Exhibit 4.1


 


NEKTAR THERAPEUTICS

(a Delaware corporation)


 


$100,000,000

3% Convertible Subordinated Notes due 2010


 


PURCHASE AGREEMENT


 


June 25, 2003


 


Merrill
Lynch, Pierce, Fenner & Smith

Incorporated


Deutsche
Bank Securities Inc.


Lehman
Brothers Inc.


Friedman,
Billings, Ramsey & Co., Inc.


SG
Cowen Securities Corporation


c/o
Merrill Lynch, Pierce, Fenner & Smith

Incorporated


North Tower


World Financial Center


New York, New York
10281-1209


 


Ladies and Gentlemen:


 


Nektar Therapeutics, a
Delaware corporation (the “Company”), confirms its agreement with Merrill
Lynch, Pierce, Fenner & Smith Incorporated (“Merrill Lynch”) and each
of the other Initial Purchasers named in Schedule 1 hereto
(collectively, the “Initial Purchasers,” which term shall also include any
initial purchaser substituted as hereinafter provided in Section 8
hereof), for whom Merrill Lynch is acting as representative (in such capacity,
the “Representative”), with respect to the issue and sale by the Company and
the purchase by the Initial Purchasers, acting severally and not jointly, of
the respective principal amounts set forth in said Schedule 1 of
$100,000,000 aggregate principal amount of the Company’s 3% Convertible
Subordinated Notes due 2010 (the “Firm Notes”), and with respect to the grant
by the Company to the Initial Purchasers, acting severally and not jointly, of
the option described in Section 2(b) hereof (the “Option”) to purchase all
or any part of an additional $25,000,000  principal amount of the Company’s 3%
Convertible Subordinated Notes due 2010 (the “Optional Notes” and, together
with the Firm Notes, the “Notes”).


 


The Notes will be
convertible into fully paid, nonassessable shares of common stock of the
Company, par value $0.0001 per share (the “Common Stock”), on the terms, and
subject to the conditions, set forth in the Indenture (as defined below).  As used herein, “Conversion Shares” means
the shares of Common Stock into which the Notes are convertible.  The Notes will be issued pursuant to an
Indenture (the “Indenture”) to be


 

















 


dated as of the First
Delivery Date (as defined in Section 2(a)), between the Company and J.P.
Morgan Trust Company, National Association, as trustee (the “Trustee”).


 


Holders
of the Notes (including the Initial Purchasers and their direct and indirect transferees) will be entitled to
the benefits of a Pledge Agreement (the “Pledge Agreement”), to be dated as of
the First Delivery Date, between the
Company and J.P. Morgan Trust Company, National Association, as collateral
agent (the “Collateral Agent”), pursuant to which the Company will deposit with
the Collateral Agent in trust for the exclusive benefit of the holders of the
Notes, a portion of the proceeds from the offering of the Notes sufficient to
purchase a portfolio of zero-coupon U.S. treasury securities in such amounts as
will be sufficient upon receipt of scheduled interest and principal payments of
such U.S. treasury securities to provide for payment in full of certain
scheduled interest payments on the Notes when due, which will be held in a
pledge account by the Collateral Agent as security for the Company’s
obligations under the Notes in accordance with the terms of the Pledge
Agreement.


 


The Notes will be offered
and sold without being registered under the Securities Act of 1933, as amended
(the “Securities Act”), in reliance on exemptions therefrom.  The Company has prepared and delivered to
each Initial Purchaser copies of a preliminary offering memorandum dated June
23, 2003 (the “Preliminary Offering Memorandum”) and has prepared and will
deliver to each Initial Purchaser, on the date hereof or the next succeeding
day, copies of a final offering memorandum dated June 25, 2003 (the “Final
Offering Memorandum”), each for use by such Initial Purchaser in connection
with its solicitation of purchases of, or offering of, the Notes.  “Offering Memorandum” means, with respect to
any date or time referred to in this Agreement, the most recent offering
memorandum (whether the Preliminary Offering Memorandum or the Final Offering
Memorandum, or any amendment or supplement to either such document) which has
been prepared and delivered by the Company to the Initial Purchasers in
connection with their solicitation of purchases of, or offering of, the
Notes.  As used herein, the terms
“Preliminary Offering Memorandum,” “Final Offering Memorandum” and “Offering
Memorandum” shall include in each case the documents incorporated by reference
therein.


 


Holders of the Notes
(including the Initial Purchasers and their direct and indirect transferees)
will be entitled to the benefits of a Resale Registration Rights Agreement,
dated the First Delivery Date, between the Company and the Initial Purchasers
(the “Registration Rights Agreement”), pursuant to which the Company will agree
to file with the Securities and Exchange Commission (the “Commission”) a shelf
registration statement pursuant to Rule 415 under the Securities Act (the
“Registration Statement”) covering the resale of the Notes and the Conversion
Shares, and to use its best efforts to cause the Registration Statement to be
declared effective.


 


This Agreement, the
Indenture, the Notes, the Pledge Agreement and the Registration Rights
Agreement are referred to herein collectively as the “Operative Documents.”


 


2

















 


Capitalized terms used
herein without definition have the respective meanings specified in the
Offering Memorandum.


 


1.                                       Representations,
Warranties and Agreements of the Company. 
The Company represents and warrants to each Initial Purchaser as of the
date hereof and as of each Delivery Date (as defined in Section 2(b)) and
agrees with each Initial Purchaser, as follows:


 


(a)                                  Each
of the Preliminary Offering Memorandum and the Offering Memorandum, did not as
of its respective date, and the Offering Memorandum will not as of a Delivery
Date (as defined in Section 2(b)), contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided that the Company makes no
representation or warranty as to information contained in or omitted from the
Preliminary Offering Memorandum or the Offering Memorandum in reliance upon and
in conformity with written information furnished to the Company by or on the
behalf of any Initial Purchaser through the Representative specifically for
inclusion therein.


 


(b)                                 Assuming
the accuracy of the representations and warranties of the Initial Purchasers
contained in Section 6 and their compliance with the agreements set forth
therein, it is not necessary, in connection with the issuance and sale of the
Notes to the Initial Purchasers and the offer, resale and delivery of the Notes
by the Initial Purchasers in the manner contemplated by this Agreement, the
Indenture, the Pledge Agreement, the Registration Rights Agreement and the
Offering Memorandum, to register the Notes or the Conversion Shares under the
Securities Act or to qualify the Indenture under the Trust Indenture Act of
1939, as amended (the “Trust Indenture Act”).


 


(c)                                  The
Company has been duly incorporated and is validly existing as a corporation in
good standing under the laws of the State of Delaware, is duly qualified to do
business and is in good standing as a foreign corporation in each jurisdiction
in which its ownership or lease of property or the conduct of its businesses
requires such qualification (except for where the failure to be so qualified
would not have a material adverse effect on the affairs, management, business,
properties, financial condition, results of operations or prospects of the
Company and its subsidiaries considered as one enterprise, whether or not
arising in the ordinary course of business (a “Material Adverse Effect”)), and
has all power and authority necessary to own or hold its properties and to
conduct the businesses in which it is engaged, as described in the Offering
Memorandum.


 


(d)                                 Each
subsidiary of the Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of its jurisdiction of
incorporation, is duly qualified to do business and is in good standing as a
foreign corporation in each jurisdiction in which its ownership or lease of
property or the conduct of its businesses requires such qualification (except
for


 


3

















 


where the failure to be
so qualified would not have a Material Adverse Effect and except for the
qualification of Nektar Therapeutics AL, Corporation (“Nektar Alabama”) in the
State of North Carolina, which qualification Nektar Alabama will promptly
obtain), and has all power and authority necessary to own or hold its
properties and to conduct the businesses in which it is engaged, as described
in the Offering Memorandum; except as otherwise disclosed in the Offering
Memorandum, all of the issued and outstanding capital stock of each subsidiary
of the Company has been duly authorized and validly issued, is fully paid and
non-assessable and is owned by the Company, directly or through subsidiaries,
free and clear of any security interest, mortgage, pledge, lien, encumbrance,
claim or equity; none of the outstanding shares of capital stock of any such
subsidiary was issued in violation of the preemptive or similar rights of any securityholder
of such subsidiary.


 


(e)                                  The
authorized, issued and outstanding capital stock of the Company, as of
March 31, 2003, is as set forth in the Offering Memorandum under the
column entitled “Actual” under the caption “Capitalization,” and all of the
issued and outstanding shares of capital stock of the Company have been duly
and validly authorized and issued, are fully paid and nonassessable; none of
the outstanding shares of capital stock of the Company was issued in violation
of the preemptive or other similar rights of any securityholder of the Company;
the capital stock of the Company conforms to the description thereof contained
in the Offering Memorandum and such description conforms to the rights set
forth in the instruments defining the same; the Conversion Shares, which are
authorized on the date hereof, have been duly and validly authorized and
reserved for issuance upon conversion of the Notes by all necessary corporate
action and are free of preemptive rights; all Conversion Shares, when so issued
and delivered upon such conversion in accordance with the terms of the
Indenture, will be duly and validly authorized and issued, fully paid and
nonassessable and free and clear of all liens, encumbrances, equities or
claims; and the issuance of such Conversion Shares upon such conversion will
not be subject to the preemptive or other similar rights of any securityholder
of the Company.


 


(f)                                    The
execution, delivery and performance of the Operative Documents by the Company
and the issuance of the Notes and the Conversion Shares and the consummation of
the transactions contemplated hereby and thereby will not (x) conflict
with or result in a breach or violation of any of the terms or provisions of,
or constitute a default under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which the Company or any of its
subsidiaries is a party or by which it or any of them are bound or to which any
of the properties or assets of the Company or any subsidiary is subject, (y) result
in any violation of the provisions of the certificate of incorporation or
bylaws of the Company or any of its subsidiaries or (z) result in any
violation of any statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Company or any
subsidiary or any of their properties or assets; and except (i) with
respect to the transactions contemplated by the Registration Rights Agreement
or the Pledge


 


4

















 


Agreement, as may be
required under the Securities Act, the Trust Indenture Act and the rules and
regulations promulgated thereunder and (ii) as required by the state
securities or “blue sky” laws, no consent, approval, authorization or order of,
or filing or registration with, any such court or governmental agency or body
is required for the execution, delivery and performance of the Operative
Documents by the Company, and the consummation of the transactions contemplated
hereby and thereby.


 


(g)                                 The
Company has all necessary corporate right, power and authority to execute and
deliver this Agreement and perform its obligations hereunder; and this
Agreement and the transactions contemplated hereby have been duly authorized,
executed and delivered by the Company.


 


(h)                                 The
Company has all necessary corporate right, power and authority to execute and
deliver the Indenture and perform its obligations thereunder; the Indenture has
been duly authorized by the Company, and upon the effectiveness of the
Registration Statement, will be qualified under the Trust Indenture Act; on the
First Delivery Date, the Indenture will have been duly executed and delivered
by the Company and, assuming due authorization, execution and delivery of the
Indenture by the Trustee, will constitute a legally valid and binding agreement
of the Company enforceable against the Company in accordance with its terms,
except as the enforceability thereof may be limited by bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and other similar laws relating
to or affecting creditors’ rights generally, subject to general principles of
equity and to limitations on availability of equitable relief, including
specific performance (whether considered in a proceeding in equity or at law)
and an implied covenant of good faith and fair dealing; and the Indenture
conforms in all material respects to the description thereof contained in the
Offering Memorandum.


 


(i)                                     The
Company has all necessary corporate right, power and authority to execute and
deliver the Pledge Agreement and perform its obligations thereunder; the Pledge
Agreement and the transactions contemplated thereby have been duly authorized
by the Company, and upon the effectiveness of the Registration Statement, will
be qualified under the Trust Indenture Act; when the Pledge Agreement is duly
executed and delivered by the Company (assuming due authorization, execution
and delivery of the Pledge Agreement by the Collateral Agent) it will be a
legally valid and binding agreement of the Company enforceable against the
Company in accordance with its terms, except as the enforceability thereof may
be limited by bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and other similar laws relating to or affecting creditors’ rights
generally, subject to general principles of equity and to limitations on
availability of equitable relief, including specific performance (whether
considered in a proceeding in equity or at law) and an implied covenant of good
faith and fair dealing; and the Pledge Agreement conforms in all material
respects to the description thereof contained in the Offering Memorandum.


 


5

















 


(j)                                     The
Company has all necessary corporate right, power and authority to execute and
deliver the Registration Rights Agreement and perform its obligations
thereunder; the Registration Rights Agreement and the transactions contemplated
thereby have been duly authorized by the Company; when the Registration Rights
Agreement is duly executed and delivered by the Company (assuming due
authorization, execution and delivery by the Initial Purchasers), it will be a
legally valid and binding agreement of the Company enforceable against the
Company in accordance with its terms, except as the enforceability thereof may
be limited by bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and other similar laws relating to or affecting creditors’ rights
generally, subject to general principles of equity and to limitations on
availability of equitable relief, including specific performance (whether
considered in a proceeding in equity or at law) and an implied covenant of good
faith and fair dealing, and except with respect to the rights of
indemnification and contribution thereunder, where enforcement thereof may be
limited by federal or state securities laws or the policies underlying such
laws; and the Registration Rights Agreement conforms in all material respects
to the description thereof contained in the Offering Memorandum.


 


(k)                                  The
Company has all necessary corporate right, power and authority to execute,
issue and deliver the Notes and perform its obligations thereunder; the Notes
have been duly authorized by the Company; when the Notes are executed,
authenticated and issued in accordance with the terms of the Indenture and
delivered to and paid for by the Initial Purchasers pursuant to this Agreement
on the respective Delivery Date (assuming due authentication of the Notes by
the Trustee), such Notes will constitute legally valid and binding obligations
of the Company, entitled to the benefits of the Indenture and enforceable
against the Company in accordance with their terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and other similar laws relating to or affecting
creditors’ rights generally, subject to general principles of equity and to
limitations on availability of equitable relief, including specific performance
(whether considered in a proceeding in equity or at law) and an implied
covenant of good faith and fair dealing; and the Notes conform in all material
respects to the description thereof contained in the Offering Memorandum.


 


(l)                                     Except
for the Registration Rights Agreement and the Stock Purchase Agreement, dated
January 18, 1995, between the Company and Pfizer, Inc. (“Pfizer”),
the Stock Purchase Agreement, dated March 1, 1996, as amended, between the
Company and Baxter Healthcare Corporation, the Stock Issuance Agreement, dated
November 4, 1999, between the Company and Alliance Pharmaceutical Corp.,
the Restated Investor Rights Agreement, dated April 29, 1993, as amended
October 29, 1993, among the Company and certain stockholders of the
Company, the Resale Registration Rights Agreement, dated October 13, 1999,
between the Company and the initial purchasers named therein, the Registration
Rights Agreement between the Company and Alliance Pharmaceutical Corp., dated
January 24, 2000, the Resale Registration Rights


 


6

















 


Agreement, dated
February 8, 2000, between the Company and the initial purchasers named
therein, the Resale Registration Rights Agreement, dated October 17, 2000,
between the Company and the initial purchasers named therein, the Rights
Agreement, dated June 1, 2001, between the Company and Mellon Investor
Services LLC., the Preferred Stock Purchase Agreement, dated
January 7, 2002, between the Company and Enzon Pharmaceuticals, Inc.
and the Registration Rights Agreements, dated June 7, 2002, July 9,
2002 and December 6, 2002, respectively, each between the Company and AFAC
Equity L.P.,  there are no contracts, agreements or understandings between
the Company and any person granting such person the right (other than rights
which have been waived or satisfied) to require the Company to file a
registration statement under the Securities Act with respect to any securities
of the Company owned or to be owned by such person or to require the Company to
include such securities in any securities being registered pursuant to any
registration statement filed by the Company under the Securities Act.


 


(m)                               Neither
the Company nor any of its subsidiaries has sustained, since the date of the
latest audited financial statements included in the Offering Memorandum, any
material loss or interference with its business from fire, explosion, flood or
other calamity, whether or not covered by insurance, or from any labor dispute
or court or governmental action, order or decree; and, since such dates, there
has not been any change in the capital stock or long-term debt of the Company
or any of its subsidiaries or any material adverse change in or affecting the
affairs, management, business, properties, financial condition, stockholders’
equity, results of operations or prospects of the Company and its subsidiaries
considered as one enterprise, whether or not arising in the ordinary course of
business, except: (i) as described in the Offering Memorandum,
(ii) any grants under the Company’s employee stock plans in accordance
with the terms of such plans as described in the Offering Memorandum, or other
shares of Common Stock (or rights to receive Common Stock) issued to service
providers to the Company in the ordinary course of business (“Authorized
Grants”), (iii) operating losses incurred in the ordinary course of
business, and (iv) indebtedness incurred by the Company’s subsidiaries
pursuant to outstanding lines of credit or other debt facilities not to exceed
$5.0 million.


 


(n)                                 The
financial statements of the Company and its consolidated subsidiaries
(including the related notes and supporting schedules) included in the Offering
Memorandum present fairly the financial condition and results of operations of
the Company and its consolidated subsidiaries, at the dates and for the periods
indicated, and have been prepared in conformity with generally accepted
accounting principles applied on a consistent basis throughout the periods
involved.  The selected and summary
financial information included in the Offering Memorandum present fairly the
information shown therein and have been compiled on a basis consistent with
that of the audited financial statements included in the Offering Memorandum.


 


7

















 


(o)                                 Ernst &
Young LLP, who have certified the financial statements of the Company
included in the Offering Memorandum, whose report is incorporated by reference
in the Offering Memorandum, are independent accountants as required by the
Securities Act and the rules and regulations promulgated thereunder.


 


(p)                                 The
Company and its subsidiaries have good and marketable title in fee simple to
all real property and good and marketable title to all personal property owned
by them, in each case free and clear of all liens, encumbrances, security
interests, claims and defects, except such as are described in the Offering
Memorandum or such as do not, singly or in the aggregate, materially affect the
value of such property and do not interfere with the use made and proposed to
be made of such property by the Company or any of its subsidiaries; and all
real property and personal property held under lease or sublease by the Company
and its subsidiaries is held by them under valid, subsisting and enforceable
leases (or subleases, as the case may be) in full force and effect, with such
exceptions as are not material and do not interfere with the use made and
proposed to be made of such property by the Company or any of its
subsidiaries.  Neither the Company nor
any of its subsidiaries have notice of any material claim of any sort that has
been asserted by anyone adverse to the rights of the Company or any of its
subsidiaries under any of the leases or subleases mentioned above, or affecting
or questioning the rights of the Company or such subsidiary to the continued
possession of the leased or subleased premises under any such lease or
sublease.


 


(q)                                 The
Company and its subsidiaries carry, or are covered by, insurance as is
customary for companies similarly situated and engaged in similar businesses in
similar industries.


 


(r)                                    The
Company and its subsidiaries own, or possess adequate rights to use, all
material trademarks, service marks, trade names, trademark registrations,
service mark registrations, copyrights and licenses necessary for the conduct
of their business, and have no reason to believe that the conduct of their
business will conflict with, and have not received any notice of any claim of
conflict with, any such rights of others.


 


(s)                                  The
Company and its subsidiaries own, or possess adequate rights to use, all
material patents necessary for the conduct of their business.  Except as set forth in the Offering
Memorandum, no valid U.S. patent is, or to the knowledge of the Company would
be, infringed by the activities of the Company or any of its subsidiaries in
the manufacture, use, offer for sale or sale of any product or component
thereof as described in the Offering Memorandum.  The patent applications (the “Patent Applications”) filed by or
on behalf of the Company and its subsidiaries described in the Offering
Memorandum have been properly prepared and filed on behalf of the Company and
its subsidiaries; each of the Patent Applications and patents (the “Patents”)
described in the Offering Memorandum is assigned or licensed to the Company or
its subsidiaries, and, except as set forth or contemplated in the Offering
Memorandum, no other entity


 


8

















 


or individual has any
right or claim in any Patent, Patent Application or any patent to be issued
therefrom; and, to the knowledge of the Company, each of the Patent
Applications discloses potentially patentable subject matter.  There are no actions, suits or judicial
proceedings pending 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, to the knowledge of the
Company, no actions, suits or judicial proceedings are threatened by
governmental authorities or, except as set forth or contemplated in the
Offering Memorandum, others.  The
Company is not aware of, except as set forth or contemplated in the Offering
Memorandum, any claim by others that the Company or any of its subsidiaries is
infringing or otherwise violating any patents or other intellectual property
rights of others and is not aware of any rights of third parties to any of the
Company’s or any of its subsidiaries’ Patent Applications, licensed Patents or
licenses which could affect materially the use thereof by the Company or any of
its subsidiaries.  Except as set forth
in the Offering Memorandum, the Company and its subsidiaries own or possess
sufficient licenses or other rights to use all patents, trade secrets,
technology and know-how necessary to conduct their business as described in the
Offering Memorandum.


 


(t)                                    Except
as disclosed in the Offering Memorandum, the Company and its subsidiaries have
filed with the Food and Drug Administration (the “FDA”) and the California Food
and Drug Branch (“CFDB”) for and received approval of all registrations,
applications, licenses, requests for exemptions, permits and other regulatory
authorizations necessary to conduct their business as it is described in the
Offering Memorandum; the Company and its subsidiaries are in material
compliance with all such registrations, applications, licenses, requests for
exemptions, permits and other regulatory authorizations, and all applicable FDA
and CFDB rules and regulations, guidelines and policies, including but not
limited to, applicable FDA and CFDB rules, regulations and policies relating to
current good manufacturing practice (“CGMP”) and current good laboratory
practice (“CGLP”); the Company has no reason to believe that any party granting
any such registration, application, license, request for exemption, permit or
other authorization is considering limiting, suspending or revoking the same
and knows of no basis for any such limitation, suspension or revocation.


 


(u)                                 The
human clinical trials, animal studies and other preclinical tests conducted by
the Company or any subsidiary or in which the Company or any subsidiary has
participated that are described in the Offering Memorandum or the results of
which are referred to in the Offering Memorandum, and, to the knowledge of the
Company, such studies and tests conducted on behalf of the Company or any of
its subsidiaries, were and, if still pending, are being conducted in accordance
with commonly used or appropriate experimental protocols, procedures and controls
applied by research scientists generally in the preclinical or clinical study
of new drugs; the descriptions or the results of such studies and tests
contained in the Offering Memorandum are accurate and complete in all material
respects, and the Company has no knowledge of any other studies or


 


9

















 


tests, the results of
which reasonably call into question the results described or referred to in the
Offering Memorandum; and neither the Company nor any of its subsidiaries has
received any notices or other correspondence from the FDA or any other
governmental agency requiring the termination, suspension or modification of
any animal studies or other preclinical tests, or clinical studies 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 Offering
Memorandum or the results of which are referred to in the Offering Memorandum.


 


(v)                                 Except
as disclosed in the Offering Memorandum, there are no legal or governmental
proceedings pending to which the Company or any of its subsidiaries is a party
or of which any of their respective properties or assets is the subject which,
if determined adversely to the Company or any subsidiary might have a Material
Adverse Effect, or which might reasonably be expected to materially and
adversely affect the consummation of the transactions contemplated by this
Agreement or the performance by the Company of its obligations hereunder; to
the Company’s knowledge, no such proceedings are threatened or contemplated by
governmental authorities or, except as set forth or contemplated in the
Offering Memorandum, threatened by others; and the aggregate of all pending
legal or governmental proceedings to which the Company or any of its
subsidiaries is a party or of which any of their respective properties or
assets is the subject (other than the Company’s or any subsidiary’s patent
applications currently pending before the U.S. Patent and Trademark Office or
before any foreign governmental authority that administers the registration of
patents), which are not described in the Offering Memorandum, including
ordinary routine litigation incidental to the business, could not reasonably be
expected to result in a Material Adverse Effect.


 


(w)                               No
event has occurred nor has any circumstance arisen which, had the Notes been
issued on such Delivery Date, would constitute a default or an Event of Default
(as such term is defined in the Indenture).


 


(x)                                   Neither
the Company nor any of its subsidiaries is (i) in violation of its
certificate of incorporation or bylaws, (ii) in default, and no event has
occurred which, with notice or lapse of time or both, would constitute such a
default, in the due performance or observance of any term, covenant or
condition contained in any indenture, mortgage, deed of trust, loan agreement
or other agreement or instrument to which the Company or any of its
subsidiaries is a party or by which it or any of them may be bound or to which
any of the properties or assets of the Company or any of its subsidiaries is
subject or (iii) in violation of any law, ordinance, governmental rule,
regulation or court decree to which any properties or assets of the Company or
any of its subsidiaries may be subject or has failed to obtain any license,
permit, certificate, franchise or other governmental authorization or permit
necessary to the ownership of their properties or to the conduct of their
business, except to the extent that any such


 


10

















 


default, event or
violation described in the foregoing clauses (i), (ii) and (iii) would not
have a Material Adverse Effect.


 


(y)                                 The
Company is in compliance in all material respects with all presently applicable
provisions of the Employee Retirement Income Security Act of 1974, as amended,
including the regulations and published interpretations thereunder (“ERISA”);
no “reportable event” (as defined in ERISA) has occurred with respect to any “pension
plan” (as defined in ERISA) for which the Company would have any liability; the
Company has not incurred and does not expect to incur liability under
(i) Title IV of ERISA with respect to termination of, or withdrawal
from, any “pension plan” or (ii) Sections 412 or 4971 of the Internal
Revenue Code of 1986, as amended, including the regulations and published
interpretations thereunder (the “Code”); and each “pension 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 by failure to act, which would cause
the loss of such qualification.


 


(z)                                   The
Company is subject to the reporting requirements of Section 13 or
Section 15(d) of the Exchange Act. 
The Company has timely and, except with respect to the failure to
provide information with respect to certain change of control and severance
arrangements with respect to J. Milton Harris, which information was subsequently
provided in an amendment to the Company’s Form 10-K for the year
ended December 31, 2002 filed prior to the date of this Agreement,
properly filed with the Commission all reports and other documents required to
have been filed by it with the Commission pursuant to the Exchange Act and the
Exchange Act Regulations (“Exchange Act Reports”).


 


(aa)                            The
Company and each of its subsidiaries, if applicable, have filed all federal,
state and local income and franchise tax returns required to be filed through
the date hereof or have requested extensions thereof and have paid all taxes
due thereon, and no tax deficiency has been determined adversely to the Company
which has had (nor does the Company or any of its subsidiaries have any
knowledge of any tax deficiency which, if determined adversely to the Company
or any of its subsidiaries, might have) a Material Adverse Effect.


 


(bb)                          There
has been no storage, disposal, generation, manufacture, refinement,
transportation, handling or treatment of toxic wastes, medical wastes,
hazardous wastes or hazardous substances by the Company or any of its
subsidiaries (or, to the knowledge of the Company, any predecessors in interest
of the Company or any of its subsidiaries) at, upon or from any of the property
now or previously owned or leased by the Company or any of its subsidiaries in
violation of any applicable law, ordinance, rule, regulation, order, judgment,
decree or permit or which would require remedial action under any applicable
law, ordinance, rule, regulation, order, judgment, decree or permit, except for
any violation or remedial action which would not have, or could not be
reasonably likely to have, singularly or in the aggregate with all such
violations and remedial


 


11

















 


actions a Material
Adverse Effect; there has been no material spill, discharge, leak, emission,
injection, escape, dumping or release of any kind onto such property or into
the environment surrounding such property of any toxic wastes, medical wastes,
solid wastes, hazardous wastes or hazardous substances due to or caused by the
Company or any of its subsidiaries or with respect to which the Company has
knowledge, except for any such spill, discharge, leak, emission, injection,
escape, dumping or release which would not have or would not be reasonably
likely to have, singularly or in the aggregate with all such spills,
discharges, leaks, emissions, injections, escapes, dumpings and releases, a
Material Adverse Effect; and the terms “hazardous wastes,” “toxic wastes,”
“hazardous substances” and “medical wastes” shall have the meanings specified
in any applicable local, state, federal and foreign laws or regulations with
respect to environmental protection.


 


(cc)                            There
are no contracts or other documents which would be required to be described in
the Offering Memorandum if the Offering Memorandum were a prospectus included
in a registration statement on Form S-1 that have not been so described
in the Offering Memorandum.


 


(dd)                          There is
no relationship, direct or indirect, between or among the Company or any of its
subsidiaries, on the one hand, and the directors, executive officers,
shareholders, customers or suppliers of the Company or any of its subsidiaries,
on the other hand, which would be required to be described in the Offering
Memorandum if the Offering Memorandum were a prospectus included in a
registration statement on Form S-1 that has not been so described.


 


(ee)                            Since
the date as of which information is given in the Offering Memorandum through
the date hereof, the Company has not (i) issued or granted any securities
(other than Authorized Grants), (ii) incurred any material liability or
obligation, direct or contingent, other than liabilities and obligations which
were incurred in the ordinary course of business or referenced in
Section 1(m)(iv) above, (iii) entered into any material transaction
not in the ordinary course of business, other than as referenced in
Section 1(m)(iv) above or (iv) declared or paid any dividend on its capital
stock.


 


(ff)                                Except
as disclosed in the Offering Memorandum, (i) there are no outstanding
securities convertible into or exchangeable for, or warrants, rights or options
issued by the Company to purchase, any shares of the capital stock of the
Company (except, in the case of options, any Authorized Grants),
(ii) there are no statutory, contractual, preemptive or other rights to
subscribe for or to purchase any Common Stock that do not by their terms
terminate upon the First Delivery Date and (iii) there are no restrictions
upon transfer of the Common Stock pursuant to the Company’s certificate of
incorporation or bylaws.


 


(gg)                          The
Company (i) makes and keeps materially accurate books and records and
(ii) maintains internal accounting controls which provide reasonable
assurance that (A) transactions are executed in accordance with
management’s 


 


12

















 


authorization,
(B) transactions are recorded as necessary to permit preparation of its
financial statements and to maintain accountability for its assets,
(C) access to its assets is permitted only in accordance with management’s
authorization and (D) the reported accountability for its assets is
compared with existing assets at reasonable intervals.


 


(hh)                          Neither
the Company or any of its subsidiaries nor any director, officer, agent or
employee acting on behalf of the Company or any of its subsidiaries has
(i) used any corporate funds for any unlawful contribution, gift,
entertainment or other unlawful expense relating to political activity,
(ii) made any direct or indirect unlawful payment to any foreign or
domestic government official or employee from corporate funds,
(iii) violated or is in violation of any provision of the Foreign Corrupt
Practices Act of 1977 or (iv) made any bribe, rebate, payoff, influence
payment, kickback or other unlawful payment.


 


(ii)                                  No
labor disturbance by the employees of the Company or any of its subsidiaries
exists or, to the knowledge of the Company, is imminent which might be expected
to have a Material Adverse Effect.


 


(jj)                                  The
Company is not, and upon the issuance and sale of the Notes as herein
contemplated and the application of the net proceeds therefrom as described in
the Offering Memorandum will not be, an “investment company” or an entity
“controlled” by an “investment company” as such terms are defined in the
Investment Company Act of 1940, as amended.


 


(kk)                            Assuming
the accuracy of the representations and warranties of the Initial Purchasers
contained in Section 6 and their compliance with the agreements set forth
therein, the Securities will be eligible for resale pursuant to
Rule 144A.  No securities of the
same class (within the meaning of Rule 144A(d)(3) under the Securities
Act) as the Notes are listed on any national securities exchange registered
under Section 6 of the Exchange Act or quoted on an automated inter-dealer
quotation system.


 


(ll)                                  None
of the Company or any of its Affiliates (as defined in Rule 501(b) of
Regulation D under the Securities Act (“Regulation D”)) (other than
the Initial Purchasers, about which no representation is made by the Company),
has, directly or through an agent, engaged or will engage in any form of
general solicitation or general advertising in connection with the offering of
the Notes (as those terms are used in Regulation D) under the Securities
Act or in any manner involving a public offering within the meaning of
Section 4(2) of the Securities Act; the Company has not entered into any
contractual arrangement with respect to the distribution of the Notes except
for this Agreement and the Company will not enter into any such arrangement.


 


(mm)                      None of the
Company or any of its affiliates (other than the Initial Purchasers, about
which no representation is made by the Company), has, directly or through any
agent, sold, offered for sale, solicited offers to buy or otherwise


 


13

















 


negotiated in respect of,
any “security” (as defined in the Securities Act) which is or will be
integrated with the sale of the Notes in a manner that would require the
registration under the Securities Act of the Notes.


 


(nn)                          The
Company has not taken, directly or indirectly, any action designed to cause or
result in, or which has constituted or which might reasonably be expected to
constitute, the stabilization or manipulation of the price of any security of
the Company in connection with the offering of the Notes.


 


(oo)                          No
consent, approval or vote of the Company’s shareholders is necessary or
required in connection with the offering, issuance or sale of the Notes
hereunder or the issuance of shares of Common Stock upon conversion of the
Notes.


 


(pp)                          Nektar
Alabama is the Company’s only subsidiary that as of the date of the latest
audited financial statements included in Offering Memorandum had revenues or
total assets that exceeded 10% of the Company’s consolidated revenues or total
assets on a consolidated basis.


 


2.                                       Purchase,
Sale and Delivery of Notes.


 


(a)                                  Subject
to the terms and conditions and in reliance upon the representations and
warranties herein set forth, the Company agrees to sell to each Initial
Purchaser, and each Initial Purchaser agrees, severally and not jointly, to
purchase from the Company, at a purchase price of 97% of the principal amount
thereof (the “purchase price”) the principal amount of Firm Notes set forth
opposite such Initial Purchaser’s name in Schedule 1 hereto (or
such number increased as set forth in Section 8).


 


Delivery of and payment
for the Firm Notes shall be made at the office of Sidley Austin
Brown & Wood llp, 555
California Street, San Francisco, California 94104, at 10:00 a.m. (New
York City time) on June 30, 2003, or such later date as the Initial Purchasers
shall designate, which date and time may be postponed by agreement between the
Initial Purchasers and the Company or as provided in Section 8 (such date
and time of delivery and payment for the Firm Notes being herein called the
“First Delivery Date”).  Delivery of the
Firm Notes shall be made to the Initial Purchasers against payment of the
purchase price by the Initial Purchasers. 
Payment for the Firm Notes shall be effected either by wire transfer of
immediately available funds to an account with a bank in The City of New York,
the account number and the ABA number for such bank to be provided by the
Company to the Initial Purchasers at least two business days in advance of the
First Delivery Date, or by such other manner of payment as may be agreed by the
Company and the Initial Purchasers.  It
is understood that each Initial Purchaser has authorized the Representative,
for its account, to accept delivery of, issue a receipt for, and make payment
of the purchase price for, the Firm Notes that it has agreed to purchase.  Merrill Lynch, individually and not as
representative of the Initial Purchasers, may (but shall not be obligated to)
make payment of the purchase price for the Firm Notes to be purchased by any
Initial Purchaser whose funds have not been received by


 


14

















 


the First Delivery Date
but such payment shall not relieve such Initial Purchaser from its obligations
hereunder.


 


(b)                                 Subject
to the terms and conditions and in reliance upon the representations and
warranties herein set forth, the Company hereby grants the Option to the
Initial Purchasers to purchase, severally and not jointly, the Optional Notes
at the same price as the Initial Purchasers shall pay for the Firm Notes and
the principal amount of the Optional Notes to be sold to each Initial Purchaser
shall be that principal amount which bears the same ratio to the aggregate
principal amount of Optional Notes being purchased as the principal amount of
Firm Notes set forth opposite the name of such Initial Purchaser in Schedule 1
hereto (or such number increased as set forth in Section 8).  The Option may be exercised once in whole or
in part at any time not more than 30 days subsequent to the date of this
Agreement upon notice in writing or by facsimile by the Representative to the
Company setting forth the amount (which shall be an integral multiple of
$1,000) of Optional Notes as to which the Initial Purchasers are exercising the
Option.


 


The date for the delivery of and payment for the
Optional Notes, being herein referred to as an “Optional Delivery Date,” which
may be the First Delivery Date (the First Delivery Date and the Optional
Delivery Date, if any, being sometimes referred to as a “Delivery Date”), shall
be determined by the Initial Purchasers but shall not be later than five full
business days after written notice of election to purchase Optional Notes is
given.  Delivery of the Optional Notes
shall be made to the Initial Purchasers against payment of the purchase price
by the Initial Purchasers.  Payment for
the Optional Notes shall be effected either by wire transfer of immediately
available funds to an account with a bank in The City of New York, the account
number and the ABA number for such bank to be provided by the Company to the
Initial Purchasers at least two business days in advance of the Optional
Delivery Date, or by such other manner of payment as may be agreed by the
Company and the Initial Purchasers.  It
is understood that each Initial Purchaser has authorized the Representative,
for its account, to accept delivery of, issue a receipt for, and make payment
of the purchase price for, the Optional Notes that it has agreed to
purchase.  Merrill Lynch, individually
and not as representative of the Initial Purchasers, may (but shall not be
obligated to) make payment of the purchase price for the Optional Notes to be
purchased by any Initial Purchaser whose funds have not been received by the
Delivery Date but such payment shall not relieve such Initial Purchaser from
its obligations hereunder.


 


(c)                                  The
Company will deliver against payment of the purchase price the Notes initially
sold to qualified institutional buyers (“QIBs”), as defined in Rule 144A
under the Securities Act (“Rule 144A”) in the form of one or more
permanent global certificates (the “Global Notes”), registered in the name of
Cede & Co., as nominee for The Depository Trust Company (“DTC”).  Beneficial interests in the Notes initially
sold to QIBs will be shown on, and transfers thereof will be effected only
through, records maintained in book-entry form by DTC and its participants.


 


The Global Notes will be made available, at the
request of the Initial Purchasers, for checking at least 24 hours prior to such
Delivery Date.  The Certificated Notes
will be


 


15

















 


made available, at the
request of the Initial Purchasers, for checking at least 48 hours prior to such
Delivery Date.


 


(d)                                 Time
shall be of the essence, and delivery at the time and place specified pursuant
to this Agreement is a further condition of the obligations of the Initial
Purchasers hereunder.


 


3.                                       Further
Agreements of the Company.  The
Company further agrees with each Initial Purchaser as follows:


 


(a)                                  The
Company will advise the Initial Purchasers promptly of any proposal to amend or
supplement the Offering Memorandum and not to effect any such amendment or
supplement without the consent of the Initial Purchasers and/or Sidley Austin
Brown & Wood llp,
counsel to the Initial Purchasers. 
Neither the consent of the Initial Purchasers, nor the Initial
Purchaser’s delivery of any such amendment or supplement, shall constitute a
waiver of any of the conditions set forth in Section 5.  The Company will immediately notify each
Initial Purchaser, and confirm such notice in writing, of (i) any filing
made by the Company of information relating to the offering of the Notes by the
Company with any securities exchange or any other regulatory body in the United
States or any other jurisdiction, and (ii) prior to the completion of the
placement of the Notes by the Initial Purchasers as evidenced by a notice in
writing from the Initial Purchasers to the Company, any material changes in or
affecting the condition, financial or otherwise, or the earnings, business
affairs or business prospects of the Company which (x) make any statement
in the Offering Memorandum false or misleading or (y) are not disclosed in
the Offering Memorandum.  In such event
or if during such time any event shall occur or condition exist as a result of
which it is necessary to amend or supplement the Offering Memorandum in order
that the Offering Memorandum will not include an untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances existing at the time it is delivered
to a purchaser, not misleading, to promptly notify the Initial Purchasers
and/or Sidley Austin Brown & Wood llp,
counsel to the Initial Purchasers, and prepare, subject to the first sentence
of this Section 3(a), such amendment or supplement as may be necessary to
correct such untrue statement or omission.


 


(b)                                 The
Company will furnish to the Initial Purchasers and to Sidley Austin
Brown & Wood llp,
counsel to the Initial Purchasers, copies of the Preliminary Offering
Memorandum and the Offering Memorandum (and all amendments and supplements
thereto) in each case as soon as available and in such quantities as the
Initial Purchasers reasonably request for internal use and for distribution to
prospective purchasers; and to furnish to the Initial Purchasers on the date
hereof five copies of the Offering Memorandum signed by duly authorized
officers of the Company, one of which will include the independent auditors’
reports therein manually signed by such independent auditors.  The Company will pay the expenses of
printing and distributing to the Initial Purchasers all such documents.


 


16

















 


(c)                                  The
Company will use its reasonable efforts to take such action as the Initial
Purchasers may reasonably request from time to time, to qualify the Notes and
the Conversion Shares for offering and sale under the securities laws of such
jurisdictions as the Initial Purchasers may request and to comply with such
laws so as to permit the continuance of sales and dealings therein in such
jurisdictions in the United States for as long as may be necessary to complete
the resale of the Notes; provided that in connection therewith, the
Company shall not be required to qualify as a foreign corporation or otherwise
subject itself to taxation in any jurisdiction in which it is not otherwise so
qualified or subject.


 


(d)                                 The
Company will apply the proceeds from the sale of the Notes as set forth under
“Use of Proceeds” in the Offering Memorandum.


 


(e)                                  During
a period of 90 days from the date of the Offering Memorandum (the “Lockup
Period”), the Company will not, and will cause its directors and executive
officers not to, without the prior written consent of Merrill Lynch,
(i) directly or indirectly, offer, pledge, sell, contract to sell, sell
any option or contract to purchase, purchase any option or contract to sell,
grant any option right or warrant to purchase or lend or otherwise transfer or
dispose of any Common Stock or any securities convertible into or exercisable
or exchangeable for Common Stock (collectively, the “Restricted Securities”) or
file any registration statement under the Securities Act with respect to any
Restricted Securities, or (ii) enter into any swap or any other agreement
or any transaction (other than the Operative Documents) that transfers, in
whole or in part, directly or indirectly, the economic consequence of ownership
of any Restricted Securities, whether any such swap or transaction described in
clause (i) or (ii) above is to be settled by delivery of Restricted
Securities, in cash or otherwise.  The
restrictions of this Section 3(e) shall not apply to (u) the Notes
offered by the Offering Memorandum, (v) the issuance of shares of Common
Stock or options to purchase shares of Common Stock pursuant to the Company’s
employee benefit plans in effect on the date of this Agreement, (w) the
issuance of shares of Common Stock upon exercise or conversion of the Notes or
any security outstanding on the date of this Agreement, (x) the issuance
of shares of Common Stock or preferred stock in connection with private
placements to strategic partners or as consideration for the Company’s
acquisition of other companies or businesses, so long as the recipients of any
such shares issued in such private placements deliver to Merrill Lynch an
agreement to the effect described in the preceding sentence prior to the
issuance of such shares but without any of the exceptions described in this
sentence, (y) the filing of one or more registration statements in order
to register the shares of Common Stock or preferred stock issued pursuant to
clause (x) above or the registration of the Company’s securities issued to
AFAC Equity L.P. pursuant to the AFAC Registration Rights Agreements for
resale by the owners thereof pursuant to the Securities Act, or (z) the
filing of one or more registration statements by the Company in order to
register Restricted Stock for sale by the Company on a delayed or continuous
basis pursuant to Rule 415 under the Securities Act, provided that no
Restricted Stock registered pursuant to such registration statements is sold
during the


 


17

















 


Lockup Period.  The Company further agrees to cause each
executive officer and director of the Company to furnish to the Initial Purchasers,
prior to the First Delivery Date, a letter or letters, in form and substance
satisfactory to counsel to the Initial Purchasers, pursuant to which each such
person shall agree not to enter into any transaction described in
clause (i) or (ii) of the first sentence of this paragraph; provided,
however,
that such restrictions shall not apply to the sale of up to 500,000 shares of
Common Stock in the aggregate by all such executive officers and directors,
donations to charitable organizations consistent with past practices and any
additional sales pursuant to 10b5-1 plans as in effect on the date of the
Offering Memorandum.


 


(f)                                    The
Company agrees that it will not, and will cause its Affiliates (as defined in
Rule 501(b) of Regulation D) not to, directly or indirectly, solicit
any offer to buy, sell or make any offer or sale of, or otherwise negotiate in
respect of, securities of the Company of any class if, as a result of the
doctrine of “integration” referred to in Rule 502 under the Securities Act,
such offer or sale would render invalid (for the purpose of (i) the sale
of the Notes by the Company to the Initial Purchasers, (ii) the resale of
the Notes by the Initial Purchasers to subsequent purchasers or (iii) the
resale of the Notes or Conversion Shares by such subsequent purchasers to
others) the exemption from the registration requirements of the Securities Act
provided by Section 4(2) thereof or by Rule 144A thereunder or
otherwise.  Notwithstanding the
foregoing, no stockholder of the Company that does not control, is not
controlled by or is not under common control with, an officer or director of
the Company shall be deemed to be an Affiliate for purposes of this paragraph.


 


(g)                                 For
so long as any of the Notes are “restricted securities” within the meaning of
Rule 144(a)(3) under the Securities Act, the Company will provide to any
holder of the Notes or to any prospective purchaser of the Notes designated by
any holder, upon request of such holder or prospective purchaser, information
required to be provided by Rule 144A(d)(4) of the Securities Act if, at
the time of such request, the Company is not subject to the reporting
requirements under Section 13(a) or 15(d) of the Exchange Act.


 


(h)                                 Until
the expiration of two years after the original issuance of the Notes, the
Company will not, and will cause its Affiliates (as defined in Rule 501(b)
of Regulation D) not to, resell any Notes or Conversion Shares which are
“restricted securities” (as such term is defined under Rule 144(a)(3) under
the Securities Act), whether as beneficial owner or otherwise (except as agent
acting as a securities broker on behalf of and for the account of customers in
the ordinary course of business in unsolicited broker’s transactions).  Notwithstanding the foregoing, no stockholder
of the Company that does not control, is not controlled by or is not under
common control with, an officer or director of the Company shall be deemed to
be an Affiliate for purposes of this paragraph.


 


(i)                                     Each
of the Notes will bear, to the extent applicable, the legend contained in
“Notice to Investors” in the Offering Memorandum for the time


 


18

















 


period and upon the other
terms stated therein, except after the Notes are resold pursuant to a registration
statement effective under the Securities Act.


 


(j)                                     The
Company will take such steps as shall be necessary to ensure that it shall not
become an “investment company” within the meaning of such term under the
Investment Company Act, and the rules and regulations of the Commission
thereunder.


 


(k)                                  None
of the Company or any of its affiliates will take, directly or indirectly, any
action which is designed to stabilize or manipulate, or which constitutes or
which might reasonably be expected to cause or result in stabilization or
manipulation, of the price of any security of the Company in connection with
the offering of the Notes.


 


(l)                                     The
Company will execute and deliver the Registration Rights Agreement and the
Pledge Agreement in form and substance satisfactory to the Initial Purchasers.


 


(m)                               The
Company will use its best efforts to assist the Initial Purchasers in arranging
to cause the Notes to be accepted to trade in the PORTAL market (“PORTAL”) of
the National Association of Securities Dealers, Inc. (“NASD”).


 


(n)                                 The
Company will use its best efforts to cause the Notes to be accepted for
clearance and settlement through the facilities of DTC.


 


(o)                                 The
Company will use its best efforts to have the Conversion Shares approved by The
Nasdaq National Market (“Nasdaq”) for inclusion prior to the effectiveness of
the Registration Statement.


 


4.                                       Expenses.  The Company agrees to pay:


 


(a)                                  the
costs incident to the authorization, issuance, sale and delivery of the Notes,
and any taxes payable in that connection;


 


(b)                                 the
costs incident to the preparation, printing and distribution of the Preliminary
Offering Memorandum, the Offering Memorandum and any amendment or supplement to
the Offering Memorandum, all as provided in this Agreement;


 


(c)                                  the
costs of producing and distributing the Operative Documents;


 


(d)                                 the
fees and expenses of Cooley Godward LLP and Ernst &
Young LLP;


 


(e)                                  the
costs of distributing the terms of agreement relating to the organization of
the underwriting syndicate and selling group to the members thereof by mail,
telex or other means of communication;


 


19

















 


(f)                                    the
fees and expenses of qualifying the Notes and the Conversion Shares under the
securities laws of the several jurisdictions as provided in Section 3(c);


 


(g)                                 all
costs and expenses incident to (i) the preparation of the “road show”
presentation materials and (ii) the road show traveling expenses of the
Company;


 


(h)                                 the
costs of preparing the Notes;


 


(i)                                     all
expenses and fees in connection with the application for inclusion of the Notes
in the PORTAL market and the inclusion of the Conversion Shares on Nasdaq;


 


(j)                                     the
fees and expenses (including fees and disbursements of counsel) of the Trustee,
and the costs and charges of any registrar, transfer agent, paying agent or
conversion agent; and


 


(k)                                  all
other costs and expenses incident to the performance of the obligations of the
Company under this Agreement;


 


provided that, except as provided in this
Section 4 and in Section 7, the Initial Purchasers shall pay their
own costs and expenses, including the costs and expenses of their counsel and
any transfer taxes on the Notes which they may sell.


 


5.                                       Conditions
of the Initial Purchasers’ Obligations. 
The several obligations of the Initial Purchasers hereunder are subject
to the accuracy, when made and on each Delivery Date, of the representations
and warranties of the Company contained herein, to the performance by the
Company of its obligations hereunder, and to each of the following additional
terms and conditions:


 


(a)                                  No
Initial Purchaser shall have discovered and disclosed to the Company prior to
or on such Delivery Date that the Offering Memorandum or any amendment or
supplement thereto contains any untrue statement of a fact which, in the
opinion of counsel to the Initial Purchasers, is material or omits to state any
fact which is material and necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading.


 


(b)                                 All
corporate proceedings and other legal matters incident to the authorization,
form and validity of the Operative Documents and the Offering Memorandum or any
amendment or supplement thereto, and all other legal matters relating to the
Operative Documents and the transactions contemplated thereby shall be
satisfactory in all material respects to counsel to the Initial Purchasers, and
the Company shall have furnished to such counsel all documents and information
that they may reasonably request to enable them to pass upon such matters.


 


20

















 


(c)                                  Cooley
Godward LLP shall have furnished to the Initial Purchasers their written
opinion, as counsel to the Company, addressed to the Initial Purchasers and
dated such Delivery Date, in form and substance satisfactory to the Initial
Purchasers, to the effect that:


 


(i)                               The
Company has been duly organized and is validly existing as a corporation in
good standing under the laws of the State of Delaware, and, based solely on
certificates of public officials, is duly qualified to do business and is in
good standing as a foreign corporation in each jurisdiction in which its
ownership or lease of property or the conduct of its business requires such
qualification, except where the failure to be so qualified would not have a
Material Adverse Effect, and has all corporate power and authority necessary to
own or hold its properties and conduct the businesses in which it is engaged,
as described in the Offering Memorandum;


 


(ii)                            The
Conversion Shares, which are authorized on the date hereof, have been duly and
validly authorized and reserved for issuance upon conversion of the Notes by
all necessary corporate action and are free of preemptive rights; all
Conversion Shares, when so issued and delivered upon such conversion in
accordance with the terms of the Indenture, will be duly and validly authorized
and issued, fully paid and nonassessable and free and clear of all liens,
encumbrances, equities or claims imposed by or arising from actions of the Company;


 


(iii)                         The
statements in the Offering Memorandum under the captions “Description of the
Notes” and “Description of Capital Stock,” insofar as they purport to summarize
the provisions of the Indenture, the Pledge Agreement, the Registration Rights
Agreement, the Notes and the Common Stock (including the Conversion Shares) are
accurate and complete in all material respects to the extent required if such
statements were contained in a registration statement on Form S-3 under
the Securities Act;


 


(iv)                        There is
no restriction upon the voting or transfer of, any shares of Common Stock
pursuant to the Company’s certificate of incorporation or bylaws;


 


(v)                           To the
knowledge of such counsel and other than as set forth in the Offering
Memorandum, there are no legal or governmental proceedings pending to which the
Company or any of its subsidiaries is a party or of which any property or asset
of the Company or any of its subsidiaries is the subject which, if determined
adversely to the Company or any of its subsidiaries might have a Material
Adverse Effect or which might reasonably be expected to materially and
adversely affect the consummation of the transactions contemplated by this
Agreement or the performance by the Company of its obligations hereunder; to
the actual


 


21

















 


knowledge of such
counsel, no such proceedings are overtly threatened or contemplated by
governmental authorities or, except as set forth or contemplated in the
Offering Memorandum, overtly threatened by others; and, to the actual knowledge
of such counsel, the aggregate of all pending legal or governmental proceedings
to which the Company and its subsidiaries are a party or of which any of their
property or assets is the subject (other than the Company’s or any of its
subsidiaries’ patent applications currently pending before the U.S. Patent and
Trademark Office or before any foreign governmental authority that administers
the registration of patents) which are not described in the Offering Memorandum,
including ordinary routine litigation incidental to the business, could not
reasonably be expected to result in a Material Adverse Effect.


 


(vi)                        The
execution, delivery and performance of this Agreement, the Indenture, the
Pledge Agreement and the Registration Rights Agreement and the issuance of the
Notes and the Conversion Shares and the consummation of the transactions
contemplated hereby and thereby do not result in any violation of the
provisions of the certificate of incorporation or bylaws of the Company or any
statute or any order, rule or regulation known to such counsel of any court or
governmental agency or body having jurisdiction over the Company or any of the
properties or assets of the Company; and, except as may be required by the securities
or “blue sky” laws of any state of the United States in connection with the
sale of the Notes, no consent, approval, authorization or order of, or filing
or registration with, any such court or governmental agency or body is required
for the execution, delivery and performance of this Agreement, the Indenture
and the Pledge Agreement by the Company and the issuance of the Notes and the
Conversion Shares and the consummation of the transactions contemplated hereby
and thereby;


 


(vii)                     No
registration of the Notes or the Conversion Shares under the Securities Act,
and no qualification of the Indenture or an indenture or the Pledge Agreement
under the Trust Indenture Act, is required in connection with the offer, sale
and delivery of the Notes or in connection with the conversion of the Notes
into Conversion Shares, in each case, in the manner contemplated by the
Offering Memorandum, this Agreement, the Indenture and the Pledge Agreement;


 


(viii)                  The statements
in the Offering Memorandum under the caption “Certain United States Federal
Income Tax Considerations,” insofar as they purport to constitute summaries of
matters of United States federal income tax law and regulations or legal
conclusions with respect thereto, constitute accurate summaries of the matters
described therein in all material respects to the extent required if such
statements were contained in a registration statement on Form S-3 under
the Securities Act;


 


22

















 


(ix)                          The
Company is not an “investment company” within the meaning of the Investment
Company Act of 1940, as amended;


 


(x)                             The
Company has all necessary corporate right, power and authority to execute and
deliver each of the Operative Documents to which it is a party and to perform
its obligations thereunder and to issue, sell and deliver the Notes and the
Conversion Shares to the Initial Purchasers;


 


(xi)                          This
Agreement has been duly authorized, executed and delivered by the Company;


 


(xii)                       The
Indenture has been duly authorized, executed and delivered by the Company and,
assuming due authorization, execution and delivery thereof by the Trustee,
constitutes a legally valid and binding agreement of the Company enforceable
against the Company in accordance with its terms, except as the enforceability
thereof may be limited by bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and other similar laws relating to or affecting
creditors’ rights generally, by general principles of equity and limitations on
availability of equitable relief, including specific performance (regardless of
whether such enforceability is considered in a proceeding in equity or at law),
and by an implied covenant of good faith and fair dealing;


 


(xiii)                    The
Registration Rights Agreement has been duly authorized, executed and delivered
by the Company and, assuming due authorization, execution and delivery thereof
by the Initial Purchasers, constitutes a legally valid and binding agreement of
the Company enforceable against the Company in accordance with its terms,
except as rights to indemnity contained therein may be limited by applicable
law and except as the enforceability thereof may be limited by bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and other similar
laws relating to or affecting creditors’ rights generally, by general
principles of equity and limitations on availability of equitable relief,
including specific performance (regardless of whether such enforceability is
considered in a proceeding in equity or at law), and by an implied covenant of
good faith and fair dealing;


 


(xiv)                   The Pledge
Agreement has been duly authorized, executed and delivered by the Company and,
assuming due authorization, execution and delivery thereof by the Collateral
Agent, constitutes a legally valid and binding agreement of the Company
enforceable against the Company in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and other similar laws relating to or
affecting creditors’ rights generally, by general principles of equity and
limitations on availability of equitable relief, including specific performance
(regardless of whether


 


23

















 


such enforceability is
considered in a proceeding in equity or at law), and by an implied covenant of
good faith and fair dealing;


 


(xv)                      Under the
Uniform Commercial Code as in effect on the date hereof in the State of New
York (the “NYUCC”), the provisions of the Pledge Agreement are sufficient to
create and grant a security interest in the Collateral Account (as defined in
the Pledge Agreement) and the Pledged Securities (as defined in the Pledge
Agreement) credited thereto in favor of the Collateral Agent to secure the
payment and performance of the Obligations (as defined in the Pledge
Agreement);


 


(xvi)                   Under the
NYUCC, the provisions of the Pledge Agreement are effective to perfect the
security interest of the Collateral Agent in the Collateral Account and the
Pledged Securities credited thereto, assuming that (i) New York is deemed
the Securities Intermediary’s jurisdiction within the meaning of Section 8-110
of the NYUCC; (ii) the Collateral Account is a “securities account” within
the meaning of Article 8 of the NYUCC; (iii) the Pledged Securities
are “security entitlements” within the meaning of Article 8 of the NYUCC,
and (iv) J.P. Morgan Trust Company, National Association, in its
capacity as the Securities Intermediary under the Pledge Agreement is a securities
intermediary within the meaning of Section 8-102(a)(14) of the
NYUCC;


 


(xvii)                Assuming that the
Collateral Agent and each of the holders of the Notes has given value within
the meaning of Section 8-502 of the NYUCC and without notice of an
adverse claim within the meaning of Sections 8-105 and 8-502
of the NYUCC (and as adverse claim is defined in Section 8-102(a)(1)
of the NYUCC), no person may assert an action based on an adverse claim against
the Collateral Agent in accordance with Section 8-502 of the NYUCC;
and


 


(xviii)             The Notes have been
duly authorized by the Company and when executed, issued and authenticated in
accordance with terms of the Indenture and delivered to and paid for by the
Initial Purchasers, will constitute legally valid and binding obligations of
the Company, entitled to the benefits of the Indenture and enforceable against
the Company in accordance with their terms, except as the enforceability
thereof may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and other similar laws relating to or affecting creditors’ rights
generally, by general principles of equity and limitations on availability of
equitable relief, including specific performance (regardless of whether such
enforceability is considered in a proceeding in equity or at law), and by an
implied covenant of good faith and fair dealing.


 


In rendering such opinion, such counsel may state that
its opinion is limited to matters governed by the federal laws of the United
States of America, the laws of the State of New York, the Delaware General
Corporation Law and the NYUCC, and may


 


24

















 


state that it is relying, in respect of matters of New York law (other
than the NYUCC), upon Sidley Austin Brown & Wood llp, and in respect of matters of fact,
upon certificates of officers of the Company, provided that such counsel shall
state that it believes that the Initial Purchasers and it are justified in
relying upon such certificates.  Such
counsel shall also have furnished to the Initial Purchasers a written
statement, addressed to the Initial Purchasers and dated such Delivery Date, in
form and substance satisfactory to the Initial Purchasers, to the effect that
during the course of preparing the Offering Memorandum, such counsel
participated in conferences with officers and other representatives of the
Company, the Company’s independent public accountants, the Initial Purchasers
and their counsel, at which the contents of the Offering Memorandum were
discussed, and while such counsel has not independently verified and is not
passing upon the accuracy, completeness or fairness of the statements made in
the Offering Memorandum except as explicitly set forth above, no facts have
come to the attention of such counsel which lead it to believe that the
Offering Memorandum (other than the financial statements, financial and
statistical data and supporting schedules as to which such counsel shall make
no statement), as of its date or as of such Delivery Date, contained or
contains any untrue statement of a material fact or omitted or omits to state a
material fact necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.


 


(d)                                 Paula
Kasler, Associate General Counsel of the Company, shall have furnished to the
Initial Purchasers her written opinion, addressed to the Initial Purchasers and
dated such Delivery Date, in form and substance satisfactory to the Initial
Purchasers, to the effect that:


 


(i)                  The authorized,
issued and outstanding capital stock of the Company, as of March 31, 2003,
is as set forth in the Offering Memorandum under the column entitled “Actual”
under the caption “Capitalization,” and all of the issued and outstanding
shares of capital stock of the Company have been duly and validly authorized
and issued, are fully paid and nonassessable;


 


(ii)               Except as disclosed
in the Offering Memorandum, there are no preemptive or other rights to
subscribe for or to purchase from the Company, or any restriction upon the
voting or transfer of, any shares of Common Stock pursuant to any agreement or
other instrument to which the Company or any of its subsidiaries is a party
known to such counsel; the issuance of the Conversion Shares, upon conversion
of the Notes in accordance with the terms of the Indenture, will not be subject
to the preemptive or other similar rights of any securityholder of the Company;


 


(iii)            The execution,
delivery and performance of this Agreement, the Indenture, the Pledge Agreement
and the Registration Rights Agreement and the issuance of the Notes and the
Conversion Shares and the consummation of the transactions contemplated hereby
and thereby (i) do not result in a breach or violation of any of the terms
or provisions of, or constitute a default under, any indenture, mortgage, deed


 


25

















 


of trust, loan agreement
or other agreement or instrument known to such counsel to which the Company or
any of its subsidiaries is a party or by which the Company or any of its
subsidiaries is bound or to which any of the property or assets of the Company
or any of its subsidiaries is subject, and (ii) do not result in any
violation of any statute or any order, rule or regulation known to such counsel
of any court or governmental agency or body having jurisdiction over Nektar
Alabama or any of the properties or assets of Nektar Alabama; and


 


(iv)           All of the issued and
outstanding capital stock of Nektar Alabama is owned by the Company, directly
or through subsidiaries, free and clear of any security interest, mortgage,
pledge, lien, encumbrance, claim or equity.


 


Such counsel shall also have furnished to the Initial
Purchasers a written statement, addressed to the Initial Purchasers and dated
such Delivery Date, in form and substance satisfactory to the Initial
Purchasers, to the effect that she has no reason to believe that the statements
under the captions “Risk Factors—If any of our patents are invalid or pending
patents do not issue or following issuance are deemed not valid, then we may
lose key intellectual property right protection. If our products infringe on
third-party’s rights, then we will suffer adverse effects on our ability to
develop and commercialize products as well as our revenues and results of
operations.” in the Offering Memorandum, and “Item 1. Business—Patents and
Proprietary Rights” in the Company’s most recent Form 10-K, as of
their respective dates or as of such Delivery Date, contained or contains any
untrue statement of a material fact or omitted or omits to state a material
fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.


 


(e)                                  Bradley
Arant Rose & White llp
shall have furnished to the Initial Purchasers their written opinion, as
special Alabama counsel to the Company, addressed to the Initial Purchasers and
dated such Delivery Date, in form and substance satisfactory to the Initial
Purchasers, to the effect that:


 


(i)             Nektar Alabama has
been duly incorporated and is validly existing as a corporation in good
standing under the laws of the State of Alabama and has all corporate power and
authority necessary to own or hold its properties and conduct the businesses in
which it is engaged, as described in the Offering Memorandum; except as
otherwise disclosed in the Offering Memorandum, all of the issued and
outstanding capital stock of Nektar Alabama has been duly authorized and
validly issued, is fully paid and non-assessable and, based on the stock ledger
of Nektar Alabama, is owned by the Company, directly or through subsidiaries;
and to the knowledge of such counsel, none of the outstanding shares of capital
stock of Nektar Alabama was issued in violation of the preemptive or similar rights
of any securityholder of Nektar Alabama; and


 


26

















 


(ii)          The execution, delivery
and performance of this Agreement, the Indenture, the Pledge Agreement and the
Registration Rights Agreement and the issuance of the Notes and the Conversion
Shares and the consummation of the transactions contemplated hereby and thereby
by the Company do not result in any violation of the provisions of the articles
of incorporation or bylaws of Nektar Alabama.


 


In rendering such opinion, such counsel may state that
its opinion is limited to matters governed by the laws of the State of Alabama.


 


(f)                                    Sidley
Austin Brown & Wood llp,
shall have furnished to the Initial Purchasers their written opinion, as
counsel to the Initial Purchasers, addressed to the Initial Purchasers and
dated such Delivery Date, in form and substance satisfactory to the Initial
Purchasers.


 


(g)                                 With
respect to the letter of Ernst & Young LLP delivered to the
Initial Purchasers concurrently with the execution of this Agreement (the
“initial letter”), the Company shall have furnished to the Initial Purchasers a
letter (the “bring-down letter”) of such accountants, addressed to the Initial
Purchasers and dated such Delivery Date (i) confirming that they are independent
accountants within the meaning of the Securities Act and are in compliance with
the applicable requirements relating to the qualification of accountants under
Rule 2-01 of Regulation S-X of the Commission,
(ii) stating, as of the date of the bring-down letter (or, with respect to
matters involving changes or developments since the respective dates as of
which specified financial information is given in the Offering Memorandum, as
of a date not more than five days prior to the date of the bring-down letter),
the conclusions and findings of such firm with respect to the financial
information and other matters covered by the initial letter and
(iii) confirming in all material respects the conclusions and findings set
forth in the initial letter.


 


(h)                                 The
Company shall have furnished to the Initial Purchasers on such Delivery Date a
certificate, dated such Delivery Date and delivered on behalf of the Company by
its chief executive officer and its chief financial officer, in form and
substance satisfactory to the Initial Purchasers, to the effect that:


 


(i)                  The
representations, warranties and agreements of the Company in Section 1
hereof are true and correct as of the date given and as of such Delivery Date;
and the Company has complied in all material respects with all its agreements
contained herein to be performed prior to or on such Delivery Date;


 


(ii)               (A) Neither the
Company nor any of its subsidiaries has sustained, since the date of the latest
audited financial statements included in the Offering Memorandum, any loss or
interference with its business from fire, explosion, flood or other calamity,
whether or not covered by insurance, or from any labor dispute or court or
governmental action,


 


27

















 


order or decree, except
(x) as set forth or contemplated in the Offering Memorandum and
(y) for operating losses incurred in the ordinary course of business, or
(B) since such date there has not been any change in the capital stock or
long-term debt of the Company or any of its subsidiaries (except for exercise
of outstanding options described in the Offering Memorandum or pursuant to
Authorized Grants and as provided in Section 1(m) above), or any change,
or any development involving a prospective change, in or affecting the general
affairs, management, financial position, stockholders’ equity or results of
operations of the Company and its subsidiaries considered as one enterprise,
except as set forth or contemplated in the Offering Memorandum; and


 


(iii)            Such officer has
carefully examined the Offering Memorandum and, in such officer’s opinion
(A) the Offering Memorandum, as of its date, did not include any untrue
statement of a material fact and did not omit to state any material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, and (B) since the date of the
Offering Memorandum, no event has occurred which should have been set forth in
a supplement or amendment to the Offering Memorandum.


 


(i)                                     The
Indenture shall have been duly executed and delivered by the Company and the
Trustee and the Notes shall have been duly executed and delivered by the
Company and duly authenticated by the Trustee.


 


(j)                                     The
Company and the Collateral Agent shall have executed and delivered the Pledge
Agreement (in form and substance satisfactory to the Initial Purchasers) and
the Pledge Agreement shall be in full force and effect.


 


(k)                                  The
Company and the Initial Purchasers shall have executed and delivered the Registration
Rights Agreement (in form and substance satisfactory to the Initial Purchasers)
and the Registration Rights Agreement shall be in full force and effect.


 


(l)                                     The
NASD shall have accepted the Notes for trading on PORTAL.


 


(m)                               (i) Neither
the Company nor any of its subsidiaries shall have sustained, since the date of
the latest audited financial statements included in the Offering Memorandum,
any loss or interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor dispute or
court or governmental action, order or decree, except (A) as set forth or
contemplated in the Offering Memorandum and (B) for operating losses
incurred in the ordinary course of business, or (ii) since such date there
shall not have been any change in the capital stock or long-term debt of the
Company or any of its subsidiaries (except for exercise of outstanding options
described in the Offering Memorandum or pursuant to Authorized Grants and as
provided in Section 1(m) above), or any change, or any development
involving a


 


28

















 


prospective change, in or
affecting the general affairs, management, financial position, stockholders’
equity or results of operations of the Company and its subsidiaries considered
as one enterprise, except as set forth or contemplated in the Offering
Memorandum, the effect of which, in any such case described in clause (i)
or (ii), is, in the reasonable judgment of the Initial Purchasers, so material
and adverse as to make it impracticable or inadvisable to proceed with the sale
or the delivery of the Notes being delivered on such Delivery Date on the terms
and in the manner contemplated in the Offering Memorandum.


 


(n)                                 The
Company shall have furnished to the Initial Purchasers such further
information, certificates and documents as the Initial Purchasers may
reasonably request to evidence compliance with the conditions set forth in this
Section 5.


 


All opinions, letters, evidence and certificates
mentioned above or elsewhere in this Agreement shall be deemed to be in
compliance with the provisions hereof only if they are in form and substance
satisfactory to counsel to the Initial Purchasers.


 


If any condition specified in this Section 5 shall
not have been fulfilled when and as required to be fulfilled, this Agreement
may be terminated by the Representative by notice to the Company at any time at
or prior to the First Delivery Date, and such termination shall be without
liability of any party to any other party except as provided in Section 4
and except that Sections 1 and 7 shall survive any such termination and remain
in full force and effect.


 


6.                                       Representations,
Warranties and Agreements of Initial Purchasers.  Each Initial Purchaser, severally and not jointly, represents and
warrants that such Initial Purchaser is a QIB. 
Each Initial Purchaser, severally and not jointly, agrees with the
Company that:


 


(a)                                  The
Notes and the Conversion Shares have not been and will not be registered under
the Securities Act in connection with the initial offering of the Notes.


 


(b)                                 Such
Initial Purchaser is a QIB;


 


(c)                                  Such
Initial Purchaser will not offer or sell the Notes in the United States by
means of any form of general solicitation or general advertising within the
meaning of Rule 502(c) of Regulation D, including (i) any
advertisement, article, notice or other communication published in any
newspaper, magazine or similar medium or broadcast over television or radio, or
(ii) any seminar or meeting whose attendees have been invited by any
general solicitation or general advertising in the United States; and


 


(d)                                 Such
Initial Purchaser has not offered or sold, and will not offer or sell, any
Notes in the United States except to persons whom it reasonably believes to be
QIBs.


 


29

















 


7.                                       Indemnification
and Contribution.


 


(a)                                  The
Company shall indemnify and hold harmless each Initial Purchaser, its officers
and employees and each person, if any, who controls any Initial Purchaser
within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act from and against any loss, claim, damage or liability,
joint or several, or any action in respect thereof (including, but not limited to,
any loss, claim, damage, liability or action relating to purchases and sales of
the Notes), to which that Initial Purchaser, officer, employee or controlling
person may become subject:


 


(i)             insofar as such loss,
claim, damage, liability or action arises out of, or is based upon:
(A) any untrue statement or alleged untrue statement of a material fact
contained in (1) any Preliminary Offering Memorandum or the Offering
Memorandum, or in any amendment or supplement thereto, or (2) any blue sky
application or other document prepared or executed by the Company (or based
upon any written information furnished by the Company) filed in any
jurisdiction specifically for the purpose of qualifying any or all of the Notes
under the securities laws of any state or other jurisdiction (such application,
document or information being hereinafter called a “Blue Sky Application”), or
(B) the omission or alleged omission to state therein any material fact
necessary to make the statements therein not misleading; or


 


(ii)          to the extent of the
aggregate amount paid in settlement of any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened, or of
any claim whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission; provided that (subject to
Section 7(c)) any such settlement is effected with the written consent of
the Company,


 


and shall reimburse each
Initial Purchaser and each such officer, employee and controlling person
promptly upon demand for any and all expense whatsoever, as incurred (including
the fees and disbursements of counsel chosen by Merrill Lynch, except as
reimbursement of such fees may be limited by Section 7(c)), reasonably
incurred by that Initial Purchaser, officer, employee or controlling person in
connection with investigating or defending or preparing to defend against any
such loss, claim, damage, liability or action as such expenses are incurred; provided,
however,
that the Company shall not be liable in any such case to the extent that any
such loss, claim, damage, liability or action arises out of, or is based upon,
any untrue statement or alleged untrue statement or omission or alleged
omission made in any Preliminary Offering Memorandum or the Offering Memorandum,
or in any such amendment or supplement, or in any Blue Sky Application in
reliance upon and in conformity with the written information furnished to the
Company by or on behalf of any Initial Purchaser specifically for inclusion
therein and described in Section 7(e); provided, further, that as to any
Preliminary Offering Memorandum, this indemnity agreement shall not inure to
the benefit of any Initial Purchaser, its officers or employees or any person
controlling that Initial Purchaser on account of any loss, claim, damage,
liability or action arising from the sale of Notes to any person by that
Initial Purchaser if that Initial Purchaser


 


30

















 


failed to send or give a
copy of the Offering Memorandum, as the same may be amended or supplemented, to
that person, and the untrue statement or alleged untrue statement of a material
fact or omission or alleged omission to state a material fact in such
Preliminary Offering Memorandum was corrected in the Offering Memorandum,
unless such failure resulted from non-compliance by the Company with
Section 3(b).  The foregoing
indemnity agreement is in addition to any liability which the Company may
otherwise have to any Initial Purchaser or to any officer, employee or controlling
person of that Initial Purchaser.


 


(b)                                 Each
Initial Purchaser, severally and not jointly, shall indemnify and hold
harmless, the Company, its officers and directors, and each person, if any, who
controls the Company within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act from and against any loss, claim,
damage or liability, joint or several, or any action in respect thereof, to
which the Company or any such director, officer or controlling person may
become subject, insofar as such loss, claim, damage, liability or action arises
out of, or is based upon:


 


(i)             any untrue statement
or alleged untrue statement of a material fact contained in any Preliminary
Offering Memorandum or the Offering Memorandum or in any amendment or
supplement thereto, or in any Blue Sky Application, or


 


(ii)          the omission or alleged
omission to state therein any material fact necessary to make the statements
therein not misleading,


 


but in each case only to
the extent that such untrue statement or alleged untrue statement or omission
or alleged omission was made in reliance upon and in conformity with the
written information furnished to the Company by or on behalf of that Initial
Purchaser specifically for inclusion therein and described in Section 7(e),
and shall reimburse the Company and any such director, officer or controlling
person promptly upon demand for any legal or other expenses reasonably incurred
by the Company or any such director, officer or controlling person in
connection with investigating or defending or preparing to defend against any
such loss, claim, damage, liability or action as such expenses are
incurred.  The foregoing indemnity
agreement is in addition to any liability which any Initial Purchaser may
otherwise have to the Company or any such director, officer or controlling
person.


 


(c)                                  Promptly
after receipt by an indemnified party under this Section 7 of notice of
any claim or the commencement of any action, the indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party under
this Section 7, notify the indemnifying party in writing of the claim or
the commencement of that action; provided, however, that the failure to
notify the indemnifying party shall not relieve it from any liability which it
may have under this Section 7 except to the extent it has been materially
prejudiced by such failure and, provided, further, that the failure to
notify the indemnifying party shall not relieve it from any liability which it
may have to an indemnified party otherwise than under this Section 7.  If any such claim or action shall be brought
against an indemnified party, and it shall notify the indemnifying party


 


31

















 


thereof,
the indemnifying party shall be entitled to participate therein and, to the
extent that it wishes, jointly with any other similarly notified indemnifying
party, to assume the defense thereof with counsel satisfactory to the
indemnified party.  After notice from
the indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 7 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation; provided, however,
that the Initial Purchasers shall have the right to employ counsel to represent
jointly the Initial Purchasers and their respective officers, employees and
controlling persons who may be subject to liability arising out of any claim in
respect of which indemnity may be sought by the Initial Purchasers against the
Company under this Section 7, if the Initial Purchasers shall have
reasonably concluded that there may be one or more legal defenses available to
the Initial Purchasers and their respective officers, employees and controlling
persons that are different from or additional to those available to the Company
and its officers, employees and controlling persons, the fees and expenses of a
single separate counsel shall be paid by the Company.  No indemnifying party shall:


 


(i)             without the prior
written consent of the indemnified parties (which consent shall not be
unreasonably withheld) settle or compromise or consent to the entry of any
judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action) unless such settlement, compromise or consent
(1) includes an unconditional release of each indemnified party from all
liability arising out of such claim, action, suit or proceeding and
(2) does not include a statement as to or an admission of fault,
culpability or a failure to act by or on behalf of any indemnified party, or


 


(ii)          be liable for any
settlement of any such action effected without its written consent (which
consent shall not be unreasonably withheld) but if settled with its written
consent or if there be a final judgment of the plaintiff in any such action,
the indemnifying party agrees to indemnify and hold harmless any indemnified
party from and against any loss of liability by reason of such settlement or
judgment.


 


(d)                                 If
the indemnification provided for in this Section 7 shall for any reason be
unavailable or insufficient to hold harmless an indemnified party under
Section 7(a) or 7(b) in respect of any loss, claim, damage or liability,
or any action in respect thereof, referred to therein, each indemnifying party
shall, in lieu of indemnifying such indemnified party, contribute to the amount
paid or payable by such indemnified party as a result of such loss, claim,
damage or liability, or action in respect thereof:


 


(i)                 in such
proportion as shall be appropriate to reflect the relative benefits received by
the Company on the one hand and the Initial Purchasers on the other from the
offering of the Notes, or


 


32

















 


(ii)              if the allocation
provided by clause 7(d)(i) is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause 7(d)(i) but also the relative fault of the Company on the one
hand and the Initial Purchasers on the other with respect to the statements or
omissions or alleged statements or alleged omissions that resulted in such
loss, claim, damage or liability (or action in respect thereof), as well as any
other relevant equitable considerations.


 


The relative benefits received by the Company on the
one hand and the Initial Purchasers on the other with respect to such offering
shall be deemed to be in the same proportion as the total net proceeds from the
offering of the Notes purchased under this Agreement (before deducting
expenses) received by the Company on the one hand, and the total discounts and
commissions received by the Initial Purchasers with respect to the Notes
purchased under this Agreement, on the other hand, bear to the total gross
proceeds from the offering of the Notes under this Agreement, in each case as
set forth in the table under the caption “Plan of Distribution” in the Offering
Memorandum.


 


The relative fault shall be determined by reference to
whether the untrue or alleged untrue statement of a material fact or omission
or alleged omission to state a material fact relates to information supplied by
the Company or the Initial Purchasers, the intent of the parties and their
relative knowledge, access to information and opportunity to correct or prevent
such statement or omission.


 


The Company and the Initial Purchasers agree that it
would not be just and equitable if the amount of contributions pursuant to this
Section 7(d) were to be determined by pro rata allocation (even if the Initial
Purchasers were treated as one entity for such purpose) or by any other method
of allocation which does not take into account the equitable considerations
referred to herein.  The amount paid or
payable by an indemnified party as a result of the loss, claim, damage or
liability, or action in respect thereof, referred to above in this
Section 7(d) shall be deemed to include, for purposes of this
Section 7(d), any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating, preparing or defending any
such litigation, investigation or proceeding by any governmental agency or
body, or commenced or threatened action or claim.


 


Notwithstanding the provisions of this
Section 7(d), no Initial Purchaser shall be required to contribute any
amount in excess of the amount by which the total price at which the Notes
resold by it in the initial placement of such Notes were offered to investors
exceeds the amount of any damages which such Initial Purchaser has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission.


 


No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled
to contribution from any person who was not guilty of such fraudulent
misrepresentation.


 


33

















 


For purposes of this Section 7(d), each person,
if any, who controls an Initial Purchaser within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act shall have the
same rights to contribution as such Initial Purchaser, and each person, if any,
who controls the Company within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act shall have the same rights to
contribution as the Company.  The
Initial Purchasers’ obligations to contribute as provided in this
Section 7(d) are several in proportion to their respective purchase
obligations and not joint.


 


(e)                                  The
Initial Purchasers severally confirm that the statements (i) with respect
to the offering of the Notes set forth in the third sentence of the ninth
paragraph on the cover page of the Offering Memorandum; (ii) in the fourth
paragraph under the heading “Plan of Distribution”; (iii) in the first
paragraph under the heading “Plan of Distribution—Commissions and Discounts” in
the Offering Memorandum; (iv) in the paragraph under the heading “Plan of
Distribution—Notes Are Not Being Registered” in the Offering Memorandum;
(v) in the third and fourth sentences of the first paragraph under the
heading “Plan of Distribution—New Issue of Notes” in the Offering Memorandum;
and (vi) in the first and third sentences of the first paragraph under the
heading “Plan of Distribution—Price Stabilization and Short Positions” in the
Offering Memorandum are correct and constitute the only information furnished
in writing to the Company by or on behalf of the Initial Purchasers
specifically for inclusion in the Offering Memorandum.


 


8.                                       Defaulting
Initial Purchasers.


 


If, on any Delivery Date, any Initial Purchaser
defaults in the performance of its obligations under this Agreement, the
remaining non-defaulting Initial Purchasers shall be obligated to purchase the
aggregate principal amount of Notes which the defaulting Initial Purchaser
agreed but failed to purchase on such Delivery Date in the respective
proportions which the total aggregate principal amount of Notes set opposite
the name of each remaining non-defaulting Initial Purchaser in Schedule 1
hereto bears to the total aggregate principal amount of Notes set opposite the
names of all the remaining non-defaulting Initial Purchasers in Schedule 1
hereto; provided,
however,
that the remaining non-defaulting Initial Purchasers shall not be obligated to
purchase any Notes on such Delivery Date if the total aggregate principal
amount of Notes which the defaulting Initial Purchasers agreed but


 


34

















 


failed to purchase on
such date exceeds 9.09% of the total aggregate principal amount at maturity of
Notes to be purchased on such Delivery Date, and any remaining non-defaulting
Initial Purchaser shall not be obligated to purchase more than 110% of the
aggregate principal amount at maturity of Notes which it agreed to purchase on
such Delivery Date pursuant to the terms of Section 2.  If the foregoing maximums are exceeded, the
remaining non-defaulting Initial Purchasers, or those other purchasers
satisfactory to the Initial Purchasers who so agree, shall have the right, but
shall not be obligated, to purchase on such Delivery Date, in such proportion
as may be agreed upon among them, the total aggregate principal amount of Notes
to be purchased on such Delivery Date. 
If the remaining Initial Purchasers or other purchasers satisfactory to
the Initial Purchasers do not elect to purchase on such Delivery Date the
aggregate principal amount of Notes which the defaulting Initial Purchasers
agreed but failed to purchase, this Agreement (or with respect to the Optional
Delivery Date, the obligation of the Initial Purchasers to purchase the
Optional Notes) shall terminate without liability on the part of any
non-defaulting Initial Purchasers and the Company, except that the Company will
continue to be liable for the payment of expenses to the extent set forth in
Sections 4 and 10.  As used in this
Agreement, the term “Initial Purchaser” includes, for all purposes of this
Agreement unless the context requires otherwise, any party not listed in Schedule
1 hereto who, pursuant to this Section 8, purchases Notes which a
defaulting Initial Purchaser agreed but failed to purchase.


 


Nothing contained herein shall relieve a defaulting
Initial Purchaser of any liability it may have to the Company for damages
caused by its default.  If other
purchasers are obligated or agree to purchase the Notes of a defaulting or
withdrawing Initial Purchaser, either the remaining non-defaulting Initial
Purchasers or the Company may postpone the Delivery Date for up to seven full
business days in order to effect any changes in the Offering Memorandum or in
any other document or arrangement that, in the opinion of counsel to the
Company or counsel to the Initial Purchasers, may be necessary.


 


9.                                       Termination.


 


(a)                                  The
obligations of the Initial Purchasers hereunder may be terminated by the
Initial Purchasers by notice given to and received by the Company prior to
delivery of and payment for the Notes if, prior to that time: (i) there
has occurred one of the events described in Section 5(m), or
(ii) there has occurred any material adverse change in the financial
markets in the United States, any outbreak of hostilities or escalation thereof
or other calamity or crisis or any change or development involving a prospective
change in national or international political, financial or economic
conditions, in each case the effect of which is such as to make it, in the
judgment of the Representative, impracticable or inadvisable to market the
Notes or to enforce contracts for the sale of the Notes, or (iii) trading
in any securities of the Company has been suspended or materially limited by
the Commission or The Nasdaq National Market, or if trading generally on the
American Stock Exchange or the New York Stock Exchange or in The Nasdaq Stock
Market has been suspended or materially limited, or minimum or maximum prices
for trading have been fixed, or maximum ranges for prices have been required,
by any of said exchanges or by such system or by order of the Commission, the
National Association of Securities Dealers, Inc. or any other governmental
authority, or a material disruption has occurred in commercial banking or
securities settlement or clearance services in the United States or (iv) a
banking moratorium has been declared by either Federal or New York authorities.


 


(b)                                 If
this Agreement is terminated pursuant to this Section 9, such termination
shall be without liability of any party to any other party except as provided
in Section 10 and provided, further, that
Sections 1, 7 and 13 shall survive such termination and remain in full
force and effect.


 


10.                                 Reimbursement
of Initial Purchasers’ Expenses.  If
(a) the Company shall fail to tender the Notes for delivery to the Initial
Purchasers for any reason permitted under this Agreement or (b) the
Initial Purchasers shall decline to purchase the Notes for


 


35

















 


any
reason permitted under this Agreement (including the termination of this
Agreement pursuant to Section 9), the Company shall reimburse the Initial
Purchasers for the fees and expenses of their counsel and for such other
out-of-pocket expenses as shall have been incurred by them in connection with
this Agreement and the proposed purchase of the Notes, and upon demand the
Company shall pay the full amount thereof to the Initial Purchasers.  If this Agreement is terminated pursuant to
Section 8 by reason of the default of one or more Initial Purchasers, the
Company shall not be obligated to reimburse any defaulting Initial Purchaser on
account of those expenses.


 


11.                                 Notices,
etc.  All statements, requests,
notices and agreements hereunder shall be in writing, and:


 


(a)                                  if
to the Initial Purchasers, shall be delivered or sent by mail, telex or
facsimile transmission to c/o Merrill Lynch & Co., North Tower, World
Financial Center, New York, New York 10281, Attention: Paul A. Pepe (Fax:
212-738-1069); and


 


(b)                                 if
to the Company, shall be delivered or sent by mail, telex or facsimile
transmission to Nektar Therapeutics, 150 Industrial Road, San Carlos,
California  94070, Attention: Secretary
(Fax: 650-620-5360).


 


provided, however, that any notice to
an Initial Purchaser pursuant to Section 7(c) shall be delivered or sent
by mail, telex or facsimile transmission to each such Initial Purchaser, which
address will be supplied to any other party hereto by Merrill Lynch upon
request.  Any such statements, requests,
notices or agreements shall take effect at the time of receipt thereof.  The Company shall be entitled to act and
rely upon any request, consent, notice or agreement given or made on behalf of
the Initial Purchasers by Merrill Lynch.


 


12.                                 Persons
Entitled to Benefit of Agreement. 
This Agreement shall inure to the benefit of and be binding upon the
Initial Purchasers, the Company and their respective successors.  This Agreement and the terms and provisions
hereof are for the sole benefit of only those persons, except that the
representations, warranties, indemnities and agreements of the Company contained
in this Agreement shall also be deemed to be for the benefit of the officers
and employees of each Initial Purchaser and the person or persons, if any, who
control each Initial Purchaser within the meaning of Section 15 of the
Securities Act and any indemnity agreement of the Initial Purchasers contained
in Section 7(b) of this Agreement shall be deemed to be for the benefit of
directors, officers and employees of the Company, and any person controlling
the Company within the meaning of Section 15 of the Securities Act.  Nothing contained in this Agreement is
intended or shall be construed to give any person, other than the persons
referred to in this Section 12, any legal or equitable right, remedy or
claim under or in respect of this Agreement or any provision contained herein.


 


13.                                 Survival.  The respective indemnities, representations,
warranties and agreements of the Company and the Initial Purchasers contained
in this Agreement or made by or on behalf of them, respectively, pursuant to
this Agreement, shall survive the


 


36

















 


delivery
of and payment for the Notes and shall remain in full force and effect,
regardless of any termination or cancellation of this Agreement or any
investigation made by or on behalf of any of them or any person controlling any
of them.


 


14.                                 Definition
of the Terms “Business Day” and “Subsidiary.”  For purposes of this Agreement, (a) ”business day” means any
day on which the New York Stock Exchange, Inc. is open for trading and
(b) ”subsidiary” has the meaning set forth in Rule 405 of the rules
and regulations promulgated under the Securities Act.


 


15.                                 Governing
Law.  This Agreement shall be
governed by, and construed in accordance with, the laws of the State of New
York.


 


16.                                 Counterparts.  This Agreement may be executed in one or
more counterparts and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to be an original but all such counterparts
shall together constitute one and the same instrument.


 


17.                                 Headings.  The headings herein are inserted for
convenience of reference only and are not intended to be part of, or to affect
the meaning or interpretation of, this Agreement.


 


37

















 


If the foregoing correctly sets forth the agreement between
the Company and the Initial Purchasers, please indicate your acceptance in the
space provided for that purpose below.


 


	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
  NEKTAR THERAPEUTICS

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  



 


Accepted and agreed by:


 


MERRILL
LYNCH, PIERCE, FENNER & SMITH

INCORPORATED


DEUTSCHE
BANK SECURITIES INC.

LEHMAN BROTHERS INC.

FRIEDMAN, BILLINGS, RAMSEY & CO., INC.

SG COWEN SECURITIES CORPORATION


 


By:
MERRILL LYNCH, PIERCE, FENNER & SMITH

INCORPORATED


 


 


	
  By:

  	
   

  	
   

  
	
   

  	
  Authorized
  Representative

  	
   

  



 


38

















 


SCHEDULE 1


 




	
  Initial Purchasers

  	
   

  	
  Principal
  Amount

  of Firm Notes

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Merrill
  Lynch, Pierce, Fenner & Smith Incorporated

  	
   

  	
  $

  	
  52,000,000

  	
   

  
	
  Deutsche Bank Securities Inc.

  	
   

  	
  16,000,000

  	
   

  
	
  Lehman Brothers Inc.

  	
   

  	
  16,000,000

  	
   

  
	
  Friedman, Billings, Ramsey & Co., Inc.

  	
   

  	
  8,000,000

  	
   

  
	
  SG
  Cowen Securities Corporation

  	
   

  	
  8,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Total

  	
   

  	
  $

  	
  100,000,000

  	
   

  






 


39