Document:

ex10_1.htm

    Exhibit 10.1

     

     

    COMMON SHARE PURCHASE AGREEMENT

     

    Dated
October 21, 2008

     

    by
and between

     

    XOMA
LTD.

     

    and

     

    AZIMUTH
OPPORTUNITY LTD.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    TABLE OF
CONTENTS

     

    
      	 
      	 
      	
              Page

            

    

    

    
      	
              Article
      I PURCHASE AND SALE OF COMMON SHARES

            	
              1

            
	
              Section
      1.1   Purchase and Sale of Stock

            	
              1

            
	
              Section
      1.2   Effective Date; Settlement Dates

            	
              1

            
	
              Section
      1.3   The Shares

            	
              2

            
	
              Section
      1.4   Current Report; Prospectus Supplement

            	
              2

            
	 	 
	
              Article
      II FIXED REQUEST TERMS; OPTIONAL AMOUNT

            	
              2

            
	
              Section
      2.1   Fixed Request Notice

            	
              2

            
	
              Section
      2.2   Fixed Requests

            	
              3

            
	
              Section
      2.3   Share Calculation

            	
              4

            
	
              Section
      2.4   Limitation of Fixed Requests

            	
              4

            
	
              Section
      2.5   Reduction of Commitment

            	
              4

            
	
              Section
      2.6   Below Threshold Price

            	
              4

            
	
              Section
      2.7   Settlement

            	
              5

            
	
              Section
      2.8   Reduction of Pricing Period

            	
              5

            
	
              Section
      2.9   Optional Amount

            	
              6

            
	
              Section
      2.10  Calculation of Optional Amount Shares

            	
              6

            
	
              Section
      2.11  Exercise of Optional Amount

            	
              7

            
	
              Section
      2.12  Aggregate Limit

            	
              7

            
	 	 
	
              Article
      III REPRESENTATIONS AND WARRANTIES OF THE INVESTOR

            	
              8

            
	
              Section
      3.1   Organization and Standing of the
    Investor

            	
              8

            
	
              Section
      3.2   Authorization and Power

            	
              8

            
	
              Section
      3.3   No Conflicts

            	
              8

            
	
              Section
      3.4   Information

            	
              9

            
	 	 
	
              Article
      IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY

            	
              9

            
	
              Section
      4.1   Organization, Good Standing and Power

            	
              9

            
	
              Section
      4.2   Authorization, Enforcement

            	
              10

            
	
              Section
      4.3   Capitalization

            	
              10

            
	
              Section
      4.4   Issuance of Shares

            	
              11

            
	
              Section
      4.5   No Conflicts

            	
              11

            
	
              Section
      4.6   Commission Documents, Financial
      Statements

            	
              11

            
	
              Section
      4.7   Subsidiaries

            	
              13

            
	
              Section
      4.8   No Material Adverse Effect

            	
              13

            
	
              Section
      4.9   Indebtedness

            	
              13

            
	
              Section
      4.10  Title To Assets

            	
              13

            
	
              Section
      4.11  Actions Pending

            	
              13

            
	
              Section
      4.12  Compliance With Law

            	
              14

            
	
              Section
      4.13  Certain Fees

            	
              14

            
	
              Section
      4.14  Operation of Business

            	
              14

            

    

    
      
        i 

      

      
         

        
          

        

      

      
         

      

    

    

    
      	
              Section
      4.15  Environmental Compliance

            	
              16

            
	
              Section
      4.16  Material Agreements

            	
              17

            
	 
      	 
      
	
              Section
      4.17  Transactions With Affiliates

            	
              17

            
	
              Section
      4.18  Securities Act; NASD Conduct Rules

            	
              17

            
	
              Section
      4.19  Employees

            	
              19

            
	
              Section
      4.20  Use of Proceeds

            	
              19

            
	
              Section
      4.21  Investment Company Act Status

            	
              19

            
	
              Section
      4.22  ERISA

            	
              19

            
	
              Section
      4.23  Taxes

            	
              20

            
	
              Section
      4.24  Insurance

            	
              20

            
	
              Section
      4.25  Acknowledgement Regarding Investor’s Purchase of
      Shares

            	
              20

            
	 	 
	
              Article
      V COVENANTS

            	
              20

            
	
              Section
      5.1   Securities Compliance

            	
              20

            
	
              Section
      5.2   Registration and Listing

            	
              21

            
	
              Section
      5.3   Compliance with Laws.

            	
              21

            
	
              Section
      5.4   Keeping of Records and Books of Account; Foreign
      Corrupt Practices Act

            	
              21

            
	
              Section
      5.5   Limitations on Holdings and Issuances

            	
              22

            
	
              Section
      5.6   Other Agreements and Other
Financings.

            	
              22

            
	
              Section
      5.7   Stop Orders

            	
              23

            
	
              Section
      5.8   Amendments to the Registration Statement; Prospectus
      Supplements; Free Writing Prospectuses

            	
              24

            
	
              Section
      5.9   Prospectus Delivery

            	
              25

            
	
              Section
      5.10  Selling Restrictions.

            	
              25

            
	
              Section
      5.11  Effective Registration Statement

            	
              26

            
	
              Section
      5.12  Non-Public Information

            	
              26

            
	
              Section
      5.13  Broker/Dealer

            	
              26

            
	
              Section
      5.14  Disclosure Schedule

            	
              27

            
	 	 
	
              Article
      VI OPINION OF COUNSEL AND CERTIFICATE; CONDITIONS TO THE SALE AND PURCHASE
      OF THE SHARES

            	
              27

            
	
              Section
      6.1   Opinion of Counsel and Certificate

            	
              27

            
	
              Section
      6.2   Conditions Precedent to the Obligation of the
      Company

            	
              27

            
	
              Section
      6.3   Conditions Precedent to the Obligation of the
      Investor

            	
              29

            
	 	 
	
              Article
      VII TERMINATION

            	
              31

            
	
              Section
      7.1   Term, Termination by Mutual Consent

            	
              31

            
	
              Section
      7.2   Other Termination

            	
              31

            
	
              Section
      7.3   Effect of Termination

            	
              32

            
	 	 
	
              Article
      VIII INDEMNIFICATION

            	
              32

            
	
              Section
      8.1   General Indemnity.

            	
              32

            
	
              Section
      8.2   Indemnification Procedures

            	
              34

            
	 	 
	
              Article
      IX MISCELLANEOUS

            	
              35

            
	
              Section
      9.1   Fees and Expenses.

            	
              35

            
	
              Section
      9.2   Specific Enforcement, Consent to Jurisdiction, Waiver
      of Jury Trial

            	
              36

            

    

    
      
         

      

      
        ii 

        
          

        

      

      
         

      

    

    

    
      	
              Section
      9.3   Entire Agreement; Amendment

            	
              37

            
	
              Section
      9.4   Notices

            	
              37

            
	
              Section
      9.5   Waivers

            	
              38

            
	
              Section
      9.6   Headings

            	
              38

            
	
              Section
      9.7   Successors and Assigns

            	
              38

            
	
              Section
      9.8   Governing Law

            	
              38

            
	
              Section
      9.9   Survival

            	
              38

            
	
              Section
      9.10  Counterparts

            	
              38

            
	
              Section
      9.11  Publicity

            	
              39

            
	
              Section
      9.12  Severability

            	
              39

            
	
              Section
      9.13  Further Assurances

            	
              39

            
	 
      	 
      
	
              Annex A.   Definitions

            	 
      

    

    

     

    
      
         

      

      
        iii 

        
          

        

      

      
         

      

    

    COMMON
SHARE PURCHASE AGREEMENT

     

    This
COMMON SHARE PURCHASE
AGREEMENT, made and entered into on this 21st day of
October 2008 (this “Agreement”), by and
between Azimuth Opportunity Ltd., an international business company incorporated
under the laws of the British Virgin Islands (the “Investor”), and XOMA
Ltd., a company organized and existing under the laws of Bermuda (the “Company”).
Capitalized terms used but not defined herein shall have the meanings ascribed
to such terms in Annex
A hereto.

     

    RECITALS

     

    WHEREAS, the parties desire
that, upon the terms and subject to the conditions contained herein, the Company
may issue and sell to the Investor and the Investor shall thereupon purchase
from the Company up to $60,000,000 of newly issued common shares of the Company,
U.S. $0.0005 par value per share (“Common Shares”),
subject, in all cases, to the Trading Market Limit; and

     

    WHEREAS, the offer and sale of
the Common Shares hereunder have been registered by the Company in the
Registration Statement, which has been declared effective by order of the
Commission under the Securities Act;

     

    NOW, THEREFORE, the parties
hereto, intending to be legally bound, hereby agree as follows:

     

    ARTICLE
I

    PURCHASE
AND SALE OF COMMON SHARES

     

    Section
1.1 Purchase and Sale of
Stock.  Upon
the terms and subject to the conditions of this Agreement, during the Investment
Period the Company in its discretion may issue and sell to the Investor up to
$60,000,000 (the “Total Commitment”) of
duly authorized, validly issued, fully paid and non-assessable Common Shares
(subject in all cases to the Trading Market Limit, the “Aggregate Limit”), by
(i) the delivery to the Investor of not more than 24 separate Fixed Request
Notices (unless the Investor and the Company mutually agree that a different
number of Fixed Request Notices may be delivered) as provided in Article II
hereof and (ii) the exercise by the Investor of Optional Amounts, which the
Company may in its discretion grant to the Investor and which may be exercised
by the Investor, in whole or in part, as provided in Article II
hereof.  The aggregate of all Fixed Request Amounts and Optional
Amount Dollar Amounts shall not exceed the Aggregate Limit.

     

    Section
1.2 Effective Date; Settlement
Dates.  This
Agreement shall become effective and binding upon delivery of counterpart
signature pages of this Agreement executed by each of the parties hereto, and by
delivery of an opinion of counsel and a certificate of the Company as provided
in Section 6.1 hereof, to the offices of Greenberg Traurig, LLP, 200 Park
Avenue, New York, New York 10166, at l:00 p.m., New York time, on the Effective
Date.  In consideration of and in express reliance upon the
representations, warranties and covenants, and otherwise upon the terms and
subject to the conditions, of this Agreement, from and after the Effective Date
and during the Investment Period (i) the Company shall issue and sell to the
Investor, and the Investor agrees to purchase from the Company, the Shares in
respect of each

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Fixed
Request and (ii) the Investor may in its discretion elect to purchase Shares in
respect of each Optional Amount.  The issuance and sale of Shares to
the Investor pursuant to any Fixed Request or Optional Amount shall occur on the
applicable Settlement Date in accordance with Sections 2.7 and 2.9 (or on such
Trading Day in accordance with Section 2.8, as applicable), provided in each
case that all of the conditions precedent thereto set forth in Article VI
theretofore shall have been fulfilled or (to the extent permitted by applicable
law) waived.

     

    Section
1.3 The
Shares

     

    Section
1.4 .  The
Company has or will have duly authorized and reserved for issuance, and
covenants to continue to so reserve once reserved for issuance, free of all
preemptive and other similar rights, at all times during the Investment Period,
the requisite aggregate number of authorized but unissued Common Shares to
timely effect the issuance, sale and delivery in full to the Investor of all
Shares to be issued in respect of all Fixed Requests and Optional Amounts under
this Agreement, in any case prior to the issuance to the Investor of such
Shares.

     

    Section
1.5 Current Report; Prospectus
Supplement.  As
soon as practicable, but in any event not later than 5:30 p.m. (New York time)
on the first Trading Day immediately following the Effective Date, the Company
shall file with the Commission a report on Form 8-K relating to the transactions
contemplated by, and describing the material terms and conditions of, this
Agreement and disclosing all information relating to the transactions
contemplated hereby required to be disclosed in the Registration Statement and
the Base Prospectus (but which permissibly has been omitted therefrom in
accordance with the Securities Act), including, without limitation, information
required to be disclosed in the section captioned “Plan of Distribution” in the
Base Prospectus (the “Current
Report”).  The Current Report shall include a copy of this
Agreement as an exhibit.  To the extent applicable, the Current Report
shall be incorporated by reference in the Registration Statement in accordance
with the provisions of Rule 430B under the Securities Act.  The
Company heretofore has provided the Investor a reasonable opportunity to comment
on a draft of such Current Report and has given due consideration to such
comments.  The Company shall file a final Base Prospectus pursuant to
Rule 424(b) under the Securities Act on or prior to the second Trading Day
immediately following the Effective Date.  Pursuant to Section 5.9 and
subject to the provisions of Section 5.8, on the first Trading Day immediately
following the last Trading Day of each Pricing Period, the Company shall file
with the Commission a Prospectus Supplement pursuant to Rule 424(b) under the
Securities Act disclosing the number of Shares to be issued and sold to the
Investor thereunder, the total purchase price therefor and the net proceeds to
be received by the Company therefrom and, to the extent required by the
Securities Act, identifying the Current Report.

     

    ARTICLE
II

    FIXED
REQUEST TERMS; OPTIONAL AMOUNT

     

    Subject
to the satisfaction of the conditions set forth in this Agreement, the parties
agree (unless otherwise mutually agreed upon by the parties in writing) as
follows:

     

    Section
2.1 Fixed Request
Notice.  Upon
two Trading Days’ prior notice to the Investor, the Company may, from time to
time in its sole discretion, provide a notice to the Investor of a Fixed Request
before 9:30 a.m. (New York time) on the first Trading Day of the Pricing Period
(the “Fixed Request
Notice”), substantially in the form attached hereto as Exhibit

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    A.  The
Fixed Request Notice shall specify the Fixed Amount Requested, establish the
Threshold Price for such Fixed Request, designate the first Trading Day of the
Pricing Period and specify the Optional Amount, if any, that the Company elects
to grant to the Investor during the Pricing Period and the applicable Threshold
Price for such Optional Amount (the “Optional Amount Threshold
Price”).  The Threshold Price and the Optional Amount Threshold
Price established by the Company in a Fixed Request Notice may be the same or
different, in the Company’s sole discretion.  Upon the terms and
subject to the conditions of this Agreement, the Investor is obligated to accept
each Fixed Request Notice prepared and delivered in accordance with the
provisions of this Agreement.

     

    Section
2.2 Fixed
Requests

     

    .  From
time to time during the Investment Period, the Company may in its sole
discretion deliver to the Investor a Fixed Request Notice for a specified Fixed
Amount Requested, and the applicable discount price (the “Discount Price”)
shall be determined, in accordance with the price and share amount parameters as
set forth below or such other parameters mutually agreed upon by the Investor
and the Company, and upon the terms and subject to the conditions of this
Agreement, the Investor shall purchase from the Company the Shares subject to
such Fixed Request Notice; provided, however, that (i) if
an ex-dividend date is established by the Trading Market in respect of the
Common Shares on or between the first Trading Day of the applicable Pricing
Period and the applicable Settlement Date, the Discount Price shall be reduced
by the per share dividend amount and (ii) the Company may not deliver any single
Fixed Request Notice for a Fixed Amount Requested in excess of the lesser of (a)
the amount in the applicable Fixed Amount Requested column below and (b) 2.5% of
the Market Capitalization:

     

    
      	
              Threshold
      Price

            	
              Fixed Amount
      Requested

            	
              Discount
      Price

            
	 	 	 
	
              Equal
      to or greater than $8.00

            	
              Not
      to exceed $16,000,000

            	
              97.35%
      of the VWAP

            
	 	 	 
	
              Equal
      to or greater than $7.00 and less than $8.00

            	
              Not
      to exceed $14,000,000

            	
              97.10%
      of the VWAP

            
	 	 	 
	
              Equal
      to or greater than $6.00 and less than $7.00

            	
              Not
      to exceed $12,000,000

            	
              96.85%
      of the VWAP

            
	 	 	 
	
              Equal
      to or greater than $5.00 and less than $6.00

            	
              Not
      to exceed $10,000,000

            	
              96.60%
      of the VWAP

               

            
	
              Equal
      to or greater than $4.00 and less than $5.00

            	
              Not
      to exceed $8,000,000

            	
              96.35%
      of the VWAP

               

            
	
              Equal
      to or greater than $3.50 and less than $4.00

            	
              Not
      to exceed $7,000,000

            	
              95.35%
      of the VWAP

               

            
	
              Equal
      to or greater than $3.00 and less than $3.50

            	
              Not
      to exceed $6,000,000

            	
              94.85%
      of the VWAP

               

            
	
              Equal
      to or greater than $2.50 and less than $3.00

            	
              Not
      to exceed $5,000,000

            	
              94.35%
      of the VWAP

               

            
	
              Equal
      to or greater than $2.00 and less than $2.50

            	
              Not
      to exceed $4,000,000

            	
              93.85%
      of the VWAP

               

            
	
              Equal
      to or greater than $1.50 and less than $2.00

            	
              Not
      to exceed $4,000,000

            	
              93.35%
      of the VWAP

               

            
	
              Equal
      to or greater than $1.00 and less than $1.50

            	
              Not
      to exceed $3,500,000

            	
              93.35%
      of the VWAP

               

            

    

    

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    Anything
to the contrary in this Agreement notwithstanding, at no time shall the Investor
be required to purchase more than $16,000,000 worth of Common Shares in respect
of any Pricing Period (not including Common Shares subject to any Optional
Amount).  The date on which the Company delivers any Fixed Request
Notice in accordance with this Section 2.2 hereinafter shall be referred to as a
“Fixed Request
Exercise Date”.

     

    Section
2.3 Share
Calculation.  With
respect to the Trading Days during the applicable Pricing Period for which the
VWAP equals or exceeds the Threshold Price, the number of Shares to be issued by
the Company to the Investor pursuant to a Fixed Request shall equal the
aggregate sum of each quotient (calculated for each Trading Day during the
applicable Pricing Period for which the VWAP equals or exceeds the Threshold
Price) determined pursuant to the following equation (rounded to the nearest
whole Share):

     

    N = (A x
B)/C, where:

     

    N = the
number of Shares to be issued by the Company to the Investor in respect of a
Trading Day during the applicable Pricing Period for which the VWAP equals or
exceeds the Threshold Price,

     

    
      A = 0.10
(the “Multiplier”),

    

     

    
      B = the
total Fixed Amount Requested, and

    

     

    
      C = the
applicable Discount Price.

    

     

    Section
2.4 Limitation of Fixed
Requests.  The
Company shall not make more than one Fixed Request in each Pricing
Period.  Not less than five Trading Days shall elapse between the end
of one Pricing Period and the commencement of any other Pricing Period during
the Investment Period.  There shall be permitted a maximum of 24 Fixed
Requests during the Investment Period.  Each Fixed Request
automatically shall expire immediately following the last Trading Day of each
Pricing Period.

     

    Section
2.5 Reduction of
Commitment.  On
the last Trading Day of each Pricing Period, the Investor’s Total Commitment
under this Agreement automatically (and without the need for any amendment to
this Agreement) shall be reduced, on a dollar-for-dollar basis, by the total
amount of the Fixed Request Amount and the Optional Amount Dollar Amount, if
any, for such Pricing Period paid to the Company at the Settlement
Date.

     

    Section
2.6 Below Threshold
Price.  If
the VWAP on any Trading Day in a Pricing Period is lower than the Threshold
Price, then for each such Trading Day the Fixed Amount Requested shall be
reduced, on a dollar-for-dollar basis, by an amount equal to the product of (x)
the Multiplier and (y) the total Fixed Amount Requested, and no Shares shall be
purchased or sold with respect to such Trading Day, except as provided
below.  If trading in the Common Shares on NASDAQ (or any other U.S.
national securities exchange on which the Common Shares are then listed) is
suspended for any reason for more than three hours on any Trading Day, the
Investor may at its option deem the price of the Common Shares to be lower than
the Threshold Price for such Trading Day and, for each such Trading Day, the
total amount of the

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    Fixed
Amount Requested shall be reduced as provided in the immediately preceding
sentence, and no Shares shall be purchased or sold with respect to such Trading
Day, except as provided below.  For each Trading Day during a Pricing
Period on which the VWAP is lower (or is deemed to be lower as provided in the
immediately preceding sentence) than the Threshold Price, the Investor may in
its sole discretion elect to purchase such U.S. dollar amount
of Shares equal to the amount by which the Fixed Amount Requested has been
reduced in accordance with this Section 2.6, at the Threshold Price multiplied
by the applicable percentage determined in accordance with the price and share
amount parameters set forth in Section 2.2.  The Investor shall inform
the Company via facsimile transmission not later than 8:00 p.m. (New York time)
on the last Trading Day of such Pricing Period as to the number of Shares, if
any, the Investor elects to purchase as provided in this Section
2.6.

     

    Section
2.7 Settlement.  The
payment for, against simultaneous delivery of, Shares in respect of each Fixed
Request shall be settled on the second Trading Day next following the last
Trading Day of each Pricing Period, or on such earlier date as the parties may
mutually agree (the “Settlement
Date”).  On each Settlement Date, the Company shall deliver the
Shares purchased by the Investor to the Investor or its designees via DTC’s
Deposit Withdrawal Agent Commission (DWAC) system, against simultaneous payment
therefor to the Company’s designated account by wire transfer of immediately
available funds, provided that if the Shares are received by the Investor later
than 1:00 p.m. (New York time), payment therefor shall be made with next day
funds.  As set forth in Section 9.1(ii), a failure by the Company to
deliver such Shares shall result in the payment of liquidated damages by the
Company to the Investor.

     

    Section
2.8 Reduction of Pricing
Period.  If
during a Pricing Period the Company elects to reduce the number of Trading Days
in such Pricing Period (and thereby amend its previously delivered Fixed Request
Notice), the Company shall so notify the Investor before 9:00 a.m. (New York
time) on any Trading Day during a Pricing Period (a “Reduction Notice”)
and the last Trading Day of such Pricing Period shall be the Trading Day
immediately preceding the Trading Day on which the Investor received such
Reduction Notice; provided, however, that if the
Company delivers the Reduction Notice later than 9:00 a.m. (New York time) on a
Trading Day during a Pricing Period, then the last Trading Day of such Pricing
Period instead shall be the Trading Day on which the Investor received such
Reduction Notice.

     

    Upon
receipt of a Reduction Notice, the Investor (i) shall purchase the Shares in
respect of each Trading Day in such reduced Pricing Period for which the VWAP
equals or exceeds the Threshold Price in accordance with Section 2.3 hereof;
(ii) may elect to purchase the Shares in respect of any Trading Day in such
reduced Pricing Period for which the VWAP is (or is deemed to be) lower than the
Threshold Price in accordance with Section 2.6 hereof; and (iii) may elect to
exercise all or any portion of an Optional Amount on any Trading Day during such
reduced Pricing Period in accordance with Sections 2.10 and 2.11
hereof.

     

    In
addition, upon receipt of a Reduction Notice, the Investor may elect to purchase
such U.S. dollar amount of additional Shares equal to the product determined
pursuant to the following equation:

     

    D = (A/B)
x (B – C), where:

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    

     

    D = the
U.S. dollar amount of additional Shares to be purchased,

     

    A = the
Fixed Amount Requested,

     

    
      B = 10
or, for purposes of this Section 2.8, such lesser number of Trading Days as the
parties may mutually agree to, and

    

     

    C = the
number of Trading Days in the reduced Pricing Period,

     

    at a per
Share price equal to (x) the Fixed Amount Requested attributable to the reduced
Pricing Period divided by (y) the number of Shares to be purchased during such
reduced Pricing Period pursuant to clauses (i) and (ii) (as applicable) of the
immediately preceding paragraph.

     

    The
Investor may also elect to exercise any portion of the applicable Optional
Amount which was unexercised during the reduced Pricing Period (provided that
such portion of the applicable Optional Amount, when combined with the portion
of the Optional Amount exercised during the reduced Pricing Period, does not
exceed the total Optional Amount set forth in the Fixed Request Notice) by
issuing an Optional Amount Notice to the Company not later than 10:00 a.m. (New
York time) on the first Trading Day next following the last Trading Day of the
reduced Pricing Period. The number of Shares to be issued upon exercise of such
Optional Amount shall be calculated pursuant to the equation set forth in
Section 2.10 hereof, except that “C” shall equal the greater of (i) the VWAP for
the Common Shares on the last Trading Day of the reduced Pricing Period or (ii)
the Optional Amount Threshold Price.

     

    The
payment for, against simultaneous delivery of, Shares to be purchased and sold
in accordance with this Section 2.8 shall be settled on the second Trading Day
next following the Trading Day on which the Investor receives a Reduction
Notice.

     

    Section
2.9 Optional
Amount.  With
respect to any Pricing Period, the Company may in its sole discretion grant to
the Investor the right to exercise, from time to time during the Pricing Period
(but not more than once on any Trading Day), all or any portion of an Optional
Amount.  The maximum Optional Amount Dollar Amount and the Optional
Amount Threshold Price shall be set forth in the Fixed Request
Notice.  If an ex-dividend date is established by the Trading Market
in respect of the Common Shares on or between the first Trading Day of the
applicable Pricing Period and the applicable Settlement Date, the applicable
exercise price in respect of the Optional Amount shall be reduced by the per
share dividend amount.  Each daily Optional Amount exercise shall be
aggregated during the Pricing Period and settled on the next Settlement
Date.  The Optional Amount Threshold Price designated by the Company
in its Fixed Request Notice shall apply to each Optional Amount exercised during
the applicable Pricing Period.

     

    Section
2.10 Calculation of Optional
Amount Shares.  The
number of Common Shares to be issued in connection with the exercise of an
Optional Amount shall be the quotient determined pursuant to the following
equation (rounded to the nearest whole Share):

     

    O = A/(B
x C), where:

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    

     

    
      O = the
number of Common Shares to be issued in connection with such Optional Amount
exercise,

    

     

    
      A = the
Optional Amount Dollar Amount with respect to which the Investor has delivered
an Optional Amount Notice,

    

     

    
      B = the
applicable percentage determined in accordance with the price and shares amount
parameters set forth in Section 2.2 (with the Optional Amount Threshold Price
serving as the Threshold Price for such purposes), and

    

     

    
      C = the
greater of (i) the VWAP for the Common Shares on the day the Investor delivers
the Optional Amount Notice or (ii) the Optional Amount Threshold
Price.

    

     

    Section
2.11 Exercise of Optional
Amount.  If
granted by the Company to the Investor with respect to a Pricing Period, all or
any portion of the Optional Amount may be exercised by the Investor on any
Trading Day during the Pricing Period, subject to the limitations set forth in
Section 2.9.  As a condition to each exercise of an Optional Amount
pursuant to this Section 2.11, the Investor shall issue an Optional Amount
Notice to the Company no later than 8:00 p.m. (New York time) on the day of such
Optional Amount exercise.  If the Investor does not exercise an
Optional Amount in full by 8:00 p.m. (New York time) on the last Trading Day of
the applicable Pricing Period, such unexercised portion of the Investor’s
Optional Amount with respect to that Pricing Period automatically shall lapse
and terminate.

     

    Section
2.12 Aggregate
Limit.  Notwithstanding
anything to the contrary contained in this Agreement, in no event may the
Company issue a Fixed Request Notice or grant an Optional Amount to the extent
that the sale of Shares pursuant thereto and pursuant to all prior Fixed Request
Notices and Optional Amounts issued hereunder, and as liquidated damages
pursuant to Section 9.1(ii), would cause the Company to sell or the Investor to
purchase Shares which in the aggregate are in excess of the Aggregate
Limit.  If the Company issues a Fixed Request Notice or Optional
Amount that otherwise would permit the Investor to purchase Common Shares which
would cause the aggregate purchases by Investor hereunder to exceed the
Aggregate Limit, such Fixed Request Notice or Optional Amount shall be void
ab initio to the extent
of the amount by which the dollar value or number, as the case may be, of Common
Shares otherwise issuable pursuant to such Fixed Request Notice or Optional
Amount together with the dollar value or number, as the case may be, of all
other Common Shares purchased by the Investor pursuant hereto would exceed the
Aggregate Limit.  The Company hereby represents, warrants and
covenants that neither it nor any of its Subsidiaries (i) has effected any
transaction or series of transactions, (ii) is a party to any pending
transaction or series of transactions or (iii) shall enter into any contract,
agreement, agreement-in-principle, arrangement or understanding with respect to,
or shall effect, any Other Financing which, in any of such cases, would be
aggregated with the transactions contemplated by this Agreement for purposes of
determining whether approval of the Company’s shareholders is required under any
bylaw, listed securities maintenance standards or other rules of the Trading
Market; provided, however, that the
Company shall be permitted to take any action referred to in clause (iii) above
if the Company has timely provided the Investor with an Integration Notice as
provided in Section 5.6(ii) hereof.

     

    
      
         

      

      
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    At the
Company’s sole discretion, and effective automatically upon receipt by the
Investor of notice thereof from the Company, this Agreement may be amended by
the Company from time to time to reduce the Aggregate Limit by a specified
dollar amount of Common Shares which shall be no greater than is required to
enable the Company to utilize the Registration Statement to consummate an
underwritten public offering of Common Shares or a registered direct public
offering of Common Shares during the Investment Period; provided, however, that any
such amendment of this Agreement (and any such purported amendment) shall be
void and of no force and effect if the effect thereof would restrict, materially
delay, conflict with or impair the ability or right of the Company to perform
its obligations under this Agreement, including, without limitation, the
obligation of the Company to deliver Shares to the Investor in respect of a
Fixed Request or Optional Amount on the applicable Settlement
Date.  In the event the Company shall have elected to reduce the
Aggregate Limit as provided in the immediately preceding sentence, at the
Company’s sole discretion, and effective automatically upon receipt by the
Investor of notice thereof from the Company, the Company may subsequently amend
this Agreement to increase the Aggregate Limit up to $60,000,000; provided, however, that in no
event shall the Company be entitled to issue Fixed Requests and grant Optional
Amounts during the remainder of the Investment Period for an aggregate amount
greater than the amount obtained by subtracting (x) the aggregate of all Fixed
Request Amounts and Optional Amount Dollar Amounts (including any amounts paid
as liquidated damages pursuant to Section 9.1(ii) hereunder) covered by all
Fixed Requests and Optional Amounts theretofore issued or granted by the Company
in respect of which a settlement has occurred pursuant to Section 2.7 from (y)
$60,000,000, subject in all cases to the Trading Market Limit.

     

    ARTICLE
III

    REPRESENTATIONS
AND WARRANTIES OF THE INVESTOR

     

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

     

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

     

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

     

    
      
         

      

      
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    not and
shall not (i) result in a violation of such Investor’s charter documents,
bye-laws or other applicable organizational instruments, (ii) conflict with,
constitute a default (or an event which, with notice or lapse of time or both,
would become a default) under, or give rise to 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 or is bound, (iii) create or impose
any lien, charge or encumbrance on any property of the Investor under any
agreement or any commitment to which the Investor is party or under which the
Investor is bound or under which any of its properties or assets are bound, or
(iv) result in a violation of any federal, state, local or foreign statute,
rule, or regulation, or any order, judgment or decree of any court or
governmental agency applicable to the Investor or by which any of its properties
or assets are bound or affected, except, in the case of clauses (ii), (iii) and
(iv), for such conflicts, defaults, terminations, amendments, acceleration,
cancellations and violations as would not, individually or in the aggregate,
prohibit or otherwise interfere with the ability of the Investor to enter into
and perform its obligations under this Agreement in any material
respect.  The Investor is not required under federal, state, local or
foreign 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 in accordance with the terms
hereof.

     

    Section
3.4 Information.  The
Investor and its advisors have been furnished with all materials relating to the
business, financial condition, management and operations of the Company and
materials relating to the offer and sale of the Shares which have been requested
by the Investor.  The Investor and its advisors have been afforded the
opportunity to ask questions of representatives 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 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
3.5 Financial
Capability.  The
Investor has the financial capability to perform all of its obligations under
this Agreement, including the capability to purchase the Shares in accordance
with the terms hereof.

     

    ARTICLE
IV

    REPRESENTATIONS
AND WARRANTIES OF THE COMPANY

     

    Except as
set forth in the disclosure schedule delivered by the Company to the Investor
(which is hereby incorporated by reference in, and constitutes an integral part
of, this Agreement) (the “Disclosure
Schedule”), the Company hereby makes the following representations and
warranties to the Investor:

     

    Section
4.1 Organization, Good Standing
and Power.  The
Company is duly continued to, validly existing and in good standing under the
laws of Bermuda and has the requisite corporate power and authority to own,
lease and operate its properties and assets and to conduct its business as it is
now being conducted.  The Company and each Subsidiary is duly
qualified as a foreign corporation to do business and is in good standing in
every jurisdiction in the United States in which the nature of the business
conducted or property owned by it makes

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    such
qualification necessary, except for any jurisdiction in which the failure to be
so qualified would not have a Material Adverse Effect.

     

    Section
4.2 Authorization,
Enforcement.  The
Company has the requisite corporate power and authority to enter into and
perform this Agreement and to issue and sell the Shares in accordance with the
terms hereof.  Except for approvals of the Company’s Board of
Directors or a committee thereof as may be required in connection with any
issuance and sale of Shares to the Investor hereunder (which approvals shall be
obtained prior to the delivery of any Fixed Request Notice), the execution,
delivery and performance by the Company of this Agreement and the consummation
by it of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action and no further consent or
authorization of the Company or its Board of Directors or shareholders is
required.  This Agreement has been duly executed 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, 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
4.3 Capitalization.  The
authorized share capital of the Company and the shares thereof issued and
outstanding are as set forth in the Commission Documents as of the dates
reflected therein.  All of the issued and outstanding Common Shares
have been duly authorized and validly issued, and are fully paid and
nonassessable.  Except as set forth in the Commission Documents, as of
the Effective Date, no Common Shares 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, any share
capital of the Company, other than those issued or granted in the ordinary
course of business and consistent with past practice.  Except as set
forth in the Commission Documents, there were no contracts, commitments,
understandings, or arrangements by which the Company is or may become bound to
issue additional share capital of the Company or options, securities or rights
convertible into or exchangeable for any share capital of the
Company.  Except for customary transfer restrictions contained in
agreements entered into by the Company to sell restricted securities or as set
forth in the Commission Documents, as of the Effective Date, the Company was not
a party to, and it had no knowledge of, any agreement restricting the voting or
transfer of any of the share capital of the Company.  Except as set
forth in the Commission Documents, the offer and sale of all share capital,
convertible or exchangeable securities, rights, warrants or options of the
Company issued prior to the Effective Date complied with all applicable federal
and state securities laws, and no shareholder has any right of rescission or
damages or any “put” or similar right with respect thereto that would have a
Material Adverse Effect.  The Company has furnished or made available
to the Investor via the Commission’s Electronic Data Gathering, Analysis and
Retrieval System (“EDGAR”) true and
correct copies of the Company’s Certificate of Continuance as in effect on the
Effective Date (the “Charter”), and the
Company’s Bye-laws as in effect on the Effective Date (the “Bye-laws”), and true
and correct copies (redacted as appropriate) of all executed resolutions of the
Company’s Board of Directors (and committees thereof) relating to the share
capital of the Company (and transactions in respect thereof) since December 31,
2005

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    (except
with respect to issuances of share capital of the Company to directors or
employees of the Company as fees or compensation that were duly approved by the
Company’s Board of Directors or a committee thereof).

     

    Section
4.4 Issuance of
Shares.  The
Shares to be issued under this Agreement have been or will be duly authorized by
all necessary corporate action and, when paid for or issued in accordance with
the terms hereof, the Shares shall be validly issued and outstanding, fully paid
and nonassessable, and, when the Shares have been issued to the Investor, the
Investor shall be entitled to all rights accorded to a holder and beneficial
owner of Common Shares.

     

    Section
4.5 No
Conflicts.  The
execution, delivery and performance by the Company of this Agreement and the
consummation by the Company of the transactions contemplated herein do not and
shall not (i) result in a violation of any provision of the Company’s Charter or
Bye-laws, (ii) conflict with, constitute a default (or an event which, with
notice or lapse of time or both, would become a default) under, or give rise to
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 or any of its
Significant Subsidiaries is a party or is bound (including, without limitation,
any listing agreement with the Trading Market), (iii) create or impose a lien,
charge or encumbrance on any property of the Company or any of its Significant
Subsidiaries under any agreement or any commitment to which the Company or any
of its Significant Subsidiaries is a party or under which the Company or any of
its Significant Subsidiaries is bound or under which any of their respective
properties or assets are bound, or (iv) result in a violation of any federal,
state, local or foreign statute, rule, regulation, order, judgment or decree
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, except,
in the case of clauses (ii), (iii) and (iv), for such conflicts, defaults,
terminations, amendments, acceleration, cancellations, liens, charges,
encumbrances and violations as would not, individually or in the aggregate, have
a Material Adverse Effect.  The Company is not required under federal,
state, local or foreign 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 issue and sell the Shares to the
Investor in accordance with the terms hereof (other than any filings which may
be required to be made by the Company with the Commission or the Trading Market
subsequent to the Effective Date, including but not limited to a Prospectus
Supplement under Sections 1.4 and 5.9 of this Agreement, and any registration
statement, prospectus or prospectus supplement which has been or may be filed
pursuant to this Agreement).

     

    Section
4.6 Commission Documents,
Financial Statements.  (a)  The
Common Shares are registered pursuant to Section 12(b) or 12(g) of the Exchange
Act and, except as disclosed in the Commission Documents, as of the Effective
Date the Company had timely filed (giving effect to permissible extensions in
accordance with Rule 12b-25 under the Exchange Act) all Commission
Documents.  The Company has delivered or made available to the
Investor via EDGAR or otherwise true and complete copies of the Commission
Documents filed with the Commission prior to the Effective Date (including,
without limitation, the 2007 Form 10-K) and has delivered or made available to
the Investor via EDGAR or otherwise true and complete copies of all of the
Commission Documents heretofore incorporated by reference in the

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    Registration
Statement and the Prospectus.  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 filing date, each Commission Document filed with
the Commission and incorporated by reference in the Registration Statement and
the Prospectus (including, without limitation, the 2007 Form 10-K) complied in
all material respects with the requirements of the Securities Act or the
Exchange Act, as applicable, and other federal, state and local laws, rules and
regulations applicable to it, and, as of its filing date (or, if amended or
superseded by a filing prior to the Effective Date, on the date of such amended
or superseded filing), such Commission Document 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.  Each
Commission Document to be filed with the Commission after the Effective Date and
incorporated by reference in the Registration Statement, the Prospectus and any
Prospectus Supplement required to be filed pursuant to Sections 1.4 and 5.9
hereof during the Investment Period (including, without limitation, the Current
Report), when such document becomes effective or is filed with the Commission,
as the case may be, shall comply in all material respects with the requirements
of the Securities Act or the Exchange Act, as applicable, and other federal,
state and local laws, rules and regulations applicable to it, and shall 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.

     

    (b) The
financial statements, together with the related notes and schedules, of the
Company included in the Commission Documents comply as to form in all material
respects with all applicable accounting requirements and the published rules and
regulations of the Commission and all other applicable rules and regulations
with respect thereto.  Such financial statements, together with the
related notes and schedules, have been prepared in accordance with 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 condition of the Company and its consolidated
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).

     

    (c) The
Company has timely filed with the Commission and made available to the Investor
via EDGAR or otherwise all certifications and statements required by (x) Rule
13a-14 or Rule 15d-14 under the Exchange Act or (y) 18 U.S.C. Section 1350
(Section 906 of the Sarbanes-Oxley Act of 2002 (“SOXA”)) with respect
to all relevant Commission Documents.  The Company is in compliance in
all material respects with the provisions of SOXA applicable to it as of the
date hereof.  The Company maintains disclosure controls and procedures
required by Rule 13a-15 or Rule 15d-15 under the Exchange Act; such controls and
procedures are effective to ensure that all material information concerning the
Company and its Subsidiaries is made known on a timely basis to the individuals
responsible for the timely and accurate preparation of the Company’s Commission
filings and other public disclosure documents.  As

     

    
      
         

      

      
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    used in
this Section 4.6(c), the term “file” shall be broadly construed to include any
manner in which a document or information is furnished, supplied or otherwise
made available to the Commission.

     

    (d) Ernst
& Young LLP, who have expressed their opinions on the audited financial
statements and related schedules included or incorporated by reference in the
Registration Statement and the Base Prospectus are, with respect to the Company,
independent public accountants as required by the Securities Act and is an
independent registered public accounting firm within the meaning of SOXA as
required by the rules of the Public Company Accounting Oversight
Board.

     

    Section
4.7 Subsidiaries.  The
2007 Form 10-K sets forth each Subsidiary of the Company as of the Effective
Date, showing its jurisdiction of incorporation or organization, and the Company
owns all of the outstanding capital stock or other ownership interests of each
such Subsidiary and does not have any other Subsidiaries as of the Effective
Date.

     

    Section
4.8 No Material Adverse
Effect.  Since December
31, 2007, the Company has not experienced or suffered any Material Adverse
Effect, and there exists no current state of facts, condition or event which
would have a Material Adverse Effect, except (i) as disclosed in any Commission
Documents filed since December 31, 2007 or (ii) continued losses from
operations.

     

    Section
4.9 Indebtedness.  The
Company’s Quarterly Report on Form 10-Q for its fiscal quarter ended June 30,
2008 sets forth, as of June 30, 2008, all outstanding secured and unsecured
Indebtedness of the Company or any Subsidiary, or for which the Company or any
Subsidiary has commitments through such date.  For the purposes of
this Agreement, “Indebtedness” shall
mean (a) any liabilities for borrowed money or amounts owed in excess of
$10,000,000 (other than trade accounts payable incurred in the ordinary course
of business), (b) all guaranties, endorsements, indemnities and other contingent
obligations in respect of Indebtedness of others in excess of $10,000,000,
whether or not the same are or should be reflected in the Company’s balance
sheet (or the notes thereto), except guaranties by endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary
course of business; and (c) the present value of any lease payments in excess of
$10,000,000 due under leases required to be capitalized in accordance with
GAAP.  There is no existing or continuing default or event of default
in respect of any Indebtedness of the Company or any of its
Subsidiaries.

     

    Section
4.10 Title To
Assets.  Each
of the Company and its Subsidiaries has good and marketable title to all of
their respective real and personal property reflected in the Commission
Documents, free of mortgages, pledges, charges, liens, security interests or
other encumbrances, except for those indicated in the Commission Documents or
those that would not have a Material Adverse Effect.  To the Company’s
knowledge, all real property leases of the Company are valid and subsisting and
in full force and effect in all material respects.

     

    Section
4.11 Actions
Pending.  There
is no action, suit, claim, investigation or proceeding pending, or to the
knowledge of the Company threatened in writing, against the Company or any
Subsidiary which questions the validity of this Agreement or the
transactions

     

    
      
         

      

      
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    contemplated
hereby or any action taken or to be taken pursuant hereto or
thereto.  Except as set forth in the Commission Documents, 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, or involving any officers or directors
of the Company or any of its Subsidiaries, including, without limitation, any
securities class action lawsuit or shareholder derivative lawsuit, in each case
which, if determined adversely to the Company, its Subsidiary or any officer or
director of the Company or its Subsidiaries, would have a Material Adverse
Effect.  With respect to each of those certain actions under the
caption “Item 3. Legal Proceedings” in the 2007 Form 10-K, there has been no
event or change required to be disclosed in a filing under the Exchange Act that
has not been so disclosed.

     

    Section
4.12 Compliance With
Law.  The
business of the Company and the Subsidiaries has been and is presently being
conducted in compliance with all applicable federal, state, local and foreign
governmental laws, rules, regulations and ordinances, except as set forth in the
Commission Documents and except for such non-compliance which, individually or
in the aggregate, would not have a Material Adverse Effect.

     

    Section
4.13 Certain
Fees.  Except
for the placement fee payable by the Company to Reedland Capital Partners, an
Institutional Division of Financial West Group, Member FINRA/SIPC (“Reedland”), which
shall be set forth in a separate engagement letter between the Company and
Reedland (a true and complete fully executed copy of which has heretofore been
provided to the Investor), no brokers, finders or financial advisory fees or
commissions shall be payable by the Company or any Subsidiary (or any of their
respective affiliates) with respect to the transactions contemplated by this
Agreement.

     

    Section
4.14 Operation of
Business.  (a)  The
Company or one or more of its Subsidiaries possesses such permits, licenses,
approvals, consents and other authorizations (including licenses, accreditation
and other similar documentation or approvals of any local health departments)
(collectively, “Governmental
Licenses”) issued by the appropriate federal, state, local or foreign
regulatory agencies or bodies, including, without limitation, the United States
Food and Drug Administration (“FDA”), necessary to
conduct the business now operated by it, except where the failure to possess
such Governmental Licenses, individually or in the aggregate, would not have a
Material Adverse Effect.  The Company and its Subsidiaries are in
compliance with the terms and conditions of all such Governmental Licenses and
all applicable FDA rules and regulations, guidelines and policies, and all
applicable rules and regulations, guidelines and policies of any governmental
authority exercising authority comparable to that of the FDA (including any
non-governmental authority whose approval or authorization is required under
foreign law comparable to that administered by the FDA), except where the
failure to so comply, individually or in the aggregate, would not have a
Material Adverse Effect.  All of the Governmental Licenses are valid
and in full force and effect, except where the invalidity of such Governmental
Licenses or the failure of such Governmental Licenses to be in full force and
effect, individually or in the aggregate, would not have a Material Adverse
Effect.  As to each product that is subject to FDA regulation or
similar legal provisions in any foreign jurisdiction that is developed,
manufactured, tested, packaged, labeled, marketed, sold, distributed and/or
commercialized by the Company or any of its Subsidiaries, each such product is
being developed, manufactured, tested, packaged, labeled, marketed, sold,
distributed and/or commercialized in compliance with all applicable requirements
of the FDA (and any non-

     

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

    governmental
authority whose approval or authorization is required under foreign law
comparable to that administered by the FDA), including, but not limited to,
those relating to investigational use, investigational device exemption,
premarket notification, premarket approval, good clinical practices, good
manufacturing practices, record keeping, filing of reports, and patient privacy
and medical record security, except where such non-compliance, individually or
in the aggregate, would not have a Material Adverse Effect.  As to
each product or product candidate of the Company or any of its Subsidiaries
subject to FDA regulation or similar legal provision in any foreign
jurisdiction, all manufacturing facilities of the Company and its Subsidiaries
are operated in compliance with the FDA’s Quality System Regulation requirements
at 21 C.F.R. Part 820, as applicable, except where such non-compliance,
individually or in the aggregate, would not have a Material Adverse
Effect.  Except as set forth in the Commission Documents or the
Registration Statement, neither the Company nor any of its Subsidiaries has
received any notice of proceedings relating to the revocation or modification of
any such Governmental Licenses or relating to a potential violation of, failure
to comply with, or request to produce additional information under, any FDA
rules and regulations, guidelines or policies which, if the subject of any
unfavorable decision, ruling or finding, individually or in the aggregate, would
have a Material Adverse Effect.  Except as set forth in the Commission
Documents or the Registration Statement, neither the Company nor any of its
Subsidiaries has received any correspondence, notice or request from the FDA,
including, without limitation, notice that any one or more products or product
candidates of the Company or any of its Subsidiaries failed to receive approval
from the FDA for use for any one or more indications, and neither the Company
nor any of its Subsidiaries knows of any basis therefor.  This Section
4.14 does not relate to environmental matters, such items being the subject of
Section 4.15.

     

    (b) The
Company or one or more of its Subsidiaries owns or possesses adequate patents,
patent rights, licenses, inventions, copyrights, know-how (including trade
secrets and other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures), trademarks, service marks, trade names,
trade dress, logos, copyrights and other intellectual property, including,
without limitation, all of the intellectual property described in the Commission
Documents as being owned or licensed by the Company (collectively, “Intellectual
Property”), necessary to carry on the business now operated by
it.  Except as set forth in the Commission Documents or on Schedule
4.14(b) hereto, there are no actions, suits or judicial proceedings pending, or
to the Company’s knowledge threatened, relating to patents or proprietary
information to which the Company or any of its Subsidiaries is a party or of
which any property of the Company or any of its Subsidiaries is subject, and
neither the Company nor any of its Subsidiaries has received any notice or is
otherwise aware of any infringement of or conflict with asserted rights of
others with respect to any Intellectual Property or of any facts or
circumstances which could render any Intellectual Property invalid or inadequate
to protect the interest of the Company and its Subsidiaries therein, and which
infringement or conflict (if the subject of any unfavorable decision, ruling or
finding) or invalidity or inadequacy, individually or in the aggregate, would
have a Material Adverse Effect.

     

    (c) All
pre-clinical and clinical trials conducted by, or on behalf of, the Company or
any of its Subsidiaries, or in which the Company or any of its Subsidiaries has
participated that are described in the Registration Statement or the Commission
Documents, or the results of which are referred to in the Registration Statement
or the Commission Documents,

     

    
      
         

      

      
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    if any,
are the only pre-clinical and clinical trials currently being conducted by or on
behalf of the Company and its Subsidiaries.  To the Company’s
knowledge, all such pre-clinical and clinical trials conducted, supervised or
monitored by, or on behalf of, the Company or any of its Subsidiaries have been
conducted in compliance with all applicable federal, state, local and foreign
laws, and the regulations and requirements of any applicable governmental
entity, including, but not limited to, FDA good clinical practice and good
laboratory practice requirements.  Except as set forth in the
Registration Statement or the Commission Documents or as would not be likely to
result in a Material Adverse Effect, neither the Company nor any of its
Subsidiaries has received any notices or correspondence from the FDA or any
other governmental agency requiring the termination, suspension, delay or
modification of any pre-clinical or clinical trials conducted by, or on behalf
of, the Company or any of its Subsidiaries or in which the Company or any of its
Subsidiaries has participated that are described in the Registration Statement
or the Commission Documents, if any, or the results of which are referred to in
the Registration Statement or the Commission Documents.  To the
Company’s knowledge, all pre-clinical and clinical trials previously conducted
by, or on behalf of, the Company or any of its Subsidiaries while conducted by
or on behalf of the Company or any of its Subsidiaries, were conducted in
compliance with all applicable federal, state, local and foreign laws, and the
regulations and requirements of any applicable governmental entity, including,
but not limited to, FDA good clinical practice and good laboratory practice
requirements.

     

    Section
4.15 Environmental
Compliance.  Except
as disclosed in the Commission Documents, the Company and each of its
Subsidiaries have obtained all material approvals, authorization, certificates,
consents, licenses, orders and permits or other similar authorizations of all
governmental authorities, or from any other person, that are required under any
Environmental Laws, except for any approvals, authorization, certificates,
consents, licenses, orders and permits or other similar authorizations the
failure of which to obtain does not or would not have a Material Adverse
Effect.  “Environmental Laws”
shall mean all applicable laws relating to the protection of the environment
including, without limitation, all requirements pertaining to reporting,
licensing, permitting, controlling, investigating or remediating emissions,
discharges, releases or threatened releases of hazardous substances, chemical
substances, pollutants, contaminants or toxic substances, materials or wastes,
whether solid, liquid or gaseous in nature, into the air, surface water,
groundwater or land, or relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of hazardous
substances, chemical substances, pollutants, contaminants or toxic substances,
material or wastes, whether solid, liquid or gaseous in
nature.  Except for such instances as would not, individually or in
the aggregate, have a Material Adverse Effect, to the Company’s knowledge, there
are no past or present events, conditions, circumstances, incidents, actions or
omissions relating to or in any way affecting the Company or its Subsidiaries
that violate or could reasonably be expected to violate any Environmental Law
after the Effective Date or that could reasonably be expected to give rise to
any environmental liability, or otherwise form the basis of any claim, action,
demand, suit, proceeding, hearing, study or investigation (i) under any
Environmental Law, or (ii) based on or related to the manufacture, processing,
distribution, use, treatment, storage (including without limitation underground
storage tanks), disposal, transport or handling, or the emission, discharge,
release or threatened release of any hazardous substance.

     

    
      
         

      

      
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    Section
4.16 Material
Agreements.  Except
as set forth in the Commission Documents, neither the Company nor any Subsidiary
of the Company is a party to any written or oral contract, instrument, agreement
commitment, obligation, plan or arrangement, a copy of which would be required
to be filed with the Commission as an exhibit to an annual report on Form 10-K
(collectively, “Material
Agreements”).  Except as set forth in the Commission Documents,
the Company and each of its Subsidiaries have performed in all material respects
all the obligations required to be performed by them under the Material
Agreements, have received no notice of default or an event of default by the
Company or any of its Subsidiaries thereunder and are not aware of any basis for
the assertion thereof, and neither the Company or any of its Subsidiaries nor,
to the knowledge of the Company, any other contracting party thereto are in
default under any Material Agreement now in effect, the result of which would
have a Material Adverse Effect.  Except as set forth in the Commission
Documents, each of the Material Agreements is in full force and effect, and
constitutes a legal, valid and binding obligation enforceable in accordance with
its terms against the Company and/or any of its Subsidiaries and, to the
knowledge of the Company, each other contracting party thereto, 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
4.17 Transactions With
Affiliates.  Except
as set forth in the Commission Documents, there are no loans, leases,
agreements, contracts, royalty agreements, management contracts, service
arrangements or other continuing transactions exceeding $120,000 between (a) the
Company or any Subsidiary, on the one hand, and (b) any person or entity who
would be covered by Item 404(a) of Regulation S-K, on the other
hand.  Except as disclosed in the Commission Documents, there are no
outstanding amounts payable to or receivable from, or advances by the Company or
any of its Subsidiaries to, and neither the Company nor any of its Subsidiaries
is otherwise a creditor of or debtor to, any beneficial owner of more than 5% of
the outstanding Common Shares, or any director, employee or affiliate of the
Company or any of its Subsidiaries, other than (i) reimbursement for reasonable
expenses incurred on behalf of the Company or any of its Subsidiaries or (ii) as
part of the normal and customary terms of such persons’ employment or service as
a director with the Company or any of its Subsidiaries.

     

    Section
4.18 Securities Act; NASD Conduct
Rules.  The
Company has complied with all applicable federal and state securities laws in
connection with the offer, issuance and sale of the Shares
hereunder.

     

    (i) The
Company has prepared and filed with the Commission in accordance with the
provisions of the Securities Act the Registration Statement, including a base
prospectus relating to the Shares.  The Registration Statement was
declared effective by order of the Commission on May 29, 2008.  As of
the date hereof, no stop order suspending the effectiveness of the Registration
Statement has been issued by the Commission or is continuing in effect under the
Securities Act and no proceedings therefor are pending before or, to the
Company’s knowledge, threatened by the Commission.  No order
preventing or suspending the use of the Prospectus or any Permitted Free Writing
Prospectus has been issued by the Commission.

     

    
      
         

      

      
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    (ii) The
Company meets the requirements for the use of Form S-3 under the Securities
Act.  The Commission has not notified the Company of any objection to
the use of the form of the Registration Statement.  The Registration
Statement complied in all material respects on the date on which it was declared
effective by the Commission and on the Effective Date of this Agreement, and
will comply in all material respects on each applicable Fixed Request Exercise
Date and on each applicable Settlement Date, with the requirements of the
Securities Act and the Registration Statement (including the documents
incorporated by reference therein) did not on the date it was declared effective
by the Commission and on the Effective Date of this Agreement and shall not on
each applicable Fixed Request Exercise Date and on each applicable Settlement
Date contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading; provided that this
representation and warranty does not apply to statements in or omissions from
the Registration Statement made in reliance upon and in conformity with
information relating to the Investor furnished to the Company in writing by or
on behalf of the Investor expressly for use therein. The Registration Statement,
as of the Effective Date, meets the requirements set forth in Rule 415(a)(1)(x)
under the Securities Act.  The Base Prospectus complied in all
material respects on its date, and will comply in all material respects on each
applicable Fixed Request Exercise Date and, when taken together with the
applicable Prospectus Supplement and any applicable Permitted Free Writing
Prospectus, on each applicable Settlement Date, with the requirements of the
Securities Act and did not on its date and on the Effective Date and shall not
on each applicable Fixed Request Exercise Date and, when taken together with the
applicable Prospectus Supplement and any applicable Permitted Free Writing
Prospectus, on each applicable Settlement Date contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; provided that this
representation and warranty does not apply to statements in or omissions from
the Base Prospectus made in reliance upon and in conformity with information
relating to the Investor furnished to the Company in writing by or on behalf of
the Investor expressly for use therein.

     

    (iii) In
accordance with NASD Conduct Rule 2710(b)(7)(C)(i) of the FINRA Financial
Industry Regulatory Authority (the “FINRA”), the offering
of the Shares pursuant to this Agreement has been registered with the Commission
on Form S-3 under the Securities Act pursuant to the standards for Form S-3 in
effect prior to October 21, 1992, and the Shares are being offered pursuant to
Rule 415 promulgated under the Securities Act.

     

    (iv) Each
Prospectus Supplement required to be filed pursuant to Sections 1.4 and 5.9
hereof, when taken together with the Base Prospectus and any applicable
Permitted Free Writing Prospectus, on its date and on the applicable Settlement
Date, shall comply in all material respects with the provisions of the
Securities Act and shall not on its date and on the applicable Settlement Date
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they are made, not misleading, except
that this representation and warranty does not apply to statements in or
omissions from any Prospectus Supplement made in reliance upon and in conformity
with information relating to the Investor furnished to the Company in writing by
or on behalf of the Investor expressly for use therein.

     

    
      
         

      

      
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    (v) At the
earliest time after the filing of the Registration Statement that the Company or
another offering participant made a bona fide offer (within the meaning of Rule
164(h)(2) under the Securities Act) relating to the Shares, the Company was not
and is not an Ineligible Issuer (as defined in Rule 405 under the Securities
Act).  Each Permitted Free Writing Prospectus (a) shall conform in all
material respects to the requirements of the Securities Act on the date of its
first use, (b) when considered together with the Prospectus on each applicable
Fixed Request Exercise Date and on each applicable Settlement Date, shall not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they are made, not misleading, and
(c) shall not include any information that conflicts with the information
contained in the Registration Statement, including any document incorporated by
reference therein and any Prospectus Supplement deemed to be a part thereof that
has not been superseded or modified.  The immediately preceding
sentence does not apply to statements in or omissions from any Permitted Free
Writing Prospectus made in reliance upon and in conformity with information
relating to the Investor furnished to the Company in writing by or on behalf of
the Investor expressly for use therein.

     

    (vi) Prior to
the Effective Date, the Company has not distributed any offering material in
connection with the offering and sale of the Shares.  From and after
the Effective Date and prior to the completion of the distribution of the
Shares, the Company shall not distribute any offering material in connection
with the offering and sale of the Shares, other than the Registration Statement,
the Base Prospectus as supplemented by any Prospectus Supplement or a Permitted
Free Writing Prospectus.

     

    Section
4.19 Employees.  As of the
Effective Date, neither the Company nor any Subsidiary of the Company has any
collective bargaining arrangements or agreements covering any of its employees,
except as set forth in the Commission Documents.  As of the Effective
Date, except as disclosed in the Registration Statement or the Commission
Documents, no officer, consultant or key employee of the Company or any
Subsidiary whose termination, either individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect, has terminated or, to
the knowledge of the Company, has any present intention of terminating his or
her employment or engagement with the Company or any Subsidiary.

     

    Section
4.20 Use of
Proceeds

     

    .  The
proceeds from the sale of the Shares shall be used by the Company and its
Subsidiaries as set forth in the Base Prospectus and any Prospectus Supplement
filed pursuant to Sections 1.4 and 5.9.

     

    Section
4.21 Investment Company Act
Status

     

    .  The
Company is not, and as a result of the consummation of the transactions
contemplated by this Agreement and the application of the proceeds from the sale
of the Shares as set forth in the Base Prospectus and any Prospectus Supplement
shall not be, an “investment company” or a company “controlled” by an
“investment company,” within the meaning of the Investment Company Act of 1940,
as amended.

     

    Section
4.22 ERISA.  Except
as would not be likely to result in a Material Adverse Effect, (i) no liability
to the Pension Benefit Guaranty Corporation has been incurred with respect to
any Plan by the Company or any of its Subsidiaries, (ii) no “prohibited
transaction” (as defined in Section 406 of ERISA or Section 4975 of the Code) or
“accumulated funding

     

    
      
         

      

      
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    deficiency”
(as defined in Section 203 of ERISA) or any of the events set forth in Section
4043(b) of ERISA has occurred with respect to any Plan, and the execution and
delivery of this Agreement and the issuance and sale of the Shares hereunder
shall not result in any of the foregoing events and (iii) each Plan is in
compliance in all material respects with applicable law, including ERISA and the
Code; the Company has not incurred and does not expect to incur liability under
Title IV of ERISA with respect to the termination of, or withdrawal from, any
Plan; and each Plan for which the Company would have any liability that is
intended to be qualified under Section 401(a) of the Code is so qualified in all
material respects and nothing has occurred, whether by action or failure to act,
which would cause the loss of such qualifications.  As used in this
Section 4.22, the term “Plan” shall mean an
“employee pension
benefit plan” (as defined in Section 3 of ERISA) which is or has been
established or maintained, or to which contributions are or have been made, by
the Company or any Subsidiary or by any trade or business, whether or not
incorporated, which, together with the Company or any Subsidiary, is under
common control, as described in Section 414(b) or (c) of the
Code.

     

    Section
4.23 Taxes.  Except
as would not be likely to result in a Material Adverse Effect, the Company (i)
has filed all necessary federal, state and foreign income and franchise tax
returns or has duly requested extensions thereof, (ii) has paid all federal,
state, local and foreign taxes due and payable for which it is liable, except to
the extent that any such taxes are being contested in good faith and by
appropriate proceedings and (iii) does not have any tax deficiency or claims
outstanding or assessed or, to the Company’s knowledge, proposed against
it.

     

    Section
4.24 Insurance.  The
Company carries, or is covered by, insurance in such amounts and covering such
risks as is adequate for the conduct of its and its Subsidiaries’ businesses and
the value of their respective properties and as is customary for companies
engaged in similar businesses in similar industries.

     

    Section
4.25 Acknowledgement 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 purchaser 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

    COVENANTS

     

    The
Company covenants with the Investor, and the Investor covenants with the
Company, as follows, which covenants of one party are for the benefit of the
other party, during the Investment Period:

     

    Section
5.1 Securities
Compliance.  The
Company shall notify the Commission and the Trading Market, as applicable, in
accordance with their respective rules and regulations, of the transactions
contemplated by this Agreement, and shall take all necessary action,
undertake

     

    
      
         

      

      
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    all
proceedings and obtain all registrations, permits, consents and approvals for
the legal and valid issuance of the Shares to the Investor in accordance with
the terms of this Agreement.

     

    Section
5.2 Registration and
Listing.  The
Company shall take all action necessary to cause the Common Shares to continue
to be registered as a class of securities under Sections 12(b) or 12(g) of the
Exchange Act, shall comply with its reporting and filing obligations under the
Exchange Act, and shall not take any action or file any document (whether or not
permitted by the Securities Act) to terminate or suspend such registration or to
terminate or suspend its reporting and filing obligations under the Exchange Act
or Securities Act, except as permitted herein. The Company shall take all action
necessary to continue the listing and trading of its Common Shares and the
listing of the Shares purchased by Investor hereunder on the Trading Market, and
shall comply with the Company’s reporting, filing and other obligations under
the bylaws, listed securities maintenance standards and other rules of the
Trading Market.

     

    Section
5.3 Compliance with
Laws.

     

    (i) The
Company shall comply, and cause each Subsidiary to comply, (a) with all laws,
rules, regulations and orders applicable to the business and operations of the
Company and its Subsidiaries except as would not have a Material Adverse Effect
and (b) with all applicable provisions of the Securities Act, the Exchange Act
and the listing standards of the Trading Market.  Without limiting the
generality of the foregoing, neither the Company nor any of its officers,
directors or affiliates has taken or will take, directly or indirectly, any
action designed or intended to stabilize or manipulate the price of any security
of the Company, or which caused or resulted in, or which would in the future
reasonably be expected to cause or result in, stabilization or manipulation of
the price of any security of the Company.

     

    (ii) The
Investor shall comply with all laws, rules, regulations and orders applicable to
the performance by it of its obligations under this Agreement and its investment
in the Shares, except as would not, individually or in the aggregate, prohibit
or otherwise interfere with the ability of the Investor to enter into and
perform its obligations under this Agreement in any material respect. Without
limiting the foregoing, the Investor shall comply with all applicable provisions
of the Securities Act and the Exchange Act.

     

    Section
5.4 Keeping of Records and Books
of Account; Foreign Corrupt Practices Act.

     

    (i) The
Company shall keep and cause each Subsidiary to keep adequate records and books
of account, in which complete entries shall be made in accordance with GAAP
consistently applied, reflecting all financial transactions of the Company and
its Subsidiaries, and in which, for each fiscal year, all proper reserves for
depreciation, depletion, obsolescence, amortization, taxes, bad debts and other
purposes in connection with its business shall be made.  The Company
shall maintain a system of internal accounting controls that (a) pertain to the
maintenance of records that in reasonable detail accurately and fairly reflect
the transactions and dispositions of the assets of the Company; (b) provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the Company are
being made only in accordance with authorizations of management and directors
of

     

    
      
         

      

      
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    the
Company; and (c) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of the Company’s
assets that could have a material effect on the Company’s financial
statements.

     

    (ii) Neither
the Company, nor any of its Subsidiaries, nor to the knowledge of the Company,
any of their respective directors, officers, agents, employees or any other
persons acting on their behalf shall, in connection with the operation of the
Company’s and its Subsidiaries’ respective businesses, (a) use any corporate
funds for unlawful contributions, payments, gifts or entertainment or to make
any unlawful expenditures relating to political activity to government
officials, candidates or members of political parties or organizations, (b) pay,
accept or receive any unlawful contributions, payments, expenditures or gifts,
or (c) violate or operate in noncompliance with any export restrictions,
anti-boycott regulations, embargo regulations or other applicable domestic or
foreign laws and regulations.

     

    (iii) Subject
to the requirements of Section 5.12 of this Agreement, from time to time from
and after the period beginning with the third Trading Day immediately preceding
each Fixed Request Exercise Date through and including the applicable Settlement
Date, the Company shall make available for inspection and review by the
Investor, customary documentation allowing the Investor and/or its appointed
counsel or advisors to conduct due diligence.

     

    Section
5.5 Limitations on Holdings and
Issuances.  At
no time during the term of this Agreement shall the Investor directly or
indirectly own more than 9.9% of the then issued and outstanding Common Shares.
The Company shall not be obligated to issue and the Investor shall not be
obligated to purchase any Common Shares which would result in the issuance under
this Agreement to the Investor at any time of Shares which, when aggregated with
all other Common Shares then owned beneficially by the Investor, would result in
the beneficial ownership by the Investor of more than 9.9% of the then issued
and outstanding Common Shares.

     

    Section
5.6 Other Agreements and Other
Financings.

     

    (i) The
Company shall not enter into, announce or recommend to its shareholders any
agreement, plan, arrangement or transaction in or of which the terms thereof
would restrict, materially delay, conflict with or impair the ability or right
of the Company or any Subsidiary to perform its obligations under this
Agreement, including, without limitation, the obligation of the Company to
deliver Shares to the Investor in respect of a Fixed Request or Optional Amount
on the applicable Settlement Date.

     

    (ii) The
Company shall notify the Investor, within 48 hours, if it enters into any
agreement, plan, arrangement or transaction with a third party, the principal
purpose of which is to obtain during a Pricing Period an Other Financing not
constituting an Acceptable Financing (an “Other Financing
Notice”); provided, however, that the
Company shall notify the Investor as soon as reasonably practicable but in no
event later than 24 hours (an “Integration Notice”)
if it enters into any agreement, plan, arrangement or transaction with a third
party, the principal purpose of which is to obtain at any time during the
Investment Period an Other Financing that may be aggregated with the
transactions contemplated by this Agreement for

     

    
      
         

      

      
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    purposes
of determining whether approval of the Company’s shareholders is required under
any bylaw, listed securities maintenance standards or other rules of the Trading
Market and, if required under applicable law, including, without limitation,
Regulation FD promulgated by the Commission, or under the applicable rules and
regulations of the Trading Market, the Company shall publicly disclose such
information in accordance with Regulation FD and the applicable rules and
regulations of the Trading Market. For purposes of this Section 5.6(ii), any
press release issued by, or Commission Document filed by, the Company shall
constitute sufficient notice, provided that it is issued or filed, as the case
may be, within the time requirements set forth in the first sentence of this
Section 5.6(ii) for an Other Financing Notice or an Integration Notice, as
applicable.  During any Pricing Period in which the Company is
required to provide an Other Financing Notice pursuant to the first sentence of
this Section 5.6(ii), the Investor shall (i) have the option to purchase the
Shares subject to the Fixed Request at (x) the price therefor in accordance with
the terms of this Agreement or (y) the third party’s per share purchase price in
connection with the Other Financing, net of such third party’s discounts,
Warrant Value and fees, or (ii) the Investor may elect to not purchase any
Shares subject to the Fixed Request for that Pricing Period. An “Other Financing”
shall mean (x) the issuance of Common Shares for a purchase price less than, or
the issuance of securities convertible into or exchangeable for Common Shares at
an exercise or conversion price (as the case may be) less than, the then Current
Market Price of the Common Shares (in each case, after all fees, discounts,
Warrant Value and commissions associated with the transaction) (a “Below Market
Offering”); (y) the implementation by the Company of any mechanism in
respect of any securities convertible into or exchangeable for Common Shares for
the reset of the purchase price of the Common Shares to below the then Current
Market Price of the Common Shares (including, without limitation, any
antidilution or similar adjustment provisions in respect of any Company
securities, but specifically excluding customary adjustments for stock splits,
stock dividends, stock combinations and similar events); or (z) the issuance of
options, warrants or similar rights of subscription in each case not
constituting an Acceptable Financing. “Acceptable Financing”
shall mean the issuance by the Company of: (1) Common Shares or securities
convertible into or exchangeable for Common Shares other than in connection with
a Below Market Offering; (2) Common Shares or securities convertible into or
exchangeable for Common Shares in connection with awards under the Company’s
benefit and equity plans and arrangements or shareholder rights plan and the
issuance of Common Shares upon the conversion, exercise or exchange thereof; (3)
Common Shares issuable upon the conversion or exchange of equity awards or
convertible or exchangeable securities outstanding as of the Effective Date; (4)
Common Shares or securities convertible into or exchangeable for Common Shares
or similar rights to subscribe for the purchase of shares of Common Shares in
connection with technology sharing, licensing, research and joint development
agreements (or amendments thereto) with third parties, and the issuance of
Common Shares upon the conversion, exercise or exchange thereof; and (5) Common
Shares and/or warrants or similar rights to subscribe for the purchase of Common
Shares issued in connection with equipment financings and/or real property
leases (or amendments thereto) and the issuance of Common Shares upon the
exercise thereof.

     

    Section
5.7 Stop
Orders.  The
Company shall advise the Investor as soon as reasonably practicable, but in no
event later than 24 hours, and shall confirm such advice in writing: (i) of the
Company’s receipt of notice of any request by the Commission for amendment of or
a supplement to the Registration Statement, the Prospectus, any Permitted Free
Writing

     

    
      
         

      

      
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    Prospectus
or for any additional information; (ii) of the Company’s receipt of notice of
the issuance by the Commission of any stop order suspending the effectiveness of
the Registration Statement or prohibiting or suspending the use of the
Prospectus or any Prospectus Supplement, or of the suspension of qualification
of the Shares for offering or sale in any jurisdiction, or the initiation or
contemplated initiation of any proceeding for such purpose; and (iii) of the
Company becoming aware of the happening of any event, which makes any statement
of a material fact made in the Registration Statement, the Prospectus or any
Permitted Free Writing Prospectus untrue or which requires the making of any
additions to or changes to the statements then made in the Registration
Statement, the Prospectus or any Permitted Free Writing Prospectus in order to
state a material fact required by the Securities Act to be stated therein or
necessary in order to make the statements then made therein (in the case of the
Prospectus, in light of the circumstances under which they were made) not
misleading, or of the necessity to amend the Registration Statement or
supplement the Prospectus or any Permitted Free Writing Prospectus to comply
with the Securities Act or any other law. The Company shall not be required to
disclose to the Investor the substance or specific reasons of any of the events
set forth in clauses (i) through (iii) of the immediately preceding sentence,
but rather, shall only be required to disclose that the event has
occurred.  The Company shall not issue any Fixed Request during the
continuation of any of the foregoing events. If at any time the Commission shall
issue any stop order suspending the effectiveness of the Registration Statement
or prohibiting or suspending the use of the Prospectus or any Prospectus
Supplement, the Company shall use commercially reasonable efforts to obtain the
withdrawal of such order at the earliest possible time.

     

    Section
5.8 Amendments to the
Registration Statement; Prospectus Supplements; Free Writing
Prospectuses.

     

    (i)           Except
as provided in this Agreement and other than periodic reports required to be
filed pursuant to the Exchange Act, the Company shall not file with the
Commission any amendment to the Registration Statement that relates to the
Investor, the Agreement or the transactions contemplated hereby or file with the
Commission any Prospectus Supplement that relates to the Investor, this
Agreement or the transactions contemplated hereby with respect to which (a) the
Investor shall not previously have been advised, (b) the Company shall not have
given due consideration to any comments thereon received from the Investor or
its counsel, or (c) the Investor shall reasonably object after being so advised,
unless the Company has determined that it is necessary to amend the Registration
Statement or make any supplement to the Prospectus to comply with the Securities
Act or any other applicable law or regulation, in which case the Company shall
immediately so inform the Investor, the Investor shall be provided with a
reasonable opportunity to review and comment upon any disclosure relating to the
Investor and the Company shall expeditiously furnish to the Investor an
electronic copy thereof. In addition, for so long as, in the reasonable opinion
of counsel for the Investor, the Prospectus (or in lieu thereof, the notice
referred to in Rule 173(a) under the Securities Act) is required to be delivered
in connection with any purchase of Shares by the Investor, the Company shall not
file any Prospectus Supplement with respect to the Shares without delivering or
making available a copy of such Prospectus Supplement, together with the Base
Prospectus, to the Investor promptly.

     

    (ii)           The
Company agrees that it has not made and, unless it obtains the prior written
consent of the Investor, it will not make an offer relating to the Shares that
would

     

    
      
         

      

      
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    constitute
an Issuer Free Writing Prospectus or that would otherwise constitute a Free
Writing Prospectus required to be filed by the Company or the Investor with the
Commission or retained by the Company or the Investor under Rule 433 under the
Securities Act.  The Investor agrees that it has not made and, unless
it obtains the prior written consent of the Company, it will not make an offer
relating to the Shares that would constitute a Free Writing Prospectus required
to be filed by the Company with the Commission or retained by the Company under
Rule 433 under the Securities Act.  Any such Issuer Free Writing
Prospectus or other Free Writing Prospectus consented to by the Investor or the
Company is referred to in this Agreement as a “Permitted Free Writing
Prospectus.”  The Company agrees that (x) it has treated and
will treat, as the case may be, each Permitted Free Writing Prospectus as an
Issuer Free Writing Prospectus and (y) it has complied and will comply, as the
case may be, with the requirements of Rules 164 and 433 under the Securities Act
applicable to any Permitted Free Writing Prospectus, including in respect of
timely filing with the Commission, legending and record keeping.

     

    Section 5.9 Prospectus
Delivery.  The
Company shall file with (i) the Commission pursuant to Rule 424(b) under the
Securities Act and (ii) if applicable, the Registrar of Companies in Bermuda a
Prospectus Supplement on the first Trading Day immediately following the last
Trading Day of each Pricing Period.  The Company shall provide the
Investor a reasonable opportunity to comment on a draft of each such Prospectus
Supplement and any Issuer Free Writing Prospectus, shall give due consideration
to all such comments and, subject to the provisions of Section 5.8 hereof, shall
deliver or make available to the Investor, without charge, an electronic copy of
each form of Prospectus Supplement, together with the Base Prospectus, and any
Permitted Free Writing Prospectus on each applicable Settlement
Date.  The Company consents to the use of the Prospectus (and of any
Prospectus Supplement thereto) in accordance with the provisions of the
Securities Act and with the securities or “blue sky” laws of the jurisdictions
in which the Shares may be sold by the Investor, in connection with the offering
and sale of the Shares and for such period of time thereafter as the Prospectus
(or in lieu thereof, the notice referred to in Rule 173(a) under the Securities
Act) is required by the Securities Act to be delivered in connection with sales
of the Shares. If during such period of time any event shall occur that in the
judgment of the Company and its counsel is required to be set forth in the
Registration Statement or the Prospectus or any Permitted Free Writing
Prospectus or should be set forth therein in order to make the statements made
therein (in the case of the Prospectus, in light of the circumstances under
which they were made) not misleading, or if it is necessary to amend the
Registration Statement or supplement or amend the Prospectus or any Permitted
Free Writing Prospectus to comply with the Securities Act or any other
applicable law or regulation, the Company shall forthwith prepare and, subject
to Section 5.8 above, file with the Commission an appropriate amendment to the
Registration Statement or Prospectus Supplement to the Prospectus (or supplement
to the Permitted Free Writing Prospectus) and shall expeditiously furnish or
make available to the Investor an electronic copy thereof.

     

    Section
5.10 Selling
Restrictions.

     

    (i) The
Investor covenants that from and after the date hereof through and including the
90th
day next following the termination of this Agreement (the “Restricted Period”),
neither the Investor nor any of its affiliates (within the meaning of the
Exchange Act) nor any entity managed or controlled by the Investor shall,
directly or indirectly, sell any securities of the Company, except the Shares
that it owns or has the right to purchase as provided

     

    
      
         

      

      
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    in a
Fixed Request Notice.  During the Restricted Period, neither the
Investor or any of its affiliates nor any entity managed or controlled by the
Investor shall sell any Common Shares of the Company it does not “own” or have
the unconditional right to receive under the terms of this Agreement (within the
meaning of Rule 200 of Regulation SHO promulgated by the Commission under the
Exchange Act), including Shares in any account of the Investor or in any account
directly or indirectly managed or controlled by the Investor or any of its
affiliates or any entity managed or controlled by the
Investor.  Without limiting the generality of the foregoing, prior to
and during the Restricted Period, neither the Investor nor any of its affiliates
nor any entity managed or controlled by the Investor or any of its affiliates
shall enter into a short position with respect to Common Shares of the Company,
including in any account of the Investor’s or in any account directly or
indirectly managed or controlled by the Investor or any of its Affiliates or any
entity managed or controlled by the Investor, except that the Investor may sell
Shares that it is obligated to purchase under a pending Fixed Request Notice but
has not yet taken possession of so long as the Investor (or the Broker-Dealer,
as applicable) covers any such sales with the Shares purchased pursuant to such
Fixed Request Notice; provided, however, that the
Investor (or the Broker-Dealer, as applicable) shall not be required to cover
any such sales with the Shares purchased pursuant to such Fixed Request Notice
if (a) the Fixed Request is terminated by mutual agreement of the Company and
the Investor and, as a result of such termination, no Shares are delivered to
the Investor under this Agreement or (b) the Company otherwise fails to deliver
such Shares to the Investor on the applicable Settlement Date upon the terms and
subject to the provisions of this Agreement.  Prior to and during the
Restricted Period, the Investor shall not grant any option to purchase or
acquire any right to dispose or otherwise dispose for value of any Common Shares
or any securities convertible into or exercisable or exchangeable for, or
warrants to purchase, any Common Shares, or enter into any swap, hedge or other
agreement that transfers, in whole or in part, the economic risk of ownership of
the Common Shares, except for such sales expressly permitted by this Section
5.10(i).

     

    (ii) In
addition to the foregoing, in connection with any sale of the Company’s
securities (including any sale permitted by paragraph (i) above), the Investor
shall comply in all respects with all applicable laws, rules, regulations and
orders, including, without limitation, the requirements of the Securities Act
and the Exchange Act.

     

    Section
5.11 Effective Registration
Statement.  During
the Investment Period, the Company shall use its reasonable best efforts to
maintain the continuous effectiveness of the Registration Statement under the
Securities Act.

     

    Section
5.12 Non-Public
Information.  Neither
the Company nor any of its directors, officers or agents shall disclose any
material non-public information about the Company to the Investor, unless a
public announcement thereof is made by the Company in the manner contemplated by
Regulation FD.

     

    Section
5.13 Broker/Dealer.  The
Investor shall use one or more broker-dealers to effectuate all sales, if any,
of the Shares that it may purchase from the Company pursuant to this Agreement
which (or whom) shall be unaffiliated with the Investor and not then currently
engaged or used by the Company (collectively, the “Broker-Dealer”).  The
Investor shall provide the Company with all information regarding the
Broker-Dealer reasonably requested by the

     

    
      
         

      

      
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    Company.  The
Investor shall be solely responsible for all fees and commissions of the
Broker-Dealer.

     

    Section
5.14 Disclosure
Schedule.

     

    (i)           During
the Investment Period, the Company shall from time to time update the Disclosure
Schedule as may be required to satisfy the condition set forth in Section
6.3(i).  For purposes of this Section 5.14, any disclosure made in a
schedule to the Compliance Certificate substantially in the form attached hereto
as Exhibit D
shall be deemed to be an update of the Disclosure
Schedule.  Notwithstanding anything in this Agreement to the contrary,
no update to the Disclosure Schedule pursuant to this Section 5.14 shall cure
any breach of a representation or warranty of the Company contained in this
Agreement and shall not affect any of the Investor’s rights or remedies with
respect thereto.

     

    (ii)           Notwithstanding
anything to the contrary contained in the Disclosure Schedules or in this
Agreement, the information and disclosure contained in any Schedule of the
Disclosure Schedules shall be deemed to be disclosed and incorporated by
reference in any other Schedule of the Disclosure Schedules as though fully set
forth in such Schedule for which applicability of such information and
disclosure is readily apparent on its face.  The fact that any item of
information is disclosed in the Disclosure Schedules shall not be construed to
mean that such information is required to be disclosed by this
Agreement.  Except as expressly set forth in this Agreement, such
information and the thresholds (whether based on quantity, qualitative
characterization, dollar amounts or otherwise) set forth herein shall not be
used as a basis for interpreting the terms “material” or “Material Adverse
Effect” or other similar terms in this Agreement.

     

    ARTICLE
VI

    OPINION
OF COUNSEL AND CERTIFICATE; CONDITIONS TO THE SALE AND

    PURCHASE
OF THE SHARES

     

    Section
6.1 Opinion of Counsel and
Certificate.  Simultaneously
with the execution and delivery of this Agreement, the Investor has received (i)
opinions of outside counsel to the Company, dated the Effective Date, in the
form mutually agreed to by the parties hereto, and (ii) a certificate from the
Company, dated the Effective Date, in the form of Exhibit C
hereto.

     

    Section
6.2 Conditions Precedent to the
Obligation of the Company.  The
obligation hereunder of the Company to issue and sell the Shares to the Investor
under any Fixed Request or Optional Amount is subject to the satisfaction or (to
the extent permitted by applicable law) waiver of each of the conditions set
forth below. These conditions are for the Company’s sole benefit and (to the
extent permitted by applicable law) may be waived by the Company at any time in
its sole discretion.

     

    (i) Accuracy
of the Investor’s Representations and Warranties.  The
representations and warranties of the Investor contained in this Agreement (i)
that are not qualified by “materiality” shall have been true and correct in all
material respects when made and shall be true and correct in all material
respects as of the applicable Fixed Request Exercise Date and the applicable
Settlement Date with the same force and effect as if made on such
dates,

     

    
      
         

      

      
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    except to
the extent such representations and warranties are as of another date, in which
case, such representations and warranties shall be true and correct in all
material respects as of such other date and (ii) that are qualified by
“materiality” shall have been true and correct when made and shall be true and
correct as of the applicable Fixed Request Exercise Date and the applicable
Settlement Date with the same force and effect as if made on such dates, except
to the extent such representations and warranties are as of another date, in
which case, such representations and warranties shall be true and correct as of
such other date.

     

    (ii) Registration
Statement.  The Registration Statement is effective and 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.  The Company shall have a maximum dollar amount certain of
Shares registered under the Registration Statement which are in an amount (A) as
of the Effective Date, not less than the Total Commitment and (B) as of the
applicable Fixed Request Exercise Date, not less than the maximum dollar amount
worth of Shares issuable pursuant to the applicable Fixed Request Notice and
applicable Optional Amount, if any.  The Current Report shall have
been filed with the Commission, as required pursuant to Section 1.4, and all
Prospectus Supplements shall have been filed with the Commission, as required
pursuant to Sections 1.4 and 5.9 hereof, to disclose the sale of the Shares
prior to each Settlement Date, as applicable.  Any other material
required to be filed by the Company or any other offering participant pursuant
to Rule 433(d) under the Securities Act shall have been filed with the
Commission within the applicable time periods prescribed for such filings by
Rule 433 under the Securities Act.

     

    (iii) Performance
by the Investor.  The Investor shall have performed, satisfied
and complied in all material respects with all covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied
with by the Investor at or prior to the applicable Fixed Request Exercise Date
and the applicable Settlement Date.

     

    (iv) No
Injunction.  No statute, regulation, order, decree, writ,
ruling or injunction shall have been enacted, entered, promulgated, threatened
or endorsed by any court or governmental authority of competent jurisdiction
which prohibits the consummation of or which would materially modify or delay
any of the transactions contemplated by this Agreement.

     

    (v) No
Suspension, Etc.  Trading in the Common Shares shall not have
been suspended by the Commission or the Trading Market (except for any
suspension of trading of limited duration agreed to by the Company, which
suspension shall be terminated prior to the applicable Fixed Request Exercise
Date and applicable Settlement Date), and, at any time prior to the applicable
Fixed Request Exercise Date and applicable Settlement Date, none of the events
described in clauses (i), (ii) and (iii) of Section 5.7 shall have occurred,
trading in securities generally as reported on the Trading Market shall not have
been suspended or limited, nor shall a banking moratorium have been declared
either by the United States or New York State authorities, nor shall there have
occurred any material outbreak or escalation of hostilities or other national or
international calamity or crisis of such magnitude in its effect on, or any
material adverse change in, any financial, credit or securities market which, in
each case, in the reasonable judgment of the Company, makes it impracticable or
inadvisable to issue the Shares.

     

    
      
         

      

      
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    (vi) No
Proceedings or Litigation.  No action, suit
or proceeding before any arbitrator or any court or governmental authority shall
have been commenced or threatened, and no inquiry or investigation by any
governmental authority shall have been commenced or threatened, against the
Company or any Subsidiary, or any of the officers, directors or affiliates of
the Company or any Subsidiary, seeking to restrain, prevent or change the
transactions contemplated by this Agreement, or seeking damages in connection
with such transactions.

     

    (vii) Aggregate
Limit.  The issuance and
sale of the Shares issuable pursuant to such Fixed Request Notice or Optional
Amount shall not violate Sections 2.2, 2.12 and 5.5 hereof.

     

    Section
6.3 Conditions Precedent to the
Obligation of the Investor.  The
obligation hereunder of the Investor to accept a Fixed Request Notice or
Optional Amount grant and to acquire and pay for the Shares is subject to the
satisfaction or (to the extent permitted by applicable law) waiver, at or before
each Fixed Request Exercise Date and each Settlement Date, of each of the
conditions set forth below. These conditions are for the Investor’s sole benefit
and (to the extent permitted by applicable law) may be waived by the Investor at
any time in its sole discretion.

     

    (i) Accuracy
of the Company’s Representations and Warranties.  The
representations and warranties of the Company contained in this Agreement (i)
that are not qualified by “materiality” or “Material Adverse Effect” shall have
been true and correct in all material respects when made and shall be true and
correct in all material respects as of the applicable Fixed Request Exercise
Date and the applicable Settlement Date with the same force and effect as if
made on such dates, except to the extent such representations and warranties are
as of another date, in which case, such representations and warranties shall be
true and correct in all material respects as of such other date and
(ii) that are qualified by “materiality” or “Material Adverse Effect” shall
have been true and correct when made and shall be true and correct as of the
applicable Fixed Request Exercise Date and the applicable Settlement Date with
the same force and effect as if made on such dates, except to the extent such
representations and warranties are as of another date, in which case, such
representations and warranties shall be true and correct as of such other
date.

     

    (ii) Registration
Statement. The
Registration Statement is effective and 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. The Company shall have a
maximum dollar amount certain of Shares registered under the Registration
Statement which are in an amount (A) as of the Effective Date, not less than the
Total Commitment and (B) as of the applicable Fixed Request Exercise Date, not
less than the maximum dollar amount worth of Shares issuable pursuant to the
applicable Fixed Request Notice and applicable Optional Amount, if any. The
Current Report shall have been filed with the Commission, as required pursuant
to Section 1.4, and all Prospectus Supplements shall have been filed with the
Commission, as required pursuant to Sections 1.4 and 5.9 hereof, to disclose the
sale of the Shares prior to each Settlement Date, as applicable, and an
electronic copy of each such Prospectus Supplement together with the Base
Prospectus shall have been delivered or made available to the Investor in
accordance with Section 5.9 hereof.  Any other material required to be
filed by the Company or any other offering participant pursuant to Rule 433(d)
under the

     

    
      
         

      

      
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    Securities
Act shall have been filed with the Commission within the applicable time periods
prescribed for such filings by Rule 433 under the Securities Act.

     

    (iii) No
Suspension.  Trading in the Common Shares shall not have been
suspended by the Commission or the Trading Market (except for any suspension of
trading of limited duration agreed to by the Company, which suspension shall be
terminated prior to the applicable Fixed Request Exercise Date and applicable
Settlement Date), and, at any time prior to the applicable Fixed Request
Exercise Date and applicable Settlement Date, none of the events described in
clauses (i), (ii) and (iii) of Section 5.7 shall have occurred, trading in
securities generally as reported on the Trading Market shall not have been
suspended or limited, nor shall a banking moratorium have been declared either
by the United States or New York State authorities, nor shall there have
occurred any material outbreak or escalation of hostilities or other national or
international calamity or crisis of such magnitude in its effect on, or any
material adverse change in, any financial, credit or securities market which, in
each case, in the reasonable judgment of the Investor, makes it impracticable or
inadvisable to purchase the Shares.

     

    (iv) Performance
of the Company.  The Company shall have performed, satisfied
and complied in all material respects with all covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the applicable Fixed Request Exercise Date
and the applicable Settlement Date and shall have delivered to the Investor on
the applicable Settlement Date the Compliance Certificate substantially in the
form attached hereto as Exhibit
D.

     

    (v) No
Injunction. No statute, rule, regulation, order, decree, writ, ruling or
injunction shall have been enacted, entered, promulgated, threatened or endorsed
by any court or governmental authority of competent jurisdiction which prohibits
the consummation of or which would materially modify or delay any of the
transactions contemplated by this Agreement.

     

    (vi) No
Proceedings or Litigation.  No action, suit or proceeding
before any arbitrator or any court or governmental authority shall have been
commenced or threatened, and no inquiry or investigation by any governmental
authority shall have been commenced or threatened, against the Company or any
Subsidiary, or any of the officers, directors or affiliates of the Company or
any Subsidiary, seeking to restrain, prevent or change the transactions
contemplated by this Agreement, or seeking damages in connection with such
transactions.

     

    (vii) Aggregate
Limit.  The issuance and sale of the Shares issuable pursuant
to such Fixed Request Notice or Optional Amount shall not violate Sections 2.2,
2.12 and 5.5 hereof.

     

    (viii) Shares
Authorized.  The Shares
issuable pursuant to such Fixed Request Notice or Optional Amount shall have
been duly authorized by all necessary corporate action of the
Company.

     

    (ix) Notification
of Listing of Shares.  If required, the
Company shall have submitted to the Trading Market a notification form of
listing of additional shares related to the

     

    
      
         

      

      
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    Shares
issuable pursuant to such Fixed Request or Optional Amount in accordance with
the bylaws, listed securities maintenance standards and other rules of the
Trading Market.

     

    (x) Opinions
of Counsel; Bring-Down.  Subsequent to the filing of the
Current Report pursuant to Section 1.4 and prior to the first Fixed Request
Exercise Date, the Investor shall have received an opinion from outside counsel
to the Company in the form mutually agreed to by the parties hereto and an
opinion from in-house counsel to the Company in the form mutually agreed to by
the parties hereto.  On each Settlement Date, the Investor shall have
received opinion “bring downs” from outside counsel to the Company in the forms
mutually agreed to by the parties hereto and an opinion “bring down” from
in-house counsel to the Company in the form mutually agreed to by the parties
hereto.

     

    (xi) Payment
of Investor’s Counsel Fees; Due Diligence Expenses.  On the Effective
Date, the Company shall have paid by wire transfer of immediately available
funds to an account designated by the Investor’s counsel, the fees and expenses
of the Investor’s counsel in accordance with the proviso to the first sentence
of Section 9.1(i) of this Agreement.  On the 30th day of
the third month in each calendar quarter during the Investment Period, the
Company shall have paid by wire transfer of immediately available funds to an
account designated by the Investor, the due diligence expenses incurred by the
Investor in accordance with the provisions of the second sentence of Section
9.1(i) of this Agreement.

     

    ARTICLE
VII

    TERMINATION

     

    Section
7.1 Term, Termination by Mutual
Consent.  Unless
earlier terminated as provided hereunder, this Agreement shall terminate
automatically on the earliest of (i) the first day of the month next following
the 24-month anniversary of the Effective Date (the “Investment Period”),
(ii) the date that the entire dollar amount of Shares registered under the
Registration Statement have been issued and sold and (iii) the date the Investor
shall have purchased the Total Commitment of Common Shares (subject in all cases
to the Trading Market Limit). The Company may terminate this Agreement effective
upon three Trading Days’ prior written notice to the Investor in accordance with
Section 9.4; provided, however, that such
termination shall not occur during a Pricing Period or prior to a Settlement
Date. This Agreement may be terminated at any time by the mutual written consent
of the parties, effective as of the date of such mutual written consent unless
otherwise provided in such written consent, it being hereby acknowledged and
agreed that the Investor may not consent to such termination during a Pricing
Period or prior to a Settlement Date in the event the Investor has instructed
the Broker-Dealer to effect an open-market sale of Shares which are subject to a
pending Fixed Request Notice but which have not yet been physically delivered by
the Company (and/or credited by book-entry) to the Investor in accordance with
the terms and subject to the conditions of this Agreement.

     

    Section
7.2 Other
Termination

    .  If
the Company provides the Investor with an Other Financing Notice (other than in
respect of an underwritten public offering of equity securities of the Company
or a registered direct public offering of equity securities of the Company) or
an Integration Notice, in each case pursuant to Section 5.6(ii) of this
Agreement, or if the Company otherwise enters into any agreement, plan,
arrangement or transaction with a third party, the principal purpose of which is
to obtain outside a Pricing Period, but otherwise during the

     

    
      
         

      

      
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    Investment
Period, an Other Financing not constituting an Acceptable Financing (other than
in respect of an underwritten public offering of equity securities of the
Company or a registered direct public offering of equity securities of the
Company), in which latter case the Company shall so notify the Investor within
48 hours thereof, then in all such cases the Investor shall have the right to
terminate this Agreement within the subsequent 30-day period (the “Event Period”),
effective upon one Trading Day’s prior written notice delivered to the Company
in accordance with Section 9.4 at any time during the Event
Period.  The Company shall notify the Investor as soon as reasonably
practicable but in no event later than 24 hours (and, if required under
applicable law, including, without limitation, Regulation FD promulgated by the
Commission, or under the applicable rules and regulations of the Trading Market,
the Company shall publicly disclose such information in accordance with
Regulation FD and the applicable rules and regulations of the Trading Market),
and the Investor shall have the right to terminate this Agreement at any time
after receipt of such notification, if: (i) any condition, occurrence, state of
facts or event constituting a Material Adverse Effect has occurred; (ii) a
Material Change in Ownership has occurred or the Company enters into a
definitive agreement providing for a Material Change in Ownership; or (iii) a
default or event of default has occurred and is continuing under the terms of
any agreement, contract, note or other instrument to which the Company or any of
its Subsidiaries is a party with respect to any indebtedness for borrowed money
representing more than 10% of the Company’s consolidated assets, in any such
case, upon one Trading Day’s prior written notice delivered to the Company in
accordance with Section 9.4 hereof.

     

    Section
7.3 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 as provided in Section 9.4 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
7.1 or 7.2 herein, this Agreement shall become void and of no further force and
effect, except as provided in Section 9.9 hereof. Nothing in this Section 7.3
shall be deemed to release the Company or the Investor from any liability for
any breach under this Agreement, 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.

     

    ARTICLE
VIII

    INDEMNIFICATION

     

    Section
8.1 General
Indemnity.

     

    (i) Indemnification
by the Company.  The Company shall
indemnify and hold harmless the Investor, the Broker-Dealer, each affiliate,
employee, representative and advisor of and to the Investor and the
Broker-Dealer, and each
person, if any, who controls the Investor or the Broker-Dealer within the
meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act
from and against all losses, claims, damages, liabilities and expenses
(including reasonable costs of defense and investigation and all attorneys’
fees) to which the Investor, the Broker-Dealer and each such other person may
become subject, under the Securities Act or otherwise, insofar as such losses,
claims, damages, liabilities and expenses (or actions in respect thereof) arise
out of or are based upon (i) any untrue statement or alleged untrue statement of
a material fact contained, or incorporated by reference, in the
Registration

     

    
      
         

      

      
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    Statement
or any amendment thereto or any omission or alleged omission to state therein,
or in any document incorporated by reference therein, a material fact required
to be stated therein or necessary to make the statements therein not misleading,
or (ii) any untrue statement or alleged untrue statement of a material fact
contained, or incorporated by reference, in the Prospectus, any Issuer Free
Writing Prospectus, or in any amendment thereof or supplement thereto, or in any
“issuer information” (as defined in Rule 433 under the Securities Act) of the
Company, which “issuer information” is required to be, or is, filed with the
Commission or otherwise contained in any Free Writing Prospectus, or any
amendment or supplement thereto, or any omission or alleged omission to state
therein, or in any document incorporated by reference therein, a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading; provided, however, that (A) the
Company shall not be liable under this Section 8.1(i) to the extent that a court
of competent jurisdiction shall have determined by a final judgment (from which
no further appeals are available) that such loss, claim, damage, liability or
expense resulting directly and solely from any such acts or failures to act,
undertaken or omitted to be taken by the Investor, any Broker-Dealer or such
person through its bad faith or willful misconduct, (B) the foregoing indemnity
shall not apply to any loss, claim, damage, liability or expense to the extent,
but only to the extent, arising out of or based upon any untrue statement or
alleged untrue statement or omission or alleged omission made in reliance upon
and in conformity with written information furnished to the Company by the
Investor or any Broker-Dealer expressly for use in the Current Report or any
Prospectus Supplement or Permitted Free Writing Prospectus, or any amendment
thereof or supplement thereto, and (C) with respect to the Prospectus, the
foregoing indemnity shall not inure to the benefit of the Investor or any such
person from whom the person asserting any loss, claim, damage, liability or
expense purchased Common Shares, if copies of all Prospectus Supplements
required to be filed pursuant to Section 1.4 and 5.9, together with the Base
Prospectus, were timely delivered or made available to the Investor pursuant
hereto and a copy of the Base Prospectus, together with a Prospectus Supplement
(as applicable), was not sent or given by or on behalf of the Investor or any
such person to such person, if required by law to have been delivered, at or
prior to the written confirmation of the sale of the Common Shares to such
person, and if delivery of the Base Prospectus, together with a Prospectus
Supplement (as applicable), would have cured the defect giving rise to such
loss, claim, damage, liability or expense.

     

    The
Company shall reimburse the Investor, the Broker-Dealer and each such
controlling person promptly upon demand (with accompanying presentation of
documentary evidence) for all legal and other costs and expenses reasonably
incurred by the Investor, the Broker-Dealer or such indemnified persons in
investigating, defending against, or preparing to defend against any such claim,
action, suit or proceeding with respect to which it is entitled to
indemnification.

     

    (ii) Indemnification
by the Investor. The Investor shall indemnify and hold harmless the
Company, each of its directors and officers, and each person, if any, who
controls the Company within the meaning of Section 15 of the Securities Act or
Section 20(a) of the Exchange Act from and against all losses, claims, damages,
liabilities and expenses (including reasonable costs of defense and
investigation and all attorneys fees) to which the Company and each such other
person may become subject, under the Securities Act or otherwise, insofar as
such losses, claims, damages, liabilities and expenses (or actions in respect
thereof) arise out of

     

    
      
         

      

      
        33

        
          

        

      

      
         

      

    

    or are
based upon any untrue statement or alleged untrue statement of a material fact
contained in the Current Report or any Prospectus Supplement or Permitted Free
Writing Prospectus, or in any amendment thereof or supplement thereto, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, in each case, to the
extent, but only to the extent, the untrue statement, alleged untrue statement,
omission or alleged omission was made in reliance upon, and in conformity with,
written information furnished by the Investor to the Company expressly for
inclusion in the Current Report or such Prospectus Supplement or Permitted Free
Writing Prospectus, or any amendment thereof or supplement thereto.

     

    The
Investor shall reimburse the Company and each such director, officer or
controlling person promptly upon demand for all legal and other costs and
expenses reasonably incurred by the Company or such indemnified persons in
investigating, defending against, or preparing to defend against any such claim,
action, suit or proceeding with respect to which it is entitled to
indemnification.

     

    Section
8.2 Indemnification
Procedures.  Promptly
after a person receives notice of a claim or the commencement of an action for
which the person intends to seek indemnification under Section 8.1, the person
will notify the indemnifying party in writing of the claim or commencement of
the action, suit or proceeding; provided, however, that failure
to notify the indemnifying party will not relieve the indemnifying party from
liability under Section 8.1, except to the extent it has been materially
prejudiced by the failure to give notice.  The indemnifying party will
be entitled to participate in the defense of any claim, action, suit or
proceeding as to which indemnification is being sought, and if the indemnifying
party acknowledges in writing the obligation to indemnify the party against whom
the claim or action is brought, the indemnifying party may (but will not be
required to) assume the defense against the claim, action, suit or proceeding
with counsel satisfactory to it.  After an indemnifying party notifies
an indemnified party that the indemnifying party wishes to assume the defense of
a claim, action, suit or proceeding, the indemnifying party will not be liable
for any legal or other expenses incurred by the indemnified party in connection
with the defense against the claim, action, suit or proceeding except that if,
in the opinion of counsel to the indemnifying party, one or more of the
indemnified parties should be separately represented in connection with a claim,
action, suit or proceeding, the indemnifying party will pay the reasonable fees
and expenses of one separate counsel for the indemnified
parties.  Each indemnified party, as a condition to receiving
indemnification as provided in Section 8.1, will cooperate in all reasonable
respects with the indemnifying party in the defense of any action or claim as to
which indemnification is sought.  No indemnifying party will be liable
for any settlement of any action effected without its prior written
consent.  Notwithstanding the foregoing sentence, if at any time an
indemnified party shall have requested (by written notice provided in accordance
with Section 9.4) an indemnifying party to reimburse the indemnified party for
fees and expenses of counsel, such indemnifying party agrees that it shall be
liable for any settlement of the nature contemplated hereby effected without its
written consent if (i) such settlement is entered into more than 45 days after
receipt by such indemnifying party of the aforesaid request, (ii) such
indemnifying party shall have received written notice of the terms of such
settlement at least 30 days prior to such settlement being entered into and
(iii) such indemnifying party shall not have reimbursed

     

    
      
         

      

      
        34

        
          

        

      

      
         

      

    

    such
indemnified party in accordance with such request prior to the date of such
settlement.  No indemnifying party will, without the prior written
consent of the indemnified party, effect any settlement of a pending or
threatened action with respect to which an indemnified party is, or is informed
that it may be, made a party and for which it would be entitled to
indemnification, unless the settlement includes an unconditional release of the
indemnified party from all liability and claims which are the subject matter of
the pending or threatened action.

     

    If for
any reason the indemnification provided for in this Agreement is not available
to, or is not sufficient to hold harmless, an indemnified party in respect of
any loss or liability referred to in Section 8.1 as to which such indemnified
party is entitled to indemnification thereunder (other than by virtue of the
application of clauses (i)(A), (B) or (C) of Section 8.1 above), each
indemnifying party shall, in lieu of indemnifying the indemnified party,
contribute to the amount paid or payable by the indemnified party as a result of
such loss or liability, (i) in the proportion which is appropriate to reflect
the relative benefits received by the indemnifying party, on the one hand, and
by the indemnified party, on the other hand, from the sale of Shares which is
the subject of the claim, action, suit or proceeding which resulted in the loss
or liability or (ii) if the allocation provided by clause (i) is not permitted
by applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above, but also the relative fault
of the indemnifying party, on the one hand, and the indemnified party, on the
other hand, with respect to the statements or omissions which are the subject of
the claim, action, suit or proceeding that resulted in the loss or liability, as
well as any other relevant equitable considerations.

     

    The
remedies provided for in Section 8.1 and this Section 8.2 are not exclusive and
shall not limit any rights or remedies which may otherwise be available to any
Indemnified Person at law or in equity.

     

    ARTICLE
IX

    MISCELLANEOUS

     

    Section
9.1 Fees and
Expenses.

     

    (i) Each
party shall bear its own fees and expenses related to the transactions
contemplated by this Agreement; provided, however, that the
Company shall pay, on the Effective Date, by wire transfer of immediately
available funds to an account designated by the Investor’s counsel, promptly
following the receipt of an invoice therefor, all reasonable attorneys’ fees and
expenses (exclusive of disbursements and out-of-pocket expenses) incurred by the
Investor, up to $35,000, in connection with the preparation, negotiation,
execution and delivery of this Agreement, legal due diligence of the Company and
review of the Registration Statement, the Base Prospectus, the Current Report,
any Permitted Free Writing Prospectus and all other related transaction
documentation. In addition, the Company shall pay, on the 30th day of
the third month in each calendar quarter during the Investment Period, promptly
following the receipt of an invoice therefor, up to $12,500, representing the
due diligence expenses incurred by the Investor during the Investment Period and
expenses relating to the Investor’s review of Prospectus Supplements, Permitted
Free Writing Prospectuses, opinion “bring downs” and all other related documents
to be delivered by the Company and its counsel in connection with a Fixed
Request Exercise Date and the applicable Settlement Date. The Company shall pay
all

     

    
      
         

      

      
        35

        
          

        

      

      
         

      

    

    U.S.
federal, state and local stamp and other similar transfer and other taxes and
duties levied in connection with issuance of the Shares pursuant
hereto.

     

    (ii) If the
Company issues a Fixed Request Notice and fails to deliver the Shares to the
Investor on the applicable Settlement Date and such failure continues for 10
Trading Days, the Company shall pay the Investor, in cash (or, at the option of
the Investor, in Common Shares which have not been registered under the
Securities Act valued at the applicable Discount Price of the Shares failed to
be delivered; provided that the issuance thereof by the Company would not
violate the Securities Act or any applicable U.S. state securities laws), as
liquidated damages for such failure and not as a penalty, an amount equal to
2.0% of the payment required to be paid by the Investor on such Settlement Date
(i.e., the sum of the Fixed Amount Requested and the Optional Amount Dollar
Amount) for the initial 30 days following such Settlement Date until the Shares
have been delivered, and an additional 2.0% for each additional 30-day period
thereafter until the Shares have been delivered, which amount shall be prorated
for such periods less than 30 days (subject in all cases to the Trading Market
Limit).

     

    Section
9.2 Specific Enforcement,
Consent to Jurisdiction, Waiver of Jury Trial.

     

    (i)  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 either party shall be entitled to an injunction or
injunctions to prevent or cure breaches of the provisions of this Agreement by
the other party and to enforce specifically the terms and provisions hereof this
being in addition to any other remedy to which either party may be entitled by
law or equity.

     

    (ii)   Each
of the Company and the Investor (a) 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 (b) 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 9.2
shall affect or limit any right to serve process in any other manner permitted
by law.

     

    (iii)   Each
of the Company and the Investor hereby waives to the fullest extent permitted by
applicable law, any right it may have to a trial by jury in respect to any
litigation directly or indirectly arising out of, under or in connection with
this Agreement or the transactions contemplated hereby or disputes relating
hereto. Each of the Company and the Investor (a) certifies that no
representative, agent or attorney of any other party has represented, expressly
or otherwise, that such other party would not, in the event of litigation, seek
to enforce the foregoing waiver and (b) acknowledges that it and the other
parties hereto have been induced to enter into this Agreement by, among other
things, the mutual waivers and certifications in this Section 9.2.

     

    
      
         

      

      
        36

        
          

        

      

      
         

      

    

     

     

    Section
9.3 Entire Agreement;
Amendment.  This
Agreement, together with the exhibits referred to herein and the Disclosure
Schedule, represents the entire agreement of the parties with respect to the
subject matter hereof, and there are no promises, undertakings, representations
or warranties by either party relative to subject matter hereof not expressly
set forth herein. No provision of this Agreement may be amended other than by a
written instrument signed by both parties hereto.  The Disclosure
Schedule and all exhibits to this Agreement are hereby incorporated by reference
in, and made a part of, this Agreement as if set forth in full
herein.

     

    Section
9.4 Notices.  Any
notice, demand, request, waiver or other communication required or permitted to
be given hereunder shall be in writing and shall be effective (a) upon hand
delivery or facsimile (with facsimile machine confirmation of delivery received)
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 address for such communications shall
be:

     

    
      	
              If
      to the Company:

            	
              XOMA
      Ltd.

            
	 
      	
              2910
      Seventh Street

            
	 
      	
              Berkeley,
      California 94710

            
	 
      	
              Telephone
      Number: (510) 204-7200

            
	 
      	
              Fax:
      (510) 644-2011

            
	 
      	
              Attention:
      Christopher J. Margolin, Esq.

            
	 
      	 
      
	
              With
      copies to:

            	
              Cahill
      Gordon & Reindel LLP

            
	 
      	
              80
      Pine Street

            
	 
      	
              New
      York, New York 10005

            
	 
      	
              Telephone
      Number: (212) 701-3000

            
	 
      	
              Fax:
      (212) 269-5420

            
	 
      	
              Attention:  Geoffrey
      E. Liebmann, Esq.

            
	 
      	 
      
	
              If
      to the investor:

            	
              Azimuth
      Opportunity Ltd.

            
	 
      	
              c/o
      Folio Administrators Limited

            
	 
      	
              Folio
      House

            
	 
      	
              P.O.
      Box 800

            
	 
      	
              Road
      Town, Tortola VG1110

            
	 
      	
              British
      Virgin Islands

            
	 
      	
              Telephone
      Number: (284) 494-7065 Ext. 250

            
	 
      	
              Fax:  (284)
      494-8356/7422

            
	 
      	
              Attention:
      Tamara Singh

            

    

    
      
         

      

      
        37

        
          

        

      

      
         

      

    

    

    

    
      	
              With
      copies to:

            	
              Greenberg
      Traurig, LLP

            
	 
      	
              The
      MetLife Building

            
	 
      	
              200
      Park Avenue

            
	 
      	
              New
      York, NY 10166

            
	 
      	
              Telephone
      Number: (212) 801-9200

            
	 
      	
              Fax:  (212)
      801-6400

            
	 
      	
              Attention: Anthony
      J. Marsico, Esq.

            

    

    

    Either
party hereto may from time to time change its address for notices by giving at
least 10 days advance written notice of such changed address to the other party
hereto.

     

    Section
9.5 Waivers.  No
waiver by either party of any default with respect to any provision, condition
or requirement of this Agreement shall be deemed to be a continuing waiver in
the future or a waiver of any other provisions, condition or requirement hereof
nor shall any delay or omission of any party to exercise any right hereunder in
any manner impair the exercise of any such right accruing to it thereafter. No
provision of this Agreement may be waived other than in a written instrument
signed by the party against whom enforcement of such waiver is
sought.

     

    Section
9.6 Headings.  The
article, section and subsection headings in this Agreement are for convenience
only and shall not constitute a part of this Agreement for any other purpose and
shall not be deemed to limit or affect any of the provisions
hereof.

     

    Section
9.7 Successors and
Assigns.  The
Investor may not assign this Agreement to any person without the prior consent
of the Company, in the Company’s sole discretion. This Agreement shall be
binding upon and inure to the benefit of the parties and their successors and
assigns. The assignment by a party to this Agreement of any rights hereunder
shall not affect the obligations of such party under this
Agreement.

     

    Section
9.8 Governing
Law.  This
Agreement shall be governed by and construed in accordance with the internal
procedural and substantive laws of the State of New York, without giving effect
to the choice of law provisions of such state  that would cause the
application of the laws of any other jurisdiction.

     

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

     

    Section
9.10 Counterparts.  This
Agreement may be executed in counterparts, all of which taken together shall
constitute one and the same original and binding instrument and shall become
effective when all counterparts have been signed by each party and delivered to
the other parties hereto, it being understood that all parties hereto need not
sign the same counterpart. In the event any signature is delivered by facsimile,
digital or electronic transmission, such transmission shall constitute delivery
of the manually executed original and the party using such means of delivery
shall thereafter cause four additional executed signature pages to be physically
delivered to the other parties within five days of the execution and delivery
hereof.  Failure to provide or delay in the delivery of such
additional executed signature pages shall not adversely affect the efficacy of
the original delivery.

     

    
      
         

      

      
        38

        
          

        

      

      
         

      

    

    

     

    Section
9.11 Publicity.  On
or after the Effective Date, the Company 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 (including,
without limitation, by filing a copy of this Agreement with the Commission);
provided, however, that prior
to issuing any such press release, or making any such public statement or
announcement, the Company shall consult with the Investor on the form and
substance of such press release or other disclosure.

     

    Section
9.12 Severability.  The
provisions of this Agreement are severable and, in the event that any court of
competent jurisdiction shall determine that any one or more of the provisions or
part of the provisions contained in this Agreement shall, for any reason, be
held to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision or part of a
provision of this Agreement, and this Agreement shall be reformed and construed
as if such invalid or illegal or unenforceable provision, or part of such
provision, had never been contained herein, so that such provisions would be
valid, legal and enforceable to the maximum extent possible.

     

    Section
9.13 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
instrument, 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.

     

    

     

    [Signature
Page Follows]

     

    
      
         

      

      
        39

        
          

        

      

      
         

      

    

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

     

    
      	
              XOMA
      LTD.:

            
	 
	 
	
              By: 
      /s/ Christopher J. Margolin        

                     
      Name:  Christopher J. Margolin

                     
      Title:    Vice President, General Counsel

                                  
      and Secretary

            
	 
	
              AZIMUTH
      OPPORTUNITY LTD.:

            
	 
	 
	
              By: 
      /s/ Deirdre M. McCoy            

                     
      Name:  Deirdre M. McCoy

                     
      Title:    Corporate
Secretary

            

    

    
      
         

      

      
        40

        
          

        

      

      
         

      

    

    ANNEX
A TO THE

    COMMON
SHARE PURCHASE AGREEMENT

    DEFINITIONS

     

    (a) “Acceptable Financing”
shall have the meaning assigned to such term in Section 5.6(ii)
hereof.

     

    (b) “Aggregate Limit”
shall have the meaning assigned to such term in Section 1.1 hereof.

     

    (c) “Base Prospectus”
shall mean the Company’s prospectus, dated October 21, 2008, a preliminary form
of which is included in the Registration Statement, including the documents
incorporated by reference therein.

     

    (d) “Below Market
Offering” shall have the meaning assigned to such term in Section 5.6(ii)
hereof.

     

    (e) “Broker-Dealer” shall
have the meaning assigned to such term in Section 5.13 hereof.

     

    (f) “Bye-laws” shall have
the meaning assigned to such term in Section 4.3 hereof.

     

    (g) “Charter” shall have
the meaning assigned to such term in Section 4.3 hereof.

     

    (h) “Code” shall mean the
Internal Revenue Code of 1986, as amended.

     

    (i) “Commission” shall
mean the Securities and Exchange Commission or any successor
entity.

     

    (j) “Commission Documents”
shall mean (1) all reports, schedules, registrations, forms, statements,
information and other documents filed by the Company with the Commission
pursuant to the reporting requirements of the Exchange Act, including all
material filed pursuant to Section 13(a) or 15(d) of the Exchange Act, which
have been filed by the Company since December 31, 2007 and which hereafter shall
be filed by the Company during the Investment Period, including, without
limitation, the Current Report and the Form 10-K filed by the Company for its
fiscal year ended December 31, 2007 (the “2007 Form 10-K”), (2)
the Registration Statement, as the same may be amended from time to time, the
Prospectus and each Prospectus Supplement, and each Permitted Free Writing
Prospectus and (3) all information contained in such filings and all documents
and disclosures that have been and heretofore shall be incorporated by reference
therein.

     

    (k) “Common Shares” shall
have the meaning assigned to such term in the Recitals.

     

    (l) “Current Market Price”
means, with respect to any particular measurement date, the closing price of a
Common Share as reported on the Trading Market for the Trading Day immediately
preceding such measurement date.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

     

    (m) “Current Report” shall
have the meaning assigned to such term in Section 1.4 hereof.

     

    (n) “Discount Price” shall
have the meaning assigned to such term in Section 2.2 hereof.

     

    (o) “EDGAR” shall have the
meaning assigned to such term in Section 4.3 hereof.

     

    (p) “Effective Date” shall
mean the date of this Agreement.

     

    (q) “Environmental Laws”
shall have the meaning assigned to such term in Section 4.15
hereof.

     

    (r) “ERISA” shall mean the
Employee Retirement Income Security Act of 1974, as amended.

     

    (s) “Event Period” shall
have the meaning assigned to such term in Section 7.2 hereof.

     

    (t) “Exchange Act” shall
mean the Securities Exchange Act of 1934, as amended, and the rules and
regulations of the Commission thereunder.

     

    (u) “FDA” shall have the
meaning assigned to such term in Section 4.14(a) hereof.

     

    (v) “FINRA” shall have the
meaning assigned to such term in Section 4.18 hereof.

     

    (w) “Fixed Amount
Requested” shall mean the amount of a Fixed Request requested by the
Company in a Fixed Request Notice delivered pursuant to Section 2.1
hereof.

     

    (x) “Fixed Request” means
the transactions contemplated under Sections 2.1 through 2.8 of this
Agreement.

     

    (y) “Fixed Request Amount”
means the actual amount of proceeds received by the Company pursuant to a Fixed
Request under this Agreement.

     

    (z) “Fixed Request Exercise
Date” shall have the meaning assigned to such term in Section 2.2
hereof.

     

    (aa) “Fixed Request Notice”
shall have the meaning assigned to such term in Section 2.1 hereof.

     

    (bb) “Free Writing
Prospectus” shall mean a “free writing prospectus” as defined in Rule 405
promulgated under the Securities Act.

     

    (cc) “GAAP” shall mean
generally accepted accounting principles in the United States of America as
applied by the Company.

     

    (dd) “Governmental
Licenses” shall have the meaning assigned to such term in Section 4.14(a)
hereof.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

     

    (ee) “Indebtedness” shall
have the meaning assigned to such term in Section 4.9 hereof.

     

    (ff) “Integration Notice”
shall have the meaning assigned to such term in Section 5.6(ii)
hereof.

     

    (gg) “Intellectual
Property” shall have the meaning assigned to such term in Section 4.14(b)
hereof.

     

    (hh) “Investment Period”
shall have the meaning assigned to such term in Section 7.1 hereof.

     

    (ii) “Issuer Free Writing
Prospectus” shall mean an “issuer free writing prospectus” as defined in
Rule 433 promulgated under the Securities Act.

     

    (jj) “Market
Capitalization” shall be calculated on the Trading Day preceding the
applicable Pricing Period and shall be the product of (x) the number of Common
Shares outstanding and (y) the closing bid price of the Common Shares, both as
determined by Bloomberg Financial LP using the DES and HP
functions.

     

    (kk) “Material Adverse
Effect” shall mean any condition, occurrence, state of facts or event
having, or insofar as reasonably can be foreseen would likely have, any effect
on the business, operations, properties or condition (financial or otherwise) of
the Company that is material and adverse to the Company and its Subsidiaries,
taken as a whole, and/or any condition, occurrence, state of facts or event that
would prohibit or otherwise materially interfere with or delay the ability of
the Company to perform any of its obligations under this Agreement.

     

    (ll) “Material Agreements”
shall have the meaning assigned to such term in Section 4.16
hereof.

     

    (mm) “Material Change in
Ownership” shall mean the occurrence of any one or more of the following:
(i) the acquisition by any person, including any syndicate or group deemed to be
a “person” under Section 13(d)(3) of the Exchange Act, of beneficial ownership,
directly or indirectly, through a purchase, amalgamation, merger or other
acquisition transaction or series of transactions, of share capital or other
securities of the Company entitling such person to exercise, upon an event of
default or default or otherwise, 50% or more of the total voting power of all
series and classes of share capital and other securities of the Company entitled
to vote generally in the election of directors, other than any such acquisition
by the Company, any Subsidiary of the Company or any employee benefit plan of
the Company; (ii) any amalgamation, consolidation or merger of the Company with
or into any other person, any amalgamation or merger of another person into the
Company, or any conveyance, transfer, sale, lease or other disposition of all or
substantially all of the properties and assets of the Company to another person,
other than (a) any such transaction (x) that does not result in any
reclassification, conversion, exchange or cancellation of outstanding share
capital of the Company and (y) pursuant to which holders of share capital of the
Company immediately prior to such transaction have the entitlement to exercise,
directly or indirectly, 50% or more of the total voting power of all share
capital of the Company entitled to vote generally in the election of directors
of the continuing or surviving person immediately after such transaction or (b)
any amalgamation or

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    merger
which is effected solely to change the jurisdiction of organization of the
Company and results in a reclassification, conversion or exchange of outstanding
Common Shares solely into shares of the surviving entity; (iii) during any
consecutive two-year period, individuals who at the beginning of that two-year
period constituted the Board of Directors (together with any new directors whose
election to the Board of Directors, or whose nomination for election by the
shareholders of the Company, was approved by a vote of a majority of the
directors then still in office who were either directors at the beginning of
such period or whose elections or nominations for election were previously so
approved) cease for any reason to constitute a majority of the Board of
Directors then in office; or (iv) the Company is liquidated or dissolved or a
resolution is passed by the Company’s shareholders approving a plan of
liquidation or dissolution of the Company. Beneficial ownership shall be
determined in accordance with Rule 13d-3 promulgated by the SEC under the
Exchange Act. The term “person” shall include any syndicate or group which would
be deemed to be a “person” under Section 13(d)(3) of the Exchange
Act.

     

    (nn) “Multiplier” shall
have the meaning assigned to such term in Section 2.3 hereof.

     

    (oo) “NASDAQ” means the
NASDAQ Global Market or any successor thereto.

     

    (pp) “Optional Amount”
means the transactions contemplated under Sections 2.9 through 2.11 of this
Agreement.

     

    (qq) “Optional Amount Dollar
Amount” shall mean the actual amount of proceeds received by the Company
pursuant to the exercise of an Optional Amount under this
Agreement.

     

    (rr) “Optional Amount
Notice” shall mean a notice sent to the Company with regard to the
Investor’s election to exercise all or any portion of an Optional Amount, as
provided in Section 2.11 hereof and substantially in the form attached hereto as
Exhibit
B.

     

    (ss) “Optional Amount Threshold
Price” shall have the meaning assigned to such term in Section 2.1
hereof.

     

    (tt) “Other Financing”
shall have the meaning assigned to such term in Section 5.6(ii)
hereof.

     

    (uu) “Other Financing
Notice” shall have the meaning assigned to such term in Section 5.6(ii)
hereof.

     

    (vv) “Permitted Free Writing
Prospectus” shall have the meaning assigned to such term in Section
5.8(ii) hereof.

     

    (ww) “Plan” shall have the
meaning assigned to such term in Section 4.22 hereof.

     

    (xx) “Pricing Period shall
mean a period of 10 consecutive Trading Days commencing on the day of delivery
of a Fixed Request Notice (or, if the Fixed Request Notice is delivered after
9:30 a.m. (New York time), on the next Trading Day), or such other period
mutually agreed upon by the Investor and the Company.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

     

    (yy) “Prospectus” shall
mean the Base Prospectus, together with any final prospectus filed with the
Commission pursuant to Rule 424(b), as supplemented by any Prospectus
Supplement, including the documents incorporated by reference
therein.

     

    (zz) “Prospectus
Supplement” shall mean any prospectus supplement to the Base Prospectus
filed with the Commission pursuant to Rule 424(b) under the Securities Act,
including the documents incorporated by reference therein.

     

    (aaa) “Reduction Notice”
shall have the meaning assigned to such term in Section 2.8 hereof.

     

    (bbb) “Registration
Statement” shall mean the registration statement on Form S-3, Commission
File Number 333-148342, filed by the Company with the Commission under the
Securities Act for the registration of the Shares, as such Registration
Statement may be amended and supplemented from time to time, including the
documents incorporated by reference therein and the information deemed to be a
part thereof at the time of effectiveness pursuant to Rule 430A or Rule 430B
under the Securities Act.

     

    (ccc) “Restricted Period”
shall have the meaning assigned to such term in Section 5.10
hereof.

     

    (ddd) “Securities Act” shall
mean the Securities Act of 1933, as amended, and the rules and regulations of
the Commission thereunder.

     

    (eee) “Settlement Date”
shall have the meaning assigned to such term in Section 2.7
hereof.

     

    (fff) “Shares” shall mean
Common Shares issuable to the Investor upon exercise of a Fixed Request and
Common Shares issuable to the Investor upon exercise of an Optional
Amount.

     

    (ggg) “Significant
Subsidiary” means any Subsidiary of the Company that would constitute a
Significant Subsidiary of the Company within the meaning of Rule 1-02 of
Regulation S-X of the Commission.

     

    (hhh) “SOXA” shall have the
meaning assigned to such term in Section 4.6(c) hereof.

     

    (iii) “Subsidiary” shall
mean any corporation or other entity of which at least a majority of the
securities or other ownership interest having ordinary voting power (absolutely
or contingently) for the election of directors or other persons performing
similar functions are at the time owned directly or indirectly by the Company
and/or any of its other Subsidiaries.

     

    (jjj) “Threshold Price” is
the lowest price (except to the extent otherwise provided in Section 2.6) at
which the Company may sell Shares during the applicable Pricing Period as set
forth in a Fixed Request Notice (not taking into account the applicable
percentage discount during such Pricing Period determined in accordance with
Section 2.2); provided, however, that at no
time shall the Threshold Price be lower than $1.00 per share unless the Company
and the Investor mutually shall agree.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

     

    (kkk) “Total Commitment”
shall have the meaning assigned to such term in Section 1.1 hereof.

     

    (lll)  “Trading Day” shall
mean a full trading day (beginning at 9:30 a.m., New York City time, and ending
at 4:00 p.m., New York City time) on the NASDAQ.

     

    (mmm) “Trading Market” means
the following markets or exchanges on which the Common Shares are listed or
quoted for trading on the date in question: the American Stock Exchange, the New
York Stock Exchange or the NASDAQ.

     

    (nnn) “Trading Market Limit”
means that number of shares which is one less than 20.0%
of the issued and outstanding Common Shares as of the Effective
Date.

     

    (ooo) “VWAP” shall mean the
daily volume weighted average price (based on a Trading Day from 9:30 a.m. to
4:00 p.m. (New York time)) of the Company on the NASDAQ as reported by Bloomberg
Financial L.P. using the AQR function.

     

    (ppp) “Warrant Value” shall
mean the fair value of all warrants, options and other similar rights issued to
a third party in connection with an Other Financing, determined by using a
standard Black-Scholes option-pricing model using an expected volatility
percentage as shall be mutually agreed by the Investor and the
Company.  In the case of a dispute relating to such expected
volatility assumption, the Investor shall obtain applicable volatility data from
three investment banking firms of nationally recognized reputation, and the
parties hereto shall use the average thereof for purposes of determining the
expected volatility percentage in connection with the Black-Scholes calculation
referred to in the immediately preceding sentence.ex10_1.htm

     

    Exhibit
10.1

    

      

      Execution
Version

      

      Lexmark
International, Inc.

      One
Lexmark Centre Drive

      740 West
New Circle Road

      Lexington,
KY  40550

      

                              October 21,
2008

      

      Re: Accelerated Share
Repurchase

      

      Ladies
and Gentlemen:

      

      This letter (the “Letter Agreement”)
sets forth the agreement we have reached with respect to a transaction between Bank of America, N.A. (“Bank of
America”), and
Lexmark International, Inc (the “Company”) in relation
to shares of the Company’s common stock, par value USD 0.01 (the “Common
Stock”).

      

      I.  Definitions

      

      As used
in this Letter Agreement, the following terms shall have the following
meanings:
 

      “Bankruptcy Code” has
the meaning specified in Section XV.

      

      “Cash Tender
Termination” has the meaning specified in Section VIII(a).

      

      “Corporate Event
Termination” has the meaning specified in Section VIII(b).

      

      “Defaulting Party” has
the meaning specified in Section IX.

      

      “Delisting
Termination” has the meaning specified in Section VIII(c).

      

      “Discount Per Share”
means an amount in U.S. dollars specified in Schedule I.

      

      “Disrupted Day” means
a Trading Day on which a Market Disruption Event occurs.

      

      “Dividend Event
Termination” has the meaning specified in Section VII(b).

      

      “Exchange” means New
York Stock Exchange or any successor exchange.

      

      “Exchange Act” means
the Securities Exchange Act of 1934, as amended.

      

      “Expected Dividend
Amount” has the meaning specified in Section VII(a).

      

      “Indemnified Party”
has the meaning specified in Section XIV.

      

      “Initial Pricing Period
Termination Date” means the date specified in Schedule I.

      

      “Initial Settlement
Date” has the meaning specified in Section II(b).

      

      “Initial Share Price”
has the meaning specified in Section II(a).

      

      “Loss” has the meaning
specified in Section X(a).

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

      

      “Loss Notice” has the
meaning specified in Section X(a).

      

      “Loss of Borrow
Termination” has the meaning specified in Section VI(b).

      

      “Market Disruption
Event” means any (i) suspension of or limitation imposed on trading by
any exchange or market on which the Common Stock is listed for trading, (ii)
event that disrupts or impairs (in the reasonable business judgment of Bank of
America) the ability of market participants in general to effect transaction in,
or obtain market values for, the shares of Common Stock or futures or options
contracts relating to the Common Stock or (iii) material decrease, on any
Trading Day, in the trading volume for the Common Stock such that in the
reasonable business judgment of Bank of America it cannot purchase the
contemplated number of shares for such Trading Day.

      

      “Maximum Borrow Cost”
means 50 basis points per annum based on the closing price per share of Common
Stock on the Trading Day immediately preceding the relevant day.

      

      “Non-Defaulting Party”
has the meaning specified in Section IX.

      

      “Number of Initial
Shares” has the meaning specified in Section II(b).

      

      “Number of Shares” has
the meaning specified in Section II(a).

      

      “Payment Amount” has
the meaning specified in Section III(b).

      

      “Pricing Period” means
the period of consecutive Trading Days commencing on the Pricing Period
Commencement Date and ending on the Pricing Period Termination Date; provided that the
Pricing Period may be extended by Bank of America upon the occurrence of a
Market Disruption Event.

      

      “Pricing Period Commencement
Date” means October 22, 2008.

      

      “Pricing Period Termination
Date” means the earlier of (a) the Scheduled Pricing Period Termination
Date, or (b) any Trading Day occurring on or following the Initial Pricing
Period Termination Date and immediately preceding any Trading Day, on which Bank
of America shall notify the Company, prior to the close of regular trading on
the Exchange on such Trading Day, of its intention to terminate the Pricing
Period; provided that, for
the avoidance of doubt, any date relating to the termination of the Transaction
and designated as such pursuant to Section X of this Letter Agreement shall not
be deemed the Pricing Period Termination Date and accordingly the settlement of
the Transaction shall be governed by such Section X and not by provisions of
Section III of this Letter Agreement.

      

      “Private Placement
Agreement” has the meaning set forth in Annex B hereto.

       

      “Private Placement
Price” has the meaning set forth in Annex B hereto.

       

      “Private Placement
Settlement” has the meaning set forth in
Section  III(b).

       

      “Private Securities”
has the meaning set forth in Annex B hereto.

       

      “Prospectus” has the
meaning specified in Annex A hereto.

      

      “Purchase Date” has
the meaning specified in Section II(a).

      

      “Purchase Price” has
the meaning specified in Section II(a).

      

      “Registered
Settlement” has the meaning set forth in
Section  III(b).

      

      “Registration
Statement” has the meaning specified in Annex A hereto.

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

      

      “Regulation M” means
Regulation M under the Exchange Act.

      

      “Remaining Share
Amount” for any Trading Day equals (i) the Number of Initial Shares,
minus (ii) the
cumulative number of shares of Common Stock that Bank of America has repurchased
to cover its short position in respect of this Transaction.  For the
avoidance of doubt, such shares shall be considered repurchased by Bank of
America as of the Trading Day on which such transactions settle.

      

      “Rule 10b-18” means
Rule 10b-18 under the Exchange Act.

      

      “Rule 10b-18 VWAP”
means, for any Trading Day, the volume-weighted average price at which the
Common Stock trades as reported in the composite transactions for the principal
U.S. securities exchange on which such Common Stock is then listed on such
Trading Day, excluding (i) trades that do not settle regular way, (ii) opening
(regular way) reported trades in the consolidated system on such Trading Day,
(iii) trades that occur in the last ten minutes before the scheduled close of
trading on the Exchange on such Trading Day and ten minutes before the scheduled
close of the primary trading in the market where the trade is effected, and (iv)
trades on such Trading Day that do not satisfy the requirements of Rule
10b-18(b)(3) of the Exchange Act, as determined in good faith by Bank of
America.  The Company acknowledges that Bank of America may refer to
the Bloomberg Page “LXK.N <Equity> AQR SEC” (or any successor thereto), in
its judgment, for such Trading Day to determine the Rule 10b-18
VWAP.

      

      “SEC” has the meaning
specified in Annex A hereto.

      

      “Scheduled Pricing Period
Termination Date” means the date specified in Schedule I; provided that, the
Scheduled Pricing Period Termination Date may be postponed by Bank of America
upon the occurrence of a Market Disruption Event on any scheduled Trading Day
during the Pricing Period.

      

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

      

      “Settlement Date”
means the fourth Trading Day immediately following the last day of the Pricing
Period.

      

      “Settlement Number”
means (a) the Purchase Price divided by the
Settlement Price, minus (b) the Number
of Initial Shares.

      

      “Settlement Price”
means (i) the average of the Rule 10b-18 VWAP prices for all Trading Days during
the Pricing Period minus (ii) the
Discount Per Share.

      

      “Share Cap” means, as
of any date of determination, ten (10) times the Number of Initial Shares minus
the number of shares of Common Stock delivered by the Company to Bank of America
on or prior to such date hereunder (in each case subject to adjustment pursuant
to Section VI(b) and VIII).

      

      “Trading Day” means
any day (i) other than a Saturday, a Sunday or a Disrupted Day, and (ii) on
which the Exchange is open for trading during its regular trading session,
notwithstanding the Exchange closing prior to its scheduled closing
time.

      

      “Transaction” means
the transaction contemplated by this Letter Agreement.

      

      “Transfer Agreement”
has the meaning specified in Annex A hereto.

      

      “Valuation Period”
means a period commencing on the first Trading Day immediately following the
last Trading Day of the Pricing Period and ending on the Trading Day on which
Bank of America completes its purchase of a number of shares of Common Stock
equal to the Settlement Number, pursuant to Section III(b), and as determined in
good faith by Bank of America in consultation with the Company.

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

      

      

      

      II.  Initial
Shares

      

      (a)           Purchase.  Subject
to the terms and conditions of this Letter Agreement, the Company agrees to
purchase from Bank of America, and Bank of America will sell to the Company, on
the date hereof or on such other Trading Day as the Company and Bank of America
shall otherwise agree (the “Purchase Date”), for
a single aggregate price of $100,000,000 (the “Purchase Price”),
3,889,537 shares of Common Stock (“Number of Shares”)
and, if the Settlement Number is greater than zero, additional number of shares
of Common Stock equal to such Settlement Number.  Bank of America will
hedge this Transaction by entering into a short sale with respect to the Number
of Initial Shares effected at the closing price per share of Common Stock on the
Purchase Date (the “Initial Share
Price”).  Such purchase, sale and hedge shall be effected in
accordance with Bank of America’s customary procedures.

      

      (b)           Initial
Settlement.  On the third Trading Day immediately following the
Purchase Date (the “Initial Settlement
Date”), Bank of America shall deliver to the Company, a number of Shares
equal to the product of (i) 85% and (ii) the Number of Shares (the “Number of Initial
Shares”), upon payment by the Company of the Purchase Price in U.S.
dollars.

      

      III.  Settlement

      

      (a)           Bank of America Settlement
Obligation.  If, following the expiration of the Pricing
Period, the Settlement Number is greater than zero, on the Settlement Date, Bank
of America shall transfer to the Company through its agent, for no additional
consideration, a number of shares of Common Stock equal to the Settlement
Number.

      

      (b)           Company Settlement
Obligation.  If, following the expiration of the Pricing
Period, the Settlement Number is less than zero, on the Settlement Date, (i) the
Company shall, in accordance with the provisions of this paragraph (b), transfer
to Bank of America through its agent, for no additional consideration, a number
of shares of Common Stock equal to the absolute value of the Settlement Number
or, (ii) if the Company so elects pursuant to this paragraph, in lieu of such
share delivery, the Company shall make a cash payment to Bank of America in an
amount equal to the absolute value of the Settlement Number multiplied by the
weighted average purchase price at which Bank of America purchases shares of
Common Stock equal to the Settlement Number during the Valuation Period (the
“Payment
Amount”), to be paid on the Trading Day immediately following the last
day of the Valuation Period; provided that, for
the avoidance of doubt, in accordance with the calculation of the Settlement
Number, in calculating any corresponding settlement obligations of the parties,
Bank of America shall take into consideration the actual payments and deliveries
made by the parties on the Initial Settlement Date for the
Transaction.  The Company shall notify Bank of America in writing of
its election (i) to pay the absolute value of the Settlement Number in cash
or, (ii) to effect the delivery of the Settlement Number of shares in accordance
with Annex A (“Registered
Settlement”) or Annex B (“Private Placement
Settlement”) to this Letter Agreement; provided that (A) the
failure to make an election and notify Bank of America in accordance with the
preceding sentence with respect to matters described in clause (i), shall
constitute an irrevocable election by the Company to deliver shares, and, (B)
the failure to make an election and notify Bank of America with respect to
matters described in clause (ii), shall constitute an election of “Private
Placement Settlement”.

      

      (c)    Delivery
Limitation.  Notwithstanding anything to the contrary in this
Letter Agreement, the Company acknowledges and agrees that, on any day, Bank of
America (or its agent or affiliate) shall not be obligated to deliver or receive
any shares of Common Stock to or from the Company and the Company shall not be
entitled to receive any shares of Common Stock if such receipt or delivery would
result in Bank of America directly or indirectly beneficially owning (as such
term is defined for purposes of Section 13(d) of the Exchange Act) at any time
in excess of 4.9% of the outstanding shares of Common Stock.  Any
purported receipt or delivery of shares of Common Stock shall be void and have
no effect to the extent (but only to the extent) that any receipt or delivery of
such shares of Common Stock would result 

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

      

      in Bank
of America directly or indirectly so beneficially owning in excess of 4.9% of
the outstanding shares of Common Stock.  If, on any day, any delivery
or receipt of shares of Common Stock by Bank of America (or its agent or
affiliate) is not effected, in whole or in part, as a result of this provision,
Bank of America’s and the Company’s respective obligations to make or accept
such receipt or delivery shall not be extinguished and such receipt or delivery
shall be effected over time as promptly as Bank of America reasonably determines
that such receipt or delivery would not result in Bank of America directly or
indirectly beneficially owning in excess of 4.9% of the outstanding shares of
Common Stock.

       

          (d)    Company Settlement
Representations.  The Company represents and warrants, as of
the Pricing Period Termination Date, that each of its filings under the
Securities Act, the Exchange Act or other applicable securities laws that are
required to be filed have been filed and that, as of the date of this
representation, there is no misstatement of material fact contained therein or
omission of a material fact required to be stated therein or necessary to make
the statements therein not misleading in the circumstances under which they were
made.

      

      IV.  Bank of America
Purchases

      

      (a)    Manner of
Purchases.  During the Pricing Period or, if applicable, the
Valuation Period, Bank of America (or its agent or affiliate) may purchase
shares of Common Stock in connection with this Transaction.  The
timing of such purchases by Bank of America, the price paid per share of Common
Stock pursuant to such purchases and the manner in which such purchases are
made, including without limitation whether such purchases are made on any
securities exchange or privately, shall be within the sole judgment of Bank of
America; provided that, during
the Valuation Period, Bank of America will use good faith efforts to make all
purchases of Common Stock in connection with this Transaction in a manner that
would comply with the limitations set forth in clauses (b)(2), (b)(3), (b)(4)
and (c) of Rule 10b-18 as if such rule were applicable to such purchases.

      

      (b)    10b5-1
Plan.  The Company acknowledges and agrees that (i) all
purchases pursuant to this Section IV hereunder shall be made in Bank of
America’s sole discretion and for Bank of America’s own account and (ii) the
Company does not have, and shall not attempt to exercise, any influence over
how, when or whether to make such purchases, including, without limitation, the
price paid per share of Common Stock pursuant to such purchases whether such
purchases are made on any securities exchange or privately.  It is the
intent of the Company and Bank of America that this Transaction comply with the
requirements of Rule 10b5-1(c) of the Exchange Act and that this Letter
Agreement shall be interpreted to comply with the requirements of Rule
10b5-1(c)(1)(i)(B) and Bank of America shall take no action that results in the
transaction not so complying with such requirements.

      

      (c)    Regulatory
Suspension.  In the event that Bank of America reasonably
concludes in good faith, that it is appropriate with respect to any legal,
regulatory or self-regulatory requirements or related policies and procedures
(whether or not such requirements, policies or procedures are imposed by law or
have been voluntarily adopted by Bank of America), or due to any Market
Disruption Event, for it to refrain from purchasing Common Stock on any Trading
Day during the Pricing Period, the Pricing Period
shall be suspended for such day.  Bank of America shall
promptly notify the Company upon exercising its rights pursuant to this Section
IV(c) and shall subsequently notify the Company in writing on the day Bank of
America believes that it may resume purchasing Common Stock.  Bank of
America shall not be required to communicate to the Company the reason for Bank
of America’s exercise of its rights pursuant to this Section IV(c) if Bank of
America reasonably determines in good faith that disclosing such reason may
result in a violation of any legal, regulatory, or self-regulatory requirements
or related policies and procedures.

      

      V.  Company
Purchases

      

      The Company (including  its “affiliated purchasers”, as defined
in Rule 10b-18) shall  not, without a prior written  consent of Bank of
America,  purchase any shares of Common Stock (or an equivalent interest, or any security convertible
into or exchangeable for such shares) on the open market, or
enter into 

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

      

      any
accelerated share repurchase program, or any derivative share repurchase
transaction, or other similar transaction, during the Pricing Period and
thereafter until all payments or deliveries of shares pursuant to Section III
have been made.  During such time, any purchases of Common Stock by
the Company shall be made through Bank of America or its affiliates, subject to
such reasonable conditions as Bank of America or such affiliate shall impose,
and in compliance with Rule 10b-18 or otherwise in a manner that the Company and
Bank of America believe is in compliance with applicable
requirements.

      

      VI.  Borrow
Events

       

      (a)           Borrow Cost
Increase.  If at any time during this Transaction, Bank of
America does not, after using commercially reasonable efforts, successfully
borrow Common Stock (up to a number equal to the Remaining Share Amount) on
terms that require Bank of America to pay or bear costs in connection with such
borrow in an amount less than or equal to the Maximum Borrow Cost, then Bank of
America will act in good faith and in a commercially reasonable manner to (a)
make the corresponding adjustment(s), if any, as Bank of America determines
appropriate (and in consultation with the Company) to account for any excess
borrowing costs and (b) determine the effective date(s) of the
adjustment(s).

       

      (b)           Loss of Borrow
Termination.  On any Trading Day, Bank of America may elect to
terminate (“Loss of
Borrow Termination”) this Transaction, in whole or in part, as the case
may be, in the event and pro rata to the extent it is no longer able, after
commercially reasonable efforts, to borrow (or maintain a borrowing of),
including at a cost that may exceed the Maximum Borrow Cost, shares of Common
Stock in an amount equal to the Remaining Share Amount.  Upon the
occurrence of a Loss of Borrow Termination, an Event of Default shall be deemed
to have occurred with the Company deemed the Defaulting Party and Bank of
America, the Non-Defaulting Party.

      

      VII.  Dividend
Event

      

      (a)           Dividend Amount. If
100% of the aggregate gross cash dividends per share of Common Stock (including
any cash extraordinary dividends) declared by the Company and for which the
ex-date occurs at any time during the Pricing Period exceeds $0.00 per share of
Common Stock (subject to adjustment in accordance with Section VIII) (the “Expected Dividend
Amount”) per calendar quarter, a Dividend Event shall be deemed to have
occurred.

      

      (b)           Dividend Event
Termination.  Upon the occurrence of a Dividend Event, on any
Trading Day on or after the occurrence of such Dividend Event, Bank of America
may terminate this Transaction (a “Dividend Event
Termination”).  Upon the occurrence of a Dividend Event
Termination, an Event of Default shall be deemed to have occurred with the
Company deemed the Defaulting Party and Bank of America, the Non-Defaulting
Party.

      

      VIII.  Extraordinary
Events

      

      (a)           
Tender
Offers.  In the event an offer is made to the holders of Common
Stock to tender in excess of 15% of the outstanding shares of Common Stock for
cash, Bank of America may, in its reasonable discretion, (i) adjust the terms of
this Transaction, so that (x) the final day of the Pricing Period shall be the
earlier of the scheduled final Trading Day of the Pricing Period and the date
the tender offer is consummated and (y) for each of the Trading Days in the
Pricing Period following the date on which the offer is made, the price used in
computing the Settlement Price shall equal the price per share of Common Stock
at which the tender offer is to be consummated, where Bank of America shall
notify the Company in writing as to the terms of any adjustment made pursuant to
this Section VIII(a) no later than 5 days after the tender offer is made or (ii)
elect to terminate this Transaction (a “Cash Tender
Termination”).  Upon the occurrence of a Cash Tender
Termination, an Event of Default shall be deemed to have occurred with the
Company deemed the Defaulting Party and Bank of America, the Non-Defaulting
Party.

      

      (b)           
Corporate
Events.  In the event of any corporate event involving the
Company or the Common Stock not specifically addressed in subsection (a) of this
Section VIII (including, without 

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

      

      limitation,
the announcement of a non-cash dividend, stock split, reorganization, merger,
offer to tender Common Stock for consideration other than cash, rights offering,
recapitalization or spin-off) or in the event that Bank of America, in its
reasonable good faith judgment, determines that the adjustments described in
subsection (a) of this Section VIII will not result in an equitable adjustment
of the terms of this Transaction, Bank of America may (i) adjust the terms of
this Transaction (including, without limitation, with respect to the Expected
Dividend Amount and the number of Trading Days in the Pricing Period) as in the
exercise of its good faith judgment it deems appropriate under the circumstances
or (ii) elect to terminate this Transaction (a “Corporate Event
Termination”).  Upon the occurrence of a Corporate Event
Termination, an Event of Default shall be deemed to have occurred with the
Company deemed the Defaulting Party and Bank of America, the Non-Defaulting
Party.

      

      (c)           Delisting.  In
the event that the Exchange announces that pursuant to the rules of such
Exchange, the Common Stock ceases (or will cease) to be listed, traded or
publicly quoted on the Exchange for any reason (other than the occurrence of an
event addressed in subsections (a) or (b) of this Section VIII) and are not
immediately re-listed, re-traded or re-quoted on an exchange or quotation system
located in the same country as the Exchange (or, where the Exchange is within
the European Union, in any member state of the European Union), Bank of America
may (i) adjust the terms of this Transaction or (ii) elect to terminate this
Transaction (a “Delisting
Termination”).  Upon the occurrence of a Delisting Termination,
an Event of Default shall be deemed to have occurred with the Company deemed the
Defaulting Party and Bank of America, the Non-Defaulting Party.

      

      IX.  Events of
Default

      

      In
addition to events contemplated by Sections VI(b), VII(b) and VIII, the
occurrence of any of the following events with respect to a party (such party,
the “Defaulting
Party” with respect to such event, and the other party, the “Non-Defaulting
Party”) shall be an Event of Default:

      

      (a)           Payment.  The
failure to make any payment or any delivery of shares pursuant to the terms of
the Letter Agreement.

      

      (b)           Breach.  Any
representation or warranty made in this Letter Agreement shall prove to have
been false in any material respect at the time it was made, given or
reaffirmed.

      

      (c)           Performance.  The
failure to perform or comply in any material respect with any other obligation
in this Letter Agreement which failure shall continue for 5 business days after
written notice of such failure has been sent to the Defaulting
Party.

      

      (d)           Insolvency.  (A)
The initiation of any case, proceeding or other action (1) under any existing or
future law of any jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, reorganization or other relief of debtors, seeking to have an order
for relief entered with respect to it, or seeking to have itself adjudicated as
bankrupt or insolvent, or seeking reorganization, arrangement, adjustment,
winding-up, liquidation, dissolution or composition or other relief under
bankruptcy or insolvency law with respect to it or its debts or (2) which seeks
appointment of a receiver, trustee, custodian, conservator or other similar
official for it or for all or any substantial part of its assets; (B) a general
assignment for the benefit of its creditors; (C) the initiation of any case,
proceeding or other action of a nature referred to in clause (A) hereof which
(1) results in the entry of an order for relief or any such adjudication or
appointment with respect to the party or any of its assets or (2) is not
dismissed, stayed, discharged or bonded for a period of 5 days; (D) the
initiation of any case, proceeding or other action seeking issuance of a warrant
of attachment, execution, or similar process against all or any substantial part
of its assets, which case, proceeding or other action results in the entry of an
order for any such relief which shall not have been vacated, discharged, or
stayed or bonded pending appeal within 30 days from the entry thereof; (E) a
party shall take any action in furtherance of, or indicating its consent to,
approval of, or acquiescence in, any of the acts set forth in clauses (A) - (D)
hereof; or (F) either party shall generally not, or shall admit in writing its
inability to, pay its debts as they become due.

      

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

      

      (e)           Cross-Default.  Any
loan or other obligation in respect of borrowed money (whether present or
future, contingent or otherwise, as principal or surety or otherwise) of a party
in an amount, (i) in the case of the Company, in excess of $100,000,000, or (ii)
in the case of Bank of America, in excess of 3% of shareholders’ equity shall
have become payable before the due date thereof as a result of acceleration of
maturity caused by the occurrence of any event of default thereunder or if any
other such loan or obligation shall not be repaid when due, as extended by any
applicable grace period specified in the contracts or agreements constituting
such loan or obligation.

      

      (f)           Merger,
Consolidation.  Any consolidation or amalgamation or merger
with or into, or any transfer of all or substantially all its assets (i) to
another entity by a party, resulting in the creditworthiness of the surviving or
transferee entity being materially weaker than that of the party immediately
prior to such action, or (ii) into any person unless the surviving person is the
Company or another person formed under the laws of a State of the United States
of America and such entity assumes or is responsible, by operation of law, for
all obligations of the Company hereunder.

      

      X.  Remedies

      

      (a)           Settlement Loss
Determination.  Upon the occurrence and the continuance of an
Event of Default, notwithstanding any other provision to the contrary in this
Letter Agreement, the Non-Defaulting Party, upon notice to the Defaulting Party,
may, in its sole discretion, immediately terminate this Transaction and, if
applicable, purchasing the number of Shares equal to the Remaining Share Amount
to cover its short position or adjusting any other term hereof, and may sell,
liquidate, offset or take any other action with respect to any short position
established or maintained by it in connection with this
Transaction.  The Non-Defaulting Party shall act in good faith and in
a commercially reasonable manner to determine the amount that such party
reasonably in good faith believes to be its total unreimbursed net losses and
costs (which may be positive or negative) incurred in connection with the
termination of this Letter Agreement (the “Loss”) and upon
completion of such determination shall deliver to the Defaulting Party a written
notice indicating the amount of such Loss (a “Loss
Notice”).  Such computation shall include any out-of-pocket
losses (which may include but not be limited to the difference between the
Initial Share Price and the average price at which the shares are purchased
during the term of this Transaction (as this Transaction may be terminated early
as a result of the operation of this Section X(a)) and any actual or anticipated loss or cost incurred as
a result of its terminating, liquidating, obtaining or reestablishing any hedge
or related trading position.  In addition to the foregoing, the
Non-Defaulting Party may include in its determination of its Loss hereunder such
losses and costs (or gains) in respect of any payment or delivery required to
have been made on or before the relevant termination date.  In
determining Loss, the Non-Defaulting Party may consider any relevant
information, including, without limitation, one or more of the following types
of information: (i) quotations (either firm or indicative) for replacement
transactions supplied by one or more third parties that may take into account
the creditworthiness of the Non-Defaulting Party at the time the quotation is
provided and the terms of any relevant documentation, including credit support
documentation, between the Non-Defaulting Party and the third party providing
the quotation; (ii) information consisting of relevant market data in the
relevant market supplied by one or more third parties including, without
limitation, relevant rates, prices, yields, yield curves, volatilities, spreads,
correlations or other relevant market data in the relevant market; or (iii)
information of the types described in clause (i) or (ii) above from internal
sources (including any of the Non-Defaulting Party’s affiliates) if that
information is of the same type used by the Non-Defaulting Party in the regular
course of its business for the valuation of similar transactions.  The
Non-Defaulting Party will consider, taking into account the standards and
procedures described in this paragraph, quotations pursuant to clause (i) above
or relevant market data pursuant to clause (ii) above unless the Non-Defaulting
Party reasonably believes in good faith that such quotations or relevant market
data are not readily available or would produce a result that would not satisfy
those standards.  When considering information described in clause
(i), (ii) or (iii) above, the Non-Defaulting Party may include costs of funding,
to the extent costs of funding are not and would not be a component of the other
information being utilized.  Third parties supplying quotations
pursuant to clause (i) above or market data pursuant to clause (ii) above may
include, without limitation, dealers in the relevant markets, end-users of the
relevant product, information vendors, brokers and other sources of market
information.  Notwithstanding the foregoing, and without affecting the
respective parties’ obligations to make payments 

       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

      

      in
accordance with Section X(b), upon reasonable written request by the Defaulting
Party, the Non-Defaulting Party shall provide a written explanation of any
calculation or adjustment made by it in connection with calculation of the Loss,
including, where applicable, a reasonable description of the methodology and the
basis for such calculation or adjustment in reasonable detail and shall consult
with the Defaulting Party with respect to the amount of such Loss, it being
understood that the Non-Defaulting Party shall not be obligated to disclose any
proprietary models used by it for such calculation.

      

      (b)           Payments.  Upon 
receipt of a Loss Notice  from the  Non-Defaulting Party, (i) if the
amount  determined in  accordance with paragraph  (a) above is
a  positive number, then the Defaulting Party shall promptly pay to the
Non-Defaulting Party, the amount of such Loss in cash or (ii) if the amount
determined in accordance with paragraph (a) above is a negative number, then the
Non-Defaulting Party shall promptly pay to the Defaulting Party, the absolute
value of the amount of such Loss in cash; provided that, in the
event the Company is the party owing the Loss amount, then this paragraph (b)
shall be subject to the terms of paragraphs (c) and (d) below.

      

      (c)    Loss Settlement
Election.  If the Company is the owing party in accordance with
paragraph (b) above, upon receipt of a Loss Notice from Bank of America as the
Non-Defaulting Party, the Company may, in addition to its option to promptly pay
to Bank of America the amount of such Loss in cash, elect to deliver to Bank of
America within two Trading Days a number of shares of Common Stock equal to (i)
the amount of such Loss divided by (ii) the
closing price of the Common Stock on the Exchange for the day upon which the
Company receives such Loss Notice, rounded up to the nearest whole
share.  Such share delivery is subject to the provisions of the last
sentence of Section III(b); provided that, for
the avoidance of doubt, in calculating any settlement obligations of the parties
in accordance with this Section X, Bank of America shall take into consideration
the actual payments and deliveries made by the parties on the Initial Settlement
Date for the Transaction; provided, further that in no
event shall the Company be required to deliver a number of shares of Common
Stock that exceeds the then applicable Share Cap.

      

      (d)    Costs and
Expenses.  In addition to the payments set forth in subsections
(b) and (c) above, the Defaulting Party agrees to indemnify the Non-Defaulting
Party from and against any reasonable expenses (including reasonable external
counsel fees and other expenses of collection) it may incur as a result of any
default by such party.

      

      XI.  Representations of the
Parties

      

      Each
party represents to the other party that:

       

      (a)           Status.  It
is duly organized and validly existing under the laws of the jurisdiction of its
organization or incorporation and, if relevant under such laws, in good
standing;

       

      (b)           Powers.  It
has the corporate or other organizational power to execute and deliver this
Letter Agreement and to perform its obligations under this Letter Agreement and
has taken all necessary action to authorize such execution, delivery and
performance;

       

      (c)           No Violation or
Conflict.  Such execution, delivery and performance do not
violate or conflict with any law applicable to it, any provision of its
constitutional documents, any order or judgment of any court or other agency of
government applicable to it or any of its assets or any contractual restriction
binding on or affecting it or any of its assets;

       

      (d)           Consents.  All
governmental and other consents that are required to have been obtained by it
with respect to this Letter Agreement have been obtained and are in full force
and effect and all conditions of any such consents have been complied
with;

       

      (e)           Obligations
Binding.  Its obligations under this Letter Agreement
constitute its legal, valid and binding obligations, enforceable in accordance
with its respective terms (subject to applicable 

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

      

      bankruptcy,
reorganization, insolvency, moratorium or similar laws affecting creditors’
rights generally and subject, as to enforceability, to equitable principles of
general application (regardless of whether enforcement is sought in a proceeding
in equity or at law)); and

       

      (f)           Absence of Certain
Events.  No Event of Default (as defined in the Agreement) or
event that, with the giving of notice or the passage of time or both, would
constitute an Event of Default has occurred and is continuing and no such event
or circumstance would occur as a result of its entering into or performing its
obligations under this Letter Agreement.

       

      XII.  Representations of the
Company

       

      The
Company additionally hereby represents on the Purchase Date to Bank of America
that:

       

      (a)    Liquidity.  Its
financial condition is such that it has no need for liquidity with respect to
its investment in the transactions contemplated by this Letter Agreement and no
need to dispose of any portion thereof to satisfy any existing or contemplated
undertaking or indebtedness.  Its investments in and liabilities in
respect of such transactions, which it understands are not readily marketable,
is not disproportionate to its net worth;

      

      (b)    Private Placement.  It acknowledges that the offer and sale of
this Transaction to it is intended to be
exempt from registration under the Securities Act, by virtue of Section 4(2)
thereof.  Accordingly, the Company represents and warrants to Bank of
America that (i) it is an “accredited investor” as that term is defined in
Regulation D as promulgated under the Securities Act, (ii) it is entering into
this Transaction for its own account and
without a view to the distribution or resale thereof, and it understands that Bank
of America has no obligation or intention to register the transactions
contemplated by this Letter Agreement under the Securities Act or any state
securities law or other applicable federal securities law;

      

      (c)    No Deposit
Insurance.  It understands
that no obligations of Bank of America to it hereunder will be entitled to the
benefit of deposit insurance and that such obligations will not be guaranteed by
any affiliate of Bank of America or any governmental agency;

      

      (d)    Assumption of
Risk.  IT UNDERSTANDS THAT THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT ARE SUBJECT TO COMPLEX RISKS THAT MAY ARISE WITHOUT WARNING AND
MAY AT TIMES BE VOLATILE AND THAT LOSSES MAY OCCUR QUICKLY AND IN UNANTICIPATED
MAGNITUDE AND IS WILLING TO ACCEPT SUCH TERMS AND CONDITIONS AND ASSUME
(FINANCIALLY AND OTHERWISE) SUCH RISKS;

      

      (e)    Compliance with Filing
Requirements.  Each of its filings under the Securities Act,
the Exchange Act, or other applicable securities laws that are required to be
filed have been filed and that, as of the respective dates thereof, there is no
misstatement of material fact contained therein or omission of a material fact
required to be stated therein or necessary to make the statements therein not
misleading

      

      (f)    Material Non-Public
Information.  It is not
entering into this Letter Agreement on the basis of, and is not aware of, any
material non-public information with respect to the Common Stock or in
anticipation of, in connection with, or to facilitate, a distribution of its
securities, a self tender offer or a third-party tender offer;

      

      (g)    No Manipulation.  It is not entering into any
transaction to create, and will not engage in any other securities or
derivatives transactions to create, actual or apparent trading activity in the
Common Stock (or any security convertible into or exchangeable for Common Stock)
or to raise or depress or to manipulate the price of the Common Stock (or any
security convertible into or exchangeable for Common Stock);

      

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

      

      (h)    Compliance with Securities
Laws.  It has not and will
not directly or indirectly violate any applicable law, rule or regulation
(including, without limitation, the Securities Act and the Exchange Act) in
connection with the transactions contemplated by this Letter
Agreement;

      

      (i)    Required Company
Approvals.  The transactions contemplated by this Letter
Agreement and any repurchase of Common Stock by the Company in connection with
such transactions are pursuant to a publicly announced share repurchase program
that has been approved by its Board of Directors and any such repurchase has
been or will when so required be publicly disclosed in its periodic filings
under the Exchange Act and its financial statements and notes thereto and, at
the time of making this representation, such transactions are not subject to any
internal policy or procedure of the Company which would prohibit the Company
from effecting any transactions in the shares of Common Stock at such
time;

      

      (j)    Regulation
M.  The Company is not on the date hereof, and will not be
during the term of the transactions contemplated by this Letter Agreement,
engaged in a distribution, as such term is used in Regulation M under the
Exchange Act, that would preclude purchases by the Company of the Common Stock
or cause the Company to violate any law, rule or regulation with respect to such
purchases;

      

      (k)    Non-Reliance.  It
is not relying, and has not relied upon, Bank of America or any of its affiliates with respect to the
legal, accounting, tax or other implications of this Letter Agreement and that
it has conducted its own analyses of the legal, accounting, tax and other
implications of this Letter Agreement.  Further, it acknowledges and agrees that neither Bank of America
nor any affiliate of Bank of America has acted as its advisor in any capacity in
connection with this Letter Agreement or the transactions contemplated
hereby.  The Company is entering into this Letter Agreement with a
full understanding of all of the terms and risks hereof (economic and
otherwise), has adequate expertise in financial matters to evaluate those terms
and risks and is capable of assuming (financially and otherwise) those
risks; and

      

      (l)    Acknowledgement of Bank of
America Activity.  It understands and acknowledges that Bank of
America and its affiliates may from time to time effect transactions for their
own account or the account of customers and hold positions in securities or
options on securities of the Company and that Bank of America and its affiliates
may continue to conduct such transactions during the Pricing Period and the
Valuation Period.

      

      XIII.  Agreements of the
Company

      

      (a)    Authorized
Shares.  The Company agrees that while this Letter Agreement is
in effect, it shall cause (i) the number of authorized shares of Common
Stock minus
(ii) the number of outstanding shares of Common Stock minus (iii) the
number of shares of Common Stock reserved for other purposes minus
(iv) without duplication of clause (iii), the aggregate maximum number of
shares of Common Stock deliverable under warrants, options, swaps, forwards,
convertible or exchangeable securities or other similar transactions, agreements
or instruments issued by the Company or to which the Company is a party that
provide for physical or net share settlement or otherwise may require the
issuance of shares of Common Stock by the Company, to exceed the then applicable
Share Cap.  At the conclusion of the Pricing Period, the Company will
have a sufficient number of treasury shares or duly authorized but unissued
shares of Common Stock available to satisfy its obligations with respect to this
Transaction, such shares of Common Stock to be fully paid and nonassessable and
free of preemptive and other rights.  The Company agrees that a
failure by the Company to comply with the preceding sentence shall be an Event
of Default hereunder with respect to the Company without regard to any grace
period that would otherwise be applicable.

      

      (b)    Nature of
Rights.  The Company acknowledges and agrees that this Letter
Agreement is not intended to convey to Bank of America rights against the
Company hereunder that are senior to the claims of common stockholders in any
U.S. bankruptcy proceedings of the Company; provided, however, that nothing
herein shall limit or shall be deemed to limit Bank of America’s right to pursue
remedies in the event of a breach by the Company of its obligations and
agreements with respect to this Letter Agreement; 

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

      

      and
provided further that in pursuing a claim against the Company in the event of a
bankruptcy, insolvency or dissolution with respect to Company, Bank of America’s
rights hereunder shall rank on a parity with the rights of a holder of shares of
Common Stock enforcing similar rights under a contract involving shares of
Common Stock.

      

      (c)    Disclosure.  The
Company agrees that the material terms of this Transaction (and any other
similar transactions), and the consequences of such transactions on the
financial condition and results of operations of the Company, will be disclosed
by the Company in accordance with all rules, regulations, accounting principles
(including EITF Issue No. 00-19) and laws applicable to the Company in its
periodic filings under the Exchange Act and its financial statements and notes
thereto.

      

      (d)           Corporate Event
Notification.  During the Pricing
Period, the Company shall (i) notify Bank of America prior to the opening of
trading in the Common Stock on any day on which the Company makes, or expects to
be made, any public announcement (as defined in Rule 165(f) under the Securities
Act) of any merger, acquisition, or similar transaction involving a
recapitalization relating to the Company (other than any such transaction in
which the consideration consists solely of cash and there is no valuation
period), (ii) promptly notify Bank of America following any such announcement
that such announcement has been made, and (iii) promptly deliver to Bank of
America following the making of any such announcement a certificate indicating
(A) the Company’s average daily Rule 10b-18 purchases (as defined in Rule
10b-18) during the three full calendar months preceding the date of the
announcement of such transaction and (B) the Company’s block purchases (as
defined in Rule 10b-18) effected pursuant to paragraph (b)(4) of Rule 10b-18
during the three full calendar months preceding the date of the announcement of
such transaction.  In addition, the Company shall promptly notify Bank
of America of the earlier to occur of the completion of such transaction and the
completion of the vote by target shareholders.  The Company
acknowledges that any such public announcement may cause the Pricing Period to
be suspended pursuant to Section IV(c).  Accordingly, the Company
acknowledges that its actions in relation to any such announcement or
transaction must comply with the standards set forth in Section
IV(a).

      

      XIV.  Indemnification

      

      The
Company agrees to indemnify and hold harmless Bank of America, its affiliates
and its assignees and their respective directors, officers, employees, agents
and controlling persons (Bank of America and each such person being an “Indemnified Party”)
from and against any and all losses, claims, damages and liabilities, joint or
several, to which such Indemnified Party may become subject, and relating to or
arising out of the transactions contemplated by this Letter Agreement, and will
reimburse any Indemnified Party for all expenses (including reasonable counsel
fees and expenses) as they are incurred in connection with the investigation of,
preparation for or defense or settlement of any pending or threatened claim or
any action, suit or proceeding arising therefrom, whether or not such
Indemnified Party is a party thereto and whether or not such claim, action, suit
or proceeding is initiated or brought by or on behalf of the
Company.  The Company will not be liable under the foregoing
indemnification provision to the extent that any loss, claim, damage, liability
or expense is found in a nonappealable judgment by a court of competent
jurisdiction to have resulted from Bank of America’s breach of a material term
of this Letter Agreement, willful misconduct or negligence.  If for
any reason the foregoing indemnification is unavailable to any Indemnified Party
or insufficient to hold harmless any Indemnified Party, then the Company shall
contribute, to the maximum extent permitted by law (but only to the extent that
such harm was not caused by Bank of America’s breach of a material term of this
Letter Agreement, willful misconduct or negligence), to the amount paid or
payable by the Indemnified Party as a result of such loss, claim, damage or
liability.  The Company also agrees that no Indemnified Party shall
have any liability to the Company or any person asserting claims on behalf of or
in right of the Company in connection with or as a result of any matter referred
to in this Letter Agreement except to the extent that any losses, claims,
damages, liabilities or expenses incurred by the Company result from the breach
of a material term of this Letter Agreement, or the Indemnified Party’s
negligence or willful misconduct.  The provisions of this Section XIV
shall survive completion of the transactions contemplated by this Letter
Agreement and shall inure to the benefit of any permitted assignee of Bank of
America.

      

      
        
          
          

        

        
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      XV.  Miscellaneous

      

      (a)           No
Collateral.  Notwithstanding  any provision of this Letter
Agreement, or any  other agreement  between the parties, to the
contrary, the obligations  of the Company under this Letter Agreement are
not secured by any collateral.

      

      (b)           Waiver of Trial by
Jury.  EACH OF THE COMPANY AND BANK OF AMERICA HEREBY
IRREVOCABLY WAIVES (ON ITS OWN BEHALF AND, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, ON BEHALF OF ITS STOCKHOLDERS) ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE)
ARISING OUT OF OR RELATING TO THIS LETTER AGREEMENT OR THE ACTIONS OF BANK OF
AMERICA OR ITS AFFILIATES IN THE NEGOTIATION, PERFORMANCE OR ENFORCEMENT
HEREOF.

      

      (c)           Governing
Law.   THIS  LETTER AGREEMENT SHALL BE 
GOVERNED  BY THE  LAW OF THE STATE OF  NEW YORK WITHOUT 
REFERENCE TO  THE CHOICE OF LAW RULES THEREOF.

      

      (d)           Submission to
Jurisdiction.  THE PARTIES HERETO IRREVOCABLY SUBMIT TO THE
EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE UNITED
STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK IN CONNECTION WITH
ALL MATTERS RELATING HERETO AND WAIVE ANY OBJECTION TO THE LAYING OF VENUE IN,
AND ANY CLAIM OF INCONVENIENT FORUM WITH RESPECT TO, THESE COURTS.

      

      (e)           Non-Confidentiality.  Notwithstanding
anything to the contrary herein, (i) Bank of America acknowledges that this
Letter Agreement may be intended to produce U.S. federal income tax benefits for
the Company and (ii) the Company and Bank of America hereby agree that
(A) the Company is not obligated to Bank of America to keep confidential
from any and all persons or otherwise limit the use of any aspect of this Letter
Agreement relating to the structure or tax aspects thereof, and (B) Bank of
America does not assert any claim of proprietary ownership in respect of any
such aspect of this Letter Agreement.

      

      (f)           Bankruptcy
Code.  The parties hereto intend for (i) the Transaction
hereunder to be a “securities contract” and a “swap agreement” as defined in the
Bankruptcy Code (Title 11 of the United States Code) (the “Bankruptcy Code”),
and the parties hereto are entitled to the protections afforded by, among other
Sections, Sections 362(b)(6), 362(b)(17), 362(o), 546, 555, 560 and 561 of the
Bankruptcy Code; (ii) a party’s right to liquidate, terminate or accelerate the
Transaction and to exercise any other remedies upon the occurrence of any Event
of Default, a Loss of Borrow Termination, a Dividend Event Termination, a Cash
Tender Termination, a Corporate Event Termination or a Delisting Termination
under this Letter Agreement with respect to the other party to constitute a
“contractual right” within the meaning of the Bankruptcy Code; (iii) all
transfers of cash, securities or other property under or in connection with the
Transaction are “transfers” made “by or to (or for the benefit of)” a “master
netting agreement participant”, a “financial institution”, a “financial
participant”, a “forward contract merchant” or a “swap participant”, (each as
defined in the Bankruptcy Code) within the meaning of Sections 546(e), 546(f),
546(g) and 546(j) of the Bankruptcy Code; (iv) all obligations under or in
connection with the Transaction represent obligations in respect of “termination
values”, “payment amounts” or “other transfer obligations” within the meaning of
Section 362, 560 and 561 of the Bankruptcy Code; and (v) each of the parties
hereto to be a “swap participant” and “financial participant” within the meaning
of Sections 101(53C) and 101(22A) of the Bankruptcy Code.

      

      (g)           Assignment and
Transfer.  The rights and duties under this Letter Agreement
may not be assigned or transferred by either party hereto without the prior
written consent of the other party hereto; provided, however, that Bank of
America may assign its obligation to deliver or receive delivery of Common Stock
hereunder to any of its affiliates without the prior written consent of the
Company.  Upon 

       

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

      

      any such
assignment Bank of America shall indemnify the Company from and against any
loss, cost or expense relating to the failure of such affiliate to perform its
delivery obligation.

      

      (h)           Calculations.  To
the extent any calculation, adjustment or determination is required to be made
by Bank of America hereunder, Bank of America shall make any such calculation,
adjustment, or determination in good faith.

      

      (i)           Notices.  Unless
otherwise specified, notices under this Letter Agreement may be made by
telephone, to be confirmed in writing to the address below.  Changes
to the Notices must be made in writing.

      

      (i)           
If to the Company:

      Lexmark
International, Inc.

      One
Lexmark Centre Drive

      740 West
New Circle Road

      Lexington,
KY  40550

      Attn:  Richard
Pelini

      Telephone:  (859)
232-5108

      Facsimile:  (859)
232-5137

      

      (ii)           If
to Bank of America:

      Bank of
America, N.A.

      Bank of America Tower

      One
Bryant Park, 3rd
Floor

      New York, NY 10036

      Attn:  John
Servidio

      Telephone: (646) 855-7127

      Facsimile: (704) 208-2869

      

      

      
        
           

        

        
          14

          
            

          

        

        
           

        

      

      Please
confirm your agreement to the foregoing by signing and returning to us the
enclosed duplicate of this Letter Agreement.

      

      Very truly yours,

      

      BANK
OF AMERICA, N.A.

      

      By:   /s/Jake
Mendelsohn                                                                    

      Name: Jake Mendelsohn

      Title: Principal

      

      

      Acknowledged
and agreed to as of

      the date
first above written,

      

      LEXMARK
INTERNATIONAL, INC.

      

      By:   /s/Bruce J.
Frost           

      Name:
Bruce J. Frost

      Title:
Assistant Treasurer

      
        
           

        

        
          15

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00148-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00148-of-00352.parquet"}]]