Exhibit 10.1


 


COMMON STOCK PURCHASE AGREEMENT




Dated as of February 23,
2010




by and between




PONIARD PHARMACEUTICALS, INC.




and




COMMERCE COURT SMALL CAP VALUE
FUND, LTD.


 

















 


TABLE OF CONTENTS


 


	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE I PURCHASE AND SALE OF
  COMMON STOCK

  	
  1

  
	
  Section 1.1

  	
  Purchase and Sale of Stock

  	
  1

  
	
  Section 1.2

  	
  Effective Date; Settlement Dates

  	
  1

  
	
  Section 1.3

  	
  Reservation of Common Stock

  	
  2

  
	
  Section 1.4

  	
  Current Report; Prospectus Supplement

  	
  2

  
	
   

  	
   

  	
   

  
	
  ARTICLE II FIXED REQUEST TERMS;
  OPTIONAL AMOUNT

  	
  3

  
	
  Section 2.1

  	
  Fixed Request Notice

  	
  3

  
	
  Section 2.2

  	
  Fixed Requests

  	
  3

  
	
  Section 2.3

  	
  Share Calculation

  	
  4

  
	
  Section 2.4

  	
  Limitation of Fixed Requests

  	
  4

  
	
  Section 2.5

  	
  Reduction of Commitment

  	
  4

  
	
  Section 2.6

  	
  Below Threshold Price

  	
  5

  
	
  Section 2.7

  	
  Settlement

  	
  5

  
	
  Section 2.8

  	
  Reduction of Pricing Period

  	
  5

  
	
  Section 2.9

  	
  Optional Amount

  	
  6

  
	
  Section 2.10

  	
  Calculation of Optional Amount Shares

  	
  7

  
	
  Section 2.11

  	
  Exercise of Optional Amount

  	
  7

  
	
  Section 2.12

  	
  Aggregate Limit

  	
  7

  
	
  Section 2.13

  	
  Commitment Shares

  	
  8

  
	
   

  	
   

  	
   

  
	
  ARTICLE III REPRESENTATIONS AND
  WARRANTIES OF THE INVESTOR

  	
  9

  
	
  Section 3.1

  	
  Organization and Standing of the Investor

  	
  9

  
	
  Section 3.2

  	
  Authorization and Power

  	
  9

  
	
  Section 3.3

  	
  No Conflicts

  	
  9

  
	
  Section 3.4

  	
  Information

  	
  10

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV REPRESENTATIONS AND
  WARRANTIES OF THE COMPANY

  	
  10

  
	
  Section 4.1

  	
  Organization, Good Standing and Power

  	
  10

  
	
  Section 4.2

  	
  Authorization, Enforcement

  	
  10

  
	
  Section 4.3

  	
  Capitalization

  	
  10

  
	
  Section 4.4

  	
  Issuance of Securities

  	
  11

  
	
  Section 4.5

  	
  No Conflicts

  	
  11

  
	
  Section 4.6

  	
  Commission Documents, Financial Statements

  	
  12

  
	
  Section 4.7

  	
  Subsidiaries

  	
  13

  
	
  Section 4.8

  	
  No Material Adverse Effect

  	
  13

  
	
  Section 4.9

  	
  Indebtedness

  	
  14

  
	
  Section 4.10

  	
  Title To Assets

  	
  14

  
	
  Section 4.11

  	
  Actions Pending

  	
  14

  
	
  Section 4.12

  	
  Compliance With Law

  	
  14

  
	
  Section 4.13

  	
  Certain Fees

  	
  14

  
	
  Section 4.14

  	
  Operation of Business

  	
  15

  
	
  Section 4.15

  	
  Environmental Compliance

  	
  17

  



 


i

















 


	
  Section 4.16

  	
  Material Agreements

  	
  17

  
	
  Section 4.17

  	
  Transactions With Affiliates

  	
  18

  
	
  Section 4.18

  	
  Securities Act

  	
  18

  
	
  Section 4.19

  	
  Employees

  	
  20

  
	
  Section 4.20

  	
  Use of Proceeds

  	
  20

  
	
  Section 4.21

  	
  Investment Company Act Status

  	
  20

  
	
  Section 4.22

  	
  ERISA

  	
  20

  
	
  Section 4.23

  	
  Taxes

  	
  21

  
	
  Section 4.24

  	
  Insurance

  	
  21

  
	
  Section 4.25

  	
  Acknowledgement Regarding Investor’s Acquisition of
  Securities

  	
  21

  
	
   

  	
   

  	
   

  
	
  ARTICLE V COVENANTS

  	
  21

  
	
  Section 5.1

  	
  Securities Compliance; FINRA Filing

  	
  21

  
	
  Section 5.2

  	
  Registration and Listing

  	
  22

  
	
  Section 5.3

  	
  Compliance with Laws

  	
  23

  
	
  Section 5.4

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

  	
  23

  
	
  Section 5.5

  	
  Limitations on Holdings and Issuances

  	
  24

  
	
  Section 5.6

  	
  Other Agreements and Other Financings

  	
  24

  
	
  Section 5.7

  	
  Stop Orders

  	
  26

  
	
  Section 5.8

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

  	
  27

  
	
  Section 5.9

  	
  Prospectus Delivery

  	
  27

  
	
  Section 5.10

  	
  Selling Restrictions

  	
  28

  
	
  Section 5.11

  	
  Effective Registration Statement

  	
  29

  
	
  Section 5.12

  	
  Non-Public Information

  	
  29

  
	
  Section 5.13

  	
  Broker/Dealer

  	
  29

  
	
  Section 5.14

  	
  Disclosure Schedule

  	
  29

  
	
   

  	
   

  	
   

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

  	
  30

  
	
  Section 6.1

  	
  Issuance of Commitment Shares; Opinion of Counsel;
  Certificate

  	
  30

  
	
  Section 6.2

  	
  Conditions Precedent to the Obligation of the Company

  	
  30

  
	
  Section 6.3

  	
  Conditions Precedent to the Obligation of the Investor

  	
  32

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII TERMINATION

  	
  34

  
	
  Section 7.1

  	
  Term, Termination by Mutual Consent

  	
  34

  
	
  Section 7.2

  	
  Other Termination

  	
  35

  
	
  Section 7.3

  	
  Effect of Termination

  	
  36

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII INDEMNIFICATION

  	
  36

  
	
  Section 8.1

  	
  General Indemnity

  	
  36

  
	
  Section 8.2

  	
  Indemnification Procedures

  	
  38

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX MISCELLANEOUS

  	
  39

  
	
  Section 9.1

  	
  Fees and Expenses

  	
  39

  
	
  Section 9.2

  	
  Specific Enforcement, Consent to Jurisdiction, Waiver of
  Jury Trial

  	
  40

  
	
  Section 9.3

  	
  Entire Agreement; Amendment

  	
  41

  



 


ii

















 


	
  Section 9.4

  	
  Notices

  	
  41

  
	
  Section 9.5

  	
  Waivers

  	
  42

  
	
  Section 9.6

  	
  Headings

  	
  42

  
	
  Section 9.7

  	
  Successors and Assigns

  	
  42

  
	
  Section 9.8

  	
  Governing Law

  	
  42

  
	
  Section 9.9

  	
  Survival

  	
  42

  
	
  Section 9.10

  	
  Counterparts

  	
  43

  
	
  Section 9.11

  	
  Publicity

  	
  43

  
	
  Section 9.12

  	
  Severability

  	
  43

  
	
  Section 9.13

  	
  Further Assurances

  	
  43

  
	
   

  	
   

  	
   

  
	
  Annex
  A.

  	
  Definitions

  	
   

  



 


iii






 


 


 












 


COMMON STOCK PURCHASE AGREEMENT


 


This
COMMON STOCK PURCHASE AGREEMENT, made
and entered into on this 23rd day of February 2010 (this “Agreement”),
by and between Commerce Court Small Cap Value Fund, Ltd., a business company
incorporated under the laws of the British Virgin Islands (the “Investor”),
and Poniard Pharmaceuticals, Inc., a corporation organized and existing
under the laws of the State of Washington (the “Company”). Capitalized
terms used but not defined herein shall have the meanings ascribed to such
terms in Annex A hereto.


 


RECITALS


 


WHEREAS, the parties desire that, upon the terms and
subject to the conditions contained herein, the Company may issue and sell to
the Investor and the Investor shall thereupon purchase from the Company up to
$20,000,000 of newly issued shares of the Company’s common stock, $0.02 par
value (“Common Stock”), subject, in all cases, to the Trading Market
Limit;


 


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


 


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


 


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


 


ARTICLE I

PURCHASE AND SALE OF COMMON STOCK


 


Section 1.1            Purchase and Sale of Stock.  Upon the terms and subject to the conditions
of this Agreement, during the Investment Period the Company in its discretion
may issue and sell to the Investor up to $20,000,000 (the “Total Commitment”)
of duly authorized, validly issued, fully paid and non-assessable shares of
Common Stock (subject in all cases to the Trading Market Limit, the “Aggregate
Limit”), by (i) the delivery to the Investor of not more than 24 separate
Fixed Request Notices (unless the Investor and the Company mutually agree that
a different number of Fixed Request Notices may be delivered) as provided in Article II
hereof and (ii) the exercise by the Investor of Optional Amounts, which
the Company may in its discretion grant to the Investor and which may be
exercised by the Investor, in whole or in part, as provided in Article II
hereof.  The aggregate of all Fixed
Request Amounts and Optional Amount Dollar Amounts shall not exceed the
Aggregate Limit.


 


Section 1.2            Effective Date; Settlement Dates.
This Agreement shall become effective and binding upon the payment of the fees
required to be paid on or prior to the Effective Date pursuant to Section 9.1,
the delivery of irrevocable instructions to issue the Commitment Shares to the
Investor or its designees as provided in Section 2.13 and 6.1, the 


 

















 


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


 


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


 


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


 


2

















 


ARTICLE II

FIXED REQUEST TERMS; OPTIONAL AMOUNT


 


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


 


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


 


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


 


	
  Threshold
  Price

  	
   

  	
  Fixed Amount Requested

  	
   

  	
  Discount Price

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Equal
  to or greater than $10.00

  	
   

  	
  Not
  to exceed $11,000,000

  	
   

  	
  96.875%
  of the VWAP

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Equal
  to or greater than $9.00 and less than $10.00

  	
   

  	
  Not
  to exceed $10,000,000

  	
   

  	
  96.750%
  of the VWAP

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Equal
  to or greater than $8.00 and less than $9.00

  	
   

  	
  Not
  to exceed $9,000,000

  	
   

  	
  96.625% of the VWAP

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Equal to or greater
  than $7.00 and less than $8.00

  	
   

  	
  Not to exceed
  $8,000,000

  	
   

  	
  96.500% of the VWAP

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Equal to or greater
  than $6.00 and less than $7.00

  	
   

  	
  Not to exceed
  $7,000,000

  	
   

  	
  96.250% of the VWAP

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Equal to or greater
  than $5.00 and less than $6.00

  	
   

  	
  Not to exceed
  $6,000,000

  	
   

  	
  96.000% of the VWAP

  



 


3

















 


	
  Equal to or greater
  than $4.00 and less than $5.00

  	
   

  	
  Not to exceed
  $5,000,000

  	
   

  	
  95.750% of the VWAP

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Equal to or greater
  than $3.50 and less than $4.00

  	
   

  	
  Not to exceed
  $4,500,000

  	
   

  	
  95.625% of the VWAP

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Equal to or greater
  than $3.00 and less than $3.50

  	
   

  	
  Not to exceed
  $4,000,000

  	
   

  	
  95.500% of the VWAP

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Equal to or greater
  than $2.50 and less than $3.00

  	
   

  	
  Not to exceed
  $3,500,000

  	
   

  	
  95.375% of the VWAP

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Equal to or greater
  than $2.00 and less than $2.50

  	
   

  	
  Not to exceed
  $3,000,000

  	
   

  	
  95.250% of the VWAP

  
	
   

  	
   

  	
   

  	
   

  	
   

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

  	
   

  	
  Not to exceed
  $2,500,000

  	
   

  	
  95.125% of the VWAP

  
	
   

  	
   

  	
   

  	
   

  	
   

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

  	
   

  	
  Not to exceed
  $2,000,000

  	
   

  	
  95.000% of the VWAP

  



 


Anything to the contrary in
this Agreement notwithstanding, at no time shall the Investor be required to
purchase more than $11,000,000 worth of Common Stock in respect of any Pricing
Period (not including Common Stock subject to any Optional Amount).  The date on which the Company delivers any
Fixed Request Notice in accordance with this Section 2.2 hereinafter shall
be referred to as a “Fixed Request Exercise Date”.


 


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


 


N =             (A x B)/C, where:


 


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


 


A =            0.125 (the “Multiplier”),


 


B =              the total Fixed Amount Requested, and


 


C =              the applicable Discount Price.


 


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


 


Section 2.5            Reduction of Commitment.  On the last Trading Day of each Pricing
Period, the Investor’s Total Commitment under this Agreement automatically (and
without the 


 


4

















 


need
for any amendment to this Agreement) shall be reduced, on a dollar-for-dollar
basis, by the total amount of the Fixed Request Amount and the Optional Amount
Dollar Amount, if any, for such Pricing Period paid to the Company at the
Settlement Date.


 


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


 


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


 


Section 2.8            Reduction of Pricing Period.  If during a Pricing Period the Company elects
to reduce the number of Trading Days in such Pricing Period (and thereby amend
its previously delivered Fixed Request Notice), the Company shall so notify the
Investor before 9:00 a.m. (New York time) on any Trading Day during a
Pricing Period (a “Reduction Notice”) and the last Trading Day of such
Pricing Period shall be the Trading Day immediately preceding the Trading Day
on which the Investor received such Reduction Notice; provided, however,
that if the Company delivers the Reduction Notice later than 9:00 a.m.
(New York time) on a Trading Day during a Pricing Period, then the last Trading
Day of such Pricing Period instead shall be the Trading Day on which the
Investor received such Reduction Notice.


 


5

















 


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


 


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


 


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


 


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


 


A =            the Fixed Amount Requested,


 


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


 


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


 


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


 


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


 


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


 


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


 


6

















 


Optional
Amount exercise shall be aggregated during the Pricing Period and settled on
the next Settlement Date.  The Optional
Amount Threshold Price designated by the Company in its Fixed Request Notice
shall apply to each Optional Amount exercised during the applicable Pricing
Period.


 


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


 


O =             A/(B x C), where:


 


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


 


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


 


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


 


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


 


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


 


Section 2.12         Aggregate Limit.  Notwithstanding anything to the contrary
contained in this Agreement, in no event may the Company issue a Fixed Request
Notice or grant an Optional Amount to the extent that the sale of Shares
pursuant thereto and pursuant to all prior Fixed Request Notices and Optional Amounts
issued hereunder, and as liquidated damages pursuant to Section 9.1(ii),
would cause the Company to sell or the Investor to purchase Shares which in the
aggregate are in excess of the Aggregate Limit. 
If the Company issues a Fixed Request Notice or Optional Amount that
otherwise would permit the Investor to purchase shares of Common Stock which
would cause the aggregate purchases by Investor hereunder to exceed the
Aggregate Limit, such Fixed Request Notice or Optional Amount shall be void ab
initio to the extent of the amount by which the dollar value of shares or
number of shares, as the case may be, of Common Stock otherwise issuable
pursuant to such Fixed Request Notice or Optional Amount together with the
dollar value of shares or number of shares, as the case may be, of all other
Common Stock purchased by the Investor pursuant hereto, or issued as liquidated
damages pursuant to Section 9.1(ii), would exceed the Aggregate
Limit.  The Company hereby represents,
warrants 


 


7

















 


and
covenants that neither it nor any of its Subsidiaries (i) has effected any
transaction or series of transactions, (ii) is a party to any pending
transaction or series of transactions or (iii) shall enter into any
contract, agreement, agreement-in-principle, arrangement or understanding with
respect to, or shall effect, any Other Financing which, in any of such cases,
may be aggregated with the transactions contemplated by this Agreement for
purposes of determining whether approval of the Company’s stockholders is
required under any bylaw, listed securities maintenance standards or other rules of
the Trading Market; provided, however, that the Company shall be
permitted to take any action referred to in clause (iii) above if (a) the
Company has timely provided the Investor with an Integration Notice as provided
in Section 5.6(ii) hereof and (b) unless the Investor has
previously terminated this Agreement pursuant to Section 7.2, the Company
obtains the requisite stockholder approval prior to the closing of such Other
Financing.


 


At the Company’s sole
discretion, and effective automatically upon delivery of notice by the Company
to the Investor, this Agreement may be amended by the Company from time to time
to reduce the Aggregate Limit by a specified dollar amount and/or number of
shares of Common Stock as shall be determined by the Company in its sole
discretion; provided, however, that any such amendment of this
Agreement (and any such purported amendment) shall be void and of no force and
effect if the effect thereof would restrict, materially delay, conflict with or
impair the ability or right of the Company to perform its obligations under
this Agreement, including, without limitation, the obligation of the Company to
deliver the Commitment Shares to the Investor in accordance with the terms of Section 2.13
and Section 6.1 of this Agreement, and the obligation of the Company to
deliver the Shares to the Investor in respect of a previously delivered Fixed
Request or Optional Amount on the applicable Settlement Date.  In the event the Company shall have elected
to reduce the Aggregate Limit as provided in the immediately preceding
sentence, at the Company’s sole discretion, and effective automatically upon
delivery of notice by the Company to the Investor, the Company may subsequently
amend this Agreement to increase the Aggregate Limit up to $20,000,000, subject
in all cases to the Trading Market Limit; provided, however, that
in no event shall the Company be entitled to issue Fixed Requests and grant
Optional Amounts during the remainder of the Investment Period for an aggregate
amount greater than the amount obtained by subtracting (x) the aggregate
of all Fixed Request Amounts and Optional Amount Dollar Amounts (including any
amounts paid as liquidated damages pursuant to Section 9.1(ii) hereunder)
covered by all Fixed Requests and Optional Amounts theretofore issued or
granted by the Company in respect of which a settlement has occurred pursuant
to Section 2.7 from (y) $20,000,000, subject in all cases to the
Trading Market Limit.


 


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


 


8

















 


avoidance of doubt, all of the Commitment Shares shall be fully earned
as of the Effective Date, regardless of whether any Fixed Requests are issued
by the Company or settled hereunder.


 


ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE INVESTOR


 


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


 


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


 


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


 


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


 


9






 












 


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


 


ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE COMPANY


 


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


 


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


 


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


 


Section 4.3            Capitalization.  The authorized capital stock of the Company
and the shares thereof issued and outstanding are as set forth in the
Commission Documents as of the dates reflected therein.  All of the outstanding shares of Common Stock
have been duly 


 


10

















 


authorized
and validly issued, and are fully paid and nonassessable.  Except as set forth in the Commission
Documents, as of the Effective Date, no shares of Common Stock were entitled to
preemptive rights or registration rights and there were no outstanding options,
warrants, scrip, rights to subscribe to, call or commitments of any character
whatsoever relating to, or securities or rights convertible into or
exchangeable for, any shares of capital stock of the Company, other than those
issued or granted in the ordinary course of business. Except as set forth in
the Commission Documents, as of the Effective Date, there were no contracts,
commitments, understandings, or arrangements by which the Company is or may
become bound to issue additional shares of the capital stock of the Company or
options, securities or rights convertible into or exchangeable for any shares
of capital stock of the Company.  Except
for customary transfer restrictions contained in agreements entered into by the
Company to sell restricted securities or as set forth in the Commission
Documents, as of the Effective Date, the Company was not a party to, and it had
no knowledge of, any agreement restricting the voting or transfer of any shares
of the capital stock of the Company. 
Except as set forth in the Commission Documents, the offer and sale of
all capital stock, convertible or exchangeable securities, rights, warrants or
options of the Company issued prior to the Effective Date complied with all
applicable federal and state securities laws, and no stockholder has any right
of rescission or damages or any “put” or similar right with respect thereto
that would have a Material Adverse Effect. 
The Company has furnished or made available to the Investor via the
Commission’s Electronic Data Gathering, Analysis and Retrieval System (“EDGAR”)
true and correct copies of the Company’s Articles of Incorporation as in effect
on the Effective Date (the “Charter”), and the Company’s Bylaws as in
effect on the Effective Date (the “Bylaws”), and true and correct copies
(redacted as appropriate) of all executed resolutions of the Company’s Board of
Directors (and committees thereof) relating to the capital stock of the Company
(and transactions in respect thereof) since December 31, 2005 (except with
respect to issuances of shares of capital stock of the Company to directors or
employees of the Company as fees or compensation that were duly approved by the
Company’s Board of Directors or a committee thereof).


 


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


 


Section 4.5            No Conflicts.  The execution, delivery and performance by
the Company of this Agreement and the consummation by the Company of the
transactions contemplated hereby do not and shall not (i) result in a
violation of any provision of the Company’s Charter or Bylaws, (ii) conflict
with, constitute a default (or an event which, with notice or lapse of time or
both, would become a default) under, or give rise to any rights of termination,
amendment, acceleration or cancellation of, any material agreement, mortgage,
deed of trust, indenture, note, bond, license, lease agreement, instrument or
obligation to which the Company or any of its Significant Subsidiaries is a
party or is bound (including, without limitation, any listing agreement with
the Trading Market), (iii) create or impose a lien, charge or encumbrance
on any 


 


11

















 


property
of the Company or any of its Significant Subsidiaries under any agreement or
any commitment to which the Company or any of its Significant Subsidiaries is a
party or under which the Company or any of its Significant Subsidiaries is
bound or under which any of their respective properties or assets are bound, or
(iv) result in a violation of any federal, state, local or foreign
statute, rule, regulation, order, judgment or decree applicable to the Company or
any of its Subsidiaries or by which any property or asset of the Company or any
of its Subsidiaries are bound or affected, except, in the case of clauses (ii),
(iii) and (iv), for such conflicts, defaults, terminations, amendments,
acceleration, cancellations, liens, charges, encumbrances and violations as
would not, individually or in the aggregate, have a Material Adverse
Effect.  The Company is not required
under federal, state, local or foreign law, rule or regulation to obtain
any consent, authorization or order of, or make any filing or registration
with, any court or governmental agency in order for it to execute, deliver or
perform any of its obligations under this Agreement, or to issue and sell the
Securities to the Investor in accordance with the terms hereof (other than any
filings which may be required to be made by the Company with the Commission,
the Financial Industry Regulatory Authority (the “FINRA”) or the Trading
Market subsequent to the Effective Date, including but not limited to a Prospectus
Supplement under Sections 1.4 and 5.9 of this Agreement, and any registration
statement, prospectus or prospectus supplement which has been or may be filed
pursuant to this Agreement).


 


Section 4.6            Commission Documents, Financial Statements.  (a) The Common Stock is registered
pursuant to Section 12(b) or 12(g) of the Exchange Act and,
except as disclosed in the Commission Documents, as of the Effective Date the
Company had timely filed (giving effect to permissible extensions in accordance
with Rule 12b-25 under the Exchange Act) all Commission Documents.  The Company has delivered or made available
to the Investor via EDGAR or otherwise true and complete copies of the
Commission Documents filed with the Commission prior to the Effective Date
(including, without limitation, the 2008 Form 10-K) and has delivered or
made available to the Investor via EDGAR or otherwise true and complete copies
of all of the Commission Documents heretofore incorporated by reference in the
Registration Statement and the Prospectus. 
The Company has not provided to the Investor any information which,
according to applicable law, rule or regulation, should have been
disclosed publicly by the Company but which has not been so disclosed, other
than with respect to the transactions contemplated by this Agreement.  As of its filing date, each Commission
Document filed with the Commission and incorporated by reference in the
Registration Statement and the Prospectus (including, without limitation, the
2008 Form 10-K) complied in all material respects with the requirements of
the Securities Act or the Exchange Act, as applicable, and other federal, state
and local laws, rules and regulations applicable to it, and, as of its
filing date (or, if amended or superseded by a filing prior to the Effective
Date, on the date of such amended or superseded filing), such Commission
Document did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
were made, not misleading.  Each
Commission Document to be filed with the Commission after the Effective Date
and incorporated by reference in the Registration Statement, the Prospectus and
any Prospectus Supplement required to be filed pursuant to Sections 1.4 and 5.9
hereof during the Investment Period (including, without limitation, the Current
Report), when such document becomes effective or is filed with the Commission,
as the case may be, shall comply in all material respects with the requirements
of the Securities Act or the Exchange Act, as applicable, and other federal,
state and local laws, rules and regulations applicable to it, and shall
not contain 


 


12

















 


any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.


 


(b)           The financial
statements, together with the related notes and schedules, of the Company
included in the Commission Documents comply as to form in all material respects
with all applicable accounting requirements and the published rules and
regulations of the Commission and all other applicable rules and
regulations with respect thereto.  Such
financial statements, together with the related notes and schedules, have been
prepared in accordance with GAAP applied on a consistent basis during the
periods involved (except (i) as may be otherwise indicated in such
financial statements or the notes thereto or (ii) in the case of unaudited
interim statements, to the extent they may not include footnotes or may be
condensed or summary statements and are subject to normal year-end audit
adjustments), and fairly present in all material respects the financial
condition of the Company and its consolidated Subsidiaries as of the dates
thereof and the results of operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments).


 


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


 


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


 


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


 


Section 4.8            No Material Adverse Effect.  Since   December 31,
2008, the Company has not experienced or suffered any Material Adverse Effect,
and there exists no current state of facts, condition or event which would have
a Material Adverse Effect, except (i) as disclosed in any Commission
Documents filed since December 31, 2008 or (ii) continued losses from
operations.


 


13

















 


Section 4.9            Indebtedness.  The Company’s Quarterly Report on Form 10-Q
for its fiscal quarter ended September 30, 2009 sets forth, as of September 30,
2009, all outstanding secured and unsecured Indebtedness of the Company or any
Subsidiary, or for which the Company or any Subsidiary has commitments through
such date.  For the purposes of this
Agreement, “Indebtedness” shall mean (a) any liabilities for
borrowed money or amounts owed in excess of $10,000,000 (other than trade
accounts payable incurred in the ordinary course of business), (b) all
guaranties, endorsements, indemnities and other contingent obligations in
respect of Indebtedness of others in excess of $10,000,000, whether or not the
same are or should be reflected in the Company’s balance sheet (or the notes
thereto), except guaranties by endorsement of negotiable instruments for
deposit or collection or similar transactions in the ordinary course of
business; and (c) the present value of any lease payments in excess of
$10,000,000 due under leases required to be capitalized in accordance with
GAAP.  There is no existing or continuing
default or event of default in respect of any Indebtedness of the Company or
any of its Subsidiaries.


 


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


 


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


 


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


 


Section 4.13         Certain Fees.  Except for the placement fee payable by the
Company to Reedland Capital Partners, an Institutional Division of Financial
West Group, Member FINRA/SIPC (“Reedland”), which shall be set forth in
a separate engagement letter between the Company and Reedland (a true and
complete fully executed copy of which has heretofore been provided to the
Investor), no brokers, finders or financial advisory fees or commissions shall
be payable by the Company or any Subsidiary (or any of their respective
affiliates) with respect to the transactions contemplated by this Agreement.
Except as set forth in this Section 4.13 or as 


 


14

















 


disclosed
in Section 4.13 of the Disclosure Schedule or in the Registration
Statement, the Prospectus or the Current Report, there are no contracts,
agreements or understandings between the Company and any person that would give
rise to a valid claim against the Company, the Investor or the Broker-Dealer
for a brokerage commission, finder’s fee or other like payment in connection
with the transactions contemplated by this Agreement or, to the Company’s
knowledge, any arrangements, agreements, understandings, payments or issuance
with respect to the Company or any of its officers, directors, stockholders,
partners, employees, Subsidiaries or Affiliates that may affect the FINRA’s
determination of the amount of compensation to be received by any FINRA member
(including, without limitation, those FINRA members set forth on Schedule 4.13
of the Disclosure Schedule) or person associated with any FINRA member in
connection with the transactions contemplated by this Agreement.  Except as set forth in this Section 4.13
or as disclosed in Section 4.13 of the Disclosure Schedule or in the
Registration Statement, the Prospectus or the Current Report, no “items of
value” (within the meaning of FINRA Rule 5110) have been received, and no
arrangements have been entered into for the future receipt of any items of
value, from the Company or any of its officers, directors, stockholders,
partners, employees, Subsidiaries or Affiliates by any FINRA member (including,
without limitation, those FINRA members set forth on Schedule 4.13 of the
Disclosure Schedule) or person associated with any FINRA member, during the
period commencing 180 days immediately preceding the Effective Date and ending
on the date this Agreement is terminated in accordance with Article VII,
that may affect the FINRA’s determination of the amount of compensation to be
received by any FINRA member or person associated with any FINRA member in
connection with the transactions contemplated by this Agreement.


 


Section 4.14         Operation of Business.  (a) The Company or one or more of its
Subsidiaries possesses such permits, licenses, approvals, consents and other
authorizations (including licenses, accreditation and other similar
documentation or approvals of any local health departments) (collectively, “Governmental
Licenses”) issued by the appropriate federal, state, local or foreign
regulatory agencies or bodies, including, without limitation, the United States
Food and Drug Administration (“FDA”), necessary to conduct the business
now operated by it, except where the failure to possess such Governmental
Licenses, individually or in the aggregate, would not have a Material Adverse
Effect.  The Company and its Subsidiaries
are in compliance with the terms and conditions of all such Governmental
Licenses and all applicable FDA rules and regulations, guidelines and
policies, and all applicable rules and regulations, guidelines and
policies of any governmental authority exercising authority comparable to that
of the FDA (including any non-governmental authority whose approval or
authorization is required under foreign law comparable to that administered by
the FDA), except where the failure to so comply, individually or in the
aggregate, would not have a Material Adverse Effect.  All of the Governmental Licenses are valid
and in full force and effect, except where the invalidity of such Governmental
Licenses or the failure of such Governmental Licenses to be in full force and
effect, individually or in the aggregate, would not have a Material Adverse
Effect.  As to each product that is
subject to FDA regulation or similar legal provisions in any foreign
jurisdiction that is developed, manufactured, tested, packaged, labeled,
marketed, sold, distributed and/or commercialized by the Company or any of its
Subsidiaries, each such product is being developed, manufactured, tested,
packaged, labeled, marketed, sold, distributed and/or commercialized in
compliance with all applicable requirements of the FDA (and any
non-governmental authority whose approval or authorization is required under
foreign law comparable to that administered by the FDA), including, but not
limited to, those relating to 


 


15

















 


investigational
use, investigational device exemption, premarket notification, premarket
approval, good clinical practices, good manufacturing practices, record
keeping, filing of reports, and patient privacy and medical record security,
except where such non-compliance, individually or in the aggregate, would not
have a Material Adverse Effect.  As to
each product or product candidate of the Company or any of its Subsidiaries
subject to FDA regulation or similar legal provision in any foreign
jurisdiction, all manufacturing facilities of the Company and its Subsidiaries
are operated in compliance with the FDA’s Quality System Regulation
requirements at 21 C.F.R. Part 820, as applicable, except where such
non-compliance, individually or in the aggregate, would not have a Material
Adverse Effect.  Except as set forth in
the Commission Documents or the Registration Statement, neither the Company nor
any of its Subsidiaries has received any notice of proceedings relating to the
revocation or modification of any such Governmental Licenses or relating to a
potential violation of, failure to comply with, or request to produce additional
information under, any FDA rules and regulations, guidelines or policies
which, if the subject of any unfavorable decision, ruling or finding,
individually or in the aggregate, would have a Material Adverse Effect.  Except as set forth in the Commission
Documents or the Registration Statement, neither the Company nor any of its
Subsidiaries has received any correspondence, notice or request from the FDA,
including, without limitation, notice that any one or more products or product
candidates of the Company or any of its Subsidiaries failed to receive approval
from the FDA for use for any one or more indications.  This Section 4.14 does not relate to
environmental matters, such items being the subject of Section 4.15.


 


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


 


(c)           All pre-clinical and
clinical trials conducted by, or on behalf of, the Company or any of its Subsidiaries,
or in which the Company or any of its Subsidiaries has participated that are
described in the Registration Statement or the Commission Documents, or the
results of which are referred to in the Registration Statement or the
Commission Documents, if any, are the only pre-clinical and clinical trials
currently being conducted by or on behalf of 


 


16

















 


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


 


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


 


Section 4.16         Material Agreements.  Except as set forth in the Commission
Documents, neither the Company nor any Subsidiary of the Company is a party to
any written or oral contract, instrument, agreement commitment, obligation,
plan or arrangement, a copy of


 


17
















 


which would be required to be filed with the
Commission as an exhibit to an annual report on Form 10-K (collectively, “Material
Agreements”). Except as set forth in the Commission Documents, the Company
and each of its Subsidiaries have performed in all material respects all the
obligations required to be performed by them under the Material Agreements,
have received no notice of default or an event of default by the Company or any
of its Subsidiaries thereunder and are not aware of any basis for the assertion
thereof, and neither the Company or any of its Subsidiaries nor, to the
knowledge of the Company, any other contracting party thereto are in default
under any Material Agreement now in effect, the result of which would have a
Material Adverse Effect.  Each of the
Material Agreements is in full force and effect, and constitutes a legal, valid
and binding obligation enforceable in accordance with its terms against the
Company and/or any of its Subsidiaries and, to the knowledge of the Company,
each other contracting party thereto, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation, conservatorship, receivership or similar laws relating to, or
affecting generally the enforcement of, creditor’s rights and remedies or by
other equitable principles of general application.


 


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


 


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


 


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


 


(ii)           The Company
satisfies all of the requirements for the use of Form S-3 under the
Securities Act for the offering and sale of the Securities contemplated by this
Agreement (without reliance on General Instruction I.B.6. of Form S-3).
The Commission has not notified the Company of any objection to the use of the
form of the Registration Statement pursuant to Rule 401(g)(1) under
the Securities Act. The Registration Statement complied in all 


 


18

















 


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


 


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


 


(iv)          At the earliest
time after the filing of the Registration Statement that the Company or another
offering participant made a bona fide offer (within the meaning of Rule 164(h)(2) under
the Securities Act) relating to the Securities, the Company was not and is not
an “ineligible issuer” (as defined in Rule 405 under the Securities
Act).  Each Permitted Free Writing
Prospectus (a) shall conform in all material respects to the requirements
of the Securities Act on the date of its first use, (b) when considered
together with the Prospectus on each applicable Fixed Request Exercise Date and
on each applicable Settlement Date, shall not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they are made, not misleading, and (c) shall not include any
information that conflicts with the 


 


19

















 


information
contained in the Registration Statement, including any document incorporated by
reference therein and any Prospectus Supplement deemed to be a part thereof
that has not been superseded or modified. 
The immediately preceding sentence does not apply to statements in or
omissions from any Permitted Free Writing Prospectus made in reliance upon and
in conformity with information relating to the Investor furnished to the
Company in writing by or on behalf of the Investor expressly for use therein.


 


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


 


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


 


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


 


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


 


Section 4.22         ERISA.  No liability to the Pension Benefit Guaranty
Corporation has been incurred with respect to any Plan by the Company or any of
its Subsidiaries which has had or would have a Material Adverse Effect.  No “prohibited transaction” (as defined in Section 406
of ERISA or Section 4975 of the Code) or “accumulated funding deficiency”
(as defined in Section 203 of ERISA) or any of the events set forth in Section 4043(b) of
ERISA has occurred with respect to any Plan which has had or would have a
Material Adverse Effect, and the execution and delivery of this Agreement and
the issuance and sale of the Shares hereunder shall not result in any of the
foregoing events.  Each Plan is in
compliance in all material respects with applicable law, including ERISA and
the Code; the Company has not incurred and does not expect to incur liability
under Title IV of ERISA with respect to the termination of, or withdrawal from,
any Plan; and each Plan for which the Company would have any liability that is
intended to be qualified under Section 401(a) of the Code is so
qualified in all material respects and nothing has occurred, whether by action
or failure to act, which would cause the loss of such qualifications.  As used in this Section 4.22, the term “Plan”
shall mean an 


 


20

















 


“employee
pension benefit plan” (as defined in Section 3 of ERISA) which is or has
been established or maintained, or to which contributions are or have been
made, by the Company or any Subsidiary or by any trade or business, whether or
not incorporated, which, together with the Company or any Subsidiary, is under
common control, as described in Section 414(b) or (c) of the
Code.


 


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


 


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


 


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


 


ARTICLE V

COVENANTS


 


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


 


Section 5.1            Securities
Compliance; FINRA Filing.


 


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


 


(ii)           The Company
shall (with the Investor’s assistance) assist Reedland with the preparation and
filing with the FINRA’s Corporate Financing Department via CobraDesk (not later
than 24 hours after the Effective Date) of all documents and information
required to be filed with the FINRA pursuant to FINRA Rule 5110 with
regard to the transactions contemplated 


 


21

















 


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


 


Section 5.2            Registration
and Listing.  The Company
shall take all action necessary to cause the Common Stock to continue to be
registered as a class of securities under Sections 12(b) or 12(g) of
the Exchange Act, shall comply with its reporting and filing obligations under
the Exchange Act, and shall not take any action or file any document (whether
or not permitted by the Securities Act) to terminate or suspend such
registration or to terminate or suspend its reporting and filing obligations
under the Exchange Act or Securities Act, except as permitted 


 


22

















 


herein. The Company shall take all action
necessary to continue the listing and trading of its Common Stock and the
listing of the Commitment Shares and the Shares acquired or purchased by the
Investor hereunder on the Trading Market (including, without limitation, maintaining
sufficient tangible net assets), and shall comply with the Company’s reporting,
filing and other obligations under the bylaws, listed securities maintenance
standards and other rules and regulations of the FINRA and the Trading
Market. The Company shall not take any action which would reasonably be
expected to result in the delisting or suspension of the Common Stock on the
Trading Market.


 


Section 5.3            Compliance with Laws.


 


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


 


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


 


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


 


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


 


23

















 


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


 


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


 


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


 


Section 5.6            Other Agreements and Other
Financings.


 


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


 


(ii)           The Company
shall notify the Investor, within 48 hours, if it enters into any agreement, plan,
arrangement or transaction with a third party, the principal purpose of which
is to obtain during a Pricing Period an Other Financing not constituting an
Acceptable Financing (an “Other Financing Notice”); provided, however,
that the Company shall notify the Investor promptly (but in no event later than
24 hours) (an “Integration Notice”) if it enters into any agreement,
plan, arrangement or transaction with a third party, the principal purpose of
which is to obtain at any time during the Investment Period an Other Financing
that may be aggregated with the transactions contemplated by this Agreement for
purposes of determining whether approval of the Company’s stockholders is
required under any bylaw, listed securities maintenance standards or other rules of
the Trading Market and, if required under applicable law, including, without
limitation, Regulation FD promulgated by the Commission, or under the 


 


24

















 


applicable
rules and regulations of the Trading Market, the Company shall publicly
disclose such information in accordance with Regulation FD and the applicable rules and
regulations of the Trading Market. For purposes of this Section 5.6(ii),
any press release issued by, or Commission Document filed by, the Company shall
constitute sufficient notice, provided that it is issued or filed, as the case
may be, within the time requirements set forth in the first sentence of this Section 5.6(ii) for
an Other Financing Notice or an Integration Notice, as applicable.  For greater certainty, the entry by the
Company into any agreement, plan, arrangement or transaction with a third party
to obtain an Other Financing (or any other financing) outside of a Pricing
Period shall not trigger any requirement for the Company to deliver an Other
Financing Notice (it being acknowledged and agreed that nothing contained in
this Section 5.6(ii) shall limit or modify in any respect the Company’s
obligations in Section 7.2). During any Pricing Period in which the
Company is required to provide an Other Financing Notice pursuant to the first
sentence of this Section 5.6(ii), the Investor shall (i) have the
option to purchase the Shares subject to the Fixed Request at (x) the
price therefor in accordance with the terms of this Agreement or (y) the
third party’s per share purchase price in connection with the Other Financing,
net of such third party’s discounts, Warrant Value and fees, or (ii) the
Investor may elect to not purchase any Shares subject to the Fixed Request for
that Pricing Period. An “Other Financing” shall mean (x) the
issuance of Common Stock for a purchase price less than, or the issuance of
securities convertible into or exchangeable for Common Stock at an exercise or
conversion price (as the case may be) less than, the then Current Market Price
of the Common Stock (in each case, after all fees, discounts, Warrant Value and
commissions associated with the transaction) (a “Below Market Offering”);
(y) the implementation by the Company of any mechanism in respect of any
securities convertible into or exchangeable for Common Stock for the reset of
the purchase price of the Common Stock to below the then Current Market Price
of the Common Stock (including, without limitation, any antidilution or similar
adjustment provisions in respect of any Company securities, but specifically
excluding customary adjustments for stock splits, stock dividends, stock
combinations and similar events); or (z) the issuance of options, warrants
or similar rights of subscription in each case not constituting an Acceptable
Financing. “Acceptable Financing” shall mean the issuance by the Company
of: (1) debt securities or any class or series of preferred stock of the
Company, in each case that are not convertible into or exchangeable for Common
Stock or securities convertible into or exchangeable for Common Stock; (2) shares
of Common Stock or securities convertible into or exchangeable for Common Stock
(including, without limitation, convertible debt securities) other than in
connection with a Below Market Offering and the issuance of shares of Common
Stock upon the conversion, exercise or exchange thereof; (3) shares of
Common Stock or securities convertible into or exchangeable for Common Stock
(including, without limitation, convertible debt securities) in connection with
an underwritten public offering of securities of the Company or a registered
direct public offering of securities of the Company, in each case where the
price per share of such Common Stock (or the conversion or exercise price of
such securities, as applicable) is fixed concurrently with the execution of
definitive documentation relating to such offering, and the issuance of shares
of Common Stock upon the conversion, exercise or exchange thereof; (4) shares
of Common Stock or securities convertible into or exchangeable for Common Stock
in connection with awards under the Company’s benefit and equity plans and
arrangements or pursuant to consulting or other vendor agreements and the
issuance of shares of Common Stock upon the conversion, exercise or exchange
thereof; (5) shares of Common Stock issuable upon the conversion, exercise
or exchange of equity awards or convertible, exercisable or exchangeable
securities (including, 


 


25

















 


without
limitation, convertible debt securities) outstanding as of the Effective Date,
and the issuance thereof upon such conversion, exercise or exchange; (6) shares
of Common Stock or securities convertible into or exercisable or exchangeable
for Common Stock (including, without limitation, convertible debt securities)
issued in connection with the acquisition, license or sale of one or more other
companies, equipment, technologies or lines of business, and the issuance of
shares of Common Stock upon the conversion, exercise or exchange thereof; (7) shares
of Common Stock or securities convertible into or exchangeable for Common Stock
(including, without limitation, convertible debt securities) or similar rights
to subscribe for the purchase of shares of Common Stock in connection with
technology sharing, licensing, research and joint development, marketing,
manufacturing supply or other similar strategic or collaborative agreements or
arrangements (or amendments thereto) with third parties, and the issuance of
shares of Common Stock upon the conversion, exercise or exchange thereof; and (8) shares
of Common Stock and/or warrants or similar rights to subscribe for the purchase
of shares of Common Stock issued in connection with commercial credit
arrangements, equipment financings and/or real property leases or service
agreements (or amendments thereto) and the issuance of shares of Common Stock
upon the exercise thereof.


 


Section 5.7            Stop
Orders.  The Company
shall advise the Investor promptly (but in no event later than 24 hours) and
shall confirm such advice in writing: (i) of the Company’s receipt of
notice of any request by the Commission for amendment of or a supplement to the
Registration Statement, the Prospectus, any Permitted Free Writing Prospectus
or for any additional information; (ii) of the Company’s receipt of notice
of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or prohibiting or suspending the
use of the Prospectus or any Prospectus Supplement, or of the suspension of
qualification of the Securities for offering or sale in any jurisdiction, or
the initiation or contemplated initiation of any proceeding for such purpose;
and (iii) of the Company becoming aware of the happening of any event,
which makes any statement of a material fact made in the Registration
Statement, the Prospectus or any Permitted Free Writing Prospectus untrue or
which requires the making of any additions to or changes to the statements then
made in the Registration Statement, the Prospectus or any Permitted Free
Writing Prospectus in order to state a material fact required by the Securities
Act to be stated therein or necessary in order to make the statements then made
therein (in the case of the Prospectus, in light of the circumstances under
which they were made) not misleading, or of the necessity to amend the
Registration Statement or supplement the Prospectus or any Permitted Free
Writing Prospectus to comply with the Securities Act or any other law. The
Company shall not be required to disclose to the Investor the substance or
specific reasons of any of the events set forth in clauses (i) through (iii) of
the immediately preceding sentence, but rather, shall only be required to
disclose that the event has occurred. 
The Company shall not issue any Fixed Request during the continuation of
any of the foregoing events. If at any time the Commission shall issue any stop
order suspending the effectiveness of the Registration Statement or prohibiting
or suspending the use of the Prospectus or any Prospectus Supplement, the
Company shall use commercially reasonable efforts to obtain the withdrawal of
such order at the earliest possible time. The Company shall also advise the
Investor promptly (but in no event later than 24 hours) and shall confirm such
advice in writing of the Company becoming aware of the happening of any event,
which makes any statement made in the FINRA Filing untrue or which requires the
making of any additions to or changes to the statements then made in the FINRA
Filing in order to comply with FINRA Rule 5110.


 


26
















 


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


 


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


 


(ii)           The Company has
not made, and agrees that unless it obtains the prior written consent of the
Investor it will not make, an offer relating to the Securities that would
constitute an Issuer Free Writing Prospectus or that would otherwise constitute
a Free Writing Prospectus required to be filed by the Company or the Investor
with the Commission or retained by the Company or the Investor under Rule 433
under the Securities Act.  The Investor
has not made, and agrees that unless it obtains the prior written consent of
the Company it will not make, an offer relating to the Securities that would
constitute a Free Writing Prospectus required to be filed by the Company with
the Commission or retained by the Company under Rule 433 under the
Securities Act.  Any such Issuer Free
Writing Prospectus or other Free Writing Prospectus consented to by the
Investor or the Company is referred to in this Agreement as a “Permitted
Free Writing Prospectus.”  The Company
agrees that (x) it has treated and will treat, as the case may be, each
Permitted Free Writing Prospectus as an Issuer Free Writing Prospectus and (y) it
has complied and will comply, as the case may be, with the requirements of Rules 164
and 433 under the Securities Act applicable to any Permitted Free Writing
Prospectus, including in respect of timely filing with the Commission,
legending and record keeping.


 


Section 5.9            Prospectus Delivery.  The Company shall file with the Commission a
Prospectus Supplement pursuant to Rule 424(b) under the Securities
Act on the first Trading Day immediately following the last Trading Day of each
Pricing Period.  The Company shall
provide the Investor a reasonable opportunity to comment on a draft of each
such Prospectus Supplement and any Issuer Free Writing Prospectus, shall give
due consideration to all such comments and, subject to the provisions of Section 5.8
hereof, shall deliver or make available to the Investor, without charge, an
electronic copy of each form of Prospectus Supplement, together with the Base
Prospectus, and any Permitted Free Writing Prospectus on each applicable
Settlement Date.  


 


27

















 


The Company consents to the use of the
Prospectus (and of any Prospectus Supplement thereto) in accordance with the
provisions of the Securities Act and with the securities or “blue sky” laws of
the jurisdictions in which the Securities may be sold by the Investor, in
connection with the offering and sale of the Securities and for such period of
time thereafter as the Prospectus (or in lieu thereof, the notice referred to
in Rule 173(a) under the Securities Act) is required by the
Securities Act to be delivered in connection with sales of the Securities. If
during such period of time any event shall occur that in the judgment of the
Company and its counsel is required to be set forth in the Registration
Statement or the Prospectus or any Permitted Free Writing Prospectus or should
be set forth therein in order to make the statements made therein (in the case
of the Prospectus, in light of the circumstances under which they were made)
not misleading, or if it is necessary to amend the Registration Statement or
supplement or amend the Prospectus or any Permitted Free Writing Prospectus to
comply with the Securities Act or any other applicable law or regulation, the
Company shall forthwith prepare and, subject to Section 5.8 above, file
with the Commission an appropriate amendment to the Registration Statement or
Prospectus Supplement to the Prospectus (or supplement to the Permitted Free
Writing Prospectus) and shall expeditiously furnish or make available to the
Investor an electronic copy thereof.


 


Section 5.10         Selling
Restrictions.


 


(i)            Except as
expressly set forth below, the Investor covenants that from and after the date
hereof through and including the 90th day next
following the termination of this Agreement (the “Restricted Period”),
neither the Investor nor any of its Affiliates nor any entity managed or controlled
by the Investor (collectively, the “Restricted Persons” and each of the
foregoing is referred to herein as a “Restricted Person”) shall,
directly or indirectly, (i) intentionally engage in any Short Sales
involving the Company’s securities or (ii) grant any option to purchase,
or acquire any right to dispose of or otherwise dispose for value of, any
shares of Common Stock or any securities convertible into or exercisable or
exchangeable for any shares of Common Stock, or enter into any swap, hedge or other
similar agreement that transfers, in whole or in part, the economic risk of
ownership of the Common Stock. Notwithstanding the foregoing, it is expressly
understood and agreed that nothing contained herein shall (without
implication that the contrary would otherwise be true) prohibit any Restricted
Person during the Restricted Period from: (1) selling “long” (as defined
under Rule 200 promulgated under Regulation SHO) the Commitment Shares or
the Shares; (2) selling a number of shares of Common Stock equal to
the number of Shares that such Restricted Person is or may be obligated to
purchase under a pending Fixed Request Notice but has not yet taken
possession of so long as such Restricted Person (or the Broker-Dealer, as
applicable) delivers the Shares purchased pursuant to such Fixed Request Notice
to the purchaser thereof or the applicable Broker-Dealer; provided, however,
such Restricted Person (or the applicable Broker-Dealer, as applicable) shall
not be required to so deliver any such Shares subject to such Fixed Request
Notice if (a) such Fixed Request is terminated by mutual agreement of the
Company and the Investor and, as a result of such termination, no such Shares
are delivered to the Investor under this Agreement or (b) the Company
otherwise fails to deliver such Shares to the Investor on the applicable
Settlement Date upon the terms and subject to the provisions of this
Agreement; or (3) executing one or more transactions of any kind
or nature from time to time and at any time so long as such transaction or
transactions (as the case may be) do not result, at any one time
during the Restricted Period, in a then-outstanding aggregate open 


 


28

















 


“short” position (within the meaning of Rule 200
under Regulation SHO) and open “put equivalent positions” (within the meaning
of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder) (without duplication) in a number of shares of Common
Stock that exceeds 121,183 shares of Common Stock (as adjusted for stock
dividends, splits, combinations and other similar events after the date hereof)
(it being understood and agreed that clause (2) above shall not be taken
into account in making determinations under this clause (3)).


 


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


 


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


 


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


 


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


 


Section 5.14         Disclosure
Schedule.


 


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


 


(ii)           Notwithstanding
anything to the contrary contained in the Disclosure Schedules or in this Agreement,
the information and disclosure contained in any Schedule of the Disclosure
Schedules shall be deemed to be disclosed and incorporated by reference in any
other Schedule of the Disclosure Schedules as though fully set forth in such
Schedule for which applicability of such information and disclosure is readily
apparent on its face.  The fact that any
item of information is disclosed in the Disclosure Schedules shall not be
construed to mean that 


 


29

















 


such information is required to be disclosed
by this Agreement.  Except as expressly
set forth in this Agreement, such information and the thresholds (whether based
on quantity, qualitative characterization, dollar amounts or otherwise) set
forth herein shall not be used as a basis for interpreting the terms “material”
or “Material Adverse Effect” or other similar terms in this Agreement.


 


ARTICLE VI

OPINION OF COUNSEL AND CERTIFICATE;

CONDITIONS TO THE SALE AND PURCHASE OF THE SHARES


 


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


 


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


 


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


 


(ii)           Registration
Statement.  The
Registration Statement is effective and neither the Company nor the Investor
shall have received notice that the Commission has issued 


 


30

















 


or intends to issue a stop order with respect
to the Registration Statement.  The
Company shall have a maximum dollar amount certain of Common Stock registered
under the Registration Statement which (A) as of the Effective Date, is
sufficient to issue to the Investor not less than (1) the Total Commitment
plus (2) the Commitment Shares and (B) as of the applicable Fixed
Request Exercise Date and the applicable Settlement Date, is sufficient to
issue to the Investor not less than the maximum dollar amount worth of Shares
issuable pursuant to the applicable Fixed Request Notice and applicable
Optional Amount, if any. The Current Report shall have been filed with the
Commission, as required pursuant to Section 1.4, and all Prospectus
Supplements shall have been filed with the Commission, as required pursuant to
Sections 1.4 and 5.9 hereof, to disclose the sale of the Shares prior to each
Settlement Date, as applicable. Any other material required to be filed by the
Company or any other offering participant pursuant to Rule 433(d) under
the Securities Act shall have been filed with the Commission within the
applicable time periods prescribed for such filings by Rule 433 under the
Securities Act.


 


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


 


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


 


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


 


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


 


31

















 


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


 


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


 


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


 


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


 


(ii)           Registration
Statement. The Registration Statement is effective and
neither the Company nor the Investor shall have received notice that the
Commission has issued or intends to issue a stop order with respect to the
Registration Statement. The Company shall have a maximum dollar amount certain
of Common Stock registered under the Registration Statement which (A) as
of the Effective Date, is sufficient to issue to the Investor not less than (1) the
Total Commitment plus (2) the Commitment Shares and (B) as of the
applicable Fixed Request Exercise Date and the applicable Settlement Date, is
sufficient to issue to the Investor not less than the maximum dollar amount
worth of Shares issuable pursuant to the applicable Fixed Request Notice and
applicable Optional Amount, if any. As of the Effective Date, the applicable
Fixed Request Exercise Date and the applicable Settlement Date, the Investor
shall be permitted to utilize the Prospectus to resell all of the Securities it
then owns or has the right to acquire pursuant to all Fixed Request Notices
issued pursuant to this Agreement (subject, in the case of the Commitment
Shares, to the proviso to clause (i) of Section 2.13). The Current
Report shall have been filed with the Commission, as required pursuant to Section 1.4,
and all Prospectus Supplements shall have been filed with the Commission, as
required pursuant to Sections 1.4 and 5.9 hereof, to disclose the sale of the
Shares prior to each Settlement Date, as 


 


32

















 


applicable, and an electronic copy of each
such Prospectus Supplement together with the Base Prospectus shall have been
delivered or made available to the Investor in accordance with Section 5.9
hereof. Any other material required to be filed by the Company or any other
offering participant pursuant to Rule 433(d) under the Securities Act
shall have been filed with the Commission within the applicable time periods
prescribed for such filings by Rule 433 under the Securities Act.


 


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


 


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


 


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


 


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


 


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


 


(viii)        Shares
Authorized and Delivered.  The Shares issuable pursuant to such Fixed
Request Notice or Optional Amount shall have been duly authorized by all
necessary 


 


33

















 


corporate action of the Company. The Company
shall have delivered all Shares relating to all prior Fixed Request Notices and
Optional Amounts, as applicable.


 


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


 


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


 


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


 


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


 


ARTICLE VII

TERMINATION


 


Section 7.1            Term,
Termination by Mutual Consent.  Unless earlier terminated as provided
hereunder, this Agreement shall terminate automatically on the earliest of (i) the
first day of the month next following the 18-month anniversary of the Effective
Date (the “Investment Period”), (ii) the date that the entire
dollar amount of Common Stock registered under the Registration Statement have
been issued and sold and (iii) the date the Investor shall have purchased
the Total Commitment of shares of Common Stock (subject in all cases to the
Trading Market Limit). Subject to Section 7.3, this Agreement may be
terminated at any time (A) by the mutual written consent of the parties,
effective as of the date of such mutual written consent unless otherwise
provided in such written consent, it being hereby acknowledged and agreed that
the Investor may not consent to such termination during a Pricing Period or
prior to a Settlement Date in the event the Investor has instructed the
Broker-Dealer to effect an open-market sale of Shares which are subject to a
pending Fixed Request Notice but which have not yet been physically delivered
by the Company (and/or credited by book-entry) to the Investor in accordance
with the terms and subject to the conditions of this Agreement, or (B) by
either the 


 


34

















 


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


 


Section 7.2            Other
Termination.  If the
Company provides the Investor with an Other Financing Notice or an Integration
Notice, in each case pursuant to Section 5.6(ii) of this Agreement,
or if the Company otherwise enters into any agreement, plan, arrangement or
transaction with a third party, the principal purpose of which is to obtain
outside a Pricing Period, but otherwise during the Investment Period, an Other
Financing not constituting an Acceptable Financing, in which latter case the
Company shall so notify the Investor within 48 hours thereof, then in all such
cases, subject to Section 7.3, the Investor shall have the right to
terminate this Agreement within the subsequent 30-day period (the “Event
Period”), effective upon one Trading Day’s prior written notice delivered
to the Company in accordance with Section 9.4 at any time during the Event
Period. The Company shall promptly (but in no event later than 24 hours) notify
the Investor (and, if required under applicable law, including, without
limitation, Regulation FD promulgated by the Commission, or under the
applicable rules and regulations of the Trading Market, the Company shall
publicly disclose such information in accordance with Regulation FD and the
applicable rules and regulations of the Trading Market), and, subject to Section 7.3,
the Investor shall have the right to terminate this Agreement at any time after
receipt of such notification, if: (i) any condition, occurrence, state of
facts or event constituting a Material Adverse Effect has occurred; (ii) a
Fundamental Transaction has occurred or the Company enters into a definitive
agreement providing for a Fundamental Transaction; or (iii) a default or
event of default has occurred and is continuing under the terms of any
agreement, contract, note or other instrument to which the Company or any of
its Subsidiaries is a party with respect to any indebtedness for borrowed money
representing more than 10% of the


 


35
















 


Company’s
consolidated assets, in any such case, upon one Trading Day’s prior written
notice delivered to the Company in accordance with Section 9.4 hereof.


 


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


 


ARTICLE VIII

INDEMNIFICATION


 


Section 8.1            General Indemnity.


 


(i)            Indemnification by the Company.  The Company shall indemnify and hold harmless
the Investor, each Affiliate, employee, representative and advisor of and to
the Investor, and each person, if any, who controls the Investor within the
meaning of Section 15 of the Securities Act or Section 20(a) of
the Exchange Act from and against all losses, claims, damages, liabilities and
expenses (including reasonable costs of defense and investigation and all
attorneys’ fees) to which the Investor and each such other person may become subject,
under the Securities Act or otherwise, insofar as such losses, claims, damages,
liabilities and expenses (or 


 


36

















 


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


 


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


 


(ii)           Indemnification by the Investor.
The Investor shall indemnify and hold harmless the Company, each of its
directors and officers, and each person, if any, who controls the Company
within the meaning of Section 15 of the Securities Act or Section 20(a) of
the Exchange Act from and against all losses, claims, damages, liabilities and
expenses (including 


 


37

















 


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


 


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


 


Section 8.2            Indemnification Procedures.  Promptly after a person receives notice of a
claim or the commencement of an action for which the person intends to seek
indemnification under Section 8.1, the person will notify the indemnifying
party in writing of the claim or commencement of the action, suit or
proceeding; provided, however, that failure to notify the
indemnifying party will not relieve the indemnifying party from liability under
Section 8.1, except to the extent it has been materially prejudiced by the
failure to give notice.  The indemnifying
party will be entitled to participate in the defense of any claim, action, suit
or proceeding as to which indemnification is being sought, and if the
indemnifying party acknowledges in writing the obligation to indemnify the
party against whom the claim or action is brought, the indemnifying party may
(but will not be required to) assume the defense against the claim, action,
suit or proceeding with counsel satisfactory to it.  After an indemnifying party notifies an
indemnified party that the indemnifying party wishes to assume the defense of a
claim, action, suit or proceeding, the indemnifying party will not be liable
for any legal or other expenses incurred by the indemnified party in connection
with the defense against the claim, action, suit or proceeding except that if,
in the opinion of counsel to the indemnifying party, one or more of the
indemnified parties should be separately represented in connection with a claim,
action, suit or proceeding, the indemnifying party will pay the reasonable fees
and expenses of one separate counsel for the indemnified parties.  Each indemnified party, as a condition to
receiving indemnification as provided in Section 8.1, will cooperate in
all reasonable respects with the indemnifying party in the defense of any
action or claim as to which indemnification is sought.  No indemnifying party will be liable for any
settlement of any action effected without its prior written consent.  Notwithstanding the foregoing sentence, if at
any time an indemnified party shall have requested (by written notice provided
in accordance with Section 9.4) an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement of the nature contemplated
hereby effected without its written consent if (i) such settlement is
entered into more than 45 days after receipt by such indemnifying party of the
aforesaid request, (ii) such indemnifying 


 


38

















 


party
shall have received written notice of the terms of such settlement at least 30
days prior to such settlement being entered into and (iii) such
indemnifying party shall not have reimbursed such indemnified party in
accordance with such request prior to the date of such settlement.  No indemnifying party will, without the prior
written consent of the indemnified party, effect any settlement of a pending or
threatened action with respect to which an indemnified party is, or is informed
that it may be, made a party and for which it would be entitled to
indemnification, unless the settlement includes an unconditional release of the
indemnified party from all liability and claims which are the subject matter of
the pending or threatened action.


 


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


 


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


 


ARTICLE IX

MISCELLANEOUS


 


Section 9.1            Fees and Expenses.


 


(i)            Each party shall
bear its own fees and expenses related to the transactions contemplated by this
Agreement; provided, however, that the Company shall pay, on the
Effective Date, by wire transfer of immediately available funds (A) to the
FINRA, the applicable filing fee with respect to the FINRA Filing and (B) to
an account designated by the Investor’s counsel, promptly following the receipt
of an invoice therefor, all reasonable attorneys’ fees and expenses (exclusive
of disbursements and out-of-pocket expenses) incurred by the Investor, up to
$40,000, in connection with the preparation, negotiation, execution and
delivery of this Agreement, legal due diligence of the Company and review of
the Registration Statement, the Base Prospectus, the Current Report, any
Permitted Free Writing Prospectus and all other related transaction
documentation. The Company shall pay all U.S. federal, state and local stamp
and other similar transfer and other taxes and duties levied in connection with
issuance of the Securities pursuant hereto. For the avoidance of doubt, all of
the fees payable to the Investor or its counsel pursuant to this Section 9.1
shall be non-refundable, regardless of whether any Fixed Requests are issued by
the Company or settled hereunder.


 


39

















 


(ii)           If the Company
issues a Fixed Request Notice and fails to deliver the Shares (which have been
approved for listing or quotation on the Trading Market) to the Investor on the
applicable Settlement Date and such failure continues for 10 Trading Days, the
Company shall pay the Investor, in cash (or, at the option of the Investor, in
shares of Common Stock which have not been registered under the Securities Act
valued at the applicable Discount Price of the Shares failed to be delivered; provided
that the issuance thereof by the Company would not violate the Securities Act
or any applicable U.S. state securities laws), as liquidated damages for such
failure and not as a penalty, an amount equal to 2.0% of the payment required
to be paid by the Investor on such Settlement Date (i.e., the sum of the Fixed
Amount Requested and the Optional Amount Dollar Amount) for the initial 30 days
following such Settlement Date until the Shares (which have been approved for
listing or quotation on the Trading Market) have been delivered, and an
additional 2.0% for each additional 30-day period thereafter until the Shares
(which have been approved for listing or quotation on the Trading Market) have
been delivered, which amount shall be prorated for such periods less than 30
days (subject in all cases to the Trading Market Limit).


 


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


 


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


 


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


 


(iii)          Each of the Company
and the Investor hereby waives to the fullest extent permitted by applicable
law, any right it may have to a trial by jury in respect to any litigation
directly or indirectly arising out of, under or in connection with this
Agreement or the transactions contemplated hereby or disputes relating hereto.
Each of the Company and the Investor (a) certifies that no representative,
agent or attorney of any other party has represented, expressly or otherwise,
that such other party would not, in the event of litigation, seek to enforce
the foregoing waiver and (b) acknowledges that it and the other parties
hereto have been induced 


 


40

















 


to
enter into this Agreement by, among other things, the mutual waivers and
certifications in this Section 9.2.


 


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


 


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


 


	
  If
  to the Company:

  	
   

  	
  Poniard
  Pharmaceuticals, Inc.

  
	
   

  	
   

  	
  7000
  Shoreline Court, Suite 270

  
	
   

  	
   

  	
  South
  San Francisco, California 94080

  
	
   

  	
   

  	
  Telephone
  Number: (650) 583-3774

  
	
   

  	
   

  	
  Fax:
  (650) 583-3789

  
	
   

  	
   

  	
  Attention:
  Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
  With
  copies to:

  	
   

  	
  Perkins
  Coie LLP

  
	
   

  	
   

  	
  1201
  Third Avenue, Suite 4800

  
	
   

  	
   

  	
  Seattle,
  Washington 98101-3099

  
	
   

  	
   

  	
  Telephone
  Number: (206) 359-8000

  
	
   

  	
   

  	
  Fax:
  (206) 359-9000

  
	
   

  	
   

  	
  Attention:
  Faith M. Wilson, Esq.

  
	
   

  	
   

  	
   

  
	
  If
  to the Investor:

  	
   

  	
  Commerce
  Court Small Cap Value Fund, Ltd.

  
	
   

  	
   

  	
  Fiduciary
  Services (BVI) Limited

  
	
   

  	
   

  	
  Qwomar
  Complex, 4th Floor

  
	
   

  	
   

  	
  P.O.
  Box 3170

  
	
   

  	
   

  	
  Road
  Town, Tortola

  
	
   

  	
   

  	
  British
  Virgin Islands

  
	
   

  	
   

  	
  Telephone
  Number: (284) 494-8086

  
	
   

  	
   

  	
  Fax:
  (284) 494-9474

  
	
   

  	
   

  	
  Attention:
  Peter W. Poole

  



 


41

















 


	
  With
  copies to:

  	
   

  	
  Greenberg
  Traurig, LLP

  
	
   

  	
   

  	
  The
  MetLife Building

  
	
   

  	
   

  	
  200
  Park Avenue

  
	
   

  	
   

  	
  New
  York, NY 10166

  
	
   

  	
   

  	
  Telephone
  Number: (212) 801-9200

  
	
   

  	
   

  	
  Fax:
  (212) 801-6400

  
	
   

  	
   

  	
  Attention:
  Anthony J. Marsico, Esq.

  



 


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


 


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


 


Section 9.6            Headings.  The article, section and subsection headings
in this Agreement are for convenience only and shall not constitute a part of
this Agreement for any other purpose and shall not be deemed to limit or affect
any of the provisions hereof.


 


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


 


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


 


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


 


42

















 


termination,
(iii) the covenants and agreements of the Investor contained in Section 5.10
(Selling Restrictions) shall remain in full force and effect notwithstanding
such termination for a period of 90 days following such termination, and (iv) the
covenants and agreements of the Company contained in Section 5.2
(Registration and Listing) shall remain in full force and effect
notwithstanding such termination for a period of 30 days following such
termination.


 


Section 9.10         Counterparts.  This Agreement may be executed in
counterparts, all of which taken together shall constitute one and the same
original and binding instrument and shall become effective when all
counterparts have been signed by each party and delivered to the other parties
hereto, it being understood that all parties hereto need not sign the same
counterpart. In the event any signature is delivered by facsimile, digital or
electronic transmission, such transmission shall constitute delivery of the
manually executed original and the party using such means of delivery shall
thereafter cause four additional executed signature pages to be physically
delivered to the other parties within five days of the execution and delivery
hereof.  Failure to provide or delay in
the delivery of such additional executed signature pages shall not
adversely affect the efficacy of the original delivery.


 


Section 9.11         Publicity.  On or after the Effective Date, the Company
may issue a press release or otherwise make a public statement or announcement
with respect to this Agreement and the transactions contemplated hereby or the
existence of this Agreement (including, without limitation, by filing a copy of
this Agreement with the Commission); provided, however, that
prior to issuing any such press release, or making any such public statement or
announcement, the Company shall consult with the Investor on the form and
substance of such press release or other disclosure.


 


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


 


Section 9.13         Further Assurances.  From and after the date of this Agreement,
upon the request of the Investor or the Company, each of the Company and the
Investor shall execute and deliver such instrument, documents and other
writings as may be reasonably necessary or desirable to confirm and carry out
and to effectuate fully the intent and purposes of this Agreement.


 


[Signature Page Follows]


 


43

















 


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


 


	
   

  	
  PONIARD
  PHARMACEUTICALS, INC.:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Gregory L. Weaver

  
	
   

  	
   

  	
  Name:
  Gregory L. Weaver

  
	
   

  	
   

  	
  Title:
  CFO

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  COMMERCE
  COURT SMALL CAP VALUE FUND, LTD.:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Graham Farhina

  
	
   

  	
   

  	
  Name:
  Graham Farhina

  
	
   

  	
   

  	
  Title:
  Director

  



 


44
















 


ANNEX A TO THE

COMMON STOCK PURCHASE AGREEMENT

DEFINITIONS


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


“Commission
Documents” shall mean (1) all reports, schedules, registrations,
forms, statements, information and other documents filed by the Company with
the Commission pursuant to the reporting requirements of the Exchange Act,
including all material filed pursuant to Section 13(a) or 15(d) of
the Exchange Act, which have been filed by the Company since December 31,
2008 and which hereafter shall be filed by the Company during the Investment
Period, including, without limitation, the Current Report and the Form 10-K
filed by the Company for its fiscal year ended December 31, 2008 (the “2008
Form 10-K”), (2) the Registration Statement, as the same may be
amended from time to time, the Prospectus and each Prospectus Supplement, and
each Permitted Free Writing Prospectus and (3) all information contained
in such filings and all documents and disclosures that have been and heretofore
shall be incorporated by reference therein.


 


“Commitment Shares”
means 121,183 shares of duly authorized, validly issued, fully paid and
non-assessable shares of Common Stock which, concurrently with the execution
and delivery of this Agreement on the Effective Date, the Company has caused
its transfer agent to electronically transfer to the Investor not later than
4:00 p.m. (New York time) on the second Trading Day immediately following
the Effective Date.


 

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


“Issuer
Free Writing Prospectus” shall mean an “issuer free writing prospectus” as
defined in Rule 433 promulgated under the Securities Act.


 


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


 


“Material Adverse Effect”
shall mean any condition, occurrence, state of facts or event having, or
insofar as reasonably can be foreseen would likely have, any effect on the
business, 


 

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 

















 


“Prospectus”
shall mean the Base Prospectus, together with any final prospectus filed with
the Commission pursuant to Rule 424(b), as supplemented by any Prospectus
Supplement, including the documents incorporated by reference therein.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 

















 


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


 


“Threshold
Price” is the lowest price (except to the extent otherwise provided in Section 2.6)
at which the Company may sell Shares during the applicable Pricing Period as
set forth in a Fixed Request Notice (not taking into account the applicable
percentage discount during such Pricing Period determined in accordance with Section 2.2);
provided, however, that at no time shall the Threshold Price be
lower than $1.00 per share unless the Company and the Investor mutually shall
agree.


 


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


 


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


 


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


 


“Trading Market Limit”
means 8,423,431 shares of duly authorized, validly issued, fully paid and
non-assessable shares of Common Stock (as adjusted for any stock splits, stock
combinations, stock dividends, recapitalizations and other similar transactions
that occur on or after the date of this Agreement); provided, however,
that the Trading Market Limit shall not exceed under any circumstances that
number of shares of Common Stock that the Company may issue pursuant to this
Agreement and the transactions contemplated hereby without (a) breaching
the Company’s obligations under the rules and regulations of the Trading
Market or (b) obtaining stockholder approval under the applicable rules and
regulations of the Trading Market.


 


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


 


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


 
















 


EXHIBIT A TO THE

COMMON STOCK PURCHASE AGREEMENT

FORM OF FIXED REQUEST NOTICE


 


Reference is made to the
Common Stock Purchase Agreement dated as of 
February 23, 2010, (the  “Purchase
Agreement”) between Poniard Pharmaceuticals, Inc., a corporation
organized and existing under the laws of the State of Washington (the “Company”),
and Commerce Court Small Cap Value Fund, Ltd., a business company incorporated
under the laws of the British Virgin Islands. Capitalized terms used and not
otherwise defined herein shall have the meanings given such terms in the
Purchase Agreement.


 


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


 


	
  Fixed
  Amount Requested:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Optional
  Amount Dollar Amount:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Pricing
  Period start date:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Pricing
  Period end date:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Settlement
  Date:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Fixed
  Request Threshold Price:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Optional
  Amount Threshold Price:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Dollar
  Amount of Common Stock Currently Unissued under the Registration Statement:

  	
   

  	
   

  
	
   

  	
   

  	
   

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

  	
   

  	
   

  



 


	
  Dated:

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Name:
  

  
	
   

  	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Address:
  

  
	
   

  	
   

  	
   

  	
   

  	
  Facsimile
  No.:

  



 


	
  AGREED AND ACCEPTED

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  



 

















 


EXHIBIT B TO THE

COMMON STOCK PURCHASE AGREEMENT

FORM OF OPTIONAL AMOUNT NOTICE


 


	
  To:

  	
   

  
	
  Fax#:

  	
   

  



 


Reference is made to the
Common Stock Purchase Agreement dated as of February 23, 2010 (the “Purchase
Agreement”) between Poniard Pharmaceuticals, Inc., a corporation
organized and existing under the laws of the State of Washington (the “Company”),
and Commerce Court Small Cap Value Fund, Ltd., a business company incorporated
under the laws of the British Virgin Islands (the “Investor”).
Capitalized terms used and not otherwise defined herein shall have the meanings
given such terms in the Purchase Agreement.


 


In accordance with and
pursuant to Section 2.1 of the Purchase Agreement, the Investor hereby
issues this Optional Amount Notice to exercise an Optional Amount for the
Optional Amount Dollar Amount indicated below.


 


	
  Optional
  Amount Dollar Amount Exercised

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Number
  of Shares to be purchased

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  VWAP
  on the date hereof:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Discount
  Price:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Settlement
  Date:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Threshold
  Price:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Dated:

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:
  

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Address:
  

  
	
   

  	
   

  	
  Facsimile
  No.:

  
					



 

















 


EXHIBIT
C TO THE

COMMON STOCK PURCHASE AGREEMENT

CERTIFICATE OF THE COMPANY


 


CLOSING
CERTIFICATE


 


                  
200   


 


The undersigned, the
[                      ]
of Poniard Pharmaceuticals, Inc., a corporation organized and existing
under the laws of the State of Washington (the “Company”), delivers this
certificate in connection with the Common Stock Purchase Agreement, dated as of
February 23, 2010 (the “Agreement”), by and between the Company and
Commerce Court Small Cap Value Fund, Ltd., a business company incorporated
under the laws of the British Virgin Islands (the “Investor”), and
hereby certifies on the date hereof that (capitalized terms used herein without
definition have the meanings assigned to them in the Agreement):


 


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


 


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


 


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


 


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


 


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


 


	
   

  	
   

  
	
   

  	
  By:

  
	
   

  	
  Title:

  



 

















 


EXHIBIT
D TO THE

COMMON STOCK PURCHASE AGREEMENT

COMPLIANCE CERTIFICATE


 


In connection with the
issuance of shares of common stock of Poniard Pharmaceuticals, Inc., a
corporation organized and existing under the laws of the State of Washington
(the “Company”), pursuant to the Fixed Request Notice, dated
[                          ],
delivered by the Company to Commerce Court Small Cap Value Fund, Ltd. (the “Investor”)
pursuant to Article II of the Common Stock Purchase Agreement, dated as of
February 23, 2010, by and between the Company and the Investor (the “Agreement”),
the undersigned hereby certifies as follows:


 


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


 


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


 


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


 


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


 


The undersigned has executed
this Certificate this [      ] day of
[                      ],
200[    ].


 


	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title: