Document:

exv10w1

 

Exhibit 10.1

COMMON STOCK PURCHASE AGREEMENT

Dated October 19, 2006

by and between

ENCYSIVE PHARMACEUTICALS INC.

and

AZIMUTH OPPORTUNITY LTD.

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	Page	 
	Article I PURCHASE AND SALE OF COMMON STOCK
	 	 	1	 
	Section 1.1 Purchase and Sale of Stock
	 	 	1	 
	Section 1.2 Effective Date; Settlement Dates
	 	 	1	 
	Section 1.3 The Shares
	 	 	2	 
	Section 1.4 Current Report; Prospectus Supplement
	 	 	2	 
	 
	 	 	 	 
	Article II FIXED REQUEST TERMS; OPTIONAL AMOUNT
	 	 	2	 
	Section 2.1 Fixed Request Notice
	 	 	2	 
	Section 2.2 Fixed Requests
	 	 	3	 
	Section 2.3 Share Calculation
	 	 	4	 
	Section 2.4 Limitation of Fixed Requests
	 	 	4	 
	Section 2.5 Reduction of Commitment
	 	 	4	 
	Section 2.6 Below Threshold Price
	 	 	5	 
	Section 2.7 Settlement
	 	 	5	 
	Section 2.8 Reduction of Pricing Period
	 	 	5	 
	Section 2.9 Optional Amount
	 	 	6	 
	Section 2.10 Calculation of Optional Amount Shares
	 	 	6	 
	Section 2.11 Exercise of Optional Amount
	 	 	7	 
	Section 2.12 Aggregate Limit
	 	 	7	 
	 
	 	 	 	 
	Article III REPRESENTATIONS AND WARRANTIES OF THE INVESTOR
	 	 	8	 
	Section 3.1 Organization and Standing of the Investor
	 	 	8	 
	Section 3.2 Authorization and Power
	 	 	8	 
	Section 3.3 No Conflicts
	 	 	8	 
	Section 3.4 Information
	 	 	9	 
	 
	 	 	 	 
	Article IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY
	 	 	9	 
	Section 4.1 Organization, Good Standing and Power
	 	 	9	 
	Section 4.2 Authorization, Enforcement
	 	 	9	 
	Section 4.3 Capitalization
	 	 	10	 
	Section 4.4 Issuance of Shares
	 	 	10	 
	Section 4.5 No Conflicts
	 	 	11	 
	Section 4.6 Commission Documents, Financial Statements
	 	 	11	 
	Section 4.7 Subsidiaries
	 	 	12	 
	Section 4.8 No Material Adverse Effect
	 	 	13	 
	Section 4.9 Indebtedness
	 	 	13	 
	Section 4.10 Title To Assets
	 	 	13	 
	Section 4.11 Actions Pending
	 	 	13	 
	Section 4.12 Compliance With Law
	 	 	13	 
	Section 4.13 Certain Fees
	 	 	14	 
	Section 4.14 Operation of Business
	 	 	14	 

i

 

	 	 	 	 	 
	 	 	Page	 
	Section 4.15 Environmental Compliance
	 	 	15	 
	Section 4.16 Material Agreements
	 	 	16	 
	Section 4.17 Transactions With Affiliates
	 	 	16	 
	Section 4.18 Securities Act; NASD Conduct Rules
	 	 	16	 
	Section 4.19 Employees
	 	 	18	 
	Section 4.20 Use of Proceeds
	 	 	18	 
	Section 4.21 Public Utility Holding Company Act and Investment Company Act Status
	 	 	18	 
	Section 4.22 ERISA
	 	 	18	 
	Section 4.23 Taxes
	 	 	19	 
	Section 4.24 Insurance
	 	 	19	 
	Section 4.25 Acknowledgement Regarding Investor’s Purchase of Shares
	 	 	19	 
	 
	 	 	 	 
	Article V COVENANTS
	 	 	19	 
	Section 5.1 Securities Compliance
	 	 	20	 
	Section 5.2 Registration and Listing
	 	 	20	 
	Section 5.3 Compliance with Laws
	 	 	20	 
	Section 5.4 Keeping of Records and Books of Account; Foreign Corrupt Practices Act
	 	 	20	 
	Section 5.5 Limitations on Holdings and Issuances
	 	 	21	 
	Section 5.6 Other Agreements and Other Financings
	 	 	21	 
	Section 5.7 Stop Orders
	 	 	22	 
	Section 5.8 Amendments to the Registration Statement; Prospectus Supplements; Free Writing Prospectuses
	 	 	23	 
	Section 5.9 Prospectus Delivery
	 	 	24	 
	Section 5.10 Selling Restrictions
	 	 	24	 
	Section 5.11 Effective Registration Statement
	 	 	25	 
	Section 5.12 Non-Public Information
	 	 	25	 
	Section 5.13 Broker/Dealer
	 	 	25	 
	Section 5.14 Update of Disclosure Schedule
	 	 	25	 
	 
	 	 	 	 
	Article VI OPINION OF COUNSEL AND CERTIFICATE; CONDITIONS TO THE SALE AND PURCHASE OF THE SHARES
	 	 	26	 
	Section 6.1 Opinion of Counsel and Certificate
	 	 	26	 
	Section 6.2 Conditions Precedent to the Obligation of the Company
	 	 	26	 
	Section 6.3 Conditions Precedent to the Obligation of the Investor
	 	 	27	 
	 
	 	 	 	 
	Article VII TERMINATION
	 	 	30	 
	Section 7.1 Term, Termination by Mutual Consent
	 	 	30	 
	Section 7.2 Other Termination
	 	 	30	 
	Section 7.3 Effect of Termination
	 	 	30	 
	 
	 	 	 	 
	Article VIII INDEMNIFICATION
	 	 	31	 
	Section 8.1 General Indemnity
	 	 	31	 
	Section 8.2 Indemnification Procedures
	 	 	32	 
	 
	 	 	 	 
	Article IX MISCELLANEOUS
	 	 	34	 
	Section 9.1 Fees and Expenses
	 	 	34	 
	Section 9.2 Specific Enforcement, Consent to Jurisdiction, Waiver of Jury Trial
	 	 	34	 

ii

 

	 	 	 	 	 
	 	 	Page	 
	Section 9.3 Entire Agreement; Amendment
	 	 	35	 
	Section 9.4 Notices
	 	 	35	 
	Section 9.5 Waivers
	 	 	36	 
	Section 9.6 Headings
	 	 	36	 
	Section 9.7 Successors and Assigns
	 	 	36	 
	Section 9.8 Governing Law
	 	 	37	 
	Section 9.9 Survival
	 	 	37	 
	Section 9.10 Counterparts
	 	 	37	 
	Section 9.11 Publicity
	 	 	37	 
	Section 9.12 Severability
	 	 	37	 
	Section 9.13 Further Assurances
	 	 	37	 
	 
	 	 	 	 
	Annex A. Definitions
	 	 	 	 

iii

 

COMMON STOCK PURCHASE AGREEMENT

     This COMMON STOCK PURCHASE AGREEMENT, made and entered into on this 19th day of October 2006
(this “Agreement”), by and between Azimuth Opportunity Ltd., an international business
company incorporated under the laws of the British Virgin Islands (the “Investor”), and
Encysive Pharmaceuticals Inc., a corporation organized and existing under the laws of the State of
Delaware (the “Company”).

RECITALS

     WHEREAS, the parties desire that, upon the terms and subject to the conditions contained
herein, the Company may issue and sell to the Investor and the Investor shall thereupon purchase
from the Company up to $75,000,000 worth of newly issued shares of the Company’s common stock,
$.005 par value (“Common Stock”), subject, in all cases, to the Trading Market Limit; and

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

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

ARTICLE I

PURCHASE AND SALE OF COMMON STOCK

     Section 1.1 Purchase and Sale of Stock. Upon the terms and subject to the conditions of
this Agreement, during the Investment Period the Company in its discretion may issue and sell to
the Investor up to $75,000,000 (the “Total Commitment”) worth of duly authorized, validly
issued, fully paid and non-assessable shares of Common Stock (subject in all cases to the Trading
Market Limit, the “Aggregate Limit”), by (i) the delivery to the Investor of not more than
24 separate Fixed Request Notices (unless the Investor and the Company mutually agree that a
different number of Fixed Request Notices may be delivered) as provided in Article II hereof and
(ii) the exercise by the Investor of Optional Amounts, which the Company may in its discretion
grant to the Investor and which may be exercised by the Investor, in whole or in part, as provided
in Article II hereof. The aggregate of all Fixed Request Amounts and Optional Amount Dollar
Amounts shall not exceed the Aggregate Limit.

     Section 1.2 Effective Date; Settlement Dates. This Agreement shall become effective and
binding upon delivery of counterpart signature pages of this Agreement executed by each of the
parties hereto, and by delivery of an opinion of counsel and a certificate of the Company as
provided in Section 6.1 hereof, to the offices of Greenberg Traurig, LLP, 200 Park Avenue, New
York, New York 10166, at l0:00 a.m., New York time, on the Effective Date. In consideration of and
in express reliance upon the representations, warranties and covenants, and otherwise upon the
terms and subject to the
conditions, of this Agreement, from and after the Effective Date and during the Investment Period
(i) the Company shall issue and sell to the Investor, and the Investor agrees to purchase from the
Company, the Shares in respect of each Fixed Request and (ii) the Investor may in its discretion
elect to purchase Shares in respect of

 

 

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

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

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

ARTICLE II

FIXED REQUEST TERMS; OPTIONAL AMOUNT

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

     Section 2.1 Fixed Request Notice. Upon two Trading Days’ prior written notice to the
Investor, the Company may, from time to time in its sole discretion, provide a notice to the
Investor of a Fixed Request before 9:30 a.m. (New York time) on the first Trading Day of the
Pricing Period (the “Fixed Request Notice”), substantially in the form attached hereto as
Exhibit A. The Fixed Request Notice shall specify the Fixed Amount Requested, establish
the Threshold Price for such Fixed Request, designate the first Trading Day of the Pricing Period
and specify

2

 

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

     Section 2.2 Fixed Requests. From time to time during the Investment Period, the Company
may in its sole discretion deliver to the Investor a Fixed Request Notice for a specified Fixed
Amount Requested, and the applicable discount price (the “Discount Price”) shall be
determined, in accordance with the price and share amount parameters as set forth below or such
other parameters mutually agreed upon by the Investor and the Company, and upon the terms and
subject to the conditions of this Agreement, the Investor shall purchase from the Company the
Shares subject to such Fixed Request Notice; provided, however, that the Company
may not deliver any single Fixed Request Notice for a Fixed Amount Requested in excess of the
lesser of: (i) the amount in the applicable Fixed Amount Requested column below and (ii) 2.5% of
the Market Capitalization:

	 	 	 	 	 
	Threshold Price	 	Fixed Amount Requested	 	Discount Price
	Equal to or greater than $17.00
	 	Not to exceed $29,500,000	 	97.125% of the VWAP
	Equal to or greater than $16.00 and less than $17.00
	 	Not to exceed $28,000,000	 	96.875% of the VWAP
	Equal to or greater than $15.00 and less than $16.00
	 	Not to exceed $26,500,000	 	96.875% of the VWAP
	Equal to or greater than $14.00 and less than $15.00
	 	Not to exceed $25,000,000	 	96.625% of the VWAP
	Equal to or greater than $13.00 and less than $14.00
	 	Not to exceed $23,500,000	 	96.625% of the VWAP
	Equal to or greater than $12.00 and less than $13.00
	 	Not to exceed $22,000,000	 	96.375% of the VWAP
	Equal to or greater than $11.00 and less than $12.00
	 	Not to exceed $20,500,000	 	96.375% of the VWAP
	Equal to or greater than $10.00 and less than $11.00
	 	Not to exceed $19,000,000	 	96.375% of the VWAP
	Equal to or greater than $9.00 and less than $10.00
	 	Not to exceed $17,500,000	 	96.125% of the VWAP
	Equal to or greater than $8.00 and less than $9.00
	 	Not to exceed $16,000,000	 	95.875% of the VWAP
	Equal to or greater than $7.00 and less than $8.00
	 	Not to exceed $14,500,000	 	95.625% of the VWAP
	Equal to or greater than $6.00 and less than $7.00
	 	Not to exceed $13,000,000	 	95.375% of the VWAP
	Equal to or greater than $5.00 and less than $6.00
	 	Not to exceed $11,500,000	 	95.125% of the VWAP
	Equal to or greater than $4.00 and less than $5.00
	 	Not to exceed $10,000,000	 	94.875% of the VWAP
	Equal to or greater than $3.00 and less than $4.00
	 	Not to exceed $  8,000,000	 	94.625% of the VWAP
	Equal to or greater than $2.00 and less than $3.00
	 	Not to exceed $  6,000,000	 	94.125% of the VWAP

3

 

     Anything to the contrary in this Agreement notwithstanding, at no time shall the Investor
be required to purchase more than $29,500,000 worth of Common Stock in respect of any Pricing
Period (not including Common Stock subject to any Optional Amount). The date on which the Company
delivers any Fixed Request Notice in accordance with this Section 2.2 hereinafter shall be referred
to as a “Fixed Request Exercise Date”.

     Section 2.3 Share Calculation. Subject to Section 2.6, the number of Shares to be issued
by the Company to the Investor pursuant to a Fixed Request shall equal the aggregate sum of each
quotient (calculated for each Trading Day during the applicable Pricing Period for which the VWAP
equals or exceeds the Threshold Price) determined pursuant to the following equation (rounded to
the nearest whole Share):

	 	 	 	 	 
	N

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

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

	 	=
	 	0.10 (the “Multiplier”); provided, however, that if the number of
Trading Days constituting a Pricing Period is decreased as set forth in Section 2.8 hereof,
then the Multiplier correspondingly shall be increased to equal the decimal equivalent (in
10-millionths) of a fraction, the numerator of which is one and the denominator of which
equals the number of Trading Days in the Pricing Period as so decreased,
	 
	 	 	 	 
	B

	 	=
	 	the Fixed Amount Requested, and
	 
	 	 	 	 
	C

	 	=
	 	the applicable Discount Price.

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

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

4

 

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

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

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

     Upon receipt of a Reduction Notice, the Investor (i) shall purchase the Shares in respect of
each Trading Day in such reduced Pricing Period for which the VWAP equals or exceeds the Threshold
Price in accordance with Section 2.3 hereof; (ii) may elect to purchase the Shares in respect of
any Trading Day in such reduced Pricing Period for which the VWAP is (or is deemed

5

 

to be) lower than the Threshold Price in accordance with Section 2.6 hereof; and (iii) may elect to
exercise all or any portion of an Optional Amount on any Trading Day during such reduced Pricing
Period in accordance with Sections 2.10 and 2.11 hereof.

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

D = A x 1/B x (B – C), where:

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

A = the Fixed Amount Requested,

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

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

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

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

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

     Section 2.9 Optional Amount.
With respect to any Pricing Period, the Company may in its sole discretion grant to the Investor
the right to exercise, from time to time during the Pricing Period (but not more than once on any
Trading Day), all or any portion of an Optional Amount. The maximum Optional Amount Dollar Amount
and the Optional Amount Threshold Price shall be set forth in the Fixed Request Notice. Each daily
Optional Amount exercise shall be aggregated during the Pricing Period and settled on the next
Settlement Date. The Optional Amount Threshold Price designated by the
Company in its Fixed Request Notice shall apply to each Optional Amount during the applicable
Pricing Period.

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

6

 

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

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

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

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

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

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

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

7

 

Section 5.6(ii) hereof. Further, at the Company’s sole
discretion, this Agreement may be amended from time to time to reduce the Aggregate Limit by an
amount as shall be determined by the Company in its sole discretion (such amount to be no greater
than is necessary to meet the Company’s registration obligations in connection with an underwritten
public offering or registered direct offering in order to effect such offering); provided,
however, any such amendment of this Agreement (and any such purported amendment) shall be
void and of no force and effect if the effect thereof would restrict, materially delay, conflict
with or impair the ability or right of the Company to perform its obligations under this Agreement,
including, without limitation, the obligation of the Company to deliver Shares to the Investor in
respect of a Fixed Request on the applicable Settlement Date; provided, further, that at
the Company’s sole discretion, it may increase the Aggregate Limit by such amount as it was reduced
pursuant to this Section 2.12, but in no event may the Company issue a Fixed Request Notice or
grant an Optional Amount to the extent that the sale of Shares pursuant thereto and pursuant to all
prior Fixed Request Notices, Optional Amounts and as liquidated damages pursuant to Section 9.1(ii)
issued hereunder would cause the Company to sell or the Investor to purchase Shares which in the
aggregate are in excess of the Aggregate Limit originally set forth in Section 1.1 hereto.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE INVESTOR

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

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

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

     Section 3.3 No Conflicts. The execution, delivery and performance by the Investor of this Agreement and the consummation
by the Investor of the transactions contemplated herein do not and shall not (i) result in a
violation of such Investor’s charter documents, bylaws or other applicable organizational
instruments, (ii) conflict with, constitute a default (or an event which, with notice or lapse of
time or both, would become a default) under, or give rise to any rights of termination, amendment,
acceleration or cancellation of, any material agreement, mortgage, deed of trust, indenture, note,
bond, license, lease agreement, instrument or obligation to which the

8

 

Investor is a party or is
bound, (iii) create or impose any lien, charge or encumbrance on any property of the Investor under
any agreement or any commitment to which the Investor is party or under which the Investor is bound
or under which any of its properties or assets are bound, or (iv) result in a violation of any
federal, state, local or foreign statute, rule, or regulation, or any order, judgment or decree of
any court or governmental agency applicable to the Investor or by which any of its properties or
assets are bound or affected, except, in the case of clauses (ii), (iii) and (iv), for such
conflicts, defaults, terminations, amendments, acceleration, cancellations, liens, charges,
encumbrances and violations as would not, individually or in the aggregate, prohibit or otherwise
interfere with the ability of the Investor to enter into and perform its obligations under this
Agreement in any material respect. The Investor is not required under federal, state, local or
foreign law, rule or regulation to obtain any consent, authorization or order of, or make any
filing or registration with, any court or governmental agency in order for it to execute, deliver
or perform any of its obligations under this Agreement or to purchase the Shares in accordance with
the terms hereof.

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

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

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

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

     Section 4.2 Authorization, Enforcement. The Company has the requisite corporate power and authority to enter into and perform this
Agreement and to issue and sell the Shares in accordance with the terms hereof. Except for
approvals of the Company’s Board of Directors or a committee thereof as may be required in
connection with any issuance and sale of Shares to the Investor hereunder (which approvals shall be
obtained prior to the delivery of any Fixed Request

9

 

Notice), the execution, delivery and
performance by the Company of this Agreement and the consummation by it of the transactions
contemplated hereby have been duly and validly authorized by all necessary corporate action and no
further consent or authorization of the Company or its Board of Directors or stockholders is
required This Agreement has been duly executed and delivered by the Company and constitutes a
valid and binding obligation of the Company enforceable against the Company in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation, conservatorship, receivership or similar laws relating to,
or affecting generally the enforcement of, creditor’s rights and remedies or by other equitable
principles of general application.

     Section 4.3 Capitalization. The authorized capital stock of the Company and the shares thereof issued and outstanding as of
the dates set forth in the Commission Documents are as set forth in the Commission Documents. All
of the outstanding shares of Common Stock have been duly authorized and validly issued, and are
fully paid and nonassessable. Except as set forth in the Commission Documents, as of the Effective
Date, no shares of Common Stock were entitled to preemptive rights or registration rights and there
were no outstanding options, warrants, scrip, rights to subscribe to, call or commitments of any
character whatsoever relating to, or securities or rights convertible into or exchangeable for, any
shares of capital stock of the Company. Except as set forth in the Commission Documents, there
were no contracts, commitments, understandings, or arrangements by which the Company is or may
become bound to issue additional shares of the capital stock of the Company or options, securities
or rights convertible into or exchangeable for any shares of capital stock of the Company. Except
for customary transfer restrictions contained in agreements entered into by the Company to sell
restricted securities or as set forth in the Commission Documents, as of the Effective Date, the
Company was not a party to, and it had no knowledge of, any agreement restricting the voting or
transfer of any shares of the capital stock
of the Company. Except as set forth in the Commission Documents, the offer and sale of all capital
stock, convertible or exchangeable securities, rights, warrants or options of the Company issued
prior to the Effective Date complied in all material respects with all applicable federal and state
securities laws, and no stockholder has any right of rescission or damages or any “put” or similar
right with respect thereto which would have a Material Adverse Effect. The Company has furnished
or made available, via the Electronic Data Gathering, Analysis, and Retrieval System (“EDGAR”) or
otherwise, to the Investor true and correct copies of the Company’s Certificate of Incorporation as
in effect on the Effective Date (the “Charter”), and the Company’s Bylaws as in effect on
the Effective Date (the “Bylaws”), and true and correct copies (redacted as appropriate) of
all executed resolutions of the Company’s Board of Directors (and committees thereof) relating to
the capital stock of the Company (and transactions in respect thereof) since December 31, 2004
(except with respect to issuances of shares of capital stock of the Company to directors or
employees of the Company as fees or compensation that were duly approved by the Company’s Board of
Directors or a committee thereof).

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

10

 

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

     Section 4.6 Commission Documents, Financial Statements. (a) The Common Stock is registered pursuant to Section 12(b) or 12(g) of the Exchange Act and,
except as disclosed in the Commission Documents, as of the Effective Date the Company had timely
filed (giving effect to permissible extensions in accordance with Rule 12b-25 under the Exchange
Act) all Commission Documents. The Company has delivered or made available, via EDGAR or
otherwise, to the Investor true and complete copies of the Commission Documents filed with the
Commission prior to the Effective Date (including, without limitation, the 2005 Form 10-K) and has
delivered or made available, via EDGAR or otherwise, to the Investor true and complete copies of
all of the Commission Documents heretofore incorporated by reference in the Registration Statement
and the Prospectus. The Company has not provided to the Investor any information which, according
to applicable law, rule or regulation, should have been disclosed publicly by the Company but which
has not been so disclosed, other than with respect to the transactions contemplated by this
Agreement. As of its filing date, each Commission Document filed with the Commission and
incorporated by reference in the Registration Statement and the Prospectus (including, without
limitation, the 2005 Form 10-K) complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as applicable, and other federal, state and local laws, rules
and regulations applicable to it, and, as of its filing date, such Commission Document did not
contain any untrue statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in

11

 

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

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

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

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

     Section 4.7 Subsidiaries. The 2005 Form 10-K sets forth each Subsidiary of the Company as of the Effective Date, showing
its jurisdiction of incorporation or organization and the percentage of the Company’s ownership of
the outstanding capital stock or other ownership

12

 

interests of such Subsidiary, and the Company does
not have any other Subsidiaries as of the Effective Date.

     Section 4.8 No Material Adverse Effect. Since December 31, 2005, the Company has not experienced or suffered any Material Adverse
Effect, and to the best knowledge of the Company, there exists no current state of facts, condition
or event which would have a Material Adverse Effect, except (i) as disclosed in any Commission
Documents filed since December 31, 2005 or (ii) continued losses from operations.

     Section 4.9 Indebtedness. The Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2006 sets
forth, as of June 30, 2006, all outstanding secured and unsecured Indebtedness of the Company or
any Subsidiary, or for which the Company or any Subsidiary has commitments through such date. For
the purposes of this Agreement, “Indebtedness” shall mean (a) any liabilities for borrowed
money or amounts owed in excess of $10,000,000 (other than trade accounts payable incurred in the
ordinary course of business), (b) all guaranties, endorsements, indemnities and other contingent
obligations in respect of Indebtedness of others in excess of $10,000,000, whether or not the same
are or should be reflected in the Company’s balance sheet (or the notes thereto), except guaranties
by endorsement of negotiable instruments for deposit or collection or similar transactions in the
ordinary course of business; and (c) the present value of any lease
payments in excess of $10,000,000 due under leases required to be capitalized in accordance with
GAAP. There is no existing or continuing default or event of default in respect of any
Indebtedness of the Company or any of its Subsidiaries.

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

     Section 4.11 Actions Pending. There is no action, suit, claim, investigation or proceeding pending, or to the knowledge of the
Company threatened, against the Company or any Subsidiary which questions the validity of this
Agreement or the transactions contemplated hereby or any action taken or to be taken pursuant
hereto or thereto. Except as set forth in the Commission Documents, there is no action, suit,
claim, investigation or proceeding pending, or to the knowledge of the Company threatened, against
or involving the Company, any Subsidiary or any of their respective properties or assets, or
involving any officers or directors of the Company or any of its Subsidiaries, including, without
limitation, any securities class action lawsuit or stockholder derivative lawsuit, in each case
which, if determined adversely to the Company, its Subsidiary or any officer or director of the
Company or its Subsidiaries, would have a Material Adverse Effect.

     Section 4.12 Compliance With Law. The business of the Company and the Subsidiaries has been and is presently being conducted in
compliance with all applicable federal, state, local and foreign governmental laws, rules,
regulations and ordinances, except as set forth

13

 

in the Commission Documents and except for such
non-compliance which, individually or in the aggregate, would not have a Material Adverse Effect.

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

     Section 4.14 Operation of Business. (a) Except as set forth in the Commission Documents, the Company or one or more of its
Subsidiaries possesses such permits, licenses, approvals, consents and other authorizations
(including licenses, accreditation and other similar documentation or approvals of any local health
departments) (collectively, “Governmental Licenses”) issued by the appropriate federal,
state, local or foreign regulatory agencies or bodies, including, without limitation, the United
States Food and Drug Administration (“FDA”), necessary to conduct the business now operated
by it, except where the failure to possess such Governmental Licenses, individually or in the
aggregate, would not have a Material Adverse Effect. Except as set forth in the Commission
Documents, the Company and its Subsidiaries are in compliance with the terms and conditions of all
such Governmental Licenses and all applicable FDA rules and regulations, guidelines and policies,
except where the failure to so comply, individually or in the aggregate, would not have a Material
Adverse Effect. All of the Governmental Licenses are valid and in full force and effect, except
where the invalidity of such Governmental Licenses or the failure of such Governmental Licenses to
be in full force and effect, individually or in the aggregate, would not have a Material Adverse
Effect. Except as set forth in the Commission Documents, neither the Company nor any of its
Subsidiaries has received any notice of proceedings relating to the revocation or modification of
any such Governmental Licenses which, if the subject of any unfavorable decision, ruling or
finding, individually or in the aggregate, would have a Material Adverse Effect. This Section 4.14
does not relate to environmental matters, such items being the subject of Section 4.15.

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

14

 

Subsidiaries therein, and which
infringement or conflict (if the subject of any unfavorable decision, ruling or finding) or
invalidity or inadequacy, individually or in the aggregate, would have a Material Adverse Effect.

          (c) The material human clinical trials conducted by the Company or any of its Subsidiaries or
in which the Company or any of its Subsidiaries has participated related to sitaxsentan sodium
(ThelinTM) or TBC3711 that are described in the Commission Documents, or the results of which are
referred to in the Commission Documents, if any, are the only material human clinical trials
currently being conducted by or on behalf of the Company and its Subsidiaries and, to the best
knowledge of the Company, except as set forth in the Commission Documents, such studies and tests
were and, if still pending, are being conducted in accordance with experimental protocols,
procedures and controls pursuant to accepted professional scientific standards. Except as set forth
in the Commission Documents, neither the Company nor any of its
Subsidiaries has received any notices or correspondence from the FDA or any other governmental
agency requiring the termination, suspension or modification of any clinical trials conducted by,
or on behalf of, the Company or any of its Subsidiaries or in which the Company or any of its
Subsidiaries has participated that are described in the Commission Documents, if any, or the
results of which are referred to in the Commission Documents. Except as set forth in the Commission
Documents, all human clinical trials previously conducted by or on behalf of the Company or any of
its Subsidiaries while conducted by or on behalf of the Company or any of its Subsidiaries, were
conducted in accordance with experimental protocols, procedures and controls pursuant to accepted
professional scientific standards.

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

15

 

     Section 4.16 Material Agreements. Except as set forth in the Commission Documents, neither the Company nor any Subsidiary of the
Company is a party to any written or oral contract, instrument, agreement commitment, obligation,
plan or arrangement, a copy of which would be required to be filed with the Commission as an
exhibit to an annual report on Form 10-K (collectively, “Material Agreements”). Except as
set forth in the Commission Documents, the Company and each of its Subsidiaries have performed in
all material respects all the obligations required to be performed by them under the Material
Agreements, have received no notice of default or an event of default by the Company or any of its
Subsidiaries thereunder and are not aware of any basis for the
assertion thereof, and neither the Company or any of its Subsidiaries nor, to the best knowledge of
the Company, any other contracting party thereto are in default under any Material Agreement now in
effect, the result of which would have a Material Adverse Effect. Except as set forth in the
Commission Documents, each of the Material Agreements is in full force and effect, and constitutes
a legal, valid and binding obligation enforceable in accordance with its terms against the Company
and/or any of its Subsidiaries and, to the best knowledge of the Company, each other contracting
party thereto, except as such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation, conservatorship, receivership or similar laws relating to,
or affecting generally the enforcement of, creditor’s rights and remedies or by other equitable
principles of general application.

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

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

          (i) The Company has prepared and filed with the Commission in accordance with the provisions
of the Securities Act the Registration Statement, including the Base Prospectus, relating to the
Shares. The Registration Statement was declared effective by order of the Commission on July 23,
2004. As of the date hereof, no stop order suspending the effectiveness of the Registration
Statement has been issued by the Commission or is continuing in effect under the Securities Act and
no proceedings therefor are pending before or, to the Company’s knowledge, threatened by the
Commission. No order preventing or suspending the use of the Prospectus or any Permitted Free
Writing Prospectus has been issued by the Commission.

16

 

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

          (iii) In accordance with Rule 2710(b)(7)(C)(i) of the Conduct Rules of the National
Association of Securities Dealers, Inc., the offering of the Shares pursuant to this Agreement has
been registered with the Commission on Form S-3 under the Securities Act pursuant to the standards
for Form S-3 in effect prior to October 21, 1992, and the Shares are being offered pursuant to Rule
415 promulgated under the Securities Act.

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

          (v) At the earliest time after the filing of the Registration Statement that the Company or
another offering participant made a bona fide offer (within the meaning of Rule 164(h)(2) under the
Securities Act) relating to the Shares, the Company was not and is not an Ineligible Issuer (as
defined in Rule 405 under the Securities Act), without taking account of any determination by the
Commission pursuant to Rule 405 that it is not necessary that the Company

17

 

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

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

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

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

     Section 4.21 Public Utility Holding Company Act and Investment Company Act Status. The Company is not a “holding company” or a “public utility company” as such terms are defined
in the Public Utility Holding Company Act of 1935, as amended. The Company is not, and as a result
of the consummation of the transactions contemplated by this Agreement and the application of the
proceeds from the sale of the Shares as set forth in the Base Prospectus and any Prospectus
Supplement shall not be, an “investment company” or a company “controlled” by an “investment
company,” within the meaning of the Investment Company Act of 1940, as amended.

     Section 4.22 ERISA. No liability to the Pension Benefit Guaranty Corporation has been incurred with respect to any
Plan by the Company or any of its Subsidiaries which has had or would have a Material Adverse
Effect. No “prohibited transaction” (as defined in Section 406 of ERISA or Section 4975 of the
Code) or “accumulated funding deficiency” (as defined in

18

 

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

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

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

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

ARTICLE V

COVENANTS

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

19

 

     Section 5.1 Securities Compliance. The Company shall notify the Commission and the Trading Market, as applicable, in accordance
with their respective rules and regulations, of the transactions contemplated by this Agreement,
and shall take all necessary action, undertake all proceedings and obtain all registrations,
permits, consents and approvals for the legal and valid issuance of the Shares to the Investor in
accordance with the terms of this Agreement.

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

     Section 5.3 Compliance with Laws.

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

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

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

          (i) The Company shall keep and cause each Subsidiary to keep adequate records and books of
account, in which complete entries shall be made in accordance with GAAP consistently applied,
reflecting all financial transactions of the Company and its Subsidiaries, and in which, for each
fiscal year in all material respects, all proper reserves for depreciation, depletion,
obsolescence, amortization, taxes, bad debts and other purposes in connection with its business
shall be made. The Company shall maintain a system of internal accounting controls which are
sufficient to provide reasonable assurance that (a) transactions are executed with management’s
authorization; (b) transactions are recorded as necessary to permit

20

 

preparation of the consolidated financial statements of the Company and to maintain accountability for the Company’s consolidated assets; (c) access to the Company’s assets is permitted only in accordance with management’s authorization; and (d) the reporting of the Company’s assets is compared with existing assets at regular intervals.

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

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

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

     Section 5.6 Other Agreements and Other Financings.

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

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

21

 

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

     Section 5.7 Stop Orders. The Company shall advise the Investor, as promptly as practicable, but in no event less
than 24 hours after, and shall confirm such advice in writing: (i)

22

 

of the Company’s receipt of
notice of any request by the Commission for amendment of or a supplement to the Registration
Statement, the Prospectus, any Permitted Free Writing Prospectus or for any additional information
with respect thereto; (ii) of the Company’s receipt of notice of the issuance by the Commission of
any stop order suspending the effectiveness of the Registration Statement or of the suspension of
qualification of the Shares for offering or sale in any jurisdiction or the initiation of any
proceeding for such purpose; and (iii) of the Company becoming aware of the happening of any event,
which makes any statement of a material fact made in the Prospectus or any Permitted Free Writing
Prospectus untrue or which requires the making of any additions to or changes to the statements
then made in the Prospectus or any Permitted Free Writing Prospectus in order to state a material
fact required by the Securities Act to be stated therein or necessary in order to make the
statements then made therein, in light of the circumstances under which they were made, not
misleading, or of the necessity to amend the Registration Statement or supplement the Prospectus or
any Permitted Free Writing Prospectus to comply with the Securities Act or any other law. If at any
time the Commission shall issue any stop order suspending the effectiveness of the Registration
Statement, the Company shall use commercially reasonable efforts to obtain the withdrawal of such
order at the earliest possible time.

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

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

          (ii) The Company agrees that, unless it obtains the prior written consent of the Investor, it
has not made and will not make an offer relating to the Shares that would constitute an Issuer Free
Writing Prospectus or that would otherwise constitute a Free Writing Prospectus required to be
filed by the Company or the Investor with the Commission or retained by the Company or the Investor
under Rule 433 under the Securities Act. The Investor agrees that, unless it obtains the prior
written consent of the Company, it has not made and will not make an

23

 

offer relating to the Shares
that would constitute a Free Writing Prospectus required to be filed by the Company with the
Commission or retained by the Company under Rule 433 under the Securities Act. Any such Issuer
Free Writing Prospectus or other Free Writing Prospectus consented to by the Investor or the
Company is referred to in this Agreement as a “Permitted Free Writing Prospectus.” The
Company agrees that (x) it has treated and will treat, as the case may be, each Permitted Free
Writing Prospectus as an Issuer Free Writing Prospectus and (y) it has complied and will comply, as
the case may be, with the requirements of Rules 164 and 433 under the Securities Act applicable to
any Permitted Free Writing Prospectus, including in respect of timely filing with the Commission,
legending and record keeping.

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

     Section 5.10 Selling Restrictions.

          (i) The Investor covenants that from and after the date hereof through and including the
90th day next following the termination of this Agreement (the “Restricted
Period”), neither the Investor nor any of its affiliates (within the meaning of the Exchange
Act) nor any entity managed or controlled by the Investor shall, directly or indirectly, sell any
securities of the Company, except the Shares that it owns or has the right to purchase as provided
in a Fixed Request Notice. During the Restricted Period, neither the
Investor or any of its affiliates nor any  entity managed or controlled by the Investor shall sell any shares of Common
Stock of the Company it does not “own” or have the unconditional right to receive under the terms
of this Agreement (within the meaning of Rule 200 of Regulation SHO promulgated by the Commission
under the Exchange Act), including Shares in any account of the Investor or in any account directly
or indirectly managed or controlled by the Investor or any of its affiliates or any

24

 

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

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

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

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

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

     Section 5.14 Update of Disclosure Schedule. During the Investment Period, the Company shall from time to time update the Disclosure Schedule
as may be required to satisfy the condition set forth in Section 6.3(i). For purposes of this
Section 5.14, any disclosure made

25

 

in a schedule to the Compliance Certificate shall be deemed to be
an update of the Disclosure Schedule. Notwithstanding anything in this Agreement to the contrary,
no update to the Disclosure Schedule pursuant to this Section 5.14 shall cure any breach of a
representation or warranty of the Company contained in this Agreement and shall not affect any of
the Investor’s remedies with respect thereto.

ARTICLE VI

OPINION OF COUNSEL AND CERTIFICATE; CONDITIONS TO THE SALE AND

PURCHASE OF THE SHARES

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

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

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

          (ii) Registration Statement.
 The Registration Statement is effective and neither the
Company nor the Investor shall have received notice that the Commission has issued or intends to
issue a stop order with respect to the Registration Statement. The Company shall have a maximum
dollar amount certain of Shares registered under the Registration Statement which are in an amount
(A) as of the Effective Date, not less than the maximum dollar amount worth of Shares issuable
pursuant to all Fixed Request Notices and Optional Amounts during the Investment Period and (B) as
of the applicable Fixed Request Exercise Date, not less than the maximum dollar amount worth of
Shares issuable pursuant to the applicable Fixed Request Notice and applicable Optional Amount, if
any. The Current Report shall have been filed with the Commission, as required pursuant to Section
1.4, and all Prospectus Supplements shall have been filed with the Commission, as required pursuant
to Sections 1.4 and 5.9 hereof, to disclose

26

 

the sale of the Shares prior to each Settlement Date,
as applicable. Any other material required to be filed by the Company or any other offering
participant pursuant to Rule 433(d) under the Securities Act shall have been filed with the
Commission within the applicable time periods prescribed for such filings by Rule 433 under the
Securities Act.

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

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

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

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

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

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

27

 

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

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

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

          (iv) Performance of the Company. The Company shall have performed, satisfied and
complied in all material respects with all covenants, agreements and conditions

28

 

required by this
Agreement to be performed, satisfied or complied with by the Company at or prior to the applicable
Fixed Request Exercise Date and the applicable Settlement Date and shall have delivered to the
Investor on the applicable Settlement Date the Compliance Certificate substantially in the form
attached hereto as Exhibit D.

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

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

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

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

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

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

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

29

 

by the
Investor, the due diligence expenses incurred by the Investor and (b) to an account designated by
the Investor’s counsel, the fees and expenses of the Investor’s counsel, in each case, in
accordance with the provisions of the second sentence of Section 9.1(i) of this Agreement.

ARTICLE VII

TERMINATION

     Section 7.1 Term, Termination by Mutual Consent. Unless earlier terminated as provided hereunder, this Agreement shall terminate automatically on
the earliest of (i) the first day of the month next following the 18-month anniversary of the
Effective Date (the “Investment Period”), (ii) the date that the entire dollar amount of
Shares registered under the Registration Statement have been issued and sold and (iii) the date the
Investor shall have purchased the Total Commitment of shares of Common Stock (subject in all cases
to the Trading Market Limit). The Company may terminate this Agreement effective upon three Trading
Days’ prior written notice to the Investor under Section 9.4; provided, however,
that such termination shall not occur during a Pricing Period or prior to a Settlement Date. This
Agreement may be terminated at any time by the mutual written consent of the parties, effective as
of the date of such mutual written consent unless otherwise provided in such written consent,
it being hereby acknowledged and agreed that the Investor may not consent to such termination
during a Pricing Period or prior to a Settlement Date in the event the Investor has instructed the
Broker-Dealer to effect an open-market sale of Shares which are subject to a pending Fixed Request
Notice but which have not yet been physically delivered by the Company (and/or credited by
book-entry) to the Investor in accordance with the terms and subject to the conditions of this
Agreement.

     Section 7.2 Other Termination. If the Company provides the Investor with an Other Financing Notice (other than in respect of an
underwritten public offering, registered direct or other customary offering where the issuer may
sell stock at a discount to the market price or an Acceptable Financing) or an Integration Notice,
the Investor shall have the right to terminate this Agreement within the subsequent 30-day period
(the “Event Period”), effective upon one Trading Day’s prior written notice delivered to
the Company in accordance with Section 9.4 at any time during the Event Period. The Company shall
notify the Investor and the Investor shall have the right to terminate this Agreement at any time
if: (i) any condition, occurrence, state of facts or event constituting a Material Adverse Effect
has occurred; (ii) a Material Change in Ownership has occurred; or (iii) a default or event of
default has occurred and is continuing under the terms of any agreement, contract, note or other
instrument to which the Company or any of its Subsidiaries is a party with respect to any
indebtedness for borrowed money representing more than 10% of the Company’s consolidated assets, in
any such case, upon one Trading Day’s prior written notice delivered to the Company in accordance
with Section 9.4 hereof.

     Section 7.3 Effect of Termination. In the event of termination by the Company or the Investor, written notice thereof shall
forthwith be given to the other party as provided in Section 9.4 and the transactions contemplated
by this Agreement shall be terminated without further action by either party. If this Agreement is
terminated as provided in Section 7.1 or 7.2 herein, this Agreement shall become void and of no
further force and effect, except as provided in Section 9.9 hereof. Nothing in this Section 7.3
shall be deemed to release the Company or the Investor from any liability for any breach under this
Agreement, or to impair the rights of the

30

 

Company and the Investor to compel specific performance
by the other party of its obligations under this Agreement.

ARTICLE VIII

INDEMNIFICATION

     Section 8.1 General Indemnity.

          (i) Indemnification by the Company. The Company shall indemnify and hold harmless the
Investor, the Broker-Dealer, each affiliate, employee, representative and advisor of and to the
Investor and the Broker-Dealer, and each person, if any, who controls the Investor or the
Broker-Dealer within the meaning of Section 15 of the Securities Act or Section 20(a) of the
Exchange Act from and against all losses, claims, damages, liabilities and expenses (including
reasonable costs of defense and investigation and all attorneys’ fees) to which the Investor, the
Broker-Dealer and each such other person may become subject, under the Securities
Act or otherwise, insofar as such losses, claims, damages, liabilities and expenses (or
actions in respect thereof) arise out of or are based upon (i) any violation of law (including
United States federal securities laws but excluding any British Virgin Islands Law) in connection
with the transactions contemplated by this Agreement by the Company or any of its Subsidiaries,
affiliates, officers, directors or employees, (ii) any untrue statement or alleged untrue statement
of a material fact contained, or incorporated by reference, in the Registration Statement or any
amendment thereto or any omission or alleged omission to state therein, or in any document
incorporated by reference therein, a material fact required to be stated therein or necessary to
make the statements therein not misleading, or (iii) any untrue statement or alleged untrue
statement of a material fact contained, or incorporated by reference, in the Prospectus, any Issuer
Free Writing Prospectus, or in any amendment thereof or supplement thereto, or in any “issuer
information” (as defined in Rule 433 under the Securities Act) of the Company, which “issuer
information” is required to be, or is, filed with the Commission or otherwise contained in any Free
Writing Prospectus, or any amendment or supplement thereto, or any omission or alleged omission to
state therein, or in any document incorporated by reference therein, a material fact required to be
stated therein or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; provided, however, that (A) the Company shall
not be liable under this Section 8.1(i) to the extent that a court of competent jurisdiction shall
have determined by a final judgment (from which no further appeals are available) that such loss,
claim, damage, liability or expense resulting directly and solely from any such acts or failures to
act, undertaken or omitted to be taken by the Investor or such person through its bad faith or
willful misconduct, (B) the foregoing indemnity shall not apply to any loss, claim, damage,
liability or expense to the extent, but only to the extent, arising out of or based upon any untrue
statement or alleged untrue statement or omission or alleged omission made in reliance upon and in
conformity with written information furnished to the Company by the Investor expressly for use in
the Current Report or any Prospectus Supplement or Permitted Free Writing Prospectus, or any
amendment thereof or supplement thereto, and (C) with respect to the Prospectus, the foregoing
indemnity shall not inure to the benefit of the Investor or any such person from whom the person
asserting any loss, claim, damage, liability or expense purchased Common Stock, if copies of all
Prospectus Supplements required to be filed pursuant to Section 1.4 and 5.9, together with the Base
Prospectus, were timely delivered or made available to the Investor pursuant hereto and a copy of
the Base Prospectus, together with a

31

 

Prospectus Supplement (as applicable), was not sent or given
by or on behalf of the Investor or any such person to such person, if required by law to have been
delivered, at or prior to the written confirmation of the sale of the Common Stock to such person,
and if delivery of the Base Prospectus, together with a Prospectus Supplement (as applicable),
would have cured the defect giving rise to such loss, claim, damage, liability or expense.

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

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

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

     Section 8.2 Indemnification Procedures. Promptly after a person receives notice of a claim or the commencement of an action for which
the person intends to seek indemnification under Section 8.1, the person will notify the
indemnifying party in writing of the claim or commencement of the action, suit or proceeding;
provided, however, that failure to notify the indemnifying party will not relieve
the indemnifying party from liability under Section 8.1, except to the extent it has been
materially prejudiced by the failure to give notice. The indemnifying party will be entitled to
participate in the defense of any claim, action, suit or proceeding as to which indemnification is
being sought, and if the indemnifying party acknowledges in writing the obligation to indemnify the
party against whom the claim or action

32

 

is brought, the indemnifying party may (but will not be
required to) assume the defense against the claim, action, suit or proceeding with counsel
satisfactory to it. After an indemnifying party notifies an indemnified party that the
indemnifying party wishes to assume the defense of a claim, action, suit or proceeding, the
indemnifying party will not be liable for any legal or other expenses incurred by the indemnified
party in connection with the defense against the claim, action, suit or proceeding except that if,
in the opinion of counsel to the indemnifying party, one or more of the indemnified parties should
be separately represented in connection with a claim, action, suit or proceeding, the indemnifying
party will pay the reasonable fees and expenses of one separate counsel for the indemnified
parties. Each indemnified party, as a condition to receiving indemnification as provided in
Section 8.1, will cooperate in all reasonable respects with the indemnifying party in the defense
of any action or claim as to which indemnification is sought. No indemnifying party will be liable
for any settlement of any action effected without its prior written consent. Notwithstanding the
foregoing sentence, if at any time an indemnified party shall have requested (by written notice
provided in accordance with Section 9.4) an indemnifying party to reimburse the indemnified party
for fees and expenses of counsel, such indemnifying party agrees that it shall be liable for any
settlement of the nature contemplated hereby effected without its written consent if (i) such
settlement is entered into more than 45 days after receipt by such indemnifying party of the
aforesaid request, (ii) such indemnifying party shall have received written notice of the terms of
such settlement at least 30 days prior to such settlement being entered into and (iii) such
indemnifying party shall not have reimbursed such indemnified party in accordance with such request
prior to the date of such settlement. No indemnifying party will, without the prior written
consent of the indemnified party, effect any settlement of a pending or threatened action with
respect to which an indemnified party is, or is informed that it may be, made a party and for which
it would be entitled to indemnification, unless the settlement includes an unconditional release of
the indemnified party from all liability and claims which are the subject matter of the pending or
threatened action.

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

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

33

 

ARTICLE IX

MISCELLANEOUS

     Section 9.1 Fees and Expenses.

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

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

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

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

          (ii) Each of the Company and the Investor (a) hereby irrevocably submits to the jurisdiction
of the United States District Court and other courts of the United States sitting in

34

 

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

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

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

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

	 	 	 	 	 
	 

	 	If to the Company:
	 	Encysive Pharmaceuticals Inc.
	 

	 	 	 	4848 Loop Central Drive, Suite 700
	 

	 	 	 	Houston, Texas 77081
	 

	 	 	 	Telephone Number: (713) 796-8822
	 

	 	 	 	Fax: (713) 796-8232
	 

	 	 	 	Attention: General Counsel

35

 

	 	 	 	 	 
	 

	 	With copies to:
	 	Porter & Hedges, L.L.P.
	 

	 	 	 	1000 Main Street, 36th Floor
	 

	 	 	 	Houston, Texas 77002
	 

	 	 	 	Telephone Number: (713) 226-6674
	 

	 	 	 	Fax: (713) 226-6274
	 

	 	 	 	Attention: Robert G. Reedy
	 
	 	 	 	 
	 

	 	If to the Investor:
	 	Azimuth Opportunity Ltd.
	 

	 	 	 	c/o Fortis Prime Fund Solutions (BVI) Limited

	 

	 	 	 	P.O. Box 761, 1st Floor
	 

	 	 	 	James Frett Building
	 

	 	 	 	Road Town, Tortola
	 

	 	 	 	British Virgin Islands
	 

	 	 	 	Telephone Number: (284) 494-6046
	 

	 	 	 	Fax: (284) 494-6898
	 

	 	 	 	Attention: Peter O’Connell
	 
	 	 	 	 
	 

	 	With copies to:
	 	Greenberg Traurig, LLP
	 

	 	 	 	The MetLife Building
	 

	 	 	 	200 Park Avenue
	 

	 	 	 	New York, NY 10166
	 

	 	 	 	Telephone Number: (212) 801-9200
	 

	 	 	 	Fax: (212) 801-6400
	 

	 	 	 	Attention: Clifford E. Neimeth, Esq.
	 

	 	 	 	                  Anthony J. Marsico, Esq.

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

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

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

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

36

 

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

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

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

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

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

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

[Signature Page Follows]

37

 

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

	 	 	 	 	 	 	 
	 	 	ENCYSIVE PHARMACEUTICALS INC.:	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Bruce D. Given, M.D.	 	 
	 

	 	 	 	 

Name: Bruce D. Given, M.D.
	 	 
	 

	 	 	 	Title: President and Chief Executive Officer	 	 
	 
	 	 	 	 	 	 
	 	 	AZIMUTH OPPORTUNITY LTD.:	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Peter W. Poole	 	 
	 

	 	 	 	 

Name: Peter W. Poole
	 	 
	 

	 	 	 	Title: Director	 	 

38

 

ANNEX A TO THE

COMMON STOCK PURCHASE AGREEMENT

DEFINITIONS

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

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

     (c) “Base Prospectus” shall mean the Company’s prospectus, dated October 19, 2006, a
preliminary form of which is included in the Registration Statement, including the documents
incorporated by reference therein.

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

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

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

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

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

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

     (j) “Commission Documents” shall mean (1) all reports, schedules, registrations,
forms, statements, information and other documents filed by the Company with the Commission
pursuant to the reporting requirements of the Exchange Act, including all material filed pursuant
to Section 13(a) or 15(d) of the Exchange Act, which have been filed by the Company since January
1, 2006 and which hereafter shall be filed by the Company during the Investment Period, including,
without limitation, the Current Report and the Form 10-K filed by the Company for its fiscal year
ended December 31, 2005 (the “2005 Form 10-K”), (2) the Registration Statement, as the same
may be amended from time to time, the Prospectus and each Prospectus Supplement, and each Permitted
Free Writing Prospectus and (3) all information contained in such filings and all documents and
disclosures that have been and heretofore shall be incorporated by reference therein.

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

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

 

 

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

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

     (o) “Effective Date” shall mean October 19, 2006.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 

 

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

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

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

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

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

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

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

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

 

 

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

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

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

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

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

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

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

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

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

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

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

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

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

 

 

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

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

     (zz) “Registration Statement” shall mean the registration statement on Form S-3,
Commission File Number 333-116193, filed by the Company with the Commission under the Securities
Act for the registration of the Shares, as such Registration Statement may be amended and
supplemented from time to time, including the documents incorporated by reference therein and the
information deemed to be a part thereof at the time of effectiveness pursuant to Rule 430A or Rule
430B under the Securities Act.

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

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

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

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

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

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

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

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

     (iii) “Threshold Price” is the lowest price (except to the extent otherwise provided
in Section 2.6) at which the Company may sell Shares during the applicable Pricing Period as set
forth in a Fixed Request Notice (not taking into account the applicable percentage discount during
such Pricing Period determined in accordance with Section 2.2); provided, however,
that at no time shall the Threshold Price be lower than $2.00 per share unless the Company and the
Investor mutually shall agree.

 

 

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

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

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

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

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

 

 

EXHIBIT A TO THE

COMMON STOCK PURCHASE AGREEMENT

FORM OF FIXED REQUEST NOTICE

     Reference is made to the Common Stock Purchase Agreement dated as of October 19, 2006, (the
“Purchase Agreement”) between Encysive Pharmaceuticals Inc., a corporation organized and
existing under the laws of the State of Delaware (the “Company”), and Azimuth Opportunity
Ltd., an international business company incorporated under the laws of the British Virgin Islands.
Capitalized terms used and not otherwise defined herein shall have the meanings given such terms in
the Purchase Agreement.

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

	 	 	 	 	 
	 

	 	Fixed Amount Requested:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Optional Amount Dollar Amount:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Pricing Period start date:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Pricing Period end date:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Settlement Date:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Fixed Request Threshold Price:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Optional Amount Threshold Price:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

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

	 	 	 	 
	 
	 	 	 	 
	 

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

	 	 	 	 

	 	 	 	 	 	 	 
	 

	 	Dated:                                         
	 	By:	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name	 	 
	 

	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	Address:
	 	 	 	 	Facsimile No.

AGREED AND ACCEPTED

	 	 	 	 	 
	By:
	 	 	 	 
	 

	 	 

Name
	 	 
	 

	 	Title:	 	 

 

 

EXHIBIT B TO TILE

COMMON STOCK PURCHASE AGREEMENT

FORM OF OPTIONAL AMOUNT NOTICE

To:                             

Fax#:                          

     Reference is made to the Common Stock Purchase Agreement dated as of October 19, 2006 (the
“Purchase Agreement”) between Encysive Pharmaceuticals Inc., a corporation organized and
existing under the laws of the State of Delaware (the “Company”), and Azimuth Opportunity
Ltd., an international business company incorporated under the laws of the British Virgin Islands
(the “Investor”). Capitalized terms used and not otherwise defined herein shall have the
meanings given such terms in the Purchase Agreement.

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

	 	 	 	 	 
	 

	 	Optional Amount Dollar Amount Exercised	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Number of Shares to be purchased	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	VWAP on the date hereof:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Discount Price:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Settlement Date:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Threshold Price:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 

	 	 	 	 	 	 	 
	 

	 	Dated:                                         
	 	By:	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name	 	 
	 

	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	Address:
	 	 	 	 	Facsimile No.

 

 

EXHIBIT C TO THE

COMMON STOCK PURCHASE AGREEMENT

CERTIFICATE OF THE COMPANY

CLOSING CERTIFICATE

                     200___

     The undersigned, the Vice President, General Counsel and Secretary of Encysive
Pharmaceuticals Inc., a corporation organized and existing under the laws of the State of Delaware
(the “Company”), delivers this certificate in connection with the Common Stock Purchase
Agreement, dated as of October 19, 2006 (the “Agreement”), by and between the Company and
Azimuth Opportunity Ltd., an international business company incorporated under the laws of the
British Virgin Islands (the “Investor”), and hereby certifies on the date hereof that
(capitalized terms used herein without definition have the meanings assigned to them in the
Agreement):

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

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

     3. Except for the requirement that the Board of Directors of the Company approve any issuance
and sale of shares of the Company’s common stock to the Investor under the Agreement, as
contemplated by Section 4.2 of the Agreement, the Board of Directors of the Company has approved
the transactions contemplated by the Agreement; said approval has not been amended, rescinded or
modified and remains in full force and effect as of the date hereof.

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

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

	 	 	 	 	 
	 

	 	 

By: Paul S. Manierre
	 	 
	 

	 	Title: Vice President, General
Counsel and Secretary	 	 

 

 

EXHIBIT D TO THE

COMMON STOCK PURCHASE AGREEMENT

COMPLIANCE CERTIFICATE

     In connection with the issuance of shares of common stock of Encysive Pharmaceuticals Inc., a
corporation organized and existing under the laws of the State of Delaware (the “Company”),
pursuant to the Fixed Request Notice, dated [                    ], delivered by the Company to Azimuth
Opportunity Ltd. (the “Investor”) pursuant to Article II of the Common Stock Purchase
Agreement, dated [                    ], 2006, by and between the Company and the Investor (the
“Agreement”), the undersigned hereby certifies as follows:

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

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

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

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

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

	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 

	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 

	 	 

 

 

DISCLOSURE SCHEDULE

RELATING TO THE COMMON STOCK

PURCHASE AGREEMENT, DATED AS OF OCTOBER 19, 2006

BETWEEN ENCYSIVE PHARMACEUTICALS INC. AND AZIMUTH OPPORTUNITY LTD.

     This disclosure schedule is made and given pursuant to Article IV of the Common Stock Purchase
Agreement, dated as of October 19, 2006 (the “Agreement”), by and between Encysive
Pharmaceuticals Inc., a Delaware corporation (the “Company”), and Azimuth Opportunity Ltd.,
an international business company incorporated under the laws of the British Virgin Islands.
Unless the context otherwise requires, all capitalized terms are used herein as defined in the
Agreement. The numbers below correspond to the section numbers of representations and warranties
in the Agreement most directly modified by the below exceptions.

     Section 4.7. Subsidiaries.

1. ImmunoPharmaceutics, Inc. — incorporated in the State of California and 100% owned by Encysive
Pharmaceuticals Inc.

2. EP-ET, LLC — a limited liability company formed in the State of Delaware and 100% owned by
Encysive Pharmaceuticals Inc.

3. Encysive, L.P. — a limited partnership formed in the State of Delaware and 99.8% limited
partnership interest owned by Encysive Pharmaceuticals Inc. and 0.2% general partnership interest
owned by EP-ET, LLC.

4. Encysive (UK) Limited — a private company formed in the United Kingdom and 100% owned by
EP-ET, LLC.

5. Encysive Germany GmbH — a private company formed in Germany and 100% owned by Encysive (UK)
Limited.exv4w1

 

Exhibit 4.1

 

 

     The Corporation will furnish without charge to each stockholder who so requests the
powers, designations, preferences and relative, participating, optional, or other special rights of
each class of stock or series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights.

     The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full according to applicable
laws or regulations:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	     TEN COM

	 	—
	 	as tenants in common	 	 	 	 	 	 	 	 	 	 
	     TEN ENT

	 	—
	 	as tenants by the entireties
	 	UNIF GIFT MIN ACT —
	 	 	 	 	 	Custodian	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	     JT TEN	 	—	 	as joint tenants with right of	 	 	 	(Cust)
	 	 	 	(Minor)
	 	 	 	 	survivorship and not as tenants in common	 	 	 	under Uniform Gifts to Minors
	 

	 	 	 	 	 	 	 	Act	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 	 	(State)	 	 

Additional abbreviations may also be used though not in the above list.

  FOR
VALUE RECEIVED,                                         hereby sell, assign and transfer unto

	 	 	 
	PLEASE INSERT SOCIAL SECURITY OR OTHER

	 	 
	IDENTIFYING NUMBER OF ASSIGNEE
 
	 	 
	 
	 	 
	 
	 	 

 

(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)

	 	 	 
	 

	 

	 	 
	 

	 	 
	 

	 

	 	 
	 

	 	Shares
	 

	 	 
	of the common stock represented by the within Certificate, and do hereby irrevocably constitute and
appoint
	 	 
	 

	 	 
	 

	 	Attorney
	 

	 	 
	to transfer the said stock on the books of the within named Corporation with full power of
substitution in the premises.
	 	 

Dated                                                                                 

	 	 	 	 	 
	 

	 	X	 	 
	 

	 	 
	 

	 	X	 	 
	 

	 	NOTICE:
	 	THE SIGNATURE(S) TO THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME(S)AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.

Signature(s) Guaranteed

	 	 	 	 	 
	By
	 	 	 	 
	 

	 	 

	 	 
	THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN
ELIGIBLE GUARANTOR INSTITUTION (BANKS,
STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND
CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED
SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT
TO S.E.C. RULE 17Ad-15.

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