Document:

Exhibit
4(a)

 

AMENDMENT

TO

RIGHTS AGREEMENT

BY AND AMONG

 

PRIMUS
TELECOMMUNICATIONS GROUP, INCORPORATED

 

AND

 

STOCKTRANS,
INC.

 

Dated as
of December 23, 1998

 

This Amendment (this “Amendment”)
to the Rights Agreement by and among Primus Telecommunications Group,
Incorporated (“Primus”) and
StockTrans, Inc. (“StockTrans”)
dated as of December 23, 1998 (the “Rights
Agreement”), is made and entered into as of April  30, 2003, by
and among Primus and StockTrans.

 

NOW, THEREFORE, in consideration of the premises and
the mutual agreements set forth herein and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto hereby agree as follows:

 

1.                                       The
Rights Agreement is hereby amended by inserting the following between Section
23 and Section 24 thereof:

 

Section 23.5.                             Exchange.

 

(a)                                  The
Board of Directors of the Company may, at its option, at any time after any
Person becomes an Acquiring Person, exchange all or part of the then
outstanding and exercisable Rights (which shall not include Rights that have
become void pursuant to the provisions of Section 7(e) hereof) for Common
Shares at an exchange ratio of one Common Share per Right, appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date hereof (such exchange ratio being hereinafter referred
to as the “Exchange Ratio”). Notwithstanding the foregoing, the Board of
Directors shall not be empowered to effect such exchange at any time after any
Person (other than an Exempt Person), together with all Affiliates and
Associates of such Person, becomes the Beneficial Owner of a majority of the
Common Shares then outstanding.

 

(b)                                 Immediately
upon the action of the Board of Directors of the Company ordering the exchange
of any Rights pursuant to Section 23.5(a) and without any further action and
without any notice, the right to exercise such Rights shall terminate and the
only right thereafter of a holder of such Rights shall be to receive that
number of Common Shares equal to the number of such Rights held by such holder
multiplied by the Exchange Ratio.  The
Company shall promptly give public notice of any such exchange (with prompt
written notice thereof to the Rights Agent); provided, however,
that the failure to give, or any defect in, such notice shall not affect the
validity of such exchange.  The 

 

 

Company promptly shall mail a notice of any such
exchange to all of the holders of such Rights at their last addresses as they
appear upon the registry books of the Rights Agent.  Any notice which is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice.  Each such notice of exchange will state the
method by which the exchange of the Common Shares for Rights will be effected
and, in the event of any partial exchange, the number of Rights which will be
exchanged.  Any partial exchange shall
be effected pro rata based on the number of Rights (other than Rights which have
become void pursuant to the provisions of Section 7(e) hereof) held by each
holder of Rights.

 

(c)                                  In
any exchange pursuant to this Section 23.5, the Company, at its option, may
substitute Units of Preferred Stock for Common Shares exchangeable for Rights,
at the initial rate of one Unit of Preferred Stock for each Common Share, as
appropriately adjusted to reflect adjustments in the voting rights of the
Preferred Shares pursuant to the terms thereof, so that the Unit of  Preferred Stock delivered in lieu of each
Common Share shall have the same voting rights as one Common Share.

 

(d)                                 In
the event that there shall not be sufficient Common Shares or Preferred Stock
authorized by the Company’s certificate of incorporation  and not outstanding or subscribed for, or
reserved or otherwise committed for issuance for purposes other than upon
exercise of Rights, to permit any exchange of Rights as contemplated in
accordance with this Section 23.5, the Company shall take all such action as
may be necessary to authorize additional Common Shares or Preferred Stock for
issuance upon exchange of the Rights.

 

(e)                                  The
Company shall not be required to issue fractions of Common Shares or to
distribute certificates which evidence fractional Common Shares. In lieu of
such fractional Common Shares, the Company shall pay to the registered holders
of the Right Certificates with regard to which such fractional Common Shares
would otherwise be issuable an amount in cash equal to the same fraction of the
current per share market value of a whole Common Share. For the purposes of
this Section 23.5(e), the current market price per share of a whole Common
Share (as determined pursuant to Section 11(d)(i) hereof) for the Trading Day
immediately prior to the date of exchange pursuant to this Section 23.5.

 

2.                                       This
Amendment is entered into pursuant to, and is subject to, the terms and
conditions of the Rights Agreement.

 

[Signature
Page Follows]

 

2

 

IN WITNESS WHEREOF, each of the parties hereto has
caused this Amendment to be executed on its behalf as of the date first above
written.

 

	
  PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED

  
	
   

  
	
  By:

  	
   John F.
  DePodesta

  	
   

  
	
   

  	
   

  
	
  Name:

  	
   John F.
  DePodesta

  	
   

  
	
   

  	
   

  
	
  Title:

  	
   Executive
  Vice President

  	
   

  
	
   

  
	
  STOCKTRANS, INC.

  
	
   

  
	
  By:

  	
   Gina M.
  Hardin

  	
   

  
	
   

  	
   

  
	
  Name:

  	
   Gina M.
  Hardin

  	
   

  
	
   

  	
   

  
	
  Title:

  	
   Vice
  President

  	
   

  
					

 

3EXHIBIT
10.1

 

 

RIGEL PHARMACEUTICALS, INC.

 

COMMON STOCK AND WARRANT PURCHASE AGREEMENT

 

APRIL 29, 2003

 

 

TABLE OF
CONTENTS

 

	
  1.

  	
  AUTHORIZATION OF SHARES AND WARRANTS

  	
  1

  
	
   

  	
   

  	
   

  
	
  2.

  	
  AGREEMENT TO SELL AND PURCHASE SHARES AND WARRANTS

  	
  1

  
	
   

  	
   

  	
   

  
	
  3.

  	
  CLOSING; DELIVERY OF SHARES AND WARRANTS

  	
  2

  
	
   

  	
   

  	
   

  
	
  4.

  	
  CONDITIONS TO COMPANY’S OBLIGATIONS

  	
  3

  
	
   

  	
   

  	
   

  
	
   

  	
  4.1

  	
  Payment

  	
  3

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.2

  	
  Representations and Warranties True and Correct

  	
  3

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.3

  	
  No Injunction or Regulatory Restraints; Illegality

  	
  3

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.4

  	
  Filing of Certificate

  	
  3

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.5

  	
  Required Stockholder Approval

  	
  3

  
	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
  CONDITIONS TO INVESTORS’ OBLIGATIONS

  	
  4

  
	
   

  	
   

  	
   

  
	
   

  	
  5.1

  	
  Representations and Warranties True and Correct

  	
  4

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.2

  	
  Compliance with Laws

  	
  4

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.3

  	
  No Injunction or Regulatory Constraints; Illegality

  	
  4

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.4

  	
  Filing of Certificate

  	
  4

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.5

  	
  Opinion of Company’s Counsel

  	
  4

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.6

  	
  Required Stockholder Approval

  	
  4

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.7

  	
  Board of Directors Designees

  	
  4

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.8

  	
  Committee Appointment

  	
  5

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.9

  	
  Investor Rights Agreement

  	
  5

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.10

  	
  Waiver of Registration Rights

  	
  5

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.11

  	
  No Material Adverse Effect

  	
  5

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.12

  	
  Executive Search

  	
  5

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.13

  	
  Covenants

  	
  5

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.14

  	
  Nasdaq Listing

  	
  6

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.15

  	
  Closing Proceeds

  	
  6

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.16

  	
  Officers’ Certificates

  	
  6

  
	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

  	
  6

  
	
   

  	
   

  	
   

  
	
   

  	
  6.1

  	
  Organization

  	
  6

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.2

  	
  Subsidiaries

  	
  6

  
	
   

  	
   

  	
   

  	
   

  

 

i

 

	
   

  	
  6.3

  	
  Due Authorization

  	
  6

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.4

  	
  Vote Required

  	
  7

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.5

  	
  Non-Contravention

  	
  7

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.6

  	
  Capitalization

  	
  8

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.7

  	
  Legal Proceedings

  	
  8

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.8

  	
  No Violations

  	
  9

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.9

  	
  Governmental Permits, Etc.

  	
  9

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.10

  	
  Intellectual Property

  	
  9

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.11

  	
  Financial Statements

  	
  10

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.12

  	
  Absence of Changes

  	
  10

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.13

  	
  Nasdaq Compliance

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.14

  	
  Reporting Status

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.15

  	
  Listing

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.16

  	
  No Manipulation of Stock

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.17

  	
  Accountants

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.18

  	
  Contracts

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.19

  	
  Taxes

  	
  12

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.20

  	
  Transfer Taxes

  	
  12

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.21

  	
  Investment Company

  	
  12

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.22

  	
  Insurance

  	
  13

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.23

  	
  DGCL 203

  	
  13

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.24

  	
  Brokers or Finders

  	
  13

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.25

  	
  Offering Materials

  	
  13

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.26

  	
  Registration Rights

  	
  14

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.27

  	
  Books and Records

  	
  14

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.28

  	
  Employee Benefit Plans; Employee Matters

  	
  14

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.29 

  	
  Environmental Laws 

  	
  14 

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.30 

  	
  Regulatory Compliance 

  	
  14 

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.31

  	
  Title to Property and Assets

  	
  15

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.32

  	
  Insider Interests; Related Party Transactions

  	
  15

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.33

  	
  Real Property Holding Corporation.

  	
  15

  
	
   

  	
   

  	
   

  	
   

  

 

ii

 

	
  7.

  	
  REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
  INVESTORS

  	
  15

  
	
   

  	
   

  	
   

  
	
   

  	
  7.1  

  	
  Investment Experience and Interest

  	
  15

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.2

  	
  Registration or Exemption Requirements

  	
  16

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.3

  	
  Foreign Jurisdictions

  	
  16

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.4

  	
  Due Authorization

  	
  16

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.5

  	
  No Legal, Tax or Investment Advice

  	
  17

  
	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
  COVENANTS

  	
  17

  
	
   

  	
   

  	
   

  
	
   

  	
  8.1

  	
  Stockholders’ Meeting

  	
  17

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.2

  	
  Filing of Proxy Statement; Amendment of Form 10-K

  	
  17

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.3

  	
  Election of Directors

  	
  18

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.4

  	
  Nasdaq Listing

  	
  18

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.5

  	
  Delivery of Warrant Shares

  	
  18

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.6

  	
  Rights Offering and Option Plan Matters

  	
  18

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.7

  	
  No Solicitation

  	
  18

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.8

  	
  Third Party Offer

  	
  20

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.9

  	
  Operation of Business

  	
  21

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.10

  	
  Reasonable Efforts; Notification; Representations

  	
  21

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.11

  	
  Indemnification Agreements; Charter Documents

  	
  21

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.12

  	
  HSR Compliance

  	
  21

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.13

  	
  Executive Recruiting Firm

  	
  21

  
	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
  TERMINATION

  	
  22

  
	
   

  	
   

  	
   

  
	
   

  	
  9.1

  	
  Termination Events

  	
  22

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.2

  	
  Effect of Termination

  	
  23

  
	
   

  	
   

  	
   

  	
   

  
	
  10.

  	
  MISCELLANEOUS

  	
  23

  
	
   

  	
   

  	
   

  
	
   

  	
  10.1

  	
  Notices

  	
  23

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.2

  	
  Amendment and Waiver

  	
  24

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.3

  	
  Survival of Representations, Warranties and
  Agreements

  	
  24

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.4

  	
  Expenses

  	
  24

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.5

  	
  Attorneys’ Fees

  	
  24

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.6

  	
  Public Announcements

  	
  25

  
	
   

  	
   

  	
   

  	
   

  

 

iii

 

	
   

  	
  10.7

  	
  Headings

  	
  25

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.8

  	
  Pronouns

  	
  25

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.9

  	
  Severability

  	
  25

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.10

  	
  Governing Law

  	
  25

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.11

  	
  Entire Agreement

  	
  25

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.12

  	
  Counterparts

  	
  25

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.13

  	
  Confidential Disclosure Agreement

  	
  26

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.14

  	
  Tax Disclosure

  	
  26

  

 

Schedule A - Schedule of Investors

Schedule B — Proposed Incentive Plan Amendments

Exhibit A — Form of Warrant

Exhibit B — Stock Certificate and Warrant Questionnaire

Exhibit C — Amended and Restated Certificate of Incorporation

Exhibit D — Form of Legal Opinion

Exhibit E — Form of Second Investor Rights Agreement

Exhibit F — Officer’s Certificate

Exhibit G — Secretary’s Certificate

Exhibit H — Form of Voting Agreement

 

 

iv

 

RIGEL PHARMACEUTICALS, INC.

 

COMMON STOCK AND WARRANT PURCHASE AGREEMENT

 

This
Common Stock and Warrant Purchase Agreement (the “Agreement”) is made as of April 29, 2003 by and among Rigel Pharmaceuticals, Inc., a Delaware corporation (the “Company”), and each of the parties set forth on Schedule A attached hereto (each, an “Investor” and, collectively, the “Investors”).

 

Recitals

 

A.                                   The Company desires to sell, and the
Investors desire to purchase, the Shares and the Warrants (each as defined
below) pursuant to the terms set forth in this Agreement.

 

B.                                     In order to induce the Investors to enter
into this Agreement, certain stockholders of the Company are executing voting
agreements in favor of the Investors.

 

Agreement

 

1.                                       Authorization of
Shares and Warrants.  Subject
to the terms and conditions of this Agreement, the Company, as of the Closing
Date (as defined in Section 3.1), will have authorized (a) the sale and
issuance of 71,874,999 shares (the “Shares”) of the Company’s common stock, par
value $0.001 per share (the “Common Stock”), and the Warrants (as defined in Section
2.1(b)) (the “Offering”)
and (b) the reservation of the shares of Common Stock into which the Warrants
are exercisable (the “Warrant
Shares”).

 

2.                                       Agreement
to Sell and Purchase Shares and Warrants.

 

2.1                                 Subject
to the terms and conditions of this Agreement, each Investor agrees, severally
and not jointly, to purchase at the Closing (as defined in Section 3.1), and
the Company agrees to sell and issue to each Investor, severally and not
jointly, at the Closing:

 

(a)                                  that
number of Shares determined by dividing (i) the dollar amount set forth
opposite such Investor’s name on Schedule A hereto (the “Aggregate Purchase Price”)
by (ii) the per share purchase price of $0.64 (the “Purchase Price”),
rounded down to the nearest whole number of Shares; and

 

(b)                                 a
warrant, in the form attached hereto as Exhibit A, exercisable for that number of
Warrant Shares equal to twenty percent (20%) of the Shares purchased by such
Investor pursuant to Section 2.1(a) above, at a price per share exercise price
equal to the Purchase Price, as set forth opposite such Investor’s name on Schedule A hereto
(each, a “Warrant”
and, collectively, the “Warrants”).

 

2.2                                 The
number of Shares to be purchased by the Investors at the Closing pursuant to
Section 2.1(a), the Purchase Price applicable to such Shares and the per

 

 

share exercise price and
number of underlying shares of Common Stock attributable to the Warrants shall
be proportionately adjusted for any subdivision or combination of Common Stock
(by stock split, reverse stock split, dividend, reorganization,
recapitalization or otherwise, including, but not limited to, the Reverse Stock
Split (as defined in Section 4.4)).

 

3.                                       Closing;
Delivery of Shares and Warrants.

 

3.1                                 The
closing of the purchase and sale of the Shares and the Warrants pursuant to
this Agreement (the “Closing”)
shall take place at 10:00 a.m. at the offices of Cooley Godward LLP, 3175
Hanover Street, Palo Alto, California on the second (2nd) business
day (the “Closing Date”)
after satisfaction in full of the closing conditions set forth in Sections 4
and 5 herein that by their terms are not to occur at the Closing, or waiver of
any such closing conditions pursuant to the terms therein, or at such other
time and place as may be agreed to by the Company and the Investors
representing a majority of the total Aggregate Purchase Prices paid by all
Investors (a “Majority
in Interest of the Investors”). 
At the Closing, each Investor shall deliver, in immediately available
funds, the Aggregate Purchase Price by wire transfer to an account designated
by the Company.  As soon as reasonably
practicable, but in no event later than five (5) business days after the
Closing, the Company shall deliver to each Investor, against payment therefor,
one or more stock certificates representing the number of Shares set forth on Schedule A hereto and
one or more Warrants to purchase the number of Warrant Shares set forth on Schedule A hereto,
each such certificate and Warrant to be dated as of the Closing Date and to be
registered in the name of the Investor or, if so indicated on the Stock
Certificate and Warrant Questionnaire attached hereto as Exhibit B, in the name of a nominee
designated by such Investor.

 

3.2                                 All
certificates representing the Shares and the Warrant Shares shall bear the
following legends:

 

(a)                                  “THE
SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“ACT”).  SUCH SHARES MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF REGISTRATION OR AN EXEMPTION THEREFROM. RIGEL
PHARMACEUTICALS, INC. MAY REQUIRE AN OPINION OF COUNSEL REASONABLY ACCEPTABLE
TO IT THAT A PROPOSED TRANSFER OR SALE IS IN COMPLIANCE WITH THE ACT.”

 

(b)                                 “THE
SALE, TRANSFER OR VOTING OF THE SHARES REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED BY THE TERMS OF A SECOND INVESTOR RIGHTS AGREEMENT BY AND AMONG
RIGEL PHARMACEUTICALS, INC. AND THE INVESTORS NAMED THEREIN. COPIES OF THE
AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDERS OF
RECORD OF THIS CERTIFICATE TO THE SECRETARY OF RIGEL PHARMACEUTICALS, INC. AT
THE PRINCIPAL EXECUTIVE OFFICES OF RIGEL PHARMACEUTICALS, INC.”

 

2

 

(c)                                  The
certificates representing the Shares and Warrant Shares will be subject to a
stop transfer order with the Company’s transfer agent that restricts the
transfer of such shares except in compliance with this Agreement.

 

(d)                                 The
Company acknowledges and agrees that an opinion of counsel shall not be
required upon the transfer by an Investor of any securities to an “Affiliate” (as
defined in Rule 12b-2 of the rules and regulations promulgated under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”)) of such Investor, including,
but not limited to, a member, retired member, partner, retired partner or
affiliated venture capital fund of such Investor.

 

4.                                       Conditions to
Company’s Obligations.  The Company’s obligation
to issue Shares and Warrants to each Investor at the Closing shall be subject
to the fulfillment on or prior to the Closing of the following conditions, any
one or more of which may be waived in whole or in part by the written consent
of the Company:

 

4.1                                 Payment. 
The Company shall have received the Aggregate Purchase
Price.

 

4.2                                 Representations and Warranties True and
Correct.  The
representations and warranties made by such Investor in Section 7 hereof shall
be true and correct in all material respects as of the date hereof and the
Closing Date with the same force and effect as if they had been made as of the
Closing Date.

 

4.3                                 No Injunction or Regulatory Restraints;
Illegality.  No temporary restraining order, preliminary
or permanent injunction or other order issued by any court of competent
jurisdiction or governmental entity or other legal or regulatory restraint or
prohibition preventing the consummation of the transactions contemplated hereby
shall be in effect; nor shall there be any action taken by any court of
competent jurisdiction or governmental entity, or any law or order enacted,
entered, enforced or deemed applicable to the transactions contemplated hereby
by any court of competent jurisdiction or governmental entity, that would
prohibit their consummation.

 

4.4                                 Filing of Certificate. 
The Company shall have filed with the Secretary of State of the State of
Delaware the Amended and Restated Certificate of Incorporation, in
substantially the form attached hereto as Exhibit C (the “Certificate”), to (a) effect a reverse
stock split of the outstanding Common Stock within the range of 1-for-5 to
1-for-15 as mutually agreed upon by the board of directors of the Company (the
“Board of Directors”)
and a Majority in Interest of the Investors (the “Reverse Stock Split”) and (b) to effect
any other changes to the Company’s certificate of incorporation as are
necessary to complete the transactions contemplated hereby, including, but not
limited to, potentially increasing the number of authorized shares of Common
Stock of the Company.

 

4.5                                 Required Stockholder Approval. 
The Company shall have obtained the Required Stockholder Approval (as
defined in Section 6.4).

 

5.                                       Conditions to
Investors’ Obligations.  Each Investor’s obligation to
purchase Shares and Warrants at the Closing shall be subject to the fulfillment
on or prior to the

 

3

 

Closing of the following
conditions, any one or more of which may be waived in whole or in part, subject
to Section 10.2, by the written consent of a Majority in Interest of the Investors:

 

5.1                                 Representations and Warranties True and
Correct.  The representations and warranties made by
the Company in Section 6 hereof shall be true and correct as of the date hereof
and the Closing Date with the same force and effect as if they had been made as
of the Closing Date, except as otherwise contemplated by this Agreement and
except (a) in each case, or in the aggregate, as does not constitute a Material
Adverse Effect on the Company (as defined in Section 5.11) and (b) for those
representations and warranties that address matters only as of a particular
date, which shall be true and correct (subject to the qualification set forth
in the preceding clause (a)) as of such date.

 

5.2                                 Compliance with Laws. 
The purchase of the Shares and Warrants by each Investor hereunder shall
be legally permitted by all laws and regulations to which the Company is
subject (including all applicable federal, state and foreign securities laws).

 

5.3                                 No Injunction or Regulatory Constraints;
Illegality.  No temporary restraining order, preliminary
or permanent injunction or other order issued by any court of competent
jurisdiction or governmental entity or other legal or regulatory restraint or
prohibition preventing the consummation of the transactions contemplated hereby
shall be in effect; nor shall there be any action taken by any court of
competent jurisdiction or governmental entity, or any law or order enacted,
entered, enforced or deemed applicable to the transactions contemplated hereby
by any court of competent jurisdiction or governmental entity, that would
prohibit their consummation.

 

5.4                                 Filing of Certificate. 
The Company shall have filed with the Secretary of State of the State of
Delaware the Certificate to (a) effect the Reverse Stock Split and (b) effect
any other changes to the Company’s certificate of incorporation as are
necessary to complete the transactions contemplated hereby, including, but not
limited to, potentially increasing the number of authorized shares of Common
Stock of the Company.

 

5.5                                 Opinion of Company’s Counsel. 
The Investors shall have received a legal opinion of Cooley Godward llp, counsel for the Company, in
substantially the form attached hereto as Exhibit D.

 

5.6                                 Required Stockholder Approval. 
The Company shall have obtained the Required Stockholder Approval.

 

5.7                                 Board
of Directors Designees.  The Board
of Directors (which shall have nine (9) members as of the Closing) shall have
appointed, effective as of the Closing, Nick Simon and Dennis Henner (the “MPM Representatives”)
as designees of MPM BioVentures III,
L.P. or its affiliates (“MPM Capital”) to serve on the Board of Directors as
Class II and Class III directors (as defined in the Company’s
Certificate).  In addition, the Board of
Directors shall have appointed, effective as of the Closing, one (1) MPM
Representative as a member of the compensation committee of the Board of
Directors and one (1) MPM Representative as a member of the nominating
committee of the Board of Directors, and all such appointments shall be in full
force and effect.

 

4

 

5.8                                 Committee Appointment. 
Kazumi Shiosaki, Ph.D., representing MPM Capital, shall have been
appointed to the Company’s drug development committee (or similar committee as
appropriate) to serve until a senior executive officer in the area of drug
development, which individual shall have extensive small molecule experience
and expertise, has been appointed by the Board of Directors.

 

5.9                                 Investor Rights Agreement. 
The parties hereto shall have entered into that certain Second Investor
Rights Agreement in substantially the form attached hereto as Exhibit E (the “Investor Rights Agreement,”
and together with this Agreement, the “Agreements”).

 

5.10                           Waiver
of Registration Rights.  The Prior Rights
Holders (as defined in the Investor Rights Agreement) shall have waived any
applicable registration rights held by them in connection with the filing of
any registration statement on behalf of the Investors pursuant to Sections 2.1
and 2.4 of the Investor Rights Agreement.

 

5.11                           No Material Adverse Effect. 
There shall have been no Material Adverse Effect on the Company between
the date of the execution of this Agreement and the Closing Date.  For the purposes of this Agreement, a “Material Adverse Effect”
on the Company shall mean an event, change or occurrence that individually, or
together with any other event, change or occurrence, has had a material adverse
impact on the Company’s financial position, business, properties, assets,
liabilities (absolute, accrued or contingent), prospects or results of
operations; provided, however,
that none of the direct effects of any of the following (individually or in
combination) shall be deemed to constitute, or shall be taken into account in
determining whether there has been, a Material Adverse Effect on the
Company:  (a) changes in generally
accepted accounting practices, (b) historically experienced seasonal
fluctuations in the Company’s performance, (c) changes in worldwide general
business or economic conditions affecting the industries in which the Company
participates, (d) changes in conditions generally affecting the biotechnology
industry, (e) the announcement or pendency of any of the transactions
contemplated by this Agreement, (f) the taking of any action required by this
Agreement and (g) expenditures by the Company in the ordinary course of
business consistent with past practices and reasonable expenditures by the
Company in connection with the transactions contemplated by this Agreement.

 

5.12                           Executive Search. 
The Company shall have initiated a search for and shall have diligently
pursued the hiring of a senior executive officer in the area of drug
development, which individual shall have extensive small molecule development
experience and expertise and be acceptable to the Board of Directors.

 

5.13                           Covenants.  Each covenant and agreement contained in
this Agreement to be performed by the Company on or prior to the Closing shall
have been performed or complied with in all material respects.

 

5.14                           Nasdaq Listing.  The Company shall (a) have filed a listing
application with the Nasdaq National Market (“Nasdaq”) for the Shares and the Warrant
Shares, (b) continue to have its shares of Common Stock listed for trading on
Nasdaq and (c) have not been notified by Nasdaq of any action or potential
action by Nasdaq or of any violation of any

 

5

 

Nasdaq rule that could
result in the delisting of the Company’s Common Stock from Nasdaq, except as
otherwise described in Section 6.13 of the Company’s Disclosure Schedule.

 

5.15                           Closing Proceeds.  The Company shall have raised at least
$40,000,000 from the Investors pursuant to this Agreement; provided, however, that, notwithstanding
Section 10.2, this condition may be waived solely by MPM Capital.

 

5.16                           Officers’ Certificates. 
The Company shall have delivered to the Investors a certificate, dated
as of the Closing Date and executed by the chief executive officer of the
Company, and a certificate, dated as of the Closing Date and executed by the
secretary of the Company, in the forms attached hereto as Exhibits F and G,  respectively.

 

6.                                       Representations and Warranties of the
Company.  Except
as otherwise described in the Company’s Disclosure Schedule, and except as expressly
contemplated herein or thereby, the Company hereby represents and warrants to
each Investor as follows:

 

6.1                                 Organization.  The Company is duly incorporated
and validly existing in good standing under the laws of the State of Delaware.
The Company has full power and authority to own, operate and occupy its
properties and to conduct its business as presently conducted and is registered
or qualified to do business and is in good standing in each jurisdiction in
which it owns or leases property or transacts business and where the failure to
be so qualified would have a Material Adverse Effect on the Company, and, to
the Company’s knowledge (as defined below), no proceeding has been instituted
in any such jurisdiction revoking, limiting or curtailing, or seeking to
revoke, limit or curtail, such power and authority or qualification.  For
purposes of this Agreement, the term “knowledge” (including any derivation thereof
such as “know”
or “knowing”
and regardless of whether such word starts with an initial capital) in
reference to the Company shall mean the actual knowledge of the Company’s
executive officers.

 

6.2                                 Subsidiaries.  The Company does not own
or control any equity security or other interest of any other corporation,
partnership or other business entity. 
Since its inception, the Company has not consolidated or merged with,
acquired all or substantially all of the assets of, or acquired the stock of or
any interest in any corporation, partnership or other business entity.

 

6.3                                 Due
Authorization.  The
Company has all requisite corporate power and authority to execute, deliver and
perform its obligations under the Agreements and Warrants, and the Agreements
and Warrants have been duly authorized and validly executed and delivered by
the Company and, except for obtaining Stockholder Approval, no other corporate
action on the part of the Company or its stockholders is necessary to authorize
the execution and delivery by the Company of the Agreements or the Warrants or
the consummation by it of the Offering. 
The Agreements and Warrants, assuming due and valid authorization,
execution and delivery hereof and thereof by the Investors, constitute legal,
valid and binding agreements of the Company, enforceable against the Company in
accordance with their terms, except as rights to indemnity and contribution may
be limited by state or federal securities laws or the public policy underlying
such laws, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors’ and
contracting

 

6

 

parties’ rights
generally, and except as enforceability may be subject to general principles of
equity (regardless of whether such enforceability is considered in a proceeding
in equity or at law).

 

6.4                                 Vote Required.  The only votes of the holders of any class
or series of the Company’s capital stock necessary to approve the Offering and
the other transactions contemplated by this Agreement (the “Stockholder Approval”)
are (a) the affirmative vote of the majority of shares of Common Stock present
in person or represented by proxy at the Stockholders’ Meeting (as defined in
Section 8.1) and entitled to vote to approve the Offering (the “Required Nasdaq Approval”),
(b) the affirmative vote of at least sixty-six and two-thirds percent (66 2/3%)
of the outstanding shares of Common Stock entitled to vote to approve the
Certificate and resulting Reverse Stock Split and, if necessary to complete the
transactions contemplated hereby, an increase in the number of authorized
shares of Common Stock (the “Reverse Split Stockholder Approval” and, together with
the Required Nasdaq Approval, the “Required Stockholder Approval”), (c) the
affirmative vote of the majority of the shares of Common Stock present in
person or represented by proxy at the Stockholders’ Meeting and entitled to
vote to approve the amendments to the Company’s 2000 Equity Incentive Plan,
2000 Non-Employee Directors’ Stock Option Plan and 2000 Employee Stock Purchase
Plan to, among other things, increase the number of shares reserved for
issuance under each such plan, as set forth on Schedule B  attached hereto (the “Plan Amendments”) and (d) the affirmative
vote of the majority of the outstanding shares of Common Stock entitled to vote
to approve the repricing, in the discretion of the Board of Directors and the
reasonable discretion of a Majority in Interest of the Investors, of all
options to purchase Common Stock issued pursuant to the Company’s 2000 Equity
Incentive Plan, 2001 Non-Officer Equity Incentive Plan and 2000 Non-Employee
Directors’ Stock Option Plan outstanding as of the Closing (the “Repricing”).

 

6.5                                 Non-Contravention.  The execution and delivery of the
Agreements, the issuance and sale of the Shares and the Warrants, the issuance
of the Warrant Shares and the consummation of the transactions contemplated
thereby will not (a) conflict with or constitute a violation of or default
(with the passage of time or otherwise) or give rise to any right of
termination, material amendment, cancellation or acceleration or loss of any
material rights under (i) any material contracts to which the Company is a
party and that are filed as exhibits to the Company’s annual report on Form
10-K for the year ended December 31, 2002 and any Current Reports on Form 8-K
or Quarterly Reports on Form 10-Q filed subsequent thereto with the Securities
and Exchange Commission (the “SEC”) by the Company (the “SEC Documents”) (such contracts, the “Material Contracts”),
(ii) the certificate of incorporation or the bylaws of the Company or any
similar organizational document of the Company or (iii) any law, administrative
regulation ordinance, writ, injunction, decree or order of any court or
governmental agency, arbitration panel or authority binding upon the Company or
its property, where such conflict, violation or default would result in a
Material Adverse Effect on the Company or (b) result in the creation or
imposition (or the obligation to create or impose) of any material lien,
encumbrance, claim, security interest, pledge, charge or restriction of any
kind upon any of the properties or assets of the Company or an acceleration of
indebtedness pursuant to any obligation, agreement or condition contained in
any Material Contract.  No consent,
approval, authorization or other order of, or registration, qualification or
filing with, any regulatory body, administrative agency or other governmental
body in the United States is required for the execution and delivery of the
Agreements and the Warrants and the valid

 

7

 

issuance and sale of the
Shares and the Warrants to be sold pursuant to this Agreement, other than such
as have been made or obtained or will be made or obtained pursuant to the
Nasdaq Marketplace Rules (the “Nasdaq Rules”) prior to the Closing and except for any
securities filings required to be made under state securities laws.

 

6.6                                 Capitalization.  As of the date of this Agreement, the authorized capital stock of
the Company consists of 100,000,000 shares of Common Stock and 10,000,000
shares of preferred stock, par value $0.001 per share. As of the date of this Agreement, (a) 46,376,004 shares of Common Stock are issued and
outstanding, (b) 45,731 shares of Common Stock are issued and held in the
treasury of the Company, (c) no shares of preferred stock are designated as
Preferred Stock, (d) 10,327,905 shares of Common Stock are reserved for
issuance upon exercise of options to purchase the Common Stock under the Company’s
stock option plans and employee stock purchase plan and (e) 1,149,615 shares of
Common Stock have been reserved for issuance upon the exercise of warrants to
purchase Common Stock.  The Shares and the
Warrants to be sold pursuant to this Agreement and the Warrant Shares have been
duly authorized, and when issued and paid for in accordance with the terms of
this Agreement and the Warrants, will be duly and validly issued, fully paid
and nonassessable.  The outstanding
shares of capital stock of the Company have been duly and validly issued and
are fully paid and nonassessable, have been issued in compliance with all
federal, state and foreign securities laws and were not issued in violation of
any preemptive rights or similar rights to subscribe for or purchase
securities.  Except as set forth in or
contemplated by the Agreements and the Warrants, there are no outstanding
rights (including, without limitation, preemptive rights), warrants or options
to acquire, or instruments convertible into or exchangeable for, any unissued
shares of capital stock or other equity interest in the Company, or any
contract, commitment, agreement, understanding or arrangement of any kind to
which the Company is a party and relating to the issuance or sale of any
capital stock of the Company, any such convertible or exchangeable securities
or any such rights, warrants or options. 
Without limiting the foregoing, no preemptive right, co-sale right,
right of first refusal or other similar right exists with respect to the
issuance and sale of the Shares and the Warrants or the issuance of the Warrant
Shares.  Other than Voting Agreements
substantially in the form attached hereto as Exhibit H, there are no stockholder
agreements, voting agreements or other similar agreements with respect to the
Common Stock to which the Company is a party.

 

6.7                                 Legal
Proceedings.  There is no material action, suit or
governmental proceeding pending or, to the knowledge of the Company, threatened
against or involving the Company or any of its properties or other assets or
which questions the validity of this Agreement or any action taken or to be
taken by the Company pursuant to the Agreements or in connection with the
transactions contemplated hereby.  There
is no fact or circumstance known to the Company that would reasonably be
expected to give rise to any material action, suit, proceeding, inquiry or investigation against, relating to
or affecting the Company or any of its properties or other assets.  The Company is not subject to any judgment,
order or decree that materially restricts its business practices or its ability
to acquire any property or conduct its business in any area.

 

6.8                                 No
Violations.  The Company is not in violation of its
certificate of incorporation or its bylaws or, to the knowledge of the Company,
in material violation of any law, administrative regulation, ordinance or order
of any court or governmental agency,

 

8

 

arbitration panel or
authority applicable to the Company, and is not in default (and there exists no
condition which, with the passage of time or otherwise, would constitute a
default) in the performance of any Material Contract.  No notice, charge, claim, action or assertion has been received
by the Company alleging such a violation or default.

 

6.9                                 Governmental
Permits, Etc.  The Company has all
necessary franchises, licenses, certificates and other authorizations from any
foreign, federal, state or local government or governmental agency, department
or body that are currently necessary for the operation of the business of the
Company as currently conducted, except where the failure to currently possess
such items would not have a Material Adverse Effect on the Company.  The Company has not received any notice of
proceedings relating to the revocation or modification of, or non-compliance
with, any such certificate, authorization or permit.

 

6.10                           Intellectual Property. 
The Company owns or possesses and holds valid and sufficient rights to
use all patents, patent rights or licenses, inventions, collaborative research
agreements, trade secrets, know-how, trademarks, service marks, trade names and
copyrights that are necessary to conduct its business as currently conducted
and as proposed to be conducted in all material respects.  The expiration of any patents, patent
rights, trade secrets, trademarks, service marks, trade names or copyrights, or
termination or expiration of any exclusive licenses thereto, would not,
individually or in the aggregate, result in a Material Adverse Effect on the
Company.  The Company has not received
any notice of, and has no knowledge of, any infringement of or conflict with
rights of the Company by others with respect to any patent, patent rights,
inventions, trade secrets, know-how, trademarks, service marks, trade names or
copyrights; and the Company has not received any notice of, and has no
knowledge of, any infringement of or conflict with rights of others with
respect to any patent, patent rights, inventions, trade secrets, know-how, trademarks,
service marks, trade names or copyrights of or exclusively licensed to the
Company.  There is no claim being made
against the Company regarding patents, patent rights or licenses, inventions,
collaborative research, trade secrets, know-how, trademarks, service marks,
trade names or copyrights.  The Company
does not, in the conduct of its business, infringe or conflict with any right
or patent of any third party, or any discovery, invention, product or process
that is the subject of a patent application filed by any third party, known to
the Company.  The Company has taken
reasonable steps to protect the material intellectual property of the
Company.  The execution, delivery and
performance by the Company of this Agreement, and the consummation of the transactions contemplated hereby, will not
result in the loss or impairment of, or give rise to any right of any third
party to terminate or materially alter, any of the Company’s material rights to
own any of its intellectual property or its material rights under any
agreements relating to such intellectual property, nor require the consent of
any governmental authority or third party in respect of any such intellectual
property.

 

6.11                           Financial
Statements.  The financial
statements of the Company and the related notes contained in the Company’s SEC
Documents have been prepared from and are in accordance with the books and
records of the Company and present fairly, in accordance with United States
generally accepted accounting principles (“GAAP”), the financial position of the Company
as of the dates indicated, and the results of its operations and cash flows for
the periods therein specified.  Such
financial statements (including the related notes) have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
therein

 

9

 

specified and have
complied, as of their respective dates, in all material respects with the
applicable accounting requirements and rules and regulations of the SEC.  The Company has not created any entities or entered into any
transactions or created any liabilities or obligations of any nature, whether
or not accrued, contingent or otherwise, for the purpose of avoiding disclosure
required by GAAP.

 

6.12                           Absence
of Changes.   Since December 31, 2002, there has not
been (a) any Material Adverse Effect on the Company, (b) any material
obligation, direct or contingent, incurred by the Company, except obligations
incurred in the ordinary course of business, (c) any dividend or distribution
of any kind declared, paid or made on the capital stock of the Company, (d) any
loss or damage (whether or not insured) to the physical property of the Company
which has had a Material Adverse Effect on the Company, (e) any change in any
method of tax or GAAP or accounting practice that would or would reasonably be
expected to result in any material change in the financial statements, (f) any
payment, loan or advance of any amount to, or sale, transfer or lease of any
material properties or assets (real, personal or mixed, tangible or intangible)
to, or any agreement or arrangement with, any executive officer or directors or
employees of the Company, except such amounts or such agreements made in the
ordinary course of business, (g) any amendment to the Company’s certificate of
incorporation, bylaws or similar organizational documents, (h) any issuance,
sale, transfer, pledge, disposal of or encumbrance of any shares of any class
or series of the Company’s capital stock, or securities convertible into or
exchangeable for, or options, warrants, calls, commitments or rights of any
kind to acquire, any shares of any class or series of its capital stock, other
than shares of Common Stock reserved
for issuance on the date of this Agreement pursuant to the Company’s stock
option plans and employee stock purchase plan, the exercise of any options or
warrants to purchase Common Stock outstanding on the date of this Agreement or
existing agreements that require the Company to issue shares of Common Stock,
(i) any redemption, purchase or other acquisition directly or indirectly of any
shares of any class or series of the Company’s capital stock, or any instrument
or security which consists of or includes a right to acquire such shares (other
than repurchases of restricted stock at the original purchase price pursuant to
agreements outstanding on the date of this Agreement or entered into after the
date of this Agreement in compliance with the provisions hereof), (j) except in
the ordinary course of business and consistent with past practice or pursuant
to the terms of its Material Contracts as in effect on the date hereof, any
termination, modification or amendment to any of its Material Contracts or any
waiver, release or assignment of any material rights under any Material
Contract or material claims, (k) any revaluation in any material respect any of
its assets, including any writing down of the value of inventory or writing-off
of notes or accounts receivable, other than in the ordinary course of business
consistent with past practice or as required by GAAP, (l) any settlement or compromise of any
pending or threatened suit, action or claim that relates to the transactions
contemplated hereby or is material to the Company, (m) any adoption of a plan
of complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization of the Company or (n)
any agreement, whether in writing or otherwise, to take any action described in
this Section 6.12.

 

6.13                           Nasdaq
Compliance.  The Company’s Common
Stock is registered pursuant to Section 12(g) of the Exchange Act and is listed
on Nasdaq, and the Company has taken no action designed to, or likely to have
the effect of, terminating the registration of the Common Stock under the
Exchange Act or delisting the Common Stock from Nasdaq.  The

 

10

 

Company has not been
notified by Nasdaq of any action or potential action by Nasdaq or of any
violation of any Nasdaq Rules that could result in the delisting of the
Company’s Common Stock from Nasdaq.

 

6.14                           Reporting
Status.  The Company has filed
in a timely manner all documents that the Company was required to file under
the Exchange Act and the Nasdaq Rules during the twelve (12) months preceding
the date of this Agreement.  The Company
has delivered to the Investors a copy of all SEC Documents filed within the ten
(10) days preceding the date hereof. 
The SEC Documents complied in all material respects with the requirements
of the Securities Act of 1933, as amended (the “Securities Act”), and the Exchange Act
and the rules and regulations of the SEC promulgated thereunder as of their
respective filing dates, and none of the SEC Documents, including any financial
statements or schedules included or incorporated by reference therein, when
filed, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.  The Chief Executive
Officer and the Chief Financial Officer of the Company have signed, and the Company has furnished to the
SEC, all certifications required by Sections 302 and 906 of the Sarbanes-Oxley
Act of 2002 (the “Certifications”).  Such Certifications contain no
qualifications or exceptions to the matters certified therein and have not been
modified or withdrawn, and neither the Company nor any of it officers has
received notice from any governmental entity questioning or challenging the
accuracy, completeness, content, form or manner of filing or submission of such
Certifications.

 

6.15                           Listing.  The Company shall comply with all
requirements of the National Association of Securities Dealers, Inc. with
respect to the issuance of the Shares and the Warrants and the listing of the
underlying Common Stock on Nasdaq.

 

6.16                           No
Manipulation of Stock.  The
Company has not taken and will not take any action outside the ordinary course
of business designed to or that might reasonably be expected to cause or result
in unlawful manipulation of the price of the Common Stock to facilitate the
sale or resale of the Shares and the Warrants.

 

6.17                           Accountants.  Ernst & Young LLP, which expressed its
opinion with respect to the financial statements included in the Company’s
Annual Report on Form 10-K for the year ended December 31, 2002, are
independent accountants as required by the Securities Act and the rules and
regulations promulgated thereunder.

 

6.18                           Contracts.

 

(a)                                  Except
for the Material Contracts, the Company does not have any agreements, contracts
and commitments not made in the ordinary course of business that are material
to the Company.

 

(b)                                 The
Company does not have any employment agreements, or any other similar
agreements that contain any severance or termination pay liabilities or
obligations, that are not filed as exhibits to the SEC Documents.

 

11

 

(c)                                  No
purchase contract or commitment of the Company continues for a period of more
than twelve (12) months or is in excess of the normal, ordinary and usual
requirements of business.

 

(d)                                 The
Company is not in default under or in material violation of, nor to the
Company’s knowledge, is there any valid basis for any claim of default, under
or material violation of, any Material Contract.

 

(e)                                  The
Company does not have any debt obligations for borrowed money, including any
guarantee of or agreement to acquire any such debt obligation of others, or any
power of attorney outstanding or any obligation or liability (whether absolute,
accrued, contingent or otherwise) as guarantor, surety, co-signer, endorser,
co-maker, indemnitor or otherwise with respect to the obligation of any
corporation, partnership, joint venture, association, organization or other
entity.

 

(f)                                    All
agreements, contracts and commitments required to be filed by the Company under
the Exchange Act or the Securities Act have been filed in a timely manner with
the SEC.

 

(g)                                 The
Company is not materially restricted by agreement from carrying on its business
anywhere in the world.

 

6.19                           Taxes.  The Company has duly and timely filed all
necessary federal, state and foreign income and franchise tax returns and has
paid or accrued all taxes shown as due thereon, and the Company has no
knowledge of a tax deficiency which has been or might be asserted or threatened
against it which would have a Material Adverse Effect on the Company.

 

6.20                           Transfer
Taxes.  On the Closing Date, all
stock transfer or other taxes (other than income taxes) which are required to
be paid in connection with the sale and transfer of the Shares and the Warrants
to be sold to the Investors hereunder will be, or will have been, fully paid or
provided for by the Company and all laws imposing such taxes will be or will
have been fully complied with.

 

6.21                           Investment
Company.  The Company is not an
“investment company” or an “affiliated person” of, or “promoter” or “principal
underwriter” for, an investment company, within the meaning of the Investment
Company Act of 1940, as amended.

 

6.22                           Insurance.  The Company maintains and will continue to
maintain insurance of the types and in the amounts that the Company reasonably
believes is adequate for its business, including, but not limited to, insurance
against theft, damage, destruction, acts of vandalism and all other risks
customarily insured against by similarly situated companies, all of which
insurance is in full force and effect.

 

6.23                           DGCL 203.  Prior to the date of
this Agreement, the Board of Directors, at a meeting duly called and held, has
(a) determined that the Agreement and the Offering are fair to, advisable and
in the best interests of the Company and the stockholders of the Company, (b)
approved the Offering and (c) resolved to recommend that the stockholders of

 

12

 

the Company approve the
Offering.  The action taken by the Board
of Directors constitutes approval of the Offering under the provisions of
Section 203 of the Delaware General Corporation Law (“DGCL”) such that
Section 203 of the DGCL does not apply to this Agreement or the Offering, and
such approval has not been amended, rescinded or modified.  No other state takeover, antitakeover,
moratorium, fair price, interested stockholder, business combination or similar
statute or rule is applicable to the Offering. 
If any state takeover statute other than Section 203 of the DGCL becomes
or is deemed to become applicable to this Agreement or the Offering, the Company
shall take all reasonable action necessary to render such statute inapplicable
to all of the foregoing.

 

6.24                           Brokers
or Finders. No agent, broker, investment banker, financial advisor or other
firm or entity is or will be entitled to any broker’s or finder’s fee or any
other commission or similar fee payable by the Company in connection with the
Offering, except for amounts paid or payable to Houlihan Lokey Howard & Zukin (the “Financial Advisor”).  The Company has no liabilities or
obligations (absolute, accrued, contingent or otherwise) to the Financial
Advisor except as set forth in the engagement letter between the Company and
the Financial Advisor, which letter has been provided to the Investors.

 

6.25                           Offering
Materials.  The Company has not distributed
and will not distribute prior to the Closing Date any offering material in
connection with the offering and sale of the Shares and the Warrants.  The Company has not issued, offered or sold
any shares of Common Stock (including for this purpose any securities of the same or a similar class as the Shares or
the Warrant Shares or any securities convertible into or exchangeable or
exercisable for the Shares or the Warrant Shares) within the six (6) month
period preceding the date hereof or taken any other action, or failed to take
any action, that, in any such case, would (i) eliminate the availability of the
exemption from registration under Regulation D under the Securities Act in
connection with the offer and sale of the Shares and the Warrants as contemplated
hereby or (ii) cause the offering of the Shares and the Warrants pursuant to
this Agreement to be integrated with prior offerings by the Company for
purposes of the Securities Act.  The
Company shall not directly or indirectly take, and shall not permit any of its
directors, or officers indirectly to take, any action (including any offering
or sale to any person or entity of the Shares, the Warrants or any Common
Stock) that will make unavailable the exemption from registration under the
Securities Act being relied upon by the Company for the offer and sale to the
Investors of the Shares and the Warrants as contemplated by this Agreement,
including the filing of a registration statement under the Securities Act.  No form of general solicitation or
advertising within the meaning of Rule 502(c) under the Securities Act has been
used or authorized by the Company or any of its officers or directors in
connection with the offer or sale of the Shares or the Warrants as contemplated
by this Agreement or any other agreement to which the Company is a party.

 

6.26                           Registration
Rights. There are no registration or other similar rights to have any
securities registered under any registration statement to be filed on behalf of
the Investors pursuant to Sections 2.1 and 2.4 of the Investor Rights Agreement
and no other registration rights exist with respect to the issuance or
registration of the Shares and the Warrant Shares by the Company under the
Securities Act that have not been satisfied or waived.

 

6.27                           Books
and Records. The books of account, minute books, stock record books and
other records of the Company are complete and correct in all material respects

 

13

 

and have been maintained
in accordance with sound business practices and the requirements of Section
13(b)(2) of the Exchange Act, including an adequate system of internal
controls. The minute books of the Company contain accurate and complete records
of all meetings held of, and corporate action taken by, the stockholders, the
Board of Directors and committees of the Board of Directors, and no meeting of
any of such stockholders, the Board of Directors or such committees has been
held for which minutes have not been prepared and are not contained in such
minute books.

 

6.28                           Employee
Benefit Plans; Employee Matters.  The consummation of the transactions
contemplated by this Agreement will not, alone or in conjunction with any other
possible event (including termination of employment) (i) entitle any current or
former employee or other service provider of the Company to severance benefits
or any other payment, compensation or benefit (including forgiveness of
indebtedness), except as expressly provided by this Agreement or (ii)
accelerate the time of payment or vesting, or increase the amount of
compensation or benefit due any such employee or service provider, alone or in
conjunction with any other possible event (including termination of
employment).  The Company is in
compliance in all material respects with all currently applicable laws and
regulations respecting employment, discrimination in employment, terms and
conditions of employment, wages, hours and occupational safety and health and
employment practices, and is not engaged in any unfair labor practice.  To the Company’s knowledge, no employees of
the Company are in violation of any term of any material employment contract,
patent disclosure agreement, noncompetition agreement or any restrictive
covenant to a former employer relating to the right of any such employee to be
employed by the Company because of the nature of the business conducted or
presently proposed to be conducted by the Company or to the use of trade
secrets or proprietary information of
others. No key employee of the Company has given written notice to the Company
and, to the Company’s knowledge, no key employee intends to terminate his or
her employment with the Company.

 

6.29                           Environmental
Laws.  The Company is not in
violation of any applicable statute, law or regulation relating to the
environment or occupational health and safety, and no material expenditures are
or will be required in order to comply with any such existing statute, law or
regulation, which could reasonably be expected to result in a Material Adverse
Effect on the Company.

 

6.30                           Regulatory
Compliance.  As to each of the product candidates of the Company, including, without
limitation, product candidates or compounds currently under research and/or
development by the Company, subject to the jurisdiction of the United States
Food and Drug Administration (“FDA”) under the Federal Food, Drug and Cosmetic Act and
the regulations thereunder (“FDCA”) (each such product, a “Life Science Product”),
such Life Science Product is being researched, developed, manufactured, tested
and studied in compliance in all material respects with all applicable
requirements under the FDCA and similar laws and regulations applicable to such
Life Science Product, including those relating to investigational use,
premarket approval, good manufacturing practices, labeling, advertising, record
keeping, filing of reports and security. 
The Company has not received any notice or other communication from the
FDA or any other federal, state or foreign governmental entity (i) contesting
the premarket approval of, the uses of or the labeling and promotion of any
Life Science Product or (ii) otherwise alleging any violation by the Company of
any law, regulation or other legal

 

14

 

provision
applicable to a Life Science Product. 
Neither the Company, nor any officer, employee or agent of the Company
has made an untrue statement of a material fact or fraudulent statement to the
FDA or other federal, state or foreign governmental entity performing similar
functions or failed to disclose a material fact required to be disclosed to the
FDA or such other federal, state or foreign governmental entity.

 

6.31                           Title
to Property and Assets.  The Company
owns its property and tangible assets free and clear of all mortgages, liens,
loans and encumbrances, except such encumbrances and liens that arise in the
ordinary course of business and do not materially impair the Company’s
ownership or use of such property or tangible assets.  With respect to the property and tangible assets it leases, the
Company is in compliance with such leases and, to the knowledge, holds a valid
leasehold interest free of any liens, claims or encumbrances.

 

6.32                           Insider
Interests; Related Party Transactions. 
Except for inventors who have assigned their patent rights to the
Company and which assignments have been filed with the United States Patent and
Trademark Office, to the Company’s knowledge no executive officer or director
of the Company has any material interest in any material property, real or
personal, tangible or intangible, including any invention, patent, trademark or
trade name, used in or pertaining to the business of the Company.

 

6.33                           Real
Property Holding Corporation.  The
Company is not a real property holding corporation within the meaning of
Section 897(c)(2) of the Internal Revenue Code of 1986, as amended, and any
regulations promulgated thereunder.

 

7.                                       Representations,
Warranties and Covenants of the Investors.

 

Each Investor, severally
and not jointly, hereby represents and warrants to the Company as follows:

 

7.1                                 Investment Experience and Interest. 
Such Investor represents and warrants to, and covenants with, the
Company that: (a) the Investor is an “accredited investor” as defined in
Regulation D under the Securities Act and the Investor is knowledgeable,
sophisticated and experienced in making, and is qualified to make decisions
with respect to, investments in shares presenting an investment decision like
that involved in the purchase of the Shares and the Warrants, including
investments in securities issued by the Company and investments in comparable
companies, and has requested, received, reviewed and considered all information
it deemed relevant in making an informed decision to purchase the Shares and
the Warrants, (b) the Investor is acquiring the number of Shares set forth on Schedule A hereto and
the Warrants to purchase the number of shares of Common Stock set forth on Schedule A hereto in
the ordinary course of its business and for its own account and with no present
intention of distributing any of such Shares or Warrants or any arrangement or
understanding with any other persons regarding the distribution of such Shares
or Warrants, (c) the Investor will not, directly or indirectly, offer, sell,
pledge, transfer or otherwise dispose of (or solicit any offers to buy,
purchase or otherwise acquire or take a pledge of) any of the Shares or the
Warrants except in compliance with the Securities Act, applicable state
securities laws and the respective rules and regulations promulgated thereunder
and (d) the Investor has, in connection with its decision to purchase the
number of Shares set forth on Schedule A hereto and the Warrants to purchase the

 

15

 

number of shares of Common
Stock set forth on Schedule
A hereto, relied only upon the SEC Documents and the information
incorporated by reference therein and the representations and warranties of the
Company contained herein.

 

7.2                                 Registration
or Exemption Requirements. Such Investor acknowledges and understands that
the Shares and the Warrants may not be resold or otherwise transferred except
in a transaction registered under the Securities Act, or unless an exemption
from such registration is available. 
Such Investor understands that the Warrants and the certificates
evidencing the Shares will be imprinted with a legend that prohibits the
transfer of such securities unless (a) they are registered or such registration
is not required and (b) if the transfer is pursuant to an exemption from
registration under the Securities Act and, if the Company shall so request in
writing, an opinion of counsel reasonably satisfactory to the Company is
obtained to the effect that the transaction is so exempt; provided, however, that notwithstanding
the foregoing, Section 3.2(d) hereof shall also apply to such transfers.

 

7.3                                 Foreign Jurisdictions.  Such
Investor acknowledges, represents and agrees that no action has been or will be
taken in any jurisdiction outside the United States by the Company, or any
agents acting on behalf of the Company, that would permit an offering of the
Shares or the Warrants, or possession or distribution of offering materials in
connection with the issue of the Shares and the Warrants, in any jurisdiction
outside the United States where action for that purpose is required.  Each Investor outside the United States will
comply with all applicable laws and regulations in each foreign jurisdiction in
which it purchases, offers, sells or delivers the Shares or the Warrants or has
in its possession or distributes any offering material, in all cases at its own
expense.

 

7.4                                 Due Authorization.  Such Investor has all
requisite corporate power and authority to execute, deliver and perform its
obligations under the Agreements and Warrants, and the Agreements and Warrants
have been duly authorized and validly executed and delivered by the Investor
and no other corporate action on the part of the Investor is necessary to
authorize the execution and delivery by the Investor of the Agreements or the
Warrants.  The Agreements and Warrants
constitute legal, valid and binding agreements of the Investor, enforceable
against the Investor in accordance with their terms, except as rights to
indemnity and contribution may be limited by state or federal securities laws
or the public policy underlying such laws, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors’ and contracting parties’ rights generally, and
except as enforceability may be subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).

 

7.5                                 No Legal, Tax or Investment Advice.  Such Investor understands
that nothing in the Agreements or any other materials presented to the Investor
in connection with the purchase and sale of the Shares and Warrants constitutes
legal, tax or investment advice.  The
Investor has consulted such legal, tax and investment advisors as it, in its sole
discretion, has deemed necessary or appropriate in connection with its purchase
of the Shares and the Warrants.  The
Investor has not, and will not, rely on the fairness opinion, if any, that the
Financial Advisor may deliver to the Board of Directors with respect to the
Offering.

 

16

 

8.                                       Covenants.

 

8.1                                 Stockholders’
Meeting.  The Company shall, in
accordance with the laws of the State of Delaware, its certificate of
incorporation and its bylaws, as each may be amended, use its commercially
reasonable best efforts to convene a meeting of holders of the Common Stock
(the “Stockholders’
Meeting”) within thirty (30) days (or such other time period
that is mutually agreed to by the Company and a Majority in Interest of
Investors) after the date of the Proxy Statement (as defined in Section 8.2),
to consider and vote upon giving Stockholder Approval.  The Board of Directors shall recommend such
approval by the stockholders (the “Company Recommendation”) and shall not (i)
withdraw, modify or qualify (or propose to withdraw, modify or qualify) in any
manner adverse to Investors such recommendation in favor of the Required
Stockholder Approval or (ii) take any action or make any statement in
connection with the Stockholders’ Meeting inconsistent with such recommendation
in favor of the Required Stockholder Approval (collectively, a “Change in the Company Recommendation”);
provided, however, that the Board
of Directors may make a Change in the Company Recommendation pursuant to
Section 8.7 hereof and to effect any action permitted by Section 9 hereof.  Notwithstanding any Change in the Company
Recommendation, the Company shall nonetheless cause the Stockholders’ Meeting
to be convened and a vote to be taken, and nothing contained herein shall be
deemed to relieve the Company of such obligation unless this Agreement is
terminated pursuant to Section 9.

 

8.2                                 Filing
of Proxy Statement; Amendment of Form 10-K.  Not later than May 9, 2003, the Company shall prepare and file
with the SEC a proxy statement meeting the requirements of Section 14 of the
Exchange Act and the related rules and regulations thereunder promulgated by
the SEC (the “Proxy
Statement”) to solicit Stockholder Approval.  The Company shall use its commercially
reasonable best efforts to cause the Proxy Statement to be cleared by the SEC
as promptly as reasonably practicable after such filing, and shall promptly
mail the Proxy Statement to the stockholders of the Company.  The Company shall keep the Investors
apprised of the status of matters relating to the Proxy Statement and the
Stockholders’ Meeting, including promptly
furnishing the Investors and their counsel with copies of notices or other
communications related to the Proxy Statement, the Stockholders’ Meeting or the
transactions contemplated hereby received by the Company from the SEC or
Nasdaq.  The Company shall use
its commercially reasonable best efforts to prepare and file with the SEC prior
to the filing of the Proxy Statement an amendment of its Annual Report on Form
10-K for the year ended December 31, 2002 in order to file certain agreements
as identified in Section 6.14 of the Company’s Disclosure Schedule.

 

8.3                                 Election
of Directors.  The Company will use
its commercially reasonable best efforts to cause, at the Closing, (i) the MPM
Representatives to be appointed as members of the Board of Directors, (ii) one
(1) of the MPM Representatives to be designated as a member of the compensation
committee of the Board of Directors and (iii) one (1) of the MPM
Representatives to be designated as a member of the nominating committee of the
Board of Directors.

 

8.4                                 Nasdaq
Listing.  The Company shall file a
listing application with Nasdaq for the Shares and the Warrant Shares.

 

8.5                                 Delivery of Warrant Shares. 
The Company covenants to each Investor that, upon exercise of the
Warrant(s) held by such Investor, it shall use its commercially

 

17

 

reasonable efforts to
cause the Warrant Shares to be issued and promptly delivered to such Investor
in accordance with the Certificate; provided,
however, that such issuance and delivery shall occur no later than
ten (10) business days after the Company’s receipt of the Investor’s surrender
of the Warrant(s) that such Investor desires to exercise.

 

8.6                                 Rights
Offering and Option Plan Matters.

 

(a)                                  The
Company and the Investors acknowledge and agree that, promptly after the
Closing, the Company intends to offer to its stockholders (excluding the
Investors) non-transferable rights to purchase 15,625,000 shares of Common
Stock at the Purchase Price, and each Investor hereby agrees to waive any right
to participate in such rights offering.

 

(b)                                 The
Company and the Investors acknowledge and agree that the Company shall solicit
the approval of its stockholders of, and, if such stockholder approval is
obtained, shall effect (i) at the Closing, the Plan Amendments and (ii) after
the Closing, the Repricing.

 

8.7                                 No
Solicitation.

 

(a)                                  The
Company and each of its officers, directors and agents shall not take, cause or
permit (and the Company shall use its commercially reasonable efforts to ensure
that none of its representatives takes, causes or permits) any person to take,
directly or indirectly, any of the following actions with any third party:  (i) solicit, knowingly encourage,
initiate or participate in any negotiations, inquiries or discussions with
respect to any offer or proposal to acquire the business, assets or capital
shares of the Company (excluding non-exclusive licenses entered into in the
ordinary course of business), whether by merger, consolidation, other business
combination, purchase of capital stock, purchase of assets, license, lease,
tender or exchange offer or otherwise (each of the foregoing, an “Alternative Proposal”),
(ii) disclose, in connection with an Alternative Proposal, any nonpublic
information concerning Company’s business or properties or afford to any third
party access to its properties, books or records, except in the ordinary course
of business and as required by law or pursuant to a governmental request for
information, (iii) enter into or execute any agreement providing for an
Alternative Proposal or (iv) make or authorize any public statement,
recommendation or solicitation in support of any Alternative Proposal or any
offer or proposal relating to an Alternative Proposal, other than with respect
to the Offering; provided, however, that, in each case, (A) if and to
the extent that (1) the Stockholders’ Meeting has not yet occurred, (2) the
Board of Directors believes in good faith, after consultation with the
Company’s legal counsel (and, in order for the Company to withhold, withdraw,
modify or change in a manner adverse to the Investors or effect a Change in the
Company Recommendation, the Company’s Financial Advisor), that such Alternative
Proposal is, or could reasonably be expected to lead to, a Superior Proposal
(as defined hereafter) and (3) the Board of Directors believes in good faith,
considering the advice of the Company’s counsel, that the failure to
participate in such negotiations or discussions, disclose such nonpublic
information or provide such access to its properties, books or records would be
inconsistent with the fiduciary duties of the Board of Directors under
applicable law, then the Company may participate in discussions or negotiations
regarding such Alternative Proposal, provide non-public information with
respect to the

 

18

 

Company (but only to the
extent that such information was previously provided to the Investors prior to
the execution of this Agreement or is provided to the Investors concurrently
therewith) or afford access to the properties, books or records of the Company,
as applicable, for no more than five (5) business days from the date of receipt
of such Alternative Proposal and (B) if and to the extent that (1) the
Stockholders’ Meeting has not yet occurred, (2) the Board of Directors believes
in good faith, after consultation with the Company’s legal counsel (and, in
order for the Company to withhold, withdraw, modify or change in a manner
adverse to the Investors or effect a Change in the Company Recommendation, the
Company’s Financial Advisor), that such Alternative Proposal is a Superior
Proposal and (3) the Board of Directors believes in good faith, considering the
advice of the Company’s counsel, that the failure to participate in such
negotiations or discussions, disclose such nonpublic information, provide such
access to its properties, books or records, enter into any agreement providing
for such Superior Proposal or make or authorize any public statement,
recommendation or solicitation in support of such Superior Proposal or any
offer or proposal relating to such Superior Proposal would be inconsistent with
the fiduciary duties of the Board of Directors under applicable law, then the
Company may participate in discussions or negotiations regarding such Superior
Proposal, provide non-public information with respect to the Company (but only
to the extent that such information was previously provided to the Investors
prior to the execution of this Agreement or is provided to the Investors
concurrently therewith), afford access to the properties, books or records of
the Company, enter into any agreement relating to such Superior Proposal
(subject to full compliance with Section 8.8 hereof) or make or authorize any
public statement, recommendation or solicitation in support of such Superior
Proposal or any offer or proposal relating to an Superior Proposal, as applicable
(subject to full compliance with Section 8.8 hereof).

 

(b)                                 In
the event that the Company is contacted by any third party expressing an
interest in discussing an Alternative Proposal, the Company will promptly, but
in no event later than twenty-four (24) hours following the Company’s knowledge
of such contact, notify the Investors in writing of such contact and the
identity of the third party so contacting the Company and shall promptly, but
in no event later than twenty-four (24) hours, advise the Investors of any
material modification or proposed modification thereto.

 

(c)                                  Nothing
contained in this Agreement shall prohibit the Company or the Board of
Directors from taking and disclosing to the Company’s stockholders a position
with respect to an unsolicited bona fide tender or exchange offer by a third
party pursuant to Rule 14e-2(a) of the Exchange Act or from making any
disclosure required by applicable law.

 

(d)                                 For
purposes of this Agreement, a “Superior Proposal” means any unsolicited written bona
fide offer or proposal from any party other than the parties hereto and any of
their affiliates to acquire all or thirty percent (30%) or more of the
business, assets or capital shares of the Company (excluding non-exclusive
licenses entered into in the ordinary course of business), whether by merger,
consolidation, other business combination, purchase of capital stock, purchase
of assets, license, lease, tender or exchange offer or otherwise, (i) on terms
(including conditions to consummation of the contemplated transaction) which
the Board of Directors in its reasonable good faith judgment (after
consultation with and based on the written advice of its Financial Advisor)
believes to be more favorable to its

 

19

 

stockholders from a
financial point of view than the Offering and the transactions contemplated by
this Agreement and (ii) that is not attributable to a material breach by the
Company of Section 8.7(a) hereof.

 

(e)                                  Notwithstanding
Section 8.7 hereof, the Company may negotiate with respect to the transaction
identified in Section 8.7 of the Company’s Disclosure Schedule on the
conditions identified therein; provided,
however, that any such material terms as disclosed in Section 8.7 of
the Company’s Disclosure Schedule shall not change.  The negotiation or consummation of such transaction (i) shall not
affect the obligations of the Company pursuant to the Agreements, including,
but not limited to, the obligation of the Company to complete the transactions
contemplated hereby, and (ii) shall not be construed as a Superior Proposal.

 

8.8                                 Third
Party Offer.  During the period from
the date of this Agreement until the Closing or the effective date of
termination of this Agreement pursuant to the termination provisions of
Sections 9.1(a), 9.1(b), 9.1(c), 9.1(d), 9.1(f) or 9.1(g), if the Board of
Directors determines in good faith to
accept a Superior Proposal, prior
to accepting such Superior Proposal, the Company shall first (a)
disclose to the Investors the terms and conditions of such Superior Proposal
and (b) offer the Investors the
opportunity to enter into a transaction with the Company on terms no less
favorable to the Company and its stockholders from a financial point of view
(including conditions to consummation of the contemplated transactions) than
those contained in the Superior Proposal (the “Offer”).  A Majority in Interest of
the Investors shall be entitled to notify the Company within five (5) business
days of the terms of a transaction with
the Company in response to the Offer (a “Counter Proposal”).  If the terms of the Counter Proposal are determined by the Board of Directors (after
consultation with its legal and financial advisors) in good faith to be no less
favorable to the Company and its stockholders from a financial point of view (including
conditions to consummation of the contemplated transaction) than those contained in the Superior
Proposal, then the Company shall accept the Counter Proposal.  If
the Company does not receive a Counter Proposal from a Majority in Interest of
the Investors within such five (5) business day period, the Company may accept
the Superior Proposal, provided there are no subsequent material changes to the
terms of such Superior Proposal.  If the terms of such Superior Proposal
are materially changed, such Superior Proposal shall be deemed a new proposal
and shall be subject to each of the terms of this Section 8.8.  This
Section 8.8 shall apply to any Superior Proposal made by any person or entity
at any time prior to the termination of the Investors’ rights under this
Section 8.8.

 

8.9                                 Operation of Business.  Except as contemplated by this Agreement,
the Company shall carry on its business in the ordinary course in substantially
the same manner as heretofore conducted and, to the extent consistent with such
business, use its commercially reasonable efforts consistent with past practice
and policies to preserve intact its present business organizations, keep
available the services of its present officers, consultants and employees and
preserve its relationships with customers, suppliers and others having business
dealings with it.  The Company shall
promptly notify the Investors of any event or occurrence or emergency, which is
not in the ordinary course of business of the Company.  The Company shall not amend or modify the
charter of any committee of the Board of Directors without the consent of a
Majority in Interest of the Investors, which consent shall not be unreasonably
withheld.

 

20

 

8.10                           Reasonable
Efforts; Notification; Representations. 
Subject to the other terms and conditions of this Agreement, each of the
parties to this Agreement shall use its commercially reasonable efforts to take
promptly, or cause to be taken, all actions, and to do promptly, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the Offering contemplated by this
Agreement.  Each party to this Agreement
shall give prompt notice to each other party to this Agreement upon becoming
aware that any representation or warranty made by such party in this Agreement
has become untrue or inaccurate or that such party has failed to comply with or
satisfy in any material respect any covenant, condition or agreement to be
complied with or satisfied by such party under this Agreement, in each case
such that the conditions set forth in Section 4 or Section 5, as the case may
be, would not be satisfied.  No party to
this Agreement shall take any action that would cause any representation or
warranty made by such party in this Agreement
to be untrue if made at the Closing.

 

8.11                           Indemnification
Agreements; Charter Documents. 
Promptly following the date hereof and prior to the time that the MPM
Representatives become members of the Board of Directors, the Company shall
execute indemnification agreements with each director appointed or elected to
the Board of Directors pursuant to Section 8.3.

 

8.12                           HSR
Compliance.  The Company and each of
the Investors shall at all times use commercially reasonable efforts to comply
with the provisions of the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.

 

8.13                           Executive Recruiting Firm.  The Company shall retain an executive recruiting
firm, reasonably acceptable to a Majority in Interest of the Investors, to
conduct a search for and diligently pursue the hire of a senior executive
officer in the area of drug development (which individual shall have extensive
small molecule development experience and expertise and be acceptable to the
Board of Directors) until such time as such senior executive officer in the
area of drug development is appointed by the Board of Directors.

 

9.                                       Termination.

 

9.1                                 Termination
Events. Without prejudice to other remedies that may be available to the
parties by law or this Agreement, this Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Closing:

 

(a)                                  mutually,
by the written consent of the Company and a Majority in Interest of the
Investors;

 

(b)                                 by
either the Company or a Majority in Interest of the Investors by giving written
notice to the other party or parties if the Closing shall not have occurred
prior to August 31, 2003, unless extended by written agreement of such parties;
provided, however, that the party
seeking termination pursuant to this subsection (b) is not in default or
material breach hereunder and provided,
further, that the right to terminate this Agreement under this
subsection (b) shall not be available to any party whose failure to fulfill any
obligation under this Agreement has been the cause of, or resulted in, the
failure of the Closing to occur on or before such date;

 

21

 

(c)                                  by
either the Company or a Majority in Interest of the Investors by giving written
notice to the other party or parties if any governmental entity shall have
issued an injunction or other ruling prohibiting the consummation of any of the
transactions contemplated by this Agreement and such injunction or other ruling
shall not be subject to appeal or shall have become final and unappealable;

 

(d)                                 by
either the Company or a Majority in Interest of the Investors in the event that
the Required Stockholder Approval is not obtained at the Stockholders’ Meeting;

 

(e)                                  by
either the Company or a Majority in Interest of the Investors, if (i) the
Company shall have entered into an agreement to consummate a Superior Proposal,
(ii) the Board of Directors shall have recommended to the stockholders of the
Company a Superior Proposal or (iii) the Board of Directors shall have
withdrawn, modified or qualified in any manner adverse to the Investors or made
any public statement inconsistent with the Company Recommendation; provided, however, that, in order for the
termination of this Agreement by the Company pursuant to this clause (e) to be
deemed effective, the Company shall have complied with all provisions of
Sections 8.7 and 8.8;

 

(f)                                    by
a Majority in Interest of the Investors, if (i) the Company shall have
materially breached any covenant or obligation in this Agreement and such
breach is not cured within ten (10) business days of the date of the delivery
to the Company by an Investor of a written notice of such breach or (ii) any of
the Company’s representations and warranties contained in this Agreement shall
have become inaccurate as of a date subsequent to the date of this Agreement
(as if made on such subsequent date), such that the condition set forth in
Section 5.1 would not be satisfied as of such date and such breach is not cured
within thirty (30) days of the date of the delivery to the Company by an
Investor of a written notice of such breach; or

 

(g)                                 by
a Majority in Interest of the Investors, if there shall have occurred an event
or events which, individually or in the aggregate, constitute a Material
Adverse Effect on the Company and such Material Adverse Effect on the Company
continues for at least thirty (30) days after the date of delivery to the Company
by an Investor of a written notice of such Material Adverse Effect on the
Company.

 

9.2                                 Effect
of Termination. In the event of any termination of this Agreement pursuant
to Section 9.1, all rights and obligations of the parties hereunder shall
terminate without any liability on the part of any party or its Affiliates in
respect thereof; provided, however,
that such termination shall not relieve the Company or any Investor of any
liability for any willful breach of this Agreement.  If this Agreement is terminated pursuant to Section 9.1(d) or
Section 9.1(f)(i), the Company shall promptly reimburse the Investors for their
reasonable and documented legal, financial, due diligence and advisory
out-of-pocket fees and expenses incurred directly in connection with this
Agreement and the transactions contemplated hereby (subject to the limit on
legal expenses set forth in Section 10.4).  
If this Agreement is terminated pursuant to Section 9.1(e), the Company
shall (a) promptly reimburse the Investors for their reasonable and documented
legal, financial, due diligence and advisory out-of-pocket fees and expenses
incurred directly in connection with this Agreement and the transactions

 

22

 

contemplated hereby
(subject to the limit on legal expenses set forth in Section 10.4) and (b) upon
the consummation of a transaction resulting from the Superior Proposal, shall
pay to the Investors an aggregate amount of $1.5 million. Each Investor’s pro
rata share of such $1.5 million payment shall be determined in relation to the
proportion that such Investor’s Aggregate Purchase Price bears to the total
Aggregate Purchase Price committed by all Investors.

 

10.                                 Miscellaneous.

 

10.1                           Notices.  All notices, requests, consents and other communications
hereunder shall be in writing; shall be mailed (a) if within the domestic
United States, by first-class registered or certified airmail, by nationally
recognized overnight express courier, postage prepaid, or by facsimile or (b)
if delivered to or from outside the United States, by International Federal
Express or facsimile; shall be deemed given: (i) if delivered by first-class
registered or certified mail domestic, three business days after so mailed,
(ii) if delivered by nationally recognized overnight carrier, one business day
after so mailed, (iii) if delivered by International Federal Express, two
business days after so mailed or (iv) if delivered by facsimile, upon electric
confirmation of receipt; and shall be delivered as addressed as follows:

 

(a)                                  if
to the Company, to:

 

Rigel Pharmaceuticals,
Inc.

1180 Veterans Boulevard

South San Francisco, CA  94080

Attn:  James M. Gower

Chairman and Chief Executive Officer

Phone:  (650) 624-1100

Telecopy:  (650) 624-1133

 

(b)                                 with
a copy mailed to:

 

Cooley Godward LLP

Five Palo Alto Square

3000 El Camino Real

Palo Alto, CA  94306

Attn: Suzanne Sawochka Hooper

Phone: (650) 843-5000

Telecopy: (650) 849-7400

 

(c)                                  if
to the Investors, at the addresses on the Schedule A hereto, or at such other address or
addresses as may have been furnished to the Company in writing.

 

10.2                           Amendment
and Waiver.  Any provision of this
Agreement may be amended, waived or modified only upon the written consent of
the Company and a Majority in Interest of the Investors; provided, however, that no amendment,
waiver or modification of this Section 10.2, the form of Warrant attached
hereto as Exhibit A
or any of the conditions to the Investors’ obligations set forth in Section 5,
and no amendment, waiver or modification of any

 

23

 

provision of this
Agreement which is detrimental to any Investor in a manner materially different
from any other Investor, shall be made without the consent of each affected
Investor.  Subject to the foregoing, any
amendment or waiver effected in accordance with this Section 10.2 shall be
binding upon each Investor and the Company.

 

10.3                           Survival
of Representations, Warranties and Agreements.  Notwithstanding any investigation made by any party to this Agreement,
all covenants, agreements, representations and warranties made by the Company
and the Investors herein shall survive the execution of this Agreement until
the third (3rd) anniversary of the Closing.

 

10.4                           Expenses. The Company shall pay all costs and expenses that it incurs with
respect to the negotiation, execution, delivery and performance of the
Agreement and the transactions contemplated thereby.  The Company shall, at the Closing, reimburse the reasonable and
documented fees and expenses of counsel for MPM Capital incurred directly in
connection with this Agreement and the transactions contemplated hereby, up to
a maximum of $100,000.00 (the “MPM Fees”); provided,
however, that if the SEC informs the Company that the Proxy
Statement will be subject to a full review by, and comments from, the SEC, then
the Company and MPM Capital shall negotiate in good faith to reach mutual
agreement regarding a necessary increase in the maximum amount of the MPM Fees,
if any.

 

10.5                           Attorneys’ Fees.  In the event that any suit
or action is instituted under or in relation to this Agreement, including
without limitation to enforce any provision in this Agreement, the prevailing
party in such dispute shall be entitled to recover from the losing party all
fees, costs and expenses of enforcing any right of such prevailing party under
or with respect to this Agreement, including without limitation, such
reasonable fees and expenses of attorneys and accountants, which shall include,
without limitation, all fees, costs and expenses of appeals.

 

10.6                           Public Announcements.  Except as may be required by law or
regulation, the Company shall not use the name of, or make reference to, any
Investor or any of its affiliates in any press release or in any public manner
(including any reports or filings made by the Company under the Exchange Act)
without such Investor’s prior written consent, which consent shall not be
unreasonably withheld.  The initial
press release with respect to the execution of this Agreement shall be approved by the Company and MPM Capital on behalf of
the Investors.  Thereafter, so long as
this Agreement is in effect, the Company and the Investors shall consult with
each other before issuing any press release or otherwise making any public
statements with respect to this Agreement or the transactions contemplated
hereby without the prior consent of the other party, which consent shall not be
unreasonably withheld; provided, however, that the Company, on the one hand,
and the Investors, on the other hand, may, without the prior consent of the
other party, issue a press release or make such public statement as may, upon
the advice of counsel, be required by law if it has used all reasonable efforts
to consult with the other party.

 

10.7                           Headings.  The headings of the various
sections of this Agreement have been inserted for convenience of reference only
and shall not be deemed to be part of this Agreement.

 

24

 

10.8                           Pronouns.  All pronouns contained
herein, and any variations thereof, shall be deemed to refer to the masculine,
feminine or neutral, singular or plural, as to the identity of the parties
hereto may require.

 

10.9                           Severability.  In case any provision contained in this
Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.

 

10.10                     Governing
Law.  This Agreement shall be
governed by, and construed in accordance with, the internal laws of the State
of California, without giving effect to the principles of conflicts of law. The
parties agree that any action brought by either party under or in relation to
this Agreement, including without limitation to interpret or enforce any
provision of this Agreement, shall be brought in, and each party agrees to and
does hereby submit to the jurisdiction and venue of, any state or federal court
located in the County of San Francisco, California.

 

10.11                     Entire Agreement.  This Agreement, including
the Exhibits hereto, constitutes the full and entire understanding and
agreement between the parties with regard to the subjects hereof, and no party
shall be liable or bound to any other in any manner by any oral or written representations,
warranties, covenants and agreements except as specifically set forth
herein.  Each party expressly represents
and warrants that it is not relying on any oral or written representations,
warranties, covenants or agreements outside of this Agreement.

 

10.12                     Counterparts.  This Agreement may be executed in two (2) or
more counterparts, each of which shall constitute an original, but all of
which, when taken together, shall constitute but one (1) instrument, and shall
become effective when one (1) or more counterparts have been signed by each
party hereto and delivered to the other parties.

 

10.13                     Confidential
Disclosure Agreement.  Notwithstanding any provision of this
Agreement to the contrary, any confidential disclosure agreement previously
executed by the Company and the Investors in connection with the transactions
contemplated by this Agreement shall remain in full force and effect in
accordance with its terms following the execution of this Agreement and the
consummation of the transactions contemplated hereby.

 

10.14                     Tax
Disclosure.  Notwithstanding any
provision of this Agreement to the contrary, any party to this Agreement (and
any employee, representative, shareholder or other agent of any party to this
Agreement) may disclose to any and all persons, without limitation of any kind,
the tax treatment and tax structure of the transactions contemplated by this
Agreement and all materials of any kind (including opinions or other tax
analyses) that are provided to it relating to such tax treatment and tax
structure; provided however, that
such disclosure may not be made to the extent reasonably necessary to comply
with any applicable federal or state securities laws; and provided further, that for this purpose, (a) the “tax treatment” of a
transaction means the purported or claimed federal income tax treatment of the
transaction and (b) the “tax
structure” of a transaction means any fact that may be relevant
to understanding the purported or claimed federal income tax treatment of the
transaction.

 

25

 

In Witness Whereof, the parties
hereto have executed this Common Stock and Warrant Purchase Agreement as of the date
set forth in the first paragraph hereof.

 

 

	
  COMPANY:

  	
  INVESTORS:

  
	
   

  	
   

  
	
   

  	
   

  
	
  RIGEL PHARMACEUTICALS, INC.

  	
  MPM BIOVENTURES III, L.P.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ James M. Gower

  	
   

  	
  By:

  	
  MPM BioVentures III GP,
  L.P.,

  
	
  Name:

  	
  James M. Gower

  	
   

  	
  its General Partner

  
	
  Title:

  	
  Chairman and Chief
  Executive Officer

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  MPM BioVentures III
  LLC,

  its General Partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Nicholas J. Simon

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Nicholas J. Simon

  
	
   

  	
   

  	
  Title:

  	
  Series A Member

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  MPM BIOVENTURES III-QP, L.P.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  MPM BioVentures III GP,
  L.P.,

  its General Partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  MPM BioVentures III
  LLC,

  its General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Nicholas J. Simon

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Nicholas J. Simon

  
	
   

  	
   

  	
  Title:

  	
  Series A Member

  
							

 

Signature
Page to

Common Stock
and Warrant Purchase Agreement

 

 

 

	
   

  	
  MPM
  BIOVENTURES III GMBH & CO.

  
	
   

  	
  PARALLEL-BETEILIGUNGS
  KG

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  MPM BioVentures III GP,
  L.P., in its

  capacity as the Managing Limited

  Partner

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  MPM BioVentures III
  LLC,

  its General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Nicholas J. Simon

  	
   

  
	
   

  	
  Name:

  	
  Nicholas J. Simon

  
	
   

  	
  Title:

  	
  Series A Member

  
	
   

  	
   

  
	
   

  	
  MPM
  BIOVENTURES III PARALLEL

  
	
   

  	
  FUND,
  L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  MPM BioVentures III GP,
  L.P.,

  its General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  MPM BioVentures III
  LLC,

  its General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Nicholas J. Simon

  	
   

  
	
   

  	
  Name:

  	
  Nicholas J. Simon

  
	
   

  	
  Title:

  	
  Series A Member

  
					

 

 

 

	
   

  	
  MPM
  ASSET MANAGEMENT

  
	
   

  	
  INVESTORS
  2003 BVIII LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Nicholas J. Simon

  	
   

  
	
   

  	
  Name:

  	
  Nicholas J. Simon

  
	
   

  	
  Title:

  	
  Manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  MPM
  BIOEQUITIES MASTER FUND,

  
	
   

  	
  L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  MPM BioEquities GP,
  L.P.,

  its General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  MPM BioEquities GP LLC,

  its General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Kurt von Emster

  	
   

  
	
   

  	
  Name:

  	
  Kurt von Emster

  
	
   

  	
  Title:

  	
  General Partner

  
						

 

 

 

	
   

  	
  ALTA BIOPHARMA PARTNERS II, L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Alta BioPharma Management Partners

  II, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Jean Deleage

  	
   

  
	
   

  	
   

  	
  Managing Director

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  ALTA EMBARCADERO BIOPHARMA

  
	
   

  	
  PARTNERS II, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Hilary S. Strain

  	
   

  
	
   

  	
   

  	
  V.P. of Finance &
  Admin.

  

 

 

 

	
   

  	
  FRAZIER
  HEALTHCARE IV, L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  FHM IV, LP, its
  General Partner

  
	
   

  	
  By:

  	
  FHM IV, LLC, its General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Nathan Every

  	
   

  
	
   

  	
   

  	
  Nathan Every, Authorized Representative

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  FRAZIER
  AFFILIATES IV, L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  FHM IV, LP, its
  General Partner

  
	
   

  	
  By:

  	
  FHM IV, LLC, its General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Nathan Every

  	
   

  
	
   

  	
   

  	
  Nathan Every, Authorized Representative

  
					

 

 

 

	
   

  	
  HBM
  BIOVENTURES (CAYMAN) LTD.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John Arnold

  	
   

  
	
   

  	
  Name:

  	
  John Arnold

  
	
   

  	
  Title:

  	
  Chairman and Managing
  Director

  
					

 

 

 

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