Document:

Amendment #1 to Subscription Agreement

 

Exhibit
4.4

AMENDMENT NO. 1 TO SUBSCRIPTION AGREEMENT

          This Amendment No. 1 to the Subscription Agreement (the “Amendment”) is made and entered into
as of February 14, 2006 by and between                           (“Subscriber”) and Cardiome Pharma Corp. (the
"Corporation”).

RECITALS

          A.     Subscriber and Corporation entered into that certain Subscription Agreement dated as of
October 21, 2005 (the “Subscription Agreement”).

          B.     Section 30 of the Subscription Agreement provides that no amendment to the Subscription
Agreement will be valid or binding unless set forth in writing and duly executed by the parties
thereto.

          C.     The parties desire to make certain amendments to the Subscription Agreement as provided for
herein.

          D.     Capitalized terms not otherwise defined here shall have the meanings ascribed to them in
the Subscription Agreement.

AGREEMENT

          NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:

1.          Section 5. Section 5 of the Subscription Agreement is hereby amended and restated in its
entirety to read as follows:

	 	 	“Subscriber shall have the registration rights as set forth in Schedule E to the
Subscription Agreement (Terms Governing Registration Rights) with regard to the filing of a
registration statement (the “Registration Statement”) under the U.S. Securities Act of 1933,
as amended (the “1933 Act,” and together with the applicable state “blue sky” securities
laws and regulations, the “Applicable U.S. Securities Laws”) for the offer and sale of the
Underlying Shares with the United States Securities and Exchange Commission (the “SEC”).
Together with the Applicable Canadian Securities Laws, the Applicable U.S. Securities Laws
are referred to herein as “Applicable Securities Laws.”

2.          Schedule E. Schedule E, in the form attached hereto as Exhibit 1, is hereby attached to the
Subscription Agreement.

3.          Section 6. Section 6 of the Subscription Agreement is hereby deleted in its entirety and the
following replaced therefore:

	 	 	“[Intentionally deleted.]”

 

4.          Section 7. Section 7 of the Subscription Agreement is hereby amended and restated in its
entirety to read as follows:

	 	 	“For avoidance of doubt, in the event that the Final Receipt is not obtained within two
years of the date of this Subscription Agreement, provided that the Corporation shall have
used its commercially reasonable best efforts to prepare and file the Canadian Prospectuses
as contemplated in sections 3 and 4, the Corporation shall have no further obligations under
sections 3, 4 and 7.”

5.          Section 8(a). Subsection (iii) of Section 8(a) of the Subscription Agreement is hereby amended
and restated in its entirety to read as follows:

	 	 	“(iii) the Special Warrants and the Underlying Shares, if not distributed through the
Canadian Prospectuses or pursuant to an effective registration statement, will be subject to
resale restrictions under Applicable Securities Laws.”

6.          Sections 8(c). The language in Section 8(c) of the Subscription Agreement that reads “through
the Final Prospectuses” is hereby amended and restated in its entirety to read as follows “through
a Canadian Final Prospectus or pursuant to an effective registration statement”.

7.          Sections 8(e). The language in Section 8(e) of the Subscription Agreement that reads “through
the Final Prospectuses and subject to an effective registration statement” is hereby amended and
restated in its entirety to read as follows “through the Canadian Final Prospectus or pursuant to
an effective registration statement”.

8.          Section 10(g). The following language is hereby inserted at the end of the first sentence of
Section 10(g) of the Subscription Agreement (i.e., the sentence that ends “by all Applicable
Securities Laws (the “Securities Filings”)”)

	 	 	“, which Securities Filings shall also include any filings made by the Corporation pursuant
to the U.S. Securities Exchange Act of 1934.”

9.          Section 10(n). The following language is hereby inserted at the beginning of Section 10(n) of
the Subscription Agreement: “except as contemplated herein,”.

10.          Sections 17. Subsection (iii) of Section 17 of the Subscription Agreement is hereby amended
and restated in its entirety to read as follows:

	 	 	“(iii) all costs incurred in connection with the preparation, printing and delivery of the
Registration Statement and Canadian Prospectuses and any amendment or supplement thereto,”

11.          Except as specifically amended hereby, the Subscription Agreement shall remain in full force
and effect in accordance with the provisions thereof and is hereby ratified and confirmed. After
this

-2-

 

Amendment becomes effective as provided herein, any reference to the Subscription Agreement shall
refer to the Subscription Agreement as amended hereby.

12.          This Amendment may be executed in counterparts or by facsimile, each of which shall be deemed
an original, and all of which together shall constitute one agreement binding on the parties
hereto.

[remainder of page intentionally blank]

-3-

 

SIGNATURE PAGE—AMENDMENT NO. 1 TO SUBSCRIPTION AGREEMENT

               IN WITNESS WHEREOF, Subscriber and Corporation have executed this Amendment No. 1 to the
Subscription Agreement as of the date first written above.

SUBSCRIBER

By:

By                                                       

Its                                                       

CARDIOME PHARMA CORP.

By                                                       

Its                                                       

 

 

EXHIBIT 1

SCHEDULE E TO SUBSCRIPTION AGREEMENT

 

TERMS GOVERNING REGISTRATION RIGHTS

	1.	 	Definitions. Capitalized terms used and not otherwise defined herein that are
defined in the Subscription Agreement will have the meanings given such terms in the
Subscription Agreement. As used in herein and the Subscription Agreement, the following terms
have the respective meanings set forth in this Section 1:

	 	 	 	“1933 Act” means the Securities Act of 1933, as amended.
	 
	 	 	 	“1934 Act” means the Securities Exchange Act of 1934, as amended.
	 
	 	 	 	“Advice” has the meaning set forth in Section 6(b).
	 
	 	 	 	“SEC” means the U.S. Securities and Exchange Commission.
	 
	 	 	 	“Common Shares” means the Common Shares of the Corporation, no par value.
	 
	 	 	 	“Corporation” means Cardiome Pharma Corp.
	 
	 	 	 	“Effective Date” means the date that the Registration Statement filed pursuant to Section 2
is first declared effective by the SEC.
	 
	 	 	 	“Effectiveness Period” has the meaning set forth in Section 2.
	 
	 	 	 	“Filing Date” means February 16, 2006 or such other date as the parties may determine.
	 
	 	 	 	“Holder” or “Holders” means the holder or holders, as the case may be, from time to time of
Registrable Securities.
	 
	 	 	 	“Indemnified Party” has the meaning set forth in Section 5(c).
	 
	 	 	 	“Indemnifying Party” has the meaning set forth in Section 5(c).
	 
	 	 	 	“Losses” has the meaning set forth in Section 5(a).
	 
	 	 	 	“Proceeding” means an action, claim, suit, investigation or proceeding (including, without
limitation, an investigation or partial proceeding, such as a deposition), whether commenced
or threatened.
	 
	 	 	 	“Prospectus” means the prospectus included in a Registration Statement (including, without
limitation, a prospectus that includes any information previously omitted from a prospectus
filed as part of an effective registration statement in reliance upon Rule 430A promulgated
under the 1933 Act), as amended or supplemented by any prospectus supplement, with respect
to the terms of the offering of any portion of the Registrable Securities covered by a
Registration Statement, and all

 

 

	 	 	 	other amendments and supplements to the Prospectus, including post-effective amendments, and
all material incorporated by reference or deemed to be incorporated by reference in such
Prospectus.
	 
	 	 	 	“Registrable Securities” means the Underlying Shares.
	 
	 	 	 	“Registration Statement” means the registration statement required to be filed in accordance
with Section 2, including the Prospectus, amendments and supplements to such registration
statements or Prospectus, including pre- and post-effective amendments, all exhibits
thereto, and all material incorporated by reference or deemed to be incorporated by
reference therein.
	 
	 	 	 	“Rule 144” means Rule 144 promulgated by the SEC pursuant to the 1933 Act, as such Rule may
be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC
having substantially the same effect as such Rule.
	 
	 	 	 	“Rule 415” means Rule 415 promulgated by the SEC pursuant to the 1933 Act, as such Rule may
be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC
having substantially the same effect as such Rule.
	 
	 	 	 	“Rule 424” means Rule 424 promulgated by the SEC pursuant to the 1933 Act, as such Rule may
be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC
having substantially the same effect as such Rule.
	 
	 	 	 	“Trading Day” shall mean a day on which the Trading Market is open for the transaction of
business or, if the Common Shares are not listed or admitted to trading on any national
securities exchange or on an electronic trading market, a business day.
	 
	 	 	 	“Trading Market” means the Nasdaq National Market System or such other stock exchange or
electronic trading market on which the Company elects to have the Common Shares listed or
quoted in the United States.

	2.	 	Registration. On or prior to the Filing Date, the Corporation shall prepare and file
with the SEC a Registration Statement on Form F-3 (or on such other form appropriate for such
purpose) covering the resale of all Registrable Securities not already covered by an existing
and effective Registration Statement for an offering to be made on a continuous basis pursuant
to Rule 415. The Corporation shall use all commercially reasonable efforts to cause such
Registration Statement to be declared effective under the 1933 Act as soon as practicable, and
shall use all commercially reasonable efforts to keep the Registration Statement continuously
effective under the 1933 Act until the date which is the earlier of (i) two years after the
date of the Subscription Agreement, (ii) such time as all of the Registrable Securities
covered by such Registration Statement have been publicly sold by the Holders, or (iii) such
time as all of the Registrable Securities covered by such Registration Statement may be sold
by the Holders pursuant to Rule 144 without restriction or another exemption under the 1933
Act during a three-month period without registration (the “Effectiveness Period”).

E-2

 

	3.	 	Registration Procedures.
	 
	 	 	In connection with the Corporation’s registration obligations hereunder, the Corporation shall:

	 	(a)	 	Not less than three Trading Days prior to the filing of a Registration Statement or any
related Prospectus or any amendment or supplement thereto, the Corporation shall furnish to
each Holder for review copies of the “Selling Shareholders” and “Plan of Distribution”
sections of such document, as proposed to be filed with such documents. The Corporation
shall not file a Registration Statement, any Prospectus or any amendments or supplements
thereto in which the disclosure in the “Selling Shareholder” section thereof differs from
the information received from a Holder in writing (as may be amended or supplemented).
	 
	 	(b)	 	Prepare and file with the SEC such amendments, including post-effective amendments, to
each Registration Statement and the Prospectus used in connection therewith as may be
necessary to keep such Registration Statement continuously effective as to the applicable
Registrable Securities for the applicable Effectiveness Period and prepare and file with
the SEC such additional Registration Statements in order to register for resale under the
1933 Act all of the Registrable Securities; (ii) cause the related Prospectus to be amended
or supplemented by any required Prospectus supplement, and as so supplemented or amended to
be filed pursuant to Rule 424; (iii) respond as promptly as reasonably practicable to any
comments received from the SEC with respect to the Registration Statement or any amendment
thereto; and (iv) comply in all material respects with the provisions of the 1933 Act and
the 1934 Act with respect to the Registration Statements and the disposition of all
Registrable Securities covered by each Registration Statement.
	 
	 	(c)	 	Notify the Holders as promptly as reasonably practicable (and, in the case of (i)(A)
below, not less than three Trading Days prior to such filing) and, if requested by any such
Person, confirm such notice in writing no later than two Trading Days following the day
(i)(A) when a Prospectus or any Prospectus supplement or post-effective amendment to a
Registration Statement is proposed to be filed; (B) when the SEC notifies the Corporation
whether there will be a “review” of such Registration Statement and whenever the SEC
comments in writing on such Registration Statement (in which case, the Corporation shall,
upon written request of Holder, provide copies thereof and all written responses thereto
that pertain to the Holders as a selling shareholder or to the “Plan of Distribution”
section, but not information which the Corporation believes would constitute material and
non-public information); and (C) with respect to each Registration Statement or any
post-effective amendment, when the same has become effective; (ii) of any request by the
SEC for amendments or supplements to a Registration Statement or Prospectus or for
additional information; (iii) of the issuance by the SEC of any stop order suspending the
effectiveness of a Registration Statement covering any or all of the Registrable Securities
or the initiation of any Proceedings for that purpose; (iv) of the receipt by the
Corporation 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; and (v)
of the occurrence of any event or passage of time that makes any statement made in such
Registration Statement or Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that requires any
revisions to such Registration Statement, Prospectus or other documents so that, in the
case of such Registration Statement or the Prospectus, as the case may be, it will not
contain any untrue statement of a material fact or omit to state any material fact required
to be stated therein or
necessary to make the statements therein, in light of the circumstances under which they
were made, not misleading.

E-3

 

	 	(d)	 	Use all commercially reasonable efforts to avoid the issuance of, or, if issued, obtain
the withdrawal of (i) any order suspending the effectiveness of a Registration Statement,
or (ii) any suspension of the qualification (or exemption from qualification) of any of the
Registrable Securities for sale in any jurisdiction, at the earliest practicable time.
	 
	 	(e)	 	Prior to any public offering of Registrable Securities, to use all commercially
reasonable efforts to register or qualify or cooperate with the selling Holders in
connection with the registration or qualification (or exemption from such registration or
qualification) of such Registrable Securities for offer and sale under the securities or
Blue Sky laws of all jurisdictions within the United States, to keep each such registration
or qualification (or exemption therefrom) effective during the Effectiveness Period and to
do any and all other acts or things necessary or advisable to enable the disposition in
such jurisdictions of the Registrable Securities covered by the Registration Statements.
	 
	 	(f)	 	Upon the occurrence of any event contemplated by Section 3(c)(v), as promptly as
reasonably practicable, prepare a supplement or amendment, including a post-effective
amendment, to the affected Registration Statements or a supplement to the related
Prospectus or any document incorporated or deemed to be incorporated therein by reference,
and file any other required document so that, as thereafter delivered, no Registration
Statement nor any Prospectus will contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not misleading.

	4.	 	Registration Expenses. All fees and expenses incident to the performance of or
compliance with the Subscription Agreement by the Corporation shall be borne by the
Corporation whether or not any Registrable Securities are sold pursuant to a Registration
Statement. The fees and expenses referred to in the foregoing sentence shall include, without
limitation, (i) fees and disbursements of counsel for the Corporation, (ii) fees and expenses
of all other Persons retained by the Corporation in connection with the registration of the
Registrable Securities, and (iii) reasonable fees and disbursements of one U.S. counsel and
one Canadian counsel for the selling Holders not to exceed $10,000 in the aggregate.

	5.	 	Indemnification.

	 	(a)	 	Indemnification by the Corporation. The Corporation shall, notwithstanding any
termination of the rights hereunder, indemnify and hold harmless each Holder, the officers,
directors, agents, investment advisors, partners, members and employees of each of them,
each Person who controls any such Holder (within the meaning of Section 15 of the 1933 Act
or Section 20 of the 1934 Act) and the officers, directors, agents and employees of each
such controlling Person, to the fullest extent permitted by applicable law, from and
against any and all losses, claims, damages, liabilities, costs (including, without
limitation, reasonable costs of preparation and reasonable attorneys’ fees) and expenses
(collectively, “Losses”), as incurred, arising out of or relating to any untrue or alleged
untrue statement of a material fact contained in the Registration Statement, any Prospectus
or any form of prospectus or in any amendment or supplement thereto or in any preliminary
prospectus, or arising out of or relating to any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements therein (in the case

E-4

 

	 	 	 	of any Prospectus or form of prospectus or supplement thereto, in light of the circumstances
under which they were made) not misleading, except to the extent, but only to the extent,
that (1) such untrue statements or omissions are based upon information regarding such
Holder furnished in writing to the Corporation by such Holder expressly for use therein, or
to the extent that such information relates to such Holder or such Holder’s proposed method
of distribution of Registrable Securities and was reviewed and expressly approved in writing
by such Holder expressly for use in the Registration Statement, such Prospectus or such form
of Prospectus or in any amendment or supplement thereto or (2) in the case of an occurrence
of an event of the type specified in Section 3(c)(ii)-(v), the use by such Holder of an
outdated or defective Prospectus after the Corporation has notified such Holder in writing
that the Prospectus is outdated or defective and prior to the receipt by such Holder of
Advice or an amended or supplemented Prospectus, but only if and to the extent that
following the receipt of the Advice or the amended or supplemented Prospectus the
misstatement or omission giving rise to such Loss would have been corrected. The
Corporation shall notify the Holders promptly of the institution, threat or assertion of any
Proceeding of which the Corporation is aware in connection with the transactions
contemplated by the Subscription Agreement.
	 
	 	(b)	 	Indemnification by Holders. Each Holder shall, severally and not jointly,
indemnify and hold harmless the Corporation, its directors, officers, agents and employees,
each Person who controls the Corporation (within the meaning of Section 15 of the 1933 Act
and Section 20 of the 1934 Act), and the directors, officers, agents or employees of such
controlling Persons, to the fullest extent permitted by applicable law, from and against
all Losses, as incurred, arising out of or based upon: (x) such Holder’s failure to comply
with the prospectus delivery requirements of the 1933 Act or (y) any untrue statement of a
material fact contained in any Registration Statement, any Prospectus, or any form of
prospectus, or in any amendment or supplement thereto, or arising out of or based upon any
omission of a material fact required to be stated therein or necessary to make the
statements therein (in the case of any Prospectus or form of prospectus or supplement
thereto, in light of the circumstances under which they were made) not misleading to the
extent, but only to the extent that, (1) such untrue statements or omissions are based upon
information regarding such Holder furnished in writing to the Corporation by such Holder
expressly for use therein, or to the extent that such information relates to such Holder or
such Holder’s proposed method of distribution of Registrable Securities and was reviewed
and expressly approved in writing by such Holder expressly for use in the Registration
Statement, such Prospectus or such form of prospectus or in any amendment or supplement
thereto or (2) in the case of an occurrence of an event of the type specified in Section
3(c)(ii)-(v), the use by such Holder of an outdated or defective Prospectus after the
Corporation has notified such Holder in writing that the Prospectus is outdated or
defective and prior to the receipt by such Holder of Advice or an amended or supplemented
Prospectus, but only if and to the extent that following the receipt of the Advice or the
amended or supplemented Prospectus the misstatement or omission giving rise to such Loss
would have been corrected. In no event shall the liability of any selling Holder hereunder
be greater in amount than the dollar amount of the net proceeds received by such Holder
upon the sale of the Registrable Securities giving rise to such indemnification obligation.
	 
	 	(c)	 	Conduct of Indemnification Proceedings. If any Proceeding shall be brought or
asserted against any Person entitled to indemnity hereunder (an “Indemnified Party”), such
Indemnified Party shall promptly notify the Person from whom indemnity is sought (the
“Indemnifying Party”) in writing, and the Indemnifying Party shall assume the defense
thereof, including the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of all fees and expenses
incurred

E-5

 

	 	 	 	in connection with defense thereof; provided, that the failure of any Indemnified
Party to give such notice shall not relieve the Indemnifying Party of its obligations or
liabilities pursuant to the Subscription Agreement, except to the extent, and only to the
extent, that it shall be finally determined by a court of competent jurisdiction (which
determination is not subject to appeal or further review) that such failure shall have
proximately and materially adversely prejudiced the Indemnifying Party.
	 
	 	(d)	 	Separate Counsel; Settlement. An Indemnified Party shall have the right to
employ separate counsel in any such Proceeding and to participate in the defense thereof,
but the fees and expenses of such counsel shall be at the expense of such Indemnified Party
or Parties unless: (1) the Indemnifying Party has agreed in writing to pay such fees and
expenses; (2) the Indemnifying Party shall have failed promptly to assume the defense of
such Proceeding and to employ counsel reasonably satisfactory to such Indemnified Party in
any such Proceeding; or (3) the named parties to any such Proceeding (including any
impleaded parties) include both such Indemnified Party and the Indemnifying Party, and such
Indemnified Party shall have been advised by counsel that a conflict of interest is likely
to exist if the same counsel were to represent such Indemnified Party and the Indemnifying
Party, in which case, if such Indemnified Party notifies the Indemnifying Party in writing
that it elects to employ separate counsel at the expense of the Indemnifying Party, the
Indemnifying Party shall not have the right to assume the defense thereof and such counsel
shall be at the expense of the Indemnifying Party. The Indemnifying Party shall not be
liable for any settlement of any such Proceeding effected without its written consent,
which consent shall not be unreasonably withheld. No Indemnifying Party shall, without the
prior written consent of the Indemnified Party, effect any settlement of any pending
Proceeding in respect of which any Indemnified Party is a party, unless such settlement
includes an unconditional release of such Indemnified Party from all liability on claims
that are the subject matter of such Proceeding.
	 
	 	(e)	 	Payment of Fees and Expenses. All fees and expenses of the Indemnified Party
(including reasonable fees and expenses to the extent incurred in connection with
investigating or preparing to defend such Proceeding in a manner not inconsistent with the
provisions herein) shall be paid to the Indemnified Party, as incurred, within ten Trading
Days of written notice thereof to the Indemnifying Party (regardless of whether it is
ultimately determined that an Indemnified Party is not entitled to indemnification
hereunder; provided, that the Indemnifying Party may require such Indemnified Party to
undertake to reimburse all such fees and expenses to the extent it is finally judicially
determined that such Indemnified Party is not entitled to indemnification hereunder).
	 
	 	(f)	 	Contribution. If a claim for indemnification under Section 5(a) or 5(b) is
unavailable to an Indemnified Party (by reason of public policy or otherwise), then each
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the
amount paid or payable by such Indemnified Party as a result of such Losses, in such
proportion as is appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that resulted in
such Losses as well as any other relevant equitable considerations. The relative fault of
such Indemnifying Party and Indemnified Party shall be determined by reference to, among
other things, whether any action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission of a material fact, has been
taken or made by, or relates to information supplied by, such Indemnifying Party or
Indemnified Party, and the parties’ relative intent, knowledge, access to information and
opportunity to correct or prevent such action, statement or omission. The amount paid or
payable
by a party as a result of any Losses shall be deemed to include, subject to the limitations
set forth in

E-6

 

	 	 	 	Section 5(c), any reasonable attorneys’ or other reasonable fees or expenses
incurred by such party in connection with any Proceeding to the extent such party would have
been indemnified for such fees or expenses if the indemnification provided for herein was
available to such party in accordance with its terms.
	 
	 	(g)	 	The parties hereto agree that it would not be just and equitable if contribution
pursuant to Section 5(f) were determined by pro rata allocation or by any other method of
allocation that does not take into account the equitable considerations referred to in the
immediately preceding paragraph. Notwithstanding the provisions of Section 5(f) or Section
5(g), no Holder shall be required to contribute, in the aggregate, any amount in excess of
the amount by which the proceeds actually received by such Holder from the sale of the
Registrable Securities subject to the Proceeding exceeds the amount of any damages that
such Holder has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission.
	 
	 	(h)	 	The indemnity and contribution agreements contained herein are in addition to any
liability that the Indemnifying Parties may have to the Indemnified Parties.

	6.	 	Miscellaneous.

	 	(a)	 	Compliance. Each Holder covenants and agrees that it will comply with the
prospectus delivery requirements of the 1933 Act as applicable to it in connection with
sales of Registrable Securities pursuant to the Registration Statement. The Corporation
shall furnish to each Holder and the underwriters, if any, such number of copies of such
registration statement, any amendments thereto, any documents incorporated by reference
therein, the prospectus, including any preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as such Holder may reasonably
request in order to facilitate the public sale or other disposition of the securities owned
by such Holder.
	 
	 	(b)	 	Discontinued Disposition. Each Holder agrees by its acquisition of such
Registrable Securities that, upon receipt of a notice from the Corporation of the
occurrence of any event of the kind described in Section 3(c) (except 3(c)(i)(C)) such
Holder will forthwith discontinue disposition of such Registrable Securities under the
Registration Statement until such Holder’s receipt of the copies of the supplemented
Prospectus and/or amended Registration Statement or until it is advised in writing (the
“Advice”) by the Corporation that the use of the applicable Prospectus may be resumed, and,
in either case, has received copies of any additional or supplemental filings that are
incorporated or deemed to be incorporated by reference in such Prospectus or Registration
Statement. The Corporation may provide appropriate stop orders to enforce the provisions
of this paragraph.
	 
	 	(c)	 	Successors and Assigns. The rights and obligations hereunder shall inure to
the benefit of and be binding upon the successors and permitted assigns of each of the
parties and shall inure to the benefit of each Holder. The Corporation may not assign its
rights or obligations hereunder without the prior written consent of each Holder. Each
Holder may assign its respective rights hereunder in the manner and to the Persons as
permitted under the Subscription Agreement.
	 
	 	(d)	 	Cumulative Remedies. The remedies provided herein are cumulative and not
exclusive of any remedies provided by law.

E-7Release

     

    

    Talk
      America Reports Fourth Quarter and Full Year 2005 Results

    Unprecedented
      Migration of Customers to Network

     

    

    

    FOURTH
      QUARTER HIGHLIGHTS

    
      	·  	
              Local
                voice and data equivalent lines on network of
                341,000

            

    

    
      	·  	
              Total
                local voice and data equivalent lines of
                595,000

            

    

    
      	·  	
              Total
                revenue of $114.6 million

            

    

    
      	·  	
              EBITDA
                of $16.0 million

            

    

    
      	·  	
              Net
                income of $2.0 million, or $0.07 per share on a diluted
                basis

            

    

    
      	·  	
              Cash
                balance of $46.3 million; total debt of $5.3 million
                

            

    

    

    YEAR
      END HIGHLIGHTS

    
      	·  	
              Total
                revenue of $462.7 million

            

    

    
      	·  	
              EBITDA
                of $86.9 million

            

    

    
      	·  	
              Net
                income of $26.1 million, or $0.89 per share on a diluted
                basis

            

    

    
      	·  	
              Cash
                flow from operations of $72.0
                million

            

    

     

    
      New
        Hope,
        PA - February 17, 2006
        - Talk
        America (NASDAQ: TALK) today announced fourth quarter and full year results
        for
        2005. For the fourth quarter 2005, we reported net income of $2.0 million,
        or
        $0.07 per share on a diluted basis, as compared to net income of $11.1 million,
        or $0.40 per share on a diluted basis, for the fourth quarter 2004. For the
        fourth quarter 2005, on-net revenues, off-net revenues, and long distance
        only
        and other revenues were $40.2 million, $58.2 million and $16.2 million,
        respectively. 

      

      Talk
        America Chief Executive Officer and President, Ed Meyercord, commented, “We
        strengthened our competitive position in 2005 by transitioning to a
        network-based services provider and by expanding our reach into the commercial
        customer segment. Given the fundamental changes in our business throughout
        the
        year, we are pleased to deliver financial results ahead of plan.”

      

      For
        the
        full year 2005, we reported net income of $26.1 million, or $0.89 per share
        on a
        diluted basis, as compared to net income of $36.8 million, or $1.32 per share
        on
        a diluted basis, for the full year 2004. For the full year 2005, on-net
        revenues, off-net revenues, and long distance only and other revenues were
        $75.2
        million, $331.2 million and $56.3 million, respectively. Results for the
        year
        include the operations of LDMI from July 13, 2005, the closing date of the
        acquisition.

      

      (Note:
        See the schedule accompanying this news release for reconciliation to generally
        accepted accounting principles (GAAP) for the non-GAAP financial measure
        mentioned in this release)

      With
        the
        build out of our network, that now covers 313 end offices in 10 states,
        including Network Telephone, and the migration of over 200,000 customers,
        approximately 57% of our current customer lines, at year-end, are served
        on our
        network. In the fourth quarter alone,
        we
        successfully provisioned an unprecedented 120,000 voice and data equivalent
        lines onto our network for a year end total of 341,000. We are not aware
        of any
        company in our industry that has ever undertaken a migration of customer
        lines
        of this scale. Our success is a testament to the quality and talent of our
        employees and an extraordinary team effort.

      

      In
        addition, with the acquisition of LDMI and NTC, we now have the reach and
        product portfolio to deliver integrated voice and data services to commercial
        customers in our networked markets. The integration initiatives continue
        to
        proceed according to plan. We are realizing the expected synergies from combined
        operations while improving the quality of service to our commercial customers.
        We are now focused on “best-in-class” service initiatives and the expansion of
        our product portfolio.

      FINANCIAL
        GUIDANCE

      Our
        financial guidance for 2006 reflects the acquisition of NTC, which closed
        on
        January 3, 2006. Guidance for 2006 EBITDA before Option Expense excludes
        the
        impact from the expensing of options pursuant to FAS 123(R). We expect that
        option expense will be approximately $1.5 million in the first quarter 2006
        and
        $5.0 million for the full year 2006. Our financial targets are as
        follows:

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    

    
      	
              Metrics

            	
            	
              Q1
                2006

            
	
              Total
                Revenue

            	 	
              $118-$120
                mm

            
	
              EBITDA
                before Option Expense

            	 	
              $13-$15
                mm

            

    

    
 

    
      	 	 	 	
              2006

            
	
              Metrics

            	 	 	
              Previous

            	
              Current

            
	
              Total
                Revenue

            	 	 	
              $445-$455
                mm

            	
              $445-$455
                mm

            
	
              EBITDA
                before Option Expense

            	 	 	
              $60-$70
                mm

            	
              $60-$70
                mm

            
	
              Capital
                Expenditures (including Software)

            	 	 	
              $21-$25
                mm

            	
              $25-$30
                mm

            

    

     

    

    
      CONFERENCE
        CALL

      Talk
        America management will host a conference call to discuss the fourth quarter
        2005 operating results at 10:00 a.m. ET on February 17, 2006. The call can
        be
        accessed by dialing the following: US 800-633-8486, International, 212-346-6527.
        A replay of the call will be available through 12:00 p.m. ET on February
        24,
        2006 by dialing the following: 800-633-8284, International 402-977-9140.
        The
        reservation number for the replay is 21283512.

       

       

      Additionally,
        a live web simulcast of the conference call will be available online at
        www.talkamerica.com and www.streetevents.com.

       

      

      About
        Talk America 

      

      Talk
        America is a leading competitive communications provider that offers phone
        services and high speed internet access to both residential and business
        customers.  Talk America delivers value in the form of savings, simplicity
        and quality service to its customers through its leading edge network and
        award-winning back office.

      

      Please
        Note: The statements contained herein regarding the future results of operations
        of Talk America should be, and certain other of the statements contained
        herein
        may be, considered forward-looking statements within the meaning of Section
        27A
        of the Securities Act of 1933 and Section 21E of the Securities Exchange
        Act of
        1934. Such statements are identified by the use of forward-looking words
        or
        phrases, including, but not limited to, "estimates," "expects," "expected,"
        "anticipates," "anticipated," "forecast," "guidance," and "targets". These
        forward-looking statements are based on our current expectations. Although
        we
        believe that the expectations reflected in such forward-looking statements
        are
        reasonable, there can be no assurance that such expectations will prove to
        have
        been correct. Forward-looking statements involve risks and uncertainties
        and our
        actual results could differ materially from our expectations. In addition
        to
        those factors discussed in the foregoing, important factors that could cause
        such actual results to differ materially include, among others, our inability
        to
        integrate effectively and as anticipated the business of NTC upon the completion
        of the acquisition, dependence on the availability and functionality of local
        exchange carriers' networks as they relate to the unbundled network element
        platform, failure to establish and deploy our own local network as we plan
        to do
        or to operate it in a profitable manner, increased price competition for
        long
        distance and local services, failure of the marketing of the bundle of local
        and
        long distance services and long distance services under our direct marketing
        channels to a smaller marketing footprint, attrition in the number of end
        users,
        failure to manage our collection management systems and credit controls for
        customers, interruption in our network and information systems, failure to
        provide adequate customer service, and changes in government policy, regulation
        and enforcement and/or adverse judicial or administrative interpretations
        and
        rulings relating to regulations and enforcement, including, but not limited
        to,
        the continued availability of the unbundled network element platform of the
        local exchange carriers network and unbundled network element pricing
        methodology.

      

      For
        a
        discussion of such risks and uncertainties, which could cause actual results
        to
        differ from those contained in the forward-looking statements, see the
        discussions contained in our Quarterly Report on Form 10-Q filed November
        9,
        2005, our Annual Report on Form 10-K for the year-ended December 31, 2004,
        filed
        on March 16, 2005, as amended by our Form 10-K/A filed March 30, 2005, and
        any
        subsequent filings. We undertake no obligation to update our forward-looking
        statements.

    

    --Financial
      Tables To Follow—

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

     

    TALK
      AMERICA HOLDINGS, INC. AND SUBSIDIARIES

    CONSOLIDATED
      STATEMENTS OF OPERATIONS

    (In
      thousands, except for per share data)

    (Unaudited)

    

    

    
      	 	 	
              Three
                Months Ended 

              December
                31,

            	 	
              Year
                Ended 

              December
                31,

            	 
	 	 	 	
              2005

            	 	 	
              2004

            	 	 	
              2005

            	 	 	
              2004

            	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Revenue

            	 	
              $

            	
              114,590

            	 	
              $

            	
              125,251

            	 	
              $

            	
              462,740

            	 	
              $

            	
              471,012

            	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Costs
                and expenses:

            	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Network
                and line costs, excluding depreciation and amortization (see
                below)

            	 	 	
              62,835

            	 	 	
              61,805

            	 	 	
              243,925

            	 	 	
              225,244

            	 
	
              General
                and administrative expenses

            	 	 	
              22,981

            	 	 	
              18,415

            	 	 	
              82,906

            	 	 	
              72,020

            	 
	
              Provision
                for doubtful accounts

            	 	 	
              4,206

            	 	 	
              7,259

            	 	 	
              19,114

            	 	 	
              21,313

            	 
	
              Sales
                and marketing expenses

            	 	 	
              8,528

            	 	 	
              14,396

            	 	 	
              29,863

            	 	 	
              70,202

            	 
	
              Depreciation
                and amortization

            	 	 	
              12,886

            	 	 	
              7,009

            	 	 	
              43,620

            	 	 	
              22,904

            	 
	
              Total
                costs and expenses

            	 	 	
              111,436

            	 	 	
              108,884

            	 	 	
              419,428

            	 	 	
              411,683

            	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Operating
                income

            	 	 	
              3,514

            	 	 	
              16,367

            	 	 	
              43,312

            	 	 	
              59,329

            	 
	
              Other
                income (expense):

            	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Interest
                income

            	 	 	
              135

            	 	 	
              86

            	 	 	
              1,007

            	 	 	
              290

            	 
	
              Interest
                expense

            	 	 	
              (165

            	
              )

            	 	
              (35

            	
              )

            	 	
              (350

            	
              )

            	 	
              (733

            	
              )

            
	
              Other
                income (expense), net

            	 	 	
              709

            	 	 	
              1,895

            	 	 	
              348

            	 	 	
              1,895

            	 
	
              Income
                before provision for income taxes

            	 	 	
              3,833

            	 	 	
              18,313

            	 	 	
              44,317

            	 	 	
              60,781

            	 
	
              Provision
                for income taxes

            	 	 	
              1,814

            	 	 	
              7,222

            	 	 	
              18,243

            	 	 	
              23,969

            	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Net
                income

            	 	
              $

            	
              2,019

            	 	
              $

            	
              11,091

            	 	
              $

            	
              26,074

            	 	
              $

            	
              36,812

            	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Income
                per share - Basic:

            	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Net
                income per share 

            	 	
              
              

              $

            	
              
              

              0.07

            	 	
              
              

              $

            	
              
              

              0.41

            	 	
              $

            	
              0.91

            	 	
              $

            	
              1.37

            	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Weighted
                average common shares outstanding 

            	 	 	
              
              

              30,314

            	 	 	
              
              

              26,992

            	 	 	
              28,675

            	 	 	
              26,847

            	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Income
                per share - Diluted:

            	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Net
                income per share 

            	 	
              $

            	
              0.07

            	 	
              $

            	
              0.40

            	 	
              $

            	
              0.89

            	 	
              $

            	
              1.32

            	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Weighted
                average common and common equivalent shares outstanding 

            	 	 	
              30,777

            	 	 	
              27,750

            	 	 	
              29,296

            	 	 	
              27,584

            	 

    

    

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    TALK
      AMERICA HOLDINGS, INC. AND SUBSIDIARIES

    CONSOLIDATED
      BALANCE SHEETS

    (In
      thousands, except for share and per share data)

    (Unaudited)

    

    

    
      	 	 	
              December
                31, 

              2005

            	 	
              December
                31, 

              2004

            	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 
	
              Assets

            	 	 	 	 	 	 	 
	
              Current
                assets:

            	 	 	 	 	 	 	 
	
              Cash
                and cash equivalents 

            	 	
              $

            	
              46,288

            	 	
              $

            	
              47,492

            	 
	
              Accounts
                receivable, trade (net of allowance for uncollectible accounts of
                $14,366
                and $17,508 at December 31, 2005 and December 31, 2004, respectively)
                

            	 	 	
              43,600

            	 	 	
              48,873

            	 
	
              Deferred
                income taxes

            	 	 	
              18,476

            	 	 	
              34,815

            	 
	
              Prepaid
                expenses and other current assets 

            	 	 	
              6,338

            	 	 	
              6,888

            	 
	
              Total
                current assets 

            	 	 	
              114,702

            	 	 	
              138,068

            	 
	 	 	 	 	 	 	 	 
	
              Property
                and equipment, net 

            	 	 	
              95,077

            	 	 	
              65,823

            	 
	
              Goodwill

            	 	 	
              39,205

            	 	 	
              13,013

            	 
	
              Intangibles,
                net

            	 	 	
              4,934

            	 	 	
              1,966

            	 
	
              Deferred
                income taxes

            	 	 	
              20,774

            	 	 	
              14,291

            	 
	
              Capitalized
                software and other assets 

            	 	 	
              9,470

            	 	 	
              8,567

            	 
	 	 	
              $

            	
              284,162

            	 	
              $

            	
              241,728

            	 
	 	 	 	 	 	 	 	 
	
              Liabilities
                and Stockholders’ Equity

            	 	 	 	 	 	 	 
	
              Current
                liabilities:

            	 	 	 	 	 	 	 
	
              Accounts
                payable and accrued expenses

            	 	
              $

            	
              40,025

            	 	
              $

            	
              38,843

            	 
	
              Sales,
                use and excise taxes 

            	 	 	
              3,970

            	 	 	
              11,179

            	 
	
              Deferred
                revenue

            	 	 	
              13,824

            	 	 	
              15,321

            	 
	
              Current
                portion of long-term debt

            	 	 	
              3,988

            	 	 	
              2,529

            	 
	
              Accrued
                compensation

            	 	 	
              9,405

            	 	 	
              6,690

            	 
	
              Other
                current liabilities

            	 	 	
              14,147

            	 	 	
              10,022

            	 
	
              Total
                current liabilities 

            	 	 	
              85,359

            	 	 	
              84,584

            	 
	 	 	 	 	 	 	
            	 
	
              Long-term
                debt

            	 	 	
              1,289

            	 	 	
              1,717

            	 
	 	 	 	 	 	 	
            	 
	
              Deferred
                income taxes

            	 	 	
              3,788

            	 	 	
              13,906

            	 
	 	 	 	 	 	 	 	 
	Other
              liabilities	 	 	  
              2,021	 	 	-- 	 
	 	 	 	 	 	 	 	 
	
              Commitments
                and contingencies

            	 	 	
              --

            	 	 	
              --

            	 
	 	 	 	 	 	 	 	 
	
              Stockholders'
                equity: 

            	 	 	 	 	 	 	 
	
              Preferred
                stock - $.01 par value, 5,000,000 shares authorized; no shares outstanding
                

            	 	 	
              --

            	 	 	
              --

            	 
	
              Common
                stock - $.01 par value, 100,000,000 shares authorized; 31,679,046
                and
                27,037,096 shares issued and outstanding at December 31, 2005 and
                December
                31, 2004, respectively

            	 	 	
              317

            	 	 	
              284

            	 
	
              Additional
                paid-in capital 

            	 	 	
              380,486

            	 	 	
              356,409

            	 
	
              Accumulated
                deficit

            	 	 	
              (184,098

            	
              )

            	 	
              (210,172

            	
              )

            
	
              Treasury
                stock - $.01 par value, 1,315,789 shares at December 31, 2005 and
                December
                31, 2004 , respectively

            	 	 	
              (5,000

            	
              )

            	 	
              (5,000

            	
              )

            
	
              Total
                stockholders' equity

            	 	 	
              191,705

            	 	 	
              141,521

            	 
	 	 	
              $

            	
              284,162

            	 	
              $

            	
              241,728

            	 

    

    
 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    TALK
      AMERICA HOLDINGS, INC. AND SUBSIDIARIES

    CONSOLIDATED
      STATEMENTS OF CASH FLOWS

    (In
      thousands)

    (Unaudited)

    

    
      	 	 	
              Year
                Ended December 31,

            	 
	 	 	 	
              2005

            	 	 	
              2004

            	 
	
              Cash
                flows from operating activities: 

            	 	 	 	 	 	 	 
	
              Net
                income 

            	 	
              $

            	
              26,074

            	 	
              $

            	
              36,812

            	 
	
                 
                Adjustments to reconcile net income to net cash provided by operating
                activities:

            	 	 	 	 	 	 	 
	
              Provision
                for doubtful accounts 

            	 	 	
              18,874

            	 	 	
              21,313

            	 
	
              Depreciation
                and amortization 

            	 	 	
              43,620

            	 	 	
              22,904

            	 
	           
              Deferred income taxes	 	 	14,938	 	 	19,588	 
	
              Other
                non-cash charges and (credits)

            	 	 	
              378

            	 	 	
              (943

            	) 
	
              Changes
                in assets and liabilities:

            	 	 	 	 	 	 	 
	
              Accounts
                receivable, trade 

            	 	 	
              (2,340

            	
              )

            	 	
              (34,461

            	
              )

            
	
              Prepaid
                expenses and other current assets 

            	 	 	
              3,481

            	 	 	
              (900

            	
              )

            
	
              Other
                assets 

            	 	 	
              (15

            	
              )

            	 	
              60
                

            	 
	
              Accounts
                payable and accrued expenses

            	 	 	
              (19,917

            	
              )

            	 	
              8,143

            	 
	
              Sales,
                use and excise taxes

            	 	 	
              (7,788

            	
              )

            	 	
              (2,342

            	
              )

            
	
              Deferred
                revenue

            	 	 	
              (4,626

            	
              )

            	 	
              4,448

            	 
	
              Accrued
                compensation

            	 	 	
              (274

            	
              )

            	 	
              (3,198

            	
              )

            
	
              Other
                current liabilities

            	 	 	
              (393

            	) 	 	
              3,171

            	
               

            
	
              Net
                cash provided by operating activities

            	 	 	
              72,012

            	 	 	
              74,595

            	 
	 	 	 	 	 	 	 	 
	
              Cash
                flows from investing activities:

            	 	 	 	 	 	 	 
	
              Proceeds
                from sale of fixed assets

            	 	 	
              70

            	 	 	
              --

            	 
	
              Acquisition
                of LDMI, net of cash acquired

            	 	 	
              (26,850

            	
              )

            	 	
              --

            	 
	
              Capital
                expenditures  

            	 	 	
              (45,234

            	
              )

            	 	
              (12,963

            	
              )

            
	
              Capitalized
                software development costs 

            	 	 	
              (3,989

            	
              )

            	 	
              (3,534

            	
              )

            
	
              Net
                cash used in investing activities 

            	 	 	
              (76,003

            	
              )

            	 	
              (16,497

            	
              )

            
	 	 	 	 	 	 	 	 
	
              Cash
                flows from financing activities:

            	 	 	 	 	 	 	 
	
              Payments
                of borrowings

            	 	 	
              --

            	 	 	
              (45,273

            	
              )

            
	
              Payments
                of capital lease obligations

            	 	 	
              (2,230

            	
              )

            	 	
              (1,228

            	
              )

            
	
              Proceeds
                from exercise of options and warrants

            	 	 	
              5,017

            	 	 	
              653

            	 
	
              Net
                cash provided by (used in) financing activities 

            	 	 	
              2,787

            	 	 	
              (45,848

            	
              )

            
	 	 	 	 	 	 	 	 
	
              Net
                change in cash and cash equivalents 

            	 	 	
              (1,204

            	
              )

            	 	
              12,250

            	 
	
              Cash
                and cash equivalents, beginning of period

            	 	 	
              47,492

            	 	 	
              35,242

            	 
	
              Cash
                and cash equivalents, end of period

            	 	
              $

            	
              46,288

            	 	
              $

            	
              47,492

            	 
	 	 	 	 	 	 	 	 

    

     

    

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

     

     

     

    TALK
      AMERICA HOLDINGS, INC. AND SUBSIDIARIES

     

    NON-GAAP
      RECONCILIATION

    

    Non-GAAP
      Financial Measures:

    

    The
      non-GAAP financial measures that we use in this news release are listed below.
      We have included reconciliation of non-GAAP financial measures to the most
      directly comparable GAAP measures in our financial statements. 

    

    Earnings
      Before Interest, Taxes, Depreciation and Amortization (EBITDA) is defined as
      operating income plus depreciation and amortization.

    

    Earnings
      Before Interest, Taxes, Depreciation, Amortization and Option Expense (EBITDA
      before Option Expense) is defined as operating income plus depreciation,
      amortization and option expense.

    

    
      	
              EBITDA

            	 
	
              ($
                in thousands)

            	 	
              Fourth
                Quarter

            	 	 	 	
              Full
                Year

            	 
	 	 	 	
              2005

            	 	 	 	 	 	
              2004

            	 	 	 	 	 	
              2005

            	 	 	 	 	 	
              2004

            	 
	
              Operating
                Income

            	 	
              $

            	
              3,154

            	 	 	 	 	
              $

            	
              16,367

            	 	 	 	 	
              $

            	
              43,312

            	 	 	 	 	
              $

            	
              59,329

            	 
	
              Depreciation
                and Amortization

            	 	 	
              12,886

            	 	 	 	 	 	
              7,009

            	 	 	 	 	 	
              43,620

            	 	 	 	 	 	
              22,904

            	 
	
              EBITDA

            	 	
              $

            	
              16,040

            	 	 	 	 	
              $

            	
              23,376

            	 	 	 	 	
              $

            	
              86,932

            	 	 	 	 	
              $

            	
              82,233

            	 

    

    

    

    

    SOURCE:
      Talk America Holdings, Inc.

    

    #
      #
      #

    Contact
      Info:

     

    Talk
      America 

    Jeff
      Schwartz

    215-862-1097

    jschwartz@talk.com

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00097-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00097-of-00352.parquet"}]]