Document:

Exhibit 10.1

Exhibit 10.1

CONSENT AND AMENDMENT AGREEMENT

This CONSENT AND AMENDMENT AGREEMENT (this “Agreement”), entered into as of the 29th
day of March 2011 (the “Effective Date”), is made by and among La Jolla Pharmaceutical
Company, a Delaware corporation (the “Company”), and the undersigned parties (each a
“Holder” and collectively the “Holders”).

WHEREAS, the Company and Holders entered into a Securities Purchase Agreement dated as of May
24, 2010 (the “Securities Purchase Agreement”);

WHEREAS, the Company, through its wholly owned subsidiary, Jewel Merger Sub, Inc.
(“Jewel”) desires to acquire certain assets of GliaMed, Inc. (“GliaMed”) pursuant
to an asset purchase agreement, dated March 29, 2011, (the “Asset Purchase Agreement”)
through which the Company will acquire certain of GliaMed’s patent rights by assignment, study drug
supplies, study data and certain related regulatory records and assets;

WHEREAS, in order to facilitate the consummation of the Asset Purchase Agreement and in
consideration of the Holders’ consent to the Asset Purchase Agreement the parties desire to enter
into this Agreement;

WHEREAS, the parties are in agreement that it is in the best interest of the Company and the
Holders to effect a reverse split of the Company’s outstanding Common Stock at a ratio of
1-for-100;

WHEREAS, in connection with the Asset Purchase Agreement, certain Holders that are parties to
the Securities Purchase Agreement have agreed to amend certain provisions of the Securities
Purchase Agreement, Cash Warrant and Certificate of Designations (each as defined in the Securities
Purchase Agreement) as set forth below; and

WHEREAS, the undersigned Holders represent the required threshold to amend each of the
following provisions of each of the Certificate of Designations, the Cash Warrant and the
Securities Purchase Agreement.

NOW, THEREFORE, in consideration of the mutual covenants and agreements contained in this
Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:

1. Capitalized Terms. Capitalized terms used and not otherwise defined herein shall have the
meanings ascribed to such terms in the Securities Purchase Agreement.

2. Representations and Warranties of the Company. The Company hereby represents and warrants
that all representations and warranties of the Company made pursuant to the Securities Purchase
Agreement not herein amended, or previously amended, are true and accurate in all material respects
as if made as of the date hereof, except with respect to those representations and warranties in
the Securities Purchase Agreement that speak as of an earlier date, which shall be true and
accurate in all material respects as of such earlier date.

 

 

 

3. Representations and Warranties of the Holders. Each of the Holders hereby represents and
warrants to the Company that, with respect solely to itself and not with respect to any other
Holder, each Holder has the requisite power and authority to enter into and perform the Agreement,
and if the Holder is an entity, such Holder is a corporation, limited liability company or
partnership duly incorporated or organized, validly existing and in good standing under the laws of
the jurisdiction of its incorporation or organization.

4. Amendments to the Securities Purchase Agreement. The Securities Purchase Agreement is
amended as follows:

	 	(a)	 	Section 3.7 of the Securities Purchase Agreement is hereby deleted in its entirety.

	 	(b)	 	Section 4.1 of the Securities Purchase Agreement is hereby amended by deleting Section
4.1(a) and Section 4.1(b) in their entirety and re-designating Section 4.1(c) as Section
4.1(a).

	 	(c)	 	Section 3.8 of the Securities Purchase Agreement is hereby deleted in its entirety and
replaced with the following:

“3.8 Reporting Status. So long as a Purchaser beneficially owns any of the
Securities, the Company shall timely file all periodic reports required to be filed
with the SEC pursuant to the Exchange Act, and the Company shall not terminate its
status as an issuer required to file reports under the Exchange Act, even if the
Exchange Act or the rules and regulations thereunder would permit such a
termination.”

	 	(d)	 	Section 4.3 of the Securities Purchase Agreement is hereby deleted in its entirety and
replaced with the following:

“4.3 Effect of the Asset Purchase Agreement

(a) Upon receipt by the Purchasers of Pre-Clinical Study Findings (as defined
in the “Asset Purchase Agreement” (defined below)) stating that there has been a
Successful Pre-Clinical Result (as defined in the Asset Purchase Agreement), then
each Purchaser agrees to exercise that number of Cash Warrants set forth on
Schedule I to the “Amendment Agreement” (defined below), by 5:00 p.m.
(Pacific Time) on the third Trading Day following receipt of the Pre-Clinical Study
Findings, and shall deliver a Notice of Exercise in connection therewith, which
Notice of Exercise shall be irrevocable.

(b) Upon a Successful Clinical Result (as defined in the Asset Purchase
Agreement), each Purchaser holding Cash Warrants shall, by 5:00 p.m. (Pacific Time)
on the third Trading Day following receipt of written notice of achievement of a
Successful Clinical Result, exercise such Purchaser’s remaining Cash Warrants in the
manner set forth in Section 1(d), as amended, of the Cash Warrant.

 

- 2 -

 

(c) If a Purchaser fails to timely exercise the Cash Warrant pursuant to either
Section 4.3(a) or Section 4.3(b) above by the applicable deadline (the “Exercise
Deadline”) (such purchaser, a “Defaulting Purchaser”), interest shall thereafter
accrue on the sums due to the Company under such Cash Warrant at a rate equal to the
lesser of 18% per annum and the highest interest rate permitted
by applicable law. Additionally, until such Cash Warrant is exercised in
accordance with Section 4.3(a) or Section 4.3(b), respectively:

	 	(i)	 	all covenants and obligations owed by the
Company to such Defaulting Purchaser under the Transaction Documents
shall be suspended until such Cash Warrant is exercised in accordance
with Section 4.3(a) or Section 4.3(b), as the case may be, and all
defaults by the Company under the Transaction Documents shall, solely
with respect to the Defaulting Purchaser, be deemed irrevocably
waived by such Defaulting Purchaser; and

	 	(ii)	 	the Defaulting Purchaser shall be required
to pay the Company on the last day of each Week elapsed following the
Exercise Deadline under Section 4.3(a) or Section 4.3(b), as the case
may be, until the amount of the Cash Warrant required by Section
4.3(a) or Section 4.3(b), respectively, is exercised in full, a cash
payment in an amount, in each instance, equal to three percent (3%)
of the aggregate exercise price for such Cash Warrant.

For clarification, the remedies set forth in Section 4.3 shall apply only with
respect to the particular Defaulting Purchaser and not to any other Purchaser and
shall not affect the voting rights of the Defaulting Purchaser under the Transaction
Documents or the Certificate of Designations.

(d) For purposes of this Agreement, the terms “Asset Purchase
Agreement” and “Amendment Agreement” shall mean (i) that certain Asset
Purchase Agreement, dated as of March 29, 2011, by and among the Company, Jewel
Merger Sub, Inc., a wholly owned subsidiary of the Company, and GliaMed, Inc., a
Delaware corporation, and (ii) that certain Consent and Amendment Agreement, entered
into as of the 29th day of March 2011 by and among the Company and the parties
thereto, respectively.”

5. Amendments to the Form of Series C-2 Preferred Stock Purchase Warrant. The outstanding Series
C-2 Preferred Stock Purchase Warrants (the “Cash Warrants”) issued pursuant to the
Securities Purchase Agreement are hereby amended as follows:

(a) The number of Warrant Shares and Series D-2 Warrants (each as defined in the Cash
Warrants) issuable upon exercise of the Cash Warrants shall be increased to the respective amounts
set forth on Schedule I attached hereto.

(b) Section 1(d) of each of the Cash Warrants is hereby deleted in its entirety and replaced
with the following:

“(d) Mandatory Exercise.

	 	(i)	 	Upon receipt by the Holder of Pre-Clinical Study
Findings (as defined in the Asset Purchase Agreement by and between the
Company, Jewel Merger Sub, Inc., and GliaMed, Inc., dated March 29, 2011
(the “Asset Purchase Agreement”)) stating that there has been a
Successful Pre-Clinical Result (as defined in the Asset Purchase
Agreement), the Holder agrees to exercise that number of Cash Warrants as
reflected on Schedule I attached to that certain Consent and Amendment Agreement,
dated March 29, 2011, by and among the Company and the parties thereto, by
5:00 p.m. (Pacific Time) on the third Trading Day following receipt of the
Pre-Clinical Study Findings (the “First Exercise Deadline”), and agrees to
deliver a Notice of Exercise in connection therewith prior to the First
Exercise Deadline, which Notice of Exercise shall be irrevocable.

 

- 3 -

 

	 	(ii)	 	Upon a Successful Clinical Result (as defined in
the Asset Purchase Agreement), the Holder shall fully exercise the
remaining unexercised portion of this Warrant by 5:00 p.m. (Pacific Time)
on the third Trading Day following receipt of written notice of
achievement of a Successful Clinical Result (the “Second Exercise
Deadline”), and agrees to deliver a Notice of Exercise in connection
therewith prior to the Second Exercise Deadline, which Notice of Exercise
shall be irrevocable.”

6. Adoption of Certificate of Designations; Exchange of Shares.

(a) The Certificate of Designations establishing the rights, preferences and privileges for
the Company’s Series C-11 Convertible Preferred Stock (the “Series C-11
Preferred”), Series C-21 Convertible Preferred Stock (the “Series C-21
Preferred”), Series D-11 Convertible Preferred Stock (the “Series D-11
Preferred”) and Series D-21 Convertible Preferred Stock (the “Series D-21
Preferred”), in the form attached hereto as Exhibit A (the “New Certificate of Designations”) is
hereby approved by the Requisite Holders pursuant to Article XII of the Certificate of
Designations. The Company shall file the New Certificate of Designations with the Delaware
Secretary of State on the Closing (as defined in the Asset Purchase Agreement).

(b) The undersigned holders of Series C-1 Preferred hereby agree to exchange each share
(including fractional shares) of Series C-1 Preferred for an equal number of shares of Series
C-11 Preferred, with such exchange to take place immediately after the filing of the New
Certificate of Designations (the “Exchange”). The parties hereto agree that the Exchange is being
effected pursuant to Section 3(a)(9) of the Securities Act of 1933, as amended (the “Securities
Act”) and that the holders of Series C-11 Preferred shall be entitled to “tack” their
holding periods of the Series C-1 Preferred pursuant to Rule 144(d)(3)(ii) under the Securities
Act.

(c) Promptly after the receipt of (i) a letter of transmittal from a holder of Series C-1
Preferred, which shall include stockholder representations regarding title to the tendered shares
and state that the tendered shares are delivered free of encumbrances, and (ii) original stock
certificate(s), properly endorsed or otherwise in proper form for transfer, representing shares of
Series C-1 Preferred, the Company shall, within three Trading Days issue a certificate to such
undersigned holder for an equal number of shares of Series C-11 Preferred, with the same
restrictive legends, if any, as may be imprinted on the certificates representing the Series C-1
Preferred.

(d) From and after the Closing (as defined in the Asset Purchase Agreement), all references in
the Securities Purchase Agreement and the Warrants (as defined in the Certificate of Designations)
to the Series C-1 Preferred, Series C-2 Preferred, Series D-1 Preferred and Series D-2 Preferred
shall thereafter change to become references to the Series
C-11 Preferred, Series C-21 Preferred, Series D-11 Preferred
and Series D-21 Preferred, respectively.

 

- 4 -

 

(e) Promptly after the filing of the New Certificate of Designations and the completion of the
Exchange, the Company shall file a Certificate of Elimination for the Series C-1 Preferred, Series
C-2 Preferred, Series D-1 Preferred and Series D-2 Preferred, whereupon references herein to the
“Certificate of Designations” shall thereafter, unless the context clearly requires otherwise,
refer to the “New Certificate of Designations.”

7. Consent of Holders:

(a) Approval of Asset Purchase Agreement. Pursuant to Article XII of the Certificate of
Designations, the undersigned Holders, constituting the Requisite Holders, hereby irrevocably
approve, for all purposes and in all respects, the Asset Purchase Agreement and the “Ancillary
Agreements” (as defined in the Asset Purchase Agreement), and the consummation of the transactions
contemplated therein.

(b) Designation as Strategic Transaction. Upon the closing of the Initial Funding (as defined
in the Asset Purchase Agreement), the acquisition of the Purchased Assets (as defined in the Asset
Purchase Agreement) under the Asset Purchase Agreement shall be deemed to be the completion of a
Strategic Transaction, as contemplated under the Certificate of Designations, and any Redemption
Events (as defined in the Certificate of Designations) then in existence shall be irrevocably
waived. For the avoidance of doubt, the mere closing of the Asset Purchase Agreement shall not
constitute a Strategic Transaction under the Certificate of Designations.

(c) Approval of Reverse Stock Split. Pursuant to Article XII of the Certificate of
Designations, the undersigned Holders, constituting the Requisite Holders, hereby irrevocably
approve, and for all purposes and in all respects authorize the Company’s Board of Directors to
effect a reverse stock split of the Company’s outstanding Common Stock at an exchange ratio of
1-for-100 within two weeks of the execution of the Asset Purchase Agreement.

8. Covenant of Company. The Company hereby agrees to reduce the salary of Deirdre Gillespie,
Chief Executive Officer, by a total of $31,900 and the salary of Gail Sloan, Chief Financial
Officer, by a total of $16,600 (each, a “Reduced Salary Amount”) during the period from April 1,
2011 through May 31, 2011; provided that upon the closing of the Initial Funding, the Company shall
promptly pay each person an amount equal to such person’s Reduced Salary Amount. Concurrent with
the execution and delivery of this Agreement, Dr. Gillespie and Ms. Sloan shall deliver to the
Company consents agreeing to the reductions in salary pursuant to this Section 8.

9. Purchase of Series C-2 Preferred Stock. Each party set forth on Schedule II
attached hereto hereby agrees to pay the Company the aggregate cash amount set forth opposite their
respective names on Schedule II within three Trading Days of the date of this Agreement in
exchange for such party’s right to receive the C-2 Shares (defined below) from the Company within
three (3) Trading Days after the closing of the Initial Funding (as defined in the Asset Purchase
Agreement). The “C-2 Shares” for each party means the number of shares of Series C-21
Preferred, rounded to the nearest 1/1,000th share, equal to the dollar amount set forth
opposite such party’s name on Schedule II, divided by the “Face Amount” of the Series
C-21 Preferred (as defined in the New Certificate of Designations) in effect on the
closing of the Initial
Funding. The C-2 Shares shall not be issuable unless and until the closing of the Initial
Funding; if, the Initial Funding does not close within the applicable time period set forth in
Section 8.2 of the Asset Purchase Agreement such that GliaMed has the right to exercise the
Repurchase Right (as defined in the Asset Purchase Agreement), then the contingent right of each
party under this Section 9 to receive the C-2 Shares shall immediately expire and the Company will
be entitled to retain the funds paid under this Section 9.

 

- 5 -

 

10. Fees and Expenses. Each party shall pay the fees and expenses of its advisors, counsel,
accountants and other experts, if any, and all other expenses, incurred by such party incident to
the negotiation, preparation, execution, delivery and performance of this Agreement and the
transactions contemplated hereby.

11. Specific Performance; Consent to Jurisdiction; Venue.

(a) The Company and the Holders acknowledge and agree that irreparable damage would occur in
the event that any of the provisions of this Agreement (including the agreements and instruments
amended hereby) (collectively, the “Asset Purchase Transaction Documents”) were not performed in
accordance with their specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent or cure breaches of the
provisions of this Agreement or the other Asset Purchase Transaction Documents and to enforce
specifically the terms and provisions hereof or thereof without the requirement of posting a bond
or providing any other security, this being in addition to any other remedy to which any of them
may be entitled by law or equity.

(b) The parties agree that venue for any dispute arising under this Agreement will lie
exclusively in the state or federal courts located in San Diego, California, and the parties
irrevocably waive any right to raise forum non conveniens or any other argument that California is
not the proper venue. The parties irrevocably consent to personal jurisdiction in the state and
federal courts of the state of California. The Company and each Holder consent to process being
served in any such suit, action or proceeding by mailing a copy thereof to such party at the
address in effect for notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing in this Section 11
shall affect or limit any right to serve process in any other manner permitted by law. The parties
hereby waive all rights to a trial by jury. In addition, the prevailing party in any dispute
arising under this Agreement shall be entitled to recover its fees and expenses, including, without
limitation, all reasonable attorneys’ fees and expenses.

12. Entire Agreement; Amendment. This Agreement, including the schedules and exhibits
attached hereto, and the Asset Purchase Transaction Documents contain the entire understanding and
agreement of the parties with respect to the matters covered hereby and, except as specifically set
forth herein or in the other Asset Purchase Transaction Documents, neither the Company nor any
Holder make any representation, warranty, covenant or undertaking with respect to such matters, and
they supersede all prior understandings and agreements with respect to said subject matter, all of
which are merged herein. No provision of this Agreement may be waived or amended on behalf of all
Holders other than by a written instrument signed by the Company and the Requisite Holders. In
addition to the foregoing, no provision of this Agreement may be amended to increase the financial
obligations of any Holder under this Agreement other than by a written instrument signed by such
Holder. Nothing provided in this
Section 12 shall limit an individual Holder’s right to waive or amend any provision of this
Agreement on its own behalf. The Holders acknowledge that any waiver effected in accordance with
this Section 12 shall be binding upon each Holder (and their permitted assigns) and the Company,
including, without limitation, a waiver that has an adverse effect on any or all Holders.

 

- 6 -

 

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

	 	If to the Company or its Subsidiaries:	 	La Jolla Pharmaceutical Company

4365 Executive Drive, Suite 300

San Diego, CA 92121

Attention: Deirdre Gillespie

Telephone No.: (858) 452-6600

Facsimile No.: (858) 626-2851

Email address: deirdre.gillespie@ljpc.com
	 
	 	with copies to:	 	Ropes & Gray LLP

Three Embarcadero Center

San Francisco, CA 94111

Attention: Ryan Murr

Telephone No.: (415) 315-6395

Facsimile No.: (415) 315-6026

Email address: Ryan.Murr@ropesgray.com
	 
	 	If to any Holder:	 	 At the address of such Holder set forth on the signature page to this
Agreement, with copies to Holder’s counsel, if any, as set forth on the signature page or
as specified in writing by such Holder.

Any party hereto may from time to time change its address for notices by giving written notice
of such changed address to the other party hereto.

14. Waivers. No waiver by either party of any default with respect to any provision,
condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future
or a waiver of any other provision, condition or requirement hereof, nor shall any delay or
omission of any party to exercise any right hereunder in any manner impair the exercise of any such
right accruing to it thereafter.

 

- 7 -

 

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

16. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of
the parties and their successors and assigns. Subject to the limitations set forth in Article 4 of
this Agreement, the Holders may assign the Securities and its rights under this Agreement and the
other Asset Purchase Transaction Documents and any other rights hereto and thereto without the
consent of the Company.

17. No Third Party Beneficiaries. This Agreement is intended for the benefit of the parties
hereto and their respective permitted successors and assigns and is not for the benefit of, nor may
any provision hereof be enforced by, any other person.

18. 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 any of the conflicts of law
principles which would result in the application of the substantive law of another jurisdiction.
This Agreement shall not be interpreted or construed with any presumption against the party causing
this Agreement to be drafted.

19. Survival. The representations and warranties of the Company and the Holders shall
terminate upon the Closing (as defined in the Asset Purchase Agreement); provided, however, that
such termination shall have no affect on the rights of the Holders under Section 7 of the
Securities Purchase Agreement or Article VII of the Certificate of Designations. The agreements
and covenants set forth in Articles 1, 3, 4, 6, 7 and 8 of the Securities Purchase Agreement shall
survive the Closing (as defined in the Asset Purchase Agreement) for the duration of the applicable
statute of limitations.

20. Counterparts. This Agreement may be executed in any number of counterparts, all of which
taken together shall constitute one and the same instrument and shall become effective when
counterparts have been signed by each party and delivered to the other parties hereto, it being
understood that all parties need not sign the same counterpart.

21. Publicity. Except as contemplated in Section 22, the Company agrees that it will not
disclose, and will not include in any public announcement, the names of the Holders without the
consent of the Holders, or unless and until such disclosure is required by law, rule or applicable
regulation, and then only to the extent of such requirement. Notwithstanding the foregoing, the
Holders consent to being identified in any filings the Company makes with the SEC to the extent
required by law or the rules and regulations of the SEC.

 

- 8 -

 

22. Disclosure of Transaction. The Company shall issue a press release describing the
material terms of the transactions contemplated hereby and under the Asset Purchase Agreement and
file with the SEC a Current Report on Form 8-K describing the material terms of the transactions
contemplated hereby and thereby, with the filing of the Form 8-K to be made as close in time as
practicable to the issuance of the press release, and with such disclosures to be made between the
hours of 8:00 p.m. (Eastern Time) and 7:00 a.m. (Eastern Time) within four Business Days following
the date of this Agreement. The Company will provide representatives
from Tang Capital Partners, LP and Boxer Capital, LLC with the opportunity to review and
approve the press release and Form 8-K prior to issuance and filing, respectively, which approval
will not be unreasonably withheld. Additionally, upon the mandatory exercise of any Cash Warrant as
described in Section 1(d) of such warrants, the Company shall issue a press release describing the
events causing such mandatory exercise and file with the SEC a Current Report on Form 8-K
describing the events causing such mandatory exercise, with such disclosure to be made as soon as
practicable, and in any event no later than 7:00 a.m. (Eastern Time) on the fourth Trading Day
following the exercise date, with such filing to be made after 8:00 p.m. (Eastern Time) on the day
before submission and before 7:00 a.m. (Eastern Time) on the day of submission.

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

24. Further Assurances. From and after the date of this Agreement, upon the request of the
Holders or the Company, the Company and each Holder shall execute and deliver such instruments,
documents and other writings as may be reasonably necessary or desirable to confirm and carry out
and to effectuate fully the intent and purposes of this Agreement and the other Asset Purchase
Transaction Documents

25. Independent Nature of Holders’ Obligations and Rights. The obligations of each Holder
under any Asset Purchase Transaction Documents are several and not joint with the obligations of
any other Holder, and no Holder shall be responsible in any way for the performance of the
obligations of any other Holder under any Asset Purchase Transaction Documents. Nothing contained
herein or in any other Asset Purchase Transaction Documents, and no action taken by any Holder
pursuant hereto or thereto, shall be deemed to constitute the Holder as a partnership, an
association, a joint venture or any other kind of entity, or create a presumption that the Holders
are in any way acting in concert or as a group with respect to such obligations or the transactions
contemplated by the Asset Purchase Transaction Documents. Each Holder confirms that it has
independently participated in the negotiation of the transaction contemplated hereby with the
advice of its own counsel and advisors. Each Holder shall be entitled to independently protect and
enforce its rights, including, without limitation, the rights arising out of this Agreement or out
of any other Asset Purchase Transaction Documents, and it shall not be necessary for any other
Holder to be joined as an additional party in any proceeding for such purpose.

 

- 9 -

 

26. Force Majeure. Notwithstanding any provision herein to the contrary, the failure of any
party to timely satisfy obligations hereunder shall be excused to the extent that (i) such failure
follows the occurrence of a Force Majeure Event (defined below), and (ii) such Force Majeure Event
has materially adversely affected the ability of such party (or its agents, including banks,
transfer agents, and clearinghouses) to perform hereunder. A failure to perform shall be
excused only for so long as the Force Majeure Event continues to materially adversely affect
such person’s ability to perform. For purposes of this Section, “Force Majeure Event”
shall mean the occurrence of any of the following events: (a) trading in securities generally on
either the Nasdaq Stock Market or the New York Stock Exchange shall have been suspended or limited,
or minimum or maximum prices shall have been generally established on any of such stock exchanges
by the SEC or FINRA; (b) a general banking moratorium shall have been declared by any of federal,
New York or California authorities; (c) an act of war, terrorism or hostility shall have occurred,
or (d) a strike, fire, flood, earthquake, accident or other calamity or Act of God shall have
occurred.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

- 10 -

 

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

	 	 	 	 	 
	 	LA JOLLA PHARMACEUTICAL COMPANY

 	 
	 	By:  	/s/ Gail A. Sloan
 	 
	 	 	Name:  	Gail A. Sloan 	 
	 	 	Title:  	Chief Financial Officer and Secretary 	 

[SIGNATURE PAGES CONTINUE]

 

 

 

[HOLDER SIGNATURE PAGES TO CONSENT AND AMENDMENT

AGREEMENT]

IN WITNESS WHEREOF, the undersigned have caused this Consent and Amendment Agreement to be
duly executed by their respective authorized signatories as of the date first indicated above.

Name of Holder: Tang Capital Partners, LP

Signature of Authorized Signatory of Holder: /s/ Kevin Tang

Name of Authorized Signatory: Kevin Tang

Title of Authorized Signatory: Managing Director of Tang Capital Management, LLC, General Partner

Email Address of Holder: jlemkey@tangcapital.com

Fax Number of Holder: 858 200 3837

Address for Notice of Holder:

4401 Eastgate Mall

San Diego, CA 92121

Address for Delivery of Securities for Holder (if not same as address for notice):

 

 

EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]

[Signature Page to Stockholder Consent and Amendment Agreement]

 

 

 

[HOLDER SIGNATURE PAGES TO CONSENT AND AMENDMENT

AGREEMENT]

IN WITNESS WHEREOF, the undersigned have caused this Consent and Amendment Agreement to be
duly executed by their respective authorized signatories as of the date first indicated above.

Name of Holder: The Haeyoung and Kevin Tang Foundation, Inc.

Signature of Authorized Signatory of Holder: /s/ Kevin Tang

Name of Authorized Signatory: Kevin Tang

Title of Authorized Signatory: President

Email Address of Holder: jlemkey@tangcapital.com

Fax Number of Holder: 858 200 3837

Address for Notice of Holder:

4401 Eastgate Mall

San Diego, CA 92121

Address for Delivery of Securities for Holder (if not same as address for notice):

 

 

EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]

[Signature Page to Stockholder Consent and Amendment Agreement]

 

 

 

[HOLDER SIGNATURE PAGES TO CONSENT AND AMENDMENT

AGREEMENT]

IN WITNESS WHEREOF, the undersigned have caused this Consent and Amendment Agreement to be
duly executed by their respective authorized signatories as of the date first indicated above.

Name of Holder: Boxer Capital, LLC

Signature of Authorized Signatory of Holder: /s/ Chris Fugelsang

Name of Authorized Signatory: Chris Fugelsang

Title of Authorized Signatory: Member, Counsel

Email Address of Holder: cfugelsang@tavistock.com

Fax Number of Holder: 858 400 3101

Address for Notice of Holder:

445 Marine View Ave 100

Del Mar, CA 92014

Address for Delivery of Securities for Holder (if not same as address for notice):

 

 

EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]

[Signature Page to Stockholder Consent and Amendment Agreement]

 

 

 

[HOLDER SIGNATURE PAGES TO CONSENT AND AMENDMENT

AGREEMENT]

IN WITNESS WHEREOF, the undersigned have caused this Consent and Amendment Agreement to be
duly executed by their respective authorized signatories as of the date first indicated above.

Name of Holder: MVA Investors, LLC

Signature of Authorized Signatory of Holder: /s/ Chris Fugelsang

Name of Authorized Signatory: Chris Fugelsang

Title of Authorized Signatory: President

Email Address of Holder: cfugelsang@tavistock.com

Fax Number of Holder: 858 400 3101

Address for Notice of Holder:

445 Marine View Ave 100

Del Mar, CA 92014

Address for Delivery of Securities for Holder (if not same as address for notice):

 

 

EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]

[Signature Page to Stockholder Consent and Amendment Agreement]

 

 

 

[HOLDER SIGNATURE PAGES TO CONSENT AND AMENDMENT AGREEMENT]

IN WITNESS WHEREOF, the undersigned have caused this Consent and Amendment Agreement to be
duly executed by their respective authorized signatories as of the date first indicated above.

Name of Holder: RTW Investments, LLC

Signature of Authorized Signatory of Holder: /s/ Roderick Wong

Name of Authorized Signatory: Roderick Wong

Title of Authorized Signatory: Managing Member

Email Address of Holder: sloughran@rtwfunds.com

Fax Number of Holder: 646 597 6998

Address for Notice of Holder:

1350 Avenue of the Americas, 28th Floor, Suite 2801

New York, NY 10019

Address for Delivery of Securities for Holder (if not same as address for notice):

 

 

EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]

[Signature Page to Stockholder Consent and Amendment Agreement]

 

 

 

Schedule I

Not filed herewith pursuant to Item 601(b)(2)
of Regulation S-K. The registrant will supplementally provide a copy of such schedule or
exhibit to the Commission upon request.

 

 

 

Schedule II

Not filed herewith pursuant to Item 601(b)(2)
of Regulation S-K. The registrant will supplementally provide a copy of such schedule or
exhibit to the Commission upon request.

 

 

 

Exhibit A

CERTIFICATE OF DESIGNATIONS,

PREFERENCES AND RIGHTS

of

SERIES C-11 CONVERTIBLE PREFERRED STOCK, SERIES C-21 CONVERTIBLE

PREFERRED STOCK, SERIES D-11

CONVERTIBLE PREFERRED STOCK AND SERIES D-21 CONVERTIBLE

PREFERRED STOCK

of

LA JOLLA PHARMACEUTICAL COMPANY

Pursuant to Section 151 of the

Delaware General Corporation Law

The undersigned, being an authorized officer of La Jolla Pharmaceutical Company (the
"Corporation”), a corporation organized and existing under the laws of the State of Delaware, in
accordance with the provisions of Section 151(g) of the Delaware General Corporation Law (“DGCL”),
does hereby certify that:

Pursuant to the authority vested in the Board of Directors of the Corporation by the
Certificate of Incorporation and Bylaws of the Corporation, each as amended and restated through
the date hereof, the Board of Directors of the Corporation, in accordance with DGCL Section 151,
duly adopted the following resolution on March 29, 2011, which authorizes four series of the
Corporation’s previously authorized Preferred Stock, par value $0.0001 per share (the “Preferred
Stock”):

RESOLVED, that pursuant to the authority vested in the Board of Directors of the Corporation
(the “Board of Directors”) by the Certificate of Incorporation and Bylaws of the Corporation, the
Board of Directors hereby establishes a Series C-11 Convertible Preferred Stock, Series
C-21 Convertible Preferred Stock, Series D-11 Convertible Preferred Stock and
Series D-21 Convertible Preferred Stock of the Corporation, each with par value $0.0001
per share, and hereby states the number of shares and fixes the powers, designations, preferences
and relative, participating, optional and other rights, and the qualifications, limitations and
restrictions thereof, of each such series of shares as follows:

I. DESIGNATION AND AMOUNT

The designation of the first new series, which consists of 11,000 shares of Preferred Stock,
is the Series C-11 Convertible Preferred Stock (the “Series C-11 Preferred
Stock”). The designation of the second new series, which consists of 22,000 shares of Preferred Stock, is
the Series C-21 Convertible Preferred Stock (the “Series C-21 Preferred
Stock” and together with the Series C-11 Preferred Stock, the “Series C Preferred
Stock”). The designation of the third new series, which consists of 5,134 shares of Preferred
Stock, is the Series D-11 Convertible Preferred Stock (the “Series D-11
Preferred Stock”). The designation of the fourth new series, which consists of 10,868 shares of
Preferred Stock, is the Series D-21 Convertible Preferred Stock (the “Series
D-21 Preferred Stock” and, together with the Series C Preferred Stock and Series
D-11 Preferred Stock, the “New Preferred Stock”).

 

 

 

II. CERTAIN DEFINITIONS

For purposes of this Certificate of Designations, the following terms shall have the following
meanings:

A. “Asset Purchase Agreement” means the Asset Purchase Agreement, dated as of March 29, 2011,
by and among the Corporation and the purchasers named therein, as the same may be amended from time
to time.

B. “Change of Control” shall mean the following, provided, however, that in no event shall a
Strategic Transaction that is approved by the Requisite Holders also be deemed to constitute a
Change of Control:

(i) the consolidation, merger or other business combination of the Corporation with or into
another entity (other than a consolidation, merger or other business combination in which holders
of the Corporation’s voting power immediately prior to the transaction continue after the
transaction to hold, directly or indirectly, in substantially the same proportion as immediately
preceding the transaction, the voting power of the surviving entity or entities necessary to elect
a majority of the members of the board of directors (or their equivalent if other than a
corporation) of such entity or entities);

(ii) the sale, lease, transfer, exclusive license or other disposition, in a single
transaction or series of related transactions, by the Corporation or any subsidiary of the
Corporation (including, without limitation, any such action effected by the Corporation or any
subsidiary of the Corporation by merger, consolidation or otherwise) of all or substantially all of
the intellectual property or assets of the Corporation and its subsidiaries, taken as a whole, or
the sale or disposition (including, without limitation, any such action effected by the Corporation
or any subsidiary of the Corporation by merger, consolidation or otherwise) of one or more
subsidiaries of the Corporation if substantially all of the assets of the Corporation and its
subsidiaries taken as a whole are held by such subsidiary or subsidiaries; or

(iii) the consolidation, merger or other business combination of the Corporation with or into
another entity that results in the cancellation of shares of any one or more series of New
Preferred Stock or that results in the conversion of shares of any one or more series of New
Preferred Stock into (1) shares of any other class or series of capital stock of the Corporation,
(2) securities of the Corporation or any other person (or the right to receive any such
securities), (3)
any property (including, without limitation, cash and the right to receive cash or other
property) or (4) any combination of the foregoing.

 

- 2 -

 

C. “Closing Date” means 11:59 p.m. on the date of the closing under the Securities Purchase
Agreement dated May 24, 2010 by and among the Corporation and the purchasers named therein, as the
same may be amended from time to time (the “Securities Purchase Agreement”).

D. “Closing Sales Price” means, as of any date, (i) the last trading price of the Common Stock
on the principal Trading Market (as defined in Article II.P.) during regular trading hours on which
such security is listed or traded as reported by Bloomberg Financial L.P. (or a comparable
reporting service of national reputation selected by the Corporation and reasonably acceptable to
the Requisite Holders, if Bloomberg Financial L.P. is not then reporting closing sales prices of
the Common Stock) (collectively, “Bloomberg”) or (ii) if no last trading price is so reported for
such date, the average of the closing bid and ask prices on the principal Trading Market during
regular trading hours on which such security is listed or traded as reported by Bloomberg. If the
Closing Sales Price cannot be calculated for such Common Stock as of any of such dates on any of
the foregoing bases, the Closing Sales Price on such date shall be the fair market value as
reasonably determined by an investment banking firm selected by the Corporation and reasonably
acceptable to the Requisite Holders, with the costs of such appraisal to be borne by the
Corporation.

E. “Common Stock” means the Corporation’s common stock, par value $0.0001 per share, and stock
of any other class of securities into which such securities may hereafter be reclassified or
changed into.

F. “Common Stock Equivalents” means any securities of the Corporation or of any subsidiary of
the Corporation that would entitle the holder thereof to acquire, directly or indirectly, at any
time, Common Stock or any security of any subsidiary of the Corporation, including, without
limitation, any debt, preferred stock, right, option, warrant or other agreement, document or
instrument that is at any time convertible into, exercisable for or exchangeable for, or otherwise
entitles the holder thereof to receive, directly or indirectly, Common Stock or any security of any
subsidiary of the Corporation.

G. “Conversion Date” means, for any Optional Conversion (as defined in Article IV.A.), the
date specified in the notice of conversion in the form attached hereto (the “Notice of
Conversion”), so long as a copy of the Notice of Conversion is delivered via electronic mail
resulting in notice to the Corporation before 11:59 p.m., New York City time, on the Conversion
Date indicated in the Notice of Conversion; provided, however, that if the Notice of Conversion is
not so e-mailed before such time, then the Conversion Date shall be the date the holder e-mails the
Notice of Conversion to the Corporation.

H. “Conversion Price” means the price obtained by dividing $1,000 by 66,667, and shall be
subject to adjustment as set forth in Article X below.

 

- 3 -

 

I. “Face Amount” shall mean, with respect to the New Preferred Stock, $1,000.00 per share, as
adjusted (i) for stock splits, stock dividends, combinations, recapitalizations, reclassifications
or the like and (ii) with respect to any given share or shares of New Preferred Stock, to account
for any accretion in the Face Amount as a result of accrued but unpaid dividends or any other
increase provided for in this Certificate of Designations.

J. “Measurement Date” means for purposes of any issuance of securities, the date of issuance
thereof.

K. “Original Issue Date” means, with respect to each share of Series C-11 Preferred
Stock or Series C-21 Preferred Stock, the date of issuance of such share.

L. “Other Stock” means (i) any class or series of preferred stock or other capital stock of
the Corporation, other than Common Stock, Common Stock Equivalents and New Preferred Stock and (ii)
any securities of the Corporation or of any subsidiary of the Corporation that would entitle the
holder thereof to acquire, directly or indirectly, at any time any capital stock listed in clause
(i), including, without limitation, any debt, preferred stock, right, option, warrant or other
agreement, document or instrument that is at any time convertible into, exercisable for or
exchangeable for, or otherwise entitles the holder thereof to receive, directly or indirectly, any
capital stock listed in clause (i).

M. Unless otherwise expressly provided in this Certificate of Designations, each reference to
a “person” refers to any individual, entity or association, including, without limitation, any
corporation, limited partnership, general partnership, joint stock company, joint venture,
association, company, trust, bank, trust company, and trust, business trust or other organization,
whether or not a legal entity, or a government or agency or any political subdivision thereof.

N. “Requisite Holders” means the holders of at least 66-2/3% of the then outstanding shares of
New Preferred Stock, voting together as one class.

O. “Strategic Transaction” means (i) any joint venture, partnership, development agreement,
research agreement, marketing agreement or license agreement, in each case relating to any drug or
drug candidate, medical device or diagnostic, (ii) any disposition of any material asset of the
Corporation or any subsidiary, in each case whether by sale, lease, license, exchange, transfer or
otherwise, (iii) any material acquisition of any stock or assets of a third party by the
Corporation or any subsidiary, or (iv) a resolution of the Board of Directors authorizing the
further development of the Corporation’s drug candidate Riquent in future human clinical trials,
but only if such further development is first approved by the Requisite Holders.

 

- 4 -

 

P. “Trading Day” means, except as set forth below, a day on which the Corporation’s securities
are traded on a Trading Market; provided, however, that in the event that the Corporation’s
securities are not traded on a Trading Market, then Trading Day shall mean any day except Saturday,
Sunday and any day on which banking institutions in the State of New York are authorized or
required by law or other government action to close. Notwithstanding the foregoing, the
following shall not be deemed Trading Days:

	 	•	 	December 24 to January 2;

	 	•	 	The Fridays immediately before Memorial Day and immediately before Labor Day;

	 	•	 	The weekday immediately before and the weekday immediately after Independence Day,
provided that if Independence Day is on a Wednesday, then the two following weekdays;

	 	•	 	Columbus Day; or

	 	•	 	The Friday immediately after Thanksgiving.

Q. “Trading Market” means the OTC Bulletin Board or the Pink Sheets, the NASDAQ Global Select
Market, the NASDAQ Global Market, the NASDAQ Capital Market, the New York Stock Exchange (“NYSE”)
or the NYSE Amex, or any successor markets thereto.

R. “Warrants” shall mean the Cashless Warrants, Cash Warrants and Subsequent Cashless Warrants
(each as defined in the Securities Purchase Agreement).

S. “Week” means a consecutive seven (7) calendar day period.

III. DIVIDENDS

A. Except as set forth below, holders of Series C-11 Preferred Stock and Series
C-21 Preferred Stock shall be entitled to receive, and the Corporation shall pay,
cumulative mandatory dividends at the rate per share of 15% of the Face Amount per annum, payable
semi-annually on November 25 and May 25 beginning on the first such date after the applicable
Original Issue Date (each such date, a “Dividend Payment Date”) (if any Dividend Payment Date is
not a Trading Day, the applicable payment shall be due on the next succeeding Trading Day). Such
dividends shall be payable in such number of additional shares of Series C-11 Preferred
Stock with respect to the Series C-11 Preferred Stock and Series C-21
Preferred Stock with respect to the Series C-21 Preferred Stock, in each case determined
by dividing the amount of the cumulative dividends by the Face Amount; provided, however, that if
funds are not legally available for the payment of dividends on the Series C-11
Preferred Stock or Series C-21 Preferred Stock, such dividends shall, effective on
the close of business on a Dividend Payment Date with respect to an unpaid dividend, accrete to,
and increase, the Face Amount of the Series C-11 Preferred Stock or Series
C-21 Preferred Stock, respectively. Dividends on the Series C-11 Preferred
Stock and Series C-21 Preferred Stock shall be calculated on the basis of a 360-day
year, consisting of twelve 30-day periods, shall accrue daily commencing on the applicable Original
Issue Date, and, subject to the preceding sentence, shall be deemed to accrue from such applicable
Original Issue Date whether or not earned or declared and whether or not there are profits, surplus
or other funds of the Corporation legally available for the payment of dividends. The record date
for determining the holders of Series C-11 Preferred Stock and Series C-21
Preferred Stock entitled to dividends pursuant to this paragraph shall be the fifth
(5th) Trading Day before the Dividend Payment Date. If any such cumulative dividends
would result in the issuance of a fractional share of Series C-11 Preferred Stock or
Series C-21 Preferred Stock, the Corporation shall issue a fractional share therefor,
rounded to the nearest 1/1000th of a share. For the avoidance of doubt, (i) for purposes
of any conversion or redemption of shares of Series C-11 Preferred Stock and Series
C-21 Preferred Stock, any amount accreted to the Face Amount of
such shares pursuant to this paragraph as of such conversion or redemption shall not be deemed
accrued but unpaid dividends and (ii) in the event of a conversion or redemption that occurs
between Dividend Payment Dates, dividends shall be deemed to accrue through the date of such
conversion or redemption, even if such accrual is less than a full semi-annual dividend period.

 

- 5 -

 

B. Shares of Series D-11 Preferred Stock and Series D-21Preferred Stock
shall not entitle the holder thereof to receive any dividends.

C. Notwithstanding the foregoing, shares of Series C-11 Preferred Stock and Series
C-21 Preferred Stock shall not be entitled to receive any dividends under Article III.A.
for the period from November 26, 2010 through May 31, 2011 (the “No Dividend Period”) and shall not
receive any cumulative mandatory dividend on May 25, 2011. Within three (3) Trading Days of the
closing of the Initial Funding (as defined in the Asset Purchase Agreement), the Company will issue
to each holder of Series C-11 Preferred Stock and Series C-21 Preferred Stock
additional shares of Series C-11 Preferred Stock with respect to the Series C-11
Preferred Stock and Series C-21 Preferred Stock with respect to the Series
C-21 Preferred Stock, in each case such number of shares determined by dividing the
amount of the cumulative dividends that such holder would have received pursuant to Article III.A.
during the No Dividend Period by the applicable Face Amount; provided, however, that if funds are
not legally available for the payment of such dividends on the Series C-11 Preferred
Stock and the Series C-21 Preferred Stock, such dividends shall, with respect to any
unpaid amount, accrete to, and increase, the Face Amount of the Series C-11 Preferred
Stock or Series C-21 Preferred Stock, respectively. In calculating the cumulative
dividends that such holder would have received pursuant to Article III.A. during the No Dividend
Period, the Company shall include the amount of any accrued but unpaid dividends on shares of the
Company’s Series C-1 Preferred that are tendered to the Company in exchange for shares of Series
C-11 Preferred.

IV. CONVERSION

A. Conversion at the Option of the Holder. Subject to the limitations on conversions
contained in Paragraph C of this Article IV, each holder of shares of New Preferred Stock may, at
any time and from time to time, convert (an “Optional Conversion”) each of its shares of New
Preferred Stock into a number of fully paid and non-assessable shares of Common Stock determined in
accordance with the following formula:

Face Amount

Conversion Price

Following the effectiveness of any Optional Conversion, the shares of Series C-11
Preferred Stock or Series C-21 Preferred Stock, as applicable, so converted shall
also entitle the former holder of such shares to receive, on the Dividend Payment Date next
following such conversion, a number of shares of Series C-11 Preferred Stock or Series
C-21 Preferred Stock, respectively, equal to the unpaid dividends that accrued on the
shares so converted through the date of such conversion, divided by the Face Amount.

 

- 6 -

 

B. Mechanics of Conversion. In order to effect an Optional Conversion, a holder shall
deliver via electronic mail a copy of the fully executed Notice of Conversion (in the form attached
hereto) to the Corporation (Attention: Secretary). Such notice shall be delivered to
conversions@ljpc.com or such other address as the Corporation may, from time to time, provide to
the holders upon delivery of a written notice. Upon receipt by the Corporation of a copy of a
Notice of Conversion from a holder, the Corporation shall promptly send, via facsimile or
electronic mail, a confirmation to such holder stating that the Notice of Conversion has been
received, the date upon which the Corporation expects to deliver the Common Stock issuable upon
such conversion and the name and telephone number of a contact person at the Corporation regarding
the conversion.

(i) Delivery of Common Stock Upon Conversion. The Corporation (itself, or through its
transfer agent) shall, no later than the second Trading Day following the Conversion Date (the
“Delivery Period”), issue and deliver (i.e., deposit with a nationally recognized overnight courier
service postage prepaid) to the holder or its nominee a certificate representing that number of
shares of Common Stock issuable upon conversion of such shares of New Preferred Stock being
converted. Notwithstanding the foregoing, if the Corporation’s transfer agent is participating in
the Depository Trust Company (“DTC”) Fast Automated Securities Transfer program or any other
program that provides for the electronic delivery of Common Stock, the Corporation shall cause its
transfer agent, by the end of the Delivery Period, to electronically transmit the Common Stock (not
in physical stock certificate form) issuable upon conversion to the holder by crediting the account
of the holder or its nominee with DTC through its Deposit Withdrawal Agent Commission system or
with any such equivalent program.

(ii) Taxes. The Corporation shall pay any and all taxes that may be imposed upon it
with respect to the issuance and delivery of the shares of Common Stock upon the conversion of the
New Preferred Stock.

(iii) No Fractional Shares. If any conversion of New Preferred Stock would result in
the issuance of a fractional share of Common Stock, such fractional share shall be payable in cash
based upon the Closing Sales Price on the Trading Day immediately preceding the Conversion Date and
the number of shares of Common Stock issuable upon conversion of the New Preferred Stock shall be
the next lower whole number of shares.

(iv) Conversion Disputes. In the case of any dispute with respect to a conversion, the
Corporation shall promptly issue such number of shares of Common Stock as are not disputed in
accordance with subparagraph (i) above. If such dispute involves the calculation of the Conversion
Price, and such dispute is not promptly resolved by discussion between the relevant holder and the
Corporation, the Corporation shall submit the disputed calculations to an independent outside
accountant within three Trading Days of receipt of the Notice of Conversion. The accountant, at the
Corporation’s sole expense, shall promptly audit the calculations and notify the Corporation and
the holder of the results no later than three Trading Days from the date it receives the disputed
calculations. The accountant’s calculation shall be deemed conclusive, absent manifest error. The
Corporation shall then issue the appropriate number of shares of Common Stock in accordance with
subparagraph (i) above.

 

- 7 -

 

C. Limitations on Conversions. The conversion of shares of New Preferred Stock shall
be subject to the following limitations (each of which limitations shall be applied independently):

(i) Timing and Volume Limitations. Each holder of shares of New Preferred Stock
(each, a “Holder”) shall be eligible for an Optional Conversion on any day of a Monday through
Sunday calendar week (each a “Conversion Week”) to the extent that, together with all prior
conversions of such Holder’s New Preferred Stock, if any, the total shares of the New Preferred
Stock that has been converted by such Holder during such Conversion Week (rounded to the nearest
1/1,000th of a share) does not exceed the product of (x) the Face Amount of the
Outstanding New Preferred Stock held by such Holder, multiplied by (y) the Conversion Cap for such
calendar week. In determining the “Conversion Cap” for any Conversion Week, other than the Fixed
Conversion Weeks, if the quotient of (A) the average of the Closing Sales Prices (as adjusted to
reflect any stock splits, stock dividends or similar recapitalizations occurring on or before the
Conversion Date) for the Trading Days during the previous Monday through Sunday calendar week
ending on the last Trading Day prior to the applicable Conversion Week, divided by (B) the
applicable Conversion Price of the New Preferred Stock on the first Trading Day of such Conversion
Week is: (1) less than one, then the Conversion Cap shall be 0%; (2) greater than or equal to one
and less than two, then the Conversion Cap shall be 0.4%; (3) greater than or equal to two and less
than three, then the Conversion Cap shall be 0.8%; (4) greater than or equal to three and less than
four, then the Conversion Cap shall be 1.6%; (5) greater than or equal to four and less than five,
then the Conversion Cap shall be 2.4%; (6) greater than or equal to five and less than six, then
the Conversion Cap shall be 3.2%; (7) greater than or equal to six and less than seven, then the
Conversion Cap shall be 4.0%; (8) greater than or equal to seven and less than eight, then the
Conversion Cap shall be 4.8%; (9) greater than or equal to eight and less than nine, then the
Conversion Cap shall be 5.6%; (10) greater than or equal to nine and less than ten, then the
Conversion Cap shall be 6.4%; or (11) greater than or equal to ten, then the Conversion Cap shall
be 7.2%. The Conversion Cap for the Fixed Conversion Weeks shall be 0.8%. For purposes of this
Article IV.C.(i).: (I) “Outstanding New Preferred Stock” means the sum of: (x) all of the Company’s
New Preferred Stock, including New Preferred Stock that has been issued by way of payment of
interest in kind pursuant to Article III, issued and outstanding immediately following the Closing
(as defined in the Asset Purchase Agreement), and (y) that number of shares of New Preferred Stock
to be issued under the Cash Warrants upon the Initial Funding (as defined in the Asset Purchase
Agreement), and (II) “Fixed Conversion Weeks” mean the periods of time commencing on (i) the first
calendar week beginning the Monday following the Closing (as defined in the Asset Purchase
Agreement), or (ii) the week following the date of any adjustment to the Conversion Price. No
Optional Conversion shall be allowed until the first Monday following the Closing under the Asset
Purchase Agreement. Notwithstanding anything to the contrary in this Article IV.C.(i), any holder
of New Preferred Stock shall have the right to convert all or any portion of its shares of New
Preferred Stock into shares of Common Stock immediately prior to a Change of Control. The foregoing
conversion limits shall apply to the New Preferred Stock on an aggregate basis; to the extent that
ownership of the New Preferred Stock is divided among multiple holders, the conversion limits shall
be apportioned among the holders on a pro rata basis by dividing the Outstanding New Preferred
Stock among the holders of New Preferred Stock based on their relative holdings of the New
Preferred Stock.

 

- 8 -

 

(ii) Additional Restrictions on Conversion or Transfer. Notwithstanding anything in
this Certificate of Designations to the contrary, at no time may the Corporation issue or sell
shares of Common Stock (including transfers by the Corporation of treasury stock) to a holder of
New Preferred Stock, and in no event shall any holder of shares of New Preferred Stock have the
right to convert shares of New Preferred Stock into shares of Common Stock, in each such case (x)
to the extent that such issuance or sale or right to effect such conversion would result in the
holder or any of its affiliates together beneficially owning more than 9.999% of the then issued
and outstanding shares of Common Stock or (y) if such holder or any of its affiliates together
beneficially own more than 9.999% of the then issued and outstanding Common Stock immediately prior
to such purported issuance, sale, transfer or conversion. For purposes of this subparagraph,
beneficial ownership shall be determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), and Regulation 13D-G thereunder. The
restriction contained in this subparagraph may not be waived. Any purported issuance, sale,
transfer or conversion effected in violation of this paragraph shall be null and void. Certificates
representing shares of New Preferred Stock shall have imprinted, typed, stamped or otherwise
affixed thereon a legend in substantially the following form:

THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO TRANSFER AND CONVERSION
RESTRICTIONS AND MAY BE TRANSFERRED OR CONVERTED ONLY AS PERMITTED BY THE TERMS OF THE CERTIFICATE
OF DESIGNATIONS SETTING FORTH THE RIGHTS, POWERS AND PREFERENCES OF SUCH PREFERRED STOCK, A COPY OF
WHICH IS ON FILE WITH THE SECRETARY OF THE CORPORATION AND SHALL BE PROVIDED FREE OF CHARGE UPON A
REQUEST THEREFOR SUBMITTED TO THE SECRETARY.

V. RESERVATION OF SHARES OF COMMON STOCK

A. If the authorized and unissued number of shares of Common Stock (the “Reserved Amount”) for
any three consecutive Trading Days (the last of such three Trading Days being the “Authorization
Trigger Date”) shall be less than a number sufficient to provide for the conversion in full, at the
then current Conversion Price thereof, without taking into account the conversion limitations set
forth in Article IV.C.(i) and without taking into account the conversion limitations set forth in
Article IV.C.(ii), of all of the New Preferred Stock and Series E Preferred Stock (i) then
outstanding, (ii) then issuable, directly or indirectly, upon exercise or otherwise in respect of
all outstanding or then issuable Warrants and (iii) then issuable as the payment of dividends on
the New Preferred Stock and Series E Preferred Stock described in clause (i) or (ii) for a period
of four (4) years (the “Required Reserve Amount”), then the Corporation shall immediately notify
the holders of New Preferred Stock and Series E Preferred Stock of such occurrence and shall take
immediate action (including, if necessary, seeking stockholder approval to increase the number of
shares of Common Stock that the Corporation is authorized to issue) to increase the Reserved Amount
to the Required Reserve Amount. Nothing contained in this Article V.A. shall limit any other
rights or remedies of the holders of the New Preferred Stock or Series E Preferred Stock hereunder
or under applicable law.

 

- 9 -

 

VI. FAILURE TO SATISFY CONVERSIONS

A. Conversion Defaults. If, at any time, (x) a holder of shares of New Preferred Stock
or Series E Convertible Preferred Stock (the “Series E Preferred Stock”) submits a Notice of
Conversion and the Corporation fails for any reason (including without limitation because such
issuance would exceed such holder’s allocated portion of the Reserved Amount, but not including
because of the limitations set forth in Article IV.C.) to deliver in strict accordance with the
terms hereof, on or prior to the last Trading Day of the Delivery Period for such conversion, such
number of shares of Common Stock to which such holder is entitled upon such conversion, or (y) the
Corporation provides written notice to any holder of New Preferred Stock or Series E Preferred
Stock (or makes a public announcement via press release) at any time of its intention not to issue
shares of Common Stock upon exercise by any holder of its conversion rights in accordance with the
terms of this Certificate of Designations (each of (x) and (y) being a “Conversion Default”), then,
in either such case, if such Conversion Default is not cured within five Trading Days of its
initial occurrence, each holder of Series C Preferred Stock may elect, by delivery of a notice (the
"Conversion Default Notice”) to the Corporation, to have such holder’s outstanding shares of Series
C Preferred Stock redeemed out of funds legally available therefore by the Corporation. Any such
redemption shall be made pursuant to the process and in the amount described in Sections A through
C of Article VII (deeming the Conversion Default Notice delivered pursuant to this Article VI.A to
be a “Redemption Trigger Notice” for such purpose and deeming the Conversion Default pursuant to
this Article VI.A to be a “Redemption Event” for such purpose).

B. Buy-In Cure. Without limiting the other rights or remedies of the holders
(including, but not limited to, the right to redemption under Article VI.A. or Article VII), unless
the Corporation has notified the applicable holder in writing prior to the delivery by such holder
of a Notice of Conversion that the Corporation is unable to honor conversions, if (i) the
Corporation fails to timely deliver during the Delivery Period shares of Common Stock to a holder
upon a conversion of shares of New Preferred Stock and (ii) thereafter, such holder purchases (in
an open market transaction or otherwise) shares of Common Stock (the “Cover Shares”) to make
delivery in satisfaction of a sale by such holder of the shares of Common Stock (the “Sold Shares”)
that such holder anticipated receiving upon such conversion (a “Buy-In”), at the election of the
holder as a redemption out of funds legally available therefor, the Corporation shall pay such
holder (in addition to any other remedies available to the holder) the amount equal to such
holder’s total purchase price (including brokerage commissions, if any) for the Cover Shares and,
upon making such payment, the Corporation’s conversion obligations shall be deemed satisfied and
the New Preferred Stock that was tendered pursuant to the Notice of Conversion shall thereupon be
cancelled and the holder shall not have any further right or remedy against the Corporation with
respect to such shares of New Preferred Stock that were tendered pursuant to the Notice of
Conversion. A holder shall provide the Corporation written notification and supporting
documentation indicating any amounts payable to such holder pursuant to this Article VI.B. The
Corporation shall make any payments required pursuant to this Article VI.B in accordance with and
subject to the provisions of Article XIII.E.

 

- 10 -

 

VII. SERIES C PREFERRED STOCK REDEMPTION RIGHTS

A. Redemption Events. In the event (each of the events described below after
expiration of the applicable cure period (if any) being a “Redemption Event”) that any of the
following occur
without the prior approval (by vote or written consent, as provided by the DGCL) of the
Requisite Holders, but only if such approval expressly specifies that the Requisite Holders signing
the consent are consenting for purposes of this Article VII:

(i) the Corporation shall fail to observe or perform any covenant, condition or agreement
contained in this Certificate of Designations or any of the Transaction Documents (as defined in
the Securities Purchase Agreement) (including, without limitation, the failure to obtain approval
(by vote or written consent, as provided by the DGCL) of the Requisite Holders under Article XII,
but excluding those covenants referred to below in paragraphs (iii) and (iv)), which failure is not
cured within eight Trading Days after receiving notice of such default sent by a holder of New
Preferred Stock;

(ii) the failure of the Common Stock to be listed on a Trading Market for a period of 20
consecutive Trading Days;

(iii) the Corporation provides written notice (or otherwise indicates in writing) to any
holder of New Preferred Stock, or states by way of public announcement distributed via a press
release, at any time, of its intention not to issue shares of Common Stock to any holder of New
Preferred Stock upon conversion in accordance with the terms of this Certificate of Designations
(other than due to the circumstances contemplated by Article V, for which the holders shall have
the remedies set forth in such Article), which notice or announcement is not rescinded within five
Trading Days and provided that the Requisite Holders elect in writing to designate such event as a
Redemption Event;

(iv) the Corporation shall fail to timely deliver the shares of Common Stock as and when
required herein for any reason (not including because of the limitations set forth in Article
IV.C.), which failure is not cured within ten Trading Days and provided that the Requisite Holders
elect in writing to designate such event as a Redemption Event;

(v) any material representation or warranty made by the Corporation or any of its subsidiaries
in the Securities Purchase Agreement shall prove to have been materially false or incorrect or
breached in a material respect, in each case as of the date made, provided that the Corporation
receives written notice of the breach or alleged falsity from any holder of Series C Preferred
Stock within one year from the consummation of a Strategic Transaction and such breach or alleged
falsity is not cured within five Trading Days of the receipt of such written notice;

(vi) the Corporation or any of its subsidiaries shall (a) apply for or consent to the
appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of
itself or of all or a substantial part of its property or assets, (b) make a general assignment for
the benefit of its creditors, (c) commence a voluntary case under the United States Bankruptcy Code
(as now or hereafter in effect) or under the comparable laws of any jurisdiction (foreign or
domestic), (d) file a petition seeking to take advantage of any bankruptcy, insolvency, moratorium,
reorganization or other similar law affecting the enforcement of creditors’ rights generally, (e)
acquiesce in writing to any petition filed against it in an involuntary case under United States
Bankruptcy Code (as now or hereafter in effect) or under the comparable laws of
any jurisdiction (foreign or domestic), (f) issue a notice of bankruptcy or winding down of
its operations or issue a press release regarding same, or (g) take any action under the laws of
any jurisdiction (foreign or domestic) analogous to any of the foregoing;

 

- 11 -

 

(vii) a proceeding or case shall be commenced in respect of the Corporation or any of its
subsidiaries, without its application or consent, in any court of competent jurisdiction, seeking
(i) the liquidation, reorganization, moratorium, dissolution, winding up, or composition or
readjustment of its debts, (ii) the appointment of a trustee, receiver, custodian, liquidator or
the like of it or of all or any substantial part of its assets in connection with the liquidation
or dissolution of the Corporation or any of its subsidiaries or (iii) similar relief in respect of
it under any law providing for the relief of debtors, and such proceeding or case described in
clause (i), (ii) or (iii) shall continue undismissed, or unstayed and in effect, for a period of 30
days or any order for relief shall be entered in an involuntary case under United States Bankruptcy
Code (as now or hereafter in effect) or under the comparable laws of any jurisdiction (foreign or
domestic) against the Corporation or action under the laws of any jurisdiction (foreign or
domestic) analogous to any of the foregoing shall be taken with respect to the Corporation and
shall continue undismissed, or unstayed and in effect for a period of 60 days;

(viii) the Corporation consummates a “going private” transaction and as a result the Common
Stock is no longer registered under Sections 12(b) or 12(g) of the Exchange Act;

(ix) there shall be any SEC or judicial stop trade order or trading suspension stop-order or
any restriction in place with the transfer agent for the Common Stock restricting the trading of
such Common Stock for a period of 20 consecutive Trading Days;

(x) there shall be a determination by the SEC or the Corporation such that the Corporation’s
representations, warranties or covenants set forth in Section 2.1(hh) of the Securities Purchase
Agreement are breached or inaccurate, which breach or inaccuracy is not cured within five Trading
Days of such determination; or

(xi) the Corporation consummates a Change of Control; or

(xii) the Corporation shall not have consummated a Strategic Transaction by the date that is
the nine months following the Closing Date (a “Nine Month Redemption Event”);

then, upon (i) the occurrence of any such Redemption Event, and (ii) the affirmative election
delivered to the Corporation by the Requisite Holders to permit a redemption in accordance with
this paragraph (the “Redemption Trigger Notice”), each holder of shares of Series C Preferred Stock
shall thereafter have the option by delivery of a notice (the “Redemption Event Notice”) to the
Corporation prior to the Redemption Date (defined below) to require the Corporation to redeem for
cash, out of funds legally available therefor, all of the then outstanding shares of Series C
Preferred Stock held of record by such holder for an amount per share equal to the Redemption Event
Amount in effect at the time of the redemption hereunder. Upon the Corporation’s receipt of any
Redemption Trigger Notice hereunder, the Corporation shall immediately (and in any event within one
Trading Day following such receipt) deliver

 

- 12 -

 

a written notice (a “Redemption Announcement”) to all
holders of Series C Preferred Stock stating the date upon which the Corporation received such Redemption Trigger Notice. The Corporation shall not
redeem any shares of Series C Preferred Stock during the three Trading Day period following the
delivery of a required Redemption Announcement hereunder. At any time and from time to time during
such three Trading Day period, each holder of Series C Preferred Stock may request (either orally
or in writing) information from the Corporation with respect to the instant redemption (including,
but not limited to, the aggregate number of shares of Series C Preferred Stock covered by
Redemption Event Notices received by the Corporation) and the Corporation shall furnish (either
orally or in writing) as soon as practicable such requested information to such requesting holder.
On the fifth Trading Day following the date of the delivery of the Redemption Trigger Notice (the
"Redemption Date”), the Corporation shall, out of funds legally available therefor, redeem all
shares of Series C Preferred Stock subject to all Redemption Event Notices received by the
Corporation prior to such date. For the avoidance of doubt: (A) the occurrence of a Redemption
Event shall not preclude the occurrence of one or more subsequent Redemption Events, and (B) if a
Nine Month Redemption Event shall occur and, prior to the delivery of a Redemption Trigger Notice,
the Corporation consummates a Strategic Transaction, then the Nine Month Redemption Event shall be
waived and the redemption right under Article VII.A(xii) shall terminate.

B. Definition of Redemption Event Amount. The “Redemption Event Amount” with respect
to a share of Series C Preferred Stock means: (1) with respect to a Nine Month Redemption Event, an
amount equal to the sum of (A) all accrued and unpaid dividends on such share of Series C Preferred
Stock and (B) the Face Amount for each such share of Series C Preferred Stock, and (2) with respect
to any Redemption Event other than a Nine Month Redemption Event, an amount equal to the greater of
(i) the Face Amount plus all accrued and unpaid dividends on such share of Series C Preferred Stock
and (ii) an amount determined by the following formula:

(V / CP) x M

where:

“V” means the Face Amount plus all accrued and unpaid dividends on such share of Series C
Preferred Stock;

“CP” means the Conversion Price in effect on the date on which the Corporation receives the
Redemption Event Notice; and

“M” means the Closing Sales Price on the date on which the Corporation receives the Redemption
Trigger Notice.

 

- 13 -

 

C. Redemption Defaults. If the Corporation fails to pay any holder the Redemption
Event Amount with respect to any share of Series C Preferred Stock within five Trading Days after
its receipt of a Redemption Event Notice, then the holder of Series C Preferred Stock entitled to
redemption shall be entitled to an additional amount of cash equal to interest on the applicable
Redemption Event Amount (excluding the interest payable pursuant to this paragraph) at a per annum
rate equal to the lower of 18% and the highest interest rate permitted by applicable law
from the date on which the Corporation receives the Redemption Event Notice until the date of
payment of the applicable Redemption Event Amount hereunder. Such interest shall be deemed a cash
payment to be made upon redemption of the Series C Preferred Stock out of funds legally available
therefor. In the event the Corporation does not have sufficient funds legally available to redeem
all of the shares of Series C Preferred Stock subject to Redemption Event Notices delivered prior
to the date upon which such redemption is to be effected, the Corporation shall use all funds
legally available to redeem shares of Series C Preferred Stock from each holder pro rata, based on
the total number of shares of Series C Preferred Stock outstanding at the time of redemption
included by such holder in all Redemption Event Notices delivered prior to the date upon which such
redemption is to be effected relative to the total number of shares of Series C Preferred Stock
outstanding at the time of redemption included in all of the Redemption Event Notices delivered
prior to the date upon which such redemption is to be effected, and shall redeem all the remaining
shares to have been redeemed as soon as practicable after the Corporation has funds legally
available therefor.

D. Redemption Right Waivers.

(i) Any and all Redemption Events that may have occurred prior to the consummation of a
Strategic Transaction and for which a Redemption Trigger Notice has not been delivered to the
Corporation shall be deemed irrevocably waived if the Requisite Holders approve a Strategic
Transaction.

(ii) Unless the Corporation and the Requisite Holders agree in writing to a longer period of
time, if a Redemption Event Notice is not tendered to the Corporation within two years from the
date of the occurrence of a particular Redemption Event, then the resulting redemption rights under
this Article VII, solely with respect to that particular Redemption Event, shall be irrevocably
waived.

(iii) Any redemption rights arising under this Article VII that are waived either by operation
of Article VII.D or upon the written approval of the Requisite Holders shall be binding on all
holders of Series C Preferred Stock.

VIII. RANK

All shares of the New Preferred Stock shall rank (i) senior to (a) the Corporation’s Common
Stock; (b) the Common Stock Equivalents (other than Senior Securities) in existence as of the
Closing Date; and (c) any Common Stock Equivalents (other than Senior Securities) and any Other
Stock (other than Senior Securities) issued after the Closing Date (unless, with the consent of the
Requisite Holders obtained in accordance with Article XII hereof, such Common Stock Equivalents or
Other Stock specifically, by their terms, rank senior to or pari passu with the New Preferred
Stock) (collectively with the Common Stock and the Common Stock Equivalents in existence as of the
Closing Date, “Junior Securities”); (ii) pari passu with any Common Stock Equivalents (other than
Senior Securities) and Other Stock (other than Senior Securities) issued after the Closing Date
(with the written consent of the Requisite Holders obtained in accordance with Article XII hereof)
specifically ranking, by their terms, on parity with the New Preferred Stock (the “Pari Passu
Securities”); and (iii) junior to any Common Stock
Equivalents or Other
Stock issued after the Closing Date (with the written consent of the Requisite Holders
obtained in accordance with Article XII hereof) specifically ranking, by their terms, senior to the
New Preferred Stock (collectively, the “Senior Securities”), in each case as to dividends or
distribution of assets upon liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary. Each share of New Preferred Stock shall rank pari passu with each other
share of New Preferred Stock as to dividends and distribution of assets upon liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary.

 

- 14 -

 

IX. LIQUIDATION PREFERENCE

A. If (i) the Corporation shall (1) commence a voluntary case under the U.S. Federal
bankruptcy laws or any other applicable bankruptcy, insolvency or similar law, (2) consent to the
entry of an order for relief in an involuntary case under any law or to the appointment of a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of the
Corporation or of any substantial part of its property, or (3) make an assignment for the benefit
of its creditors, (ii) a decree or order for relief in respect of the Corporation shall be entered
by a court having jurisdiction in the premises in an involuntary case under the U.S. Federal
bankruptcy laws or any other applicable bankruptcy, insolvency or similar law resulting in the
appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar
official) of the Corporation or of any substantial part of its property, or ordering the winding up
or liquidation of its affairs, and any such decree or order shall be unstayed and in effect for a
period of 60 consecutive days, or (iii) the Corporation sells or transfers all or substantially all
of its assets in one transaction or in a series of related transactions and, on account of any such
event as set forth in clauses (i), (ii) or (iii), the Corporation shall liquidate, dissolve or wind
up, or if the Corporation shall otherwise liquidate, dissolve or wind up (a “Liquidation Event”),
no distribution shall be made to the holders of any shares of capital stock of the Corporation
(other than Senior Securities pursuant to the rights, preferences and privileges thereof) upon
liquidation, dissolution or winding up unless prior thereto the holders of shares of New Preferred
Stock shall have received the Liquidation Preference with respect to each share then outstanding.
If, upon the occurrence of a Liquidation Event, the assets and funds legally available for
distribution among the holders of the New Preferred Stock and holders of Pari Passu Securities, if
any, shall be insufficient to permit the payment to such holders of the preferential amounts
payable thereon, then the entire assets and funds of the Corporation legally available for
distribution to the New Preferred Stock and the Pari Passu Securities, if any, shall be distributed
ratably among such shares in proportion to the ratio that the Liquidation Preference payable on
each such share bears to the aggregate Liquidation Preference payable on all such shares.

B. The purchase or redemption by the Corporation of stock of any class, in any manner
permitted by law, shall not, for the purposes hereof, be regarded as a liquidation, dissolution or
winding up of the Corporation. Neither the consolidation or merger of the Corporation with or into
any other entity nor the sale or transfer by the Corporation of less than substantially all of its
assets shall, for the purposes hereof, be deemed to be a liquidation, dissolution or winding up of
the Corporation.

 

- 15 -

 

C. The “Liquidation Preference” with respect to a share of New Preferred Stock means an amount
equal to the Face Amount thereof plus all accrued and unpaid dividends on the New
Preferred Stock (as adjusted for any stock dividends, combinations, splits, recapitalizations
and the like with respect to such shares). The Liquidation Preference with respect to any Pari
Passu Securities, if any, shall be as set forth in the Certificate of Designations filed in respect
thereof. The Series E Preferred Stock shall be Junior Securities subordinate to the New Preferred
Stock.

X. ADJUSTMENTS TO THE CONVERSION PRICE

The Conversion Price shall be subject to adjustment from time to time as follows:

A. Stock Splits, Stock Dividends, Etc. If, at any time on or after the Closing Date,
the number of outstanding shares of Common Stock is increased by a stock split, stock dividend,
combination, reclassification or other similar event (in each case, whether by merger or
otherwise), then, after the date of record for such event, the Conversion Price shall be
proportionately reduced. If the number of outstanding shares of Common Stock is decreased by a
reverse stock split, combination or reclassification of shares, or other similar event (in each
case, whether by merger or otherwise), then, after the date of record for such event, the
Conversion Price shall be proportionately increased. In any such event described in this paragraph,
the Corporation shall notify the Corporation’s transfer agent of such change on or before the
effective date thereof.

B. Adjustment Due to Merger, Consolidation, Etc. With respect to each share of New
Preferred Stock, if, at any time after the Closing Date, there shall be (i) any recapitalization,
reclassification or change of the outstanding shares of Common Stock (but not of such share of New
Preferred Stock), other than a change in par value, or from par value to no par value, or from no
par value to par value, or as a result of a transaction causing an adjustment pursuant to Article
X.A., (ii) any Change of Control or any merger, conversion, consolidation or other business
combination, in each case pursuant to which the Common Stock (but not such share of New Preferred
Stock) is converted into or exchanged for capital stock or other securities of the Corporation or
any subsidiary of the Corporation or any other person (or the right to receive any such stock or
securities) or into any property (including, without limitation, cash and the right to receive cash
or other property) or any combination of the foregoing, or (iii) any share exchange pursuant to
which all of the outstanding shares of Common Stock (but not such share of New Preferred Stock) are
converted into or exchanged for capital stock or other securities of the Corporation or any
subsidiary of the Corporation or any other person (or the right to receive any such securities) or
into any property (including, without limitation, cash and the right to receive cash or other
property) or into any combination of the foregoing (each of (i) — (iii) above being a “Corporate
Change”), then the holder of such share of New Preferred Stock shall thereafter have the right to
receive upon conversion, in lieu of the shares of Common Stock otherwise issuable, such shares of
stock, securities and/or other property as would have been issued or payable in such Corporate
Change if such share of New Preferred Stock had been converted into Common Stock immediately prior
to such Corporate Change without taking into account the limitations on conversion set forth in
Article IV. The Corporation shall not effect any Corporate Change unless (i) each holder of New
Preferred Stock has received written notice of such transaction at least 20 days prior thereto, but
in no event later than 10 days prior to the record date for the determination of stockholders
entitled to vote with respect thereto, (ii) the Requisite

 

- 16 -

 

Holders approve (by vote or written
consent, as provided by the DGCL) such transaction in writing or at a meeting, and (iii) the resulting successor or acquiring entity (if not the
Corporation) assumes by written instrument (in form and substance reasonable satisfactory to the
Requisite Holders) the obligations of this Certificate of Designations. The above provisions shall
apply regardless of whether or not there would have been a sufficient number of shares of Common
Stock authorized and available for issuance upon conversion of the shares of New Preferred Stock
outstanding as of the date of such transaction, and shall similarly apply to successive
recapitalizations, changes, conversions, combinations, reclassifications, consolidations, mergers,
sales, transfers or share exchanges.

C. Adjustment Due to Distribution. If, at any time after the Closing Date, the
Corporation shall declare or make any distribution of its assets (or rights to acquire its assets)
to holders of Common Stock other than a dividend for which an adjustment is provided under Section
A. or Section D. of this Article X.), by way of return of capital or otherwise (including, without
limitation, any dividend or distribution to the Corporation’s stockholders in cash or shares (or
rights to acquire shares) of capital stock of a subsidiary (i.e., a spin-off)) (a “Distribution”),
then the holders of New Preferred Stock shall be entitled, upon any conversion of shares of New
Preferred Stock after the date of record for determining stockholders entitled to such
Distribution, to receive the amount of such assets which would have been payable to the holder with
respect to the shares of Common Stock issuable upon such conversion had such holder been the holder
of such shares of Common Stock on the record date for the determination of stockholders entitled to
such Distribution. If the Distribution involves rights, warrants, or options and the right to
exercise or convert such right, warrant or option would expire in accordance with its terms prior
to the conversion of the New Preferred Stock, then the terms of such right, warrant or option shall
provide that such exercise or convertibility right shall remain in effect until 10 days after the
date the holder of New Preferred Stock receives such right, warrant or option pursuant to the
conversion thereof.

D. Purchase Rights. If, at any time after the Closing Date, the Corporation issues any
securities (“Purchase Rights”) that are convertible into or exercisable or exchangeable for or
impart a right to purchase securities other than Common Stock or Common Stock Equivalents (whether
of the Corporation or any subsidiary of the Corporation) pro rata to the record holders of any
class of Common Stock, then the holders of New Preferred Stock will be entitled to acquire (at the
same time the holders of Common Stock receive such Purchase Rights), upon the terms applicable to
such Purchase Rights, the aggregate Purchase Rights which such holder could have acquired if such
holder had held the number of shares of Common Stock acquirable upon complete conversion of the New
Preferred Stock (without giving effect to the limitations contained in Article IV) immediately
before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights,
or, if no such record is taken, the date as of which the record holders of Common Stock are to be
determined for the grant, issue or sale of such Purchase Rights.

 

- 17 -

 

E. Adjustment Due to Dilutive Issuances.

(i) Dilutive Issuance. Except as otherwise provided in Paragraphs A, B and F of this
Article X, if and whenever the Corporation issues or sells, or in accordance with Article X.E.(ii)
hereof is deemed to have issued or sold, any shares of Common Stock for no consideration or for a
consideration per share less than the Conversion Price on the Measurement Date for such shares
of Common Stock (a “Dilutive Issuance"), then effective immediately upon the such Dilutive
Issuance, the Conversion Price will be adjusted to equal the per share price at which such shares
were issued, sold or deemed to have been issued or sold in such Dilutive Issuance, provided that
such adjustment may be reversed as set forth below.

(ii) Effect on Conversion Price of Certain Events. For purposes of determining the
adjusted Conversion Price under subparagraph (i), the following will be applicable:

(a) Issuance of Options. If the Corporation in any manner issues or grants any
warrants, rights or options, whether or not immediately exercisable, to subscribe for or to
purchase Common Stock or Common Stock Equivalents (such warrants, rights and options to purchase
Common Stock or Common Stock Equivalents are hereinafter referred to as “Options”) and the price
per share for which Common Stock is issuable upon the exercise of such Options (and the price of
any conversion of Common Stock Equivalents, if applicable) is less than the Conversion Price (in
effect on the Measurement Date of such Options) (“Below Conversion Price Options”), then the
maximum total number of shares of Common Stock issuable upon the exercise of all such Below
Conversion Price Options (assuming full exercise, conversion or exchange of Common Stock
Equivalents, if applicable) will, as of the date of the issuance or grant of such Below Conversion
Price Options, be deemed to be outstanding and to have been issued and sold by the Corporation for
such price per share. For purposes of the preceding sentence, the “price per share for which Common
Stock is issuable upon the exercise of such Below Conversion Price Options” is determined by
dividing (i) the total amount, if any, received or receivable by the Corporation as consideration
for the issuance or granting of all such Below Conversion Price Options, plus the minimum aggregate
amount of additional consideration, if any, payable to the Corporation upon the exercise of all
such Below Conversion Price Options, plus, in the case of Common Stock Equivalents issuable upon
the exercise of such Below Conversion Price Options, the minimum aggregate amount of additional
consideration payable upon the exercise, conversion or exchange thereof at the time such Common
Stock Equivalents first become exercisable, convertible or exchangeable, by (ii) the maximum total
number of shares of Common Stock issuable upon the exercise of all such Below Conversion Price
Options (assuming full conversion of Common Stock Equivalents, if applicable). No further
adjustment to the Conversion Price will be made upon the actual issuance of such Common Stock upon
the exercise of such Below Conversion Price Options or upon the exercise, conversion or exchange of
Common Stock Equivalents issuable upon exercise of such Below Conversion Price Options although the
forfeiture or expiration of any such Below Conversion Price Options may result in a subsequent
increase in the Conversion Price as set forth below.

 

- 18 -

 

(b) Issuance of Common Stock Equivalents. If the Corporation in any manner issues or
sells any Common Stock Equivalents, whether or not immediately exercisable, convertible or
exchangeable (other than where the same are issuable upon the exercise of Options), and the price
per share for which Common Stock is issuable upon such exercise, conversion or exchange of such
Common Stock Equivalents is less than the Conversion Price (in effect on the Measurement Date for
such Common Stock Equivalents), then the maximum total number of shares of Common Stock issuable
upon the exercise, conversion or exchange of all such Common Stock Equivalents will, as of the date
of the issuance of such Common Stock
Equivalents, be deemed to be outstanding and to have been issued and sold by the Corporation
for such price per share. For the purposes of the preceding sentence, the “price per share for
which Common Stock is issuable upon such exercise, conversion or exchange” is determined by
dividing (i) the total amount, if any, received or receivable by the Corporation as consideration
for the issuance or sale of all such Common Stock Equivalents, plus the minimum aggregate amount of
additional consideration, if any, payable to the Corporation upon the exercise, conversion or
exchange thereof at the time such Common Stock Equivalents first become exercisable, convertible or
exchangeable, by (ii) the maximum total number of shares of Common Stock issuable upon the
exercise, conversion or exchange of all such Common Stock Equivalents. No further adjustment to the
Conversion Price will be made upon the actual issuance of such Common Stock upon exercise,
conversion or exchange of such Common Stock Equivalents, although the forfeiture or expiration of
any such Common Stock Equivalent may result in a subsequent increase in the Conversion Price as set
forth below.

(c) Expiration of Options or Common Stock Equivalents. If any Dilutive Issuance is
deemed to have occurred as a result of the issuance of Below Conversion Price Options or the
issuance of Common Stock Equivalents at a price per share below the Conversion Price (each, a
"Dilutive Instrument”), and if the Dilutive Instrument expires, terminates or is otherwise
forfeited without having been exercised, converted or exchanged in any manner whatsoever that has
resulted in the issuance of any shares of Common Stock or Common Stock Equivalents, then in each
case, the adjustment to the Conversion Price made upon the issuance of such Dilutive Instrument
shall be reversed; provided, however, that any such reversal shall not impact any Conversion Price
adjustment made as a result of any other Dilutive Issuance; and provided further, however, such
reversal shall not impact the Conversion Price for any conversion of New Preferred Stock with
respect to which conversion the Conversion Date is prior to such reversal.

(iii) Change in Option Price or Conversion Rate. If there is a change at any time in
(a) the amount of consideration payable to the Corporation upon the exercise of any Options; (b)
the amount of consideration, if any, payable to the Corporation upon the exercise, conversion or
exchange of any Common Stock Equivalents; or (c) the rate at which any Common Stock Equivalents are
convertible into or exchangeable for Common Stock, such change shall be deemed to be a new issuance
of such Option or Common Stock Equivalent as of the date of such change for purposes of this
Article X.E., and the Conversion Price in effect at the time of such change will be readjusted in
accordance with Paragraphs (i), (ii) or (iii) of this Article X.E., as applicable.

(iv) Calculation of Consideration Received. If any Common Stock, Options or Common
Stock Equivalents are issued, granted or sold for cash, the consideration received therefor will be
the amount received by the Corporation therefor, after deduction of all underwriting discounts or
allowances in connection with such issuance, grant or sale. In case any Common Stock, Options or
Common Stock Equivalents are issued or sold for a consideration part or all of which shall be other
than cash, the amount of the consideration other than cash received by the Corporation will be the
fair market value of such consideration as determined by a majority of the Board of Directors and
the Requisite Holders, except where such consideration consists of securities, in which case the
amount of consideration received by the Corporation will be the market price thereof as of the date
of receipt; in the event that the

 

- 19 -

 

Board of Directors and the Requisite Holders cannot agree on the value of such consideration, then the matter shall be promptly
submitted to an independent accountant mutually agreed upon by the Board of Directors and the
Requisite Holders, whose determination shall be binding, absent manifest error. In case any Common
Stock, Options or Common Stock Equivalents are issued in connection with any merger or
consolidation in which the Corporation is the surviving corporation, the amount of consideration
therefor will be deemed to be the fair market value of such portion of the net assets and business
of the non-surviving corporation as is attributable to such Common Stock, Options or Common Stock
Equivalents, as the case may be. Notwithstanding anything else herein to the contrary, if Common
Stock, Options or Common Stock Equivalents are issued, granted or sold in conjunction with each
other as part of a single transaction or in a series of related transactions, no deduction shall be
made to the issuance price of any such securities to account for the fair value of any of the other
securities issued, granted or sold in conjunction therewith or as part of the same transaction or
series of related transactions. An adjustment pursuant to this Article X shall be made, if
applicable, for each separate security issued, granted or sold as if such security was not issued,
granted or sold in conjunction with any other security as part of a single transaction or in a
series of related transactions.

(v) No adjustment shall be made pursuant to this Paragraph E (other than a reversal pursuant
to subparagraph (ii)(c)) if such adjustment would result in an increase in the Conversion Price.

F. Adjustment of Conversion Price Upon Redemption Event. If, at any time on or after
the Closing Date, a Redemption Event shall have occurred as a result of any of the events described
in subparagraphs (i), (iii), (iv), (v), (x), (xi), (xiii) or (xiv) of Article VII.A., then the
Conversion Price shall immediately and automatically be reduced to 10% of the Conversion Price in
effect immediately prior to such Redemption Event.

G. Exceptions to Adjustment of Conversion Price. No adjustment to the Conversion Price
will be made (i) except in the case of Article X.E.(iii), upon the conversion or exercise of any
warrants, options or convertible securities issued and outstanding on the Closing Date that are set
forth on Schedule 2.1(c) of the Securities Purchase Agreement in accordance with the terms of such
securities as of such date; (ii) upon the grant or exercise of any stock or options to employees,
directors or consultants of the Corporation which may hereafter be granted to or exercised by any
employee, director or consultant under any stock option, employee stock purchase or similar benefit
plan of the Corporation now existing or to be implemented in the future, so long as the issuance of
such stock or options is approved (by vote or written consent, as provided by the DGCL) by a
majority of the Board of Directors or a majority of the members of a committee of non-employee
directors established for such purpose; (iii) upon issuance or conversion of the New Preferred
Stock or exercise of the Warrants, or (iv) upon the issuance of securities approved (by vote or
written consent, as provided by the DGCL) by the Requisite Holders, which approval specifies that
the issuance is intended to be exempt hereunder.

 

- 20 -

 

H. Notice of Adjustments. Upon the occurrence of each adjustment or readjustment of
the Conversion Price pursuant to this Article X amounting to a more than 5% change in such
Conversion Price, the Corporation, at its expense, shall promptly compute such adjustment or
readjustment and prepare and furnish to each holder of New Preferred Stock a certificate setting
forth such adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Corporation shall, upon the written request at any time of
any holder of New Preferred Stock, furnish to such holder a like certificate setting forth (i) such
adjustment or readjustment, (ii) the Conversion Price at the time in effect and (iii) the number of
shares of Common Stock and the amount, if any, of other securities or property which at the time
would be received upon conversion of a share of New Preferred Stock.

I. Adjustment Following Reverse Stock Split. If, on the Conversion Price Adjustment
Date (as defined below), the average of the Closing Sales Prices (as adjusted to reflect any stock
splits, stock dividends or similar recapitalizations occurring on or before the Conversion Price
Adjustment Date) for the five (5) consecutive Trading Day period ending on the last Trading Day
prior to the Conversion Price Adjustment Date (the “Adjustment 5-Day Average Price”) is less than
the product of the Conversion Price then in effect multiplied by 10, as adjusted to reflect any
stock splits, stock dividends or similar recapitalizations occurring on or before the Conversion
Price Adjustment Date, then, effective as of the Conversion Price Adjustment Date, the Conversion
Price shall be reduced to a price equal to ten percent (10%) of the Adjustment 5-Day Average Price.
The “Conversion Price Adjustment Date” shall mean the Saturday that is three (3) calendar weeks
following the Saturday of the week the Reverse Split (defined below) is effected. The Company
hereby agrees that it will not issue any press releases or file any periodic reports on Form 8-K
under the Exchange Act, except where required by law, during the period of time in which the
Adjustment 5-Day Average Price is being calculated. The “Reverse Split” means a reverse stock split
of the Company’s outstanding Common Stock at an exchange ratio of 1-for-100, and effected within
two weeks of the Closing (defined under the Asset Purchase Agreement).

XI. VOTING RIGHTS

The holders of the New Preferred Stock have no voting power whatsoever, except as otherwise
required by the DGCL in this Article XI and in Article XII below.

Notwithstanding the above, the Corporation shall provide each holder of New Preferred Stock
with prior notification of any meeting of the stockholders (and copies of proxy materials and other
information sent to stockholders). If the Corporation takes a record of its stockholders for the
purpose of determining stockholders entitled to (a) receive payment of any dividend or other
distribution, any right to subscribe for, purchase or otherwise acquire (including by way of
merger, consolidation or recapitalization) any share of any class or any other securities or
property, or to receive any other right, or (b) to vote in connection with any proposed sale, lease
or conveyance of all or substantially all of the assets of the Corporation, or any proposed merger,
consolidation, liquidation, dissolution or winding up of the Corporation, the Corporation shall
mail a notice to each holder, at least 10 days prior to the record date specified therein (or 20
days prior to the consummation of the transaction or event, whichever is earlier, but in no event
earlier than public announcement of such proposed transaction), of the date on which any such
record is to be taken for the purpose of such vote, dividend, distribution, right or other event,
and a brief statement regarding the amount and character of such vote, dividend, distribution,
right or other event to the extent known at such time.

 

- 21 -

 

To the extent that under the DGCL the vote of the holders of the New Preferred Stock, voting
together as a single class, is required to authorize a given action of the Corporation, the
affirmative vote of the Requisite Holders (except as otherwise may be required under the DGCL)
shall constitute the approval of such action by such class; provided, however, that if the DGCL
requires only the separate vote of any one or more, but not all, of the series of New Preferred
Stock, the affirmative vote of at least 66-2/3% of the voting power of such one or more series,
voting together as a single class, shall constitute the approval of such action by the New
Preferred Stock in lieu of the approval of the Requisite Holders. To the extent that under the DGCL
holders of the New Preferred Stock are entitled to vote on a matter with holders of Common Stock,
voting together as one class, each share of New Preferred Stock shall be entitled to a number of
votes equal to the number of shares of Common Stock into which it is then convertible (subject to
the limitations contained in Article IV.C.(ii)) using the record date for the taking of such vote
of stockholders as the date as of which the Conversion Price is calculated. The Corporation shall
not (i) combine the outstanding shares of any series of New Preferred Stock into a smaller number
of shares of such series (whether by reclassification, merger, stock split or otherwise) or (ii)
subdivide the outstanding shares of any series of New Preferred Stock into a greater number of
shares of such series (whether by reclassification, merger, stock split, stock dividend or
otherwise) without the approval (by vote or written consent, as provided by the DGCL) of the
holders of at least 66-2/3% of the voting power of such series of New Preferred Stock to be
combined or subdivided, voting as a separate class.

XII. PROTECTION PROVISIONS

So long as at least 1,000 shares of New Preferred Stock (as adjusted for any stock dividends,
combinations, splits, recapitalizations and the like with respect to such shares) are outstanding,
or after all of the Cash Warrants have been fully exercised, at least 3,000 shares of New Preferred
Stock (as adjusted for any stock dividends, combinations, splits, recapitalizations and the like
with respect to such shares) are outstanding, the Corporation shall not, and shall not allow any of
its subsidiaries to, take any of the following actions (in each case whether by merger,
consolidation, conversion or otherwise) without first obtaining the approval (by vote or written
consent, as provided by the DGCL) of the Requisite Holders:

A. amend, alter, change or repeal the rights, powers, preferences or privileges of the New
Preferred Stock so as to affect the New Preferred Stock adversely; provided, however, that if such
amendment, alteration, change or repeal would affect adversely the rights, powers, preferences or
privileges of any one or more series of New Preferred Stock but shall not so affect each series of
New Preferred Stock, this subparagraph A. shall require the approval (by vote or written consent,
as provided by the DGCL) of the holders of at least 66-2/3% of the voting power of the one or more
series of New Preferred Stock adversely affected, voting together as a single class, in lieu of the
approval of the Requisite Holders required by this subparagraph A;

B. amend, alter, change or repeal any provision of the Certificate of Incorporation of the
Corporation (including, for the avoidance of doubt, any Certificate of Designation or Certificate
of Designations (including this Certificate of Designations) filed pursuant to Section 151(g) of
the DGCL);

 

- 22 -

 

C. redeem, purchase or otherwise acquire, or apply to or set aside any monies for the
redemption, purchase or other acquisition of, or permit any subsidiary of the Corporation to
redeem, purchase or otherwise acquire, or apply to or set aside any monies for the redemption,
purchase or other acquisition of, or declare or pay any dividend or make any Distribution or other
distribution on or with respect to, any capital stock, other than (i) under this Certificate of
Designations with respect to the New Preferred Stock or (ii) in connection with the redemption of
unvested shares of Common Stock issued pursuant to equity compensation plans or arrangements;

D. increase the par value of the Common Stock;

E. enter into a definitive agreement that, if consummated, would represent, or take any other
corporate action that would represent, a Strategic Transaction;

F. enter into a definitive agreement that, if consummated, would result in, or take any other
corporate action that would result in, a Change of Control, Corporate Change or Liquidation Event;

G. file a registration statement under the Securities Act of 1933, as amended (the “Act”),
relating to the sale of any securities of the Corporation, other than registration statements filed
on Form S-8 and any successor thereto; or

H. (i) issue, sell, transfer from the Corporation or distribute any capital stock or other
equity security of the Corporation or any subsidiary of the Corporation including, without
limitation, Common Stock, Options, Purchase Rights or Common Stock Equivalents, whether for no
consideration or for cash consideration, property, services or other exchange, (ii) issue, sell,
transfer from the Corporation or distribute any promissory note or other instrument evidencing
indebtedness for borrowed money, whether for no consideration or for cash consideration, property,
services or other exchange, or (iii) incur indebtedness for borrowed money by the Corporation or
any subsidiary of the Corporation, whether for no consideration or for cash consideration,
property, services or other exchange.

Notwithstanding anything to the contrary contained herein, nothing in this Article XII, shall
require the consent of the Requisite Holders for (i) issuances of shares of Common Stock or options
to employees, officers, directors, or consultants of the Corporation pursuant to any stock option
plan duly adopted by a majority of the non-employee members of the Board of Directors or a majority
of the members of a committee of non-employees directors established for such purpose, duly
approved (by vote or written consent, as provided by the DGCL) by the Corporation’s stockholders
and described in the Public Filings (as described in the Securities Purchase Agreement); (ii)
issuances of securities upon the exercise, exchange of or conversion of any Common Stock
Equivalents issued and outstanding on the Closing Date and described in the Public Filings,
provided that such securities have not been amended since the Closing Date (other than adjustments
due to stock splits or recapitalization events) to increase the number of such securities or to
decrease the exercise, exchange or conversion price of any such securities; and (iii) the issuance
of any Common Stock or Common Stock Equivalents under the terms of
the Securities Purchase Agreement or the Warrants (including in connection with any
adjustments to the conversion price of any such securities pursuant to their terms).

 

- 23 -

 

XIII. MISCELLANEOUS

A. Cancellation of New Preferred Stock. If any shares of New Preferred Stock are
converted pursuant to Article IV or redeemed or repurchased by the Corporation, the Corporation
shall take all actions necessary to cause the shares so converted or redeemed to be canceled and
return to the status of authorized, but unissued preferred stock of no designated series, and such
shares shall not be issuable by the Corporation as New Preferred Stock.

B. Lost or Stolen Certificates. Upon receipt by the Corporation of (i) evidence of the
loss, theft, destruction or mutilation of any stock certificate(s) representing shares of New
Preferred Stock (each a “Preferred Stock Certificate”) and (ii) (y) in the case of loss, theft or
destruction, of indemnity (without any bond or other security) reasonably satisfactory to the
Corporation, or (z) in the case of mutilation, upon surrender and cancellation of the Preferred
Stock Certificate(s), the Corporation shall execute and deliver new Preferred Stock Certificate(s)
of like tenor and date. However, the Corporation shall not be obligated to reissue such lost or
stolen Preferred Stock Certificate(s) if the holder contemporaneously requests the Corporation to
convert in full all shares of New Preferred Stock represented by such Preferred Stock
Certificate(s).

C. Allocation of Reserved Amount. The Reserved Amount shall be allocated pro rata
among the holders of New Preferred Stock based on the number of shares of New Preferred Stock
issued to each holder and issuable to each holder upon exercise of all outstanding Warrants then
held of record by such holder. Each increase to the Reserved Amount shall be allocated pro rata
among the holders of New Preferred Stock based on the number of shares of New Preferred Stock held
by each holder at the time of the increase Reserved Amount. Any portion of the Reserved Amount
which remains allocated to any person or entity which does not hold any New Preferred Stock or
Warrants shall be allocated to the remaining holders of shares of New Preferred Stock and Warrants,
pro rata based on the number of shares of New Preferred Stock and the number of shares of New
Preferred Stock underlying the Warrants then held of record by such holders.

D. Quarterly Statements of Available Shares. For each calendar quarter beginning in
the Closing Date occurs and thereafter so long as any shares of New Preferred Stock are
outstanding, the Corporation shall deliver (or cause its transfer agent to deliver) to each holder
upon its written request a written report notifying such holder of any occurrence which prohibits
the Corporation from issuing Common Stock upon any such conversion. The report shall also specify
(i) the total number of shares of New Preferred Stock outstanding as of the end of such quarter,
(ii) the total number of shares of Common Stock issued upon all conversions of New Preferred Stock
prior to the end of such quarter, (iii) the total number of shares of Common Stock which are
reserved for issuance upon conversion of the New Preferred Stock as of the end of such quarter and
(iv) the total number of shares of Common Stock which may thereafter be issued by the Corporation
upon conversion of the New Preferred Stock before the Corporation would exceed the Reserved Amount.
In addition, the Corporation shall provide (or cause its
transfer agent to provide), as promptly as practicable delivery to the Corporation of a
written request by any holder, any of the information enumerated in clauses (i) — (iv) of this
Paragraph D as of the date of such request.

 

- 24 -

 

E. Payment of Cash; Defaults. Whenever the Corporation is required to make any cash
payment to a holder under this Certificate of Designations (upon redemption or otherwise), such
cash payment shall be made to the holder within ten Trading Days after delivery by such holder of a
notice specifying that the holder elects to receive such payment in cash and the method (e.g., by
check, wire transfer) in which such payment should be made and any supporting documentation
reasonably requested by the Corporation to substantiate the holder’s claim to such cash payment or
the amount thereof. If such payment is not delivered within such ten Trading Day period, such
holder shall thereafter be entitled to interest on the unpaid amount at a per annum rate equal to
the lower of 18% and the highest interest rate permitted by applicable law until such amount is
paid in full to the holder. Such amount shall be deemed to be paid as a redemption out of funds
legally available therefor on the shares of New Preferred Stock giving rise to such default.

F. Status as Stockholder. Upon submission of a Notice of Conversion by a holder of New
Preferred Stock, (i) the shares covered thereby shall be deemed converted into shares of Common
Stock and (ii) the holder’s rights as a holder of such converted shares of New Preferred Stock
shall cease and terminate, excepting only the right to receive certificates for such shares of
Common Stock and to any remedies provided herein or otherwise available at law or in equity to such
holder because of a failure by the Corporation to comply with the terms of this Certificate of
Designations. Notwithstanding the foregoing, if a holder has not received all shares of Common
Stock prior to the last Trading Day of the Delivery Period with respect to a conversion of New
Preferred Stock for any reason, then (unless the holder otherwise elects to retain its status as a
holder of Common Stock by so notifying the Corporation within five Trading Days after the
expiration of such Delivery Period) the holder shall regain the rights of a holder of New Preferred
Stock with respect to such unconverted shares of New Preferred Stock and the Corporation shall, as
soon as practicable, return any certificate representing such unconverted shares to the holder. In
all cases, the holder shall retain all of its rights and remedies for the Corporation’s failure to
convert New Preferred Stock.

G. Waiver. Notwithstanding any provision in this Certificate of Designations to the
contrary, any provision contained herein and any right of the holders of New Preferred Stock
granted hereunder may be waived as to all shares of New Preferred Stock (and the holders thereof)
upon the written consent of the Requisite Holders, unless a higher percentage is required by
applicable law, in which case the written consent of the holders of not less than such higher
percentage shall be required; provided, however, that if a waiver would affect adversely the
rights, powers, preferences or privileges of any one or more series of New Preferred Stock but
shall not so affect the rights, powers, preferences or privileges of each series of New Preferred
Stock, this paragraph shall require the written consent of the holders of at least 66-2/3% of the
voting power (or such higher percentage required by applicable law) of such one or more series of
New Preferred Stock adversely affected, voting together as a single class, in lieu of the written
consent of the Requisite Holders required by this paragraph.

 

- 25 -

 

H. Reference to Other Agreements and Documents. When the terms of this Certificate of
Designations refers to a specific agreement or other document to determine the meaning or operation
of a provision hereof, the secretary of the Corporation shall maintain a copy of such agreement or
document at the principal executive offices of the Corporation and a copy thereof shall be provided
free of charge to any stockholder who makes a request therefor. Unless otherwise provided in this
Certificate of Designations, a reference to any specific agreement or other document shall be
deemed a reference to such agreement or document as amended from time to time in accordance with
the terms of such agreement or document.

I. Severability. If any term of any series of New Preferred Stock is invalid,
unlawful, or incapable of being enforced by reason of any rule of law or public policy, all other
terms of such series of New Preferred Stock as set forth herein which can be given effect without
the invalid, unlawful or unenforceable term will, nevertheless, remain in full force and effect,
and no term of any series of New Preferred Stock will be deemed dependent upon any other such term
unless so expressed in this Certificate of Designations.

J. Force Majeure. Notwithstanding any provision herein to the contrary, the failure of
any party to timely satisfy obligations hereunder shall be excused to the extent that (i) such
failure follows the occurrence of a Force Majeure Event (defined below), and (ii) such Force
Majeure Event has materially adversely affected the ability of such party (or its agents, including
banks, transfer agents, and clearinghouses) to perform hereunder. A failure to perform shall be
excused only for so long as the Force Majeure Event continues to materially adversely affect such
person’s ability to perform. For purposes of this Section, “Force Majeure Event” shall mean
the occurrence of any of the following events: (a) trading in securities generally on either the
Nasdaq Stock Market or the New York Stock Exchange shall have been suspended or limited, or minimum
or maximum prices shall have been generally established on any of such stock exchanges by the SEC
or FINRA; (b) a general banking moratorium shall have been declared by any of federal, New York or
California authorities; (c) an act of war, terrorism or hostility shall have occurred, or (d) a
strike, fire, flood, earthquake, accident or other calamity or Act of God shall have occurred.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

- 26 -

 

IN WITNESS WHEREOF, this Certificate of Designations is executed on behalf of the Corporation
this 30th day of March, 2011.

	 	 	 	 	 
	 	La Jolla Pharmaceutical Company

 	 
	 	By:  	 	 
	 	 	Name:  	Gail A. Sloan 	 
	 	 	Title:  	Chief Financial Officer and Secretary 	 

 

- 27 -

 

Exhibit A

NOTICE OF CONVERSION

(To be Executed by the Registered Holder

in order to Convert the [Series C-11] [Series C-21] [Series D-11] [Series D-21] Preferred Stock)

The undersigned hereby irrevocably elects to convert [insert number of shares to nearest
1/1000th] shares of [Series C-11] [Series C-21] [Series
D-11] [Series D-21] Preferred Stock (the “Conversion”), represented by stock
certificate No(s).  (the “Preferred Stock Certificates”), into shares of common stock
(“Common Stock”) of La Jolla Pharmaceutical Company (the “Corporation”) according to the conditions
of the Certificate of Designations, Preferences and Rights of Series C-11 Convertible
Preferred Stock, Series C-21 Convertible Preferred Stock, Series D-11
Convertible Preferred Stock and Series D-21Convertible Preferred Stock, as of the date
written below. If securities are to be issued in the name of a person other than the undersigned,
the undersigned will pay all transfer taxes payable with respect thereto. No fee will be charged to
the holder for any conversion, except for transfer taxes, if any. Each Preferred Stock Certificate
is attached hereto (or evidence of loss, theft or destruction thereof).

The Corporation shall electronically transmit the Common Stock issuable pursuant to this
Notice of Conversion to the account of the undersigned or its nominee (which is  )
with DTC through its Deposit Withdrawal Agent Commission System (“DTC Transfer”).

The undersigned acknowledges that these securities are “restricted securities” under the
Securities Act of 1933, as amended (the “Act”) and accordingly agrees that all offers and sales by
the undersigned of the securities issuable to the undersigned upon conversion of the [Series
C-11] [Series C-21] [Series D-11] [Series D-21]
Preferred Stock have been or will be made only pursuant to an effective registration of the
transfer of the Common Stock under the Act, or pursuant to an exemption from registration under the
Act.

	 	 	 	 	 
	 	 	Date of Conversion:
	 
	 	 	 	 
	 	 	Applicable Conversion Price:
	 
	 	 	 	 
	 	 	Shares of Common Stock beneficially owned (determined in accordance with
Section 13(d) of the Exchange Act):           
	 
	 	 	 	 
	 

	 	Signature:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Name:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Address:exv10w7

Exhibit 10.7

PROMISSORY NOTE

	 	 	 	 	 

	 

	 	April 1, 2011
	 	 
	 
	 	 	 	 
	$170,000

	 	Hopkinton, Massachusetts	 	 

     FOR VALUE RECEIVED, Alseres Pharmaceuticals, Inc.. (the “Maker”), promises to pay to Robert L
Gipson, or order, at the offices of Robert L. Gipson, c/o Ingalls & Snyder LLC, 61 Broadway, New
York, New York 10006 or at such other place as the holder of this Note may designate, the principal
sum of $170,000, together with interest on the unpaid principal balance of this Note from time to
time outstanding at the rate of 7% per year until paid in full. All principal and accrued interest
shall be due and payable on demand of the Holder.

Interest on this Note shall be computed on the basis of a year of 365 days for the actual number of
days elapsed. All payments by the Maker under this Note shall be in immediately available funds.

Every amount overdue under this Note shall bear interest from and after the date on which such
amount first became overdue at an annual rate which is two (2) percentage points above the rate per
year specified in the first paragraph of this Note. Such interest on overdue amounts under this
Note shall be payable on demand and shall accrue and be compounded monthly until the obligation of
the Maker with respect to the payment of such interest has been discharged (whether before or after
judgment).

In no event shall any interest charged, collected or reserved under this Note exceed the maximum
rate then permitted by applicable law and if any such payment is paid by the Maker, then such
excess sum shall be credited by the holder as a payment of principal.

All payments by the Maker under this Note shall be made without set-off or counterclaim and be free
and clear and without any deduction or withholding for any taxes or fees of any nature whatever,
unless the obligation to make such deduction or withholding is imposed by law. The Maker shall pay
and save the holder harmless from all liabilities with respect to or resulting from any delay or
omission to make any such deduction or withholding required by law.

Whenever any amount is paid under this Note, all or part of the amount paid may be applied to
principal, premium or interest in such order and manner as shall be determined by the holder in its
discretion.

No reference in this Note to any guaranty or other document shall impair the obligation of the
Maker, which is absolute and unconditional, to pay all amounts under this Note strictly in
accordance with the terms of this Note.

The Maker agrees to pay on demand all costs of collection, including reasonable attorneys’ fees,
incurred by the holder in enforcing the obligations of the Maker under this Note.

 

 

No delay or omission on the part of the holder in exercising any right under this Note shall
operate as a waiver of such right or of any other right of such holder, nor shall any delay,
omission or waiver on any one occasion be deemed a bar to or waiver of the same or any other right
on any future occasion. The Maker and every endorser or guarantor of this Note regardless of the
time, order or place of signing waives presentment, demand, protest and notices of every kind and
assents to any extension or postponement of the time of payment or any other indulgence, to any
substitution, exchange or release of collateral, and to the addition or release of any other party
or person primarily or secondarily liable.

This Note may be prepaid in whole or in part at any time or from time to time upon five days’ prior
written notice with the consent of the holder, with the giving of such consent to be in the sole
discretion of the holder. Any such prepayment shall be without penalty or premium.

None of the terms or provisions of this Note may be excluded, modified or amended except by a
written instrument duly executed on behalf of the holder expressly referring to this Note and
setting forth the provision so excluded, modified or amended.

All rights and obligations hereunder shall be governed by the laws of the Commonwealth of
Massachusetts and this Note is executed as an instrument under seal.

	 	 	 	 	 
	 	Alseres Pharmaceuticals, Inc.

 	 
	 	By:  	/s/Kenneth L. Rice Jr
 	 
	 
	 	Title: EVP & CFO

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00187-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00187-of-00352.parquet"}]]