Document:

Exhibit 10.35

 

Execution Copy

 

COMMON
STOCK PURCHASE AGREEMENT

 

Dated September 25,
2009

 

by and between

 

AFFYMAX,
INC.

 

and

 

AZIMUTH
OPPORTUNITY LTD.

 

 

TABLE OF CONTENTS

 

	
   

  	
  Page

  
	
   

  	
   

  
	
  Article I PURCHASE AND SALE OF COMMON STOCK

  	
  1

  
	
  Section 1.1

  	
  Purchase
  and Sale of Stock

  	
  1

  
	
  Section 1.2

  	
  Effective
  Date; Settlement Dates

  	
  1

  
	
  Section 1.3

  	
  The
  Shares

  	
  2

  
	
  Section 1.4

  	
  Current
  Report; Prospectus Supplement

  	
  2

  
	
   

  	
   

  	
   

  
	
  Article II FIXED REQUEST TERMS; OPTIONAL AMOUNT

  	
  2

  
	
  Section 2.1

  	
  Fixed
  Request Notice

  	
  3

  
	
  Section 2.2

  	
  Fixed
  Requests

  	
  3

  
	
  Section 2.3

  	
  Share
  Calculation

  	
  4

  
	
  Section 2.4

  	
  Limitation
  of Fixed Requests

  	
  4

  
	
  Section 2.5

  	
  Reduction
  of Commitment

  	
  5

  
	
  Section 2.6

  	
  Below
  Threshold Price

  	
  5

  
	
  Section 2.7

  	
  Settlement

  	
  5

  
	
  Section 2.8

  	
  Reduction
  of Pricing Period

  	
  5

  
	
  Section 2.9

  	
  Optional
  Amount

  	
  7

  
	
  Section 2.10

  	
  Calculation
  of Optional Amount Shares

  	
  7

  
	
  Section 2.11

  	
  Exercise
  of Optional Amount

  	
  7

  
	
  Section 2.12

  	
  Aggregate
  Limit

  	
  8

  
	
   

  	
   

  	
   

  
	
  Article III REPRESENTATIONS AND WARRANTIES OF THE
  INVESTOR

  	
  9

  
	
  Section 3.1

  	
  Organization
  and Standing of the Investor

  	
  9

  
	
  Section 3.2

  	
  Authorization
  and Power

  	
  9

  
	
  Section 3.3

  	
  No
  Conflicts

  	
  9

  
	
  Section 3.4

  	
  Information

  	
  10

  
	
   

  	
   

  	
   

  
	
  Article IV REPRESENTATIONS AND WARRANTIES OF THE
  COMPANY

  	
  10

  
	
  Section 4.1

  	
  Organization,
  Good Standing and Power

  	
  10

  
	
  Section 4.2

  	
  Authorization,
  Enforcement

  	
  10

  
	
  Section 4.3

  	
  Capitalization

  	
  11

  
	
  Section 4.4

  	
  Issuance
  of Shares

  	
  11

  
	
  Section 4.5

  	
  No
  Conflicts

  	
  12

  
	
  Section 4.6

  	
  Commission
  Documents, Financial Statements

  	
  12

  
	
  Section 4.7

  	
  Subsidiaries

  	
  14

  
	
  Section 4.8

  	
  No
  Material Adverse Effect

  	
  14

  
	
  Section 4.9

  	
  Indebtedness

  	
  14

  
	
  Section 4.10

  	
  Title
  To Assets

  	
  14

  
	
  Section 4.11

  	
  Actions
  Pending

  	
  14

  
	
  Section 4.12

  	
  Compliance
  With Law

  	
  15

  

 

i

 

	
  Section 4.13

  	
  Certain
  Fees

  	
  15

  
	
  Section 4.14

  	
  Operation
  of Business

  	
  16

  
	
  Section 4.15

  	
  Environmental
  Compliance

  	
  18

  
	
  Section 4.16

  	
  Material
  Agreements

  	
  18

  
	
  Section 4.17

  	
  Transactions
  With Affiliates

  	
  19

  
	
  Section 4.18

  	
  Securities
  Act

  	
  19

  
	
  Section 4.19

  	
  Employees

  	
  21

  
	
  Section 4.20

  	
  Use
  of Proceeds

  	
  21

  
	
  Section 4.21

  	
  Investment
  Company Act Status

  	
  21

  
	
  Section 4.22

  	
  ERISA

  	
  21

  
	
  Section 4.23

  	
  Taxes

  	
  22

  
	
  Section 4.24

  	
  Insurance

  	
  22

  
	
  Section 4.25

  	
  Acknowledgement
  Regarding Investor’s Purchase of Shares

  	
  22

  
	
   

  	
   

  	
   

  
	
  Article V COVENANTS

  	
  22

  
	
  Section 5.1

  	
  Securities
  Compliance; FINRA Filing

  	
  22

  
	
  Section 5.2

  	
  Registration
  and Listing

  	
  23

  
	
  Section 5.3

  	
  Compliance
  with Laws

  	
  24

  
	
  Section 5.4

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

  	
  24

  
	
  Section 5.5

  	
  Limitations
  on Holdings and Issuances

  	
  25

  
	
  Section 5.6

  	
  Other
  Agreements and Other Financings

  	
  25

  
	
  Section 5.7

  	
  Stop
  Orders

  	
  27

  
	
  Section 5.8

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

  	
  27

  
	
  Section 5.9

  	
  Prospectus
  Delivery

  	
  28

  
	
  Section 5.10

  	
  Selling
  Restrictions

  	
  29

  
	
  Section 5.11

  	
  Effective
  Registration Statement

  	
  30

  
	
  Section 5.12

  	
  Non-Public
  Information

  	
  30

  
	
  Section 5.13

  	
  Broker/Dealer

  	
  30

  
	
  Section 5.14

  	
  Disclosure
  Schedule

  	
  30

  
	
   

  	
   

  	
   

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

  	
  31

  
	
  Section 6.1

  	
  Opinion
  of Counsel and Certificate

  	
  31

  
	
  Section 6.2

  	
  Conditions
  Precedent to the Obligation of the Company

  	
  31

  
	
  Section 6.3

  	
  Conditions
  Precedent to the Obligation of the Investor

  	
  32

  
	
   

  	
   

  	
   

  
	
  Article VII TERMINATION

  	
  35

  
	
  Section 7.1

  	
  Term,
  Termination by Mutual Consent

  	
  35

  
	
  Section 7.2

  	
  Other
  Termination

  	
  36

  
	
  Section 7.3

  	
  Effect
  of Termination

  	
  37

  
	
   

  	
   

  	
   

  
	
  Article VIII INDEMNIFICATION

  	
  37

  
	
  Section 8.1

  	
  General
  Indemnity.

  	
  37

  
	
  Section 8.2

  	
  Indemnification
  Procedures

  	
  39

  

 

ii

 

	
  Article IX MISCELLANEOUS

  	
  40

  
	
  Section 9.1

  	
  Fees
  and Expenses.

  	
  40

  
	
  Section 9.2

  	
  Specific
  Enforcement, Consent to Jurisdiction, Waiver of Jury Trial

  	
  41

  
	
  Section 9.3

  	
  Entire
  Agreement; Amendment

  	
  42

  
	
  Section 9.4

  	
  Notices

  	
  42

  
	
  Section 9.5

  	
  Waivers

  	
  43

  
	
  Section 9.6

  	
  Headings

  	
  43

  
	
  Section 9.7

  	
  Successors
  and Assigns

  	
  43

  
	
  Section 9.8

  	
  Governing
  Law

  	
  43

  
	
  Section 9.9

  	
  Survival

  	
  43

  
	
  Section 9.10

  	
  Counterparts

  	
  43

  
	
  Section 9.11

  	
  Publicity

  	
  44

  
	
  Section 9.12

  	
  Severability

  	
  44

  
	
  Section 9.13

  	
  Further
  Assurances

  	
  44

  
	
   

  	
   

  	
   

  
	
  Annex
  A.

  	
  Definitions

  	
   

  
				

 

iii

 

 

COMMON STOCK PURCHASE AGREEMENT

 

This COMMON STOCK PURCHASE
AGREEMENT, made and entered into on this 25th day of
September, 2009 (this “Agreement”), by and between Azimuth Opportunity
Ltd., an international business company incorporated under the laws of the
British Virgin Islands (the “Investor”), and Affymax, Inc., a
corporation organized and existing under the laws of the State of Delaware (the
“Company”). Capitalized terms used but not defined herein shall have the
meanings ascribed to such terms in Annex A hereto.

 

RECITALS

 

WHEREAS, the parties desire that, upon the terms and subject
to the conditions contained herein, the Company may issue and sell to the
Investor and the Investor shall thereupon purchase from the Company up to
$60,000,000 of newly issued shares of the Company’s common stock, $0.001 par
value (“Common Stock”), subject, in all cases, to the Trading Market
Limit; and

 

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

 

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

 

ARTICLE I

PURCHASE AND SALE OF COMMON STOCK

 

Section 1.1                                   Purchase and Sale of Stock. 
Upon the terms and subject to the conditions of this Agreement, during
the Investment Period the Company in its discretion may issue and sell to the
Investor up to $60,000,000 (the “Total Commitment”) of duly authorized,
validly issued, fully paid and non-assessable shares of Common Stock (subject
in all cases to the Trading Market Limit, the “Aggregate Limit”), by (i) the
delivery to the Investor of not more than 36 separate Fixed Request Notices
(unless the Investor and the Company mutually agree that a different number of
Fixed Request Notices may be delivered) as provided in Article II hereof
and (ii) the exercise by the Investor of Optional Amounts, which the
Company may in its discretion grant to the Investor and which may be exercised
by the Investor, in whole or in part, as provided in Article II
hereof.  The aggregate of all Fixed
Request Amounts and Optional Amount Dollar Amounts shall not exceed the
Aggregate Limit.

 

Section 1.2                                   Effective Date; Settlement
Dates.  This Agreement shall become effective and
binding upon delivery of counterpart signature pages of this Agreement
executed by each of the parties hereto, and by delivery of an opinion of
counsel and a certificate of the Company as provided in Section 6.1
hereof, to the offices of Greenberg Traurig, LLP, 200 Park Avenue, New York,
New York 10166, at 4:00 p.m., New York time, on the Effective Date.  In consideration of and in express reliance
upon the representations, warranties and covenants, and otherwise upon the terms
and subject to the conditions, of this Agreement, from and after the Effective
Date and during the Investment Period (i) the Company shall issue and sell
to the 

 

 

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

 

Section 1.3                                   The Shares. 
The Company has or will have duly authorized and reserved for issuance,
and covenants to continue to so reserve once reserved for issuance, free of all
preemptive and other similar rights, at all times during the Investment Period,
the requisite aggregate number of authorized but unissued shares of its Common
Stock to timely effect the issuance, sale and delivery in full to the Investor
of all Shares to be issued in respect of all Fixed Requests and Optional
Amounts under this Agreement, in any case prior to the issuance to the Investor
of such Shares.

 

Section 1.4                                   Current Report; Prospectus
Supplement.  As soon as practicable, but in any event not
later than 5:30 p.m. (New York time) on the first Trading Day immediately
following the Effective Date, the Company shall file with the Commission a
report on Form 8-K relating to the transactions contemplated by, and
describing the material terms and conditions of, this Agreement and disclosing
all information relating to the transactions contemplated hereby required to be
disclosed in the Registration Statement and the Base Prospectus (but which
permissibly has been omitted therefrom in accordance with the Securities Act),
including, without limitation, information required to be disclosed in the
section captioned “Plan of Distribution” in the Base Prospectus (the “Current
Report”).  The Current Report shall
include a copy of this Agreement as an exhibit. 
To the extent applicable, the Current Report shall be incorporated by
reference in the Registration Statement in accordance with the provisions of Rule 430B
under the Securities Act.  The Company
heretofore has provided the Investor a reasonable opportunity to comment on a
draft of such Current Report and has given due consideration to such
comments.  The Company shall file a final
Base Prospectus pursuant to Rule 424(b) under the Securities Act on
or prior to the second Trading Day immediately following the Effective
Date.  Pursuant to Section 5.9 and
subject to the provisions of Section 5.8, on the first Trading Day
immediately following the last Trading Day of each Pricing Period, the Company
shall file with the Commission a Prospectus Supplement pursuant to Rule 424(b) under
the Securities Act disclosing the number of Shares to be issued and sold to the
Investor thereunder, the total purchase price therefor and the net proceeds to
be received by the Company therefrom and, to the extent required by the
Securities Act, identifying the Current Report.

 

ARTICLE II

FIXED REQUEST TERMS; OPTIONAL AMOUNT

 

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

 

2

 

Section 2.1                                   Fixed Request Notice. 
The Company may, from time to time in its sole discretion, no later than
9:30 a.m. (New York time) on the first Trading Day of the Pricing Period,
provide to the Investor a Fixed Request notice, substantially in the form
attached hereto as Exhibit A (the “Fixed Request Notice”),
which Fixed Request Notice shall become effective at 9:30 a.m. (New York
time) on the first Trading Day of the Pricing Period specified in the Fixed
Request Notice; provided; however, that if the Company delivers
the Fixed Request Notice to the Investor later than 9:30 a.m. (New York
time) on a Trading Day, then the first Trading Day of such Pricing Period shall
not be the Trading Day on which the Investor received such Fixed Request
Notice, but shall be the Trading Day thereafter. The Fixed Request Notice shall
specify the Fixed Amount Requested, establish the Threshold Price for such
Fixed Request, designate the first and last Trading Day of the Pricing Period and
specify the Optional Amount, if any, that the Company elects to grant to the
Investor during the Pricing Period and the applicable Threshold Price for such
Optional Amount (the “Optional Amount Threshold Price”). The Threshold
Price and the Optional Amount Threshold Price established by the Company in a
Fixed Request Notice may be the same or different, in the Company’s sole
discretion.  Upon the terms and subject
to the conditions of this Agreement, the Investor is obligated to accept each
Fixed Request Notice prepared and delivered in accordance with the provisions
of this Agreement.

 

Section 2.2                                   Fixed Requests. 
From time to time during the Investment Period, the Company may in its
sole discretion deliver to the Investor a Fixed Request Notice for a specified
Fixed Amount Requested, and the applicable discount price (the “Discount
Price”) shall be determined, in accordance with the price and share amount
parameters as set forth below or such other parameters mutually agreed upon by
the Investor and the Company, and upon the terms and subject to the conditions
of this Agreement, the Investor shall purchase from the Company the Shares
subject to such Fixed Request Notice; provided, however, that (i) if
an ex-dividend date is established by the Trading Market in respect of the
Common Stock on or between the first Trading Day of the applicable Pricing
Period and the applicable Settlement Date, the Discount Price shall be reduced
by the per share dividend amount and (ii) the Company may not deliver any
single Fixed Request Notice for a Fixed Amount Requested in excess of the
lesser of (a) the amount in the applicable Fixed Amount Requested column
below and (b) 2.5% of the Market Capitalization:

 

	
  Threshold
  Price

  	
   

  	
  Fixed Amount Requested

  	
   

  	
  Discount Price

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Equal to or greater
  than $36.00

  	
   

  	
  Not to exceed
  $5,250,000

  	
   

  	
  96.25% of the VWAP

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Equal to or greater
  than $34.00 and less than $36.00

  	
   

  	
  Not to exceed
  $5,000,000

  	
   

  	
  96.20% of the VWAP

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Equal to or greater
  than $32.00 and less than $34.00

  	
   

  	
  Not to exceed $4,750,000

  	
   

  	
  96.15% of the VWAP

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Equal to or greater
  than $30.00 and less than $32.00

  	
   

  	
  Not to exceed
  $4,500,000

  	
   

  	
  96.10% of the VWAP

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Equal to or greater
  than $28.00 and less than $30.00

  	
   

  	
  Not to exceed
  $4,250,000

  	
   

  	
  96.05% of the VWAP

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Equal to or greater
  than $26.00 and less than $28.00

  	
   

  	
  Not to exceed
  $4,000,000

  	
   

  	
  96.00% of the VWAP

  

 

3

 

	
  Equal to or greater
  than $24.00 and less than $26.00

  	
   

  	
  Not to exceed
  $3,750,000

  	
   

  	
  95.80% of the VWAP

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Equal to or greater
  than $22.00 and less than $24.00

  	
   

  	
  Not to exceed
  $3,500,000

  	
   

  	
  95.60% of the VWAP

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Equal to or greater
  than $20.00 and less than $22.00

  	
   

  	
  Not to exceed
  $3,250,000

  	
   

  	
  95.40% of the VWAP

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Equal to or greater
  than $18.00 and less than $20.00

  	
   

  	
  Not to exceed
  $3,000,000

  	
   

  	
  95.20% of the VWAP

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Equal to or greater
  than $16.00 and less than $18.00

  	
   

  	
  Not to exceed
  $2,750,000

  	
   

  	
  95.00% of the VWAP

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Equal to or greater
  than $14.00 and less than $16.00

  	
   

  	
  Not to exceed
  $2,500,000

  	
   

  	
  94.75% of the VWAP

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Equal to or greater
  than $12.00 and less than $14.00

  	
   

  	
  Not to exceed
  $2,250,000

  	
   

  	
  94.50% of the VWAP

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Equal to or greater
  than $10.00 and less than $12.00

  	
   

  	
  Not to exceed
  $2,000,000

  	
   

  	
  94.38% of the VWAP

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Equal to or greater
  than $8.00 and less than $10.00

  	
   

  	
  Not to exceed
  $1,750,000

  	
   

  	
  94.25% of the VWAP

  

 

Anything to the contrary
in this Agreement notwithstanding, at no time shall the Investor be required to
purchase more than $5,250,000 worth of Common Stock in respect of any Pricing
Period (not including Common Stock subject to any Optional Amount).  The date on which the Company delivers any
Fixed Request Notice in accordance with this Section 2.2 hereinafter shall
be referred to as a “Fixed Request Exercise Date”.

 

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

 

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

 

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

 

A = 0.10 (the “Multiplier”),

 

B = the total Fixed Amount Requested, and

 

C = the applicable Discount Price.

 

Section 2.4                                   Limitation of Fixed
Requests.  The Company shall not make more than one
Fixed Request in each Pricing Period. 
Not less than five Trading Days shall elapse between the end of one
Pricing Period and the commencement of any other Pricing Period during the 

 

4

 

Investment Period.  There shall
be permitted a maximum of 36 Fixed Requests during the Investment Period.  Each Fixed Request automatically shall expire
immediately following the last Trading Day of each Pricing Period.

 

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

 

Section 2.6                                   Below Threshold Price. 
If the VWAP on any Trading Day in a Pricing Period is lower than the
Threshold Price, then for each such Trading Day the Fixed Amount Requested
shall be reduced, on a dollar-for-dollar basis, by an amount equal to the
product of (x) the Multiplier and (y) the total Fixed Amount
Requested, and no Shares shall be purchased or sold with respect to such
Trading Day, except as provided below. 
If trading in the Common Stock on NASDAQ (or any other U.S. national
securities exchange on which the Common Stock is then listed) is suspended for
any reason for more than three hours on any Trading Day, the Investor may at
its option deem the price of the Common Stock to be lower than the Threshold
Price for such Trading Day and, for each such Trading Day, the total amount of
the Fixed Amount Requested shall be reduced as provided in the immediately
preceding sentence, and no Shares shall be purchased or sold with respect to
such Trading Day, except as provided below. 
For each Trading Day during a Pricing Period on which the VWAP is lower
(or is deemed to be lower as provided in the immediately preceding sentence)
than the Threshold Price, the Investor may in its sole discretion elect to
purchase  such U.S. dollar amount of Shares
equal to the amount by which the Fixed Amount Requested has been reduced in
accordance with this Section 2.6, at the Threshold Price multiplied by the
applicable percentage determined in accordance with the price and share amount
parameters set forth in Section 2.2. 
The Investor shall inform the Company via facsimile transmission not
later than 8:00 p.m. (New York time) on the last Trading Day of such
Pricing Period as to the number of Shares, if any, the Investor elects to
purchase as provided in this Section 2.6.

 

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

 

Section 2.8                                   Reduction of Pricing
Period.  If during a Pricing Period the Company elects
to reduce the number of Trading Days in such Pricing Period (and thereby amend
its previously delivered Fixed Request Notice), the Company shall so notify the
Investor before 

 

5

 

9:00 a.m. (New York time) on any Trading Day during a Pricing
Period (a “Reduction Notice”) and the last Trading Day of such Pricing
Period shall be the Trading Day immediately preceding the Trading Day on which
the Investor received such Reduction Notice; provided, however,
that if the Company delivers the Reduction Notice later than 9:00 a.m.
(New York time) on a Trading Day during a Pricing Period, then the last Trading
Day of such Pricing Period instead shall be the Trading Day on which the
Investor received such Reduction Notice.

 

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

 

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

 

D = (A/B) x (B – C),
where:

 

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

 

A = the Fixed Amount
Requested,

 

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

 

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

 

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

 

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

 

6

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

7

 

Section 2.12                            Aggregate Limit. 
Notwithstanding anything to the contrary contained in this Agreement, in
no event may the Company issue a Fixed Request Notice or grant an Optional
Amount to the extent that the sale of Shares pursuant thereto and pursuant to
all prior Fixed Request Notices and Optional Amounts issued hereunder, and as
liquidated damages pursuant to Section 9.1(ii), would cause the Company to
sell or the Investor to purchase Shares which in the aggregate are in excess of
the Aggregate Limit.  If the Company
issues a Fixed Request Notice or Optional Amount that otherwise would permit
the Investor to purchase shares of Common Stock which would cause the aggregate
purchases by Investor hereunder to exceed the Aggregate Limit, such Fixed Request
Notice or Optional Amount shall be void ab initio to
the extent of the amount by which the dollar value of shares or number of
shares, as the case may be, of Common Stock otherwise issuable pursuant to such
Fixed Request Notice or Optional Amount together with the dollar value of
shares or number of shares, as the case may be, of all other Common Stock
purchased by the Investor pursuant hereto, or issued as liquidated damages
pursuant to Section 9.1(ii), would exceed the Aggregate Limit.  The Company hereby represents, warrants and
covenants that neither it nor any of its Subsidiaries (i) has effected any
transaction or series of transactions, (ii) is a party to any pending
transaction or series of transactions or (iii) shall enter into any
contract, agreement, agreement-in-principle, arrangement or understanding with
respect to, or shall effect, any Other Financing which, in any of such cases,
may be aggregated with the transactions contemplated by this Agreement for
purposes of determining whether approval of the Company’s stockholders is
required under any bylaw, listed securities maintenance standards or other rules of
the Trading Market; provided, however, that the Company shall be
permitted to take any action referred to in clause (iii) above if (a) the
Company has timely provided the Investor with an Integration Notice as provided
in Section 5.6(ii) hereof and (b) unless the Investor has
previously terminated this Agreement pursuant to Section 7.2, the Company
obtains the requisite stockholder approval prior to the closing of such Other
Financing.

 

At the Company’s sole
discretion, and effective automatically upon delivery of notice by the Company
to the Investor, this Agreement may be amended by the Company from time to time
to reduce the Aggregate Limit by a specified dollar amount and/or number of
shares of Common Stock as shall be determined by the Company in its sole
discretion; provided, however, that any such amendment of this
Agreement (and any such purported amendment) shall be void and of no force and
effect if the effect thereof would restrict, materially delay, conflict with or
impair the ability or right of the Company to perform its obligations under
this Agreement, including, without limitation, the obligation of the Company to
deliver Shares to the Investor in respect of a Fixed Request or Optional Amount
on the applicable Settlement Date.  In
the event the Company shall have elected to reduce the Aggregate Limit as
provided in the immediately preceding sentence, at the Company’s sole discretion,
and effective automatically upon delivery of notice by the Company to the
Investor, the Company may subsequently amend this Agreement to increase the
Aggregate Limit up to $60,000,000; provided, however, that in no
event shall the Company be entitled to issue Fixed Requests and grant Optional
Amounts during the remainder of the Investment Period for an aggregate amount
greater than the amount obtained by subtracting (x) the aggregate of all
Fixed Request Amounts and Optional Amount Dollar Amounts (including any amounts
paid as liquidated damages pursuant to Section 9.1(ii) 

 

8

 

hereunder) covered by all Fixed Requests and Optional
Amounts theretofore issued or granted by the Company in respect of which a
settlement has occurred pursuant to Section 2.7 from (y) $60,000,000,
subject in all cases to the Trading Market Limit.

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE INVESTOR

 

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

 

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

 

Section 3.2                                   Authorization and Power. 
The Investor has the requisite corporate power and authority to enter
into and perform its obligations under this Agreement and to purchase the
Shares in accordance with the terms hereof. 
The execution, delivery and performance of this Agreement by the
Investor and the consummation by it of the transactions contemplated hereby
have been duly authorized by all necessary corporate action, and no further
consent or authorization of the Investor, its Board of Directors or
stockholders is required.  This Agreement
has been duly executed and delivered by the Investor.  This Agreement constitutes a valid and
binding obligation of the Investor enforceable against it in accordance with
its terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation, conservatorship,
receivership, or similar laws relating to, or affecting generally the
enforcement of, creditor’s rights and remedies or by other equitable principles
of general application.

 

Section 3.3                                   No Conflicts. 
The execution, delivery and performance by the Investor of this
Agreement and the consummation by the Investor of the transactions contemplated
herein do not and shall not (i) result in a violation of such Investor’s
charter documents, bylaws or other applicable organizational instruments, (ii) conflict
with, constitute a default (or an event which, with notice or lapse of time or
both, would become a default) under, or give rise to any rights of termination,
amendment, acceleration or cancellation of, any material agreement, mortgage,
deed of trust, indenture, note, bond, license, lease agreement, instrument or
obligation to which the Investor is a party or is bound, (iii) create or
impose any lien, charge or encumbrance on any property of the Investor under
any agreement or any commitment to which the Investor is party or under which
the Investor is bound or under which any of its properties or assets are bound,
or (iv) result in a violation of any federal, state, local or foreign statute,
rule, or regulation, or any order, judgment or decree of any court or
governmental agency applicable to the Investor or by which any of its
properties or assets are bound or affected, except, in the case of clauses
(ii), (iii) and (iv), for such conflicts, defaults, terminations,
amendments, acceleration, cancellations and violations as would not,
individually or in the aggregate, prohibit or otherwise interfere with the
ability of the Investor to enter into and perform its obligations under this Agreement
in any material respect.  The Investor is
not required under federal, state, local or foreign law, rule or
regulation to obtain any consent, authorization or order of, or make any filing
or registration 

 

9

 

with, any court or governmental agency in order for it to execute,
deliver or perform any of its obligations under this Agreement or to purchase
the Shares in accordance with the terms hereof.

 

Section 3.4                                   Information. 
All materials relating to the business, financial condition, management
and operations of the Company and materials relating to the offer and sale of
the Shares which have been requested by the Investor have been furnished or
otherwise made available to the Investor or its advisors (subject to Section 5.12
of this Agreement).  The Investor and its
advisors have been afforded the opportunity to ask questions of representatives
of the Company.  The Investor has sought
such accounting, legal and tax advice as it has considered necessary to make an
informed investment decision with respect to its acquisition of the
Shares.  The Investor understands that it
(and not the Company) shall be responsible for its own tax liabilities that may
arise as a result of this investment or the transactions contemplated by this
Agreement.

 

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

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

 

Section 4.1                                   Organization, Good
Standing and Power.  The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has the requisite corporate power and authority to own,
lease and operate its properties and assets and to conduct its business as it
is now being conducted.  The Company and
each Subsidiary is duly qualified as a foreign corporation to do business and
is in good standing in every jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary, except
for any jurisdiction in which the failure to be so qualified would not have a
Material Adverse Effect.

 

Section 4.2                                   Authorization, Enforcement. 
The Company has the requisite corporate power and authority to enter
into and perform this Agreement and to issue and sell the Shares in accordance
with the terms hereof.  Except for
approvals of the Company’s Board of Directors or a committee thereof as may be
required in connection with any issuance and sale of Shares to the Investor
hereunder (which approvals shall be obtained prior to the delivery of any Fixed
Request Notice), the execution, delivery and performance by the Company of this
Agreement and the consummation by it of the transactions contemplated hereby
have been duly and validly authorized by all necessary corporate action and no
further consent or authorization of the Company or its Board of Directors or
stockholders is required.  This Agreement
has been duly executed and delivered by the Company and constitutes a valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation,
conservatorship, receivership or similar laws relating to, or affecting
generally the

 

10

 

enforcement of, creditor’s
rights and remedies or by other equitable principles of general application.

 

Section 4.3            Capitalization. 
The authorized capital stock of the Company and the shares thereof
issued and outstanding are as set forth in the Commission Documents as of the
dates reflected therein.  All of the
outstanding shares of Common Stock have been duly authorized and validly
issued, and are fully paid and nonassessable. 
Except as set forth in the Commission Documents, as of the Effective
Date, no shares of Common Stock were entitled to preemptive rights or
registration rights and there were no outstanding options, warrants, scrip,
rights to subscribe to, call or commitments of any character whatsoever
relating to, or securities or rights convertible into or exchangeable for, any
shares of capital stock of the Company, other than those issued or granted in
the ordinary course of business pursuant to the Company’s equity incentive
plans.  Except as set forth in the
Commission Documents, there were no contracts, commitments, understandings, or
arrangements by which the Company is or may become bound to issue additional
shares of the capital stock of the Company or options, securities or rights
convertible into or exchangeable for any shares of capital stock of the
Company, other than those issued or granted in the ordinary course of business
pursuant to the Company’s equity incentive plans.  Except for customary transfer restrictions
contained in agreements entered into by the Company to sell restricted
securities or as set forth in the Commission Documents, as of the Effective
Date, the Company was not a party to, and it had no knowledge of, any agreement
restricting the voting or transfer of any shares of the capital stock of the
Company.  Except as set forth in the
Commission Documents, the offer and sale of all capital stock, convertible or
exchangeable securities, rights, warrants or options of the Company issued
prior to the Effective Date complied with all applicable federal and state
securities laws, and no stockholder has any right of rescission or damages or
any “put” or similar right with respect thereto that would have a Material
Adverse Effect.  The Company has
furnished or made available to the Investor via the Commission’s Electronic
Data Gathering, Analysis and Retrieval System (“EDGAR”) true and correct
copies of the Company’s Certificate of Incorporation as in effect on the
Effective Date (the “Charter”), and the Company’s Bylaws as in effect on
the Effective Date (the “Bylaws”), and true and correct copies (redacted
as appropriate) of all executed resolutions of the Company’s Board of Directors
(and committees thereof) relating to the capital stock of the Company (and
transactions in respect thereof) since December 31, 2006 (except with respect
to issuances of shares of capital stock of the Company to directors,
consultants,  or employees of the Company
as fees or compensation that were duly approved by the Company’s Board of
Directors or a committee thereof or other subcommittee established and
authorized by the Board to issue shares or other equity securities under the
Company’s equity incentive plans).

 

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

 

11

 

Section 4.5            No Conflicts. 
The execution, delivery and performance by the Company of this Agreement
and the consummation by the Company of the transactions contemplated herein do
not and shall not (i) result in a violation of any provision of the
Company’s Charter or Bylaws, (ii) conflict with, constitute a default (or
an event which, with notice or lapse of time or both, would become a default)
under, or give rise to any rights of termination, amendment, acceleration or
cancellation of, any material agreement, mortgage, deed of trust, indenture,
note, bond, license, lease agreement, instrument or obligation to which the
Company or any of its Significant Subsidiaries is a party or is bound
(including, without limitation, any listing agreement with the Trading Market),
(iii) create or impose a lien, charge or encumbrance on any property of
the Company or any of its Significant Subsidiaries under any agreement or any
commitment to which the Company or any of its Significant Subsidiaries is a
party or under which the Company or any of its Significant Subsidiaries is
bound or under which any of their respective properties or assets are bound, or
(iv) result in a violation of any federal, state, local or foreign
statute, rule, regulation, order, judgment or decree applicable to the Company
or any of its Subsidiaries or by which any property or asset of the Company or
any of its Subsidiaries are bound or affected, except, in the case of clauses
(ii), (iii) and (iv), for such conflicts, defaults, terminations,
amendments, acceleration, cancellations, liens, charges, encumbrances and
violations as would not, individually or in the aggregate, have a Material
Adverse Effect.  The Company is not
required under federal, state, local or foreign law, rule or regulation to
obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency in order for it to execute,
deliver or perform any of its obligations under this Agreement, or to issue and
sell the Shares to the Investor in accordance with the terms hereof (other than
any filings which may be required to be made by the Company with the
Commission, the Financial Industry Regulatory Authority (the “FINRA”) or
the Trading Market subsequent to the Effective Date, including but not limited
to a Prospectus Supplement under Sections 1.4 and 5.9 of this Agreement, the
FINRA Filing under Section 5.1 of this Agreement and any registration
statement, prospectus or prospectus supplement which has been or may be filed
pursuant to this Agreement).

 

Section 4.6            Commission Documents, Financial
Statements.  (a)  The Common Stock is registered
pursuant to Section 12(b) or 12(g) of the Exchange Act and,
except as disclosed in the Commission Documents, as of the Effective Date the
Company had timely filed (giving effect to permissible extensions in accordance
with Rule 12b-25 under the Exchange Act) all Commission Documents.  The Company has delivered or made available
to the Investor via EDGAR or otherwise true and complete copies of the
Commission Documents filed with the Commission prior to the Effective Date
(including, without limitation, the 2008 Form 10-K) and has delivered or
made available to the Investor via EDGAR or otherwise true and complete copies
of all of the Commission Documents heretofore incorporated by reference in the
Registration Statement and the Prospectus. 
The Company has not provided to the Investor any information which,
according to applicable law, rule or regulation, should have been
disclosed publicly by the Company but which has not been so disclosed, other
than with respect to the transactions contemplated by this Agreement.  As of its filing date, each Commission
Document filed with the Commission and incorporated by reference in the
Registration Statement and the Prospectus (including, without limitation, the
2008 Form 10-K) complied in all material respects 

 

12

 

with the requirements of the Securities Act or the Exchange Act, as
applicable, and other federal, state and local laws, rules and regulations
applicable to it, and, as of its filing date (or, if amended or superseded by a
filing prior to the Effective Date, on the date of such amended or superseded
filing), such Commission Document did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.  Each Commission Document to be filed with the
Commission after the Effective Date and incorporated by reference in the
Registration Statement, the Prospectus and any Prospectus Supplement required
to be filed pursuant to Sections 1.4 and 5.9 hereof during the Investment
Period (including, without limitation, the Current Report), when such document
becomes effective or is filed with the Commission, as the case may be, shall
comply in all material respects with the requirements of the Securities Act or
the Exchange Act, as applicable, and other federal, state and local laws, rules and
regulations applicable to it, and shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.

 

(b)           The financial
statements, together with the related notes and schedules, of the Company
included in the Commission Documents comply as to form in all material respects
with all applicable accounting requirements and the published rules and
regulations of the Commission and all other applicable rules and regulations
with respect thereto as may be subject to any applicable out of period
adjustments disclosed in the Commission Documents.  Such financial statements, together with the
related notes and schedules, have been prepared in accordance with GAAP applied
on a consistent basis during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto or (ii) in
the case of unaudited interim statements, to the extent they may not include
footnotes or may be condensed or summary statements and are subject to normal
year-end audit adjustments), and fairly present in all material respects the
financial condition of the Company and its consolidated Subsidiaries as of the
dates thereof and the results of operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments).

 

(c)           The Company has
timely filed with the Commission and made available to the Investor via EDGAR
or otherwise all certifications and statements required by (x) Rule 13a-14
or Rule 15d-14 under the Exchange Act or (y) 18 U.S.C. Section 1350
(Section 906 of the Sarbanes-Oxley Act of 2002 (“SOXA”)) with
respect to all relevant Commission Documents. 
The Company is in compliance in all material respects with the
provisions of SOXA applicable to it as of the date hereof.  The Company maintains disclosure controls and
procedures required by Rule 13a-15 or Rule 15d-15 under the Exchange
Act; such controls and procedures are effective to ensure that all material
information concerning the Company and its Subsidiaries is made known on a
timely basis to the individuals responsible for the timely and accurate
preparation of the Company’s Commission filings and other public disclosure
documents.  As used in this Section 4.6(c),
the term “file” shall be broadly construed to include any manner in which a
document or information is furnished, supplied or otherwise made available to
the Commission.

 

13

 

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

 

Section 4.7            Subsidiaries. 
The 2008 Form 10-K sets forth each Subsidiary of the Company as of
the Effective Date, showing its jurisdiction of incorporation or organization
and the percentage of the Company’s ownership of the outstanding capital stock
or other ownership interests of such Subsidiary, and the Company does not have
any other Subsidiaries as of the Effective Date.

 

Section
4.8            No
Material Adverse Effect. 
Since December 31, 2008, the Company has not experienced or suffered any
Material Adverse Effect, and there exists no current state of facts, condition
or event which would have a Material Adverse Effect, except (i) as disclosed in
any Commission Documents filed since December 31, 2008 or (ii) continued losses
from operations.

 

Section 4.9            Indebtedness. 
The Company’s Quarterly Report on Form 10-Q for its fiscal quarter
ended June 30, 2009 sets forth, as of June 30, 2009, all outstanding
secured and unsecured Indebtedness of the Company or any Subsidiary, or for
which the Company or any Subsidiary has commitments through such date. For the
purposes of this Agreement, “Indebtedness” shall mean (a) any
liabilities for borrowed money or amounts owed in excess of $10,000,000 (other
than trade accounts payable incurred in the ordinary course of business), (b) all
guaranties, endorsements, indemnities and other contingent obligations in
respect of Indebtedness of others in excess of $10,000,000, whether or not the
same are or should be reflected in the Company’s balance sheet (or the notes
thereto), except guaranties by endorsement of negotiable instruments for
deposit or collection or similar transactions in the ordinary course of
business; and (c) the present value of any lease payments in excess of
$10,000,000 due under leases required to be capitalized in accordance with
GAAP.  There is no existing or continuing
default or event of default in respect of any Indebtedness of the Company or
any of its Subsidiaries.

 

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

 

Section 4.11         Actions Pending. 
There is no action, suit, claim, investigation or proceeding pending, or
to the knowledge of the Company threatened, against the Company or any
Subsidiary which questions the validity of this Agreement or the transactions
contemplated hereby or any action taken or to be taken pursuant hereto or thereto.  Except as set forth in the 

 

14

 

Commission Documents, there is no action, suit, claim, investigation or
proceeding pending, or to the knowledge of the Company threatened, against or
involving the Company, any Subsidiary or any of their respective properties or
assets, or involving any officers or directors of the Company or any of its
Subsidiaries, including, without limitation, any securities class action
lawsuit or stockholder derivative lawsuit, in each case which, if determined
adversely to the Company, its Subsidiary or any officer or director of the
Company or its Subsidiaries, would have a Material Adverse Effect. With respect
to each of those certain claims, disputes, investigations, arbitrations,
actions or proceedings under the caption “Item 1. Legal Proceedings” in Part II
of the Company’s Quarterly Report on Form 10-Q for its fiscal quarter
ended June 30, 2009, there has been no event or change required to be
disclosed in a filing under the Exchange Act that has not been so disclosed.

 

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

 

Section 4.13         Certain Fees. 
Except for the placement fee payable by the Company to Reedland Capital
Partners, an Institutional Division of Financial West Group, Member FINRA/SIPC
(“Reedland”), which shall be set forth in a separate engagement letter
between the Company and Reedland (a true and complete fully executed copy of
which has heretofore been provided to the Investor), no brokers, finders or
financial advisory fees or commissions shall be payable by the Company or any
Subsidiary (or any of their respective affiliates) with respect to the
transactions contemplated by this Agreement. Except as set forth in this Section 4.13
or as disclosed in Section 4.13 of the Disclosure Schedule or in the
Registration Statement, the Prospectus or the Current Report, there are no
contracts, agreements or understandings between the Company and any person that
would give rise to a valid claim against the Company, the Investor or the
Broker-Dealer for a brokerage commission, finder’s fee or other like payment in
connection with the transactions contemplated by this Agreement or, to the
Company’s knowledge, any arrangements, agreements, understandings, payments or
issuance with respect to the Company or any of its officers, directors,
stockholders, partners, employees, Subsidiaries or affiliates that may affect
the FINRA’s determination of the amount of compensation to be received by any
FINRA member (including, without limitation, those FINRA members set forth on
Schedule 4.13 of the Disclosure Schedule) or person associated with any FINRA
member in connection with the transactions contemplated by this Agreement.  Except as set forth in this Section 4.13
or as disclosed in Section 4.13 of the Disclosure Schedule or in the
Registration Statement, the Prospectus or the Current Report, no “items of
value” (within the meaning of Rule 2710 of the NASD Conduct Rules) have
been received, and no arrangements have been entered into for the future
receipt of any items of value, from the Company or any of its officers,
directors, stockholders, partners, employees, Subsidiaries or affiliates by any
FINRA member (including, without limitation, those FINRA members set forth on
Schedule 4.13 of the Disclosure Schedule) or person associated with any FINRA
member, during the period commencing 180 days immediately preceding the
Effective Date and ending on the date this 

 

15

 

Agreement is terminated in accordance with Article VII, that may
affect the FINRA’s determination of the amount of compensation to be received
by any FINRA member or person associated with any FINRA member in connection
with the transactions contemplated by this Agreement.

 

Section 4.14         Operation of Business.  (a) 
The Company or one or more of its Subsidiaries possesses such permits,
licenses, approvals, consents and other authorizations (including licenses,
accreditation and other similar documentation or approvals of any local health
departments) (collectively, “Governmental Licenses”) issued by the
appropriate federal, state, local or foreign regulatory agencies or bodies, including,
without limitation, the United States Food and Drug Administration (“FDA”),
necessary to conduct the business now operated by it, except where the failure
to possess such Governmental Licenses, individually or in the aggregate, would
not have a Material Adverse Effect or as otherwise disclosed in the Commission
Documents.  The Company and its
Subsidiaries are in compliance with the terms and conditions of all such
Governmental Licenses and all applicable FDA rules and regulations,
guidelines and policies, and all applicable rules and regulations,
guidelines and policies of any governmental authority exercising authority
comparable to that of the FDA (including any non-governmental authority whose
approval or authorization is required under foreign law comparable to that
administered by the FDA), except where the failure to so comply, individually
or in the aggregate, would not have a Material Adverse Effect or as otherwise
disclosed in the Commission Documents.. 
All of the Governmental Licenses are valid and in full force and effect,
except where the invalidity of such Governmental Licenses or the failure of
such Governmental Licenses to be in full force and effect, individually or in
the aggregate, would not have a Material Adverse Effect or as otherwise
disclosed in the Commission Documents.. 
As to each product that is subject to FDA regulation or similar legal
provisions in any foreign jurisdiction that is developed, manufactured, tested,
packaged, labeled, marketed, sold, distributed and/or commercialized by the
Company or any of its Subsidiaries, each such product is being developed,
manufactured, tested, packaged, labeled, marketed, sold, distributed and/or
commercialized in compliance with all applicable requirements of the FDA (and
any non-governmental authority whose approval or authorization is required
under foreign law comparable to that administered by the FDA), including, but
not limited to, those relating to investigational use, investigational device
exemption, premarket notification, premarket approval, good clinical practices,
good manufacturing practices, record keeping, filing of reports, and patient
privacy and medical record security, except where such non-compliance,
individually or in the aggregate, would not have a Material Adverse Effect or
as otherwise disclosed in the Commission Documents..  As to each product or product candidate of
the Company or any of its Subsidiaries subject to FDA regulation or similar
legal provision in any foreign jurisdiction, all manufacturing facilities of
the Company and its Subsidiaries are operated in compliance with the FDA’s
Quality System Regulation requirements at 21 C.F.R. Part 820, as
applicable, except where such non-compliance, individually or in the aggregate,
would not have a Material Adverse Effect. 
Except as set forth in the Commission Documents or the Registration
Statement, neither the Company nor any of its Subsidiaries has received any
notice of proceedings relating to the revocation or modification of any such
Governmental Licenses or relating to a potential violation of, failure to
comply with, or request to produce additional information under, any FDA rules 

 

16

 

and regulations, guidelines or policies which, if the subject of any unfavorable
decision, ruling or finding, individually or in the aggregate, would have a
Material Adverse Effect.  Except as set
forth in the Commission Documents or the Registration Statement, neither the
Company nor any of its Subsidiaries has received any correspondence, notice or
request from the FDA, including, without limitation, notice that any one or
more products or product candidates of the Company or any of its Subsidiaries
failed to receive approval from the FDA for use for any one or more indications.  This Section 4.14 does not relate to
environmental matters, such items being the subject of Section 4.15.

 

(b)           The Company or one
or more of its Subsidiaries owns or possesses adequate rights to use patents,
patent rights, licenses, inventions, copyrights, know-how (including trade
secrets and other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures), trademarks, service marks, trade names,
trade dress, logos, copyrights and other intellectual property, including,
without limitation, all of the intellectual property described in the
Commission Documents as being owned or licensed by the Company (collectively, “Intellectual
Property”), necessary to carry on the business now operated by it, except
where the failure to own, license or have such rights would not, individually
or in the aggregate, have a Material Adverse Effect.  Except as set forth in the Commission
Documents, there are no actions, suits or judicial proceedings pending, or to
the Company’s knowledge threatened, relating to patents or proprietary
information to which the Company or any of its Subsidiaries is a party or of
which any property of the Company or any of its Subsidiaries is subject, and
neither the Company nor any of its Subsidiaries has received any notice or is
otherwise aware of any infringement of or conflict with asserted rights of
others with respect to any Intellectual Property or of any facts or
circumstances which could render any Intellectual Property invalid or
inadequate to protect the interest of the Company and its Subsidiaries therein,
and which infringement or conflict (if the subject of any unfavorable decision,
ruling or finding) or invalidity or inadequacy, individually or in the
aggregate, would have a Material Adverse Effect.

 

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

 

17

 

of its Subsidiaries while conducted by or on
behalf of the Company or any of its Subsidiaries, were conducted in compliance
with all applicable federal, state, local and foreign laws, and the regulations
and requirements of any applicable governmental entity, including, but not
limited to, FDA good clinical practice and good laboratory practice requirements
(or the foreign equivalent requirements) except as set forth in the Commission
Documents or as would not likely result in a Material Adverse Effect .

 

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

 

Section 4.16         Material Agreements. 
Except as set forth in the Commission Documents, neither the Company nor
any Subsidiary of the Company is a party to any written or oral contract,
instrument, agreement commitment, obligation, plan or arrangement, a copy of
which would be required to be filed with the Commission as an exhibit to an
annual report on Form 10-K (collectively, “Material Agreements”).
Except as set forth in the Commission Documents, the Company and each of its
Subsidiaries have performed in all material respects all the obligations
required to be performed by them under the Material Agreements, have received
no notice of default or an event of default by the Company or any of its
Subsidiaries thereunder and are not aware of any basis for the assertion
thereof, and neither the Company or any of its Subsidiaries nor, to the
knowledge of the Company, any other contracting party thereto are in default
under any Material Agreement now in effect, the result of which would have a
Material Adverse Effect. Except as set forth in the Commission Documents, each
of the Material 

 

18

 

Agreements is in full force and effect, and constitutes a legal, valid
and binding obligation enforceable in accordance with its terms against the
Company and/or any of its Subsidiaries and, to the knowledge of the Company,
each other contracting party thereto, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation, conservatorship, receivership or similar laws relating to, or
affecting generally the enforcement of, creditor’s rights and remedies or by
other equitable principles of general application.

 

Section 4.17         Transactions With Affiliates. 
Except as set forth in the Commission Documents, there are no loans,
leases, agreements, contracts, royalty agreements, management contracts,
service arrangements or other continuing transactions exceeding $120,000
between (a) the Company or any Subsidiary, on the one hand, and (b) any
person or entity who would be covered by Item 404(a) of Regulation S-K, on
the other hand.  Except as disclosed in
the Commission Documents, there are no outstanding amounts payable to or
receivable from, or advances by the Company or any of its Subsidiaries to, and
neither the Company nor any of its Subsidiaries is otherwise a creditor of or
debtor to, any beneficial owner of more than 5% of the outstanding shares of
Common Stock, or any director, employee or affiliate of the Company or any of
its Subsidiaries, other than (i) reimbursement for reasonable expenses
incurred on behalf of the Company or any of its Subsidiaries or (ii) as
part of the normal and customary terms of such persons’ employment or service
as a director with the Company or any of its Subsidiaries.

 

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

 

(i)            The Company has
prepared and filed with the Commission in accordance with the provisions of the
Securities Act the Registration Statement, including a base prospectus relating
to the Shares.  The Registration
Statement was declared effective by order of the Commission on May 2,
2008.  As of the date hereof, no stop
order suspending the effectiveness of the Registration Statement has been
issued by the Commission or is continuing in effect under the Securities Act
and no proceedings therefor are pending before or, to the Company’s knowledge,
threatened by the Commission.  No order
preventing or suspending the use of the Prospectus or any Permitted Free
Writing Prospectus has been issued by the Commission.

 

(ii)           The Company
satisfies all of the requirements for the use of Form S-3 under the
Securities Act for the offering and sale of the Securities contemplated by this
Agreement and the Warrants (without reliance on General Instruction I.B.6. of Form S-3).
The Commission has not notified the Company of any objection to the use of the
form of the Registration Statement pursuant to Rule 401(g)(1) under
the Securities Act. The Registration Statement complied in all material
respects on the date on which it was declared effective by the Commission, and
will comply in all material respects at each deemed effective date with respect
to the Investor pursuant to Rule 430B(f)(2) of the Securities Act,
with the requirements of the Securities Act, and the Registration Statement
(including the documents incorporated by reference therein) did not on the date
it was declared effective by the Commission, and shall not at each deemed
effective date with respect to the Investor pursuant to Rule 430B(f)(2) of
the Securities Act, contain an untrue statement of a material fact or omit to
state a material fact 

 

19

 

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

 

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

 

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

 

20

 

with information relating to the Investor furnished to
the Company in writing by or on behalf of the Investor expressly for use
therein.

 

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

 

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

 

Section 4.20         Use of Proceeds. 
The proceeds from the sale of the Shares shall be used by the Company
and its Subsidiaries as set forth in the Base Prospectus and any Prospectus
Supplement filed pursuant to Sections 1.4 and 5.9.

 

Section 4.21         Investment Company Act Status. 
The Company is not, and as a result of the consummation of the
transactions contemplated by this Agreement and the application of the proceeds
from the sale of the Shares as set forth in the Base Prospectus and any
Prospectus Supplement shall not be, an “investment company” or a company
“controlled” by an “investment company,” within the meaning of the Investment
Company Act of 1940, as amended.

 

Section 4.22         ERISA. 
No liability to the Pension Benefit Guaranty Corporation has been
incurred with respect to any Plan by the Company or any of its Subsidiaries
which has had or would have a Material Adverse Effect.  No “prohibited transaction” (as defined in
Section 406 of ERISA or Section 4975 of the Code) or “accumulated
funding deficiency” (as defined in Section 203 of ERISA) or any of the
events set forth in Section 4043(b) of ERISA has occurred with
respect to any Plan which has had or would have a Material Adverse Effect, and
the execution and delivery of this Agreement and the issuance and sale of the
Shares hereunder shall not result in any of the foregoing events.  Each Plan is in compliance in all material
respects with applicable law, including ERISA and the Code; the Company has not
incurred and does not expect to incur liability under Title IV of ERISA with
respect to the termination of, or withdrawal from, any Plan; and each Plan for
which the Company would have any liability that is intended to be qualified
under Section 401(a) of the Code is so qualified in all material
respects and nothing has occurred, whether by action or failure to act, which
would cause the loss of such qualifications. 
As used in this Section 4.22, the term “Plan” shall mean an
“employee pension benefit plan” (as defined in Section 3 of ERISA)
which is or has been established or maintained, or to which contributions are
or have been made, by the Company or

 

21

 

any Subsidiary or by any trade or business, whether or
not incorporated, which, together with the Company or any Subsidiary, is under
common control, as described in Section 414(b) or (c) of the
Code.

 

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

 

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

 

Section 4.25         Acknowledgement Regarding Investor’s
Purchase of Shares.  The Company acknowledges and
agrees that the Investor is acting solely in the capacity of an arm’s length
purchaser with respect to this Agreement and the transactions contemplated
hereunder. The Company further acknowledges that the Investor is not acting as
a financial advisor or fiduciary of the Company (or in any similar capacity)
with respect to this Agreement and the transactions contemplated hereunder, and
any advice given by the Investor or any of its representatives or agents in connection
with this Agreement and the transactions contemplated hereunder is merely
incidental to the Investor’s purchase of the Shares.

 

ARTICLE
V

COVENANTS

 

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

 

Section 5.1            Securities Compliance;
FINRA Filing.

 

(i)            The Company shall notify the Commission
and the Trading Market, as applicable, in accordance with their respective
rules and regulations, of the transactions contemplated by this Agreement,
and shall take all necessary action, undertake all proceedings and obtain all
registrations, permits, consents and approvals for the legal and valid issuance
of the Shares to the Investor in accordance with the terms of this Agreement.

 

(ii)           As promptly as practicable, the Company
shall (with the Investor’s assistance) prepare and, no later than 24 hours
after the Effective Date, file with the FINRA’s Corporate Financing Department
via CobraDesk all documents and information required to be

 

22

 

filed with the FINRA pursuant to NASD Conduct
Rule 2710 of the FINRA with regard to the transactions contemplated by
this Agreement (the “FINRA Filing”). 
In connection therewith, on the Effective Date, the Company shall pay to
the FINRA by wire transfer of immediately available funds the applicable filing
fee with respect to the FINRA Filing, and the Company shall be solely
responsible for payment of such fee.  The
parties hereby agree to provide each other all requisite information and
otherwise to assist each other in a timely fashion in order for the Company to
complete the preparation and submission of the FINRA Filing in accordance with
this Section 5.1(ii) and to promptly respond to any inquiries or
requests from FINRA or its staff.  Each
party hereto shall (A) promptly notify the other party of any
communication to that party or its affiliates from the FINRA, including,
without limitation, any request from the FINRA or its staff for amendments or
supplements to or additional information in respect of the FINRA Filing and
permit the other party to review in advance any proposed written communication
to the FINRA and (B) furnish the other party with copies of all written
correspondence, filings and communications between them and their affiliates
and their respective representatives and advisors, on the one hand, and the
FINRA or members of its staff, on the other hand, with respect to this
Agreement or the transactions contemplated hereby.  Each of the parties hereto agrees to use its
commercially reasonable efforts to take, or cause to be taken, all actions, and
to do, or cause to be done, and to assist and cooperate with the other party in
doing, all things necessary, proper or advisable to obtain as promptly as
practicable (but in no event later than 60 days after the Effective Date)
written confirmation from the FINRA to the effect that the FINRA’s Corporate
Financing Department has determined not to raise any objection with respect to
the fairness and reasonableness of the terms of this Agreement or the
transactions contemplated hereby; provided, however, that the
Investor shall have no responsibility for the compliance or non-compliance of
any Broker-Dealer with NASD Rule 2710 and shall not be required to
(x) disclose to the FINRA or to any other governmental agency, person or
entity any business, financial or other information that the Investor deems, in
its sole and absolute discretion, to be proprietary, confidential or otherwise
sensitive information, (y) amend, modify or change any of the terms or
conditions of this Agreement or (z) otherwise take any other action,
including, without limitation, modifying the Discount Price thresholds referred
to in Section 2.2 or the amount of fees and commissions to be paid to the
Broker-Dealer in connection with the transactions contemplated by this
Agreement, in each case, in such a manner that would, in the Investor’s sole
and absolute discretion, render the terms and conditions of this Agreement and
the transactions contemplated hereby to be no longer advisable to the
Investor.  Notwithstanding anything to
the contrary contained in this Agreement, the Company shall not be permitted to
deliver any Fixed Request Notice to the Investor, and the Investor shall not be
obligated to purchase any Shares pursuant to a Fixed Request Notice, unless and
until the parties hereto shall have received written confirmation from the
FINRA to the effect that the FINRA’s Corporate Financing Department has
determined not to raise any objection with respect to the fairness and
reasonableness of the terms of this Agreement or the transactions contemplated
hereby.

 

Section 5.2            Registration and Listing. 
The Company shall take all action necessary to cause the Common Stock to
continue to be registered as a class of securities under Sections 12(b) or
12(g) of the Exchange Act, shall comply with its reporting and filing
obligations under the Exchange Act, and shall not take any action or file any
document (whether or not permitted by

 

23

 

the Securities Act) to terminate or suspend such
registration or to terminate or suspend its reporting and filing obligations
under the Exchange Act or Securities Act, except as permitted herein. The
Company shall take all action necessary to continue the listing and trading of
its Common Stock and the listing of the Shares purchased by Investor hereunder
on the Trading Market, and shall comply with the Company’s reporting, filing
and other obligations under the bylaws, listed securities maintenance standards
and other rules of the Trading Market.

 

Section 5.3            Compliance with Laws.

 

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

 

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

 

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

 

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

 

24

 

(ii)           Neither the Company, nor any of its Subsidiaries, nor
to the knowledge of the Company, any of their respective directors, officers,
agents, employees or any other persons acting on their behalf shall, in
connection with the operation of the Company’s and its Subsidiaries’ respective
businesses, (a) use any corporate funds for unlawful contributions,
payments, gifts or entertainment or to make any unlawful expenditures relating
to political activity to government officials, candidates or members of
political parties or organizations, (b) pay, accept or receive any
unlawful contributions, payments, expenditures or gifts, or (c) violate or
operate in noncompliance with any export restrictions, anti-boycott
regulations, embargo regulations or other applicable domestic or foreign laws
and regulations, except for such violations or noncompliant operations that
would not likely result in a Material Adverse Effect.

 

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

 

Section 5.5            Limitations on Holdings
and Issuances.  The Company shall not be obligated to issue
and the Investor shall not be obligated to purchase any shares of Common Stock
which, when aggregated with all other shares of Common Stock then owned beneficially
by the Investor, would result in the beneficial ownership by the Investor of
more than 9.9% of the then issued and outstanding shares of Common Stock.

 

Section 5.6            Other Agreements and
Other Financings.

 

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

 

(ii)           The Company shall notify the Investor, within 48
hours, if it enters into any agreement, plan, arrangement or transaction with a
third party, the principal purpose of which is to obtain during a Pricing
Period an Other Financing not constituting an Acceptable Financing (an “Other
Financing Notice”); provided, however, that the Company shall
notify the Investor promptly (but in no event later than 24 hours) (an “Integration
Notice”) if it enters into any agreement, plan, arrangement or transaction
with a third party, the principal purpose of which is to obtain at any time
during the Investment Period an Other Financing that may be aggregated with the
transactions contemplated by this Agreement for purposes of determining whether
approval of the Company’s stockholders is required under any bylaw, listed securities
maintenance standards or other rules of the Trading Market and, if
required under applicable law, including, without limitation, Regulation FD
promulgated by the Commission, or under the applicable rules and
regulations of the Trading Market, the Company shall simultaneously

 

25

 

publicly disclose such information in accordance with
Regulation FD and the applicable rules and regulations of the Trading
Market. For purposes of this Section 5.6(ii), any press release issued by,
or Commission Document filed by, the Company shall constitute sufficient
notice, provided that it is issued or filed, as the case may be, within the
time requirements set forth in the first sentence of this Section 5.6(ii) for
an Other Financing Notice or an Integration Notice, as applicable. For greater
certainty, the entry by the Company into any agreement, plan, arrangement or
transaction with a third party to obtain an Other Financing (or any other
financing) outside of a Pricing Period shall not trigger any requirement for
the Company to deliver an Other Financing Notice (it being acknowledged and
agreed that nothing contained in this Section 5.6(ii) shall limit or
modify in any respect the Company’s obligations in Section 7.2). During
any Pricing Period in which the Company is required to provide an Other
Financing Notice pursuant to the first sentence of this Section 5.6(ii),
the Investor shall (i) have the option to purchase the Shares subject to
the Fixed Request at (x) the price therefor in accordance with the terms
of this Agreement or (y) the third party’s per share purchase price in
connection with the Other Financing, net of such third party’s discounts,
Warrant Value and fees, or (ii) the Investor may elect to not purchase any
Shares subject to the Fixed Request for that Pricing Period. An “Other
Financing” shall mean (x) the issuance of Common Stock for a purchase
price less than, or the issuance of securities convertible into or exchangeable
for Common Stock at an exercise or conversion price (as the case may be) less
than, the then Current Market Price of the Common Stock (in each case, after
all fees, discounts, Warrant Value and commissions associated with the
transaction) (a “Below Market Offering”); (y) the implementation by
the Company of any mechanism in respect of any securities convertible into or
exchangeable for Common Stock for the reset of the purchase price of the Common
Stock to below the then Current Market Price of the Common Stock (including,
without limitation, any antidilution or similar adjustment provisions in
respect of any Company securities, but specifically excluding customary
adjustments for stock splits, stock dividends, stock combinations and similar
events); or (z) the issuance of options, warrants or similar rights of
subscription, in each case above not constituting an Acceptable Financing. “Acceptable
Financing” shall mean the issuance by the Company of: (1) shares of
Common Stock or securities convertible into or exchangeable for Common Stock
other than in connection with a Below Market Offering; (2) shares of
Common Stock or securities convertible into or exchangeable for Common Stock in
connection with awards under the Company’s benefit and equity plans and
arrangements or pursuant to consulting or other vendor agreements and the
issuance of shares of Common Stock upon the conversion, exercise or exchange
thereof; (3) shares of Common Stock issuable upon the conversion or
exchange of equity awards or exercisable, convertible or exchangeable
securities outstanding as of the Effective Date; (4) shares of Common
Stock or securities convertible into or exchangeable for Common Stock or
similar rights to subscribe for the purchase of shares of Common Stock in
connection with technology sharing, licensing, research and joint development
agreements (or amendments thereto) with third parties, and the issuance of
shares of Common Stock upon the conversion, exercise or exchange thereof; and
(5) shares of Common Stock and/or warrants or similar rights to subscribe
for the purchase of shares of Common Stock issued in connection with equipment
financings and/or real property leasing arrangements and the issuance of shares
of Common Stock upon the exercise thereof.

 

26

 

Section 5.7            Stop Orders. 
The Company shall advise the Investor promptly (but in no event later
than 24 hours) and shall confirm such advice in writing: (i) of the
Company’s receipt of notice of any request by the Commission for amendment of
or a supplement to the Registration Statement, the Prospectus, any Permitted
Free Writing Prospectus or for any additional information; (ii) of the
Company’s receipt of notice of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or prohibiting or
suspending the use of the Prospectus or any Prospectus Supplement, or of the
suspension of qualification of the Shares for offering or sale in any
jurisdiction, or the initiation or contemplated initiation of any proceeding
for such purpose; and (iii) of the Company becoming aware of the happening
of any event, which makes any statement of a material fact made in the
Registration Statement, the Prospectus or any Permitted Free Writing Prospectus
untrue or which requires the making of any additions to or changes to the
statements then made in the Registration Statement, the Prospectus or any
Permitted Free Writing Prospectus in order to state a material fact required by
the Securities Act to be stated therein or necessary in order to make the
statements then made therein (in the case of the Prospectus, in light of the
circumstances under which they were made) not misleading, or of the necessity
to amend the Registration Statement or supplement the Prospectus or any
Permitted Free Writing Prospectus to comply with the Securities Act or any
other law. The Company shall not be required to disclose to the Investor the
substance or specific reasons of any of the events set forth in clauses
(i) through (iii) of the immediately preceding sentence, but rather,
shall only be required to disclose that the event has occurred.  The Company shall not issue any Fixed Request
during the continuation of any of the foregoing events. If at any time the
Commission shall issue any stop order suspending the effectiveness of the
Registration Statement or prohibiting or suspending the use of the Prospectus
or any Prospectus Supplement, the Company shall use commercially reasonable
efforts to obtain the withdrawal of such order at the earliest possible time.
The Company shall also advise the Investor promptly (but in no event later than
24 hours) and shall confirm such advice in writing of the Company becoming
aware of the happening of any event, which makes any statement made in the
FINRA Filing untrue or which requires the making of any additions to or changes
to the statements then made in the FINRA Filing in order to comply with NASD
Conduct Rule 2710 of the FINRA.

 

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

 

(i)            Except as provided in this Agreement and
other than periodic reports required to be filed pursuant to the Exchange Act,
the Company shall not file with the Commission any amendment to the
Registration Statement that relates to the Investor, the Agreement or the
transactions contemplated hereby or file with the Commission any Prospectus
Supplement that relates to the Investor, this Agreement or the transactions
contemplated hereby with respect to which (a) the Investor shall not
previously have been advised, (b) the Company shall not have given due
consideration to any comments thereon received from the Investor or its
counsel, or (c) the Investor shall reasonably object after being so
advised, unless it is necessary to amend the Registration Statement or make any
supplement to the Prospectus to comply with the Securities Act or any other
applicable law or regulation, in which case the Company shall

 

27

 

immediately so inform the Investor, the Investor shall
be provided with a reasonable opportunity to review and comment upon any
disclosure relating to the Investor and the Company shall expeditiously furnish
to the Investor an electronic copy thereof. In addition, for so long as, in the
reasonable opinion of counsel for the Investor, the Prospectus (or in lieu
thereof, the notice referred to in Rule 173(a) under the Securities
Act) is required to be delivered in connection with any purchase of Shares by
the Investor, the Company shall not file any Prospectus Supplement with respect
to the Shares without delivering or making available a copy of such Prospectus
Supplement, together with the Base Prospectus, to the Investor promptly.

 

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

 

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

 

28

 

Prospectus or any Permitted Free Writing Prospectus to
comply with the Securities Act or any other applicable law or regulation, the
Company shall forthwith prepare and, subject to Section 5.8 above, file
with the Commission an appropriate amendment to the Registration Statement or
Prospectus Supplement to the Prospectus (or supplement to the Permitted Free
Writing Prospectus) and shall expeditiously furnish or make available to the
Investor an electronic copy thereof.

 

Section 5.10         Selling Restrictions.

 

(i)            The Investor covenants that from and after the date
hereof through and including the 90th day next following the termination of this
Agreement (the “Restricted Period”), neither the Investor nor any of its
affiliates (within the meaning of the Exchange Act) nor any entity managed or
controlled by the Investor shall, directly or indirectly, sell any securities
of the Company, except the Shares that it owns or has the right to purchase as
provided in a Fixed Request Notice. 
During the Restricted Period, neither the Investor or any of its
affiliates nor any entity managed or controlled by the Investor shall sell any
shares of Common Stock of the Company it does not “own” or have the
unconditional right to receive under the terms of this Agreement (within the
meaning of Rule 200 of Regulation SHO promulgated by the Commission under
the Exchange Act), including Shares in any account of the Investor or in any
account directly or indirectly managed or controlled by the Investor or any of
its affiliates or any entity managed or controlled by the Investor.  Without limiting the generality of the
foregoing, prior to and during the Restricted Period, neither the Investor nor
any of its affiliates nor any entity managed or controlled by the Investor or
any of its affiliates shall enter into a short position with respect to shares
of Common Stock of the Company, including in any account of the Investor’s or
in any account directly or indirectly managed or controlled by the Investor or
any of its affiliates or any entity managed or controlled by the Investor,
except that the Investor may sell Shares that it is obligated to purchase under
a pending Fixed Request Notice but has not yet taken possession of so long as
the Investor (or the Broker-Dealer, as applicable) covers any such sales with
the Shares purchased pursuant to such Fixed Request Notice; provided, however,
that the Investor (or the Broker-Dealer, as applicable) shall not be required
to cover any such sales with the Shares purchased pursuant to such Fixed
Request Notice if (a) the Fixed Request is terminated by mutual agreement
of the Company and the Investor and, as a result of such termination, no Shares
are delivered to the Investor under this Agreement or (b) the Company
otherwise fails to deliver such Shares to the Investor on the applicable
Settlement Date upon the terms and subject to the provisions of this
Agreement.  Prior to and during the
Restricted Period, the Investor shall not grant any option to purchase or
acquire any right to dispose or otherwise dispose for value of any shares of
Common Stock or any securities convertible into or exercisable or exchangeable
for, or warrants to purchase, any shares of Common Stock, or enter into any
swap, hedge or other agreement that transfers, in whole or in part, the
economic risk of ownership of the Common Stock, except for such sales expressly
permitted by this Section 5.10(i).

 

(ii)           In addition to the foregoing, in connection with any
sale of the Company’s securities (including any sale permitted by paragraph
(i) above), the Investor shall comply in all

 

29

 

respects with all applicable laws, rules, regulations and orders, including,
without limitation, the requirements of the Securities Act and the Exchange
Act.

 

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

 

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

 

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

 

Section 5.14         Disclosure Schedule.

 

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

 

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

 

30

 

ARTICLE VI

OPINION OF COUNSEL AND CERTIFICATE; CONDITIONS TO THE SALE AND

PURCHASE OF THE SHARES

 

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

 

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

 

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

 

(ii)                                  Registration Statement. 
The Registration Statement is effective and neither the Company nor the
Investor shall have received notice that the Commission has issued or intends
to issue a stop order with respect to the Registration Statement.  The Company shall have a maximum dollar amount
certain of Shares registered under the Registration Statement which are in an
amount (A) as of the Effective Date, not less than the Total Commitment
and (B) as of the applicable Fixed Request Exercise Date, not less than
the maximum dollar amount worth of Shares issuable pursuant to the applicable
Fixed Request Notice and applicable Optional Amount, if any.  The Current Report shall have been filed with
the Commission, as required pursuant to Section 1.4, and all Prospectus
Supplements shall have been filed with the Commission, as required pursuant to
Sections 1.4 and 5.9 hereof, to disclose the sale of the Shares prior to each
Settlement Date, as applicable.  Any
other material required to be filed by the Company or any other offering
participant pursuant to Rule 433(d) under the Securities Act shall
have been filed with the Commission within the applicable time periods
prescribed for such filings by Rule 433 under the Securities Act.

 

31

 

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

 

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

 

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

 

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

 

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

 

(viii)                        No Unresolved FINRA
Objection.   There shall not exist any unresolved
objection raised by the FINRA’s Corporate Financing Department with respect to
the fairness and reasonableness of the terms of this Agreement or the
transactions contemplated hereby, and the parties hereto shall have obtained
written confirmation thereof from the FINRA.

 

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

 

32

 

(to the extent permitted by applicable law) may be waived by the
Investor at any time in its sole discretion.

 

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

 

(ii)                                  Registration Statement. The Registration Statement is effective and neither
the Company nor the Investor shall have received notice that the Commission has
issued or intends to issue a stop order with respect to the Registration
Statement. The Company shall have a maximum dollar amount certain of Shares
registered under the Registration Statement which are in an amount (A) as
of the Effective Date, not less than the Total Commitment and (B) as of
the applicable Fixed Request Exercise Date, not less than the maximum dollar
amount worth of Shares issuable pursuant to the applicable Fixed Request Notice
and applicable Optional Amount, if any. The Current Report shall have been
filed with the Commission, as required pursuant to Section 1.4, and all
Prospectus Supplements shall have been filed with the Commission, as required
pursuant to Sections 1.4 and 5.9 hereof, to disclose the sale of the Shares
prior to each Settlement Date, as applicable, and an electronic copy of each
such Prospectus Supplement together with the Base Prospectus shall have been
delivered or made available to the Investor in accordance with Section 5.9
hereof.  Any other material required to
be filed by the Company or any other offering participant pursuant to Rule 433(d) under
the Securities Act shall have been filed with the Commission within the
applicable time periods prescribed for such filings by Rule 433 under the
Securities Act.

 

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

 

33

 

or any material adverse change in, any financial, credit or securities
market which, in each case, in the reasonable judgment of the Investor, makes
it impracticable or inadvisable to purchase the Shares.

 

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

 

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

 

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

 

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

 

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

 

(ix)                                Notification of Listing of
Shares.  If required, the Company shall have submitted
to the Trading Market a notification form of listing of additional shares
related to the Shares issuable pursuant to such Fixed Request or Optional
Amount in accordance with the bylaws, listed securities maintenance standards
and other rules of the Trading Market.

 

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

 

34

 

(xi)                                No Unresolved FINRA Objection.   There shall
not exist any unresolved objection raised by the FINRA’s Corporate Financing
Department with respect to the fairness and reasonableness of the terms of this
Agreement or the transactions contemplated hereby, and the parties hereto shall
have obtained written confirmation thereof from the FINRA.

 

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

 

ARTICLE VII

TERMINATION

 

Section 7.1                                   Term, Termination by
Mutual Consent.  Unless earlier terminated as provided
hereunder, this Agreement shall terminate automatically on the earliest of (i) the
first day of the month next following the 24-month anniversary of the Effective
Date (the “Investment Period”), (ii) the date that the entire
dollar amount of Common Stock registered under the Registration Statement have
been issued and sold and (iii) the date the Investor shall have purchased
the Total Commitment of shares of Common Stock (subject in all cases to the
Trading Market Limit). Subject to Section 7.3, this Agreement may be
terminated at any time (A) by the mutual written consent of the parties,
effective as of the date of such mutual written consent unless otherwise
provided in such written consent, it being hereby acknowledged and agreed that
the Investor may not consent to such termination during a Pricing Period or
prior to a Settlement Date in the event the Investor has instructed the
Broker-Dealer to effect an open-market sale of Shares which are subject to a
pending Fixed Request Notice but which have not yet been physically delivered
by the Company (and/or credited by book-entry) to the Investor in accordance
with the terms and subject to the conditions of this Agreement, or (B) by
either the Company or the Investor effective upon written notice to the other
party under Section 9.4, if the FINRA’s Corporate Financing Department has
raised any objection with respect to the fairness and reasonableness of the
terms of the transactions contemplated by this Agreement, or has otherwise
failed to confirm in writing that it has determined not to raise any such
objection, and such objection shall not have been resolved, or such confirmation
of no objection shall not have been obtained, prior to (1) the 60th day immediately
following the Effective Date, in the case of an objection raised or
confirmation failure occurring prior to the first Fixed Request Exercise Date,
or (2) prior to the 60th day immediately following the receipt by the
Company or the Investor of notice of such objection, in the case of an
objection raised after the first Fixed Request Exercise Date; provided, however,
that (x) the party seeking to terminate this Agreement pursuant to this
clause (B) of Section 7.1 shall have used its commercially reasonable
efforts to resolve such objection and/or to obtain such confirmation of no
objection in accordance with and subject to the provisions of Section 5.1(ii) of
this Agreement and (y) the right to 

 

35

 

terminate this Agreement pursuant to this clause (B) of Section 7.1
shall not be available to any party whose action or failure to act has been a
principal cause of, or has resulted in, such objection or confirmation failure
and such action or failure to act constitutes a breach of this Agreement.
Subject to Section 7.3, the Company may terminate this Agreement effective
upon three Trading Days’ prior written notice to the Investor delivered in
accordance with Section 9.4; provided, however, that (i) such
termination shall not occur during a Pricing Period or, subsequent to the
issuance of a Fixed Request Notice, prior to the Settlement Date related to
such Fixed Request Notice and (ii) prior to issuing any press release, or
making any public statement or announcement, with respect to such termination,
the Company shall consult with the Investor and shall obtain the Investor’s
consent to the form and substance of such press release or other disclosure,
which consent shall not be unreasonably delayed or withheld.

 

Section 7.2                                   Other Termination. 
If (i) the Company provides the Investor with an Other Financing
Notice (other than in respect of an underwritten public offering of Company securities,
a registered direct public offering of Company securities, a “bought deal” of
Company securities to an underwriter or underwriters, a private investment in
public equity (PIPE) of Company securities or any other similar financing, in
each case including Below Market Offerings, provided that in each case the
price per share of such securities is fixed concurrently with the execution of
definitive agreements relating to such transaction) or an Integration Notice,
in each case pursuant to Section 5.6(ii) of this Agreement, or (ii) the
Company otherwise enters into any agreement, plan, arrangement or transaction
with a third party, the principal purpose of which is to obtain outside a
Pricing Period, but otherwise during the Investment Period, an Other Financing
not constituting an Acceptable Financing (other than in respect of an
underwritten public offering of Company securities, a registered direct public
offering of Company securities, a “bought deal” of Company securities to an
underwriter or underwriters, a private investment in public equity (PIPE) of
Company securities or any other similar financing, in each case including Below
Market Offerings, provided that in each case the price per share of such
securities is fixed concurrently with the execution of definitive agreements
relating to such transaction), in which case referred to in this clause (ii) the
Company shall so notify the Investor within 48 hours thereof, then in all such
cases referred to in clauses (i) and (ii) hereof the Investor shall
have the right to terminate this Agreement within the subsequent 30-day period
(the “Event Period”), effective upon one Trading Day’s prior written
notice delivered to the Company in accordance with Section 9.4 at any time
during the Event Period.  The Company
shall promptly (but in no event later than 48 
hours) notify the Investor (and, if required under applicable law,
including, without limitation, Regulation FD promulgated by the Commission, or
under the applicable rules and regulations of the Trading Market, the
Company shall publicly disclose such information in accordance with Regulation
FD and the applicable rules and regulations of the Trading Market), and
the Investor shall have the right to terminate this Agreement within the
subsequent 30-day period at any time after receipt of such notification, if: (a) any
condition, occurrence, state of facts or event constituting a Material Adverse
Effect has occurred; (b) a Material Change in Ownership has occurred or
the Company enters into a definitive agreement providing for a Material Change
in Ownership; or (c) a default or event of default has occurred and is
continuing under the terms of any agreement, contract, note or other instrument
to which the Company or any of its Subsidiaries is a party with respect to any
indebtedness for borrowed money 

 

36

 

representing more than 10% of the Company’s consolidated assets, in any
such case, upon one Trading Day’s prior written notice delivered to the Company
in accordance with Section 9.4 hereof.

 

Section 7.3                                   Effect of Termination. 
In the event of termination by the Company or the Investor pursuant to Section 7.1
or 7.2, as applicable, written notice thereof shall forthwith be given to the
other party as provided in Section 9.4 and the transactions
contemplated by this Agreement shall be terminated without further action by
either party. If this Agreement is terminated as provided in Section 7.1
or 7.2 herein, this Agreement shall become void and of no further force and
effect, except that the provisions of Article VIII (Indemnification), Section 9.1
(Fees and Expenses), Section 9.2 (Specific Enforcement, Consent to
Jurisdiction, Waiver of Jury Trial), Section 9.4 (Notices),  Section 9.8 (Governing Law), Section 9.9
(Survival), Section 9.12 (Severability) and this Article VII
(Termination) shall remain in full force and effect notwithstanding such
termination. Nothing in this Section 7.3 shall be deemed to release the
Company or the Investor from any liability for any breach under this Agreement,
or to impair the rights of the Company and the Investor to compel specific
performance by the other party of its obligations under this Agreement.

 

ARTICLE VIII

INDEMNIFICATION

 

Section 8.1                                   General Indemnity.

 

(i)                                     Indemnification by the
Company.  The Company shall indemnify and hold
harmless the Investor, the Broker-Dealer, each affiliate, employee,
representative and advisor of and to the Investor and the Broker-Dealer, and each person, if any, who controls the Investor or the
Broker-Dealer within the meaning of Section 15 of the Securities Act or Section 20(a) of
the Exchange Act from and against all losses, claims, damages, liabilities and
expenses (including reasonable costs of defense and investigation and all
attorneys’ fees) to which the Investor, the Broker-Dealer and each such other
person may become subject, under the Securities Act or otherwise, insofar as
such losses, claims, damages, liabilities and expenses (or actions in respect
thereof) arise out of or are based upon (a) any violation of United States
federal or state securities laws in connection with the transactions
contemplated by this Agreement by the Company or any of its Subsidiaries,
affiliates, officers, directors or employees, (b) any untrue statement or
alleged untrue statement of a material fact contained, or incorporated by
reference, in the Registration Statement or any amendment thereto or any
omission or alleged omission to state therein, or in any document incorporated
by reference therein, a material fact required to be stated therein or
necessary to make the statements therein not misleading, or (c) any untrue
statement or alleged untrue statement of a material fact contained, or
incorporated by reference, in the Prospectus, any Issuer Free Writing
Prospectus, or in any amendment thereof or supplement thereto, or in any “issuer
information” (as defined in Rule 433 under the Securities Act) of the
Company, which “issuer information” is required to be, or is, filed with the
Commission or otherwise contained in any Free Writing Prospectus, or any
amendment or supplement thereto, or any omission or alleged omission to state
therein, or in any document incorporated by reference therein, a material fact
required to be stated therein or necessary to 

 

37

 

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

 

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

 

(ii)                                  Indemnification by the
Investor. The
Investor shall indemnify and hold harmless the Company, each of its directors
and officers, and each person, if any, who controls the Company within the
meaning of Section 15 of the Securities Act or Section 20(a) of
the Exchange Act from and against all losses, claims, damages, liabilities and
expenses (including reasonable costs of defense and investigation and all
attorneys fees) to which the Company and each such other person may become
subject, under the Securities Act or otherwise, insofar as such losses, claims,
damages, liabilities and expenses (or actions in respect thereof) arise out of
or are based upon any untrue statement or alleged untrue statement of a
material fact contained in the Current Report or any Prospectus Supplement or
Permitted Free Writing Prospectus, or in any amendment thereof or supplement
thereto, or any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, in each
case, to the extent, but only to the extent, the untrue statement, alleged
untrue statement, omission or alleged omission was made in reliance upon, and
in conformity with, written information furnished by the Investor to the
Company expressly for inclusion in the Current Report or such Prospectus 

 

38

 

Supplement or Permitted Free Writing Prospectus, or any amendment
thereof or supplement thereto.

 

Subject to Section 8.2, the Investor shall
reimburse the Company and each such director, officer or controlling person
promptly upon demand for all legal and other costs and expenses reasonably
incurred by the Company or such indemnified persons in investigating, defending
against, or preparing to defend against any such claim, action, suit or
proceeding with respect to which it is entitled to indemnification.

 

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

 

39

 

an unconditional release of the indemnified party from all liability
and claims which are the subject matter of the pending or threatened action.

 

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

 

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

 

ARTICLE IX

MISCELLANEOUS

 

Section 9.1                                   Fees and Expenses.

 

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

 

40

 

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

 

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

 

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

 

(ii)                                  Each of the Company and the Investor (a) hereby
irrevocably submits to the jurisdiction of the United States District Court and
other courts of the United States sitting in the State of Delaware for the
purposes of any suit, action or proceeding arising out of or relating to this
Agreement, and (b) hereby waives, and agrees not to assert in any such
suit, action or proceeding, any claim that it is not personally subject to the
jurisdiction of such court, that the suit, action or proceeding is brought in
an inconvenient forum or that the venue of the suit, action or proceeding is
improper. Each of the Company and the Investor consents to process being served
in any such suit, action or proceeding by mailing a copy thereof to such party
at the address in effect for notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing in this Section 9.2 shall affect or limit any right to
serve process in any other manner permitted by law.

 

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

 

41

 

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

 

Section 9.4                                   Notices. 
Any notice, demand, request, waiver or other communication required or
permitted to be given hereunder shall be in writing and shall be effective (a) upon
hand delivery or facsimile (with facsimile machine confirmation of delivery
received) at the address or number designated below (if delivered on a business
day during normal business hours where such notice is to be received), or the
first business day following such delivery (if delivered other than on a
business day during normal business hours where such notice is to be received)
or (b) on the second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon actual
receipt of such mailing, whichever shall first occur. The address for such
communications shall be:

 

If to
the Company:                                             Affymax, Inc.

4001 Miranda Avenue

Palo Alto, California 94304

Telephone Number: (650) 812-8700

Fax: (650) 812-8932

Attention: Steven Love, VP Finance

cc:  Grace U. Shin, General Counsel

 

With
copies to:                                                              Cooley Godward Kronish LLP

Five Palo Alto Square

3000 El Camino Real

Palo Alto, California 94306-2155

Telephone Number: (650) 843-5000

Fax: (650) 849-7400

Attention:  Glen Sato, Esq.

 

If to
the Investor:                                                   Azimuth Opportunity Ltd.

c/o Folio Administrators Limited

Folio House

P.O. Box 800

Road Town, Tortola VG1110

British Virgin Islands

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

Fax:  (284) 494-8356/7422

Attention: Tamara Singh

 

42

 

With
copies to:                                                              Greenberg Traurig, LLP

The MetLife Building

200 Park Avenue

New York, NY 10166

Telephone Number: (212) 801-9200

Fax:  (212) 801-6400

Attention: Anthony J. Marsico, Esq.

 

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

 

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

 

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

 

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

 

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

 

Section 9.9                                   Survival. 
The representations, warranties, covenants and agreements of the Company
and the Investor contained in this Agreement shall survive the execution and
delivery hereof until the termination of this Agreement; provided, however,
that the provisions of Article VII (Termination), Article VIII
(Indemnification), Section 9.1 (Fees and Expenses), Section 9.2
(Specific Enforcement, Consent to Jurisdiction, Waiver of Jury Trial), Section 9.4
(Notices), Section 9.8 (Governing Law), Section 9.9 (Survival) and Section 9.12
(Severability) shall remain in full force and effect notwithstanding such
termination.

 

Section 9.10                            Counterparts. 
This Agreement may be executed in counterparts, all of which taken
together shall constitute one and the same original and binding instrument and
shall 

 

43

 

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

 

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

 

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

 

Section 9.13                            Further Assurances. 
From and after the date of this Agreement, upon the request of the
Investor or the Company, each of the Company and the Investor shall execute and
deliver such instrument, documents and other writings as may be reasonably
necessary or desirable to confirm and carry out and to effectuate fully the
intent and purposes of this Agreement.

 

[Remainder of Page Intentionally Left Blank]

 

44

 

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

 

 

	
   

  	
  AFFYMAX, INC.:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Paul Cleveland

  
	
   

  	
   

  	
  Name: Paul Cleveland

  
	
   

  	
   

  	
  Title: Chief Financial
  Officer

  
	
   

  	
   

  
	
   

  	
  AZIMUTH OPPORTUNITY LTD.:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Peter Poole

  
	
   

  	
   

  	
  Name: Peter Poole

  
	
   

  	
   

  	
  Title: Director

  

 

45

 

ANNEX A
TO THE

COMMON
STOCK PURCHASE AGREEMENT

DEFINITIONS

 

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

 

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

 

(c)                                  “Base Prospectus” shall mean the
Company’s prospectus, dated September 25, 2009, a preliminary form of
which is included in the Registration Statement, including the documents
incorporated by reference therein.

 

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

 

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

 

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

 

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

 

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

 

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

 

(j)                                     “Commission Documents” shall mean (1) all
reports, schedules, registrations, forms, statements, information and other
documents filed by the Company with the Commission pursuant to the reporting
requirements of the Exchange Act, including all material filed pursuant to Section 13(a) or
15(d) of the Exchange Act, which have been filed by the Company since December 31,
2008 and which hereafter shall be filed by the Company during the Investment
Period, including, without limitation, the Current Report and the Form 10-K
filed by the Company for its fiscal year ended December 31, 2008 (the “2008
Form 10-K”), (2) the Registration Statement, as the same may be
amended from time to time, the Prospectus and each Prospectus Supplement, and
each Permitted Free Writing Prospectus and (3) all information contained
in such filings and all documents and disclosures that have been and heretofore
shall be incorporated by reference therein.

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(v)                                 “FINRA” shall have the meaning assigned
to such term in Section [4.5] [4.18] hereof.

 

(w)                               “FINRA Filing” shall have the
meaning assigned to such term in Section 5.1 hereof.

 

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

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(ll)                                  “Material Adverse Effect” shall
mean any condition, occurrence, state of facts or event having, or insofar as
reasonably can be foreseen would likely have, any effect on the business,
operations, properties or condition (financial or otherwise) of the Company
that is material and adverse to the Company and its Subsidiaries, taken as a whole,
and/or any condition, occurrence, state of facts or event that would prohibit
or otherwise materially interfere with or delay the ability of the Company to
perform any of its obligations under this Agreement; provided, however,
that none of the following, individually or in the aggregate, shall be taken
into account in determining whether a Material Adverse Effect has occurred or
insofar as reasonably can be foreseen would likely occur: (i) changes in
conditions in the U.S. or global capital, credit or financial markets
generally, including changes in the availability of capital or currency
exchange rates, provided such changes shall not have affected the Company in a
materially disproportionate manner as compared to other similarly situated
companies; (ii) changes generally affecting the biotechnology or
pharmaceutical industries, provided such changes shall not have affected the
Company in a materially disproportionate manner as compared to other similarly
situated companies; and (iii) any effect of the announcement of this
Agreement or the consummation of the transactions contemplated by this
Agreement on the Company’s relationships, contractual or otherwise, with
customers, suppliers, vendors, bank lenders, strategic venture partners or
employees.

 

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

 

 

(nn)                          “Material Change in Ownership”
shall mean the occurrence of any one or more of the following: (i) the
acquisition by any person, including any syndicate or group deemed to be a “person”
under Section 13(d)(3) of the Exchange Act, of beneficial ownership,
directly or indirectly, through a purchase, merger or other acquisition
transaction or series of transactions, of shares of capital stock or other
securities of the Company entitling such person to exercise, upon an event of
default or default or otherwise, 50% or more of the total voting power of all
series and classes of capital stock and other securities of the Company
entitled to vote generally in the election of directors, other than any such
acquisition by the Company, any Subsidiary of the Company or any employee
benefit plan of the Company; (ii) any consolidation or merger of the
Company with or into any other person, any merger of another person into the
Company, or any conveyance, transfer, sale, lease or other disposition of all
or substantially all of the properties and assets of the Company to another
person, other than (a) any such transaction (x) that does not result
in any reclassification, conversion, exchange or cancellation of outstanding
shares of capital stock of the Company and (y) pursuant to which holders
of capital stock of the Company immediately prior to such transaction have the
entitlement to exercise, directly or indirectly, 50% or more of the total
voting power of all shares of capital stock of the Company entitled to vote
generally in the election of directors of the continuing or surviving person
immediately after such transaction or (b) any merger which is effected
solely to change the jurisdiction of incorporation of the Company and results
in a reclassification, conversion or exchange of outstanding shares of Common
Stock solely into shares of common stock of the surviving entity; (iii) during
any consecutive two-year period, individuals who at the beginning of that
two-year period constituted the Board of Directors (together with any new
directors whose election to the Board of Directors, or whose nomination for
election by the stockholders of the Company, was approved by a vote of a
majority of the directors then still in office who were either directors at the
beginning of such period or whose elections or nominations for election were
previously so approved) cease for any reason to constitute a majority of the
Board of Directors then in office; or (iv) the Company is liquidated or
dissolved or a resolution is passed by the Company’s stockholders approving a
plan of liquidation or dissolution of the Company. Beneficial ownership shall
be determined in accordance with Rule 13d-3 promulgated by the SEC under
the Exchange Act. The term “person” shall include any syndicate or group which
would be deemed to be a “person” under Section 13(d)(3) of the
Exchange Act.

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

(yy)                          “Pricing Period shall mean a
period of 10 consecutive Trading Days commencing on the Pricing Period start
date set forth in the Fixed Request Notice pursuant to Section 2.1 hereof,
or such other period mutually agreed upon by the Investor and the Company.

 

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

 

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

 

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

 

(ccc)                      “Registration Statement” shall
mean the registration statement on Form S-3, Commission File Number
333-149772, filed by the Company with the Commission under the Securities Act
for the registration of the Shares, as such Registration Statement may be
amended and supplemented from time to time, including the documents
incorporated by reference therein and the information deemed to be a part
thereof at the time of effectiveness pursuant to Rule 430A or Rule 430B
under the Securities Act.

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

(kkk)                      “Threshold Price” is the lowest
price (except to the extent otherwise provided in Section 2.6) at which
the Company may sell Shares during the applicable Pricing Period as set forth
in a Fixed Request Notice (not taking into account the applicable percentage
discount during such Pricing Period determined in accordance with Section 2.2);
provided, however, that at no time shall the Threshold Price be
lower than $8.00 per share unless the Company and the Investor mutually shall
agree.

 

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

 

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

 

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

 

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

 

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

 

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

 

 

EXHIBIT
A TO THE

COMMON STOCK PURCHASE AGREEMENT

FORM OF FIXED REQUEST NOTICE

 

Reference is made to the
Common Stock Purchase Agreement dated as of September 25, 2009, (the “Purchase
Agreement”) between Affymax, Inc., a corporation organized and existing under
the laws of the State of Delaware (the “Company”), and Azimuth
Opportunity Ltd., an international business company incorporated under the laws
of the British Virgin Islands. Capitalized terms used and not otherwise defined
herein shall have the meanings given such terms in the Purchase Agreement.

 

In accordance with and
pursuant to Section 2.1 of the Purchase Agreement, the Company hereby issues
this Fixed Request Notice to exercise a Fixed Request for the Fixed Request
Amount indicated below.

 

	
   

  	
  Fixed
  Amount Requested:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Optional
  Amount Dollar Amount:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Pricing
  Period start date:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Pricing
  Period end date:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Settlement
  Date:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Fixed
  Request Threshold Price:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Optional
  Amount Threshold Price:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Dollar
  Amount of Common Stock Currently Unissued under the Registration Statement;

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Dollar
  Amount of Common Stock Currently Available under the Aggregate Limit:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Dated:

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name

  
	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Address:

  
	
   

  	
   

  	
   

  	
  Facsimile
  No.

  
						

 

AGREED AND ACCEPTED

 

	
  By:

  	
   

  	
   

  
	
   

  	
  Name

  
	
   

  	
  Title:

  

 

 

EXHIBIT
B TO THE

COMMON STOCK PURCHASE AGREEMENT

FORM OF OPTIONAL AMOUNT NOTICE

 

To:

Fax#:

 

Reference is made to the
Common Stock Purchase Agreement dated as of September 25, 2009 (the “Purchase
Agreement”) between Affymax, Inc., a corporation organized and existing
under the laws of the State of Delaware (the “Company”), and Azimuth
Opportunity Ltd., an international business company incorporated under the laws
of the British Virgin Islands (the “Investor”). Capitalized terms used
and not otherwise defined herein shall have the meanings given such terms in
the Purchase Agreement.

 

In accordance with and
pursuant to Section 2.1 of the Purchase Agreement, the Investor hereby issues
this Optional Amount Notice to exercise an Optional Amount for the Optional
Amount Dollar Amount indicated below.

 

	
  Optional
  Amount Dollar Amount Exercised

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Number
  of Shares to be purchased

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  VWAP
  on the date hereof:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Discount
  Price:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Settlement
  Date:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Threshold
  Price:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Dated:

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name

  
	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Address:

  
	
   

  	
   

  	
   

  	
  Facsimile
  No.

  
						

 

 

EXHIBIT
C TO THE

COMMON STOCK PURCHASE AGREEMENT

CERTIFICATE OF THE COMPANY

 

CLOSING
CERTIFICATE

 

            200 

 

The undersigned, the [                  ]
of Affymax, Inc., a corporation organized and existing under the laws of the
State of Delaware (the “Company”), delivers this certificate in
connection with the Common Stock Purchase Agreement, dated as of September 25,
2009 (the “Agreement”), by and between the Company and Azimuth
Opportunity Ltd., an international business company incorporated under the laws
of the British Virgin Islands (the “Investor”), and hereby certifies on
the date hereof that (capitalized terms used herein without definition have the
meanings assigned to them in the Agreement):

 

1.             Attached hereto as Exhibit A is a
true, complete and correct copy of the Certificate of Incorporation of the
Company as filed with the Secretary of State of the State of Delaware. The
Certificate of Incorporation of the Company has not been further amended or
restated, and no document with respect to any amendment to the Certificate of
Incorporation of the Company has been filed in the office of the Secretary of
State of the State of Delaware since the date shown on the face of the state
certification relating to the Company’s Certificate of Incorporation, which is
in full force and effect on the date hereof, and no action has been taken by
the Company in contemplation of any such amendment or the dissolution, merger
or consolidation of the Company.

 

2.             Attached hereto as Exhibit B is a
true and complete copy of the Bylaws of the Company, as amended and restated
through, and as in full force and effect on, the date hereof, and no proposal
for any amendment, repeal or other modification to the Bylaws of the Company
has been taken or is currently pending before the Board of Directors or
stockholders of the Company.

 

3.             The Board of Directors of the Company has approved the
transactions contemplated by the Agreement; said approval has not been amended,
rescinded or modified and remains in full force and effect as of the date
hereof.

 

4.             Each person who, as an officer of the Company, or as
attorney-in-fact of an officer of the Company, signed (i) the Agreement and (ii)
any other document delivered prior hereto or on the date hereof in connection
with the transactions contemplated by the Agreement, was duly elected,
qualified and acting as such officer or duly appointed and acting as such
attorney-in-fact, and the signature of each such person appearing on any such
document is his genuine signature.

 

IN WITNESS WHEREOF, I have signed
my name as of the date first above written.

 

	
   

  	
   

  
	
   

  	
  By:

  
	
   

  	
  Title:

  

 

 

EXHIBIT
D TO THE

COMMON STOCK PURCHASE AGREEMENT

COMPLIANCE CERTIFICATE

 

In connection with the
issuance of shares of common stock of Affymax, Inc., a corporation organized
and existing under the laws of the State of Delaware (the “Company”),
pursuant to the Fixed Request Notice, dated [                          ], delivered by the
Company to Azimuth Opportunity Ltd. (the “Investor”) pursuant to Article
II of the Common Stock Purchase Agreement, dated September 25, 2009, by and
between the Company and the Investor (the “Agreement”), the undersigned
hereby certifies as follows:

 

1.             The undersigned is the duly elected [                          ] of the Company.

 

2.             Except as set forth in the attached Disclosure Schedule,
the representations and warranties of the Company set forth in Article IV of
the Agreement (i) that are not qualified by “materiality” or “Material Adverse
Effect” are true and correct in all material respects as of [insert Fixed
Request Exercise Date] and as of the date hereof with the same force and effect
as if made on such dates, except to the extent such representations and
warranties are as of another date, in which case, such representations and
warranties are true and correct in all material respects as of such other date
and (ii) that are qualified by “materiality” or “Material Adverse Effect” are
true and correct as of [insert Fixed Request Exercise Date] and as of the date
hereof with the same force and effect as if made on such dates, except to the
extent such representations and warranties are as of another date, in which
case, such representations and warranties are true and correct as of such other
date.

 

3.             The Company has performed, satisfied and complied in all
material respects with all covenants, agreements and conditions required by the
Agreement to be performed, satisfied or complied with by the Company at or
prior to [insert Fixed Request Exercise Date] and the date hereof.

 

Capitalized terms used but
not otherwise defined herein shall have the meanings assigned to them in the
Agreement.

 

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

 

 

	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:Exhibit 10.1

 

FIRST AMENDMENT TO

CONFIDENTIAL LICENSE AGREEMENT

FOR THE Wii CONSOLE

(Western Hemisphere)

 

THIS
FIRST AMENDMENT (“First Amendment”) amends that certain Confidential License
Agreement for the Wii Console (Western Hemisphere) effective October 13,
2006 between Nintendo of America Inc. (“Nintendo”) and THQ Inc. (“Licensee”) (“Agreement”).

 

RECITALS

 

WHEREAS,
Nintendo and Licensee entered into the Agreement;

 

WHEREAS,
the Agreement currently expires on October 12, 2009, and the parties now
desire to extend the Term (as such term is defined in the Agreement) of the
Agreement as set forth below.

 

AMENDMENT

 

NOW,
THEREFORE, the parties agree as follows:

 

1.                                       The definition
of “Term” as set forth in Section 2.24 of the Agreement is hereby deleted
in its entirety and replaced with the following:

 

“‘Term’
means six (6) years from the Effective Date.”

 

2.                                       The Term of the
Agreement shall now expire on October 12, 2012.

 

3.                                       All other terms
and conditions of the Agreement shall remain in full force and effect.  This First Amendment may be signed in
counterparts, which together shall constitute one original First Amendment.

 

4.                                       Signatures
provided by facsimile or by email (i.e., a scanned document) shall be the
equivalent of originals.

 

This First Amendment shall be effective as of September 15,
2009.

 

IN
WITNESS WHEREOF, the parties have entered into this First Amendment.

 

	
  NINTENDO:

  	
   

  	
  LICENSEE:

  
	
   

  	
   

  	
   

  
	
  Nintendo
  of America Inc.

  	
   

  	
  THQ
  Inc.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  James R. Cannataro

  	
   

  	
  By:

  	
  /s/ Brian J.
  Farrell

  
	
   

  	
   

  	
   

  
	
  Name:
  James R. Cannataro

  	
   

  	
  Name:
  Brian J. Farrell

  
	
   

  	
   

  	
   

  
	
  Its:
  EVP, Administration

  	
   

  	
  Its:
  President & CEO

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