exv10w1






Exhibit 10.1




SECURITIES PURCHASE AGREEMENT




     This Securities Purchase Agreement (this “Agreement”) is dated as of December 17, 2008, by and
among Ardea Biosciences, Inc., a Delaware corporation (the “Company”), and each purchaser
identified on the signature pages hereto (each, including its successors and assigns, a “Purchaser”
and collectively, the “Purchasers”).



RECITALS




          A. The Company and each Purchaser is executing and delivering this Agreement in reliance upon
the exemption from securities registration afforded by Section 4(2) of the Securities Act of 1933,
as amended (the “Securities Act”), and Rule 506 of Regulation D (“Regulation D”) as promulgated by
the United States Securities and Exchange Commission (the “Commission”) under the Securities Act.




          B. Each Purchaser, severally and not jointly, wishes to purchase, and the Company wishes to
sell, upon the terms and conditions stated in this Agreement, (i) that aggregate number of shares
of common stock, par value $0.001 per share (the “Common Stock”), of the Company, set forth below
such Purchaser’s name on the signature page of this Agreement (which aggregate amount for all
Purchasers together shall be 2,737,336 shares of Common Stock and shall be collectively referred to
herein as the “Shares”) and warrants substantially in the form attached hereto as Exhibit A
to purchase that aggregate number of shares of Common Stock set forth below such Purchaser’s name
on the signature page of this Agreement (which aggregate number of warrants for all Purchasers
together shall be warrants to purchase 684,332 shares of Common Stock and shall be collectively
referred to herein as the “Warrants"). The Shares and the Warrants are collectively referred to
herein as the “Securities.”




          C. Contemporaneously with the execution and delivery of this Agreement, the parties hereto are
executing and delivering a Registration Rights Agreement, substantially in the form attached hereto
as Exhibit B (the “Registration Rights Agreement), pursuant to which, among other things,
the Company will agree to provide certain registration rights with respect to the Shares and the
shares of Common Stock issuable upon exercise of the Warrants (the “Warrant Shares") under the
Securities Act and the rules and regulations promulgated thereunder and applicable state securities
laws.




     NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for
other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged,
the Company and the Purchasers hereby agree as follows:



ARTICLE I.

DEFINITIONS




     1.1 Definitions. In addition to the terms defined elsewhere in this Agreement, for
all purposes of this Agreement, the following terms shall have the meanings indicated in this
Section 1.1:



          “Action” means any action, suit, inquiry, notice of violation, proceeding (including any
partial proceeding such as a deposition) or investigation pending or, to the Company’s Knowledge,
threatened in writing against the Company, any Subsidiary or any of their respective properties or
any officer, director or employee of the Company or any Subsidiary acting in his or her capacity as
an officer, director or employee before or by any federal, state, county, local or foreign court,
arbitrator, governmental or administrative agency, regulatory authority, stock market, stock
exchange or trading facility.




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          “Affiliate” means, with respect to any Person, any other Person that, directly or indirectly
through one or more intermediaries, Controls, is controlled by or is under common control with such
Person, as such terms are used in and construed under Rule 144. With respect to a Purchaser, any
investment fund or managed account that is managed on a discretionary basis by the same investment
manager as such Purchaser will be deemed to be an Affiliate of such Purchaser.




          “Agreement” shall have the meaning ascribed to such term in the Preamble.




          “Business Day” means a day, other than a Saturday or Sunday, on which banks in New York City
are open for the general transaction of business.




          “Buy-In” has the meaning set forth in Section 4.1(f).




          “Buy-In Price” has the meaning set forth in Section 4.1(f).




          “Closing” means the closing of the purchase and sale of the Securities pursuant to this
Agreement.




          “Closing Bid Price” means, for any security as of any date, the last closing price for such
security on the Principal Trading Market, as reported by Bloomberg, or, if the Principal Trading
Market begins to operate on an extended hours basis and does not designate the closing bid price
then the last bid price of such security prior to 4:00 p.m., New York City Time, as reported by
Bloomberg, or, if the Principal Trading Market is not the principal securities exchange or trading
market for such security, the last closing price of such security on the principal securities
exchange or trading market where such security is listed or traded as reported by Bloomberg, or if
the foregoing do not apply, the last closing price of such security in the over-the-counter market
on the electronic bulletin board for such security as reported by Bloomberg, or, if no closing bid
price is reported for such security by Bloomberg, the average of the bid prices of any market
makers for such security as reported in the “pink sheets” by Pink Sheets LLC (formerly the National
Quotation Bureau, Inc.). If the Closing Bid Price cannot be calculated for a security on a
particular date on any of the foregoing bases, the Closing Bid Price of such security on such date
shall be the fair market value as mutually determined by the Company and the holder. If the Company
and the holder are unable to agree upon the fair market value of such security, then the Company
shall, within two (2) Business Days submit via facsimile (a) the disputed determination to an
independent, reputable investment bank selected by the Company and approved by the holder or (b)
the disputed arithmetic calculation to the Company’s independent, outside accountant. The Company
shall cause at its expense the investment bank or the accountant, as the case may be, to perform
the determinations or calculations and notify the Company and the holder of the results no later
than ten (10) Business Days from the time it receives the disputed determinations or calculations.
Such investment bank’s or accountant’s determination or calculation, as the case may be, shall be
binding upon all parties absent demonstrable error. All such determinations shall be appropriately
adjusted for any stock dividend, stock split, stock combination or other similar transaction during
the applicable calculation period.




          “Closing Date” means the Trading Day when all of the Transaction Documents have been executed
and delivered by the applicable parties thereto, and all of the conditions set forth in Sections
2.1, 2.2, 5.1 and 5.2 hereof are satisfied, or such other date as the parties may agree.




          “Commission” has the meaning set forth in the Recitals.




          “Common Stock” has the meaning set forth in the Recitals, and also includes any securities
into which the Common Stock may hereafter be reclassified or changed.




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          “Common Stock Equivalents” means any securities of the Company or any Subsidiary which would
entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any
debt, preferred stock, rights, options, warrants or other instrument that is at any time
convertible into or exchangeable for, or otherwise entitles the holder thereof to receive, Common
Stock or other securities that entitle the holder to receive, directly or indirectly, Common Stock.




          “Company Counsel” means Cooley Godward Kronish LLP.




          “Company Deliverables” has the meaning set forth in Section 2.2(a).




          “Company’s Knowledge” means with respect to any statement made to the knowledge of the
Company, that the statement is based upon the actual knowledge of the executive officers of the
Company having responsibility for the matter or matters that are the subject of the statement.




          “Control” (including the terms “controlling”, “controlled by” or “under common control with”)
means the possession, direct or indirect, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.




          “Disclosure Materials” has the meaning set forth in Section 3.1(h).




          “Effective Date” means the date on which the initial Registration Statement required by
Section 2(a) of the Registration Rights Agreement applicable to such Purchaser is first declared
effective by the Commission.




          “Environmental Laws” has the meaning set forth in Section 3.1(l).




          “Exchange Act” means the Securities Exchange Act of 1934, as amended, or any successor
statute, and the rules and regulations promulgated thereunder.




          “GAAP” means U.S. generally accepted accounting principles, as applied by the Company.




          “Indemnified Person” has the meaning set forth in Section 4.8(b).




          “Intellectual Property” has the meaning set forth in Section 3.1(r).




          “Irrevocable Transfer Agent Instructions” means, with respect to the Company, the Irrevocable
Transfer Agent Instructions, in the form of Exhibit E, executed by the Company and
delivered to and acknowledged in writing by the Transfer Agent.




          “Lien” means any lien, charge, claim, encumbrance, security interest, right of first refusal,
preemptive right or other restrictions of any kind.




          “Material Adverse Effect” means a material adverse effect on the results of operations,
assets, business or financial condition of the Company, except that any of the following, either
alone or in combination, shall not be deemed a Material Adverse Effect: (i) effects caused by
changes or circumstances affecting general market conditions in the U.S. economy or which are
generally applicable to the industry in which the Company operates, (ii) effects resulting from or
relating to the announcement or disclosure of the sale of the Securities or other transactions
contemplated by this Agreement, or (iii) effects caused by any event, occurrence or condition
resulting from or relating to the taking of any action in accordance with this Agreement.




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          “Material Contract” means any contract of the Company that was filed as an exhibit to the SEC
Reports pursuant to Item 601(b)(4) or Item 601(b)(10) of Regulation S-K.




          “Material Permits” has the meaning set forth in Section 3.1(p).




          “New York Courts” means the state and federal courts sitting in the City of New York, Borough
of Manhattan.




          “Outside Date” means the 30th day following the date of this Agreement.




          “Person” means an individual, corporation, partnership, limited liability company, trust,
business trust, association, joint stock company, joint venture, sole proprietorship,
unincorporated organization, governmental authority or any other form of entity not specifically
listed herein.




          “Principal Trading Market” means the Trading Market on which the Common Stock is primarily
listed on and quoted for trading, which, as of the date of this Agreement and the Closing Date,
shall be the NASDAQ Global Market.




          “Proceeding” means an action, claim, suit, investigation or proceeding (including, without
limitation, an investigation or partial proceeding, such as a deposition), whether commenced or
threatened.




          “Purchaser Deliverables” has the meaning set forth in Section 2.2(b).




          “Purchaser Party” has the meaning set forth in Section 4.8(a).




          “Registration Rights Agreement” has the meaning set forth in the Recitals.




          “Registration Statement” means a registration statement meeting the requirements set forth in
the Registration Rights Agreement applicable to such Purchaser and covering the resale by such
Purchaser of the Registrable Securities (as defined in the Registration Rights Agreement).




          “Required Approvals” has the meaning set forth in Section 3.1(e).




          “Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as
such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by
the Commission having substantially the same effect as such Rule.




          “SEC Reports” has the meaning set forth in Section 3.1(h).




          “Secretary’s Certificate” has the meaning set forth in Section 2.2(a)(vi).




          “Securities Act” means the Securities Act of 1933, as amended.




          “Share Purchase Price” means $11.14 per share.




          “Short Sales” include, without limitation, all “short sales” as defined in Rule 200
promulgated under Regulation SHO under the Exchange Act, whether or not against the box, and all
types of direct and indirect stock pledges, forward sale contracts, options, puts, calls, short
sales, swaps, “put equivalent positions” (as defined in Rule 16a-1(h) under the Exchange Act) and
similar arrangements (including on a total return basis), and sales and other transactions through
non-U.S. broker dealers or foreign regulated brokers.




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          “Subscription Amount” means with respect to each Purchaser, the aggregate amount to be paid
for the Shares and the Warrants purchased hereunder as indicated on such Purchaser’s signature page
to this Agreement next to the heading “Aggregate Purchase Price (Subscription Amount)”.




          “Subsidiary” means any entity in which the Company, directly or indirectly, owns capital stock
or holds an equity or similar interest.




          “Trading Affiliate” has the meaning set forth in Section 3.2(h).




          “Trading Day” means (i) a day on which the Common Stock is listed or quoted and traded on its
Principal Trading Market (other than the OTC Bulletin Board), or (ii) if the Common Stock is not
listed on a Trading Market (other than the OTC Bulletin Board), a day on which the Common Stock is
traded in the over-the-counter market, as reported by the OTC Bulletin Board, or (iii) if the
Common Stock is not quoted on any Trading Market, a day on which the Common Stock is quoted in the
over-the-counter market as reported in the “pink sheets” by Pink Sheets LLC (or any similar
organization or agency succeeding to its functions of reporting prices); provided, that in the
event that the Common Stock is not listed or quoted as set forth in (i), (ii) and (iii) hereof,
then Trading Day shall mean a Business Day.




          “Trading Market” means whichever of the New York Stock Exchange, the American Stock Exchange,
the NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ Capital Market or the OTC
Bulletin Board on which the Common Stock is listed or quoted for trading on the date in question.




          “Transaction Documents” means this Agreement, the schedules and exhibits attached hereto, the
Warrants, the Registration Rights Agreement, the Irrevocable Transfer Agent Instructions and any
other documents or agreements executed in connection with the transactions contemplated hereunder.




          “Transfer Agent” means Computershare Trust Company N.A., or any successor transfer agent for
the Company.




ARTICLE II.

PURCHASE AND SALE




     2.1 Closing.



          (a) Amount. Subject to the terms and conditions set forth in this Agreement, at the
Closing, the Company shall issue and sell to each Purchaser, and each Purchaser shall, severally
and not jointly, purchase from the Company, such number of (A) Shares equal to the quotient
resulting from dividing (i) the Subscription Amount for such Purchaser by (ii) the sum of (y) the
Share Purchase Price and (z) 0.03125, rounded down to the nearest whole Share and (B) Warrants to
purchase such number of Warrant Shares equal to the quotient resulting from muliplying (i) the
number of Shares to be acquired by such Purchaser pursuant hereto, by (ii) 0.25, rounded down to
the nearest whole Warrant Share.




          (b) Closing. The Closing of the purchase and sale of the Securities shall take place
at the offices of Cooley Godward Kronish LLP, 4401 Eastgate Mall, San Diego, California on the
Closing Date or at such other locations or remotely by facsimile transmission or other electronic
means as the parties may mutually agree.




          (c) Form of Payment. On the Closing Date (i) each Purchaser that has agreed to wire
funds directly to the Company shall wire such Purchaser’s Subscription Amount to the Company in
accordance with the written directions from the Company, and (ii) the Company shall (A) deliver or
cause to



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be delivered to each Purchaser a duly executed Warrant to purchase the number of Warrant
Shares set forth below such Purchaser’s name on the signature page of this Agreement and (B)
irrevocably instruct the Transfer Agent to deliver to each Purchaser one or more stock
certificates, free and clear of all restrictive and other legends (except as expressly provided in
Section 4.1(b) hereof), evidencing the number of Shares such Purchaser is purchasing as is set
forth on such Purchaser’s signature page to this Agreement next to the heading “Number of Shares to
be Acquired”, within three (3) Business Days after the Closing, duly executed on behalf of the
Company and registered in the name of such Purchaser.




     2.2 Closing Deliveries.



          (a) On or prior to the Closing, the Company shall issue, deliver or cause to be delivered to
each Purchaser the following (the “Company Deliverables”):




               (i) this Agreement, duly executed by the Company;



               (ii) facsimile copies of one or more stock certificates, free and clear of all restrictive and
other legends (except as provided in Section 4.1(b) hereof), evidencing the Shares
subscribed for by Purchaser hereunder, registered in the name of such Purchaser as set forth on the
Stock Certificate Questionnaire included as Exhibit C-2 hereto (the “Stock Certificates”),
with the original Stock Certificates sent within three (3) Business Days of Closing;



               (iii) a Warrant to purchase the number of Warrant Shares set forth below such Purchaser’s name
on the signature page of this Agreement, duly executed by the Company;



               (iv) a legal opinion of Company Counsel, dated as of the Closing Date and in the form attached
hereto as Exhibit D, executed by such counsel and addressed to the Purchasers;



               (v) the Registration Rights Agreement, duly executed by the Company;



               (vi) duly executed Irrevocable Transfer Agent Instructions acknowledged in writing by the
Transfer Agent;



               (vii) a certificate of the Secretary of the Company (the “Secretary’s Certificate”), dated as
of the Closing Date, certifying (a) the resolutions adopted by the Board of Directors of the
Company or a duly authorized committee thereof approving the transactions contemplated by this
Agreement and the other Transaction Documents and the issuance of the Securities, (b) the current
versions of the certificate of incorporation and by-laws of the Company, each as amended, and (c)
as to the signatures and authority of persons signing the Transaction Documents and related
documents on behalf of the Company, in the form attached hereto as Exhibit F;



               (viii) the Compliance Certificate referred to in Section 5.1(g);



               (ix) a certificate evidencing the formation and good standing of the Company in its
jurisdiction of formation issued by the Secretary of State (or comparable office) of such
jurisdiction, as of a date within five (5) Business Days of the Closing Date;



               (x) a certificate evidencing the Company’s qualification as a foreign corporation and good
standing issued by the Secretary of State of the State of California, as of a date within ten (10)
Business Days of the Closing Date; and



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               (xi) a certified copy of the certificate of incorporation, as certified by the Secretary of
State of the State (or comparable office) of the Company’s jurisdiction of formation, as of a date
within ten (10) Business Days of the Closing Date.



          (b) On or prior to the Closing, each Purchaser shall deliver or cause to be delivered to the
Company the following (the “Purchaser Deliverables”):




               (i) this Agreement, duly executed by such Purchaser;



               (ii) its Subscription Amount, in United States dollars and in immediately available funds, in
the amount set forth as the “Purchase Price” indicated below such Purchaser’s name on the
applicable signature page hereto under the heading “Aggregate Purchase Price (Subscription Amount)”
by wire transfer to the escrow account set forth on Exhibit H attached hereto or to the
account of the Company pursuant to Section 2.1(c);



               (iii) the Registration Rights Agreement, duly executed by such Purchaser;



               (iv) a fully completed and duly executed Selling Stockholder Questionnaire in the form
attached as Annex B to the Registration Rights Agreement; and



               (v) a fully completed and duly executed Accredited Investor Questionnaire, reasonably
satisfactory to the Company, and Stock Certificate Questionnaire in the forms attached hereto as
Exhibits B-1 and B-2, respectively.



ARTICLE III.

REPRESENTATIONS AND WARRANTIES




     3.1 Representations and Warranties of the Company. The Company hereby represents and
warrants as of the date hereof and the Closing Date (except for the representations and warranties
that speak as of a specific date, which shall be made as of such date), to each of the Purchasers
that, except as set forth in the Schedules delivered herewith or disclosed in the SEC Reports:



          (a) Subsidiaries. The Company has no direct or indirect Subsidiaries other than those
listed in Schedule 3.1(a) hereto. Except as disclosed in Schedule 3.1(a) hereto,
the Company owns, directly or indirectly, all of the capital stock or comparable equity interests
of each Subsidiary free and clear of any and all Liens which could reasonably be expected to have a
Material Adverse Effect, and all the issued and outstanding shares of capital stock or comparable
equity interest of each Subsidiary are validly issued and are fully paid, non-assessable and free
of preemptive and similar rights to subscribe for or purchase securities.




          (b) Organization and Qualification. The Company and each of its Subsidiaries is an
entity duly incorporated or otherwise organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation or organization (as applicable), with the requisite
corporate power and authority to own or lease and use its properties and assets and to carry on its
business as currently conducted. Neither the Company nor any Subsidiary is in violation of any of
the provisions of its respective certificate or articles of incorporation, bylaws or other
organizational or charter documents. The Company and each of its Subsidiaries is duly qualified to
conduct business and is in good standing as a foreign corporation or other entity in each
jurisdiction in which the nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in good standing, as the
case may be, would not have a Material Adverse Effect.




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          (c) Authorization; Enforcement; Validity. The Company has the requisite corporate
power and authority to enter into and to consummate the transactions contemplated by each of the
Transaction Documents to which it is a party and otherwise to carry out its obligations hereunder
and thereunder. The Company’s execution and delivery of each of the Transaction Documents to which
it is a party and the consummation by it of the transactions contemplated hereby and thereby
(including, but not limited to, the sale and delivery of the Securities and the reservation for
issuance and the subsequent issuance of the Warrant Shares) have been duly authorized by all
necessary corporate action on the part of the Company, and no further corporate action is required
by the Company, its Board of Directors or its stockholders in connection therewith other than in
connection with the Required Approvals. Each of the Transaction Documents to which it is a party
has been (or upon delivery will have been) duly executed by the Company and is, or when delivered
in accordance with the terms hereof, will constitute the legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its terms, except (i) as such
enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally the enforcement of, creditors’
rights and remedies or by other equitable principles of general , (ii) as limited by laws relating
to the availability of specific performance, injunctive relief or other equitable remedies and
(iii) insofar as indemnification and contribution provisions may be limited by applicable law.
Except for Material Contracts and as set forth on Schedule 3.1(c) hereto, there are no
stockholder agreements, voting agreements, or other similar arrangements with respect to the
Company’s capital stock to which the Company is a party or, to the Company’s Knowledge, between or
among any of the Company’s stockholders.




          (d) No Conflicts. The execution, delivery and performance by the Company of the
Transaction Documents to which it is a party and the consummation by the Company of the
transactions contemplated hereby or thereby (including, without limitation, the issuance of the
Securities and the Warrant Shares) do not and will not (i) conflict with or violate any provisions
of the Company’s or any Subsidiary’s certificate or articles of incorporation, bylaws or otherwise
result in a violation of the organizational documents of the Company, (ii) conflict with, or
constitute a default (or an event that with notice or lapse of time or both would result in a
default) under, result in the creation of any Lien upon any of the properties or assets of the
Company or give to others any rights of termination, amendment, acceleration or cancellation (with
or without notice, lapse of time or both) of, any Material Contract, or (iii) subject to the
Required Approvals, conflict with or result in a violation of any law, rule, regulation, order,
judgment, injunction, decree or other restriction of any court or governmental authority to which
the Company is subject (including federal and state securities laws and regulations and the rules
and regulations, assuming the correctness of the representations and warranties made by the
Purchasers herein, of any self-regulatory organization to which the Company or its securities are
subject, including all applicable Trading Markets), or by which any property or asset of the
Company is bound or affected, except in the case of clauses (ii) and (iii) such as would not,
individually or in the aggregate, have a Material Adverse Effect.




          (e) Filings, Consents and Approvals. Neither the Company nor any of its Subsidiaries
is required to obtain any consent, waiver, authorization or order of, give any notice to, or make
any filing or registration with, any court or other federal, state, local or other governmental
authority or other Person in connection with the execution, delivery and performance by the Company
of the Transaction Documents (including the issuance of the Securities and the Warrant Shares),
other than (i) the filing with the Commission of one or more Registration Statements in accordance
with the requirements of the Registration Rights Agreement, (ii) filings required by applicable
state securities laws, (iii) the filing of a Notice of Sale of Securities on Form D with the
Commission under Regulation D of the Securities Act, (iv) the filing of any requisite notices
and/or application(s) to the Principal Trading Market for the issuance and sale of the Common Stock
and the listing of the Common Stock for trading or quotation, as the case may be, thereon in the
time and manner required thereby, (v) the filings required in accordance with Section 4.7 of this
Agreement and (vi) those that have been made or obtained prior to the date of this Agreement
(collectively, the “Required Approvals”).




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          (f) Issuance of the Shares and the Warrant Shares. The Shares and the Warrant Shares
have been duly authorized and, when issued and paid for in accordance with the terms of the
Transaction Documents, will be duly and validly issued, fully paid and nonassessable and free and
clear of all Liens, other than restrictions on transfer provided for in the Transaction Documents
or imposed by applicable securities laws, and shall not be subject to preemptive or similar rights.
Assuming the accuracy of the representations and warranties of the Purchasers in this Agreement,
the Shares, Warrants and the Warrant Shares will be issued in compliance with all applicable
federal and state securities laws. The Warrants have been duly authorized and, when issued and
paid for in accordance with the terms of the Transaction Documents, will be duly and validly
issued, free and clear of all Liens, other than restrictions on transfer provided for in the
Transaction Documents or imposed by applicable securities laws, and shall not be subject to
preemptive or similar rights of stockholders. As of the Closing Date, the Company shall have
reserved from its duly authorized capital stock the number of shares of Common Stock issuable upon
exercise of the Warrants (without taking into account any limitations on the exercise of the
Warrants set forth in the Warrants). The Company shall, so long as any of the Warrants are
outstanding, take all action necessary to reserve and keep available out of its authorized and
unissued capital stock, solely for the purpose of effecting the exercise of the Warrants, 100% of
the number of shares of Common Stock issuable upon exercise of the Warrants.




          (g) Capitalization. The number of shares and type of all authorized, issued and
outstanding capital stock, options and other securities of the Company (whether or not presently
convertible into or exercisable or exchangeable for shares of capital stock of the Company) has
been set forth in the SEC Reports and has changed since the date of such SEC Reports only due to
stock grants or other equity awards or stock option and warrant exercises that do not, individually
or in the aggregate, have a material effect on the issued and outstanding capital stock, options
and other securities. All of the outstanding shares of capital stock of the Company are duly
authorized, validly issued, fully paid and non-assessable, have been issued in compliance in all
material respects with all applicable federal and state securities laws, and none of such
outstanding shares was issued in violation of any preemptive rights or similar rights to subscribe
for or purchase any capital stock of the Company. Except as specified in the SEC Reports: (i) no
shares of the Company’s outstanding capital stock are subject to preemptive rights or any other
similar rights; (ii) there are no outstanding options, warrants, scrip, rights to subscribe to,
calls or commitments of any character whatsoever relating to, or securities or rights convertible
into, or exercisable or exchangeable for, any shares of capital stock of the Company, or contracts,
commitments, understandings or arrangements by which the Company is or may become bound to issue
additional shares of capital stock of the Company or options, warrants, scrip, rights to subscribe
to, calls or commitments of any character whatsoever relating to, or securities or rights
convertible into, or exercisable or exchangeable for, any shares of capital stock of the Company,
other than those issued or granted pursuant to Material Contracts or equity or incentive plans or
arrangements described in the SEC Reports; (iii) there are no material outstanding debt securities,
notes, credit agreements, credit facilities or other agreements, documents or instruments
evidencing indebtedness of the Company or by which the Company is bound; (iv) to the Company’s
Knowledge, there are no financing statements securing obligations in any material amounts, either
singly or in the aggregate, filed in connection with the Company; (v) there are no agreements or
arrangements under which the Company is obligated to register the sale of any of their securities
under the Securities Act (except the Registration Rights Agreement); (vi) there are no outstanding
securities or instruments of the Company or which contain any redemption or similar provisions, and
there are no contracts, commitments, understandings or arrangements by which the Company is or may
become bound to redeem a security of the Company; (vii) there are no securities or instruments
containing anti-dilution or similar provisions that will be triggered by the issuance of the
Shares; (viii) the Company does not have any stock appreciation rights or “phantom stock” plans or
agreements or any similar plan or agreement; and (ix) the Company has no liabilities or obligations
required to be disclosed in the SEC Reports but not so disclosed in the SEC Reports, other than
those incurred in the ordinary course of the Company’s businesses and which, individually or in the
aggregate, do not or would not have a Material Adverse Effect.




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          (h) SEC Reports. The Company has filed all reports, schedules, forms, statements and
other documents required to be filed by it under the Exchange Act, including pursuant to Section
13(a) or 15(d) thereof, for the twelve months preceding the date hereof (or such shorter period as
the Company was required by law or regulation to file such material) (the foregoing materials,
including the exhibits thereto and documents incorporated by reference therein, being collectively
referred to herein as the “SEC Reports” and together with this Agreement and the Schedules to this
Agreement (if any), the “Disclosure Materials”), on a timely basis or has received a valid
extension of such time of filing and has filed any such SEC Reports prior to the expiration of any
such extension. As of their respective filing dates, or to the extent corrected by a subsequent
restatement, the SEC Reports complied in all material respects with the requirements of the
Securities Act and the Exchange Act and the rules and regulations of the Commission promulgated
thereunder, and none of the SEC Reports, when filed, contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were made, not
misleading.




          (i) Financial Statements. The financial statements of the Company included in the SEC
Reports comply in all material respects with applicable accounting requirements and the rules and
regulations of the Commission with respect thereto as in effect at the time of filing (or to the
extent corrected by a subsequent restatement). Such financial statements have been prepared in
accordance with GAAP applied on a consistent basis during the periods involved, 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 fairly present in all
material respects the financial position of the Company and its consolidated subsidiaries taken as
a whole as of and for the dates thereof and the results of operations and cash flows for the
periods then ended, subject, in the case of unaudited statements, to normal, year-end audit
adjustments.




          (j) Tax Matters. The Company (i) has prepared and filed all foreign, federal and
state income and all other tax returns, reports and declarations required by any jurisdiction to
which it is subject, (ii) has paid all taxes and other governmental assessments and charges that
are material in amount, shown or determined to be due on such returns, reports and declarations,
except those being contested in good faith, with respect to which adequate reserves have been set
aside on the books of the Company and (iii) has set aside on its books provisions reasonably
adequate for the payment of all taxes for periods subsequent to the periods to which such returns,
reports or declarations apply, except, in the case of clauses (i) and (ii) above, where the failure
to so pay or file any such tax, assessment, charge or return would not have a Material Adverse
Effect.




          (k) Material Changes. Since the date of the latest financial statements included
within the SEC Reports, except as specifically disclosed in the SEC Reports or as set forth in
Schedule 3.1(k) hereto, (i) there have been no events, occurrences or developments that
have had or would reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect, (ii) the Company has not incurred any material liabilities (contingent or
otherwise) other than (A) trade payables, accrued expenses and other liabilities incurred in the
ordinary course of business consistent with past practice and (B) liabilities not required to be
reflected in the Company’s financial statements pursuant to GAAP or required to be disclosed in
filings made with the Commission, (iii) the Company has not altered materially its method of
accounting or the manner in which it keeps its accounting books and records, (iv) the Company has
not declared or made any dividend or distribution of cash or other property to its stockholders or
purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock
(other than in connection with repurchases of unvested stock issued to employees of the Company),
(v) the Company has not issued any equity securities to any officer, director or Affiliate, except
Common Stock issued in the ordinary course as dividends on outstanding preferred stock or issued
pursuant to existing Company stock option or stock purchase plans or executive and director
corporate arrangements disclosed in the SEC Reports and (vi) there has not been any material change
or amendment to, or any waiver of any material right




10









 







by the Company under, any Material Contract under which the Company or any of its Subsidiaries
is bound or subject. Except for the transactions contemplated by this Agreement or as set forth in
Schedule 3.1(k) hereto, no event, liability or development has occurred or exists with
respect to the Company or its Subsidiaries or their respective business, properties, operations or
financial condition that would be required to be disclosed by the Company under applicable
securities laws at the time this representation is made that has not been publicly disclosed at
least one Trading Day prior to the date that this representation is made.




          (l) Environmental Matters. To the Company’s Knowledge, neither the Company nor any of
its Subsidiaries (i) is in violation of any statute, rule, regulation, decision or order of any
governmental agency or body or any court, domestic or foreign, relating to the use, disposal or
release of hazardous or toxic substances or relating to the protection or restoration of the
environment or human exposure to hazardous or toxic substances (collectively, “Environmental
Laws”), (ii) owns or operates any real property contaminated with any substance that is in
violation of any Environmental Laws, (iii) is liable for any off-site disposal or contamination
pursuant to any Environmental Laws, or (iv) is subject to any claim relating to any Environmental
Laws; which violation, contamination, liability or claim has had or would have, individually or in
the aggregate, a Material Adverse Effect; and, to the Company’s Knowledge, there is no pending or
threatened investigation that might lead to such a claim.




          (m) Litigation. To the Company’s Knowledge, there is no Action which (i) adversely
affects or challenges the legality, validity or enforceability of any of the Transaction Documents
or the Securities or (ii) except as specifically disclosed in the SEC Reports, could, if there were
an unfavorable decision, individually or in the aggregate, have a Material Adverse Effect. Neither
the Company nor any Subsidiary, nor to the Company’s Knowledge any director or officer thereof, is
or has been the subject of any Action involving a claim of violation of or liability under federal
or state securities laws or a claim of breach of fiduciary duty. There has not been, and to the
Company’s Knowledge there is not pending or contemplated, any investigation by the Commission
involving the Company or any current or former director or officer of the Company. The Commission
has not issued any stop order or other order suspending the effectiveness of any registration
statement filed by the Company or any of its Subsidiaries under the Exchange Act or the Securities
Act.




          (n) Employment Matters. No material labor dispute exists or, to the Company’s
Knowledge, is imminent with respect to any of the employees of the Company which would have a
Material Adverse Effect. None of the Company’s employees is a member of a union that relates to
such employee’s relationship with the Company, and neither the Company nor any of its Subsidiaries
is a party to a collective bargaining agreement, and the Company and each Subsidiary believes that
its relationship with its employees is good. No executive officer of the Company (as defined in
Rule 501(f) of the 1933 Act) has notified the Company that such officer intends to leave the
Company or otherwise terminate such officer’s employment with the Company. To the Company’s
Knowledge, it is in compliance with all U.S. federal, state, local and foreign laws and regulations
relating to employment and employment practices, terms and conditions of employment and wages and
hours, except where the failure to be in compliance would not, individually or in the aggregate,
have a Material Adverse Effect.




          (o) Compliance. Neither the Company nor any of its Subsidiaries (i) is in default
under or in violation of (and no event has occurred that has not been waived that, with notice or
lapse of time or both, would result in a default by the Company or any of its Subsidiaries under),
nor has the Company or any of its Subsidiaries received written notice of a claim that it is in
default under or that it is in violation of, any Material Contract (whether or not such default or
violation has been waived), (ii) is in violation of any order of which the Company has been made
aware in writing of any court, arbitrator or governmental body having jurisdiction over the Company
or its properties or assets, or (iii) is in violation of, or in receipt of written notice that it
is in violation of, any statute, rule or regulation of any governmental authority applicable to the
Company, except in each case as would not, individually or in the aggregate, have a Material
Adverse Effect.




11









 








          (p) Regulatory Permits. The Company and each of its Subsidiaries possess or have
applied for all certificates, authorizations and permits issued by the appropriate federal, state,
local or foreign regulatory authorities necessary to conduct its respective businesses as currently
conducted and as described in the SEC Reports, except where the failure to possess such permits,
individually or in the aggregate, has not and would not have, individually or in the aggregate, a
Material Adverse Effect (“Material Permits”), and (i) neither the Company nor any of its
Subsidiaries has received any notice in writing of proceedings relating to the revocation or
material adverse modification of any such Material Permits and (ii) the Company is unaware of any
facts or circumstances that would give rise to the revocation or material adverse modification of
any Material Permits.




          (q) Title to Assets. The Company and its Subsidiaries do not own any real property.
The Company and its Subsidiaries have good and marketable title to all tangible personal property
owned by them which is material to the business of the Company and its Subsidiaries, taken as
whole, in each case free and clear of all Liens except 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 of its Subsidiaries. Any real property and facilities held under lease by the
Company and any of its Subsidiaries are held by them 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 and its Subsidiaries.




          (r) Patents and Trademarks. To the Company’s Knowledge, the Company and its
Subsidiaries own, possess, license or have other rights to use all foreign and domestic patents,
patent applications, trade and service marks, trade and service mark registrations, trade names,
copyrights, inventions, trade secrets, technology, Internet domain names, know-how and other
intellectual property (collectively, the “Intellectual Property”) necessary for the conduct of
their respective businesses as now conducted or as proposed to be conducted. Except as set forth
in the SEC Reports and except where such violations or infringements would not have, either
individually or in the aggregate, a Material Adverse Effect, (i) to the Company’s Knowledge, there
are no rights of third parties to any such Intellectual Property; (ii) to the Company’s Knowledge,
there is no infringement by third parties of any such Intellectual Property; (iii) to the Company’s
Knowledge, there is no pending or threatened action, suit, proceeding or claim by others
challenging the Company’s and its Subsidiaries’ rights in or to any such Intellectual Property;
(iv) to the Company’s Knowledge, there is no pending or threatened action, suit, proceeding or
claim by others challenging the validity or scope of any such Intellectual Property; and (v) to the
Company’s Knowledge, there is no pending or threatened action, suit, proceeding or claim by others
that the Company and/or any Subsidiary infringes or otherwise violates any patent, trademark,
copyright, trade secret or other proprietary rights of others.




          (s) Insurance. The Company and each of the Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such amounts as the
Company believes to be prudent and customary in the businesses and locations in which the Company
and the Subsidiaries are engaged. Neither the Company nor any of its Subsidiaries has received any
notice of cancellation of any such insurance, nor, to the Company’s Knowledge, will it or any
Subsidiary be unable to renew their respective 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.




          (t) Transactions With Affiliates and Employees. Except as set forth in the SEC
Reports and other than the grant of stock options or other equity awards that are not individually
or in the aggregate material in amount, none of the officers or directors of the Company and, to
the Company’s Knowledge, none of the employees of the Company, is presently a party to any
transaction with the Company or any Subsidiary or to a presently contemplated transaction (other
than for services as employees, officers and




12









 







directors) that would be required to be disclosed pursuant to Item 404 of Regulation S-K
promulgated under the Securities Act.




          (u) Internal Accounting Controls. The Company maintains a system of internal
accounting controls sufficient to provide reasonable assurance that (i) transactions are executed
in accordance with management’s general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with GAAP and to maintain
asset and liability accountability, (iii) access to assets or incurrence of liabilities is
permitted only in accordance with management’s general or specific authorization, and (iv) the
recorded accountability for assets and liabilities is compared with the existing assets and
liabilities at reasonable intervals and in the Company’s good faith judgment appropriate action is
taken with respect to any differences. Since the most recently filed periodic report under the
Exchange Act, there have been no changes in the Company’s internal control over financial reporting
(as such term is defined in the Exchange Act) that have materially affected, or is reasonably
likely to materially affect, the Company’s internal control over financial reporting.




          (v) Sarbanes-Oxley; Disclosure Controls. To the Company’s Knowledge, the Company is
in compliance in all material respects with all of the provisions of the Sarbanes-Oxley Act of 2002
which are applicable to it, except where such noncompliance would not have, individually or in the
aggregate, a Material Adverse Effect. The Company maintains disclosure controls and procedures (as
such term is defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act).




          (w) Certain Fees. No person or entity will have, as a result of the transactions
contemplated by this Agreement, any valid right, interest or claim against or upon the Company or a
Purchaser for any commission, fee or other compensation pursuant to any agreement, arrangement or
understanding entered into by or on behalf of the Company with respect to the offer and sale of the
Securities or the Warrant Shares. The Company shall indemnify, pay, and hold each Purchaser
harmless against, any liability, loss or expense (including, without limitation, attorneys’ fees
and out-of-pocket expenses) arising in connection with any such right, interest or claim.




          (x) Private Placement. Assuming the accuracy of the Purchasers’ representations and
warranties set forth in Section 3.2 of this Agreement and the accuracy of the information disclosed
in the Accredited Investor Questionnaires, no registration under the Securities Act is required for
the offer and sale of the Securities or the Warrant Shares by the Company to the Purchasers under
the Transaction Documents.




          (y) Registration Rights. Other than as set forth in the SEC Reports and other than
each of the Purchasers or as set forth in Schedule 3.1(y) hereto, no Person has any right
to cause the Company to effect the registration under the Securities Act of any securities of the
Company other than those securities which are currently registered on an effective registration
statement on file with the Commission.




          (z) No Integrated Offering. Assuming the accuracy of the Purchasers’ representations
and warranties set forth in Section 3.2, none of the Company, its Subsidiaries nor, to the
Company’s Knowledge, any of its Affiliates or any Person acting on its behalf has, directly or
indirectly, at any time within the past six months, made any offers or sales of any Company
security or solicited any offers to buy any security under circumstances that would (i) eliminate
the availability of the exemption from registration under Regulation D under the Securities Act in
connection with the offer and sale by the Company of the Securities as contemplated hereby or (ii)
cause the offering of the Securities pursuant to the Transaction Documents to be integrated with
prior offerings by the Company for purposes of any applicable law, regulation or stockholder
approval provisions, including, without limitation, under the rules and regulations of any Trading
Market on which any of the securities of the Company are listed or designated. Neither the Company
nor, to the Company’s Knowledge, any person acting on behalf of the Company has offered or sold any
of the Securities by any form of general solicitation or general advertising.




13









 








          (aa) Listing and Maintenance Requirements. The Company’s Common Stock is registered
pursuant to Section 12(b) or 12(g) of the Exchange Act, and the Company has taken no action
designed to terminate the registration of the Common Stock under the Exchange Act nor has the
Company received any notification that the Commission is contemplating terminating such
registration. The Company has not, in the twelve (12) months preceding the date hereof, received
written notice from any Trading Market on which the Common Stock is listed or quoted to the effect
that the Company is not in compliance with the listing or maintenance requirements of such Trading
Market. The Company is in compliance in all material respects with the listing and maintenance
requirements for continued trading of the Common Stock on the Principal Trading Market.




          (bb) Investment Company. Neither the Company nor any of its Subsidiaries is required
to be registered as, and is not an Affiliate of, and immediately following the Closing will not be
required to register as, an “investment company” within the meaning of the Investment Company Act
of 1940, as amended.




          (cc) Questionable Payments. To the Company’s Knowledge, neither the Company nor any
of its Subsidiaries, nor any directors, officers, employees, agents or other Persons acting at the
direction of the Company has, in the course of its actions for, or on behalf of, the Company: (i)
directly or indirectly, used any material corporate funds for unlawful contributions, gifts,
entertainment or other unlawful expenses relating to foreign or domestic political activity; (ii)
made any material direct or indirect unlawful payments to any foreign or domestic governmental
officials or employees or to any foreign or domestic political parties or campaigns from corporate
funds; (iii) violated in any material respect any provision of the Foreign Corrupt Practices Act of
1977, as amended, or (iv) made any other material unlawful bribe, rebate, payoff, influence
payment, kickback or other material unlawful payment to any foreign or domestic government official
or employee.




          (dd) Application of Takeover Protections; Rights Agreements. The Company and its
board of directors have taken all necessary action, if any, in order to render inapplicable any
control share acquisition, business combination, poison pill (including any distribution under a
rights agreement) or other similar anti-takeover provision under the Company’s charter documents or
the laws of its state of incorporation that is applicable to any of the Purchasers as a result of
the Purchasers and the Company fulfilling their obligations or exercising their rights under the
Transaction Documents, including, without limitation, the Company’s issuance of the Securities and
the Purchasers’ ownership of the Securities. The Company has not adopted a stockholder rights plan
or similar arrangement relating to accumulations of beneficial ownership of Common Stock or a
change in control of the Company.




          (ee) Disclosure. To the Company’s Knowledge, no event or circumstance has occurred or
information exists with respect to the Company or any of its Subsidiaries or its or their business,
properties, operations or financial conditions, which, under applicable law, rule or regulation,
requires public disclosure or announcement by the Company but which has not been so publicly
announced or disclosed (assuming for this purpose that the Company’s reports filed under the
Exchange Act are being incorporated into an effective registration statement filed by the Company
under the Securities Act), except for the announcement of this Agreement and related transactions
and as may be disclosed on the Form 8-K filed pursuant to Section 4.6.




          (ff) Off Balance Sheet Arrangements. There is no transaction, arrangement, or other
relationship between the Company (or any Subsidiary) and an unconsolidated or other off balance
sheet entity that is required to be disclosed by the Company in its Exchange Act filings and is not
so disclosed and would have a Material Adverse Effect.




14









 








          (gg) Acknowledgment Regarding Purchasers’ Purchase of Securities. The Company
acknowledges and agrees that each of the Purchasers is acting solely in the capacity of an arm’s
length purchaser with respect to the Transaction Documents and the transactions contemplated hereby
and thereby. The Company further acknowledges that no Purchaser is acting as a financial advisor
or fiduciary of the Company (or in any similar capacity) with respect to the Transaction Documents
and the transactions contemplated thereby and any advice given by any Purchaser or any of their
respective representatives or agents in connection with the Transaction Documents and the
transactions contemplated thereby is merely incidental to the Purchasers’ purchase of the
Securities.




          (hh) Regulation M Compliance. In the last thirty (30) calendar days, the Company has
not, and to the Company’s Knowledge no one acting on its behalf has, (i) taken, directly or
indirectly, any action designed to cause or to result in the stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale of any of the Securities,
(ii) sold, bid for, purchased, or paid any compensation for soliciting purchases of, any of the
securities of the Company or (iii) paid or agreed to pay to any Person any compensation for
soliciting another to purchase any other securities of the Company.




          (ii) OFAC. Neither the Company nor any Subsidiary nor, to the Company’s Knowledge, any
director, officer, agent, employee, Affiliate or Person acting on behalf of the Company or any
Subsidiary is currently subject to any U.S. sanctions administered by the Office of Foreign Assets
Control of the U.S. Treasury Department (“OFAC”); and the Company will not knowingly directly or
indirectly use the proceeds of the sale of the Securities, or lend, contribute or otherwise make
available such proceeds to any Subsidiary, joint venture partner or other Person or entity, towards
any sales or operations in Cuba, Iran, Syria, Sudan, Myanmar or any other country sanctioned by
OFAC or for the purpose of financing the activities of any Person currently subject to any U.S.
sanctions administered by OFAC.




          (jj) Money Laundering Laws. To the Company’s Knowledge, the operations of each of the
Company and any Subsidiary are and have been conducted at all times in compliance with the money
laundering statutes of applicable jurisdictions, the rules and regulations thereunder and any
related or similar rules, regulations or guidelines, issued, administered or enforced by any
applicable governmental agency (collectively, the “Money Laundering Laws”) and to the Company’s
Knowledge, no action, suit or proceeding by or before any court or governmental agency, authority
or body or any arbitrator involving the Company and/or any Subsidiary with respect to the Money
Laundering Laws is pending or threatened.




          (kk) FDA. To the Company’s Knowledge, there is no pending, completed or threatened,
action (including any lawsuit, arbitration, or legal or administrative or regulatory proceeding,
charge, complaint, or investigation) against the Company or any of its Subsidiaries, and none of
the Company or any of its Subsidiaries has received any notice, warning letter or other
communication from the U.S. Food and Drug Administration (“FDA”) or any other governmental entity,
which (i) contests the premarket clearance, licensure, registration, or approval of, the uses of,
the distribution of, the manufacturing or packaging of, the testing of, the sale of, or the
labeling and promotion of any product subject to the jurisdiction of the FDA under the Federal
Food, Drug and Cosmetic Act, as amended, and the regulations thereunder that is manufactured,
packaged, labeled, tested, distributed, sold, and/or marketed by the Company or any of its
Subsidiaries (each such product, a “Pharmaceutical Product”), (ii) imposes a clinical hold on any
clinical investigation by the Company or any of its Subsidiaries, (iii) enjoins production at any
facility of the Company or any of its Subsidiaries, (iv) enters or proposes to enter into a consent
decree of permanent injunction with the Company or any of its Subsidiaries, or (v) otherwise
alleges any violation of any laws, rules or regulations by the Company or any of its Subsidiaries,
and which, either individually or in the aggregate, would have a Material Adverse Effect. The
Company has not been informed in writing by the FDA that the FDA will prohibit the marketing, sale,
license or use in the United States of any product proposed to be developed, produced or marketed
by the Company.




15









 








          (ll) No Additional Agreements. The Company does not have any agreement or
understanding with any Purchaser with respect to the transactions contemplated by the Transaction
Documents other than as specified in the Transaction Documents.




     3.2 Representations and Warranties of the Purchasers. Each Purchaser hereby, for
itself and for no other Purchaser, represents and warrants as of the date hereof and as of the
Closing Date to the Company as follows:



          (a) Organization; Authority. Such Purchaser is an entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its organization with the
requisite corporate or partnership power and authority to enter into and to consummate the
transactions contemplated by the applicable Transaction Documents and otherwise to carry out its
obligations hereunder and thereunder. The execution, delivery and performance by such Purchaser of
the transactions contemplated by this Agreement have been duly authorized by all necessary
corporate or, if such Purchaser is not a corporation, such partnership, limited liability company
or other applicable like action, on the part of such Purchaser. Each of this Agreement and the
Registration Rights Agreement applicable to such Purchaser has been duly executed by such
Purchaser, and when delivered by such Purchaser in accordance with the terms hereof, will
constitute the valid and legally binding obligation of such Purchaser, enforceable against it in
accordance with its terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting
generally the enforcement of, creditors’ rights and remedies or by other equitable principles of
general application.




          (b) No Conflicts. The execution, delivery and performance by such Purchaser of this
Agreement and the Registration Rights Agreement applicable to such Purchaser and the consummation
by such Purchaser of the transactions contemplated hereby and thereby will not (i) result in a
violation of the organizational documents of such Purchaser, (ii) conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which such Purchaser is a party, or (iii) result in a
violation of any law, rule, regulation, order, judgment or decree (including federal and state
securities laws) applicable to such Purchaser, except in the case of clauses (ii) and (iii) above,
for such conflicts, defaults, rights or violations which would not, individually or in the
aggregate, reasonably be expected to have a material adverse effect on the ability of such
Purchaser to perform its obligations hereunder.




          (c) Investment Intent. Such Purchaser understands that the Securities are “restricted
securities” and have not been registered under the Securities Act or any applicable state
securities law and is acquiring the Securities as principal for its own account and not with a view
to, or for distributing or reselling such Securities or any part thereof in violation of the
Securities Act or any applicable state securities laws, provided, however, that by making the
representations herein, such Purchaser does not agree to hold any of the Securities for any minimum
period of time and reserves the right, subject to the provisions of this Agreement and the
Registration Rights Agreement applicable to such Purchaser, at all times to sell or otherwise
dispose of all or any part of such Securities and the Warrant Shares pursuant to an effective
registration statement under the Securities Act or under an exemption from such registration and in
compliance with applicable federal and state securities laws. Such Purchaser is acquiring the
Securities hereunder in the ordinary course of its business. Such Purchaser does not presently have
any agreement, plan or understanding, directly or indirectly, with any Person to distribute or
effect any distribution of any of the Securities (or any securities which are derivatives thereof,
including the Warrant Shares) to or through any person or entity; such Purchaser is not a
registered broker-dealer under Section 15 of the Exchange Act or an entity engaged in a business
that would require it to be so registered as a broker-dealer.




16









 








          (d) Purchaser Status. At the time such Purchaser was offered the Securities, it was,
and at the date hereof it is, an “accredited investor” as defined in Rule 501(a) under the
Securities Act.




          (e) General Solicitation. Such Purchaser is not purchasing the Securities as a result
of any advertisement, article, notice or other communication regarding the Securities published in
any newspaper, magazine or similar media or broadcast over television or radio or presented at any
seminar or any other general advertisement.




          (f) Experience of Such Purchaser. Such Purchaser, either alone or together with its
representatives, has such knowledge, sophistication and experience in business and financial
matters so as to be capable of evaluating the merits and risks of the prospective investment in the
Securities, and has so evaluated the merits and risks of such investment. Such Purchaser is able
to bear the economic risk of an investment in the Securities and, at the present time, is able to
afford a complete loss of such investment.




          (g) Access to Information. Such Purchaser acknowledges that it has had the
opportunity to review the Disclosure Materials and has been afforded (i) the opportunity to ask
such questions as it has deemed necessary of, and to receive answers from, representatives of the
Company concerning the terms and conditions of the offering of the Securities and the merits and
risks of investing in the Securities; (ii) access to information about the Company and the
Subsidiaries and their respective financial condition, results of operations, business, properties,
management and prospects sufficient to enable it to evaluate its investment; and (iii) the
opportunity to obtain such additional information that the Company possesses or can acquire without
unreasonable effort or expense that is necessary to make an informed investment decision with
respect to the investment. Neither such inquiries nor any other investigation conducted by or on
behalf of such Purchaser or its representatives or counsel shall modify, amend or affect such
Purchaser’s right to rely on the truth, accuracy and completeness of the Disclosure Materials and
the Company’s representations and warranties contained in the Transaction Documents. Such
Purchaser has sought such accounting, legal and tax advice as it has considered necessary to make
an informed decision with respect to its acquisition of the Securities.




          (h) Certain Trading Activities. Other than with respect to the transactions
contemplated herein, since the time that such Purchaser was first contacted by the Company or any
other Person regarding the transactions contemplated hereby, neither the Purchaser nor any
Affiliate of such Purchaser which (x) had knowledge of the transactions contemplated hereby, (y)
has or shares discretion relating to such Purchaser’s investments or trading or information
concerning such Purchaser’s investments, including in respect of the Securities, and (z) is subject
to such Purchaser’s review or input concerning such Affiliate’s investments or trading
(collectively, “Trading Affiliates”) has directly or indirectly, nor has any Person acting on
behalf of or pursuant to any understanding with such Purchaser or Trading Affiliate, effected or
agreed to effect any purchases or sales of the securities of the Company (including, without
limitation, any Short Sales involving the Company’s securities). Notwithstanding the foregoing, in
the case of a Purchaser and/or Trading Affiliate that is, individually or collectively, a
multi-managed investment bank or vehicle whereby separate portfolio managers manage separate
portions of such Purchaser’s or Trading Affiliate’s assets and the portfolio managers have no
direct knowledge of the investment decisions made by the portfolio managers managing other portions
of such Purchaser’s or Trading Affiliate’s assets, the representation set forth above shall apply
only with respect to the portion of assets managed by the portfolio manager that have knowledge
about the financing transaction contemplated by this Agreement. Other than to other Persons party
to this Agreement, such Purchaser has maintained the confidentiality of all disclosures made to it
in connection with this transaction (including the existence and terms of this transaction).
Notwithstanding the foregoing, except as provided in Section 4.11, no Purchaser makes any
representation, warranty or covenant hereby that it will not engage in Short Sales in the
securities of the Company after the time that the Initial Registration Statement becomes effective.




17









 








          (i) Brokers and Finders. No Person will have, as a result of the transactions
contemplated by this Agreement, any valid right, interest or claim against or upon the Company or
any Purchaser for any commission, fee or other compensation pursuant to any agreement, arrangement
or understanding entered into by or on behalf of the Purchaser.




          (j) Independent Investment Decision. Such Purchaser has independently evaluated the
merits of its decision to purchase Securities (including the Warrant Shares) pursuant to the
Transaction Documents, and such Purchaser confirms that it has not relied on the advice of any
other Purchaser’s business and/or legal counsel in making such decision. Such Purchaser
understands that nothing in this Agreement or any other materials presented by or on behalf of the
Company to the Purchaser in connection with the purchase of the Securities constitutes legal, tax
or investment advice. Such Purchaser has consulted such legal, tax and investment advisors as it,
in its sole discretion, has deemed necessary or appropriate in connection with its purchase of the
Securities.




          (k) Reliance on Exemptions. Such Purchaser understands that the Securities being
offered and sold to it in reliance on specific exemptions from the registration requirements of
United States federal and state securities laws and that the Company is relying in part upon the
truth and accuracy of, and such Purchaser’s compliance with, the representations, warranties,
agreements, acknowledgements and understandings of such Purchaser set forth herein in order to
determine the availability of such exemptions and the eligibility of such Purchaser to acquire the
Securities.




          (l) No Governmental Review. Such Purchaser understands that no United States federal
or state agency or any other government or governmental agency has passed on or made any
recommendation or endorsement of the Securities or the fairness or suitability of the investment in
the Securities nor have such authorities passed upon or endorsed the merits of the offering of the
Securities.




          (m) Regulation M. Such Purchaser is aware that the anti-manipulation rules of
Regulation M under the Exchange Act may apply to sales of Common Stock and other activities with
respect to the Common Stock by the Purchasers.




          (n) Residency. Such Purchaser’s residence (if an individual) or office in which its
investment decision with respect to the Securities was made (if an entity) is located at the
address immediately below such Purchaser’s name on its signature page hereto.




The Company and each of the Purchasers acknowledge and agree that no party to this Agreement has
made or makes any representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Article III and the Transaction Documents.




ARTICLE IV.

OTHER AGREEMENTS OF THE PARTIES




     4.1 Transfer Restrictions.



          (a) Compliance with Laws. Notwithstanding any other provision of this Article IV,
each Purchaser covenants that the Securities and, if applicable, the Warrant Shares may be disposed
of only pursuant to an effective registration statement under, and in compliance with the
requirements of, the Securities Act, or pursuant to an available exemption from, or in a
transaction not subject to, the registration requirements of the Securities Act, and in compliance
with any applicable state and federal securities laws. In connection with any transfer of the
Securities or the Warrant Shares other than (i) pursuant to an effective registration statement,
(ii) to the Company, (iii) pursuant to Rule 144 (provided that the Purchaser provides the Company
with reasonable assurances (in the form of seller and broker representation letters) that the




18









 







securities may be sold pursuant to such rule) or Rule 144A, or (iv) in connection with a bona
fide pledge, the Company may require the transferor thereof to provide to the Company and the
Transfer Agent an opinion of counsel selected by the transferor and reasonably acceptable to the
Company and the Transfer Agent, the form and substance of which opinion shall be reasonably
satisfactory to the Company and the Transfer Agent, to the effect that such transfer does not
require registration of such transferred Securities or Warrant Shares under the Securities Act. As
a condition of transfer, any such transferee shall agree in writing to be bound by the terms of
this Agreement and the Warrant, if applicable, and shall have the rights of a Purchaser under this
Agreement and the Registration Rights Agreement applicable to the transferring Purchaser.




          (b) Legends. Certificates evidencing the Securities and Warrant Shares shall bear any
legend as required by the “blue sky” laws of any state and a restrictive legend in substantially
the following form, until such time as they are not required under Section 4.1(c):





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 FOR SALE, SOLD, TRANSFERRED OR
ASSIGNED EXCEPT AS PROVIDED BY SECTION 4 OF THAT CERTAIN SECURITIES
PURCHASE AGREEMENT, DATED AS OF DECEMBER 17, 2008, BY AND AMONG ARDEA
BIOSCIENCES, INC. AND EACH PURCHASER IDENTIFIED ON THE SIGNATURE PAGES
THERETO.



          (c) Removal of Legends. The legend set forth in Section 4.1(b) above shall be removed
and the Company shall issue a certificate without such legend or any other legend to the holder of
the applicable Securities or Warrant Shares upon which it is stamped or issue to such holder by
electronic delivery at the applicable balance account at the Depository Trust Company (“DTC”), if
(i) such Securities or Warrant Shares are registered for resale under the Securities Act (provided
that the Purchaser agrees to only sell such Securities and Warrant Shares when, and as permitted,
by the effective registration statement permitting such resale), (ii) such Securities or Warrant
Shares are sold or transferred pursuant to Rule 144 (if the transferor is not an Affiliate of the
Company), or (iii) such Securities or Warrant Shares are eligible for sale under Rule 144 following
the expiration of the one-year holding requirement under subparagraphs (b)(1)(i) and (d) thereof
(if the transferor is not an Affiliate of the Company). Any fees (with respect to the Transfer
Agent, Company Counsel or otherwise) associated with the removal of such legend shall be borne by
the Company. Following the Effective Date applicable to such Securities or Warrant Shares, or at
such earlier time as a legend is no longer required for certain Securities or Warrant Shares, the
Company will no later than three (3) Trading Days following the delivery by a Purchaser to the
Company or the Transfer Agent (with notice to the Company) of (i) a legended certificate
representing such Securities or Warrant Shares (endorsed or with stock powers attached, signatures
guaranteed, and otherwise in form necessary to affect the reissuance and/or transfer) or (ii) an
Exercise Notice in the manner stated in the Warrants to effect the exercise of such Warrant in
accordance with its terms and an opinion of counsel to the extent required by Section 4.1(a) (such
third Trading Day, the “Legend Removal Date”), deliver or cause to be delivered to such Purchaser
or the transferee of such Purchaser, as applicable, a certificate representing such Securities or
Warrant Shares that is free from all restrictive and other legends. The Company may not make any
notation on its records or give instructions to the Transfer Agent that enlarge the restrictions on
transfer set forth in this Section. Certificates for Securities or Warrant Shares subject to
legend removal hereunder may be transmitted by the Transfer Agent to the Purchasers by crediting
the account of the Purchaser’s prime broker with DTC.




          (d) Irrevocable Transfer Agent Instructions. The Company shall issue irrevocable
instructions to its Transfer Agent, and any subsequent transfer agent in the form of Exhibit
E attached hereto (the “Irrevocable Transfer Agent Instructions”). The Company represents and
warrants that no instruction




19









 







other than the Irrevocable Transfer Agent Instructions referred to in this Section 4.1(d) or
instructions that are not contradictory therewith will be given by the Company to its transfer
agent in connection with this Agreement, and that the Securities and Warrant Shares shall otherwise
be freely transferable on the books and records of the Company as and to the extent provided in
this Agreement and the other Transaction Documents and applicable law. The Company acknowledges
that a breach by it of its obligations under this Section 4.1(d) will cause irreparable harm to a
Purchaser. Accordingly, the Company acknowledges that the remedy at law for a breach of its
obligations under this Section 4.1(d) will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Section 4.1(d), that a Purchaser shall
be entitled, in addition to all other available remedies, to an order and/or injunction restraining
any breach and requiring immediate issuance and transfer, without the necessity of showing economic
loss and without any bond or other security being required.




          (e) Acknowledgement. Each Purchaser hereunder acknowledges its primary
responsibilities under the Securities Act and accordingly will not sell or otherwise transfer the
Securities or Warrant Shares or any interest therein without complying with the requirements of the
Securities Act. Except as otherwise provided below, while the above-referenced registration
statement remains effective, each Purchaser hereunder may sell the Securities or Warrant Shares in
accordance with the plan of distribution contained in the registration statement and if it does so
it will comply therewith and with the related prospectus delivery requirements unless an exemption
therefrom is available. Each Purchaser, severally and not jointly with the other Purchasers,
agrees that if it is notified by the Company in writing at any time that the registration statement
registering the resale of the Shares or Warrant Shares is not effective or that the prospectus
included in such registration statement no longer complies with the requirements of Section 10 of
the Securities Act, the Purchaser will refrain from selling such Shares or Warrant Shares until
such time as the Purchaser is notified by the Company that such registration statement is effective
or such prospectus is compliant with Section 10 of the Exchange Act, unless such Purchaser is able
to, and does, sell such Shares or Warrant Shares pursuant to an available exemption from the
registration requirements of Section 5 of the Securities Act. Both the Company and its Transfer
Agent, and their respective directors, officers, employees and agents, may rely on this subsection
(e) and each Purchaser hereunder will indemnify and hold harmless each of such persons from any
breaches or violations of this paragraph.




          (f) Buy-In. If the Company shall fail for any reason or for no reason to issue to a
Purchaser unlegended certificates within three (3) Business Days of receipt of all documents
necessary for the removal of the legend set forth above (the “Deadline Date”), then, in addition to
all other remedies available to such Purchaser, if on or after the Business Day immediately
following such three (3) Business Day period, such Purchaser purchases (in an open market
transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the holder
of shares of Common Stock that such Purchaser anticipated receiving from the Company without any
restrictive legend (a “Buy-In”), then the Company shall, within three (3) Business Days after such
Purchaser’s request and in such Purchaser’s sole discretion, either (i) pay cash to the Purchaser
in an amount equal to such Purchaser’s total purchase price (including brokerage commissions, if
any) for the shares of Common Stock so purchased (the “Buy-In Price”), at which point the Company’s
obligation to deliver such certificate (and to issue such shares of Common Stock) shall terminate,
or (ii) promptly honor its obligation to deliver to such Purchaser a certificate or certificates
representing such shares of Common Stock and pay cash to the Purchaser in an amount equal to the
excess (if any) of the Buy-In Price over the product of (a) such number of shares of Common Stock,
times (b) the Closing Bid Price on the Deadline Date.




     4.2 Reservation of Common Stock. The Company shall take all action necessary to at all
times have authorized, and reserved for the purpose of issuance from and after the Closing Date,
the number of shares of Common Stock issuable upon exercise of the Warrants issued at the Closing.



20









 





     4.3 Acknowledgment of Dilution. The Company acknowledges that the issuance of the
Shares and the Warrant Shares may result in dilution of the outstanding shares of Common Stock.
The Company further acknowledges that its obligations under the Transaction Documents, including
without limitation its obligation to issue the Shares and Warrant Shares pursuant to the
Transaction Documents, are unconditional and absolute and not subject to any right of set off,
counterclaim, delay or reduction, regardless of the effect of any such dilution or any claim the
Company may have against any Purchaser and regardless of the dilutive effect that such issuance may
have on the ownership of the other stockholders of the Company.



     4.4 Furnishing of Information. In order to enable the Purchasers to sell the
Securities and the Warrant Shares under Rule 144 of the Securities Act, for a period of one year
from the Closing, the Company shall use its commercially reasonable efforts to timely file (or
obtain extensions in respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to the Exchange Act. During
such one-year period, if the Company is not required to file reports pursuant to such laws, it will
prepare and furnish to the Purchasers and make publicly available in accordance with Rule 144(c)
such information as is required for the Purchasers to sell the Securities and Warrant Shares under
Rule 144.



     4.5 Form D and Blue Sky. The Company agrees to timely file a Form D with respect to
the Securities as required under Regulation D. The Company, on or before the Closing Date, shall
take such action as the Company shall reasonably determine is necessary in order to obtain an
exemption for or to qualify the Securities for sale to the Purchasers at the Closing pursuant to
this Agreement under applicable securities or “Blue Sky” laws of the states of the United States
(or to obtain an exemption from such qualification). The Company shall make all filings and
reports relating to the offer and sale of the Securities required under applicable securities or
“Blue Sky” laws of the states of the United States following the Closing Date.



     4.6 No Integration. The Company shall not, and shall use its commercially reasonable
efforts to ensure that no Affiliate of the Company shall, sell, offer for sale or solicit offers to
buy or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities
Act) that will be integrated with the offer or sale of the Securities in a manner that would
require the registration under the Securities Act of the sale of the Securities to the Purchasers,
or that will be integrated with the offer or sale of the Securities for purposes of the rules and
regulations of any Trading Market such that it would require stockholder approval prior to the
closing of such other transaction unless stockholder approval is obtained before the closing of
such subsequent transaction.



     4.7 Securities Laws Disclosure; Publicity. By 9:00 a.m., New York City time, on the
Trading Day immediately following the execution of this Agreement, the Company shall issue a press
release (the “Press Release”) disclosing all material terms of the transactions contemplated
hereby. On or before 9:00 a.m., New York City time, on the Trading Day immediately following the
execution of this Agreement, the Company will file a Current Report on Form 8-K with the Commission
describing the terms of the Transaction Documents (and including as exhibits to such Current Report
on Form 8-K the material Transaction Documents (including, without limitation, this Agreement, the
Warrant and the Registration Rights Agreement)). Notwithstanding the foregoing, the Company shall
not publicly disclose the name of any Purchaser or an Affiliate of any Purchaser, or include the
name of any Purchaser or an Affiliate of any Purchaser in any press release or filing with the
Commission (other than the Registration Statements) or any regulatory agency or Trading Market,
without the prior written consent of such Purchaser, except (i) as required by federal securities
law in connection with (A) any registration statement contemplated by the Registration Rights
Agreement and (B) the filing of final Transaction Documents (including signature pages thereto)
with the Commission and (ii) to the extent such disclosure is required by law, request of the Staff
of the Commission or Trading Market regulations, in which case the Company shall provide the
Purchasers with prior written notice of such disclosure permitted under this subclause (ii). From
and after the issuance



21









 







of the Press Release, no Purchaser shall be in possession of any material, non-public
information received from the Company, any Subsidiary or any of their respective officers,
directors, employees or agents, that is not disclosed in the Press Release unless a Purchaser shall
have executed a written agreement regarding the confidentiality and use of such information. Each
Purchaser, severally and not jointly with the other Purchasers, covenants that until such time as
the transactions contemplated by this Agreement are publicly disclosed by the Company as described
in this Section 4.6, such Purchaser will maintain the confidentiality of all disclosures made to it
in connection with this transaction (including the existence and terms of this transaction).



     4.8 Non-Public Information. Except with respect to the material terms and conditions
of the transactions contemplated by the Transaction Documents, and except with the express written
consent of such Purchaser and unless prior thereto such Purchaser shall have executed a written
agreement regarding the confidentiality and use of such information the Company shall not, and
shall cause each Subsidiary and each of their respective officers, directors, employees and agents,
not to, and each Purchaser shall not directly solicit the Company, any of its Subsidiaries or any
of their respective officers, directors, employees or agents to provide any Purchaser with any
material, non-public information regarding the Company or any of its Subsidiaries from and after
the filing of the Press Release.



     4.9 Indemnification.



          (a) Indemnification of Purchasers. In addition to the indemnity provided in the
Registration Rights Agreement applicable to such Purchaser, the Company will indemnify and hold
each Purchaser and its directors, officers, stockholders, members, partners, employees and agents
(and any other Persons with a functionally equivalent role of a Person holding such titles
notwithstanding a lack of such title or any other title), each Person who controls such Purchaser
(within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and
the directors, officers, stockholders, agents, members, partners or employees (and any other
Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack
of such title or any other title) of such controlling person (each, a “Purchaser Party”) harmless
from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and
expenses, including all judgments, amounts paid in settlements, court costs and reasonable
attorneys’ fees and costs of investigation that any such Purchaser Party may suffer or incur as a
result of (a) any breach of any of the representations, warranties, covenants or agreements made by
the Company in this Agreement or in the other Transaction Documents; provided that such a claim for
indemnification relating to any breach of any of the representations or warranties made by the
Company in this Agreement is made within one year from Closing or (b) any action instituted against
a Purchaser, or any of them or their respective Affiliates, by any stockholder of the Company who
is not an Affiliate of such Purchaser, with respect to any of the transactions contemplated by the
Transaction Documents (unless such action is based upon any agreements or understandings such
Purchaser may have with any such stockholder or any violations by the Purchaser of state or federal
securities laws or any conduct by such Purchaser which constitutes fraud, gross negligence, willful
misconduct or malfeasance). The Company will not be liable to any Purchaser Party under this
Agreement to the extent, but only to the extent that a loss, claim, damage or liability is
attributable to any Purchaser Party’s breach of any of the representations, warranties, covenants
or agreements made by such Purchaser Party in this Agreement or in the other Transaction Documents.




          (b) Conduct of Indemnification Proceedings. Promptly after receipt by any Person (the
"Indemnified Person”) of notice of any demand, claim or circumstances which would or might give
rise to a claim or the commencement of any action, proceeding or investigation in respect of which
indemnity may be sought pursuant to Section 4.8(a), such Indemnified Person shall promptly notify
the Company in writing and the Company shall assume the defense thereof, including the employment
of counsel reasonably satisfactory to such Indemnified Person, and shall assume the payment of all
fees and expenses; provided, however, that the failure of any Indemnified Person so to notify the
Company shall not relieve the Company




22









 







of its obligations hereunder except to the extent that the Company is actually and materially
prejudiced by such failure to notify. In any such proceeding, any Indemnified Person shall have
the right to retain its own counsel, but the fees and expenses of such counsel shall be at the
expense of such Indemnified Person unless: (i) the Company and the Indemnified Person shall have
mutually agreed to the retention of such counsel; (ii) the Company shall have failed promptly to
assume the defense of such proceeding and to employ counsel reasonably satisfactory to such
Indemnified Person in such proceeding; or (iii) in the reasonable judgment of counsel to such
Indemnified Person, representation of both parties by the same counsel would be inappropriate due
to actual or potential differing interests between them. 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. Without the prior written consent of the
Indemnified Person, 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 Indemnified Person is or could have been a party and indemnity could have been sought hereunder
by such Indemnified Party, unless such settlement includes an unconditional release of such
Indemnified Person from all liability arising out of such proceeding.




     4.10 Listing of Shares and Warrant Shares. In the time and manner required by the
Principal Trading Market, the Company shall prepare and file with such Trading Market an additional
shares listing application covering all of the Shares and Warrant Shares and shall use its
commercially reasonable efforts to take all steps necessary to cause the Shares and Warrant Shares
to be approved for listing on the Principal Trading Market as soon as possible thereafter.



     4.11 Use of Proceeds. The Company intends to use the net proceeds from the sale of
the Securities hereunder for working capital and general corporate purposes.



     4.12 Dispositions After The Date Hereof. Each Purchaser shall not, and shall cause
its Trading Affiliates not to, prior to the effectiveness of the Initial Registration Statement:
(a) sell, offer to sell, solicit offers to buy, dispose of, loan, pledge or grant any right with
respect to (collectively, a “Disposition") the Securities or the Warrant Shares unless pursuant to
an exemption from the registration requirements under the Securities Act; or (b) engage in any
hedging or other transaction which is designed or could reasonably be expected to lead to or result
in a Disposition of the Securities or the Warrant Shares by such Purchaser or an Affiliate. In
addition, prior to the effectiveness of the Initial Registration Statement, Purchaser agrees that
it will not enter into any short sale of Shares executed at a time when the Purchaser has no
equivalent offsetting long position in the Common Stock. For purposes of determining whether the
Purchaser has an equivalent offsetting long position in the Common Stock, shares that the Purchaser
is entitled to receive within sixty (60) calendar days (whether pursuant to contract or upon
conversion or exercise of convertible securities) will be included as if held long by the
Purchaser. Such Purchaser covenants that neither it nor any Person acting on its behalf or pursuant
to any understanding with it will engage in any transactions in the Company’s securities
(including, without limitation, any Short Sales involving the Company’s securities) during the
period from the date hereof until the earlier of such time as (i) the transactions contemplated by
this Agreement are first publicly announced as described in Section 4.6 or (ii) this Agreement is
terminated in full pursuant to Section 6.17. Notwithstanding the foregoing, in the case of a
Purchaser that is a multi-managed investment vehicle whereby separate portfolio managers manage
separate portions of such Purchaser’s assets and the portfolio managers have no direct knowledge of
the investment decisions made by the portfolio managers managing other portions of such Purchaser’s
assets, the representation set forth above shall apply only with respect to the portion of assets
managed by the portfolio manager that have knowledge about the financing transaction contemplated
by this Agreement. Each Purchaser understands and acknowledges, severally and not jointly with any
other Purchaser, that the Commission currently takes the position that covering a short position
established prior to effectiveness of a resale registration statement with shares included in such
registration statement would be a violation of Section 5 of the Securities Act, as set



23









 







forth in Item 65, Section 5 under Section A, of the Manual of Publicly Available Telephone
Interpretations, dated July 1997, compiled by the Office of Chief Counsel, Division of Corporation
Finance.



ARTICLE V.

CONDITIONS PRECEDENT TO CLOSING




     5.1 Conditions Precedent to the Obligations of the Purchasers to Purchase Securities.
The obligation of each Purchaser to acquire Securities at the Closing is subject to the fulfillment
to such Purchaser’s satisfaction, on or prior to the Closing Date, of each of the following
conditions, any of which may be waived by such Purchaser (as to itself only):



          (a) Representations and Warranties. The representations and warranties of the Company
contained herein shall be true and correct in all material respects (except for those
representations and warranties which are qualified as to materiality, in which case such
representations and warranties shall be true and correct in all respects) as of the date when made
and as of the Closing Date, as though made on and as of such date, except for such representations
and warranties that speak as of a specific date.




          (b) Performance. The Company shall have performed, satisfied and complied in all
material respects with all covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by it at or prior to the Closing.




          (c) No Injunction. No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction that prohibits the consummation of any of the transactions
contemplated by the Transaction Documents.




          (d) Consents. The Company shall have obtained in a timely fashion any and all
consents, permits, approvals, registrations and waivers necessary for consummation of the purchase
and sale of the Securities at the Closing (including all Required Approvals), all of which shall be
and remain so long as necessary in full force and effect.




          (e) No Suspensions of Trading in Common Stock; Listing. The Common Stock (i) shall be
designated for quotation or listed on the Principal Trading Market and (ii) shall not have been
suspended, as of the Closing Date, by the Commission or the Principal Trading Market from trading
on the Principal Trading Market nor shall suspension by the Commission or the Principal Trading
Market have been threatened, as of the Closing Date, either (A) in writing by the Commission or the
Principal Trading Market or (B) by falling below the minimum listing maintenance requirements of
the Principal Trading Market.




          (f) Company Deliverables. The Company shall have delivered the Company Deliverables
in accordance with Section 2.2(a).




          (g) Compliance Certificate. The Company shall have delivered to each Purchaser a
certificate, dated as of the Closing Date and signed 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) in the form attached hereto as Exhibit G.




          (h) Termination. This Agreement shall not have been terminated as to such Purchaser in
accordance with Section 6.17 herein.




24









 








     5.2 Conditions Precedent to the Obligations of the Company to sell Securities. The
Company’s obligation to sell and issue the Securities at the Closing is subject to the fulfillment
to the satisfaction of the Company on or prior to the Closing Date of the following conditions, any
of which may be waived by the Company:



          (a) Representations and Warranties. The representations and warranties made by the
Purchaser in Section 3.2 hereof shall be true and correct in all material respects as of the date
when made, and as of the Closing Date as though made on and as of such date, except for
representations and warranties that speak as of a specific date.




          (b) Performance. Such Purchaser shall have performed, satisfied and complied in all
material respects with all covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by such Purchaser at or prior to the Closing
Date.




          (c) No Injunction. No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction that prohibits the consummation of any of the transactions
contemplated by the Transaction Documents.




          (d) Consents. The Company shall have obtained in a timely fashion any and all
consents, permits, approvals, registrations and waivers necessary for consummation of the purchase
and sale of the Securities, all of which shall be and remain so long as necessary in full force and
effect.




          (e) Purchasers Deliverables. Such Purchaser shall have delivered its Purchaser
Deliverables in accordance with Section 2.2(b).




          (f) Termination. This Agreement shall not have been terminated as to such Purchaser in
accordance with Section 6.17 herein.




ARTICLE VI.

MISCELLANEOUS




     6.1 Fees and Expenses. The Company and the Purchasers shall each pay the fees and
expenses of their respective advisers, counsel, accountants and other experts, if any, and all
other expenses incurred by such party in connection with the negotiation, preparation, execution,
delivery and performance of this Agreement. The Company shall pay all Transfer Agent fees, stamp
taxes and other taxes and duties levied in connection with the sale and issuance of the Securities
to the Purchasers.



     6.2 Entire Agreement. The Transaction Documents, together with the Exhibits and
Schedules thereto, contain the entire understanding of the parties with respect to the subject
matter hereof and supersede all prior agreements, understandings, discussions and representations,
oral or written, with respect to such matters, which the parties acknowledge have been merged into
such documents, exhibits and schedules. At or after the Closing, and without further
consideration, the Company and the Purchasers will execute and deliver to the other such further
documents as may be reasonably requested in order to give practical effect to the intention of the
parties under the Transaction Documents.



     6.3 Notices. Any and all notices or other communications or deliveries required or
permitted to be provided hereunder shall be in writing and shall be deemed given and effective on
the earliest of (a) the date of transmission, if such notice or communication is delivered via
facsimile (provided the sender receives a machine-generated confirmation of successful
transmission) at the facsimile number specified in this



25









 







Section prior to 5:00 p.m., New York City time, on a Trading Day, (b) the next Trading Day
after the date of transmission, if such notice or communication is delivered via facsimile at the
facsimile number specified in this Section on a day that is not a Trading Day or later than 5:00
p.m., New York City time, on any Trading Day, (c) the Trading Day following the date of mailing, if
sent by U.S. nationally recognized overnight courier service with next day delivery specified, or
(d) upon actual receipt by the party to whom such notice is required to be given. The address for
such notices and communications shall be as follows:



	 	 	 	 	 
	 

	 	If to the Company:
	 	Ardea Biosciences, Inc.
	 

	 	 	 	4939 Directors Place
	 

	 	 	 	San Diego, CA 92121
	 

	 	 	 	Telephone No.: (858) 652-6500
	 

	 	 	 	Facsimile No.: (858) 625-0745
	 

	 	 	 	Attention: Barry D. Quart, Pharm.D
	 

	 	 	 	E-mail: bquart@ardeabio.com
	 
	 	 	 	 
	 

	 	With a copy to:
	 	Cooley Godward Kronish LLP
	 

	 	 	 	4401 Eastgate Mall
	 

	 	 	 	San Diego, CA 92121-1909
	 

	 	 	 	Telephone No.: (858) 550-6067
	 

	 	 	 	Facsimile No.: (858) 550-6420
	 

	 	 	 	Attention: Ethan Christensen
	 

	 	 	 	E-mail: echristensen@cooley.com
	 
	 	 	 	 
	 

	 	If to a Purchaser:
	 	To the address set forth under such Purchaser’s name on the signature page hereof;





or such other address as may be designated in writing hereafter, in the same manner, by such
Person.




     6.4 Amendments; Waivers; No Additional Consideration. No provision of this Agreement
may be waived or amended except in a written instrument signed, in the case of an amendment, by the
Company and each of the Purchasers holding or having the right to acquire a majority of the Shares
and the Warrant Shares on a fully diluted basis at the time of such amendment or, in the case of a
waiver, by the party against whom enforcement of any such waiver is sought. No waiver of any
default with respect to any provision, condition or requirement of this Agreement shall be deemed
to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any
other provision, condition or requirement hereof, nor shall any delay or omission of either party
to exercise any right hereunder in any manner impair the exercise of any such right. No
consideration shall be offered or paid to any Purchaser to amend or consent to a waiver or
modification of any provision of any Transaction Document unless the same consideration is also
offered to all Purchasers who then hold Shares or Warrant Shares.



     6.5 Construction. The headings herein are for convenience only, do not constitute a
part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.
The language used in this Agreement will be deemed to be the language chosen by the parties to
express their mutual intent, and no rules of strict construction will be applied against any party.
This Agreement shall be construed as if drafted jointly by the parties, and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any
provisions of this Agreement or any of the Transaction Documents.



     6.6 Successors and Assigns. The provisions of this Agreement shall inure to the
benefit of and be binding upon the parties and their successors and permitted assigns. This
Agreement, or any rights or obligations hereunder, may not be assigned by the Company without the
prior written consent of the Purchasers. Any Purchaser may assign its rights hereunder in whole or
in part to any Person to whom such



26









 







Purchaser assigns or transfers any Securities or Warrant Shares in compliance with the
Transaction Documents and applicable law, provided such transferee shall agree in writing to be
bound, with respect to the transferred Securities or Warrant Shares, by the terms and conditions of
this Agreement that apply to the “Purchasers”.



     6.7 No Third-Party Beneficiaries. This Agreement is intended for the benefit of the
parties hereto and their respective successors and permitted assigns and is not for the benefit of,
nor may any provision hereof be enforced by, any other Person.



     6.8 Governing Law. All questions concerning the construction, validity, enforcement
and interpretation of this Agreement shall be governed by and construed and enforced in accordance
with the internal laws of the State of New York, without regard to the principles of conflicts of
law thereof. Each party agrees that all Proceedings concerning the interpretations, enforcement
and defense of the transactions contemplated by this Agreement and any other Transaction Documents
(whether brought against a party hereto or its respective Affiliates, employees or agents) shall be
commenced exclusively in the New York Courts. Each party hereto hereby irrevocably submits to the
exclusive jurisdiction of the New York Courts for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed herein (including with
respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and
agrees not to assert in any Proceeding, any claim that it is not personally subject to the
jurisdiction of any such New York Court, or that such Proceeding has been commenced in an improper
or inconvenient forum. Each party hereto hereby irrevocably waives personal service of process and
consents to process being served in any such Proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party at the address in
effect for notices to it under this Agreement and agrees that such service shall constitute good
and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to
limit in any way any right to serve process in any manner permitted by law. EACH PARTY HERETO
HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO
TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.



     6.9 Survival. Subject to applicable statute of limitations, the representations,
warranties, agreements and covenants contained herein shall survive the Closing and the delivery of
the Securities, except that the representations and warranties contained herein shall terminate
upon the one year anniversary of the Closing Date.



     6.10 Execution. This Agreement may be executed in two or more counterparts, all of
which when taken together shall be considered one and the same agreement and shall become effective
when counterparts have been signed by each party and delivered to the other party, it being
understood that both parties need not sign the same counterpart. In the event that any signature
is delivered by facsimile transmission, or by e-mail delivery of a “.pdf” format data file, such
signature shall create a valid and binding obligation of the party executing (or on whose behalf
such signature is executed) with the same force and effect as if such facsimile signature page were
an original thereof.



     6.11 Severability. If any provision of this Agreement is held to be invalid or
unenforceable in any respect, the validity and enforceability of the remaining terms and provisions
of this Agreement shall not in any way be affected or impaired thereby and the parties will attempt
to agree upon a valid and enforceable provision that is a reasonable substitute therefor, and upon
so agreeing, shall incorporate such substitute provision in this Agreement.



     6.12 Replacement of Securities. If any certificate or instrument evidencing any
Securities or Warrant Shares is mutilated, lost, stolen or destroyed, the Company shall issue or
cause to be issued in



27









 







exchange and substitution for and upon cancellation thereof, or in lieu of and substitution
therefor, a new certificate or instrument, but only upon receipt of evidence reasonably
satisfactory to the Company and the Transfer Agent of such loss, theft or destruction and the
execution by the holder thereof of a customary lost certificate affidavit of that fact and an
agreement to indemnify and hold harmless the Company and the Transfer Agent for any losses in
connection therewith or, if required by the Transfer Agent, a bond in such form and amount as is
required by the Transfer Agent. The applicants for a new certificate or instrument under such
circumstances shall also pay any reasonable third-party costs associated with the issuance of such
replacement Shares or Warrant Shares. If a replacement certificate or instrument evidencing any
Securities or Warrant Shares is requested due to a mutilation thereof, the Company may require
delivery of such mutilated certificate or instrument as a condition precedent to any issuance of a
replacement.



     6.13 Remedies. In addition to being entitled to exercise all rights provided herein
or granted by law, including recovery of damages, each of the Purchasers and the Company will be
entitled to specific performance under the Transaction Documents. The parties agree that monetary
damages may not be adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agree to waive in any action for
specific performance of any such obligation (other than in connection with any action for a
temporary restraining order) the defense that a remedy at law would be adequate.



     6.14 Payment Set Aside. To the extent that the Company makes a payment or payments to
any Purchaser pursuant to any Transaction Document or a Purchaser enforces or exercises its rights
thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any
part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside,
recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the
Company, a trustee, receiver or any other person under any law (including, without limitation, any
bankruptcy law, state or federal law, common law or equitable cause of action), then to the extent
of any such restoration the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.



     6.15 Adjustments in Share Numbers and Prices. In the event of any stock split,
subdivision, dividend or distribution payable in shares of Common Stock (or other securities or
rights convertible into, or entitling the holder thereof to receive directly or indirectly shares
of Common Stock), combination or other similar recapitalization or event occurring after the date
hereof and prior to the Closing, each reference in any Transaction Document to a number of shares
or a price per share shall be deemed to be amended to appropriately account for such event.



     6.16 Independent Nature of Purchasers’ Obligations and Rights. The obligations of
each Purchaser under any Transaction Document 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 any Transaction Document. The decision of each Purchaser
to purchase Securities pursuant to the Transaction Documents has been made by such Purchaser
independently of any other Purchaser and independently of any information, materials, statements or
opinions as to the business, affairs, operations, assets, properties, liabilities, results of
operations, condition (financial or otherwise) or prospects of the Company or any Subsidiary which
may have been made or given by any other Purchaser or by any agent or employee of any other
Purchaser, and no Purchaser and any of its agents or employees shall have any liability to any
other Purchaser (or any other Person) relating to or arising from any such information, materials,
statement or opinions. Nothing contained herein or in any Transaction Document, and no action
taken by any Purchaser pursuant thereto, 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 transactions contemplated by the Transaction Documents. Each Purchaser acknowledges that no
other Purchaser has acted as agent for such



28









 







Purchaser in connection with making its investment hereunder and that no Purchaser will be
acting as agent of such Purchaser in connection with monitoring its investment in the Securities or
enforcing its rights under the Transaction Documents. Each Purchaser shall be entitled to
independently protect and enforce its rights, including without limitation the rights arising out
of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any
other Purchaser to be joined as an additional party in any proceeding for such purpose. The
Company acknowledges that each of the Purchasers has been provided with the same Transaction
Documents for the purpose of closing a transaction with multiple Purchasers and not because it was
required or requested to do so by any Purchaser. The Company’s obligations to each Purchaser under
this Agreement are identical to its obligations to each other Purchaser other than such differences
resulting solely from the number of Securities purchased by such Purchaser, but regardless of
whether such obligations are memorialized herein or in another agreement between the Company and a
Purchaser.



     6.17 Termination. This Agreement may be terminated and the sale and purchase of the
Securities abandoned at any time prior to the Closing by either the Company or any Purchaser (with
respect to itself only) upon written notice to the other, if the Closing has not been consummated
on or prior to 5:00 p.m., New York City time, on the Outside Date; provided, however, that the
right to terminate this Agreement under this Section 6.17 shall not be available to any Person
whose failure to comply with its obligations under this Agreement has been the cause of or resulted
in the failure of the Closing to occur on or before such time. Nothing in this Section 6.17 shall
be deemed to release any party from any liability for any breach by such party of the terms and
provisions of this Agreement or the other Transaction Documents or to impair the right of any party
to compel specific performance by any other party of its obligations under this Agreement or the
other Transaction Documents. In the event of a termination pursuant to this Section, the Company
shall promptly notify all non-terminating Purchasers. Upon a termination in accordance with this
Section, the Company and the terminating Purchaser(s) shall not have any further obligation or
liability (including arising from such termination) to the other, and no Purchaser will have any
liability to any other Purchaser under the Transaction Documents as a result therefrom.



     6.18 Waiver of Conflicts. Each party to this Agreement acknowledges that Company
Counsel, 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 the Transaction Documents, including representation of such Purchasers
or their affiliates in matters of a similar nature to the transactions contemplated by the
Transaction Documents. The applicable rules of professional conduct require that Company Counsel
inform the parties hereunder of this representation and obtain their consent. Company Counsel has
served as outside general counsel to the Company and has negotiated the terms of the transactions
contemplated by the Transaction Documents 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 transactions
contemplated by the Transaction Documents, Company Counsel 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 Company Counsel’s representation of the Company in the transactions
contemplated by the Transaction Documents.



[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

[COMPANY SIGNATURE PAGE FOLLOWS]





29











 





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



	 	 	 	 	 
	 	ARDEA BIOSCIENCES, INC.

 	 
	 	By:  	/s/
Christopher W. Krueger	 
	 	 	Name:  	Christopher W. Krueger	 
	 	 	Title:  	Chief Business Officer	 
	 



[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

[SIGNATURE PAGES FOR PURCHASERS FOLLOW]




30









 








	 	 	 
	
Baker Bros. Investments II, L.P.

By: Baker Bros. Capital, L.P., (general partner)

By: Baker Bros. Capital (GP), LLC, (general partner)

By: Felix Baker, Ph.D., Managing Member


/s/ Felix Baker,
Ph.D.

	 	NAME OF PURCHASER:                                                             






	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Name:
	 	 

	 	 
	 

	 	Title:	 	 	 	 






	 	 	 
	 

	 	Aggregate Purchase Price (Subscription Amount): $9,160.42
	 
	 	 
	 

	 	Number of Shares to be Acquired: 820
	 
	 	 
	 

	 	Warrants to be Acquired: 205
	 
	 	 
	 

	 	Tax ID No.:                                         
	 
	 	 
	 

	 	Address for Notice:
	 
	 	 
	 

	 	667 Madison Ave
	 

	 	New York, NY 10065
	 

	 	                                                            
	 
	 	 
	 

	 	Telephone No.: 212 339 5634
	 
	 	 
	 

	 	Facsimile No.: 212 339 5634
	 
	 	 
	 

	 	E-mail Address: dfedorisko@bbinvestments.com
	 
	 	 
	 

	 	Attention: Don Fedorisko





Delivery Instructions:

(if different than above)




c/o                                                          




Street:                                                     




City/State/Zip:                                        




Attention:                                                




Telephone No.:                                                             




[PURCHASER SIGNATURE PAGE – SECURITIES PURCHASE AGREEMENT]






 









 








	 	 	 
	
14159, L.P.

By: 14159, L.P., (general partner)

By: 14159 Capital (GP), LLC, (general partner)

By: Felix Baker, Ph.D., Managing Member


/s/ Felix Baker, Ph.D.

	 	NAME OF PURCHASER:                                                             






	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Name:
	 	 

	 	 
	 

	 	Title:	 	 	 	 






	 	 	 
	 

	 	Aggregate Purchase Price
(Subscription Amount): $179,778.90
	 
	 	 
	 

	 	Number of Shares to be Acquired: 16,093
	 
	 	 
	 

	 	Warrants to be Acquired: 4,023
	 
	 	 
	 

	 	Tax ID No.:                                         
	 
	 	 
	 

	 	Address for Notice:
	 
	 	 
	 

	 	667 Madison Ave
	 

	 	New York, NY 10065
	 

	 	                                                            
	 
	 	 
	 

	 	Telephone No.: 212 339 5634
	 
	 	 
	 

	 	Facsimile No.: 212 339 5634
	 
	 	 
	 

	 	E-mail Address: dfedorisko@bbinvestments.com
	 
	 	 
	 

	 	Attention: Don Fedorisko





Delivery Instructions:

(if different than above)




c/o                                                          




Street:                                                     




City/State/Zip:                                        




Attention:                                                




Telephone No.:                                                             




[PURCHASER SIGNATURE PAGE – SECURITIES PURCHASE AGREEMENT]






 









 








	 	 	 
	
Baker Brothers Life Sciences, L.P.

By: Baker Brothers Life Sciences Capital, L.P., (general partner)

By: Baker Brothers Life Sciences Capital (GP), LLC, (general
partner)

By: Felix Baker, Ph.D., Managing Member


/s/ Felix Baker, Ph.D.

	NAME OF PURCHASER:                                                             







	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Name:
	 	 

	 	 
	 

	 	Title:	 	 	 	 






	 	 	 
	 

	 	Aggregate Purchase Price
(Subscription Amount): $6,581,754.16
	 
	 	 
	 

	 	Number of Shares to be Acquired:
589,169
	 
	 	 
	 

	 	Warrants to be Acquired: 147,292
	 
	 	 
	 

	 	Tax ID No.:                                         
	 
	 	 
	 

	 	Address for Notice:
	 
	 	 
	 

	 	667 Madison Ave
	 

	 	New York, NY 10065
	 

	 	                                                            
	 
	 	 
	 

	 	Telephone No.: 212 339 5634
	 
	 	 
	 

	 	Facsimile No.: 212 339 5634
	 
	 	 
	 

	 	E-mail Address: dfedorisko@bbinvestments.com
	 
	 	 
	 

	 	Attention: Don Fedorisko





Delivery Instructions:

(if different than above)




c/o                                                          




Street:                                                     




City/State/Zip:                                        




Attention:                                                




Telephone No.:                                                             




[PURCHASER SIGNATURE PAGE – SECURITIES PURCHASE AGREEMENT]






 









 








	 	 	 
	Baker/Tisch
Investments, L.P.

By: Baker/Tisch Capital, L.P., (general partner)

By: Baker/Tisch Capital (GP), LLC, (general partner)

By: Felix Baker, Ph.D., Managing Member


/s/ Felix Baker, Ph.D.
	 	NAME OF PURCHASER:                                                             






	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Name:
	 	 

	 	 
	 

	 	Title:	 	 	 	 






	 	 	 
	 

	 	Aggregate Purchase Price
(Subscription Amount): $10,947.83
	 
	 	 
	 

	 	Number of Shares to be Acquired: 980
	 
	 	 
	 

	 	Warrants to be Acquired: 245
	 
	 	 
	 

	 	Tax ID No.:                                         
	 
	 	 
	 

	 	Address for Notice:
	 
	 	 
	 

	 	667 Madison Ave
	 

	 	New York, NY 10065
	 

	 	                                                            
	 
	 	 
	 

	 	Telephone No.: 212 339 5634
	 
	 	 
	 

	 	Facsimile No.: 212 339 5634
	 
	 	 
	 

	 	E-mail Address: dfedorisko@bbinvestments.com
	 
	 	 
	 

	 	Attention: Don Fedorisko





Delivery Instructions:

(if different than above)




c/o                                                          




Street:                                                     




City/State/Zip:                                        




Attention:                                                




Telephone No.:                                                             




[PURCHASER SIGNATURE PAGE – SECURITIES PURCHASE AGREEMENT]






 









 








	 	 	 
	Baker/Tisch Investments, L.P.

By: Baker/Tisch Capital, L.P., (general partner)

By: Baker/Tisch Capital (GP), LLC, (general partner)

By: Felix Baker, Ph.D., Managing Member


/s/ Felix Baker, Ph.D.

	 	NAME OF PURCHASER:                                                             






	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Name:
	 	 

	 	 
	 

	 	Title:	 	 	 	 






	 	 	 
	 

	 	Aggregate Purchase Price
(Subscription Amount): $33,625.53
	 
	 	 
	 

	 	Number of Shares to be Acquired: 3,010
	 
	 	 
	 

	 	Warrants to be Acquired: 753
	 
	 	 
	 

	 	Tax ID No.:                                         
	 
	 	 
	 

	 	Address for Notice:
	 
	 	 
	 

	 	667 Madison Ave
	 

	 	New York, NY 10065
	 

	 	                                                            
	 
	 	 
	 

	 	Telephone No.: 212 339 5634
	 
	 	 
	 

	 	Facsimile No.: 212 339 5634
	 
	 	 
	 

	 	E-mail Address: dfedorisko@bbinvestments.com
	 
	 	 
	 

	 	Attention: Don Fedorisko





Delivery Instructions:

(if different than above)




c/o                                                          




Street:                                                     




City/State/Zip:                                        




Attention:                                                




Telephone No.:                                                             




[PURCHASER SIGNATURE PAGE – SECURITIES PURCHASE AGREEMENT]






 









 









	 	 	 
	
667, L.P.

By: Baker Biotech Capital, L.P., (general partner)

By: Baker Biotech Capital (GP), LLC, (general partner)

By: Felix Baker, Ph.D., Managing Member


/s/ Felix Baker, Ph.D.

	NAME OF PURCHASER:                                                             






	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Name:
	 	 

	 	 
	 

	 	Title:	 	 	 	 






	 	 	 
	 

	 	Aggregate Purchase Price
(Subscription Amount): $ 1,103,630.13
	 
	 	 
	 

	 	Number of Shares to be Acquired:
98,792
	 
	 	 
	 

	 	Warrants to be Acquired: 24,698
	 
	 	 
	 

	 	Tax ID No.:                                         
	 
	 	 
	 

	 	Address for Notice:
	 
	 	 
	 

	 	667 Madison Ave
	 

	 	New York, NY 10065
	 

	 	                                                            
	 
	 	 
	 

	 	Telephone No.: 212 339 5634
	 
	 	 
	 

	 	Facsimile No.: 212 339 5634
	 
	 	 
	 

	 	E-mail Address:
dfedorisko@bbinvestments.com
	 
	 	 
	 

	 	Attention: Don Fedorisko





Delivery Instructions:

(if different than above)




c/o                                                          




Street:                                                     




City/State/Zip:                                        




Attention:                                                




Telephone No.:                                                             




[PURCHASER SIGNATURE PAGE – SECURITIES PURCHASE AGREEMENT]






 









 








	 	 	 
	
667, L.P.

By: Baker Biotech Capital, L.P., (general partner)

By: Baker Biotech Capital (GP), LLC, (general partner)

By: Felix Baker, Ph.D., Managing Member


/s/ Felix Baker, Ph.D.

	NAME OF PURCHASER:                                                             






	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Name:
	 	 

	 	 
	 

	 	Title:	 	 	 	 






	 	 	 
	 

	 	Aggregate Purchase Price
(Subscription Amount): $ 960,593.45
	 
	 	 
	 

	 	Number of Shares to be Acquired:
85,988
	 
	 	 
	 

	 	Warrants to be Acquired: 21,497
	 
	 	 
	 

	 	Tax ID No.:                                         
	 
	 	 
	 

	 	Address for Notice:
	 
	 	 
	 

	 	667 Madison Ave
	 

	 	New York, NY 10065
	 

	 	                                                            
	 
	 	 
	 

	 	Telephone No.: 212 339 5634
	 
	 	 
	 

	 	Facsimile No.: 212 339 5634
	 
	 	 
	 

	 	E-mail Address:
dfedorisko@bbinvestments.com
	 
	 	 
	 

	 	Attention: Don Fedorisko





Delivery Instructions:

(if different than above)




c/o                                                          




Street:                                                     




City/State/Zip:                                        




Attention:                                                




Telephone No.:                                                             




[PURCHASER SIGNATURE PAGE – SECURITIES PURCHASE AGREEMENT]






 









 









	 	 	 
	 

	 	NAME OF PURCHASER: Visium  Balanced
Fund, LP






	 	 	 	 	 	 	 
	 

	 	By:	 	/s/ Mark Gottlieb 	 	 
	 

	 	Name:
	 	Mark Gottlieb


	 	 
	 

	 	Title:	 	Signatory	 	 






	 	 	 
	 

	 	Aggregate Purchase Price
(Subscription Amount): $ 770,000.66
	 
	 	 
	 

	 	Number of Shares to be Acquired:
68,927
	 
	 	 
	 

	 	Warrants to be Acquired: 17,231
	 
	 	 
	 

	 	Tax ID No.:                                         
	 
	 	 
	 

	 	Address for Notice:
	 
	 	 
	 

	 	c/o Visium Asset Management
	 

	 	950 Third Ave - 29th
Floor
	 

	 	NY, NY 10022
	 
	 	 
	 

	 	Telephone No.: 646-840-5847
	 
	 	 
	 

	 	Facsimile No.: 646-840-5807
	 
	 	 
	 

	 	E-mail Address:
asilberstein@visiumfunds.com
	 
	 	 
	 

	 	Attention: Allen Silberstein





Delivery Instructions:

(if different than above)




c/o                                                          




Street:                                                     




City/State/Zip:                                        




Attention:                                                




Telephone No.:                                                             




[PURCHASER SIGNATURE PAGE – SECURITIES PURCHASE AGREEMENT]






 









 








	 	 	 
	 

	 	NAME OF PURCHASER: Visium Balanced
Offshore Fund, Ltd.






	 	 	 	 	 	 	 
	 

	 	By:	 	/s/ Mark Gottlieb	 	 
	 

	 	Name:
	 	Mark Gottlieb

	 	 
	 

	 	Title:	 	Signatory
	 	 






	 	 	 
	 

	 	Aggregate Purchase Price
(Subscription Amount): $ 1,979,992.35
	 
	 	 
	 

	 	Number of Shares to be Acquired:
177,240
	 
	 	 
	 

	 	Warrants to be Acquired: 44,310
	 
	 	 
	 

	 	Tax ID No.:                                         
	 
	 	 
	 

	 	Address for Notice:
	 
	 	 
	 

	 	c/o Visium Asset Management, L.P.
	 

	 	950 Third Avenue  - 29th
Floor
	 

	 	NY, NY 10022
	 
	 	 
	 

	 	Telephone No.: 646-840-5847
	 
	 	 
	 

	 	Facsimile No.: 646-840-5807
	 
	 	 
	 

	 	E-mail Address:
asilberstein@visiumfunds.com
	 
	 	 
	 

	 	Attention: Allen Silberstein





Delivery Instructions:

(if different than above)




c/o                                                          




Street:                                                     




City/State/Zip:                                        




Attention:                                                




Telephone No.:                                                             




[PURCHASER SIGNATURE PAGE – SECURITIES PURCHASE AGREEMENT]






 









 








	 	 	 
	 

	 	NAME OF PURCHASER: TANG CAPITAL
PARTNERS, LP






	 	 	 	 	 	 	 
	 

	 	By:	 	/s/ Kevin Tang	 	 
	 

	 	 
	 	 

	 	 
	 

	 	Name:
	 	Kevin Tang
	 	 
	 

	 	Title:	 	Managing Director	 	 






	 	 	 
	 

	 	Aggregate Purchase Price
(Subscription Amount): $1,749,998.66
	 
	 	 
	 

	 	Number of Shares to be Acquired:
156,652
	 
	 	 
	 

	 	Warrants to be Acquired: 39,163
	 
	 	 
	 

	 	Tax ID No.:                                         
	 
	 	 
	 

	 	Address for Notice:
	 
	 	 
	 

	 	4401 Eastgate Mall
	 

	 	SAN DIEGO, CA 92121
	 

	 	 
	 
	 	 
	 

	 	Telephone No.: 858-200-3412
	 
	 	 
	 

	 	Facsimile No.: 858-200-3837
	 
	 	 
	 

	 	E-mail Address:
kevin@tangcapital.com and jlemkey@tangcapital.com
	 
	 	 
	 

	 	Attention: John Lemkey





Delivery Instructions:

(if different than above)




c/o                                                          




Street:                                                     




City/State/Zip:                                        




Attention:                                                




Telephone No.:                                                             




[PURCHASER SIGNATURE PAGE – SECURITIES PURCHASE AGREEMENT]






 









 









	 	 	 
	 

	 	NAME OF PURCHASER: Broadfin
Healthcare Master Fund LTD






	 	 	 	 	 	 	 
	 

	 	By:	 	/s/ Kevin Kotler	 	 
	 

	 	Name:
	 	Kevin
Kotler

	 	 
	 

	 	Title:	 	Director	 	 






	 	 	 
	 

	 	Aggregate Purchase Price
(Subscription Amount): $ 1,449,994.71
	 
	 	 
	 

	 	Number of Shares to be Acquired:
129,797
	 
	 	 
	 

	 	Warrants to be Acquired: 32,449
	 
	 	 
	 

	 	Tax ID No.:                                         
	 
	 	 
	 

	 	Address for Notice:
	 
	 	 
	 

	 	237 Park Ave
	 

	 	Suite 900
	 

	 	NY, NY 10017
	 
	 	 
	 

	 	Telephone No.: 212 808 2460
	 
	 	 
	 

	 	Facsimile No.: 212 808 2464
	 
	 	 
	 

	 	E-mail Address:
investor@broadfincapital.com
	 
	 	 
	 

	 	Attention: Kevin@Broadfincapital.com





Delivery Instructions:

(if different than above)




c/o                                                          




Street:                                                     




City/State/Zip:                                        




Attention:                                                




Telephone No.:                                                             




[PURCHASER SIGNATURE PAGE – SECURITIES PURCHASE AGREEMENT]






 









 









	 	 	 
	 

	 	NAME OF PURCHASER: RA Capital
Healthcare Fund II, LP






	 	 	 	 	 	 	 
	 

	 	By:	 	/s/ Peter Kolchinsky	 	 
	 

	 	Name:
	 	Peter Kolchinsky

	 	 
	 

	 	Title:	 	Manager	 	 






	 	 	 
	 

	 	Aggregate Purchase Price
(Subscription Amount): $ 82,499.68
	 
	 	 
	 

	 	Number of Shares to be Acquired:
7,385
	 
	 	 
	 

	 	Warrants to be Acquired: 1,846
	 
	 	 
	 

	 	Tax ID No.:                                         
	 
	 	 
	 

	 	Address for Notice:
	 
	 	 
	 

	 	800 Boylston Street, Suite 1500
	 

	 	Boston, MA 02199
	 

	 	                                                            
	 
	 	 
	 

	 	Telephone No.: 617/778-2509
	 
	 	 
	 

	 	Facsimile No.: 617/778-2510
	 
	 	 
	 

	 	E-mail Address: adaniels@racap.com 
	 
	 	 
	 

	 	Attention: Amanda Daniels





Delivery Instructions:

(if different than above)




c/o                                                          




Street:                                                     




City/State/Zip:                                        




Attention:                                                




Telephone No.:                                                             




[PURCHASER SIGNATURE PAGE – SECURITIES PURCHASE AGREEMENT]






 









 








	 	 	 
	 

	 	NAME OF PURCHASER: RA Capital
Healthcare Fund, LP






	 	 	 	 	 	 	 
	 

	 	By:	 	/s/ Peter Kolchinsky	 	 
	 

	 	Name:
	 	Peter Kolchinsky

	 	 
	 

	 	Title:	 	Manager	 	 






	 	 	 
	 

	 	Aggregate Purchase Price
(Subscription Amount): $ 10,917,495.06
	 
	 	 
	 

	 	Number of Shares to be Acquired:
977,285
	 
	 	 
	 

	 	Warrants to be Acquired: 244,321
	 
	 	 
	 

	 	Tax ID No.:                                         
	 
	 	 
	 

	 	Address for Notice:
	 
	 	 
	 

	 	800 Boylston Street, Suite 1500
	 

	 	Boston, MA 02199
	 

	 	                                                            
	 
	 	 
	 

	 	Telephone No.: 617/778-2509
	 
	 	 
	 

	 	Facsimile No.: 617/778-2510
	 
	 	 
	 

	 	E-mail Address: adaniels@racap.com
	 
	 	 
	 

	 	Attention: Amanda Daniels





Delivery Instructions:

(if different than above)




c/o                                                          




Street:                                                     




City/State/Zip:                                        




Attention:                                                




Telephone No.:                                                             




[PURCHASER SIGNATURE PAGE – SECURITIES PURCHASE AGREEMENT]






 









 








	 	 	 
	 

	 	NAME OF PURCHASER: Jennison Health
Sciences Fund, a series
                    
                   
     of Jennison Sector Funds, Inc.
(the “Fund”)






	 	 	 	 	 	 	 
	 

	 	By:	 	Jennison Associates LLC
(“Jennison”), as sub-adviser to the Fund	 	 
	 
	 

	 	By:	 	/s/ David Chan	 	 
	 

	 	Name:
	 	David Chan

	 	 
	 

	 	Title:	 	Managing Director of Jennison and
Portfolio Manager to the Fund	 	 






	 	 	 
	 

	 	Aggregate Purchase Price
(Subscription Amount): $ 4,212,678.38
	 
	 	 
	 

	 	Number of Shares to be Acquired:
377,100
	 
	 	 
	 

	 	Warrants to be Acquired: 94,275
	 
	 	 
	 

	 	Tax ID No.:                                         
	 
	 	 
	 

	 	Address for Notice:









c/o
Jennison Associates LLC




Street:
466 Lexington Avenue




City/State/Zip:
New York, New York 10017






	 	 	 
	 

	 	Telephone No.: 212 833 0476
	 
	 	 
	 

	 	Facsimile No.: 212 986 6183
	 
	 	 
	 

	 	E-mail Address: dchan@jennison.com
	 
	 	 
	 

	 	Attention: David Chan*






*See
attached Schedule A for additional contacts


Delivery Instructions:

(if different than above)




c/o: The Bank of New York Mellon Corp.




Street:
One Wall Street, 3rd Floor, Window A




City/State/Zip:
New York, New York 10286




Attention:
Jennison Health Sciences Fund #296227




Contact
Person:  Leif Hines








 









 





SCHEDULE A




Additional Contacts:




For Operational Matters:

Jennison Associates LLC

466 Lexington Avenue

New York, New York 10017




ATTN.:




	 	 	 	 	 
	Thomas O’Connell

	 	Spiro Kartsonis
	 	Clyte Mensuroglu
	 

	 	 
	 	 
	Name

	 	Name
	 	Name
	 
	 	 	 	 
	212 833 0629

	 	212 833 0484
	 	212 833 0709
	 

	 	 
	 	 
	Telephone Number

	 	Telephone Number
	 	Telephone Number
	 
	 	 	 	 
	212 949 9753

	 	212 949 9753
	 	212 949 9753
	 

	 	 
	 	 
	Facsimile Number

	 	Facsimile Number
	 	Facsimile Number
	 
	 	 	 	 
	toconnell@jennison.com

	 	skartsonis@jennison.com
	 	cmensuroglu@jennison.com
	 

	 	 
	 	 
	E-mail

	 	E-mail
	 	E-mail






For Legal Matters:

Jennison Associates LLC

466 Lexington Avenue

New York, New York 10017




ATTN.:




	 	 	 
	Mirry Hwang

	 	 
	 

Name

	 	 
	 
	 	 
	212 833 0589
	 	 
	 

Telephone Number

	 	 
	 
	 	 
	212 682 9831
	 	 
	 

Facsimile Number

	 	 
	 
	 	 
	mhwang@jennison.com
	 	 
	 

E-mail

	 	 




















 








	 	 	 
	 

	 	NAME OF PURCHASER: Pacific Select Fund, Health Sciences 

Portfolio (the “Fund”) 







	 	 	 	 	 	 	 
	 

	 	By:	 	Jennison Associates LLC (“Jennison”), as sub-adviser to the Fund	 	 
	 
	 

	 	By:	 	/s/ David Chan	 	 
	 

	 	Name:
	 	David Chan

	 	 
	 

	 	Title:	 	Managing Director of Jennison and Portfolio Manager to the Fund	 	 






	 	 	 
	 

	 	Aggregate Purchase Price
(Subscription Amount): $537,314.72
	 
	 	 
	 

	 	Number of Shares to be Acquired:
48,098
	 
	 	 
	 

	 	Warrants to be Acquired: 12,024
	 
	 	 
	 

	 	Tax ID No.:                                         
	 
	 	 
	 

	 	Address for Notice:
	 
	 	 
	 

	 	c/o: Jennison Associates LLC
	 

	 	Street: 466 Lexington Avenue
	 

	 	City/State/Zip: New York, New York 10017
	 
	 	 
	 

	 	Telephone No.: 212 833 0476
	 
	 	 
	 

	 	Facsimile No.: 212 986 6183
	 
	 	 
	 

	 	E-mail Address:
dchan@jennison.com
	 
	 	 
	 

	 	Attention: David Chan*





* See attached Schedule A for additional contacts



Delivery Instructions:

(if different than above)




c/o: DTCC / New York Window




Street: 55 Water Street, Plaza Level, 3rd Floor




City/State/Zip: New York, New York 10041




Attention: RE.: Pacific Life Health Sciences Portfolio #PS2G




Contact Person: Robert Mendez / Scott Moorhead



Telephone No.: (816) 871-9233 (State Street, as Custodian)




 






 









 





SCHEDULE A




Additional Contacts:




For Operational Matters:

Jennison Associates LLC

466 Lexington Avenue

New York, New York 10017




ATTN.:




	 	 	 	 	 
	Thomas O’Connell

	 	Spiro Kartsonis
	 	Clyte Mensuroglu
	 

	 	 
	 	 
	Name

	 	Name
	 	Name
	 
	 	 	 	 
	212 833 0629

	 	212 833 0484
	 	212 833 0709
	 

	 	 
	 	 
	Telephone Number

	 	Telephone Number
	 	Telephone Number
	 
	 	 	 	 
	212 949 9753

	 	212 949 9753
	 	212 949 9753
	 

	 	 
	 	 
	Facsimile Number

	 	Facsimile Number
	 	Facsimile Number
	 
	 	 	 	 
	toconnell@jennison.com

	 	skartsonis@jennison.com
	 	cmensuroglu@jennison.com
	 

	 	 
	 	 
	E-mail

	 	E-mail
	 	E-mail






For Legal Matters:

Jennison Associates LLC

466 Lexington Avenue

New York, New York 10017




ATTN.:




	 	 	 
	Mirry Hwang

	 	 
	 

Name

	 	 
	 
	 	 
	212 833 0589
	 	 
	 

Telephone Number

	 	 
	 
	 	 
	212 682 9831
	 	 
	 

Facsimile Number

	 	 
	 
	 	 
	mhwang@jennison.com
	 	 
	 

E-mail

	 	 




















 








EXHIBITS:




	 	 	 
	A:

	 	Form of Warrant
	 
	 	 
	B:

	 	Form of Registration Rights Agreement
	 
	 	 
	C-1:

	 	Accredited Investor Questionnaire
	 
	 	 
	C-2:

	 	Stock Certificate Questionnaire
	 
	 	 
	D:

	 	Form of Opinion of Company Counsel
	 
	 	 
	E:

	 	Irrevocable Transfer Agent Instructions
	 
	 	 
	F:

	 	Form of Secretary’s Certificate
	 
	 	 
	G:

	 	Form of Officer’s Certificate
	 
	 	 
	H:

	 	Wire Instructions






 









 






EXHIBIT A



Form of Warrant




 









 








EXHIBIT B



Form of Registration Rights Agreement




 









 








Instruction Sheet




(to be read in conjunction with the entire Securities Purchase Agreement and Registration Rights
Agreement applicable to Purchaser)



A. Complete the following items in the Securities Purchase Agreement and Registration Rights
Agreement applicable to Purchaser:





	 	1.	 	Provide the information regarding the Purchaser requested on the signature
page. The Securities Purchase Agreement and the Registration Rights Agreement
applicable to Purchaser must be executed by an individual authorized to bind the
Purchaser.
	 
	 	2.	 	Exhibit C-1 – Accredited Investor Questionnaire:
	 
	 	 	 	Provide the information requested by the Accredited Investor Questionnaire
	 
	 	3.	 	Exhibit C-2 Stock Certificate Questionnaire:
	 
	 	 	 	Provide the information requested by the Stock Certificate Questionnaire
	 
	 	4.	 	Annex B to the Registration Rights Agreement applicable to Purchaser — Selling
Securityholder Notice and Questionnaire
	 
	 	 	 	Provide the information requested by the Selling Securityholder Notice and
Questionnaire
	 
	 	5.	 	Return the signed Securities Purchase Agreement and Registration Rights
Agreement applicable to Purchaser to:




Ethan E. Christensen

Cooley Godward Kronish LLP

4401 Eastgate Mall

San Diego, California 92121

Tel: (858) 550-6076

Fax: (858) 550-6420

Email: echristensen@cooley.com





	B.	 	Instructions regarding the transfer of funds for the purchase of Shares are set forth on
Exhibit H to the Securities Purchase Agreement.




 









 











EXHIBIT C-1




ACCREDITED INVESTOR QUESTIONNAIRE

(ALL INFORMATION WILL BE TREATED CONFIDENTIALLY)



To:      Ardea Biosciences, Inc.



This Investor Questionnaire (“Questionnaire”) must be completed by each potential investor in
connection with the offer and sale of the shares of the common stock, par value $0.001 per share
(the “Securities”), of Ardea Biosciences, Inc., a Delaware corporation (the “Corporation”). The
Securities are being offered and sold by the Corporation without registration under the Securities
Act of 1933, as amended (the “Act”), and the securities laws of certain states, in reliance on the
exemptions contained in Section 4(2) of the Act and on Regulation D promulgated thereunder and in
reliance on similar exemptions under applicable state laws. The Corporation must determine that a
potential investor meets certain suitability requirements before offering or selling Securities to
such investor. The purpose of this Questionnaire is to assure the Corporation that each investor
will meet the applicable suitability requirements. The information supplied by you will be used
in determining whether you meet such criteria, and reliance upon the private offering exemptions
from registration is based in part on the information herein supplied.



This Questionnaire does not constitute an offer to sell or a solicitation of an offer to buy any
security. Your answers will be kept strictly confidential. However, by signing this
Questionnaire, you will be authorizing the Corporation to provide a completed copy of this
Questionnaire to such parties as the Corporation deems appropriate in order to ensure that the
offer and sale of the Securities will not result in a violation of the Act or the securities laws
of any state and that you otherwise satisfy the suitability standards applicable to purchasers of
the Securities. All potential investors must answer all applicable questions and complete, date
and sign this Questionnaire. Please print or type your responses and attach additional sheets of
paper if necessary to complete your answers to any item.




PART A. BACKGROUND INFORMATION




Name of Beneficial Owner of the Securities:                                                                            
                                                                             




Business Address:                                                                
             
               
                                                                               
                     

                                                            (Number and Street)




 





(City)                                        (State)                                   
                          (Zip Code)




Telephone Number: (                       )                                         
                           
                                                                             




If a corporation, partnership, limited liability company, trust or other entity:

Type of entity:
                              
                                                                                
                                                                

State of formation:                                          Approximate Date of formation:                            
                                 
          



Set forth in the space provided below the (i) state(s), if any, in the United States in which you
maintained your principal office during the past two years and the dates during which you
maintained your office in each state, and (ii) state(s), if any, in which you pay income taxes:





 











 





	 	 	 
	 


	 	 
	 
	 	 
	 


	 	 
	 
	 	 
	 


	 	 





Were you formed for the purpose of investing in the securities being offered?




               Yes                                 No                     



If an individual:




	 	 	 	 	 
	Residence Address:
	 	 	 	 
	 	 	 
	 

	 	(Number and Street)	 	 






	 	 	 	 	 
	 
	(City)
	 	(State)
	 	(Zip Code)






	 	 	 
	Telephone Number: (___)
	 	 
	 

	 	 





	 	 	 	 	 
	Age:                     

	 	Citizenship:                     
	 	Where registered to vote:                     





Set forth in the space provided below the state(s), if any, in the United States in which you
maintained your residence during the past two years and the dates during which you resided in each
state:




Are you a director or executive officer of the Corporation?




               Yes                                 No                     



	 	 	 
	Social Security or Taxpayer Identification No.
	 	 
	 

	 	 





PART B. ACCREDITED INVESTOR QUESTIONNAIRE




     In order for the Company to offer and sell the Securities in conformance with state and
federal securities laws, the following information must be obtained regarding your investor status.
Please initial each category applicable to you as a Purchaser of Securities of the Company.



	 	 	 	 	 	 	 	 	 
	 

	 	___
	 	 	(1	)	 	A bank as defined in Section 3(a)(2) of the Securities Act,
or any savings and loan association or other institution as defined in Section
3(a)(5)(A) of the Securities Act whether acting in its individual or fiduciary
capacity;
	 
	 	 	 	 	 	 	 	 
	 

	 	___
	 	 	(2	)	 	A broker or dealer registered pursuant to Section 15 of the
Securities Exchange Act of 1934;
	 
	 	 	 	 	 	 	 	 
	 

	 	___
	 	 	(3	)	 	An insurance company as defined in Section 2(13) of the
Securities Act;
	 
	 	 	 	 	 	 	 	 
	 

	 	___
	 	 	(4	)	 	An investment company registered under the Investment Company
Act of 1940 or a business development company as defined in Section 2(a)(48) of
that Act;
	 
	 	 	 	 	 	 	 	 
	 

	 	___
	 	 	(5	)	 	A Small Business Investment Company licensed by the U.S.
Small Business Administration under Section 301(c) or (d) of the Small Business
Investment Act of 1958;






 









 






	 	 	 	 	 	 	 	 	 
	 

	 	___
	 	 	(6	)	 	A plan established and maintained by a state, its political
subdivisions, or any agency or instrumentality of a state or its political
subdivisions, for the benefit of its employees, if such plan has total assets in
excess of $5,000,000;
	 
	 	 	 	 	 	 	 	 
	 

	 	___
	 	 	(7	)	 	An employee benefit plan within the meaning of the Employee
Retirement Income Security Act of 1974, if the investment decision is made by a
plan fiduciary, as defined in Section 3(21) of such act, which is either a bank,
savings and loan association, insurance company, or registered investment
adviser, or if the employee benefit plan has total assets in excess of
$5,000,000 or, if a self-directed plan, with investment decisions made solely by
persons that are accredited investors;
	 
	 	 	 	 	 	 	 	 
	 

	 	___
	 	 	(8	)	 	A private business development company as defined in Section
202(a)(22) of the Investment Advisers Act of 1940;
	 
	 	 	 	 	 	 	 	 
	 

	 	___
	 	 	(9	)	 	An organization described in Section 501(c)(3) of the
Internal Revenue Code, a corporation, Massachusetts or similar business trust,
or partnership, not formed for the specific purpose of acquiring the Securities,
with total assets in excess of $5,000,000;
	 
	 	 	 	 	 	 	 	 
	 

	 	___
	 	 	(10	)	 	A trust, with total assets in excess of $5,000,000, not
formed for the specific purpose of acquiring the Securities, whose purchase is
directed by a sophisticated person who has such knowledge and experience in
financial and business matters that such person is capable of evaluating the
merits and risks of investing in the Company;
	 
	 	 	 	 	 	 	 	 
	 

	 	___
	 	 	(11	)	 	A natural person whose individual net worth, or joint net worth with that person’s
spouse, at the time of his purchase exceeds $1,000,000;
	 
	 	 	 	 	 	 	 	 
	 

	 	___
	 	 	(12	)	 	A natural person who had an individual income in excess of $200,000 in each of the two
most recent years, or joint income with that person’s spouse in excess of $300,000, in each of
those years, and has a reasonable expectation of reaching the same income level in the current
year;
	 
	 	 	 	 	 	 	 	 
	 

	 	___
	 	 	(13	)	 	An executive officer or director of the Company;
	 
	 	 	 	 	 	 	 	 
	 

	 	___
	 	 	(14	)	 	An entity in which all of the equity owners qualify under any of the above
subparagraphs. If the undersigned belongs to this investor category only, list
the equity owners of the undersigned, and the investor category which each such
equity owner satisfies.






	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	A.	 	FOR EXECUTION BY AN INDIVIDUAL:	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	By	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 

	 	Date	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	Print
	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 	 	 

	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	B.	 	FOR EXECUTION BY AN ENTITY:	 	 	 	 
	 	 	 	 	 	 	 	Entity
Name:
	 	 
	 

	 	 	 	 	 	 	 	 	 	 	 	 

	 	 
	 

	 	 	 	 	 	 	 	By	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 

	 	Date	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	Print
	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 	 	Title:
	 	 
	 	 

	 	 
	 

	 	 	 	 	 	 	 	 	 	 	 	 

	 	 






 









 






	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	C.	 	ADDITIONAL SIGNATURES (if required by partnership, corporation or trust document):
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	Entity Name:
	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 	 	 

	 	 	 	 
	 

	 	 	 	 	 	 	 	By	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	Date	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	Print
	 	Name:	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	Title:
	 	 
	 	 

	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 	 	 

	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	Entity Name:
	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 	 	 

	 	 	 	 
	 

	 	 	 	 	 	 	 	By	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	Date	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	Print
	 	Name:	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	Title:
	 	 
	 	 

	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 	 	 

	 	 	 	 






 









 






EXHIBIT C-2




Stock Certificate Questionnaire




          Pursuant to Section 2.2(b) of the Agreement, please provide us with the following information:




	 	 	 	 	 
	1.

	 	The exact name that the Shares are to be registered in (this is the
name that will appear on the stock certificate(s)). You may use a
nominee name if appropriate:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	2.

	 	The relationship between the Purchaser of the Shares and the
Registered Holder listed in response to Item 1 above:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	3.

	 	The mailing address, telephone and telecopy number of the Registered
Holder listed in response to Item 1 above:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	4.

	 	The Tax Identification Number (or, if an individual, the Social
Security Number) of the Registered Holder listed in response to Item 1
above:	 	 
	 

	 	 	 	 





 









 






EXHIBIT D




Form of Opinion of Company Counsel



1. The Company has been duly incorporated and is a validly existing corporation in good
standing under the laws of the State of Delaware.



2. The Company has the requisite corporate power to own its property and assets and to
conduct its business as it is currently being conducted.



3. The Company is duly qualified to do business as a foreign corporation and is in good
standing under the laws of the State of California.



4. The Company has the requisite corporate power to execute, deliver and perform its
obligations under the Financing Agreements, including, without limitation, to issue, sell and
deliver the Shares and Warrants under the Purchase Agreement.



5. Each of the Financing Agreements has been duly and validly authorized, executed and
delivered by the Company and each such agreement constitutes a valid and binding agreement of the
Company enforceable against the Company in accordance with its terms.



6. The Company’s authorized capital stock consists of 70,000,000 shares of Common
Stock, par value $0.001 per share, and 5,000,000 shares of Preferred Stock, par value $0.001 per
share. 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, and free of any preemptive right or similar rights
contained in the Company’s Certificate of Incorporation or Bylaws or any Material Agreement. The
Warrants Shares have been duly authorized, and upon issuance and delivery upon exercise of the
Warrants in accordance with the terms of the Warrants, the Warrant Shares will be validly issued,
outstanding, fully paid and nonassessable, and free of any preemptive right or similar rights
contained in the Company’s Certificate of Incorporation or Bylaws or any Material Agreement.



7. The execution and delivery of the Financing Agreements by the Company and the
issuance of the Shares and Warrants 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
Financing Agreements or (b) any order, writ, judgment, injunction, decree, determination or award
which has been entered against the Company and of which we are aware, in each case to the extent
the violation of which would materially and adversely affect the Company and its subsidiaries,
taken as a whole.





 









 







8. To our knowledge, there is no action, proceeding or investigation pending or overtly threatened
against the Company before any court or administrative agency that questions the validity or
enforceability of the Financing Agreements, or seeks to enjoin the performance of the Financing
Agreements or that could reasonably be expected to result, either individually or in the aggregate,
in a Material Adverse Effect on the Company and its subsidiaries, taken as a whole.



9. All consents, approvals, authorizations, or orders of, and filings, registrations,
and qualifications with any U.S. Federal or California regulatory authority or governmental body or
the under the DGCL required for the issuance of the Shares and Warrants, 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).



10. The offer and sale of the Shares and Warrants are exempt from the
registration requirements of the Securities Act of 1933, as amended, subject to the timely filing
of a Form D pursuant to Securities and Exchange Commission Regulation D.



11. To our knowledge, there are no written contracts, agreements or
understandings between the Company and any person granting such person the right (other than rights
which have been waived in writing or otherwise satisfied) to require the Company to include any
securities of the Company in any registration statement contemplated by Section 2 of the
Registration Rights Agreement.





 











 





EXHIBIT E




Form of Irrevocable Transfer Agent Instructions




As of                     , ____




Computershare Trust Company N.A.

[Address]

[Address]

Attn:                                         




Ladies and Gentlemen:




     Reference is made to that certain Securities Purchase Agreement, dated as of                      ___,
2008 (the “Agreement”), by and among Ardea Biosciences, Inc., a Delaware corporation (the
“Company”), and the purchasers named on the signature pages thereto (collectively, and including
permitted transferees, the “Holders”), pursuant to which the Company is issuing to the Holders
shares (the “Shares”) of Common Stock of the Company, par value $0.001 per share (the “Common
Stock”).



     This letter shall serve as our irrevocable authorization and direction to you (provided that
you are the transfer agent of the Company at such time and the conditions set forth in this letter
are satisfied), subject to any stop transfer instructions that we may issue to you from time to
time, if any, to issue certificates representing shares of Common Stock upon transfer or resale of
the Shares.



     You acknowledge and agree that so long as you have received (a) written confirmation from the
Company that either (1) a registration statement covering resales of the Shares has been declared
effective by the Securities and Exchange Commission (the “Commission”) under the Securities Act of
1933, as amended (the “Securities Act”), or (2) the Shares have been sold in conformity with Rule
144 under the Securities Act (“Rule 144”) or are eligible for sale under Rule 144 following the
expiration of the one-year holding requirement under subparagraphs (b)(1)(i) and (d) thereof (if
the transferor is not an affiliate) and (b) if applicable, a copy of such registration statement,
then, unless otherwise required by law, within three (3) business days of your receipt of a notice
of transfer, you shall issue the certificates representing the Shares registered in the names of
such Holders or transferees, as the case may be, and such certificates shall not bear any legend
restricting transfer of the Shares thereby and should not be subject to any stop-transfer
restriction; provided, however, that if such Shares are not registered for resale under the
Securities Act or able to be sold under Rule 144, then the certificates for such Shares shall bear
the following legend:


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 FOR SALE, SOLD, TRANSFERRED OR

ASSIGNED EXCEPT AS PROVIDED BY SECTION 4 OF THAT CERTAIN SECURITIES

PURCHASE AGREEMENT, DATED AS OF                      __, 2008, BY AND AMONG ARDEA

BIOSCIENCES, INC. AND EACH PURCHASER IDENTIFIED ON THE SIGNATURE PAGES

THERETO.




     A form of written confirmation from the Company’s outside legal counsel that a registration
statement covering resales of the Shares has been declared effective by the Commission under the
Securities Act is attached hereto as Annex I.



     Please be advised that the Holders are relying upon this letter as an inducement to enter into
the Agreement and, accordingly, each Holder is a third-party beneficiary to these instructions.



 









 





     Please execute this letter in the space indicated to acknowledge your agreement to act in
accordance with these instructions.



	 	 	 	 	 	 	 
	 	 	Very truly yours,	 	 
	 
	 	 	 	 	 	 
	 	 	ARDEA BIOSCIENCES, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 

	 	 






Acknowledged and Agreed:




COMPUTERSHARE TRUST COMPANY N.A.




	 	 	 	 	 
	By:

	 	 	 	 
	 

	 	 	 	 
	Name:
	 	 	 	 
	 

	 	 	 	 
	Title:
	 	 	 	 
	 

	 	 

	 	 
	 
	 	 	 	 
	Date:
	 	                                             ,          
	 	 






 









 





Annex I




FORM OF NOTICE OF EFFECTIVENESS OF REGISTRATION STATEMENT




Computershare Trust Company N.A.

[Address]

[Address]

Attn:                                                             




	 	 	 	 	 
	 

	 	Re:
	 	Ardea Biosciences, Inc.






Ladies and Gentlemen:




     Reference is made to that certain Securities Purchase Agreement, dated as of                      ___,
2008, entered into by and among Ardea Biosciences, Inc. (the “Company”) and the buyers named
therein (collectively, the “Purchasers”) pursuant to which the Company issued to the Purchasers
shares of the Company’s common stock, $0.001 par value per share (the “Common Stock”). Pursuant to
that certain Registration Rights Agreement of even date, the Company agreed to register the resale
of the Common Stock (the “Registrable Securities”), under the Securities Act of 1933, as amended
(the “Securities Act”). In connection with the Company’s obligations under the Registration Rights
Agreement, on                                         ,                     , the Company filed a Registration Statement on
Form [S-3] (File No. 333-                                        ) (the “Registration Statement”) with the
Securities and Exchange Commission (the “Commission”) relating to the Registrable Securities which
names each of the Purchasers as a selling stockholder thereunder.



     In connection with the foregoing, we advise you that a member of the Commission’s staff has
advised us by telephone that the Commission has entered an order declaring the Registration
Statement effective under the Securities Act at ___[a.m.][p.m.] on                     , ___.



	 	 	 	 	 	 	 
	 	 	Very truly yours,	 	 
	 
	 	 	 	 	 	 
	 	 	Ardea Biosciences, Inc.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

	 	 






CC:   Purchasers




 









 





EXHIBIT F




Form of Secretary’s Certificate



The undersigned hereby certifies that he is the duly elected, qualified and acting Secretary of
Ardea Biosciences, Inc., a Delaware corporation (the “Company”), and that as such he is authorized
to execute and deliver this certificate in the name and on behalf of the Company and in connection
with the Securities Purchase Agreement, dated as of ___, 2008, by and among the Company
and the investors party thereto (the “Securities Purchase Agreement”), and further certifies in his
official capacity, in the name and on behalf of the Company, the items set forth below.
Capitalized terms used but not otherwise defined herein shall have the meaning set forth in the
Securities Purchase Agreement.





	1.	 	Attached hereto as Exhibit A is a true, correct and complete copy of the resolutions
duly adopted by the Board of Directors of the Company or the Pricing Committee of the Board of
Directors of the Company, as applicable, at meetings held on ___, 2008. Such resolutions
have not in any way been amended, modified, revoked or rescinded, have been in full force and
effect since their adoption to and including the date hereof and are now in full force and
effect.
	 
	2.	 	Attached hereto as Exhibit B is a true, correct and complete copy of the Certificate
of Incorporation of the Company, together with any and all amendments thereto currently in
effect, and no action has been taken to further amend, modify or repeal such Certificate of
Incorporation, the same being in full force and effect in the attached form as of the date
hereof.
	 
	3.	 	Attached hereto as Exhibit C is a true, correct and complete copy of the Bylaws of
the Company and any and all amendments thereto currently in effect, and no action has been
taken to further amend, modify or repeal such Bylaws, the same being in full force and effect
in the attached form as of the date hereof.
	 
	4.	 	Each person listed below has been duly elected or appointed to the position(s) indicated
opposite his name and is duly authorized to sign the Securities Purchase Agreement and each of
the Transaction Documents on behalf of the Company, and the signature appearing opposite such
person’s name below is such person’s genuine signature.





	 	 	 	 	 	 	 
	Name	 	Position	 	Signature	 	 
	 
	 	 	 	 	 	 
	Barry D. Quart, Pharm.D

	 	President and Chief Executive Officer
	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Christopher W. Krueger, J.D. 

	 	Secretary 
	 	 

	 	 





IN WITNESS
WHEREOF, the undersigned has hereunto set his hand as of this ___ day of                     , 2008.




	 	 	 	 	 
	 

	 	 

Secretary
	 	  






 









 




I, Barry D. Quart, Pharm.D, President and Chief Executive Officer, hereby certify that Christopher
W. Krueger, J.D. is the duly elected, qualified and acting Secretary of the Company and that the
signature set forth above is his true signature.




	 	 	 	 	 
	 

	 	 

Barry D. Quart, Pharm.D
	 	 
	 

	 	President and Chief Executive Officer	 	 






 









 






EXHIBIT A




Resolutions




 









 





EXHIBIT B




Certificate of Incorporation




 









 





EXHIBIT C




Bylaws




 









 





EXHIBIT G




Form of Officer’s Certificate



The undersigned, the President and Chief Executive Officer of Ardea Biosciences, Inc., a Delaware
corporation (the “Company”), pursuant to Section 5.1(g) of the Securities Purchase Agreement, dated
as of                      ___, 2008, by and among the Company and the investors signatory thereto (the
"Securities Purchase Agreement”), hereby represents, warrants and certifies as follows (capitalized
terms used but not otherwise defined herein shall have the meaning set forth in the Securities
Purchase Agreement):





	 	1.	 	The representations and warranties of the Company contained in the Securities
Purchase Agreement are true and correct in all material respects as of the date when
made and as of the Closing Date, as though made on and as of such date, except for such
representations and warranties that speak as of a specific date.
	 
	 	2.	 	The Company has performed, satisfied and complied in all material respects with
all covenants, agreements and conditions required by the Transaction Documents to be
performed, satisfied or complied with by it at or prior to the Closing.




IN WITNESS WHEREOF, the undersigned has executed this certificate this ___day of                     , 2008.




	 	 	 	 	 
	 

	 	 

Barry D. Quart, Pharm.D
	 	 
	 

	 	President and Chief Executive Officer	 	 






 









 






EXHIBIT H




Wire Instructions