Document:

Exhibit 4.1

 

NEKTAR THERAPEUTICS

(a Delaware corporation)

 

$100,000,000

3% Convertible Subordinated Notes due 2010

 

PURCHASE AGREEMENT

 

June 25, 2003

 

Merrill
Lynch, Pierce, Fenner & Smith

Incorporated

Deutsche
Bank Securities Inc.

Lehman
Brothers Inc.

Friedman,
Billings, Ramsey & Co., Inc.

SG
Cowen Securities Corporation

c/o
Merrill Lynch, Pierce, Fenner & Smith

Incorporated

North Tower

World Financial Center

New York, New York
10281-1209

 

Ladies and Gentlemen:

 

Nektar Therapeutics, a
Delaware corporation (the “Company”), confirms its agreement with Merrill
Lynch, Pierce, Fenner & Smith Incorporated (“Merrill Lynch”) and each
of the other Initial Purchasers named in Schedule 1 hereto
(collectively, the “Initial Purchasers,” which term shall also include any
initial purchaser substituted as hereinafter provided in Section 8
hereof), for whom Merrill Lynch is acting as representative (in such capacity,
the “Representative”), with respect to the issue and sale by the Company and
the purchase by the Initial Purchasers, acting severally and not jointly, of
the respective principal amounts set forth in said Schedule 1 of
$100,000,000 aggregate principal amount of the Company’s 3% Convertible
Subordinated Notes due 2010 (the “Firm Notes”), and with respect to the grant
by the Company to the Initial Purchasers, acting severally and not jointly, of
the option described in Section 2(b) hereof (the “Option”) to purchase all
or any part of an additional $25,000,000  principal amount of the Company’s 3%
Convertible Subordinated Notes due 2010 (the “Optional Notes” and, together
with the Firm Notes, the “Notes”).

 

The Notes will be
convertible into fully paid, nonassessable shares of common stock of the
Company, par value $0.0001 per share (the “Common Stock”), on the terms, and
subject to the conditions, set forth in the Indenture (as defined below).  As used herein, “Conversion Shares” means
the shares of Common Stock into which the Notes are convertible.  The Notes will be issued pursuant to an
Indenture (the “Indenture”) to be

 

 

dated as of the First
Delivery Date (as defined in Section 2(a)), between the Company and J.P.
Morgan Trust Company, National Association, as trustee (the “Trustee”).

 

Holders
of the Notes (including the Initial Purchasers and their direct and indirect transferees) will be entitled to
the benefits of a Pledge Agreement (the “Pledge Agreement”), to be dated as of
the First Delivery Date, between the
Company and J.P. Morgan Trust Company, National Association, as collateral
agent (the “Collateral Agent”), pursuant to which the Company will deposit with
the Collateral Agent in trust for the exclusive benefit of the holders of the
Notes, a portion of the proceeds from the offering of the Notes sufficient to
purchase a portfolio of zero-coupon U.S. treasury securities in such amounts as
will be sufficient upon receipt of scheduled interest and principal payments of
such U.S. treasury securities to provide for payment in full of certain
scheduled interest payments on the Notes when due, which will be held in a
pledge account by the Collateral Agent as security for the Company’s
obligations under the Notes in accordance with the terms of the Pledge
Agreement.

 

The Notes will be offered
and sold without being registered under the Securities Act of 1933, as amended
(the “Securities Act”), in reliance on exemptions therefrom.  The Company has prepared and delivered to
each Initial Purchaser copies of a preliminary offering memorandum dated June
23, 2003 (the “Preliminary Offering Memorandum”) and has prepared and will
deliver to each Initial Purchaser, on the date hereof or the next succeeding
day, copies of a final offering memorandum dated June 25, 2003 (the “Final
Offering Memorandum”), each for use by such Initial Purchaser in connection
with its solicitation of purchases of, or offering of, the Notes.  “Offering Memorandum” means, with respect to
any date or time referred to in this Agreement, the most recent offering
memorandum (whether the Preliminary Offering Memorandum or the Final Offering
Memorandum, or any amendment or supplement to either such document) which has
been prepared and delivered by the Company to the Initial Purchasers in
connection with their solicitation of purchases of, or offering of, the
Notes.  As used herein, the terms
“Preliminary Offering Memorandum,” “Final Offering Memorandum” and “Offering
Memorandum” shall include in each case the documents incorporated by reference
therein.

 

Holders of the Notes
(including the Initial Purchasers and their direct and indirect transferees)
will be entitled to the benefits of a Resale Registration Rights Agreement,
dated the First Delivery Date, between the Company and the Initial Purchasers
(the “Registration Rights Agreement”), pursuant to which the Company will agree
to file with the Securities and Exchange Commission (the “Commission”) a shelf
registration statement pursuant to Rule 415 under the Securities Act (the
“Registration Statement”) covering the resale of the Notes and the Conversion
Shares, and to use its best efforts to cause the Registration Statement to be
declared effective.

 

This Agreement, the
Indenture, the Notes, the Pledge Agreement and the Registration Rights
Agreement are referred to herein collectively as the “Operative Documents.”

 

2

 

Capitalized terms used
herein without definition have the respective meanings specified in the
Offering Memorandum.

 

1.                                       Representations,
Warranties and Agreements of the Company. 
The Company represents and warrants to each Initial Purchaser as of the
date hereof and as of each Delivery Date (as defined in Section 2(b)) and
agrees with each Initial Purchaser, as follows:

 

(a)                                  Each
of the Preliminary Offering Memorandum and the Offering Memorandum, did not as
of its respective date, and the Offering Memorandum will not as of a Delivery
Date (as defined in Section 2(b)), contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided that the Company makes no
representation or warranty as to information contained in or omitted from the
Preliminary Offering Memorandum or the Offering Memorandum in reliance upon and
in conformity with written information furnished to the Company by or on the
behalf of any Initial Purchaser through the Representative specifically for
inclusion therein.

 

(b)                                 Assuming
the accuracy of the representations and warranties of the Initial Purchasers
contained in Section 6 and their compliance with the agreements set forth
therein, it is not necessary, in connection with the issuance and sale of the
Notes to the Initial Purchasers and the offer, resale and delivery of the Notes
by the Initial Purchasers in the manner contemplated by this Agreement, the
Indenture, the Pledge Agreement, the Registration Rights Agreement and the
Offering Memorandum, to register the Notes or the Conversion Shares under the
Securities Act or to qualify the Indenture under the Trust Indenture Act of
1939, as amended (the “Trust Indenture Act”).

 

(c)                                  The
Company has been duly incorporated and is validly existing as a corporation in
good standing under the laws of the State of Delaware, is duly qualified to do
business and is in good standing as a foreign corporation in each jurisdiction
in which its ownership or lease of property or the conduct of its businesses
requires such qualification (except for where the failure to be so qualified
would not have a material adverse effect on the affairs, management, business,
properties, financial condition, results of operations or prospects of the
Company and its subsidiaries considered as one enterprise, whether or not
arising in the ordinary course of business (a “Material Adverse Effect”)), and
has all power and authority necessary to own or hold its properties and to
conduct the businesses in which it is engaged, as described in the Offering
Memorandum.

 

(d)                                 Each
subsidiary of the Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of its jurisdiction of
incorporation, is duly qualified to do business and is in good standing as a
foreign corporation in each jurisdiction in which its ownership or lease of
property or the conduct of its businesses requires such qualification (except
for

 

3

 

where the failure to be
so qualified would not have a Material Adverse Effect and except for the
qualification of Nektar Therapeutics AL, Corporation (“Nektar Alabama”) in the
State of North Carolina, which qualification Nektar Alabama will promptly
obtain), and has all power and authority necessary to own or hold its
properties and to conduct the businesses in which it is engaged, as described
in the Offering Memorandum; except as otherwise disclosed in the Offering
Memorandum, all of the issued and outstanding capital stock of each subsidiary
of the Company has been duly authorized and validly issued, is fully paid and
non-assessable and is owned by the Company, directly or through subsidiaries,
free and clear of any security interest, mortgage, pledge, lien, encumbrance,
claim or equity; none of the outstanding shares of capital stock of any such
subsidiary was issued in violation of the preemptive or similar rights of any securityholder
of such subsidiary.

 

(e)                                  The
authorized, issued and outstanding capital stock of the Company, as of
March 31, 2003, is as set forth in the Offering Memorandum under the
column entitled “Actual” under the caption “Capitalization,” and all of the
issued and outstanding shares of capital stock of the Company have been duly
and validly authorized and issued, are fully paid and nonassessable; none of
the outstanding shares of capital stock of the Company was issued in violation
of the preemptive or other similar rights of any securityholder of the Company;
the capital stock of the Company conforms to the description thereof contained
in the Offering Memorandum and such description conforms to the rights set
forth in the instruments defining the same; the Conversion Shares, which are
authorized on the date hereof, have been duly and validly authorized and
reserved for issuance upon conversion of the Notes by all necessary corporate
action and are free of preemptive rights; all Conversion Shares, when so issued
and delivered upon such conversion in accordance with the terms of the
Indenture, will be duly and validly authorized and issued, fully paid and
nonassessable and free and clear of all liens, encumbrances, equities or
claims; and the issuance of such Conversion Shares upon such conversion will
not be subject to the preemptive or other similar rights of any securityholder
of the Company.

 

(f)                                    The
execution, delivery and performance of the Operative Documents by the Company
and the issuance of the Notes and the Conversion Shares and the consummation of
the transactions contemplated hereby and thereby will not (x) conflict
with or result in a breach or violation of any of the terms or provisions of,
or constitute a default under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which the Company or any of its
subsidiaries is a party or by which it or any of them are bound or to which any
of the properties or assets of the Company or any subsidiary is subject, (y) result
in any violation of the provisions of the certificate of incorporation or
bylaws of the Company or any of its subsidiaries or (z) result in any
violation of any statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Company or any
subsidiary or any of their properties or assets; and except (i) with
respect to the transactions contemplated by the Registration Rights Agreement
or the Pledge

 

4

 

Agreement, as may be
required under the Securities Act, the Trust Indenture Act and the rules and
regulations promulgated thereunder and (ii) as required by the state
securities or “blue sky” laws, no consent, approval, authorization or order of,
or filing or registration with, any such court or governmental agency or body
is required for the execution, delivery and performance of the Operative
Documents by the Company, and the consummation of the transactions contemplated
hereby and thereby.

 

(g)                                 The
Company has all necessary corporate right, power and authority to execute and
deliver this Agreement and perform its obligations hereunder; and this
Agreement and the transactions contemplated hereby have been duly authorized,
executed and delivered by the Company.

 

(h)                                 The
Company has all necessary corporate right, power and authority to execute and
deliver the Indenture and perform its obligations thereunder; the Indenture has
been duly authorized by the Company, and upon the effectiveness of the
Registration Statement, will be qualified under the Trust Indenture Act; on the
First Delivery Date, the Indenture will have been duly executed and delivered
by the Company and, assuming due authorization, execution and delivery of the
Indenture by the Trustee, will constitute a legally valid and binding agreement
of the Company enforceable against the Company in accordance with its terms,
except as the enforceability thereof may be limited by bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and other similar laws relating
to or affecting creditors’ rights generally, subject to general principles of
equity and to limitations on availability of equitable relief, including
specific performance (whether considered in a proceeding in equity or at law)
and an implied covenant of good faith and fair dealing; and the Indenture
conforms in all material respects to the description thereof contained in the
Offering Memorandum.

 

(i)                                     The
Company has all necessary corporate right, power and authority to execute and
deliver the Pledge Agreement and perform its obligations thereunder; the Pledge
Agreement and the transactions contemplated thereby have been duly authorized
by the Company, and upon the effectiveness of the Registration Statement, will
be qualified under the Trust Indenture Act; when the Pledge Agreement is duly
executed and delivered by the Company (assuming due authorization, execution
and delivery of the Pledge Agreement by the Collateral Agent) it will be a
legally valid and binding agreement of the Company enforceable against the
Company in accordance with its terms, except as the enforceability thereof may
be limited by bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and other similar laws relating to or affecting creditors’ rights
generally, subject to general principles of equity and to limitations on
availability of equitable relief, including specific performance (whether
considered in a proceeding in equity or at law) and an implied covenant of good
faith and fair dealing; and the Pledge Agreement conforms in all material
respects to the description thereof contained in the Offering Memorandum.

 

5

 

(j)                                     The
Company has all necessary corporate right, power and authority to execute and
deliver the Registration Rights Agreement and perform its obligations
thereunder; the Registration Rights Agreement and the transactions contemplated
thereby have been duly authorized by the Company; when the Registration Rights
Agreement is duly executed and delivered by the Company (assuming due
authorization, execution and delivery by the Initial Purchasers), it will be a
legally valid and binding agreement of the Company enforceable against the
Company in accordance with its terms, except as the enforceability thereof may
be limited by bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and other similar laws relating to or affecting creditors’ rights
generally, subject to general principles of equity and to limitations on
availability of equitable relief, including specific performance (whether
considered in a proceeding in equity or at law) and an implied covenant of good
faith and fair dealing, and except with respect to the rights of
indemnification and contribution thereunder, where enforcement thereof may be
limited by federal or state securities laws or the policies underlying such
laws; and the Registration Rights Agreement conforms in all material respects
to the description thereof contained in the Offering Memorandum.

 

(k)                                  The
Company has all necessary corporate right, power and authority to execute,
issue and deliver the Notes and perform its obligations thereunder; the Notes
have been duly authorized by the Company; when the Notes are executed,
authenticated and issued in accordance with the terms of the Indenture and
delivered to and paid for by the Initial Purchasers pursuant to this Agreement
on the respective Delivery Date (assuming due authentication of the Notes by
the Trustee), such Notes will constitute legally valid and binding obligations
of the Company, entitled to the benefits of the Indenture and enforceable
against the Company in accordance with their terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and other similar laws relating to or affecting
creditors’ rights generally, subject to general principles of equity and to
limitations on availability of equitable relief, including specific performance
(whether considered in a proceeding in equity or at law) and an implied
covenant of good faith and fair dealing; and the Notes conform in all material
respects to the description thereof contained in the Offering Memorandum.

 

(l)                                     Except
for the Registration Rights Agreement and the Stock Purchase Agreement, dated
January 18, 1995, between the Company and Pfizer, Inc. (“Pfizer”),
the Stock Purchase Agreement, dated March 1, 1996, as amended, between the
Company and Baxter Healthcare Corporation, the Stock Issuance Agreement, dated
November 4, 1999, between the Company and Alliance Pharmaceutical Corp.,
the Restated Investor Rights Agreement, dated April 29, 1993, as amended
October 29, 1993, among the Company and certain stockholders of the
Company, the Resale Registration Rights Agreement, dated October 13, 1999,
between the Company and the initial purchasers named therein, the Registration
Rights Agreement between the Company and Alliance Pharmaceutical Corp., dated
January 24, 2000, the Resale Registration Rights

 

6

 

Agreement, dated
February 8, 2000, between the Company and the initial purchasers named
therein, the Resale Registration Rights Agreement, dated October 17, 2000,
between the Company and the initial purchasers named therein, the Rights
Agreement, dated June 1, 2001, between the Company and Mellon Investor
Services LLC., the Preferred Stock Purchase Agreement, dated
January 7, 2002, between the Company and Enzon Pharmaceuticals, Inc.
and the Registration Rights Agreements, dated June 7, 2002, July 9,
2002 and December 6, 2002, respectively, each between the Company and AFAC
Equity L.P.,  there are no contracts, agreements or understandings between
the Company and any person granting such person the right (other than rights
which have been waived or satisfied) to require the Company to file a
registration statement under the Securities Act with respect to any securities
of the Company owned or to be owned by such person or to require the Company to
include such securities in any securities being registered pursuant to any
registration statement filed by the Company under the Securities Act.

 

(m)                               Neither
the Company nor any of its subsidiaries has sustained, since the date of the
latest audited financial statements included in the Offering Memorandum, any
material loss or interference with its business from fire, explosion, flood or
other calamity, whether or not covered by insurance, or from any labor dispute
or court or governmental action, order or decree; and, since such dates, there
has not been any change in the capital stock or long-term debt of the Company
or any of its subsidiaries or any material adverse change in or affecting the
affairs, management, business, properties, financial condition, stockholders’
equity, results of operations or prospects of the Company and its subsidiaries
considered as one enterprise, whether or not arising in the ordinary course of
business, except: (i) as described in the Offering Memorandum,
(ii) any grants under the Company’s employee stock plans in accordance
with the terms of such plans as described in the Offering Memorandum, or other
shares of Common Stock (or rights to receive Common Stock) issued to service
providers to the Company in the ordinary course of business (“Authorized
Grants”), (iii) operating losses incurred in the ordinary course of
business, and (iv) indebtedness incurred by the Company’s subsidiaries
pursuant to outstanding lines of credit or other debt facilities not to exceed
$5.0 million.

 

(n)                                 The
financial statements of the Company and its consolidated subsidiaries
(including the related notes and supporting schedules) included in the Offering
Memorandum present fairly the financial condition and results of operations of
the Company and its consolidated subsidiaries, at the dates and for the periods
indicated, and have been prepared in conformity with generally accepted
accounting principles applied on a consistent basis throughout the periods
involved.  The selected and summary
financial information included in the Offering Memorandum present fairly the
information shown therein and have been compiled on a basis consistent with
that of the audited financial statements included in the Offering Memorandum.

 

7

 

(o)                                 Ernst &
Young LLP, who have certified the financial statements of the Company
included in the Offering Memorandum, whose report is incorporated by reference
in the Offering Memorandum, are independent accountants as required by the
Securities Act and the rules and regulations promulgated thereunder.

 

(p)                                 The
Company and its subsidiaries have good and marketable title in fee simple to
all real property and good and marketable title to all personal property owned
by them, in each case free and clear of all liens, encumbrances, security
interests, claims and defects, except such as are described in the Offering
Memorandum or such as do not, singly or in the aggregate, materially affect the
value of such property and do not interfere with the use made and proposed to
be made of such property by the Company or any of its subsidiaries; and all
real property and personal property held under lease or sublease by the Company
and its subsidiaries is held by them under valid, subsisting and enforceable
leases (or subleases, as the case may be) in full force and effect, with such
exceptions as are not material and do not interfere with the use made and
proposed to be made of such property by the Company or any of its
subsidiaries.  Neither the Company nor
any of its subsidiaries have notice of any material claim of any sort that has
been asserted by anyone adverse to the rights of the Company or any of its
subsidiaries under any of the leases or subleases mentioned above, or affecting
or questioning the rights of the Company or such subsidiary to the continued
possession of the leased or subleased premises under any such lease or
sublease.

 

(q)                                 The
Company and its subsidiaries carry, or are covered by, insurance as is
customary for companies similarly situated and engaged in similar businesses in
similar industries.

 

(r)                                    The
Company and its subsidiaries own, or possess adequate rights to use, all
material trademarks, service marks, trade names, trademark registrations,
service mark registrations, copyrights and licenses necessary for the conduct
of their business, and have no reason to believe that the conduct of their
business will conflict with, and have not received any notice of any claim of
conflict with, any such rights of others.

 

(s)                                  The
Company and its subsidiaries own, or possess adequate rights to use, all
material patents necessary for the conduct of their business.  Except as set forth in the Offering
Memorandum, no valid U.S. patent is, or to the knowledge of the Company would
be, infringed by the activities of the Company or any of its subsidiaries in
the manufacture, use, offer for sale or sale of any product or component
thereof as described in the Offering Memorandum.  The patent applications (the “Patent Applications”) filed by or
on behalf of the Company and its subsidiaries described in the Offering
Memorandum have been properly prepared and filed on behalf of the Company and
its subsidiaries; each of the Patent Applications and patents (the “Patents”)
described in the Offering Memorandum is assigned or licensed to the Company or
its subsidiaries, and, except as set forth or contemplated in the Offering
Memorandum, no other entity

 

8

 

or individual has any
right or claim in any Patent, Patent Application or any patent to be issued
therefrom; and, to the knowledge of the Company, each of the Patent
Applications discloses potentially patentable subject matter.  There are no actions, suits or judicial
proceedings pending 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, to the knowledge of the
Company, no actions, suits or judicial proceedings are threatened by
governmental authorities or, except as set forth or contemplated in the
Offering Memorandum, others.  The
Company is not aware of, except as set forth or contemplated in the Offering
Memorandum, any claim by others that the Company or any of its subsidiaries is
infringing or otherwise violating any patents or other intellectual property
rights of others and is not aware of any rights of third parties to any of the
Company’s or any of its subsidiaries’ Patent Applications, licensed Patents or
licenses which could affect materially the use thereof by the Company or any of
its subsidiaries.  Except as set forth
in the Offering Memorandum, the Company and its subsidiaries own or possess
sufficient licenses or other rights to use all patents, trade secrets,
technology and know-how necessary to conduct their business as described in the
Offering Memorandum.

 

(t)                                    Except
as disclosed in the Offering Memorandum, the Company and its subsidiaries have
filed with the Food and Drug Administration (the “FDA”) and the California Food
and Drug Branch (“CFDB”) for and received approval of all registrations,
applications, licenses, requests for exemptions, permits and other regulatory
authorizations necessary to conduct their business as it is described in the
Offering Memorandum; the Company and its subsidiaries are in material
compliance with all such registrations, applications, licenses, requests for
exemptions, permits and other regulatory authorizations, and all applicable FDA
and CFDB rules and regulations, guidelines and policies, including but not
limited to, applicable FDA and CFDB rules, regulations and policies relating to
current good manufacturing practice (“CGMP”) and current good laboratory
practice (“CGLP”); the Company has no reason to believe that any party granting
any such registration, application, license, request for exemption, permit or
other authorization is considering limiting, suspending or revoking the same
and knows of no basis for any such limitation, suspension or revocation.

 

(u)                                 The
human clinical trials, animal studies and other preclinical tests conducted by
the Company or any subsidiary or in which the Company or any subsidiary has
participated that are described in the Offering Memorandum or the results of
which are referred to in the Offering Memorandum, and, to the knowledge of the
Company, such studies and tests conducted on behalf of the Company or any of
its subsidiaries, were and, if still pending, are being conducted in accordance
with commonly used or appropriate experimental protocols, procedures and controls
applied by research scientists generally in the preclinical or clinical study
of new drugs; the descriptions or the results of such studies and tests
contained in the Offering Memorandum are accurate and complete in all material
respects, and the Company has no knowledge of any other studies or

 

9

 

tests, the results of
which reasonably call into question the results described or referred to in the
Offering Memorandum; and neither the Company nor any of its subsidiaries has
received any notices or other correspondence from the FDA or any other
governmental agency requiring the termination, suspension or modification of
any animal studies or other preclinical tests, or clinical studies 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 Offering
Memorandum or the results of which are referred to in the Offering Memorandum.

 

(v)                                 Except
as disclosed in the Offering Memorandum, there are no legal or governmental
proceedings pending to which the Company or any of its subsidiaries is a party
or of which any of their respective properties or assets is the subject which,
if determined adversely to the Company or any subsidiary might have a Material
Adverse Effect, or which might reasonably be expected to materially and
adversely affect the consummation of the transactions contemplated by this
Agreement or the performance by the Company of its obligations hereunder; to
the Company’s knowledge, no such proceedings are threatened or contemplated by
governmental authorities or, except as set forth or contemplated in the
Offering Memorandum, threatened by others; and the aggregate of all pending
legal or governmental proceedings to which the Company or any of its
subsidiaries is a party or of which any of their respective properties or
assets is the subject (other than the Company’s or any subsidiary’s patent
applications currently pending before the U.S. Patent and Trademark Office or
before any foreign governmental authority that administers the registration of
patents), which are not described in the Offering Memorandum, including
ordinary routine litigation incidental to the business, could not reasonably be
expected to result in a Material Adverse Effect.

 

(w)                               No
event has occurred nor has any circumstance arisen which, had the Notes been
issued on such Delivery Date, would constitute a default or an Event of Default
(as such term is defined in the Indenture).

 

(x)                                   Neither
the Company nor any of its subsidiaries is (i) in violation of its
certificate of incorporation or bylaws, (ii) in default, and no event has
occurred which, with notice or lapse of time or both, would constitute such a
default, in the due performance or observance of any term, covenant or
condition contained in any indenture, mortgage, deed of trust, loan agreement
or other agreement or instrument to which the Company or any of its
subsidiaries is a party or by which it or any of them may be bound or to which
any of the properties or assets of the Company or any of its subsidiaries is
subject or (iii) in violation of any law, ordinance, governmental rule,
regulation or court decree to which any properties or assets of the Company or
any of its subsidiaries may be subject or has failed to obtain any license,
permit, certificate, franchise or other governmental authorization or permit
necessary to the ownership of their properties or to the conduct of their
business, except to the extent that any such

 

10

 

default, event or
violation described in the foregoing clauses (i), (ii) and (iii) would not
have a Material Adverse Effect.

 

(y)                                 The
Company is in compliance in all material respects with all presently applicable
provisions of the Employee Retirement Income Security Act of 1974, as amended,
including the regulations and published interpretations thereunder (“ERISA”);
no “reportable event” (as defined in ERISA) has occurred with respect to any “pension
plan” (as defined in ERISA) for which the Company would have any liability; the
Company has not incurred and does not expect to incur liability under
(i) Title IV of ERISA with respect to termination of, or withdrawal
from, any “pension plan” or (ii) Sections 412 or 4971 of the Internal
Revenue Code of 1986, as amended, including the regulations and published
interpretations thereunder (the “Code”); and each “pension 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 by failure to act, which would cause
the loss of such qualification.

 

(z)                                   The
Company is subject to the reporting requirements of Section 13 or
Section 15(d) of the Exchange Act. 
The Company has timely and, except with respect to the failure to
provide information with respect to certain change of control and severance
arrangements with respect to J. Milton Harris, which information was subsequently
provided in an amendment to the Company’s Form 10-K for the year
ended December 31, 2002 filed prior to the date of this Agreement,
properly filed with the Commission all reports and other documents required to
have been filed by it with the Commission pursuant to the Exchange Act and the
Exchange Act Regulations (“Exchange Act Reports”).

 

(aa)                            The
Company and each of its subsidiaries, if applicable, have filed all federal,
state and local income and franchise tax returns required to be filed through
the date hereof or have requested extensions thereof and have paid all taxes
due thereon, and no tax deficiency has been determined adversely to the Company
which has had (nor does the Company or any of its subsidiaries have any
knowledge of any tax deficiency which, if determined adversely to the Company
or any of its subsidiaries, might have) a Material Adverse Effect.

 

(bb)                          There
has been no storage, disposal, generation, manufacture, refinement,
transportation, handling or treatment of toxic wastes, medical wastes,
hazardous wastes or hazardous substances by the Company or any of its
subsidiaries (or, to the knowledge of the Company, any predecessors in interest
of the Company or any of its subsidiaries) at, upon or from any of the property
now or previously owned or leased by the Company or any of its subsidiaries in
violation of any applicable law, ordinance, rule, regulation, order, judgment,
decree or permit or which would require remedial action under any applicable
law, ordinance, rule, regulation, order, judgment, decree or permit, except for
any violation or remedial action which would not have, or could not be
reasonably likely to have, singularly or in the aggregate with all such
violations and remedial

 

11

 

actions a Material
Adverse Effect; there has been no material spill, discharge, leak, emission,
injection, escape, dumping or release of any kind onto such property or into
the environment surrounding such property of any toxic wastes, medical wastes,
solid wastes, hazardous wastes or hazardous substances due to or caused by the
Company or any of its subsidiaries or with respect to which the Company has
knowledge, except for any such spill, discharge, leak, emission, injection,
escape, dumping or release which would not have or would not be reasonably
likely to have, singularly or in the aggregate with all such spills,
discharges, leaks, emissions, injections, escapes, dumpings and releases, a
Material Adverse Effect; and the terms “hazardous wastes,” “toxic wastes,”
“hazardous substances” and “medical wastes” shall have the meanings specified
in any applicable local, state, federal and foreign laws or regulations with
respect to environmental protection.

 

(cc)                            There
are no contracts or other documents which would be required to be described in
the Offering Memorandum if the Offering Memorandum were a prospectus included
in a registration statement on Form S-1 that have not been so described
in the Offering Memorandum.

 

(dd)                          There is
no relationship, direct or indirect, between or among the Company or any of its
subsidiaries, on the one hand, and the directors, executive officers,
shareholders, customers or suppliers of the Company or any of its subsidiaries,
on the other hand, which would be required to be described in the Offering
Memorandum if the Offering Memorandum were a prospectus included in a
registration statement on Form S-1 that has not been so described.

 

(ee)                            Since
the date as of which information is given in the Offering Memorandum through
the date hereof, the Company has not (i) issued or granted any securities
(other than Authorized Grants), (ii) incurred any material liability or
obligation, direct or contingent, other than liabilities and obligations which
were incurred in the ordinary course of business or referenced in
Section 1(m)(iv) above, (iii) entered into any material transaction
not in the ordinary course of business, other than as referenced in
Section 1(m)(iv) above or (iv) declared or paid any dividend on its capital
stock.

 

(ff)                                Except
as disclosed in the Offering Memorandum, (i) there are no outstanding
securities convertible into or exchangeable for, or warrants, rights or options
issued by the Company to purchase, any shares of the capital stock of the
Company (except, in the case of options, any Authorized Grants),
(ii) there are no statutory, contractual, preemptive or other rights to
subscribe for or to purchase any Common Stock that do not by their terms
terminate upon the First Delivery Date and (iii) there are no restrictions
upon transfer of the Common Stock pursuant to the Company’s certificate of
incorporation or bylaws.

 

(gg)                          The
Company (i) makes and keeps materially accurate books and records and
(ii) maintains internal accounting controls which provide reasonable
assurance that (A) transactions are executed in accordance with
management’s 

 

12

 

authorization,
(B) transactions are recorded as necessary to permit preparation of its
financial statements and to maintain accountability for its assets,
(C) access to its assets is permitted only in accordance with management’s
authorization and (D) the reported accountability for its assets is
compared with existing assets at reasonable intervals.

 

(hh)                          Neither
the Company or any of its subsidiaries nor any director, officer, agent or
employee acting on behalf of the Company or any of its subsidiaries has
(i) used any corporate funds for any unlawful contribution, gift,
entertainment or other unlawful expense relating to political activity,
(ii) made any direct or indirect unlawful payment to any foreign or
domestic government official or employee from corporate funds,
(iii) violated or is in violation of any provision of the Foreign Corrupt
Practices Act of 1977 or (iv) made any bribe, rebate, payoff, influence
payment, kickback or other unlawful payment.

 

(ii)                                  No
labor disturbance by the employees of the Company or any of its subsidiaries
exists or, to the knowledge of the Company, is imminent which might be expected
to have a Material Adverse Effect.

 

(jj)                                  The
Company is not, and upon the issuance and sale of the Notes as herein
contemplated and the application of the net proceeds therefrom as described in
the Offering Memorandum will not be, an “investment company” or an entity
“controlled” by an “investment company” as such terms are defined in the
Investment Company Act of 1940, as amended.

 

(kk)                            Assuming
the accuracy of the representations and warranties of the Initial Purchasers
contained in Section 6 and their compliance with the agreements set forth
therein, the Securities will be eligible for resale pursuant to
Rule 144A.  No securities of the
same class (within the meaning of Rule 144A(d)(3) under the Securities
Act) as the Notes are listed on any national securities exchange registered
under Section 6 of the Exchange Act or quoted on an automated inter-dealer
quotation system.

 

(ll)                                  None
of the Company or any of its Affiliates (as defined in Rule 501(b) of
Regulation D under the Securities Act (“Regulation D”)) (other than
the Initial Purchasers, about which no representation is made by the Company),
has, directly or through an agent, engaged or will engage in any form of
general solicitation or general advertising in connection with the offering of
the Notes (as those terms are used in Regulation D) under the Securities
Act or in any manner involving a public offering within the meaning of
Section 4(2) of the Securities Act; the Company has not entered into any
contractual arrangement with respect to the distribution of the Notes except
for this Agreement and the Company will not enter into any such arrangement.

 

(mm)                      None of the
Company or any of its affiliates (other than the Initial Purchasers, about
which no representation is made by the Company), has, directly or through any
agent, sold, offered for sale, solicited offers to buy or otherwise

 

13

 

negotiated in respect of,
any “security” (as defined in the Securities Act) which is or will be
integrated with the sale of the Notes in a manner that would require the
registration under the Securities Act of the Notes.

 

(nn)                          The
Company has not taken, directly or indirectly, any action designed to cause or
result in, or which has constituted or which might reasonably be expected to
constitute, the stabilization or manipulation of the price of any security of
the Company in connection with the offering of the Notes.

 

(oo)                          No
consent, approval or vote of the Company’s shareholders is necessary or
required in connection with the offering, issuance or sale of the Notes
hereunder or the issuance of shares of Common Stock upon conversion of the
Notes.

 

(pp)                          Nektar
Alabama is the Company’s only subsidiary that as of the date of the latest
audited financial statements included in Offering Memorandum had revenues or
total assets that exceeded 10% of the Company’s consolidated revenues or total
assets on a consolidated basis.

 

2.                                       Purchase,
Sale and Delivery of Notes.

 

(a)                                  Subject
to the terms and conditions and in reliance upon the representations and
warranties herein set forth, the Company agrees to sell to each Initial
Purchaser, and each Initial Purchaser agrees, severally and not jointly, to
purchase from the Company, at a purchase price of 97% of the principal amount
thereof (the “purchase price”) the principal amount of Firm Notes set forth
opposite such Initial Purchaser’s name in Schedule 1 hereto (or
such number increased as set forth in Section 8).

 

Delivery of and payment
for the Firm Notes shall be made at the office of Sidley Austin
Brown & Wood llp, 555
California Street, San Francisco, California 94104, at 10:00 a.m. (New
York City time) on June 30, 2003, or such later date as the Initial Purchasers
shall designate, which date and time may be postponed by agreement between the
Initial Purchasers and the Company or as provided in Section 8 (such date
and time of delivery and payment for the Firm Notes being herein called the
“First Delivery Date”).  Delivery of the
Firm Notes shall be made to the Initial Purchasers against payment of the
purchase price by the Initial Purchasers. 
Payment for the Firm Notes shall be effected either by wire transfer of
immediately available funds to an account with a bank in The City of New York,
the account number and the ABA number for such bank to be provided by the
Company to the Initial Purchasers at least two business days in advance of the
First Delivery Date, or by such other manner of payment as may be agreed by the
Company and the Initial Purchasers.  It
is understood that each Initial Purchaser has authorized the Representative,
for its account, to accept delivery of, issue a receipt for, and make payment
of the purchase price for, the Firm Notes that it has agreed to purchase.  Merrill Lynch, individually and not as
representative of the Initial Purchasers, may (but shall not be obligated to)
make payment of the purchase price for the Firm Notes to be purchased by any
Initial Purchaser whose funds have not been received by

 

14

 

the First Delivery Date
but such payment shall not relieve such Initial Purchaser from its obligations
hereunder.

 

(b)                                 Subject
to the terms and conditions and in reliance upon the representations and
warranties herein set forth, the Company hereby grants the Option to the
Initial Purchasers to purchase, severally and not jointly, the Optional Notes
at the same price as the Initial Purchasers shall pay for the Firm Notes and
the principal amount of the Optional Notes to be sold to each Initial Purchaser
shall be that principal amount which bears the same ratio to the aggregate
principal amount of Optional Notes being purchased as the principal amount of
Firm Notes set forth opposite the name of such Initial Purchaser in Schedule 1
hereto (or such number increased as set forth in Section 8).  The Option may be exercised once in whole or
in part at any time not more than 30 days subsequent to the date of this
Agreement upon notice in writing or by facsimile by the Representative to the
Company setting forth the amount (which shall be an integral multiple of
$1,000) of Optional Notes as to which the Initial Purchasers are exercising the
Option.

 

The date for the delivery of and payment for the
Optional Notes, being herein referred to as an “Optional Delivery Date,” which
may be the First Delivery Date (the First Delivery Date and the Optional
Delivery Date, if any, being sometimes referred to as a “Delivery Date”), shall
be determined by the Initial Purchasers but shall not be later than five full
business days after written notice of election to purchase Optional Notes is
given.  Delivery of the Optional Notes
shall be made to the Initial Purchasers against payment of the purchase price
by the Initial Purchasers.  Payment for
the Optional Notes shall be effected either by wire transfer of immediately
available funds to an account with a bank in The City of New York, the account
number and the ABA number for such bank to be provided by the Company to the
Initial Purchasers at least two business days in advance of the Optional
Delivery Date, or by such other manner of payment as may be agreed by the
Company and the Initial Purchasers.  It
is understood that each Initial Purchaser has authorized the Representative,
for its account, to accept delivery of, issue a receipt for, and make payment
of the purchase price for, the Optional Notes that it has agreed to
purchase.  Merrill Lynch, individually
and not as representative of the Initial Purchasers, may (but shall not be
obligated to) make payment of the purchase price for the Optional Notes to be
purchased by any Initial Purchaser whose funds have not been received by the
Delivery Date but such payment shall not relieve such Initial Purchaser from
its obligations hereunder.

 

(c)                                  The
Company will deliver against payment of the purchase price the Notes initially
sold to qualified institutional buyers (“QIBs”), as defined in Rule 144A
under the Securities Act (“Rule 144A”) in the form of one or more
permanent global certificates (the “Global Notes”), registered in the name of
Cede & Co., as nominee for The Depository Trust Company (“DTC”).  Beneficial interests in the Notes initially
sold to QIBs will be shown on, and transfers thereof will be effected only
through, records maintained in book-entry form by DTC and its participants.

 

The Global Notes will be made available, at the
request of the Initial Purchasers, for checking at least 24 hours prior to such
Delivery Date.  The Certificated Notes
will be

 

15

 

made available, at the
request of the Initial Purchasers, for checking at least 48 hours prior to such
Delivery Date.

 

(d)                                 Time
shall be of the essence, and delivery at the time and place specified pursuant
to this Agreement is a further condition of the obligations of the Initial
Purchasers hereunder.

 

3.                                       Further
Agreements of the Company.  The
Company further agrees with each Initial Purchaser as follows:

 

(a)                                  The
Company will advise the Initial Purchasers promptly of any proposal to amend or
supplement the Offering Memorandum and not to effect any such amendment or
supplement without the consent of the Initial Purchasers and/or Sidley Austin
Brown & Wood llp,
counsel to the Initial Purchasers. 
Neither the consent of the Initial Purchasers, nor the Initial
Purchaser’s delivery of any such amendment or supplement, shall constitute a
waiver of any of the conditions set forth in Section 5.  The Company will immediately notify each
Initial Purchaser, and confirm such notice in writing, of (i) any filing
made by the Company of information relating to the offering of the Notes by the
Company with any securities exchange or any other regulatory body in the United
States or any other jurisdiction, and (ii) prior to the completion of the
placement of the Notes by the Initial Purchasers as evidenced by a notice in
writing from the Initial Purchasers to the Company, any material changes in or
affecting the condition, financial or otherwise, or the earnings, business
affairs or business prospects of the Company which (x) make any statement
in the Offering Memorandum false or misleading or (y) are not disclosed in
the Offering Memorandum.  In such event
or if during such time any event shall occur or condition exist as a result of
which it is necessary to amend or supplement the Offering Memorandum in order
that the Offering Memorandum will not include an untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances existing at the time it is delivered
to a purchaser, not misleading, to promptly notify the Initial Purchasers
and/or Sidley Austin Brown & Wood llp,
counsel to the Initial Purchasers, and prepare, subject to the first sentence
of this Section 3(a), such amendment or supplement as may be necessary to
correct such untrue statement or omission.

 

(b)                                 The
Company will furnish to the Initial Purchasers and to Sidley Austin
Brown & Wood llp,
counsel to the Initial Purchasers, copies of the Preliminary Offering
Memorandum and the Offering Memorandum (and all amendments and supplements
thereto) in each case as soon as available and in such quantities as the
Initial Purchasers reasonably request for internal use and for distribution to
prospective purchasers; and to furnish to the Initial Purchasers on the date
hereof five copies of the Offering Memorandum signed by duly authorized
officers of the Company, one of which will include the independent auditors’
reports therein manually signed by such independent auditors.  The Company will pay the expenses of
printing and distributing to the Initial Purchasers all such documents.

 

16

 

(c)                                  The
Company will use its reasonable efforts to take such action as the Initial
Purchasers may reasonably request from time to time, to qualify the Notes and
the Conversion Shares for offering and sale under the securities laws of such
jurisdictions as the Initial Purchasers may request and to comply with such
laws so as to permit the continuance of sales and dealings therein in such
jurisdictions in the United States for as long as may be necessary to complete
the resale of the Notes; provided that in connection therewith, the
Company shall not be required to qualify as a foreign corporation or otherwise
subject itself to taxation in any jurisdiction in which it is not otherwise so
qualified or subject.

 

(d)                                 The
Company will apply the proceeds from the sale of the Notes as set forth under
“Use of Proceeds” in the Offering Memorandum.

 

(e)                                  During
a period of 90 days from the date of the Offering Memorandum (the “Lockup
Period”), the Company will not, and will cause its directors and executive
officers not to, without the prior written consent of Merrill Lynch,
(i) directly or indirectly, offer, pledge, sell, contract to sell, sell
any option or contract to purchase, purchase any option or contract to sell,
grant any option right or warrant to purchase or lend or otherwise transfer or
dispose of any Common Stock or any securities convertible into or exercisable
or exchangeable for Common Stock (collectively, the “Restricted Securities”) or
file any registration statement under the Securities Act with respect to any
Restricted Securities, or (ii) enter into any swap or any other agreement
or any transaction (other than the Operative Documents) that transfers, in
whole or in part, directly or indirectly, the economic consequence of ownership
of any Restricted Securities, whether any such swap or transaction described in
clause (i) or (ii) above is to be settled by delivery of Restricted
Securities, in cash or otherwise.  The
restrictions of this Section 3(e) shall not apply to (u) the Notes
offered by the Offering Memorandum, (v) the issuance of shares of Common
Stock or options to purchase shares of Common Stock pursuant to the Company’s
employee benefit plans in effect on the date of this Agreement, (w) the
issuance of shares of Common Stock upon exercise or conversion of the Notes or
any security outstanding on the date of this Agreement, (x) the issuance
of shares of Common Stock or preferred stock in connection with private
placements to strategic partners or as consideration for the Company’s
acquisition of other companies or businesses, so long as the recipients of any
such shares issued in such private placements deliver to Merrill Lynch an
agreement to the effect described in the preceding sentence prior to the
issuance of such shares but without any of the exceptions described in this
sentence, (y) the filing of one or more registration statements in order
to register the shares of Common Stock or preferred stock issued pursuant to
clause (x) above or the registration of the Company’s securities issued to
AFAC Equity L.P. pursuant to the AFAC Registration Rights Agreements for
resale by the owners thereof pursuant to the Securities Act, or (z) the
filing of one or more registration statements by the Company in order to
register Restricted Stock for sale by the Company on a delayed or continuous
basis pursuant to Rule 415 under the Securities Act, provided that no
Restricted Stock registered pursuant to such registration statements is sold
during the

 

17

 

Lockup Period.  The Company further agrees to cause each
executive officer and director of the Company to furnish to the Initial Purchasers,
prior to the First Delivery Date, a letter or letters, in form and substance
satisfactory to counsel to the Initial Purchasers, pursuant to which each such
person shall agree not to enter into any transaction described in
clause (i) or (ii) of the first sentence of this paragraph; provided,
however,
that such restrictions shall not apply to the sale of up to 500,000 shares of
Common Stock in the aggregate by all such executive officers and directors,
donations to charitable organizations consistent with past practices and any
additional sales pursuant to 10b5-1 plans as in effect on the date of the
Offering Memorandum.

 

(f)                                    The
Company agrees that it will not, and will cause its Affiliates (as defined in
Rule 501(b) of Regulation D) not to, directly or indirectly, solicit
any offer to buy, sell or make any offer or sale of, or otherwise negotiate in
respect of, securities of the Company of any class if, as a result of the
doctrine of “integration” referred to in Rule 502 under the Securities Act,
such offer or sale would render invalid (for the purpose of (i) the sale
of the Notes by the Company to the Initial Purchasers, (ii) the resale of
the Notes by the Initial Purchasers to subsequent purchasers or (iii) the
resale of the Notes or Conversion Shares by such subsequent purchasers to
others) the exemption from the registration requirements of the Securities Act
provided by Section 4(2) thereof or by Rule 144A thereunder or
otherwise.  Notwithstanding the
foregoing, no stockholder of the Company that does not control, is not
controlled by or is not under common control with, an officer or director of
the Company shall be deemed to be an Affiliate for purposes of this paragraph.

 

(g)                                 For
so long as any of the Notes are “restricted securities” within the meaning of
Rule 144(a)(3) under the Securities Act, the Company will provide to any
holder of the Notes or to any prospective purchaser of the Notes designated by
any holder, upon request of such holder or prospective purchaser, information
required to be provided by Rule 144A(d)(4) of the Securities Act if, at
the time of such request, the Company is not subject to the reporting
requirements under Section 13(a) or 15(d) of the Exchange Act.

 

(h)                                 Until
the expiration of two years after the original issuance of the Notes, the
Company will not, and will cause its Affiliates (as defined in Rule 501(b)
of Regulation D) not to, resell any Notes or Conversion Shares which are
“restricted securities” (as such term is defined under Rule 144(a)(3) under
the Securities Act), whether as beneficial owner or otherwise (except as agent
acting as a securities broker on behalf of and for the account of customers in
the ordinary course of business in unsolicited broker’s transactions).  Notwithstanding the foregoing, no stockholder
of the Company that does not control, is not controlled by or is not under
common control with, an officer or director of the Company shall be deemed to
be an Affiliate for purposes of this paragraph.

 

(i)                                     Each
of the Notes will bear, to the extent applicable, the legend contained in
“Notice to Investors” in the Offering Memorandum for the time

 

18

 

period and upon the other
terms stated therein, except after the Notes are resold pursuant to a registration
statement effective under the Securities Act.

 

(j)                                     The
Company will take such steps as shall be necessary to ensure that it shall not
become an “investment company” within the meaning of such term under the
Investment Company Act, and the rules and regulations of the Commission
thereunder.

 

(k)                                  None
of the Company or any of its affiliates will take, directly or indirectly, any
action which is designed to stabilize or manipulate, or which constitutes or
which might reasonably be expected to cause or result in stabilization or
manipulation, of the price of any security of the Company in connection with
the offering of the Notes.

 

(l)                                     The
Company will execute and deliver the Registration Rights Agreement and the
Pledge Agreement in form and substance satisfactory to the Initial Purchasers.

 

(m)                               The
Company will use its best efforts to assist the Initial Purchasers in arranging
to cause the Notes to be accepted to trade in the PORTAL market (“PORTAL”) of
the National Association of Securities Dealers, Inc. (“NASD”).

 

(n)                                 The
Company will use its best efforts to cause the Notes to be accepted for
clearance and settlement through the facilities of DTC.

 

(o)                                 The
Company will use its best efforts to have the Conversion Shares approved by The
Nasdaq National Market (“Nasdaq”) for inclusion prior to the effectiveness of
the Registration Statement.

 

4.                                       Expenses.  The Company agrees to pay:

 

(a)                                  the
costs incident to the authorization, issuance, sale and delivery of the Notes,
and any taxes payable in that connection;

 

(b)                                 the
costs incident to the preparation, printing and distribution of the Preliminary
Offering Memorandum, the Offering Memorandum and any amendment or supplement to
the Offering Memorandum, all as provided in this Agreement;

 

(c)                                  the
costs of producing and distributing the Operative Documents;

 

(d)                                 the
fees and expenses of Cooley Godward LLP and Ernst &
Young LLP;

 

(e)                                  the
costs of distributing the terms of agreement relating to the organization of
the underwriting syndicate and selling group to the members thereof by mail,
telex or other means of communication;

 

19

 

(f)                                    the
fees and expenses of qualifying the Notes and the Conversion Shares under the
securities laws of the several jurisdictions as provided in Section 3(c);

 

(g)                                 all
costs and expenses incident to (i) the preparation of the “road show”
presentation materials and (ii) the road show traveling expenses of the
Company;

 

(h)                                 the
costs of preparing the Notes;

 

(i)                                     all
expenses and fees in connection with the application for inclusion of the Notes
in the PORTAL market and the inclusion of the Conversion Shares on Nasdaq;

 

(j)                                     the
fees and expenses (including fees and disbursements of counsel) of the Trustee,
and the costs and charges of any registrar, transfer agent, paying agent or
conversion agent; and

 

(k)                                  all
other costs and expenses incident to the performance of the obligations of the
Company under this Agreement;

 

provided that, except as provided in this
Section 4 and in Section 7, the Initial Purchasers shall pay their
own costs and expenses, including the costs and expenses of their counsel and
any transfer taxes on the Notes which they may sell.

 

5.                                       Conditions
of the Initial Purchasers’ Obligations. 
The several obligations of the Initial Purchasers hereunder are subject
to the accuracy, when made and on each Delivery Date, of the representations
and warranties of the Company contained herein, to the performance by the
Company of its obligations hereunder, and to each of the following additional
terms and conditions:

 

(a)                                  No
Initial Purchaser shall have discovered and disclosed to the Company prior to
or on such Delivery Date that the Offering Memorandum or any amendment or
supplement thereto contains any untrue statement of a fact which, in the
opinion of counsel to the Initial Purchasers, is material or omits to state any
fact which is material and necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading.

 

(b)                                 All
corporate proceedings and other legal matters incident to the authorization,
form and validity of the Operative Documents and the Offering Memorandum or any
amendment or supplement thereto, and all other legal matters relating to the
Operative Documents and the transactions contemplated thereby shall be
satisfactory in all material respects to counsel to the Initial Purchasers, and
the Company shall have furnished to such counsel all documents and information
that they may reasonably request to enable them to pass upon such matters.

 

20

 

(c)                                  Cooley
Godward LLP shall have furnished to the Initial Purchasers their written
opinion, as counsel to the Company, addressed to the Initial Purchasers and
dated such Delivery Date, in form and substance satisfactory to the Initial
Purchasers, to the effect that:

 

(i)                               The
Company has been duly organized and is validly existing as a corporation in
good standing under the laws of the State of Delaware, and, based solely on
certificates of public officials, is duly qualified to do business and is in
good standing as a foreign corporation in each jurisdiction in which its
ownership or lease of property or the conduct of its business requires such
qualification, except where the failure to be so qualified would not have a
Material Adverse Effect, and has all corporate power and authority necessary to
own or hold its properties and conduct the businesses in which it is engaged,
as described in the Offering Memorandum;

 

(ii)                            The
Conversion Shares, which are authorized on the date hereof, have been duly and
validly authorized and reserved for issuance upon conversion of the Notes by
all necessary corporate action and are free of preemptive rights; all
Conversion Shares, when so issued and delivered upon such conversion in
accordance with the terms of the Indenture, will be duly and validly authorized
and issued, fully paid and nonassessable and free and clear of all liens,
encumbrances, equities or claims imposed by or arising from actions of the Company;

 

(iii)                         The
statements in the Offering Memorandum under the captions “Description of the
Notes” and “Description of Capital Stock,” insofar as they purport to summarize
the provisions of the Indenture, the Pledge Agreement, the Registration Rights
Agreement, the Notes and the Common Stock (including the Conversion Shares) are
accurate and complete in all material respects to the extent required if such
statements were contained in a registration statement on Form S-3 under
the Securities Act;

 

(iv)                        There is
no restriction upon the voting or transfer of, any shares of Common Stock
pursuant to the Company’s certificate of incorporation or bylaws;

 

(v)                           To the
knowledge of such counsel and other than as set forth in the Offering
Memorandum, there are no legal or governmental proceedings pending to which the
Company or any of its subsidiaries is a party or of which any property or asset
of the Company or any of its subsidiaries is the subject which, if determined
adversely to the Company or any of its subsidiaries might have a Material
Adverse Effect or which might reasonably be expected to materially and
adversely affect the consummation of the transactions contemplated by this
Agreement or the performance by the Company of its obligations hereunder; to
the actual

 

21

 

knowledge of such
counsel, no such proceedings are overtly threatened or contemplated by
governmental authorities or, except as set forth or contemplated in the
Offering Memorandum, overtly threatened by others; and, to the actual knowledge
of such counsel, the aggregate of all pending legal or governmental proceedings
to which the Company and its subsidiaries are a party or of which any of their
property or assets is the subject (other than the Company’s or any of its
subsidiaries’ patent applications currently pending before the U.S. Patent and
Trademark Office or before any foreign governmental authority that administers
the registration of patents) which are not described in the Offering Memorandum,
including ordinary routine litigation incidental to the business, could not
reasonably be expected to result in a Material Adverse Effect.

 

(vi)                        The
execution, delivery and performance of this Agreement, the Indenture, the
Pledge Agreement and the Registration Rights Agreement and the issuance of the
Notes and the Conversion Shares and the consummation of the transactions
contemplated hereby and thereby do not result in any violation of the
provisions of the certificate of incorporation or bylaws of the Company or any
statute or any order, rule or regulation known to such counsel of any court or
governmental agency or body having jurisdiction over the Company or any of the
properties or assets of the Company; and, except as may be required by the securities
or “blue sky” laws of any state of the United States in connection with the
sale of the Notes, no consent, approval, authorization or order of, or filing
or registration with, any such court or governmental agency or body is required
for the execution, delivery and performance of this Agreement, the Indenture
and the Pledge Agreement by the Company and the issuance of the Notes and the
Conversion Shares and the consummation of the transactions contemplated hereby
and thereby;

 

(vii)                     No
registration of the Notes or the Conversion Shares under the Securities Act,
and no qualification of the Indenture or an indenture or the Pledge Agreement
under the Trust Indenture Act, is required in connection with the offer, sale
and delivery of the Notes or in connection with the conversion of the Notes
into Conversion Shares, in each case, in the manner contemplated by the
Offering Memorandum, this Agreement, the Indenture and the Pledge Agreement;

 

(viii)                  The statements
in the Offering Memorandum under the caption “Certain United States Federal
Income Tax Considerations,” insofar as they purport to constitute summaries of
matters of United States federal income tax law and regulations or legal
conclusions with respect thereto, constitute accurate summaries of the matters
described therein in all material respects to the extent required if such
statements were contained in a registration statement on Form S-3 under
the Securities Act;

 

22

 

(ix)                          The
Company is not an “investment company” within the meaning of the Investment
Company Act of 1940, as amended;

 

(x)                             The
Company has all necessary corporate right, power and authority to execute and
deliver each of the Operative Documents to which it is a party and to perform
its obligations thereunder and to issue, sell and deliver the Notes and the
Conversion Shares to the Initial Purchasers;

 

(xi)                          This
Agreement has been duly authorized, executed and delivered by the Company;

 

(xii)                       The
Indenture has been duly authorized, executed and delivered by the Company and,
assuming due authorization, execution and delivery thereof by the Trustee,
constitutes a legally valid and binding agreement of the Company enforceable
against the Company in accordance with its terms, except as the enforceability
thereof may be limited by bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and other similar laws relating to or affecting
creditors’ rights generally, by general principles of equity and limitations on
availability of equitable relief, including specific performance (regardless of
whether such enforceability is considered in a proceeding in equity or at law),
and by an implied covenant of good faith and fair dealing;

 

(xiii)                    The
Registration Rights Agreement has been duly authorized, executed and delivered
by the Company and, assuming due authorization, execution and delivery thereof
by the Initial Purchasers, constitutes a legally valid and binding agreement of
the Company enforceable against the Company in accordance with its terms,
except as rights to indemnity contained therein may be limited by applicable
law and except as the enforceability thereof may be limited by bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and other similar
laws relating to or affecting creditors’ rights generally, by general
principles of equity and limitations on availability of equitable relief,
including specific performance (regardless of whether such enforceability is
considered in a proceeding in equity or at law), and by an implied covenant of
good faith and fair dealing;

 

(xiv)                   The Pledge
Agreement has been duly authorized, executed and delivered by the Company and,
assuming due authorization, execution and delivery thereof by the Collateral
Agent, constitutes a legally valid and binding agreement of the Company
enforceable against the Company in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and other similar laws relating to or
affecting creditors’ rights generally, by general principles of equity and
limitations on availability of equitable relief, including specific performance
(regardless of whether

 

23

 

such enforceability is
considered in a proceeding in equity or at law), and by an implied covenant of
good faith and fair dealing;

 

(xv)                      Under the
Uniform Commercial Code as in effect on the date hereof in the State of New
York (the “NYUCC”), the provisions of the Pledge Agreement are sufficient to
create and grant a security interest in the Collateral Account (as defined in
the Pledge Agreement) and the Pledged Securities (as defined in the Pledge
Agreement) credited thereto in favor of the Collateral Agent to secure the
payment and performance of the Obligations (as defined in the Pledge
Agreement);

 

(xvi)                   Under the
NYUCC, the provisions of the Pledge Agreement are effective to perfect the
security interest of the Collateral Agent in the Collateral Account and the
Pledged Securities credited thereto, assuming that (i) New York is deemed
the Securities Intermediary’s jurisdiction within the meaning of Section 8-110
of the NYUCC; (ii) the Collateral Account is a “securities account” within
the meaning of Article 8 of the NYUCC; (iii) the Pledged Securities
are “security entitlements” within the meaning of Article 8 of the NYUCC,
and (iv) J.P. Morgan Trust Company, National Association, in its
capacity as the Securities Intermediary under the Pledge Agreement is a securities
intermediary within the meaning of Section 8-102(a)(14) of the
NYUCC;

 

(xvii)                Assuming that the
Collateral Agent and each of the holders of the Notes has given value within
the meaning of Section 8-502 of the NYUCC and without notice of an
adverse claim within the meaning of Sections 8-105 and 8-502
of the NYUCC (and as adverse claim is defined in Section 8-102(a)(1)
of the NYUCC), no person may assert an action based on an adverse claim against
the Collateral Agent in accordance with Section 8-502 of the NYUCC;
and

 

(xviii)             The Notes have been
duly authorized by the Company and when executed, issued and authenticated in
accordance with terms of the Indenture and delivered to and paid for by the
Initial Purchasers, will constitute legally valid and binding obligations of
the Company, entitled to the benefits of the Indenture and enforceable against
the Company in accordance with their terms, except as the enforceability
thereof may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and other similar laws relating to or affecting creditors’ rights
generally, by general principles of equity and limitations on availability of
equitable relief, including specific performance (regardless of whether such
enforceability is considered in a proceeding in equity or at law), and by an
implied covenant of good faith and fair dealing.

 

In rendering such opinion, such counsel may state that
its opinion is limited to matters governed by the federal laws of the United
States of America, the laws of the State of New York, the Delaware General
Corporation Law and the NYUCC, and may

 

24

 

state that it is relying, in respect of matters of New York law (other
than the NYUCC), upon Sidley Austin Brown & Wood llp, and in respect of matters of fact,
upon certificates of officers of the Company, provided that such counsel shall
state that it believes that the Initial Purchasers and it are justified in
relying upon such certificates.  Such
counsel shall also have furnished to the Initial Purchasers a written
statement, addressed to the Initial Purchasers and dated such Delivery Date, in
form and substance satisfactory to the Initial Purchasers, to the effect that
during the course of preparing the Offering Memorandum, such counsel
participated in conferences with officers and other representatives of the
Company, the Company’s independent public accountants, the Initial Purchasers
and their counsel, at which the contents of the Offering Memorandum were
discussed, and while such counsel has not independently verified and is not
passing upon the accuracy, completeness or fairness of the statements made in
the Offering Memorandum except as explicitly set forth above, no facts have
come to the attention of such counsel which lead it to believe that the
Offering Memorandum (other than the financial statements, financial and
statistical data and supporting schedules as to which such counsel shall make
no statement), as of its date or as of such Delivery Date, contained or
contains any untrue statement of a material fact or omitted or omits to state a
material fact necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.

 

(d)                                 Paula
Kasler, Associate General Counsel of the Company, shall have furnished to the
Initial Purchasers her written opinion, addressed to the Initial Purchasers and
dated such Delivery Date, in form and substance satisfactory to the Initial
Purchasers, to the effect that:

 

(i)                  The authorized,
issued and outstanding capital stock of the Company, as of March 31, 2003,
is as set forth in the Offering Memorandum under the column entitled “Actual”
under the caption “Capitalization,” and all of the issued and outstanding
shares of capital stock of the Company have been duly and validly authorized
and issued, are fully paid and nonassessable;

 

(ii)               Except as disclosed
in the Offering Memorandum, there are no preemptive or other rights to
subscribe for or to purchase from the Company, or any restriction upon the
voting or transfer of, any shares of Common Stock pursuant to any agreement or
other instrument to which the Company or any of its subsidiaries is a party
known to such counsel; the issuance of the Conversion Shares, upon conversion
of the Notes in accordance with the terms of the Indenture, will not be subject
to the preemptive or other similar rights of any securityholder of the Company;

 

(iii)            The execution,
delivery and performance of this Agreement, the Indenture, the Pledge Agreement
and the Registration Rights Agreement and the issuance of the Notes and the
Conversion Shares and the consummation of the transactions contemplated hereby
and thereby (i) do not result in a breach or violation of any of the terms
or provisions of, or constitute a default under, any indenture, mortgage, deed

 

25

 

of trust, loan agreement
or other agreement or instrument known to such counsel to which the Company or
any of its subsidiaries is a party or by which the Company or any of its
subsidiaries is bound or to which any of the property or assets of the Company
or any of its subsidiaries is subject, and (ii) do not result in any
violation of any statute or any order, rule or regulation known to such counsel
of any court or governmental agency or body having jurisdiction over Nektar
Alabama or any of the properties or assets of Nektar Alabama; and

 

(iv)           All of the issued and
outstanding capital stock of Nektar Alabama is owned by the Company, directly
or through subsidiaries, free and clear of any security interest, mortgage,
pledge, lien, encumbrance, claim or equity.

 

Such counsel shall also have furnished to the Initial
Purchasers a written statement, addressed to the Initial Purchasers and dated
such Delivery Date, in form and substance satisfactory to the Initial
Purchasers, to the effect that she has no reason to believe that the statements
under the captions “Risk Factors—If any of our patents are invalid or pending
patents do not issue or following issuance are deemed not valid, then we may
lose key intellectual property right protection. If our products infringe on
third-party’s rights, then we will suffer adverse effects on our ability to
develop and commercialize products as well as our revenues and results of
operations.” in the Offering Memorandum, and “Item 1. Business—Patents and
Proprietary Rights” in the Company’s most recent Form 10-K, as of
their respective dates or as of such Delivery Date, contained or contains any
untrue statement of a material fact or omitted or omits to state a material
fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.

 

(e)                                  Bradley
Arant Rose & White llp
shall have furnished to the Initial Purchasers their written opinion, as
special Alabama counsel to the Company, addressed to the Initial Purchasers and
dated such Delivery Date, in form and substance satisfactory to the Initial
Purchasers, to the effect that:

 

(i)             Nektar Alabama has
been duly incorporated and is validly existing as a corporation in good
standing under the laws of the State of Alabama and has all corporate power and
authority necessary to own or hold its properties and conduct the businesses in
which it is engaged, as described in the Offering Memorandum; except as
otherwise disclosed in the Offering Memorandum, all of the issued and
outstanding capital stock of Nektar Alabama has been duly authorized and
validly issued, is fully paid and non-assessable and, based on the stock ledger
of Nektar Alabama, is owned by the Company, directly or through subsidiaries;
and to the knowledge of such counsel, none of the outstanding shares of capital
stock of Nektar Alabama was issued in violation of the preemptive or similar rights
of any securityholder of Nektar Alabama; and

 

26

 

(ii)          The execution, delivery
and performance of this Agreement, the Indenture, the Pledge Agreement and the
Registration Rights Agreement and the issuance of the Notes and the Conversion
Shares and the consummation of the transactions contemplated hereby and thereby
by the Company do not result in any violation of the provisions of the articles
of incorporation or bylaws of Nektar Alabama.

 

In rendering such opinion, such counsel may state that
its opinion is limited to matters governed by the laws of the State of Alabama.

 

(f)                                    Sidley
Austin Brown & Wood llp,
shall have furnished to the Initial Purchasers their written opinion, as
counsel to the Initial Purchasers, addressed to the Initial Purchasers and
dated such Delivery Date, in form and substance satisfactory to the Initial
Purchasers.

 

(g)                                 With
respect to the letter of Ernst & Young LLP delivered to the
Initial Purchasers concurrently with the execution of this Agreement (the
“initial letter”), the Company shall have furnished to the Initial Purchasers a
letter (the “bring-down letter”) of such accountants, addressed to the Initial
Purchasers and dated such Delivery Date (i) confirming that they are independent
accountants within the meaning of the Securities Act and are in compliance with
the applicable requirements relating to the qualification of accountants under
Rule 2-01 of Regulation S-X of the Commission,
(ii) stating, as of the date of the bring-down letter (or, with respect to
matters involving changes or developments since the respective dates as of
which specified financial information is given in the Offering Memorandum, as
of a date not more than five days prior to the date of the bring-down letter),
the conclusions and findings of such firm with respect to the financial
information and other matters covered by the initial letter and
(iii) confirming in all material respects the conclusions and findings set
forth in the initial letter.

 

(h)                                 The
Company shall have furnished to the Initial Purchasers on such Delivery Date a
certificate, dated such Delivery Date and delivered on behalf of the Company by
its chief executive officer and its chief financial officer, in form and
substance satisfactory to the Initial Purchasers, to the effect that:

 

(i)                  The
representations, warranties and agreements of the Company in Section 1
hereof are true and correct as of the date given and as of such Delivery Date;
and the Company has complied in all material respects with all its agreements
contained herein to be performed prior to or on such Delivery Date;

 

(ii)               (A) Neither the
Company nor any of its subsidiaries has sustained, since the date of the latest
audited financial statements included in the Offering Memorandum, any loss or
interference with its business from fire, explosion, flood or other calamity,
whether or not covered by insurance, or from any labor dispute or court or
governmental action,

 

27

 

order or decree, except
(x) as set forth or contemplated in the Offering Memorandum and
(y) for operating losses incurred in the ordinary course of business, or
(B) since such date there has not been any change in the capital stock or
long-term debt of the Company or any of its subsidiaries (except for exercise
of outstanding options described in the Offering Memorandum or pursuant to
Authorized Grants and as provided in Section 1(m) above), or any change,
or any development involving a prospective change, in or affecting the general
affairs, management, financial position, stockholders’ equity or results of
operations of the Company and its subsidiaries considered as one enterprise,
except as set forth or contemplated in the Offering Memorandum; and

 

(iii)            Such officer has
carefully examined the Offering Memorandum and, in such officer’s opinion
(A) the Offering Memorandum, as of its date, did not include any untrue
statement of a material fact and did not omit to state any material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, and (B) since the date of the
Offering Memorandum, no event has occurred which should have been set forth in
a supplement or amendment to the Offering Memorandum.

 

(i)                                     The
Indenture shall have been duly executed and delivered by the Company and the
Trustee and the Notes shall have been duly executed and delivered by the
Company and duly authenticated by the Trustee.

 

(j)                                     The
Company and the Collateral Agent shall have executed and delivered the Pledge
Agreement (in form and substance satisfactory to the Initial Purchasers) and
the Pledge Agreement shall be in full force and effect.

 

(k)                                  The
Company and the Initial Purchasers shall have executed and delivered the Registration
Rights Agreement (in form and substance satisfactory to the Initial Purchasers)
and the Registration Rights Agreement shall be in full force and effect.

 

(l)                                     The
NASD shall have accepted the Notes for trading on PORTAL.

 

(m)                               (i) Neither
the Company nor any of its subsidiaries shall have sustained, since the date of
the latest audited financial statements included in the Offering Memorandum,
any loss or interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor dispute or
court or governmental action, order or decree, except (A) as set forth or
contemplated in the Offering Memorandum and (B) for operating losses
incurred in the ordinary course of business, or (ii) since such date there
shall not have been any change in the capital stock or long-term debt of the
Company or any of its subsidiaries (except for exercise of outstanding options
described in the Offering Memorandum or pursuant to Authorized Grants and as
provided in Section 1(m) above), or any change, or any development
involving a

 

28

 

prospective change, in or
affecting the general affairs, management, financial position, stockholders’
equity or results of operations of the Company and its subsidiaries considered
as one enterprise, except as set forth or contemplated in the Offering
Memorandum, the effect of which, in any such case described in clause (i)
or (ii), is, in the reasonable judgment of the Initial Purchasers, so material
and adverse as to make it impracticable or inadvisable to proceed with the sale
or the delivery of the Notes being delivered on such Delivery Date on the terms
and in the manner contemplated in the Offering Memorandum.

 

(n)                                 The
Company shall have furnished to the Initial Purchasers such further
information, certificates and documents as the Initial Purchasers may
reasonably request to evidence compliance with the conditions set forth in this
Section 5.

 

All opinions, letters, evidence and certificates
mentioned above or elsewhere in this Agreement shall be deemed to be in
compliance with the provisions hereof only if they are in form and substance
satisfactory to counsel to the Initial Purchasers.

 

If any condition specified in this Section 5 shall
not have been fulfilled when and as required to be fulfilled, this Agreement
may be terminated by the Representative by notice to the Company at any time at
or prior to the First Delivery Date, and such termination shall be without
liability of any party to any other party except as provided in Section 4
and except that Sections 1 and 7 shall survive any such termination and remain
in full force and effect.

 

6.                                       Representations,
Warranties and Agreements of Initial Purchasers.  Each Initial Purchaser, severally and not jointly, represents and
warrants that such Initial Purchaser is a QIB. 
Each Initial Purchaser, severally and not jointly, agrees with the
Company that:

 

(a)                                  The
Notes and the Conversion Shares have not been and will not be registered under
the Securities Act in connection with the initial offering of the Notes.

 

(b)                                 Such
Initial Purchaser is a QIB;

 

(c)                                  Such
Initial Purchaser will not offer or sell the Notes in the United States by
means of any form of general solicitation or general advertising within the
meaning of Rule 502(c) of Regulation D, including (i) any
advertisement, article, notice or other communication published in any
newspaper, magazine or similar medium or broadcast over television or radio, or
(ii) any seminar or meeting whose attendees have been invited by any
general solicitation or general advertising in the United States; and

 

(d)                                 Such
Initial Purchaser has not offered or sold, and will not offer or sell, any
Notes in the United States except to persons whom it reasonably believes to be
QIBs.

 

29

 

7.                                       Indemnification
and Contribution.

 

(a)                                  The
Company shall indemnify and hold harmless each Initial Purchaser, its officers
and employees and each person, if any, who controls any Initial Purchaser
within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act from and against any loss, claim, damage or liability,
joint or several, or any action in respect thereof (including, but not limited to,
any loss, claim, damage, liability or action relating to purchases and sales of
the Notes), to which that Initial Purchaser, officer, employee or controlling
person may become subject:

 

(i)             insofar as such loss,
claim, damage, liability or action arises out of, or is based upon:
(A) any untrue statement or alleged untrue statement of a material fact
contained in (1) any Preliminary Offering Memorandum or the Offering
Memorandum, or in any amendment or supplement thereto, or (2) any blue sky
application or other document prepared or executed by the Company (or based
upon any written information furnished by the Company) filed in any
jurisdiction specifically for the purpose of qualifying any or all of the Notes
under the securities laws of any state or other jurisdiction (such application,
document or information being hereinafter called a “Blue Sky Application”), or
(B) the omission or alleged omission to state therein any material fact
necessary to make the statements therein not misleading; or

 

(ii)          to the extent of the
aggregate amount paid in settlement of any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened, or of
any claim whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission; provided that (subject to
Section 7(c)) any such settlement is effected with the written consent of
the Company,

 

and shall reimburse each
Initial Purchaser and each such officer, employee and controlling person
promptly upon demand for any and all expense whatsoever, as incurred (including
the fees and disbursements of counsel chosen by Merrill Lynch, except as
reimbursement of such fees may be limited by Section 7(c)), reasonably
incurred by that Initial Purchaser, officer, employee or controlling person in
connection with investigating or defending or preparing to defend against any
such loss, claim, damage, liability or action as such expenses are incurred; provided,
however,
that the Company shall not be liable in any such case to the extent that any
such loss, claim, damage, liability or action arises out of, or is based upon,
any untrue statement or alleged untrue statement or omission or alleged
omission made in any Preliminary Offering Memorandum or the Offering Memorandum,
or in any such amendment or supplement, or in any Blue Sky Application in
reliance upon and in conformity with the written information furnished to the
Company by or on behalf of any Initial Purchaser specifically for inclusion
therein and described in Section 7(e); provided, further, that as to any
Preliminary Offering Memorandum, this indemnity agreement shall not inure to
the benefit of any Initial Purchaser, its officers or employees or any person
controlling that Initial Purchaser on account of any loss, claim, damage,
liability or action arising from the sale of Notes to any person by that
Initial Purchaser if that Initial Purchaser

 

30

 

failed to send or give a
copy of the Offering Memorandum, as the same may be amended or supplemented, to
that person, and the untrue statement or alleged untrue statement of a material
fact or omission or alleged omission to state a material fact in such
Preliminary Offering Memorandum was corrected in the Offering Memorandum,
unless such failure resulted from non-compliance by the Company with
Section 3(b).  The foregoing
indemnity agreement is in addition to any liability which the Company may
otherwise have to any Initial Purchaser or to any officer, employee or controlling
person of that Initial Purchaser.

 

(b)                                 Each
Initial Purchaser, severally and not jointly, shall indemnify and hold
harmless, the Company, its officers and directors, and each person, if any, who
controls the Company within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act from and against any loss, claim,
damage or liability, joint or several, or any action in respect thereof, to
which the Company or any such director, officer or controlling person may
become subject, insofar as such loss, claim, damage, liability or action arises
out of, or is based upon:

 

(i)             any untrue statement
or alleged untrue statement of a material fact contained in any Preliminary
Offering Memorandum or the Offering Memorandum or in any amendment or
supplement thereto, or in any Blue Sky Application, or

 

(ii)          the omission or alleged
omission to state therein any material fact necessary to make the statements
therein not misleading,

 

but in each case only to
the extent that such untrue statement or alleged untrue statement or omission
or alleged omission was made in reliance upon and in conformity with the
written information furnished to the Company by or on behalf of that Initial
Purchaser specifically for inclusion therein and described in Section 7(e),
and shall reimburse the Company and any such director, officer or controlling
person promptly upon demand for any legal or other expenses reasonably incurred
by the Company or any such director, officer or controlling person in
connection with investigating or defending or preparing to defend against any
such loss, claim, damage, liability or action as such expenses are
incurred.  The foregoing indemnity
agreement is in addition to any liability which any Initial Purchaser may
otherwise have to the Company or any such director, officer or controlling
person.

 

(c)                                  Promptly
after receipt by an indemnified party under this Section 7 of notice of
any claim or the commencement of any action, the indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party under
this Section 7, notify the indemnifying party in writing of the claim or
the commencement of that action; provided, however, that the failure to
notify the indemnifying party shall not relieve it from any liability which it
may have under this Section 7 except to the extent it has been materially
prejudiced by such failure and, provided, further, that the failure to
notify the indemnifying party shall not relieve it from any liability which it
may have to an indemnified party otherwise than under this Section 7.  If any such claim or action shall be brought
against an indemnified party, and it shall notify the indemnifying party

 

31

 

thereof,
the indemnifying party shall be entitled to participate therein and, to the
extent that it wishes, jointly with any other similarly notified indemnifying
party, to assume the defense thereof with counsel satisfactory to the
indemnified party.  After notice from
the indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 7 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation; provided, however,
that the Initial Purchasers shall have the right to employ counsel to represent
jointly the Initial Purchasers and their respective officers, employees and
controlling persons who may be subject to liability arising out of any claim in
respect of which indemnity may be sought by the Initial Purchasers against the
Company under this Section 7, if the Initial Purchasers shall have
reasonably concluded that there may be one or more legal defenses available to
the Initial Purchasers and their respective officers, employees and controlling
persons that are different from or additional to those available to the Company
and its officers, employees and controlling persons, the fees and expenses of a
single separate counsel shall be paid by the Company.  No indemnifying party shall:

 

(i)             without the prior
written consent of the indemnified parties (which consent shall not be
unreasonably withheld) settle or compromise or consent to the entry of any
judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action) unless such settlement, compromise or consent
(1) includes an unconditional release of each indemnified party from all
liability arising out of such claim, action, suit or proceeding and
(2) does not include a statement as to or an admission of fault,
culpability or a failure to act by or on behalf of any indemnified party, or

 

(ii)          be liable for any
settlement of any such action effected without its written consent (which
consent shall not be unreasonably withheld) but if settled with its written
consent or if there be a final judgment of the plaintiff in any such action,
the indemnifying party agrees to indemnify and hold harmless any indemnified
party from and against any loss of liability by reason of such settlement or
judgment.

 

(d)                                 If
the indemnification provided for in this Section 7 shall for any reason be
unavailable or insufficient to hold harmless an indemnified party under
Section 7(a) or 7(b) in respect of any loss, claim, damage or liability,
or any action in respect thereof, referred to therein, each indemnifying party
shall, in lieu of indemnifying such indemnified party, contribute to the amount
paid or payable by such indemnified party as a result of such loss, claim,
damage or liability, or action in respect thereof:

 

(i)                 in such
proportion as shall be appropriate to reflect the relative benefits received by
the Company on the one hand and the Initial Purchasers on the other from the
offering of the Notes, or

 

32

 

(ii)              if the allocation
provided by clause 7(d)(i) is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause 7(d)(i) but also the relative fault of the Company on the one
hand and the Initial Purchasers on the other with respect to the statements or
omissions or alleged statements or alleged omissions that resulted in such
loss, claim, damage or liability (or action in respect thereof), as well as any
other relevant equitable considerations.

 

The relative benefits received by the Company on the
one hand and the Initial Purchasers on the other with respect to such offering
shall be deemed to be in the same proportion as the total net proceeds from the
offering of the Notes purchased under this Agreement (before deducting
expenses) received by the Company on the one hand, and the total discounts and
commissions received by the Initial Purchasers with respect to the Notes
purchased under this Agreement, on the other hand, bear to the total gross
proceeds from the offering of the Notes under this Agreement, in each case as
set forth in the table under the caption “Plan of Distribution” in the Offering
Memorandum.

 

The relative fault shall be determined by reference to
whether the untrue or alleged untrue statement of a material fact or omission
or alleged omission to state a material fact relates to information supplied by
the Company or the Initial Purchasers, the intent of the parties and their
relative knowledge, access to information and opportunity to correct or prevent
such statement or omission.

 

The Company and the Initial Purchasers agree that it
would not be just and equitable if the amount of contributions pursuant to this
Section 7(d) were to be determined by pro rata allocation (even if the Initial
Purchasers were treated as one entity for such purpose) or by any other method
of allocation which does not take into account the equitable considerations
referred to herein.  The amount paid or
payable by an indemnified party as a result of the loss, claim, damage or
liability, or action in respect thereof, referred to above in this
Section 7(d) shall be deemed to include, for purposes of this
Section 7(d), any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating, preparing or defending any
such litigation, investigation or proceeding by any governmental agency or
body, or commenced or threatened action or claim.

 

Notwithstanding the provisions of this
Section 7(d), no Initial Purchaser shall be required to contribute any
amount in excess of the amount by which the total price at which the Notes
resold by it in the initial placement of such Notes were offered to investors
exceeds the amount of any damages which such Initial Purchaser has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission.

 

No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled
to contribution from any person who was not guilty of such fraudulent
misrepresentation.

 

33

 

For purposes of this Section 7(d), each person,
if any, who controls an Initial Purchaser within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act shall have the
same rights to contribution as such Initial Purchaser, and each person, if any,
who controls the Company within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act shall have the same rights to
contribution as the Company.  The
Initial Purchasers’ obligations to contribute as provided in this
Section 7(d) are several in proportion to their respective purchase
obligations and not joint.

 

(e)                                  The
Initial Purchasers severally confirm that the statements (i) with respect
to the offering of the Notes set forth in the third sentence of the ninth
paragraph on the cover page of the Offering Memorandum; (ii) in the fourth
paragraph under the heading “Plan of Distribution”; (iii) in the first
paragraph under the heading “Plan of Distribution—Commissions and Discounts” in
the Offering Memorandum; (iv) in the paragraph under the heading “Plan of
Distribution—Notes Are Not Being Registered” in the Offering Memorandum;
(v) in the third and fourth sentences of the first paragraph under the
heading “Plan of Distribution—New Issue of Notes” in the Offering Memorandum;
and (vi) in the first and third sentences of the first paragraph under the
heading “Plan of Distribution—Price Stabilization and Short Positions” in the
Offering Memorandum are correct and constitute the only information furnished
in writing to the Company by or on behalf of the Initial Purchasers
specifically for inclusion in the Offering Memorandum.

 

8.                                       Defaulting
Initial Purchasers.

 

If, on any Delivery Date, any Initial Purchaser
defaults in the performance of its obligations under this Agreement, the
remaining non-defaulting Initial Purchasers shall be obligated to purchase the
aggregate principal amount of Notes which the defaulting Initial Purchaser
agreed but failed to purchase on such Delivery Date in the respective
proportions which the total aggregate principal amount of Notes set opposite
the name of each remaining non-defaulting Initial Purchaser in Schedule 1
hereto bears to the total aggregate principal amount of Notes set opposite the
names of all the remaining non-defaulting Initial Purchasers in Schedule 1
hereto; provided,
however,
that the remaining non-defaulting Initial Purchasers shall not be obligated to
purchase any Notes on such Delivery Date if the total aggregate principal
amount of Notes which the defaulting Initial Purchasers agreed but

 

34

 

failed to purchase on
such date exceeds 9.09% of the total aggregate principal amount at maturity of
Notes to be purchased on such Delivery Date, and any remaining non-defaulting
Initial Purchaser shall not be obligated to purchase more than 110% of the
aggregate principal amount at maturity of Notes which it agreed to purchase on
such Delivery Date pursuant to the terms of Section 2.  If the foregoing maximums are exceeded, the
remaining non-defaulting Initial Purchasers, or those other purchasers
satisfactory to the Initial Purchasers who so agree, shall have the right, but
shall not be obligated, to purchase on such Delivery Date, in such proportion
as may be agreed upon among them, the total aggregate principal amount of Notes
to be purchased on such Delivery Date. 
If the remaining Initial Purchasers or other purchasers satisfactory to
the Initial Purchasers do not elect to purchase on such Delivery Date the
aggregate principal amount of Notes which the defaulting Initial Purchasers
agreed but failed to purchase, this Agreement (or with respect to the Optional
Delivery Date, the obligation of the Initial Purchasers to purchase the
Optional Notes) shall terminate without liability on the part of any
non-defaulting Initial Purchasers and the Company, except that the Company will
continue to be liable for the payment of expenses to the extent set forth in
Sections 4 and 10.  As used in this
Agreement, the term “Initial Purchaser” includes, for all purposes of this
Agreement unless the context requires otherwise, any party not listed in Schedule
1 hereto who, pursuant to this Section 8, purchases Notes which a
defaulting Initial Purchaser agreed but failed to purchase.

 

Nothing contained herein shall relieve a defaulting
Initial Purchaser of any liability it may have to the Company for damages
caused by its default.  If other
purchasers are obligated or agree to purchase the Notes of a defaulting or
withdrawing Initial Purchaser, either the remaining non-defaulting Initial
Purchasers or the Company may postpone the Delivery Date for up to seven full
business days in order to effect any changes in the Offering Memorandum or in
any other document or arrangement that, in the opinion of counsel to the
Company or counsel to the Initial Purchasers, may be necessary.

 

9.                                       Termination.

 

(a)                                  The
obligations of the Initial Purchasers hereunder may be terminated by the
Initial Purchasers by notice given to and received by the Company prior to
delivery of and payment for the Notes if, prior to that time: (i) there
has occurred one of the events described in Section 5(m), or
(ii) there has occurred any material adverse change in the financial
markets in the United States, any outbreak of hostilities or escalation thereof
or other calamity or crisis or any change or development involving a prospective
change in national or international political, financial or economic
conditions, in each case the effect of which is such as to make it, in the
judgment of the Representative, impracticable or inadvisable to market the
Notes or to enforce contracts for the sale of the Notes, or (iii) trading
in any securities of the Company has been suspended or materially limited by
the Commission or The Nasdaq National Market, or if trading generally on the
American Stock Exchange or the New York Stock Exchange or in The Nasdaq Stock
Market has been suspended or materially limited, or minimum or maximum prices
for trading have been fixed, or maximum ranges for prices have been required,
by any of said exchanges or by such system or by order of the Commission, the
National Association of Securities Dealers, Inc. or any other governmental
authority, or a material disruption has occurred in commercial banking or
securities settlement or clearance services in the United States or (iv) a
banking moratorium has been declared by either Federal or New York authorities.

 

(b)                                 If
this Agreement is terminated pursuant to this Section 9, such termination
shall be without liability of any party to any other party except as provided
in Section 10 and provided, further, that
Sections 1, 7 and 13 shall survive such termination and remain in full
force and effect.

 

10.                                 Reimbursement
of Initial Purchasers’ Expenses.  If
(a) the Company shall fail to tender the Notes for delivery to the Initial
Purchasers for any reason permitted under this Agreement or (b) the
Initial Purchasers shall decline to purchase the Notes for

 

35

 

any
reason permitted under this Agreement (including the termination of this
Agreement pursuant to Section 9), the Company shall reimburse the Initial
Purchasers for the fees and expenses of their counsel and for such other
out-of-pocket expenses as shall have been incurred by them in connection with
this Agreement and the proposed purchase of the Notes, and upon demand the
Company shall pay the full amount thereof to the Initial Purchasers.  If this Agreement is terminated pursuant to
Section 8 by reason of the default of one or more Initial Purchasers, the
Company shall not be obligated to reimburse any defaulting Initial Purchaser on
account of those expenses.

 

11.                                 Notices,
etc.  All statements, requests,
notices and agreements hereunder shall be in writing, and:

 

(a)                                  if
to the Initial Purchasers, shall be delivered or sent by mail, telex or
facsimile transmission to c/o Merrill Lynch & Co., North Tower, World
Financial Center, New York, New York 10281, Attention: Paul A. Pepe (Fax:
212-738-1069); and

 

(b)                                 if
to the Company, shall be delivered or sent by mail, telex or facsimile
transmission to Nektar Therapeutics, 150 Industrial Road, San Carlos,
California  94070, Attention: Secretary
(Fax: 650-620-5360).

 

provided, however, that any notice to
an Initial Purchaser pursuant to Section 7(c) shall be delivered or sent
by mail, telex or facsimile transmission to each such Initial Purchaser, which
address will be supplied to any other party hereto by Merrill Lynch upon
request.  Any such statements, requests,
notices or agreements shall take effect at the time of receipt thereof.  The Company shall be entitled to act and
rely upon any request, consent, notice or agreement given or made on behalf of
the Initial Purchasers by Merrill Lynch.

 

12.                                 Persons
Entitled to Benefit of Agreement. 
This Agreement shall inure to the benefit of and be binding upon the
Initial Purchasers, the Company and their respective successors.  This Agreement and the terms and provisions
hereof are for the sole benefit of only those persons, except that the
representations, warranties, indemnities and agreements of the Company contained
in this Agreement shall also be deemed to be for the benefit of the officers
and employees of each Initial Purchaser and the person or persons, if any, who
control each Initial Purchaser within the meaning of Section 15 of the
Securities Act and any indemnity agreement of the Initial Purchasers contained
in Section 7(b) of this Agreement shall be deemed to be for the benefit of
directors, officers and employees of the Company, and any person controlling
the Company within the meaning of Section 15 of the Securities Act.  Nothing contained in this Agreement is
intended or shall be construed to give any person, other than the persons
referred to in this Section 12, any legal or equitable right, remedy or
claim under or in respect of this Agreement or any provision contained herein.

 

13.                                 Survival.  The respective indemnities, representations,
warranties and agreements of the Company and the Initial Purchasers contained
in this Agreement or made by or on behalf of them, respectively, pursuant to
this Agreement, shall survive the

 

36

 

delivery
of and payment for the Notes and shall remain in full force and effect,
regardless of any termination or cancellation of this Agreement or any
investigation made by or on behalf of any of them or any person controlling any
of them.

 

14.                                 Definition
of the Terms “Business Day” and “Subsidiary.”  For purposes of this Agreement, (a) ”business day” means any
day on which the New York Stock Exchange, Inc. is open for trading and
(b) ”subsidiary” has the meaning set forth in Rule 405 of the rules
and regulations promulgated under the Securities Act.

 

15.                                 Governing
Law.  This Agreement shall be
governed by, and construed in accordance with, the laws of the State of New
York.

 

16.                                 Counterparts.  This Agreement may be executed in one or
more counterparts and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to be an original but all such counterparts
shall together constitute one and the same instrument.

 

17.                                 Headings.  The headings herein are inserted for
convenience of reference only and are not intended to be part of, or to affect
the meaning or interpretation of, this Agreement.

 

37

 

If the foregoing correctly sets forth the agreement between
the Company and the Initial Purchasers, please indicate your acceptance in the
space provided for that purpose below.

 

	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
  NEKTAR THERAPEUTICS

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

Accepted and agreed by:

 

MERRILL
LYNCH, PIERCE, FENNER & SMITH

INCORPORATED

DEUTSCHE
BANK SECURITIES INC.

LEHMAN BROTHERS INC.

FRIEDMAN, BILLINGS, RAMSEY & CO., INC.

SG COWEN SECURITIES CORPORATION

 

By:
MERRILL LYNCH, PIERCE, FENNER & SMITH

INCORPORATED

 

 

	
  By:

  	
   

  	
   

  
	
   

  	
  Authorized
  Representative

  	
   

  

 

38

 

SCHEDULE 1

 

	
  Initial Purchasers

  	
   

  	
  Principal
  Amount

  of Firm Notes

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Merrill
  Lynch, Pierce, Fenner & Smith Incorporated

  	
   

  	
  $

  	
  52,000,000

  	
   

  
	
  Deutsche Bank Securities Inc.

  	
   

  	
  16,000,000

  	
   

  
	
  Lehman Brothers Inc.

  	
   

  	
  16,000,000

  	
   

  
	
  Friedman, Billings, Ramsey & Co., Inc.

  	
   

  	
  8,000,000

  	
   

  
	
  SG
  Cowen Securities Corporation

  	
   

  	
  8,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Total

  	
   

  	
  $

  	
  100,000,000

  	
   

  

 

39Exhibit
4.2

 

RESALE REGISTRATION
RIGHTS AGREEMENT

 

among

 

NEKTAR THERAPEUTICS,

 

MERRILL LYNCH, PIERCE,
FENNER & SMITH INCORPORATED

 

DEUTSCHE
BANK SECURITIES INC.

 

LEHMAN
BROTHERS INC.

 

FRIEDMAN,
BILLINGS, RAMSEY & CO., INC.

 

and

 

SG
COWEN SECURITIES CORPORATION

 

Dated as of June 30, 2003

 

 

Resale Registration Rights Agreement (the
“Agreement”), dated as of June 30, 2003 among Nektar Therapeutics, a Delaware
corporation (together with any successor entity, herein referred to as the
“Issuer”), Merrill Lynch, Pierce, Fenner & Smith Incorporated, Deutsche Bank Securities Inc., Lehman Brothers
Inc., Friedman, Billings, Ramsey & Co., Inc. and SG Cowen Securities
Corporation (collectively, the “Initial Purchasers”).

 

Pursuant to the Purchase Agreement, dated June 25,
2003, between the Issuer and the Initial Purchasers (the “Purchase Agreement”),
the Initial Purchasers have agreed to purchase from the Issuer up to
$100,000,000 ($125,000,000 if the Initial Purchasers exercise the
over-allotment option in full) in aggregate principal amount of 3% Convertible
Subordinated Notes due 2010 (the “Notes”). 
The Notes will be convertible into fully paid, nonassessable common
stock, par value $0.0001 per share, of the Issuer (the “Common Stock”) on the
terms, and subject to the conditions, set forth in the Indenture (as defined
herein).  To induce the Initial
Purchasers to purchase the Notes, the Issuer has agreed to provide the
registration rights set forth in this Agreement pursuant to Section 3(l)
of the Purchase Agreement.

 

The parties hereby agree as follows:

 

1.                                       Definitions.  As used in
this Agreement, the following capitalized terms shall have the following
meanings:

 

Advice:  As defined in Section 4(c)(ii) hereof.

 

Agreement:  As defined in the preamble hereto.

 

Blue
Sky Application:  As
defined in Section 6(a)(i) hereof.

 

Broker-Dealer:  Any broker or dealer registered under the
Exchange Act.

 

Business
Day:  A day other than
a Saturday or Sunday or any federal holiday in the United States.

 

Closing
Date:  The date of this
Agreement.

 

Commission:  Securities and Exchange Commission.

 

Common
Stock:  As defined in
the preamble hereto.

 

Damages
Payment Date:  Each
Interest Payment Date.  For purposes of
this Agreement, if no Notes are outstanding, “Damages Payment Date” shall mean
each June 30 and December 30.

 

Effectiveness
Period:  As defined in
Section 2(a)(iii) hereof.

 

Effectiveness
Target Date:  As
defined in Section 2(a)(ii) hereof.

 

Exchange
Act:  Securities
Exchange Act of 1934, as amended.

 

1

 

Holder:  A Person who owns, beneficially or
otherwise, Transfer Restricted Securities.

 

Indemnified
Holder:  As defined in
Section 6(a) hereof.

 

Indenture:  The Indenture, dated as of June 30, 2003,
between the Issuer and J.P. Morgan Trust Company, National Association, as
trustee (the “Trustee”), pursuant to which the Notes are to be issued, as such
Indenture is amended, modified or supplemented from time to time in accordance
with the terms thereof.

 

Initial
Purchasers:  As defined
in the preamble hereto.

 

Interest
Payment Date:  As
defined in the Indenture.

 

Issuer:  As defined in the preamble hereto.

 

Liquidated
Damages:  As defined
in Section 3(a) hereof.

 

Majority
of Holders:  Holders
holding over 50% of the aggregate principal amount of Notes outstanding;
provided that, for purpose of this definition, a holder of shares of Common
Stock which constitute Transfer Restricted Securities and were issued upon
conversion of the Notes shall be deemed to hold an aggregate principal amount
of Notes (in addition to the aggregate principal amount of Notes held by such
holder) equal to the aggregate principal amount of Notes converted by such
Holder into such shares of Common Stock.

 

NASD:  National Association of Securities Dealers,
Inc.

 

Notes:  As defined in the preamble hereto.

 

Person:  An individual, partnership, corporation,
unincorporated organization, trust, joint venture or a government or agency or
political subdivision thereof.

 

Prospectus:  The prospectus included in a Shelf Registration
Statement, as amended or supplemented by any prospectus supplement and by all
other amendments thereto, including post-effective amendments, and all material
incorporated by reference into such Prospectus.

 

Questionnaire Deadline:  As defined in Section 2(b) hereof.

 

Record
Holder:  With respect
to any Damages Payment Date, each Person who is a Holder on the record date
with respect to the Interest Payment Date on which such Damages Payment Date
shall occur.  In the case of a Holder of
shares of Common Stock issued upon conversion of the Notes, “Record Holder”
shall mean each Person who is a Holder of shares of Common Stock which
constitute Transfer Restricted Securities on the June 15 or December 15
immediately preceding the Damages Payment Date.

 

Registration
Default:  As defined
in Section 3(a) hereof.

 

Sale
Notice:  As defined in Section 4(e) hereof.

 

Securities
Act:  Securities Act
of 1933, as amended.

 

2

 

Shelf
Filing Deadline: As defined in Section 2(a)(i) hereof.

 

Shelf
Registration Statement: 
As defined in Section 2(a)(i) hereof.

 

Suspension
Period.  As defined in
Section 4(b)(i) hereof.

 

TIA:  Trust Indenture Act of 1939, as in effect on
the date the Indenture is qualified under the TIA.

 

Transfer
Restricted Securities: 
Each Note and each share of Common Stock issued upon conversion of Notes
until the earlier of:

 

(i)                                     the
date on which such Note or such share of Common Stock issued upon conversion
has been effectively registered under the Securities Act and disposed of in
accordance with the Shelf Registration Statement;

 

(ii)                                  the
date on which such Note or such share of Common Stock issued upon conversion is
transferred in compliance with Rule 144 under the Securities Act or may be sold
or transferred pursuant to Rule 144 under the Securities Act (or any other
similar provision then in force); or

 

(iii)                               the
date on which such Note or such share of Common Stock issued upon conversion
ceases to be outstanding (whether as a result of redemption, repurchase and
cancellation, conversion or otherwise).

 

Underwritten
Registration or Underwritten Offering:  A registration in which securities of the
Issuer are sold to an underwriter for reoffering to the public.

 

2.                                      Shelf
Registration.

 

(a)                                  The
Issuer shall:

 

(i)                                     not
later than 90 days after the date hereof (the “Shelf Filing Deadline”), cause
to be filed a registration statement pursuant to Rule 415 under the Securities
Act (the “Shelf Registration Statement”), which Shelf Registration Statement
shall provide for resales of all Transfer Restricted Securities held by Holders
that have provided the information required pursuant to the terms of Section
2(b) hereof;

 

(ii)                                  use
its best efforts  to cause the Shelf Registration Statement to be declared
effective by the Commission as promptly as reasonably practicable, but in no
event later than 210 days after the date hereof (the “Effectiveness Target
Date”); and

 

(iii)                               use its best efforts to
keep the Shelf Registration Statement continuously effective, supplemented and
amended as required by the provisions of Section 4(b) hereof to the extent
necessary to ensure that (A) it is available for resales by the Holders of
Transfer Restricted Securities entitled to the benefit of this Agreement and
(B) conforms with the requirements of this Agreement and the Securities Act and
the rules and

 

3

 

regulations of the Commission promulgated thereunder
as announced from time to time for a period (the “Effectiveness Period”) of:

 

(A)                              two
years following the last date of original issuance of Notes; or

 

(B)                                such
shorter period that will terminate when (x) all of the Holders of Transfer
Restricted Securities are able to sell all Transfer Restricted Securities
immediately without restriction pursuant to Rule 144(k) under the Securities
Act or any successor rule thereto, (y) when all Transfer Restricted Securities
have ceased to be outstanding (whether as a result of redemption, repurchase
and cancellation, conversion or otherwise) or (z) all Transfer Restricted
Securities registered under the Shelf Registration Statement have been sold.

 

(b)                                 No
Holder of Transfer Restricted Securities may include any of its Transfer
Restricted Securities in the Shelf Registration Statement pursuant to this
Agreement unless such Holder furnishes to the Issuer in writing, prior to or on
the 20th Business Day after receipt of a request therefor (the “Questionnaire
Deadline”), such information as the Issuer may reasonably request for use in
connection with the Shelf Registration Statement or the Prospectus or
preliminary Prospectus included therein and in any application to be filed with
or under state securities laws.  In
connection with all such requests for information from Holders of Transfer
Restricted Securities, the Issuer shall notify such Holders of the requirements
set forth in the preceding sentence.  No
Holder of Transfer Restricted Securities shall be entitled to Liquidated
Damages pursuant to Section 3 hereof unless such Holder shall have provided all
such reasonably requested information prior to or on the Questionnaire
Deadline.  Each Holder as to which the
Shelf Registration Statement is being effected agrees to furnish promptly to
the Issuer all information required to be disclosed in order to make
information previously furnished to the Issuer by such Holder not materially
misleading.

 

3.                                       Liquidated
Damages.

 

(a)                                  If:

 

(i)                                     the
Shelf Registration Statement is not filed with the Commission prior to or on
the Shelf Filing Deadline;

 

(ii)                                  the
Shelf Registration Statement has not been declared effective by the Commission
prior to or on the Effectiveness Target Date;

 

(iii)                               subject to the
provisions of Section 4(b)(i) hereof, the Shelf Registration Statement is filed
and declared effective but, during the Effectiveness Period, shall thereafter
cease to be effective or fail to be usable for its intended purpose without
being succeeded within five Business Days by a post-effective amendment to the
Shelf Registration Statement or a report filed with the Commission pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act that cures such failure
and, in the case of a post-effective amendment, is itself immediately declared
effective; or

 

(iv)                              prior
to or on the 45th, 60th or 90th day, as the
case may be, of any Suspension Period, such suspension has not been terminated,

 

4

 

(each such event referred to in foregoing clauses (i)
through (iv), a “Registration Default”), the Issuer hereby agrees to pay
additional interest as liquidated damages (“Liquidated Damages”) with respect
to the Transfer Restricted Securities from and including the day following the
Registration Default to but excluding the day on which the Registration Default
has been cured:

 

(A)                              in
respect of the Notes, to each holder of Notes, (x) with respect to the first
90-day period during which a Registration Default shall have occurred and be
continuing, in an amount per year equal to an additional 0.25% of the principal
amount of the Notes, and (y) with respect to the period commencing on the 91st
day following the day the Registration Default shall have occurred and be
continuing, in an amount per year equal to an additional 0.50% of the principal
amount of the Notes; provided that in no event shall Liquidated Damages accrue
at a rate per year exceeding 0.50% of the principal amount of the Notes; and

 

(B)                                in
respect of any shares of Common Stock, to each holder of shares of Common Stock
issued upon conversion of Notes, (x) with respect to the first 90-day period
during which a Registration Default shall have occurred and be continuing, in
an amount per year equal to 0.25% of the principal amount of the converted
Notes, and (y) with respect to the period commencing the 91st day following the
day the Registration Default shall have occurred and be continuing, in an
amount per year equal to 0.50% of the principal amount of the converted Notes;
provided that in no event shall Liquidated Damages accrue at a rate per year
exceeding 0.50% of the principal amount of the converted Notes.

 

(b)                                 All
accrued Liquidated Damages shall be paid in arrears to Record Holders by the
Issuer on each Damages Payment Date by wire transfer of immediately available
funds or by federal funds check. 
Following the cure of all Registration Defaults relating to any
particular Note or share of Common Stock, the accrual of Liquidated Damages
with respect to such Note or share of Common Stock will cease.

 

All obligations of the Issuer set forth in this
Section 3 that are outstanding with respect to any Transfer Restricted Security
at the time such security ceases to be a Transfer Restricted Security shall
survive until such time as all such obligations with respect to such Transfer
Restricted Security shall have been satisfied in full.

 

The Liquidated Damages set forth above shall be the
exclusive monetary remedy available to the Holders of Transfer Restricted
Securities for such Registration Default.

 

4.                                       Registration
Procedures.

 

(a)                                  In
connection with the Shelf Registration Statement, the Issuer shall comply with
all the provisions of Section 4(b) hereof and shall use its best efforts to
effect such registration to permit the sale of the Transfer Restricted
Securities being sold in accordance with the intended method or methods of
distribution thereof, and pursuant thereto, shall as expeditiously as possible
prepare and file with the Commission a Shelf Registration Statement relating to
the registration on any appropriate form under the Securities Act.

 

5

 

(b)                                 In
connection with the Shelf Registration Statement and any Prospectus required by
this Agreement to permit the sale or resale of Transfer Restricted Securities,
the Issuer shall:

 

(i)                                     Subject
to any notice by the Issuer in accordance with this Section 4(b) of the
existence of any fact or event of the kind described in Section 4(b)(iii)(D),
use its best efforts to keep the Shelf Registration Statement continuously
effective during the Effectiveness Period; upon the occurrence of any event
that would cause the Shelf Registration Statement or the Prospectus contained
therein (A) to contain a material misstatement or omission or (B) not be
effective and usable for resale of Transfer Restricted Securities during the
Effectiveness Period, the Issuer shall file promptly an appropriate amendment
to the Shelf Registration Statement or a report filed with the Commission
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, in the case
of clause (A), correcting any such misstatement or omission, and, in the case
of either clause (A) or (B), use its best efforts to cause such amendment to be
declared effective and the Shelf Registration Statement and the related
Prospectus to become usable for their intended purposes as soon as practicable
thereafter.  Notwithstanding the
foregoing, the Issuer may suspend the effectiveness of the Shelf Registration
Statement by written notice to the Holders for a period not to exceed an
aggregate of 45 days in any 90-day period (each such period, a “Suspension
Period”) if:

 

(x)                                   an
event occurs and is continuing as a result of which the Shelf Registration
Statement would, in the Issuer’s reasonable judgment, contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading; and

 

(y)                                 the
Issuer reasonably determines that the disclosure of such event at such time
would have a material adverse effect on the business of the Issuer (and its
subsidiaries, if any, taken as a whole);

 

provided
that in the event the disclosure relates to a previously
undisclosed proposed or pending material business transaction, the disclosure
of which would impede the Issuer’s ability to consummate such transaction, the
Issuer may extend a Suspension Period from 45 days to 60 days; provided,
however, that Suspension Periods shall not exceed an aggregate of 90 days in
any 360-day period.

 

(ii)                                  Prepare
and file with the Commission such amendments and post-effective amendments to
the Shelf Registration Statement as may be necessary to keep the Shelf
Registration Statement effective during the Effectiveness Period; cause the
Prospectus to be supplemented by any required Prospectus supplement, and as so
supplemented to be filed pursuant to Rule 424 under the Securities Act, and to
comply fully with the applicable provisions of Rules 424 and 430A under the
Securities Act in a timely manner; and comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by the
Shelf Registration Statement during the applicable period in accordance with
the intended method or methods of distribution by the sellers thereof set forth
in the Shelf Registration Statement or supplement to the Prospectus.

 

6

 

(iii)                               Advise the
underwriter(s), if any, and selling Holders promptly (but in any event within
five Business Days) and, if requested by such Persons, to confirm such advice
in writing:

 

(A)                              when
the Prospectus or any Prospectus supplement or post-effective amendment has
been filed, and, with respect to the Shelf Registration Statement or any
post-effective amendment thereto, when the same has become effective,

 

(B)                                of
any request by the Commission for amendments to the Shelf Registration
Statement or amendments or supplements to the Prospectus or for additional
information relating thereto,

 

(C)                                of
the issuance by the Commission of any stop order suspending the effectiveness
of the Shelf Registration Statement under the Securities Act or of the
suspension by any state securities commission of the qualification of the
Transfer Restricted Securities for offering or sale in any jurisdiction, or the
initiation of any proceeding for any of the preceding purposes, or

 

(D)                               of
the existence of any fact or the happening of any event, during the
Effectiveness Period, that makes any statement of a material fact made in the
Shelf Registration Statement, the Prospectus, any amendment or supplement
thereto, or any document incorporated by reference therein untrue, or that
requires the making of any additions to or changes in the Shelf Registration
Statement or the Prospectus in order to make the statements therein not
misleading.

 

If at any time the Commission shall issue any stop order suspending the
effectiveness of the Shelf Registration Statement, or any state securities
commission or other regulatory authority shall issue an order suspending the
qualification or exemption from qualification of the Transfer Restricted Securities
under state securities or Blue Sky laws, the Issuer shall use its reasonable
best efforts to obtain the withdrawal or lifting of such order at the earliest
possible time.

 

(iv)                              Furnish
to counsel for the Initial Purchasers, before filing with the Commission, a
copy of the Shelf Registration Statement and copies of any Prospectus included
therein or any amendments or supplements to the Shelf Registration Statement or
Prospectus (other than documents incorporated by reference after the initial
filing of the Shelf Registration Statement), which documents will be subject to
the review of such counsel, for a period of at least five Business Days, and
the Issuer will not file any Shelf Registration Statement or Prospectus or any
amendment or supplement to the Shelf Registration Statement or Prospectus
(other than documents incorporated by reference) to which such counsel shall
reasonably object within five Business Days after the receipt thereof.  Counsel for the Initial Purchasers shall be
deemed to have reasonably objected to such filing if the Shelf Registration
Statement, amendment, Prospectus or supplement, as applicable, as proposed to
be filed, contains a material misstatement or omission.  Notwithstanding the foregoing, the Issuer
shall not be required to furnish counsel for the Initial Purchasers with any
amendment or supplement to the Shelf Registration Statement or Prospectus filed
solely to reflect changes to the amount of Notes held by any particular 

 

7

 

Holder at the request of such Holder or immaterial
revisions to the information contained therein.

 

(v)                                 Make
available at reasonable times for inspection by one or more representatives of
the selling Holders, designated in writing by a Majority of Holders whose
Transfer Restricted Securities are included in the Shelf Registration
Statement, any underwriter participating in any distribution pursuant to the
Shelf Registration Statement, and any attorney or accountant retained by such
selling Holders or any of the underwriter(s), all financial and other records,
pertinent corporate documents and properties of the Issuer as shall be
reasonably necessary to enable them to exercise any applicable due diligence
responsibilities, and cause the Issuer’s officers, directors, managers and
employees to supply all information reasonably requested by any such
representative or representatives of the selling Holders, underwriter, attorney
or accountant in connection with the Shelf Registration Statement after the filing
thereof and before its effectiveness; provided, however, that any information
designated by the Company as confidential at the time of delivery of such
information shall be kept confidential by the recipient thereof.

 

(vi)                              If
requested by any selling Holders or the underwriter(s), if any, promptly
incorporate in the Shelf Registration Statement or Prospectus, pursuant to a
supplement or post-effective amendment if necessary, such information as such
selling Holders and underwriter(s), if any, may reasonably request to have
included therein, including, without limitation: (1) information relating to
the “Plan of Distribution” of the Transfer Restricted Securities, (2)
information with respect to the principal amount of Notes or number of shares
of Common Stock being sold to such underwriter(s), (3) the purchase price being
paid therefor and (4) any other terms of the offering of the Transfer
Restricted Securities to be sold in such offering; and make all required
filings of such Prospectus supplement or post-effective amendment as soon as
reasonably practicable after the Issuer is notified of the matters to be
incorporated in such Prospectus supplement or post-effective amendment.  Notwithstanding the foregoing, following the
effective date of the Shelf Registration Statement, the Issuer shall not be
required to file more than one such supplement or post-effective amendment to
reflect changes in the amount of Notes held by any particular Holder at the
request of such Holder in any 30-day period.

 

(vii)                           Furnish to each selling
Holder and each of the underwriter(s), if any, without charge, at least one
copy of the Shelf Registration Statement, as first filed with the Commission,
and of each amendment thereto (and any documents incorporated by reference therein
or exhibits thereto (or exhibits incorporated in such exhibits by reference) as
such Person may request).

 

(viii)                        Deliver to each selling Holder
and each of the underwriter(s), if any, without charge, as many copies of the
Prospectus (including each preliminary prospectus) and any amendment or
supplement thereto as such Persons reasonably may request; subject to any
notice by the Issuer in accordance with this Section 4(b) of the existence of
any fact or event of the kind described in Section 4(b)(iii)(D), the Issuer
hereby consents to the use of the Prospectus and any amendment or supplement
thereto by each of the selling Holders and each of the underwriter(s), if any,
in connection with the offering and 

 

8

 

the sale of the Transfer Restricted Securities covered
by the Prospectus or any amendment or supplement thereto.

 

(ix)                                If  an underwriting agreement is entered into
and the registration is an Underwritten Registration, the Issuer shall:

 

(A)                              upon
request, furnish to each selling Holder and each underwriter, in such substance
and scope as they may reasonably request and as are customarily made by issuers
to underwriters in primary underwritten offerings, upon the date of closing of
any sale of Transfer Restricted Securities in an Underwritten Registration:

 

(1)                                  a
certificate, dated the date of such closing, signed by the Chief Financial
Officer of the Issuer confirming, as of the date thereof, the matters set forth
in Section 5(h) of the Purchase Agreement and such other matters as such
parties may reasonably request;

 

(2)                                  opinions,
each dated the date of such closing, of counsel to the Issuer covering such of
the matters set forth in Sections 5(c), 5(d) and 5(e) of the Purchase Agreement
as are customarily covered in legal opinions to underwriters in connection with
primary underwritten offerings of securities; and

 

(3)                                  customary
comfort letters, dated the date of such closing, from the Issuer’s independent
certified public accountants (and from any other accountants whose report is
contained or incorporated by reference in the Shelf Registration Statement), in
the customary form and covering matters of the type customarily covered in
comfort letters to underwriters in connection with primary underwritten offerings
of securities;

 

(B)                                set
forth in full in the underwriting agreement, if any, indemnification provisions
and procedures which provide rights no less protective than those set forth in
Section 6 hereof with respect to all parties to be indemnified; and

 

(C)                                deliver
such other documents and certificates as may be reasonably requested by such
parties to evidence compliance with clause (A) above and with any customary
conditions contained in the underwriting agreement or other agreement entered
into by the selling Holders pursuant to this clause (ix).

 

(D)                               if
requested by any underwriters, make appropriate officers of the Issuer
available to such underwriters for meetings with prospective purchasers of the
Transfer Restricted Securities and prepare and present to potential investors
customary “road show” materials in a manner consistent with new issuances of
securities similar to the Transfer Restricted Securities.

 

(x)                                   Before
any public offering of Transfer Restricted Securities, cooperate with the
selling Holders, the underwriter(s), if any, and their respective counsel in 

 

9

 

connection with the registration and qualification of
the Transfer Restricted Securities under the securities or Blue Sky laws of such
jurisdictions as the selling Holders or underwriter(s), if any, may reasonably
request and do any and all other acts or things necessary or advisable to
enable the disposition in such jurisdictions of the Transfer Restricted
Securities covered by the Shelf Registration Statement; provided, however, that
the Issuer shall not be required (A) to register or qualify as a foreign
corporation or a dealer of securities where it is not now so qualified or to
take any action that would subject it to the service of process in any
jurisdiction where it is not now so subject or (B) to subject themselves to
taxation in any such jurisdiction if they are not now so subject.

 

(xi)                                Cooperate
with the selling Holders and the underwriter(s), if any, to facilitate the
timely preparation and delivery of certificates representing Transfer
Restricted Securities to be sold and not bearing any restrictive legends
(unless required by applicable securities laws); and enable such Transfer
Restricted Securities to be in such denominations and registered in such names
as the Holders or the underwriter(s), if any, may request at least two Business
Days before any sale of Transfer Restricted Securities made by such
underwriter(s).

 

(xii)                             Use its best efforts to
cause the Transfer Restricted Securities covered by the Shelf Registration
Statement to be registered with or approved by such other U.S. governmental
agencies or authorities as may be necessary to enable the seller or sellers
thereof or the underwriter(s), if any, to consummate the disposition of such
Transfer Restricted Securities.

 

(xiii)                          Subject to Section 4(b)(i)
hereof, if any fact or event contemplated by Section 4(b)(iii)(D) hereof shall
exist or have occurred, use its reasonable best efforts to prepare a supplement
or post-effective amendment to the Shelf Registration Statement or related
Prospectus or any document incorporated therein by reference or file any other
required document so that, as thereafter delivered to the purchasers of
Transfer Restricted Securities, the Prospectus will not contain an untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading.

 

(xiv)                         Provide CUSIP numbers for all
Transfer Restricted Securities not later than the effective date of the Shelf
Registration Statement and provide the Trustee under the Indenture with
certificates for the Notes that are in a form eligible for deposit with The
Depository Trust Company.

 

(xv)                            Cooperate
and assist in any filings required to be made with the NASD and in the
performance of any due diligence investigation by any underwriter that is
required to be retained in accordance with the rules and regulations of the
NASD.

 

(xvi)                         Otherwise use its best efforts
to comply with all applicable rules and regulations of the Commission and all
reporting requirements under the rules and regulations of the Exchange Act.

 

10

 

(xvii)                      Cause the Indenture to be
qualified under the TIA not later than the effective date of the Shelf
Registration Statement required by this Agreement, and, in connection
therewith, cooperate with the trustee and the holders of Notes to effect such
changes to the Indenture as may be required for such Indenture to be so
qualified in accordance with the terms of the TIA; and execute and use its best
efforts to cause the trustee thereunder to execute all documents that may be
required to effect such changes and all other forms and documents required to
be filed with the Commission to enable such Indenture to be so qualified in a
timely manner.

 

(xviii)                   Cause all Transfer Restricted
Securities covered by the Shelf Registration Statement to be listed or quoted,
as the case may be, on each securities exchange or automated quotation system
on which similar securities issued by the Issuer are then listed or quoted.

 

(xix)                           Provide promptly to each
Holder upon written request each document filed with the Commission pursuant to
the requirements of Section 13 and Section 15 of the Exchange Act after the
effective date of the Shelf Registration Statement.

 

(c)                                  Each
Holder agrees by acquisition of a Transfer Restricted Security that, upon
receipt of any notice from the Issuer of the existence of any fact of the kind
described in Section 4(b)(iii)(D) hereof, such Holder will, and will use its
reasonable best efforts to cause any underwriter(s) in an Underwritten Offering
to, forthwith discontinue disposition of Transfer Restricted Securities
pursuant to the Shelf Registration Statement until:

 

(i)                                     such
Holder has received copies of the supplemented or amended Prospectus
contemplated by Section 4(b)(xiii) hereof; or

 

(ii)                                  such
Holder is advised in writing (the “Advice”) by the Issuer that the use of the
Prospectus may be resumed, and has received copies of any additional or
supplemental filings that are incorporated by reference in the Prospectus.

 

If so directed by the Issuer, each Holder will deliver to the Issuer
(at the Issuer’s expense) all copies, other than permanent file copies then in
such Holder’s possession, of the Prospectus covering such Transfer Restricted
Securities that was current at the time of receipt of such notice of
suspension.

 

(d)                                 Each
Holder who intends to be named as a selling Holder in the Shelf Registration
Statement shall furnish to the Issuer in writing, within 20 Business Days after
receipt of a request therefor as set forth in a questionnaire, such information
regarding such Holder and the proposed distribution by such Holder of its
Transfer Restricted Securities as the Issuer may reasonably request for use in
connection with the Shelf Registration Statement or Prospectus or preliminary
Prospectus included therein.  (The form
of the questionnaire is attached hereto as Exhibit A.)  Holders that do not complete the
questionnaire and deliver it to the Issuer shall not be named as selling
securityholders in the Prospectus or preliminary Prospectus included in the
Shelf Registration Statement and therefore shall not be permitted to sell any
Transfer Restricted Securities pursuant to the Shelf Registration
Statement.  Each Holder who intends to
be named as

 

11

 

a selling Holder in the Shelf Registration Statement shall promptly
furnish to the Issuer in writing such other information as the Issuer may from
time to time reasonably request in writing.

 

(e)                                  Upon
the effectiveness of the Shelf Registration Statement, each Holder shall notify
the Issuer at least three Business Days prior to any intended distribution of
Transfer Restricted Securities pursuant to the Shelf Registration Statement (a
“Sale Notice”), which notice shall be effective for five Business Days.  Each Holder of this Security, by accepting
the same, agrees to hold any communication by the Company in response to a Sale
Notice in confidence.  Upon any transfer
of Transfer Restricted Securities pursuant to the Shelf Registration Statement,
each Holder shall comply with all such Holder’s obligations relating to delivery
of the Prospectus under applicable securities laws.  The Issuer and its representatives shall be entitled to rely on
the foregoing covenant as evidence of compliance with such obligations by such
Holder in connection with (i) any instruction requested of it in
connection with such transfer by the Trustee of the Notes or the transfer agent
of the Common Stock or (ii) any representation made by the Issuer or such
representative to any governing authority, including, the Commission or NASD.

 

5.                                       Registration
Expenses.

 

(a)                                  All
expenses incident to the Issuer’s performance of or compliance with this
Agreement shall be borne by the Issuer regardless of whether a Shelf
Registration Statement becomes effective, including, without limitation:

 

(i)                                     all
registration and filing fees and expenses (including filings made by any
Initial Purchasers or Holders with the NASD);

 

(ii)                                  all
fees and expenses of compliance with federal securities and state Blue Sky or
securities laws;

 

(iii)                               all expenses of printing
(including printing of Prospectuses and certificates for the Common Stock to be
issued upon conversion of the Notes), messenger and delivery services and
telephone charges;

 

(iv)                              all
fees and disbursements of counsel to the Issuer and, subject to Section 5(b)
below, the Holders of Transfer Restricted Securities;

 

(v)                                 all
application and filing fees in connection with listing (or authorizing for
quotation) the Common Stock on a national securities exchange or automated
quotation system pursuant to the requirements hereof; and

 

(vi)                              all
fees and disbursements of independent certified public accountants of the
Issuer (including the expenses of any special audit and comfort letters
required by or incident to such performance).

 

The Issuer shall bear its internal expenses
(including, without limitation, all salaries and expenses of their officers and
employees performing legal, accounting or other duties), the expenses of any
annual audit and the fees and expenses of any Person, including special
experts, retained by the Issuer.

 

12

 

(b)                                 In
connection with the Shelf Registration Statement required by this Agreement,
the Issuer shall reimburse the Initial Purchasers and the Holders of Transfer
Restricted Securities being registered pursuant to the Shelf Registration
Statement, as applicable, for the reasonable fees and disbursements of not more
than one counsel, which shall be Sidley Austin Brown & Wood llp, or such
other counsel as may be chosen by a Majority of Holders for whose benefit the
Shelf Registration Statement is being prepared.

 

6.                                       Indemnification
and Contribution.

 

(a)                                  The
Issuer shall indemnify and hold harmless each Holder, such Holder’s officers
and employees and each person, if any, who controls such Holder within the
meaning of the Securities Act (each, an “Indemnified Holder”), from and against
any loss, claim, damage or liability, joint or several, or any action in
respect thereof (including, but not limited to, any loss, claim, damage,
liability or action relating to resales of the Transfer Restricted Securities),
to which such Indemnified Holder may become subject, insofar as any such loss,
claim, damage, liability or action arises out of, or is based upon:

 

(i)                                     any
untrue statement or alleged untrue statement of a material fact contained in
(A) the Shelf Registration Statement or Prospectus or any amendment or
supplement thereto or (B) any blue sky application or other document or any
amendment or supplement thereto prepared or executed by the Issuer (or based
upon written information furnished by or on behalf of the Issuer expressly for
use in such blue sky application or other document or amendment on supplement)
filed in any jurisdiction specifically for the purpose of qualifying any or all
of the Transfer Restricted Securities under the securities law of any state or
other jurisdiction (such application or document being hereinafter called a
“Blue Sky Application”); or

 

(ii)                                  the
omission or alleged omission to state therein any 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,

 

and shall reimburse each Indemnified Holder promptly upon demand for
any legal or other expenses reasonably incurred by such Indemnified Holder in
connection with investigating or defending or preparing to defend against any
such loss, claim, damage, liability or action as such expenses are incurred;
provided, however, that the Issuer shall not be liable in any such case to the
extent that any such loss, claim, damage, liability or action arises out of, or
is based upon, any untrue statement or alleged untrue statement or omission or
alleged omission made in the Shelf Registration Statement or Prospectus or
amendment or supplement thereto or Blue Sky Application in reliance upon and in
conformity with written information furnished to the Issuer by or on behalf of
any Holder (or its related Indemnified Holder) specifically for use
therein.  The foregoing indemnity
agreement is in addition to any liability which the Issuer may otherwise have
to any Indemnified Holder.

 

(b)                                 Each
Holder, severally and not jointly, shall indemnify and hold harmless the
Issuer, its officers and employees and each person, if any, who controls the
Issuer within the meaning of the Securities Act, from and against any loss,
claim, damage or liability, joint or several, or any action in respect thereof,
to which the Issuer or any such officer, employee or 

 

13

 

controlling person may become subject, insofar as any such loss, claim,
damage or liability or action arises out of, or is based upon:

 

(i)                                     any
untrue statement or alleged untrue statement of any material fact contained in
the Shelf Registration Statement or Prospectus or any amendment or supplement
thereto or any Blue Sky Application; or

 

(ii)                                  the
omission or the alleged omission to state therein any material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading,

 

but in each case only to the extent that such untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the Issuer by or
on behalf of such Holder (or its related Indemnified Holder) specifically for
use therein, and shall reimburse the Issuer and any such officer, employee or
controlling person promptly upon demand for any legal or other expenses
reasonably incurred by the Issuer or any such officer, employee or controlling
person in connection with investigating or defending or preparing to defend
against any such loss, claim, damage, liability or action as such expenses are
incurred.  The foregoing indemnity
agreement is in addition to any liability which any Holder may otherwise have
to the Issuer and any such officer, employee or controlling person.

 

(c)                                  Promptly
after receipt by an indemnified party under this Section 6 of notice of any
claim or the commencement of any action, the indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party under
this Section 6, notify the indemnifying party in writing of the claim or the
commencement of that action; provided, however, that the failure to notify the
indemnifying party shall not relieve it from any liability which it may have
under this Section 6 except to the extent it has been materially prejudiced by
such failure and, provided, further, that the failure to notify the
indemnifying party shall not relieve it from any liability which it may have to
an indemnified party otherwise than under this Section 6.  If any such claim or action shall be brought
against an indemnified party, and it shall notify the indemnifying party
thereof, the indemnifying party shall be entitled to participate therein and,
to the extent that it wishes, jointly with any other similarly notified
indemnifying party, to assume the defense thereof with counsel satisfactory to
the indemnified party.  After notice
from the indemnifying party to the indemnified party of its election to assume
the defense of such claim or action, the indemnifying party shall not be liable
to the indemnified party under this Section 6 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation; provided, however, that a
Majority of Holders shall have the right to employ a single counsel to
represent jointly a Majority of Holders and their respective officers,
employees and controlling persons who may be subject to liability arising out
of any claim in respect of which indemnity may be sought by a Majority of
Holders against the Issuer under this Section 6, if a Majority of Holders shall
have reasonably concluded that there may be one or more legal defenses
available to them and their respective officers, employees and controlling
persons that are different from or additional to those available to the Issuer
and its officers, employees and controlling persons, the fees and expenses of a
single separate counsel shall be paid by the Issuer.  No indemnifying party shall:

 

14

 

(i)                                     without
the prior written consent of the indemnified parties (which consent shall not
be unreasonably withheld) settle or compromise or consent to the entry of any
judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action) unless such settlement, compromise or consent
(1) includes an unconditional release of each indemnified party from all
liability arising out of such claim, action, suit or proceeding and
(2) does not include a statement as to or an admission of fault,
culpability or a failure to act by or on behalf of any indemnified party, or

 

(ii)                                  be
liable for any settlement of any such action effected without its written
consent (which consent shall not be unreasonably withheld), but if settled with
its written consent or if there be a final judgment for the plaintiff in any
such action, the indemnifying party agrees to indemnify and hold harmless any
indemnified party from and against any loss of liability by reason of such
settlement or judgment.

 

(d)                                 If
the indemnification provided for in this Section 6 shall for any reason be
unavailable or insufficient to hold harmless an indemnified party under Section
6(a) or 6(b) in respect of any loss, claim, damage or liability (or action in
respect thereof) referred to therein, each indemnifying party shall, in lieu of
indemnifying such indemnified party, contribute to the amount paid or payable
by such indemnified party as a result of such loss, claim, damage or liability
(or action in respect thereof):

 

(i)                                     in
such proportion as is appropriate to reflect the relative benefits received by
the Issuer from the offering and sale of the Transfer Restricted Securities on
the one hand and a Holder with respect to the sale by such Holder of the
Transfer Restricted Securities on the other, or

 

(ii)                                  if
the allocation provided by clause (6)(d)(i) is not permitted by applicable law,
in such proportion as is appropriate to reflect not only the relative benefits
referred to in clause 6(d)(i) but also the relative fault of the Issuer on the
one hand and the Holders on the other in connection with the statements or
omissions or alleged statements or alleged omissions that resulted in such
loss, claim, damage or liability (or action in respect thereof), as well as any
other relevant equitable considerations.

 

The relative benefits received by the Issuer on the
one hand and a Holder on the other with respect to such offering and such sale
shall be deemed to be in the same proportion as the total net proceeds from the
offering of the Notes purchased under the Purchase Agreement (before deducting
expenses) received by the Issuer as set forth in the table appearing in the
section entitled “Plan of Distribution” in the Offering Memorandum, dated June
25, 2003, on the one hand, bear to the total proceeds received by such Holder
with respect to its sale if Transfer Restricted Securities on the other.

 

The relative fault of the parties shall be determined
by reference to whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Issuer on the one hand or the Holders on the other,
the

 

15

 

intent of the parties and their relative knowledge, access to
information and opportunity to correct or prevent such statement or omission.

 

The Issuer and each Holder agree that it would not be
just and equitable if the amount of contribution pursuant to this Section 6(d)
were determined by pro rata allocation or by any other method of allocation
that does not take into account the equitable considerations referred to in the
first sentence of this paragraph (d). 
The amount paid or payable by an indemnified party as a result of the
loss, claim, damage or liability, or action in respect thereof, referred to
above in this Section 6 shall be deemed to include, for purposes of this
Section 6, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating, or defending or preparing to defend any
such litigation, investigation or proceeding by any governmental agency or
body, or commenced or threatened action or claim.  Notwithstanding the provisions of this Section 6, no Holder shall
be required to contribute any amount in excess of the amount by which the total
price at which the Transfer Restricted Securities purchased by it were resold
exceeds the amount of any damages which such Holder has otherwise been required
to pay by reason of any untrue or alleged untrue statement or omission or
alleged omission.

 

No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled
to contribution from any person who was not guilty of such fraudulent
misrepresentation.  The Holders’
obligations to contribute as provided in this Section 6(d) are several and not
joint.

 

7.                                       Rule
144A.  In
the event the Issuer is not subject to Section 13 or 15(d) of the Exchange Act,
the Issuer hereby agrees with each Holder, for so long as any Transfer
Restricted Securities remain outstanding, to make available to any Holder or
beneficial owner of Transfer Restricted Securities in connection with any sale
thereof and any prospective purchaser of such Transfer Restricted Securities
from such Holder or beneficial owner, the information required by Rule
144A(d)(4) under the Securities Act in order to permit resales of such Transfer
Restricted Securities pursuant to Rule 144A.

 

8.                                       Participation
in Underwritten Registrations.  No Holder may participate in any Underwritten
Registration hereunder unless such Holder:

 

(i)                                     agrees
to sell such Holder’s Transfer Restricted Securities on the basis provided in
any underwriting arrangements approved by the Persons entitled hereunder to
approve such arrangements and

 

(ii)                                  completes
and executes all reasonable questionnaires, powers of attorney, indemnities,
underwriting agreements, lock-up letters and other documents required under the
terms of such underwriting arrangements.

 

16

 

9.                                       Selection
of Underwriters.  The Holders of Transfer Restricted Securities covered
by the Shelf Registration Statement who desire to do so may sell such Transfer Restricted
Securities in an Underwritten Offering. 
In any such Underwritten Offering, the investment banker or investment
bankers and manager or managers that will administer the offering will be
selected by a Majority of Holders whose Transfer Restricted Securities are
included in such offering; provided, that such investment bankers and managers
must be reasonably satisfactory to the Issuer.

 

10.                                 Miscellaneous.

 

(a)                                  Remedies.  The Issuer acknowledges and agrees that any
failure by the Issuer to comply with its obligations under Section 2 hereof may
result in material irreparable injury to the Initial Purchasers or the Holders
for which there is no adequate remedy at law, that it will not be possible to
measure damages for such injuries precisely and that, in the event of any such
failure, the Initial Purchasers or any Holder may obtain such relief as may be
required to specifically enforce the Issuer’s obligations under Section 2
hereof.  The Issuer further agrees to
waive the defense in any action for specific performance that a remedy at law
would be adequate.

 

(b)                                 Adjustments
Affecting Transfer Restricted Securities.  The Issuer shall not, directly or indirectly, take any action
with respect to the Transfer Restricted Securities as a class that would adversely
affect the ability of the Holders of Transfer Restricted Securities to include
such Transfer Restricted Securities in a registration undertaken pursuant to
this Agreement.

 

(c)                                  No
Inconsistent Agreements. The Issuer will not, on or after the date
of this Agreement, enter into any agreement with respect to its securities that
is inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof.  In addition, the Issuer shall not grant to any of its security
holders (other than the holders of Transfer Restricted Securities in such
capacity) the right to include any of its securities in the Shelf Registration
Statement provided for in this Agreement other than the Transfer Restricted
Securities.  Other than the Registration
Rights Agreement and the Stock Purchase Agreement, dated January 18, 1995,
between the Issuer and Pfizer, Inc., the Stock Purchase Agreement, dated March
1, 1996, as amended, between the Issuer and Baxter Healthcare Corporation, the
Stock Issuance Agreement, dated November 4, 1999, between the Issuer and
Alliance Pharmaceutical Corp., the Restated Investor Rights Agreement, dated
April 29, 1993, as amended October 29, 1993, among the Company and
certain stockholders of the Company, the Resale Registration Rights Agreements,
dated October 13, 1999, February 8, 2000 and October 17, 2000,
each between the Company and the initial purchasers named therein, the
Registration Rights Agreement between the Company and Alliance Pharmaceutical
Corp., dated January 24, 2000, the Rights Agreement, dated June 1, 2001,
between the Company and Mellon Investor Services LLC., the Preferred Stock
Purchase Agreement, dated January 7, 2002, between the Company and Enzon
Pharmaceuticals, Inc. and the Registration Rights Agreements, dated June 7,
2002, July 9, 2002 and December 6, 2002, respectively, each between the Company
and AFAC Equity L.P.,  the Issuer has not previously entered into
any agreement (which has not expired or been terminated) granting any registration
rights with respect to its securities to any Person which rights conflict with
the provisions hereof.

 

17

 

(d)                                 Amendments
and Waivers. This Agreement may not be amended, modified or
supplemented, and waivers or consents to or departures from the provisions
hereof may not be given, unless the Issuer has obtained the written consent of
a Majority of Holders.

 

(e)                                  Notices.
All notices and other communications provided for or permitted hereunder shall be
made in writing by hand-delivery, first-class mail (registered or certified,
return receipt requested), telex, telecopier, or air courier guaranteeing
overnight delivery:

 

(i)                                     if
to a Holder, at the address set forth on the records of the registrar under the
Indenture or the transfer agent of the Common Stock, as the case may be; and

 

(ii)                                  if
to the Issuer:

 

	
   

  	
  Nektar Therapeutics

  
	
   

  	
  150 Industrial Road

  
	
   

  	
  San Carlos, California 94070

  
	
   

  	
  Attention: Secretary

  
	
   

  	
   

  
	
   

  	
  With a copy to:

  
	
   

  	
   

  
	
   

  	
  Cooley Godward LLP

  
	
   

  	
  Five Palo Alto Square

  
	
   

  	
  3000 El Camino Real

  
	
   

  	
  Palo Alto, CA 94306

  
	
   

  	
  Attention: 
  John Geschke, Esq.

  

 

All such notices and communications shall be deemed to
have been duly given: at the time delivered by hand, if personally delivered;
five Business Days after being deposited in the mail, postage prepaid, if
mailed; when answered back, if telexed; when receipt acknowledged, if
telecopied; and on the next Business Day, if timely delivered to an air courier
guaranteeing overnight delivery.

 

(f)                                    Successors
and Assigns. This Agreement shall inure to the benefit of and be
binding upon the successors and assigns of each of the parties, including
without limitation and without the need for an express assignment, subsequent
Holders of Transfer Restricted Securities; provided, however, that (i) this
Agreement shall not inure to the benefit of or be binding upon a successor or
assign of a Holder unless and to the extent such successor or assign acquired
Transfer Restricted Securities from such Holder and (ii) nothing contained
herein shall be deemed to permit any assignment, transfer or other disposition
of Transfer Restricted Securities in violation of the terms of the Purchase
Agreement or the Indenture.  If any
transferee of any Holder shall acquire Transfer Restricted Securities, in any
manner, whether by operation of law or otherwise, such Transfer Restricted
Securities shall be held subject to all of the terms of this Agreement, and by
taking and holding such Transfer Restricted Securities such person shall be
conclusively deemed to have agreed to be bound by and to perform all of the
terms and provisions of this Agreement.

 

(g)                                 Counterparts.
This Agreement may be executed in any number of counterparts and by the parties
hereto in separate counterparts, each of which when so executed shall be

 

18

 

deemed to be an original and all of which taken together shall
constitute one and the same agreement.

 

(h)                                 Securities
Held by the Issuer or Their Affiliates.  Whenever the consent or approval of Holders of a specified
percentage of Transfer Restricted Securities is required hereunder, Transfer
Restricted Securities held by the Issuer or its “affiliates” (as such term is
defined in Rule 405 under the Securities Act) shall not be counted in
determining whether such consent or approval was given by the Holders of such
required percentage.

 

(i)                                     Headings.
The headings in this Agreement are for convenience of reference only and shall
not limit or otherwise affect the meaning hereof.

 

(j)                                     Governing
Law.  This Agreement shall be
governed by, and construed in accordance with, the law of the State of New
York, without regard to conflict of laws principles thereof.

 

(k)                                  Severability.
If  any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.

 

(l)                                     Entire
Agreement.  This Agreement is
intended by the parties as a final expression of their agreement and intended
to be a complete and exclusive statement of the agreement and understanding of
the parties hereto in respect of the subject matter contained herein.  There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted by the Issuer with respect to the
Transfer Restricted Securities.  This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.

 

19

 

IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first written above.

 

	
   

  	
  NEKTAR THERAPEUTICS

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MERRILL LYNCH, PIERCE,
  FENNER & SMITH

  INCORPORATED

  
	
   

  	
  DEUTSCHE BANK SECURITIES INC.

  
	
   

  	
  LEHMAN BROTHERS INC.

  
	
   

  	
  FRIEDMAN, BILLINGS, RAMSEY
  & CO., INC.

  
	
   

  	
  SG COWEN SECURITIES
  CORPORATION

  
	
   

  	
   

  
	
   

  	
  By: Merrill Lynch,
  Pierce, Fenner & Smith

  Incorporated

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Authorized Signatory

  
				

 

20

 

Exhibit A

 

NEKTAR THERAPEUTICS

 

FORM OF SELLING
SECURITYHOLDER NOTICE AND QUESTIONNAIRE

 

The undersigned beneficial holder of 3% Convertible
Subordinated Notes due 2010 (the “Notes”) of Nektar Therapeutics (the
“Issuer”), or common stock, par value $0.0001 per share (the “Shares” and
together with the Notes, the “Transfer Restricted Securities”) of the Issuer
understands that the Issuer has filed, or intends to file, with the Securities
and Exchange Commission (the “Commission”) a registration statement (the “Shelf
Registration Statement”), for the registration and resale under Rule 415 of the
Securities Act of 1933, as amended (the “Securities Act”), of the Transfer
Restricted Securities in accordance with the terms of the Registration Rights
Agreement, dated as of June 30, 2003 (the “Registration Rights Agreement”)
between the Issuer and Merrill Lynch, Pierce, Fenner & Smith Incorporated, Deutsche Bank Securities Inc., Lehman Brothers
Inc., Friedman, Billings, Ramsey & Co., Inc. and SG Cowen Securities
Corporation.  A copy of the
Registration Rights Agreement is available from the Issuer upon request at the
address set forth below.  All
capitalized terms not otherwise defined herein have the meaning ascribed
thereto in the Registration Rights Agreement.

 

Each beneficial owner of Transfer Restricted
Securities is entitled to the benefits of the Registration Rights
Agreement.  In order to sell or
otherwise dispose of any Transfer Restricted Securities pursuant to the Shelf
Registration Statement, a beneficial owner of Transfer Restricted Securities
generally will be required to be named as a selling securityholder in the
related Prospectus, deliver a Prospectus to purchasers of Transfer Restricted
Securities and be bound by those provisions of the Registration Rights
Agreement applicable to such beneficial owner (including certain
indemnification provisions, as described below).  Beneficial owners that do not complete this Notice and Questionnaire
within 20 Business Days of receipt hereof and deliver it to the Issuer as
provided below will not be named as selling securityholders in the Prospectus
and therefore will not be permitted to sell any Transfer Restricted Securities
pursuant to the Shelf Registration Statement.

 

Certain legal consequences arise from being named as a
selling securityholder in the Shelf Registration Statement and the related
Prospectus.  Accordingly, holders and
beneficial owners of Transfer Restricted Securities are advised to consult
their own securities law counsel regarding the consequences of being named or
not being named as a selling securityholder in the Shelf Registration Statement
and the related Prospectus.

 

NOTICE

 

The undersigned beneficial owner (the “Selling
Securityholder”) of Transfer Restricted Securities hereby gives notice to the
Issuer of its intention to sell or otherwise dispose of Transfer Restricted
Securities beneficially owned by it and listed below in Item 3 (unless
otherwise specified under Item 3) pursuant to the Shelf Registration
Statement.  The undersigned, by signing
and returning this Notice and Questionnaire, understands that it will be 

 

1

 

bound by the terms and conditions of this Notice and Questionnaire and
the Registration Rights Agreement.

 

Pursuant to the Registration Rights Agreement, the
undersigned has agreed to indemnify and hold harmless the Issuer, the Issuer’s
directors, the Issuer’s officers who sign the Shelf Registration Statement and
each person, if any, who controls the Issuer within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act, from and
against certain losses arising in connection with statements concerning the
undersigned made in the Shelf Registration Statement or the related Prospectus
in reliance upon the information provided in this Notice and Questionnaire.

 

The undersigned hereby provides the following
information to the Issuer and represents and warrants that such information is
accurate and complete:

 

QUESTIONNAIRE

 

1.                                      (a)                                   Full
legal name of Selling Securityholder:

 

(b)                                 Full
legal name of registered holder (if not the same as (a) above) through which
Transfer Restricted Securities listed in (3) below are held:

 

(c)                                  Full
legal name of DTC participant (if applicable and if not the same as (b) above)
through which Transfer Restricted Securities listed in (3) are held:

 

2.                                       Address
for notices to Selling Securityholders:

 

Telephone:

 

Fax:

 

Contact Person:

 

3.                                       Beneficial
ownership of Transfer Restricted Securities:

 

(a)                                  Type
of Transfer Restricted Securities beneficially owned, and principal amount of
Notes or number of shares of Common Stock, as the case may be, beneficially
owned:

 

(b)                                 CUSIP
No(s). of such Transfer Restricted Securities beneficially owned:

 

4.                                       Beneficial
ownership of the Issuer’s securities owned by the Selling Securityholder:

 

Except
as set forth below in this Item (4), the undersigned is not the beneficial or
registered owner of any securities of the Issuer other than the Transfer
Restricted Securities listed above in Item (3) (“Other Securities”).

 

(a)                                  Type
and amount of Other Securities beneficially owned by the Selling Securityholder:

 

2

 

(b)                                 CUSIP
No(s). of such Other Securities beneficially owned:

 

5.                                       Relationship
with the Issuer

 

Except as set forth below, neither the undersigned nor
any of its affiliates, officers, directors or principal equity holders (5% or
more) has held any position or office or has had any other material
relationship with the Issuer (or their predecessors or affiliates) during the
past three years.

 

State any exceptions here:

 

6.                                       Plan
of Distribution

 

Except as set forth below, the undersigned (including
its donees or pledgees) intends to distribute the Transfer Restricted
Securities listed above in Item (3) pursuant to the Shelf Registration
Statement only as follows (if at all). 
Such Transfer Restricted Securities may be sold from time to time
directly by the undersigned or, alternatively, through underwriters,
broker-dealers or agents.  If the
Transfer Restricted Securities are sold through underwriters or broker-dealers,
the Selling Securityholder will be responsible for underwriting discounts or
commissions or agent’s commissions. 
Such Transfer Restricted Securities may be sold in one or more
transactions at fixed prices, at prevailing market prices at the time of sale,
at varying prices determined at the time of sale, or at negotiated prices.  Such sales may be effected in transactions
(which may involve crosses or block transactions):

 

(i)                                     on
any national securities exchange or quotation service on which the Transfer
Restricted Securities may be listed or quoted at the time of sale;

 

(ii)                                  in
the over-the-counter market;

 

(iii)                               in transactions
otherwise than on such exchanges or services or in the over-the-counter market;
or

 

(iv)                              through
the writing of options.

 

In connection with sales of the Transfer Restricted Securities or
otherwise, the undersigned may enter into hedging transactions with
broker-dealers, which may in turn engage in short sales of the Transfer
Restricted Securities and deliver Transfer Restricted Securities to close out
such short positions, or loan or pledge Transfer Restricted Securities to
broker-dealers that in turn may sell such securities.

 

State any exceptions here:

 

Note: In no event will such method(s) of distribution take the form of
an underwritten offering of the Transfer Restricted Securities without the
prior agreement of the Issuer.

 

The undersigned
acknowledges that it understands its obligation to comply with the provisions
of the Exchange Act and the rules and regulations promulgated thereunder
relating to 

 

3

 

stock manipulation, particularly Regulation M thereunder (or any
successor rules or regulations), in connection with any offering of Transfer
Restricted Securities pursuant to the Shelf Registration Statement.  The undersigned agrees that neither it nor
any person acting on its behalf will engage in any transaction in violation of
such provisions.

 

The Selling
Securityholder hereby acknowledges its obligations under the Registration
Rights Agreement to indemnify and hold harmless certain persons as set forth
therein and to deliver the Prospectus as required under applicable securities
laws.

 

Pursuant to the
Registration Rights Agreement, the Issuer has agreed under certain
circumstances to indemnify the Selling Securityholders against certain
liabilities.

 

In accordance with the
undersigned’s obligation under the Registration Rights Agreement to provide
such information as may be required by law for inclusion in the Shelf
Registration Statement, the undersigned agrees to promptly notify the Issuer of
any inaccuracies or changes in the information provided herein that may occur
subsequent to the date hereof at any time while the Shelf Registration
Statement remains effective.  All
notices hereunder and pursuant to the Registration Rights Agreement shall be
made in writing at the address set forth below.

 

By signing below, the
undersigned consents to the disclosure of the information contained herein in
its answers to items (1) through (6) above and the inclusion of such
information in the Shelf Registration Statement and the related Prospectus. The
undersigned understands that such information will be relied upon by the Issuer
in connection with the preparation or amendment of the Shelf Registration
Statement and the related Prospectus.

 

4

 

IN WITNESS WHEREOF, the undersigned, by authority duly
given, has caused this Notice and Questionnaire to be executed and delivered
either in person or by its duly authorized agent.

 

	
  Dated:

  
	
   

  
	
  Beneficial Owner

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  

 

Please return the completed and executed Notice and Questionnaire to
Nektar Therapeutics at:

 

Nektar Therapeutics

150 Industrial Road

San Carlos, California 94070

Attention: Secretary

 

5

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