Exhibit 10.31


 


SECURITIES PURCHASE AGREEMENT


 


This SECURITIES PURCHASE
AGREEMENT (this “Agreement”)
is dated as of the 13th day of February, 2009 (the “Effective Date”) by
and between Affymax, Inc., a Delaware corporation, with its principal
office at 4001 Miranda Avenue, Palo Alto, California 94304 (the “Company”), and the
several purchasers identified in the attached Exhibit A
(individually, a “Purchaser”
and collectively, the “Purchasers”).


 


WHEREAS, the Company desires
to issue and sell to the Purchasers an aggregate of 2,844,708 shares (the “Shares”) of the
authorized but unissued shares of common stock, $0.001 par value per share, of
the Company (the “Common
Stock”); and


 


WHEREAS, the Purchasers,
severally but not jointly, wish to purchase the Shares on the terms and subject
to the conditions set forth in this Agreement.


 


NOW, THEREFORE, in
consideration of the mutual agreements, representations, warranties and
covenants herein contained, the parties hereto agree as follows:


 


1.             Definitions.  As used in this Agreement, the following
terms shall have the following respective meanings:


 


(a)           “Affiliate” of a party
means any corporation or other business entity controlled by, controlling or
under common control with such party. 
For this purpose “control”
shall mean direct or indirect beneficial ownership of fifty percent (50%)
or more of the voting or income interest in such corporation or other business
entity.


 


(b)           “Closing Date” means
the date of the Closing.


 


(c)           “Exchange Act” means
the Securities Exchange Act of 1934, as amended, and all of the rules and
regulations promulgated thereunder.


 


(d)           “Majority Purchasers”
shall mean Purchasers which, at any given time, hold or have the right to
acquire hereunder greater than fifty percent (50%) of the voting power of
the Shares issued and sold or to be issued and sold pursuant to this Agreement,
that have not been resold pursuant to an effective registration statement under
the Securities Act or Rule 144 under the Securities Act.


 


(e)           “Registration Statement”
shall mean any registration statement required to be filed by Section 7.1
below, and shall include any preliminary prospectus, final prospectus, exhibit
or amendment included in or relating to such registration statements.


 


(f)            “Registrable Shares”  shall mean all of the Shares.


 

















 


(g)           “Rules and Regulations”
shall mean the rules and regulations of the SEC.


 


(h)           “SEC” shall mean the
Securities and Exchange Commission.


 


(i)            “SEC Documents” shall
have the meaning set forth in Section 3.23 below.


 


(j)            “Securities Act” shall
mean the Securities Act of 1933, as amended, and all of the rules and
regulations promulgated thereunder.


 


2.             Purchase and
Sale of Shares.


 


2.1           Purchase and Sale.  Subject to and upon the terms and conditions
set forth in this Agreement, the Company agrees to issue and sell to each
Purchaser, and each Purchaser, severally but not jointly, hereby agrees to
purchase from the Company, at the Closing (as defined below), the number of
Shares of Common Stock set forth opposite the name of such Purchaser under the
heading “Number of Shares to be Purchased” on Exhibit A
hereto, at a purchase price of $11.24896 per share (the “Common Stock Purchase Price”).  The purchase price payable by each Purchaser
for the Shares that such Purchaser is hereby agreeing to purchase is set forth
opposite the name of such Purchaser under the heading “Purchase Price”
on Exhibit A hereto.


 


2.2           Closing.  Subject to the satisfaction (or waiver) of
the closing conditions set forth in Sections 5.1 and 5.2 of this Agreement, the
closing of the transactions contemplated under this Agreement (the “Closing”) shall take
place at the offices of Cooley Godward Kronish LLP (“Cooley”), counsel to
the Company, located at Five Palo Alto Square, 3000 El Camino Real, Palo Alto,
CA 94306, at 10:00 a.m. California time on March 2, 2009, or at such
other location, date and time as may be agreed upon between the Majority
Purchasers and the Company.


 


2.3           Delivery.  At the Closing, the Company shall deliver to
each Purchaser one or more original stock certificates, free and clear of all
restrictive and other legends (except as provided in Section 6 hereof),
evidencing the Shares subscribed for by Purchaser hereunder and registered in
the name of such Purchaser, against payment of the purchase price therefor by
wire transfer of immediately available funds to such account or accounts as the
Company shall designate in writing or such other method of closing upon which
the Company and the Purchasers may agree.


 


3.             Representations
and Warranties of the Company. Except as disclosed in the SEC Documents,
the Company hereby represents and warrants to each of the Purchasers, as of the
Effective Date and the Closing Date, as follows:


 


3.1           Organization and
Qualification. The Company has been duly incorporated, is validly existing
as a corporation in good standing under the laws of the State of Delaware, has
the corporate power and authority to own, lease and operate, as the case may
be, its properties and assets and to conduct its business as currently conducted
and as described in the SEC Documents and is duly qualified to transact
business and is


 


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in
good standing in each jurisdiction in which the conduct of its business or its
ownership or leasing of property or its employment of employees or consultants
therein requires such qualification, except to the extent that the failure to
be so qualified or be in good standing would not, individually or in the
aggregate, have a material adverse effect on the Company, including, without
limitation, a material adverse effect on the condition, financial or otherwise,
or in the earnings, business, properties, operations or prospects of the
Company or on the power or ability of the Company to perform its obligations under
this Agreement (a “Material
Adverse Effect”).  The
Company has not received a written notification that any proceeding has been
instituted in any such jurisdiction, revoking, limiting or curtailing, or
seeking to revoke, limit or curtail, such power and authority or qualification,
and to the Company’s knowledge, no proceeding has been instituted in any such
jurisdiction, revoking, limiting or curtailing, or seeking to revoke, limit or
curtail, such power and authority or qualification.  The Company is in possession of and operating
in material compliance with all authorizations, licenses, certificates,
consents, orders and permits from state, federal and other regulatory
authorities that are material to the conduct of its business, all of which are
valid and in full force and effect.  The
Company is not in violation of its certificate of incorporation or bylaws as in
effect on the Effective Date and the Closing Date, complete and correct copies
of which have been filed by the Company with the SEC.


 


3.2           Subsidiaries.
The Company has no subsidiaries other than its wholly owned subsidiary, Affymax
Pharma Limited, which has no operations, assets, liabilities or employees.  The Company does not own any shares of stock
or any other equity or long-term debt securities of any corporation or have any
equity interest in any firm, partnership, limited liability company, joint
venture, association or other entity except as set forth in the SEC Documents.


 


3.3           Due
Authorization; Enforcement. (a) The Company has all requisite
corporate power and authority to enter into this Agreement and to perform the
transactions contemplated hereby, (b) this Agreement has been duly
authorized, executed and delivered by the Company, and (c) this Agreement
constitutes a valid and binding obligation of the Company enforceable against
the Company in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to or affecting creditors’ rights generally or by general
equitable principles and except as to the enforceability of any rights to
indemnification or contribution that may be violative of the public policy
underlying any law, rule or regulation (including any federal or state
securities law, rule or regulation).


 


3.4           Capitalization.
The authorized capital stock of the Company consists of (i) 100,000,000
shares of Common Stock, of which 15,315,000 shares are outstanding on the
Effective Date and (ii) 10,000,000 shares of preferred stock, of which no shares
are outstanding on the Effective Date. 
The shares of Common Stock outstanding prior to the issuance of the
Shares have been duly authorized and are validly issued, fully paid and
non-assessable, have been issued in compliance with all federal and state
securities laws, and have not been issued in violation of or subject to any
preemptive rights or other rights to subscribe for or purchase securities.  Except for (i) options to purchase
Common Stock or other equity awards issued to employees and consultants of


 


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the
Company pursuant to the employee benefits plans disclosed in the SEC Documents
and (ii) outstanding warrants disclosed in the SEC Documents, there are no
existing options, warrants, calls, preemptive (or similar) rights,
subscriptions or other rights, agreements, arrangements or commitments of any
character obligating the Company to issue, transfer or sell, or cause to be
issued, transferred or sold, any shares of the capital stock of the Company or
other equity interests in the Company or any securities convertible into or
exchangeable for such shares of capital stock or other equity interests, and
there are no outstanding contractual obligations of the Company to repurchase,
redeem or otherwise acquire any shares of its capital stock or other equity
interests.  The description of the
Company’s warrants, stock option plans, employee stock purchase plans or
similar arrangements, and the options or other rights granted and exercised
thereunder, set forth in the SEC Documents accurately and fairly presents, in
all material respects, the information required to be shown with respect to
such warrants, plans, arrangements, options and rights.  The issuance and sale of the Shares will not
result in a right of any current holder of Company securities to adjust the
exercise, conversion, exchange or reset price under such securities.


 


3.5           Issuance of the
Shares. The Shares to be issued and sold by the Company to the Purchasers
hereunder have been duly and validly authorized, and the Shares, when issued
and delivered against payment therefor as provided herein, will be duly and
validly issued, fully paid and non-assessable and will be sold free and clear
of any pledge, lien, security interest, encumbrance, claim or equitable
interest.  No preemptive right, co-sale
right, right of first refusal or other similar right of stockholders exists
with respect to any of the Shares or the issuance and sale thereof, other than
those that have been expressly waived prior to the date hereof.  No further approval or authorization of any
stockholder or the Board of Directors of the Company is required for the
issuance and sale or transfer of the Shares, or the filing of the Registration
Statement by the Company.  No further
approval or authorization of any other third party is required for the issuance
and sale or transfer of the Shares, or the filing of the Registration Statement
by the Company, except as may be required under federal, state or other
securities or blue sky laws.


 


3.6           No Conflict.
The execution and delivery by the Company of, the performance by the Company of
its obligations under, and the consummation of the transactions contemplated by
this Agreement (including, without limitation, the issuance and sale of the
Shares) will not contravene any provision of (i) applicable law, (ii) the
amended and restated certificate of incorporation or bylaws of the Company, (iii) any
contract, agreement, license, understanding, indenture, mortgage, deed of
trust, loan agreement, joint venture, lease, bond, debenture, note or other
evidence of indebtedness or other instrument binding upon the Company or by or
to which it or its properties are or may be subject (each, a “Contract”), or (iv) any
judgment, order or decree of any governmental body, agency or court having
jurisdiction over the Company except, in the cases of clauses (i) and (iii) above
for any such contraventions that would not, individually or in the aggregate,
have a Material Adverse Effect, and no consent, approval, authorization or
order of, or qualification with, any governmental body, agency or court or the
NASDAQ Stock Market LLC (“NASDAQ”)
is required for the execution and delivery by the Company of, the performance
by the Company of its obligations


 


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under,
or the consummation of the transactions contemplated by this Agreement
(including, without limitation, the issuance and sale of the Shares), except
such as may be contemplated under this Agreement or required by the securities
or Blue Sky laws of the various states in connection with the offer and sale of
the Shares.


 


3.7           Material Changes.  Since the date of the latest financial
statements included in the SEC Documents, except as specifically disclosed in the
SEC Documents, there has not occurred any Material Adverse Effect or any
development, occurrence or change that has had or would reasonably be expected
to have, either individually or in the aggregate, a Material Adverse Effect.


 


3.8           Litigation;
Contracts.  There are no actions,
suits, claims, investigations or proceedings pending or, to the Company’s
knowledge, threatened, to which the Company, or to the Company’s knowledge, any
of its respective directors or officers is a party or to which any of the properties
of the Company is subject, at law or in equity, before or by any federal,
state, local or foreign governmental or regulatory commission, board, body,
authority or agency, other than proceedings accurately described in all
material respects in the SEC Documents and proceedings that would not have a
Material Adverse Effect.  There are no
Contracts of a character required to be described or referred to in the SEC
Documents, and/or filed as an exhibit to the SEC Documents, by the Securities
Act, the Exchange Act or the Rules and Regulations, which have not been
accurately described in all material respects in the SEC Documents, and/or
filed as an exhibit to the SEC Documents, other than the omission of which
would not reasonably be expected to have a Material Adverse Effect.  The Contracts described in the SEC Documents
are in full force and effect and are valid agreements, enforceable by the
Company, except as the enforcement thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or
affecting creditors’ rights generally or by general equitable principles.  No event has occurred, and no circumstance or
condition exists, that (with or without notice or lapse of time) (A) has
resulted or is reasonably likely to result in a breach, default, violation or
waiver of any Contract or any provision thereof; (B) gives or is
reasonably likely to give any party to any Contract the right to declare a
breach, default or violation of or exercise any remedy under such Contract; (C) gives
or is reasonably likely to give any party to any Contract the right to cancel,
terminate, modify or be excused from performance of any obligations under such
Contract; or (D) has resulted or is reasonably likely to result in a
violation of any Law or in imposition of any fines, penalties, damages,
injunctions, prohibitions or other sanctions, except where such breaches,
defaults, violations, waivers, remedies, cancellations, terminations,
modifications, excuses or impositions would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.


 


3.9           Investment
Company. 
The Company is not and, after giving effect to the offering
and sale of the Shares and the receipt of the proceeds contemplated herein,
will not be an “investment company,” as such term is defined in the Investment
Company Act of 1940, as amended.


 


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3.10         Environmental
Matters.  The Company (i) is in
compliance with any and all applicable foreign, federal, state and local laws
and regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants (“Environmental
Laws”), (ii) has received all permits, licenses or other
approvals required under applicable Environmental Laws to conduct its business
and (iii) is in compliance with all terms and conditions of any such
permit, license or approval, except where such noncompliance with Environmental
Laws, failure to receive required permits, licenses or other approvals or
failure to comply with the terms and conditions of such permits, licenses or
approvals would not, singly or in the aggregate, have a Material Adverse
Effect.  There are no costs or liabilities
associated with Environmental Laws (including, without limitation, any capital
or operating expenditures required for clean-up, closure of properties or
compliance with Environmental Laws or any permit, license or approval, any
related constraints on operating activities and any potential liabilities to
third parties) that would, singly or in the aggregate, have a Material Adverse
Effect.  Except as set forth in the SEC
Documents, (x) the Company has not received any notice from any
governmental authority or third party of an asserted claim under Environmental
Laws, which claim is required to be disclosed in the SEC Documents and (y) to
the Company’s knowledge, no property that is owned, leased or occupied by the
Company has been designated a Superfund site pursuant to the Comprehensive
Response, Compensation and Liability Act of 1980, as amended (42 U.S.C. Section 9601,
et seq.), or otherwise designated as a contaminated site under applicable state
or local law.


 


3.11         Registration
Rights.  Other than as set forth in
that certain Amended and Restated Investor Rights Agreement, dated September 7,
2006, by and between the Company and the other parties thereto, (i) no
stockholder of the Company has any right to require the Company to register the
sale of any shares owned by such stockholder under the Securities Act in the
Registration Statement other than as set forth herein and (ii) no
stockholder of the Company has any right to require the Company to file a
registration statement under the Securities Act with respect to any securities
of the Company other than as set forth herein.


 


3.12         Liabilities.  Since the date of the latest financial
statements included in the SEC Documents: (i) the Company has not incurred
any material liability or obligation, direct or contingent, nor entered into
any material transaction not in the ordinary course of business; (ii) the
Company has not purchased any of its outstanding capital stock other than
ordinary and customary repurchases of restricted stock from employees upon termination
of service pursuant to the terms of the Company’s equity incentive plans, nor
declared, paid or otherwise made any dividend or distribution of any kind on
its capital stock; (iii) there has not been any material change in the
capital stock, short-term debt or long-term debt of the Company; and (iv) there
has not been any loss or damage (whether or not insured) to the property of the
Company that has been sustained or will have been sustained that would
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect, except in each case as described in the SEC Documents.


 


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3.13         Title to Assets.  The Company has good and marketable title to
all properties and assets owned by it that are material to the business of the
Company, free and clear of all liens, encumbrances and defects except as
described in the SEC Documents or such as do not 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; and any real property and buildings held under
lease by the Company is held under valid, subsisting and enforceable leases
with such exceptions as are not material and do not interfere with the use made
and proposed to be made of such property and buildings by the Company, except
as described in the SEC Documents. 
Except as set forth in the SEC Documents, the Company owns or leases all
such properties and assets as are necessary to its operations as now conducted
or as proposed to be conducted.  The
Company does not own any real property.


 


3.14         Intellectual
Property.


 


(a)           Except as set
forth in the SEC Documents, all patents and patent applications filed by or on
behalf of the Company (the “Owned Patents”) are owned or co-owned by the Company
free and clear of all liens, encumbrances, defects or other restrictions,
except as would not, singly or in the aggregate, have a Material Adverse
Effect; and the Company is not aware of any valid or bona fide basis for a
finding that any of the Owned Patents in their entirety is unpatentable,
invalid or unenforceable; and the Company reasonably believes that the Owned
Patents are patentable, valid and enforceable, except as would not, singly or
in the aggregate, have a Material Adverse Effect.


 


(b)           In connection
with the Company’s Owned Patents, all known relevant prior art references were
disclosed or will be disclosed to the USPTO to the extent required by and in
accordance with 37 C.F.R. Section 1.56; all information submitted to the
USPTO in such patent applications, and in connection with the prosecution of
such applications, was accurate in all material respects; and neither the
Company nor, to the Company’s knowledge, any other person made any material
misrepresentations or concealed any material information from the USPTO in such
applications, or in connection with the prosecution of such applications, in
violation of 37 C.F.R. Section 1.56.


 


(c)           Except as set
forth in the SEC Documents, the Company owns or possesses rights to use, or can
acquire on reasonable terms ownership of or rights to use, all patents, patent
applications, patent rights, licenses, inventions, copyrights, know-how
(including trade secrets and other unpatented and/or unpatentable proprietary
or confidential information, systems or procedures), trademarks, service marks,
trade names and other intellectual property (collectively, “Intellectual Property”)
necessary for the conduct of the Company’s business as now conducted, and for
the manufacture, use or sale of its presently proposed products, as described
in the SEC Documents, and except as set forth in the SEC Documents, the Company
has not received any notice of infringement of or conflict with asserted rights
of others with respect to any of the foregoing that, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding, would
have a Material Adverse Effect.  The
Company’s Intellectual Property


 


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is
free and clear of any pledge, lien, security interest, encumbrance, claim or
equitable interest, whether imposed by agreement, contract, understanding, law,
equity or otherwise, except as described in the SEC Documents.  The Company is not obligated to pay a
material royalty, grant a material license or provide other material
consideration to any third party in connection with the Company’s Intellectual
Property other than as disclosed or referenced in the SEC Documents.


 


(d)           Except as set
forth in the SEC Documents, to the Company’s knowledge, after due inquiry, and
except as would not have a Material Adverse Effect, there are no valid and
enforceable rights of third parties to the Company’s Intellectual Property that
are or would be infringed by the business currently conducted by the Company or
in the manufacture, use, sale, offer for sale or import of its presently
proposed products as described in the SEC Documents.


 


(e)           Except as set
forth in the SEC Documents, the Company is not subject to any judgment, order,
writ, injunction or decree of any court or any federal, state, local, foreign
or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, or any arbitrator.  Except as set forth in the SEC documents, the
Company is not a party to any contract, which restricts or impairs its use of
any Intellectual Property in a manner that would have a Material Adverse
Effect.


 


(f)            To the Company’s
knowledge, there are no ongoing infringements by others of any Intellectual
Property owned by the Company in connection with the business currently
conducted by the Company or its presently proposed products, except as
described in the SEC Documents.


 


(g)           Other than as
set forth in the SEC Documents and except as would not have a Material Adverse
Effect, to the Company’s knowledge, there is no U.S. patent or published U.S.
patent application which contains valid and enforceable claims that dominate or
that would dominate any Owned Patent or other Intellectual Property owned by
the Company or that interferes with the issued or pending claims of any such
Owned Patent or other Intellectual Property.


 


(h)           Subject to the
disclosures in the SEC Documents, the Company has taken those steps required in
accordance with sound business practice and commercially reasonable business
judgment to establish and preserve its ownership of, and licenses to, all of
the Company’s Intellectual Property. 
Each former and current employee and independent contractor of the
Company has signed and delivered one or more written contracts with the Company
pursuant to which such employee or independent contractor assigns to the
Company all of his, her or its rights in and to any inventions, discoveries,
improvements, works of authorship, know-how, or information made, conceived,
reduced to practice, authored, or discovered in the course of employment by or
performance of services for the Company, as well as any and all patent rights,
copyrights, trademark rights, and other intellectual property rights therein or
thereto except where the failure to do so would not have a Material Adverse
Effect.  Neither the Company nor, to the
knowledge of the Company, any of its employees or


 


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independent
contractors have any agreements or arrangements with any third party
restricting the Company’s or any such employee’s or independent contractor’s
engagement in business activities that are material aspects of the Company’s
business as described in the SEC Documents. 
To the Company’s knowledge, no employee or independent contractor of the
Company is in violation of any term of any employment contract, patent
disclosure agreement, invention assignment agreement, non-competition
agreement, non-disclosure agreement, or any other agreement or arrangement with
any former employer, customer, or other third party as a result of such
employee’s or independent contractors relationship with the Company or any
actions undertaken by such employee or independent contractor while employed by
or engaged with the Company, except as such violation would not reasonably be
expected to have a Material Adverse Effect.


 


3.15         Employment Matters.  No material labor dispute with the employees
of the Company exists or, to the knowledge of the Company, is imminent; and the
Company is not aware of any existing, threatened or imminent labor disturbance
by the employees of any of its principal suppliers, manufacturers or
contractors that would reasonably be expected to have a Material Adverse
Effect.  No collective bargaining
agreement exists with any of the Company’s employees and, to the Company’s
knowledge, no such agreement is imminent.


 


3.16         Insurance. The
Company is insured by insurers of recognized financial responsibility against
such losses and risks and in such amounts as are prudent and customary in the
businesses in which it is engaged; the Company has not been refused any
insurance coverage previously held in the last year or customarily carried in
the business in which it is engaged; and the Company has no reason to believe
that it will not be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar insurers as
may be necessary to continue its business at a cost that would not have a
Material Adverse Effect.


 


3.17         No Integrated
Offering.  The Company has not sold,
issued or distributed any shares of Common Stock during the six-month period
preceding the date hereof, including any sales pursuant to Rule 144A
under, or Regulation D or S of, the Securities Act, other than shares issued
pursuant to employee benefit plans, qualified stock option plans or other
employee compensation plans or arrangements, or pursuant to outstanding
options, restricted stock units, rights or warrants.  The Company has not in the past nor will it
hereafter take any action to sell, offer for sale or solicit offers to buy any
securities of the Company which would require the offer, issuance or sale of
the Shares, as contemplated by this Agreement, to be registered under Section 5
of the Securities Act.


 


3.18         Disclosure
Controls. The Company has established and maintains disclosure controls and
procedures (as such term is defined in Rule 13a-15 and 15d-15 under the
Exchange Act) in the manner and to the extent required by the Exchange Act and
the rules promulgated thereunder by the SEC.  Such disclosure controls and procedures are
designed to ensure that information required to be disclosed by the Company is
recorded, processed, summarized and reported, within the time periods


 


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specified
in the SEC’s rules and forms and that such information is accumulated and
communicated to the Company’s principal executive officer and its principal
financial officer.  Such disclosure
controls and procedures are sufficient to provide reasonable assurance that the
Company’s principal executive officer and principal financial officer are
alerted to material information required to be included in the Company’s
periodic reports required under the Exchange Act so as to allow timely
decisions regarding required disclosure. 
Since the filing of the Company’s most recent annual report on Form 10-K,
the Company’s auditors and the Audit Committee of the Board of Directors have
been advised of (i) any significant deficiencies in the design or
operation of internal controls which could adversely affect the Company’s
ability to record, process, summarize and report financial data and (ii) any
fraud, whether or not material, that involves management or other employees who
have a role in the Company’s internal controls. 
Since the filing of the Company’s most recent annual report on Form 10-K,
any material weaknesses in internal controls have been identified for the
Company’s auditors.  Since the date of
the most recent evaluation of such disclosure controls and procedures, there
have been no significant changes in internal controls or in other factors that
could significantly affect internal controls.


 


3.19         Internal
Accounting Controls. Except as described in the SEC Documents, the Company
maintains a system of internal control over financial reporting (as defined in Rule 13a-15
under the Exchange Act) sufficient to provide reasonable assurance that (i) transactions
are executed in accordance with management’s general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles and to maintain asset accountability; (iii) access
to assets is permitted only in accordance with management’s general or specific
authorization; and (iv) the recorded accountability for assets is compared
with the existing assets at reasonable intervals and appropriate action is
taken with respect to any differences.


 


3.20         Sarbanes-Oxley.
The principal executive officers (or their equivalents) and principal financial
officers (or their equivalents) of the Company have made all certifications
required by the Sarbanes-Oxley Act of 2002, as amended (the “Sarbanes-Oxley Act”)
and any related Rules and Regulations, and the statements contained in any
such certifications are complete and correct. 
The Company is in compliance in all material respects with all
applicable effective provisions of the Sarbanes-Oxley Act of 2002, as amended.


 


3.21         Regulatory
Approvals.


 


(a)           The Company has
all necessary consents, authorizations, approvals, orders, certificates and
permits of and from, and has made all required declarations and filings with,
and complied with all formal recommendations of, all federal, state, local and
other governmental authorities, all self-regulatory organizations and all
courts and other tribunals, to own, lease, license and use its properties and
assets and to conduct its business in the manner described in the SEC Documents,
including, without limitation, all necessary U.S. Food and Drug Administration
(“FDA”),
independent data monitoring committee, and applicable foreign regulatory agency


 


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approvals
and recommendations, except as disclosed in the SEC Documents, and except to
the extent that the failure to obtain such consents, authorizations, approvals,
orders, certificates, permits, or to make such declarations or filings, or to
follow such recommendations would not have a Material Adverse Effect.  The Company has not received any notice of
proceedings relating to the revocation or modification of any such consent,
authorization, approval, order, certificate, permit or recommendation which,
singly or in the aggregate, if the subject of an unfavorable decision, ruling
or finding, would have a Material Adverse Effect.


 


(b)           No
investigational new drug (“IND”)
application filed by or on behalf of the Company with the FDA has been
terminated by the FDA, and none of the FDA, any independent data monitoring
committee, or any applicable foreign regulatory agency has recommended,
commenced, or, to the knowledge of the Company, threatened to initiate, any
action to place a clinical hold order on, or otherwise delay or suspend,
proposed or ongoing clinical investigations conducted or proposed to be
conducted by or on behalf of the Company.


 


(c)           To the best of
the Company’s knowledge, all the operations of the Company and all the
manufacturing facilities and operations of the Company’s suppliers of products
and product candidates and the components thereof manufactured in or imported
into the United States are in compliance with applicable FDA regulations,
including current Good Manufacturing Practices, and meet sanitation standards
set by the Federal Food, Drug and Cosmetic Act of 1938, as amended, and all the
operations of the Company and all the manufacturing facilities and operations
of the Company’s suppliers of products and product candidates manufactured
outside, or exported from, the United States are in compliance with applicable
foreign regulatory requirements and standards, except to the extent that the
failure to be in compliance with such regulations and standards would not have
a Material Adverse Effect.


 


(d)           The Company has
operated its business and currently is in compliance in all material respects
with all applicable rules, regulations and policies of the FDA and any
applicable foreign regulatory organization and all recommendations and actions
of any independent data monitoring committee.


 


3.22         NASDAQ Global
Market.  The Common Stock is
registered pursuant to Section 12(g) of the Exchange Act and is
listed on the NASDAQ Global Market, and the Company has taken no action
designed to, or likely to have the effect of, terminating the registration of
the Common Stock under the Exchange Act or delisting the Common Stock from the
NASDAQ Global Market.  The Company has
not received any notification that the SEC or NASDAQ is contemplating
terminating such registration or listing. 
The Company is in compliance with all corporate governance requirements
of the NASDAQ Global Market.  At Closing,
the Company shall have complied with the requirements of the NASDAQ Global
Market with respect to the issuance of the Shares.


 


3.23         SEC Documents.  The Company has made available to each
Purchaser, a true and complete copy of the Company’s Annual Report on Form 10-K
for the year ended December 31, 2007 and the Company’s Quarterly Reports
on Form 10-Q


 


11

















 


for
the periods ended March 31, 2008, June 30, 2008 and September 30,
2008, and any other statement, report (including, without limitation, Current
Reports on Form 8-K), registration statement (other than registration
statements on Form S-8) or definitive proxy statement filed by the Company
with the SEC during the 12-month period ending on the Effective Date.  The Company will, promptly upon the filing
thereof, also make available to each Purchaser all statements, reports
(including, without limitation, Quarterly Reports on Form 10-Q and Current
Reports on Form 8-K), registration statements and definitive proxy
statements filed by the Company with the SEC during the period commencing on
the date hereof and ending on the Closing Date (all such materials being
called, collectively, the “SEC
Documents”).  The Company
has filed in a timely manner all documents that the Company was required to
file under the Exchange Act during the 12 months preceding the date of this Agreement.  As of their respective filing dates, the SEC
Documents complied or will comply in all material respects with the
requirements of the Exchange Act or the Securities Act, as applicable, and none
of the SEC Documents contained or will contain any untrue statement of a
material fact or omitted or will omit to state a material fact required to be
stated therein or necessary in order to make the statements made therein, in
light of the circumstances under which they were made, not misleading, as of their
respective filing dates, except to the extent corrected by a subsequently filed
SEC Document.  The Company meets the
registration and transaction requirements for the use of Form S-3 for the
registration of the Shares for resale by the Purchasers.


 


3.24         Brokers and
Finders.  The Company has not
retained, utilized or been represented by any broker or finder in connection
with the transactions contemplated by this Agreement and has not incurred, and
shall not incur, directly or indirectly, any liability for any brokerage or
finders’ fees or agents commissions or any similar charges in connection with
this Agreement or any transaction contemplated hereby.


 


3.25         No General
Solicitation; Securities Laws. Neither the Company nor, to the knowledge of
the Company, any person acting for the Company, has conducted any “general
solicitation” (as such term is defined in Regulation D) with respect to any of
the Shares being offered hereby. 
Assuming that all of the representations and warranties of the
Purchasers set forth in Section 4, are true and correct, the offer and
sale of the Shares was conducted and completed in compliance with the
Securities Act.


 


3.26         Accountants.  Ernst & Young LLP, the Company’s
accountants, are, to the Company’s knowledge, independent registered public
accountants as required by the Securities Act and the Rules and
Regulations.  Except as described in the
SEC Documents and as pre-approved in accordance with the requirements set forth
in Section 10A of the Exchange Act, to the Company’s knowledge, Ernst &
Young LLP has not engaged in any “prohibited activities” (as defined in Section 10A
of the Exchange Act) on behalf of the Company. 
PricewaterhouseCoopers LLP, whose report on the financial statements of
the Company is filed with the SEC in the Company’s Annual Report on Form 10-K
for the year ended December 31, 2007 are, to the Company’s knowledge,


 


12

















 


independent
registered public accountants as required by the Securities Act and the Rules and
Regulations.


 


3.27         Financial
Statements.  The financial statements
of the Company, together with the related schedules and notes, set forth in the
SEC Documents:  (i) present fairly, in all material respects, the
financial position of the Company as of the dates indicated and the results of
operations and cash flows of the Company for the periods specified; and (ii) have
been prepared in compliance with requirements of the Securities Act and the Rules and
Regulations and in conformity with generally accepted accounting principles in
the United States applied on a consistent basis during the periods presented,
except as may be otherwise specified in such financial statements or the notes
thereto and except that unaudited financial statements may not contain all
footnotes required by GAAP, and the schedules included in such financial
statements present fairly, in all material respects, the information required
to be stated therein (provided, however,
that the statements that are unaudited are subject to normal year-end
adjustments).  There are no financial
statements (historical or pro forma) and/or related schedules and notes that
are required to be included in the SEC Documents that are not included as
required by the Securities Act, the Exchange Act and/or the Rules and
Regulations, except where a failure to so include would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect.


 


3.28         Tax Returns.  The Company has timely filed all federal,
state and foreign income and franchise tax returns required to be filed by the
Company on or prior to the date hereof, and has paid all taxes shown thereon as
due, and there is no tax deficiency that has been or, to the Company’s
knowledge, might be asserted against the Company that would reasonably be
expected to have a Material Adverse Effect. 
All tax liabilities are adequately provided for on the books of the
Company except where such inadequate provision would not have a Material
Adverse Effect.


 


3.29         Audit Committee.  The Company’s Board of Directors has validly
appointed an Audit Committee whose composition satisfies the requirements of Rule 4350(d)(2) of
the Rules of NASDAQ (the “NASDAQ Rules”) and the Board of Directors and/or the
Audit Committee has adopted a charter that satisfies the requirements of Rule 4350(d)(1) of
the NASDAQ Rules.


 


3.30         Losses.  The Company has not sustained since the date
of the latest financial statements included in the SEC Documents, any losses or
interferences 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, other than any losses or interferences
which would not reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect.


 


3.31         No Manipulation of
Stock.  Neither the Company nor, to
its knowledge, any of its affiliates has taken, directly or indirectly, any
action designed to or which has constituted or which might reasonably be
expected to cause or result, under the Exchange Act or otherwise, in the
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Shares.


 


13

















 


3.32         ERISA.  The Company is in compliance in all material
respects with all currently applicable provisions of the Employee Retirement
Income Security Act of 1974, as amended, including the regulations and
published interpretations thereunder, except where a failure to so comply would
not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect.


 


3.33         Outstanding Loans
to Officers or Directors.  There are
no outstanding loans, advances (except normal advances for business expenses in
the ordinary course of business) or guarantees of indebtedness by the Company
to or for the benefit of any of the officers or directors of the Company or any
of the members of the families of any of them as prohibited by the
Sarbanes-Oxley Act.


 


4.             Representations and Warranties
of the Purchasers.  Each Purchaser
severally for itself, and not jointly with the other Purchasers, represents and
warrants to the Company, as of the Effective Date and the Closing Date, as
follows:


 


4.1           Authorization.  All action on the part of such Purchaser and,
if applicable, its officers, directors and stockholders necessary for the
authorization, execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated herein has been taken.  When executed and delivered, this Agreement
will constitute the legal, valid and binding obligation of such Purchaser,
enforceable against such Purchaser in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting creditors’ rights
generally or by general equitable principles and except as to the
enforceability of any rights to indemnification or contribution that may be
violative of the public policy underlying any law, rule or regulation
(including any federal or state securities law, rule or regulation).  Such Purchaser has all requisite corporate
power to enter into this Agreement and to carry out and perform its obligations
under the terms of this Agreement.  Such
Purchaser has the knowledge and experience in financial and business matters as
to be capable of evaluating the merits and risks of an investment in the Shares
and has the ability to bear the economic risks of an investment in the Shares
for an indefinite period of time.


 


4.2           Purchase Entirely
for Own Account.  Such Purchaser is
acquiring the Shares being purchased by it hereunder for investment, for its
own account, and not for resale or with a view to distribution thereof in
violation of the Securities Act. Such Purchaser has not entered into an
agreement or understanding with any other party to resell or distribute such
Shares.


 


4.3           Investor Status;
Etc.  Such Purchaser certifies and
represents to the Company that it is now, and at the time such Purchaser
acquires any of the Shares, such Purchaser will be, an “Accredited Investor” as
defined in Rule 501 of Regulation D promulgated under the Securities Act
and was not organized for the purpose of acquiring the Shares.  Such Purchaser’s financial condition is such
that it is able to bear the risk of holding the Shares for an indefinite period
of time and the risk of loss of its entire investment.  Such Purchaser has received, reviewed and
considered all information it deems necessary in making an informed decision to
make an investment in the Shares


 


14

















 


and
has been afforded the opportunity to ask questions of and receive answers from
the management of the Company concerning this investment and has sufficient
knowledge and experience in investing in companies similar to the Company in
terms of the Company’s stage of development so as to be able to evaluate the
risks and merits of its investment in the Company.


 


4.4           Confidential
Information.  Each Purchaser
understands that any information, other than the SEC Documents, provided to
such Purchaser by the Company, including, without limitation, the existence and
nature of all discussions and presentations, if any, regarding this offering
and this Agreement, is strictly confidential and proprietary to the Company and
is being submitted to the Purchaser solely for such Purchaser’s confidential
use in connection with its investment decision regarding the Shares.  Such Purchaser agrees to use such information
for the sole purpose of evaluating a possible investment in the Shares and such
Purchaser hereby acknowledges that it is prohibited from reproducing or
distributing such information, this Agreement, or any other offering materials,
in whole or in part, or divulging or discussing any of their contents except
for use internally and by its legal counsel and except as required by law or
legal process.  Such Purchaser
understands that the federal securities laws prohibit any person who possesses
material nonpublic information about a company from trading in securities of
such company.


 


4.5           Shares Not
Registered.  Such Purchaser
understands that the Shares have not been registered under the Securities Act,
by reason of their issuance by the Company in a transaction exempt from the
registration requirements of the Shares Act, and that the Shares must continue
to be held by such Purchaser unless a subsequent disposition thereof is
registered under the Securities Act or is exempt from such registration.  The Purchaser understands that the exemptions
from registration afforded by Rule 144 (the provisions of which are known
to it) promulgated under the Securities Act depend on the satisfaction of
various conditions, and that, if applicable, Rule 144 may afford the basis
for sales only in limited amounts.


 


4.6           No Conflict.  The execution and delivery of this Agreement
by such Purchaser and the consummation of the transactions contemplated hereby
will not conflict with or result in any material violation of or default by such
Purchaser (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration of any material
obligation or to a loss of a material benefit under (i) any provision of
the organizational documents of such Purchaser, (ii) any material
agreement or instrument, permit, franchise, or license or (iii) any
judgment, order, statute, law, ordinance, rule or regulations, applicable
to such Purchaser or its respective properties or assets.


 


4.7           Brokers and Finders.  Such Purchaser has not retained, utilized or
been represented by any broker or finder in connection with the transactions
contemplated by this Agreement.


 


4.8           Consents.  All consents, approvals, orders and
authorizations required on the part of such Purchaser in connection with the
execution, delivery or


 


15

















 


performance
of this Agreement and the consummation of the transactions contemplated herein
have been obtained and are, or will be, effective as of the Closing.


 


4.9           Information.
Each Purchaser and its advisors, if any, have been furnished with all materials
relating to the business, finances and operations of the Company, and materials
relating to the offer and sale of the Shares, if any, that have been requested
by the Purchaser or its advisors, if any. 
The Purchaser and its advisors, if any, have been afforded the
opportunity to ask questions of the Company. 
The Purchaser acknowledges and understands that its investment in the
Shares involves a significant degree of risk, including the risks reflected in
the SEC Documents.


 


4.10         No Public Offering.  Such Purchaser has not received any
information relating to the Shares or the Company, and is not purchasing the
Shares as a result of or in connection with, any form of general solicitation
or general advertising, including but not limited to, any advertisement,
prospectus, article, notice or other communication published in any newspaper,
magazine or similar media or broadcast over television or radio or pursuant to
any seminar or meeting whose attendees were invited by any general solicitation
or general advertising.


 


4.11         Short Positions.
Such Purchaser represents, warrants and agrees that, since the date that is the
tenth (10th) trading day prior to the date of this Agreement, it has not
engaged in any short selling of the Company’s securities, or established or
increased any “put equivalent position” as defined in Rule 16(a)-1(h) under
the Exchange Act with respect to the Company’s securities and will not use any
of the Shares acquired pursuant to this Agreement to cover any short position
in the Common Stock if doing so would be in violation of applicable securities
laws.


 


4.12         Residency.  Purchaser’s
principal executive offices are in the jurisdiction set forth immediately below
Purchaser’s name on the applicable signature page attached hereto.


 


4.13         Governmental
Review. 
Purchaser understands that no United States federal or state
agency or any other government or governmental agency has passed upon or made
any recommendation or endorsement of the Shares.


 


4.14         Beneficial
Ownership.  The purchase by such Purchaser of the Shares issuable to
it at the Closing will not result in such Purchaser (individually or together
with any other Person with whom such Purchaser has identified, or will have
identified, itself as part of a “group” in a public filing made with the SEC
involving the Company’s securities) acquiring, or obtaining the right to
acquire, in excess of 19.9% of the outstanding shares of Common Stock or the
voting power of the Company on a post-transaction basis that assumes that such
Closing shall have occurred.  Such Purchaser does not presently intend to,
alone or together with others, make a public filing with the SEC to disclose that
it has (or that it together with such other Persons have) acquired, or obtained
the right to acquire, as a result of such Closing (when added to any other
securities of the Company that it or they then own or have the right to
acquire), in excess


 


16

















 


of
19.9% of the outstanding shares of Common Stock or the voting power of the
Company on a post-transaction basis that assumes that each Closing shall have
occurred.


 


5.             Conditions
Precedent to Closing.


 


5.1           Conditions to the
Obligation of the Purchasers to Consummate the Closing.  The obligation of each Purchaser to
consummate the Closing and to purchase and pay for the Shares being purchased
by it pursuant to this Agreement is subject to the satisfaction of the following
conditions, any of which may be waived by such Purchaser:


 


(a)           The
representations and warranties of the Company contained herein shall be true
and correct on and as of the Closing Date with the same force and effect as
though made on and as of the Closing Date (it being understood and agreed by
each Purchaser that, in the case of any representation and warranty of the
Company contained herein which is not hereinabove qualified by application
thereto of a materiality standard, such representation and warranty need be
true and correct only in all material respects in order to satisfy as to such
representation or warranty the condition precedent set forth in the foregoing
provisions of this Section 5.1(a)).


 


(b)           The Company
shall have performed all obligations and conditions required to be performed or
observed by the Company under this Agreement on or prior to the Closing Date.


 


(c)           The Company
shall have delivered a Certificate, executed on behalf of the Company by its
Chief Executive Officer or its Chief Financial Officer, dated as of the Closing
Date, certifying to the fulfillment of the conditions specified in Sections 5.1(a) and
(b).


 


(d)           The Company
shall have delivered a Certificate, executed on behalf of the Company by its
Secretary, its Chief Executive Officer or its Chief Financial Officer, dated as
of the Closing Date, certifying the resolutions adopted by the Board of
Directors of the Company approving the transactions contemplated by this
Agreement and the issuance of the Shares, certifying the current versions of
the Certificate of Incorporation and Bylaws of the Company and certifying as to
the signatures and authority of persons signing this Agreement and related
documents on behalf of the Company.


 


(e)           Since the date
of execution of this Agreement, no event or series of events shall have
occurred that has had or would reasonably be expected to have a Material
Adverse Effect.


 


(f)            No stop order
or suspension of trading shall have been imposed by the NASDAQ Global Market,
the SEC or any other governmental regulatory body with respect to public
trading in the Common Stock, nor shall suspension by the NASDAQ Global Market
or the SEC have been threatened, as of the Closing Date, in writing by the
NASDAQ Global Market or the SEC.


 


17

















 


(g)           No proceeding
challenging this Agreement or the transactions contemplated hereby, or seeking
to prohibit, alter, prevent or materially delay the Closing, shall have been
instituted before any court, arbitrator or governmental body, agency or
official and shall be pending.


 


(h)           The purchase of
and payment for the Shares by the Purchaser shall not be prohibited by any law
or governmental order or regulation.  All
necessary consents, approvals, licenses, permits, orders and authorizations of,
or registrations, declarations and filings with, any governmental or
administrative agency or of any other person with respect to any of the
transactions contemplated hereby shall have been duly obtained or made and
shall be in full force and effect (except for the filing of a Form D and
related blue sky law filings which will be timely filed after the Closing
Date).


 


(i)            The NASDAQ
Global Market listing of additional shares application for the Shares shall
have been filed in accordance with the NASDAQ Rules.


 


(j)            All instruments
and corporate proceedings in connection with the transactions contemplated by
this Agreement to be consummated at the Closing shall be satisfactory in form
and substance to such Purchaser; the Purchaser shall have received an opinion
of legal counsel to the Company substantially in the form of Exhibit B
attached hereto; such Purchaser shall have received counterpart originals, or
certified or other copies of all documents, including without limitation,
records of corporate or other proceedings, which it may have reasonably
requested in connection therewith.


 


(k)           The Purchasers
shall have received a copy of the irrevocable instructions to the Company’s
transfer agent instructing the transfer agent to deliver the Shares to the
Purchasers in accordance with the amounts set forth in Exhibit A.


 


5.2          Conditions to the
Obligation of the Company to Consummate the Closing.  The obligation of the Company to consummate
the Closing and to issue and sell to each of the Purchasers the Shares to be
purchased by it at the Closing is subject to the satisfaction of the following
conditions precedent:


 


(a)           The
representations and warranties contained herein of such Purchaser shall be true
and correct on and as of the Closing Date with the same force and effect as
though made on and as of the Closing Date (it being understood and agreed by
the Company that, in the case of any representation and warranty of each
Purchaser contained herein which is not hereinabove qualified by application
thereto of a materiality standard, such representation and warranty need be
true and correct only in all material respects in order to satisfy as to such
representation or warranty the condition precedent set forth in the foregoing
provisions of this Section 5.2(a)).


 


18
















 


(b)                                 The
Purchasers shall have performed all obligations and conditions herein required
to be performed or observed by the Purchasers on or prior to the Closing Date.


 


(c)                                  No
proceeding challenging this Agreement or the transactions contemplated hereby,
or seeking to prohibit, alter, prevent or materially delay the Closing, shall
have been instituted before any court, arbitrator or governmental body, agency
or official and shall be pending.


 


(d)                                 The
sale of the Shares by the Company shall not be prohibited by any law or
governmental order or regulation.  All
necessary consents, approvals, licenses, permits, orders and authorizations of,
or registrations, declarations and filings with, any governmental or
administrative agency or of any other person with respect to any of the
transactions contemplated hereby shall have been duly obtained or made and
shall be in full force and effect (except for the filing of a Form D and
related blue sky law filings which will be timely filed after the Closing
Date).


 


(e)                                  All
instruments and corporate proceedings in connection with the transactions
contemplated by this Agreement to be consummated at the Closing shall be
satisfactory in form and substance to the Company, and the Company shall have
received counterpart originals, or certified or other copies of all documents,
including without limitation records of corporate or other proceedings, which
it may have reasonably requested in connection therewith.


 


6.                                       Transfer,
Legends.


 


6.1           Securities
Law Transfer Restrictions.


 


(a)                                  Each
Purchaser understands that the Shares have not been registered under the
Securities Act or any state securities laws, and each Purchaser agrees that,
except as provided in Section 7 of this Agreement, it will not sell, offer
to sell, solicit offers to buy, dispose of, loan, pledge or grant any right
with respect to (collectively, a “Disposition”), the Shares nor will such
Purchaser engage in any hedging or other transaction which is designed to or
could be reasonably expected to lead to or result in a Disposition of Shares by
such Purchaser or any other person or entity unless (a) the Shares are
registered under the Securities Act, (b) the Shares are transferred to the
Company, (c) the Shares are transferred pursuant to Rule 144
(provided that the Purchaser provides the Company with reasonable assurances
(in the form of seller and, if applicable, broker representation letters) that
the securities may be sold pursuant to such rule), (d) the Shares are
transferred in connection with a bona fide pledge as contemplated in Section 6.2(a) below
or (e) such Purchaser shall have delivered to the Company an opinion of
counsel in form, substance and scope reasonably acceptable to the Company, to
the effect that registration is not required under the Securities Act or any
applicable state securities law due to the applicability of an exemption
therefrom.


 


(b)                                 Each
Purchaser acknowledges that no action has been or will be taken in any
jurisdiction outside the United States by the Company that would 


 


19

















 


permit an offering of the Shares, or possession or distribution of
offering materials in connection with the issue of Shares, in any jurisdiction
outside of the United States where action by the Company for that purpose is
required.  Each Purchaser outside the
United States will comply with all applicable laws and regulations in each
foreign jurisdiction in which it purchases, offers, sells or delivers Shares or
has in its possession or distributes any offering material, in all cases at its
own expense.  No third party is
authorized to make any representation or use any information in connection with
the issue, placement, purchase and sale of the Shares.


 


(c)                                  Each
Purchaser hereby covenants with the Company not to make any sale of the Shares
without complying with the provisions of this Agreement and with all applicable
securities laws and regulations, and such Purchaser acknowledges that the
certificates evidencing the Shares will be imprinted with a legend that prohibits
their transfer except in accordance therewith.


 


6.2           Legends.


 


(a)                                  Each
certificate representing any of the Shares shall be endorsed with the legend
substantially in the form as set forth below, together with other legends as
may be required by applicable securities laws, and each Purchaser covenants
that, except to the extent such restrictions are waived by the Company, it
shall not transfer the securities represented by any such certificate without
complying with the restrictions on transfer described in this Agreement and the
legends endorsed on such certificate:


 


“THESE
SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES ACT”), OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES MAY NOT BE OFFERED, SOLD, ASSIGNED, PLEDGED, TRANSFERRED OR
OTHERWISE DISPOSED OF (I) IN THE ABSENCE OF (A) AN EFFECTIVE
REGISTRATION STATEMENT UNDER SAID SECURITIES ACT OR (B) AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, REGISTRATION UNDER SAID
SECURITIES ACT AND, IF REQUESTED BY THE COMPANY, UPON DELIVERY OF AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT THE PROPOSED TRANSFER IS
EXEMPT FROM SAID SECURITIES ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144
UNDER THE SECURITIES ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR
FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”


 


The Company acknowledges and agrees that a Purchaser may from time to
time pledge, and/or grant a security interest in, some or all of the legended
Shares in connection with applicable securities laws, pursuant to a bona fide
margin agreement in 


 


20

















 


compliance
with a bona fide margin loan.  Such a
pledge would not be subject to approval or consent of the Company and no legal
opinion of legal counsel to the pledgee, secured party or pledgor shall be
required in connection with the pledge, but such legal opinion shall be
required in connection with a subsequent transfer or foreclosure following
default by the Purchaser transferee of the pledge.  No notice shall be required of such pledge,
but Purchaser’s transferee shall promptly notify the Company of any such
subsequent transfer or foreclosure.  Each
Purchaser acknowledges that the Company shall not be responsible for any
pledges relating to, or the grant of any security interest in, any of the
Shares or for any agreement, understanding or arrangement between any Purchaser
and its pledgee or secured party.  At the
appropriate Purchaser’s expense, the Company will execute and deliver such
reasonable documentation as a pledgee or secured party of Shares may reasonably
request in connection with a pledge or transfer of the Shares, including the
preparation and filing of any required prospectus supplement under Rule 424(b)(3) of
the Securities Act or other applicable provision of the Securities Act to
appropriately amend the list of Selling Stockholders thereunder.  Each Purchaser acknowledges and agrees that,
except as otherwise provided in Section 6.2(b), any Shares subject to a
pledge or security interest as contemplated by this Section 6.2(a) shall
continue to bear the legend set forth in this Section 6.2(a) and be
subject to the restrictions on transfer set forth in Section 6.1(a).


 


(b)                                 Certificates
evidencing the Shares shall not contain any legend (including, without
limitation, the legend set forth in Section 6.2(a) hereof): (i) while
a registration statement (including, without limitation, the Registration Statement)
covering the resale of such Shares is effective under the Securities Act, or (ii) following
any sale of such Shares pursuant to Rule 144, or (iii) if such Shares
are eligible for sale under Rule 144(b)(1), or (iv) if such legend is
not required under applicable requirements of the Securities Act (including,
without limitation, judicial interpretations and pronouncements issued by the
staff of the SEC).  The Company agrees
that following the effectiveness of the Registration Statement or at such time
as such legend is no longer required under this Section 6.2(b), it will,
no later than three (3) business days following the delivery by a
Purchaser to the Company or the Company’s transfer agent of (i) a
certificate representing Shares issued with a restrictive legend and (ii) a
letter acknowledging that sales of such Shares shall be made in a manner
consistent with the plan of distribution set forth in the Registration
Statement (such third business day, the “Legend Removal Date”) deliver or cause to be
delivered to such Purchaser a certificate representing such Shares that is free
from all restrictive and other legends. 
The Company may not make any notation on its records or give
instructions to any transfer agent of the Company that enlarge the restrictions
on transfer set forth in this Section. 
Certificates for Shares subject to legend removal hereunder shall be
transmitted by the transfer agent of the Company to the Purchaser by crediting
the account of the Purchaser’s prime broker with the Depository Trust Company
System.  The failure to timely deliver
certificates without restrictive legends by the Legend Removal Date shall not
be a breach of the foregoing covenant if such delay is solely due to the action
or inaction of the Company’s transfer agent and if the Company has taken all
reasonable steps necessary to facilitate the removal of such legends (provided
that if permitted by the Company’s transfer agent counsel to the
Purchasers shall be permitted to submit a legal opinion to the Company’s transfer
agent authorizing legend removal in order to meet any requirement for an 


 


21

















 


opinion of counsel by such transfer agent). The Company’s obligation to
issue unlegended certificates pursuant to this Section 6.2(b) shall
be excused if (i) the SEC promulgates any rule or interpretation
expressly prohibiting removal of legends in such circumstances, (ii) the
SEC or other regulatory authority instructs the Company or its transfer agent
not to remove such legends, (iii) the SEC makes it a condition to the
effectiveness of a registration statement that the Company continue to keep
such legends in place, and (iv) with respect to a Purchaser, so long as
such Purchaser is deemed to be an “affiliate” of the Company pursuant to the
Securities Act and Rule 144 promulgated thereunder (in which case, the
certificate(s) evidencing such Purchaser’s shares shall also bear a legend
disclosing Purchaser’s status as an “affiliate” of the Company until such time
as such Purchaser is no longer deemed by the Company, in its reasonable
discretion with the advice of its legal counsel, to be an “affiliate” of the
Company in accordance with the Securities Act).


 


(c)                                  Each
Purchaser agrees that the removal of the restrictive legend from certificates
representing Shares as set forth in this Section 6.2 is predicated upon
the Company’s reliance that such Purchaser will sell any Shares pursuant to
either the registration requirements of the Securities Act, including any
applicable prospectus delivery requirements, or an exemption therefrom.


 


(d)                                 Notwithstanding
anything herein to the contrary, no registration statement or opinion of
counsel shall be necessary for a transfer (i) by a Purchaser that is a
partnership to a partner (limited or general) of such partnership or a retired
partner of such partnership who retires after the date hereof, or to the estate
of any such partner or retired partner or the transfer by gift, will or
intestate succession of any partner to his or her spouse or to the siblings,
lineal descendants or ancestors of such partner or his or her spouse, (ii) by
a Purchaser that is a limited liability company to a member of such limited
liability company or a retired member of such limited liability company who
retires after the date hereof, or to the estate of any such member or retired
member or the transfer by gift, will or intestate succession of any member to
his or her spouse or to the siblings, lineal descendants or ancestors of such
member or his or her spouse or (iii) by a Purchaser to an affiliate of
such Purchaser, if the prospective transferee agrees in all such instances in
writing to be subject to the terms hereof to the same extent as if he or she
were an original Purchaser hereunder.


 


7.                                       Covenants.


 


7.1           Registration
Procedures and Expenses.  The Company
shall:


 


(a)                                  file
a Registration Statement with the SEC within forty-five (45) days
following the Closing Date to register the Registrable Shares on Form S-3
under the Securities Act (providing for shelf registration of such Registrable
Shares under SEC Rule 415) or, only if the Company is not eligible to use Form S-3,
on such other form which is appropriate to register such Registrable Shares for
resale from time to time by the Purchasers;


 


22

















 


(b)                                 subject
to receipt of necessary information from the Purchasers, cause any such
Registration Statement filed pursuant to Section 7.1(a) above to
become effective as promptly after filing of such Registration Statement as practicable
but in any event by the date (the “Effectiveness Deadline Date”) that is ninety
(90) days following the Closing Date; provided,
however, that in the event that the Registration Statement is
reviewed by the SEC (subject to the exception contained in 7.1(b)(1)), then the
Effectiveness Deadline Date shall mean, with respect to such Registration
Statement, the date that is one hundred twenty (120) days following the
Closing Date;


 


(1)                                  notwithstanding the
foregoing, if the SEC reviews the Registration Statement and provides comments
solely relating to the Company’s absence of certain Part II or Part III
information from the Company’s Annual Report on Form 10-K for the year
ended December 31, 2008 (similar to the SEC comment letter issued to the
Company March 25, 2008), then such comments shall not be considered a “review”
for purposes of Section 7.1(b) and the Effectiveness Deadline Date in
such case shall be 90 days from the Closing Date;


 


(c)                                  prepare
and file with the SEC such amendments and supplements to such Registration
Statement and the prospectus used in connection therewith as may be necessary
to keep such Registration Statement continuously effective until termination of
such obligation as provided in Section 7.5 below, subject to the Company’s
right to suspend pursuant to Section 7.4;


 


(d)                                 furnish
to each Purchaser (and to each underwriter, if any, of such Registrable Shares)
such number of copies of prospectuses in conformity with the requirements of
the Securities Act and such other documents as the Purchasers may reasonably
request, in order to facilitate the public sale or other disposition of all or
any of the Registrable Shares by the Purchasers;


 


(e)                                  file
such documents as may be required of the Company for normal securities law
clearance for the resale of the Registrable Shares in such states of the United
States as may be reasonably requested by each Purchaser; provided, however, that the Company shall
not be required in connection with this paragraph (e) to qualify as a
foreign corporation or execute a general consent to service of process in any
jurisdiction;


 


(f)                                    advise
each Purchaser promptly:


 


(1)                                  of
the effectiveness of the Registration Statement or any post-effective
amendments thereto;


 


(2)                                  of
any request by the SEC for amendments to the Registration Statement or
amendments to the prospectus or for additional information relating thereto;


 


(3)                                  of
the issuance by the SEC of any stop order suspending the effectiveness of the
Registration Statement under the Securities Act or of 


 


23

















 


the suspension
by any state securities commission of the qualification of the Registrable
Shares for offering or sale in any jurisdiction, or the initiation of any
proceeding for any of the preceding purposes; and


 


(4)                                  of
the existence of any fact and the happening of any event that makes any
statement of a material fact made in the Registration Statement, the prospectus
and amendment or supplement thereto, or any document incorporated by reference
therein, untrue, or that requires the making of any additions to or changes in
the Registration Statement or the prospectus in order to make the statements
therein not misleading;


 


(g)                                 use
its best efforts to cause all Registrable Shares to be listed on each securities
exchange, if any, on which equity securities by the Company are then listed;
and


 


(h)                                 bear
all expenses in connection with the procedures in paragraphs (a) through (g) of
this Section 7.1 and the registration of the Registrable Shares on such
Registration Statement and the satisfaction of the blue sky laws of such
states.


 


Notwithstanding
the registration obligations set forth in this Section 7.1, in the event
the SEC informs the Company that all of the Registrable Shares cannot, as a
result of the application of Rule 415, be registered for resale as a
secondary offering on a single registration statement, the Company agrees to
promptly (i) inform each of the Purchasers thereof and file amendments to
the initial Registration Statement as required by the SEC and/or (ii) withdraw
the initial Registration Statement and file a new registration statement, in
either case covering the maximum number of Registrable Shares permitted to be
registered by the SEC, on Form S-3 or such other form available to
register for resale the Registrable Shares as a secondary offering; provided, however, that prior to filing
such amendment or new Registration Statement, the Company shall be obligated to
use its best efforts to advocate with the SEC for the registration of all of the
Registrable Shares in accordance with the SEC Guidance, including without
limitation, the Manual of Publicly Available Telephone Interpretations D.29.
Notwithstanding any other provision of this Agreement and subject to the
payment of liquidated damages in Section 7.2, if any SEC Guidance imposes
a limitation on the number of Registrable Shares permitted to be registered on
a particular Registration Statement as a secondary offering (and
notwithstanding that the Company used best efforts to advocate with the SEC for
the registration of all or a greater number of Registrable Shares), the number
of Registrable Shares to be registered on such Registration Statement shall be
reduced on a pro rata basis based on the total number of unregistered Shares
held by such Purchasers, provided that the Company shall have an ongoing
obligation to register the remaining Registrable Shares in one or more
additional Registration Statements to be filed within 30 days of the Company
becoming eligible to do so (the “Springing Date”), with such subsequent
Registration Statement(s) to be declared effective within 90 days from the
Springing Date or, in the case of an SEC review as contemplated in Section 7.1(b),
120 days from the Springing Date.


 


24

















 


7.2           Delay
in Effectiveness.  If the Registration Statement is
not declared effective by the SEC on or prior to the Effectiveness Deadline
Date, then for each partial or whole thirty (30) day period following the
Effectiveness Deadline Date, until but excluding the date the Registration
Statement is declared effective, the Company shall, for such period, pay each
Purchaser, as liquidated damages and not as a penalty, an amount equal to 1.0%
of the purchase price of the Shares purchased by such Purchaser hereunder, for
such period (or prorated for any partial period), up to a maximum of 10% in the
aggregate; and for any such period, such payment shall be made no later than
the first business day of the calendar month next succeeding the last month in
which such period occurs.  The parties
hereto agree that the liquidated damages provided for in this Section 7.2
constitute a reasonable estimate of the damages that may be incurred by the
Purchasers by reason of the failure of the Registration Statement to be
declared effective in accordance with the provisions hereof.


 


7.3           Indemnification.


 


(a)                                  The
Company agrees to indemnify and hold harmless each Purchaser, the partners,
members, officers, directors, controlling persons or Affiliates of each Purchaser
and each person, if any, who controls such Purchaser within the meaning of the
Securities Act or the Exchange Act, from and against any losses, claims,
damages or liabilities to which they may become subject (under the Securities
Act or otherwise) insofar as such losses, claims, damages or liabilities (or
actions or proceedings in respect thereof) arise out of, or are based upon, any
untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement or any omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading or arise out of any failure by the Company to fulfill any
undertaking included in the Registration Statement and the Company will, as
incurred, reimburse such Purchaser, partner, member, officer, director,
controlling person or Affiliate for any legal or other expenses reasonably
incurred in investigating, defending or preparing to defend any such action,
proceeding or claim; provided, however,
that the Company shall not be liable in any such case to the extent that such
loss, claim, damage or liability (collectively, “Loss”) arises solely out of, or is based
solely upon, an untrue statement or omission or alleged untrue statement or
omission made in such Registration Statement in reliance upon and in conformity
with written information furnished to the Company by or on behalf of such
Purchaser, partner, member, officer, director, controlling person or Affiliate
specifically for use in preparation of the Registration Statement or any breach
of this Agreement by such Purchaser; and provided,
further, however, that the Company shall not be liable to any
Purchaser of Registrable Shares (or any partner, member, officer, director,
controlling person or Affiliate of such Purchaser) to the extent that any such
Loss is caused by an untrue statement or omission or alleged untrue statement
or omission made in any preliminary prospectus if such Purchaser sold
Registrable Shares in violation of such Purchaser’s covenant contained in Section 7.4
of this Agreement.


 


(b)                                 Each
Purchaser, severally and not jointly, agrees to indemnify and hold harmless the
Company (and each person, if any, who controls the Company within the meaning
of Section 15 of the Securities Act or Section 20 of the 


 


25

















 


Exchange Act, each officer of the Company who signs the Registration
Statement and each director of the Company), from and against any losses,
claims, damages or liabilities to which the Company (or any such officer,
director or controlling person) may become subject (under the Securities Act or
otherwise), insofar as such losses, claims, damages or liabilities (or actions
or proceedings in respect thereof) arise solely out of, or are based solely
upon, any breach of this Agreement by such Purchaser or any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement or any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading in each
case, on the effective date thereof, if, and to the extent, such untrue
statement or omission or alleged untrue statement or omission was made in
reliance upon and in conformity with written information furnished by or on
behalf of such Purchaser specifically for use in preparation of the
Registration Statement, and such Purchaser will reimburse the Company (and each
of its officers, directors or controlling persons) for any legal or other
expenses reasonably incurred in investigating, defending or preparing to defend
any such action, proceeding or claim; provided,
however, that in no event shall any indemnity under this Section 7.3(b) be
greater in amount than the dollar amount of the proceeds (net of the amount of
any damages such Purchaser has otherwise been required to pay by reason of such
untrue statement or omission or alleged untrue statement or omission) received
by such Purchaser upon the sale of the Registrable Shares included in the
Registration Statement giving rise to such indemnification obligation.


 


(c)                                  Promptly
after receipt by any indemnified person of a notice of a claim or the beginning
of any action in respect of which indemnity is to be sought against an
indemnifying person pursuant to this Section 7.3, such indemnified person
shall promptly notify the indemnifying person in writing of such claim or of
the commencement of such action, and, subject to the provisions hereinafter
stated, in case any such action shall be brought against an indemnified person
and such indemnifying person shall have been notified thereof, such
indemnifying person shall be entitled to participate therein, and, to the
extent that it shall wish, to assume the defense thereof, with counsel
reasonably satisfactory to such indemnified person.  After notice from the indemnifying person to
such indemnified person of its election to assume the defense thereof, such
indemnifying person shall not be liable to such indemnified person for any
legal expenses subsequently incurred by such indemnified person in connection
with the defense thereof; provided, however,
that if there exists or shall exist a conflict of interest that would make it
inappropriate in the reasonable judgment of the indemnified person for the same
counsel to represent both the indemnified person and such indemnifying person
or any Affiliate or associate thereof, the indemnified person shall be entitled
to retain its own counsel at the expense of such indemnifying person; provided, further, that no indemnifying
person shall be responsible for the fees and expense of more than one separate
counsel for all indemnified parties.  The
indemnifying party shall not settle an action without the consent of the
indemnified party, which consent shall not be unreasonably withheld.


 


(d)                                 If
after proper notice of a claim or the commencement of any action against the
indemnified party, the indemnifying party does not choose to 


 


26

















 


participate, then the indemnified party shall assume the defense
thereof and upon written notice by the indemnified party requesting advance
payment of a stated amount for its reasonable defense costs and expenses, the
indemnifying party shall advance payment for such reasonable defense costs and
expenses (the “Advance
Indemnification Payment”) to the indemnified party.  In the event that the indemnified party’s
actual defense costs and expenses exceed the amount of the Advance
Indemnification Payment, then upon written request by the indemnified party,
the indemnifying party shall reimburse the indemnified party for such
difference; in the event that the Advance Indemnification Payment exceeds the
indemnified party’s actual costs and expenses, the indemnified party shall
promptly remit payment of such difference to the indemnifying party.


 


(e)                                  If
the indemnification provided for in this Section 7.3 is held by a court of
competent jurisdiction to be unavailable to an indemnified party with respect
to any losses, claims, damages or liabilities referred to herein, the
indemnifying party, in lieu of indemnifying such indemnified party thereunder,
shall to the extent permitted by applicable law contribute to the amount paid
or payable by such indemnified party as a result of such loss, claim, damage or
liability in such proportion as is appropriate to reflect the relative fault of
the indemnifying party on the one hand and of the indemnified party on the
other, as well as any other relevant equitable considerations; provided, that in no event shall any
contribution by an indemnifying party hereunder be greater in amount than the
dollar amount of the proceeds (net of the amount of any damages such
indemnifying party has otherwise been required to pay by reason of such untrue
statement or omission or alleged untrue statement or omission) received by such
indemnifying party upon the sale of the Registrable Shares included in the
Registration Statement giving rise to such indemnification obligation.


 


7.4           Prospectus
Delivery.  Each Purchaser hereby
covenants with the Company not to make any sale of the Registrable Shares
without complying with Section 6. 
The Purchaser acknowledges that there may be times when the Company must
suspend the use of the prospectus forming a part of the Registration Statement
until such time as an amendment to the Registration Statement has been filed by
the Company and declared effective by the SEC, or until such time as the
Company has filed an appropriate report with the SEC pursuant to the Exchange
Act.  The Purchaser hereby covenants that
it will not sell any Registrable Shares pursuant to said prospectus during the
period commencing at the time at which the Company gives the Purchaser notice
of the suspension of the use of said prospectus and ending at the time the
Company gives the Purchaser notice that the Purchaser may thereafter effect
sales pursuant to said prospectus; provided
that (i) such suspension periods shall in no event exceed ten (10) days
in any twelve (12) month period and (ii) the Board of Directors of the
Company shall have made a good faith judgment that the Company would, in the
absence of such delay or suspension hereunder, be required under state or
federal securities laws to disclose a specific corporate development or
potentially significant transaction or event, the disclosure of which would
reasonably be expected to have a material adverse effect upon the Company or
its shareholders.


 


7.5           Termination
of Obligations.  The obligations of
the Company pursuant to Section 7.1 hereof shall cease and terminate upon
the earlier to occur of 


 


27

















 


(a) such time as all of the Registrable Shares have been resold, (b) such
time as all of the Registrable Shares may be resold without restriction
pursuant to Rule 144, or (c) the third anniversary of the Closing
Date, but not so long as any Purchaser is deemed an Affiliate of the Company.


 


7.6           Reporting
Requirements.  With a view to making
available the benefits of Rule 144 and any other rules and
regulations of the SEC that may at any time permit the sale of the Shares to
the public without registration or pursuant to a registration statement on Form S-3,
the Company agrees to use its best efforts to:


 


(1)                                          make
and keep public information available, as those terms are understood and
defined in Rule 144 under the Securities Act;


 


(2)                                          file
with the SEC in a timely manner all reports and other documents required of the
Company under the Securities Act and the Exchange Act; and


 


(3)                                          so
long as any of the Purchasers own Registrable Shares, to furnish to such
Purchaser upon request (A) a written statement by the Company as to
whether it is in compliance with the reporting requirements of Rule 144,
the Securities Act and the Exchange Act, or whether it is qualified as a
registrant whose securities may be resold pursuant to SEC Form S-3, and (B) a
copy of the most recent annual or quarterly report of the Company and such
other reports and documents so filed by the Company.


 


7.7              Blue
Sky.  The Company shall obtain and
maintain all necessary blue sky law permits and qualifications, or secured
exemptions therefrom, required by any state for the offer and sale of Shares.


 


8.                                       Termination;
Liabilities Consequent Thereon.  This
Agreement may be terminated and the transactions contemplated hereunder
abandoned at any time prior to the Closing only as follows:


 


(a)                                  by
any Purchaser (with respect to such Purchaser providing notice only), upon
notice to the Company if the conditions set forth in Section 5.1 shall not
have been satisfied on or prior to March 13, 2009 (other than as a result
of the failure on the part of the Purchaser giving such notice of termination
to perform its covenants and obligations under this Agreement in all material
respects); or


 


(b)                                 by
the Company, upon notice to the Purchasers if the conditions set forth in Section 5.2
shall not have been satisfied on or prior to March 13, 2009; or


 


(c)                                  at
any time by mutual agreement of the Company and the Purchasers; or


 


(d)                                 by
any Purchaser (with respect to such Purchaser providing notice only), if there
has been any breach of any representation or warranty or any material breach of
any covenant of the Company contained herein and the same has not been cured
within 15 days after notice thereof (it being understood and agreed by each
Purchaser that, in the case of any 


 


28

















 


representation
or warranty of the Company contained herein which is not hereinabove qualified
by application thereto of a materiality standard, such representation or
warranty will be deemed to have been breached for purposes of this Section 8(d) only
if such representation or warranty was not true and correct in all material
respects at the time such representation or warranty was made by the Company);
or


 


(e)                                  by
the Company, if there has been any breach of any representation, warranty or
any material breach of any covenant of any Purchaser contained herein and the
same has not been cured within 15 days after notice thereof (it being
understood and agreed by the Company that, in the case of any representation
and warranty of the Purchaser contained herein which is not hereinabove
qualified by application thereto of a materiality standard, such representation
or warranty will be deemed to have been breached for purposes of this Section 8(e) only
if such representation or warranty was not true and correct in all material
respects at the time such representation or warranty was made by such
Purchaser).


 


Notwithstanding
the foregoing, with respect to Sections 8(b) and 8(e), the Company may not
terminate this Agreement as to any Purchaser who (i) has met its closing
obligations under Section 5.2, (ii) is not in breach of any
representation or warranty or material breach of any covenant of such
Purchaser, and (iii) elects to proceed with the Closing despite the
failure of one or more other Purchasers to meet their respective closing
obligations under Section 5.2, which shall include any act that causes any
closing obligation under Section 5.2 to not be met, or the breach by one
or more other Purchasers of any representation, warranty or material covenant
of any such Purchaser. Any termination pursuant to this Section 8 shall be
without liability on the part of any party, unless such termination is the
result of a material breach of this Agreement by a party to this Agreement in
which case such breaching party shall remain liable for such breach
notwithstanding any termination of this Agreement.  Any liability of a Purchaser under this Section 7
shall be several, and not joint, with the obligations of any other Purchaser.


 


9.                                       Indemnification
Provisions.


 


9.1                                 Indemnification.
In addition to the indemnification provisions set forth in Section 7
hereof, the Company agrees to indemnify and hold harmless each Purchaser from
and against any losses, claims, damages, judgments, fines, penalties, expenses
(including reasonable attorney’s fees and expenses), amounts paid in
settlement, and liabilities joint or several (“Claims”) to which such Purchaser may
become subject (under the Securities Act or otherwise) or which it may incur in
connection with investigating, preparing or defending any action, claim, suit,
inquiry, proceeding, investigation or appeal taken from the foregoing by or
before any court or governmental, administrative or other regulatory agency,
body or the SEC, whether pending or threatened, whether or not an indemnified
party is or may be a party thereto insofar as such Claims (or actions or
proceedings in respect thereof) arise out of or are based upon any breach of
the representations or warranties of the Company contained herein or failure to
comply with the covenants and agreements of the Company contained herein. The
Company shall reimburse each Purchaser for the amounts provided for herein on
demand as such expenses are incurred as reasonably documented by the Purchaser.  The Company will not be liable to any
Purchaser under this Agreement to the extent, but only to the extent that a
loss, claim, damage or liability is attributable to any Purchaser’s 


 


29

















 


breach of any of the representations, warranties, covenants or
agreements made by such Purchaser in this Agreement.


 


9.2                                 Conduct of
Indemnification Proceedings. Promptly after receipt by any Purchaser of
notice of any claim or the beginning of any action in respect of which
indemnity is to be sought against an indemnifying person pursuant to this Section 9,
such Purchaser shall promptly notify the Company in writing of such claim or of
the commencement of such action, and the Company shall be entitled to
participate therein, and, to the extent that it shall wish, to assume the
defense thereof, with counsel reasonably satisfactory to Purchaser; provided, however, that the failure of any
Purchaser to so notify the Company shall not relieve the Company of its
obligations hereunder except to the extent, and only to the extent, that the
Company is actually and materially and adversely prejudiced by such failure to
notify.  After notice from the Company to the Purchaser of its election to
assume the defense thereof, the Company shall not be liable to such Purchaser
for any legal expenses subsequently incurred by such Purchaser in connection
with the defense thereof; provided, however,
that if there exists or shall exist a conflict of interest that would make it
inappropriate in the reasonable judgment of the Purchaser for the same counsel
to represent both the Purchaser and the Company or any Affiliate or associate
thereof, the Purchaser shall be entitled to retain its own counsel at the
expense of the Company; provided, further,
that the Company shall not be responsible for the fees and expense of more than
one separate counsel for all Purchasers. 
The Company shall not be liable for any settlement of any proceeding
effected without its written consent, which consent shall not be unreasonably
withheld, delayed or conditioned unless the Company fails to defend any
proceeding or fails to promptly respond to a settlement offer.  Without
the prior written consent of the Purchaser, which consent shall not be
unreasonably withheld, delayed or conditioned, the Company shall not effect any
settlement of any pending or threatened proceeding in respect of which any
Purchaser is or could have been a party and indemnity could have been sought
hereunder by such Purchaser, unless such settlement includes an unconditional
release of such Purchaser from all liability arising out of such proceeding.


 


10.                                 Miscellaneous
Provisions.


 


10.1                           Public Statements or
Releases.  The Company shall, on the
business day following the date of this Agreement, issue a press release
announcing the entry into this Agreement and disclosing the transactions
contemplated hereby, as well as make such other filings and notices in the
manner and time required by the SEC. 
Prior to such announcement, no Purchaser shall make, issue, or release
any announcement, whether to the public generally, or to any of its limited
partners or other third parties, with respect to this Agreement or the
transactions provided for herein, or make any statement or acknowledgment of
the existence of, or reveal the status of, this Agreement or the transactions
provided for herein, without the prior consent of the Company, which shall not
be unreasonably withheld or delayed, provided,
that nothing in this Section 10.1 shall prevent any of the parties hereto
from making such public announcements as it may consider necessary in order to
satisfy its legal obligations, but to the extent not inconsistent with such
obligations, it shall provide the other parties with an opportunity to review
and comment on any proposed public announcement before it is made.


 


30
















 


10.2                           Further Assurances.  Each party agrees to cooperate fully with the
other parties and to execute such further instruments, documents and agreements
and to give such further written assurances, as may be reasonably requested by
the other parties to better evidence and reflect the transactions described
herein and contemplated hereby, and to carry into effect the intents and
purposes of this Agreement.


 


10.3                           Rights Cumulative.  Each and all of the various rights, powers
and remedies of the parties shall be considered to be cumulative with and in
addition to any other rights, powers and remedies which such parties may have
at law or in equity in the event of the breach of any of the terms of this
Agreement.  The exercise or partial
exercise of any right, power or remedy shall neither constitute the exclusive
election thereof nor the waiver of any other right, power or remedy available
to such party.


 


10.4                           Pronouns.  All pronouns or any variation thereof shall
be deemed to refer to the masculine, feminine or neuter, singular or plural, as
the identity of the person, persons, entity or entities may require.


 


10.5                           Notices.  Any notices, reports or other correspondence
(hereinafter collectively referred to as “correspondence”) required or
permitted to be given hereunder shall be in writing, addressed as set forth
below and shall be deemed effectively given: (a) upon personal delivery to
the party to be notified, (b) when sent by confirmed electronic mail or
facsimile if sent during normal business hours of the recipient, if not, then
on the next business day, (c) three business (3) days after having
been sent by registered or certified mail, return receipt requested, postage
prepaid, or (d) one (1) day after deposit with a nationally
recognized overnight courier, specifying next day delivery, with written
verification of receipt, in each case costs prepaid.


 


(a)                                  All
correspondence to the Company shall be addressed as follows:


 


	
  Affymax, Inc.

  
	
  4001 Miranda
  Avenue

  
	
  Palo Alto,
  California 94304

  
	
   

  
	
  Attention:

  	
  Grace U. Shin

  
	
   

  	
  General
  Counsel

  
	
  Facsimile:

  	
  (650)
  424-0832

  
	
   

  
	
  with a copy
  to (which shall not constitute notice):

  
	
   

  
	
  Cooley
  Godward Kronish, LLP

  
	
  Five Palo
  Alto Square

  
	
  3000 El
  Camino Real

  
	
  Palo Alto,
  CA 94306

  
	
   

  
	
  Attention:

  	
  Laura A.
  Berezin, Esq.

  
	
  Facsimile:

  	
  (650) 849-7400

  



 


31

















 


All
correspondence to any Purchaser shall be sent to such Purchaser at the address
set forth in Exhibit A.


 


(b)                                 Any
entity may change the address to which correspondence to it is to be addressed
by ten (10) days advance written notification as provided for herein.


 


10.6                           Captions.  The captions and paragraph headings of this
Agreement are solely for the convenience of reference and shall not affect its
interpretation.


 


10.7                           Severability.  Should any part or provision of this
Agreement be held unenforceable or in conflict with the applicable laws or
regulations of any jurisdiction, the invalid or unenforceable part or
provisions shall be replaced with a provision which accomplishes, to the extent
possible, the original business purpose of such part or provision in a valid
and enforceable manner, and the remainder of this Agreement shall remain
binding upon the parties hereto.


 


10.8                           Governing Law; Injunctive
Relief.


 


(a)                                  This
Agreement shall be governed by and construed in accordance with the internal
and substantive laws of the State of California and without regard to any
conflicts of laws concepts which would apply the substantive law of some other
jurisdiction.


 


(b)                                 Each
of the parties hereto acknowledges and agrees that damages will not be an
adequate remedy for any material breach or violation of this Agreement if such
material breach or violation would cause immediate and irreparable harm (an “Irreparable Breach”).  Accordingly, in the event of a threatened or
ongoing Irreparable Breach, each party hereto shall be entitled to seek
equitable relief of a kind appropriate in light of the nature of the ongoing or
threatened Irreparable Breach, which relief may include, without limitation,
specific performance or injunctive relief; provided,
however, that if the party bringing such action is unsuccessful in
obtaining the relief sought, the moving party shall pay the non-moving party’s
reasonable costs, including attorney’s fees, incurred in connection with
defending such action.  Such remedies
shall not be the parties’ exclusive remedies, but shall be in addition to all
other remedies provided in this Agreement.


 


10.9                           Amendments. This
Agreement may not be amended or modified, and no rights or provisions may be
waived, except pursuant to an instrument in writing signed by the Company and
the Majority Purchasers; provided, however,
that this Agreement may not be amended or modified, and no rights or provisions
may be waived, in any way that materially adversely affects the rights and/or
obligations of any Purchaser under this Agreement in a manner materially
different from the manner in which it affects the rights and/or obligations of
the other Purchasers without the written consent of such adversely affected
party. The Company shall give prompt written notice of any amendment,
modification or waiver hereof to any party hereto that did not consent in
writing to such amendment, modification or waiver. Any amendment, modification
or


 


32

















 


waiver
effected in accordance with this Section 10.9 shall be binding on all
parties hereto, even if they do not execute such consent.


 


10.10                     Waiver.  No waiver of any term, provision or condition
of this Agreement, whether by conduct or otherwise, in any one or more
instances, shall be deemed to be, or be construed as, a further or continuing
waiver of any such term, provision or condition or as a waiver of any other
term, provision or condition of this Agreement.


 


10.11                     Expenses.  Each party will bear its own costs and
expenses in connection with this Agreement; provided,
however that the Company shall reimburse reasonably documented
legal, due diligence and other fees and expenses incurred by ProQuest
Investments in connection with the transaction described in this Agreement (not
to exceed $135,000 total, inclusive of the review of the Registration Statement
required to be filed pursuant to this Agreement).


 


10.12                     Assignment.  The rights and obligations of the parties
hereto shall inure to the benefit of and shall be binding upon the authorized
successors and permitted assigns of each party. 
No party may assign its rights or obligations under this Agreement or
designate another person (i) to perform all or part of its obligations
under this Agreement or (ii) to have all or part of its rights and
benefits under this Agreement, in each case without the prior written consent
of the Company, provided, however,
that a Purchaser may assign its rights hereunder with respect to any Shares
transferred pursuant to and in compliance with Section 6 of this
Agreement, and may designate such transferee to perform the duties of the
Purchaser hereunder with respect to such transferred Shares; provided, further that irrespective of
such transfer and designation the Purchaser shall remain obligated hereunder
with respect to all of such Purchaser’s purchased Shares.  In the event of any assignment in accordance
with the terms of this Agreement, the assignee shall specifically assume and be
bound by the provisions of the Agreement by executing and agreeing to an
assumption agreement reasonably acceptable to the Company.


 


10.13                     Counterpart. This Agreement
may be executed in two or more counterparts, each of which shall be deemed an
original and all of which together shall constitute one instrument. A
facsimile, photocopy or other reproduction of this Agreement may be executed by
one or more parties hereto and delivered by such party by facsimile or any
similar electronic transmission device pursuant to which the signature of or on
behalf of such party can be seen. Such execution and delivery shall be
considered valid, binding and effective for all purposes.  At the request of any party hereto, all
parties hereto agree to execute and deliver an original of this Agreement as
well as any facsimile, photocopy or other reproduction hereof.


 


10.14                     Entire Agreement.  This Agreement constitutes the entire
agreement between the parties hereto respecting the subject matter hereof and
supersede all prior agreements, negotiations, understandings, representations
and statements respecting the subject matter hereof, whether written or
oral.  No modification, alteration,
waiver or change in any of the terms of this Agreement shall be valid or
binding upon the


 


33

















 


parties hereto
unless made in writing and duly executed by the Company and the Majority
Purchasers.


 


10.15                     Waiver of Conflicts.  Each party to this Agreement acknowledges
that Cooley, outside general counsel to the Company, has in the past performed
and is or may now or in the future represent one or more Purchasers or their
affiliates in matters unrelated to the transactions contemplated by this
Agreement (the “Financing”),
including representation of such Purchasers or their affiliates in matters of a
similar nature to the Financing.  The
applicable rules of professional conduct require that Cooley inform the
parties hereunder of this representation and obtain their consent.  Cooley has served as outside general counsel
to the Company and has negotiated the terms of the Financing solely on behalf
of the Company.  The Company and each
Purchaser hereby (a) acknowledge that they have had an opportunity to ask
for and have obtained information relevant to such representation, including
disclosure of the reasonably foreseeable adverse consequences of such
representation; (b) acknowledge that with respect to the Financing, Cooley
has represented solely the Company, and not any Purchaser or any stockholder,
director or employee of the Company or any Purchaser; and (c) gives its
informed consent to Cooley’s representation of the Company in the Financing.


 


10.16                     Independent Nature of
Purchasers’ Obligations and Rights. The obligations of each Purchaser under
this Agreement are several and not joint with the obligations of any other
Purchaser, and no Purchaser shall be responsible in any way for the performance
of the obligations of any other Purchaser under this Agreement. Nothing
contained herein, and no action taken by any Purchaser, shall be deemed to
constitute the Purchasers as a partnership, an association, a joint venture or
any other kind of entity, or create a presumption that the Purchasers are in
any way acting in concert or as a group with respect to such obligations or the
transaction contemplated hereby. Each Purchaser shall be entitled to
independently protect and enforce its rights, including without limitation the
rights arising out of this Agreement, and it shall not be necessary for any
other Purchaser to be joined as an additional party in any proceeding for such
purpose.


 


10.17                     Use of Proceeds.  The Company agrees that all proceeds from the
sale of the Shares pursuant to this Agreement shall be used only for working
capital and other corporate/operational purposes of the Company; provided, however, that the Company shall
be permitted to use such proceeds to make required payments on the Company’s
outstanding indebtedness on the Effective Date as disclosed in the SEC
Documents.


 


[SIGNATURE PAGE TO FOLLOW]


 


34

















 


IN
WITNESS WHEREOF, the parties hereto have executed this
SECURITIES PURCHASE AGREEMENT as
of the day and year first above written.


 


	
   

  	
  AFFYMAX, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
    /s/ Paul B. Cleveland

  
	
   

  	
  Name:  Paul
  B. Cleveland

  
	
   

  	
  Title:

  	
  Chief
  Financial Officer

  
				



 

















 


IN
WITNESS WHEREOF, the parties hereto have executed this
SECURITIES PURCHASE AGREEMENT as
of the day and year first above written.


 


	
   

  	
  PURCHASER:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PROQUEST INVESTMENTS IV, L.P.

  
	
   

  	
  By: ProQuest
  Associates IV LLC

  
	
   

  	
  Its: General
  Partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Pasquale
  DeAngelis 

  
	
   

  	
   

  	
  Name:
  Pasquale DeAngelis

  
	
   

  	
   

  	
  Title:
  Managing Member

  
	
   

  	
   

  
	
   

  	
  Notice
  Address:

  
	
   

  	
   

  
	
   

  	
  ProQuest
  Investments IV, L.P.

  
	
   

  	
  90 Nassau
  Street

  
	
   

  	
  Fifth Floor

  
	
   

  	
  Princeton,
  NJ 08542

  
	
   

  	
  Attn:
  Pasquale DeAngelis

  
	
   

  	
  Fax: (609)
  375-1047

  
				



 

















 


IN
WITNESS WHEREOF, the parties hereto have executed this
SECURITIES PURCHASE AGREEMENT as
of the day and year first above written.


 


	
   

  	
  PURCHASER:

  
	
   

  	
   

  
	
   

  	
  BESSEMER VENTURE PARTNERS VI L.P.

  
	
   

  	
  By: Deer
  VI & Co. LLC, General Partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
    /s/ Scott Ring 

  
	
   

  	
  Scott Ring,
  General Counsel

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Notice
  Address:

  
	
   

  	
   

  
	
   

  	
  c/o Bessemer Venture
  Partners

  
	
   

  	
  1865 Palmer Avenue

  
	
   

  	
  Suite 104

  
	
   

  	
  Larchmont, NY 10538

  
	
   

  	
  Tel.
  914-833-5300

  
	
   

  	
  Email:
  transactions@bvp.com

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PURCHASER:

  
	
   

  	
   

  
	
   

  	
  BESSEMER VENTURE PARTNERS CO-INVESTMENT L.P.

  
	
   

  	
  By: Deer
  VI & Co. LLC, General Partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
    /s/ Scott Ring 

  
	
   

  	
  Scott Ring,
  General Counsel

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Notice
  Address:

  
	
   

  	
   

  
	
   

  	
  c/o Bessemer Venture
  Partners

  
	
   

  	
  1865 Palmer Avenue

  
	
   

  	
  Suite 104

  
	
   

  	
  Larchmont, NY 10538

  
	
   

  	
  Tel. 914-833-5300

  
	
   

  	
  Email:
  transactions@bvp.com

  



 

















 


IN
WITNESS WHEREOF, the parties hereto have executed this
SECURITIES PURCHASE AGREEMENT as
of the day and year first above written.


 


	
   

  	
  PURCHASER:

  
	
   

  	
   

  
	
   

  	
  BIOTECHNOLOGY VALUE FUND, L.P.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
    /s/ Mark Lampert

  
	
   

  	
  Name: Mark
  Lampert

  
	
   

  	
  Title: 

  	
  President of
  BVF Inc.

  
	
   

  	
   

  	
  General
  Partner of BVF Partners L.P.

  
	
   

  	
   

  	
  General
  Partner of Biotechnology Value 

  Fund, L.P.

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
   

  	
  One Sansome Street, 39th Floor

  
	
   

  	
   

  	
  San Francisco, CA 94104

  
	
   

  	
   

  
	
   

  	
  Fax:
  (415)-288-2394

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PURCHASER:

  
	
   

  	
   

  
	
   

  	
  BIOTECHNOLOGY VALUE FUND II, L.P.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
    /s/ Mark Lampert

  
	
   

  	
  Name: Mark
  Lampert

  
	
   

  	
  Title: 

  	
  President of
  BVF Inc.

  
	
   

  	
   

  	
  General
  Partner of BVF Partners L.P.

  
	
   

  	
   

  	
  General
  Partner of Biotechnology Value 

  Fund II, L.P.

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
   

  	
  One Sansome Street, 39th Floor

  
	
   

  	
   

  	
  San Francisco, CA 94104

  
	
   

  	
   

  
	
   

  	
  Fax:
  (415)-288-2394

  
				



 

















 


IN WITNESS WHEREOF,
the parties hereto have executed this SECURITIES
PURCHASE AGREEMENT as of the day and year first above written.


 


	
   

  	
  PURCHASER:

  
	
   

  	
   

  
	
   

  	
  INVESTMENT 10, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
    /s/
  Mark Lampert

  
	
   

  	
  Name: Mark
  Lampert

  
	
   

  	
  Title: 

  	
  President of
  BVF Inc.

  
	
   

  	
   

  	
  General
  Partner of BVF Partners L.P.

  
	
   

  	
   

  	
  Attorney-in-fact
  for Investment 10, LLC

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
   

  	
  One Sansome Street, 39th Floor

  
	
   

  	
   

  	
  San Francisco, CA 94104

  
	
   

  	
   

  
	
   

  	
  Fax:
  (415)-288-2394

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PURCHASER:

  
	
   

  	
   

  
	
   

  	
  BVF INVESTMENTS, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
    /s/
  Mark Lampert

  
	
   

  	
  Name: Mark
  Lampert

  
	
   

  	
  Title: 

  	
  President of
  BVF Inc.

  
	
   

  	
   

  	
  General
  Partner of BVF Partners L.P.

  
	
   

  	
   

  	
  Manager of
  BVF Investments, LLC

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
   

  	
  One Sansome Street, 39th Floor

  
	
   

  	
   

  	
  San Francisco, CA 94104

  
	
   

  	
   

  
	
   

  	
  Fax:
  (415)-288-2394

  
				



 
















 


Exhibit A


 


SCHEDULE
OF PURCHASERS


 


	
  Purchaser Name and Address

  	
   

  	
  Number of Shares to

  be Purchased

  	
   

  	
  Purchase Price

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ProQuest Investments IV, L.P.

  90 Nassau Street, Fifth Floor 

  Princeton, NJ 08542

  Attn: Pasquale DeAngelis

  	
   

  	
  1,777,942

  	
   

  	
  $

  	
  19,999,998.44

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Bessemer Venture Partners VI L.P.

  c/o Bessemer Venture Partners

  1865 Palmer Avenue

  Suite 104

  Larchmont, NY 10538

  Attn: Scott Ring

  	
   

  	
  333,365

  	
   

  	
  $

  	
  3,750,009.55

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Bessemer Venture Partners Co-Investment L.P.

  c/o Bessemer Venture Partners

  1865 Palmer Avenue

  Suite 104

  Larchmont, NY 10538

  Attn: Scott Ring

  	
   

  	
  111,121

  	
   

  	
  $

  	
  1,249,995.68

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Biotechnology Value Fund, L.P.

  One Sansome Street, 39th Floor

  San Francisco, CA 94104

  Attn: Oleg Nodelman

  	
   

  	
  138,815

  	
   

  	
  $

  	
  1,561,524.38

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Biotechnology Value Fund II, L.P.

  One Sansome Street, 39th Floor

  San Francisco, CA 94104

  Attn: Oleg Nodelman

  	
   

  	
  97,341

  	
   

  	
  $

  	
  1,094,985.02

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Investment 10, LLC

  One Sansome Street, 39th Floor

  San Francisco, CA 94104

  Attn: Oleg Nodelman

  	
   

  	
  35,659

  	
   

  	
  $

  	
  401,126.66

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  BVF Investments, LLC

  One Sansome Street, 39th Floor

  San Francisco, CA 94104

  Attn: Oleg Nodelman

  	
   

  	
  350,465

  	
   

  	
  $

  	
  3,942,366.77

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  TOTAL

  	
   

  	
  2,844,708

  	
   

  	
  $

  	
  32,000,006.50

  	
   

  



 

















 


Exhibit B


 


FORM OF LEGAL OPINION


 


March      ,
2009


 


To
the Purchasers Set Forth on Schedule A Hereto


 


RE:         Affymax, Inc.


 


Ladies and
Gentlemen:


 


We have acted
as counsel for Affymax, Inc., a Delaware corporation (the “Company”), in
connection with the issuance and sale of 2,844,708 shares of the Company’s
common stock (the “Common
Stock”),
$0.001 par value per share (the “Shares”) to the Purchasers under the
Securities Purchase Agreement dated as of February 13, 2009 (the “Purchase  Agreement”).  We are rendering this opinion pursuant to Section 5.1(h) of
the Purchase Agreement.  Except as
otherwise defined herein, capitalized terms used but not defined herein have
the respective meanings given to them in the Purchase Agreement.


 


In connection
with this opinion, we have examined and relied upon the representations and
warranties as to factual matters contained in and made pursuant to the Purchase
Agreement by the various parties and originals or copies certified to our
satisfaction, of such records, documents, certificates, opinions, memoranda and
other instruments as in our judgment are necessary or appropriate to enable us
to render the opinion expressed below. 
As to certain factual matters, we have relied upon certificates of
officers of the Company and have not sought to independently verify such
matters.


 


In rendering
this opinion, we have assumed: (i) the authenticity of all documents
submitted to us as originals; (ii) the conformity to originals of all
documents submitted to us as copies; (iii) the accuracy, completeness and
authenticity of certificates of public officials; (iv) the due
authorization, execution and delivery of all documents (except the due
authorization, execution and delivery by the Company of the Purchase
Agreement), where authorization, execution and delivery are prerequisites to
the effectiveness of such documents; and (v) the genuineness and
authenticity of all signatures on original documents (except the signatures on
behalf of the Company on the Purchase Agreement). We have also assumed: that
all individuals executing and delivering documents had the legal capacity to so
execute and deliver; that the Purchase Agreement is an obligation binding upon
the parties thereto other than the Company; that the parties to the Purchase
Agreement other than the Company have filed any required California franchise
or income tax returns and have paid any required California franchise or income
taxes; and that there are no extrinsic agreements or understandings among the
parties to the Purchase Agreement or to the Material Agreements (as defined
below) that would modify or interpret the terms of the Purchase Agreement or
the respective rights or obligations of the parties thereunder.


 


Our opinion is
expressed only with respect to the federal laws of the United States of America
and the laws of the State of California and the General Corporation Law of the
State of Delaware.  We express no opinion
as to whether the laws of any particular jurisdiction would


 

















 


apply
and no opinion to the extent that the laws of any jurisdiction other than those
identified above are applicable to the subject matter hereof or any liquidated
damages provisions in the Purchase Agreement.


 


We are not
rendering any opinion as to any statute, rule, regulation, ordinance, decree or
decisional law relating to antitrust, banking, land use, environmental,
pension, employee benefits, tax, fraudulent conveyance, usury, laws governing
the legality of investments for regulated entities, Regulations T, U or X of
the Board of Governors of the Federal Reserve System, any law, rules or
regulations relating to the United States Food and Drug Administration or any
other federal, state or foreign agencies or bodies engaged in the regulation of
pharmaceuticals or the bylaws, rules or regulations of the Financial
Industry Regulatory Authority, Inc. (“FINRA”). 
Furthermore, we express no opinion with respect to compliance with
antifraud laws, rules or regulations relating to securities or the offer
and sale thereof; compliance with fiduciary duties by the Company’s Board of
Directors or stockholders; compliance with safe harbors for disinterested Board
of Director or stockholder approvals; compliance with state securities or blue
sky laws except as specifically set forth below; or compliance with laws that
place limitations on corporate distributions.


 


With regard to
our opinion in paragraph 1 below with respect to the good standing and due
qualification of the Company, we have relied solely upon certificates of the
Secretaries of State of the indicated jurisdictions as of a recent date and a
certificate from the California Franchise Tax Board as of a recent date.


 


With regard to
our opinion in paragraph 5 below concerning defaults under and any material
breaches of any Material Agreement, we have relied solely upon an examination
of the contracts identified in the list attached hereto as Schedule B (the “Material  Agreements”), in the
form provided to us by the Company.  We
have made no further investigation. 
Further, with regard to our opinion in paragraph 5 below concerning
Material Agreements, we express no opinion as to (i) financial covenants
or similar provisions therein requiring financial calculations or
determinations to ascertain compliance, (ii) provisions therein relating
to the occurrence of a “material adverse event” or words of similar import or (iii) any
statement or writing that may constitute parol evidence bearing on
interpretation or construction.  We have
assumed that the Material Agreements are enforceable against the parties
thereto in accordance with their respective terms.  To the extent that laws other than those of
California govern any of the Material Agreements, we have also assumed that the
Material Agreements would be interpreted in accordance with their plain
meaning.


 


With regard to
our opinion in paragraph 7 below, we have assumed the following: (a) that
the representations made by each Purchaser in the Purchase Agreement are true
and correct; and (b) that neither the Company, nor any person acting on
behalf of the Company has offered or sold the Securities by any form of general
solicitation or general advertising within the meaning of Rule 502(c) of
Regulation D promulgated under the Securities Act.


 


With regard to
our opinion in paragraph 7 concerning exemption from registration, our opinion
is expressed only with respect to the offer and sale of the Shares without
regard to any offers or sales of other securities occurring prior to or
subsequent to the date hereof.


 

















 


With regard to
our opinion in paragraph 8 below, we have based our opinion, to the extent we
consider appropriate, on Rule 3a-8 under the Investment Company Act of
1940, as amended, and a certificate of an officer of the Company as to
compliance with each of the requirements necessary to comply with Rule 3a-8.  We have conducted no further investigation.


 


On the basis
of the foregoing, in reliance thereon and with the foregoing qualifications, we
are of the opinion that:


 


1.             The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware and has all corporate power and authority necessary to own and
lease its properties and to conduct its business as it is currently being
conducted. The Company is qualified to do business as a foreign corporation and
is in good standing in California.


 


2.             The Company has the requisite
corporate power to execute, deliver and perform its obligations under the
Purchase Agreement.


 


3.             All corporate action on the part of
the Company necessary for the authorization, execution and delivery of the
Purchase Agreement by the Company and the authorization, sale, issuance and
delivery of the Shares has been taken. The Purchase Agreement has been duly and
validly authorized, executed and delivered by the Company and such agreement
constitutes a valid and binding agreement of the Company enforceable against
the Company in accordance with its terms, except that we express no opinion as
to the validity of rights to indemnity and contribution under Sections 7.3 and
9 of the Purchase Agreement and except as such enforceability may be limited by
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
arrangement, moratorium or other similar laws affecting creditors’ rights
generally, and subject to general equity principles and to limitations on
availability of equitable relief, including specific performance.


 


4.             The Shares have been duly
authorized, and upon issuance and delivery against payment therefor in
accordance with the terms of the Purchase Agreement, the Shares will be validly
issued, outstanding, fully paid and nonassessable.  The issuance and sale of the Shares is not
subject to any preemptive right under (i) the Delaware General Corporation
Law, (ii) the Company’s Certificate of Incorporation or Bylaws, or (iii) any
of the Material Agreements.


 


5.             The execution and delivery of the
Purchase Agreement, and the issuance of the Shares pursuant thereto, do not
violate any provision of the Company’s Certificate of Incorporation or Bylaws,
do not constitute a default under or a material breach of any Material
Agreement and do not violate (a) any governmental statute, rule or
regulation which in our experience is typically applicable to transactions of
the nature contemplated by the Purchase Agreement or (b) any order, writ,
judgment, injunction, decree, determination or award which has been entered
against the Company and of which we are aware.


 


6.             All consents, approvals,
authorizations, or orders of, and filings, registrations, and qualifications
with any U.S. Federal or California regulatory authority or governmental body
required for the issuance of the Shares, have been made or obtained, except (a) for
the filing of a


 

















 


Form D pursuant to Securities and
Exchange Commission Regulation D, and (b) for the filing of the notice to
be filed under California Corporations Code Section 25102.1(d).


 


7.             The offer and sale of the Shares is
exempt from the registration requirements of the Securities Act of 1933, as
amended.


 


8.             The Company is not, and, after
giving effect to the offering and sale of the Shares and the application of the
proceeds thereof, will not be an “investment company,” as that term is defined
in the Investment Company Act of 1940, as amended.


 


[Signature Page Follows]


 

















 


This opinion
is intended solely for your benefit and is not to be made available to or be
relied upon by any other person, firm, or entity without our prior written
consent.


 


 


Very truly
yours,


 




	
  COOLEY GODWARD KRONISH LLP

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Laura A.
  Berezin, Esq.

  	
   

  	
   

  
					






 

















 


Schedule A


 


PURCHASERS


 


ProQuest
Investments IV, L.P.


 


Bessemer
Venture Partners VI L.P.


 


Bessemer
Venture Partners Co-Investment L.P.


 


Biotechnology
Value Fund, L.P.


 


Biotechnology
Value Fund II, L.P.


 


Investment 10,
LLC


 


BVF
Investments, LLC


 

















 


Schedule B


 


MATERIAL AGREEMENTS


 


Amended and
Restated Investor Rights Agreement, dated September 7, 2006


 


Form of
Indemnity Agreement between the Company and each of its officers and directors


 


2001 Stock
Option/Stock Issuance Plan


 


2006 Employee
Stock Purchase Plan


 


Employment
Agreement, dated June 10, 2003, by and between the Company and Arlene M.
Morris


 


Executive
Employment Agreement, dated November 17, 2005, by and between the Company
and Paul B. Cleveland


 


Executive
Employment Agreement, dated July 21, 2007, by and between the Company and
Steven Love


 


Research and
Development/Office Lease, dated May 30, 1990, by and between Miranda
Associates and Affymax Research Institute


 


First
Amendment to Lease, dated November 16, 1999, by and between Spieker
Properties, L.P., successor in interest to Miranda Associates, and Affymax
Research Institute


 


Second
Amendment to Lease, dated December 20, 1999, by and between Spieker
Properties, L.P. and Affymax Research Institute


 


Third
Amendment, dated December 31, 2001, by and between EOP-Foothill Research
Center, L.L.C., successor by merger to Spieker Properties L.P., and the
Company


 


EPO Receptor
License Agreement, dated September 5, 1996, by and between the Company and
Genetics Institute, Inc.


 


License
Agreement (Therapeutic Products), dated June 28, 1996, by and between the
Company, Dyax Corp. and Protein Engineering Corporation


 


License
Agreement, dated July 25, 2001, by and between the Company and Dyax Corp.


 


License
Agreement, dated July 27, 2001, by and between the Company, Glaxo Group
Limited, SmithKline Beecham Corporation, Affymax N.V., Affymax Research
Institute and Affymax Technologies N.V.


 


License
Agreement, dated August 13, 2001, by and between the Company and XOMA
Ireland Limited


 

















 


License,
Manufacturing, and Supply Agreement, dated April 8, 2004, by and between
the Company and Nektar Therapeutics AL, Corporation


 


Collaboration
and License Agreement, dated February 13, 2006, by and between the Company
and Takeda Pharmaceutical Company Limited


 


Collaboration
and License Agreement, dated June 27, 2006, by and between the Company and
Takeda Pharmaceutical Company Limited


 


Research and
Development Agreement, dated April 2, 1992, by and between the Company and
The R.W. Johnson Pharmaceutical Research Institute


 


Sublease
Agreement, dated September 1, 2006, by and between the Company and TIBCO
Software Inc.


 


First
Amendment to Collaboration and License Agreement, dated April 1, 2007, by
and between Company and Takeda Pharmaceutical Company Limited


 


Fourth
Amendment to Lease, dated November 30, 2006, by and between Company and
CA-Foothill Research Center L.P.


 


Second
Amendment to Collaboration and License Agreements between Company and Takeda
Pharmaceutical Company Limited effective January 1, 2008