exv10w57



 






Exhibit 10.57




Execution Copy




COMMON STOCK PURCHASE AGREEMENT




by and between




KINGSBRIDGE CAPITAL LIMITED




and




CYTOKINETICS, INCORPORATED




dated as of October 28, 2005





 









 








TABLE OF CONTENTS




	 	 	 	 	 
	 	 	Page	 
	ARTICLE I DEFINITIONS
	 	 	2	 
	Section 1.01. “Blackout Amount”
	 	 	2	 
	Section 1.02. “Blackout Shares”
	 	 	2	 
	Section 1.03. “Certificate”
	 	 	2	 
	Section 1.04. “Closing Date”
	 	 	2	 
	Section 1.05. “Commission”
	 	 	2	 
	Section 1.06. “Commission Documents”
	 	 	2	 
	Section 1.07. “Commitment Period”
	 	 	2	 
	Section 1.08. “Common Stock”
	 	 	2	 
	Section 1.09. “Condition Satisfaction Date”
	 	 	2	 
	Section 1.10. “Damages”
	 	 	2	 
	Section 1.11. “Draw Down”
	 	 	2	 
	Section 1.12. “Draw Down Amount”
	 	 	2	 
	Section 1.13. “Draw Down Discount Price”
	 	 	2	 
	Section 1.14. “Draw Down Notice”
	 	 	3	 
	Section 1.15. “Draw Down Pricing Period”
	 	 	3	 
	Section 1.16. “DTC”
	 	 	3	 
	Section 1.17. “Effective Date”
	 	 	3	 
	Section 1.18. “Exchange Act”
	 	 	3	 
	Section 1.19. “Excluded Merger or Sale”
	 	 	3	 
	Section 1.20. “Knowledge”
	 	 	3	 
	Section 1.21. “Make Whole Amount”
	 	 	3	 
	Section 1.22. “Market Capitalization”
	 	 	3	 
	Section 1.23. “Material Adverse Effect”
	 	 	3	 
	Section 1.24. “Maximum Commitment Amount”
	 	 	3	 
	Section 1.25. “Maximum Draw Down Amount”
	 	 	3	 
	Section 1.26. “NASD”
	 	 	3	 
	Section 1.27. “Permitted Transaction”
	 	 	4	 
	Section 1.28. “Person”
	 	 	4	 
	Section 1.29. “Principal Market”
	 	 	4	 
	Section 1.30. “Prohibited Transaction”
	 	 	4	 
	Section 1.31. “Prospectus”
	 	 	4	 
	Section 1.32. “Registrable Securities”
	 	 	4	 






i









 






TABLE OF CONTENTS

(Continued)




	 	 	 	 	 
	 	 	Page	 
	Section 1.33. “Registration Rights Agreement”
	 	 	4	 
	Section 1.34. “Registration Statement”
	 	 	4	 
	Section 1.35. “Regulation D”
	 	 	4	 
	Section 1.36. “Section 4(2)”
	 	 	4	 
	Section 1.37. “Securities Act”
	 	 	4	 
	Section 1.39. “Shares”
	 	 	5	 
	Section 1.40. “Trading Day”
	 	 	5	 
	Section 1.41. “VWAP”
	 	 	5	 
	Section 1.42. “Warrant”
	 	 	5	 
	Section 1.43. “Warrant Shares”
	 	 	5	 
	ARTICLE II PURCHASE AND SALE OF COMMON STOCK
	 	 	5	 
	Section 2.01. Purchase and Sale of Stock
	 	 	5	 
	Section 2.02. Closing
	 	 	5	 
	Section 2.03. Registration Statement and Prospectus
	 	 	5	 
	Section 2.04. Warrant
	 	 	5	 
	Section 2.05. Blackout Shares
	 	 	5	 
	ARTICLE III DRAW DOWN TERMS
	 	 	6	 
	Section 3.01. Draw Down Notice
	 	 	6	 
	Section 3.02. Number of Shares
	 	 	6	 
	Section 3.03. Limitation on Draw Downs
	 	 	6	 
	Section 3.04. Trading Cushion
	 	 	6	 
	Section 3.05. Settlement
	 	 	6	 
	Section 3.06. Delivery of Shares; Payment of Draw Down Amount
	 	 	6	 
	Section 3.07. Failure to Deliver Shares
	 	 	7	 
	ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY
	 	 	7	 
	Section 4.01. Organization, Good Standing and Power
	 	 	8	 
	Section 4.02. Authorization; Enforcement
	 	 	8	 
	Section 4.03. Capitalization
	 	 	8	 
	Section 4.04. Issuance of Shares
	 	 	9	 
	Section 4.05. No Conflicts
	 	 	9	 
	Section 4.06. Commission Documents, Financial Statements
	 	 	10	 
	Section 4.07. No Material Adverse Change
	 	 	10	 






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(Continued)




	 	 	 	 	 
	 	 	Page	 
	Section 4.08. No Undisclosed Liabilities
	 	 	10	 
	Section 4.09. No Undisclosed Events or Circumstances
	 	 	10	 
	Section 4.10. Actions Pending
	 	 	11	 
	Section 4.11. Compliance with Law
	 	 	11	 
	Section 4.12. Certain Fees
	 	 	11	 
	Section 4.13. Disclosure
	 	 	11	 
	Section 4.14. Material Non-Public Information
	 	 	11	 
	Section 4.15. Exemption from Registration; Valid Issuances
	 	 	11	 
	Section 4.16. No General Solicitation or Advertising in Regard to this Transaction
	 	 	12	 
	Section 4.17. No Integrated Offering
	 	 	12	 
	Section 4.18. Acknowledgment Regarding Investor’s Purchase of Shares
	 	 	12	 
	ARTICLE V REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE INVESTOR
	 	 	12	 
	Section 5.01. Organization and Standing of the Investor
	 	 	12	 
	Section 5.02. Authorization and Power
	 	 	12	 
	Section 5.03. No Conflicts
	 	 	13	 
	Section 5.04. Financial Capability
	 	 	13	 
	Section 5.05. Information
	 	 	13	 
	Section 5.06. Trading Restrictions
	 	 	13	 
	Section 5.07. Statutory Underwriter Status
	 	 	14	 
	Section 5.08. Not an Affiliate
	 	 	14	 
	Section 5.09. Manner of Sale
	 	 	14	 
	Section 5.10. Prospectus Delivery
	 	 	14	 
	ARTICLE VI COVENANTS OF THE COMPANY
	 	 	14	 
	Section 6.01. Securities
	 	 	14	 
	Section 6.02. Reservation of Common Stock
	 	 	14	 
	Section 6.03. Registration and Listing
	 	 	14	 
	Section 6.04. Registration Statement
	 	 	15	 
	Section 6.05. Compliance with Laws
	 	 	15	 
	Section 6.06. Other Financing
	 	 	15	 
	Section 6.07. Prohibited Transactions
	 	 	16	 
	Section 6.08. Corporate Existence
	 	 	16	 
	Section 6.09. Non-Disclosure of Non-Public Information
	 	 	16	 






iii









 






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(Continued)




	 	 	 	 	 
	 	 	Page	 
	Section 6.10. Notice of Certain Events Affecting Registration; Suspension of Right
to Request a Draw Down
	 	 	16	 
	Section 6.11. Amendments to the Registration Statement
	 	 	17	 
	Section 6.12. Prospectus Delivery
	 	 	17	 
	ARTICLE VII CONDITIONS TO THE OBLIGATION OF THE INVESTOR TO ACCEPT A DRAW DOWN
	 	 	17	 
	Section 7.01. Accuracy of the Company’s Representations and Warranties
	 	 	17	 
	Section 7.02. Performance by the Company
	 	 	17	 
	Section 7.03. Compliance with Law
	 	 	17	 
	Section 7.04. Effective Registration Statement
	 	 	18	 
	Section 7.05. No Knowledge
	 	 	18	 
	Section 7.06. No Suspension
	 	 	18	 
	Section 7.07. No Injunction
	 	 	18	 
	Section 7.08. No Proceedings or Litigation
	 	 	18	 
	Section 7.09. Sufficient Shares Registered for Resale
	 	 	18	 
	Section 7.10. Warrant
	 	 	18	 
	Section 7.11. Opinion of Counsel
	 	 	18	 
	Section 7.12. Accuracy of Investor’s Representation and Warranties
	 	 	19	 
	ARTICLE VIII TERMINATION
	 	 	19	 
	Section 8.01. Term
	 	 	19	 
	Section 8.02. Other Termination
	 	 	19	 
	Section 8.03. Effect of Termination
	 	 	19	 
	Section 9.01. Indemnification
	 	 	20	 
	Section 9.02. Notification of Claims for Indemnification
	 	 	21	 
	ARTICLE X MISCELLANEOUS
	 	 	22	 
	Section 10.01. Fees and Expenses
	 	 	22	 
	Section 10.02. Reporting Entity for the Common Stock
	 	 	23	 
	Section 10.03. Brokerage
	 	 	23	 
	Section 10.04. Notices
	 	 	23	 
	Section 10.05. Assignment
	 	 	24	 
	Section 10.06. Amendment; No Waiver
	 	 	24	 
	Section 10.07. Entire Agreement
	 	 	24	 
	Section 10.08. Severability
	 	 	24	 






iv









 






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(Continued)




	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	Section 10.09.
	 	Title and Subtitles	 	 	25	 
	Section 10.10.
	 	Counterparts	 	 	25	 
	Section 10.11.
	 	Choice of Law	 	 	25	 
	Section 10.12.
	 	Specific Enforcement, Consent to Jurisdiction	 	 	25	 
	Section 10.13.
	 	Survival	 	 	25	 
	Section 10.14.
	 	Publicity	 	 	25	 
	Section 10.15.
	 	Assurances	 	 	26	 







v









 








COMMON STOCK PURCHASE AGREEMENT




by and between




KINGSBRIDGE CAPITAL LIMITED




and




CYTOKINETICS, INCORPORATED




dated as of October 28, 2005




     This COMMON STOCK PURCHASE AGREEMENT (this “Agreement”) is entered into as of the
28th day of October, 2005, by and between KINGSBRIDGE CAPITAL LIMITED, an entity
organized and existing under the laws of the British Virgin Islands (the “Investor”) and
CYTOKINETICS, INCORPORATED, a corporation organized and existing under the laws of the State of
Delaware (the “Company”).



     WHEREAS, the parties desire that, upon the terms and subject to the conditions and limitations
set forth herein, the Company may issue and sell to the Investor, from time to time as provided
herein, and the Investor shall purchase from the Company, up to $75 million worth of shares of
Common Stock (as defined below); and



     WHEREAS, such investments will be made in reliance upon the provisions of Section 4(2)
(“Section 4(2)”) and Regulation D (“Regulation D”) of the United States Securities
Act of 1933, as amended and the rules and regulations promulgated thereunder (the “Securities
Act”), and/or upon such other exemption from the registration requirements of the Securities
Act as may be available with respect to any or all of the investments in Common Stock to be made
hereunder; and



     WHEREAS, the parties hereto are concurrently entering into a Registration Rights Agreement in
the form of Exhibit A hereto (the “Registration Rights Agreement”) pursuant to which the
Company shall register the Common Stock issued and sold to the Investor under this Agreement and
under the Warrant (as defined below), upon the terms and subject to the conditions set forth
therein; and



     WHEREAS, in consideration for the Investor’s execution and delivery of, and its performance of
its obligations under, this Agreement, the Company is concurrently issuing to the Investor a
Warrant in the form of Exhibit B hereto (the “Warrant”) pursuant to which the Investor may
purchase from the Company up to 244,000 shares of Common Stock, upon the terms and subject to the
conditions set forth therein;



     NOW, THEREFORE, the parties hereto agree as follows:



 









 





ARTICLE I




DEFINITIONS




     Section 1.01. “Blackout Amount” shall have the meaning assigned to such term in the
Registration Rights Agreement.



     Section 1.02. “Blackout Shares” shall have the meaning assigned to such term in the
Registration Rights Agreement.



     Section 1.03. “Certificate” shall have the meaning assigned to such term in Section
4.03 hereof.



     Section 1.04. “Closing Date” means the date on which this Agreement is executed and
delivered by the Company and the Investor.



     Section 1.05. “Commission” means the United States Securities Exchange Commission.



     Section 1.06. “Commission Documents” shall have the meaning assigned to such term in
Section 4.06 hereof.



     Section 1.07. “Commitment Period” means the period commencing on the Effective Date
and expiring on the earliest to occur of (i) the date on which the Investor shall have purchased
Shares pursuant to this Agreement for an aggregate purchase price equal to the Maximum Commitment
Amount, (ii) the date this Agreement is terminated pursuant to Article VIII hereof, and (iii) the
date occurring thirty-six (36) months from the Effective Date.



     Section 1.08. “Common Stock” means the common stock of the Company, par value $0.001
per share.



     Section 1.09. “Condition Satisfaction Date” shall have the meaning assigned to such
term in Article VII hereof.



     Section 1.10. “Damages” means any loss, claim, damage, liability, costs and expenses
(including, without limitation, reasonable attorneys’ fees and expenses and costs and reasonable
expenses of expert witnesses and investigation).



     Section 1.11. “Draw Down” shall have the meaning assigned to such term in Section 3.01
hereof.



     Section 1.12. “Draw Down Amount” means the actual amount of a Draw Down paid to the
Company.



     Section 1.13. “Draw Down Discount Price” means (i) 90% of the VWAP on any Trading Day
during a Draw Down Pricing Period when the VWAP equals or exceeds $3.50 but is less than or equal
to $7.00, (ii) 92% of the VWAP on any Trading Day during the Draw Down Pricing Period when VWAP
exceeds $7.00 but is less than or equal to $10.05, or (ii) 94% of the VWAP on any Trading Day
during the Draw Down Pricing Period when VWAP exceeds $10.05.



2









 





     Section 1.14. “Draw Down Notice” shall have the meaning assigned to such term in
Section 3.01 hereof.



     Section 1.15. “Draw Down Pricing Period” shall mean, with respect to each Draw Down, a
period of eight (8) consecutive Trading Days beginning on the first Trading Day specified in a Draw
Down Notice.



     Section 1.16. “DTC” shall mean the Depository Trust Company, or any successor thereto.



     Section 1.17. “Effective Date” means the first Trading Day immediately following the
date on which the Registration Statement is declared effective by the Commission.



     Section 1.18. “Exchange Act” means the U.S. Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.



     Section 1.19. “Excluded Merger or Sale” shall have the meaning assigned to such term
in the Warrant.



     Section 1.20. “Knowledge” means the actual knowledge of the Chief Executive Officer,
Chief Financial Officer or any Executive Vice President, Senior Vice President or Vice President of
the Company.



     Section 1.21. “Make Whole Amount” shall have the meaning specified in Section 3.07.



     Section 1.22. “Market Capitalization” means, as of any Trading Day, the product of (i)
the closing sale price of the Company’s Common Stock as reported by Bloomberg L.P. using the AQR
function and (ii) the number of outstanding shares of Common Stock of the Company as reported by
Bloomberg L.P. using the DES function.



     Section 1.23. “Material Adverse Effect” means any continuing effect on the business,
operations, properties or financial condition of the Company and its consolidated subsidiaries that
is material and adverse to the Company and such subsidiaries, taken as a whole, and/or any
condition, circumstance, or situation that would prohibit or otherwise interfere with the ability
of the Company to perform any of its obligations under this Agreement, the Registration Rights
Agreement or the Warrant in any material respect; provided, that none of the following
shall constitute a “Material Adverse Effect”: (i) the effects of conditions or events that are
generally applicable to the capital, financial, banking or currency markets and the biotechnology
industry, (ii) any changes or effects resulting from the announcement or consummation of the
transactions contemplated by this Agreement, including, without limitation, any changes or effects
associated with any particular Draw Down, and (iii) changes in the market price of the Common
Stock.



     Section 1.24. “Maximum Commitment Amount” means the lesser of (i) $75 million in
aggregate Draw Down Amounts or (ii) 5,703,488 shares of Common Stock (as adjusted for stock splits,
stock combinations, stock dividends and recapitalizations that occur on or after the date of this
Agreement).



     Section 1.25. “Maximum Draw Down Amount” means the lesser of (i) 2.5% of the Company’s
Market Capitalization at the time of the Draw Down, or (ii) $15 million.



     Section 1.26. “NASD” means the National Association of Securities Dealers, Inc.



3









 





     Section 1.27. “Permitted Transaction” shall have the meaning assigned to such term in
Section 6.06 hereof.



     Section 1.28. “Person” means any individual, corporation, partnership, limited
liability company, association, trust or other entity or organization, including any government or
political subdivision or an agency or instrumentality thereof.



     Section 1.29. “Principal Market” means the Nasdaq National Market, the Nasdaq SmallCap
Market, the American Stock Exchange or the New York Stock Exchange, whichever is at the time the
principal trading exchange or market for the Common Stock.



     Section 1.30. “Prohibited Transaction” shall have the meaning assigned to such term in
Section 6.07 hereof.



     Section 1.31. “Prospectus” as used in this Agreement means the prospectus in the form
included in the Registration Statement, as supplemented from time to time pursuant to Rule 424(b)
of the Securities Act.



     Section 1.32. “Registrable Securities” means (i) the Shares, (ii) the Warrant Shares,
and (iii) any securities issued or issuable with respect to any of the foregoing by way of
exchange, stock dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization or otherwise. As to any particular
Registrable Securities, once issued such securities shall cease to be Registrable Securities when
(w) the Registration Statement has been declared effective by the SEC and such Registrable
Securities have been disposed of pursuant to the Registration Statement, (x) such Registrable
Securities have been sold under circumstances under which all of the applicable conditions of Rule
144 (or any similar provision then in force) under the Securities Act (“Rule 144”) are met,
(y) such time as such Registrable Securities have been otherwise transferred to holders who may
trade such shares without restriction under the Securities Act, and the Company has delivered a new
certificate or other evidence of ownership for such securities not bearing a restrictive legend or
(z) in the opinion of counsel to the Company such Registrable Securities may be sold without
registration and without any time, volume or manner limitations pursuant to Rule 144(k) (or any
similar provision then in effect) under the Securities Act.



     Section 1.33. “Registration Rights Agreement” shall have the meaning set forth in the
recitals of this Agreement.



     Section 1.34. “Registration Statement” shall have the meaning assigned to such term in
the Registration Rights Agreement.



     Section 1.35. “Regulation D” shall have the meaning set forth in the recitals of this
Agreement.



     Section 1.36. “Section 4(2)” shall have the meaning set forth in the recitals of this
Agreement.



     Section 1.37. “Securities Act” shall have the meaning set forth in the recitals of
this Agreement.



     Section 1.38. “Settlement Date” shall have the meaning assigned to such term in
Section 3.05 hereof.



4









 





     Section 1.39. “Shares” means the shares of Common Stock of the Company that are and/or
may be purchased hereunder.



     Section 1.40. “Trading Day” means any day other than a Saturday or a Sunday on which
the Principal Market is open for trading in equity securities.



     Section 1.41. “VWAP” means the volume weighted average price (the aggregate sales
price of all trades of Common Stock during each Trading Day divided by the total number of shares
of Common Stock traded during such Trading Day) of the Common Stock during any Trading Day as
reported by Bloomberg, L.P. using the AQR function.



     Section 1.42. “Warrant” shall have the meaning set forth in the recitals of this
Agreement.



     Section 1.43. “Warrant Shares” means the shares of Common Stock issuable to the
Investor upon exercise of the Warrant.



ARTICLE II




PURCHASE AND SALE OF COMMON STOCK




     Section 2.01. Purchase and Sale of Stock. Upon the terms and subject to the
conditions set forth in this Agreement, the Company shall to the extent it elects to make Draw
Downs in accordance with Article III hereof, issue and sell to the Investor and the Investor shall
purchase from the Company Common Stock for an aggregate (in Draw Down Amounts) of up to the Maximum
Commitment Amount, consisting of purchases based on Draw Downs in accordance with Article III
hereof.



     Section 2.02. Closing. In consideration of and in express reliance upon the
representations, warranties, covenants, terms and conditions of this Agreement, the Company agrees
to issue and sell to the Investor, and the Investor agrees to purchase from the Company, that
number of the Shares to be issued in connection with each Draw Down. The execution and delivery of
this Agreement (the “Closing”) shall take place at the offices of Clifford Chance US LLP,
31 West 52nd Street, New York, NY 10019 at 2:00 p.m. local time on October 28, 2005, or
at such other time and place or on such date as the Investor and the Company may agree upon (the
“Closing Date”). Each party shall deliver at or prior to the Closing all documents,
instruments and writings required to be delivered at the Closing by such party pursuant to this
Agreement.



     Section 2.03. Registration Statement and Prospectus. The Company shall prepare and
file with the Commission the Registration Statement (including the Prospectus) in accordance with
the provisions of the Securities Act and the Registration Rights Agreement.



     Section 2.04. Warrant. On the Closing Date, the Company shall issue and deliver the
Warrant to the Investor.



     Section 2.05. Blackout Shares. The Company shall deliver any Blackout Amount or issue
and deliver any Blackout Shares to the Investor in accordance with Section 1(e) of the Registration
Rights Agreement.



5









 





ARTICLE III




DRAW DOWN TERMS




     Subject to the satisfaction of the conditions hereinafter set forth in this Agreement, the
parties agree as follows:



     Section 3.01. Draw Down Notice. The Company, may, in its sole discretion, issue a
Draw Down Notice (defined below) specifying the dollar amount of Shares it elects to sell to the
Investor (each such election a “Draw Down”) up to a Draw Down Amount equal to the Maximum
Draw Down Amount during the Commitment Period, which Draw Down the Investor will be obligated to
accept. The Company shall inform the Investor in writing via facsimile transmission, with a copy
to the Investor’s counsel, as to such Draw Down Amount before commencement of trading on the first
Trading Day of the related Draw Down Pricing Period (the “Draw Down Notice”). In addition
to the Draw Down Amount, each Draw Down Notice shall designate the first Trading Day of the Draw
Down Pricing Period. In no event shall any Draw Down Amount exceed the Maximum Draw Down Amount.
Each Draw Down Notice shall be accompanied by a certificate, signed by the Chief Executive Officer
or Chief Financial Officer dated, as of the date of such Draw Down Notice, in the form of
Exhibit C hereof.



     Section 3.02. Number of Shares. Subject to Section 3.06(b), the number of Shares to
be issued in connection with each Draw Down shall be equal to the sum of the number of shares
issuable on each Trading Day of the Draw Down Pricing Period. The number of shares issuable on a
Trading Day during a Draw Down Pricing Period shall be equal to the quotient of one eighth
(1/8th) of the Draw Down Amount divided by the Draw Down Discount Price for such Trading
Day.



     Section 3.03. Limitation on Draw Downs. Only one Draw Down shall be permitted for
each Draw Down Pricing Period.



     Section 3.04. Trading Cushion. Unless the parties agree in writing otherwise, there
shall be a minimum of three (3) Trading Days between the expiration of any Draw Down Pricing Period
and the beginning of the next succeeding Draw Down Pricing Period.



     Section 3.05. Settlement. The number of Shares purchased by the Investor in any Draw
Down shall be determined and settled on two separate dates. Shares purchased by the Investor
during the first four Trading Days of any Draw Down Pricing Period shall be determined and settled
no later than the sixth Trading Day of such Draw Down Pricing Period. Shares purchased by the
Investor during the second four Trading Days of any Draw Down Pricing Period shall be determined
and settled no later than the second Trading Day after the last Trading Day of such Draw Down
Pricing Period. Each date on which settlement of the purchase and sale of Shares occurs hereunder
being referred to as a “Settlement Date.” The Investor shall provide the Company with
delivery instructions for the Shares to be issued at each Settlement Date at least two Trading Days
in advance of such Settlement Date. The number of Shares actually issued shall be rounded to the
nearest whole number of Shares.



     Section 3.06. Delivery of Shares; Payment of Draw Down Amount.



     (a) On each Settlement Date, the Company shall deliver the Shares purchased by the Investor to
the Investor or its designees exclusively via book-entry through the DTC to an account designated
by the Investor, and upon receipt of the Shares, the Investor shall cause



6









 




payment therefor to be
made to the Company’s designated account by wire transfer of immediately available funds, if the
Shares are received by the Investor no later than 1:00 p.m. (Eastern Time), or next day available
funds, if the Shares are received thereafter.




     (b) For each Trading Day during a Draw Down Pricing Period that the VWAP is less than the
greater of (i) 85% of the Closing Price of the Company’s Common Stock on the Trading Day
immediately preceding the commencement of such Draw Down Pricing Period, or (ii) $3.50, such
Trading Day shall not be used in calculating the number of Shares to be issued in connection with
such Draw Down, and the Draw Down Amount in respect of such Draw Down Pricing Period shall be
reduced by one eighth (1/8th) of the initial Draw Down Amount specified in the Draw Down
Notice. If trading in the Company’s Common Stock is suspended for any reason for more than three
(3) consecutive or non-consecutive hours during any Trading Day during a Draw Down Pricing Period,
such Trading Day shall not be used in calculating the number of Shares to be issued in connection
with such Draw Down, and the Draw Down Amount in respect of such Draw Down Pricing Period shall be
reduced by one eighth (1/8th) of the initial Draw Down Amount specified in the Draw Down Notice.



     Section 3.07. Failure to Deliver Shares. If on any Settlement Date, the Company fails
to take all actions within the reasonable control of the Company to cause the delivery of the
Shares purchased by the Investor, and such failure is not cured within two (2) Trading Days
following such Settlement Date, the Company shall pay to the Investor on demand in cash by wire
transfer of immediately available funds to an account designated by the Investor the “Make
Whole Amount;” provided, however, that in the event that the Company is
prevented from delivering Shares in respect of any such Settlement Date in a timely manner by any
fact or circumstance that is reasonably within the control of, or directly attributable to, the
Investor, then such two (2) Trading Day period shall be automatically extended until such time as
such fact or circumstance is cured. As used herein, the Make Whole Amount shall be an amount equal
to the sum of (i) the Draw Down Amount actually paid by the Investor in respect of such Shares plus
(ii) an amount equal to the actual loss suffered by the Investor in respect of sales to subsequent
purchasers, pursuant to transactions entered into before the Settlement Date, of the Shares that
were required to be delivered by the Company, which shall be based upon documentation reasonably
satisfactory to the Company demonstrating the difference (if greater than zero) between (A) the
price per share paid by the Investor to purchase such number of shares of Common Stock necessary
for the Investor to meet its share delivery obligations to such subsequent purchasers minus (B) the
average Draw Down Discount Price during the applicable Draw Down Pricing Period. In the event that
the Make Whole Amount is not paid within two (2) Trading Days following a demand therefor from the
Investor, the Make Whole Amount shall accrue interest compounded daily at a rate of five percent
(5%) per annum up to and including the date on which the Make Whole Amount is actually paid.
Notwithstanding anything to the contrary set forth in this Agreement, in the event that the Company
pays the Make Whole Amount (plus interest, if applicable) in respect of any Settlement Date in
accordance with this Section 3.07, such payment shall be the Investor’s sole remedy in respect of
the Company’s failure to deliver Shares in respect of such Settlement Date, and the Company shall
not be obligated to deliver such Shares.



ARTICLE IV




REPRESENTATIONS AND WARRANTIES OF THE COMPANY




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



7









 





     Section 4.01. Organization, Good Standing and Power. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the State of Delaware and
has all requisite power and authority to own, lease and operate its properties and to carry on its
business as now being conducted. Except as set forth in the Commission Documents (as defined
below), the Company does not own more than fifty percent (50%) of the outstanding capital stock of
or control any other business entity, other than any wholly-owned subsidiary that is not
“significant” within the meaning of Regulation S-X promulgated by the Commission. The Company is
duly qualified as a foreign corporation to do business and is in good standing in every
jurisdiction in which the nature of the business conducted or property owned by it makes such
qualification necessary, other than those in which the failure so to qualify or be in good standing
would not have a Material Adverse Effect.



     Section 4.02. Authorization; Enforcement. (i) The Company has the requisite corporate
power and authority to enter into and perform its obligations under this Agreement, the
Registration Rights Agreement and the Warrant and to issue the Shares, the Warrant, the Warrant
Shares and any Blackout Shares (except to the extent that the number of Blackout Shares required to
be issued exceeds the number of authorized shares of Common Stock under the Certificate); (ii) the
execution and delivery of this Agreement and the Registration Rights Agreement, and the execution,
issuance and delivery of the Warrant, by the Company and the consummation by it of the transactions
contemplated hereby and thereby have been duly authorized by all necessary corporate action and no
further consent or authorization of the Company or its Board of Directors or stockholders is
required (other than as contemplated by Section 6.05); and (iii) each of this Agreement and the
Registration Rights Agreement has been duly executed and delivered, and the Warrant has been duly
executed, issued and delivered, by the Company and constitutes a valid and binding obligation of
the Company enforceable against the Company in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, securities, insolvency, or similar laws
relating to, or affecting generally the enforcement of, creditors’ rights and remedies, or
indemnification or by other equitable principles of general application.



     Section 4.03. Capitalization. The authorized capital stock of the Company and the
shares thereof issued and outstanding as of June 30, 2005 are set forth on a schedule (the
“Disclosure Schedule”) previously delivered to the Investor. All of the outstanding shares
of the Common Stock have been duly and validly authorized and issued, and are fully paid and
non-assessable. Except as set forth in this Agreement or as previously disclosed on the Disclosure
Schedule, as of June 30, 2005, no shares of Common Stock were entitled to preemptive rights or
registration rights and there were no outstanding options, warrants, scrip, rights to subscribe to,
call or commitments of any character whatsoever relating to, or securities or rights convertible
into or exchangeable for or giving any right to subscribe for, any shares of capital stock of the
Company. Except as set forth in this Agreement, the Commission Documents, or as previously
disclosed to the Investor in the Disclosure Schedule, as of June 30, 2005, there were no contracts,
commitments, understandings, or arrangements by which the Company is or may become bound to issue
additional shares of the capital stock of the Company or options, securities or rights convertible
into or exchangeable for or giving any right to subscribe for any shares of capital stock of the
Company. Except as described in the Commission Documents or as previously disclosed to the
Investor in the Disclosure Schedule, as of the date hereof the Company is not a
party to any agreement granting registration rights to any Person with respect to any of its
equity or debt securities. Except as set forth in the Commission Documents or as previously
disclosed to the Investor in writing, as of the date hereof the Company is not a party to, and it
has no Knowledge of, any agreement restricting the voting or transfer of any shares of the capital
stock of the Company. The offer and sale of all capital stock, convertible securities, rights,
warrants, or options of the Company issued during the twenty-four month period immediately prior to
the



8









 




Closing complied in all material respects with all applicable federal and state securities
laws, and no stockholder has a right of rescission or damages with respect thereto that could
reasonably be expected to have a Material Adverse Effect. The Company has furnished or made
available to the Investor true and correct copies of the Company’s Certificate of Incorporation, as
amended and in effect on the date hereof (the “Certificate”), and the Company’s Bylaws, as
amended and in effect on the date hereof (the “Bylaws”).




     Section 4.04. Issuance of Shares. Subject to Section 6.05, the Shares, the Warrant
and the Warrant Shares have been, and any Blackout Shares will be, duly authorized by all necessary
corporate action (except to the extent that the number of Blackout Shares required to be issued
exceeds the number of authorized shares of Common Stock under the Certificate) and, when issued and
paid for in accordance with the terms of this Agreement, the Registration Rights Agreement and the
Warrant, and subject to, and in reliance on, the representations, warranties and covenants made
herein by the Investor, the Shares and the Warrant Shares shall be validly issued and outstanding,
fully paid and non-assessable, and the Investor shall be entitled to all rights accorded to a
holder of shares of Common Stock.



     Section 4.05. No Conflicts. The execution, delivery and performance of this
Agreement, the Registration Rights Agreement, the Warrant and any other document or instrument
contemplated hereby or thereby, by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby do not: (i) violate any provision of the Certificate
or Bylaws, (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 material agreement, mortgage, deed of trust, indenture, note,
bond, license, lease agreement, instrument or obligation to which the Company is a party where such
default or conflict would constitute a Material Adverse Effect, (iii) create or impose a lien,
charge or encumbrance on any property of the Company under any agreement or any commitment to which
the Company is a party or by which the Company is bound or by which any of its respective
properties or assets are bound which would constitute a Material Adverse Effect, (iv) result in a
violation of any federal, state, local or foreign statute, rule, regulation, order, writ, judgment
or decree (including federal and state securities laws and regulations) applicable to the Company
or any of its subsidiaries or by which any property or asset of the Company or any of its
subsidiaries are bound or affected where such violation would constitute a Material Adverse Effect,
or (v) require any consent of any third-party that has not been obtained pursuant to any material
contract to which the Company is subject or to which any of its assets, operations or management
may be subject where the failure to obtain any such consent would constitute a Material Adverse
Effect. The Company is not required under federal, state or local law, rule or regulation to
obtain any consent, authorization or order of, or make any filing or registration with, any court
or governmental agency in order for it to execute, deliver or perform any of its obligations under
this Agreement, the Registration Rights Agreement or the Warrant, or issue and sell the Shares, the
Warrant Shares or the Blackout Shares (except to the extent that the number of Blackout Shares
required to be issued exceeds the number of authorized shares of Common Stock under the
Certificate) in accordance with the terms hereof and thereof (other than any filings that may be
required to be made by the Company with the Commission, the NASD/Nasdaq or state securities
commissions subsequent to the Closing, and, any
registration statement (including any amendment or supplement thereto) or any other filing or
consent which may be filed pursuant to this Agreement, the Registration Rights Agreement or the
Warrant); provided that, for purposes of the representation made in this sentence, the
Company is assuming and relying upon the accuracy of the relevant representations and agreements of
the Investor herein.



9









 





     Section 4.06. Commission Documents, Financial Statements. The Common Stock is
registered pursuant to Section 12(b) or 12(g) of the Exchange Act, and since April 29, 2003 the
Company has timely filed all reports, schedules, forms, statements and other documents required to
be filed by it with the Commission pursuant to the reporting requirements of the Exchange Act,
including material filed pursuant to Section 13(a) or 15(d) of the Exchange Act (all of the
foregoing, including filings incorporated by reference therein, being referred to herein as the
“Commission Documents”). Except as previously disclosed to the Investor in writing, since
April 29, 2004 the Company has maintained all requirements for the continued listing or quotation
of its Common Stock, and such Common Stock is currently listed or quoted on the Nasdaq National
Market. The Company has made available to the Investor true and complete copies of the Commission
Documents filed with the Commission since April 29, 2004 and prior to the Closing Date. The
Company has not provided to the Investor any information which, according to applicable law, rule
or regulation, should have been disclosed publicly by the Company but which has not been so
disclosed, other than with respect to the transactions contemplated by this Agreement. As of its
date, the Company’s Form 10-K for the year ended December 31, 2004 complied in all material
respects with the requirements of the Exchange Act and the rules and regulations of the Commission
promulgated thereunder applicable to such document, and, as of its date, after giving effect to the
information disclosed and incorporated by reference therein, to the Company’s Knowledge such Form
10-K did not contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. As of their respective dates, to the
Company’s Knowledge the financial statements of the Company included in the Commission Documents
filed with the Commission since April 29, 2004 complied as to form and substance in all material
respects with applicable accounting requirements and the published rules and regulations of the
Commission or other applicable rules and regulations with respect thereto. Such financial
statements have been prepared in accordance with generally accepted accounting principles
(“GAAP”) applied on a consistent basis during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto or (ii) in the case of
unaudited interim statements, to the extent they may not include footnotes or may be condensed or
summary statements), and fairly present in all material respects the financial position of the
Company and its subsidiaries as of the dates thereof and the results of operations and cash flows
for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments).



     Section 4.07. No Material Adverse Change. Except as disclosed in the Commission
Documents, since June 30, 2005 no event or series of events has or have occurred that would,
individually or in the aggregate, have a Material Adverse Effect on the Company.



     Section 4.08. No Undisclosed Liabilities. To the Company’s Knowledge, neither the
Company nor any of its subsidiaries has any liabilities, obligations, claims or losses (whether
liquidated or unliquidated, secured or unsecured, absolute, accrued, contingent or otherwise) that
would be required to be disclosed on a balance sheet of the Company or any subsidiary (including
the notes thereto) in conformity with GAAP and are not disclosed in the Commission Documents, other
than those incurred in the ordinary course of the Company’s or its
subsidiaries respective businesses since June 30, 2005 or which, individually or in the
aggregate, do not or would not have a Material Adverse Effect on the Company.



     Section 4.09. No Undisclosed Events or Circumstances. To the Company’s Knowledge, no
event or circumstance has occurred or exists with respect to the Company or its subsidiaries or
their respective businesses, properties, operations or financial condition, which, under applicable
law, rule or regulation, requires public disclosure or announcement by the



10









 




Company but which has
not been so publicly announced or disclosed and which, individually or in the aggregate, would have
a Material Adverse Effect on the Company.




     Section 4.10. Actions Pending. There is no action, suit, claim, investigation or
proceeding pending or, to the Knowledge of the Company, threatened against the Company or any
subsidiary which questions the validity of this Agreement or the transactions contemplated hereby
or any action taken or to be taken pursuant hereto or thereto. Except as set forth in the
Commission Documents or in the Disclosure Schedule, there is no action, suit, claim, investigation
or proceeding pending or, to the Knowledge of the Company, threatened, against or involving the
Company, any subsidiary or any of their respective properties or assets that could be reasonably
expected to have a Material Adverse Effect on the Company. Except as set forth in the Commission
Documents or as previously disclosed to the Investor in writing, no judgment, order, writ,
injunction or decree or award has been issued by or, to the Knowledge of the Company, requested of
any court, arbitrator or governmental agency which could be reasonably expected to result in a
Material Adverse Effect.



     Section 4.11. Compliance with Law. The businesses of the Company and its subsidiaries
have been and are presently being conducted in accordance with all applicable federal, state and
local governmental laws, rules, regulations and ordinances, except as set forth in the Commission
Documents or such that would not reasonably be expected to cause a Material Adverse Effect. Except
as set forth in the Commission Documents, the Company and each of its subsidiaries have all
franchises, permits, licenses, consents and other governmental or regulatory authorizations and
approvals necessary for the conduct of its business as now being conducted by it, except for such
franchises, permits, licenses, consents and other governmental or regulatory authorizations and
approvals, the failure to possess which, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.



     Section 4.12. Certain Fees. Except as expressly set forth in this Agreement, no
brokers, finders or financial advisory fees or commissions will be payable by the Company or any of
its subsidiaries in respect of the transactions contemplated by this Agreement.



     Section 4.13. Disclosure. To the Company’s Knowledge, neither this Agreement nor any
other documents, certificates or instruments furnished to the Investor by or on behalf of the
Company or any subsidiary in connection with the transactions contemplated by this Agreement
contain any untrue statement of a material fact or omit to state a material fact necessary in order
to make the statements made herein or therein, in the light of the circumstances under which they
were made herein or therein, not misleading.



     Section 4.14. Material Non-Public Information. Except for this Agreement and the
transactions contemplated hereby, neither the Company nor its employees have disclosed to the
Investor, any material non-public information that, according to applicable law, rule or
regulation, should have been disclosed publicly by the Company prior to the date hereof but which
has not been so disclosed.



     Section 4.15. Exemption from Registration; Valid Issuances. Subject to, and in
reliance on, the representations, warranties and covenants made herein by the Investor, the
issuance and sale of the Shares, the Warrant, the Warrant Shares and any Blackout Shares in
accordance with the terms and on the bases of the representations and warranties set forth in this
Agreement, may and shall be properly issued pursuant to Section 4(2), Regulation D and/or any other
applicable federal and state securities laws. Neither the sales of the Shares, the Warrant, the
Warrant Shares or any Blackout Shares pursuant to, nor the Company’s performance of its



11









 




obligations
under, this Agreement, the Registration Rights Agreement, or the Warrant shall (i) result in the
creation or imposition of any liens, charges, claims or other encumbrances upon the Shares, the
Warrant Shares, any Blackout Shares or any of the assets of the Company, or (ii) except as
previously disclosed to the Investor in writing, entitle the holders of any outstanding shares of
capital stock of the Company to preemptive or other rights to subscribe to or acquire the shares of
Common Stock or other securities of the Company.




     Section 4.16. No General Solicitation or Advertising in Regard to this Transaction.
Neither the Company nor any of its affiliates or any person acting on its or their behalf (i) has
conducted any general solicitation (as that term is used in Rule 502(c) of Regulation D) or general
advertising with respect to any of the Shares, the Warrant, the Warrant Shares or any Blackout
Shares or (ii) has made any offers or sales of any security or solicited any offers to buy any
security under any circumstances that would require registration of the Shares under the Securities
Act.



     Section 4.17. No Integrated Offering. Neither the Company, nor any of its affiliates,
nor any person acting on its or their behalf has, directly or indirectly, made any offers or sales
of any security or solicited any offers to buy any security, other than pursuant to this Agreement
and employee benefit plans, under circumstances that would require registration under the
Securities Act of shares of the Common Stock issuable hereunder with any other offers or sales of
securities of the Company.



     Section 4.18. Acknowledgment Regarding Investor’s Purchase of Shares. The Company
acknowledges and agrees that the Investor is acting solely in the capacity of an arm’s length
investor with respect to this Agreement and the transactions contemplated hereunder. The Company
further acknowledges that the Investor is not acting as a financial advisor or fiduciary of the
Company (or in any similar capacity) with respect to this Agreement and the transactions
contemplated hereunder and any advice given by the Investor or any of its representatives or agents
in connection with this Agreement and the transactions contemplated hereunder is merely incidental
to the Investor’s purchase of the Shares.



ARTICLE V




REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE INVESTOR




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



     Section 5.01. Organization and Standing of the Investor. The Investor is a company
duly organized, validly existing and in good standing under the laws of the British Virgin Islands.



     Section 5.02. Authorization and Power. The Investor has the requisite power and
authority to enter into and perform its obligations under this Agreement, the Warrant and the
Registration Rights Agreement and to purchase the Shares, the Warrant and the Warrant Shares
in accordance with the terms hereof and thereof. The execution, delivery and performance of this
Agreement, the Warrant and the Registration Rights Agreement by Investor and the consummation by it
of the transactions contemplated hereby or thereby have been duly authorized by all necessary
corporate action, and no further consent or authorization of the Investor, its Board of Directors
or stockholders is required. Each of this Agreement and the Registration Rights Agreement has been
duly executed and delivered by the Investor and constitutes a valid and binding obligation of the
Investor enforceable against the Investor in accordance with its



12









 




terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation, conservatorship, receivership, or similar laws relating to, or affecting generally the
enforcement of creditor’s rights and remedies or by other equitable principles of general
application.




     Section 5.03. No Conflicts. The execution, delivery and performance of this
Agreement, the Registration Rights Agreement, the Warrant and any other document or instrument
contemplated hereby, by the Investor and the consummation of the transactions contemplated thereby
do not (i) violate any provision of the Investor’s charter documents or bylaws, (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 material agreement, mortgage, deed of trust, indenture, note, bond, license,
lease agreement, instrument or obligation to which the Investor is a party, (iii) create or impose
a lien, charge or encumbrance on any property of the Investor under any agreement or any commitment
to which the Investor is a party or by which the Investor is bound or by which any of its
respective properties or assets are bound, (iv) result in a violation of any federal, state, local
or foreign statute, rule, regulation, order, writ, judgment or decree (including federal and state
securities laws and regulations) applicable to the Investor or by which any property or asset of
the Investor are bound or affected, or (v) require the consent of any third-party that has not been
obtained pursuant to any material contract to which Investor is subject or to which any of its
assets, operations or management may be subject. The Investor is not required under federal, state
or local law, rule or regulation to obtain any consent, authorization or order of, or make any
filing or registration with, any court or governmental agency in order for it to execute, deliver
or perform any of its obligations under this Agreement or to purchase the Shares or the Warrant in
accordance with the terms hereof, provided that, for purposes of the representation made in
this sentence, the Investor is assuming and relying upon the accuracy of the relevant
representations and agreements of the Company herein.



     Section 5.04. Financial Capability. The Investor has the financial capability to
perform all of its obligations under this Agreement, including the capability to purchase the
Shares, the Warrant and the Warrant Shares in accordance with the terms hereof. The Investor has
such knowledge and experience in business and financial matters that it is capable of evaluating
the merits and risks of an investment in Common Stock. The Investor is an “accredited investor” as
defined in Regulation D. The Investor is a “sophisticated investor” as described in Rule
506(b)(2)(ii) of Regulation D. The Investor acknowledges that an investment in the Common Stock
and the Warrant is speculative and involves a high degree of risk.



     Section 5.05. Information. The Investor and its advisors, if any, have been furnished
with all materials relating to the business, finances and operations of the Company and materials
relating to the offer and sale of the Shares, the Warrant and the Warrant Shares which have been
requested by the Investor. The Investor has reviewed or received copies of the Commission
Documents. The Investor and its advisors, if any, have been afforded the opportunity to ask
questions of the Company. The Investor has sought such accounting, legal and tax advice
as it has considered necessary to make an informed investment decision with respect to its
acquisition of the Shares, the Warrant and the Warrant Shares. The Investor understands that it
(and not the Company) shall be responsible for its own tax liabilities that may arise as a result
of this investment or the transactions contemplated by this Agreement.



     Section 5.06. Trading Restrictions. The Investor covenants that neither the Investor
nor any of its affiliates nor any entity managed or controlled by the Investor will, or cause or
assist any Person to, enter into or execute any “short sale” (as such term is defined in Rule 200
of



13









 




Regulation SHO, or any successor regulation, promulgated by the Commission under the Exchange
Act) of any securities of the Company.




     Section 5.07. Statutory Underwriter Status. The Investor acknowledges that, pursuant
to the Commission’s current interpretations of the Securities Act, the Investor will be disclosed
as an “underwriter” within the meaning of the Securities Act in the Registration Statement (and
amendments thereto) and in any Prospectus contained therein to the extent required by applicable
law.



     Section 5.08. Not an Affiliate. The Investor is not an officer, director or
“affiliate” (as defined in Rule 405 of the Securities Act) of the Company.



     Section 5.09. Manner of Sale. At no time was Investor presented with or solicited by
or through any leaflet, public promotional meeting, television advertisement or any other form of
general solicitation or advertising.



     Section 5.10. Prospectus Delivery. The Investor agrees that unless the Shares and
Warrant Shares are eligible for resale pursuant to all the conditions of Rule 144, it will resell
the Shares and Warrant Shares only pursuant to the Registration Statement, in a manner described
under the caption “Plan of Distribution” in the Registration Statement, and in a manner in
compliance with all applicable securities laws, including, without limitation, the prospectus
delivery requirements of the Securities Act and the insider trading restrictions of the Exchange
Act.



ARTICLE VI




COVENANTS OF THE COMPANY




     The Company covenants with the Investor as follows, which covenants are for the benefit of the
Investor and its permitted assignees (as defined herein):



     Section 6.01. Securities. The Company shall notify the Commission and the Principal
Market, if and as applicable, in accordance with their rules and regulations, of the transactions
contemplated by this Agreement, and shall use commercially reasonable efforts to take all other
necessary action and proceedings as may be required and permitted by applicable law, rule and
regulation, for the legal and valid issuance of the Shares, the Warrant Shares and the Blackout
Shares, if any, to the Investor.



     Section 6.02. Reservation of Common Stock. As of the date hereof, the Company has
available and the Company shall reserve and keep available at all times, free of preemptive rights
and other similar contractual rights of stockholders, shares of Common Stock for the purpose of
enabling the Company to satisfy any obligation to issue the Shares in connection with all Draw
Downs contemplated hereunder and the Warrant Shares. The number
of shares so reserved from time to time, as theretofore increased or reduced as hereinafter
provided, may be reduced by the number of shares actually delivered hereunder.



     Section 6.03. Registration and Listing. During the Commitment Period, the Company
shall use commercially reasonable efforts: (i) to take all action necessary to cause its Common
Stock to continue to be registered under Section 12(b) or 12(g) of the Exchange Act, (ii) to comply
in all respects with its reporting and filing obligations under the Exchange Act, (iii) to prevent
the termination or suspension of such registration, or the termination or suspension of its



14









 




reporting and filing obligations under the Exchange Act or Securities Act (except as expressly
permitted herein). The Company shall use commercially reasonable efforts to maintain the listing
and trading of its Common Stock and the listing of the Shares purchased by Investor hereunder on
the Principal Market (including, without limitation, maintaining sufficient net tangible assets)
and will comply in all material respects with the Company’s reporting, filing and other obligations
under the bylaws or rules of the NASD and the Principal Market. The Company will not be required to
carry out any action pursuant to this Agreement, the Registration Rights Agreement or the Warrant
that would adversely impact the listing of the Company’s securities on the Principal Market as now
in effect, and as may be changed by the Company in the future in the Company’s discretion.




     Section 6.04. Registration Statement. Without the prior written consent of the
Investor, the Registration Statement shall be used solely in connection with the transactions
between the Company and the Investor contemplated hereby.



     Section 6.05. Compliance with Laws.



     (a) The Company shall comply, and cause each subsidiary to comply, with all applicable laws,
rules, regulations and orders, noncompliance with which could reasonably be expected to have a
Material Adverse Effect.



     (b) Without the consent of its stockholders in accordance with NASD rules, the Company will
not be obligated to issue, and the Investor will not be obligated to purchase, any Shares or
Blackout Shares which would result in the issuance under this Agreement, the Warrant and the
Registration Rights Agreement of Shares and Blackout Shares (collectively) representing more than
the applicable percentage under the rules of the NASD, including, without limitation, NASD Rule
4350(i), that would require stockholder approval of the issuance thereof.



     Section 6.06. Other Financing. Nothing in this Agreement shall be construed to
restrict the right of the Company to offer, sell and/or issue securities of any kind whatsoever,
provided such transaction is not a Prohibited Transaction (as defined below) (any such transaction
that is not a Prohibited Transaction is referred to in this Agreement as a “Permitted
Transaction”). Without limiting the generality of the preceding sentence, the Company may, without
the prior written consent of the Investor, (i) establish stock option or award plans or agreements
(for directors, employees, consultants and/or advisors), and issue securities thereunder, and amend
such plans or agreements, including increasing the number of shares available thereunder, (ii)
issue equity securities to finance, or otherwise in connection with, the acquisition of one or more
other companies, equipment, technologies or lines of business, (iii) issue shares of Common Stock
and/or Preferred Stock in connection with the Company’s option or award plans, stock purchase
plans, rights plans, warrants or options, (iv) issue shares of Common Stock and/or Preferred Stock
in connection with the acquisition of products, licenses, equipment or other assets and strategic
partnerships or joint ventures; (v) issue shares of Common and/or Preferred Stock to consultants
and/or advisors as consideration for services rendered or to be rendered, (vi) issue and
sell equity or debt securities in a public offering, (vii) issue and sell and equity or debt
securities in a private placement (other than in connection with any Prohibited Transaction),
(viii) issue equity securities to equipment lessors, equipment vendors, banks or similar lending
institutions in connection with leases or loans, or in connection with strategic commercial or
licensing transactions, (ix) issue securities in connection with any stock split, stock dividend,
recapitalization, reclassification or similar event by the Company, and (x) issue shares of Common
Stock to the Investor under any other agreement entered into between the Investor and the Company.



15









 





     Section 6.07. Prohibited Transactions. During the term of this Agreement, the Company
shall not enter into any Prohibited Transaction without the prior written consent of the Investor,
which consent may be withheld at the sole discretion of the Investor. For the purposes of this
Agreement, the term “Prohibited Transaction” shall refer to the issuance by the Company of
any “future priced securities,” which shall mean the issuance of shares of Common Stock or
securities of any type whatsoever that are, or may become, convertible or exchangeable into shares
of Common Stock where the purchase, conversion or exchange price for such Common Stock is
determined using any floating discount or other post-issuance adjustable discount to the market
price of Common Stock, including, without limitation, pursuant to any equity line or other
financing that is substantially similar to the financing provided for under this Agreement,
provided that any future issuance by the Company of a convertible security (“Convertible
Security”) that contains provisions that adjust the conversion price of such Convertible Security
(“Conversion Price”) solely in the event of stock splits, dividends, distributions or similar
events shall not be a Prohibited Transaction for purposes of this Section 6.07 so long as such
Convertible Security does not contain a provision that adjusts the Conversion Price as a result of
any issuances of new securities after the issue date of the Convertible Security at a price below
the then effective Conversion Price of the Convertible Security, or as a result of any decline in
the market price of the Common Stock after the issue date of the Convertible Security, other than a
decline resulting directly from stock splits, dividends, distributions or similar events including,
without limitation, the type of conversion price adjustments customarily found in a firm commitment
Rule 144A offering to qualified institutional buyers.



     Section 6.08. Corporate Existence. The Company shall take all steps necessary to
preserve and continue the corporate existence of the Company; provided, however,
that nothing in this Agreement shall be deemed to prohibit the Company from engaging in any
Excluded Merger or Sale with another Person provided that in the event of an Excluded Merger or
Sale, if the surviving, successor or purchasing Person does not agree to assume the obligations
under the Warrant, then the Company shall deliver a notice to the Investor at least ten (10) days
before the consummation of such Excluded Merger or Sale, the Investor may exercise the Warrant at
any time before the consummation of such Excluded Merger or Sale (and such exercise may be made
contingent upon the consummation of such Excluded Merger or Sale), and any portion of the Warrant
that has not been exercised before consummation of such Excluded Merger or Sale shall terminate and
expire, and shall no longer be outstanding.



     Section 6.09. Non-Disclosure of Non-Public Information. Except as otherwise expressly
provided in this Agreement, the Registration Rights Agreement or the Warrant, none of the Company,
its officers, directors, employees nor agents shall disclose material non-public information to the
Investor, its advisors or representatives.



     Section 6.10. Notice of Certain Events Affecting Registration; Suspension of Right to
Request a Draw Down. The Company shall promptly notify the Investor upon the occurrence of any
of the following events in respect of the Registration Statement or the
Prospectus related to the offer, issuance and sale of the Shares and the Warrant Shares
hereunder: (i) receipt of any request for additional information by the Commission or any other
federal or state governmental authority during the period of effectiveness of the Registration
Statement for amendments or supplements to the Registration Statement or the Prospectus; (ii) the
issuance by the Commission or any other federal or state governmental authority of any stop order
suspending the effectiveness of the Registration Statement or the initiation of any proceedings for
that purpose; and (iii) receipt of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Registrable Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for such purpose. The Company
shall not be



16









 




required to disclose to the Investor the substance or specific reasons of any of the
events set forth in clauses (i) through (ii) of the previous sentence, only that the event has
ocurred. The Company shall not request a Draw Down during the continuation of any of the foregoing
events.




     Section 6.11. Amendments to the Registration Statement. When the Registration
Statement is declared effective by the Commission, the Company shall (i) not file any amendment to
the Registration Statement or make any amendment or supplement to the Prospectus of which the
Investor shall not previously have been advised and (ii) so long as, in the reasonable opinion of
counsel for the Investor, a Prospectus is required to be delivered in connection with sales of the
Shares by the Investor, if the Company files any information, documents or reports that are
incorporated by reference in the Registration Statement pursuant to the Exchange Act, the Company
shall, if requested in writing by the Investor, deliver a copy of such information, documents or
reports to the Investor promptly following such filing.



     Section 6.12. Prospectus Delivery. From time to time for such period as in the
reasonable opinion of counsel for the Investor a prospectus is required by the Securities Act to be
delivered in connection with sales by the Investor, the Company will expeditiously deliver to the
Investor, without charge, as many copies of the Prospectus (and of any amendment or supplement
thereto) as the Investor may reasonably request. The Company consents to the use of the Prospectus
(and of any amendment or supplement thereto) in accordance with the provisions of the Securities
Act and state securities laws in connection with the offering and sale of the Shares and the
Warrant Shares and for such period of time thereafter as the Prospectus is required by the
Securities Act to be delivered in connection with sales of the Shares and the Warrant Shares.



ARTICLE VII




CONDITIONS TO THE OBLIGATION OF THE INVESTOR TO ACCEPT A DRAW DOWN




     The obligation of the Investor hereunder to accept a Draw Down Notice and to acquire and pay
for the Shares in accordance therewith is subject to the satisfaction or waiver, at each Condition
Satisfaction Date, of each of the conditions set forth below. Other than those conditions set
forth in Section 7.12 which are for the Company’s sole benefit and may be waived by the Company at
any time in its sole discretion, the conditions are for the Investor’s sole benefit and may be
waived by the Investor at any time in its sole discretion. As used in this Agreement, the term
“Condition Satisfaction Date” shall mean, with respect to each Draw Down, the date on which
the applicable Draw Down Notice is delivered to the Investor and each Settlement Date in respect of
the applicable Draw Down Pricing Period.



     Section 7.01. Accuracy of the Company’s Representations and Warranties. Each of the
representations and warranties of the Company shall be true and correct in all
material respects as of the date when made as though made at that time except for
representations and warranties that are expressly made as of a particular date.



     Section 7.02. Performance by the Company. The Company shall have, in all material
respects, performed, satisfied and complied with all covenants, agreements and conditions required
by this Agreement, the Registration Rights Agreement and the Warrant to be performed, satisfied or
complied with by the Company.



     Section 7.03. Compliance with Law. The Company shall have complied in all respects
with all applicable federal, state and local governmental laws, rules, regulations and ordinances
in



17









 




connection with the execution, delivery and performance of this Agreement and the consummation
of the transactions contemplated hereby except for any failures to so comply which could not
reasonably be expected to have a Material Adverse Effect.




     Section 7.04. Effective Registration Statement. Upon the terms and subject to the
conditions set forth in the Registration Rights Agreement, the Registration Statement shall have
previously become effective and shall remain effective and (i) neither the Company nor the Investor
shall have received notice that the Commission has issued or intends to issue a stop order with
respect to the Registration Statement or that the Commission otherwise has suspended or withdrawn
the effectiveness of the Registration Statement, either temporarily or permanently, or intends or
has threatened to do so (unless the Commission’s concerns have been addressed and the Investor is
reasonably satisfied that the Commission no longer is considering or intends to take such action),
and (ii) no other suspension of the use or withdrawal of the effectiveness of the Registration
Statement or the Prospectus shall exist.



     Section 7.05. No Knowledge. The Company shall have no Knowledge of any event that
could reasonably be expected to have the effect of causing the Registration Statement with respect
to the resale of the Registrable Securities by the Investor to be suspended or otherwise
ineffective (which event is reasonably likely to occur within eight Trading Days following the
Trading Day on which a Draw Down Notice is delivered) as of the Settlement Date.



     Section 7.06. No Suspension. Trading in the Company’s Common Stock shall not have
been suspended by the Commission, the Principal Market or the NASD and trading in securities
generally as reported on the Principal Market shall not have been suspended or limited.



     Section 7.07. 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 which prohibits the consummation of any of the
transactions contemplated by this Agreement.



     Section 7.08. No Proceedings or Litigation. No action, suit or proceeding before any
arbitrator or any governmental authority shall have been commenced, and, to the Knowledge of the
Company no investigation by any governmental authority shall have been threatened, against the
Company or any subsidiary, or any of the officers, directors or affiliates of the Company or any
subsidiary seeking to enjoin, prevent or change the transactions contemplated by this Agreement.



     Section 7.09. Sufficient Shares Registered for Resale. The Company shall have
sufficient Shares, calculated using the closing trade price of the Common Stock as of the Trading
Day immediately preceding such Draw Down Notice, registered under the Registration Statement to
issue and sell such Shares in accordance with such Draw Down Notice.



     Section 7.10. Warrant. The Warrant shall have been duly executed, delivered and
issued to the Investor, and the Company shall not be in default in any material respect under any
of the provisions thereof, provided that any refusal by or failure of the Company to issue and
deliver Warrant Shares in respect of any exercise (in whole or in part) thereof shall be deemed to
be material for the purposes of this Section 7.10.



     Section 7.11. Opinion of Counsel. The Investor shall have received the form of
opinion agreed to between the parties on the date of this Agreement.



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     Section 7.12. Accuracy of Investor’s Representation and Warranties. The
representations and warranties of the Investor shall be true and correct in all material respects
as of the date when made as though made at that time except for representations and warranties that
are made as of a particular date.



ARTICLE VIII




TERMINATION




     Section 8.01. Term. Unless otherwise terminated in accordance with Section 8.02
below, this Agreement shall terminate upon the earlier to occur of (i) the expiration of the
Commitment Period or (ii) the issuance of Shares pursuant to this Agreement in an amount equal to
the Maximum Commitment Amount.



     Section 8.02. Other Termination.



     (a) The Investor may terminate this Agreement upon (x) one (1) business day’s notice if the
Company enters into any Prohibited Transaction as set forth in Section 6.07 without the Investor’s
prior written consent, or (y) one (1) business day’s notice if the Investor provides written notice
of a Material Adverse Effect to the Company, and such Material Adverse Effect continues for a
period of ten (10) Trading Days after the receipt by the Company of such notice.



     (b) The Investor may terminate this Agreement upon one (1) business day’s notice to the
Company at any time in the event that the Registration Statement is not initially declared
effective in accordance with the Registration Rights Agreement, provided, however, that in the
event the Registration Statement is declared effective prior to the delivery of such notice, the
Investor shall thereafter have no right to terminate this Agreement pursuant to this Section
8.02(b).



     (c) The Company may terminate this Agreement upon one (1) business day’s notice;
provided, however, that the Company shall not terminate this Agreement pursuant to
this Section 8.02(c) during any Draw Down Pricing Period; provided further;
that, in the event of any termination of this Agreement by the Company hereunder, so long as the
Investor owns Shares purchased hereunder and/or Warrant Shares, unless all of such shares of Common
Stock may be resold by the Investor without registration and without any time, volume or manner
limitations pursuant to Rule 144(k) (or any similar provision then in effect) under the Securities
Act, the Company shall not suspend or withdraw the Registration Statement or otherwise cause the
Registration Statement to become ineffective, or voluntarily delist the Common Stock from, the
Principal Market without listing the Common Stock on another Principal Market.



     (d) Each of the parties hereto may terminate this Agreement upon one (1) day’s notice if the
other party has breached a material representation, warranty or covenant to this Agreement
and such breach is not remedied within ten (10) Trading Days after notice of such breach is
delivered to the breaching party.



     Section 8.03. Effect of Termination. In the event of termination by the Company or
the Investor, written notice thereof shall forthwith be given to the other party and the
transactions contemplated by this Agreement shall be terminated without further action by either
party. If this Agreement is terminated as provided in Section 8.01 or 8.02 herein, this Agreement
shall become void and of no further force and effect, except as provided in Section 10.13. Nothing
in this Section 8.03 shall be deemed to release the Company or the Investor from any liability for
any



19









 




breach under this Agreement occurring prior to such termination, or to impair the rights of the
Company and the Investor to compel specific performance by the other party of its obligations under
this Agreement arising prior to such termination.




ARTICLE IX




INDEMNIFICATION




     Section 9.01. Indemnification.



     (a) Except as otherwise provided in this Article IX, unless disputed as set forth in Section
9.02, the Company agrees to indemnify, defend and hold harmless the Investor and its affiliates and
their respective officers, directors, agents, employees, subsidiaries, partners, members and
controlling persons (each, an “Investor Indemnified Party”), to the fullest extent
permitted by law from and against any and all Damages directly resulting from or directly arising
out of any breach of any representation or warranty, covenant or agreement by the Company in this
Agreement, the Registration Rights Agreement or the Warrant; provided, however,
that the Company shall not be liable under this Article IX to an Investor Indemnified Party to the
extent that such Damages resulted or arose from the breach by an Investor Indemnified Party of any
representation, warranty, covenant or agreement of an Investor Indemnified Party contained in this
Agreement, the Registration Rights Agreement or the Warrant or the negligence, recklessness,
willful misconduct or bad faith of an Investor Indemnified Party. The parties intend that any
Damages subject to indemnification pursuant to this Article IX will be net of insurance proceeds
(which the Investor Indemnified Party agrees to use commercially reasonable efforts to recover).
Accordingly, the amount which the Company is required to pay to any Investor Indemnified Party
hereunder (a “Company Indemnity Payment”) will be reduced by any insurance proceeds
actually recovered by or on behalf of any Investor Indemnified Party in reduction of the related
Damages. In addition, if an Investor Indemnified Party receives a Company Indemnity Payment
required by this Article IX in respect of any Damages and subsequently receives any such insurance
proceeds, then the Investor Indemnified Party will pay to the Company an amount equal to the
Company Indemnity Payment received less the amount of the Company Indemnity Payment that would have
been due if the insurance proceeds had been received, realized or recovered before the Company
Indemnity Payment was made.



     (b) Except as otherwise provided in this Article IX, unless disputed as set forth in Section
9.02, the Investor agrees to indemnify, defend and hold harmless the Company and its affiliates and
their respective officers, directors, agents, employees, subsidiaries, partners, members and
controlling persons (each, a “Company Indemnified Party”), to the fullest extent permitted
by law from and against any and all Damages directly resulting from or directly arising out of any
breach of any representation or warranty, covenant or agreement by the Investor in this Agreement,
the Registration Rights Agreement or the Warrant; provided, however, that the
Investor shall not be liable under this Article IX to a Company Indemnified Party to the extent
that such Damages resulted or arose from the breach by a Company Indemnified Party of any
representation, warranty, covenant or agreement of a Company Indemnified Party contained in this
Agreement, the Registration Rights Agreement or the Warrant or negligence, recklessness, willful
misconduct or bad faith of a Company Indemnified Party. The parties intend that any Damages
subject to indemnification pursuant to this Article IX will be net of insurance proceeds (which the
Company agrees to use commercially reasonable efforts to recover). Accordingly, the amount which
the Investor is required to pay to any Company Indemnified Party hereunder (an “Investor
Indemnity Payment”) will be reduced by any insurance proceeds theretofore actually recovered by
or on behalf of any Company Indemnified Party in reduction of the related



20









 




Damages. In addition, if
a Company Indemnified Party receives an Investor Indemnity Payment required by this Article IX in
respect of any Damages and subsequently receives any such insurance proceeds, then the Company
Indemnified Party will pay to the Investor an amount equal to the Investor Indemnity Payment
received less the amount of the Investor Indemnity Payment that would have been due if the
insurance proceeds had been received, realized or recovered before the Investor Indemnity Payment
was made.




     Section 9.02. Notification of Claims for Indemnification. Each party entitled to
indemnification under this Article IX (an “Indemnified Party”) shall, promptly after the
receipt of notice of the commencement of any claim against such Indemnified Party in respect of
which indemnity may be sought from the party obligated to indemnify such Indemnified Party under
this Article IX (the “Indemnifying Party”), notify the Indemnifying Party in writing of the
commencement thereof. Any such notice shall describe the claim in reasonable detail. The failure
of any Indemnified Party to so notify the Indemnifying Party of any such action shall not relieve
the Indemnifying Party from any liability which it may have to such Indemnified Party (a) other
than pursuant to this Article IX or (b) under this Article IX unless, and only to the extent that,
such failure results in the Indemnifying Party’s forfeiture of substantive rights or defenses or
the Indemnifying Party is prejudiced by such delay. The procedures listed below shall govern the
procedures for the handling of indemnification claims.



     (a) Any claim for indemnification for Damages that do not result from a Third Party Claim as
defined in the following paragraph, shall be asserted by written notice given by the Indemnified
Party to the Indemnifying Party. Such Indemnifying Party shall have a period of thirty (30) days
after the receipt of such notice within which to respond thereto. If such Indemnifying Party does
not respond within such thirty (30) day period, such Indemnifying Party shall be deemed to have
refused to accept responsibility to make payment as set forth in Section 9.01. If such
Indemnifying Party does not respond within such thirty (30) day period or rejects such claim in
whole or in part, the Indemnified Party shall be free to pursue such remedies as specified in this
Agreement.



     (b) If an Indemnified Party shall receive notice or otherwise learn of the assertion by a
person or entity not a party to this Agreement of any threatened legal action or claim
(collectively a “Third Party Claim”), with respect to which an Indemnifying Party may be
obligated to provide indemnification, the Indemnified Party shall give such Indemnifying Party
written notice thereof within twenty (20) days after becoming aware of such Third Party Claim.



     (c) An Indemnifying Party may elect to defend (and, unless the Indemnifying Party has
specified any reservations or exceptions, to seek to settle or compromise) at such Indemnifying
Party’s own expense and by such Indemnifying Party’s own counsel, any Third Party Claim. Within
thirty (30) days after the receipt of notice from an Indemnified Party (or sooner if the nature of
such Third Party Claim so requires), the Indemnifying Party shall notify the Indemnified Party
whether the Indemnifying Party will assume responsibility for defending such
Third Party Claim, which election shall specify any reservations or exceptions. If such
Indemnifying Party does not respond within such thirty (30) day period or rejects such claim in
whole or in part, the Indemnified Party shall be free to pursue such remedies as specified in this
Agreement. In case any such Third Party Claim shall be brought against any Indemnified Party, and
it shall notify the Indemnifying Party of the commencement thereof, the Indemnifying Party shall be
entitled to assume the defense thereof at its own expense, with counsel satisfactory to such
Indemnified Party in its reasonable judgment; provided, however, that any Indemnified Party may, at
its own expense, retain separate counsel to participate in such defense at its own expense.
Notwithstanding the foregoing, in any Third Party Claim in which both the



21









 




Indemnifying Party, on
the one hand, and an Indemnified Party, on the other hand, are, or are reasonably likely to become,
a party, such Indemnified Party shall have the right to employ separate counsel and to control its
own defense of such claim if, in the reasonable opinion of counsel to such Indemnified Party,
either (x) one or more significant defenses are available to the Indemnified Party that are not
available to the Indemnifying Party or (y) a conflict or potential conflict exists between the
Indemnifying Party, on the one hand, and such Indemnified Party, on the other hand, that would make
such separate representation advisable; provided, however, that in such
circumstances the Indemnifying Party (i) shall not be liable for the fees and expenses of more than
one counsel to all Indemnified Parties and (ii) shall reimburse the Indemnified Parties for such
reasonable fees and expenses of such counsel incurred in any such Third Party Claim, as such
expenses are incurred, provided that the Indemnified Parties agree to repay such amounts if it is
ultimately determined that the Indemnifying Party was not obligated to provide indemnification
under this Article IX. The Indemnifying Party agrees that it will not compromise or consent to the
entry of any judgment in any pending or threatened claim relating to the matters contemplated
hereby (if any Indemnified Party is a party thereto or has been actually threatened to be made a
party thereto) unless such settlement, compromise or consent includes an unconditional release of
such Indemnified Party from all liability arising or that may arise out of such claim. The rights
accorded to an Indemnified Party hereunder shall be in addition to any rights that any Indemnified
Party may have at common law, by separate agreement or otherwise; provided,
however, that notwithstanding the foregoing or anything to the contrary contained in this
Agreement, nothing in this Article IX shall restrict or limit any rights that any Indemnified Party
may have to seek equitable relief.




ARTICLE X




MISCELLANEOUS




     Section 10.01. Fees and Expenses.



     (a) Each of the Company and the Investor agrees to pay its own expenses incident to the
performance of its obligations hereunder, except that the Company shall be solely responsible for
(i) all reasonable attorneys fees and expenses incurred by the Investor in connection with the
preparation, negotiation, execution and delivery of this Agreement, the Registration Rights
Agreement and the Warrant, and review of the Registration Statement, and in connection with any
amendments, modifications or waivers of this Agreement, including, without limitation, all
reasonable attorneys fees and expenses, and (ii) all reasonable fees and expenses incurred in
connection with the Investor’s enforcement of this Agreement, including, without limitation, all
reasonable attorneys fees and expenses, and (iii) due diligence expenses incurred by the Investor
during the term of this Agreement equal to $12,500 per calendar quarter, provided that such
$12,500 shall not be payable in respect of any calendar quarter following the calendar quarter
during which the Company shall have issued and sold Common Stock hereunder during the term of this
Agreement in aggregate Draw Down Amounts equal to or exceeding $25 million, and
(v) all stamp or other similar taxes and duties, if any, levied in connection with issuance of
the Shares pursuant hereto; provided, however, that in each of the above instances
the Investor shall provide customary supporting invoices or similar documentation in reasonable
detail describing such expenses, and provided further that the maximum aggregate
amount payable by the Company pursuant to clause (i) above shall be $75,000 and the Investor shall
bear all fees and expenses in excess of $75,000 incurred in connection with the events described
under clause (i) above.



22









 





     (b) If any action at law or in equity is necessary to enforce or interpret the terms of this
Agreement, the Registration Rights Agreement or the Warrant, the prevailing party shall be entitled
to reasonable fees, costs and necessary disbursements in addition to any other relief to which such
party may be entitied.



     Section 10.02. Reporting Entity for the Common Stock. The reporting entity relied
upon for the determination of the trading price or trading volume of the Common Stock on any given
Trading Day for the purposes of this Agreement shall be Bloomberg, L.P. or any successor thereto.
The written mutual consent of the Investor and the Company shall be required to employ any other
reporting entity.



     Section 10.03. Brokerage. Each of the parties hereto represents that it has had no
dealings in connection with this transaction with any finder or broker who will demand payment of
any fee or commission from the other party. The Company on the one hand, and the Investor, on the
other hand, agree to indemnify the other against and hold the other harmless from any and all
liabilities to any Persons claiming brokerage commissions or finder’s fees on account of services
purported to have been rendered on behalf of the indemnifying party in connection with this
Agreement or the transactions contemplated hereby.



     Section 10.04. Notices. All notices, demands, requests, consents, approvals, and
other communications required or permitted hereunder shall be in writing and, unless otherwise
specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or
certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier
service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile,
addressed as set forth below or to such other address as such party shall have specified most
recently by written notice given in accordance herewith, in each case with a copy to the e-mail
address set forth beside the facsimile number for the addressee below. Any notice or other
communication required or permitted to be given hereunder shall be deemed effective (a) upon hand
delivery or delivery by facsimile, with accurate confirmation generated by the transmitting
facsimile machine, at the address or number designated below (if delivered on a business day during
normal business hours where such notice is to be received), or the first business day following
such delivery (if delivered other than on a business day during normal business hours where such
notice is to be received) or (b) on the second business day following the date of mailing by
express courier service, fully prepaid, addressed to such address, or upon actual receipt of such
mailing, whichever shall first occur. The addresses for such communications shall be:


If to the Company:


Cytokinetics, Incorporated

280 East Grand Avenue

South San Francisco, CA 94080

Facsimile: (650) 624 3000

Attention: Sharon Surrey-Barbari, Chief Financial Officer -

sbarbari@cytokinetics.com



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



Wilson Sonsini Goodrich & Rosati

650 Page Mill Road

Palo Alto, CA 94304



23









 







Facsimile: (650) 493 6811

Attention: Michael O’Donnell, Esq. – modonnell@wsgr.com



if to the Investor:



Kingsbridge Capital Limited/ c/o Kingsbridge Corporate Services Limited

Main Street

Kilcullen, County Kildare

Republic of Ireland

Facsimile: 011-353-45-482-003 – adamgurney@eircom.net

Attention: Adam Gurney, Managing Director



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



Clifford Chance US LLP

31 West 52nd Street

New York, NY 10019

Facsimile: (212) 878-8375

Attention: Keith M. Andruschak, Esq. – keith.andruschak@cliffordchance.com


Either party hereto may from time to time change its address or facsimile number for notices under
this Section by giving at least ten (10) days’ prior written notice of such changed address or
facsimile number to the other party hereto.




     Section 10.05. Assignment. Neither this Agreement nor any rights of the Investor or
the Company hereunder may be assigned by either party to any other Person.



     Section 10.06. Amendment; No Waiver. No party shall be liable or bound to any other
party in any manner by any warranties, representations or covenants except as specifically set
forth in this Agreement, the Warrant and the Registration Rights Agreement. Except as expressly
provided in this Agreement, neither this Agreement nor any term hereof may be amended, waived,
discharged or terminated other than by a written instrument signed by both parties hereto. The
failure of the either party to insist on strict compliance with this Agreement, or to exercise any
right or remedy under this Agreement, shall not constitute a waiver of any rights provided under
this Agreement, nor estop the parties from thereafter demanding full and complete compliance nor
prevent the parties from exercising such a right or remedy in the future.



     Section 10.07. Entire Agreement. This Agreement, the Registration Rights Agreement
and the Warrant set forth the entire agreement and understanding of the parties relating to the
subject matter hereof and supersedes all prior and contemporaneous agreements, negotiations and
understandings between the parties, both oral and written, relating to the subject matter hereof.



     Section 10.08. Severability. If any provision of this Agreement becomes or is
declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement
shall continue in full force and effect without said provision; provided that, if the
severance of such provision materially changes the economic benefits of this Agreement to either
party as such benefits are anticipated as of the date hereof, then such party may terminate this
Agreement on five (5) business days prior written notice to the other party. In such event, the
Registration Rights Agreement will terminate simultaneously with the termination of this Agreement;
provided that in the event that this Agreement is terminated by the Company in accordance with this
Section 10.08 and the Warrant Shares either have not been registered for resale by the Investor in
accordance with the Registration Rights Agreement or are otherwise not freely tradable (if and when
issued) in accordance with applicable law, then the Registration Rights



24









 




Agreement in respect of the
registration of the Warrant Shares shall remain in full force and effect.




     Section 10.09. Title and Subtitles. The titles and subtitles used in this Agreement
are used for the convenience of reference and are not to be considered in construing or
interpreting this Agreement.



     Section 10.10. Counterparts. This Agreement may be executed in multiple counterparts,
each of which may be executed by less than all of the parties and shall be deemed to be an original
instrument which shall be enforceable against the parties actually executing such counterparts and
all of which together shall constitute one and the same instrument.



     Section 10.11. Choice of Law. This Agreement shall be construed under the laws of the
State of New York.



     Section 10.12. Specific Enforcement, Consent to Jurisdiction.



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



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



     Section 10.13. Survival. The representations and warranties of the Company and the
Investor contained in Articles IV and V and the covenants contained in Article V and Article VI
shall survive the execution and delivery hereof and the Closing until the termination of this
Agreement, and the agreements and covenants set forth in Article VIII and Article IX of this
Agreement shall survive the execution and delivery hereof and the Closing hereunder.



     Section 10.14. Publicity. Except as otherwise required by applicable law or
regulation, or Nasdaq rule or judicial process, prior to the Closing, neither the Company nor the
Investor shall issue any press release or otherwise make any public statement or announcement with
respect to this Agreement or the transactions contemplated hereby or the existence of this
Agreement. In the event the Company is required by law, regulation, Nasdaq rule or judicial
process, based upon reasonable advice of the Company’s counsel, to issue a press release or
otherwise make a public statement or announcement with respect to this Agreement prior to the
Closing, the Company shall consult with the Investor on the form and substance of such press



25









 




release, statement or announcement. Promptly after the Closing, each party may issue a press
release or otherwise make a public statement or announcement with respect to this Agreement or the
transactions contemplated hereby or the existence of this Agreement; provided that, prior
to issuing any such press release, making any such public statement or announcement, the party
wishing to make such release, statement or announcement consults and cooperates in good faith with
the other party in order to formulate such press release, public statement or announcement in form
and substance reasonably acceptable to both parties.




     Section 10.15. Further Assurances. From and after the date of this Agreement, upon
the request of the Investor or the Company, each of the Company and the Investor shall execute and
deliver such instruments, documents and other writings as may be reasonably necessary or desirable
to confirm and carry out and to effectuate fully the intent and purposes of this Agreement.



[Remainder of this page intentionally left blank]




26









 








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




	 	 	 	 	 	 	 	 	 
	 	 	KINGSBRIDGE CAPITAL LIMITED	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	By:	 	/s/ Maria O’Donoghue	 	 	 	 
	 

	 	 	 	 

Maria O’Donoghue

Director
	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	CYTOKINETICS, INCORPORATED	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	By:	 	/s/ James Sabry	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	James Sabry	 	 	 	 
	 

	 	 	 	President and Chief Executive Officer	 	 	 	 






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Exhibit A




Form of Registration Rights Agreement




 









 








Exhibit B




Form of Warrant




 









 








Exhibit C




Officer’s Certificate




     I, [NAME OF OFFICER], do hereby certify to Kingsbridge Capital Limited (the “Investor”), with
respect to the common stock of Cytokinetics, Incorporated (the “Company”) issuable in connection
with the Draw Down Notice, dated                      (the “Notice”) attached hereto and delivered
pursuant to Article III of the Common Stock Purchase Agreement, dated October 28, 2005 (the
“Agreement”), by and between the Company and the Investor, as follows (capitalized terms used but
undefined herein have the meanings given to such terms in the Agreement):



     1. I am the duly elected [OFFICER] of the Company.



     2. The representations and warranties of the Company set forth in Article IV of the Agreement
are true and correct in all material respects as though made on and as of the date hereof (except
for such representations and warranties that are made as of a particular date).



     3. The Company has performed in all material respects all covenants and agreements to be
performed by the Company on or prior to the date hereof related to the Notice and has satisfied
each of the conditions to the obligation of the Investor set forth in Article VII of the Agreement.



     4. The Shares issuable in respect of the Notice will be delivered without restrictive legend
via book entry through the Depositary Trust Company to an account designated by the Investor.



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



	 	 	 	 	 	 	 
	 

	 	 

Name:
	 	 	 	 
	 

	 	Title: