Document:

ex4-1

 

EXHIBIT 4.1

[*Confidential treatment has been requested as to certain portions of this document. Each such portion,
which has been omitted herein and replaced with an asterisk [*], has been filed separately
with the Securities and Exchange Commission.]

INVESTMENT AGREEMENT

dated as of February 1, 2002

by and between

PHARMACIA & UPJOHN COMPANY

a Delaware corporation

and

NASTECH PHARMACEUTICAL COMPANY, INC.,

a Delaware corporation

 

TABLE OF CONTENTS

	 	 	 	 	 	 
	ARTICLE I PURCHASE AND SALE OF SHARES	 	 	
1	 
	 	Section 1.1 Purchase and Sale	 	 	
1	 
	 	Section 1.2 Closing Date	 	 	
1	 
	 	Section 1.3 Transactions at Closing	 	 	
2	 
	 
	ARTICLE II REPRESENTATIONS AND WARRANTIES	 	 	
2	 
	 	Section 2.1 Representations and Warranties of the Company	 	 	
2	 
	 	Section 2.2 Representations and Warranties of Purchaser	 	 	
7	 
	 
	ARTICLE III COVENANTS AND ADDITIONAL AGREEMENTS	 	 	
8	 
	 	Section 3.1 Ordinary Course	 	 	
8	 
	 	Section 3.2 Access and Information	 	 	
8	 
	 	Section 3.3 Further Actions	 	 	8	 
	 	Section 3.4 Further Assurances	 	 	9	 
	 
	ARTICLE IV . CONDITIONS PRECEDENT	 	 	
9	 
	 	Section 4.1 Each Party’s Obligations	 	 	
9	 
	 	Section 4.2 Conditions to the Obligations of the Company	 	 	
9	 
	 	Section 4.3 Conditions to the Obligations of Purchaser	 	 	
10	 
	 
	ARTICLE V TERMINATION	 	 	
11	 
	 	Section 5.1 Termination	 	 	
11	 
	 	Section 5.2 Effect of Termination	 	 	
12	 
	 
	ARTICLE VI INDEMNIFICATION	 	 	
12	 
	 	Section 6.1 Indemnification of Purchaser	 	 	
12	 
	 	Section 6.2 Indemnification Procedures	 	 	
13	 
	 	Section 6.3 Survival of Representations and Warranties	 	 	
14	 
	 
	ARTICLE VII INTERPRETATION; DEFINITIONS	 	 	
14	 
	 	Section 7.1 Interpretation	 	 	
13	 
	 	Section 7.2 Definitions	 	 	
14	 
	 
	ARTICLE VIII MISCELLANEOUS	 	 	
17	 
	 	Section 8.1 Governing Law	 	 	
17	 
	 	Section 8.2 Assignment	 	 	
17	 
	 	Section 8.2 Amendments	 	 	
17	 
	 	Section 8.4 Notices	 	 	
17	 
	 	Section 8.5 Public Announcements	 	 	
18	 
	 	Section 8.6 No Strict Construction	 	 	
18	 
	 	Section 8.7 Headings	 	 	
18	 
	 	Section 8.8 No Implied Waivers; Rights Cumulative	 	 	
18	 
	 	Section 8.9 Severability	 	 	
18	 
	 	Section 8.10 Execution in Counterparts	 	 	
19	 
	 	Section 8.11 No Third Party Beneficiaries	 	 	
19	 
	 	Section 8.12 Specific Enforcement	 	 	
19	 
	 	Section 8.13 Cooperation	 	 	
19	 
	 	Section 8.14 Expenses and Remedies	 	 	
19	 
	 	Section 8.15 Transfer of Shares	 	 	
19	 

 

INVESTMENT AGREEMENT

               THIS INVESTMENT AGREEMENT (the “Agreement”) is made as of February 1st,
2002 by and between NASTECH PHARMACEUTICAL COMPANY, INC., a Delaware
corporation (the “Company”), and PHARMACIA & UPJOHN COMPANY, a Delaware
corporation (“Purchaser”).

               WHEREAS, the Company and Purchaser are parties to a Collaboration and
License Agreement (“Collaboration Agreement”) executed as of the date set forth
above;

               WHEREAS, in connection with the execution of the Collaboration Agreement,
Purchaser wishes to purchase from the Company, and the Company wishes to sell
to Purchaser, shares of the Company’s Common Stock, $ .006 par value per share
(“Common Stock”), on the terms and subject to the conditions set forth herein;

               WHEREAS, in connection with such sale and purchase of shares of Common
Stock, the Company and Purchaser wish to enter into a registration rights
agreement (the “Registration Rights Agreement”), substantially in the form
attached hereto as Exhibit A.

               NOW, THEREFORE, in consideration of the premises and the mutual covenants
set forth herein, the Company and Purchaser agree as follows:

ARTICLE I

PURCHASE AND SALE OF SHARES

               Section 1.1      Purchase and Sale.

                                         Subject to the terms and conditions of this Agreement, at the Closing (as
defined below) the Company agrees to issue and sell to Purchaser, and Purchaser
agrees to purchase from the Company, 250,000 shares of the Company’s Common
Stock (the “Shares”), at a purchase price of $ 20.00 per share for an aggregate
purchase price of Five Million Dollars ($5,000,000) (the “Purchase Price”).

               Section 1.1      Section 1.2 Closing Date.

                                         The closing of the purchase and sale of the Shares hereunder (the
“Closing”) shall be held at the offices of Kramer Levin Naftalis & Frankel LLP,
919 Third Avenue, New York, New York 10022, at 10:00 a.m. Eastern Standard Time
on the third Business Day following the first date on which all the conditions
to Closing set forth in Article IV have been satisfied or waived, or at such
other place, time and date as the Company and Purchaser shall agree. The
Company shall give Purchaser three (3) Business Days prior notice of the date
the Closing is scheduled to occur. The date of the Closing is hereinafter
referred to as the “Closing Date.”

 

     Section 1.3      Transactions at Closing.

                               At the Closing, subject to the terms and conditions of this Agreement, (i)
the Company shall issue and sell to Purchaser, and Purchaser shall purchase,
the Shares; (ii) the Company shall deliver to Purchaser a certificate
representing the Shares, registered in the name of Purchaser against payment of
the Purchase Price by wire transfer of immediately available funds to an
account or accounts previously designated by the Company no less than five (5)
Business Days prior to the Closing Date; and (iii) the Company and Purchaser
shall enter into the Registration Rights Agreement.

ARTICLE II

REPRESENTATIONS AND WARRANTIES

     Section 2.1      Representations and Warranties of the Company. The Company
hereby represents and warrants to Purchaser as follows:

                               

                               (a)      Corporate Organization. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Each Subsidiary is duly organized and validly existing and, if applicable, is
in good standing, under the laws of the jurisdiction of its incorporation or
organization. Each of the Company and its Subsidiaries is duly qualified or
licensed and, if applicable, is in good standing as a foreign corporation, in
each jurisdiction in which the properties owned, leased or operated, or the
business conducted, by it require such qualification or licensing, except for
any such failure so to qualify or be in good standing which, individually or in
the aggregate, would not have a Material Adverse Effect on the Company and its
Subsidiaries, taken as a whole. Each of the Subsidiaries has the requisite
power and authority to carry on its business as it is now being conducted. The
Company has heretofore made available to Purchaser complete and correct copies
of the Certificate of Incorporation of the Company (the “Company Charter”) and
the By-laws of the Company (the “Company By-Laws”) and the certificate of
incorporation and by-laws, or the comparable organizational documents, of each
of its Subsidiaries, each as amended to date and currently in full force and
effect.

                               (b)      Corporate Authority. The Company has the requisite corporate power
and authority to execute, deliver and perform this Agreement and the
Registration Rights Agreement and to consummate the transactions contemplated
hereby and thereby. The execution, delivery and performance of this Agreement
and the Registration Rights Agreement by the Company, the issuance and sale by
the Company of the Shares and the performance by the Company of the other
transactions contemplated hereby and thereby have been duly authorized by the
Company’s Board of Directors, and no other corporate proceedings on the part of
the Company are necessary to authorize this Agreement or the Registration
Rights Agreement or for the Company to consummate the transactions contemplated
herein and therein. This Agreement is, and the Registration Rights Agreement,
when executed or delivered will be, valid and binding agreements of the
Company, enforceable against the Company in accordance with their respective
terms, subject as to enforcement of remedies to applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting generally the
enforcement of creditors’

 

rights and subject to a court’s discretionary authority with respect to
the granting of a decree ordering specific performance or other equitable
remedies.

                               (c)      No Violations; Consents and Approvals.

		
	 	                               (i)      Neither the execution, delivery or performance by the Company of
this Agreement or the Registration Rights Agreement nor the consummation
by the Company of the transactions contemplated hereby or thereby (A)
will result in a violation or breach of the Company Charter or the
Company By-Laws or the charter or by-laws of any of the Company’s
Subsidiaries or (B) will result in a violation or breach of (or give rise
to any right of termination, revocation, cancellation or acceleration
under or increased payments under), or constitute a default (with or
without due notice or lapse of time or both) under, or result in the
creation of any lien, mortgage, charge, encumbrance or security interest
of any kind (a “Lien”) upon any of the properties or assets of the
Company or any of its Subsidiaries under, (1) any of the terms,
conditions or provisions of any note, bond, mortgage, indenture,
contract, agreement, obligation, instrument, offer, commitment,
understanding or other arrangement (each a “Contract”) or of any license,
waiver, exemption, order, franchise, permit or concession (each a
“Permit”) to which the Company or any of its Subsidiaries is a party or
by which any of their properties or assets may be bound, or (2) subject
to the governmental filings and other matters referred to in clause (ii)
below, any judgment, order, decree, statute, law, regulation or rule
applicable to the Company or any of its Subsidiaries, except in the case
of clause (B), for violations, breaches, defaults, rights of
cancellation, termination, revocation or acceleration or Liens that would
not, individually or in the aggregate, have a Material Adverse Effect on
the Company and its Subsidiaries, taken as a whole.

		
	 	                               (ii)      Except for filings as may be required under, and other
applicable requirements of, the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the “HSR Act”), no consent, approval, order or
authorization of, or registration, declaration or filing with, any
government or any court, administrative agency or commission or other
governmental authority or agency, federal, state, local or foreign (a
“Governmental Entity”), is required to be made or obtained by the Company
in connection with the execution, delivery or performance by the Company
of this Agreement or the consummation by the Company of the transactions
contemplated hereby (except where the failure to obtain such consents,
approvals, orders or authorizations, or to make such filings would not,
individually or in the aggregate, have a Material Adverse Effect on the
Company and its Subsidiaries, taken as a whole).

                               (d)      Capital Stock. The authorized capital stock of the Company consists
of (i) 25,000,000 shares of Common Stock, of which an aggregate of 9,562,285
shares of Common Stock were issued and outstanding as of the close of business
on December 31, 2001, and (ii) 100,000 shares of preferred stock, $.01 par
value per share, of which none were issued and outstanding as of the close of
business on December 31, 2001. As of the close of business on December 31,
2001, there were outstanding under the Company’s stock option and incentive
plans (collectively, the “Company Stock Plans”), options to acquire an
aggregate of 2,125,372 shares of Common Stock (subject to adjustment on the
terms set forth therein). All of the outstanding shares of Common Stock have
been duly authorized and validly issued, and are

 

fully paid and nonassessable. Except as set forth on Schedule 2.1(d),
there are no preemptive or similar rights on the part of any holders of any
class of securities of the Company or of any of its Subsidiaries. Except for
the Common Stock or as set forth on Schedule 2.1(d), the Company has
outstanding no bonds, debentures, notes or other obligations or securities the
holders of which have the right to vote (or are convertible or exchangeable
into or exercisable for securities having the right to vote) with the
stockholders of the Company on any matter. Except as set forth above or on
Schedule 2.1(d), as of the date of this Agreement, there are no securities
convertible into or exchangeable for, or options, warrants, calls,
subscriptions, rights, contracts, commitments, arrangements or understandings
of any kind to which the Company or any of its Subsidiaries is a party or by
which any of them is bound obligating the Company or any of its Subsidiaries
contingently or otherwise to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock or other voting
securities of the Company or of any of its Subsidiaries. Except as set forth
on Schedule 2.1(d), there are no outstanding agreements of the Company or any
of its Subsidiaries to repurchase, redeem or otherwise acquire any shares of
capital stock of the Company or any of its Subsidiaries.

                               (e)      Subsidiaries.

		
	 	                               (i)      Schedule 2.1(e)(i) contains a complete and correct description
of the shares of stock or other equity interests that are authorized, or
issued and outstanding, of each of the Company’s Subsidiaries. Except as
set forth on Schedule 2.1(e)(i), the Company has no equity interests with
a value of $100,000 or more in any Person other than its Subsidiaries,
and there are no commitments on the part of the Company or any Subsidiary
to contribute additional capital in respect of any equity interest in any
Person. Each of the outstanding shares of capital stock of each of the
Subsidiaries has been duly authorized and validly issued, and is fully
paid and nonassessable. All of the outstanding shares of capital stock
of each Subsidiary are owned, either directly or indirectly, by the
Company free and clear of all Liens.

		
	 	                               (ii)      Schedule 2.1(e)(ii) contains a complete and correct list of all
Subsidiaries of the Company.

                               (f)      SEC Filings. The Company has timely filed all reports, schedules,
forms, statements and other documents required to be filed by it with the SEC
under the Securities Act and the Exchange Act since January 1, 1999 (the
“Company SEC Documents”). As of its filing date, each Company SEC Document
filed, as amended or supplemented, if applicable, (i) complied in all material
respects with the applicable requirements of the Securities Act or the Exchange
Act, as applicable, and the rules and regulations thereunder and (ii) did not,
at the time it was filed, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein in light of the circumstances under which they were
made, not misleading.

                               (g)      Absence of Certain Events and Changes. Except as disclosed in the
Company SEC Documents filed with the SEC and publicly available prior to the
date hereof, or as otherwise contemplated or permitted by this Agreement, since
December 31, 2000, the Company and its Subsidiaries have conducted their
respective businesses in the ordinary course consistent with past practice and
there has not been any event, change or development which,

 

individually or in the aggregate, would have a Material Adverse Effect on
the Company and its Subsidiaries, taken as a whole, other than any state of
facts, event, change or effect attributable to changes in general economic or
market conditions affecting the biotechnology and pharmaceutical industries.

                               (h)      Compliance with Applicable Law. Except as disclosed in the Company
SEC Documents, each of the Company and its Subsidiaries is in compliance with
all statutes, laws, regulations, rules, judgments, orders and decrees of all
Governmental Entities applicable to it that relate to its respective business,
and neither the Company nor any of its Subsidiaries has received any notice
alleging noncompliance except, with reference to all the foregoing, where the
failure to be in compliance would not, individually or in the aggregate, have a
Material Adverse Effect on the Company and its Subsidiaries, taken as a whole.
Each of the Company and its Subsidiaries has all Permits that are required in
order to permit it to carry on its business as it is presently conducted,
except where the failure to have such Permits or rights would not, individually
or in the aggregate, have a Material Adverse Effect on the Company and its
Subsidiaries, taken as a whole. All such Permits are in full force and effect
and the Company and its Subsidiaries are in compliance with the terms of such
Permits, except where the failure to be in full force and effect or in
compliance would not individually or in the aggregate, have a Material Adverse
Effect on the Company and its Subsidiaries, taken as a whole.

                               (i)      Litigation. Except as disclosed in the Company SEC Documents filed
with the SEC and publicly available prior to the date hereof or referred to in
Schedule 2.1(i), there are no civil, criminal or administrative actions, suits,
or proceedings pending or, to the Knowledge of the Company, threatened, against
the Company or any of its Subsidiaries that, individually or in the aggregate,
are likely to have a Material Adverse Effect on the Company and its
Subsidiaries, taken as a whole. Except as disclosed in the Company SEC
Documents filed with the SEC and publicly available prior to the date hereof,
there are no outstanding judgments, orders, decrees, or injunctions of any
Governmental Entity against the Company or any of its Subsidiaries that,
insofar as can reasonably be foreseen, individually or in the aggregate, in the
future would have a Material Adverse Effect on the Company and its
Subsidiaries, taken as a whole.

                               (j)      Contracts.

		
	 	                               (i)      The Company has filed as exhibits to the Company SEC Documents
all material agreements required to be filed under the rules and
regulations of the SEC (the “Material Contracts”).

		
	 	                               (ii)      All Material Contracts are legal, valid, binding, in full force
and effect and enforceable against the Company, and, to the Knowledge of
the Company, against each other party thereto, except to the extent that
any failure to be enforceable, individually or in the aggregate, would
not reasonably be expected to have or result in a Material Adverse Effect
on the Company and its Subsidiaries, taken as a whole, provided that no
representation is made as to the enforceability of any non-competition
provision in any employment agreement or as to any indemnification
provision. There does not exist under any Material Contract any
violation, breach or event of default, or event or condition that, after
notice or lapse of time or both, would

 

		
	 	constitute a violation, breach or event of default thereunder, on
the part of any of the Company or its Subsidiaries or, to the Knowledge
of the Company or any of its Subsidiaries, any other Person, other than
such violations, breaches or events of default as would not, individually
or in the aggregate, have a Material Adverse Effect on the Company and
its Subsidiaries, taken as a whole. The enforceability of all Material
Contracts will not be materially and adversely affected in any manner by
the execution, delivery or performance by the Company of this Agreement
or the Registration Rights Agreement or the consummation by the Company
of the transactions contemplated hereby or thereby, and no Material
Contract contains any change in control or other terms or conditions that
will become applicable or inapplicable as a result of the consummation of
such transactions. Neither the Company nor the Subsidiaries are a party
to any contract prohibiting or materially restricting the ability of the
Company or any of its Subsidiaries to conduct its business, to engage in
any business or operate in any geographical area or compete with any
Person.

                               (k)      Intellectual Property. The Intellectual Property that is owned by the
Company or any of its Subsidiaries is owned free from any Liens (other than
Permitted Liens), except where the failure to be free from liens would not have
a Material Adverse Effect on the Company and its Subsidiaries, taken as a
whole. All material Intellectual Property Licenses are in full force and
effect in accordance with their terms, and are free and clear of any Liens
(other than Permitted Liens), except where the failure to be free from Liens or
to be in full force and effect would not have a Material Adverse Effect on the
Company and its Subsidiaries, taken as a whole. To the Knowledge of the
Company, the conduct of the business of the Company and its Subsidiaries does
not infringe or conflict with the rights of any third party in respect of any
Intellectual Property, except where such conduct would not materially affect
the ability of the Company and its Subsidiaries to conduct their business as
presently conducted. To the Knowledge of the Company, none of the Company
Intellectual Property is being infringed by any third party except where such
infringement would not have a Material Adverse Effect on Company and its
Subsidiaries, taken as a whole. There is no claim or demand of any Person
pertaining to, or any proceeding which is pending or, to the Knowledge of the
Company, threatened, that challenges the rights of the Company or any of its
Subsidiaries in respect of any Company Intellectual Property, or that claims
that any default exists under any Intellectual Property License, except where
such claim, demand or proceeding would not materially affect the ability of the
Company and its Subsidiaries to conduct their business as presently conducted.
For purposes of this Agreement, “Company Intellectual Property” means the
Intellectual Property that is owned by the Company and its Subsidiaries and the
Intellectual Property subject to written or oral licenses, agreements or
arrangements pursuant to which its use by the Company or any of its
Subsidiaries is permitted by any Person.

                               (l)      Brokers or Finders. No agent, broker, investment banker or other firm
is or will be entitled to any broker’s or finder’s fee or any other similar
commission or fee from Purchaser by reason of any act of the Company or any of
its Affiliates connection with any of the transactions contemplated by this
Agreement.

 

     Section 2.2      Representations and Warranties of Purchaser.

     Purchaser hereby represents and warrants to the Company as follows:

                               (a)      Organization. Purchaser is a corporation duly organized and validly
existing and in good standing under the laws of Delaware, with all requisite
power and authority to own, lease and operate its properties and to conduct its
business as now being conducted.

                               (b)      Authority. Purchaser has the requisite corporate power and authority
to execute, deliver and perform its obligations under this Agreement and the
Registration Rights Agreement and to consummate the transactions contemplated
hereby and thereby. All necessary corporate action required to have been taken
by or on behalf of Purchaser by applicable law or otherwise to authorize the
approval, execution, delivery and performance by Purchaser of this Agreement
and the Registration Rights Agreement and the consummation by it of the
transactions contemplated hereby and thereby have been duly authorized, and no
other proceedings on its part are or will be necessary to authorize this
Agreement or the Registration Rights Agreement or for it to consummate such
transactions. This Agreement is, and the Registration Rights Agreement, when
executed and delivered will be, valid and binding agreements of Purchaser,
enforceable against Purchaser in accordance with their respective terms,
subject as to enforcement of remedies to applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting generally the enforcement
of creditors’ rights and subject to a court’s discretionary authority with
respect to the granting of a decree ordering specific performance or other
equitable remedies and subject to applicable provisions of securities laws, or
the public policy underlying those laws, with respect to the indemnification
and contribution provisions of this Agreement and the Registration Rights
Agreement.

                               (c)      Conflicting Agreements and Other Matters. Neither the execution and
delivery of this Agreement or the Registration Rights Agreement nor the
performance by Purchaser of its obligations hereunder or thereunder will (i)
conflict with, result in a breach of the terms, conditions or provisions of,
constitute a default under, result in the creation of any Lien upon any of the
properties or assets of Purchaser pursuant to, or (ii) require any consent,
approval or other action by or any notice to or filing with any Government
Entity pursuant to, the organizational documents or agreements of Purchaser or
any Contract of Purchaser or any, order, judgment, decree, statute, law, rule
or regulation by which Purchaser or any of its properties or assets is bound,
except where the failure to obtain such consents, approvals, orders or
authorizations, or to make such filings would not, individually or in the
aggregate, have a Material Adverse Effect on the Purchaser and its
Subsidiaries, taken as a whole or for filings under the HSR Act.

                               (d)      Acquisition for Investment. (i) Purchaser is acquiring the Shares for
its own account for the purpose of investment and not with a view to or for
sale in connection with any distribution thereof, and Purchaser has no present
intention to effect, or any present or contemplated plan, agreement,
undertaking, arrangement, obligation, indebtedness, or commitment providing
for, any distribution of Shares, (ii) Purchaser is an “accredited investor” as
defined in Rule 501(a) under the Securities Act, (iii) Purchaser has carefully
reviewed the representations concerning the Company contained in this
Agreement, has been given the

 

opportunity to ask questions of and receive information from the Company
and has made detailed inquiry concerning the Company, its business and its
personnel, and (iv) Purchaser has sufficient knowledge and experience in
finance and business that it is capable of evaluating the risks and merits of
its investment in the Company and is able financially to bear the risks
thereof.

                                     (e)      Brokers or Finders. No agent, broker, investment banker or other firm
is or will be entitled to any broker’s or finder’s fee or any other similar
commission or fee from Company by reason of any act of the Purchaser or any of
its Affiliates in connection with any of the transactions contemplated by this
Agreement.

ARTICLE III

COVENANTS AND ADDITIONAL AGREEMENTS

          Section 3.1      Ordinary Course. During the period from the date of this
Agreement and continuing until the Closing, the Company agrees as to itself and
its Subsidiaries that, except to the extent that Purchaser otherwise consents
in writing, the Company and its Subsidiaries shall conduct their respective
businesses in the ordinary course in substantially the same manner as presently
conducted.

          Section 3.2      Access and Information.

     Prior to the Closing the Company will (and will cause each of its
Subsidiaries and each of their respective accountants, counsel, consultants,
officers, directors, employees, agents and representatives of or to any of the
Subsidiaries, to) give Purchaser and its Representatives, reasonable access
during reasonable business hours with reasonable notice to all of their
respective properties, assets, books, contracts, reports and records relating
to the Company and its Subsidiaries, and furnish to them all such documents,
records and information with respect to the properties, assets and business of
the Company and its Subsidiaries, as Purchaser shall from time to time
reasonably request.

           Section 3.3       Further Actions.

                                     (a)      Each of the Company and Purchaser shall use reasonable best efforts to
take or cause to be taken all actions, and to do or cause to be done all other
things, necessary, proper or advisable in order to fulfill and perform its
obligations in respect of this Agreement and the Registration Rights Agreement,
or otherwise to consummate and make effective the transactions contemplated
hereby and thereby.

                                     (b)      Each of the Company and Purchaser shall, as promptly as practicable,
(i) make, or cause to be made, all filings and submissions (including but not
limited to under the HSR Act and foreign antitrust filings) required under any
law applicable to it or any of its Subsidiaries, and give such reasonable
undertakings as may be required in connection therewith, and (ii) use all
reasonable efforts to obtain or make, or cause to be obtained or made, all
Permits necessary to be obtained or made by it or any of its Subsidiaries, in
each case in connection with this Agreement and the Registration Rights
Agreement, the sale and transfer of the Shares pursuant hereto and the
consummation of the other transactions contemplated hereby or thereby.

 

                                     (c)      Each of the Company and Purchaser shall coordinate and cooperate with
the other party in exchanging such information and supplying such reasonable
assistance as may be reasonably requested by such other party in connection
with the filings and other actions contemplated by this Agreement and the
Registration Rights Agreement.

                                     (d)      At all times prior to the Closing Date, the Company and Purchaser
shall promptly notify each other in writing of any fact, condition, event or
occurrence that could reasonably be expected to result in the failure of any of
the conditions contained in Article IV to be satisfied, promptly upon becoming
aware of the same.

           Section 3.4      Further Assurances.

                                    Following the Closing Date, the Company and the Purchaser shall, from time
to time, execute and deliver such additional instruments, documents,
conveyances or assurances and take such other actions as shall be necessary, or
otherwise reasonably be requested by Purchaser, to confirm and assure the
rights and obligations provided for in this Agreement and the Registration
Rights Agreement and render effective the consummation of the transactions
contemplated hereby and thereby, or otherwise to carry out the intent and
purposes of this Agreement.

ARTICLE IV .

CONDITIONS PRECEDENT

           Section 4.1      Each Party’s Obligations. The obligations of the Company and
Purchaser to consummate the transactions contemplated to occur at the Closing
shall be subject to the satisfaction prior to the Closing of each of the
following conditions, each of which may be waived only if it is legally
permissible to do so:

                                     (a)      HSR and Other Approvals. Any applicable waiting period under the HSR
Act relating to the transactions contemplated hereby shall have expired or been
terminated, and all other material authorizations, consents, orders or
approvals of, or regulations, declarations or filings with, or expirations of
applicable waiting periods imposed by, any Governmental Entity (including,
without limitation, any foreign antitrust filing) necessary for the
consummation of the transactions contemplated hereby, shall have been obtained
or filed or shall have occurred.

                                   (b)      No Litigation, Injunctions or Restraints. No statute, rule,
regulation, executive order, decree, temporary restraining order, preliminary
or permanent injunction or other order enacted, entered, promulgated, enforced
or issued by any Governmental Entity or other legal restraint or prohibition
preventing the consummation of the transactions contemplated by this Agreement
and the Registration Rights Agreement shall be in effect.

                                    (c)      Collaboration Agreement. The Collaboration Agreement shall have
become effective in accordance with the terms and conditions thereof and
neither party has delivered a notice of termination thereunder.

 

                                    (d)      Nasdaq Listing. The Shares shall have been approved for listing on
the Nasdaq Stock Market, Inc. subject only to official notice of issuance.

           Section 4.2      Conditions to the Obligations of the Company. The obligations
of the Company to consummate the transactions contemplated to occur at the
Closing shall be subject to the satisfaction or waiver thereof prior to the
Closing of each of the following conditions:

                                   (a)      Representations and Warranties. The representations and warranties of
Purchaser that are qualified as to materiality shall be true and correct, and
those that are not so qualified shall be true and correct in all material
respects, as of the date of this Agreement and as of the time of the Closing as
though made at and as of such time, except to the extent such representations
and warranties expressly relate to an earlier date (in which case such
representations and warranties that are qualified as to materiality shall be
true and correct, and those that are not so qualified shall be true and correct
in all material respects, on and as of such earlier date) and the Company shall
have received a certificate signed by an authorized officer of Purchaser to
such effect.

                                   (b)      Registration Rights Agreement. Purchaser shall have executed and
delivered the Registration Rights Agreement.

          Section 4.3      Conditions to the Obligations of Purchaser. The obligations
of Purchaser to consummate the transactions contemplated to occur at the
Closing shall be subject to the satisfaction or waiver thereof prior to the
Closing of each of the following conditions:

                                   (a)      Representations and Warranties. The representations and warranties of
the Company set forth in this Agreement that are qualified as to materiality
shall be true and correct, and those that are not so qualified shall be true
and correct in all material respects, as of the date of this Agreement and as
of the time of the Closing as though made at and as of such time, except to the
extent such representations and warranties expressly relate to an earlier date
(in which case such representations and warranties that are qualified as to
materiality shall be true and correct, and those that are not so qualified
shall be true and correct in all material respects, on and as of such earlier
date) and except to the extent such representations and warranties are updated
by information disclosed in Company SEC Documents filed after the date of this
Agreement, provided, however, that the representations and warranties of the
Company set forth in Sections 2.1(a), (b), (c), and (l) shall be true and
correct as of the date of the Closing without giving effect to Company SEC
Documents filed after the date of this Agreement and/or updated Schedules to
Section 2.1. Purchaser shall have received a certificate signed by the chief
executive officer and chief financial officer of the Company to such effect.

                                   (b)      Opinion of the Company’s Counsel. Purchaser shall have received an
opinion dated as of the Closing of Kramer Levin Naftalis & Frankel LLP, counsel
to the Company, in form and substance reasonably satisfactory to Purchaser.

                                   (c)      Registration Rights Agreement. The Company shall have executed and
delivered the Registration Rights Agreement.

                                   (d)      Performance of Obligations of the Company. The Company shall have
performed or complied in all material respects with all obligations and
covenants required

 

to be performed or complied with by the Company under this Agreement on or
prior to the Closing and the Purchaser shall have received a certificate signed
by the chief executive officer and chief financial officer of the Company to
such effect.

                                   (e)      Corporate Proceedings. All corporate proceedings of the Company in
connection with the transactions contemplated by this Agreement and the
Registration Rights Agreement, and all documents and instruments incident
thereto, shall be reasonably satisfactory in form and substance to Purchaser
and its counsel, and Purchaser and its counsel shall have received all such
documents and instruments, or copies thereof, certified or requested, as may be
reasonably requested.

ARTICLE V

TERMINATION

          Section 5.1      Termination. This Agreement may be terminated at any time
prior to the Closing:

                                   (a)      by mutual written consent of Purchaser and the Company;

                                   (b)      by Purchaser or the Company;

		
	 	                                   (i)      if the Closing shall not have occurred prior to [*], provided,
that the right to terminate this Agreement pursuant to this clause (i)
shall not be available to any party whose failure to fulfill any
obligation under this Agreement results in the failure of the Closing to
occur;

		
	 	                                   (ii)     if there shall be any statute, law, regulation or rule enacted
after the date hereof that makes consummating the transactions
contemplated hereby illegal or if any court or other Governmental Entity
of competent jurisdiction shall have issued judgment, order, decree or
ruling, or shall have taken such other action restraining, enjoining or
otherwise prohibiting the consummation of the transactions contemplated
hereby and such judgment, order, decree or ruling shall have become final
and non-appealable; or
	 
	 	                                   (iii)      if the Collaboration Agreement shall have terminated;

	
        

        	 	 
	[*] Certain portions of this page have been omitted and filed separately with
the Securities and Exchange Commission. Confidential Treatment with respect to
such omitted portions has been requested.	 	 

 

                                   (c)      by Purchaser

		
	 	                                   (i)      if the Company shall have failed to perform in any material
respect any of its obligations hereunder or shall have breached in any
respect any representation or warranty contained herein qualified by
materiality or shall have breached in any material respect any
representation or warranty not so qualified, and the Company has failed
to perform such obligation or cure such breach, within 30 days of its
receipt of written notice thereof from Purchaser, and such failure to
perform or breach shall not have been waived in accordance with the terms
of this Agreement;

		
	 	                                   (ii)      if any of the conditions set forth in Section 4.1 or 4.3 shall
become impossible to fulfill (other than as a result of any breach by
Purchaser of the terms of this Agreement) and shall not have been waived
in accordance with the terms of this Agreement; or

		
	 	                                   (iii) if the Common Stock shall no longer be listed for trading on
the Nasdaq Stock Market, Inc. or other national securities exchange or
automated quotation system;

                                   (d)      by the Company:

		
	 	                                   (i)      if Purchaser shall have failed to perform in any material
respect any of its obligations hereunder or shall have breached in any
respect any representation or warranty contained herein qualified by
materiality or shall have breached any material respect any
representation or warranty not so qualified, and Purchaser has failed to
perform such obligation or cure such breach, within 30 days of its
receipt of written notice thereof from the Company, and such failure to
perform or breach shall not have been waived in accordance with the terms
of this Agreement; or

		
	 	                                   (ii)      if any of the conditions set forth in Section 4.1 or 4.2 shall
become impossible to fulfill (other than as a result of any breach by the
company of the terms of this Agreement) and shall not have been waived in
accordance with the terms of this Agreement;

                Section 5.2      Effect of Termination. In the event of termination of this
Agreement by either the Company or Purchaser as provided in Section 5.1, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of Purchaser or the Company, other than the
provisions of this Section 5.2, Article VI and Article VIII and except to the
extent that such termination results from the willful and material breach by a
party of any of its representations, warranties, covenants or agreements set
forth in this Agreement.

ARTICLE VI

INDEMNIFICATION

                Section 6.1      Indemnification of Purchaser. The Company covenants and
agrees to defend, indemnify and hold harmless each of Purchaser, its
Affiliates, and their respective officers, directors, partners, employees,
agents, advisers and representatives (collectively, the

 

“Purchaser Indemnitees”) from and against, and pay or reimburse the
Purchaser Indemnitees for, any and all claims, demands, liabilities,
obligations, losses, costs, expenses, fines or damages (whether absolute,
accrued, conditional or otherwise and whether or not resulting from third party
claims), including interest and penalties with respect thereto and all
reasonable out of pocket expenses incurred in the investigation or defense of
any of the same or in asserting, preserving or enforcing any of their
respective rights hereunder (collectively, “Losses”), resulting from or based
on (or allegedly resulting from or based on) any breach by the Company of any
representation, warranty, covenant or obligation of the Company hereunder The
Losses described in this Section 6.1 are herein referred to as “Purchaser
Indemnifiable Losses”. The Company shall reimburse the Purchaser Indemnitees
for any reasonable out of pocket legal or other expenses incurred by such
Purchaser Indemnitees in connection with investigating or defending any such
Purchaser Indemnifiable Losses as such expenses are incurred.

                Section 6.2      Indemnification Procedures. Promptly after receipt by a
Purchaser Indemnitee of notice of the commencement of any action or the written
assertion of any claim, such Purchaser Indemnitee shall, if a claim in respect
thereof is to be made against the Company, notify the Company in writing of the
commencement or the written assertion thereof. Failure by a Purchaser
Indemnitee to so notify the Company shall relieve the Company from the
obligation to indemnify such Purchaser Indemnitee only to the extent that the
Company suffers actual and material prejudice as a result of such failure but
in no event shall such failure to notify the Company (i) constitute prejudice
suffered by the Company if it has otherwise received notice of the actions
giving rise to such obligation to indemnify or (ii) relieve it from any
liability or obligation that it may otherwise have to such Purchaser
Indemnitee. In case any such action or claim shall be brought or asserted
against any Purchaser Indemnitee and it shall notify the Company of the
commencement or assertion thereof, such Indemnitee shall be entitled to select
counsel to participate in, but not control, the defense of such action or
claim, but the fees and expenses of such counsel shall be paid by such
Indemnitee unless the Indemnifying Party shall not have so assumed the defense
of such action or claim with counsel reasonably satisfactory to such Indemnitee
or unless representation by the Purchaser Indemnitee by counsel selected by the
Company would be inappropriate due to actual or potential differing interests
or conflicts between any Purchaser Indemnitee and the Company or any other
party represented by such counsel in such proceeding, in which case such
Indemnitee may select counsel reasonably satisfactory to the Company to conduct
and control the defense of such action or claim, provided that the Company
shall not, in connection with any one such action or proceeding or separate but
substantially similar actions or proceedings arising out of the same general
allegations, be liable for the fees and expenses of more than one separate firm
of attorneys at any time for all Purchaser Indemnitees, except to the extent
that local counsel, in addition to regular counsel, is required in order to
effectively defend against such action or proceeding and further provided that
a Purchaser Indemnitee shall not enter into any settlement of any such claim
without the prior consent of the Company, such consent not to be unreasonably
withheld or delayed. In case any such action or claim shall be brought or
asserted by any Purchaser Indemnitee directly against the Company, such
Purchaser Indemnitee shall be entitled to select counsel to control the
prosecution of such action or claim (and the defense of any counterclaims
brought by the Company), and the reasonable fees and expenses of such counsel
shall be paid by the Company; but in such event the prevailing party in such
action or proceeding shall pay the reasonable out of pocket legal or other
expenses incurred by the other party in connection with such action or
proceeding. The remedies set forth in this Article 6 are cumulative and shall
not be construed to

 

restrict or otherwise affect any other remedies that may be available to a
Purchaser Indemnitee or a party under any other agreement, pursuant to
statutory or common law or equity.

                Section 6.3      Survival of Representations and Warranties. The
representations and warranties of the Company contained in this Agreement shall
expire for all purposes on the second anniversary of the Closing Date.

ARTICLE VII

INTERPRETATION; DEFINITIONS

           Section 7.1      Interpretation. As used in this Agreement, unless the context
otherwise requires:

                                    (a)      any reference to the Company and its Subsidiaries means the Company
and each of its Subsidiaries;

                                   (b)      words of any gender include all genders;

                                   (c)      words using the singular or plural number also include the plural or
singular number, respectively; and

                                   (d)      the terms “hereof”, “herein”, and “hereby” and derivative or similar
words refer to this entire Agreement.

          Section 7.2      Definitions. For purposes of this Agreement, the following
terms shall have the following meanings:

          “Affiliate” shall have the meaning set forth in the Collaboration
Agreement.

          “Agreement” is defined in the recitals to this Agreement.

          “Business Day” means any day on which banking institutions are open in New
York, New York.

          “Closing” is defined in Section 1.2.

          “Closing Date” is defined in Section 1.2.

          “Code” means the Internal Revenue Code of 1986, as amended, and the
regulations promulgated thereunder, as amended.

          “Collaboration Agreement” is defined in the recitals to this Agreement.

          “Common Stock” is defined in the recitals to this Agreement.

          “Company” is defined in the recitals to this Agreement.

          “Company Intellectual Property” is defined in Section 2.1(m).

 

          “Company Stock Plans” is defined in Section 2.1(d).

          “Company SEC Documents” is defined in Section 2.1(f).

          “Contract” is defined in Section 2.1(c).

          “Exchange Act” means the Securities Exchange Act of 1934, as amended, or
any successor federal statute, and the rules and regulations of the SEC
promulgated thereunder, all as the same shall be in effect from time to time.

          “GAAP” means United States generally accepted accounting principles.

          “Governmental Entity” is defined in Section 2.1(c).

          “HSR Act” is defined in Section 2.1(c).

          “Intellectual Property” means trademarks, trade names, trade dress,
service marks, copyrights, domain names, and similar rights (including
registrations and applications to register or renew the registration of any of
the foregoing), patents and patent applications, trade secrets, ideas,
inventions, improvements, practices, processes, formulas, designs, know-how,
confidential business and technical information, computer software, firmware,
data and documentation, licenses of or agreements relating to any of the
foregoing, rights of privacy and publicity, moral rights, and any other similar
intellectual property rights and tangible embodiments of any of the foregoing
(in any medium including electronic media).

          “Intellectual Property License” means any license, permit, authorization,
approval, Contract or consent granted, issued by or with any Person relating to
the use of Intellectual Property.

          “Knowledge of the Company”, “Knowledge of the Company or any of its
Subsidiaries” or any like expression means to the actual knowledge, without
special inquiry or investigation, of the persons listed on Schedule 7.2 as of
the Closing Date.

          “Lien” is defined in Section 2.1(c).

          “Losses” is defined in Section 6.1.

          “Material Adverse Effect” on or with respect to an entity (or group of
entities taken as a whole) means any state of facts, event, change or effect
that has had, or would reasonably be expected to have, a material adverse
effect on (a) the business, properties, results of operations or financial
condition of such entity (or, if with respect thereto, of such group of
entities taken as a whole), or (b) the ability of such entity (or group of
entities) to consummate the transactions contemplated under this Agreement or
the Registration Rights Agreement.

          “Material Contract” is defined in Section 2.1(j).

          “Permit” is defined in Section 2.1(c).

 

          “Permitted Liens” means those Liens (A) securing debt that is reflected on
the balance sheets or the notes thereto contained in the Company SEC Documents
filed with the SEC and publicly available prior to the date hereof, (B) for
taxes not yet due or payable or being contested in good faith and for which
adequate reserves have been established in accordance with GAAP, (C) that
constitute mechanics’, carriers’, workmens’ or like liens, liens arising under
original purchase price conditional sales contracts and equipment leases with
third parties entered into in the ordinary course, (D) Liens incurred or
deposits made in the ordinary course of business consistent with past practice
in connection with workers’ compensation, unemployment insurance and social
security, retirement and other legislation and (E) easements, covenants,
declarations, rights or way, encumbrances, or similar restrictions in
connection with real property owned by the Company of any of its Subsidiaries
that do not materially impair the use of such real property by the Company and
any of its Subsidiaries, and in the case of Liens described in clauses (B),
(C), (D), or (E) that individually or in the aggregate, would not have a
Material Adverse Effect on the Company and its Subsidiaries, taken as a whole.

          “Person” means any individual, partnership, joint venture, corporation,
limited liability company, trust, unincorporated organization, government or
department or agency of a government or other entity.

          “Purchaser” is defined in the recitals to this Agreement.

          “Purchaser Indemnifiable Losses” is defined in Section 6.1.

          “Purchaser Indemnitees” is defined in Section 6.1.

          “Purchase Price” is defined in Section 1.1

          “Registration Rights Agreement” is defined in the recitals to this
Agreement.

          “Representative” means an agent or employee of Purchaser, or of an
independent public accounting firm, law firm, or other consulting company or
advisor of Purchaser.

          “SEC” means the Securities and Exchange Commission.

          “Securities Act” means the Securities Act of 1933, as amended, or any
successor federal statute, and the rules and regulations of the SEC promulgated
thereunder, all as the same shall be in effect from time to time.

          “Shares” is defined in Section 1.1.

          “Subsidiary” means, as to any Person, any corporation at least a majority
of the shares of stock of which having general voting power under ordinary
circumstances to elect a majority of the Board of Directors of such corporation
(irrespective of whether or not at the time stock of any other class or classes
shall have or might have voting power by reason of the happening of any
contingency) is, at the time as of which the determination is being made, owned
by such Person, or one or more of its Subsidiaries or by such Person and one or
more of its Subsidiaries.

 

ARTICLE VIII

MISCELLANEOUS

          Section 8.1      Governing Law. This Agreement shall be construed and the
respective rights of the parties determined according to the substantive laws
of the State of Delaware notwithstanding the provisions governing conflict of
laws under such Delaware law to the contrary, except matters of intellectual
property law which shall be determined in accordance with the intellectual
property laws relevant to the intellectual property in question.

          Section 8.2      Assignment. Neither the Company nor the Purchaser may
transfer or assign this Agreement in whole or in part without the consent of
the other, except if such transfer or assignment occurs in connection with the
sale or transfer (by merger or otherwise) of all or substantially all of the
business and assets of the Company or the Purchaser to which the subject matter
of this Agreement pertains, provided that the acquirer confirms to the other
party in writing its agreement to be bound by all of the terms and conditions
of this Agreement. Notwithstanding the foregoing, Pharmacia may assign this
Agreement to an Affiliate, provided that such party shall guarantee the
performance of such Affiliate, and provided further that either party may
assign its rights (but not its obligations) pursuant to this Agreement in whole
or in part to an Affiliate of such party that is controlled by such party.

          Section 8.3      Amendments. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof, and supersedes
all previous arrangements with respect to the subject matter hereof, whether
written or oral. The parties also acknowledge the simultaneous execution and
delivery of the Collaboration Agreement and the Registration Rights Agreement,
which shall not be superseded by this Agreement. Any amendment or modification
to this Agreement shall be made in writing signed by both parties.

          Section 8.4      Notices.

                    All notices and other communications required or permitted under this
Agreement shall be effective upon receipt and shall be in writing and may be
delivered in person, by facsimile transmission, overnight delivery service or
registered or certified United States mail, addressed to the Company or the
Purchaser, as the case may be, at their respective addresses or facsimile
numbers set forth below or as the same may be revised pursuant to notice to the
other party in accordance with this paragraph:

	 	 
	 	

Nastech Pharmaceutical Company, Inc.
45 Adams Avenue

Hauppauge, New York 11788

Attn: Office of the President

Telephone: 631-273-0101

Facsimile: 631-273-0252

Notices to the Purchaser shall be addressed to:

	 	 
	 	
Pharmacia & Upjohn Company

 

	 	 
	 	

100 Route 206 North

Peapack, New Jersey 07977

Attn: Vice President and Associate General Counsel

Telephone: (908) 901-7108

Facsimile: (908) 901-1862

Either party may change its address (or person’s attention, telephone or
facsimile numbers) to which notices shall be sent by giving notice to the other
party in the manner herein provided. All notices and other communications
shall be effective upon the earlier of actual receipt thereof by the person to
whom notice is directed or (a) in the case of notices and communications sent
by personal delivery or telecopy, one business day after such notice or
communication arrives at the applicable address or was successfully sent to the
applicable telecopy number, (b) in the case of notices and communications sent
by overnight delivery service, at noon (local time) on the second business day
following the day such notice or communications was delivered to such delivery
service, and (c) in the case of notices and communications sent by United
States mail, seven days after such notice or communication shall have been
deposited in the United States mail.

          Section 8.5      Public Announcements. The provisions of Section 11.7 of the
Collaboration Agreement shall govern any and all public statements with respect
to the transactions contemplated by this Agreement.

          Section 8.6      No Strict Construction. This Agreement has been prepared
jointly and shall not be strictly construed against either Party.

          Section 8.7      Headings. The captions or headings of the sections or other
subdivisions hereof are inserted only as a matter of convenience or for
reference and shall have no effect on the meaning of the provisions hereof.

          Section 8.8      No Implied Waivers; Rights Cumulative. No failure on the part
of the Company or the Purchaser to exercise, and no delay in exercising, any
right, power, remedy or privilege under this Agreement, or provided by statute
or at law or in equity or otherwise, shall impair, prejudice or constitute a
waiver of any such right, power, remedy or privilege or be construed as a
waiver of any breach of this Agreement or as an acquiescence therein, nor shall
any single or partial exercise of any such right, power, remedy or privilege
preclude any other or further exercise thereof or the exercise of any other
right, power, remedy or privilege.

          Section 8.9      Severability. If any provision hereof should be held invalid,
illegal or unenforceable in any respect in any jurisdiction, the parties hereto
shall substitute, by mutual consent, valid provisions for such invalid, illegal
or unenforceable provisions which valid provisions in their economic effect are
sufficiently similar to the invalid, illegal or unenforceable provisions that
it can be reasonably assumed that the parties would have entered into this
Agreement with such valid provisions. In case such valid provisions cannot be
agreed upon, the invalidity, illegality or unenforceability of one or more
provisions of this Agreement shall not affect the validity of this Agreement as
a whole, unless the invalid, illegal or unenforceable provisions are of such
essential importance to this Agreement that it is to be reasonably assumed

 

that the parties would not have entered into this Agreement without the
invalid, illegal or unenforceable provisions.

          Section 8.10      Execution in Counterparts. This Agreement may be executed in
counterparts, each of which counterparts, when so executed and delivered, shall
be deemed to be an original, and all of which counterparts, taken together,
shall constitute one and the same instrument.

          Section 8.11      No Third Party Beneficiaries. No person or entity other than
the Purchaser, the Company and their respective Affiliates and permitted
assignees hereunder shall be deemed an intended beneficiary hereunder or have
any right to enforce any obligation of this Agreement.

          Section 8.12      Specific Enforcement. Purchaser, on the one hand, and the
Company, on the other, acknowledge and agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of the provisions hereof in any court of the
United States or any state thereof having jurisdiction, this being in addition
to any other remedy to which they may be entitled at law or equity.

          Section 8.13      Cooperation. Purchaser and the Company agree to take, or
cause to be taken, all such further or other actions as shall reasonably be
necessary to make effective and consummate the transactions contemplated by
this Agreement, including, without limitation, making all required filings
under the HSR Act, if any.

          Section 8.14      Expenses and Remedies. Whether or not the Closing takes
place, all costs and expenses incurred in connection with this Agreement and
the transactions contemplated hereby shall be borne by the party incurring such
expense.

          Section 8.15      Transfer of Shares. Purchaser understands and agrees that
the Shares have not been registered under the Securities Act or the securities
laws of any state and that they may be sold or otherwise disposed of only in
one or more transactions registered under the Securities Act and, where
applicable, such laws or as to which an exemption from the registration
requirements of the Securities Act and, where applicable, such laws is
available. Purchaser acknowledges that except as provided in the Registration
Rights Agreement, Purchaser has no right to require the Company to register the
Shares and understands and agrees that each certificate representing the Shares
(other than Shares which have been transferred in a transaction registered
under the Securities Act or exempt from the registration requirements of the
Securities Act pursuant to Rule 144 thereunder or any similar rule or
regulation) shall bear the following legend:

		
	 	     “THE SECURITIES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT
BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION

 

		
	 	     STATEMENT UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS OR AN APPLICABLE EXEMPTION TO THE
REGISTRATION REQUIREMENTS OF SUCH ACT OR SUCH LAWS.”

and Purchaser agrees to transfer the Shares only in accordance with the
provisions of such legend.

  

  

  

  

  

  

  

  

 

     IN WITNESS WHEREOF, the COMPANY and the PURCHASER have caused this
Agreement to be executed as of the day and year first above written.

	 	 	 
	 	NASTECH PHARMACEUTICAL COMPANY, INC
	 
	 	By:     
	 	 	

	 	Title:     
	 	 	

	 	PHARMACIA & UPJOHN COMPANY
	 
	 	By:
	 	 	

	 	Christopher Coughlin

Executive Vice President and Chief
Financial
 Officer

 

ARTICLE IX

Schedule 2.1(d) – Listing or preemptive or similar rights outstanding

As of December 31, 2001, the Company has outstanding warrants to purchase
671,707 shares of the Company’s Common Stock.

 

Schedule 2.1(e) – Outstanding Shares of Company’s Subsidiaries

None

 

Schedule 2.1(e)(ii)  — List of Company Subsidiaries

None

 

Schedule 2.1(i)

[*]

	
[*] Information on this page has been omitted and filed separately with the
Securities and Exchange Commission. Confidential Treatment with respect to
such omitted information has been requested.

 

Schedule 7.2

Steven C. Quay, M.D., Ph.D., Chairman, Chief Executive Officer, and President

Randall M. Brock, Controller

Bruce R. Thaw, Esq.ex4-2

 

EXHIBIT 4.2

[*Confidential treatment has been requested as to certain portions of this document. Each such portion, which has been omitted herein and replaced with an asterisk [*], has been filed separately with the Securities and Exchange Commission.]

REGISTRATION RIGHTS AGREEMENT

     This REGISTRATION RIGHTS AGREEMENT
(this “Agreement”) is entered into as of February 1, 2002 by
and between Nastech Pharmaceutical Company, Inc., a Delaware corporation
(the “Company”), and Pharmacia & Upjohn Company, a Delaware
corporation (“Purchaser”).

RECITALS

     WHEREAS, the Company and the Purchaser have entered into an
Investment Agreement, dated as of February 1, 2002 (the “Investment Agreement”), pursuant
to which the Purchaser has agreed to purchase shares (the “Shares”) of common
stock, par value $.006 per share, of the Company, upon the terms and conditions
set forth therein;

     WHEREAS, in order to induce the Purchaser to enter into the Investment
Agreement, the Company has agreed to provide the registration rights set forth
in this Agreement for the benefit of Purchaser and its direct and indirect
transferees upon the terms and conditions set forth herein; and

     WHEREAS, the execution and delivery of this Agreement is a condition to
the Purchaser’s obligations pursuant to the Investment Agreement.

     NOW, THEREFORE, in consideration of the mutual premises, covenants and
conditions set forth herein, the parties hereby agree as follows:

     1.         Definitions. Capitalized terms used herein without definition shall
have the meanings assigned to such terms in the Investment Agreement. For the
purposes of this Agreement:

                 “Business Day” means a day on which banking institutions in New York, New
York are open for business.

                 “Commission” means the U.S. Securities and Exchange Commission or any
other governmental authority from time to time administering the Securities
Act.

                 “Common Stock” means the common stock, par value $.006 per share, of the
Company.

                 “DTC” means the Depository Trust Company.

                 “Exchange Act” means the Securities Exchange Act of 1934, as amended, or
any successor federal statute, and the rules and the regulations of the
Commission promulgated thereunder, all as the same shall be in effect from time
to time.

		1

 

                 “Holder” means any Person owning or having the right to acquire
Registrable Securities, including an Affiliate or any successor, assignee or
transferee of Purchaser or a Person that has received Registrable Securities in
accordance with Section 13 hereof.

                 “Knowledge of Company” has the meaning provided such term in the
Investment Agreement.

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

                 “Person” means any natural person, firm, partnership, association,
corporation, company, joint venture, unincorporated association, trust,
business trust, government or department or agency of a government, limited
liability company or other entity.

                 “Prospectus” means the prospectus included in any Registration Statement
(including without limitation, a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective Registration
Statement in reliance upon Rule 430A), as amended or supplemented by any
prospectus supplement, with respect to the terms of the offering of any portion
of the Registrable Securities covered by such Registration Statement and all
other amendments and supplements to the prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such prospectus.

         “Registrable Securities” means (a) the Shares of Common Stock received by
the Purchaser pursuant to the Investment Agreement, and (b) any capital stock
or other securities of the Company issued or issuable with respect to the
Shares, (i) upon any conversion or exchange thereof, (ii) by way of stock
dividend or other distribution, stock split or reverse stock split, or (iii) in
connection with a combination of shares, recapitalization, merger,
consolidation, exchange offer or other reorganization. As to any particular
Registrable Securities, once issued such securities shall cease to be
Registrable Securities when (A) a Registration Statement with respect to the
sale of such securities shall have become effective under the Securities Act
and such securities shall have been disposed of in accordance with such
Registration Statement, (B) such securities shall have been distributed to the
public in reliance upon Rule 144 (or any successor provision) under the
Securities Act, without any limitation on the amount of such securities which
may be sold, or (C) they shall have ceased to be outstanding.

             “Registration Expenses” means all fees and expenses incident to the
performance of or compliance with the provisions of this Agreement, whether or
not any Registration Statement is filed or becomes effective, including,
without limitation, all (a) registration and filing fees (including, without
limitation, (i) fees with respect to filings required to be made and other
expenses associated with the NASD and any other applicable exchange in
connection with an Underwritten Offering, and (ii) fees and expenses of
compliance with state securities or blue sky laws (including, without
limitation, fees and distributions of counsel for the underwriter or
underwriters in connection with blue sky qualifications of the Registrable
Securities and determination of eligibility of the Registrable Securities for
investment under the laws of such jurisdictions as are provided in Section
5(e)), (b) printing expenses (including, without limitation, expenses of
printing certificates for Registrable Securities in a form eligible for deposit
with DTC and of printing prospectuses), (c) fees and disbursements of all
independent certified public

-2-

 

accountants referred to in Section 5 (including, without limitation, the
reasonable expenses of any special audit and “cold comfort” letters required by
or incident to such performance), (d) the fees and expenses of any “qualified
independent underwriter” or other independent appraiser participating in an
offering pursuant to the NASD Rules of Conduct and the corresponding rules of
any other applicable exchange, (e) liability insurance under the Securities Act
or any other securities laws, if the Company desires such insurance, (f) fees
and expenses of all attorneys, advisers, appraisers and other persons retained
by the Company or any Subsidiary of the Company, (g) internal expenses of the
Company and its Subsidiaries (including, without limitation, all salaries and
expenses of officers and employees of the Company and its Subsidiaries, other
general overhead expenses of the Company and its Subsidiaries, and other
expenses for the performance of legal or accounting duties), (h) the expense of
any annual audit and the preparation of historical and pro forma financial
statements or other data normally prepared by the Company in the ordinary
course of business, (i) the expenses relating to printing, word processing and
distributing all Registration Statements, underwriting agreements, securities
sales agreements, and any other documents necessary in order to comply with
this Agreement, (j) any fees and disbursements of any other underwriters and
broker-dealers customarily paid by issuers or sellers of securities, and (k)
the fees and disbursements of not more than one (1) counsel (together with
appropriate local counsel) chosen by the Holders of a majority of the
Registrable Securities to be included in such Registration Statement;    provided,
   however, that in all cases in which the Company is required to pay Registration
Expenses hereunder, Registration Expenses shall exclude any underwriting,
brokers and dealers discounts, selling commissions, fees and other remuneration
or any transfer taxes payable in respect of the sale of the Registrable
Securities by the Holders thereof.

             “Registration Statement” means any registration statement of the Company
that covers any of the Registrable Securities pursuant to the provisions of
this Agreement, and all amendments and supplements to any such registration
statement, including post-effective amendments, in each case including the
Prospectus, all exhibits and all material incorporated by reference or deemed
to be incorporated by reference in such registration statement.

             “Rule 144” means Rule 144 (or any successor provision) under the
Securities Act.

             “Securities Act” means the Securities Act of 1933, as amended, or any
successor federal statute, and the rules and regulations of the Commission
promulgated thereunder, all as the same shall be in effect from time to time.

             “Special Registration” means the registration of shares of equity
securities and/or options or other rights in respect thereof to be offered
solely to directors, members of management, employees, consultants or sales
agents, distributors or similar representatives of the Company or its direct or
indirect Subsidiaries, solely on Form S-8 or any successor form, a registration
on Form S-4 with respect to any merger, consolidation or acquisition, or a
registration on another form not available for registering Registrable
Securities for sale to the public.

             “Underwritten Registration” or “Underwritten Offering” means a
registration in which securities of the Company (including Registrable
Securities) are sold to an underwriter for reoffering to the public.

-3-

 

     2.        Demand Registration.

               (a)           
Request for Registration. Subject to the provisions of Sections 2(d)
and 8, at any time or from time to time after the date hereof, Holders of at
least 25% of the Registrable Securities shall have the right to make a written
request that the Company effect a registration under the Securities Act of all
or part of its Registrable Securities of the Holders making such request. A
request for registration pursuant to this Section 2 (a “Demand Registration”)
shall specify the approximate number of Registrable Securities requested to be
registered, the anticipated per share price range for such offering and the
intended method or disposition thereof by such Holders.

               (d)           
Obligation to Effect Registration. Within five (5) days after receipt
by the Company of any request for Demand Registration, the Company shall give
written notice of such requested registration to all Holders. Such Holders
shall have the right, by giving written notice to the Company within ten (10)
Business Days after the Company provides its notice, to elect to have included
in such registration such of their Registrable Securities as such Holders may
request in such notice of election. Thereupon, the Company shall, as
expeditiously as possible, use commercially reasonable efforts to effect the
registration under the Securities Act of all Registrable Securities that the
Company has been requested to so register.

               (d)           
Registration Statement Form. Registrations under this Section 2 shall
be on such appropriate form of Registration Statement of the Commission as
shall be selected by the Company and available to it under the Securities Act.
The Company agrees to include in any such Registration Statement all
information which, in the opinion of counsel to the Company, is required to be
included therein under the Securities Act.

               (d)           
Limitations on Registration. The Company shall not be required to
effect (i) more than two (2) Demand Registrations pursuant to this Section 2,
and (ii) any Demand Registration pursuant to this Section 2 at any time before
[*] of the Purchaser’s purchase of Shares pursuant to the Investment
Agreement. In addition, the Company shall not be required to effect any
registration (other than on Form S-3 or any successor form relating to
secondary offerings) during the period starting with the date sixty (60) days
prior to the Company’s estimated date of filing of, and ending on the date one
hundred eighty (180) days immediately following the effective date of, any
Registration Statement (other than a Special Registration) pertaining to the
securities of the Company, provided that the Company is actively employing in
good faith all reasonable efforts to cause such Registration Statement to
become effective.

               (e)           
Inclusion of Other Securities. In the event the Company is requested
by other holders of Common Stock to include some or all such securities on a
piggyback basis in a Demand Registration, and in the event that such Demand
Registration will involve an Underwritten Offering, such securities may be
included therein, subject to the provisions of Section 2(h).

	[*] Certain portions of this page have been omitted and filed separately with
the Securities and Exchange Commission. Confidential Treatment with respect to
such omitted portions has been requested.

-4-

 

               (f)           
Effective Registration Statement. A Demand Registration shall not be
deemed to have been effected unless a Registration Statement covering all of
the Registrable Securities requested to be included in such registration by the
Holders thereof and as reduced, if necessary, in accordance with Section 2(h)
hereof has been declared effective by the Commission and remains continually
effective for the period specified in Section 5(b).

               (g)           
Suspension. If the Board of Directors of the Company, in its good
faith judgment, determines that any registration under the Securities Act of
Registrable Securities should not be made or continued because it would
materially interfere with any material financing, acquisition, corporation
reorganization, merger, or other transaction involving the Company or any of
its subsidiaries (a “Valid Business Reason”), (i) the Company may postpone
filing a Registration Statement relating to a Demand Registration until such
Valid Business Reason no longer exists, but in no event for more than 90 days,
and (ii) in case a Registration Statement has been filed relating to a Demand
Registration, the Company may cause such Registration Statement to be withdrawn
and its effectiveness terminated or may postpone amending or supplementing such
Registration Statement until such Valid Business Reason no longer exists, but
in no event for more than 90 days (the “Postponement Period”); provided,
however, that in no event shall the Company be permitted to postpone or
withdraw a Registration Statement within 180 days after the expiration of any
Postponement Period.

               (h)           
Allocation. If any Demand Registration involves an Underwritten
Offering and the managing underwriter of such offering shall advise the Company
that, in its view, the number of securities requested to be included in such
registration exceeds the largest number (the “Section 2(h) Number”) that can be
sold in an orderly manner in such offering within a price range acceptable to
the Holders of Registrable Securities requesting the registration, the Company
shall include in such registration:

                               (i)      first, all Registrable Securities requested to be included in such
Registration by the Holders of Registrable Securities requesting such
registration; provided, however, that, if the number of such Registrable
Securities exceeds the Section 2(h) Number, the number of such Registrable
Securities (not to exceed the Section 2(h) Number) shall be allocated on a pro
rata basis among all Holders of Registrable Securities requesting such
registration based on the number of Registrable Securities that each holder
requesting registration then owns and the number of Registrable Securities then
owned by all such Holders requesting such registration;

                               (ii)      second, to the extent that the number of Registrable Securities to be
included by all Holders of Registrable Securities requesting such registration
is less than the Section 2(h) Number, securities that the Company proposes to
register (but only to the extent such securities may be included without
exceeding the Section 2(h) Number); and

                               (iii)      third, to the extent additional securities may be included without
exceeding the Section 2(h) Number, then securities to be sold for other holders
of Company securities requesting registration on a piggyback basis in
accordance with Section 2(e).

-5-

 

               (i)           
Underwritten Offering. The Company may require that any Demand
Registration provide for an Underwritten Offering.

               (j)           
Termination of Demand Rights. Notwithstanding anything else in this
Section 2 to the contrary, the Company’s obligations under this Section 2 shall
terminate at such time as the Holders cease to own at least forty percent (40%)
of the Shares of Common Stock received by the Purchaser under the Investment
Agreement, or any capital stock or other securities of the Company issued or
issuable with respect to such Shares (i) upon any conversion or exchange
thereof, (ii) by way of stock dividend or other distribution, stock split or
reverse stock split, or (iii) in connection with a combination of shares,
recapitalization, merger, consolidation, exchange offer or other
reorganization.

     3.       Piggyback Registration.

               (a)           
Inclusion in Piggyback Registration. If the Company at any time
proposes to register any of its securities under the Securities Act (other than
pursuant to Section 2 or a Special Registration), whether or not for sale for
its own account, (a “Company Registration”), it shall each such time, prior to
such filing, give prompt written notice to all Holders of Registrable
Securities of its intention to do so and, upon the written request of any
Holder of Registrable Securities given to the Company within ten (10) Business
Days after the Company has provided such notice (which request shall state the
intended method of disposition of such Registrable Securities), the Company
shall use commercially reasonable efforts to cause all Registrable Securities
that the Company has been requested by the Holders thereof to register to be so
registered under the Securities Act to the extent necessary to permit their
disposition in accordance with the intended methods of distribution specified
in the Company’s notice; provided, that if at any time after giving written
notice of its intention to register any securities and prior to the effective
date of the Registration Statement filed in connection with such registration,
the Company shall determine for any reason not to register such securities, the
Company may, at its election, without liability or obligation to any Holder of
Registrable Securities, give written notice of such determination to each
Holder that was previously notified of such registration, and, thereupon, shall
not register any Registrable Securities in connection with such registration
(but shall nevertheless pay the Registration Expenses in connection therewith),
without prejudice, however, to the rights of any Holders to request that a
registration be effected under Section 2 and provided further, that no
registration effected under this Section 3 shall relieve the Company from its
obligations to effect registration under the Securities Act upon request under
Section 2.

               (b)           
Terms of Underwriting. In connection with any offering under this
Section 3 involving an Underwritten Offering, the Company shall not be required
to include any Registrable Securities in such offering unless the Holder
thereof accepts the terms, if any, of the underwriting as agreed upon between
the Company and the underwriters selected by it provided that such terms must
be reasonably satisfactory in substance and form to the Holder and consistent
with this Agreement, and then only in such quantity as will not, in the opinion
of the managing underwriter, jeopardize the success of the offering by the
Company.

-6-

 

               (c)           
Allocation. If any Company Registration involves an Underwritten
Offering and the managing underwriter of such offering shall advise the Company
that, in its view, the number of securities requested to be included in such
registration exceeds the largest number (the “Section 3(c) Number”) that can be
sold in an orderly manner in such offering within a price range acceptable to
the Company, the Company shall include in such registration:

                    
           (i)         
first, all securities that the Company proposes to register for its
own account and for the account of security Holders that have demand
registration rights pursuant to which such Company registration was effected
(the “Company Securities”); and

                    
           (ii)         
second, to the extent that the number of Company Securities is less
than the Section 3(c) Number, the remaining securities to be included in such
registration shall be allocated on a pro rata basis among (i) all Holders of
Registrable Securities requesting that Registrable Securities be included in
such Registration, and (ii) all other holders (“Other Holders”) of the
Company’s securities who have been granted “piggy-back” registration rights
with respect to such securities (the “Other Securities”) and have requested
that such Other Securities be included in such registration, based on the
number of Registrable Securities and Other Securities that each such Holder and
Other Holder requesting such registration bears to the aggregate number of
Registrable Securities and Other Securities then owned by all such Holders and
Other Holders requesting such registration.

               (d)           
Termination of Piggy Back Rights. Notwithstanding anything else in
this Section 3 to the contrary, the Company’s obligations under this Section 3
shall terminate at such time as the Holders cease to own at least forty percent
(40%) of the Shares of Common Stock received by the Purchaser under the
Investment Agreement, or any capital stock or other securities of the Company
issued or issuable with respect to such Shares (i) upon any conversion or
exchange thereof, (ii) by way of stock dividend or other distribution, stock
split or reverse stock split, or (iii) in connection with a combination of
shares, recapitalization, merger, consolidation, exchange offer or other
reorganization.

     4.     Allocation of Expenses. The Company will pay all Registration Expenses
of all registrations under this Agreement.

     5.     Obligations of the Company. If and whenever the Company is required to
use reasonable efforts to effect the registration under the Securities Act of
any Registrable Securities pursuant to Sections 2 or 3 of this Agreement, the
Company shall:

               (a)           
file with the Commission, as soon as reasonably practicable, a
Registration Statement with respect to such Registrable Securities, make all
required filings with the NASD and any other applicable exchange, and use
commercially reasonable efforts to cause such Registration Statement to become
effective at the earliest possible date and remain effective;

               (b)           
prepare and file with the Commission such amendments and supplements
to the Registration Statement and the Prospectus used in connection therewith
and such other documents as may be necessary to keep the Registration Statement
effective for a period of (i) 90 days in the case of a Registration Statement
filed pursuant to Section 2 hereof, and (ii) such

-7-

 

 period of time as the Company deems appropriate in the case of a
Registration Statement filed pursuant to Section 3 hereof, and the Company
shall otherwise comply with the provisions of the Securities Act with respect
to the disposition of all securities covered by such Registration Statement;

               (c)           
furnish to counsel (if any) selected by the Holders of a majority of
the Registrable Securities covered by such Registration Statement and to
counsel for the underwriters in any Underwritten Offering copies of all
documents proposed to be filed with the Commission in connection with such
registration a reasonable time prior to the proposed filing thereof and give
reasonable consideration in good faith to any comments of such Holders, counsel
and underwriters;

               (d)           
furnish to each seller of such securities, without charge, such number
of conformed copies of such Registration Statement and of each such amendment
and supplement thereto (in each case, including all exhibits (including all
exhibits incorporated by reference), financial statements, schedules, and all
documents incorporated therein, deemed to be incorporated therein by reference
or filed therewith, except that the Company shall not be obligated to furnish
any seller of securities with more than two copies of such exhibits and
documents), such numbers of copies of the Prospectus included in such
Registration Statement (including each preliminary prospectus) in conformity
with the requirements of the Securities Act, and such other documents, as such
seller may reasonably request in order to facilitate the disposition of the
Registrable Securities owned by such seller;

               (e)           
use its commercially reasonable efforts to register or qualify and
cooperate with the Holders of Registrable Securities, the underwriters and
their respective counsels in connection with the registration or qualification
(or exemption from such registration or qualification) of the securities
covered by such Registration Statement under such other securities or blue sky
laws of such jurisdictions as each seller shall reasonably request; provided,
however, that where Registrable Securities are offered other than through an
Underwritten Offering, the Company agrees to cause its counsel to perform blue
sky investigations and file registrations and qualification required to be
filed pursuant to this Section 5(e); keep each such registration or
qualification (or exemption therefrom) effective during the period such
Registration Statement is required to be effective hereunder and do any and all
other acts and things which may be reasonably necessary or advisable to enable
such seller to consummate the disposition in such jurisdictions of the
securities owned by such seller, except that the Company shall not for any such
purpose be required to qualify generally to do business as a foreign
corporation in any jurisdiction wherein it is not so qualified, subject itself
to taxation in any jurisdiction wherein it is not so subject, or take any
action which would subject it to general service of process in any jurisdiction
wherein it is not so subject;

               (f)           
in connection with an Underwritten Offering only, furnish to each
seller in a signed counterpart, addressed to the sellers, of

                    
           (i)         
an opinion of counsel for the Company experienced in securities
law matters, dated the effective date of the closing of such Underwritten
Offering, and

-8-

 

                    
           (ii)         
a “cold comfort” letter signed by the independent public
accountants who have issued an audit report on the Company’s financial
statements included in the Registration Statement, subject to such seller
having executed and delivered to the independent public accountants such
certificates and documents as such accountants shall reasonably request,

covering substantially the same matters with respect to the Registration
Statement (and the Prospectus included therein) and, in the case of such
accountants’ letter, with respect to events subsequent to the date of such
financial statements, as are customarily covered in opinions of issuer’s
counsel and in accountants’ letters delivered to the underwriters in
underwritten public offerings of securities;

               (g)           
(i) promptly notify each Holder of Registrable Securities subject to
such Registration Statement if such Registration Statement, at the time it or
any amendment thereto became effective, (x) contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading upon discovery by
the Company of such material misstatement or omission or (y) upon discovery by
the Company of the happening of any event as a result of which the Company
believes there would be such a material misstatement or omission, and, Subject
to Section 2(g), as promptly as practicable, prepare and file with the
Commission a post-effective amendment to such Registration Statement and use
commercially reasonable efforts to cause such post-effective amendment to
become effective such that such Registration Statement, as so amended, shall
not contain an untrue statement or a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading, and
(ii) promptly notify each Holder of Registrable Securities subject to such
Registration Statement, at any time when a Prospectus related therefor is
required to be delivered under the Securities Act, if the Prospectus included
in such Registration Statement, as then in effect, includes an untrue statement
of a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading upon discovery by the
Company of such material misstatement or omission or upon the discovery by the
Company of the happening of any event as a result of which the Company believes
that there would be a material misstatement or omission, and, as promptly as is
reasonably practicable, prepare and furnish to such Holder a reasonable number
of copies of a supplement to or an amendment of such Prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such
securities, such Prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading;

               (h)           
otherwise use its commercially reasonable efforts to comply with all
applicable rules and regulations of the Commission, and make available to its
security holders, as soon as reasonably practicable, an earnings statement of
the Company complying with the provisions of Section 11(a) of the Securities
Act and Rule 158 under the Securities Act (or any similar rule promulgated
under the Securities Act) no later than 45 days after the end of any 12-month
period (or 90 days after the end of any 12-month period if such period is a
fiscal year) (i) commencing at the end of any fiscal quarter in which
Registrable Securities are sold to an

-9-

 

 underwriter or to underwriters in a firm commitment or best efforts
Underwritten Offering, and (ii) if not sold to an underwriter or to
underwriters in such an offering, commencing on the first day of the first
fiscal quarter of the Company after the effective date of the relevant
Registration Statement, which statements shall cover said 12-month periods;

               (i)           
promptly notify each Holder of Registrable Securities covered by such
Registration Statement, their counsel and the underwriters (i) when such
Registration Statement, or any post-effective amendment to such Registration
Statement, shall have become effective, or any amendment of or supplement to
the Prospectus used in connection therewith shall be filed, (ii) of any request
by the Commission to amend such Registration Statement or to amend or
supplement such Prospectus or for additional information, (iii) of the issuance
by the Commission of any stop order suspending the effectiveness of such
Registration Statement or of any order preventing or suspending the use of any
preliminary prospectus or the initiation or threatening, to the Knowledge of
the Company, of any proceedings for any of such purposes, and (iv) of the
suspension of the qualification of such securities for offering or sale in any
jurisdiction, or of the institution, to the Knowledge of the Company, of any
proceedings for any of such purposes, and (v) if at any time when a Prospectus
is to be required by the Securities Act to be delivered in connection with the
sale of the Registrable Securities, the representations and warranties of the
Company contained in any agreement (including the underwriting agreement
contemplated in Section 6(b) below), to the Knowledge of the Company, cease to
be true and correct in any material respect;

               (j)           
use its commercially reasonable efforts to prevent the issuance of any
order suspending the effectiveness of the Registration Statement or of any
order preventing or suspending the use of a Prospectus or suspending the
qualification (or exemption from qualification) of any of the Registrable
Securities covered thereby for sale in any jurisdiction, and, if any such order
is issued, to obtain the withdrawal of any such order at the earliest possible
moment;

               (k)           
if requested by the managing underwriter, if any, (i) promptly
incorporate in a prospectus supplement or post-effective amendment such
information as the managing underwriter, if any, reasonably requests to be
included therein to comply with applicable law, and (ii) make all required
filings of such prospectus supplement or such post-effective amendment as soon
as practicable after the Company has received notification of the matters to be
incorporated in such prospectus supplement or post-effective amendment;

               (l)           
cooperate with the Holders and the managing underwriter, if any, to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold, which certificates shall not bear any
restrictive legends whatsoever and shall be in a form eligible for deposit with
DTC, and enable such Registrable Securities to be in such denominations and
registered in such names as the underwriters, if any, or Holders may reasonably
request at least two (2) Business Days prior to any sale of Registrable
Securities in a firm commitment Underwritten Offering;

               (m)           
use its commercially reasonable efforts to cause the Registrable
Securities covered by a Registration Statement to be registered with, and to
obtain the consent or approval

-10-

 

 of, each governmental agency or authority, whether federal, state, local
or foreign, which may be required to effect such registration or the offering
or sale in connection therewith or to enable the sellers to offer, or to
consummate the disposition of, the Registrable Securities subject to such
Registration Statement, except as may be required solely as a consequence of
the nature of such seller’s business, in which case the Company will cooperate
with all reasonable respects with the filing of the Registration Statement and
the granting of such approvals;

               (n)           
prior to the effective date of the Registration Statement, (i) provide
the registrar for the Common Stock or such other Registrable Securities with
printed certificates for such securities in a form eligible for deposit with
DTC and (ii) provide a CUSIP number for such securities;

               (o)           
agree not to file or make any amendment to any Registration Statement
with respect to any Registrable Securities, or any amendment of or supplement
to the Prospectus used in connection therewith, which refers to any Holder of
any Registrable Securities covered thereby by name, or otherwise identifies
such Holder as the holder of any securities of the Company, without the consent
of such Holder, such consent not to be unreasonably withheld, except that no
such consent shall be required for any disclosure that is required by law.

     6.     Underwritten Offerings. The provisions of this Section 6 do not
establish additional registration rights but instead set forth procedures
applicable, in addition to those set forth in Sections 2, 3, 5 and 9, to any
registration that is an Underwritten Offering.

               (a)           
Underwritten Offerings Exclusive. Whenever a request for Demand
Registration is for an Underwritten Offering, only securities that are to be
distributed by the underwriters may be included in the Registration.

               (b)           
Underwriting Agreement. If requested by the underwriters for any
Underwritten Offering by Holders pursuant to a request for Demand Registration,
the Company shall enter into an underwriting agreement with such underwriters
for such offering, such agreement to be reasonably satisfactory in substance
and form to the Company, the Holders of a majority of the Registrable
Securities to be covered by such registration and to the underwriters and to
contain such representations and warranties by the Company and such other terms
and provisions as are customarily contained in agreements of this type,
including, but not limited to, indemnities to the effect and to the extent
provided in Section 10, provisions for the delivery of officers’ certificates,
opinions of counsel and accountants’ “cold comfort” letters, and hold-back
arrangements. The Holders of Registrable Securities to be distributed by such
underwriters shall be parties to such underwriting agreement and may, at their
option, require that any or all the representations and warranties by, and the
agreements on the part of, the Company to and for the benefit of such
underwriters be made to and for the benefit of such Holders and that any or all
of the conditions precedent to the obligations of such underwriters under such
underwriting agreements shall also be conditions precedent to the obligations
of such Holders. No such Holders shall be required by the Company to make any
representations or warranties to, or agreements with, the Company or the
underwriters other than as set forth in Sections 6(d) and 9 and
representations, warranties or agreements regarding such Holder’s and such
Holders’ intended method of distribution.

-11-

 

               (c)           
Selection of Underwriters. Whenever a request for Demand Registration
is for an Underwritten Offering, the Holders of a majority of the Registrable
Securities to be Registered pursuant to such offering shall have the right to
select one or more underwriters to administer the offering, subject to the
consent of the Company, which shall not be unreasonably withheld. If the
Company at any time proposes to register any of its securities under the
Securities Act for sale for its own account and such securities are to be
distributed by or through an Underwritten Offering (other than an Underwritten
Offering in which the Company is participating pursuant to the provisions of
Sections 2(e) and 2(h) (ii)), the Company shall have the right to select one or
more underwriters to administer the offering, subject to the consent of the
Holders of a majority of the Registrable Securities to be included in such
Demand Registration, which shall not be unreasonably withheld. In all cases in
this Section 6(c), at least one of the underwriters chosen by the Company shall
be an underwriter of nationally recognized standing.

               (d)           
Hold Back Agreements. If and whenever the Company proposes to
register any of its equity securities under the Securities Act for the account
of any Holder, each Holder, if required by the managing underwriter in an
Underwritten Offering, agrees by acquisition of such Registrable Securities not
to effect (other than pursuant to such registration) any public sale or
distribution, including, without limitation, any sale pursuant to Rule 144, of
any Registrable Securities, any other equity securities of the Company or any
securities convertible into or exchangeable or exercisable for any equity
securities of the Company during the ten (10) days prior to, and for up to
ninety (90) days after, the effective date of such registration, to the extent
timely notified in writing by the Company or the managing underwriter, and the
Company agrees to cause each director and executive officer of the Company to
enter into a similar agreement with the Company. The foregoing provisions
shall not apply to any Holder if such Holder is prevented by applicable statute
or regulation from entering into any such agreement; provided, however, that
any such Holder shall undertake, in its request to participate in any such
Underwritten Offering, not to effect any public sale or distribution of any
applicable class of Registrable Securities commencing on the date of sale of
such applicable class of Registrable Securities unless it has provided
forty-five (45) days prior written notice of such sale or distribution to the
underwriter or underwriters. The Company further agrees not to effect (other
than pursuant to such registration or pursuant to a Special Registration) any
public sale or distribution, or to file any Registration Statement (other than
such registration or Special Registration) covering any, of its equity
securities, or any securities convertible into or exchangeable or exercisable
for such securities, during the ten (10) days prior to, and for ninety (90)
days after, the effective date of such registration if required by the managing
underwriter (provided, however, in no event shall such period of time be
greater than the period of time any Holder or any other selling shareholder
agrees with the managing underwriter).

     7.     Preparation, Reasonable Investigation. In connection with the
preparation and filing of each Registration Statement registering Registrable
Securities under the Securities Act, the Company shall give the Holders of
Registrable Securities to be so registered and the underwriters, if any, and
their respective counsel and accountants, the opportunity to participate in the
preparation of such Registration Statement, each Prospectus included therein or
filed with

-12-

 

the Commission, and each amendment thereof or supplement thereto, and
shall give each of them such access to all pertinent financial, corporate, and
other documents and properties of the Company and its Subsidiaries, and such
opportunities to discuss the business of the Company with its officers,
directors, employees and the independent public accountants who have issued
audit reports on its financial statements as shall be necessary, in the opinion
of such Holders’ and such underwriters’ respective counsel, to conduct a
reasonable investigation within the meaning of the Securities Act.

     8.     Other Registration. If and whenever the Company is required to use its
reasonable efforts to effect the registration under the Securities Act of any
Registrable Securities pursuant to Sections 2 or 3, and if such registration
shall not have been withdrawn or abandoned, the Company shall not be obligated
to and shall not file any Registration Statement with respect to any of its
securities (including Registrable Securities) under the Securities Act (other
than a Special Registration), whether of its own accord or at the request or
demand of any holder or holders of such securities, until a period of 180 days
shall have elapsed from the effective date of such previous registration,
provided that the Company shall not be excused from filing a Registration
Statement by virtue of this Section 8 more than once in a 360 day period.

     9.     Certain Obligations of Holders.

               (a)           
The Company may require each Holder of any Registrable Securities as
to which any registration is being effected to furnish to the Company such
information regarding such Holder and the intended method of disposition of
such securities as the Company may from time to time reasonably request in
writing and as shall be required to effect the registration of such Holder’s
Registrable Securities. Each such Holder agrees to furnish promptly to the
Company all information required to be disclosed in order to make the
information previously furnished to the Company by such Holder not materially
misleading, and, in the case of an Underwritten Offering, to execute and
deliver a customary underwriting agreement, containing representations,
warranties and agreements of such Holder that are customary for such an
agreement, all closing documents, custody and control agreements and other
instruments that may be reasonably requested by any underwriter.

               (b)           
Each Holder of Registrable Securities covered by a Registration
Statement agrees that, upon receipt of any notice from the Company pursuant to
Sections 2(g) (ii) or 5(g), such Holder shall promptly discontinue the
disposition of Registrable Securities pursuant to such Registration Statement
until such Holder shall have received, in the case of Section 2(g) (ii) or 5(g)
(i), notice from the Company that such Registration Statement has been amended,
as contemplated by Section 5(g), and, in the case of clause (ii) of Section
5(g), copies of the supplemented or amended Prospectus contemplated by Section
5(g). If so directed by the Company, each Holder will deliver to the Company
(at the Company’s expense) all copies, other than permanent file copies, in
such Holder’s possession of the Prospectus covering such Registrable Securities
at the time of receipt of such notice. In the event that the Company shall
give any such notice, the period mentioned in Section 5(b) shall be extended by
the number of days during the period from and including the date of the giving
of such notice to and including the date when each seller of any Registrable
Securities covered by such Registration Statement

-13-

 

shall have received copies of the supplemented or amended Prospectus
covering such Registrable Securities contemplated by Section 5(g).

     10.     Indemnification and Contribution.

               (a)           
In the event of any registration of any of the Registrable Securities
under the Securities Act pursuant to this Agreement, the Company will indemnify
and hold harmless the seller of such securities, its directors, officers, and
employees, each other Person who participates as an underwriter, broker or
dealer in the offering or sale of such securities, and each other Person, if
any, who controls such seller, underwriter, broker, dealer or any such
participating Person within the meaning of the Securities Act or the Exchange
Act (each of the foregoing indemnified Persons an “Indemnified Person”),
against any losses, claims, damages, or liabilities, joint or several, to which
such Indemnified Person may become subject under the Securities Act, the
Exchange Act, state securities or blue sky laws, or otherwise, insofar as such
losses, claims, damages, or liabilities (or actions or proceedings in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in any Registration Statement under
which such Registrable Securities were registered under the Securities Act, any
preliminary prospectus, or Prospectus contained in the Registration Statement,
or any amendment or supplement to such Registration Statement, or arise out of
or are based upon the omission or alleged omission to state a material fact
required to be stated therein or necessary to make the statements therein (in
respect of any Prospectus, under the circumstances under which they were made)
not misleading; and the Company shall reimburse such Indemnified Person for any
reasonable out-of-pocket expense (including without limitation reasonable
attorneys’ fees) incurred in connection with investigating or defending any
such loss, claim, damage, liability, action or proceeding as such expenses are
incurred; provided, however, that the Company will not be liable in any such
case to the extent that any such loss, claim, damage, liability or expense
arises out of or is based upon any untrue statement or omission made in (a)
such Registration Statement, preliminary prospectus, or Prospectus, or any such
amendment or supplement, in reliance upon and in conformity with information
furnished to the Company, in writing, by or on behalf of such Indemnified
Person specifically for use in the preparation thereof, or (b) any preliminary
prospectus that was cured in a final Prospectus or amendment or supplement
thereto that was (x) delivered by the Company to such Indemnified Person
sufficiently in advance of the sale of the Registrable Securities by the
Indemnified Person to the purchaser of such Registrable Securities in order to
enable the Indemnified Person to deliver such final Prospectus or amendment or
supplement thereto to such purchaser, and (y) not delivered to the purchaser of
such Registrable Securities.

               (b)           
In the event of any registration of any of the Registrable Securities
under the Securities Act pursuant to this Agreement, each seller of such
securities, severally and not jointly, will indemnify and hold harmless the
Company, each of its directors and officers and each underwriter (if any) and
each Person, if any, who controls the Company or any such underwriter within
the meaning of the Securities Act or the Exchange Act, against any losses,
claims, damages, or liabilities, joint or several, to which the Company, such
directors and officers, underwriters, or controlling Persons may become subject
under the Securities Act, Exchange Act, state securities or blue sky laws, or
otherwise, insofar as such losses, claims, damages, or liabilities (or actions
or proceedings in respect thereof) arise out of or are based upon

-14-

 

 any untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement under which such securities were
registered under the Securities Act, any preliminary prospectus or Prospectus
contained in the Registration Statement, or any amendment or supplement to the
Registration Statement, or arise out of or are based upon any omission or
alleged omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, if the statement or
omission was made in reliance upon and in conformity with information relating
to such seller furnished in writing to the Company by or on behalf of such
seller expressly for use in connection with the preparation of such
Registration Statement, preliminary prospectus, Prospectus, amendment, or
supplement; provided, however, that the liability of each such seller hereunder
shall be limited to the net amount received by such seller (after deducting any
underwriting discount and expenses) from the sale of Registrable Securities
sold in connection with such registration.

               (c)           
Each party entitled to indemnification under this Section 10 (the
“Indemnified Party”) shall give notice to the party required to provide
indemnification (the “Indemnifying Party”) promptly after such Indemnified
Party has actual knowledge of any claim as to which indemnity may be sought and
shall permit the Indemnifying Party to assume the defense of any such claim or
any litigation resulting therefrom; provided, that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not be unreasonably
withheld or delayed); and, provided, further, that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 10, except to the
extent that the Indemnifying Party is adversely and materially affected by such
failure. The Indemnified Party may participate in, but not control, such
defense at such party’s expense; provided, however, that the Indemnifying Party
shall pay such expense of one counsel for all of the Indemnified Persons if
representation of such Indemnified Party by the counsel retained by the
Indemnifying Party would be inappropriate due to actual or potential differing
interests or conflicts between the Indemnified Party and any other Indemnified
Person represented by such counsel in such proceeding. No Indemnifying Party,
in the defense of any such claim or litigation, shall, except with the consent
of the Indemnified Party, consent to entry of any judgment or enter into any
settlement that does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnified Party of a release from all
liability in respect of such claim or litigations, and no Indemnified Person
(including any Indemnified Party) shall consent to entry of any judgment or
settle such claim or litigation without the prior written consent of the
Indemnifying Party, which consent shall not be unreasonably withheld.

               (d)           
If for any reason the foregoing indemnity is unavailable, or is
insufficient to hold harmless an Indemnified Party, other than by reason of the
exceptions provided in this Section 10, then the Indemnifying Party shall, in
lieu of indemnifying such Indemnified Party, contribute to the amount paid or
payable by the Indemnifying Party as a result of such losses, claims, damages,
liabilities or expenses in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party on the one hand and the Indemnified
Party on the other in connection with the statements or omissions which
resulted in such losses, claims, damages, or liabilities, as well as any other
relevant equitable considerations. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to

-15-

 

 information supplied by the Company or the Holders of Registrable
Securities covered by the Registration Statement in question and the parties’
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.

               (e)           
The Company and the Holders agree that it would not be just and
equitable if contribution pursuant to this Section 10 were determined by pro
rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in Section 10(d). The
amount paid or payable by an Indemnified Party as a result of the losses,
claims, damages and liabilities referred to in Section 10(d) shall be deemed to
include, subject to the limitations set forth above, any reasonable legal or
other expenses reasonably incurred by such Indemnified Party in connection with
investigating or defending any such claim or litigation. Notwithstanding
anything to the contrary in this Section 10, (A) no such Holder will be
required to contribute any amount in excess of the proceeds it received from
the sale of its Registrable Securities pursuant to such Registration Statement,
(B) no Person guilty of fraudulent misrepresentation, within the meaning of
Section 11(f) of the Securities Act, shall be entitled to contribution from any
Person who was not guilty of such fraudulent misrepresentation, and (C) no
party shall be liable for contribution under this Section 10 except to the
extent and under such circumstances as such party would have been liable to
indemnify under this Section 10 if such indemnification were enforceable under
applicable law. Any party entitled to contribution will, promptly after
receipt of notice of commencement of any action, suit or proceeding against
such party in respect to which a claim for contribution may be made against
another party or parties under this Section, notify such party or parties from
whom contribution may be sought, but the omission so to notify such party or
parties from whom contribution may be sought shall not relieve such party from
any other obligation it or they may have thereunder or otherwise under this
Section. No party shall be liable for contribution with respect to any action,
suit, proceeding or claim settled without its prior written consent, which
consent shall not be unreasonably withheld.

     11.     Indemnification with Respect to Underwritten Offering. In the event
that Registrable Securities are sold pursuant to a Registration Statement in an
Underwritten Offering, the Company agrees to enter into an underwriting
agreement containing customary representations and warranties with respect to
the business and operations of an issuer of the securities being registered and
customary covenants and agreements to be performed by such issuer, including
without limitation customary provisions with respect to indemnification by the
Company of the underwriters of such offering.

     12.     Reports Under Securities Exchange Act of 1934. With a view to making
available to the Holders the benefits of Rule 144 promulgated under the
Securities Act and any other rule or regulation of the Commission that may at
any time permit a Holder to sell Registrable Securities of the Company to the
public without Registration, the Company agrees to use its commercially
reasonable efforts to:

               (a)           
Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act;

-16-

 

               (b)           
file with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange
Act; and

               (c)           
furnish to any Holder, so long as such Holder owns any Registrable
Securities, forthwith upon request (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144 under the
Securities Act, any other such applicable reporting requirements under the
Securities Act and all applicable reporting requirements under the Exchange
Act, (ii) a copy of the most recent annual or quarterly report of the Company
and such other reports and documents so filed by the Company, and (iii) such
other information as may be reasonably requested in availing any Holder of any
rule or regulation of the Commission which permits the selling of any such
securities without registration under the Securities Act or pursuant to such
form.

     13.     Successors, Assigns and Transferees.

              
This Agreement shall be binding upon and shall inure to the benefit of
each party hereto, and their respective permitted successors, assigns and
transferees. The Purchaser or any other Holder under this Agreement may
transfer or assign its rights under this Agreement to any Affiliate of the
Purchaser or any such Holder; provided, however, that the Company is given
written notice from the Purchaser or any such Holder at the time of such
transfer or assignment or within a reasonable time after said transfer or
assignment stating the name and address of the transferee or assign and
identifying the securities with respect to which the rights hereunder are being
transferred. As a condition to the effectiveness of any transfer permitted
hereunder the transferee or assign shall agree, in writing, upon request of the
Company, to be bound by the provisions of this Agreement. Provided that the
Purchaser or any Holder and any permitted transferee or assignee has complied
with the foregoing conditions, this Agreement shall survive any permitted
transfer of Registrable Securities to and shall inure to the benefit of an
Affiliate of the Purchaser or any such Holder. In addition, and whether or not
any express transfer or assignment shall have been made, the provisions of this
Agreement which are for the benefit of the Purchaser shall also be for the
benefit of and enforceable by any subsequent Holder of Registrable Securities.

     14.     Miscellaneous.

               (a)           
No Inconsistent Agreements. The Company will not hereafter enter into
any agreement with respect to its securities which is inconsistent with or
violates the rights granted to the Holders in this Agreement.

               (b)           
Adjustments Affecting Registrable Securities. The Company will not
take any action, or permit any change to occur, with respect to its securities
that would adversely affect the ability of the Holders to include such
Registrable Securities in a registration undertaken pursuant to this Agreement
or which would materially and adversely affect the marketability of such
Registrable Securities in any such registration (including, without limitation,
effecting a stock split or a combination of shares).

-17-

 

               (c)           
Specific Performance; Other Rights. The parties recognize that
various of the rights of the Purchaser and any other Holder under this
Agreement are unique 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. Accordingly, the parties
agree that each of the Purchaser and any such Holder shall, in addition to such
other remedies as may be available to it at law or in equity, have the right to
enforce its rights hereunder by actions for injunctive relief and specific
performance in any court of the United States or any state thereof having
jurisdiction, to the extent permitted by law.

               (d)           
Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants, and restrictions without including any
of such which may be hereafter declared invalid, void or unenforceable.

               (e)           
Notices. All notices and other communications required or permitted
under this Agreement shall be in writing and may be delivered in person, by
telecopy, overnight delivery service or registered or certified United States
mail, addressed to the Company or the Purchaser (or to any other Holder not a
party hereto on the date hereof, to the address of such Holder in the stock
record books of the Company), as the case may be, at their respective addresses
and facsimile numbers set forth below or as the same may be revised pursuant to
notice to the other party in accordance wit this paragraph:

	 	 	 
	(i)	 	
If to the Company to:
	 	 	
Nastech Pharmaceutical Company, Inc.
	 	 	
45 Adams Avenue
	 	 	
Hauppauge, New York 11788
	 	 	
Attn: Office of the President
	 	 	
Telephone: (631)-273-0101
	 	 	
Facsimile: (631)-273-0252
	 	 	 
	(ii)	 	
If to Purchaser to:
	 	 	
Pharmacia & Upjohn Company
	 	 	
100 Route 206 North
	 	 	
Peapack, New Jersey 07977
	 	 	
Attn: Vice President and Associate General Counsel
	 	 	
Telephone: (908) 901-7108
	 	 	
Facsimile: (908) 901-1862

Either party may change its address (or person’s attention, telephone or
facsimile numbers) to which notices shall be sent by giving notice to the other
party in the manner herein provided. All notices and other communications
shall be effective upon the earlier of actual receipt thereof by

-18-

 

the person to whom notice is directed or (a) in the case of notices and
communications sent by personal delivery or telecopy, one Business Day after
such notice or communication arrives at the applicable address or was
successfully sent to the applicable telecopy number, (b) in the case of notices
and communications sent by overnight delivery service, at noon (local time) on
the second Business Day following the day such notice or communications was
delivered to such delivery service, and (c) in the case of notices and
communications sent by United States mail, seven days after such notice or
communication shall have been deposited in the United States mail.

               (f)           
Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof, and supersedes
all previous arrangements with respect to the subject matter hereof, whether
written or oral. The parties also acknowledge the simultaneous execution and
delivery of the Investment Agreement and Collaboration Agreement, which shall
not be superseded by this Agreement. Any amendment or modification to this
Agreement shall be made in writing signed by both parties.

               (g)           
Amendments and Waivers. This Agreement may be amended as to the
Holders and their successors and assigns (determined as provided in Section
13), and the Company may take any action herein prohibited, or omit to perform
any act required to be performed by it, only if the Company shall obtain the
written consent of the Holders of 75% of the Registrable Securities. This
Agreement may not be waived, changed, modified, or discharged orally, but only
by an agreement in writing signed by the party or parties against whom
enforcement of any waiver, change, modification or discharge is sought or by
parties with the right to consent to such waiver, change, modification or
discharge on behalf of such party; provided, however, that any consent required
by the Holders shall require the consent in writing of no less than the Holders
of 75% of the Registrable Securities.

               (h)           
Headings; Counterparts. Headings in this Agreement are for purposes
of reference only and shall not limit or otherwise affect the meaning hereof.
This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original, but all of which together shall constitute
one and the same instrument, and shall become effective when one or more of the
counterparts have been signed by each party and delivered to the other party,
which signature and delivery may be effected by facsimile, it being understood
that all parties need not sign the same counterpart.

               (i)           
Gender. Whenever used herein the singular number shall include the
plural, the plural shall include the singular, and the use of any gender shall
include all genders.

               (j)           
Further Assurances. Each of the parties hereto agrees to execute and
deliver those writings and documents reasonably required to more fully carry
out the purposes of this Agreement and the transactions contemplated hereby.

               (k)           
Governing Law. This agreement shall be construed in accordance with
and governed by the laws of the state of Delaware without regard to conflicts
of law principles.

-19-

 

               (l)           
No Third Party Beneficiaries. Except as provided by Sections 10 and
13, nothing contained in this Agreement is intended to confer upon any Person
other than the parties hereto and their respective successors and permitted
assigns and transferees, any benefit, right or remedies under or by reason of
this Agreement.

               (m)           
Consent to Jurisdiction. Each of the parties hereto irrevocably
submits to the personal exclusive jurisdiction of the United States District
Court for the District of Delaware for the purposes of any suit, action or
other proceeding arising out of this Agreement or any transaction contemplated
hereby (and, to the extent permitted under applicable rules of procedure,
agrees not to commence any action, suit or proceeding relating hereto except in
such court). Each of the parties hereto further agrees that service of any
process, summons, notice or document hand delivered or sent by registered mail
to such party’s respective address set forth in Section 14(e) will be effective
service of process for any action, suit or proceeding in Delaware with respect
to any matters to which it has submitted to jurisdiction as set forth in the
immediately preceding sentence. Each of the parties hereto irrevocably and
unconditionally waives any objection to the laying of venue of any action, suit
or proceeding arising out of this Agreement or the transactions contemplated
hereby in the United States District Court for the District of Delaware, and
hereby further irrevocably and unconditionally waives and agrees not to plead
or claim in such court that any such action, suit or proceeding brought in such
court has been brought in an inconvenient forum.

[Remainder of Page Intentionally Left Blank]

-20-

 

     IN WITNESS WHEREOF, each of the Company and Purchaser has executed this
Agreement or caused this Agreement to be executed on its behalf as of the day
and year first above written.

	 	 	 
	NASTECH PHARMACEUTICAL COMPANY, INC	 	
PHARMACIA & UPJOHN COMPANY
	 	 	 
	 	 	
By:_________________________________
	By:____________________________________	 	
Christopher Coughlin
	Title:___________________________________	 	
Executive Vice President and Chief
	 	 	
Financial Officer

-21-

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