IN CASE THE COMPANY SHALL TAKE RECORD OF THE
HOLDERS OF ITS COMMON STOCK OR ANY OTHER PREFERRED STOCK FOR THE PURPOSE OF
ENTITLING THEM TO SUBSCRIBE FOR OR PURCHASE COMMON STOCK OR CONVERTIBLE
SECURITIES, THEN THE DATE OF THE ISSUE OR SALE OF THE SHARES OF COMMON STOCK
SHALL BE DEEMED TO BE SUCH RECORD DATE.
(X)
CERTAIN ISSUES EXCEPTED.
ANYTHING HEREIN TO THE CONTRARY
NOTWITHSTANDING, THE COMPANY SHALL NOT BE REQUIRED TO MAKE ANY ADJUSTMENT TO THE
CONVERSION PRICE UPON (I) SECURITIES ISSUED (OTHER THAN FOR CASH) IN CONNECTION
WITH A MERGER, ACQUISITION, OR CONSOLIDATION, (II) SECURITIES ISSUED PURSUANT TO
THE CONVERSION OR EXERCISE OF CONVERTIBLE OR EXERCISABLE SECURITIES ISSUED OR
OUTSTANDING ON OR PRIOR TO THE DATE OF THE PURCHASE AGREEMENT OR ISSUED PURSUANT
TO THE PURCHASE AGREEMENT (SO LONG AS THE CONVERSION OR EXERCISE PRICE IN SUCH
SECURITIES ARE NOT AMENDED TO LOWER SUCH PRICE AND/OR ADVERSELY AFFECT THE
HOLDERS), (III) SECURITIES ISSUED IN CONNECTION WITH BONA FIDE STRATEGIC LICENSE
AGREEMENTS OR OTHER PARTNERING ARRANGEMENTS SO LONG AS SUCH ISSUANCES ARE NOT
FOR THE PURPOSE OF RAISING CAPITAL, (IV) COMMON STOCK ISSUED OR THE ISSUANCE OR
GRANTS OF OPTIONS TO PURCHASE COMMON STOCK PURSUANT TO THE COMPANY'S STOCK
OPTION PLANS AND EMPLOYEE STOCK PURCHASE PLANS OUTSTANDING AS THEY EXIST ON THE
DATE OF THE PURCHASE AGREEMENT SO LONG AS APPROVED BY THE COMPANY'S BOARD OF
DIRECTORS, AND (V) ANY WARRANTS ISSUED TO THE PLACEMENT AGENT AND ITS DESIGNEES
FOR THE TRANSACTIONS CONTEMPLATED BY THE PURCHASE AGREEMENT.
(F)
­NO IMPAIRMENT.
THE COMPANY SHALL NOT, BY AMENDMENT OF ITS
ARTICLES OF INCORPORATION OR THROUGH ANY REORGANIZATION, TRANSFER OF ASSETS,
CONSOLIDATION, MERGER, DISSOLUTION, ISSUE OR SALE OF SECURITIES OR ANY OTHER
VOLUNTARY ACTION, AVOID OR SEEK TO AVOID THE OBSERVANCE OR PERFORMANCE OF ANY OF
THE TERMS TO BE OBSERVED OR PERFORMED UNDER THIS SECTION 5 BY THE COMPANY, BUT
WILL AT ALL TIMES IN GOOD FAITH ASSIST IN THE CARRYING OUT OF ALL THE PROVISIONS
OF THIS SECTION 5 AND IN THE TAKING OF ALL SUCH ACTION AS MAY BE NECESSARY OR
APPROPRIATE IN ORDER TO PROTECT THE CONVERSION RIGHTS OF THE HOLDERS OF THE
SERIES A PREFERRED STOCK AGAINST IMPAIRMENT.
IN THE EVENT A HOLDER SHALL ELECT
TO CONVERT ANY SHARES OF SERIES A PREFERRED STOCK AS PROVIDED HEREIN, THE
COMPANY CANNOT REFUSE CONVERSION BASED ON ANY CLAIM THAT SUCH HOLDER OR ANY ONE
ASSOCIATED OR AFFILIATED WITH SUCH HOLDER HAS BEEN ENGAGED IN ANY VIOLATION OF
LAW, UNLESS (I) AN ORDER FROM THE SECURITIES AND EXCHANGE COMMISSION PROHIBITING
SUCH CONVERSION OR (II) AN INJUNCTION FROM A COURT, ON NOTICE, RESTRAINING
AND/OR ADJOINING CONVERSION OF ALL OR OF SAID SHARES OF SERIES A PREFERRED STOCK
SHALL HAVE BEEN ISSUED AND THE COMPANY POSTS A SURETY BOND FOR THE BENEFIT OF
SUCH HOLDER IN AN AMOUNT EQUAL TO 120% OF THE LIQUIDATION PREFERENCE AMOUNT OF
THE SERIES A PREFERRED STOCK SUCH HOLDER HAS ELECTED TO CONVERT, WHICH BOND
SHALL REMAIN IN EFFECT UNTIL THE COMPLETION OF ARBITRATION/LITIGATION OF