Exhibit 10.1
SOMAXON PHARMACEUTICALS, INC.
Common Stock
($0.0001 par value per share)
AT-THE-MARKET EQUITY OFFERING SALES AGREEMENT
August 1, 2011
CITADEL SECURITIES LLC
601 Lexington Avenue, 28th Floor
New York, NY 10003
Ladies and Gentlemen:
Somaxon Pharmaceuticals, Inc., a Delaware corporation (the “Company”), proposes,
subject to the terms and conditions stated herein, to issue and sell from time
to time to or through Citadel Securities LLC (“Citadel”), as sales agent and/or
principal (“Agent”), shares (the “Shares”) of the Company’s common stock,
$0.0001 par value per share (the “Common Stock”), having an aggregate offering
price of up to $30,000,000 on the terms set forth in Section 2 of this Sales
Agreement (the “Agreement”). The Company agrees that whenever it determines to
sell Shares directly to the Agent as principal, it will enter into a separate
agreement (each, a “Terms Agreement”) in substantially the form of Annex I
hereto, relating to such sale in accordance with Section 3 of this Agreement.
The Company has filed with the Securities and Exchange Commission (the
“Commission”) registration statements under the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder (the “1933 Act”),
on Form S-3 (File Nos. 333-162788 and 333-167789), in respect of the Company’s
Common Stock (including the Shares) not earlier than three years prior to the
date hereof; such registration statements, and any post-effective amendments
thereto, have become effective; and no stop order suspending the effectiveness
of such registration statements or any part thereof has been issued and no
proceeding for that purpose has been initiated or, to the knowledge of the
Company, threatened by the Commission (each base prospectus filed as part of
each such registration statement, in the form in which it has most recently been
filed with the Commission on or prior to the date of this Agreement, are
hereinafter collectively called the “Base Prospectus”; the various parts of such
registration statements, including all exhibits thereto and any prospectus
supplement or prospectus relating to the Shares that is filed with the
Commission and deemed by virtue of Rule 430B under the 1933 Act to be part of
such registration statements, each as amended at the time such part of the
registration statements became effective, are hereinafter collectively called
the “Registration Statement” and all references to the Registration Statement
herein shall be deemed to collectively refer to each such registration
statement, unless the context requires otherwise; the prospectus supplements
specifically relating to the Shares to be prepared and filed with the Commission
pursuant to Rule 424(b) under the 1933 Act are hereinafter collectively called
the “Prospectus Supplement” and all references to the Prospectus Supplement
herein shall be deemed to collectively refer to each such prospectus supplement,
unless the context requires otherwise; the Base Prospectus, as amended and
supplemented by the Prospectus Supplement, is hereinafter called the
“Prospectus”; any reference herein to the Base Prospectus, the Prospectus
Supplement or the Prospectus shall be deemed to refer to and include the
documents incorporated by reference therein pursuant to Item 12 of Form S-3
under the 1933 Act; any reference to any amendment or supplement

 

 

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to the Base Prospectus, the Prospectus Supplement or the Prospectus shall be
deemed to refer to and include any post-effective amendment to the Registration
Statement, any prospectus supplement or prospectus relating to the Shares filed
with the Commission pursuant to Rule 424(b) under the 1933 Act and any documents
filed under the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder (the “1934 Act”), and incorporated therein,
in each case after the date of the Base Prospectus, the Prospectus Supplement or
the Prospectus, as the case may be; any reference to any amendment to the
Registration Statement shall be deemed to refer to and include any annual report
of the Company filed pursuant to Section 13(a) or 15(d) of the 1934 Act after
the effective date of the Registration Statement that is incorporated by
reference in the Registration Statement; and any “issuer free writing
prospectus” as defined in Rule 433 under the 1933 Act relating to the Shares is
hereinafter called an “Issuer Free Writing Prospectus”).
For the purposes of this Agreement, the “Applicable Time” means, with respect to
any Shares, the time of sale of such Shares pursuant to this Agreement. The
Prospectus and the applicable Issuer Free Writing Prospectus(es) issued at or
prior to such Applicable Time, taken together, collectively, and, with respect
to any Shares, together with the public offering price of such Shares, shall be
referred to herein as the “General Disclosure Package”.
Section 1. Representations and Warranties. The Company represents, warrants and
covenants to the Agent, as of the date of this Agreement, any applicable
Registration Statement Amendment Date (as defined in Section 3 below), each
Company Periodic Report Date (as defined in Section 3 below), each Applicable
Time (as defined in Section 1(a) below) and each Settlement Date (as defined in
Section 2 below), if any, and covenants with the Agent, as follows:
(a) Compliance with Registration Requirements. The Registration Statement and
any Rule 462(b) Registration Statement have been declared effective by the
Commission under the 1933 Act. The Company has complied, to the Commission’s
satisfaction, with all requests of the Commission for additional or supplemental
information. No stop order suspending the effectiveness of the Registration
Statement or any Rule 462(b) Registration Statement is in effect and no
proceedings for such purpose have been instituted or are pending or, to the
Company’s knowledge, are contemplated or threatened by the Commission.
The Base Prospectus when filed complied in all material respects with the 1933
Act and, if filed by electronic transmission pursuant to the Commission’s
Electronic Data Gathering, Analysis and Retrieval System (except as may be
permitted by Regulation S-T under the 1933 Act), was identical to the copy
thereof delivered to the Agent for use in connection with the offer and sale of
the Shares. Each of the Registration Statement, any Rule 462(b) Registration
Statement and any post-effective amendment thereto, at the time it became
effective and at all subsequent times during any period when the delivery of a
prospectus is required in connection with the offering or sale of Shares
(whether physically or through compliance with Rule 153 or 172 under the 1933
Act, or in lieu thereof, a notice referred to in Rule 173(a) under the 1933 Act)
(the “Prospectus Delivery Period”), complied and will comply in all material
respects with the 1933 Act and did not and will not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading. As of the
Applicable Time, the General Disclosure Package (including any Prospectus
wrapper) did not, and at the time of each sale of the Shares and at the
Settlement Date (as hereinafter defined in Section 2), the General Disclosure
Package, as then amended or supplemented by the Company, if applicable, will
not, contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading. The Prospectus (including any
Prospectus wrapper), as amended or supplemented, as of its date and at all
subsequent times during the Prospectus Delivery Period, did not and will not
contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The representations
and warranties set forth in the three immediately preceding sentences do not
apply to statements in or omissions from the Registration Statement, any

 

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Rule 462(b) Registration Statement, or any post-effective amendment thereto, or
the Base Prospectus, the Prospectus or the General Disclosure Package, or any
amendments or supplements thereto, made in reliance upon and in conformity with
information relating to the Agent furnished to the Company in writing by the
Agent expressly for use therein, it being understood and agreed that the only
such information furnished by the Agent to the Company consists of the
information described in Section 7(b) below. There are no contracts or other
documents required to be described in the General Disclosure Package or the
Prospectus or to be filed as exhibits to the Registration Statement which have
not been described or filed as required.
The Company is not an “ineligible issuer” in connection with the offering of the
Shares pursuant to Rules 164, 405 and 433 under the 1933 Act. Any free writing
prospectus that the Company is required to file pursuant to Rule 433(d) under
the 1933 Act has been, or will be, filed with the Commission in accordance with
the requirements of the 1933 Act. Each free writing prospectus that the Company
has filed, or is required to file, pursuant to Rule 433(d) under the 1933 Act or
that was prepared by or behalf of or used or referred to by the Company complies
or will comply in all material respects with the requirements of Rule 433 under
the 1933 Act including timely filing with the Commission or retention where
required and legending, and each such free writing prospectus, as of its issue
date and at all subsequent times through the completion of the public offer and
sale of the Shares did not, does not and will not include any information that
conflicted, conflicts with or will conflict with the information contained in
the Registration Statement, the Base Prospectus or the Prospectus, including any
document incorporated by reference therein. The Company has not prepared, used
or referred to, and will not, without your prior consent, prepare, use or refer
to, any free writing prospectus.
(b) Offering Materials Furnished to Agent. If so requested by the Agent, the
Company has delivered to the Agent two complete copies of the Registration
Statement, each amendment thereto and any Rule 462(b) Registration Statement and
of each consent and certificate of experts filed as a part thereof.
(c) Distribution of Offering Material By the Company. The Company has not
distributed and will not distribute, prior to the completion of the Agent’s
distribution of the Shares, any offering material in connection with the
offering and sale of the Shares pursuant to this Agreement other than the Base
Prospectus, the General Disclosure Package, the Prospectus, any free writing
prospectus reviewed and consented to by the Agent, or the Registration
Statement.
(d) The Sales Agreement. This Agreement has been duly authorized, executed and
delivered by, and is a valid and binding agreement of, the Company, enforceable
against the Company in accordance with its terms, except as rights to
indemnification hereunder may be limited by applicable law and except as the
enforcement hereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting the rights and
remedies of creditors or by general equitable principles.
(e) Authorization of the Shares. The Shares have been duly authorized for
issuance and sale pursuant to this Agreement and, when issued and delivered by
the Company pursuant to this Agreement, will be validly issued, fully paid and
nonassessable, and the issuance and sale of the Shares is not subject to any
preemptive rights, rights of first refusal or other similar rights to subscribe
for or purchase the Shares, except for such rights as have been duly waived. No
approval of the stockholders of the Company under the rules and regulations of
Nasdaq (including Rule 5635 of the Nasdaq Marketplace Rules) is required for the
Company to issue and deliver to the Agent the Shares.
(f) No Applicable Registration or Other Similar Rights. There are no persons
with registration or other similar rights to have any equity or debt securities
registered for sale under the Registration Statement or included in the offering
contemplated by this Agreement, except for such rights as have been duly waived.

 

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(g) No Material Adverse Change. Except as otherwise disclosed in the General
Disclosure Package, subsequent to the respective dates as of which information
is given in the General Disclosure Package: (i) there has been no material
adverse change, or any development that could reasonably be expected to result
in a material adverse change, in the condition, financial or otherwise, or in
the earnings, business, operations or prospects, whether or not arising from
transactions in the ordinary course of business, of the Company (any such change
is called a “Material Adverse Change”); (ii) the Company has not incurred any
material liability or obligation, indirect, direct or contingent, not in the
ordinary course of business nor entered into any material transaction or
agreement not in the ordinary course of business; and (iii) there has been no
dividend or distribution of any kind declared, paid or made by the Company on
any class of capital stock or repurchase or redemption by the Company of any
class of capital stock.
(h) Independent Accountants. PricewaterhouseCoopers LLP, who have expressed
their opinion with respect to the financial statements (which term as used in
this Agreement includes the related notes thereto) and supporting schedules
filed with the Commission as a part of the Registration Statement and
incorporated by reference into the Base Prospectus, the Prospectus and General
Disclosure Package (each, an “Applicable Prospectus” and collectively, the
“Applicable Prospectuses”), are (i) an independent registered public accounting
firm with respect to the Company within the meaning of the 1933 Act, the 1934
Act and the applicable rules and regulations thereunder adopted by the
Commission, (ii) in compliance with the applicable requirements relating to the
qualification of accountants under Rule 2-01 of Regulation S-X and (iii) an
independent registered public accounting firm as defined by the Public Company
Accounting Oversight Board (the “PCAOB”) whose registration has not been
suspended or revoked and, to the Company’s knowledge, who has not requested such
registration to be withdrawn.
(i) Preparation of the Financial Statements. The financial statements filed with
the Commission as a part of the Registration Statement and included in the Base
Prospectus, the General Disclosure Package and the Prospectus present fairly in
all material respects the financial position of the Company as of and at the
dates indicated and the results of its operations and cash flows for the periods
specified. The supporting schedules included in the Registration Statement
present fairly in all material respects the information required to be stated
therein. Such financial statements and supporting schedules have been prepared
in conformity with generally accepted accounting principles as applied in the
United States applied on a consistent basis throughout the periods involved,
except as may be expressly stated in the related notes thereto. No other
financial statements or supporting schedules are required to be included in the
Registration Statement or any Applicable Prospectus. The financial data set
forth or incorporated by reference in each Applicable Prospectus fairly present
the information set forth therein on a basis consistent with that of the audited
financial statements contained in the Registration Statement and each Applicable
Prospectus. To the Company’s knowledge, no person who has been suspended or
barred from being associated with a registered public accounting firm, or who
has failed to comply with any sanction pursuant to Rule 5300 promulgated by the
PCAOB, has participated in or otherwise aided the preparation of, or audited,
the financial statements, supporting schedules or other financial data filed
with the Commission as a part of the Registration Statement and included in any
Applicable Prospectus.
(j) Company’s Accounting System. The Company makes and keeps accurate books and
records and maintains a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management’s general or specific authorization; (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles as applied in the
United States and to maintain accountability for assets; (iii) access to assets
is permitted only in accordance with management’s general or specific
authorization; and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences. The Company is not aware of any material weakness in
the Company’s internal control over financial reporting (whether or not
remediated) as of December 31, 2010 and as of the date hereof, and since
December 31, 2010, there has been no change in the Company’s internal control
over financial reporting that has materially affected, or is reasonably likely
to materially affect, the Company’s internal control over financial reporting.

 

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(k) Incorporation and Good Standing of the Company. The Company has been duly
incorporated and is validly existing as a corporation in good standing under the
laws of Delaware and has the power and authority to own, lease and operate its
properties and to conduct its business as described in each Applicable
Prospectus and to enter into and perform its obligations under this Agreement,
except where the failure to be in good standing would not reasonably be expected
to result in a Material Adverse Change. The Company is duly qualified as a
foreign corporation to transact business and is in good standing in the State of
California and each other jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or the conduct of
business, except where the failure to be so qualified or in good standing would
not reasonably be expected to result in a Material Adverse Change. The Company
does not own or control, directly or indirectly, any corporation, association or
other entity and the Company has no subsidiaries.
(l) Capitalization and Other Capital Stock Matters. The authorized, issued and
outstanding capital stock of the Company is as set forth in each Applicable
Prospectus (other than for subsequent issuances, if any, pursuant to employee
benefit plans described in the General Disclosure Package or upon the exercise
of outstanding options or warrants described in each Applicable Prospectus). The
Shares conform in all material respects to the description thereof contained in
the General Disclosure Package. All of the issued and outstanding Shares have
been duly authorized and validly issued, are fully paid and nonassessable and
have been issued in compliance with federal and state securities laws. None of
the outstanding Shares was issued in violation of any preemptive rights, rights
of first refusal or other similar rights to subscribe for or purchase securities
of the Company. There are no authorized or outstanding options, warrants,
preemptive rights, rights of first refusal or other rights to purchase, or
equity or debt securities convertible into or exchangeable or exercisable for,
any capital stock of the Company other than those accurately described in each
Applicable Prospectus. The description of the Company’s stock option, stock
bonus and other stock plans or arrangements, and the options or other rights
granted thereunder, set forth in each Applicable Prospectus accurately and
fairly presents the information required to be shown with respect to such plans,
arrangements, options and rights. All grants of options to acquire Shares (each,
a “Company Stock Option”) were validly issued and approved by the Board of
Directors of the Company, a committee thereof or an individual with authority
duly delegated by the Board of Directors of the Company or a committee thereof.
Grants of Company Stock Options were (i) made in material compliance with all
applicable laws and (ii) as a whole, made in material compliance with the terms
of the plans under which such Company Stock Options were issued. There is no and
has been no policy or practice of the Company to coordinate the grant of Company
Stock Options with the release or other public announcement of material
information regarding the Company or its results of operations or prospects.
Except as described in the General Disclosure Package and the Prospectus, the
Company has not sold or issued any Shares during the six-month period preceding
the date of the Prospectus, including any sales pursuant to Rule 144A under, or
Regulations D or S of, the 1933 Act other than Shares issued pursuant to
employee benefit plans, qualified stock options plans or other employee
compensation plans or pursuant to outstanding options, rights or warrants.
(m) Stock Exchange Listing. The Shares are registered pursuant to Section 12(b)
of the 1934 Act and are listed on the Nasdaq Capital Market (“Nasdaq”), and the
Company has taken no action designed to, or likely to have the effect of,
terminating the registration of the Shares under the 1934 Act or delisting the
Shares from Nasdaq, nor has the Company received any notification that the
Commission or Nasdaq is contemplating terminating such registration or listing,
except for such notifications described in the General Disclosure Package and
the Prospectus.
(n) Non-Contravention of Existing Instruments; No Further Authorizations or
Approvals Required. The Company is not in violation of its charter or by-laws
and is not in default (or, with the giving of notice or lapse of time, would be
in default) (“Default”) under any indenture, mortgage, loan or credit agreement,
note, contract, franchise, lease or other instrument to which the Company is a
party or by which it may be bound (including, without limitation, any credit
agreement, indenture, pledge agreement, security agreement or other instrument
or agreement evidencing, guaranteeing, securing or relating to indebtedness of
the Company), or to which any of the property or assets of the Company is
subject (each, an “Existing Instrument”), except for such Defaults as would not
reasonably be expected to, individually or in the aggregate, result in a
Material Adverse Change. The Company’s execution, delivery and performance of
this Agreement, consummation of the transactions contemplated hereby and by each
Applicable Prospectus and

 

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the issuance and sale of the Shares (i) have been duly authorized by all
necessary corporate action and will not result in any violation of the
provisions of the charter or by-laws of the Company, (ii) will not conflict with
or constitute a breach of, or Default under, or result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets of the
Company pursuant to, or require the consent of any other party to, any Existing
Instrument, except for consents that have been validly obtained and except for
such breaches, Defaults or results, or failure to obtain such consent, as would
not reasonably be expected, individually or in the aggregate, to result in a
Material Adverse Change, and (iii) will not result in any violation of any law,
administrative regulation or administrative or court decree applicable to the
Company, except for such violations as would not reasonably be expected,
individually or in the aggregate, to result in a Material Adverse Change. No
consent, approval, authorization or other order of, or registration or filing
with, any court or other governmental or regulatory authority or agency, is
required for the Company’s execution, delivery and performance of this Agreement
and consummation of the transactions contemplated hereby and by each Applicable
Prospectus, except such as have been obtained or made or will be made by the
Company under the 1933 Act, or that may be required under applicable state
securities or blue sky laws and from the Financial Industry Regulatory Authority
(“FINRA”).
(o) No Material Actions or Proceedings. Except as disclosed in the General
Disclosure Package and the Prospectus with respect to notices and related
litigation regarding “paragraph IV certifications” (including the fact that the
Company cannot predict the outcome of any such related litigation), there are no
legal or governmental actions, suits or proceedings pending or, to the best of
the Company’s knowledge, threatened (i) against or affecting the Company,
(ii) which have as the subject thereof any officer or director of, or property
owned or leased by, the Company or (iii) relating to environmental or
discrimination matters, where in any such case (A) such action, suit or
proceeding (including without limitation, any such action, suit or proceeding
for which, to the Company’s knowledge, there is a substantial likelihood that it
will be determined adversely to the Company or such officer or director), if so
determined adversely, would reasonably be expected to result in a Material
Adverse Change or adversely affect the consummation of the transactions
contemplated by this Agreement or (B) any such action, suit or proceeding is or
would be material in the context of the sale of Shares. No material labor
dispute with the employees of the Company, or to the Company’s knowledge, with
the employees of any principal supplier, manufacturer, customer or contractor of
the Company, exists or, to the Company’s knowledge, is threatened or imminent.
(p) Intellectual Property Rights. The Company owns, possesses or can acquire on
reasonable terms sufficient trademarks, trade names, patent rights, copyrights,
domain names, licenses, approvals, trade secrets and other similar rights
(collectively, “Intellectual Property Rights”) reasonably necessary to conduct
its businesses as now conducted; except to the extent failure to own, possess or
acquire such Intellectual Property Rights would not result in a Material Adverse
Change. The Company has not received and has no reason to believe that it will
receive, any notice of infringement or conflict with asserted Intellectual
Property Rights of others. Except as would not be reasonably likely to result,
individually or in the aggregate, in a Material Adverse Change or except as
disclosed in the General Disclosure Package and the Prospectus with respect to
notices and related litigation regarding “paragraph IV certifications”
(including the fact that the Company cannot predict the outcome of any such
related litigation), (A) to the Company’s knowledge there is no infringement,
misappropriation or violation by third parties of any of the Intellectual
Property Rights owned by the Company; (B) there is no pending or, to the
Company’s knowledge, threatened action, suit, proceeding or claim by others
challenging the rights of the Company in or to any such Intellectual Property
Rights, and the Company is unaware of any facts which would form a reasonable
basis for any such claim, that would reasonably be expected, individually or in
the aggregate, together with any other claims in this subsection (p) to result
in a Material Adverse Change; (C) the Intellectual Property Rights owned by the
Company and, to the Company’s knowledge, the Intellectual Property Rights
licensed to the Company have not been adjudged by a court of competent
jurisdiction invalid or unenforceable, in whole or in part, and there is no
pending or, to the Company’s knowledge, threatened action, suit, proceeding or
claim by others challenging the validity or scope of any such Intellectual
Property Rights, and, except as described in the General Disclosure Package and
the Prospectus (including the fact that there may be additional “paragraph IV
certifications”), the Company is unaware of any facts which would form a
reasonable basis for any such claim that would

 

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reasonably be expected, individually or in the aggregate, together with any
other claims in this subsection (p) to result in a Material Adverse Change;
(D) there is no pending or, to the Company’s knowledge, threatened action, suit,
proceeding or claim by others that the Company infringes, misappropriates or
otherwise violates any Intellectual Property Rights or other proprietary rights
of others, the Company has not received any written notice of such claim and the
Company is unaware of any other facts which would form a reasonable basis for
any such claim that would reasonably be expected, individually or in the
aggregate, together with any other claims in this subsection (p) to result in a
Material Adverse Change; (E) to the Company’s knowledge, all prior art
references relevant to the patentability of any pending claim of any patent
applications comprising or that have resulted in Intellectual Property Rights
known to the Company, applicable inventor(s) or licensors, or any of their
counsel during the prosecution of such patent applications that were required to
be disclosed to the relevant patent authority were so disclosed by the required
time, and, to the best of the Company’s knowledge, neither the Company nor any
such inventor, licensor or counsel made any misrepresentation to, or omitted any
material fact from, the relevant patent authority during such prosecution; and
(F) to the Company’s knowledge, no employee of the Company is in or has ever
been in violation in any material respect of any term of any employment
contract, patent disclosure agreement, invention assignment agreement,
non-competition agreement, non-solicitation agreement, nondisclosure agreement
or any restrictive covenant to or with a former employer where the basis of such
violation relates to such employee’s employment with the Company, or actions
undertaken by the employee while employed with the Company and would reasonably
be expected to result, individually or in the aggregate, in a Material Adverse
Change. To the Company’s knowledge, all material technical information developed
by and belonging to the Company for which it has not sought, and does not intend
to seek, to patent or otherwise protect pursuant to applicable intellectual
property laws has been kept confidential or disclosed only under obligations of
confidentiality. The Company is not a party to or bound by any options, licenses
or agreements with respect to the Intellectual Property Rights of any other
person or entity that are required to be set forth in the Prospectus and are not
described therein. The General Disclosure Package contains in all material
respects the same description of the matters set forth in the preceding sentence
contained in the Prospectus. None of the technology employed by the Company has
been obtained or is being used by the Company in violation of any contractual
obligation binding on the Company or, to the Company’s knowledge, any of its
officers, directors or employees or otherwise in violation of the rights of any
persons, except in each case for such violations that would not reasonably be
expected to result in a Material Adverse Change.
(q) All Necessary Permits, etc. The Company possesses such valid and current
certificates, authorizations or permits issued by the appropriate state, federal
or foreign regulatory agencies or bodies necessary to conduct their respective
businesses as currently conducted by them and described in the General
Disclosure Package and the Prospectus, and the Company has not received and has
no reason to believe that it will receive, any notice of proceedings relating to
the revocation or modification of, or non-compliance with, any such certificate,
authorization or permit which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would reasonably be expected to result
in a Material Adverse Change.
(r) Title to Properties. The Company has good and marketable title to all of the
real and personal property and other assets reflected as owned in the financial
statements referred to in Section 1(i) above (or elsewhere in any Applicable
Prospectus), in each case free and clear of any security interests, mortgages,
liens, encumbrances, equities, adverse claims and other defects, except such as
do not materially and adversely affect the value of such property and do not
materially interfere with the use made or proposed to be made of such property
by the Company, except as described in the General Disclosure Package and the
Prospectus. To the Company’s knowledge, the real property, improvements,
equipment and personal property held under lease by the Company are held under
valid and enforceable leases, with such exceptions as are not material and do
not materially interfere with the use made or proposed to be made of such real
property, improvements, equipment or personal property by the Company.

 

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(s) Tax Law Compliance. The Company has filed all necessary federal, state and
foreign income and franchise tax returns or has properly requested extensions
thereof and has paid all taxes required to be paid by the Company and, if due
and payable, any related or similar assessment, fine or penalty levied against
the Company except as may be being contested in good faith and by appropriate
proceedings. The Company has made adequate charges, accruals and reserves in the
applicable financial statements referred to in Section 1(i) above in respect of
all federal, state and foreign income and franchise taxes for all periods as to
which the tax liability of the Company has not been finally determined.
(t) Company Not an “Investment Company”. The Company has been advised of the
rules and requirements under the Investment Company Act of 1940, as amended (the
“Investment Company Act”). The Company is not, and will not be, either after
receipt of payment for the Shares or after the application of the proceeds
therefrom as described under “Use of Proceeds” in each Applicable Prospectus, an
“investment company” within the meaning of Investment Company Act and will
conduct its business in a manner so that it will not become subject to the
Investment Company Act.
(u) Insurance. The Company is insured by recognized, financially sound and
reputable institutions with policies in such amounts and with such deductibles
and covering such risks as are reasonably adequate and customary for its
business as currently conducted and described in the General Disclosure Package
and the Prospectus, including, but not limited to, policies covering real and
personal property owned or leased by the Company against theft, damage,
destruction, acts of vandalism and policies covering the Company for product
liability claims and clinical trial liability claims. The Company has no reason
to believe that it will not be able (i) to renew its existing insurance coverage
as and when such policies expire or (ii) to obtain comparable coverage from
similar institutions as may be necessary or appropriate to conduct its business
as now conducted and at a cost that would not result in a Material Adverse
Change. The Company has not been denied any insurance coverage material to the
Company which it has sought or for which it has applied.
(v) No Price Stabilization or Manipulation; Compliance with Regulation M. The
Company has not taken, directly or indirectly, any action designed to or that
might be reasonably expected to cause or result in stabilization or manipulation
of the price of the Shares or any other “reference security” (as defined in
Rule 100 of Regulation M under the 1934 Act (“Regulation M”)) whether to
facilitate the sale or resale of the Shares or otherwise, and has taken no
action which would directly or indirectly violate Regulation M.
(w) Related Party Transactions. There are no business relationships or
related-party transactions involving the Company or any other person required to
be described in each Applicable Prospectus which have not been described as
required. The General Disclosure Package contains in all material respects the
same description of the matters set forth in the preceding sentence contained in
the Prospectus.
(x) S-3 Eligibility. At the time the Registration Statement was originally
declared effective and at the time the Company’s Annual Report on Form 10-K for
the year ended December 31, 2010 was filed with the Commission, the Company met
the then applicable requirements for use of Form S-3 under the 1933 Act. The
Company is eligible to offer and sell securities under the Registration
Statement (including the offer and sale of the Shares) without reliance on
General Instruction I.B.6 of Form S-3.
(y) 1934 Act Compliance. The documents incorporated or deemed to be incorporated
by reference in the Prospectus, at the time they were or hereafter are filed
with the Commission, complied and will comply in all material respects with the
requirements of the 1934 Act, and, when read together with the other information
in the Prospectus, at the time the Registration Statement and any amendments
thereto become effective and at the Settlement Date, as the case may be, will
not contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading.

 

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(z) FINRA Matters. All of the information provided to the Agent or to counsel
for the Agent by the Company, its officers and directors and, to the Company’s
knowledge, the holders of any securities (debt or equity) or options to acquire
any securities of the Company in connection with letters, filings or other
supplemental information provided to FINRA Rule 5110 or the National Association
of Securities Dealers Inc. (the “NASD”) Conduct Rule 2710 or 2720 is true,
complete and correct. Neither the Company nor, to the knowledge of the Company,
any of its affiliates (within the meaning of the NASD Conduct Rule 2720(f)(1))
directly or indirectly controls, is controlled by, or is under common control
with, or is an associated person (within the meaning of Article I, Section 1(ee)
of the By-laws of FINRA) of, any member firm of FINRA.
(aa) Statistical and Market-Related Data. The statistical, demographic and
market-related data included in the Registration Statement and each Applicable
Prospectus are based on or derived from sources that the Company believes to be
reliable and accurate or represent the Company’s good faith estimates that are
made on the basis of data derived from such sources.
(bb) No Unlawful Contributions or Other Payments. The Company and, to the
Company’s knowledge, any employee or agent of the Company, have not made any
contribution or other payment to any official of, or candidate for, any federal,
state or foreign office in violation of any law or of the character required to
be disclosed in the Registration Statement and each Applicable Prospectus.
(cc) Disclosure Controls and Procedures; Deficiencies in or Changes to Internal
Control Over Financial Reporting. The Company has established and maintains
disclosure controls and procedures (as defined in 1934 Act Rules 13a-15(e) and
15d-15(e)), which (i) are designed to ensure that material information relating
to the Company is made known to the Company’s principal executive officer and
its principal financial officer by others within the Company, particularly
during the periods in which the periodic reports required under the 1934 Act are
being prepared; (ii) have been evaluated by management of the Company for
effectiveness as of the end of the Company’s most recent fiscal quarter; and
(iii) the Company’s principal executive officer and principal financial officer
concluded to be effective at the reasonable assurance level. Based on the most
recent evaluation of its internal control over financial reporting, the Company
is not aware of (i) any significant deficiencies or material weaknesses in the
design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the Company’s ability to record, process,
summarize and report financial information or (ii) any fraud, whether or not
material, that involves management or other employees who have a significant
role in the Company’s internal control over financial reporting. The Company is
not aware of any change in its internal control over financial reporting that
has occurred during its most recent fiscal quarter that has materially affected,
or is reasonably likely to materially affect, the Company’s internal control
over financial reporting.
(dd) Compliance with Environmental Laws. Except as described in each Applicable
Prospectus and except as would not reasonably be expected to, singly or in the
aggregate, result in a Material Adverse Change, (i) the Company is not in
violation of any federal, state, local or foreign statute, law, rule,
regulation, ordinance, code, policy or rule of common law or any judicial or
administrative interpretation thereof, including any judicial or administrative
order, consent, decree or judgment, relating to pollution or protection of human
health, the environment (including, without limitation, ambient air, surface
water, groundwater, land surface or subsurface strata) or wildlife, including,
without limitation, laws and regulations relating to the release or threatened
release of chemicals, pollutants, contaminants, wastes, toxic substances,
hazardous substances, petroleum or petroleum products (collectively, “Hazardous
Materials”) or to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Materials (collectively,
“Environmental Laws”), (ii) the Company has all permits, authorizations and
approvals required under any applicable Environmental Laws and is in compliance
with their requirements, (iii) there are no pending or, to the knowledge of the
Company, threatened administrative, regulatory or judicial actions, suits,
demands, demand letters, claims, liens, notices of noncompliance or violation,
investigation or proceedings relating to any Environmental Law against the
Company, and (iv) there are no events or circumstances that might reasonably be
expected to form the basis of an order for clean-up or remediation, or an
action, suit or proceeding by any private party or governmental body or agency,
against or affecting the Company relating to Hazardous Materials or any
Environmental Laws.

 

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(ee) ERISA Compliance. The Company and any “employee benefit plan” (as defined
under the Employee Retirement Income Security Act of 1974, as amended, and the
regulations and published interpretations thereunder (collectively, “ERISA”))
established or maintained by the Company or its “ERISA Affiliates” (as defined
below) are in compliance in all material respects with ERISA. “ERISA Affiliate”
means, with respect to the Company, any member of any group of organizations
described in Sections 414(b),(c),(m) or (o) of the Internal Revenue Code of
1986, as amended, and the regulations and published interpretations thereunder
(the “Code”) of which the Company is a member. No “reportable event” (as defined
under ERISA) has occurred or is reasonably expected to occur with respect to any
“employee benefit plan” established or maintained by the Company or any of its
ERISA Affiliates. No “employee benefit plan” established or maintained by the
Company or any of its ERISA Affiliates, if such “employee benefit plan” were
terminated, would have any “amount of unfunded benefit liabilities” (as defined
under ERISA). Neither the Company nor any of its ERISA Affiliates has incurred
or reasonably expects to incur any liability under (i) Title IV of ERISA with
respect to termination of, or withdrawal from, any “employee benefit plan” or
(ii) Sections 412, 4971, 4975 or 4980B of the Code. Each “employee benefit plan”
established or maintained by the Company or any of its ERISA Affiliates that is
intended to be qualified under Section 401(a) of the Code is so qualified and
nothing has occurred, whether by action or failure to act, which would
reasonably be expected to result in the loss of such qualification.
(ff) Brokers. Except as contemplated by this Agreement, there is no broker,
finder or other party that is entitled to receive from the Company any brokerage
or finder’s fee or other fee or commission as a result of any transactions
contemplated by this Agreement.
(gg) No Outstanding Loans or Other Extensions of Credit. Since the adoption of
Section 13(k) of the 1934 Act, the Company has not extended or maintained
credit, arranged for the extension of credit, or renewed any extension of
credit, in the form of a personal loan, to or for any director or executive
officer (or equivalent thereof) of the Company except for such extensions of
credit as are expressly permitted by Section 13(k) of the 1934 Act.
(hh) Compliance with Laws. The Company has not been advised, and has no reason
to believe, that it is not conducting business in compliance with all applicable
laws, rules and regulations of the jurisdictions in which it is conducting
business, except where failure to be so in compliance would not result in a
Material Adverse Change. The Company has not received any FDA Form 483, notice
of adverse finding, warning letter, untitled letter or other correspondence or
notice from the U.S. Food and Drug Administration or any other governmental
authority alleging or asserting noncompliance with any laws applicable to the
Company, except for such noncompliance the correction of which would not result
in a Material Adverse Change.
(ii) Clinical Trials. The studies, tests and preclinical and clinical trials
conducted by or on behalf of the Company were and, if still pending, are being
conducted in compliance with experimental protocols, procedures and controls
pursuant to accepted professional scientific standards and all applicable laws
and authorizations, including, without limitation, the Federal Food, Drug and
Cosmetic Act and the rules and regulations promulgated thereunder, except where
the failure to be in compliance has not resulted and would not reasonably be
expected to result in a Material Adverse Change; the descriptions of the results
of such studies, tests and trials contained in any Applicable Prospectus are
accurate and complete in all material respects and fairly present the data
derived from such studies, tests and trials; except to the extent disclosed in
any Applicable Prospectus, the Company is not aware of any studies, tests or
trials, the results of which the Company believes reasonably call into question
the study, test, or trial results described or referred to in any Applicable
Prospectus when viewed in the context in which such results are described and
the clinical state of development; and the Company has not received any notices
or correspondence from any applicable governmental authority requiring the
termination, suspension or material modification of any studies, tests or
preclinical or clinical trials conducted by or on behalf of the Company.

 

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(jj) Foreign Corrupt Practices Act. Neither the Company nor, to the Company’s
knowledge, any director, officer, agent, employee, affiliate or other person
acting on behalf of the Company is aware of or has taken any action, directly or
indirectly, that has resulted or would result in a violation of the Foreign
Corrupt Practices Act of 1977, as amended, and the rules and regulations
thereunder (the “FCPA”), including, without limitation, making use of the mails
or any means or instrumentality of interstate commerce corruptly in furtherance
of an offer, payment, promise to pay or authorization of the payment of any
money, or other property, gift, promise to give, or authorization of the giving
of anything of value to any “foreign official” (as such term is defined in the
FCPA) or any foreign political party or official thereof or any candidate for
foreign political office, in contravention of the FCPA; and the Company and, to
the Company’s knowledge, the Company’s affiliates have conducted their
respective businesses in compliance with the FCPA and have instituted and
maintain policies and procedures designed to ensure, and which are reasonably
expected to continue to ensure, continued compliance therewith.
(kk) Money Laundering Laws. The operations of the Company are, and have been
conducted at all times, in compliance with applicable financial recordkeeping
and reporting requirements of the Currency and Foreign Transactions Reporting
Act of 1970, as amended, the money laundering statutes of all applicable
jurisdictions, the rules and regulations thereunder and any related or similar
applicable rules, regulations or guidelines, issued, administered or enforced by
any governmental agency (collectively, the “Money Laundering Laws”) and no
action, suit or proceeding by or before any court or governmental agency,
authority or body or any arbitrator involving the Company with respect to the
Money Laundering Laws is pending or, to the best knowledge of the Company,
threatened.
(ll) OFAC. Neither the Company nor, to the Company’s knowledge, any director,
officer, agent, employee, affiliate or person acting on behalf of the Company is
currently subject to any U.S. sanctions administered by the Office of Foreign
Assets Control of the U.S. Treasury Department (“OFAC”); and the Company will
not directly or indirectly use the proceeds of this offering, or lend,
contribute or otherwise make available such proceeds to any subsidiary, joint
venture partner or other person or entity, for the purpose of financing the
activities of any person currently subject to any U.S. sanctions administered by
OFAC.
Any certificate signed by any officer of the Company and delivered to the Agent
or to counsel for the Agent shall be deemed a representation and warranty by the
Company to the Agent as to the matters covered thereby.
The Company acknowledges that the Agent and, for purposes of the opinions to be
delivered pursuant to Section 6 hereof, counsel to the Company, will rely upon
the accuracy and truthfulness of the foregoing representations and hereby
consents to such reliance.
Section 2. Sale and Delivery of Shares.
(a) Subject to the terms and conditions set forth herein, the Company agrees to
issue and sell exclusively through the Agent acting as sales agent or directly
to the Agent acting as principal from time to time, and the Agent agrees to use
its commercially reasonable efforts to sell as sales agent for the Company, the
Shares. Sales of the Shares, if any, through the Agent acting as sales agent or
directly to the Agent acting as principal will be made by means of ordinary
brokers’ transactions on the Nasdaq or any other market for the Common Stock, in
privately negotiated transactions or otherwise at market prices prevailing at
the time of sale, at prices related to prevailing market prices or at negotiated
prices. Nothing contained herein shall be deemed to restrict the Company from
undertaking a simultaneous offering of its securities, provided the Agent is
given notice pursuant to Section 3(q).
(b) The Shares are to be sold on a daily basis or otherwise as shall be agreed
to by the Company and the Agent on that trading day (other than a day on which
the Nasdaq is scheduled to close prior to its regular weekday closing time,
each, a “Trading Day”) that the Company has satisfied its obligations under
Section 6 of this Agreement and that the Company has instructed the Agent to
make such sales (the “Purchase Date”); provided that the foregoing limitation
shall not apply to sales solely to employees or security holders of the Company,
or to a trustee or other person acquiring such securities for the accounts of
such persons in which Citadel is acting for

 

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the Company in a capacity other than as Agent under this Agreement; and further
provided that so long as the Company’s Common Stock is not an “actively-traded
security” within the meaning of Rule 101(c)(1) of Regulation M or if deemed
necessary, in the Agent’s reasonable discretion, in connection with the Agent’s
initiation of research reports about the Company, the Agent may, in its
reasonable discretion, by notice to the Company, delay the Purchase Date in
respect of all or any portion of the Shares deliverable pursuant to this
Agreement or any Terms Agreement to such date as it determines is reasonably
necessary to ensure compliance with Regulation M and any other applicable legal
or regulatory requirements. On any Trading Day, the Company may instruct the
Agent by telephone (confirmed promptly by telecopy or email, which confirmation
will be promptly acknowledged by the Agent) as to the maximum number of Shares
to be sold by the Agent on such day (in any event not in excess of the number
available for issuance under the Prospectus and the currently effective
Registration Statement) and the minimum price per Share at which such Shares may
be sold. On any Trading Day, the Company may instruct the Agent by telephone
(confirmed promptly by telecopy or email, which confirmation will be promptly
acknowledged by the Agent) not to sell any Shares. Subject to the terms and
conditions hereof, the Agent shall use its commercially reasonable efforts to
sell as sales agent all of the Shares so designated by the Company, and such
sales will be made only by methods deemed to be an “at the market offering” as
defined in Rule 415 under the 1933 Act or as otherwise agreed to by the Agent
and the Company. The Company and the Agent each acknowledge and agree that
(A) there can be no assurance that the Agent will be successful in selling the
Shares, (B) the Agent will incur no liability or obligation to the Company or
any other person or entity if they do not sell Shares for any reason other than
a failure by the Agent to use its commercially reasonable efforts consistent
with its normal trading and sales practices and applicable law and regulations
to sell such Shares as required by this Agreement, and (C) the Agent shall be
under no obligation to purchase Shares on a principal basis except as otherwise
specifically agreed by each of the Agent and the Company pursuant to a Terms
Agreement. In the event of a conflict between the terms of this Agreement and
the terms of a Terms Agreement, the terms of such Terms Agreement will control.
(c) Notwithstanding the foregoing, the Company shall not authorize the issuance
and sale of, and the Agent as sales agent shall not be obligated to use its
commercially reasonable efforts to sell, any Shares (i) at a price lower than
the minimum price therefor authorized from time to time, or (ii) in a number in
excess of the number of Shares authorized from time to time to be issued and
sold under this Agreement, in each case, by the Company’s board of directors, or
a duly authorized committee thereof, and notified to the Agent in writing. In
addition, the Company may, upon notice to the Agent, suspend the offering of the
Shares or the Agent may, upon notice to the Company, suspend the offering of the
Shares with respect to which the Agent is acting as sales agent for any reason
and at any time; provided, however, that such suspension or termination shall
not affect or impair the parties’ respective obligations with respect to the
Shares sold hereunder prior to the giving of such notice. Any notice given
pursuant to the preceding sentence may be given by telephone (confirmed promptly
by telecopy or email, which confirmation will be promptly acknowledged).
(d) The gross sales price of any Shares sold pursuant to this Agreement by the
Agent acting as sales agent of the Company shall be the market price prevailing
at the time of sale for shares of the Company’s Common Stock sold by the Agent
on the Nasdaq or any other market for the Common Stock, at prices relating to
prevailing market prices or at negotiated prices. The compensation payable to
the Agent for sales of Shares with respect to which the Agent acts as sales
agent shall be equal to 3.0% of the gross sales price of the Shares for amounts
of Shares sold pursuant to this Agreement. The Company may sell Shares to the
Agent, acting as principal, at a price agreed upon with the Agent at the
relevant Applicable Time and pursuant to a separate Terms Agreement. The
remaining proceeds, after further deduction for any transaction fees imposed by
any governmental, regulatory or self-regulatory organization in respect of such
sales, shall constitute the net proceeds to the Company for such Shares (the
“Net Proceeds”). The Agent shall notify the Company as promptly as practicable
if any deduction referenced in the preceding sentence will be required.

 

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(e) If acting as a sales agent hereunder, the Agent shall provide written
confirmation to the Company following the close of trading on the Nasdaq, each
day in which Shares are sold under this Agreement setting forth the number of
Shares sold on such day, the aggregate gross sales proceeds of the Shares, the
Net Proceeds to the Company and the compensation payable by the Company to the
Agent with respect to such sales.
(f) Under no circumstances shall the aggregate offering price or number, as the
case may be, of Shares sold pursuant to this Agreement and any Terms Agreement
exceed the aggregate offering price or number, as the case may be, of Shares of
Common Stock (i) set forth in the preamble paragraph of this Agreement,
(ii) available for issuance under the Prospectus and the then currently
effective Registration Statement or (iii) authorized from time to time to be
issued and sold under this Agreement or any Terms Agreement by the Company’s
board of directors, or a duly authorized committee thereof, and notified to the
Agent in writing. In addition, under no circumstances shall any Shares with
respect to which the Agent acts as sales agent be sold at a price lower than the
minimum price therefor authorized from time to time by the Company’s board of
directors, or a duly authorized committee thereof, and notified to the Agent in
writing. Any Shares sold pursuant to this Agreement and any Terms Agreement
shall be issued under the registration statement on Form S-3 (File
No. 333-162788) and the prospectus supplement thereto to the extent Shares are
available for issuance pursuant to such registration statement; thereafter, any
Shares sold pursuant to this Agreement and any Terms Agreement shall be issued
under the registration statement on Form S-3 (File No. 333-167789) and the
prospectus supplement thereto.
(g) Settlement for sales of Shares pursuant to this Section 2 will occur on the
third business day that is also a Trading Day following the trade date on which
such sales are made, unless another date shall be agreed to by the Company and
the Agent (each such day, a “Settlement Date”). On each Settlement Date, the
Shares sold through the Agent for settlement on such date shall be delivered by
the Company to the Agent against payment of the Net Proceeds from the sale of
such Shares. Settlement for all Shares shall be effected by book-entry delivery
of Shares to the Agent’s account at The Depository Trust Company against
payments by the Agent of the Net Proceeds from the sale of such Shares in same
day funds delivered to an account designated by the Company. If the Company
shall default on its obligation to deliver Shares on any Settlement Date, the
Company shall (i) indemnify and hold the Agent harmless against any loss, claim
or damage arising from or as a result of such default by the Company and
(ii) pay the Agent any commission to which it would otherwise be entitled absent
such default.
(h) Notwithstanding any other provision of this Agreement, the Company and the
Agent agree that no sales of Shares shall take place, and the Company shall not
request the sale of any Shares that would be sold, and the Agent shall not be
obligated to sell, during any period in which the Company is, or could be deemed
to be, in possession of material non-public information; provided that, unless
otherwise agreed between the Company and the Agent, for purposes of this
paragraph (h) any such period shall be deemed to end on the date on which the
Company’s next subsequent Annual Report on Form 10-K or Quarterly Report on Form
10-Q, as the case may be, is filed with the Commission.
(i) At each Applicable Time, Settlement Date, Registration Amendment Date and
each Company Periodic Report Date, the Company shall be deemed to have affirmed
each representation and warranty contained in this Agreement. Any obligation of
the Agent to use its commercially reasonable efforts to sell the Shares on
behalf of the Company as sales agent shall be subject to the continuing accuracy
of the representations and warranties of the Company herein, to the performance
by the Company of its obligations hereunder and to the continuing satisfaction
of the additional conditions specified in Section 6 of this Agreement.

 

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Section 3. Covenants. The Company agrees with the Agent:
(a) During the Prospectus Delivery Period, (i) that the Company will not file
any amendment or any supplement to the Registration Statement or the Prospectus
prior to any Settlement Date unless a copy thereof has been submitted to the
Agent a reasonable period before the filing and the Agent has not reasonably
objected thereto (provided, the failure to object shall not relieve the Company
of liability or obligations hereunder or affect the Agent’s rights to rely on
the representations and warranties herein) and will advise the Agent, promptly
after it receives notice thereof, of the time when any amendment to the
Registration Statement has been filed or becomes effective or any amendment or
supplement to the Prospectus has been filed and to furnish the Agent with copies
thereof, (ii) to file promptly all other material required to be filed by the
Company with the Commission pursuant to Rule 433(d) under the 1933 Act, (iii) to
file promptly all reports and any definitive proxy or information statements
required to be filed by the Company with the Commission pursuant to
Section 13(a), 13(c), 14 or 15(d) of the 1934 Act, (iv) to advise the Agent,
promptly after it receives notice thereof, of the issuance by the Commission of
any stop order or of any order preventing or suspending the use of the
Prospectus or other prospectus in respect of the Shares, of the suspension of
the qualification of the Shares for offering or sale in any jurisdiction, of the
initiation or threatening of any proceeding for any such purpose, or of any
request by the Commission for the amending or supplementing of the form of the
Registration Statement or the Prospectus or for additional information, and
(v) in the event of the issuance of any such stop order or of any such order
preventing or suspending the use of the Prospectus in respect of the Shares or
suspending any such qualification, to promptly use its commercially reasonable
efforts to obtain the withdrawal of such order; and in the event of any such
issuance of a notice of objection, promptly to take such reasonable steps as may
be reasonably necessary to permit offers and sales of the Shares by the Agent,
which may include, without limitation, amending the Registration Statement or
filing a new registration statement, at the Company’s expense (references herein
to the Registration Statement shall include any such amendment or new
registration statement).
(b) Promptly from time to time to take such action as the Agent may reasonably
request to qualify the Shares for offering and sale under the securities laws of
such jurisdictions as the Agent may reasonably request and to comply with such
laws so as to permit the continuance of sales and dealings therein in such
jurisdictions for as long as may be necessary to complete the sale of the
Shares, provided that in connection therewith the Company shall not be required
to qualify as a foreign corporation or to file a general consent to service of
process in any jurisdiction; and to promptly advise the Agent of the receipt by
the Company of any notification with respect to the suspension of the
qualification of the Shares for offer or sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose.
(c) During the Prospectus Delivery Period, the Company will make available to
the Agent, as soon as practicable after the execution of this Agreement, and
thereafter from time to time furnish to the Agent, copies of the most recent
Prospectus in such quantities and at such locations as the Agent may reasonably
request for the purposes contemplated by the 1933 Act. During the Prospectus
Delivery Period, and if at such time any event shall have occurred as a result
of which the Prospectus as then amended or supplemented would include an untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made when such Prospectus is delivered, not misleading, or, if
for any other reason it shall be necessary during such same period to amend or
supplement the Prospectus or to file under the 1934 Act any document
incorporated by reference in the Prospectus in order to comply with the 1933 Act
or the 1934 Act, to notify the Agent and to file such document and to prepare
and furnish without charge to the Agent as many written and electronic copies as
the Agent may from time to time reasonably request of an amended Prospectus or a
supplement to the Prospectus which will correct such statement or omission or
effect such compliance.

 

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(d) To make generally available to its securityholders as soon as practicable,
but in any event not later than sixteen months after the effective date of the
Registration Statement (as defined in Rule 158(c) under the 1933 Act), an
earnings statement of the Company (which need not be audited) complying with
Section 11(a) of the 1933 Act and the rules and regulations of the Commission
thereunder (including, at the option of the Company, Rule 158).
(e) To pay the required Commission filing fees relating to the Shares within the
time required by Rule 456(b)(1) under the 1933 Act without regard to the proviso
therein and otherwise in accordance with Rules 456(b) and 457(r) under the 1933
Act.
(f) To use the Net Proceeds received by it from the sale of the Shares pursuant
to this Agreement and any Terms Agreement in the manner specified in the
Disclosure Package.
(g) In connection with the offering and sale of the Shares, the Company will
file with the Nasdaq all documents and notices, and make all certifications,
required by the Nasdaq of companies that have securities that are listed or
quoted on the Nasdaq and will maintain such listings or quotations.
(h) To not take, directly or indirectly, and to cause its affiliates to refrain
from taking, any action designed to cause or result in, or that has constituted
or might reasonably be expected to constitute, under the 1934 Act or otherwise,
the stabilization or manipulation of the price of any securities of the Company
to facilitate the sale or resale of the Shares.
(i) At each Applicable Time, each Settlement Date, each Registration Statement
Amendment Date (as defined below), each Company Periodic Report Date (as defined
below) and each date on which Shares are delivered to the Agent pursuant to a
Terms Agreement, the Company shall be deemed to have affirmed each
representation, warranty, covenant and other agreement contained in this
Agreement or any Terms Agreement. In each Annual Report on Form 10-K or
Quarterly Report on Form 10-Q filed by the Company in respect of any quarter in
which sales of Shares were made by or through the Agent under this Agreement or
any Terms Agreement (each date on which any such document is filed, and any date
on which an amendment to any such document is filed, a “Company Periodic Report
Date”), the Company shall set forth with regard to such quarter the number of
Shares sold through the Agent under this Agreement or any Terms Agreement and
the Net Proceeds received by the Company with respect to sales of Shares
pursuant to this Agreement or any Terms Agreement.
(j) Upon commencement of the offering of Shares under this Agreement and each
time the Shares are delivered to the Agent as principal on a Settlement Date and
promptly after each (i) date the Registration Statement or the Prospectus shall
be amended or supplemented (other than (1) by an amendment or supplement
providing solely for the determination of the terms of the Shares, (2) in
connection with the filing of a prospectus supplement that contains solely the
information set forth in Section 3(i), (3) in connection with the filing of any
current reports on Form 8-K (other than any current reports on Form 8-K which
contain financial statements, supporting schedules or other financial data,
including any current report on Form 8-K under Item 2.02 of such form that is
considered “filed” under the 1934 Act) or (4) by a prospectus supplement
relating to the offering of other securities (including, without limitation,

 

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other shares of Common Stock)) (each such date, a “Registration Statement
Amendment Date”) and (ii) filing by the Company of an Annual Report on Form
10-K, the Company will furnish or cause to be furnished forthwith to the Agent a
certificate dated the date of effectiveness of such amendment or the date of
filing with the Commission of such supplement or other document, as the case may
be, in a form reasonably satisfactory to the Agent to the effect that the
statements contained in the certificate referred to in Section 6(e) of this
Agreement which were last furnished to the Agent are true and correct at the
time of such amendment, supplement or filing, as the case may be, as though made
at and as of such time (except that such statements shall be deemed to relate to
the Registration Statement, the General Disclosure Package and the Prospectus as
amended and supplemented to such time) or, in lieu of such certificate, a
certificate of the same tenor as the certificate referred to in said
Section 6(e), but modified as necessary to relate to the Registration Statement
and the Prospectus as amended and supplemented, or to the document incorporated
by reference into the Prospectus, to the time of delivery of such certificate.
As used in this paragraph, to the extent there shall be an Applicable Time on or
following the date referred to in clause (i) or (ii) above, promptly shall be
deemed to be on or prior to the next succeeding Applicable Time.
(k) Upon commencement of the offering of Shares under this Agreement and
promptly after each (i) Registration Statement Amendment Date and (ii) filing by
the Company of an Annual Report on Form 10-K, the Company will furnish or cause
to be furnished to the Agent and to counsel to the Agent the written opinion and
letter of Latham & Watkins LLP or other counsel reasonably satisfactory to the
Agent, dated the date of effectiveness of such amendment or the date of filing
with the Commission of such supplement or other document, as the case may be, in
a form and substance reasonably satisfactory to the Agent and its counsel, of
the same tenor as the opinions and letters referred to in Section 6(b) of this
Agreement, but modified as necessary to relate to the Registration Statement,
the General Disclosure Package and the Prospectus as amended and supplemented,
or to the document incorporated by reference into the Prospectus, to the time of
delivery of such opinion and letter or, in lieu of such opinion and letter,
counsel last furnishing such letter to the Agent shall furnish the Agent with a
letter substantially to the effect that the Agent may rely on such last opinion
and letter to the same extent as though each were dated the date of such letter
authorizing reliance (except that statements in such last letter shall be deemed
to relate to the Registration Statement and the Prospectus as amended and
supplemented to the time of delivery of such letter authorizing reliance). As
used in this paragraph, to the extent there shall be an Applicable Time on or
following the date referred to in clause (i) or (ii) above, promptly shall be
deemed to be on or prior to the next succeeding Applicable Time.
(l) Upon commencement of the offering of Shares under this Agreement and
promptly after each (i) Registration Statement Amendment Date and (ii) filing by
the Company of an Annual Report on Form 10-K, the Company will cause
PricewaterhouseCoopers LLP, or other independent accountants reasonably
satisfactory to the Agent, to furnish to the Agent a letter, dated the date of
effectiveness of such amendment or the date of filing of such supplement or
other document with the Commission, as the case may be, in form reasonably
satisfactory to the Agent and its counsel, of the same tenor as the letter
referred to in Section 6(c) hereof, but modified as necessary to relate to the
Registration Statement, the Disclosure Package and the Prospectus, as amended
and supplemented, or to the document incorporated by reference into the
Prospectus, to the date of such letter. As used in this paragraph, to the extent
there shall be an Applicable Time on or following the date referred to in clause
(i) or (ii) above, promptly shall be deemed to be on or prior to the next
succeeding Applicable Time.
(m) Upon commencement of the offering of Shares under this Agreement, the
Company will furnish or cause to be furnished to the Agent and to counsel to the
Agent the written opinion of Knobbe, Martens, Olson & Bear LLP, intellectual
property counsel for the Company, with respect to certain intellectual property
matters, dated as of the Applicable Time, in a form and substance reasonably
satisfactory to the Agent and its counsel, of the same tenor as the opinions and
letters referred to in Section 6(d) of this Agreement.

 

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(n) The Company consents to Citadel trading in the Company’s Common Stock for
Citadel’s own account and for the account of its clients at the same time as
sales of Shares occur pursuant to this Agreement or any Terms Agreement.
(o) If, to the knowledge of the Company, all filings required by Rule 424 in
connection with this offering shall not have been made or the representations in
Section 1(a) shall not be true and correct on the applicable Settlement Date,
the Company will offer to any person who has agreed to purchase Shares from the
Company as the result of an offer to purchase solicited by the Agent the right
to refuse to purchase and pay for such Shares.
(p) The Company will cooperate timely with any reasonable due diligence review
conducted by the Agent or its counsel from time to time in connection with the
transactions contemplated hereby or in any Terms Agreement, including, without
limitation, and upon reasonable notice providing information and making
available documents and appropriate corporate officers, during regular business
hours and at the Company’s principal offices or electronically or
telephonically, as the Agent may reasonably request.
(q) The Company will not, without (i) giving the Agent at least five business
days’ prior written notice specifying the nature of the proposed sale and the
date of such proposed sale and (ii) the Agent suspending activity under this
program for such period of time as requested by the Company or as deemed
appropriate by the Agent in light of the proposed sale, (A) (1) offer, pledge,
announce the intention to sell, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell, grant any option,
right or warrant for the sale of, lend or otherwise transfer or dispose of,
directly or indirectly, any shares of Common Stock or securities convertible
into or exchangeable or exercisable for or repayable with Common Stock, or file
any registration statement under the 1933 Act with respect to any of the
foregoing (other than a shelf registration statement under Rule 415 under the
1933 Act, a registration statement on Form S-8 or post-effective amendment to
the Registration Statement) or (2) enter into any swap or other agreement or any
transaction that transfers in whole or in part, directly or indirectly, any of
the economic consequence of ownership of the Common Stock, or any securities
convertible into or exchangeable or exercisable for or repayable with Common
Stock, whether any such swap or transaction described in clause (1) or (2) above
is to be settled by delivery of Common Stock or such other securities, in cash
or otherwise; or (B) directly or indirectly repurchase, offer to repurchase,
announce its intention to repurchase, or otherwise enter into any transaction
with the economic effect of repurchasing any shares of its Common Stock. The
foregoing sentence shall not apply to (y) the Shares to be offered and sold
through the Agent pursuant to this Agreement or any Terms Agreement and
(z) equity incentive awards approved by the board of directors of the Company or
the compensation committee thereof or the issuance of Common Stock upon exercise
thereof.
(r) If immediately prior to the third anniversary (the “Renewal Deadline”) of
the initial effective date of the Registration Statement, any of the Shares
remain unsold, the Company will, prior to the Renewal Deadline file, if it has
not already done so and is eligible to do so, an “automatic shelf registration
statement” (as defined in Rule 405 under the 1933 Act) relating to the Shares,
in a form reasonably satisfactory to the Agent. If the Company is not eligible
to file an automatic shelf registration statement, the Company will, prior to
the Renewal Deadline, if it has not already done so, file a new shelf
registration statement relating to the Shares, in a form reasonably satisfactory
to the Agent, and will use its reasonable best efforts to cause such
registration statement to be declared effective within 60 days after the Renewal
Deadline. The Company will take all other action necessary or appropriate to
permit the issuance and sale of the Shares to continue as contemplated in the
expired registration statement relating to the Shares. References herein to the
Registration Statement shall include such new automatic shelf registration
statement or such new shelf registration statement, as the case may be.

 

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Section 4. Free Writing Prospectus.
(a) (i) The Company represents and agrees that without the prior consent of the
Agent, it has not made and will not make any offer relating to the Shares that
would constitute a “free writing prospectus” as defined in Rule 405 under the
1933 Act and (ii) the Agent represents and agrees that, without the prior
consent of the Company, it has not made and will not make any offer relating to
the Shares that would constitute a free writing prospectus required to be filed
with the Commission.
(b) The Company has complied and will comply with the requirements of Rule 433
under the 1933 Act applicable to any Issuer Free Writing Prospectus (including
any free writing prospectus identified in Section 4(a) hereof), including timely
filing with the Commission or retention where required and legending.
Section 5. Payment of Expenses. The Company covenants and agrees with the Agent
that the Company will pay or cause to be paid the following: (i) the fees,
disbursements and expenses of the Company’s counsel and accountants in
connection with the registration of the Shares under the 1933 Act and all other
expenses in connection with the preparation, printing and filing of the
Registration Statement, the Base Prospectus, Prospectus Supplement, any Issuer
Free Writing Prospectus and the Prospectus and amendments and supplements
thereto and the mailing and delivering of copies thereof to the Agent; (ii) the
cost of printing or producing this Agreement or any Terms Agreement, any Blue
Sky Memoranda, closing documents (including any compilations thereof) and any
other documents in connection with the offering, purchase, sale and delivery of
the Shares; (iii) all documented expenses in connection with the qualification
of the Shares for offering and sale under state securities laws as provided in
Section 3(b) hereof, including the reasonable documented fees and disbursements
of counsel for the Agent in connection with such qualification and in connection
with the Blue Sky Surveys; (iv) any documented filing fees incident to, and the
reasonable documented fees and disbursements of counsel for the Agent in
connection with, any required review by FINRA of the terms of the sale of the
Shares; (v) the reasonable documented fees and expenses of counsel to the Agent
in connection with this Agreement and the offering contemplated hereby, which
fees, expenses and other amounts pursuant to subsections (iii), (iv) and
(v) herein shall not exceed $50,000 in the aggregate; (vi) all fees and expenses
in connection with listing or quoting the Shares on the Nasdaq; (vii) the cost
of preparing the Shares; (vii) the costs and charges of any transfer agent or
registrar or any dividend distribution agent; and (ix) all other costs and
expenses incident to the performance of its obligations hereunder which are not
otherwise specifically provided for in this Section. It is understood, however,
that, except as provided in this Section, and Section 7 hereof, the Agent will
pay all of its own costs and expenses, including the fees of its counsel,
transfer taxes on resale of any of the Shares by it, and any advertising
expenses connected with any offers it may make.
Section 6. Conditions of the Agent’s Obligation. The obligations of the Agent
hereunder shall be subject, in its discretion, to the condition that all
representations and warranties and other statements of the Company herein or in
certificates of any officer of the Company delivered pursuant to the provisions
hereof are true and correct as of the time of the execution of this Agreement,
the date of any executed Terms Agreement and as of each Registration Statement
Amendment Date, Company Periodic Report Date, Applicable Time and Settlement
Date, to the condition that the Company shall have performed in all material
respects all of its obligations hereunder theretofore to be performed, and the
following additional conditions:

 

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(a) The Prospectus Supplement shall have been filed with the Commission pursuant
to Rule 424(b) under the 1933 Act prior to the commencement of the offering of
Shares under this Agreement and in accordance with Section 3(a) hereof, any
other material required to be filed by the Company pursuant to Rule 433(d) under
the 1933 Act shall have been filed with the Commission within the applicable
time periods prescribed for such filings by Rule 433; no stop order suspending
the effectiveness of the Registration Statement or any part thereof shall have
been issued and no proceeding for that purpose shall have been initiated or
threatened by the Commission and no notice of objection of the Commission to the
use of the form of the Registration Statement or any post-effective amendment
thereto pursuant to Rule 401(g)(2) under the 1933 Act shall have been received;
no stop order suspending or preventing the use of the Prospectus or any Issuer
Free Writing Prospectus shall have been initiated or threatened by the
Commission; and all requests for additional information on the part of the
Commission shall have been complied with to the reasonable satisfaction of the
Agent.
(b) On every date specified in Section 3(k) hereof and on such other dates as
reasonably requested by the Agent, Latham & Watkins LLP, counsel for the
Company, shall have furnished to the Agent a written opinion or opinions and a
negative assurance letter, dated as of such date, in form and substance
reasonably satisfactory to the Agent.
(c) At the dates specified in Section 3(l) hereof and on such other dates as
reasonably requested by the Agent, the independent accountants of the Company
who have certified the financial statements of the Company included or
incorporated by reference in the Registration Statement, the General Disclosure
Package and the Prospectus shall have furnished to the Agent a letter dated as
of the date of delivery thereof and addressed to the Agent in form and substance
reasonably satisfactory to the Agent and its counsel, containing statements and
information of the type ordinarily included in accountants’ “comfort letters” to
underwriters with respect to the financial statements of the Company included or
incorporated by reference in the Registration Statement, the General Disclosure
Package and the Prospectus.
(d) On the date specified in Section 3(m) hereof and on such other dates as
reasonably requested by the Agent in connection with a Material Adverse Change
with respect to the Company’s intellectual property, Knobbe, Martens, Olson &
Bear LLP, intellectual property counsel for the Company, shall have furnished to
the Agent a written opinion with respect to certain intellectual property
matters, dated as of such date, in form and substance reasonably satisfactory to
the Agent.
(e) (i) Upon commencement of the offering of Shares under this Agreement and on
such other dates as reasonably requested by the Agent, the Company will furnish
or cause to be furnished promptly to the Agent a certificate of an officer in a
form satisfactory to the Agent stating the minimum price for the sale of such
Shares pursuant to this Agreement and the maximum number of Shares that may be
issued and sold pursuant to this Agreement or, alternatively, maximum gross
proceeds from such sales, as authorized from time to time by the Company’s board
of directors or a duly authorized committee thereof or, in connection with any
amendment, revision or modification of such minimum price or maximum Share
number or amount, a new certificate with respect thereto and (ii) on each date
specified in Section 3(j) and on such other dates as reasonably requested by the
Agent, the Agent shall have received a certificate of the Company executed by
two executive officers of the Company, one of whom shall be the Chief Financial
Officer, Chief Accounting Officer, Treasurer, or Senior Vice President in the
area of capital markets and investments, dated as of the date thereof,
certifying, after reasonable inquiry, that (A) there has been no Material
Adverse Change since the date as of which information is given in the General
Disclosure Package and the Prospectus as then amended or supplemented, (B) the
representations

 

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and warranties in Section 1 hereof are true and correct as of such date, (C) no
stop order suspending the effectiveness of the Registration Statement or any
Rule 462(b) Registration Statement is in effect and no proceedings for such
purpose have been instituted or are pending or, to the Company’s knowledge, are
contemplated or threatened by the Commission and (D) the Company has complied
with all of the agreements entered into in connection with the transaction
contemplated herein and satisfied all conditions on its part to be performed or
satisfied, in each case, in all material respects.
(f) Since the date of the latest audited financial statements then included or
incorporated by reference in the General Disclosure Package and the Prospectus,
no Material Adverse Change shall have occurred.
(g) The Company shall have complied with the provisions of Section 3(c) hereof
with respect to the timely furnishing of prospectuses.
(h) On such dates as reasonably requested by the Agent, the Company shall have
cooperated with and permitted the Agent to conduct due diligence sessions, in
form and substance satisfactory to the Agent.
(i) All filings with the Commission required by Rule 424 under the 1933 Act to
have been filed by each Applicable Time or related Settlement Date shall have
been made within the applicable time period prescribed for such filing by
Rule 424 (without reliance on Rule 424(b)(8)).
(j) The Shares shall have received approval for listing or quotation on the
Nasdaq prior to the first Settlement Date.
(k) Prior to any Settlement Date, the Company shall have furnished to the Agent
such further information, documents or certificates as the Agent may reasonably
request.
Section 7. Indemnification.
(a) The Company will indemnify and hold harmless the Agent against any losses,
claims, damages or liabilities, joint or several, to which the Agent may become
subject, under the 1933 Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement, the Base Prospectus, the Prospectus
Supplement or the Prospectus or any amendment or supplement thereto, any Issuer
Free Writing Prospectus or any “issuer information” filed or required to be
filed pursuant to Rule 433(d) under the 1933 Act, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse the Agent for any legal or other expenses reasonably incurred
by the Agent in connection with investigating or defending any such action or
claim as such expenses are incurred; provided, however, that the Company shall
not be liable in any such case to the extent that any such loss, claim, damage
or liability arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in the Registration
Statement, the Base Prospectus, the Prospectus Supplement or the Prospectus, or
any amendment or supplement thereto, or any Issuer Free Writing Prospectus, in
reliance upon and in strict conformity with written information furnished to the
Company by the Agent expressly for use therein, it being understood and agreed
upon that the only such information furnished by the Agent consists of the
information in the Prospectus as specified in Annex II hereto.

 

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(b) The Agent will indemnify and hold harmless the Company against any losses,
claims, damages or liabilities to which the Company may become subject, under
the 1933 Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in the
Registration Statement, the Base Prospectus, the Prospectus Supplement or the
Prospectus, or any amendment or supplement thereto, or any Issuer Free Writing
Prospectus, or arise out of or are based upon the omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, in each case to the extent, but only
to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in the Registration Statement, the Base
Prospectus, the Prospectus Supplement or the Prospectus, or any such amendment
or supplement thereto, or any Issuer Free Writing Prospectus, in reliance upon
and in conformity with written information furnished to the Company by the Agent
expressly for use therein, it being understood and agreed upon that the only
such information furnished by the Agent consists of the information in the
Prospectus as specified in Annex II hereto; and will reimburse the Company for
any legal or other expenses reasonably incurred by the Company in connection
with investigating or defending any such action or claim as such expenses are
incurred.
(c) Promptly after receipt by an indemnified party under subsection (a) or
(b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party shall
not relieve it from any liability which it may have to any indemnified party
otherwise than under such subsection except and then only to the extent such
indemnifying party is materially prejudiced thereby. In case any such action
shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party and, after notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party shall not be liable to such
indemnified party under this Section 7 for any legal expenses of other counsel
or any other expenses, in each case subsequently incurred by such indemnified
party, in connection with the defense thereof other than reasonable costs of
investigation; provided, however, if the defendants in any such action include
both the indemnified party and the indemnifying party and the indemnified party
shall have reasonably concluded, based on the opinion of its legal counsel, that
a conflict may arise between the positions of the indemnifying party and the
indemnified party in conducting the defense of any such action or that there may
be legal defenses available to it and/or other indemnified parties which are
different from or additional to those available to the indemnifying party, the
indemnified party or parties shall have the right to select separate counsel to
assume such legal defenses and to otherwise participate in the defense of such
action on behalf of such indemnified party or parties, in which event the
reasonable fees and expenses of such single separate counsel shall be borne by
the indemnifying party or parties and reimbursed to the indemnified party as
incurred. No indemnifying party shall, without the written consent of the
indemnified party, effect the settlement or compromise of, or consent to the
entry of any judgment with respect to, any pending or threatened action or claim
in respect of which indemnification or contribution may be sought hereunder
(whether or not the indemnified party is an actual or potential party to such
action or claim) unless such settlement, compromise or judgment (i) includes an
unconditional release of the indemnified party from all liability arising out of
such action or claim and (ii) does not include a statement as to or an admission
of fault, culpability or a failure to act, by or on behalf of any indemnified
party.

 

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(d) If the indemnification provided for in this Section 7 is unavailable to hold
harmless an indemnified party under subsection (a) or (b) above in respect of
any losses, claims, damages or liabilities (or actions in respect thereof)
referred to therein, then each indemnifying party shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages or liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect the relative benefits received by the Company on the one
hand and the Agent on the other from the offering of the Shares to which such
loss, claim, damage or liability (or action in respect thereof) relates. If,
however, the allocation provided by the immediately preceding sentence is not
permitted by applicable law, then each indemnifying party shall contribute to
such amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company on the one hand and the Agent on the other in connection
with the statements or omissions which resulted in such losses, claims, damages
or liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and the Agent on the other shall be deemed to be in the same proportion
as the total net proceeds from the offering (before deducting expenses) received
by the Company bear to the total commissions received by the Agent. The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
on the one hand or the Agent on the other and the parties’ relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the Agent agree that it would not be just
and equitable if contribution pursuant to this subsection (d) were determined by
pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to above in this subsection
(d). The amount paid or payable by an indemnified party as a result of the
losses, claims, damages or liabilities (or actions in respect thereof) referred
to above in this subsection (d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (d), the Agent shall not be required to contribute
any amount in excess of the amount by which the total compensation received by
the Agent with respect to sales of the Shares sold by it to the public exceeds
the amount of any damages which the Agent has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the 1933 Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
(e) The obligations of the Company under this Section 7 shall be in addition to
any liability which the Company may otherwise have and shall extend, upon the
same terms and conditions, to the directors, officers and employees of the Agent
and to each person, if any, who controls the Agent within the meaning of the
1933 Act and each broker dealer affiliate of the Agent; and the obligations of
the Agent under this Section 7 shall be in addition to any liability which the
Agent may otherwise have and shall extend, upon the same terms and conditions,
to each director, officer and employee of the Company and to each person, if
any, who controls the Company within the meaning of the 1933 Act.
Section 8. Representations, Warranties and Agreements to Survive Delivery. The
respective indemnities, agreements, representations, warranties and other
statements of the Company and the Agent, as set forth in this Agreement or made
by or on behalf of them, respectively, pursuant to this Agreement, shall remain
in full force and effect, regardless of any investigation (or any statement as
to the results thereof) made by or on behalf of the Agent or any controlling
person of the Agent, or the Company, or any officer or director or controlling
person of the Company, and shall survive delivery of and payment for the Shares.

 

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Section 9. No Advisory or Fiduciary Relationship. The Company acknowledges and
agrees that (i) the Agent is acting solely in the capacity of an arm’s length
contractual counterparty to the Company with respect to the offering of Shares
contemplated hereby (including in connection with determining the terms of such
offering) and (ii) the Agent has not assumed an advisory or fiduciary
responsibility in favor of the Company with respect to the offering contemplated
hereby or the process leading thereto (irrespective of whether the Agent has
advised or is currently advising the Company on other matters) or any other
obligation to the Company except the obligations expressly set forth in this
Agreement and (iii) the Company has consulted its own legal and financial
advisors to the extent it deemed appropriate. The Company agrees that it will
not claim that the Agent has rendered advisory services of any nature or
respect, or owe a fiduciary or similar duty to the Company, in connection with
such transaction or the process leading thereto.
Section 10. Termination.
(a) The Company shall have the right, by giving written notice as hereinafter
specified, to terminate this Agreement in its sole discretion at any time. Any
such termination shall be without liability of any party to any other party,
except that (i) with respect to any pending sale through the Agent for the
Company, the obligations of the Company, including in respect of compensation of
the Agent, shall remain in full force and effect notwithstanding such
termination; and (ii) the provisions of Section 1, Section 5, Section 7 and
Section 8 of this Agreement shall remain in full force and effect
notwithstanding such termination.
(b) The Agent shall have the right, by giving written notice as hereinafter
specified, to terminate this Agreement in its sole discretion at any time. Any
such termination shall be without liability of any party to any other party
except that the provisions of Section 1, Section 5, Section 7 and Section 8 of
this Agreement shall remain in full force and effect notwithstanding such
termination.
(c) This Agreement shall remain in full force and effect until and unless
terminated pursuant to Section 10(a) or (b) above or otherwise by mutual
agreement of the parties; provided that any such termination by mutual agreement
or pursuant to this clause (c) shall in all cases be deemed to provide that
Section 1, Section 5, Section 7 and Section 8 of this Agreement shall remain in
full force and effect. This Agreement shall terminate automatically upon the
issuance and sale of Shares having an aggregate offering price equal to the
amount set forth in the introductory paragraph of this Agreement.
(d) Any termination of this Agreement shall be effective on the date specified
in such notice of termination; provided that such termination shall not be
effective until the close of business on the date of receipt of such notice by
the Agent or the Company, as the case may be. If such termination shall occur
prior to the Settlement Date for any sale of Shares, such sale shall settle in
accordance with the provisions of Section 2(h) hereof.
(e) In the case of any purchase by the Agent pursuant to a Terms Agreement, the
Agent may terminate this Agreement at any time at or prior to the Settlement
Date (i) if there has been, since the time of execution of this Agreement or
since the respective dates as of which information is given in the General
Disclosure Package or the Prospectus, any Material Adverse Change, or (ii) if
there has occurred any material adverse change in the financial markets in the
United States or the international financial markets, any outbreak of
hostilities or escalation thereof or other calamity or crisis or any change or
development involving a prospective change in national or international
political, financial or economic conditions, in each case the effect of which is
such as to make it, in the judgment of the Agent, impracticable or inadvisable
to market the Shares or to enforce contracts for the sale of Shares, or (iii) if
trading in any securities of the Company has been suspended or materially
limited by the Commission or the Nasdaq, or if trading generally on the NYSE or
Nasdaq has been suspended or materially limited, or minimum or maximum prices
for trading have been fixed, or maximum ranges for prices have been required, by
any of said exchanges or by such system or by order of the Commission, FINRA or
any other governmental authority, or (iv) a material disruption has occurred in
commercial banking or securities settlement or clearance services in the United
States, or (v) if a banking moratorium has been declared by either Federal or
New York authorities.

 

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(f) Subject to the additional limitations set forth in Section 5 of this
Agreement, in the event of termination of this Agreement prior to the sale of
any Shares (i) by the Company pursuant to subsection (a) above or (ii) as a
result of an event set forth under clauses (i) or (iii) in subsection (e) above,
the Agent shall be entitled only to reimbursement of its out-of-pocket expenses
actually incurred.
Section 11. Notices. All statements, requests, notices and agreements hereunder
shall be in writing, and if to Citadel shall be delivered or sent by mail, telex
or facsimile transmission to:
Citadel Securities LLC
601 Lexington Avenue, 29th Floor
New York, NY 10003
Fax No. (212) 220-8977
Attention: Equity Capital Markets
with a copy to:
Citadel LLC
131 S. Dearborn Street, 32nd Floor
Chicago, IL 60603
Fax No. (312) 267-7602
Attention: Legal Department
and if to the Company to:
Somaxon Pharmaceuticals, Inc.
3750 Carmel Mountain Road
Suite 100
San Diego, CA 92130
Fax: (858) 509-1761
Attention: General Counsel
Any such statements, requests, notices or agreements shall take effect upon
receipt thereof.
Section 12. Parties. This Agreement shall be binding upon, and inure solely to
the benefit of, the Agent and the Company and, to the extent provided in
Sections 7 and 8 hereof, the officers, directors and employees of the Company
and the Agent and each person who controls the Company or the Agent, and their
respective heirs, executors, administrators, successors and assigns, and no
other person shall acquire or have any right under or by virtue of this
Agreement. No purchaser of Shares through the Agent shall be deemed a successor
or assign by reason merely of such purchase.
Section 13. Time of the Essence. Time shall be of the essence of this Agreement.
As used herein, the term “business day” shall mean any day when the Commission’s
office in Washington, D.C. is open for business.

 

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Section 14. Waiver of Jury Trial. The Company and the Agent hereby irrevocably
waive, to the fullest extent permitted by applicable law, any and all right to
jury trial by jury in any legal proceeding arising out of or relating to this
Agreement or the transactions contemplated hereby.
Section 15. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO ITS
PRINCIPLES OF CONFLICTS OF LAW THAT WOULD RESULT IN THE APPLICATION OF THE LAWS
OF ANY JURISDICTION OTHER THAN THE LAWS OF THE STATE OF NEW YORK.
Section 16. Counterparts. This Agreement and any Terms Agreement may be executed
by any one or more of the parties hereto and thereto in any number of
counterparts, each of which shall be deemed to be an original, but all such
respective counterparts shall together constitute one and the same instrument.
This Agreement and any Terms Agreement may be delivered by any party by
facsimile or other electronic transmission.
Section 17. Severability. The invalidity or unenforceability of any Section,
paragraph or provision of this Agreement shall not affect the validity or
enforceability of any other Section, paragraph or provision hereof. If any
Section, paragraph or provision of this Agreement is for any reason determined
to be invalid or unenforceable, there shall be deemed to be made such minor
changes (and only such minor changes) as are necessary to make it valid and
enforceable.

 

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If the foregoing is in accordance with your understanding of our agreement,
please sign and return to the Company a counterpart hereof, whereupon this
instrument, along with all counterparts, will become a binding agreement between
the Agent and the Company in accordance with its terms.

            Very truly yours,

SOMAXON PHARMACEUTICALS, INC.
      By:   /s/ Matthew W. Onaitis       Name:   Matthew W. Onaitis      
Title:   SVP and General Counsel    

          Accepted as of the date hereof:    
 
        CITADEL SECURITIES LLC    
 
       
By:
  /s/ Christopher L. Ramsay    
 
     
 
  Name: Christopher L. Ramsay    
 
  Title: Authorized Signatory    

 

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Annex I
SOMAXON PHARMACEUTICALS, INC.
Common Stock
($0.0001 par value per share)
TERMS AGREEMENT
CITADEL SECURITIES LLC
601 Lexington Avenue, 28th Floor
New York, NY 10003
Attn: Equity Capital Markets
Ladies and Gentlemen:
Somaxon Pharmaceuticals, Inc., a Delaware corporation (the “Company”), proposes,
subject to the terms and conditions stated herein and in the At-the-Market
Equity Offering Sales Agreement, dated August 1, 2011 (the “Sales Agreement”),
between the Company and Citadel Securities LLC (the “Agent”), to issue and sell
to the Agent the securities specified in the Schedule hereto (the “Purchased
Securities”). All capitalized terms used herein and not otherwise defined herein
shall have the meanings ascribed to them in the Sales Agreement.
Each of the provisions of the Sales Agreement not specifically related to the
solicitation by the Agent, as agent of the Company, of offers to purchase
securities is incorporated herein by reference in its entirety, and shall be
deemed to be part of this Terms Agreement to the same extent as if such
provisions had been set forth in full herein. Each of the representations and
warranties set forth therein shall be deemed to have been made at and as of the
date of this Terms Agreement and the Applicable Time, except that each
representation and warranty in Section 1 of the Sales Agreement which makes
reference to the Prospectus (as therein defined) shall be deemed to be a
representation and warranty as of the date of the Sales Agreement in relation to
the Prospectus, and also a representation and warranty as of the date of this
Terms Agreement and the Settlement Date in relation to the Prospectus as amended
and supplemented to relate to the Purchased Securities.
An amendment to the Registration Statement (as defined in the Sales Agreement),
or a supplement to the Prospectus, as the case may be, relating to the Purchased
Securities, in the form heretofore delivered to the Agent is now proposed to be
filed with the Securities and Exchange Commission.
Subject to the terms and conditions set forth herein and in the Sales Agreement
which are incorporated herein by reference, the Company agrees to issue and sell
to the Agent and the latter agrees to purchase from the Company the number of
shares of the Purchased Securities at the time and place and at the purchase
price set forth in the Schedule hereto.

 

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If the foregoing is in accordance with your understanding of our agreement,
please sign and return to the Company a counterpart hereof, whereupon this
instrument, along with all counterparts, will become a binding agreement between
the Agent and the Company in accordance with its terms.

            Very truly yours,

SOMAXON PHARMACEUTICALS, INC.
      By:           Name:           Title:        

          Accepted as of the date hereof:    
 
        CITADEL SECURITIES LLC    
 
       
By:
       
 
     
 
  Name:    
 
  Title:    

 

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Annex II
Information Supplied by the Agent
As sales agent, Citadel will not engage in any transactions that stabilize the
Company’s common stock.
Subject to the terms and conditions of this Agreement, Citadel will use its
commercially reasonable efforts to sell shares of common stock on the Company’s
behalf on a daily basis or as otherwise agreed upon by the Company and Citadel.

 

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