exv10w1






Exhibit 10.1




Execution Copy


COMMON STOCK PURCHASE AGREEMENT




Dated as of May 26, 2010



by and between



ALEXZA PHARMACEUTICALS, INC.



and



AZIMUTH OPPORTUNITY 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 The Shares
	 	 	2	 
	Section 1.4 Current Report; Prospectus Supplement
	 	 	2	 
	 
	 	 	 	 
	ARTICLE II FIXED REQUEST TERMS; OPTIONAL AMOUNT
	 	 	2	 
	Section 2.1 Fixed Request Notice
	 	 	2	 
	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	 
	 
	 	 	 	 
	ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE INVESTOR
	 	 	8	 
	Section 3.1 Organization and Standing of the Investor
	 	 	8	 
	Section 3.2 Authorization and Power
	 	 	9	 
	Section 3.3 No Conflicts
	 	 	9	 
	Section 3.4 Information
	 	 	9	 
	 
	 	 	 	 
	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 Shares
	 	 	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
	 	 	13	 
	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
	 	 	14	 
	Section 4.15 Environmental Compliance
	 	 	16	 






i









 






	 	 	 	 	 
	 	 	Page	 
	Section 4.16 Material Agreements
	 	 	17	 
	Section 4.17 Transactions With Affiliates
	 	 	17	 
	Section 4.18 Securities Act; FINRA Rules
	 	 	18	 
	Section 4.19 Employees
	 	 	20	 
	Section 4.20 Use of Proceeds
	 	 	20	 
	Section 4.21 Investment Company Act Status
	 	 	20	 
	Section 4.22 ERISA
	 	 	20	 
	Section 4.23 Taxes
	 	 	20	 
	Section 4.24 Insurance
	 	 	21	 
	Section 4.25 Acknowledgement Regarding Investor’s Purchase of Shares
	 	 	21	 
	 
	 	 	 	 
	ARTICLE V COVENANTS
	 	 	21	 
	Section 5.1 Securities Compliance
	 	 	21	 
	Section 5.2 Registration and Listing
	 	 	21	 
	Section 5.3 Compliance with Laws
	 	 	21	 
	Section 5.4 Keeping of Records and Books of Account; Foreign Corrupt Practices Act.
	 	 	22	 
	Section 5.5 Limitations on Holdings and Issuances
	 	 	23	 
	Section 5.6 Other Agreements and Other Financings
	 	 	23	 
	Section 5.7 Stop Orders
	 	 	24	 
	Section 5.8 Amendments to the Registration Statement; Prospectus Supplements; Free Writing Prospectuses
	 	 	25	 
	Section 5.9 Prospectus Delivery
	 	 	26	 
	Section 5.10 Selling Restrictions
	 	 	26	 
	Section 5.11 Effective Registration Statement
	 	 	27	 
	Section 5.12 Non-Public Information
	 	 	27	 
	Section 5.13 Broker/Dealer
	 	 	27	 
	Section 5.14 Disclosure Schedule
	 	 	28	 
	 
	 	 	 	 
	ARTICLE VI OPINION OF COUNSEL AND CERTIFICATE; CONDITIONS TO THE SALE AND PURCHASE OF THE SHARES
	 	 	28	 
	Section 6.1 Opinion of Counsel and Certificate
	 	 	28	 
	Section 6.2 Conditions Precedent to the Obligation of the Company
	 	 	28	 
	Section 6.3 Conditions Precedent to the Obligation of the Investor
	 	 	30	 
	 
	 	 	 	 
	ARTICLE VII TERMINATION
	 	 	32	 
	Section 7.1 Term, Termination by Mutual Consent
	 	 	32	 
	Section 7.2 Other Termination
	 	 	33	 
	Section 7.3 Effect of Termination
	 	 	33	 
	 
	 	 	 	 
	ARTICLE VIII INDEMNIFICATION
	 	 	34	 
	Section 8.1 General Indemnity
	 	 	34	 
	Section 8.2 Indemnification Procedures
	 	 	35	 
	 
	 	 	 	 
	ARTICLE IX MISCELLANEOUS
	 	 	37	 
	Section 9.1 Fees and Expenses
	 	 	37	 






ii









 






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






iii









 






COMMON STOCK PURCHASE AGREEMENT




     This COMMON STOCK PURCHASE AGREEMENT, made and entered into on this 26 day of May 2010
(this “Agreement”), by and between Azimuth Opportunity Ltd., an international business
company incorporated under the laws of the British Virgin Islands (the “Investor”), and
Alexza Pharmaceuticals, Inc., a corporation organized and existing under the laws of the State of
Delaware (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 $25,000,000 of newly issued shares of the Company’s common stock, $0.0001
par value (“Common Stock”), subject, in all cases, to the Trading Market Limit; and



     WHEREAS, the offer and sale of the shares of Common Stock 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 $25,000,000 (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 delivery of counterpart signature pages of this Agreement executed by each of the parties
hereto, and by delivery of an opinion of counsel and a certificate of the Company as provided in
Section 6.1 hereof, to the offices of Greenberg Traurig, LLP, 200 Park Avenue, New York, New York
10166, at 4:00 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 The Shares. The Company has or will have duly authorized and reserved for issuance,
and covenants to continue to so reserve once reserved for issuance, free of all preemptive and
other similar rights, at all times during the Investment Period, the requisite aggregate number of
authorized but unissued 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.



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



2









 




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 $4,000,000
	 	95.00% of the VWAP
	 
	 	 	 	 
	Equal to or greater than $9.00 and less than $10.00

	 	Not to exceed $3,250,000
	 	94.75% of the VWAP
	 
	 	 	 	 
	Equal to or greater than $8.00 and less than $9.00

	 	Not to exceed $3,000,000
	 	94.50% of the VWAP
	 
	 	 	 	 
	Equal to or greater than $7.00 and less than $8.00

	 	Not to exceed $2,750,000
	 	94.25% of the VWAP
	 
	 	 	 	 
	Equal to or greater than $6.00 and less than $7.00

	 	Not to exceed $2,500,000
	 	94.00% of the VWAP
	 
	 	 	 	 
	Equal to or greater than $5.00 and less than $6.00

	 	Not to exceed $2,000,000
	 	93.75% of the VWAP
	 
	 	 	 	 
	Equal to or greater than $4.00 and less than $5.00

	 	Not to exceed $1,750,000
	 	93.50% of the VWAP
	 
	 	 	 	 
	Equal to or greater than $3.00 and less than $4.00

	 	Not to exceed $1,500,000
	 	93.25% of the VWAP






3









 






     Anything to the contrary in this Agreement notwithstanding, at no time shall the Investor
be required to purchase more than $4,000,000 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

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

	 	=
	 	the total Fixed Amount Requested, and
	 
	 	 	 	 
	C

	 	=
	 	the applicable Discount Price.






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



4









 





     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 NASDAQ (or any other U.S.
national securities exchange on which the Common Stock is then listed) is suspended for any reason
for more than three hours on any Trading Day, the Investor may at its option deem the price of the
Common 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 deliver the Shares
purchased by the Investor to the Investor or its designees via DTC’s Deposit/Withdrawal at
Custodian (DWAC) system, 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.



     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




5











 




respect of any Trading Day in such reduced Pricing Period for which the VWAP is (or is deemed to be) lower
than the Threshold Price in accordance with Section 2.6 hereof; and (iii) may elect to exercise all
or any portion of an Optional Amount on any Trading Day during such reduced Pricing Period in
accordance with Sections 2.10 and 2.11 hereof.




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




	 	 	D = (A/B) x (B – C), where:
	 
	 	 	D = the U.S. dollar amount of additional Shares to be purchased,
	 
	 	 	A = the Fixed Amount Requested,
	 
	 	 	B = 10 or, for purposes of this Section 2.8, such lesser number
of Trading Days as the parties may mutually agree to, and
	 
	 	 	C = the number of Trading Days in the reduced Pricing Period,




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




     The Investor may also elect to exercise any portion of the applicable Optional Amount which
was unexercised during the reduced Pricing Period 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 Optional Amount exercise shall be
aggregated during the Pricing Period and settled on the next



6









 




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



7









 





Section 9.1(ii), would exceed the
Aggregate Limit. The Company hereby represents, warrants and covenants that neither it nor any of
its Subsidiaries (i) has effected any transaction or series of transactions, (ii) is a party to any
pending transaction or series of transactions or (iii) shall enter into any contract, agreement,
agreement-in-principle, arrangement or understanding with respect to, or shall effect, any Other
Financing which, in any of such cases, may be aggregated with the transactions contemplated by this
Agreement for purposes of determining whether approval of the Company’s stockholders is required
under any bylaw, listed securities maintenance standards or other rules of the Trading Market;
provided, however, that the Company shall be permitted to take any action referred
to in clause (iii) above if (a) the Company has timely provided the Investor with an Integration
Notice as provided in Section 5.6(ii) hereof and (b) unless the Investor has previously terminated
this Agreement pursuant to Section 7.2, the Company obtains 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 Shares to the Investor in respect of a Fixed
Request or Optional Amount on the applicable Settlement Date. In the event the Company shall have
elected to reduce the Aggregate Limit as provided in the immediately preceding sentence, at the
Company’s sole discretion, and effective automatically upon delivery of notice by the Company to
the Investor, the Company may subsequently amend this Agreement to increase the Aggregate Limit up
to $25,000,000; provided, however, that in no event shall the Company be entitled
to issue Fixed Requests and grant Optional Amounts during the remainder of the Investment Period
for an aggregate amount greater than the amount obtained by subtracting (x) the aggregate of all
Fixed Request Amounts and Optional Amount Dollar Amounts (including any amounts paid as 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) $25,000,000, subject in all cases to the Trading Market Limit.



ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE INVESTOR




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



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



8









 





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



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



     Section 3.4 Information. All materials relating to the business, financial condition,
management and operations of the Company and materials relating to the offer and sale of the Shares
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 Shares. 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.



9









 





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



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



10









 




any shares of capital stock of
the Company, other than those issued or granted in the ordinary course of business. 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
Certificate of Incorporation as in effect on the Effective Date (the “Charter”), and the
Company’s Bylaws as in effect on the Effective Date (the “Bylaws”).




     Section 4.4 Issuance of Shares. The Shares to be issued under this Agreement have
been or will be duly authorized by all necessary corporate action and, when paid for or issued in
accordance with the terms hereof, the Shares shall be validly issued and outstanding, fully paid
and nonassessable, and, when the Shares have been issued to the Investor, the Investor shall be
entitled to all rights accorded to a holder and beneficial owner of Common Stock.



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



11









 




a Prospectus Supplement under Sections 1.4 and 5.9 of
this Agreement, and any registration statement, prospectus or prospectus supplement which has been
or may be filed pursuant to this Agreement).




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



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





12









 







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




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




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




     Section 4.7 Subsidiaries. The 2009 Form 10-K sets forth each Subsidiary of the
Company as of the Effective Date, showing its jurisdiction of incorporation or organization and the
percentage of the Company’s ownership of the outstanding capital stock or other ownership interests
of such Subsidiary, and the Company does not have any other Subsidiaries as of the Effective Date.



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



     Section 4.9 Indebtedness. The Company’s Quarterly Report on Form 10-Q for its fiscal
quarter ended March 31, 2010 sets forth, as of March 31, 2010, all outstanding secured and
unsecured Indebtedness of the Company or any Subsidiary, or for which the Company or any Subsidiary
has commitments through such date. For the purposes of this Agreement, “Indebtedness” shall
mean (a) any liabilities for borrowed money or amounts owed in excess of $10,000,000 (other than
trade accounts payable incurred in the ordinary course of business), (b) all guaranties,
endorsements, indemnities and other contingent obligations in respect of Indebtedness of others in
excess of $10,000,000, whether or not the same are or should be



13









 




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. Except as set forth in the Commission Documents, 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. All real property leases of the Company are valid and subsisting and in full force
and effect in all material respects.



     Section 4.11 Actions Pending. There is no action, suit, claim, investigation or
proceeding pending, or to the knowledge of the Company threatened in writing, against the Company
or any Subsidiary which questions the validity of this Agreement or the transactions contemplated
hereby or any action taken or to be taken pursuant hereto or thereto. Except as set forth in the
Commission Documents, there is no action, suit, claim, investigation or proceeding pending, or to
the knowledge of the Company threatened in writing, 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.



     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



14









 




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 or as otherwise disclosed in the Commission
Documents. 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 or as otherwise disclosed in the Commission Documents. 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 or as otherwise
disclosed in the Commission Documents. As to each product that is subject to FDA regulation or
similar legal provisions in any foreign jurisdiction that is developed, manufactured, tested,
packaged, labeled, marketed, sold, distributed and/or commercialized by the Company or any of its
Subsidiaries, each such product is being developed, manufactured, tested, packaged, labeled,
marketed, sold, distributed and/or commercialized in compliance with all applicable requirements of
the FDA (and any non-governmental authority whose approval or authorization is required under
foreign law comparable to that administered by the FDA), including, but not limited to, those
relating to investigational use, investigational device exemption, premarket notification,
premarket approval, good clinical practices, good manufacturing practices, record keeping, filing
of reports, and patient privacy and medical record security, except where such non-compliance,
individually or in the aggregate, would not have a Material Adverse Effect or as otherwise
disclosed in the Commission Documents. 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 or as otherwise
disclosed in the Commission Documents. Except as set forth in the Commission Documents or the
Registration Statement, neither the Company nor any of its Subsidiaries has received any
correspondence, notice or request from the FDA, including, without limitation, notice that any one
or more products or product candidates of the Company or any of its Subsidiaries failed to receive
approval from the FDA for use for any one or more indications, and neither the Company nor any of
its Subsidiaries knows of any basis therefor. This Section 4.14 does not relate to environmental
matters, such items being the subject of Section 4.15.



15









 







          (b) To the Company’s knowledge, the Company or one or more of its Subsidiaries owns or
possesses adequate patents, patent rights, licenses, inventions, copyrights, know-how (including
trade secrets and other unpatented and/or unpatentable proprietary or confidential information,
systems or procedures), trademarks, service marks, trade names, trade dress, logos, copyrights and
other intellectual property, including, without limitation, all of the intellectual property
described in the Commission Documents as being owned or licensed by the Company (collectively,
“Intellectual Property”), necessary to carry on the business now operated by it. Except as
set forth in the Commission Documents, there are no actions, suits or judicial proceedings pending,
or to the Company’s knowledge threatened in writing, relating to patents or proprietary information
to which the Company or any of its Subsidiaries is a party or of which any property of the Company
or any of its Subsidiaries is subject, and neither the Company nor any of its Subsidiaries has
received any notice or is otherwise aware of any infringement of or conflict with asserted rights
of others with respect to any Intellectual Property or of any facts or circumstances which would
render any Intellectual Property invalid or inadequate to protect the interest of the Company and
its Subsidiaries therein, and which infringement or conflict (if the subject of any unfavorable
decision, ruling or finding) or invalidity or inadequacy, individually or in the aggregate, would
have a Material Adverse Effect.




          (c) All pre-clinical and clinical trials conducted by, or on behalf of, the Company or any of
its Subsidiaries, or in which the Company or any of its Subsidiaries has participated that are
described in the Registration Statement or the Commission Documents, or the results of which are
referred to in the Registration Statement or the Commission Documents, if any, are the only
pre-clinical and clinical trials currently being conducted by or on behalf of the Company and its
Subsidiaries. All such pre-clinical and clinical trials conducted, supervised or monitored by, or
on behalf of, the Company or any of its Subsidiaries have been conducted in compliance with all
applicable federal, state, local and foreign laws, and the regulations and requirements of any
applicable governmental entity, including, but not limited to, FDA good clinical practice and good
laboratory practice requirements. Except as set forth in the Registration Statement or the
Commission Documents, 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. 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
compliance with all applicable federal, state, local and foreign laws, and the regulations and
requirements of any applicable governmental entity, including, but not limited to, FDA good
clinical practice and good laboratory practice requirements.




     Section 4.15 Environmental Compliance. Except as disclosed in the Commission
Documents, the Company and each of its Subsidiaries have obtained all material approvals,
authorization, certificates, consents, licenses, orders and permits or other similar authorizations
of all governmental authorities, or from any other person, that are required under any



16









 




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




     Section 4.16 Material Agreements. Except as set forth in the Commission Documents,
neither the Company nor any Subsidiary of the Company is a party to any written or oral contract,
instrument, agreement commitment, obligation, plan or arrangement, a copy of which would be
required to be filed with the Commission as an exhibit to an annual report on Form 10-K
(collectively, “Material Agreements”). 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



17









 




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; FINRA Rules. The Company has complied with all
applicable federal and state securities laws in connection with the offer, issuance and sale of the
Shares hereunder.



          (i) The Company has prepared and filed with the Commission in accordance with the provisions
of the Securities Act the Registration Statement, including a base prospectus relating to the
Shares. The Registration Statement was declared effective by order of the Commission on May 20,
2010. 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 Shares contemplated by this Agreement (without
reliance on General Instruction I.B.6. of Form S-3). The Commission has not notified the Company of
any objection to the use of the form of the Registration Statement pursuant to Rule 401(g)(1) under
the Securities Act. The Registration Statement complied in all material respects on the date on
which it was declared effective by the Commission, and will comply in all material respects at each
deemed effective date with respect to the Investor pursuant to Rule 430B(f)(2) of the Securities
Act, with the requirements of the Securities Act, and the Registration Statement (including the
documents incorporated by reference therein) did not on the date it was declared effective by the
Commission, and shall not at each deemed effective date with respect to the Investor pursuant to
Rule 430B(f)(2) of the Securities Act, contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the statements therein not
misleading; provided that this representation and warranty does not apply to statements in
or omissions from the Registration Statement made in reliance upon and in
conformity with information relating to the Investor furnished to the Company in writing by or
on behalf of the Investor expressly for use therein. The Registration Statement, as of the
Effective Date, meets the requirements set forth in Rule 415(a)(1)(x) under the Securities Act.
The Base Prospectus complied in all material respects on 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



18









 






untrue statement
of a material fact or omit to state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they were made, not
misleading; provided that this representation and warranty does not apply to statements in
or omissions from the Base Prospectus made in reliance upon and in conformity with information
relating to the Investor furnished to the Company in writing by or on behalf of the Investor
expressly for use therein.




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




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




          (v) At the earliest time after the filing of the Registration Statement that the Company or
another offering participant made a bona fide offer (within the meaning of Rule 164(h)(2) under the
Securities Act) relating to the Shares, the Company was not and is not an “ineligible issuer” (as
defined in Rule 405 under the Securities Act). Each Permitted Free Writing Prospectus (a) shall
conform in all material respects to the requirements of the Securities Act on the date of its first
use, (b) when considered together with the Prospectus on each applicable Fixed Request Exercise
Date and on each applicable Settlement Date, shall not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they are made, not misleading,
and (c) shall not include any information that conflicts with the information contained in the
Registration Statement, including any document incorporated by reference therein and any Prospectus
Supplement deemed to be a part thereof that has not been superseded or modified. The immediately
preceding sentence does not apply to statements in or omissions from any Permitted Free Writing
Prospectus made in reliance upon and in conformity
with information relating to the Investor furnished to the Company in writing by or on behalf
of the Investor expressly for use therein.




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



19









 







     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 302 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 “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



20









 




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 reasonably deems adequate for the conduct of its and
its Subsidiaries’ businesses and the value of their respective properties and as is customary for
companies engaged in similar businesses in similar industries.



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



ARTICLE V

COVENANTS




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



     Section 5.1 Securities Compliance. The Company shall notify the Commission and the
Trading Market, as applicable, in accordance with their respective rules and regulations, of the
transactions contemplated by this Agreement, and shall take all necessary action, undertake all
proceedings and obtain all registrations, permits, consents and approvals for the legal and valid
issuance of the Shares to the Investor in accordance with the terms of this Agreement.



     Section 5.2 Registration and Listing. The Company shall take all action necessary to
cause the Common Stock to continue to be registered as a class of securities under Sections 12(b)
or 12(g) of the Exchange Act, shall comply with its reporting and filing obligations under the
Exchange Act, and shall not take any action or file any document (whether or not permitted by the
Securities Act) to terminate or suspend such registration or to terminate or suspend its reporting
and filing obligations under the Exchange Act or Securities Act, except as permitted herein. The
Company shall take all action necessary to continue the listing and trading of its Common Stock and
the listing of the Shares purchased by Investor hereunder on the Trading
Market, and shall comply with the Company’s reporting, filing and other obligations under the
bylaws, listed securities maintenance standards and other rules of the Trading Market.



     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






21









 







all applicable
provisions of the Securities Act, the Exchange Act and the listing standards of the Trading Market.
Without limiting the generality of the foregoing, neither the Company nor any of its officers,
directors or affiliates has taken or will take, directly or indirectly, any action designed or
intended to stabilize or manipulate the price of any security of the Company, or which caused or
resulted in, or which would in the future reasonably be expected to cause or result in,
stabilization or manipulation of the price of any security of the Company.




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




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



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




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




          (iii) Subject to the requirements of Section 5.12 of this Agreement, from time to time from
and after the period beginning with each Fixed Request Exercise Date through and including the
applicable Settlement Date, the Company shall make available for inspection and



22









 






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. The Company shall not be obligated
to issue and the Investor shall not be obligated to purchase any shares of Common Stock which, when
aggregated with all other shares of Common Stock then owned beneficially by the Investor, 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 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 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




23









 







subject to the Fixed Request for that Pricing Period. An “Other Financing” shall
mean any of the following, in each case, that does not also constitute an Acceptable Financing: (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.
“Acceptable Financing” shall mean the issuance by the Company of any of the following: (1)
shares of Common Stock or securities convertible into or exercisable or exchangeable for Common
Stock other than in connection with a Below Market Offering; (2) shares of Common Stock or
securities convertible into or exercisable or exchangeable for Common Stock in connection with
awards or issuances under the Company’s benefit and equity plans and arrangements and the issuance
of shares of Common Stock upon the conversion, exercise or exchange thereof; (3) shares of Common
Stock issuable upon the conversion or exchange of equity awards or convertible or exchangeable
securities outstanding as of the Effective Date; (4) shares of Common Stock or securities
convertible into or exercisable or exchangeable for Common Stock or similar rights to subscribe for
the purchase of shares of Common Stock in connection with technology sharing, licensing, research
and joint development agreements (or amendments thereto) with third parties, and the issuance of
shares of Common Stock upon the conversion, exercise or exchange thereof; and (5) shares of Common
Stock or securities convertible into or exercisable or exchangeable for Common Stock or similar
rights to subscribe for the purchase of shares of Common Stock issued in connection with equipment
loan or leasing arrangements and/or real property leasing arrangements and the issuance of shares
of Common Stock upon the conversion, exercise or exchange thereof. As used in this Section 5.6(ii),
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.




     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 Shares
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



24









 




to
state a material fact required by the Securities Act to be stated therein or necessary in order to
make the statements then made therein (in the case of the Prospectus, in light of the circumstances
under which they were made) not misleading, or of the necessity to amend the Registration Statement
or supplement the Prospectus or any Permitted Free Writing Prospectus to comply with the Securities
Act or any other law. The Company shall not be required to disclose to the Investor the substance
or specific reasons of any of the events set forth in clauses (i) through (iii) of the immediately
preceding sentence, but rather, shall only be required to disclose that the event has occurred.
The Company shall not issue any Fixed Request during the continuation of any of the foregoing
events. If at any time the Commission shall issue any stop order suspending the effectiveness of
the Registration Statement or prohibiting or suspending the use of the Prospectus or any Prospectus
Supplement, the Company shall use commercially reasonable efforts to obtain the withdrawal of such
order at the earliest possible time.




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



          (i) Except as provided in this Agreement and other than periodic reports required to be filed
pursuant to the Exchange Act, the Company shall not file with the Commission any amendment to the
Registration Statement that relates to the Investor, the Agreement or the transactions contemplated
hereby or file with the Commission any Prospectus Supplement that relates to the Investor, this
Agreement or the transactions contemplated hereby with respect to which (a) the Investor shall not
previously have been advised, (b) the Company shall not have given due consideration to any
comments thereon received from the Investor or its counsel, or (c) the Investor shall reasonably
object after being so advised, unless 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 purchase of Shares by
the Investor, the Company shall not file any Prospectus Supplement with respect to the Shares
without delivering or making available a copy of such Prospectus Supplement, together with the Base
Prospectus, to the Investor promptly.




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




25









 







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




     Section 5.9 Prospectus Delivery. The Company shall file with the Commission a
Prospectus Supplement pursuant to Rule 424(b) under the Securities Act on the first Trading Day
immediately following the last Trading Day of each Pricing Period. The Company shall provide the
Investor a reasonable opportunity to comment on a draft of each such Prospectus Supplement and any
Issuer Free Writing Prospectus, shall give due consideration to all such comments and, subject to
the provisions of Section 5.8 hereof, shall deliver or make available to the Investor, without
charge, an electronic copy of each form of Prospectus Supplement, together with the Base
Prospectus, and any Permitted Free Writing Prospectus on each applicable Settlement Date. The
Company consents to the use of the Prospectus (and of any Prospectus Supplement thereto) in
accordance with the provisions of the Securities Act and with the securities or “blue sky” laws of
the jurisdictions in which the Shares may be sold by the Investor, in connection with the offering
and sale of the Shares 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 Shares. 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) The Investor covenants that from and after the date hereof through and including the
90th day next following the termination of this Agreement (the “Restricted
Period”), neither the Investor nor any of its affiliates (within the meaning of the Exchange
Act) nor any entity managed or controlled by the Investor shall, directly or indirectly, sell any
securities of the Company, except the Shares that it owns or has the right to purchase as provided
in a Fixed Request Notice. During the Restricted Period, neither the Investor or any of its
affiliates nor any entity managed or controlled by the Investor shall sell any shares of Common
Stock it does not “own” or have the unconditional right to receive under the terms of this
Agreement (within the meaning of Rule 200 of Regulation SHO promulgated by the




26









 







Commission under the
Exchange Act), including Shares in any account of the Investor or in any account directly or
indirectly managed or controlled by the Investor or any of its affiliates or any
entity managed or controlled by the Investor. Without limiting the generality of the
foregoing, prior to and during the Restricted Period, neither the Investor nor any of its
affiliates nor any entity managed or controlled by the Investor or any of its affiliates shall
enter into a short position with respect to shares of Common Stock, including in any account of the
Investor’s or in any account directly or indirectly managed or controlled by the Investor or any of
its affiliates or any entity managed or controlled by the Investor, except that the Investor may
sell Shares that it is obligated to purchase under a pending Fixed Request Notice but has not yet
taken possession of so long as the Investor (or the Broker-Dealer, as applicable) covers any such
sales with the Shares purchased pursuant to such Fixed Request Notice; provided,
however, that the Investor (or the Broker-Dealer, as applicable) shall not be required to
cover any such sales with the Shares purchased pursuant to such Fixed Request Notice if (a) the
Fixed Request is terminated by mutual agreement of the Company and the Investor and, as a result of
such termination, no Shares are delivered to the Investor under this Agreement or (b) the Company
otherwise fails to deliver such Shares to the Investor on the applicable Settlement Date upon the
terms and subject to the provisions of this Agreement. Prior to and during the Restricted Period,
the Investor shall not grant any option to purchase or acquire any right to dispose or otherwise
dispose for value of any shares of Common Stock or any securities convertible into or exercisable
or exchangeable for, or warrants to purchase, any shares of Common Stock, or enter into any swap,
hedge or other agreement that transfers, in whole or in part, the economic risk of ownership of the
Common Stock, except for such sales expressly permitted by this Section 5.10(i).




          (ii) In addition to the foregoing, in connection with any sale of the Company’s securities
(including any sale permitted by paragraph (i) above), the Investor shall comply in all 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 promulgated by the Commission.



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



27









 





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




ARTICLE VI

OPINION OF COUNSEL AND CERTIFICATE; CONDITIONS TO THE SALE AND

PURCHASE OF THE SHARES




     Section 6.1 Opinion of Counsel and Certificate. Simultaneously with the execution and
delivery of this Agreement, the Investor has received (i) an opinion of outside counsel to the
Company, dated the Effective Date, in the form mutually agreed to by the parties hereto, and (ii) a
certificate from the Company, dated the Effective Date, in the form of Exhibit C hereto.



     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




28









 







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




          (ii) Registration Statement. The Registration Statement is effective and neither the
Company nor the Investor shall have received notice that the Commission has issued or intends to
issue a stop order with respect to the Registration Statement. The Company shall have a maximum
dollar amount certain of Shares registered under the Registration Statement which are in an amount
(a) as of the Effective Date, not less than the Total Commitment and (b) as of the applicable Fixed
Request Exercise Date, 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. 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) 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.



29









 







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




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




     Section 6.3 Conditions Precedent to the Obligation of the Investor. The obligation
hereunder of the Investor to accept a Fixed Request Notice or Optional Amount grant and to acquire
and pay for the Shares is subject to the satisfaction or (to the extent permitted by 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 Shares registered under the Registration Statement which are in an amount
(a) as of the Effective Date, not less than the Total Commitment and (b) as of the applicable Fixed
Request Exercise Date, 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, and an
electronic copy of each such Prospectus Supplement together with the Base Prospectus shall have
been delivered or made





30












 




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) of Section 5.7 shall
have occurred, trading in securities generally as reported on the Trading Market shall not have
been suspended or limited, nor shall a banking moratorium have been declared either by the United
States or New York State authorities, nor shall there have occurred any material outbreak or
escalation of hostilities or other national or international calamity or crisis of such magnitude
in its effect on, or any material adverse change in, any financial, credit or securities market
which, in each case, in the reasonable judgment of the Investor, makes it impracticable or
inadvisable to purchase the Shares.




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




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




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




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




          (viii) Shares Authorized. The Shares issuable pursuant to such Fixed Request Notice
or Optional Amount shall have been duly authorized by all necessary corporate action of the
Company.







31









 








          (ix) Listing of Shares. 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, if required under the rules and regulations of the Trading Market, 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) Payment of Investor’s Counsel Fees; Due Diligence Expenses. On the Effective
Date, the Company shall have paid by wire transfer of immediately available funds to an account
designated by the Investor’s counsel, the fees and expenses of the Investor’s counsel in accordance
with the proviso to the first sentence of Section 9.1(i) of this Agreement. On the 30th
day of the third month in each calendar quarter during the Investment Period when no Shares have
been purchased or sold because the Company did not deliver a Fixed Request Notice, the Company
shall have paid by wire transfer of immediately available funds to an account designated by the
Investor, the due diligence expenses incurred by the Investor in accordance with the provisions of
the second sentence of Section 9.1(i) of this Agreement.




ARTICLE VII

TERMINATION




     Section 7.1 Term, Termination by Mutual Consent. Unless earlier terminated as
provided hereunder, this Agreement shall terminate automatically on the earliest of (i) the first
day of the month next following the 24-month anniversary of the Effective Date (the “Investment
Period”), (ii) the date that the entire dollar amount of Shares registered under the
Registration Statement have been issued and sold and (iii) the date the Investor shall have
purchased the Total Commitment of 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 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. 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



32









 




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 (other than in respect of an underwritten public offering of equity securities of
the Company or a registered direct public offering of equity securities of the Company) 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 (other than in
respect of an underwritten public offering of equity securities of the Company or a registered
direct public offering of equity securities of the Company), in which latter case the Company shall
so notify the Investor within 48 hours thereof, then in all such cases 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 immediately 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 simultaneously publicly disclose such information in accordance with Regulation FD and the
applicable rules and regulations of the Trading Market), and the Investor shall have the right to
terminate this Agreement at any time after receipt of such notification, if: (i) any condition,
occurrence, state of facts or event constituting a Material Adverse Effect has occurred; (ii) a
Material Change in Ownership has occurred or the Company enters into a definitive agreement
providing for a Material Change in Ownership; or (iii) a default or event of default has occurred
and is continuing under the terms of any agreement, contract, note or other instrument to which the
Company or any of its Subsidiaries is a party with respect to any indebtedness for borrowed money
representing more than 10% of the Company’s consolidated assets, in any such case, upon one Trading
Day’s prior written notice delivered to the Company in accordance with Section 9.4 hereof.



     Section 7.3 Effect of Termination. In the event of termination by the Company or the
Investor pursuant to Section 7.1 or 7.2, as applicable, written notice thereof shall forthwith be
given to the other party as provided in Section 9.4 and the transactions contemplated by this
Agreement shall be terminated without further action by either party. If this Agreement is
terminated as provided in Section 7.1 or 7.2 herein, this Agreement shall become void and of no
further force and effect, except that the provisions of Article VIII (Indemnification), Section 9.1
(Fees and Expenses), Section 9.2 (Specific Enforcement, Consent to Jurisdiction, Waiver of Jury
Trial), Section 9.4 (Notices), Section 9.8 (Governing Law), Section 9.9 (Survival), Section 9.11
(Publicity), Section 9.12 (Severability) and this Article VII (Termination) shall remain in full
force and effect notwithstanding such termination. 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



33









 




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 actions in respect thereof)
arise out of or are based upon (a) any violation of law (including United States federal securities
laws) 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






34









 







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 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



35









 




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 that
is entitled to reimbursement pursuant to this Article VIII (Indemnification) shall have requested
(by written notice provided in accordance with Section 9.4) an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, such indemnifying party agrees that it shall be
liable for any settlement of the nature contemplated hereby effected without its written consent if
(i) such settlement is entered into more than 45 days after receipt by such indemnifying party of
the aforesaid request, (ii) such indemnifying party shall have received written notice of the terms
of such settlement at least 30 days prior to such settlement being entered into and (iii) such
indemnifying party shall not have reimbursed such indemnified party in accordance with such request
prior to the date of such settlement. No indemnifying party will, without the prior written
consent of the indemnified party, effect any settlement of a pending or threatened action with
respect to which an indemnified party is, or is informed that it may be, made a party and for which
it would be entitled to indemnification, unless the settlement includes an unconditional release of
the indemnified party from all liability and claims which are the subject matter of the pending or
threatened action.




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



36









 





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



ARTICLE IX

MISCELLANEOUS




     Section 9.1 Fees and Expenses.



          (i) Each party shall bear its own fees and expenses related to the transactions contemplated
by this Agreement; provided, however, that the Company shall pay, on the Effective
Date, by wire transfer of immediately available funds to an account designated by the Investor’s
counsel, promptly following the receipt of an invoice therefor, all reasonable attorneys’ fees and
expenses (exclusive of disbursements and out-of-pocket expenses) incurred by the Investor, up to
$35,000, in connection with the preparation, negotiation, execution and delivery of this Agreement,
legal due diligence of the Company and review of the Registration Statement, the Base Prospectus,
the Current Report, any Permitted Free Writing Prospectus and all other related transaction
documentation. In addition, the Company shall pay, on the 30th day of the third month in
each calendar quarter during the Investment Period when no Shares have been purchased or sold
because the Company did not deliver a Fixed Request Notice, promptly following the receipt of a
reasonably detailed invoice therefor, all reasonable attorneys’ fees and expenses, up to $5,000,
representing the due diligence expenses incurred by the Investor during such calendar quarter. 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 Shares pursuant hereto.




          (ii) If the Company issues a Fixed Request Notice and fails to deliver the Shares (which, if
required by the applicable rules of the Trading Market, 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, if required by the applicable rules of the Trading
Market, 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, if
required by the applicable rules of the Trading Market, 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.



37









 





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




          (ii) Each of the Company and the Investor (a) hereby irrevocably submits to the jurisdiction
of the United States District Court and other courts of the United States sitting in the State of
Delaware 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 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



38









 




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:
	 	Alexza Pharmaceuticals, Inc.
	 

	 	 	 	2091 Stierlin Court
	 

	 	 	 	Mountain View, California 94043
	 

	 	 	 	Telephone Number: (650) 944-7000
	 

	 	 	 	Fax: (650) 944-7988
	 

	 	 	 	Attention: August J. Moretti
	 
	 	 	 	 
	 

	 	With copies to:
	 	Cooley LLP
	 

	 	 	 	380 Interlocken Crescent, Suite 900
	 

	 	 	 	Broomfield, Colorado 80021
	 

	 	 	 	Telephone Number: (720) 566-4000
	 

	 	 	 	Fax: (720) 566-4099
	 

	 	 	 	Attention: James C.T. Linfield, Esq.
	 

	 	 	 	                 Brent D. Fassett, Esq.






	 	 	 	 	 

	 

	 	If to the Investor:
	 	Azimuth Opportunity Ltd.
	 

	 	 	 	c/o Folio Administrators Limited
	 

	 	 	 	Folio House
	 

	 	 	 	P.O. Box 800
	 

	 	 	 	Road Town, Tortola VG1110
	 

	 	 	 	British Virgin Islands
	 

	 	 	 	Telephone Number: (284) 494-7065 Ext. 250
	 

	 	 	 	Fax: (284) 494-8356/7422
	 

	 	 	 	Attention: Tamara Singh
	 
	 	 	 	 
	 

	 	With copies to:
	 	Greenberg Traurig, LLP
	 

	 	 	 	The MetLife Building
	 

	 	 	 	200 Park Avenue
	 

	 	 	 	New York, NY 10166
	 

	 	 	 	Telephone Number: (212) 801-9200
	 

	 	 	 	Fax: (212) 801-6400
	 

	 	 	 	Attention: Anthony J. Marsico, Esq.





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




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



39









 




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 Delaware, 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 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 9.9 (Survival), Section 9.11
(Publicity) and Section 9.12 (Severability) shall remain in full force and effect notwithstanding
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 or the
transactions contemplated hereby or the existence of this Agreement (including, without limitation,
by filing a copy of this Agreement with the Commission); provided, however, that
prior to issuing any such press release, or making any such public statement or announcement, the
Company shall consult with the Investor on the form and substance of such press release or other
disclosure.



40









 





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



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



[Signature Page Follows]



41









 





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



	 	 	 	 	 
	 	ALEXZA PHARMACEUTICALS, INC.:

 	 
	 	By:  	/s/ Thomas B. King
 	 
	 	 	Name:  	Thomas B. King 	 
	 	 	Title:  	President and Chief Executive Officer 	 
	 
	 	AZIMUTH OPPORTUNITY LTD.:

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




 












 





ANNEX A TO THE

COMMON STOCK PURCHASE AGREEMENT

DEFINITIONS




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



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



     (c) “Base Prospectus” shall mean the Company’s prospectus, dated May 26, 2010, a
preliminary form of which is included in the Registration Statement, including the documents
incorporated by reference therein.



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



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



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



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



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



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



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



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



     (l) “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.



 









 





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



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



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



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



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



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



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



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



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



     (v) “FINRA” shall have the meaning assigned to such term in Section 4.18 hereof.



     (w) “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.



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



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



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



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



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



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



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



 









 





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



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



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



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



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



     (jj) “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.



     (kk) “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.



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



     (mm) “Material Change in Ownership” shall mean the occurrence of any one or more of
the following: (i) the acquisition by any person, including any syndicate or group deemed to be a
“person” under Section 13(d)(3) of the Exchange Act, of beneficial ownership, directly or
indirectly, through a purchase, merger or other acquisition transaction or series of transactions,
of shares of capital stock or other securities of the Company entitling such person to exercise,
upon an event of default or default or otherwise, 50% or more of the total voting power of all
series



 









 




and classes of capital stock and other securities of the Company entitled to vote generally in
the election of directors, other than any such acquisition by the Company, any Subsidiary of the
Company or any employee benefit plan of the Company or any Subsidiary of the Company; (ii) any
consolidation or merger of the Company with or into any other person, any merger of another person
into the Company, or any conveyance, transfer, sale, lease or other disposition of all or
substantially all of the properties and assets of the Company to another person, other than (a) any
such transaction (x) that does not result in any reclassification, conversion, exchange or
cancellation of outstanding shares of capital stock of the Company and (y) pursuant to which
holders of capital stock of the Company immediately prior to such transaction have the entitlement
to exercise, directly or indirectly, 50% or more of the total voting power of all shares of capital
stock of the Company entitled to vote generally in the election of directors of the continuing or
surviving person immediately after such transaction or (b) any merger which is effected solely to
change the jurisdiction of incorporation of the Company and results in a reclassification,
conversion or exchange of outstanding shares of Common Stock solely into shares of common stock of
the surviving entity; (iii) during any consecutive two-year period, individuals who at the
beginning of that two-year period constituted the Board of Directors (together with any new
directors whose election to the Board of Directors, or whose nomination for election by the
stockholders of the Company, was approved by a vote of a majority of the directors then still in
office who were either directors at the beginning of such period or whose elections or nominations
for election were previously so approved) cease for any reason to constitute a majority of the
Board of Directors then in office; or (iv) the Company is liquidated or dissolved or a resolution
is passed by the Company’s stockholders approving a plan of liquidation or dissolution of the
Company. Beneficial ownership shall be determined in accordance with Rule 13d-3 promulgated by the
SEC under the Exchange Act. The term “person” shall include any syndicate or group which would be
deemed to be a “person” under Section 13(d)(3) of the Exchange Act.




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



     (oo) “NASDAQ” means the NASDAQ Global Market or any successor thereto.



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



     (qq) “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.



     (rr) “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.



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



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



 









 





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



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



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



     (xx) “Pricing Period shall mean a period of 10 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.



     (yy) “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.



     (zz) “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.



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



     (bbb) “Registration Statement” shall mean the registration statement on Form S-3,
Commission File Number 333-166514, 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.



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



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



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



     (fff) “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.



     (ggg) “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.



 









 





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



     (iii) “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.



     (jjj) “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 $3.00 per share unless the Company and the
Investor mutually shall agree.



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



     (lll) “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.



     (mmm) “Trading Market” means the following markets or exchanges on which the Common
Stock is listed or quoted for trading on the date in question: the NYSE AMEX, the Nasdaq Capital
Market, the NASDAQ, the Nasdaq Global Select Market or the New York Stock Exchange (or any
successors to any of the foregoing), whichever is at the time the principal trading exchange or
market for the Common Stock.



     (nnn) “Trading Market Limit” means 10,581,724 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.



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



     (ppp) “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 May 26, 2010,
(the “Purchase Agreement”) between Alexza Pharmaceuticals, Inc., a corporation organized
and existing under the laws of the State of Delaware (the “Company”), and Azimuth
Opportunity Ltd., an international business company incorporated under the laws of the British
Virgin Islands. Capitalized terms used and not otherwise defined herein shall have the meanings
given such terms in the Purchase Agreement.



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



	 	 	 

	Fixed Amount Requested:
	 	 
	 

	 	 
	 
	 	 
	Optional Amount Dollar Amount:
	 	 
	 

	 	 
	 
	 	 
	Pricing Period start date:
	 	 
	 

	 	 
	 
	 	 
	Pricing Period end date:
	 	 
	 

	 	 
	 
	 	 
	Settlement Date:
	 	 
	 

	 	 
	 
	 	 
	Fixed Request Threshold Price:
	 	 
	 

	 	 
	 
	 	 
	Optional Amount Threshold Price:
	 	 
	 

	 	 
	 
	 	 
	Dollar Amount of Common 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 May 26, 2010 (the
“Purchase Agreement”) between Alexza Pharmaceuticals, Inc., a corporation organized and
existing under the laws of the State of Delaware (the “Company”), and Azimuth Opportunity
Ltd., an international business company incorporated under the laws of the British Virgin Islands
(the “Investor”). Capitalized terms used and not otherwise defined herein shall have the
meanings given such terms in the Purchase Agreement.



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



	 	 	 

	Optional Amount Dollar Amount Exercised
	 	 
	 

	 	 
	 
	 	 
	Number of Shares to be purchased
	 	 
	 

	 	 
	 
	 	 
	VWAP on the date hereof:
	 	 
	 

	 	 
	 
	 	 
	Discount Price:
	 	 
	 

	 	 
	 
	 	 
	Settlement Date:
	 	 
	 

	 	 
	 
	 	 
	Threshold Price:
	 	 
	 

	 	 
	 
	 	 
	 
	 	 
	 

	 	 





	 	 	 	 	 	 	 

	Dated:

	 	 	 	By:	 	 
	 

	 	 
	 	 	 	 
	 

	 	 	 	Name

Title:	 	 






	 	 	 

	 

	 	Address:
	 

	 	Facsimile No.






 









 






EXHIBIT C TO THE

COMMON STOCK PURCHASE AGREEMENT

CERTIFICATE OF THE COMPANY




CLOSING CERTIFICATE

                    , 200   



     The undersigned, the [                    ] of Alexza Pharmaceuticals, Inc., a corporation organized
and existing under the laws of the State of Delaware (the “Company”), delivers this
certificate in connection with the Common Stock Purchase Agreement, dated as of May 26,
2010 (the “Agreement”), by and between the Company and Azimuth Opportunity Ltd., an
international business company incorporated under the laws of the British Virgin Islands (the
“Investor”), and hereby certifies on the date hereof that (capitalized terms used herein
without definition have the meanings assigned to them in the Agreement):



     1. Attached hereto as Exhibit A is a true, complete and correct copy of the Certificate of
Incorporation of the Company as filed with the Secretary of State of the State of Delaware. The
Certificate of Incorporation of the Company has not been further amended or restated, and no
document with respect to any amendment to the Certificate of Incorporation of the Company has been
filed in the office of the Secretary of State of the State of Delaware since the date shown on the
face of the state certification relating to the Company’s Certificate 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 stockholders 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 Alexza Pharmaceuticals, Inc., a
corporation organized and existing under the laws of the State of Delaware (the “Company”),
pursuant to the Fixed Request Notice, dated [                    ], delivered by the Company to Azimuth
Opportunity Ltd. (the “Investor”) pursuant to Article II of the Common Stock Purchase
Agreement, dated as of May 26, 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 [                    ], 20[___].



	 	 	 	 	 
	 	 	 
	 	By:  	
 	 
	 	 	Name:  	
 	 
	 	 	Title: