Document:

exv10w1

 

Exhibit 10.1

Execution Copy

COMMON STOCK PURCHASE AGREEMENT

by and between

KINGSBRIDGE CAPITAL LIMITED

and

CELL GENESYS, INC.

dated as of March 14, 2006

 

 

TABLE OF CONTENTS

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

i

 

TABLE OF CONTENTS

(Continued)

	 	 	 	 	 
	 	 	Page	 
	Section 1.33. “Prospectus”
	 	 	4	 
	Section 1.34. “Registrable Securities”
	 	 	4	 
	Section 1.35. “Registration Rights Agreement”
	 	 	4	 
	Section 1.36. “Registration Statement”
	 	 	5	 
	Section 1.37. “Regulation D”
	 	 	5	 
	Section 1.38. “Section 4(2)”
	 	 	5	 
	Section 1.39. “Securities Act”
	 	 	5	 
	Section 1.41. “Shares”
	 	 	5	 
	Section 1.42. “Trading Day”
	 	 	5	 
	Section 1.43. “VWAP”
	 	 	5	 
	Section 1.44. “Warrant”
	 	 	5	 
	Section 1.45. “Warrant Shares”
	 	 	5	 
	ARTICLE II PURCHASE AND SALE OF COMMON STOCK
	 	 	5	 
	Section 2.01. Purchase and Sale of Stock
	 	 	5	 
	Section 2.02. Closing
	 	 	5	 
	Section 2.03. Registration Statement and Prospectus
	 	 	6	 
	Section 2.04. Warrant
	 	 	6	 
	Section 2.05. Blackout Shares
	 	 	6	 
	ARTICLE III DRAW DOWN TERMS
	 	 	6	 
	Section 3.01. Draw Down Notice
	 	 	6	 
	Section 3.02. Number of Shares
	 	 	6	 
	Section 3.03. Limitation on Draw Downs
	 	 	6	 
	Section 3.04. Trading Cushion
	 	 	6	 
	Section 3.05. Settlement
	 	 	6	 
	Section 3.06. Delivery of Shares; Payment of Draw Down Amount
	 	 	7	 
	Section 3.07. Failure to Deliver Shares
	 	 	7	 
	ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY
	 	 	8	 
	Section 4.01. Organization, Good Standing and Power
	 	 	8	 
	Section 4.02. Authorization; Enforcement
	 	 	8	 
	Section 4.03. Capitalization
	 	 	8	 
	Section 4.04. Issuance of Shares
	 	 	9	 
	Section 4.05. No Conflicts
	 	 	9	 

ii

 

TABLE OF CONTENTS

(Continued)

	 	 	 	 	 
	 	 	Page	 
	Section 4.06. Commission Documents, Financial Statements
	 	 	10	 
	Section 4.07. No Material Adverse Change
	 	 	10	 
	Section 4.08. No Undisclosed Liabilities
	 	 	10	 
	Section 4.09. No Undisclosed Events or Circumstances
	 	 	11	 
	Section 4.10. Actions Pending
	 	 	11	 
	Section 4.11. Compliance with Law
	 	 	11	 
	Section 4.12. Certain Fees
	 	 	11	 
	Section 4.13. Disclosure
	 	 	11	 
	Section 4.14. Material Non-Public Information
	 	 	11	 
	Section 4.15. Exemption from Registration; Valid Issuances
	 	 	12	 
	Section 4.16. No General Solicitation or Advertising in Regard to this Transaction
	 	 	12	 
	Section 4.17. No Integrated Offering
	 	 	12	 
	Section 4.18. Acknowledgment Regarding Investor’s Purchase of Shares
	 	 	12	 
	ARTICLE V REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE INVESTOR
	 	 	12	 
	Section 5.01. Organization and Standing of the Investor
	 	 	12	 
	Section 5.02. Authorization and Power
	 	 	13	 
	Section 5.03. No Conflicts
	 	 	13	 
	Section 5.04. Financial Capability
	 	 	13	 
	Section 5.05. Information
	 	 	13	 
	Section 5.06. Trading Restrictions
	 	 	14	 
	Section 5.07. Statutory Underwriter Status
	 	 	14	 
	Section 5.08. Not an Affiliate
	 	 	14	 
	Section 5.09. Manner of Sale
	 	 	14	 
	Section 5.10. Prospectus Delivery
	 	 	14	 
	ARTICLE VI COVENANTS OF THE COMPANY
	 	 	14	 
	Section 6.01. Securities
	 	 	14	 
	Section 6.02. Reservation of Common Stock
	 	 	15	 
	Section 6.03. Registration and Listing
	 	 	15	 
	Section 6.04. Registration Statement
	 	 	15	 
	Section 6.05. Compliance with Laws
	 	 	15	 
	Section 6.06. Other Financing
	 	 	15	 
	Section 6.07. Prohibited Transactions
	 	 	16	 

iii

 

TABLE OF CONTENTS

(Continued)

	 	 	 	 	 
	 	 	Page	 
	Section 6.08. Corporate Existence
	 	 	16	 
	Section 6.09. Non-Disclosure of Non-Public Information
	 	 	17	 
	Section 6.10. Notice of Certain Events Affecting Registration; Suspension of Right
to Request a Draw Down
	 	 	17	 
	Section 6.11. Amendments to the Registration Statement
	 	 	17	 
	Section 6.12. Prospectus Delivery
	 	 	17	 
	ARTICLE VII CONDITIONS TO THE OBLIGATION OF THE INVESTOR TO ACCEPT A DRAW DOWN
	 	 	18	 
	Section 7.01. Accuracy of the Company’s Representations and Warranties
	 	 	18	 
	Section 7.02. Performance by the Company
	 	 	18	 
	Section 7.03. Compliance with Law
	 	 	18	 
	Section 7.04. Effective Registration Statement
	 	 	18	 
	Section 7.05. No Knowledge
	 	 	18	 
	Section 7.06. No Suspension
	 	 	18	 
	Section 7.07. No Injunction
	 	 	19	 
	Section 7.08. No Proceedings or Litigation
	 	 	19	 
	Section 7.09. Sufficient Shares Registered for Resale
	 	 	19	 
	Section 7.10. Warrant
	 	 	19	 
	Section 7.11. Opinion of Counsel
	 	 	19	 
	Section 7.12. Accuracy of Investor’s Representation and Warranties
	 	 	19	 
	Section 7.13. Payment of Fees
	 	 	19	 
	ARTICLE VIII TERMINATION
	 	 	19	 
	Section 8.01. Term
	 	 	19	 
	Section 8.02. Other Termination
	 	 	19	 
	Section 8.03. Effect of Termination
	 	 	20	 
	Section 9.01. Indemnification
	 	 	20	 
	Section 9.02. Notification of Claims for Indemnification
	 	 	21	 
	ARTICLE X MISCELLANEOUS
	 	 	23	 
	Section 10.01. Fees and Expenses
	 	 	23	 
	Section 10.02. Reporting Entity for the Common Stock
	 	 	23	 
	Section 10.03. Brokerage
	 	 	23	 
	Section 10.04. Notices
	 	 	24	 
	Section 10.05. Assignment
	 	 	25	 

iv

 

TABLE OF CONTENTS

(Continued)

	 	 	 	 	 
	 	 	Page	 
	Section 10.06. Amendment; No Waiver
	 	 	25	 
	Section 10.07. Entire Agreement
	 	 	25	 
	Section 10.08. Severability
	 	 	25	 
	Section 10.09. Title and Subtitles
	 	 	25	 
	Section 10.10. Counterparts
	 	 	25	 
	Section 10.11. Choice of Law
	 	 	26	 
	Section 10.12. Specific Enforcement, Consent to Jurisdiction
	 	 	26	 
	Section 10.13. Survival
	 	 	26	 
	Section 10.14. Publicity
	 	 	26	 
	Section 10.15. Further Assurances
	 	 	27	 

v

 

COMMON STOCK PURCHASE AGREEMENT

by and between

KINGSBRIDGE CAPITAL LIMITED

and

CELL GENESYS, INC.

dated as of March 14, 2006

     This COMMON STOCK PURCHASE AGREEMENT (this “Agreement”) is entered into as of the 14th
day of March, 2006, by and between KINGSBRIDGE CAPITAL LIMITED, an entity organized and existing
under the laws of the British Virgin Islands, with registered address Palm Grove House, 2nd Floor,
Road Town, Tortola, British Virgin Islands (the “Investor”) and CELL GENESYS, INC., a
corporation organized and existing under the laws of the State of Delaware (the “Company”).

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

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

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

     WHEREAS, in consideration for the Investor’s execution and delivery of, and its performance of
its obligations under, this Agreement, the Company is concurrently issuing to the Investor a
Warrant in the form of Exhibit B hereto (the “Warrant”) pursuant to which the Investor may
purchase from the Company up to 375,000 shares of Common Stock, upon the terms and subject to the
conditions set forth therein;

     NOW, THEREFORE, the parties hereto agree as follows:

 

 

ARTICLE I

DEFINITIONS

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

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

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

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

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

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

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

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

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

     Section 1.10. “Consolidated Subsidiary” means any subsidiary that the Company
consolidates in the preparation of its audited consolidated financial statements, and for greater
certainty, does not include Ceregene, Inc.

     Section 1.11. “Damages” means any loss, claim, damage, liability, costs and expenses
(including, without limitation, reasonable attorneys’ fees and expenses and costs and reasonable
expenses of expert witnesses and investigation).

     Section 1.12. “Draw Down” shall have the meaning assigned to such term in Section 3.01
hereof.

     Section 1.13. “Draw Down Amount” means the actual amount of a Draw Down paid to the
Company.

     Section 1.14. “Draw Down Discount Price” means (i) 90% of the VWAP on any Trading Day
during a Draw Down Pricing Period when the VWAP equals or exceeds $3.00 but is less than or equal
to $8.00, (ii) 92% of the VWAP on any Trading Day during the Draw Down

2

 

Pricing Period when VWAP exceeds $8.00 but is less than or equal to $11.20, or (ii) 94% of the VWAP on any Trading Day
during the Draw Down Pricing Period when VWAP exceeds $11.20.

     Section 1.15. “Draw Down Notice” shall have the meaning assigned to such term in
Section 3.01 hereof.

     Section 1.16. “Draw Down Pricing Period” shall mean, with respect to each Draw Down, a
period of eight (8) consecutive Trading Days beginning on the first Trading Day specified in a Draw
Down Notice.

     Section 1.17. “DTC” shall mean the Depository Trust Company, or any successor thereto.

     Section 1.18. “Effective Date” means the first Trading Day immediately following the
date on which the Registration Statement is declared effective by the Commission.

     Section 1.19. “Exchange Act” means the U.S. Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.

     Section 1.20. “Excluded Merger or Sale” shall have the meaning assigned to such term
in the Warrant.

     Section 1.21. “Knowledge” means the actual knowledge of the Chief Executive Officer,
Chief Financial Officer or any Executive Vice President, Senior Vice President or Vice President of
the Company.

     Section 1.22. “LIBOR” means the offered rate for twelve-month U.S. dollar deposits
that appears on Moneyline Telerate Page 3750 (or such other page as may replace such Moneyline
Telerate Page 3750 for the purpose of displaying comparable rates), as of 11:00 a.m. (London time)
two (2) business days prior to the beginning of the relevant period.

     Section 1.23. “Make Whole Amount” shall have the meaning specified in Section 3.07.

     Section 1.24. “Market Capitalization” means, as of any Trading Day, the product of (i)
the closing sale price of the Company’s Common Stock as reported by Bloomberg L.P. using the AQR
function and (ii) the number of outstanding shares of Common Stock of the Company as reported by
Bloomberg L.P. using the DES function.

     Section 1.25. “Material Adverse Effect” means any continuing effect on the business,
operations, properties or financial condition of the Company and its Consolidated Subsidiaries that
is material and adverse to the Company and such subsidiaries, taken as a whole, and/or any
condition, circumstance, or situation that would prohibit or otherwise interfere with the ability
of the Company to perform any of its obligations under this Agreement, the Registration Rights
Agreement or the Warrant in any material respect; provided, that none of the
following shall constitute a “Material Adverse Effect”: (i) the effects of conditions or
events that are generally applicable to the capital, financial, banking or currency markets and the
biotechnology industry, (ii) any changes or effects resulting from the announcement or consummation
of the transactions contemplated by this Agreement, including, without limitation, any changes or
effects associated with any particular Draw Down, and (iii) changes in the market price of the
Common Stock.

3

 

     Section 1.26. “Maximum Commitment Amount” means the lesser of (i) $75 million in
aggregate Draw Down Amounts or (ii) 8,709,256 shares of Common Stock (as adjusted for stock splits,
stock combinations, stock dividends and recapitalizations that occur on or after the date of this
Agreement), provided, however, that the Maximum Commitment Amount shall not exceed that number of
shares of Common Stock which the Company may issue pursuant to the Agreement and the transactions
contemplated herein, without breaching the Company’s obligations under the rules and regulations of
the Nasdaq National Market.

     Section 1.27. “Maximum Draw Down Amount” means the lesser of (i) 2.5% of the Company’s
Market Capitalization at the time of the Draw Down, or (ii) $15 million.

     Section 1.28. “NASD” means the National Association of Securities Dealers, Inc.

     Section 1.29. “Permitted Transaction” shall have the meaning assigned to such term in
Section 6.06 hereof.

     Section 1.30. “Person” means any individual, corporation, partnership, limited
liability company, association, trust or other entity or organization, including any government or
political subdivision or an agency or instrumentality thereof.

     Section 1.31. “Principal Market” means the Nasdaq National Market, the Nasdaq SmallCap
Market, the American Stock Exchange or the New York Stock Exchange, whichever is at the time the
principal trading exchange or market for the Common Stock.

     Section 1.32. “Prohibited Transaction” shall have the meaning assigned to such term in
Section 6.07 hereof.

     Section 1.33. “Prospectus” as used in this Agreement means the prospectus in the form
included in the Registration Statement, as supplemented from time to time pursuant to Rule 424(b)
of the Securities Act (including, without limitation, any information that may have been omitted
from such prospectus pursuant to Rules 430(a), 430(b) and 430(c) of the Securities Act).

     Section 1.34. “Registrable Securities” means (i) the Shares, (ii) the Warrant Shares,
and (iii) any securities issued or issuable with respect to any of the foregoing by way of
exchange, stock dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization or otherwise. As to any particular
Registrable Securities, once issued such securities shall cease to be Registrable Securities when
(w) the Registration Statement has been declared effective by the SEC and such Registrable
Securities have been disposed of pursuant to the Registration Statement, (x) such Registrable
Securities have been sold under circumstances under which all of the applicable conditions of
Rule 144 (or any similar provision then in force) under the Securities Act (“Rule 144”) are
met, (y) such time as such Registrable Securities have been otherwise transferred to holders who
may trade such shares without restriction under the Securities Act, and the Company has delivered a
new certificate or other evidence of ownership for such securities not bearing a restrictive legend
or (z) in the opinion of counsel to the Company such Registrable Securities may be sold without
registration and pursuant to Rule 144(k), without any time, volume or manner limitations of Rule
144 (or any similar provision then in effect) under the Securities Act.

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

4

 

     Section 1.36. “Registration Statement” shall have the meaning assigned to such term in
the Registration Rights Agreement.

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

     Section 1.38. “Section 4(2)” shall have the meaning set forth in the recitals of this
Agreement.

     Section 1.39. “Securities Act” shall have the meaning set forth in the recitals of
this Agreement.

     Section 1.40. “Settlement Date” shall have the meaning assigned to such term in
Section 3.05 hereof.

     Section 1.41. “Shares” means the shares of Common Stock of the Company that are and/or
may be purchased hereunder.

     Section 1.42. “Trading Day” means any day other than a Saturday or a Sunday on which
the Principal Market is open for trading in equity securities.

     Section 1.43. “VWAP” means the volume weighted average price (the aggregate sales
price of all trades of Common Stock during each Trading Day divided by the total number of shares
of Common Stock traded during such Trading Day) of the Common Stock during any Trading Day as
reported by Bloomberg, L.P. using the AQR function.

     Section 1.44. “Warrant” shall have the meaning set forth in the recitals of this
Agreement.

     Section 1.45. “Warrant Shares” means the shares of Common Stock issuable to the
Investor upon exercise of the Warrant.

ARTICLE II

PURCHASE AND SALE OF COMMON STOCK

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

     Section 2.02. Closing. In consideration of and in express reliance upon the
representations, warranties, covenants, terms and conditions of this Agreement, the Company agrees
to issue and sell to the Investor, and the Investor agrees to purchase from the Company, that
number of the Shares to be issued in connection with each Draw Down. The execution and delivery of
this Agreement (the “Closing”) shall take place on March 14, 2006 (the “Closing
Date”). Each party shall deliver at or prior to the Closing all documents, instruments and
writings required to be delivered at the Closing by such party pursuant to this Agreement.

5

 

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

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

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

ARTICLE III

DRAW DOWN TERMS

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

     Section 3.01. Draw Down Notice. The Company may, in its sole discretion, issue a Draw
Down Notice (defined below) specifying the dollar amount of Shares it elects to sell to the
Investor (each such election a “Draw Down”) up to a Draw Down Amount equal to the Maximum
Draw Down Amount, which Draw Down the Investor will be obligated to accept. The Company shall
inform the Investor in writing, via e-mail to the addresses set forth in Section 10.04 and via
facsimile transmission to the number set forth in Section 10.04, with a copy to the Investor’s
counsel, as to such Draw Down Amount before commencement of trading on the first Trading Day of the
related Draw Down Pricing Period (the “Draw Down Notice”). In addition to the Draw Down
Amount, each Draw Down Notice shall designate the first Trading Day of the Draw Down Pricing
Period. In no event shall any Draw Down Amount exceed the Maximum Draw Down Amount. Each Draw
Down Notice shall be accompanied by a certificate, signed by the Chief Executive Officer or Chief Financial Officer and dated, as of the date of such Draw
Down Notice, in the form of Exhibit C hereof.

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

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

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

     Section 3.05. Settlement. Subject to Section 3.06(b), the number of Shares purchased
by the Investor in any Draw Down shall be determined and settled on two separate dates. Shares
purchased by the Investor during the first four Trading Days of any Draw Down Pricing Period shall
be determined and settled no later than the sixth Trading Day of such Draw Down Pricing Period.
Shares purchased by the Investor during the second four Trading Days of any Draw

6

 

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

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

     (a) On each Settlement Date, the Company shall deliver the Shares purchased by the Investor to
the Investor or its designees exclusively via book-entry through the DTC to an account designated
by the Investor, and upon receipt of the Shares, the Investor shall cause payment therefor to be
made to the Company’s designated account by wire transfer of immediately available funds, if the
Shares are received by the Investor no later than 12:00 p.m. (Eastern Time), or next day available
funds, if the Shares are received thereafter.

     (b) For each Trading Day during a Draw Down Pricing Period that the VWAP is less than the
greater of (i) 85% of the Closing Price of the Company’s Common Stock on the Trading Day
immediately preceding the commencement of such Draw Down Pricing Period, or (ii) $3.00, such
Trading Day shall not be used in calculating the number of Shares to be issued in connection with
such Draw Down, and the Draw Down Amount in respect of such Draw Down Pricing Period shall be
reduced by one eighth (1/8th) of the initial Draw Down Amount specified in the Draw Down
Notice. If trading in the Company’s Common Stock is suspended for any reason for more than three
(3) consecutive or non-consecutive hours during any Trading Day during a Draw Down Pricing Period,
such Trading Day shall not be used in calculating the number of Shares to be issued in connection
with such Draw Down, and the Draw Down Amount in respect of such Draw Down Pricing Period shall be reduced by one eighth (1/8th) of the initial Draw Down
Amount specified in the Draw Down Notice.

     Section 3.07. Failure to Deliver Shares. If, on any Settlement Date, the Company
fails to take all actions within the reasonable control of the Company to cause the delivery of the
Shares purchased by the Investor, and such failure is not cured within two (2) Trading Days
following such Settlement Date, the Company shall pay to the Investor on demand in cash by wire
transfer of immediately available funds to an account designated by the Investor the “Make
Whole Amount;” provided, however, that in the event that the Company is
prevented from delivering Shares in respect of any such Settlement Date in a timely manner by any
fact or circumstance that is reasonably within the control of, or directly attributable to, the
Investor, then such two (2) Trading Day period shall be automatically extended until such time as
such fact or circumstance is cured. As used herein, the Make Whole Amount shall be an amount equal
to the sum of (i) the Draw Down Amount actually paid by the Investor in respect of such Shares plus
(ii) an amount equal to the actual loss suffered by the Investor in respect of sales to subsequent
purchasers, pursuant to transactions entered into before the Settlement Date, of the Shares that
were required to be delivered by the Company, which shall be based upon documentation reasonably
satisfactory to the Company demonstrating the difference (if greater than zero) between (A) the
price per share paid by the Investor to purchase such number of shares of Common Stock necessary
for the Investor to meet its share delivery obligations to such subsequent purchasers minus (B) the
average Draw Down Discount Price during the applicable Draw Down Pricing Period. In the event that
the Make Whole Amount is not paid within two (2) Trading Days following a demand therefor from the
Investor, the Make Whole Amount shall accrue interest compounded daily at a rate of LIBOR plus 300
basis points, per annum up to and including the date on which the Make Whole Amount is actually
paid. Notwithstanding anything

7

 

to the contrary set forth in this Agreement, in the event that the
Company pays the Make Whole Amount (plus interest, if applicable) in respect of any Settlement Date
in accordance with this Section 3.07, such payment shall be the Investor’s sole remedy in respect
of the Company’s failure to deliver Shares in respect of such Settlement Date, and the Company
shall not be obligated to deliver such Shares.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

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

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

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

     Section 4.03. Capitalization. The authorized capital stock of the Company and the
shares thereof issued and outstanding as of December 31, 2005 are set forth in the Commission
Documents. All of the outstanding shares of the Common Stock have been duly and validly authorized
and issued, and are fully paid and non-assessable. Except as set forth in this Agreement or in the
Commission Documents, as of December 31, 2005, no shares of Common Stock were entitled to
preemptive rights or registration rights, and there were no outstanding options, warrants, scrip,
rights issued by the Company to subscribe to, call or commitments of any character whatsoever
issued by the Company relating to, or securities or rights convertible into or exchangeable for or
giving any right to subscribe for, any shares of capital stock of the Company. Except as set forth
in this Agreement, the Commission Documents, as of December

8

 

31, 2005, there were no contracts, commitments, understandings, or arrangements by which the Company is or may become bound to issue
additional shares of the capital stock of the Company or options, securities or rights convertible
into or exchangeable for or giving any right to subscribe for any shares of capital stock of the
Company. Except as described in the Commission Documents, as of the date hereof the Company is not
a party to any agreement granting registration rights to any Person with respect to any of its
equity or debt securities. Except as set forth in the Commission Documents or as previously
disclosed to the Investor in writing, as of the date hereof the Company is not a party to, and it
has no Knowledge of, any agreement restricting the voting or transfer of any shares of the capital
stock of the Company. The offer and sale of all capital stock, convertible securities, rights,
warrants, or options of the Company issued during the twenty-four month period immediately prior to
the Closing complied in all material respects with all applicable federal and state securities
laws, and no stockholder has a right of rescission or damages with respect thereto that could
reasonably be expected to have a Material Adverse Effect. The Company has furnished or made
available to the Investor true and correct copies of the Company’s Certificate of Incorporation, as
amended and in effect on the date hereof (the “Certificate”), and the Company’s Bylaws, as
amended and in effect on the date hereof (the “Bylaws”).

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

     Section 4.05. No Conflicts. The execution, delivery and performance of this
Agreement, the Registration Rights Agreement, the Warrant and any other document or instrument
contemplated hereby or thereby, by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby do not: (i) violate any provision of the Certificate
or Bylaws, (ii) conflict with, or constitute a default (or an event which with notice or lapse of
time or both would become a default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any material agreement, mortgage, deed of trust, indenture, note,
bond, license, lease agreement, instrument or obligation to which the Company is a party where such
default or conflict would constitute a Material Adverse Effect, (iii) create or impose a lien,
charge or encumbrance on any property of the Company under any agreement or any commitment to which
the Company is a party or by which the Company is bound or by which any of its respective
properties or assets are bound which would constitute a Material Adverse Effect, (iv) result in a
violation of any federal, state, local or foreign statute, rule, regulation, order, writ, judgment
or decree (including federal and state securities laws and regulations) applicable to the Company
or any of its Consolidated Subsidiaries or by which any property or asset of the Company or any of
its Consolidated Subsidiaries are bound where such violation would constitute a Material Adverse
Effect, or (v) require any consent of any third-party that has not been obtained pursuant to any
material contract to which the Company is a party or to which any of its assets, operations or
management may be bound where the failure to obtain any such consent would constitute a Material
Adverse Effect. The Company is not required under federal, state or local law, rule or regulation
to obtain any consent, authorization or order of, or make any filing or registration with, any
court or governmental agency in order for it to execute, deliver or perform any of its obligations
under this Agreement, the Registration Rights

9

 

Agreement or the Warrant, or issue and sell the
Shares, the Warrant Shares or the Blackout Shares (except to the extent that the number of Blackout
Shares required to be issued exceeds the number of authorized shares of Common Stock under the
Certificate) in accordance with the terms hereof and thereof (other than any filings that may be
required to be made by the Company with the Commission, the NASD/Nasdaq or state securities
commissions subsequent to the Closing, and, any registration statement (including any amendment or
supplement thereto) or any other filing or consent which may be filed pursuant to this Agreement,
the Registration Rights Agreement or the Warrant); provided that, for purposes of the
representation made in this sentence, the Company is assuming and relying upon the accuracy of the
relevant representations and agreements of the Investor herein.

     Section 4.06. Commission Documents, Financial Statements. The Common Stock is
registered pursuant to Section 12(b) or 12(g) of the Exchange Act, and since December 31, 2003 the
Company has timely filed all reports, schedules, forms, statements and other documents required to
be filed by it with the Commission pursuant to the reporting requirements of the Exchange Act,
including material filed pursuant to Section 13(a) or 15(d) of the Exchange Act (all of the
foregoing, including filings incorporated by reference therein, being referred to herein as the
“Commission Documents”). Except as previously disclosed to the Investor in writing, since December 31, 2003 the Company has maintained all requirements for the continued
listing or quotation of its Common Stock, and such Common Stock is currently listed or quoted on
the Nasdaq National Market. To the extent not available on the Commission’s EDGAR filing system,
the Company has made available to the Investor true and complete copies of the Commission Documents
filed with the Commission since December 31, 2003 and prior to the Closing Date. As of its date,
the Company’s Form 10-K for the year ended December 31, 2005 complied in all material respects with
the requirements of the Exchange Act and the rules and regulations of the Commission promulgated
thereunder applicable to such document, and, as of its date, after giving effect to the information
disclosed and incorporated by reference therein, to the Company’s Knowledge such Form 10-K did not
contain any untrue statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. As of their respective dates, to the Company’s
Knowledge the financial statements of the Company included in the Commission Documents filed with
the Commission since December 31, 2003 complied as to form and substance in all material respects
with applicable accounting requirements and the published rules and regulations of the Commission
or other applicable rules and regulations with respect thereto. Such financial statements have
been prepared in accordance with generally accepted accounting principles (“GAAP”) applied
on a consistent basis during the periods involved (except (i) as may be otherwise indicated in such
financial statements or the notes thereto or (ii) in the case of unaudited interim statements, to
the extent they may not include footnotes or may be condensed or summary statements), and fairly
present in all material respects the financial position of the Company and its 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).

     Section 4.07. No Material Adverse Change. Except as disclosed in the Commission
Documents, since December 31, 2005 no event or series of events has or have occurred that would,
individually or in the aggregate, have a Material Adverse Effect on the Company.

     Section 4.08. No Undisclosed Liabilities. To the Company’s Knowledge, neither the
Company nor any of its Consolidated Subsidiaries has any liabilities, obligations, claims or losses
(whether liquidated or unliquidated, secured or unsecured, absolute, accrued, contingent or
otherwise) that would be required to be disclosed on a balance sheet of the Company or any

10

 

Consolidated Subsidiary (including the notes thereto) in conformity with GAAP and are not disclosed
in the Commission Documents, other than those incurred in the ordinary course of the Company’s or
its Consolidated Subsidiaries respective businesses since December 31, 2005 or which, individually
or in the aggregate, do not or would not have a Material Adverse Effect on the Company.

     Section 4.09. No Undisclosed Events or Circumstances. To the Company’s Knowledge, no
event or circumstance has occurred or exists with respect to the Company or its Consolidated
Subsidiaries or their respective businesses, properties, operations or financial condition, which,
under applicable law, rule or regulation, requires public disclosure or announcement by the Company
but which has not been so publicly announced or disclosed and which, individually or in the
aggregate, would have a Material Adverse Effect on the Company.

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

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

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

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

     Section 4.14. Material Non-Public Information. Except for this Agreement and the
transactions contemplated hereby, neither the Company nor its employees have disclosed to the

11

 

Investor, any material non-public information that, according to applicable law, rule or
regulation, should have been disclosed publicly by the Company prior to the date hereof but which
has not been so disclosed.

     Section 4.15. Exemption from Registration; Valid Issuances. Subject to, and in
reliance on, the representations, warranties and covenants made herein by the Investor, the
issuance and sale of the Shares, the Warrant, the Warrant Shares and any Blackout Shares in
accordance with the terms and on the bases of the representations and warranties set forth in this
Agreement, may and shall be properly issued pursuant to Section 4(2), Regulation D and/or any
other applicable federal and state securities laws. Neither the sales of the Shares, the
Warrant, the Warrant Shares or any Blackout Shares pursuant to, nor the Company’s performance of
its obligations under, this Agreement, the Registration Rights Agreement, or the Warrant shall (i)
result in the creation or imposition of any liens, charges, claims or other encumbrances upon the
Shares, the Warrant Shares, any Blackout Shares or any of the assets of the Company, or (ii) except
as previously disclosed to the Investor in writing, entitle the holders of any outstanding shares
of capital stock of the Company to preemptive or other rights to subscribe to or acquire the shares
of Common Stock or other securities of the Company.

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

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

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

ARTICLE V

REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE INVESTOR

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

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

12

 

     Section 5.02. Authorization and Power. The Investor has the requisite power and
authority to enter into and perform its obligations under this Agreement, the Warrant and the
Registration Rights Agreement and to purchase the Shares, the Warrant and the Warrant Shares in
accordance with the terms hereof and thereof. The execution, delivery and performance of this
Agreement, the Warrant and the Registration Rights Agreement by Investor and the consummation
by it of the transactions contemplated hereby or thereby have been duly authorized by all necessary
corporate action, and no further consent or authorization of the Investor, its Board of Directors
or stockholders is required. Each of this Agreement and the Registration Rights Agreement has been
duly executed and delivered by the Investor and constitutes a valid and binding obligation of the
Investor enforceable against the Investor in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation, conservatorship, receivership, or similar laws relating to, or affecting generally the
enforcement of creditor’s rights and remedies or by other equitable principles of general
application.

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

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

     Section 5.05. Information. The Investor and its advisors, if any, have been furnished
with all materials relating to the business, finances and operations of the Company and materials
relating to the offer and sale of the Shares, the Warrant and the Warrant Shares which have been
requested by the Investor. The Investor has reviewed or received copies of the Commission

13

 

Documents. The Investor and its advisors, if any, have been afforded the opportunity
to ask questions of the Company. The Investor has sought such accounting, legal and tax
advice as it has considered necessary to make an informed investment decision with respect to its
acquisition of the Shares, the Warrant and the Warrant Shares. Except for this Agreement and the
transactions contemplated hereby, neither the Company nor its employees have disclosed to the
Investor, any material non-public information that, according to applicable law, rule or
regulation, should have been disclosed publicly by the Company prior to the date hereof but which
has not been so disclosed. The Investor understands that it (and not the Company) shall be
responsible for its own tax liabilities that may arise as a result of this investment or the
transactions contemplated by this Agreement.

     Section 5.06. Trading Restrictions. The Investor covenants that neither the Investor
nor any of its affiliates nor any entity managed or controlled by the Investor will, or cause or
assist any Person to, enter into or execute any “short sale” (as such term is defined in Rule 200
of Regulation SHO, or any successor regulation, promulgated by the Commission under the Exchange
Act) of any securities of the Company.

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

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

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

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

ARTICLE VI

COVENANTS OF THE COMPANY

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

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

14

 

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

     Section 6.03. Registration and Listing. During the Commitment Period, the Company
shall use commercially reasonable efforts: (i) to take all action necessary to cause its Common
Stock to continue to be registered under Section 12(b) or 12(g) of the Exchange Act, (ii) to comply
in all material respects with its reporting and filing obligations under the Exchange Act, (iii) to
prevent the termination or suspension of such registration, or the termination or suspension of its
reporting and filing obligations under the Exchange Act or Securities Act (except as expressly
permitted herein). The Company shall use commercially reasonable efforts to maintain the listing
and trading of its Common Stock and the listing of the Shares purchased by Investor hereunder on
the Principal Market (including, without limitation, maintaining sufficient net tangible assets)
and to comply in all material respects with the Company’s reporting, filing and other obligations
under the bylaws or rules of the NASD and the Principal Market. The Company will not be required to
carry out any action pursuant to this Agreement, the Registration Rights Agreement or the Warrant
that would adversely impact the listing of the Company’s securities on the Principal Market as now
in effect, and as may be changed by the Company in the future in the Company’s discretion.

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

     Section 6.05. Compliance with Laws.

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

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

     Section 6.06. Other Financing.

     (a) Nothing in this Agreement shall be construed to restrict the right of the Company to
offer, sell and/or issue securities of any kind whatsoever, provided such transaction is not a
Prohibited Transaction (as defined below) (any such transaction that is not a Prohibited
Transaction is referred to in this Agreement as a “Permitted Transaction”). Without limiting the
generality of the preceding sentence, the Company may, without the prior written consent of the
Investor, (i) establish stock option or award plans or agreements (for directors, employees,
consultants and/or advisors), and issue securities thereunder, and amend such plans or

15

 

agreements,
including increasing the number of shares available thereunder, (ii) issue equity securities to
finance, or otherwise in connection with, the acquisition of one or more other companies,
equipment, technologies or lines of business, (iii) issue shares of Common Stock and/or Preferred
Stock in connection with the Company’s option or award plans, stock purchase plans, rights plans,
warrants, options or the 3.125% Convertible Senior Notes Due 2011, (iv) issue shares of Common
Stock and/or Preferred Stock in connection with the acquisition of products, licenses, equipment or
other assets and strategic partnerships or joint ventures; (v) issue shares of Common and/or
Preferred Stock to consultants and/or advisors as consideration for services rendered or to be
rendered, (vi) issue and sell equity or debt securities in a public offering, (vii) issue and sell
and equity or debt securities in a private placement (other than in connection with any Prohibited
Transaction), (viii) issue equity securities to equipment lessors, equipment vendors, banks or
similar lending institutions in connection with leases or loans, or in connection with strategic
commercial or licensing transactions, (ix) issue securities in connection with any stock split,
stock dividend, recapitalization, reclassification or similar event by the Company, and (x) issue
shares of Common Stock to the Investor under any other agreement entered into between the Investor
and the Company.

     (b) Notwithstanding the foregoing, the Company shall not engage in any Permitted Transaction
during any Draw Down Pricing Period.

     Section 6.07. Prohibited Transactions. During the term of this Agreement, the Company
shall not enter into any Prohibited Transaction without the prior written consent of the Investor,
which consent may be withheld at the sole discretion of the Investor. For the purposes of this
Agreement, the term “Prohibited Transaction” shall refer to the issuance by the Company of
any “future priced securities,” which shall mean the issuance of shares of Common Stock or
securities of any type whatsoever that are, or may become, convertible or exchangeable into shares
of Common Stock where the purchase, conversion or exchange price for such Common Stock is
determined using any floating discount or other post-issuance adjustable discount to the market
price of Common Stock, including, without limitation, pursuant to any equity line or other
financing that is substantially similar to the financing provided for under this Agreement,
provided that any future issuance by the Company of a convertible security (“Convertible
Security”) that contains provisions that adjust the conversion price of such Convertible Security
(“Conversion Price”) solely in the event of stock splits, dividends, distributions or similar
events shall not be a Prohibited Transaction for purposes of this Section 6.07 so long as such
Convertible Security does not contain a provision that adjusts the Conversion Price as a result of
any issuances of new securities after the issue date of the Convertible Security at a price below
the then effective Conversion Price of the Convertible Security, or as a result of any decline in
the
market price of the Common Stock after the issue date of the Convertible Security, other than
a decline resulting directly from stock splits, dividends, distributions or similar events
including, without limitation, the type of conversion price adjustments customarily found in a firm
commitment Rule 144A offering to qualified institutional buyers; provided, further,
that nothing in this Section 6.07 shall prevent the Company from restructuring, or consummating an
exchange offer for, its 3.125% Convertible Senior Notes Due 2011.

     Section 6.08. Corporate Existence. The Company shall take all steps necessary to
preserve and continue the corporate existence of the Company; provided, however,
that nothing in this Agreement shall be deemed to prohibit the Company from engaging in any
Excluded Merger or Sale with another Person provided that in the event of an Excluded Merger or
Sale, if the surviving, successor or purchasing Person does not agree to assume the obligations
under the Warrant, then the Company shall deliver a notice to the Investor at least ten (10) days
before the consummation of such Excluded Merger or Sale, the Investor may exercise the Warrant at
any

16

 

time before the consummation of such Excluded Merger or Sale (and such exercise may be made
contingent upon the consummation of such Excluded Merger or Sale), and any portion of the Warrant
that has not been exercised before consummation of such Excluded Merger or Sale shall terminate and
expire, and shall no longer be outstanding.

     Section 6.09. Non-Disclosure of Non-Public Information. Except as otherwise expressly
provided in this Agreement, including Section 6.10 hereof, the Registration Rights Agreement or the
Warrant, none of the Company, its officers, directors, employees nor agents shall disclose material
non-public information to the Investor, its advisors or representatives.

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

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

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

17

 

ARTICLE VII

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

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

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

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

     Section 7.03. Compliance with Law. The Company shall have complied in all respects
with all applicable federal, state and local governmental laws, rules, regulations and ordinances
in connection with the execution, delivery and performance of this Agreement and the consummation
of the transactions contemplated hereby except for any failures to so comply which would not
reasonably be expected to have a Material Adverse Effect.

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

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

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

18

 

     Section 7.07. No Injunction. No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or
governmental authority of competent jurisdiction which prohibits the consummation of any of the
transactions contemplated by this Agreement.

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

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

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

     Section 7.11. Opinion of Counsel. The Investor shall have received the form of
opinion agreed to between the parties on the Closing Date.

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

     Section 7.13. Payment of Fees. The Company shall be current on all undisputed expense
invoices that the Company is required to pay pursuant to Section 10.01.

ARTICLE VIII

TERMINATION

     Section 8.01. Term. Unless otherwise terminated in accordance with Section 8.02
below, this Agreement shall terminate upon the earlier to occur of (i) the expiration

     of the Commitment Period or (ii) the issuance of Shares pursuant to this Agreement in an
amount equal to the Maximum Commitment Amount.

     Section 8.02. Other Termination.

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

19

 

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

     (c) The Investor may terminate this Agreement upon one (1) business day’s notice to the
Company at any time in the event that following the first twelve (12) month period of the term, the
Company fails to make cumulative Draw Downs of at least $2 million during any consecutive twelve
(12) month period during the term. For the avoidance of doubt, this provision shall not entitle
the Investor to terminate this Agreement prior to the end of the twenty-fourth (24th)
month of the term.

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

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

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

ARTICLE IX

INDEMNIFICATION

     Section 9.01. Indemnification.

     (a) Except as otherwise provided in this Article IX, unless disputed as set forth in Section
9.02, the Company agrees to indemnify, defend and hold harmless the Investor and its affiliates and
their respective officers, directors, agents, employees, subsidiaries, partners, members and
controlling persons (each, an “Investor Indemnified Party”), to the fullest extent
permitted by law from and against any and all Damages directly resulting from or directly arising

20

 

out of any breach of any representation or warranty, covenant or agreement by the Company in this
Agreement, the Registration Rights Agreement or the Warrant; provided, however,
that the Company shall not be liable under this Article IX to an Investor Indemnified Party to the
extent that such Damages resulted or arose from the breach by an Investor Indemnified Party of any
representation, warranty, covenant or agreement of an Investor Indemnified Party contained in this
Agreement, the Registration Rights Agreement or the Warrant or the negligence, recklessness,
willful misconduct or bad faith of an Investor Indemnified Party. The parties intend that any
Damages subject to indemnification pursuant to this Article IX will be net of insurance proceeds
(which the Investor Indemnified Party agrees to use commercially reasonable efforts to recover).
Accordingly, the amount which the Company is required to pay to any Investor Indemnified Party
hereunder (a “Company Indemnity Payment”) will be reduced by any insurance proceeds
actually recovered by or on behalf of any Investor Indemnified Party in reduction of the related
Damages. In addition, if an Investor Indemnified Party receives a Company Indemnity Payment
required by this Article IX in respect of any Damages and subsequently receives any such insurance
proceeds, then the Investor Indemnified Party will pay to the Company an amount equal to the
Company Indemnity Payment received less the amount of the Company Indemnity Payment that would have
been due if the insurance proceeds had been received, realized or recovered before the Company
Indemnity Payment was made.

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

     Section 9.02. Notification of Claims for Indemnification. Each party entitled to
indemnification under this Article IX (an “Indemnified Party”) shall, promptly after the
receipt of notice of the commencement of any claim against such Indemnified Party in respect of
which indemnity may be sought from the party obligated to indemnify such Indemnified Party under
this Article IX (the “Indemnifying Party”), notify the Indemnifying Party in writing of the
commencement thereof. Any such notice shall describe the claim in reasonable detail. The failure
of any Indemnified Party to so notify the Indemnifying Party of any such action shall not relieve
the Indemnifying Party from any liability which it may have to such Indemnified Party (a)

21

 

other
than pursuant to this Article IX or (b) under this Article IX unless, and only to the extent that,
such failure results in the Indemnifying Party’s forfeiture of substantive rights or defenses or
the Indemnifying Party is prejudiced by such delay. The procedures listed below shall govern the
procedures for the handling of indemnification claims.

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

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

     (c) An Indemnifying Party may elect to defend (and, unless the Indemnifying Party has
specified any reservations or exceptions, to seek to settle or compromise), at such Indemnifying
Party’s own expense and by such Indemnifying Party’s own counsel, any Third Party Claim. Within
thirty (30) days after the receipt of notice from an Indemnified Party (or sooner if the nature of
such Third Party Claim so requires), the Indemnifying Party shall notify the Indemnified Party
whether the Indemnifying Party will assume responsibility for defending such Third Party Claim,
which election shall specify any reservations or exceptions. If such Indemnifying Party does not
respond within such thirty (30) day period or rejects such claim in whole or in part, the
Indemnified Party shall be free to pursue such remedies as specified in this Agreement. In case
any such Third Party Claim shall be brought against any Indemnified Party, and it shall notify the
Indemnifying Party of the commencement thereof, the Indemnifying Party shall be entitled to assume
the defense thereof at its own expense, with counsel satisfactory to such Indemnified Party in its
reasonable judgment; provided, however, that any Indemnified Party may, at its own expense, retain
separate counsel to participate in such defense at its own expense. Notwithstanding the foregoing,
in any Third Party Claim in which both the Indemnifying Party, on the one hand, and an Indemnified
Party, on the other hand, are, or are reasonably likely to become, a party, such Indemnified Party
shall have the right to employ separate counsel and to control its own defense of such claim if, in
the reasonable opinion of counsel to such Indemnified Party, either (x) one or more significant
defenses are available to the
Indemnified Party that are not available to the Indemnifying Party or (y) a conflict or
potential conflict exists between the Indemnifying Party, on the one hand, and such Indemnified
Party, on the other hand, that would make such separate representation advisable; provided,
however, that in such circumstances the Indemnifying Party (i) shall not be liable for the
fees and expenses of more than one counsel to all Indemnified Parties and (ii) shall reimburse the
Indemnified Parties for such reasonable fees and expenses of such counsel incurred in any such
Third Party Claim, as such expenses are incurred, provided that the Indemnified Parties agree to
repay such amounts if it is ultimately determined that the Indemnifying Party was not obligated to
provide indemnification under this Article IX. The Indemnifying Party agrees that it will not
compromise or consent to the entry of any judgment in any pending or threatened claim relating to
the matters contemplated hereby (if any Indemnified Party is a party thereto or has been actually
threatened

22

 

to be made a party thereto) unless such settlement, compromise or consent includes an
unconditional release of such Indemnified Party from all liability arising or that may arise out of
such claim. The rights accorded to an Indemnified Party hereunder shall be in addition to any
rights that any Indemnified Party may have at common law, by separate agreement or otherwise;
provided, however, that notwithstanding the foregoing or anything to the contrary
contained in this Agreement, nothing in this Article IX shall restrict or limit any rights that any
Indemnified Party may have to seek equitable relief.

ARTICLE X

MISCELLANEOUS

     Section 10.01. Fees and Expenses.

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

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

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

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

23

 

services
purported to have been rendered on behalf of the indemnifying party in connection with this
Agreement or the transactions contemplated hereby.

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

If to the Company:

Cell Genesys, Inc.

500 Forbes Blvd.

South San Francisco, CA 94080

Facsimile: (650) 266-2930

E-mail: Sharon.Tetlow@cellgenesys.com

Attention: Sharon Tetlow, Senior Vice President and Chief Financial Officer

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

Wilson Sonsini Goodrich & Rosati

650 Page Mill Road

Palo Alto, CA 94304

Facsimile: (650) 493-9300

E-mail: hfockler@wsgr.com

Attention: Herbert P. Fockler, Esq.

if to the Investor:

Kingsbridge Capital Limited/ c/o Kingsbridge Corporate Services Limited

Main Street

Kilcullen, County Kildare

Republic of Ireland

Facsimile: 011-353-45-482-0030

E-mail: adamgurney@eircom.net

Attention: Adam Gurney, Chief Executive Officer

24

 

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

Clifford Chance US LLP

31 West 52nd Street

New York, NY 10019

Facsimile: (212) 878-8375

E-mail: keith.andruschak@cliffordchance.com

Attention: Keith M. Andruschak, Esq.

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

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

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

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

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

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

     Section 10.10. Counterparts. This Agreement may be executed in multiple counterparts,
each of which may be executed by less than all of the parties and shall be deemed to be an

25

 

original
instrument which shall be enforceable against the parties actually executing such counterparts and
all of which together shall constitute one and the same instrument.

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

     Section 10.12. Specific Enforcement, Consent to Jurisdiction.

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

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

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

     Section 10.14. Publicity. Except as otherwise required by applicable law or
regulation, or Nasdaq rule or judicial process, prior to the Closing, neither the Company nor the
Investor shall issue any press release or otherwise make any public statement or announcement with
respect to this Agreement or the transactions contemplated hereby or the existence of this
Agreement. In the event the Company is required by law, regulation, Nasdaq rule or judicial
process, based upon reasonable advice of the Company’s counsel, to issue a press release or
otherwise make a public statement or announcement with respect to this Agreement prior to the
Closing, the Company shall consult with the Investor on the form and substance of such press
release, statement or announcement. Promptly after the Closing, each party may issue a press
release or otherwise make a public statement or announcement with respect to this Agreement or the
transactions contemplated hereby or the existence of this Agreement; provided that, prior
to issuing any such press release, making any such public statement or announcement, the party
wishing to make such release, statement or announcement consults and cooperates in good faith with
the other party in order to formulate such press release, public statement or announcement in form
and substance reasonably acceptable to both parties.

26

 

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

[Remainder of this page intentionally left blank]

27

 

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

	 	 	 	 	 	 	 
	 	 	KINGSBRIDGE CAPITAL LIMITED	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Adam Gurney	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Adam Gurney	 	 
	 

	 	 	 	Chief Executive Officer	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	Palm Grove House	 	 
	 

	 	 	 	2nd Floor	 	 
	 

	 	 	 	Road Town, Tortola	 	 
	 

	 	 	 	British Virgin Islands	 	 
	 
	 	 	 	 	 	 
	 	 	CELL GENESYS, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Stephen A. Sherwin, M.D.	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Stephen A. Sherwin, M.D.	 	 
	 

	 	 	 	Chief Executive Officer	 	 

28

 

Exhibit A

Form of Registration Rights Agreement

 

 

Exhibit B

Form of Warrant

 

 

Exhibit C

Officer’s Certificate

     I, [NAME OF OFFICER], do hereby certify to Kingsbridge Capital Limited (the “Investor”), with
respect to the common stock of Cell Genesys, Inc. (the “Company”) issuable in connection with the
Draw Down Notice, dated                      (the “Notice”) attached hereto and delivered pursuant to
Article III of the Common Stock Purchase Agreement, dated March 14, 2006 (the “Agreement”), by and
between the Company and the Investor, as follows (capitalized terms used but undefined herein have
the meanings given to such terms in the Agreement):

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

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

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

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

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

	 	 	 
	 

	 	 
	 

	 	Name:
	 

	 	Title:exv10w2

 

Exhibit 10.2

Execution Copy

REGISTRATION RIGHTS AGREEMENT

     This REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as of March 14, 2006, is
by and between CELL GENESYS, INC. (the “Company”) and KINGSBRIDGE CAPITAL LIMITED, an
entity organized and existing under the laws of the British Virgin Islands, with registered address
Palm Grove House, 2nd Floor, Road Town, Tortola, British Virgin Islands (the “Investor”).

     WHEREAS, the Company and the Investor have entered into that certain Common Stock Purchase
Agreement, dated as of the date hereof (the “Purchase Agreement”), pursuant to which the
Company may issue, from time to time, to the Investor up to $75 million worth of shares of Common
Stock as provided for therein;

     WHEREAS, pursuant to the terms of, and in partial consideration for the Investor entering
into, the Purchase Agreement, the Company has issued to the Investor a warrant, exercisable from
time to time within five (5) years following the six-month anniversary of the date of issuance (the
“Warrant”) for the purchase of an aggregate of up to 375,000 shares of Common Stock at a
price specified in such Warrant;

     WHEREAS, pursuant to the terms of, and in partial consideration for, the Investor’s agreement
to enter into the Purchase Agreement, the Company has agreed to provide the Investor with certain
registration rights with respect to the Registrable Securities (as defined in the Purchase
Agreement) as set forth herein;

     NOW, THEREFORE, in consideration of the premises, the representations, warranties, covenants
and agreements contained herein, in the Warrant, and in the Purchase Agreement, and for other good
and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, intending
to be legally bound hereby, the parties hereto agree as follows (capitalized terms used herein and
not defined herein shall have the respective meanings ascribed to them in the Purchase Agreement):

ARTICLE I

REGISTRATION RIGHTS

     Section 1.1. Registration Statement.

     (a) Filing of the Registration Statement. Upon the terms and subject to the
conditions set forth in this Agreement, the Company shall file with the Commission within sixty
(60) calendar days after the Closing Date a registration statement on Form S-3 under the Securities
Act or such other form as deemed appropriate by counsel to the Company for the registration for the
resale by the Investor of the Registrable Securities (the “Registration Statement”).

     (b) Effectiveness of the Registration Statement. The Company shall use
commercially reasonable efforts (i) to have the Registration Statement declared effective by the
Commission as soon as reasonably practicable, but in any event no later than one hundred eighty
(180) calendar days after the Closing Date and (ii) to ensure that the Registration Statement
remains in effect throughout the term of this Agreement as set forth in Section 4.2, subject to the
terms and conditions of this Agreement.

     (c) Regulatory Disapproval. The contemplated effective date for the Registration
Statement as described in Section 1.1(b) shall be extended without default or liquidated damages
hereunder or under the Purchase Agreement in the event that the Company’s failure to obtain the
effectiveness of the Registration Statement on a timely basis results solely from the Commission’s
disapproval of the structure of the transactions contemplated by the Purchase Agreement. In such
event, the parties agree to cooperate with one another in good faith to arrive at a resolution
acceptable to the Commission.

 

 

     (d) Failure to Maintain Effectiveness of Registration Statement. In the event the
Company fails to maintain the effectiveness of the Registration Statement (or the Prospectus)
throughout the period set forth in Section 4.2, other than temporary suspensions as set forth in
Section 1.1(e) and the Investor holds any Registrable Securities at any time during the period of
such ineffectiveness (an “Ineffective Period”), the Company shall pay to the Investor in
immediately available funds into an account designated by the Investor an amount equal to the
product of (x) the total number of Registrable Securities issued to the Investor under the Purchase
Agreement (which, for the avoidance of doubt, shall not include any Warrant Shares) and owned by
the Investor at any time during such Ineffective Period and (y) the result, if greater than zero,
obtained by subtracting the VWAP on the Trading Day immediately following the last day of such
Ineffective Period from the VWAP on the Trading Day immediately preceding the day on which any such
Ineffective Period began; provided, however, (i) that the foregoing payments shall
not apply in respect of Registrable Securities that are otherwise freely tradable by the Investor.

     (e) Deferral or Suspension During a Blackout Period. Notwithstanding the
provisions of Section 1.1(d), if in the good faith judgment of the Company, following consultation
with legal counsel, it would be detrimental to the Company or its stockholders for the Registration
Statement to be filed or for resales of Registrable Securities to be made pursuant to the
Registration Statement due to (i) the existence of a material development or potential material
development involving the Company that the Company would be obligated to disclose in the
Registration Statement, which disclosure would be premature or otherwise inadvisable at such time
or would have a Material Adverse Effect on the Company or its stockholders, or (ii) a filing of a
Company-initiated registration of any class of its equity securities, which, in the good faith
judgment of the Company, because such filing of the Registration Statement or continued resale
would adversely affect or require premature disclosure of the filing of such Company-initiated
registration (notice thereof, a “Blackout Notice”), the Company shall have the right to (A)
immediately defer such filing for a period of not more than sixty (60) days beyond the date by
which such Registration Statement was otherwise required hereunder to be filed or (B) suspend use
of such Registration Statement for a period of not more than thirty (30) days (any such deferral or
suspension period, a “Blackout Period”). The Investor acknowledges that it would be
seriously detrimental to the Company and its stockholders for such Registration Statement to be
filed (or remain in effect) during a Blackout Period and therefore essential to defer such filing
(or suspend the use thereof) during such Blackout Period and agrees to cease any disposition of the
Registrable Securities during such Blackout Period. The Company may not utilize any of its rights
under this Section 1.1(e) to defer the filing of a Registration Statement (or suspend its
effectiveness) more than six (6) times in any twelve (12) month period. In the event that, within
fifteen (15) Trading Days following any Settlement Date, the Company gives a Blackout Notice to the
Investor and the VWAP on the Trading Day immediately preceding such Blackout Period (“Old
VWAP”) is greater than the VWAP on the first Trading Day following such Blackout Period that
the Investor may sell its Registrable Securities pursuant to an effective Registration Statement
(“New VWAP”), then the Company shall pay to the Investor, by wire transfer of immediately
available funds to an account designated by the Investor, the “Blackout Amount.”
For the purposes of this Agreement, Blackout Amount means a percentage equal to: (1)
seventy-five percent (75%) if such Blackout Notice is delivered prior to the fifth (5th) Trading
Day following such Settlement Date; (2) fifty percent (50%) if such Blackout Notice is delivered on
or after the fifth (5th) Trading Day following such Settlement Date, but prior to the tenth (10th)
Trading Day following such Settlement Date; (3) twenty-five percent (25%) if such Blackout Notice
is delivered on or after the tenth (10th) Trading Day following such Settlement Date, but prior to
the fifteenth (15th) Trading Day following such Settlement Date; and (4) zero percent (0%)
thereafter of: the product of (i) the number of Registrable Securities purchased by the Investor
pursuant to the most recent Draw Down and actually held by the Investor immediately prior to the
Blackout Period and (ii) the result, if greater than zero, obtained by subtracting the New VWAP
from the Old VWAP. For any Blackout Period in respect of which a Blackout Amount becomes due and
payable, rather than paying the Blackout Amount, the Company may at is sole discretion, issue to
the Investor shares of Common Stock with an aggregate market value

2

 

determined as of the first
Trading Day following such Blackout Period equal to the Blackout Amount (“Blackout
Shares”).

     (f) Liquidated Damages. The Company and the Investor hereto acknowledge and agree
that the amounts payable under Sections 1.1(d) and 1.1(e) and the Blackout Shares deliverable under
Section 1.1(e) above shall constitute liquidated damages and not penalties. The parties further
acknowledge that (i) the amount of loss or damages likely to be incurred by the Investor is
incapable or is difficult to precisely estimate, (ii) the amounts specified in such subsections
bear a reasonable proportion and are not plainly or grossly disproportionate to the probable loss
likely to be incurred in connection with any failure by the Company to obtain or maintain the
effectiveness of the Registration Statement, (iii) one of the reasons for the Company and the
Investor reaching an agreement as to such amounts was the uncertainty and cost of litigation
regarding the question of actual damages, and (iv) the Company and the Investor are sophisticated
business parties and have been represented by sophisticated and able legal and financial counsel
and negotiated this Agreement at arm’s length.

     (g) Additional Registration Statements. In the event and to the extent that the
Registration Statement fails to register a sufficient amount of Common Stock necessary for the
Company to issue and sell to the Investor and the Investor to purchase from the Company all of the
Registrable Securities to be issued, sold and purchased under the Purchase Agreement and the
Warrant, the Company shall, upon a timetable mutually agreeable to both the Company and the
Investor, prepare and file with the Commission an additional registration statement or statements
in order to effectuate the purpose of this Agreement, the Purchase Agreement, and the Warrant.

ARTICLE II

REGISTRATION PROCEDURES

     Section 2.1. Filings; Information. The Company shall effect the registration with respect
to the sale of the Registrable Securities by the Investor in accordance with the intended methods
of disposition thereof. Without limiting the foregoing, the Company in each such case will do the
following as expeditiously as possible, but in no event later than the deadline, if any, prescribed
therefor in this Agreement:

     (a) Subject to Section 1.1(e), the Company shall (i) prepare and file with the Commission
the Registration Statement; (ii) use commercially reasonable efforts to cause such filed
Registration Statement to become and to remain effective (pursuant to Rule 415 under the Securities
Act or otherwise); (iii) prepare and file with the Commission such amendments and supplements to
the Registration Statement and the Prospectus used in connection therewith as
may be necessary to keep such Registration Statement effective for the time period prescribed
by Section 4.2 and in order to effectuate the purpose of this Agreement, the Purchase Agreement,
and the Warrant; and (iv) comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by such Registration Statement during such period in
accordance with the intended methods of disposition by the Investor set forth in such Registration
Statement; provided, however, that the Investor shall be responsible for the
delivery of the Prospectus to the Persons to whom the Investor sells the Shares and the Warrant
Shares, and the Investor agrees to dispose of Registrable Securities in compliance with the plan of
distribution described in the Registration Statement and otherwise in compliance with applicable
federal and state securities laws.

     (b) After the filing of the Registration Statement, the Company shall promptly notify the
Investor of any stop order issued or threatened by the Commission in connection therewith and take
all commercially reasonable actions required to prevent the entry of such stop order or to remove
it if entered.

3

 

     (c) The Company shall use commercially reasonable efforts to (i) register or qualify the
Registrable Securities under such other securities or blue sky laws of each jurisdiction in the
United States as the Investor may reasonably (in light of its intended plan of distribution)
request, and (ii) cause the Registrable Securities to be registered with or approved by such other
governmental agencies or authorities in the United States as may be necessary by virtue of the
business and operations of the Company and do any and all other customary acts and things that may
be reasonably necessary or advisable to enable the Investor to consummate the disposition of the
Registrable Securities; provided, however, that the Company will not be required to
qualify generally to do business in any jurisdiction where it would not otherwise be required to
qualify but for this Section 2.1(c), subject itself to taxation in any such jurisdiction, consent
or subject itself to general service of process in any such jurisdiction, change any existing
business practices, benefit plans or outstanding securities or amend or otherwise modify the
Charter or Bylaws.

     (d) The Company shall make available to the Investor (and will deliver to Investor’s
counsel), (A) subject to restrictions imposed by the United States federal government or any agency
or instrumentality thereof, copies of all public correspondence between the Commission and the
Company concerning the Registration Statement and will also make available for inspection by the
Investor and any attorney, accountant or other professional retained by the Investor (collectively,
the “Inspectors”), (B) upon reasonable advance notice during normal business hours all
financial and other records, pertinent corporate documents and properties of the Company
(collectively, the “Records”) as shall be reasonably necessary to enable them to exercise
their due diligence responsibility, and cause the Company’s officers and employees to supply all
information reasonably requested by any Inspectors in connection with the Registration Statement;
provided, however, that any such Inspectors must agree in writing for the benefit
of the Company not to use or disclose any such Records except as provided in this Section 2.1(d).
Records that the Company determines, in good faith, to be confidential and that it notifies the
Inspectors are confidential shall not be disclosed by the Inspectors unless the disclosure or
release of such Records is requested or required pursuant to oral questions, interrogatories,
requests for information or documents or a subpoena or other order from a court of competent
jurisdiction or other judicial or governmental process; provided, however, that
prior to any disclosure or release pursuant to the immediately preceding clause, the Inspectors
shall provide the Company with prompt notice of any such request or requirement so that the Company
may seek an appropriate protective order or waive such Inspectors’ obligation not to disclose such
Records; and, provided, further, that if failing the entry of a protective order or
the waiver by the Company permitting the
disclosure or release of such Records, the Inspectors, upon advice of counsel, are compelled
to disclose such Records, the Inspectors may disclose that portion of the Records that counsel has
advised the Inspectors that the Inspectors are compelled to disclose; provided,
however, that upon any such required disclosure, such Inspector shall use his or her best
efforts to obtain reasonable assurances that confidential treatment will be afforded such
information. The Investor agrees that information obtained by it solely as a result of such
inspections (not including any information obtained from a third party who, insofar as is known to
the Investor after reasonable inquiry, is not prohibited from providing such information by a
contractual, legal or fiduciary obligation to the Company) shall be deemed confidential and shall
not be used for any purposes other than as indicated above or by it as the basis for any market
transactions in the securities of the Company or its affiliates unless and until such information
is made generally available to the public. The Investor further agrees that it will, upon learning
that disclosure of such Records is sought in a court of competent jurisdiction, give notice to the
Company and allow the Company, at its expense, to undertake appropriate action to prevent
disclosure of the Records deemed confidential.

     (e) The Company shall otherwise comply, in all material respects, with the applicable
rules and regulations of the Commission, including, without limitation, compliance with applicable
reporting requirements under the Exchange Act.

4

 

     (f) The Company shall appoint a transfer agent and registrar for all of the Registrable
Securities covered by such Registration Statement not later than the effective date of such
Registration Statement.

     (g) The Investor shall cooperate with the Company, as reasonably requested by the Company,
in connection with the preparation and filing of any Registration Statement hereunder. The Company
may require the Investor to promptly furnish in writing to the Company such information as may be
required in connection with such registration including, without limitation, all such information
as may be requested by the Commission or the NASD or any state securities commission and all such
information regarding the Investor, the Registrable Securities held by the Investor and the
intended method of disposition of the Registrable Securities. The Investor agrees to provide such
information requested in connection with such registration within five (5) business days after
receiving such written request and the Company shall not be responsible for any delays in obtaining
or maintaining the effectiveness of the Registration Statement caused by the Investor’s failure to
timely provide such information.

     (h) Upon receipt of a Blackout Notice from the Company, the Investor shall immediately
discontinue disposition of Registrable Securities pursuant to the Registration Statement covering
such Registrable Securities until (i) the Company advises the Investor that the Blackout Period has
terminated and (ii) the Investor receives copies of a supplemented or amended prospectus, if
necessary. If so directed by the Company, the Investor will deliver to the Company (at the expense
of the Company) or destroy (and deliver to the Company a certificate of destruction) all copies in
the Investor’s possession (other than a limited number of file copies) of the prospectus covering
such Registrable Securities that is current at the time of receipt of such notice.

     Section 2.2. Registration Expenses. Except as set forth in Section 10.01 of the Purchase
Agreement, the Company shall pay all registration expenses incurred in connection with the
Registration Statement (the “Registration Expenses”), including, without limitation: (i)
all registration, filing, securities exchange listing and fees required by the National Association
of Securities Dealers, (ii) all registration, filing, qualification and other fees and expenses of
compliance with securities or blue sky laws (including reasonable fees and disbursements of
counsel in connection with blue sky qualifications of the Registrable Securities), (iii) all
word processing, duplicating, printing, messenger and delivery expenses, (iv) the Company’s
internal expenses (including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), (v) the fees and expenses incurred by the Company
in connection with the listing of the Registrable Securities, (vi) reasonable fees and
disbursements of counsel for the Company and customary fees and expenses for independent certified
public accountants retained by the Company (including the expenses of any special audits or comfort
letters or costs associated with the delivery by independent certified public accountants of such
special audit(s) or comfort letter(s), (vii) the fees and expenses of any special experts retained
by the Company in connection with such registration and amendments and supplements to the
Registration Statement and Prospectus, and (viii) premiums and other costs of the Company for
policies of insurance against liabilities of the Company arising out of any public offering of the
Registrable Securities being registered to the extent the Company in its discretion elects to
obtain and maintain such insurance. Any fees and disbursements of underwriters, broker-dealers or
investment bankers, including without limitation underwriting fees, discounts, transfer taxes or
commissions, and any other fees or expenses (including legal fees and expenses) if any,
attributable to the sale of Registrable Securities, shall be payable by each holder of Registrable
Securities pro rata on the basis of the number of Registrable Securities of each such holder that
are included in a registration under this Agreement.

5

 

ARTICLE III

INDEMNIFICATION

     Section 3.1. Indemnification. The Company agrees to indemnify and hold harmless the
Investor, its partners, affiliates, officers, directors, employees and duly authorized agents, and
each Person or entity, if any, who controls the Investor within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, together with the partners, affiliates, officers,
directors, employees and duly authorized agents of such controlling Person or entity (collectively,
the “Controlling Persons”), from and against any loss, claim, damage, liability, costs and
expenses (including, without limitation, reasonable attorneys’ fees and disbursements and costs and
expenses of investigating and defending any such claim) (collectively, “Damages”), joint or
several, and any action or proceeding in respect thereof to which the Investor, its partners,
affiliates, officers, directors, employees and duly authorized agents, and any Controlling Person,
may become subject under the Securities Act or otherwise, as incurred, insofar as such Damages (or
actions or proceedings in respect thereof) arise out of, or are based upon, any untrue statement or
alleged untrue statement of a material fact contained in any Registration Statement, or in any
preliminary prospectus, final prospectus, summary prospectus, amendment or supplement relating to
the Registrable Securities or arises out of, or are based upon, any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make the statements
therein under the circumstances not misleading, and shall reimburse the Investor, its partners,
affiliates, officers, directors, employees and duly authorized agents, and each such Controlling
Person, for any legal and other expenses reasonably incurred by the Investor, its partners,
affiliates, officers, directors, employees and duly authorized agents, or any such Controlling
Person, as incurred, in investigating or defending or preparing to defend against any such Damages
or actions or proceedings; provided, however, that the Company shall not be liable
to the extent that any such Damages arise out of or are based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in such Registration Statement, or any such
preliminary prospectus, final prospectus, summary prospectus, amendment or supplement in reliance
upon and in conformity with written information furnished to the Company by or on behalf of the
Investor or any other person who participates as an underwriter in the offering or sale of such
securities, in either case, specifically stating that it is for use in the preparation thereof. In
connection with any Registration Statement with respect to which the Investor is participating, the
Investor will indemnify and hold harmless, to the same extent and in the same manner as set forth
in the preceding paragraph, the Company, each of its partners, affiliates, officers, directors,
employees and duly authorized agents of such controlling Person (each a “Company Indemnified
Person”) against any Damages to which any Company Indemnified Person may become subject under
the Securities Act, the Exchange Act or otherwise, insofar as such Damages arise out of or are
based upon (a) any untrue statement or alleged untrue statement of a material fact contained in any
Registration Statement, or in any preliminary prospectus, final prospectus, summary prospectus,
amendment or supplement relating to the Registrable Securities or arise out of, or are based upon,
any omission or alleged omission to state therein a material fact required to be stated therein or
necessary to make the statements therein under the circumstances not misleading to the extent that
such violation occurs in reliance upon and in conformity with written information furnished to the
Company by the Investor or on behalf of the Investor expressly for use in connection with such
Registration Statement, or (b) any failure by the Investor to comply with prospectus delivery
requirements of the Securities Act, the Exchange Act or any other law or legal requirement
applicable to sales under the Registration Statement.

     Section 3.2. Conduct of Indemnification Proceedings. All claims for indemnification
under Section 3.1 shall be asserted and resolved in accordance with the provisions of Section 9.02
and 9.03 of the Purchase Agreement.

     Section 3.3. Additional Indemnification. Indemnification similar to that specified in
the preceding paragraphs of this Article 3 (with appropriate modifications) shall be given by the
Company

6

 

with respect to any required registration or other qualification of securities under any
federal or state law or regulation of any governmental authority other than the Securities Act.
The provisions of this Article III shall be in addition to any other rights to indemnification,
contribution or other remedies which an Indemnified Party or a Company Indemnified Person may have
pursuant to law, equity, contract or otherwise.

     To the extent that any indemnification provided for herein is prohibited or limited by law,
the indemnifying party will make the maximum contribution with respect to any amounts for which it
would otherwise be liable under this Article III to the fullest extent permitted by law. However,
(a) no contribution will be made under circumstances where maker of such contribution would not
have been required to indemnify the indemnified party under the fault standards set forth in this
Article III, (b) if the Investor is guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) the Investor will not be entitled to contribution from any
Person who is not guilty of such fraudulent misrepresentation, and (c) contribution (together with
any indemnification obligations under this Agreement) by the Investor will be limited in amount to
the proceeds received by the Investor from sales of Registrable Securities.

ARTICLE IV

MISCELLANEOUS

     Section 4.1. No Outstanding Registration Rights. Except as otherwise disclosed in
accordance with the Purchase Agreement or in the Commission Documents, the Company represents and
warrants to the Investor that there is not in effect on the date hereof any agreement by the
Company pursuant to which any holders of securities of the Company have a right to cause the
Company to register or qualify such securities under the Securities Act or any securities or blue
sky laws of any jurisdiction.

     Section 4.2. Term. The registration rights provided to the holders of Registrable
Securities hereunder, and the Company’s obligation to keep the Registration Statement effective,
shall terminate at the earlier of (i) such time that is two years following the termination of the
Purchase Agreement, (ii) such time as all Registrable Securities have been issued and have ceased
to be Registrable Securities, or (iii) upon the consummation of an “Excluded Merger or Sale” as
defined in the Warrant. Notwithstanding the foregoing, paragraph (d) of Section 1.1, Article III,
Section 4.7, Section 4.8, Section 4.9, Section 4.10 and Section 4.13 shall survive the termination
of this Agreement.

     Section 4.3. Rule 144. The Company will, at its expense, promptly take such action as
holders of Registrable Securities may reasonably request to enable such holders of Registrable
Securities to sell Registrable Securities without registration under the Securities Act within the
limitation of the exemptions provided by (a) Rule 144 under the Securities Act (“Rule
144”), as such Rule may be amended from time to time, or (b) any similar rule or regulation
hereafter adopted by the Commission. If at any time the Company is not required to file such
reports, it will, at its expense, forthwith upon the written request of any holder of Registrable
Securities, make available adequate current public information with respect to the Company within
the meaning of paragraph (c)(2) of Rule 144 or such other information as necessary to permit sales
pursuant to Rule 144. Upon the request of the Investor, the Company will deliver to the Investor a
written statement, signed by the Company’s principal financial officer, as to whether it has
complied with such requirements.

     Section 4.4. Certificate. The Company will, at its expense, forthwith upon the
request of any holder of Registrable Securities, deliver to such holder a certificate, signed by
the Company’s principal financial officer, stating (a) the Company’s name, address and telephone
number (including area code), (b) the Company’s Internal Revenue Service identification number, (c)
the Company’s Commission file number, (d) the number of shares of each class of Stock outstanding
as shown by the most recent report or

7

 

statement published by the Company, and (e) whether the Company has filed the reports required
to be filed under the Exchange Act for a period of at least ninety (90) days prior to the date of
such certificate and in addition has filed the most recent annual report required to be filed
thereunder.

     Section 4.5. Amendment And Modification. Any provision of this Agreement may be
waived, provided that such waiver is set forth in a writing executed by both parties to this
Agreement. The provisions of this Agreement, including the provisions of this sentence, may be
amended, modified or supplemented, and waivers or consents to departures from the provisions hereof
may be given, with the written consent of the Investor and the Company. No course of dealing
between or among any Person having any interest in this Agreement will be deemed effective to
modify, amend or discharge any part of this Agreement or any rights or obligations of any person
under or by reason of this Agreement.

     Section 4.6. Successors and Assigns; Entire Agreement. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns. The Company may assign this Agreement at any time in
connection with a sale or acquisition of the Company, whether by merger, consolidation, sale of all
or substantially all of the Company’s assets, or similar transaction, without the consent of the
Investor, provided that the successor or acquiring Person or entity agrees in writing to assume all
of the Company’s rights and obligations under this Agreement. Investor may assign its rights and
obligations under this Agreement only with the prior written consent of the Company, and any
purported assignment by the Investor absent the Company’s consent shall be null and void. This
Agreement, together with the Purchase Agreement and the Warrant, sets forth the entire agreement
and understanding between the parties as to the subject matter hereof and merges and supersedes all
prior discussions, agreements and understandings of any and every nature among them.

     Section 4.7. Severability. If any provision of this Agreement becomes or is declared
by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement shall
continue in full force and effect without said provision; provided that, if the severance
of such provision materially changes the economic benefits of this Agreement to either party as
such benefits are anticipated as of the date hereof, then such party may terminate this Agreement
on five (5) business days prior written notice to the other party. In such event, the Purchase
Agreement will terminate simultaneously with the termination of this Agreement.

     Section 4.8. Notices. All notices, demands, requests, consents, approvals, and other
communications required or permitted hereunder shall be given in accordance with Section 10.04 of
the Purchase Agreement.

     Section 4.9. Governing Law; Dispute Resolution. This Agreement shall be construed
under the laws of the State of New York.

     Section 4.10. Headings. The headings in this Agreement are for convenience of
reference only and shall not constitute a part of this Agreement, nor shall they affect their
meaning, construction or effect.

     Section 4.11. Counterparts. This Agreement may be executed in multiple counterparts,
each of which shall be deemed to be an original instrument and all of which together shall
constitute one and the same instrument.

     Section 4.12. Further Assurances. Each party shall cooperate and take such action as
may be reasonably requested by another party in order to carry out the provisions and purposes of
this Agreement and the transactions contemplated hereby.

8

 

     Section 4.13. Absence of Presumption. This Agreement shall be construed without
regard to any presumption or rule requiring construction or interpretation against the party
drafting or causing any instrument to be drafted.

9

 

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by the
undersigned, thereunto duly authorized, as of the date first set forth above.

	 	 	 	 	 	 	 
	 	 	KINGSBRIDGE CAPITAL LIMITED	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Adam Gurney	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Adam Gurney	 	 
	 

	 	 	 	Chief Executive Officer	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	Palm Grove House	 	 
	 

	 	 	 	2nd Floor	 	 
	 

	 	 	 	Road Town, Tortola	 	 
	 

	 	 	 	British Virgin Islands	 	 
	 
	 	 	 	 	 	 
	 	 	CELL GENESYS, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Stephen A. Sherwin, M.D.	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Stephen A. Sherwin, M.D.	 	 
	 

	 	 	 	Chief Executive Officer	 	 

10

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