period as
reported by the Trading Market (as reported by Bloomberg), National Quotation
Bureau Incorporated or other reporting organization or agency, as applicable,
and (ii) the total aggregate trading volume for the Common Stock for all Trading
Days in such specified period, as reported by the Trading Market (as reported by
Bloomberg), National Quotation Bureau Incorporated or other reporting
organization or agency, as applicable.

T. “Warrants” means the Cashless Warrants, Cash Warrants and Subsequent Cashless
Warrants (each as defined in the Securities Purchase Agreement).

U. “Week” means a consecutive seven (7) calendar day period.

III. DIVIDENDS

A. Except as set forth below, holders of Series C-12 Preferred Stock and
Series C-22 Preferred Stock shall be entitled to receive, and the Corporation
shall pay, cumulative mandatory dividends at the rate per share of 15% of the
Face Amount per annum, payable semi-annually on November 25 and May 25 beginning
on the first such date after the applicable Original Issue Date (each such date,
a “Dividend Payment Date”) (if any Dividend Payment Date is not a Trading Day,
the applicable payment shall be due on the next succeeding Trading Day). Such
dividends shall be payable in such number of additional shares of Series C-12
Preferred Stock with respect to the Series C-12 Preferred Stock and Series C-22
Preferred Stock with respect to the Series C-22 Preferred Stock, in each case
determined by dividing the amount of the

 

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cumulative dividends by the Face Amount; provided, however, that if funds are
not legally available for the payment of dividends on the Series C-12 Preferred
Stock or Series C-22 Preferred Stock, such dividends shall, effective on the
close of business on a Dividend Payment Date with respect to an unpaid dividend,
accrete to, and increase, the Face Amount of the Series C-12 Preferred Stock or
Series C-22 Preferred Stock, respectively. Dividends on the Series C-12
Preferred Stock and Series C-22 Preferred Stock shall be calculated on the basis
of a 360-day year, consisting of twelve 30-day periods, shall accrue daily
commencing on the applicable Original Issue Date, and, subject to the preceding
sentence, shall be deemed to accrue from such applicable Original Issue Date
whether or not earned or declared and whether or not there are profits, surplus
or other funds of the Corporation legally available for the payment of
dividends. The record date for determining the holders of Series C-12 Preferred
Stock and Series C-22 Preferred Stock entitled to dividends pursuant to this
paragraph shall be the fifth (5th) Trading Day before the Dividend Payment Date.
If any such cumulative dividends would result in the issuance of a fractional
share of Series C-12 Preferred Stock or Series C-22 Preferred Stock, the
Corporation shall issue a fractional share therefor, rounded to the nearest
1/1000th of a share. For the avoidance of doubt, (i) for purposes of any
conversion or redemption of shares of Series C-12 Preferred Stock and
Series C-22 Preferred Stock, any amount accreted to the Face Amount of such
shares pursuant to this paragraph as of such conversion or redemption shall not
be deemed accrued but unpaid dividends and (ii) in the event of a conversion or
redemption that occurs between Dividend Payment Dates, dividends shall be deemed
to accrue through the date of such conversion or redemption, even if such
accrual is less than a full semi-annual dividend period.

B. Shares of Series D-12 Preferred Stock and Series D-22 Preferred Stock shall
not entitle the holder thereof to receive any dividends.

IV. CONVERSION

A. Conversion at the Option of the Holder. Subject to the limitations on
conversions contained in Paragraph C of this Article IV, each holder of shares
of New Preferred Stock may, at any time and from time to time, convert (an
“Optional Conversion”) each of its shares of New Preferred Stock into a number
of fully paid and non-assessable shares of Common Stock determined in accordance
with the following formula:

Face Amount

Conversion Price

Following the effectiveness of any Optional Conversion, the shares of
Series C-12 Preferred Stock or Series C-22 Preferred Stock, as applicable, so
converted shall also entitle the former holder of such shares to receive, on the
Dividend Payment Date next following such conversion, a number of shares of
Series C-12 Preferred Stock or Series C-22 Preferred Stock, respectively, equal
to the unpaid dividends that accrued on the shares so converted through the date
of such conversion, divided by the Face Amount.

 

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B. Mechanics of Conversion. In order to effect an Optional Conversion, a holder
shall deliver via electronic mail a copy of the fully executed Notice of
Conversion (in the form attached hereto) to the Corporation (Attention:
Secretary). Such notice shall be delivered to conversions@ljpc.com or such other
address as the Corporation may, from time to time, provide to the holders upon
delivery of a written notice. Upon receipt by the Corporation of a copy of a
Notice of Conversion from a holder, the Corporation shall promptly send, via
facsimile or electronic mail, a confirmation to such holder stating that the
Notice of Conversion has been received, the date upon which the Corporation
expects to deliver the Common Stock issuable upon such conversion and the name
and telephone number of a contact person at the Corporation regarding the
conversion.

(i) Delivery of Common Stock Upon Conversion. The Corporation (itself, or
through its transfer agent) shall, no later than the second Trading Day
following the Conversion Date (the “Delivery Period”), issue and deliver (i.e.,
deposit with a nationally recognized overnight courier service postage prepaid)
to the holder or its nominee a certificate representing that number of shares of
Common Stock issuable upon conversion of such shares of New Preferred Stock
being converted. Notwithstanding the foregoing, if the Corporation’s transfer
agent is participating in the Depository Trust Company (“DTC”) Fast Automated
Securities Transfer program or any other program that provides for the
electronic delivery of Common Stock, the Corporation shall cause its transfer
agent, by the end of the Delivery Period, to electronically transmit the Common
Stock (not in physical stock certificate form) issuable upon conversion to the
holder by crediting the account of the holder or its nominee with DTC through
its Deposit Withdrawal Agent Commission system or with any such equivalent
program.

(ii) Taxes. The Corporation shall pay any and all taxes that may be imposed upon
it with respect to the issuance and delivery of the shares of Common Stock upon
the conversion of the New Preferred Stock.

(iii) No Fractional Shares. If any conversion of New Preferred Stock would
result in the issuance of a fractional share of Common Stock, such fractional
share shall be payable in cash based upon the Closing Sales Price on the Trading
Day immediately preceding the Conversion Date and the number of shares of Common
Stock issuable upon conversion of the New Preferred Stock shall be the next
lower whole number of shares.

(iv) Conversion Disputes. In the case of any dispute with respect to a
conversion, the Corporation shall promptly issue such number of shares of Common
Stock as are not disputed in accordance with subparagraph (i) above. If such
dispute involves the calculation of the Conversion Price, and such dispute is
not promptly resolved by discussion between the relevant holder and the
Corporation, the Corporation shall submit the disputed calculations to an
independent outside accountant within three Trading Days of receipt of the
Notice of Conversion. The accountant, at the Corporation’s sole expense, shall
promptly audit the calculations and notify the Corporation and the holder of the
results no later than three Trading Days from the date it receives the disputed
calculations. The accountant’s calculation shall be deemed conclusive, absent
manifest error. The Corporation shall then issue the appropriate number of
shares of Common Stock in accordance with subparagraph (i) above.

C. Limitations on Conversions. The conversion of shares of New Preferred Stock
shall be subject to the following limitations (each of which limitations shall
be applied independently):

 

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(i) Timing and Volume Limitations. Each holder of shares of New Preferred Stock
(each a “Holder”) shall be eligible for an Optional Conversion on any day of a
Monday through Sunday calendar week (each a “Conversion Week”) to the extent
that, together with all prior conversions of such Holder’s New Preferred Stock,
if any, the total shares of the New Preferred Stock that has been converted by
such Holder during such Conversion Week (rounded to the nearest 1/1,000th of a
share) does not exceed the product of (x) the Face Amount of the Outstanding New
Preferred Stock (as defined below) held by such Holder, multiplied by (y) the
Conversion Cap for such calendar week. In determining the “Conversion Cap” for
any Conversion Week, if the quotient of (A) the VWCP (as adjusted to reflect any
stock splits, stock dividends or similar recapitalizations occurring on or
before the Conversion Date) for the three consecutive Trading Days during the
previous Monday through Sunday calendar week ending on the last Trading Day
prior to the applicable Conversion Week, divided by (B) the applicable
Conversion Price of the New Preferred Stock on the first Trading Day of such
Conversion Week is: (1) less than one, then the Conversion Cap shall be 0%;
(2) greater than or equal to one and less than two, then the Conversion Cap
shall be 0.21%; (3) greater than or equal to two and less than three, then the
Conversion Cap shall be 0.42%; (4) greater than or equal to three and less than
four, then the Conversion Cap shall be 0.84%; (5) greater than or equal to four
and less than five, then the Conversion Cap shall be 1.25%; (6) greater than or
equal to five and less than six, then the Conversion Cap shall be 1.67%;
(7) greater than or equal to six and less than seven, then the Conversion Cap
shall be 2.09%; (8) greater than or equal to seven and less than eight, then the
Conversion Cap shall be 2.51%; (9) greater than or equal to eight and less than
nine, then the Conversion Cap shall be 2.93%; (10) greater than or equal to nine
and less than ten, then the Conversion Cap shall be 3.34%; or (11) greater than
or equal to ten, then the Conversion Cap shall be 3.76%. For purposes of this
Article IV.C.(i), “Outstanding New Preferred Stock” means all of the Company’s
Series C-12 Preferred Stock, including the Series C-12 Preferred Stock that has
been issued by way of payment of dividends in kind pursuant to Article III,
issued and outstanding immediately following the Closing (as defined in the
Asset Purchase Agreement). Notwithstanding anything to the contrary in this
Article IV.C.(i), any holder of New Preferred Stock shall have the right to
convert all or any portion of its shares of New Preferred Stock into shares of
Common Stock immediately prior to a Change of Control. The foregoing conversion
limits shall apply to the New Preferred Stock on an aggregate basis; to the
extent that ownership of the New Preferred Stock is divided among multiple
holders, the conversion limits shall be apportioned, on a weekly basis, among
the holders on a pro rata basis by dividing the Outstanding New Preferred Stock
among the holders of New Preferred Stock based on their relative holdings of the
New Preferred Stock.

(ii) Additional Restrictions on Conversion or Transfer. Notwithstanding anything
in this Certificate of Designations to the contrary, at no time may the
Corporation issue or sell shares of Common Stock (including transfers by the
Corporation of treasury stock) to a holder of New Preferred Stock, and in no
event shall any holder of shares of New Preferred Stock have the right to
convert shares of New Preferred Stock into shares of Common Stock, in each such
case (x) to the extent that such issuance or sale or right to effect such
conversion would result in the holder or any of its affiliates together
beneficially owning more than 9.999% of the then issued and outstanding shares
of Common Stock or (y) if such holder or any of its affiliates together
beneficially own more than 9.999% of the then issued and outstanding Common
Stock immediately prior to such purported issuance, sale, transfer or
conversion. For purposes of this

 

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subparagraph, beneficial ownership shall be determined in accordance with
Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), and Regulation 13D-G thereunder. The restriction contained in this
subparagraph may not be waived. Any purported issuance, sale, transfer or
conversion effected in violation of this paragraph shall be null and void.
Certificates representing shares of New Preferred Stock shall have imprinted,
typed, stamped or otherwise affixed thereon a legend in substantially the
following form:

THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO TRANSFER AND
CONVERSION RESTRICTIONS AND MAY BE TRANSFERRED OR CONVERTED ONLY AS PERMITTED BY
THE TERMS OF THE CERTIFICATE OF DESIGNATIONS SETTING FORTH THE RIGHTS, POWERS
AND PREFERENCES OF SUCH PREFERRED STOCK, A COPY OF WHICH IS ON FILE WITH THE
SECRETARY OF THE CORPORATION AND SHALL BE PROVIDED FREE OF CHARGE UPON A REQUEST
THEREFOR SUBMITTED TO THE SECRETARY.

V. RESERVATION OF SHARES OF COMMON STOCK

A. If the authorized and unissued number of shares of Common Stock (the
“Reserved Amount”) for any three consecutive Trading Days shall be less than a
number sufficient to provide for the conversion in full, at the then current
Conversion Price thereof, without taking into account the conversion limitations
set forth in Article IV.C.(i) and without taking into account the conversion
limitations set forth in Article IV.C.(ii), of all of the New Preferred Stock
then outstanding, (the “Required Reserve Amount”), then the Corporation shall
immediately notify the holders of New Preferred Stock of such occurrence and
shall take immediate action (including, if necessary, seeking stockholder
approval to increase the number of shares of Common Stock that the Corporation
is authorized to issue) to increase the Reserved Amount to at least the Required
Reserve Amount. Nothing contained in this Article V.A. shall limit any other
rights or remedies of the holders of the New Preferred Stock hereunder or under
applicable law.

VI. FAILURE TO SATISFY CONVERSIONS

A. Conversion Defaults. If, at any time, (x) a holder of shares of New Preferred
Stock submits a Notice of Conversion and the Corporation fails for any reason
(including without limitation because such issuance would exceed such holder’s
allocated portion of the Reserved Amount, but not including because of the
limitations set forth in Article IV.C.) to deliver in strict accordance with the
terms hereof, on or prior to the last Trading Day of the Delivery Period for
such conversion, such number of shares of Common Stock to which such holder is
entitled upon such conversion, or (y) the Corporation provides written notice to
any holder of New Preferred Stock (or makes a public announcement via press
release) at any time of its intention not to issue shares of Common Stock upon
exercise by any holder of its conversion rights in accordance with the terms of
this Certificate of Designations (each of (x) and (y) being a “Conversion
Default”), then, in either such case, if such Conversion Default is not cured
within five Trading Days of its initial occurrence, each holder of Series C
Preferred Stock may elect, by delivery of a notice (the “Conversion Default
Notice”) to the Corporation, to have such holder’s outstanding shares of Series
C Preferred Stock redeemed to the fullest extent permitted by law. Any such
redemption

 

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shall be made pursuant to the process and in the amount described in Sections A
through C of Article VII (deeming the Conversion Default Notice delivered
pursuant to this Article VI.A to be a “Redemption Trigger Notice” for such
purpose and deeming the Conversion Default pursuant to this Article VI.A to be a
“Redemption Event” for such purpose).

B. Buy-In Cure. Without limiting the other rights or remedies of the holders
(including, but not limited to, the right to redemption under Article VI.A. or
Article VII), unless the Corporation has notified the applicable holder in
writing prior to the delivery by such holder of a Notice of Conversion that the
Corporation is unable to honor conversions, if (i) the Corporation fails to
timely deliver during the Delivery Period shares of Common Stock to a holder
upon a conversion of shares of New Preferred Stock and (ii) thereafter, such
holder purchases (in an open market transaction or otherwise) shares of Common
Stock (the “Cover Shares”) to make delivery in satisfaction of a sale by such
holder of the shares of Common Stock (the “Sold Shares”) that such holder
anticipated receiving upon such conversion (a “Buy-In”), at the election of the
holder as a redemption to the fullest extent permitted by law, the Corporation
shall pay such holder (in addition to any other remedies available to the
holder) the amount equal to such holder’s total purchase price (including
brokerage commissions, if any) for the Cover Shares and, upon making such
payment, the Corporation’s conversion obligations shall be deemed satisfied and
the New Preferred Stock that was tendered pursuant to the Notice of Conversion
shall thereupon be cancelled and the holder shall not have any further right or
remedy against the Corporation with respect to such shares of New Preferred
Stock that were tendered pursuant to the Notice of Conversion. A holder shall
provide the Corporation written notification and supporting documentation
indicating any amounts payable to such holder pursuant to this Article VI.B. The
Corporation shall make any payments required pursuant to this Article VI.B in
accordance with and subject to the provisions of Article XIII.E.

VII. SERIES C PREFERRED STOCK REDEMPTION RIGHTS

A. Redemption Events. In the event (each of the events described below after
expiration of the applicable cure period (if any) being a “Redemption Event”)
that any of the following occur without the prior approval (by vote or written
consent, as provided by the DGCL) of the Requisite Holders, but only if such
approval expressly specifies that the Requisite Holders signing the consent are
consenting for purposes of this Article VII:

(i) the Corporation shall fail to observe or perform any covenant, condition or
agreement contained in this Certificate of Designations or any of the
Transaction Documents (as defined in the Securities Purchase Agreement)
(including, without limitation, the failure to obtain approval (by vote or
written consent, as provided by the DGCL) of the Requisite Holders under
Article XII, but excluding those covenants referred to below in paragraphs
(iii) and (iv)), which failure is not cured within eight Trading Days after
receiving notice of such default sent by a holder of New Preferred Stock;

(ii) the failure of the Common Stock to be listed on a Trading Market for a
period of 20 consecutive Trading Days;

 

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(iii) the Corporation provides written notice (or otherwise indicates in
writing) to any holder of New Preferred Stock, or states by way of public
announcement distributed via a press release, at any time, of its intention not
to issue shares of Common Stock to any holder of New Preferred Stock upon
conversion in accordance with the terms of this Certificate of Designations
(other than due to the circumstances contemplated by Article V, for which the
holders shall have the remedies set forth in such Article), which notice or
announcement is not rescinded within five Trading Days and provided that the
Requisite Holders elect in writing to designate such event as a Redemption
Event;

(iv) the Corporation shall fail to timely deliver the shares of Common Stock as
and when required herein for any reason (not including because of the
limitations set forth in Article IV.C.), which failure is not cured within ten
Trading Days and provided that the Requisite Holders elect in writing to
designate such event as a Redemption Event;

(v) any material representation or warranty made by the Corporation or any of
its subsidiaries in the Securities Purchase Agreement shall prove to have been
materially false or incorrect or breached in a material respect, in each case as
of the date made, provided that the Corporation receives written notice of the
breach or alleged falsity from any holder of Series C Preferred Stock within one
year from the consummation of a Strategic Transaction and such breach or alleged
falsity is not cured within five Trading Days of the receipt of such written
notice;

(vi) the Corporation or any of its subsidiaries shall: (a) apply for or consent
to the appointment of, or the taking of possession by, a receiver, custodian,
trustee or liquidator of itself or of all or a substantial part of its property
or assets; (b) make a general assignment for the benefit of its creditors;
(c) commence a voluntary case under the United States Bankruptcy Code (as now or
hereafter in effect) or under the comparable laws of any jurisdiction (foreign
or domestic); (d) file a petition seeking to take advantage of any bankruptcy,
insolvency, moratorium, reorganization or other similar law affecting the
enforcement of creditors’ rights generally; (e) acquiesce in writing to any
petition filed against it in an involuntary case under United States Bankruptcy
Code (as now or hereafter in effect) or under the comparable laws of any
jurisdiction (foreign or domestic); (f) issue a notice of bankruptcy or winding
down of its operations or issue a press release regarding same; or (g) take any
action under the laws of any jurisdiction (foreign or domestic) analogous to any
of the foregoing;

(vii) a proceeding or case shall be commenced in respect of the Corporation or
any of its subsidiaries, without its application or consent, in any court of
competent jurisdiction, seeking (i) the liquidation, reorganization, moratorium,
dissolution, winding up, or composition or readjustment of its debts; (ii) the
appointment of a trustee, receiver, custodian, liquidator or the like of it or
of all or any substantial part of its assets in connection with the liquidation
or dissolution of the Corporation or any of its subsidiaries; or (iii) similar
relief in respect of it under any law providing for the relief of debtors, and
such proceeding or case described in clause (i), (ii) or (iii) shall continue
undismissed, or unstayed and in effect, for a period of 30 days or any order for
relief shall be entered in an involuntary case under United States Bankruptcy
Code (as now or hereafter in effect) or under the comparable laws of any
jurisdiction (foreign or domestic) against the Corporation or action under the
laws of any jurisdiction (foreign or domestic) analogous to any of the foregoing
shall be taken with respect to the Corporation and shall continue undismissed,
or unstayed and in effect for a period of 60 days;

 

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(viii) the Corporation consummates a “going private” transaction and as a result
the Common Stock is no longer registered under Sections 12(b) or 12(g) of the
Exchange Act;

(ix) there shall be any SEC or judicial stop trade order or trading suspension
stop-order or any restriction in place with the transfer agent for the Common
Stock restricting the trading of such Common Stock for a period of 20
consecutive Trading Days;

(x) there shall be a determination by the SEC or the Corporation such that the
Corporation’s representations, warranties or covenants set forth in
Section 2.1(hh) of the Securities Purchase Agreement are breached or inaccurate,
which breach or inaccuracy is not cured within five Trading Days of such
determination; or

(xi) the Corporation consummates a Change of Control;

then, upon (i) the occurrence of any such Redemption Event, and (ii) the
affirmative election delivered to the Corporation by the Requisite Holders to
permit a redemption in accordance with this paragraph (the “Redemption Trigger
Notice”), each holder of shares of Series C Preferred Stock shall thereafter
have the option by delivery of a notice (the “Redemption Event Notice”) to the
Corporation prior to the Redemption Date (defined below) to require the
Corporation to redeem for cash, to the fullest extent permitted by law, all of
the then outstanding shares of Series C Preferred Stock held of record by such
holder for an amount per share equal to the Redemption Event Amount in effect at
the time of the redemption hereunder. Upon the Corporation’s receipt of any
Redemption Trigger Notice hereunder, the Corporation shall immediately (and in
any event within one Trading Day following such receipt) deliver a written
notice (a “Redemption Announcement”) to all holders of Series C Preferred Stock
stating the date upon which the Corporation received such Redemption Trigger
Notice. The Corporation shall not redeem any shares of Series C Preferred Stock
during the three Trading Day period following the delivery of a required
Redemption Announcement hereunder. At any time and from time to time during such
three Trading Day period, each holder of Series C Preferred Stock may request
(either orally or in writing) information from the Corporation with respect to
the instant redemption (including, but not limited to, the aggregate number of
shares of Series C Preferred Stock covered by Redemption Event Notices received
by the Corporation) and the Corporation shall furnish (either orally or in
writing) as soon as practicable such requested information to such requesting
holder. On the fifth Trading Day following the date of the delivery of the
Redemption Trigger Notice (the “Redemption Date”), the Corporation shall, to the
fullest extent permitted by law, redeem all shares of Series C Preferred Stock
subject to all Redemption Event Notices received by the Corporation prior to
such date. For the avoidance of doubt, the occurrence of a Redemption Event
shall not preclude the occurrence of one or more subsequent Redemption Events.

B. Definition of Redemption Event Amount. The “Redemption Event Amount” with
respect to a share of Series C Preferred Stock means an amount equal to the
greater of (i) the Face Amount plus all accrued and unpaid dividends on such
share of Series C Preferred Stock and (ii) an amount determined by the following
formula:

 

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(V / CP) x M

where:

“V” means the Face Amount plus all accrued and unpaid dividends on such share of
Series C Preferred Stock;

“CP” means the Conversion Price in effect on the date on which the Corporation
receives the Redemption Event Notice; and

“M” means the Closing Sales Price on the date on which the Corporation receives
the Redemption Trigger Notice.

C. Twelve Month Redemption. On, and only on, the date that is one (1) year
following the Closing (as defined in the Asset Purchase Agreement) (the
“12-Month Anniversary”), 2,900 shares of the Corporation’s Series C-12 Preferred
Stock (or the total number of shares of Series C-12 Preferred Stock then issued
and outstanding, if less than 2,900 shares, such amount being the “Redemption
Shares”) will be redeemable, to the fullest extent permitted by law, for a cash
amount equal to their aggregate Face Amount (the “12-Month Redemption”), but
only upon the affirmative election delivered to the Corporation by the Requisite
Holders no later than five Trading Days prior to the 12-Month Anniversary (the
“12-Month Redemption Notice”). If the 12-Month Redemption Notice is received by
the Corporation, then the Corporation shall redeem the Redemption Shares on a
pro rata basis among all holders of the Redemption Shares. Such redemption shall
occur on the 12-Month Anniversary, provided that, if the 12-Month Anniversary is
not a Trading Day, the redemption will be effected on the first Trading Day
after the 12-Month Anniversary.

D. Redemption Defaults. If the Corporation fails to pay any holder the
Redemption Event Amount or any other redemption amount owed to such holder
pursuant to this Certificate of Designations (including without limitation the
amounts owed as a result of the 12-Month Redemption) with respect to any share
of Series C Preferred Stock within five Trading Days after its receipt of a
Redemption Event Notice or 12-Month Redemption Notice, then the holder of
Series C Preferred Stock entitled to redemption shall be entitled to an
additional amount of cash equal to interest on the applicable Redemption Event
Amount or other redemption amount (excluding the interest payable pursuant to
this paragraph) at a per annum rate equal to the lower of 18% and the highest
interest rate permitted by applicable law from the date on which the Corporation
receives the Redemption Event Notice (or, in the case of the 12-Month
Redemption, from the date that is one (1) year following the Closing) until the
date of payment of the applicable Redemption Event Amount or other redemption
amount hereunder. Such interest shall be deemed a cash payment to be made, to
the fullest extent permitted by law, upon redemption of the Series C Preferred
Stock. In the event the Corporation is not permitted by applicable law to redeem
all of the shares of Series C Preferred Stock submitted for redemption, the
Corporation shall use all funds legally available to redeem shares of Series C
Preferred Stock from each

 

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holder pro rata, based on the total number of shares of Series C Preferred Stock
outstanding at the time of redemption included by such holder in the Redemption
Event Notice or the 12-Month Redemption Notice delivered prior to the date upon
which such redemption is to be effected relative to the total number of shares
of Series C Preferred Stock outstanding at the time of redemption included in
all of the Redemption Event Notices or the 12-Month Redemption Notice delivered
prior to the date upon which such redemption is to be effected, and shall redeem
all the remaining shares to have been redeemed as soon as practicable after the
Corporation is permitted to effect such redemption by applicable law. The
Corporation shall use its best efforts to create sufficient liquidity and to
perform its obligation to pay all amounts owed as redemption to holders of
Series C Preferred Stock on the date on which redemption is to occur, or, if the
Corporation is prohibited by applicable law from paying the redemption on such
date, as soon as possible after such scheduled date of redemption, and shall, to
the extent required to enable it to satisfy such obligation, take such actions,
including but not limited to the following actions, as shall be required to
enable it to satisfy such obligation (but subject to the consent rights set
forth in Article XI, Article XII, Article XIII and the other provisions of this
Certificate of Designations): (A) the issuance and sale of any notes, bonds or
other debt securities; (B) the issuance and sale of (I) any notes or debt
securities containing equity features (including any notes or debt securities
convertible into or exchangeable for equity securities of the Corporation) or
(II) any equity securities of the Corporation (or any securities convertible
into or exchangeable for any equity securities of the Corporation) or rights to
acquire any equity securities of the Corporation; (C) the sale of any or all
assets of the Corporation; (D) the merger or consolidation of the Corporation
with any other entity; or (E) the liquidation of the Corporation and the winding
up of its business and affairs. The Corporation hereby further agrees that,
unless prohibited by law, in determining whether the Corporation can pay the
amounts owed as a redemption pursuant to this Certificate of Designations and in
accordance with applicable law, the Corporation’s assets will be valued at the
highest possible value, without regard to the impact of such redemption on the
Corporation’s business, including its ability to continue as a going concern.

E. Redemption Right Waivers.

(i) Any and all Redemption Events that may have occurred prior to the
consummation of a Strategic Transaction and for which a Redemption Trigger
Notice has not been delivered to the Corporation shall be deemed irrevocably
waived if the Requisite Holders approve a Strategic Transaction.

(ii) Unless the Corporation and the Requisite Holders agree in writing to a
longer period of time, if a Redemption Event Notice is not tendered to the
Corporation within two years from the date of the occurrence of a particular
Redemption Event, then the resulting redemption rights under this Article VII,
solely with respect to that particular Redemption Event, shall be irrevocably
waived.

(iii) Any redemption rights arising under this Article VII that are waived
either by operation of Article VII.D or upon the written approval of the
Requisite Holders shall be binding on all holders of Series C Preferred Stock.

 

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VIII. RANK

All shares of the New Preferred Stock shall rank (i) senior to (a) the
Corporation’s Common Stock; (b) the Common Stock Equivalents (other than Senior
Securities) in existence as of the Closing Date; and (c) any Common Stock
Equivalents (other than Senior Securities) and any Other Stock (other than
Senior Securities) issued after the Closing Date (unless, with the consent of
the Requisite Holders obtained in accordance with Article XII hereof, such
Common Stock Equivalents or Other Stock specifically, by their terms, rank
senior to or pari passu with the New Preferred Stock) (collectively with the
Common Stock and the Common Stock Equivalents in existence as of the Closing
Date, “Junior Securities”); (ii) pari passu with any Common Stock Equivalents
(other than Senior Securities) and Other Stock (other than Senior Securities)
issued after the Closing Date (with the written consent of the Requisite Holders
obtained in accordance with Article XII hereof) specifically ranking, by their
terms, on parity with the New Preferred Stock (the “Pari Passu Securities”); and
(iii) junior to any Common Stock Equivalents or Other Stock issued after the
Closing Date (with the written consent of the Requisite Holders obtained in
accordance with Article XII hereof) specifically ranking, by their terms, senior
to the New Preferred Stock (collectively, the “Senior Securities”), in each case
as to dividends or distribution of assets upon liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary. Each share of
New Preferred Stock shall rank pari passu with each other share of New Preferred
Stock as to dividends and distribution of assets upon liquidation, dissolution
or winding up of the Corporation, whether voluntary or involuntary.

IX. LIQUIDATION PREFERENCE

A. If (i) the Corporation shall: (1) commence a voluntary case under the U.S.
Federal bankruptcy laws or any other applicable bankruptcy, insolvency or
similar law; (2) consent to the entry of an order for relief in an involuntary
case under any law or to the appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or other similar official) of the Corporation
or of any substantial part of its property; or (3) make an assignment for the
benefit of its creditors; (ii) a decree or order for relief in respect of the
Corporation shall be entered by a court having jurisdiction in the premises in
an involuntary case under the U.S. Federal bankruptcy laws or any other
applicable bankruptcy, insolvency or similar law resulting in the appointment of
a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other
similar official) of the Corporation or of any substantial part of its property,
or ordering the winding up or liquidation of its affairs, and any such decree or
order shall be unstayed and in effect for a period of 60 consecutive days; or
(iii) the Corporation sells or transfers all or substantially all of its assets
in one transaction or in a series of related transactions and, on account of any
such event as set forth in clauses (i), (ii) or (iii), the Corporation shall
liquidate, dissolve or wind up, or if the Corporation shall otherwise liquidate,
dissolve or wind up (a “Liquidation Event”), no distribution shall be made to
the holders of any shares of capital stock of the Corporation (other than Senior
Securities pursuant to the rights, preferences and privileges thereof) upon
liquidation, dissolution or winding up unless prior thereto the holders of
shares of New Preferred Stock shall have received the Liquidation Preference
with respect to each share then outstanding. If, upon the occurrence of a
Liquidation Event, the assets and funds legally available for distribution among
the holders of the New Preferred Stock and holders of Pari Passu Securities, if
any, shall be insufficient to permit the payment to such holders of the
preferential amounts payable

 

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thereon, then the entire assets and funds of the Corporation legally available
for distribution to the New Preferred Stock and the Pari Passu Securities, if
any, shall be distributed ratably among such shares in proportion to the ratio
that the Liquidation Preference payable on each such share bears to the
aggregate Liquidation Preference payable on all such shares.

B. The purchase or redemption by the Corporation of stock of any class, in any
manner permitted by law, shall not, for the purposes hereof, be regarded as a
liquidation, dissolution or winding up of the Corporation. Neither the
consolidation or merger of the Corporation with or into any other entity nor the
sale or transfer by the Corporation of less than substantially all of its assets
shall, for the purposes hereof, be deemed to be a liquidation, dissolution or
winding up of the Corporation.

C. The “Liquidation Preference” with respect to a share of New Preferred Stock
means an amount equal to the Face Amount thereof plus all accrued and unpaid
dividends on the New Preferred Stock (as adjusted for any stock dividends,
combinations, splits, recapitalizations and the like with respect to such
shares). The Liquidation Preference with respect to any Pari Passu Securities,
if any, shall be as set forth in the Certificate of Designations filed in
respect thereof.

X. ADJUSTMENTS TO THE CONVERSION PRICE

The Conversion Price shall be subject to adjustment from time to time as
follows:

A. Stock Splits, Stock Dividends, Etc. If, at any time on or after the Closing
Date, the number of outstanding shares of Common Stock is increased by a stock
split, stock dividend, combination, reclassification or other similar event (in
each case, whether by merger or otherwise), then, after the date of record for
such event, the Conversion Price shall be proportionately reduced. If the number
of outstanding shares of Common Stock is decreased by a reverse stock split,
combination or reclassification of shares, or other similar event (in each case,
whether by merger or otherwise), then, after the date of record for such event,
the Conversion Price shall be proportionately increased. In any such event
described in this paragraph, the Corporation shall notify the Corporation’s
transfer agent of such change on or before the effective date thereof.

B. Adjustment Due to Merger, Consolidation, Etc. With respect to each share of
New Preferred Stock, if, at any time after the Closing Date, there shall be
(i) any recapitalization, reclassification or change of the outstanding shares
of Common Stock (but not of such share of New Preferred Stock), other than a
change in par value, or from par value to no par value, or from no par value to
par value, or as a result of a transaction causing an adjustment pursuant to
Article X.A.; (ii) any Change of Control or any merger, conversion,
consolidation or other business combination, in each case pursuant to which the
Common Stock (but not such share of New Preferred Stock) is converted into or
exchanged for capital stock or other securities of the Corporation or any
subsidiary of the Corporation or any other person (or the right to receive any
such stock or securities) or into any property (including, without limitation,
cash and the right to receive cash or other property) or any combination of the
foregoing; or (iii) any share exchange pursuant to which all of the outstanding
shares of Common Stock (but not such share of New Preferred Stock) are converted
into or exchanged for capital stock or other securities of the

 

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Corporation or any subsidiary of the Corporation or any other person (or the
right to receive any such securities) or into any property (including, without
limitation, cash and the right to receive cash or other property) or into any
combination of the foregoing (each of (i) — (iii) above being a “Corporate
Change”), then the holder of such share of New Preferred Stock shall thereafter
have the right to receive upon conversion, in lieu of the shares of Common Stock
otherwise issuable, such shares of stock, securities and/or other property as
would have been issued or payable in such Corporate Change if such share of New
Preferred Stock had been converted into Common Stock immediately prior to such
Corporate Change without taking into account the limitations on conversion set
forth in Article IV. The Corporation shall not effect any Corporate Change
unless: (i) each holder of New Preferred Stock has received written notice of
such transaction at least 20 days prior thereto, but in no event later than
10 days prior to the record date for the determination of stockholders entitled
to vote with respect thereto; (ii) the Requisite Holders approve (by vote or
written consent, as provided by the DGCL) such transaction in writing or at a
meeting; and (iii) the resulting successor or acquiring entity (if not the
Corporation) assumes by written instrument (in form and substance reasonable
satisfactory to the Requisite Holders) the obligations of this Certificate of
Designations. The above provisions shall apply regardless of whether or not
there would have been a sufficient number of shares of Common Stock authorized
and available for issuance upon conversion of the shares of New Preferred Stock
outstanding as of the date of such transaction, and shall similarly apply to
successive recapitalizations, changes, conversions, combinations,
reclassifications, consolidations, mergers, sales, transfers or share exchanges.

C. Adjustment Due to Distribution. If, at any time after the Closing Date, the
Corporation shall declare or make any distribution of its assets (or rights to
acquire its assets) to holders of Common Stock other than a dividend for which
an adjustment is provided under Section A. or Section D. of this Article X.), by
way of return of capital or otherwise (including, without limitation, any
dividend or distribution to the Corporation’s stockholders in cash or shares (or
rights to acquire shares) of capital stock of a subsidiary (i.e., a spin-off))
(a “Distribution”), then the holders of New Preferred Stock shall be entitled,
upon any conversion of shares of New Preferred Stock after the date of record
for determining stockholders entitled to such Distribution, to receive the
amount of such assets which would have been payable to the holder with respect
to the shares of Common Stock issuable upon such conversion had such holder been
the holder of such shares of Common Stock on the record date for the
determination of stockholders entitled to such Distribution. If the Distribution
involves rights, warrants, or options and the right to exercise or convert such
right, warrant or option would expire in accordance with its terms prior to the
conversion of the New Preferred Stock, then the terms of such right, warrant or
option shall provide that such exercise or convertibility right shall remain in
effect until 10 days after the date the holder of New Preferred Stock receives
such right, warrant or option pursuant to the conversion thereof.

D. Purchase Rights. If, at any time after the Closing Date, the Corporation
issues any securities (“Purchase Rights”) that are convertible into or
exercisable or exchangeable for or impart a right to purchase securities other
than Common Stock or Common Stock Equivalents (whether of the Corporation or any
subsidiary of the Corporation) pro rata to the record holders of any class of
Common Stock, then the holders of New Preferred Stock will be entitled to
acquire (at the same time the holders of Common Stock receive such Purchase
Rights), upon the

 

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terms applicable to such Purchase Rights, the aggregate Purchase Rights which
such holder could have acquired if such holder had held the number of shares of
Common Stock acquirable upon complete conversion of the New Preferred Stock
(without giving effect to the limitations contained in Article IV) immediately
before the date on which a record is taken for the grant, issuance or sale of
such Purchase Rights, or, if no such record is taken, the date as of which the
record holders of Common Stock are to be determined for the grant, issue or sale
of such Purchase Rights.

E. Adjustment Due to Dilutive Issuances.

(i) Dilutive Issuance. Except as otherwise provided in Paragraphs A, B and F of
this Article X, if and whenever the Corporation issues or sells, or in
accordance with Article X.E.(ii) hereof is deemed to have issued or sold, any
shares of Common Stock for no consideration or for a consideration per share
less than the Conversion Price on the Measurement Date for such shares of Common
Stock (a “Dilutive Issuance”), then effective immediately upon the such Dilutive
Issuance, the Conversion Price will be adjusted to equal the per share price at
which such shares were issued, sold or deemed to have been issued or sold in
such Dilutive Issuance, provided that such adjustment may be reversed as set
forth below.

(ii) Effect on Conversion Price of Certain Events. For purposes of determining
the adjusted Conversion Price under subparagraph (i), the following will be
applicable:

(a) Issuance of Options. If the Corporation in any manner issues or grants any
warrants, rights or options, whether or not immediately exercisable, to
subscribe for or to purchase Common Stock or Common Stock Equivalents (such
warrants, rights and options to purchase Common Stock or Common Stock
Equivalents are hereinafter referred to as “Options”) and the price per share
for which Common Stock is issuable upon the exercise of such Options (and the
price of any conversion of Common Stock Equivalents, if applicable) is less than
the Conversion Price (in effect on the Measurement Date of such Options) (“Below
Conversion Price Options”), then the maximum total number of shares of Common
Stock issuable upon the exercise of all such Below Conversion Price Options
(assuming full exercise, conversion or exchange of Common Stock Equivalents, if
applicable) will, as of the date of the issuance or grant of such Below
Conversion Price Options, be deemed to be outstanding and to have been issued
and sold by the Corporation for such price per share. For purposes of the
preceding sentence, the “price per share for which Common Stock is issuable upon
the exercise of such Below Conversion Price Options” is determined by dividing
(i) the total amount, if any, received or receivable by the Corporation as
consideration for the issuance or granting of all such Below Conversion Price
Options, plus the minimum aggregate amount of additional consideration, if any,
payable to the Corporation upon the exercise of all such Below Conversion Price
Options, plus, in the case of Common Stock Equivalents issuable upon the
exercise of such Below Conversion Price Options, the minimum aggregate amount of
additional consideration payable upon the exercise, conversion or exchange
thereof at the time such Common Stock Equivalents first become exercisable,
convertible or exchangeable, by (ii) the maximum total number of shares of
Common Stock issuable upon the exercise of all such Below Conversion Price
Options (assuming full conversion of Common Stock Equivalents, if applicable).
No further adjustment to the Conversion Price will be made upon the actual
issuance of such

 

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Common Stock upon the exercise of such Below Conversion Price Options or upon
the exercise, conversion or exchange of Common Stock Equivalents issuable upon
exercise of such Below Conversion Price Options although the forfeiture or
expiration of any such Below Conversion Price Options may result in a subsequent
increase in the Conversion Price as set forth below.

(b) Issuance of Common Stock Equivalents. If the Corporation in any manner
issues or sells any Common Stock Equivalents, whether or not immediately
exercisable, convertible or exchangeable (other than where the same are issuable
upon the exercise of Options), and the price per share for which Common Stock is
issuable upon such exercise, conversion or exchange of such Common Stock
Equivalents is less than the Conversion Price (in effect on the Measurement Date
for such Common Stock Equivalents), then the maximum total number of shares of
Common Stock issuable upon the exercise, conversion or exchange of all such
Common Stock Equivalents will, as of the date of the issuance of such Common
Stock Equivalents, be deemed to be outstanding and to have been issued and sold
by the Corporation for such price per share. For the purposes of the preceding
sentence, the “price per share for which Common Stock is issuable upon such
exercise, conversion or exchange” is determined by dividing (i) the total
amount, if any, received or receivable by the Corporation as consideration for
the issuance or sale of all such Common Stock Equivalents, plus the minimum
aggregate amount of additional consideration, if any, payable to the Corporation
upon the exercise, conversion or exchange thereof at the time such Common Stock
Equivalents first become exercisable, convertible or exchangeable, by (ii) the
maximum total number of shares of Common Stock issuable upon the exercise,
conversion or exchange of all such Common Stock Equivalents. No further
adjustment to the Conversion Price will be made upon the actual issuance of such
Common Stock upon exercise, conversion or exchange of such Common Stock
Equivalents, although the forfeiture or expiration of any such Common Stock
Equivalent may result in a subsequent increase in the Conversion Price as set
forth below.

(c) Expiration of Options or Common Stock Equivalents. If any Dilutive Issuance
is deemed to have occurred as a result of the issuance of Below Conversion Price
Options or the issuance of Common Stock Equivalents at a price per share below
the Conversion Price (each, a “Dilutive Instrument”), and if the Dilutive
Instrument expires, terminates or is otherwise forfeited without having been
exercised, converted or exchanged in any manner whatsoever that has resulted in
the issuance of any shares of Common Stock or Common Stock Equivalents, then in
each case, the adjustment to the Conversion Price made upon the issuance of such
Dilutive Instrument shall be reversed; provided, however, that any such reversal
shall not impact any Conversion Price adjustment made as a result of any other
Dilutive Issuance; and provided further, however, such reversal shall not impact
the Conversion Price for any conversion of New Preferred Stock with respect to
which conversion the Conversion Date is prior to such reversal.

(iii) Change in Option Price or Conversion Rate. If there is a change at any
time in: (a) the amount of consideration payable to the Corporation upon the
exercise of any Options; (b) the amount of consideration, if any, payable to the
Corporation upon the exercise, conversion or exchange of any Common Stock
Equivalents; or (c) the rate at which any Common Stock Equivalents are
convertible into or exchangeable for Common Stock, such change shall be deemed
to be a new issuance of such Option or Common Stock Equivalent as of the date of
such change for purposes of this Article X.E., and the Conversion Price in
effect at the time of such change will be readjusted in accordance with
Paragraphs (i), (ii) or (iii) of this Article X.E., as applicable.

 

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(iv) Calculation of Consideration Received. If any Common Stock, Options or
Common Stock Equivalents are issued, granted or sold for cash, the consideration
received therefor will be the amount received by the Corporation therefor, after
deduction of all underwriting discounts or allowances in connection with such
issuance, grant or sale. In case any Common Stock, Options or Common Stock
Equivalents are issued or sold for a consideration part or all of which shall be
other than cash, the amount of the consideration other than cash received by the
Corporation will be the fair market value of such consideration as determined by
a majority of the Board of Directors and the Requisite Holders, except where
such consideration consists of securities, in which case the amount of
consideration received by the Corporation will be the market price thereof as of
the date of receipt; in the event that the Board of Directors and the Requisite
Holders cannot agree on the value of such consideration, then the matter shall
be promptly submitted to an independent accountant mutually agreed upon by the
Board of Directors and the Requisite Holders, whose determination shall be
binding, absent manifest error. In case any Common Stock, Options or Common
Stock Equivalents are issued in connection with any merger or consolidation in
which the Corporation is the surviving corporation, the amount of consideration
therefor will be deemed to be the fair market value of such portion of the net
assets and business of the non-surviving corporation as is attributable to such
Common Stock, Options or Common Stock Equivalents, as the case may be.
Notwithstanding anything else herein to the contrary, if Common Stock, Options
or Common Stock Equivalents are issued, granted or sold in conjunction with each
other as part of a single transaction or in a series of related transactions, no
deduction shall be made to the issuance price of any such securities to account
for the fair value of any of the other securities issued, granted or sold in
conjunction therewith or as part of the same transaction or series of related
transactions. An adjustment pursuant to this Article X shall be made, if
applicable, for each separate security issued, granted or sold as if such
security was not issued, granted or sold in conjunction with any other security
as part of a single transaction or in a series of related transactions.

(v) No adjustment shall be made pursuant to this Paragraph E (other than a
reversal pursuant to subparagraph (ii)(c)) if such adjustment would result in an
increase in the Conversion Price.

F. Adjustment of Conversion Price Upon Redemption Event. If, at any time on or
after the Closing Date, a Redemption Event shall have occurred as a result of
any of the events described in subparagraphs (i), (iii), (iv), (v), (x), (xi),
(xiii) or (xiv) of Article VII.A., then the Conversion Price shall immediately
and automatically be reduced to 10% of the Conversion Price in effect
immediately prior to such Redemption Event.

G. Exceptions to Adjustment of Conversion Price. No adjustment to the Conversion
Price will be made (i) except in the case of Article X.E.(iii), upon the
conversion or exercise of any warrants, options or convertible securities issued
and outstanding on the Closing Date that are set forth on Schedule 2.1(c) of the
Securities Purchase Agreement in accordance with the terms of such securities as
of such date; (ii) upon the grant or exercise of any stock or options to
employees, directors or consultants of the Corporation which may hereafter be
granted to or

 

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exercised by any employee, director or consultant under any stock option,
employee stock purchase or similar benefit plan of the Corporation now existing
or to be implemented in the future, so long as the issuance of such stock or
options is approved (by vote or written consent, as provided by the DGCL) by a
majority of the Board of Directors or a majority of the members of a committee
of non-employee directors established for such purpose; (iii) upon issuance or
conversion of the New Preferred Stock or exercise of the Warrants, or (iv) upon
the issuance of securities approved (by vote or written consent, as provided by
the DGCL) by the Requisite Holders, which approval specifies that the issuance
is intended to be exempt hereunder.

H. Notice of Adjustments. Upon the occurrence of each adjustment or readjustment
of the Conversion Price pursuant to this Article X amounting to a more than 5%
change in such Conversion Price, the Corporation, at its expense, shall promptly
compute such adjustment or readjustment and prepare and furnish to each holder
of New Preferred Stock a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Corporation shall, upon the written request at any
time of any holder of New Preferred Stock, furnish to such holder a like
certificate setting forth: (i) such adjustment or readjustment; (ii) the
Conversion Price at the time in effect; and (iii) the number of shares of Common
Stock and the amount, if any, of other securities or property which at the time
would be received upon conversion of a share of New Preferred Stock.

I. Adjustment Following Reverse Stock Split. If, on the Conversion Price
Adjustment Date (as defined below), the VWCP (as adjusted to reflect any stock
splits, anti-dilution adjustments, stock dividends or similar recapitalizations
occurring on or before the Conversion Price Adjustment Date) for the three
(3) consecutive Trading Day period ending on the last Trading Day prior to the
Conversion Price Adjustment Date (the “3-Day VWCP”) is less than the product of
the Conversion Price then in effect multiplied by 10, as adjusted to reflect any
stock splits, anti-dilution adjustments, stock dividends or similar
recapitalizations occurring on or before the Conversion Price Adjustment Date,
then, effective as of the Conversion Price Adjustment Date, the Conversion Price
shall be reduced to a price equal to ten percent (10%) of the 3-Day VWCP. The
“Conversion Price Adjustment Date” shall mean the Saturday that is two
(2) calendar weeks following the Saturday of the week the Reverse Split (defined
below) is effected. The Company hereby agrees that it will not issue any press
releases or file any periodic reports on Form 8-K under the Exchange Act, except
where required by law, during the period beginning on the day after the
effective date of the Reverse Split and ending on the Conversion Price
Adjustment Date. The “Reverse Split” means a reverse stock split of the
Corporation’s outstanding Common Stock at an exchange ratio of 1-for-100, and
effected between two (2) and eight (8) weeks from the Closing (as defined in the
Asset Purchase Agreement).

J. Adjustment Due to Delayed Reverse Split. If a reverse stock split of the
Corporation’s outstanding Common Stock at an exchange ratio of 1-for-100 has not
been effected by the date that is eight (8) weeks from the Closing (as defined
in the Asset Purchase Agreement) (the “Reverse Split Deadline”), then on the
next Saturday to occur after the Reverse Split Deadline, the Conversion Price of
the New Preferred Stock shall be reduced to $0.0001 per share.

 

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XI. VOTING RIGHTS

The holders of the New Preferred Stock have no voting power whatsoever, except
as otherwise required by the DGCL in this Article XI and in Article XII below.

Notwithstanding the above, the Corporation shall provide each holder of New
Preferred Stock with prior notification of any meeting of the stockholders (and
copies of proxy materials and other information sent to stockholders). If the
Corporation takes a record of its stockholders for the purpose of determining
stockholders entitled to (a) receive payment of any dividend or other
distribution, any right to subscribe for, purchase or otherwise acquire
(including by way of merger, consolidation or recapitalization) any share of any
class or any other securities or property, or to receive any other right, or
(b) to vote in connection with any proposed sale, lease or conveyance of all or
substantially all of the assets of the Corporation, or any proposed merger,
consolidation, liquidation, dissolution or winding up of the Corporation, the
Corporation shall mail a notice to each holder, at least 10 days prior to the
record date specified therein (or 20 days prior to the consummation of the
transaction or event, whichever is earlier, but in no event earlier than public
announcement of such proposed transaction), of the date on which any such record
is to be taken for the purpose of such vote, dividend, distribution, right or
other event, and a brief statement regarding the amount and character of such
vote, dividend, distribution, right or other event to the extent known at such
time.

To the extent that under the DGCL the vote of the holders of the New Preferred
Stock, voting together as a single class, is required to authorize a given
action of the Corporation, the affirmative vote of the Requisite Holders (except
as otherwise may be required under the DGCL) shall constitute the approval of
such action by such class; provided, however, that if the DGCL requires only the
separate vote of any one or more, but not all, of the series of New Preferred
Stock, the affirmative vote of at least 80% of the voting power of such one or
more series, voting together as a single class, shall constitute the approval of
such action by the New Preferred Stock in lieu of the approval of the Requisite
Holders. To the extent that under the DGCL holders of the New Preferred Stock
are entitled to vote on a matter with holders of Common Stock, voting together
as one class, each share of New Preferred Stock shall be entitled to a number of
votes equal to the number of shares of Common Stock into which it is then
convertible (subject to the limitations contained in Article IV.C.(ii)) using
the record date for the taking of such vote of stockholders as the date as of
which the Conversion Price is calculated. The Corporation shall not (i) combine
the outstanding shares of any series of New Preferred Stock into a smaller
number of shares of such series (whether by reclassification, merger, stock
split or otherwise) or (ii) subdivide the outstanding shares of any series of
New Preferred Stock into a greater number of shares of such series (whether by
reclassification, merger, stock split, stock dividend or otherwise) without the
approval (by vote or written consent, as provided by the DGCL) of the holders of
at least 80% of the voting power of such series of New Preferred Stock to be
combined or subdivided, voting as a separate class.

XII. PROTECTION PROVISIONS

So long as at least 1,000 shares of New Preferred Stock (as adjusted for any
stock dividends, combinations, splits, recapitalizations and the like with
respect to such shares) are outstanding, or after all of the Cash Warrants have
been fully exercised, at least 3,000 shares of New Preferred Stock (as adjusted
for any stock dividends, combinations, splits, recapitalizations

 

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and the like with respect to such shares) are outstanding, the Corporation shall
not, and shall not allow any of its subsidiaries to, take any of the following
actions (in each case whether by merger, consolidation, conversion or otherwise)
without first obtaining the approval (by vote or written consent, as provided by
the DGCL) of the Requisite Holders (and any of the following actions taken
without such approval of the Requisite Holders shall be null and void ab initio
and of no force and effect):

A. amend, alter, change or repeal the rights, powers, preferences or privileges
of the New Preferred Stock so as to affect the New Preferred Stock adversely;
provided, however, that if such amendment, alteration, change or repeal would
affect adversely the rights, powers, preferences or privileges of any one or
more series of New Preferred Stock but shall not so affect each series of New
Preferred Stock, this subparagraph A shall require the approval (by vote or
written consent, as provided by the DGCL) of the holders of at least 66-2/3% of
the voting power of the one or more series of New Preferred Stock adversely
affected, voting together as a single class, in lieu of the approval of the
Requisite Holders required by this subparagraph A;

B. amend, alter, change or repeal any provision of the Certificate of
Incorporation of the Corporation (including, for the avoidance of doubt, any
Certificate of Designation or Certificate of Designations (including this
Certificate of Designations) filed pursuant to Section 151(g) of the DGCL);

C. redeem, purchase or otherwise acquire, or apply to or set aside any monies
for the redemption, purchase or other acquisition of, or permit any subsidiary
of the Corporation to redeem, purchase or otherwise acquire, or apply to or set
aside any monies for the redemption, purchase or other acquisition of, or
declare or pay any dividend or make any Distribution or other distribution on or
with respect to, any capital stock, other than (i) under this Certificate of
Designations with respect to the New Preferred Stock or (ii) in connection with
the redemption of unvested shares of Common Stock issued pursuant to equity
compensation plans or arrangements;

D. increase the par value of the Common Stock;

E. enter into a definitive agreement that, if consummated, would represent, or
take any other corporate action that would represent, a Strategic Transaction;

F. enter into a definitive agreement that, if consummated, would result in, or
take any other corporate action that would result in, a Change of Control,
Corporate Change or Liquidation Event;

G. file a registration statement under the Securities Act of 1933, as amended
(the “Act”), relating to the sale of any securities of the Corporation, other
than registration statements filed on Form S-8 and any successor thereto;

H. (i) issue, sell, transfer from the Corporation or distribute any capital
stock or other equity security of the Corporation or any subsidiary of the
Corporation including, without limitation, Common Stock, Options, Purchase
Rights or Common Stock Equivalents, whether for no

 

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consideration or for cash consideration, property, services or other exchange;
(ii) issue, sell, transfer from the Corporation or distribute any promissory
note or other instrument evidencing indebtedness for borrowed money, whether for
no consideration or for cash consideration, property, services or other
exchange; or (iii) incur indebtedness for borrowed money by the Corporation or
any subsidiary of the Corporation, whether for no consideration or for cash
consideration, property, services or other exchange;

I. take any action, including authorizing any expenditure or entering into any
contract, to cause the Corporation’s Net Cash to fall below $2,900,000 until the
date that is thirteen months from the date of the Asset Purchase Agreement.

Notwithstanding anything to the contrary contained herein, nothing in this
Article XII, shall require the consent of the Requisite Holders for
(i) issuances of shares of Common Stock or options to employees, officers,
directors, or consultants of the Corporation pursuant to any stock option plan
duly adopted by a majority of the non-employee members of the Board of Directors
or a majority of the members of a committee of non-employees directors
established for such purpose, duly approved (by vote or written consent, as
provided by the DGCL) by the Corporation’s stockholders and described in the
Public Filings (as described in the Securities Purchase Agreement), provided
that the number of shares of Common Stock authorized for issuance under such
plan(s) shall have been (since the inception of such plan) and, from and after
the date of such grant, shall be ratably adjusted concurrent with any stock
split, reverse stock split or similar adjustment to the outstanding Common Stock
of the Corporation; (ii) issuances of securities upon the exercise, exchange of
or conversion of any Common Stock Equivalents issued and outstanding on the
Closing Date and described in the Public Filings, provided that such securities
have not been amended since the Closing Date (other than adjustments due to
stock splits or recapitalization events) to increase the number of such
securities or to decrease the exercise, exchange or conversion price of any such
securities; and (iii) the issuance of any Common Stock or Common Stock
Equivalents under the terms of the Securities Purchase Agreement or the Warrants
(including in connection with any adjustments to the conversion price of any
such securities pursuant to their terms).

 

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XIII. CORPORATE CAPACITY AND POWER

Without the prior written consent of the Requisite Holders, the Corporation
shall not have the corporate capacity or power to take any action, including
authorizing any expenditure or entering into any contract, to cause the
Corporation’s Net Cash to fall below $2,900,000 until the date that is thirteen
months from the date of the Asset Purchase Agreement, with any such prohibited
action or expenditure being deemed ultra vires under the DGCL, and, if any such
action is taken without the prior written consent of the Requisite Holders, then
the Corporation and the Corporation’s stockholders shall have, among other
rights and remedies arising under the DGCL or other applicable law, all rights
and remedies set forth in Section 124(2) of the DGCL.

XIV. MISCELLANEOUS

A. Cancellation of New Preferred Stock. If any shares of New Preferred Stock are
converted pursuant to Article IV or redeemed or repurchased by the Corporation,
the Corporation shall take all actions necessary to cause the shares so
converted or redeemed to be canceled and return to the status of authorized, but
unissued preferred stock of no designated series, and such shares shall not be
issuable by the Corporation as New Preferred Stock.

B. Lost or Stolen Certificates. Upon receipt by the Corporation of (i) evidence
of the loss, theft, destruction or mutilation of any stock certificate(s)
representing shares of New Preferred Stock (each a “Preferred Stock
Certificate”) and (ii) (y) in the case of loss, theft or destruction, of
indemnity (without any bond or other security) reasonably satisfactory to the
Corporation, or (z) in the case of mutilation, upon surrender and cancellation
of the Preferred Stock Certificate(s), the Corporation shall execute and deliver
new Preferred Stock Certificate(s) of like tenor and date. However, the
Corporation shall not be obligated to reissue such lost or stolen Preferred
Stock Certificate(s) if the holder contemporaneously requests the Corporation to
convert in full all shares of New Preferred Stock represented by such Preferred
Stock Certificate(s).

C. Allocation of Reserved Amount. The Reserved Amount shall be allocated pro
rata among the holders of New Preferred Stock based on the number of shares of
New Preferred Stock issued to each holder and issuable to each holder upon
exercise of all outstanding Warrants then held of record by such holder. Each
increase to the Reserved Amount shall be allocated pro rata among the holders of
New Preferred Stock based on the number of shares of New Preferred Stock held by
each holder at the time of the increase Reserved Amount. Any portion of the
Reserved Amount which remains allocated to any person or entity which does not
hold any New Preferred Stock or Warrants shall be allocated to the remaining
holders of shares of New Preferred Stock and Warrants, pro rata based on the
number of shares of New Preferred Stock and the number of shares of New
Preferred Stock underlying the Warrants then held of record by such holders.

D. Quarterly Statements of Available Shares. For each calendar quarter beginning
in the Closing Date occurs and thereafter so long as any shares of New Preferred
Stock are outstanding, the Corporation shall deliver (or cause its transfer
agent to deliver) to each holder upon its written request a written report
notifying such holder of any occurrence which prohibits the

 

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Corporation from issuing Common Stock upon any such conversion. The report shall
also specify: (i) the total number of shares of New Preferred Stock outstanding
as of the end of such quarter; (ii) the total number of shares of Common Stock
issued upon all conversions of New Preferred Stock prior to the end of such
quarter; (iii) the total number of shares of Common Stock which are reserved for
issuance upon conversion of the New Preferred Stock as of the end of such
quarter; and (iv) the total number of shares of Common Stock which may
thereafter be issued by the Corporation upon conversion of the New Preferred
Stock before the Corporation would exceed the Reserved Amount. In addition, the
Corporation shall provide (or cause its transfer agent to provide), as promptly
as practicable delivery to the Corporation of a written request by any holder,
any of the information enumerated in clauses (i) — (iv) of this Paragraph D as
of the date of such request.

E. Payment of Cash; Defaults. Whenever the Corporation is required to make any
cash payment to a holder under this Certificate of Designations (upon redemption
or otherwise), such cash payment shall be made to the holder within ten Trading
Days after delivery by such holder of a notice specifying that the holder elects
to receive such payment in cash and the method (e.g., by check, wire transfer)
in which such payment should be made and any supporting documentation reasonably
requested by the Corporation to substantiate the holder’s claim to such cash
payment or the amount thereof. If such payment is not delivered within such ten
Trading Day period, such holder shall thereafter be entitled to interest on the
unpaid amount at a per annum rate equal to the lower of 18% and the highest
interest rate permitted by applicable law until such amount is paid in full to
the holder. Such amount shall be deemed to be paid as a redemption to the
fullest extent permitted by law on the shares of New Preferred Stock giving rise
to such default.

F. Status as Stockholder. Upon submission of a Notice of Conversion by a holder
of New Preferred Stock, (i) the shares covered thereby shall be deemed converted
into shares of Common Stock and (ii) the holder’s rights as a holder of such
converted shares of New Preferred Stock shall cease and terminate, excepting
only the right to receive certificates for such shares of Common Stock and to
any remedies provided herein or otherwise available at law or in equity to such
holder because of a failure by the Corporation to comply with the terms of this
Certificate of Designations. Notwithstanding the foregoing, if a holder has not
received all shares of Common Stock prior to the last Trading Day of the
Delivery Period with respect to a conversion of New Preferred Stock for any
reason, then (unless the holder otherwise elects to retain its status as a
holder of Common Stock by so notifying the Corporation within five Trading Days
after the expiration of such Delivery Period) the holder shall regain the rights
of a holder of New Preferred Stock with respect to such unconverted shares of
New Preferred Stock and the Corporation shall, as soon as practicable, return
any certificate representing such unconverted shares to the holder. In all
cases, the holder shall retain all of its rights and remedies for the
Corporation’s failure to convert New Preferred Stock.

G. Waiver. Notwithstanding any provision in this Certificate of Designations to
the contrary, any provision contained herein and any right of the holders of New
Preferred Stock granted hereunder may be waived as to all shares of New
Preferred Stock (and the holders thereof) upon the written consent of the
Requisite Holders, unless a higher percentage is required by applicable law, in
which case the written consent of the holders of not less than such higher

 

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percentage shall be required; provided, however, that if a waiver would affect
adversely the rights, powers, preferences or privileges of any one or more
series of New Preferred Stock but shall not so affect the rights, powers,
preferences or privileges of each series of New Preferred Stock, this paragraph
shall require the written consent of the holders of at least 66-2/3% of the
voting power (or such higher percentage required by applicable law) of such one
or more series of New Preferred Stock adversely affected, voting together as a
single class, in lieu of the written consent of the Requisite Holders required
by this paragraph.

H. Reference to Other Agreements and Documents. When the terms of this
Certificate of Designations refers to a specific agreement or other document to
determine the meaning or operation of a provision hereof, the secretary of the
Corporation shall maintain a copy of such agreement or document at the principal
executive offices of the Corporation and a copy thereof shall be provided free
of charge to any stockholder who makes a request therefor. Unless otherwise
provided in this Certificate of Designations, a reference to any specific
agreement or other document shall be deemed a reference to such agreement or
document as amended from time to time in accordance with the terms of such
agreement or document.

I. Severability. If any term of any series of New Preferred Stock is invalid,
unlawful, or incapable of being enforced by reason of any rule of law or public
policy, all other terms of such series of New Preferred Stock as set forth
herein which can be given effect without the invalid, unlawful or unenforceable
term will, nevertheless, remain in full force and effect, and no term of any
series of New Preferred Stock will be deemed dependent upon any other such term
unless so expressed in this Certificate of Designations.

J. Force Majeure. Notwithstanding any provision herein to the contrary, the
failure of any party to timely satisfy obligations hereunder shall be excused to
the extent that (i) such failure follows the occurrence of a Force Majeure Event
(defined below), and (ii) such Force Majeure Event has materially adversely
affected the ability of such party (or its agents, including banks, transfer
agents, and clearinghouses) to perform hereunder. A failure to perform shall be
excused only for so long as the Force Majeure Event continues to materially
adversely affect such person’s ability to perform. For purposes of this Section,
“Force Majeure Event” shall mean the occurrence of any of the following events:
(a) trading in securities generally on either the Nasdaq Stock Market or the New
York Stock Exchange shall have been suspended or limited, or minimum or maximum
prices shall have been generally established on any of such stock exchanges by
the SEC or FINRA; (b) a general banking moratorium shall have been declared by
any of federal, New York or California authorities; (c) an act of war, terrorism
or hostility shall have occurred, or (d) a strike, fire, flood, earthquake,
accident or other calamity or Act of God shall have occurred.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

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IN WITNESS WHEREOF, this Certificate of Designations is executed on behalf of
the Corporation this         day of January, 2012.

 

La Jolla Pharmaceutical Company By:  

 

  Name: George Tidmarsh   Title: Chief Executive Officer and President

 

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Exhibit A

NOTICE OF CONVERSION

(To be Executed by the Registered Holder

in order to Convert the [Series C-12] [Series C-22] [Series D-12] [Series D-22]
Preferred Stock)

The undersigned hereby irrevocably elects to convert [insert number of shares to
nearest 1/1000th] shares of [Series C-12] [Series C-22] [Series D-12]
[Series D-22] Preferred Stock (the “Conversion”), represented by stock
certificate No(s).         (the “Preferred Stock Certificates”), into shares of
common stock (“Common Stock”) of La Jolla Pharmaceutical Company (the
“Corporation”) according to the conditions of the Certificate of Designations,
Preferences and Rights of Series C-12 Convertible Preferred Stock, Series C-22
Convertible Preferred Stock, Series D-12 Convertible Preferred Stock and
Series D-22 Convertible Preferred Stock, as of the date written below. If
securities are to be issued in the name of a person other than the undersigned,
the undersigned will pay all transfer taxes payable with respect thereto. No fee
will be charged to the holder for any conversion, except for transfer taxes, if
any. Each Preferred Stock Certificate is attached hereto (or evidence of loss,
theft or destruction thereof).

The Corporation shall electronically transmit the Common Stock issuable pursuant
to this Notice of Conversion to the account of the undersigned or its nominee
(which is         ) with DTC through its Deposit Withdrawal Agent Commission
System (“DTC Transfer”).

The undersigned acknowledges that these securities are “restricted securities”
under the Securities Act of 1933, as amended (the “Act”) and accordingly agrees
that all offers and sales by the undersigned of the securities issuable to the
undersigned upon conversion of the [Series C-12] [Series C-22] [Series D-12]
[Series D-22] Preferred Stock have been or will be made only pursuant to an
effective registration of the transfer of the Common Stock under the Act, or
pursuant to an exemption from registration under the Act.

 

   Date of Conversion:                         
                                         
                                                                               
Applicable Conversion Price:                                        
                                         
                                               Shares of Common Stock
beneficially owned (determined in accordance with Section 13(d) of the Exchange
Act):                                        
                                         
                                                             
Signature:                                                                      
                                         
                                                      
Name:                                                                       
                                         
                                                            
Address: