Document:

Exhibit
4.1

 

EXECUTION VERSION

 

 

HARDINGE INC.

 

And

 

COMPUTERSHARE

 

TRUST COMPANY,

 

N.A.

 

 

Rights Agreement

 

Dated as of
February 18, 2010

 

 

 

TABLE
OF CONTENTS

 

	
   

  	
   

  	
  Page

  Number

  
	
   

  	
   

  	
   

  
	
  Section 1.

  	
  Definitions

  	
  1

  
	
   

  	
   

  	
   

  
	
  Section 2.

  	
  Appointment of Rights
  Agent

  	
  6

  
	
   

  	
   

  	
   

  
	
  Section 3.

  	
  Issue of Right
  Certificates

  	
  7

  
	
   

  	
   

  	
   

  
	
  Section 4.

  	
  Form of Right
  Certificates

  	
  9

  
	
   

  	
   

  	
   

  
	
  Section 5.

  	
  Countersignature and
  Registration

  	
  9

  
	
   

  	
   

  	
   

  
	
  Section 6.

  	
  Transfer, Split Up,
  Combination and Exchange of Right Certificates; Mutilated, Destroyed, Lost or
  Stolen Right Certificates

  	
  10

  
	
   

  	
   

  	
   

  
	
  Section 7.

  	
  Exercise of Rights;
  Purchase Price; Expiration Date of Rights

  	
  11

  
	
   

  	
   

  	
   

  
	
  Section 8.

  	
  Cancellation and
  Destruction of Right Certificates

  	
  13

  
	
   

  	
   

  	
   

  
	
  Section 9.

  	
  Availability of
  Preferred Shares

  	
  13

  
	
   

  	
   

  	
   

  
	
  Section 10.

  	
  Preferred Shares Record
  Date

  	
  14

  
	
   

  	
   

  	
   

  
	
  Section 11.

  	
  Adjustment of Purchase
  Price, Number of Shares or Number of Rights

  	
  15

  
	
   

  	
   

  	
   

  
	
  Section 12.

  	
  Certificate of Adjusted
  Purchase Price or Number of Shares

  	
  25

  
	
   

  	
   

  	
   

  
	
  Section 13.

  	
  Consolidation, Merger
  or Sale or Transfer of Assets or Earning Power

  	
  26

  
	
   

  	
   

  	
   

  
	
  Section 14.

  	
  Fractional Rights and
  Fractional Shares

  	
  27

  
	
   

  	
   

  	
   

  
	
  Section 15.

  	
  Rights of Action

  	
  29

  
	
   

  	
   

  	
   

  
	
  Section 16.

  	
  Agreement of Right
  Holders

  	
  30

  
	
   

  	
   

  	
   

  
	
  Section 17.

  	
  Right Certificate
  Holder Not Deemed a Stockholder

  	
  30

  
	
   

  	
   

  	
   

  
	
  Section 18.

  	
  Concerning the Rights
  Agent

  	
  31

  
	
   

  	
   

  	
   

  
	
  Section 19.

  	
  Merger or Consolidation
  or Change of Name of Rights Agent

  	
  32

  

 

i

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
  Number

  
	
   

  	
   

  	
   

  
	
  Section 20.

  	
  Duties of Rights Agent

  	
  33

  
	
   

  	
   

  	
   

  
	
  Section 21.

  	
  Change of Rights Agent

  	
  35

  
	
   

  	
   

  	
   

  
	
  Section 22.

  	
  Issuance of New Right
  Certificates

  	
  37

  
	
   

  	
   

  	
   

  
	
  Section 23.

  	
  Redemption

  	
  37

  
	
   

  	
   

  	
   

  
	
  Section 24.

  	
  Exchange

  	
  38

  
	
   

  	
   

  	
   

  
	
  Section 25.

  	
  Notice of Certain
  Events

  	
  40

  
	
   

  	
   

  	
   

  
	
  Section 26.

  	
  Notices

  	
  42

  
	
   

  	
   

  	
   

  
	
  Section 27.

  	
  Supplements and
  Amendments

  	
  43

  
	
   

  	
   

  	
   

  
	
  Section 28.

  	
  Successors

  	
  43

  
	
   

  	
   

  	
   

  
	
  Section 29.

  	
  Benefits of this
  Agreement

  	
  43

  
	
   

  	
   

  	
   

  
	
  Section 30.

  	
  Severability

  	
  44

  
	
   

  	
   

  	
   

  
	
  Section 31.

  	
  Governing Law

  	
  44

  
	
   

  	
   

  	
   

  
	
  Section 32.

  	
  Counterparts

  	
  44

  
	
   

  	
   

  	
   

  
	
  Section 33.

  	
  Descriptive Headings

  	
  44

  
	
   

  	
   

  	
   

  
	
  Section 34.

  	
  Force Majeure

  	
  44

  
	
   

  	
   

  	
   

  
	
  Signatures

  	
   

  	
  46

  

 

 

	
  Exhibit A

  	
  -

  	
  Form of
  Certificate of Amendment

  
	
   

  	
   

  	
   

  
	
  Exhibit B

  	
  -

  	
  Form of Right
  Certificate

  
	
   

  	
   

  	
   

  
	
  Exhibit C

  	
  -

  	
  Summary of Rights to
  Purchase Preferred Shares

  

 

ii

 

Agreement, dated as of
February 18, 2010, between Hardinge Inc., a New York corporation (the “Company”),
and Computershare Trust Company, N.A., a federally chartered trust company, as
rights agent (the “Rights Agent”).

 

The Board of Directors of
the Company has authorized and declared a dividend of one Series B
preferred share purchase right (a “Right”) for each Common Share (as
hereinafter defined) of the Company outstanding on March 1, 2010 (the “Record
Date”), each Right representing the right to purchase one one-hundredth of
a Preferred Share (as hereinafter defined), upon the terms and subject to the
conditions herein set forth, and has further authorized and directed the
issuance of one Right with respect to each Common Share that shall become
outstanding between the Record Date and the earliest of the Distribution Date,
the Redemption Date and the Final Expiration Date (as such terms are
hereinafter defined).

 

Accordingly, in
consideration of the premises and the mutual agreements herein set forth, the
parties hereby agree as follows:

 

Section 1.              Definitions. 
For purposes of this Agreement, the following terms have the meanings
indicated:

 

(a)           “Acquiring Person” shall mean any Person who or which, together
with all Affiliates and Associates of such Person, shall be the Beneficial
Owner of 20% or more of the Common Shares of the Company then outstanding, but
shall not include the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or any Subsidiary of the Company, or any entity
holding Common Shares for or pursuant to the terms of any such plan.  Notwithstanding the foregoing, no Person
shall become an “Acquiring Person” as the result of an acquisition of Common
Shares by the Company which, by reducing the number of Common 

 

 

Shares of the Company outstanding, increases the proportionate number
of Common Shares of the Company Beneficially Owned by such Person to 20% or
more of the Common Shares of the Company then outstanding; provided, however,
that, if a Person shall become the Beneficial Owner of 20% or more of the
Common Shares of the Company then outstanding by reason of share purchases by
the Company and shall, after such share purchases by the Company, become the
Beneficial Owner of any additional Common Shares of the Company, then such
Person shall be deemed to be an “Acquiring Person.”  Notwithstanding the foregoing, if the Board
of Directors of the Company determines in good faith that a Person who would
otherwise be an “Acquiring Person,” as defined pursuant to the foregoing
provisions of this paragraph (a), has become such inadvertently, and such
Person divests as promptly as practicable a sufficient number of Common Shares
so that such Person would no longer be an “Acquiring Person,” as defined
pursuant to the foregoing provisions of this paragraph (a), then such Person
shall not be deemed to be an “Acquiring Person” for any purposes of this
Agreement.

 

(b)           “Affiliate” shall have the meaning ascribed to such term in
Rule 12b-2 of the General Rules and Regulations under the Exchange
Act as in effect on the date of this Agreement.

 

(c)           “Associate” shall have the meaning ascribed to such term in
Rule 12b-2 of the General Rules and Regulations under the Exchange
Act as in effect on the date of this Agreement.

 

(d)           A Person shall be deemed the “Beneficial Owner” of and shall be deemed
to “Beneficially Own” any securities:

 

2

 

(i)            which such Person or any of such Person’s
Affiliates or Associates beneficially owns, directly or indirectly;

 

(ii)           which such Person or any of such Person’s
Affiliates or Associates has (A) the right to acquire (whether such right
is exercisable immediately or only after the passage of time) pursuant to any
agreement, arrangement or understanding (other than customary agreements with
and between underwriters and selling group members with respect to a bona
fide public offering of securities), or upon the exercise of conversion
rights, exchange rights, rights (other than these Rights), warrants or options,
or otherwise; provided, however, that a Person shall not be
deemed the Beneficial Owner of, or to Beneficially Own, securities tendered
pursuant to a tender or exchange offer made by or on behalf of such Person or
any of such Person’s Affiliates or Associates until such tendered securities
are accepted for purchase or exchange; or (B) the right to vote pursuant
to any agreement, arrangement or understanding; provided, however,
that a Person shall not be deemed the Beneficial Owner of, or to Beneficially
Own, any security if the agreement, arrangement or understanding to vote such
security (1) arises solely from a revocable proxy or consent given to such
Person in response to a public proxy or consent solicitation made pursuant to,
and in accordance with, the applicable rules and regulations promulgated
under the Exchange Act and (2) is not also then reportable on Schedule 13D
under the Exchange Act (or any comparable or successor report); or

 

(iii)          which are beneficially owned, directly or
indirectly, by any other Person with which such Person or any of such Person’s
Affiliates or Associates has any agreement, arrangement or understanding (other
than customary agreements with and between underwriters and selling group
members with respect to a bona fide public offering of securities) 

 

3

 

for the purpose of
acquiring, holding, voting (except to the extent contemplated by the proviso to
Section 1(d)(ii)(B) hereof) or disposing of any securities of the
Company.

 

Notwithstanding anything
in this definition of Beneficial Ownership to the contrary, the phrase “then
outstanding,” when used with reference to a Person’s Beneficial Ownership of
securities of the Company, shall mean the number of such securities then issued
and outstanding together with the number of such securities not then actually
issued and outstanding which such Person would be deemed to Beneficially Own
hereunder.

 

(e)           “Business Day” shall mean any day other than a Saturday, a
Sunday, or a day on which banking institutions in New York City are authorized
or obligated by law or executive order to close.

 

(f)            “Close of Business” on any given date shall mean 5:00 P.M.,
New York City time, on such date; provided, however, that, if
such date is not a Business Day, it shall mean 5:00 P.M., New York City
time, on the next succeeding Business Day.

 

(g)           “Common Shares” when used with reference to the Company shall
mean the shares of common stock, par value $0.01 per share, of the
Company.  “Common Shares” when used with
reference to any Person other than the Company shall mean the capital stock (or
equity interest) with the greatest voting power of such other Person or, if
such other Person is a Subsidiary of another Person, the Person or Persons
which ultimately control such first-mentioned Person.

 

4

 

(h)           “Distribution Date” shall have the meaning set forth in
Section 3(a) hereof.

 

(i)            “Exchange Act” shall mean the Securities Exchange Act of 1934,
as amended.

 

(j)            “Exchange Ratio” shall have the meaning set forth in
Section 24(a) hereof.

 

(k)           “Final Expiration Date” shall have the meaning set forth in
Section 7(a) hereof.

 

(l)            “NASDAQ” shall mean the NASDAQ Stock Market.

 

(m)          “Person” shall mean any individual, firm, corporation or other
entity, and shall include any successor (by merger or otherwise) of such
entity.

 

(n)           “Preferred Shares” shall mean shares of Series B Preferred
Stock, par value $0.01 per share, of the Company having the rights and
preferences set forth in the Form of Certificate of Amendment attached to
this Agreement as Exhibit A.

 

(o)           “Purchase Price” shall have the meaning set forth in
Section 4 hereof.

 

(p)           “Record Date” shall have the meaning set forth in the second
paragraph hereof.

 

(q)           “Redemption Date” shall have the meaning set forth in
Section 7(a) hereof.

 

5

 

(r)            “Redemption Price” shall have the meaning set forth in
Section 23(a) hereof.

 

(s)            “Right” shall have the meaning set forth in the second paragraph
hereof.

 

(t)            “Right Certificate” shall have the meaning set forth in
Section 3(a) hereof.

 

(u)           “Shares Acquisition Date” shall mean the first date of public
announcement by the Company or an Acquiring Person that an Acquiring Person has
become such.

 

(v)           “Subsidiary” of any Person shall mean any corporation or other
entity of which a majority of the voting power of the voting equity securities
or equity interest is owned, directly or indirectly, by such Person.

 

(w)          “Summary of Rights” shall have the meaning set forth in Section 3(b) hereof.

 

(x)           “Trading Day” shall have the meaning set forth in
Section 11(d) hereof.

 

Section 2.              Appointment of Rights Agent. 
The Company hereby appoints the Rights Agent to act as agent for the
Company in accordance with the terms and conditions hereof, and the Rights
Agent hereby accepts such appointment. 
The Company may from time to time appoint such co-Rights Agents as it
may deem necessary or desirable, upon five (5) business days prior written
notice to the Rights Agent; provided, however, that no such advance notice
shall be required in the event of any “force majeure” development as addressed
in Section 34 hereof.  The Rights
Agent shall have no duty to supervise, and shall in no event be liable for, the
acts or omissions of any such co-Rights Agent.

 

6

 

Section 3.              Issue of Right Certificates. 
(a)  Until the tenth day after the Shares Acquisition Date
(including any such date which is after the date of this Agreement and prior to
the issuance of the Rights; the “Distribution Date”), (i) the
Rights will be evidenced (subject to the provisions of
Section 3(b) hereof) by the certificates for Common Shares of the
Company registered in the names of the holders thereof (which certificates
shall also be deemed to be Right Certificates) and not by separate Right
Certificates, and (ii) the right to receive Right Certificates will be
transferable only in connection with the transfer of Common Shares of the
Company.  As soon as practicable after
the Distribution Date, the Company will prepare and execute, the Rights Agent
will countersign, and the Company will send or cause to be sent (and the Rights
Agent will, if requested, send) by first-class, insured, postage-prepaid mail,
to each record holder of Common Shares of the Company as of the Close of
Business on the Distribution Date, at the address of such holder shown on the
records of the Company, a Right Certificate, in substantially the form of
Exhibit B hereto (a “Right Certificate”), evidencing one Right for
each Common Share so held.  As of the
Distribution Date, the Rights will be evidenced solely by such Right
Certificates.

 

(b)           On the Record Date, or as soon as practicable thereafter, the Company
will send a copy of a Summary of Rights to Purchase Preferred Shares, in
substantially the form of Exhibit C hereto (the “Summary of Rights”),
by first-class, postage-prepaid mail, to each record holder of Common Shares as
of the Close of Business on the Record Date, at the address of such holder
shown on the records of the Company. 
With respect to certificates for Common Shares of the Company
outstanding as of the Record Date, until the Distribution Date, the Rights will
be evidenced by such certificates registered in the names of the holders
thereof together with a copy of the Summary of Rights attached thereto.  Until the Distribution Date (or the earlier
of the

 

7

 

 

Redemption Date or the Final Expiration Date), the
surrender for transfer of any certificate for Common Shares of the Company
outstanding on the Record Date, with or without a copy of the Summary of Rights
attached thereto, shall also constitute the transfer of the Rights associated
with the Common Shares of the Company represented thereby.

 

(c)                                  Certificates for Common Shares
which become outstanding (including, without limitation, reacquired Common
Shares referred to in the last sentence of this paragraph (c)) after the Record
Date but prior to the earliest of the Distribution Date, the Redemption Date or
the Final Expiration Date shall have impressed on, printed on, written on or
otherwise affixed to them the following legend:

 

This certificate also evidences and entitles the
holder hereof to certain rights as set forth in an Agreement between Hardinge
Inc. and Computershare Trust Company, N.A., dated as of February 18, 2010,
as it may be amended from time to time (the “Agreement”), the terms of which
are hereby incorporated herein by reference and a copy of which is on file at
the principal executive offices of Hardinge Inc.  Under certain circumstances, as set forth in
the Agreement, such Rights (as defined in the Agreement) will be evidenced by
separate certificates and will no longer be evidenced by this certificate.  Hardinge Inc. will mail to the holder of this
certificate a copy of the Agreement without charge after receipt of a written
request therefor.  As set forth in the
Agreement, Rights Beneficially Owned by any Person (as defined in the
Agreement) who becomes an Acquiring Person (as defined in the Agreement) become
null and void.

 

With respect to such certificates containing the foregoing legend,
until the Distribution Date, the Rights associated with the Common Shares of
the Company represented by such certificates shall be evidenced by such
certificates alone, and the surrender for transfer of any such certificate
shall also constitute the transfer of the Rights associated with the Common Shares
of the Company represented thereby.  In
the event that the Company purchases or acquires any Common Shares of the
Company after the Record Date but prior to the Distribution Date, any Rights
associated with such Common Shares of the Company shall be deemed cancelled and
retired so

 

8

 

that the Company shall not be entitled to exercise any Rights
associated with the Common Shares of the Company which are no longer
outstanding.

 

Section 4.                                            Form of
Right Certificates.  The Right Certificates (and the forms of
election to purchase Preferred Shares and of assignment to be printed on the
reverse thereof) shall be substantially the same as Exhibit B hereto, and
may have such marks of identification or designation and such legends,
summaries or endorsements printed thereon as the Company may deem appropriate
and as are not inconsistent with the provisions of this Agreement, or as may be
required to comply with any applicable law or with any applicable rule or
regulation made pursuant thereto or with any applicable rule or regulation
of any stock exchange or the Financial Industry Regulatory Authority, or to
conform to usage.  Subject to the
provisions of Section 22 hereof, the Right Certificates shall entitle the
holders thereof to purchase such number of one one-hundredths of a Preferred
Share as shall be set forth therein at the price per one one-hundredth of a
Preferred Share set forth therein (the “Purchase Price”), but the number
of such one one-hundredths of a Preferred Share and the Purchase Price shall be
subject to adjustment as provided herein.

 

Section 5.                                            Countersignature
and Registration.  The Right Certificates shall be executed on
behalf of the Company by its Chairman of the Board, its Chief Executive Officer,
its President, any of its Vice Presidents or its Treasurer, either manually or
by facsimile signature, shall have affixed thereto the Company’s seal or a
facsimile thereof, and shall be attested by the Secretary or an Assistant
Secretary of the Company, either manually or by facsimile signature.  The Right Certificates shall be countersigned
either manually or by facsimile signature by the Rights Agent and shall not be
valid for any purpose unless countersigned. 
In case any officer of the Company who shall have signed any of the
Right Certificates shall cease to be such officer of

 

9

 

the
Company before countersignature by the Rights Agent and issuance and delivery
by the Company, such Right Certificates, nevertheless, may be countersigned by
the Rights Agent and issued and delivered by the Company with the same force
and effect as though the individual who signed such Right Certificates had not
ceased to be such officer of the Company; and any Right Certificate may be
signed on behalf of the Company by any individual who, at the actual date of
the execution of such Right Certificate, shall be a proper officer of the
Company to sign such Right Certificate, although at the date of the execution
of this Agreement any such individual was not such an officer.

 

Following the Distribution Date, the Rights Agent will
keep or cause to be kept, at its principal office, books for registration and
transfer of the Right Certificates issued hereunder.  Such books shall show the names and addresses
of the respective holders of the Right Certificates, the number of Rights
evidenced on its face by each of the Right Certificates and the date of each of
the Right Certificates.

 

Section 6.                                            Transfer,
Split Up, Combination and Exchange of Right Certificates; Mutilated, Destroyed,
Lost or Stolen Right Certificates.  Subject to the provisions of Section 14
hereof, at any time after the Close of Business on the Distribution Date, and
at or prior to the Close of Business on the earlier of the Redemption Date or
the Final Expiration Date, any Right Certificate or Right Certificates (other
than Right Certificates representing Rights that have become void pursuant to
Section 11(a)(ii) hereof or that have been exchanged pursuant to
Section 24 hereof) may be transferred, split up, combined or exchanged for
another Right Certificate or Right Certificates entitling the registered holder
to purchase a like number of one one-hundredths of a Preferred Share as the
Right Certificate or Right Certificates surrendered then entitled such holder
to purchase.  Any registered holder
desiring to transfer, split up,

 

10

 

combine
or exchange any Right Certificate or Right Certificates shall make such request
in writing delivered to the Rights Agent, and shall surrender the Right
Certificate or Right Certificates to be transferred, split up, combined or
exchanged at the principal office of the Rights Agent.  Thereupon the Rights Agent shall countersign
and deliver to the Person entitled thereto a Right Certificate or Right
Certificates, as the case may be, as so requested.  The Company may require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer, split up, combination or exchange of Right
Certificates.

 

Upon receipt by the Company and the Rights Agent of
evidence reasonably satisfactory to them of the loss, theft, destruction or
mutilation of a Right Certificate, and, in case of loss, theft or destruction,
of indemnity or security reasonably satisfactory to them, and, at the Company’s
request, reimbursement to the Company and the Rights Agent of all reasonable
expenses incidental thereto, and upon surrender to the Rights Agent and
cancellation of the Right Certificate if mutilated, the Company will make and
deliver a new Right Certificate of like tenor to the Rights Agent for delivery
to the registered holder in lieu of the Right Certificate so lost, stolen,
destroyed or mutilated.

 

Section 7.                                            Exercise
of Rights; Purchase Price; Expiration Date of Rights.
(a)  The registered holder of any Right Certificate may exercise the
Rights evidenced thereby (except as otherwise provided herein), in whole or in
part, at any time after the Distribution Date, upon surrender of the Right
Certificate, with the form of election to purchase on the reverse side thereof
duly executed, to the Rights Agent at the principal office of the Rights Agent,
together with payment of the Purchase Price for each one one-hundredth of a
Preferred Share as to which the Rights are exercised, at or prior to the
earliest of (i) the Close of Business on March 1, 2011 (the “Final
Expiration Date”), (ii) the time at which the Rights are redeemed as
provided in Section

 

11

 

23
hereof (the “Redemption Date”), or (iii) the time at which such
Rights are exchanged as provided in Section 24 hereof.

 

(b)                                 The Purchase Price for each one
one-hundredth of a Preferred Share purchasable pursuant to the exercise of a
Right shall initially be $35.00, and shall be subject to adjustment from time
to time as provided in Section 11 or 13 hereof, and shall be payable in
lawful money of the United States of America in accordance with paragraph
(c) below.

 

(c)                                  Upon receipt of a Right
Certificate representing exercisable Rights, with the form of election to
purchase duly executed, accompanied by payment of the Purchase Price for the
shares to be purchased and an amount equal to any applicable transfer tax
required to be paid by the holder of such Right Certificate in accordance with
Section 9 hereof by certified check, cashier’s check or money order
payable to the order of the Company, the Rights Agent shall thereupon promptly
(i) (A) requisition from any transfer agent of the Preferred Shares
certificates for the number of Preferred Shares to be purchased and the Company
hereby irrevocably authorizes any such transfer agent to comply with all such
requests, or (B) requisition from the depositary agent depositary receipts
representing such number of one one-hundredths of a Preferred Share as are to
be purchased (in which case certificates for the Preferred Shares represented
by such receipts shall be deposited by the transfer agent of the Preferred
Shares with such depositary agent) and the Company hereby directs such
depositary agent to comply with such request; (ii) when appropriate,
requisition from the Company the amount of cash to be paid in lieu of issuance
of fractional shares in accordance with Section 14 hereof;
(iii) after receipt of such certificates or depositary receipts, cause the
same to be delivered to or upon the order of the registered holder of such
Right Certificate, registered in such name or names as may be designated

 

12

 

by such holder; and (iv) when appropriate,
after receipt, deliver such cash to or upon the order of the registered holder
of such Right Certificate.

 

(d)                                 In case the registered holder of
any Right Certificate shall exercise less than all the Rights evidenced
thereby, a new Right Certificate evidencing Rights equivalent to the Rights
remaining unexercised shall be issued by the Rights Agent to the registered
holder of such Right Certificate or to such holder’s duly authorized assigns,
subject to the provisions of Section 14 hereof.

 

Section 8.                                            Cancellation
and Destruction of Right Certificates.  All Right Certificates surrendered for the
purpose of exercise, transfer, split up, combination or exchange shall, if
surrendered to the Company or to any of its agents, be delivered to the Rights
Agent for cancellation or in cancelled form, or, if surrendered to the Rights
Agent, shall be cancelled by it, and no Right Certificates shall be issued in
lieu thereof except as expressly permitted by any of the provisions of this
Agreement.  The Company shall deliver to
the Rights Agent for cancellation and retirement, and the Rights Agent shall so
cancel and retire, any other Right Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof.  The Rights Agent shall deliver all cancelled
Right Certificates to the Company, or shall, at the written request of the
Company, destroy such cancelled Right Certificates, and, in such case, shall
deliver a certificate of destruction thereof to the Company.

 

Section 9.                                            Availability
of Preferred Shares.  The Company covenants and agrees that it will
cause to be reserved and kept available out of its authorized and unissued
Preferred Shares or any Preferred Shares held in its treasury the number of
Preferred Shares that will be sufficient to permit the exercise in full of all
outstanding Rights in accordance with Section 7

 

13

 

hereof.  The Company covenants and agrees that it will
take all such action as may be necessary to ensure that all Preferred Shares
delivered upon exercise of Rights shall, at the time of delivery of the
certificates for such Preferred Shares (subject to payment of the Purchase
Price), be duly and validly authorized and issued and fully paid and
nonassessable shares.

 

The Company further covenants and agrees that it will
pay when due and payable any and all federal and state transfer taxes and
charges which may be payable in respect of the issuance or delivery of the Right
Certificates or of any Preferred Shares upon the exercise of Rights.  The Company shall not, however, be required
to pay any transfer tax which may be payable in respect of any transfer or
delivery of Right Certificates to a Person other than, or the issuance or
delivery of certificates or depositary receipts for the Preferred Shares in a
name other than that of, the registered holder of the Right Certificate
evidencing Rights surrendered for exercise or to issue or to deliver any
certificates or depositary receipts for Preferred Shares upon the exercise of
any Rights until any such tax shall have been paid (any such tax being payable
by the holder of such Right Certificate at the time of surrender) or until it
has been established to the Company’s reasonable satisfaction that no such tax
is due.

 

Section 10.                                      Preferred
Shares Record Date.  Each Person in whose name any certificate for
Preferred Shares is issued upon the exercise of Rights shall for all purposes
be deemed to have become the holder of record of the Preferred Shares
represented thereby on, and such certificate shall be dated, the date upon
which the Right Certificate evidencing such Rights was duly surrendered and
payment of the Purchase Price (and any applicable transfer taxes) was made; provided,
however, that, if the date of such surrender and payment is a date upon
which the Preferred Shares transfer books of the Company are closed, such
Person shall be deemed to have become the record holder of such shares on, and
such certificate shall be dated, the next

 

14

 

succeeding
Business Day on which the Preferred Shares transfer books of the Company are
open.  Prior to the exercise of the
Rights evidenced thereby, the holder of a Right Certificate shall not be
entitled to any rights of a holder of Preferred Shares for which the Rights
shall be exercisable, including, without limitation, the right to vote, to
receive dividends or other distributions or to exercise any preemptive rights,
and shall not be entitled to receive any notice of any proceedings of the
Company, except as provided herein.

 

Section 11.                                      Adjustment
of Purchase Price, Number of Shares or Number of Rights.  The Purchase Price, the number of Preferred
Shares covered by each Right and the number of Rights outstanding are subject
to adjustment from time to time as provided in this Section 11.

 

(a)                                  (i)                                     In the event the Company shall at
any time after the date of this Agreement (A) declare a dividend on the
Preferred Shares payable in Preferred Shares, (B) subdivide the
outstanding Preferred Shares, (C) combine the outstanding Preferred Shares
into a smaller number of Preferred Shares or (D) issue any shares of its
capital stock in a reclassification of the Preferred Shares (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation), except as otherwise
provided in this Section 11(a), the Purchase Price in effect at the time
of the record date for such dividend or of the effective date of such
subdivision, combination or reclassification, and the number and kind of shares
of capital stock issuable on such date, shall be proportionately adjusted so
that the holder of any Right exercised after such time shall be entitled to
receive the aggregate number and kind of shares of capital stock which, if such
Right had been exercised immediately prior to such date and at a time when the
Preferred Shares transfer books of the Company were open, such holder would have
owned upon such exercise and been entitled to

 

15

 

receive by virtue of such dividend, subdivision,
combination or reclassification; provided, however, that in no
event shall the consideration to be paid upon the exercise of one Right be less
than the aggregate par value of the shares of capital stock of the Company
issuable upon exercise of one Right.

 

(ii)                                  Subject
to Section 24 hereof, in the event any Person becomes an Acquiring Person,
each holder of a Right shall thereafter have a right to receive, upon exercise
thereof at a price equal to the then current Purchase Price multiplied by the
number of one one-hundredths of a Preferred Share for which a Right is then
exercisable, in accordance with the terms of this Agreement and in lieu of
Preferred Shares, such number of Common Shares of the Company as shall equal
the result obtained by (A) multiplying the then current Purchase Price by
the number of one one-hundredths of a Preferred Share for which a Right is then
exercisable and dividing that product by (B) 50% of the then current per
share market price of the Common Shares of the Company (determined pursuant to
Section 11(d) hereof) on the date of the occurrence of such event.  In the event that any Person shall become an
Acquiring Person and the Rights shall then be outstanding, the Company shall
not take any action which would eliminate or diminish the benefits intended to
be afforded by the Rights.

 

From and after the occurrence of such event, any
Rights that are or were acquired or Beneficially Owned by any Acquiring Person
shall be void, and any holder of such Rights shall thereafter have no right to
exercise such Rights under any provision of this Agreement.  No Right Certificate shall be issued pursuant
to Section 3 hereof that represents Rights Beneficially Owned by an
Acquiring Person whose Rights would be void pursuant to the

 

16

 

preceding sentence or any Associate or Affiliate thereof; no Right
Certificate shall be issued at any time upon the transfer of any Rights to an
Acquiring Person whose Rights would be void pursuant to the preceding sentence
or any Associate or Affiliate thereof or to any nominee of such Acquiring
Person, Associate or Affiliate or with respect to any Common Shares otherwise
deemed to be Beneficially Owned by any of the foregoing; and any Right
Certificate delivered to the Rights Agent for transfer to an Acquiring Person
or other Person whose Rights would be void pursuant to the preceding sentence
shall be cancelled.

 

(iii)                               In the
event that there shall not be sufficient Common Shares issued but not
outstanding or authorized but unissued to permit the exercise in full of the
Rights in accordance with subparagraph (ii) above, the Company shall take
all such action as may be necessary to authorize additional Common Shares for
issuance upon exercise of the Rights.  In
the event the Company shall, after good faith effort, be unable to take all such
action as may be necessary to authorize such additional Common Shares, the
Company shall substitute, for each Common Share that would otherwise be
issuable upon exercise of a Right, a number of Preferred Shares or fraction
thereof such that the current per share market price of one Preferred Share
multiplied by such number or fraction is equal to the current per share market
price of one Common Share as of the date of issuance of such Preferred Shares
or fraction thereof.

 

(b)                                 In case the Company shall fix a
record date for the issuance of rights, options or warrants to all holders of
Preferred Shares entitling them (for a period expiring within 45 calendar days
after such record date) to subscribe for or purchase Preferred Shares (or
shares having the same rights, privileges and preferences as the Preferred
Shares (“equivalent preferred shares”)) or securities convertible into
Preferred Shares or equivalent preferred shares at a price per Preferred Share
or equivalent preferred share (or having a conversion price per share, if a
security convertible into Preferred Shares or equivalent preferred shares) less
than the then current per share market price of the Preferred Shares (as
defined in Section 11(d)) on such record date,

 

17

 

 

the
Purchase Price to be in effect after such record date shall be determined by
multiplying the Purchase Price in effect immediately prior to such record date
by a fraction, the numerator of which shall be the number of Preferred Shares
outstanding on such record date plus the number of Preferred Shares which the
aggregate offering price of the total number of Preferred Shares and/or
equivalent preferred shares so to be offered (and/or the aggregate initial
conversion price of the convertible securities so to be offered) would purchase
at such current market price and the denominator of which shall be the number
of Preferred Shares outstanding on such record date plus the number of
additional Preferred Shares and/or equivalent preferred shares to be offered
for subscription or purchase (or into which the convertible securities so to be
offered are initially convertible); provided, however, that in no
event shall the consideration to be paid upon the exercise of one Right be less
than the aggregate par value of the shares of capital stock of the Company
issuable upon exercise of one Right.  In
case such subscription price may be paid in a consideration part or all of
which shall be in a form other than cash, the value of such consideration shall
be as determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent and
shall be binding on the Rights Agent and holders of the Rights.  Preferred Shares owned by or held for the account
of the Company shall not be deemed outstanding for the purpose of any such
computation.  Such adjustment shall be
made successively whenever such a record date is fixed; and, in the event that
such rights, options or warrants are not so issued, the Purchase Price shall be
adjusted to be the Purchase Price which would then be in effect if such record
date had not been fixed.

 

(c)           In case the Company shall fix a
record date for the making of a distribution to all holders of the Preferred
Shares (including any such distribution made in connection with a consolidation
or merger in which the Company is the continuing or surviving corporation)

 

18

 

of
evidences of indebtedness or assets (other than a regular quarterly cash
dividend or a dividend payable in Preferred Shares) or subscription rights or
warrants (excluding those referred to in Section 11(b) hereof), the
Purchase Price to be in effect after such record date shall be determined by
multiplying the Purchase Price in effect immediately prior to such record date
by a fraction, the numerator of which shall be the then-current per share
market price of the Preferred Shares on such record date, less the fair market
value (as determined in good faith by the Board of Directors of the Company,
whose determination shall be described in a statement filed with the Rights
Agent and shall be binding on the Rights Agent and holders of the Rights) of
the portion of the assets or evidences of indebtedness so to be distributed or
of such subscription rights or warrants applicable to one Preferred Share and
the denominator of which shall be such then-current per share market price of
the Preferred Shares on such record date; provided, however, that
in no event shall the consideration to be paid upon the exercise of one Right
be less than the aggregate par value of the shares of capital stock of the
Company to be issued upon exercise of one Right.  Such adjustments shall be made successively
whenever such a record date is fixed; and, in the event that such distribution
is not so made, the Purchase Price shall again be adjusted to be the Purchase
Price which would then be in effect if such record date had not been fixed.

 

(d)           (i)   For the purpose of any computation hereunder,
the “current per share market price” of any security (a “Security” for
the purpose of this Section 11(d)(i)) on any date shall be deemed to be
the average of the daily closing prices per share of such Security for the 30
consecutive Trading Days immediately prior to such date; provided, however,
that, in the event that the current per share market price of the Security is
determined during a period following the announcement by the issuer of such
Security of (A) a dividend or distribution on such Security payable in
shares of such Security or Securities convertible into such shares, or (B) any
subdivision,

 

19

 

combination
or reclassification of such Security and prior to the expiration of 30 Trading
Days after the ex-dividend date for such dividend or distribution, or the
record date for such subdivision, combination or reclassification, then, and in
each such case, the current per share market price shall be appropriately
adjusted to reflect the current market price per share equivalent of such
Security.  The closing price for each day
shall be the last sale price, regular way, reported at or prior to 4:00 P.M.
Eastern time or, in case no such sale takes place on such day, the average of
the closing bid and asked prices, regular way, reported as of 4:00 P.M.
Eastern time, in either case, as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the Security is not listed or
admitted to trading on the New York Stock Exchange, as reported in the
principal consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which the Security is
listed or admitted to trading or, if the Security is not listed or admitted to
trading on any national securities exchange, the last quoted price reported at
or prior to 4:00 P.M. Eastern time or, if not so quoted, the average of
the high bid and low asked prices in the over-the-counter market, as reported
as of 4:00 P.M. Eastern time by NASDAQ or such other system then in use,
or, if on any such date the Security is not quoted by any such organization,
the average of the closing bid and asked prices as furnished by a professional
market maker making a market in the Security selected by the Board of Directors
of the Company.  The term “Trading Day”
shall mean a day on which the principal national securities exchange on which
the Security is listed or admitted to trading is open for the transaction of
business, or, if the Security is not listed or admitted to trading on any
national securities exchange, a Business Day.

 

20

 

(ii)           For the purpose of any computation
hereunder, the “current per share market price” of the Preferred Shares shall
be determined in accordance with the method set forth in Section 11(d)(i).  If the Preferred Shares are not publicly
traded, the “current per share market price” of the Preferred Shares shall be
conclusively deemed to be the current per share market price of the Common
Shares as determined pursuant to Section 11(d)(i) hereof (appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date hereof), multiplied by one hundred.  If neither the Common Shares nor the
Preferred Shares are publicly held or so listed or traded, “current per share
market price” shall mean the fair value per share as determined in good faith
by the Board of Directors of the Company, whose determination shall be described
in a statement filed with the Rights Agent.

 

(e)           No adjustment in the Purchase Price
shall be required unless such adjustment would require an increase or decrease
of at least 1% in the Purchase Price; provided, however, that any
adjustments which by reason of this Section 11(e) are not required to
be made shall be carried forward and taken into account in any subsequent
adjustment.  All calculations under this Section 11
shall be made to the nearest cent or to the nearest one one-millionth of a
Preferred Share or one ten-thousandth of any other share or security as the
case may be.  Notwithstanding the first
sentence of this Section 11(e), any adjustment required by this Section 11
shall be made no later than the earlier of (i) three years from the date
of the transaction which requires such adjustment or (ii) the date of the
expiration of the right to exercise any Rights.

 

(f)            If, as a result of an adjustment
made pursuant to Section 11(a) hereof, the holder of any Right
thereafter exercised shall become entitled to receive any shares of  capital stock of the Company other than
Preferred Shares, thereafter the number of such other shares so receivable upon
exercise of any Right shall be subject to adjustment from time to time in a manner

 

21

 

and
on terms as nearly equivalent as practicable to the provisions with respect to
the Preferred Shares contained in Section 11(a) through (c) hereof,
inclusive, and the provisions of Sections 7, 9, 10 and 13 hereof with respect
to the Preferred Shares shall apply on like terms to any such other shares.

 

(g)           All Rights originally issued by the
Company subsequent to any adjustment made to the Purchase Price hereunder shall
evidence the right to purchase, at the adjusted Purchase Price, the number of
one one-hundredths of a Preferred Share purchasable from time to time hereunder
upon exercise of the Rights, all subject to further adjustment as provided
herein.

 

(h)           Unless the Company shall have
exercised its election as provided in Section 11(i) hereof, upon each
adjustment of the Purchase Price as a result of the calculations made in
Sections 11(b) and (c) hereof, each Right outstanding immediately
prior to the making of such adjustment shall thereafter evidence the right to
purchase, at the adjusted Purchase Price, that number of one one-hundredths of
a Preferred Share (calculated to the nearest one one-millionth of a Preferred
Share) obtained by (A) multiplying (x) the number of one
one-hundredths of a share covered by a Right immediately prior to this
adjustment by (y) the Purchase Price in effect immediately prior to such
adjustment of the Purchase Price and (B) dividing the product so obtained
by the Purchase Price in effect immediately after such adjustment of the
Purchase Price.

 

(i)            The Company may elect, on or after
the date of any adjustment of the Purchase Price, to adjust the number of
Rights in substitution for any adjustment in the number of one one-hundredths
of a Preferred Share purchasable upon the exercise of a Right.  Each of the Rights outstanding after such
adjustment of the number of Rights shall be exercisable for the number of one
one-hundredths of a Preferred Share for which a Right was exercisable immediately

 

22

 

prior
to such adjustment.  Each Right held of
record prior to such adjustment of the number of Rights shall become that
number of Rights (calculated to the nearest one ten-thousandth) obtained by
dividing the Purchase Price in effect immediately prior to adjustment of the
Purchase Price by the Purchase Price in effect immediately after adjustment of
the Purchase Price.  The Company shall
make a public announcement of its election to adjust the number of Rights, indicating
the record date for the adjustment, and, if known at the time, the amount of
the adjustment to be made.  This record
date may be the date on which the Purchase Price is adjusted or any day thereafter,
but, if the Right Certificates have been issued, shall be at least 10 days
later than the date of the public announcement. 
If Right Certificates have been issued, upon each adjustment of the
number of Rights pursuant to this Section 11(i), the Company shall, as
promptly as practicable, cause to be distributed to holders of record of Right
Certificates on such record date Right Certificates evidencing, subject to Section 14
hereof, the additional Rights to which such holders shall be entitled as a
result of such adjustment, or, at the option of the Company, shall cause to be
distributed to such holders of record in substitution and replacement for the
Right Certificates held by such holders prior to the date of adjustment, and
upon surrender thereof, if required by the Company, new Right Certificates evidencing
all the Rights to which such holders shall be entitled after such
adjustment.  Right Certificates so to be
distributed shall be issued, executed and countersigned in the manner provided
for herein, and shall be registered in the names of the holders of record of
Right Certificates on the record date specified in the public announcement.

 

(j)            Irrespective of any adjustment or
change in the Purchase Price or in the number of one one-hundredths of a
Preferred Share issuable upon the exercise of the Rights, the Right
Certificates theretofore and thereafter issued may continue to express the
Purchase Price

 

23

 

and
the number of one one-hundredths of a Preferred Share which were expressed in
the initial Right Certificates issued hereunder.

 

(k)           Before taking any action that would
cause an adjustment reducing the Purchase Price below one one-hundredth of the
then par value, if any, of the Preferred Shares issuable upon exercise of the
Rights, the Company shall take any corporate action which may, in the opinion
of its counsel, be necessary in order that the Company may validly and legally
issue fully paid and nonassessable Preferred Shares at such adjusted Purchase
Price.

 

(l)            In any case in which this Section 11
shall require that an adjustment in the Purchase Price be made effective as of
a record date for a specified event, the Company may elect to defer until the
occurrence of such event the issuing to the holder of any Right exercised after
such record date of the Preferred Shares and other capital stock or securities
of the Company, if any, issuable upon such exercise over and above the
Preferred Shares and other capital stock or securities of the Company, if any,
issuable upon such exercise on the basis of the Purchase Price in effect prior
to such adjustment; provided, however, that the Company shall
deliver to such holder a due bill or other appropriate instrument evidencing
such holder’s right to receive such additional shares upon the occurrence of
the event requiring such adjustment.

 

(m)          Anything in this Section 11 to
the contrary notwithstanding, the Company shall be entitled to make such
reductions in the Purchase Price, in addition to those adjustments expressly
required by this Section 11, as and to the extent that it, in its sole
discretion, shall determine to be advisable in order that any consolidation or
subdivision of the Preferred Shares, issuance wholly for cash of any Preferred
Shares at less than the current market price, issuance wholly for cash of
Preferred Shares or securities which by their terms are convertible into or exchangeable

 

24

 

for
Preferred Shares, dividends on Preferred Shares payable in Preferred Shares or issuance
of rights, options or warrants referred to in Section 11(b) hereof,
hereafter made by the Company to holders of the Preferred Shares shall not be
taxable to such stockholders.

 

(n)           In the event that, at any time after
the date of this Agreement and prior to the Distribution Date, the Company
shall (i) declare or pay any dividend on the Common Shares payable in
Common Shares, or (ii) effect a subdivision, combination or consolidation
of the Common Shares (by reclassification or otherwise than by payment of
dividends in Common Shares) into a greater or lesser number of Common Shares,
then, in any such case, (A) the number of one one-hundredths of a
Preferred Share purchasable after such event upon proper exercise of each Right
shall be determined by multiplying the number of one one-hundredths of a
Preferred Share so purchasable immediately prior to such event by a fraction,
the numerator of which is the number of Common Shares outstanding immediately
before such event and the denominator of which is the number of Common Shares
outstanding immediately after such event, and (B) each Common Share
outstanding immediately after such event shall have issued with respect to it
that number of Rights which each Common Share outstanding immediately prior to
such event had issued with respect to it. 
The adjustments provided for in this Section 11(n) shall be
made successively whenever such a dividend is declared or paid or such a
subdivision, combination or consolidation is effected.

 

Section 12.             Certificate of Adjusted Purchase
Price or Number of Shares.  Whenever
an adjustment is made as provided in Section 11 or 13 hereof, the Company
shall promptly (a) prepare a certificate setting forth such adjustment and
a brief statement of the facts accounting for such adjustment, (b) file
with the Rights Agent and with each transfer agent for the Common Shares or the
Preferred Shares and the Securities and Exchange Commission a copy

 

25

 

of
such certificate and (c) if such adjustment occurs at any time after the
Distribution Date, mail a brief summary thereof to each holder of a Right
Certificate in accordance with Section 25 hereof.

 

Section 13.             Consolidation, Merger or Sale or
Transfer of Assets or Earning Power. 
In the event, directly or indirectly, at any time after a Person has
become an Acquiring Person, (a) the Company shall consolidate with, or
merge with and into, any other Person, (b) any Person shall consolidate
with the Company, or merge with and into the Company and the Company shall be
the continuing or surviving corporation of such merger and, in connection with
such merger, all or part of the Common Shares shall be changed into or
exchanged for stock or other securities of any other Person (or the Company) or
cash or any other property, or (c) the Company shall sell or otherwise
transfer (or one or more of its Subsidiaries shall sell or otherwise transfer),
in one or more transactions, assets or earning power aggregating 50% or more of
the assets or earning power of the Company and its Subsidiaries (taken as a
whole) to any other Person other than the Company or one or more of its
wholly-owned Subsidiaries, then, and in each such case, proper provision shall
be made so that (i) each holder of a Right (except as otherwise provided
herein) shall thereafter have the right to receive, upon the exercise thereof
at a price equal to the then current Purchase Price multiplied by the number of
one one-hundredths of a Preferred Share for which a Right is then exercisable, in
accordance with the terms of this Agreement and in lieu of Preferred Shares,
such number of Common Shares of such other Person (including the Company as
successor thereto or as the surviving corporation) as shall equal the result
obtained by (A) multiplying the then current Purchase Price by the number
of one one-hundredths of a Preferred Share for which a Right is then
exercisable and dividing that product by (B) 50% of the then current per
share market price of the Common Shares of such

 

26

 

other
Person (determined pursuant to Section 11(d) hereof) on the date of
consummation of such consolidation, merger, sale or transfer; (ii) the
issuer of such Common Shares shall thereafter be liable for, and shall assume,
by virtue of such consolidation, merger, sale or transfer, all the obligations
and duties of the Company pursuant to this Agreement; (iii) the term “Company”
shall thereafter be deemed to refer to such issuer; and (iv) such issuer
shall take such steps (including, but not limited to, the reservation of a
sufficient number of its Common Shares in accordance with Section 9
hereof) in connection with such consummation as may be necessary to assure that
the provisions hereof shall thereafter be applicable, as nearly as reasonably
may be, in relation to the Common Shares thereafter deliverable upon the
exercise of the Rights.  The Company
shall not consummate any such consolidation, merger, sale or transfer unless,
prior thereto, the Company and such issuer shall have executed and delivered to
the Rights Agent a supplemental agreement so providing.  The Company shall not enter into any
transaction of the kind referred to in this Section 13 if at the time of
such transaction there are any rights, warrants, instruments or securities
outstanding or any agreements or arrangements which, as a result of the
consummation of such transaction, would eliminate or substantially diminish the
benefits intended to be afforded by the Rights. 
The provisions of this Section 13 shall similarly apply to
successive mergers or consolidations or sales or other transfers.

 

Section 14.             Fractional Rights and Fractional
Shares.  (a)  The Company shall
not be required to issue fractions of Rights or to distribute Right
Certificates which evidence fractional Rights. 
In lieu of such fractional Rights, there shall be paid to the registered
holders of the Right Certificates with regard to which such fractional Rights
would otherwise be issuable, an amount in cash equal to the same fraction of
the current market value of a whole Right. 
For the purposes of this Section 14(a), the current market value of
a whole Right shall be the closing

 

27

 

price of the Rights for the Trading Day immediately prior to the date
on which such fractional Rights would have been otherwise issuable.  The closing price for any day shall be the
last sale price, regular way, or, in case no such sale takes place on such day,
the average of the closing bid and asked prices, regular way, in either case,
as reported in the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the New York Stock
Exchange or, if the Rights are not listed or admitted to trading on the New
York Stock Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal national
securities exchange on which the Rights are listed or admitted to trading or,
if the Rights are not listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average of the high
bid and low asked prices in the over-the-counter market, as reported by NASDAQ
or such other system then in use or, if on any such date the Rights are not
quoted by any such organization, the average of the closing bid and asked
prices as furnished by a professional market maker making a market in the
Rights selected by the Board of Directors of the Company.  If on any such date no such market maker is
making a market in the Rights, the fair value of the Rights on such date as
determined in good faith by the Board of Directors of the Company shall be
used.

 

(b)           The
Company shall not be required to issue fractions of Preferred Shares (other
than fractions which are integral multiples of one one-hundredth of a Preferred
Share) upon exercise of the Rights or to distribute certificates which evidence
fractional Preferred Shares (other than fractions which are integral multiples
of one one-hundredth of a Preferred Share). 
Fractions of Preferred Shares in integral multiples of one one-hundredth
of a Preferred Share may, at the election of the Company, be evidenced by
depositary receipts, pursuant to an appropriate agreement between the Company
and a depositary selected by it; provided that such 

 

28

 

agreement shall provide that the holders of such depositary receipts
shall have all the rights, privileges and preferences to which they are
entitled as beneficial owners of the Preferred Shares represented by such
depositary receipts.  In lieu of
fractional Preferred Shares that are not integral multiples of one
one-hundredth of a Preferred Share, the Company shall pay to the registered
holders of Right Certificates at the time such Rights are exercised as herein
provided an amount in cash equal to the same fraction of the current market
value of one Preferred Share.  For the
purposes of this Section 14(b), the current market value of a Preferred
Share shall be the closing price of a Preferred Share (as determined pursuant
to the second sentence of Section 11(d)(i) hereof) for the Trading
Day immediately prior to the date of such exercise.

 

(c)           The
holder of a Right, by the acceptance of the Right, expressly waives such holder’s
right to receive any fractional Rights or any fractional shares upon exercise
of a Right (except as provided above).

 

Section 15.             Rights
of Action.  All rights of action in
respect of this Agreement, excepting the rights of action given to the Rights
Agent under Section 18 hereof, are vested in the respective registered
holders of the Right Certificates (and, prior to the Distribution Date, the
registered holders of the Common Shares); and any registered holder of any
Right Certificate (or, prior to the Distribution Date, of the Common Shares),
without the consent of the Rights Agent or of the holder of any other Right
Certificate (or, prior to the Distribution Date, of the Common Shares), may, in
such holder’s own behalf and for such holder’s own benefit, enforce, and may
institute and maintain any suit, action or proceeding against the Company to enforce,
or otherwise act in respect of, such holder’s right to exercise the Rights
evidenced by such Right Certificate in the manner provided in such Right
Certificate and in this Agreement.  Without
limiting the foregoing or any remedies available to the holders of Rights, it
is specifically 

 

29

 

acknowledged that the holders of Rights would not have an adequate
remedy at law for any breach of this Agreement, and will be entitled to
specific performance of the obligations under, and injunctive relief against
actual or threatened violations of the obligations of any Person subject to,
this Agreement.

 

Section 16.             Agreement
of Right Holders.  Every holder of a
Right, by accepting the same, consents and agrees with the Company and the
Rights Agent and with every other holder of a Right that:

 

(a)           prior
to the Distribution Date, the Rights will be transferable only in connection
with the transfer of the Common Shares;

 

(b)           after
the Distribution Date, the Right Certificates are transferable only on the
registry books of the Rights Agent if surrendered at the principal office of
the Rights Agent, duly endorsed or accompanied by a proper instrument of
transfer; and

 

(c)           the
Company and the Rights Agent may deem and treat the person in whose name the
Right Certificate (or, prior to the Distribution Date, the associated Common
Shares certificate) is registered as the absolute owner thereof and of the
Rights evidenced thereby (notwithstanding any notations of ownership or writing
on the Right Certificate or the associated Common Shares certificate made by
anyone other than the Company or the Rights Agent) for all purposes whatsoever,
and neither the Company nor the Rights Agent shall be affected by any notice to
the contrary.

 

Section 17.             Right
Certificate Holder Not Deemed a Stockholder.  No holder, as such, of any Right Certificate
shall be entitled to vote, receive dividends or be deemed for any 

 

30

 

purpose the holder of the Preferred Shares or any other securities of
the Company which may at any time be issuable on the exercise of the Rights
represented thereby, nor shall anything contained herein or in any Right
Certificate be construed to confer upon the holder of any Right Certificate, as
such, any of the rights of a stockholder of the Company or any right to vote
for the election of directors or upon any matter submitted to stockholders at
any meeting thereof, or to give or withhold consent to any corporate action, or
to receive notice of meetings or other actions affecting stockholders (except
as provided in Section 25 hereof), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by such Right
Certificate shall have been exercised in accordance with the provisions hereof.

 

Section 18.             Concerning
the Rights Agent.  The Company agrees
to pay to the Rights Agent reasonable compensation for all services rendered by
it hereunder, and, from time to time, on demand of the Rights Agent, its
reasonable expenses and counsel fees and other disbursements incurred in the
administration and execution of this Agreement and the exercise and performance
of its duties hereunder.  The Company
also agrees to indemnify the Rights Agent for, and to hold it harmless against,
any loss, liability, or expense incurred without gross negligence, bad faith or
willful misconduct on the part of the Rights Agent, for anything done or omitted
by the Rights Agent in connection with the acceptance and administration of
this Agreement, including the costs and expenses of defending against any claim
of liability in the premises.

 

The Rights Agent shall be protected and shall incur no
liability for, or in respect of any action taken, suffered or omitted by it in
connection with, its administration of this Agreement in reliance upon any
Right Certificate or certificate for the Preferred Shares or Common Shares or
for other securities of the Company, instrument of assignment or  transfer, power of attorney, endorsement,
affidavit, letter, notice, direction, consent, certificate, statement, or 

 

31

 

other paper or document believed by it to be genuine
and to be signed, executed and, where necessary, verified or acknowledged, by
the proper person or persons, or otherwise upon the advice of counsel as set
forth in Section 20 hereof.

 

Section 19.             Merger
or Consolidation or Change of Name of Rights Agent.  Any corporation into which the Rights Agent
or any successor Rights Agent may be merged or with which it may be
consolidated, or any corporation resulting from any merger or consolidation to
which the Rights Agent or any successor Rights Agent shall be a party, or any
corporation succeeding to the stock transfer or corporate trust powers of the
Rights Agent or any successor Rights Agent, shall be the successor to the
Rights Agent under this Agreement without the execution or filing of any paper
or any further act on the part of any of the parties hereto; provided
that such corporation would be eligible for appointment as a successor Rights
Agent under the provisions of Section 21 hereof.  In case at the time such successor Rights
Agent shall succeed to the agency created by this Agreement, any of the Right
Certificates shall have been countersigned but not delivered, any such
successor Rights Agent may adopt the countersignature of the predecessor Rights
Agent and deliver such Right Certificates so countersigned; and, in case at
that time any of the Right Certificates shall not have been  countersigned, any successor Rights Agent may
countersign such Right Certificates either in the name of the predecessor
Rights Agent or in the name of the successor Rights Agent; and, in all such
cases, such Right Certificates shall have the full force provided in the Right
Certificates and in this Agreement.

 

In case at any time the name of the Rights Agent shall
be changed and at such time any of the Right Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the
countersignature under its prior name and deliver Right Certificates so
countersigned; and, in case at that time any of the Right Certificates shall
not have been countersigned, 

 

32

 

the Rights Agent may countersign such Right
Certificates either in its prior name or in its changed name; and, in all such
cases, such Right Certificates shall have the full force provided in the Right
Certificates and in this Agreement.

 

Section 20.             Duties
of Rights Agent.  The Rights Agent
undertakes the duties and obligations imposed by this Agreement upon the
following terms and conditions, by all of which the Company and the holders of
Right Certificates, by their acceptance thereof, shall be bound:

 

(a)           The
Rights Agent may consult with legal counsel (who may be legal counsel for the
Company), and the opinion of such counsel shall be full and complete authorization
and protection to the Rights Agent as to any action taken or omitted by it in
good faith and in accordance with such opinion.

 

(b)           Whenever
in the performance of its duties under this Agreement the Rights Agent shall
deem it necessary or desirable that any fact or matter be proved or established
by the Company prior to taking or suffering any action hereunder, such fact or
matter (unless other evidence in respect thereof be herein specifically
prescribed) may be deemed to be conclusively proved and established by a
certificate signed by any one of the Chairman of the Board, the Chief Executive
Officer, the President, any Vice President, the Treasurer or the Secretary of
the Company and delivered to the Rights Agent; and such certificate shall be
full authorization to the Rights Agent for any action taken or suffered in good
faith by it under the provisions of this Agreement in reliance upon such
certificate.

 

(c)           The
Rights Agent shall be liable hereunder to the Company and any other Person only
for its own gross negligence, bad faith or willful misconduct.

 

33

 

(d)           The
Rights Agent shall not be liable for or by reason of any of the statements of
fact or recitals contained in this Agreement or in the Right Certificates
(except its countersignature thereof) or be required to verify the same, but
all such statements and recitals are and shall be deemed to have been made by
the Company only.

 

(e)           The
Rights Agent shall not be under any responsibility in respect of the validity
of this Agreement or the execution and delivery hereof (except the due
execution hereof by the Rights Agent) or in respect of the validity or
execution of any Right Certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Right Certificate; nor shall it
be responsible for any change in the exercisability of the Rights (including
the Rights becoming void pursuant to Section 11(a)(ii) hereof) or any
adjustment in the terms of the Rights (including the manner, method or amount
thereof) provided for in Section 3, 11, 13, 23 or 24 hereof, or the ascertaining
of the existence of facts that would require any such change or adjustment
(except with respect to the exercise of Rights evidenced by Right Certificates
after actual notice that such change or adjustment is required); nor shall it
by any act hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any Preferred Shares to be issued pursuant to
this Agreement or any Right Certificate or as to whether any Preferred Shares
will, when issued, be validly authorized and issued, fully paid and
nonassessable.

 

(f)            The
Company agrees that it will perform, execute, acknowledge and deliver or cause
to be performed, executed, acknowledged and delivered all such further and other
acts, instruments and assurances as may reasonably be required by the Rights
Agent for the carrying out or performing by the Rights Agent of the provisions
of this Agreement.

 

34

 

(g)           The
Rights Agent is hereby authorized and directed to accept instructions with
respect to the performance of its duties hereunder from any one of the Chairman
of the Board, the Chief Executive Officer, the President, any Vice President,
the Secretary or the Treasurer of the Company, and to apply to such officers
for advice or instructions in connection with its duties, and it shall not be
liable for any action taken or suffered by it in good faith in accordance with
instructions of any such officer or for any delay in acting while waiting for
those instructions.

 

(h)           The
Rights Agent and any stockholder, director, officer or employee of the Rights
Agent may buy, sell or deal in any of the Rights or other securities of the
Company or become pecuniarily interested in any transaction in which the
Company may be interested, or contract with or lend money to the Company or
otherwise act as fully and freely as though it were not Rights Agent under this
Agreement.  Nothing herein shall preclude
the Rights Agent from acting in any other capacity for the Company or for any
other legal entity.

 

(i)            The
Rights Agent may execute and exercise any of the rights or powers hereby vested
in it or perform any duty hereunder either itself or by or through its
attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys
or agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct, provided that reasonable care was exercised in the selection
and continued employment thereof.

 

Section 21.             Change
of Rights Agent.  The Rights Agent or
any successor Rights Agent may resign and be discharged from its duties under
this Agreement upon 30 days’ notice in writing mailed to the Company and, in
the event that the Rights Agent or one of its Affiliates 

 

35

 

is not also the transfer agent for the Company, to each transfer agent
of the Common Shares or Preferred Shares by registered or certified mail.  In the event the transfer agency relationship
in effect between the Company and the Rights Agent terminates, the Rights Agent
will be deemed, as of the day that is 30 days after the effective date of such
termination, to resign and be discharged from its duties under this Agreement,
and the Company shall be responsible for sending any required notice.  The Company may remove the Rights Agent or
any successor Rights Agent upon 30 days’ notice in writing, mailed to the
Rights Agent or successor Rights Agent, as the case may be, and to each
transfer agent of the Common Shares or Preferred Shares by registered or
certified mail, and to the holders of the Right Certificates by first-class
mail.  If the Rights Agent shall resign
or be removed or shall otherwise become incapable of acting, the Company shall
appoint a successor to the Rights Agent. 
If the Company shall fail to make such appointment within a  period of 30 days after giving notice of such
removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent or by the holder of a
Right Certificate (which holder shall, with such notice, submit such holder’s
Right Certificate for inspection by the Company), then the registered holder of
any Right Certificate may apply to any court of competent jurisdiction for the
appointment of a new Rights Agent.  Any
successor Rights Agent, whether appointed by the Company or by such a court,
shall be a corporation or other entity organized and doing business under the
laws of the United States or of the State of New York (or of any other state of
the United States so long as such corporation is authorized to do business as a
banking institution in the State of New York), in good standing, which is authorized
under such laws to exercise corporate trust or stock transfer powers and is
subject to supervision or examination by federal or state authority and which
has individually or combined with an Affiliate at the time of its appointment
as Rights Agent a 

 

36

 

combined capital and surplus of at least $50 million.  After appointment, the successor Rights Agent
shall be vested with the same powers, rights, duties and responsibilities as if
it had been originally named as Rights Agent without further act or deed; but
the predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver
any further assurance, conveyance, act or deed necessary for the purpose.  Not later than the effective date of any such
appointment, the Company shall file notice thereof in writing with the
predecessor Rights Agent and each transfer agent of the Common Shares or
Preferred Shares, and mail a notice thereof in writing to the registered
holders of the Right Certificates. 
Failure to give any notice provided for in this Section 21,
however, or any defect therein, shall not affect the legality or validity of
the resignation or removal of the Rights Agent or the appointment of the
successor Rights Agent, as the case may be.

 

Section 22.             Issuance
of New Right Certificates. 
Notwithstanding any of the provisions of this Agreement or of the Rights
to the contrary, the Company may, at its option, issue new Right Certificates
evidencing Rights in such form as may be approved by the Board of Directors of
the Company to reflect any adjustment or change in the Purchase Price and the
number or kind or class of shares or other securities or property purchasable
under the Right Certificates made in accordance with the provisions of this
Agreement.

 

Section 23.             Redemption.  (a)  The Board of Directors of the
Company may, at its option, at any time prior to such time as any Person
becomes an Acquiring Person, redeem all but not less than all the then
outstanding Rights at a redemption price of $.01 per Right, appropriately adjusted
to reflect any stock split, stock dividend or similar transaction occurring
after the date hereof (such redemption price being hereinafter referred to as
the “Redemption Price”).  The
redemption of the Rights by the Board of Directors of the Company may be made
effective

 

37

 

 

 

 

 

at such time, on such basis and with such conditions as the Board of
Directors of the Company, in its sole discretion, may establish.

 

(b)           Immediately upon the action of the Board
of Directors of the Company ordering the redemption of the Rights pursuant to
paragraph (a) of this Section 23, and without any further action and
without any notice, the right to exercise the Rights will terminate and the
only right thereafter of the holders of Rights shall be to receive the
Redemption Price.  The Company shall promptly
give public notice of any such redemption; provided, however,
that the failure to give, or any defect in, any such notice shall not affect
the validity of such redemption.  Within
10 days after such action of the Board of Directors of the Company ordering the
redemption of the Rights, the Company shall mail a notice of redemption to all
the holders of the then outstanding Rights at their last addresses as they
appear upon the registry books of the Rights Agent or, prior to the
Distribution Date, on the registry books of the transfer agent for the Common
Shares.  Any notice which is mailed in
the manner herein provided shall be deemed given, whether or not the holder
receives the notice.  Each such notice of
redemption will state the method by which the payment of the Redemption Price
will be made.  Neither the Company nor
any of its Affiliates or Associates may redeem, acquire or purchase for value
any Rights at any time in any manner other than that specifically set forth in
this Section 23 or in Section 24 hereof, and other than in connection
with the purchase of Common Shares prior to the Distribution Date.

 

Section 24.            Exchange.  (a)  The Board of Directors of the
Company may, at its option, at any time after any Person becomes an Acquiring
Person, exchange all or part of the then outstanding and exercisable Rights
(which shall not include Rights that have become void pursuant to the
provisions of Section 11(a)(ii) hereof) for Common Shares at an
exchange ratio of one Common Share per Right, appropriately adjusted to reflect
any adjustment in the number 

 

38

 

of Rights pursuant to Section 11(i) (such exchange ratio
being hereinafter referred to as the “Exchange Ratio”).  Notwithstanding the foregoing, the Board of
Directors of the Company shall not be empowered to effect such exchange at any
time after any Person (other than the Company, any Subsidiary of the Company,
any employee benefit plan of the Company or any such Subsidiary, or any entity
holding Common Shares for or pursuant to the terms of any such plan), becomes
the Beneficial Owner of 50% or more of the Common Shares then outstanding.

 

(b)           Immediately upon the action of the Board
of Directors of the Company ordering the exchange of any Rights pursuant to
paragraph (a) of this Section 24 and without any further action and
without any notice, the right to exercise such Rights shall terminate and the
only right thereafter of a holder of such Rights shall be to receive that
number of Common Shares equal to the number of such Rights held by such holder
multiplied by the Exchange Ratio.  The
Company shall promptly give public notice of any such exchange; provided,
however, that the failure to give, or any defect in, such notice shall
not affect the validity of such exchange. 
The Company promptly shall mail a notice of any such exchange to all of
the holders of such Rights at their last addresses as they appear upon the
registry books of the Rights Agent.  Any
notice which is mailed in the manner herein provided shall be deemed given,
whether or not the holder receives the notice. 
Each such notice of exchange will state the method by which the exchange
of the Common Shares for Rights will be effected, and, in the event of any
partial exchange, the number of Rights which will be exchanged.  Any partial exchange shall be effected pro
rata based on the number of Rights (other than Rights which have become
void pursuant to the provisions of Section 11(a)(ii) hereof) held by
each holder of Rights.

 

(c)           In the event that there shall not be
sufficient Common Shares issued but not outstanding or authorized but unissued
to permit any exchange of Rights as contemplated in

 

39

 

accordance with this Section 24, the Company shall take all such
action as may be necessary to authorize additional Common Shares for issuance
upon exchange of the Rights.  In the
event the Company shall, after good faith effort, be unable to take all such
action as may be necessary to authorize such additional Common Shares, the
Company shall substitute, for each Common Share that would otherwise be
issuable upon exchange of a Right, a number of Preferred Shares or fraction
thereof such that the current per share market price of one Preferred Share
multiplied by such number or fraction is equal to the current per share market
price of one Common Share as of the date of issuance of such Preferred Shares
or fraction thereof.

 

(d)           The Company shall not be required to
issue fractions of Common Shares or to distribute certificates which evidence
fractional Common Shares.  In lieu of
such fractional Common Shares, the Company shall pay to the registered holders
of the Right Certificates with regard to which such fractional Common Shares
would otherwise be issuable an amount in cash equal to the same fraction of the
current market value of a whole Common Share. 
For the purposes of this paragraph (d), the current market value of a
whole Common Share shall be the closing price of a Common Share (as determined
pursuant to the second sentence of Section 11(d)(i) hereof) for the
Trading Day immediately prior to the date of exchange pursuant to this Section 24.

 

Section 25.            Notice of Certain Events.  (a)  In
case the Company shall, at any time after the Distribution Date, propose (i) to
pay any dividend payable in stock of any class to the holders of the Preferred
Shares or to make any other distribution to the holders of the Preferred Shares
(other than a regular quarterly cash dividend), (ii) to offer to the
holders of the Preferred Shares rights or warrants to subscribe for or to
purchase any additional Preferred Shares or shares of stock of any class or any
other securities, rights or options, (iii) to effect any reclassification 

 

40

 

of the Preferred Shares (other than a reclassification involving only
the subdivision of outstanding Preferred Shares), (iv) to effect any
consolidation or merger into or with, or to effect any sale or other transfer
(or to permit one or more of its Subsidiaries to effect any sale or other
transfer), in one or more transactions, of 50% or more of the assets or earning
power of the Company and its Subsidiaries (taken as a whole) to, any other
Person, (v) to effect the liquidation, dissolution or winding up of the
Company, or (vi) to declare or pay any dividend on the Common Shares
payable in Common Shares or to effect a subdivision, combination or
consolidation of the Common Shares (by reclassification or otherwise than by
payment of dividends in Common Shares), then, in each such case, the Company
shall give to each holder of a Right Certificate, in accordance with Section 26
hereof, a notice of such proposed action, which shall specify the record date
for the purposes of such stock dividend, or distribution of rights or warrants,
or the date on which such reclassification, consolidation, merger, sale,
transfer, liquidation, dissolution, or winding up is to take place and the date
of participation therein by the holders of the Common Shares and/or Preferred
Shares, if any such date is to be fixed, and such notice shall be so given in
the case of any action covered by clause (i) or (ii) above at least
10 days prior to the record date for determining holders of the Preferred
Shares for purposes of such action, and, in the case of any such other action,
at least 10 days prior to the date of the taking of such proposed action or the
date of participation therein by the holders of the Common Shares and/or Preferred
Shares, whichever shall be the earlier.

 

(b)           In case the event set forth in Section 11(a)(ii) hereof
shall occur, then the Company shall, as soon as practicable thereafter, give to
each holder of a Right Certificate, in accordance with Section 26 hereof,
a notice of the occurrence of such event, which notice shall 

 

41

 

describe such event and the consequences of such event to holders of
Rights under Section 11(a)(ii) hereof.

 

Section 26.            Notices.  Notices or demands authorized by this
Agreement to be given or made by the Rights Agent or by the holder of any Right
Certificate to or on the Company shall be sufficiently given or made if sent by
overnight delivery service or first-class mail, postage prepaid, addressed
(until another address is filed in writing with the Rights Agent) as follows:

 

Hardinge Inc.

One Hardinge Drive

Elmira, NY, 14902-1507

Attention:  Corporate Secretary

 

Subject to the provisions of Section 21 hereof,
any notice or demand authorized by this Agreement to be given or made by the
Company or by the holder of any Right Certificate to or on the Rights Agent
shall be sufficiently given or made if sent by overnight delivery service or
first-class mail, postage prepaid, addressed (until another address is filed in
writing with the Company) as follows:

 

Computershare
Trust Company, N.A.

2 North LaSalle
Street

Chicago, IL 60602

Attention: Client
Services

 

Notices or demands authorized by this Agreement to be
given or made by the Company or the Rights Agent to the holder of any Right
Certificate shall be sufficiently given or made if sent by first-class mail,
postage prepaid, addressed to such holder at the address of such holder as
shown on the registry books of the Company.

 

42

 

Section 27.            Supplements and Amendments.  The Company
may from time to time supplement or amend this Agreement without the approval
of any holders of Right Certificates in order to cure any ambiguity, to correct
or supplement any provision contained herein which may be defective or
inconsistent with any other provisions herein, or to make any other provisions
with respect to the Rights which the Company may deem necessary or desirable,
any such supplement or amendment to be evidenced by a writing signed by the
Company and the Rights Agent; provided, however, that, from and
after such time as any Person becomes an Acquiring Person, this Agreement shall
not be amended in any manner which would adversely affect the interests of the
holders of Rights.  The Rights Agent will
duly execute and deliver any supplement or amendment hereto requested by the
Company, provided that such supplement or amendment does not adversely affect
the rights, duties or obligations of the Rights Agent under this Agreement.

 

Section 28.            Successors.  All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.

 

Section 29.            Benefits of this Agreement.  Nothing in
this Agreement shall be construed to give to any Person other than the Company,
the Rights Agent and the registered holders of the Right Certificates (and,
prior to the Distribution Date, the Common Shares) any legal or equitable
right, remedy or claim under this Agreement; but this Agreement shall be for
the sole and exclusive benefit of the Company, the Rights Agent and the
registered holders of the Right Certificates (and, prior to the Distribution
Date, the Common Shares).

 

43

 

Section 30.            Severability.  If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated.

 

Section 31.            Governing Law.  This Agreement and each Right
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of New York and for all purposes shall be governed by and
construed in accordance with the laws of such state applicable to contracts to
be made and performed entirely within such state.

 

Section 32.            Counterparts.  This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.  A signature to
this Agreement transmitted electronically shall have the same authority, effect
and enforceability as an original signature.

 

Section 33.            Descriptive Headings.  Descriptive
headings of the several Sections of this Agreement are inserted for convenience
only and shall not control or affect the meaning or construction of any of the
provisions hereof.

 

Section 34             Force Majeure. 
Notwithstanding anything to the contrary contained herein, the Rights
Agent shall not be liable for any delays or failures in performance resulting
from acts beyond its reasonable control including, without limitation, acts of
God, terrorist acts, shortage of supply, breakdowns or malfunctions,
interruptions or malfunction of computer facilities, or loss of data due to
power failures or mechanical difficulties with information 

 

44

 

storage or retrieval systems, labor difficulties, war, or civil
unrest.  The Rights Agent shall provide
the Company prompt notice as soon as practicable in the event that any such
delay or failure in performance occurs.

 

45

 

IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be duly executed and attested, all as of the day and year
first above written.

 

 

	
  Attest:

  	
   

  	
  HARDINGE
  INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By

  	
  /s/ Edward J. Gaio

  	
   

  	
   

  	
  By

  	
  /s/
  Richard L. Simons

  
	
  Name: Edward J. Gaio

  	
   

  	
   

  	
  Name:
  Richard L. Simons

  
	
  Title: 

  	
  Vice President and Chief

  	
   

  	
   

  	
  Title:
  President and Chief Executive Officer

  
	
   

  	
  Financial Officer

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  	
  COMPUTERSHARE
  TRUST COMPANY, 

  
	
   

  	
   

  	
   

  	
  N.A.

  
	
   

  	
   

  	
   

  	
   

  
	
  By

  	
  /s/ James Walsh

  	
   

  	
   

  	
  By

  	
  /s/
  Dennis V. Moccia

  
	
  Name: James Walsh

  Title: Relationship Manager

  	
   

  	
   

  	
  Name:
  Dennis V. Moccia

  Title: Manager, Contract Adminstrator

  
								

 

46

 

Exhibit A

 

FORM OF

 

CERTIFICATE OF AMENDMENT

 

of

 

THE CERTIFICATE OF INCORPORATION

 

of

 

HARDINGE INC.

 

(Pursuant to Section 805 of the Business
Corporation Law)

 

It is hereby certified that:

 

FIRST:                                                           The name of the corporation is Hardinge
Inc. (hereinafter called the “Corporation”). 
The name under which the Corporation was formed was Hardinge Brothers, Inc.

 

SECOND:                                            The Certificate of Consolidation with
respect to the consolidation of Hardinge Brothers, Inc. and Morrison
Machine Products, Inc. was filed by the Department of State of the State
of New York on December 24, 1937.  A
Restated Certificate of Incorporation of the Corporation was filed by the Department
of State of the State of New York on May 24, 1995.

 

THIRD:                                                       This Certificate of Amendment (1) eliminates
the existing subdivision VII of Article 4 of the Certificate of Incorporation
respecting the series of preferred stock, par value $0.01 per share, of the
Corporation (the “Preferred Stock”) designated as the “Series A Preferred
Stock” and (2) creates a new subdivision VII (which replaces the existing
subdivision VII) of Article 4 of the Certificate of Incorporation
respecting a new series of Preferred Stock designated as the “Series B Preferred
Stock.”

 

FOURTH:                                           To effect the foregoing, Article 4
of the Certificate of Incorporation, relating to capitalization of the
Corporation, is amended to read in its entirety as follows:

 

“4.                                 The relative voting, dividend,
liquidation and other rights, preferences and limitations of the shares of each
class are as follows:

 

I.                                         The Preferred Stock may be issued from
time to time in one or more series, each such series to have the number of
shares and designation, and the shares of each such series to have such
relative rights, preferences or limitations, as the Board of Directors, subject
to the limitations prescribed by law or provided herein, may from time to time
fix, before issuance, by delivering an appropriate certificate of amendment to
the Department of State pursuant to the Business Corporation Law of the State
of New York.  The authority of the Board

 

A-1

 

of Directors with respect
to each series shall include, but not be limited to, the fixing of the
following:

 

(a)                                  The number of shares to constitute the series
and the distinctive designation thereof;

 

(b) The
dividend rate on the shares of the series; whether dividends shall be cumulative,
and, if so, from what date or dates;

 

(c) Whether
or not the shares of the series shall be redeemable and, if redeemable, the
terms upon which the shares of the series may be redeemed and the premium, if
any, over and above the par value thereof and any dividends accrued thereon
which the shares of the series shall be entitled to receive upon the redemption
thereof;

 

(d) Whether
or not the shares of the series shall be subject to the operation of a
retirement or sinking fund to be applied to the purchase or redemption of such
shares for retirement and, if such retirement or sinking fund be established,
the annual amount thereof and the terms and provisions relative to the operation
thereof;

 

(e) Whether
or not the shares of the series shall be convertible into shares of any class
or classes of stock of the Corporation, with or without par value, or of any
other series of the same class and, if convertible, the conversion price or
prices or the rate at which such conversion may be made and the method, if any,
of adjusting the same;

 

(f) The
rights of the shares of the series in the event of voluntary or involuntary
liquidation, dissolution or winding-up of the Corporation;

 

(g) The
restrictions, if any, on the payment of dividends upon, and the making of the
distributions to any class of stock ranking junior to the shares of the series,
and the restrictions, if any, on the purchase or redemption of the shares of
any such junior class;

 

(h) Whether
the series shall have voting rights, in addition to the voting rights provided
by law, and, if so, the terms of such voting rights; and

 

(i) Any other
relative rights, preferences and limitations of the series.

 

II.                                     Holders of shares of Preferred Stock
shall be entitled to receive, when and as declared by the Board of Directors,
out of funds legally available for the payment of dividends, dividends at the
rates fixed by the Board of Directors for the respective series, before any
dividends shall be declared and paid, or set apart for payment, on any other
class of stock of the Corporation ranking junior to

 

A-2

 

the Preferred Stock
either as to dividends or assets, with respect to the same dividend period.

 

III.                                 Whenever, at any time, dividends on the
then outstanding Preferred Stock as may be required by the terms of the
certificate creating the series representing the shares outstanding shall have
been paid or declared and set apart for payment on the then outstanding
Preferred Stock and after complying with all the provisions with respect to any
retirement or sinking fund or funds for any series of Preferred Stock, the
Board of Directors may, subject to the provisions of any certificate creating
any series of Preferred Stock with respect to the payment of dividends on any
other class or classes of stock, declare and pay dividends on the Common Stock,
and the Preferred Stock shall not be entitled to share therein.

 

IV.                                 Upon any liquidation, dissolution or
winding-up of the Corporation, after payment, if any is required, shall have
been made in full to the Preferred Stock as provided in any certificate
creating any series thereof, but not prior thereto, the Common Stock shall,
subject to the respective terms and provisions, if any, of any such
certificate, be entitled to receive any and all assets remaining to be paid or
distributed, and the Preferred Stock shall not be entitled to share therein.

 

V.                                     No holder of Common Stock or any series
of Preferred Stock shall, as such holder, have any preemptive or preferential
right of subscription to any stock of any class of the Corporation or to any
obligations convertible into any such stock or to any right of subscription to,
or to any warrant or option for, the purchase of any stock, other than such, if
any, as the Board of Directors of the Corporation in its discretion may
determine from time to time.

 

VI.                                 The holders of the Common Stock shall
have the right to vote on all questions to the exclusion of all other classes
of stock, except as by law expressly provided or as otherwise expressly provided
with respect to the holders of any other class or classes of stock.

 

VII.  Series B Preferred Stock:  The designation and amount, relative rights,
preferences and limitations of the shares of Series B Preferred Stock, par
value $0.01 per share, as fixed by the Board of Directors of the Corporation,
are as follows:

 

Section 1.                    Designation and Amount.  The shares of
such series shall be designated as “Series B Preferred Stock” (the “Series B
Preferred Stock”) and the number of shares constituting the Series B
Preferred Stock shall be 200,000.  Such
number of shares may be increased or decreased by resolution of the Board of
Directors; provided, that no decrease shall reduce the number of shares
of Series B Preferred Stock to a number less than the number of shares
then outstanding plus the number of shares reserved for issuance upon the
exercise of outstanding options, rights or warrants or upon the conversion of
any outstanding securities issued by the Corporation convertible into Series B
Preferred Stock.

 

A-3

 

Section 2.                    Dividends and Distributions.

 

(A)                              Subject to the rights of the holders of
any shares of any series of Preferred Stock (or any similar stock) ranking
prior and superior to the Series B Preferred Stock with respect to
dividends, the holders of shares of Series B Preferred Stock, in preference
to the holders of Common Stock, par value $.01 per share (the “Common Stock”),
of the Corporation, and of any other junior stock, shall be entitled to
receive, when, as and if declared by the Board of Directors out of funds
legally available for the purpose, quarterly dividends payable in cash on the
first day of March, June, September and December in each year (each
such date being referred to herein as a “Quarterly Dividend Payment Date”),
commencing on the first Quarterly Dividend Payment Date after the first
issuance of a share or fraction of a share of Series B Preferred Stock, in
an amount per share (rounded to the nearest cent) equal to the greater of (a) $1
or (b) subject to the provision for adjustment hereinafter set forth, 100
times the aggregate per share amount of all cash dividends, and 100 times the
aggregate per share amount (payable in kind) of all non-cash dividends or other
distributions, other than a dividend payable in shares of Common Stock or a
subdivision of the outstanding shares of Common Stock (by reclassification or
otherwise), declared on the Common Stock since the immediately preceding
Quarterly Dividend Payment Date or, with respect to the first Quarterly
Dividend Payment Date, since the first issuance of any share or fraction of a share
of Series B Preferred Stock.  In the
event the Corporation shall at any time declare or pay any dividend on the
Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in
each  such case the amount to which
holders of shares of Series B Preferred Stock were entitled immediately
prior to such event under clause (b) of the preceding sentence shall be
adjusted by multiplying such amount by a fraction, the numerator of which is
the number of shares of Common Stock outstanding immediately after such event
and the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.

 

(B)                                The Corporation shall declare a dividend
or distribution on the Series B Preferred Stock as provided in paragraph (A) of
this Section immediately after it declares a dividend or distribution on
the Common Stock (other than a dividend payable in shares of Common Stock);
provided that, in the event no dividend or distribution shall have been
declared on the Common Stock during the period between any Quarterly Dividend
Payment Date and the next subsequent Quarterly Dividend Payment Date, a
dividend of $1 per share on the Series B Preferred Stock shall
nevertheless be payable on such subsequent Quarterly Dividend Payment Date.

 

(C)                                Dividends shall begin to accrue and be
cumulative on outstanding shares of Series B Preferred Stock from the
Quarterly Dividend Payment Date next preceding the date of issue of such
shares, unless the date of issue of such shares is prior to the record date for
the first Quarterly Dividend Payment Date, in which case dividends on such
shares shall begin to accrue from the date of issue of such shares, or unless
the date of issue is a Quarterly Dividend Payment Date or is a date after the
record date for the determination

 

A-4

 

of holders of shares of Series B Preferred Stock
entitled to receive a quarterly dividend and before such Quarterly Dividend
Payment Date, in either of which events such dividends shall begin to accrue and
be cumulative from such Quarterly Dividend Payment Date.  Accrued but unpaid dividends shall not bear
interest.  Dividends paid on the shares
of Series B Preferred Stock in an amount less than the total amount of
such dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares at the time
outstanding.  The Board of Directors may
fix a record date for the determination of holders of shares of Series B
Preferred Stock entitled to receive payment of a dividend or distribution
declared thereon, which record date shall be not more than 60 days prior to the
date fixed for the payment thereof.

 

Section 3.                    Voting Rights.  The holders
of shares of Series B Preferred Stock shall have the following voting
rights:

 

(A)                              Subject to the provision for adjustment
hereinafter set forth, each share of Series B Preferred Stock shall
entitle the holder thereof to 100 votes on all matters submitted to a vote of
the stockholders of the Corporation.  In
the event the Corporation shall at any time declare or pay any dividend on the
Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the number of votes per share to which holders of shares of Series B
Preferred Stock were entitled immediately prior to such event shall be adjusted
by multiplying such number by a fraction, the numerator of which is the number
of shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.

 

(B)                                Except as otherwise provided herein, in
any other Certificate of Amendment creating a series of Preferred Stock or any
similar stock, or by law, the holders of shares of Series B Preferred
Stock and the holders of shares of Common Stock and any other capital stock of
the Corporation having general voting rights shall vote together as one class
on all matters submitted to a vote of stockholders of the Corporation.

 

(C)                                Except as set forth herein, or as otherwise
provided by law, holders of Series B Preferred Stock shall have no special
voting rights and their consent shall not be required (except to the extent
they are entitled to vote with holders of Common Stock as set forth herein) for
taking any corporate action.

 

Section 4.                    Certain Restrictions.

 

(A)                              Whenever quarterly dividends or other
dividends or distributions payable on the Series B  Preferred Stock as provided in Section 2
are in arrears, thereafter and until all accrued and unpaid dividends and distributions,
whether or not declared, on shares of Series B Preferred Stock outstanding
shall have been paid in full, the Corporation shall not:

 

A-5

 

(i)                                     declare or pay dividends, or make any
other distributions, on any shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Series B
Preferred Stock;

 

(ii)                                  declare or pay dividends, or make any
other distributions, on any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series B
Preferred Stock, except dividends paid ratably on the Series B Preferred
Stock and all such parity stock on which dividends are payable or in arrears in
proportion to the total amounts to which the holders of all such shares are
then entitled;

 

(iii)                               redeem or purchase or otherwise acquire
for consideration shares of any stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Series B Preferred
Stock, provided that the Corporation may at any time redeem, purchase or
otherwise acquire shares of any such junior stock in exchange for shares of any
stock of the Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series B Preferred Stock;
or

 

(iv)                              redeem or purchase or otherwise acquire
for consideration any shares of Series B Preferred Stock, or any shares of
stock ranking on a parity with the Series B Preferred Stock, except in
accordance with a purchase offer made in writing or by publication (as
determined by the Board of Directors) to all holders of such shares upon such
terms as the Board of Directors, after consideration of the respective annual
dividend rates and other relative rights and preferences of the respective
series and classes, shall determine in good faith will result in fair and equitable
treatment among the respective series or classes.

 

(B)                                The Corporation shall not permit any
subsidiary of the Corporation to purchase or otherwise acquire for
consideration any shares of stock of the Corporation unless the Corporation
could, under paragraph (A) of this Section 4, purchase or otherwise acquire
such shares at such time and in such manner.

 

Section 5.                    Reacquired Shares.  Any shares of
Series B Preferred Stock purchased or otherwise acquired by the
Corporation in any manner whatsoever shall be retired and cancelled promptly
after the acquisition thereof.  All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
subject to the conditions and restrictions on issuance set forth herein, in the
Certificate of Incorporation, or in any other Certificate of Amendment creating
a series of Preferred Stock or any similar stock or as otherwise required by
law.

 

Section 6.                    Liquidation, Dissolution or Winding Up. 
Upon any liquidation, dissolution or winding up of the Corporation, no
distribution shall be made (1) to the holders of shares of stock ranking
junior (either as to dividends or upon liquidation, dissolution or winding up)
to the Series B Preferred Stock unless, prior thereto, the holders of
shares of Series B Preferred Stock shall have received $100 per share,
plus an amount equal to accrued and unpaid dividends and distributions thereon,
whether or not declared, to the date of such payment, provided

 

A-6

 

that the holders
of shares of Series B Preferred Stock shall be entitled to receive an aggregate
amount per share, subject to the provision for adjustment hereinafter set
forth, equal to 100 times the aggregate amount to be distributed per share to
holders of shares of Common Stock, or (2) to the holders of shares of stock
ranking on a parity (either as to dividends or upon liquidation, dissolution or
winding up) with the Series B Preferred Stock, except distributions made
ratably on the Series B Preferred Stock and all such parity stock in
proportion to the total amounts to which the holders of all such shares are
entitled upon such liquidation, dissolution or winding up.  In the event the Corporation shall at any
time declare or pay any dividend on the Common Stock payable in shares of Common
Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser
number of shares of Common Stock, then in each such case the aggregate amount
to which holders of shares of Series B 
Preferred Stock were entitled immediately prior to such event under the
proviso in clause (1) of the preceding sentence shall be adjusted by
multiplying such amount by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.

 

Section 7.                    Consolidation, Merger, etc. 
In case the Corporation shall enter into any consolidation, merger,
combination or other transaction in which the shares of Common Stock are
exchanged for or changed into other stock or securities, cash and/or any other
property, then in any such case each share of Series B Preferred Stock
shall at the same time be similarly exchanged or changed into an amount per
share, subject to the provision for adjustment hereinafter set forth, equal to
100 times the aggregate amount of stock, securities, cash and/or any other
property (payable in kind), as the case may be, into which or for which each
share of Common Stock is changed or exchanged. 
In the event the Corporation shall at any time declare or pay any dividend
on the Common Stock payable in shares of Common Stock, or effect a subdivision
or combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the amount set forth in the preceding sentence with respect to the
exchange or change of shares of Series B Preferred Stock shall be adjusted
by multiplying such amount by a fraction, the numerator of which is the number
of shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.

 

Section 8.                    No Redemption.  The shares of
Series B Preferred Stock shall not be redeemable.

 

Section 9.                    Rank.  The Series B
Preferred Stock shall rank, with respect to the payment of dividends and the
distribution of assets, junior to all series of any other class of the
Corporation’s Preferred Stock.

 

Section 10.              Amendment.  The Certificate of Incorporation of the
Corporation shall not be amended in any manner which would materially alter or
change the powers, preferences or special rights of the Series B Preferred
Stock so as to affect them adversely without the

 

A-7

 

affirmative
vote  of the holders of at least
two-thirds of the outstanding shares of Series B Preferred Stock, voting
together as a single class.”

 

FIFTH:                                                          This amendment to the Certificate of
Incorporation was authorized, pursuant to Section 502 of the Business
Corporation Law and the Certificate of Incorporation, by a vote of the Board of
Directors.  Pursuant to Section 502
of the Business Corporation Law and the Certificate of Incorporation, no vote
of the stockholders was necessary for adoption of this amendment.  The Board of Directors adopted resolutions on
February 17, 2010 authorizing the amendment of the Certificate of
Incorporation to (1) pursuant to Section 502(e) of the Business
Corporation Law, eliminate from the Certificate of Incorporation subdivision
VII of Article 4 thereof respecting the series of series of Preferred
Stock designated as the “Series A Preferred Stock” as none of the
authorized shares of such series are outstanding and no shares of such series
will be issued subject to the Certificate of Incorporation and (2) pursuant
to Section 502(c) of the Business Corporation Law and the Certificate
of Incorporation, create a new series of Preferred Stock, state the designation
of such series as the “Series B Preferred Stock” and the number of shares
thereof, and fix the relative rights, preferences, and limitations thereof as
set forth above in new subdivision VII (which replaces the existing subdivision
VII) of Article 4.  The Certificate
of Incorporation provides that the Board of Directors may, by delivering an
appropriate certificate of amendment to the Department of State of the State of
New York, fix the designation and number of shares of one or more series of
Preferred Stock, and may establish all relative rights, preferences and
limitations pertaining to such series, without the approval of the stockholders
of the Corporation.

 

A-8

 

IN WITNESS WHEREOF, we have subscribed
this document on this           
day of February, 2010 and do hereby affirm, under the penalties of perjury,
that the statements contained therein have been examined by me and are true and
correct.

 

 

	
   

  	
   

  
	
   

  	
  Richard
  L. Simons

  
	
   

  	
  President
  and Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Edward J. Gaio

  
	
   

  	
  Vice
  President and Chief Financial Officer

  

 

A-9

 

CERTIFICATE OF AMENDMENT

 

of

 

THE CERTIFICATE OF INCORPORATION

 

of

 

HARDINGE INC.

 

(Pursuant to Section 805 of the Business Corporation Law)

 

Dated:             February       ,
2010

 

Filer:                                                  Richard L.
Simons

President
and Chief Executive Officer

Hardinge
Inc.

One
Hardinge Drive

Elmira,
NY 14902

 

A-10

 

Exhibit B

 

Form of Right
Certificate

 

	
  Certificate No. R-

  	
   

  	
   

  	
   Rights

  

 

NOT
EXERCISABLE AFTER MARCH 1, 2011 OR EARLIER IF REDEMPTION OR EXCHANGE
OCCURS.  THE RIGHTS ARE SUBJECT TO
REDEMPTION AT $.01 PER RIGHT AND TO EXCHANGE ON THE TERMS SET FORTH IN THE AGREEMENT.

 

Right Certificate

 

HARDINGE INC.

 

This certifies that                     ,
or registered assigns, is the registered owner of the number of Rights set
forth above, each of which entitles the owner thereof, subject to the terms,
provisions and conditions of the Agreement, dated as of February 18, 2010
(the “Agreement”), between Hardinge Inc., a New York corporation (the
“Company”), and Computershare Trust Company, N.A. (the “Rights Agent”), to
purchase from the Company at any time after the Distribution Date (as such term
is defined in the Agreement) and prior to 5:00 P.M., New York City time,
on March 1, 2011 at the principal office of the Rights Agent, or at the
office of its successor as Rights Agent, one one-hundredth of a fully paid
non-assessable share of Series B Preferred Stock, par value $0.01 per
share, of the Company (the “Preferred Shares”), at a purchase price of
$ 35.00 per one one-hundredth of a Preferred Share (the “Purchase Price”),
upon presentation and surrender of this Right Certificate with the Form of
Election to Purchase duly executed.  The
number of Rights evidenced by this Right Certificate (and the number of one
one-hundredths of a Preferred Share which may be purchased upon exercise
hereof) set forth above, and the Purchase Price set forth above, are the number
and Purchase Price as of           ,
20    , based on the Preferred Shares as constituted
at such date.  As provided in the Agreement,
the Purchase Price and the number of one one-hundredths of a Preferred Share
which may be purchased upon the exercise of the Rights evidenced by this Right
Certificate are subject to modification and adjustment upon the happening of
certain events.

 

This Right Certificate is subject to all of the terms, provisions and
conditions of the Agreement, which terms, provisions and conditions are hereby
incorporated herein by reference and made a part hereof and to which Agreement
reference is hereby made for a full description of the rights, limitations of
rights, obligations, duties and immunities hereunder of the Rights Agent, the
Company and the holders of the Right Certificates.  Copies of the Agreement are on file at the
principal executive offices of the Company and the offices of the Rights Agent.

 

This Right Certificate, with or without other Right Certificates, upon
surrender at the principal office of the Rights Agent, may be exchanged for
another Right Certificate or Right Certificates of like tenor and date
evidencing Rights entitling the holder to purchase a like aggregate number of
Preferred Shares as the Rights evidenced by the Right Certificate or Right Certificates

 

B-1

 

surrendered shall have entitled such holder to
purchase.  If this Right Certificate
shall be exercised in part, the holder shall be entitled to receive upon
surrender hereof another Right Certificate or Right Certificates for the number
of whole Rights not exercised.

 

Subject to the provisions of the Agreement, the Rights evidenced by
this Right Certificate (i) may be redeemed by the Company at a redemption
price of $.01 per Right or (ii) may be exchanged in whole or in part for
Preferred Shares or shares of the Company’s Common Stock, par value $0.01 per
share.

 

No fractional Preferred Shares will be issued upon the exercise of any
Right or Rights evidenced hereby (other than fractions which are integral
multiples of one one-hundredth of a Preferred Share, which may, at the election
of the Company, be evidenced by depositary receipts), but, in lieu thereof, a
cash payment will be made, as provided in the Agreement.

 

No holder of this Right Certificate shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of the Preferred
Shares or of any other securities of the Company which may at any time be
issuable on the exercise hereof, nor shall anything contained in the Agreement
or herein be construed to confer upon the holder hereof, as such, any of the
rights of a stockholder of the Company or any right to vote for the election of
directors or upon any matter submitted to stockholders at any  meeting thereof, or to give or withhold
consent to any corporate action, or to receive notice of meetings or other
actions affecting stockholders (except as provided in the Agreement), or to
receive dividends or subscription rights, or otherwise, until the Right or
Rights evidenced by this Right Certificate shall have been exercised as provided
in the Agreement.

 

This Right Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.

 

WITNESS the facsimile signature of the proper officers
of the Company and its corporate seal. 
Dated as of           ,
        .

 

	
  ATTEST:

  	
   

  	
  HARDINGE INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  	
   

  
	
  Name:

  	
   

  	
   

  	
  Name:

  
	
  Title:

  	
   

  	
   

  	
  Title:

  
	
  Countersigned:

  	
   

  	
   

  

 

 

	
  COMPUTERSHARE TRUST COMPANY, N.A.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  

 

Form of Reverse Side of
Right Certificate

 

B-2

 

FORM OF ASSIGNMENT

 

(To be executed by the
registered holder if such

holder desires to transfer the Right Certificate.)

 

FOR VALUE RECEIVED                                 
hereby sells, assigns and transfers unto                                               

	
   

  
	
  (Please print name and
  address of transferee)

  
	
   

  
	
   

  

this Right Certificate, together with all right, title
and interest therein, and does hereby irrevocably constitute and appoint                     
Attorney, to transfer the within Right Certificate on the books of the
within-named Company, with full power of substitution.

 

	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Signature

  

 

Signature Guaranteed:

 

All Guarantees must be made by a financial institution (such as a bank
or broker) which is a participant in the Securities Transfer Agents Medallion
Program (“STAMP”), the New York Stock Exchange, Inc. Medallion Signature
Program (“MSP”), or the Stock Exchanges Medallion Program (“SEMP”) and must not
be dated.  Guarantees by a notary public
are not acceptable.

 

The undersigned hereby certifies that the Rights evidenced by this
Right Certificate are not Beneficially Owned by an Acquiring Person or an
Affiliate or Associate thereof (as such terms are defined in the Agreement).

 

 

	
   

  	
   

  	
  Signature

  

 

Form of Reverse Side of
Right Certificate — continued

 

B-3

 

FORM OF ELECTION TO
PURCHASE

 

(To be executed if holder
desires to exercise

Rights represented by the Right Certificate.)

 

To:  HARDINGE
INC.

 

The undersigned hereby irrevocably elects to exercise                            
Rights represented by this Right Certificate to purchase the Preferred Shares
issuable upon the exercise of such Rights and requests that certificates for
such Preferred Shares be issued in the name of:

 

Please insert social security

or other identifying number

 

	
   

  
	
  (Please
  print name and address)

  
	
   

  
	
   

  

 

If such number of Rights shall not be all the Rights
evidenced by this Right Certificate, a new Right Certificate for the balance
remaining of such Rights shall be registered in the name of and delivered to:

 

Please insert social security

or other identifying number

 

	
   

  
	
  (Please
  print name and address)

  
	
   

  
	
   

  

 

 

	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Signature

  

 

Signature Guaranteed:

 

All Guarantees must be made by a financial institution (such as a bank
or broker) which is a participant in the Securities Transfer Agents Medallion
Program (“STAMP”), the New York Stock Exchange, Inc. Medallion Signature
Program (“MSP”), or the Stock Exchanges Medallion Program (“SEMP”) and must not
be dated.  Guarantees by a notary public
are not acceptable.

 

B-4

 

The undersigned hereby certifies that the Rights evidenced by this
Right Certificate are not Beneficially Owned by an Acquiring Person or an
Affiliate or Associate thereof and (as such terms are defined in the Agreement).

 

	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Signature

  

 

NOTICE

 

The signature in the Form of Assignment or Form of Election
to Purchase, as the case may be, must conform to the name as written upon the
face of this Right Certificate in every particular, without alteration or
enlargement or any change whatsoever.

 

In the event the certification set forth above in the Form of
Assignment or the Form of Election to Purchase, as the case may be, is not
completed, the Company and the Rights Agent will deem the Beneficial Owner of
the Rights evidenced by this Right Certificate to be an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Agreement) and such Assignment
or Election to Purchase will not be honored.

 

B-5

 

Exhibit C

 

SUMMARY OF RIGHTS TO
PURCHASE

PREFERRED SHARES

 

Introduction

 

On February 17,
2010, the Board of Directors of our Company, Hardinge Inc., a New York
corporation, declared a dividend of one preferred share purchase right (a
“Right”) for each outstanding share of common stock, par value $0.01 per
share.  The dividend is payable on March 1,
2010 to the stockholders of record on March 1, 2010.

 

In connection with the
distribution of Rights, our Company entered into a Rights Agreement with
Computershare Trust Company, N.A., as the Rights Agent, dated February 18,
2010 (the “Rights Agreement”).  Our Board
has adopted this Rights Agreement to protect stockholders from coercive or
otherwise unfair takeover tactics.  In
general terms, it works by imposing a significant penalty upon any person or
group which acquires 20% or more of our outstanding common stock without the approval
of our Board.  The Rights Agreement
should not interfere with any merger or other business combination approved by
our Board.

 

For those interested in the
terms of the Rights Agreement, we provide the following summary
description.  Please note, however, that
this description is only a summary, and is not complete, and should be read
together with the entire Rights Agreement, which has been filed by the Company
with the Securities and Exchange Commission as an exhibit to a Current Report
on Form 8-K filed on February 23, 2010.  A copy of the agreement is available free of
charge from our Company.

 

The
Rights.  The Rights will initially trade with, and will
be inseparable from, the common stock. 
The Rights are evidenced only by certificates that represent shares of
common stock.  New Rights will accompany
any new shares of common stock we issue after March 1, 2010 until the
Distribution Date described below.

 

Exercise
Price.  Each Right will allow its holder to purchase
from our Company one one-hundredth of a share of Series B Preferred Stock
(a “Preferred Share”) for $35.00 (the “Exercise Price”), once the Rights become
exercisable.  This portion of a Preferred
Share will give the stockholder approximately the same dividend, voting, and
liquidation rights as would one share of common stock.  Prior to exercise, the Right does not give
its holder any dividend, voting, or liquidation rights.

 

Exercisability.  The
Rights will not be exercisable until 10 days after the public announcement that
a person or group has become an “Acquiring Person” by obtaining beneficial ownership
of 20% or more of our outstanding common stock.

 

We
refer to the date when the Rights become exercisable as the “Distribution
Date.”  Until that date, the common stock
certificates will also evidence the Rights, and any transfer of shares of
common stock will constitute a transfer of Rights.  After that date, the Rights will separate
from the common stock and be evidenced by book-entry credits or by Rights
certificates that we will mail to all eligible holders of common stock.  Any Rights held by an Acquiring Person are
void and may not be exercised.

 

C-1

 

Consequences of a Person or Group Becoming an
Acquiring Person.

 

·                  Flip In. 
If a person or group becomes an Acquiring Person, all holders of Rights
except the Acquiring Person may, for $35.00, purchase shares of our common
stock with a market value of $70.00, based on the market price of the common
stock prior to such acquisition.

 

·                  Flip Over. 
If our Company is later acquired in a merger or similar transaction
after the Distribution Date, all holders of Rights except the Acquiring Person
may, for $35.00, purchase shares of the acquiring corporation with a market
value of $70.00, based on the market price of the acquiring corporation’s stock
prior to such transaction.

 

Preferred
Share Provisions.

 

Each
one one-hundredth of a Preferred Share, if issued:

 

·                  will not be redeemable.

 

·                  will entitle its holder to quarterly dividend payments
of $.01, or an amount equal to the dividend paid on one share of common stock,
whichever is greater.

 

·                  will entitle its holder upon liquidation either to
receive $1 or an amount equal to the payment made on one share of common stock,
whichever is greater.

 

·                  will have the same voting power as one share of common
stock.

 

·                  if shares of our common stock are exchanged via
merger, consolidation, or a similar transaction, will entitle holders to a per
share payment equal to the payment made on one share of common stock.

 

The
value of one one-hundredth interest in a Preferred Share should approximate the
value of one share of common stock.

 

Expiration. 
The Rights will expire on March 1, 2011.

 

Redemption. 
Our Board may redeem the Rights for $.01 per Right at any time before
any person or group becomes an Acquiring Person.  If our Board redeems any Rights, it must
redeem all of the Rights.  Once the
Rights are redeemed, the only right of the holders of Rights will be to receive
the redemption price of $.01 per Right. 
The redemption price will be adjusted if we have a stock split or stock
dividends of our common stock.

 

Exchange. 
After a person or group becomes an Acquiring Person, but before an
Acquiring Person owns 50% or more of our outstanding common stock, our Board
may extinguish the Rights by exchanging one share of common stock or an
equivalent security for each Right, other than Rights held by the Acquiring
Person.

 

Anti-Dilution
Provisions.  Our Board may adjust the purchase price of
the Preferred Shares, the number of Preferred Shares issuable and the number of
outstanding Rights to prevent dilution 

 

C-2

 

that
may occur from a stock dividend, a stock split, a reclassification of the
Preferred Shares or common stock.  No
adjustments to the Exercise Price of less than 1% will be made.

 

Amendments.  The terms of the Rights Agreement may be
amended by our Board without the consent of the holders of the Rights.  After a person or group becomes an Acquiring
Person, our Board may not amend the agreement in a way that adversely affects
holders of the Rights.

 

C-3Exhibit 10.1

 

COMMON STOCK PURCHASE AGREEMENT

Dated as of February 23,
2010

by and between

PONIARD PHARMACEUTICALS, INC.

and

COMMERCE COURT SMALL CAP VALUE
FUND, LTD.

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE I PURCHASE AND SALE OF
  COMMON STOCK

  	
  1

  
	
  Section 1.1

  	
  Purchase and Sale of Stock

  	
  1

  
	
  Section 1.2

  	
  Effective Date; Settlement Dates

  	
  1

  
	
  Section 1.3

  	
  Reservation of Common Stock

  	
  2

  
	
  Section 1.4

  	
  Current Report; Prospectus Supplement

  	
  2

  
	
   

  	
   

  	
   

  
	
  ARTICLE II FIXED REQUEST TERMS;
  OPTIONAL AMOUNT

  	
  3

  
	
  Section 2.1

  	
  Fixed Request Notice

  	
  3

  
	
  Section 2.2

  	
  Fixed Requests

  	
  3

  
	
  Section 2.3

  	
  Share Calculation

  	
  4

  
	
  Section 2.4

  	
  Limitation of Fixed Requests

  	
  4

  
	
  Section 2.5

  	
  Reduction of Commitment

  	
  4

  
	
  Section 2.6

  	
  Below Threshold Price

  	
  5

  
	
  Section 2.7

  	
  Settlement

  	
  5

  
	
  Section 2.8

  	
  Reduction of Pricing Period

  	
  5

  
	
  Section 2.9

  	
  Optional Amount

  	
  6

  
	
  Section 2.10

  	
  Calculation of Optional Amount Shares

  	
  7

  
	
  Section 2.11

  	
  Exercise of Optional Amount

  	
  7

  
	
  Section 2.12

  	
  Aggregate Limit

  	
  7

  
	
  Section 2.13

  	
  Commitment Shares

  	
  8

  
	
   

  	
   

  	
   

  
	
  ARTICLE III REPRESENTATIONS AND
  WARRANTIES OF THE INVESTOR

  	
  9

  
	
  Section 3.1

  	
  Organization and Standing of the Investor

  	
  9

  
	
  Section 3.2

  	
  Authorization and Power

  	
  9

  
	
  Section 3.3

  	
  No Conflicts

  	
  9

  
	
  Section 3.4

  	
  Information

  	
  10

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV REPRESENTATIONS AND
  WARRANTIES OF THE COMPANY

  	
  10

  
	
  Section 4.1

  	
  Organization, Good Standing and Power

  	
  10

  
	
  Section 4.2

  	
  Authorization, Enforcement

  	
  10

  
	
  Section 4.3

  	
  Capitalization

  	
  10

  
	
  Section 4.4

  	
  Issuance of Securities

  	
  11

  
	
  Section 4.5

  	
  No Conflicts

  	
  11

  
	
  Section 4.6

  	
  Commission Documents, Financial Statements

  	
  12

  
	
  Section 4.7

  	
  Subsidiaries

  	
  13

  
	
  Section 4.8

  	
  No Material Adverse Effect

  	
  13

  
	
  Section 4.9

  	
  Indebtedness

  	
  14

  
	
  Section 4.10

  	
  Title To Assets

  	
  14

  
	
  Section 4.11

  	
  Actions Pending

  	
  14

  
	
  Section 4.12

  	
  Compliance With Law

  	
  14

  
	
  Section 4.13

  	
  Certain Fees

  	
  14

  
	
  Section 4.14

  	
  Operation of Business

  	
  15

  
	
  Section 4.15

  	
  Environmental Compliance

  	
  17

  

 

i

 

	
  Section 4.16

  	
  Material Agreements

  	
  17

  
	
  Section 4.17

  	
  Transactions With Affiliates

  	
  18

  
	
  Section 4.18

  	
  Securities Act

  	
  18

  
	
  Section 4.19

  	
  Employees

  	
  20

  
	
  Section 4.20

  	
  Use of Proceeds

  	
  20

  
	
  Section 4.21

  	
  Investment Company Act Status

  	
  20

  
	
  Section 4.22

  	
  ERISA

  	
  20

  
	
  Section 4.23

  	
  Taxes

  	
  21

  
	
  Section 4.24

  	
  Insurance

  	
  21

  
	
  Section 4.25

  	
  Acknowledgement Regarding Investor’s Acquisition of
  Securities

  	
  21

  
	
   

  	
   

  	
   

  
	
  ARTICLE V COVENANTS

  	
  21

  
	
  Section 5.1

  	
  Securities Compliance; FINRA Filing

  	
  21

  
	
  Section 5.2

  	
  Registration and Listing

  	
  22

  
	
  Section 5.3

  	
  Compliance with Laws

  	
  23

  
	
  Section 5.4

  	
  Keeping of Records and Books of Account; Foreign Corrupt
  Practices Act

  	
  23

  
	
  Section 5.5

  	
  Limitations on Holdings and Issuances

  	
  24

  
	
  Section 5.6

  	
  Other Agreements and Other Financings

  	
  24

  
	
  Section 5.7

  	
  Stop Orders

  	
  26

  
	
  Section 5.8

  	
  Amendments to the Registration Statement; Prospectus
  Supplements; Free Writing Prospectuses

  	
  27

  
	
  Section 5.9

  	
  Prospectus Delivery

  	
  27

  
	
  Section 5.10

  	
  Selling Restrictions

  	
  28

  
	
  Section 5.11

  	
  Effective Registration Statement

  	
  29

  
	
  Section 5.12

  	
  Non-Public Information

  	
  29

  
	
  Section 5.13

  	
  Broker/Dealer

  	
  29

  
	
  Section 5.14

  	
  Disclosure Schedule

  	
  29

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI OPINION OF COUNSEL AND
  CERTIFICATE; CONDITIONS TO THE SALE AND PURCHASE OF THE SHARES

  	
  30

  
	
  Section 6.1

  	
  Issuance of Commitment Shares; Opinion of Counsel;
  Certificate

  	
  30

  
	
  Section 6.2

  	
  Conditions Precedent to the Obligation of the Company

  	
  30

  
	
  Section 6.3

  	
  Conditions Precedent to the Obligation of the Investor

  	
  32

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII TERMINATION

  	
  34

  
	
  Section 7.1

  	
  Term, Termination by Mutual Consent

  	
  34

  
	
  Section 7.2

  	
  Other Termination

  	
  35

  
	
  Section 7.3

  	
  Effect of Termination

  	
  36

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII INDEMNIFICATION

  	
  36

  
	
  Section 8.1

  	
  General Indemnity

  	
  36

  
	
  Section 8.2

  	
  Indemnification Procedures

  	
  38

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX MISCELLANEOUS

  	
  39

  
	
  Section 9.1

  	
  Fees and Expenses

  	
  39

  
	
  Section 9.2

  	
  Specific Enforcement, Consent to Jurisdiction, Waiver of
  Jury Trial

  	
  40

  
	
  Section 9.3

  	
  Entire Agreement; Amendment

  	
  41

  

 

ii

 

	
  Section 9.4

  	
  Notices

  	
  41

  
	
  Section 9.5

  	
  Waivers

  	
  42

  
	
  Section 9.6

  	
  Headings

  	
  42

  
	
  Section 9.7

  	
  Successors and Assigns

  	
  42

  
	
  Section 9.8

  	
  Governing Law

  	
  42

  
	
  Section 9.9

  	
  Survival

  	
  42

  
	
  Section 9.10

  	
  Counterparts

  	
  43

  
	
  Section 9.11

  	
  Publicity

  	
  43

  
	
  Section 9.12

  	
  Severability

  	
  43

  
	
  Section 9.13

  	
  Further Assurances

  	
  43

  
	
   

  	
   

  	
   

  
	
  Annex
  A.

  	
  Definitions

  	
   

  

 

iii

 

 

 

 

COMMON STOCK PURCHASE AGREEMENT

 

This
COMMON STOCK PURCHASE AGREEMENT, made
and entered into on this 23rd day of February 2010 (this “Agreement”),
by and between Commerce Court Small Cap Value Fund, Ltd., a business company
incorporated under the laws of the British Virgin Islands (the “Investor”),
and Poniard Pharmaceuticals, Inc., a corporation organized and existing
under the laws of the State of Washington (the “Company”). Capitalized
terms used but not defined herein shall have the meanings ascribed to such
terms in Annex A hereto.

 

RECITALS

 

WHEREAS, the parties desire that, upon the terms and
subject to the conditions contained herein, the Company may issue and sell to
the Investor and the Investor shall thereupon purchase from the Company up to
$20,000,000 of newly issued shares of the Company’s common stock, $0.02 par
value (“Common Stock”), subject, in all cases, to the Trading Market
Limit;

 

WHEREAS, in partial
consideration for the Investor’s execution and delivery of this Agreement, the
Company is concurrently causing its transfer agent to issue to the Investor the
Commitment Shares in accordance with the terms and subject to the conditions of
this Agreement; and

 

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

 

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

 

ARTICLE I

PURCHASE AND SALE OF COMMON STOCK

 

Section 1.1            Purchase and Sale of Stock.  Upon the terms and subject to the conditions
of this Agreement, during the Investment Period the Company in its discretion
may issue and sell to the Investor up to $20,000,000 (the “Total Commitment”)
of duly authorized, validly issued, fully paid and non-assessable shares of
Common Stock (subject in all cases to the Trading Market Limit, the “Aggregate
Limit”), by (i) the delivery to the Investor of not more than 24 separate
Fixed Request Notices (unless the Investor and the Company mutually agree that
a different number of Fixed Request Notices may be delivered) as provided in Article II
hereof and (ii) the exercise by the Investor of Optional Amounts, which
the Company may in its discretion grant to the Investor and which may be
exercised by the Investor, in whole or in part, as provided in Article II
hereof.  The aggregate of all Fixed
Request Amounts and Optional Amount Dollar Amounts shall not exceed the
Aggregate Limit.

 

Section 1.2            Effective Date; Settlement Dates.
This Agreement shall become effective and binding upon the payment of the fees
required to be paid on or prior to the Effective Date pursuant to Section 9.1,
the delivery of irrevocable instructions to issue the Commitment Shares to the
Investor or its designees as provided in Section 2.13 and 6.1, the 

 

 

delivery
of counterpart signature pages of this Agreement executed by each of the
parties hereto, and the delivery of all other documents, instruments and
writings required to be delivered on the Effective Date, in each case as
provided in Section 6.1 hereof, to the offices of Greenberg Traurig, LLP,
200 Park Avenue, New York, New York 10166, at 5:00 p.m., New York time, on
the Effective Date.  In consideration of
and in express reliance upon the representations, warranties and covenants, and
otherwise upon the terms and subject to the conditions, of this Agreement, from
and after the Effective Date and during the Investment Period (i) the
Company shall issue and sell to the Investor, and the Investor agrees to
purchase from the Company, the Shares in respect of each Fixed Request and (ii) the
Investor may in its discretion elect to purchase Shares in respect of each
Optional Amount.  The issuance and sale
of Shares to the Investor pursuant to any Fixed Request or Optional Amount
shall occur on the applicable Settlement Date in accordance with Sections 2.7
and 2.9 (or on such Trading Day in accordance with Section 2.8, as
applicable), provided in each case that all of the conditions precedent
thereto set forth in Article VI theretofore shall have been fulfilled or
(to the extent permitted by applicable law) waived.

 

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

 

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

 

2

 

ARTICLE II

FIXED REQUEST TERMS; OPTIONAL AMOUNT

 

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

 

Section 2.1            Fixed Request Notice.  The Company may, from time to time in its
sole discretion, no later than 9:30 a.m. (New York time) on the second
Trading Day immediately preceding the first Trading Day of the Pricing Period,
provide to the Investor a Fixed Request notice, substantially in the form
attached hereto as Exhibit A (the “Fixed Request Notice”),
which Fixed Request Notice shall become effective at 9:30 a.m. (New York
time) on the first Trading Day of the Pricing Period specified in the Fixed
Request Notice. The Fixed Request Notice shall specify the Fixed Amount
Requested, establish the Threshold Price for such Fixed Request, designate the
first and last Trading Day of the Pricing Period and specify the Optional
Amount, if any, that the Company elects to grant to the Investor during the
Pricing Period and the applicable Threshold Price for such Optional Amount (the
“Optional Amount Threshold Price”). The Threshold Price and the Optional
Amount Threshold Price established by the Company in a Fixed Request Notice may
be the same or different, in the Company’s sole discretion. Upon the terms and
subject to the conditions of this Agreement, the Investor is obligated to
accept each Fixed Request Notice prepared and delivered in accordance with the
provisions of this Agreement.

 

Section 2.2            Fixed Requests.  From time to time during the Investment Period,
the Company may in its sole discretion deliver to the Investor a Fixed Request
Notice for a specified Fixed Amount Requested, and the applicable discount
price (the “Discount Price”) shall be determined, in accordance with the
price and share amount parameters as set forth below or such other parameters
mutually agreed upon by the Investor and the Company, and upon the terms and
subject to the conditions of this Agreement, the Investor shall purchase from
the Company the Shares subject to such Fixed Request Notice at the Discount
Price; provided, however, that (i) if an ex-dividend date is
established by the Trading Market in respect of the Common Stock on or between
the first Trading Day of the applicable Pricing Period and the applicable
Settlement Date, the Discount Price shall be reduced by the per share dividend
amount and (ii) the Company may not deliver any single Fixed Request
Notice for a Fixed Amount Requested in excess of the lesser of (a) the
amount in the applicable Fixed Amount Requested column below and (b) 2.5%
of the Market Capitalization:

 

	
  Threshold
  Price

  	
   

  	
  Fixed Amount Requested

  	
   

  	
  Discount Price

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Equal
  to or greater than $10.00

  	
   

  	
  Not
  to exceed $11,000,000

  	
   

  	
  96.875%
  of the VWAP

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Equal
  to or greater than $9.00 and less than $10.00

  	
   

  	
  Not
  to exceed $10,000,000

  	
   

  	
  96.750%
  of the VWAP

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Equal
  to or greater than $8.00 and less than $9.00

  	
   

  	
  Not
  to exceed $9,000,000

  	
   

  	
  96.625% of the VWAP

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Equal to or greater
  than $7.00 and less than $8.00

  	
   

  	
  Not to exceed
  $8,000,000

  	
   

  	
  96.500% of the VWAP

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Equal to or greater
  than $6.00 and less than $7.00

  	
   

  	
  Not to exceed
  $7,000,000

  	
   

  	
  96.250% of the VWAP

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Equal to or greater
  than $5.00 and less than $6.00

  	
   

  	
  Not to exceed
  $6,000,000

  	
   

  	
  96.000% of the VWAP

  

 

3

 

	
  Equal to or greater
  than $4.00 and less than $5.00

  	
   

  	
  Not to exceed
  $5,000,000

  	
   

  	
  95.750% of the VWAP

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Equal to or greater
  than $3.50 and less than $4.00

  	
   

  	
  Not to exceed
  $4,500,000

  	
   

  	
  95.625% of the VWAP

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Equal to or greater
  than $3.00 and less than $3.50

  	
   

  	
  Not to exceed
  $4,000,000

  	
   

  	
  95.500% of the VWAP

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Equal to or greater
  than $2.50 and less than $3.00

  	
   

  	
  Not to exceed
  $3,500,000

  	
   

  	
  95.375% of the VWAP

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Equal to or greater
  than $2.00 and less than $2.50

  	
   

  	
  Not to exceed
  $3,000,000

  	
   

  	
  95.250% of the VWAP

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Equal to or greater
  than $1.50 and less than $2.00

  	
   

  	
  Not to exceed
  $2,500,000

  	
   

  	
  95.125% of the VWAP

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Equal to or greater
  than $1.00 and less than $1.50

  	
   

  	
  Not to exceed
  $2,000,000

  	
   

  	
  95.000% of the VWAP

  

 

Anything to the contrary in
this Agreement notwithstanding, at no time shall the Investor be required to
purchase more than $11,000,000 worth of Common Stock in respect of any Pricing
Period (not including Common Stock subject to any Optional Amount).  The date on which the Company delivers any
Fixed Request Notice in accordance with this Section 2.2 hereinafter shall
be referred to as a “Fixed Request Exercise Date”.

 

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

 

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

 

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

 

A =            0.125 (the “Multiplier”),

 

B =              the total Fixed Amount Requested, and

 

C =              the applicable Discount Price.

 

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

 

Section 2.5            Reduction of Commitment.  On the last Trading Day of each Pricing
Period, the Investor’s Total Commitment under this Agreement automatically (and
without the 

 

4

 

need
for any amendment to this Agreement) shall be reduced, on a dollar-for-dollar
basis, by the total amount of the Fixed Request Amount and the Optional Amount
Dollar Amount, if any, for such Pricing Period paid to the Company at the
Settlement Date.

 

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

 

Section 2.7            Settlement.  The payment for, against simultaneous
delivery of, Shares in respect of each Fixed Request shall be settled on the
second Trading Day next following the last Trading Day of each Pricing Period,
or on such earlier date as the parties may mutually agree (the “Settlement
Date”). On each Settlement Date, the Company shall, or shall cause its
transfer agent to, electronically transfer the Shares purchased by the Investor
by crediting the Investor’s or its designees’ account at DTC through its
Deposit/Withdrawal at Custodian (DWAC) system, which Shares shall be freely
tradable and transferable and without restriction on resale, against
simultaneous payment therefor to the Company’s designated account by wire
transfer of immediately available funds; provided that if the Shares are
received by the Investor later than 1:00 p.m. (New York time), payment
therefor shall be made with next day funds. 
As set forth in Section 9.1(ii), a failure by the Company to
deliver such Shares shall result in the payment of liquidated damages by the
Company to the Investor.

 

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

 

5

 

Upon receipt of a Reduction Notice,
the Investor (i) shall purchase the Shares in respect of each Trading Day
in such reduced Pricing Period for which the VWAP equals or exceeds the
Threshold Price in accordance with Section 2.3 hereof; (ii) may elect
to purchase the Shares in respect of any Trading Day in such reduced Pricing
Period for which the VWAP is (or is deemed to be) lower than the Threshold
Price in accordance with Section 2.6 hereof; and (iii) may elect to
exercise all or any portion of an Optional Amount on any Trading Day during
such reduced Pricing Period in accordance with Sections 2.10 and 2.11 hereof.

 

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

 

D =             (A/B) x (B – C), where:

 

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

 

A =            the Fixed Amount Requested,

 

B =              8 or, for purposes of this Section 2.8, such
lesser number of Trading Days as the parties may mutually agree to, and

 

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

 

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

 

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

 

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

 

Section 2.9            Optional Amount.  With respect to any Pricing Period, the
Company may in its sole discretion grant to the Investor the right to exercise,
from time to time during the Pricing Period (but not more than once on any
Trading Day), all or any portion of an Optional Amount.  The maximum Optional Amount Dollar Amount and
the Optional Amount Threshold Price shall be set forth in the Fixed Request
Notice.  If an ex-dividend date is
established by the Trading Market in respect of the Common Stock on or between
the first Trading Day of the applicable Pricing Period and the applicable
Settlement Date, the applicable exercise price in respect of the Optional
Amount shall be reduced by the per share dividend amount.  Each daily 

 

6

 

Optional
Amount exercise shall be aggregated during the Pricing Period and settled on
the next Settlement Date.  The Optional
Amount Threshold Price designated by the Company in its Fixed Request Notice
shall apply to each Optional Amount exercised during the applicable Pricing
Period.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Section 2.12         Aggregate Limit.  Notwithstanding anything to the contrary
contained in this Agreement, in no event may the Company issue a Fixed Request
Notice or grant an Optional Amount to the extent that the sale of Shares
pursuant thereto and pursuant to all prior Fixed Request Notices and Optional Amounts
issued hereunder, and as liquidated damages pursuant to Section 9.1(ii),
would cause the Company to sell or the Investor to purchase Shares which in the
aggregate are in excess of the Aggregate Limit. 
If the Company issues a Fixed Request Notice or Optional Amount that
otherwise would permit the Investor to purchase shares of Common Stock which
would cause the aggregate purchases by Investor hereunder to exceed the
Aggregate Limit, such Fixed Request Notice or Optional Amount shall be void ab
initio to the extent of the amount by which the dollar value of shares or
number of shares, as the case may be, of Common Stock otherwise issuable
pursuant to such Fixed Request Notice or Optional Amount together with the
dollar value of shares or number of shares, as the case may be, of all other
Common Stock purchased by the Investor pursuant hereto, or issued as liquidated
damages pursuant to Section 9.1(ii), would exceed the Aggregate
Limit.  The Company hereby represents,
warrants 

 

7

 

and
covenants that neither it nor any of its Subsidiaries (i) has effected any
transaction or series of transactions, (ii) is a party to any pending
transaction or series of transactions or (iii) shall enter into any
contract, agreement, agreement-in-principle, arrangement or understanding with
respect to, or shall effect, any Other Financing which, in any of such cases,
may be aggregated with the transactions contemplated by this Agreement for
purposes of determining whether approval of the Company’s stockholders is
required under any bylaw, listed securities maintenance standards or other rules of
the Trading Market; provided, however, that the Company shall be
permitted to take any action referred to in clause (iii) above if (a) the
Company has timely provided the Investor with an Integration Notice as provided
in Section 5.6(ii) hereof and (b) unless the Investor has
previously terminated this Agreement pursuant to Section 7.2, the Company
obtains the requisite stockholder approval prior to the closing of such Other
Financing.

 

At the Company’s sole
discretion, and effective automatically upon delivery of notice by the Company
to the Investor, this Agreement may be amended by the Company from time to time
to reduce the Aggregate Limit by a specified dollar amount and/or number of
shares of Common Stock as shall be determined by the Company in its sole
discretion; provided, however, that any such amendment of this
Agreement (and any such purported amendment) shall be void and of no force and
effect if the effect thereof would restrict, materially delay, conflict with or
impair the ability or right of the Company to perform its obligations under
this Agreement, including, without limitation, the obligation of the Company to
deliver the Commitment Shares to the Investor in accordance with the terms of Section 2.13
and Section 6.1 of this Agreement, and the obligation of the Company to
deliver the Shares to the Investor in respect of a previously delivered Fixed
Request or Optional Amount on the applicable Settlement Date.  In the event the Company shall have elected
to reduce the Aggregate Limit as provided in the immediately preceding
sentence, at the Company’s sole discretion, and effective automatically upon
delivery of notice by the Company to the Investor, the Company may subsequently
amend this Agreement to increase the Aggregate Limit up to $20,000,000, subject
in all cases to the Trading Market Limit; provided, however, that
in no event shall the Company be entitled to issue Fixed Requests and grant
Optional Amounts during the remainder of the Investment Period for an aggregate
amount greater than the amount obtained by subtracting (x) the aggregate
of all Fixed Request Amounts and Optional Amount Dollar Amounts (including any
amounts paid as liquidated damages pursuant to Section 9.1(ii) hereunder)
covered by all Fixed Requests and Optional Amounts theretofore issued or
granted by the Company in respect of which a settlement has occurred pursuant
to Section 2.7 from (y) $20,000,000, subject in all cases to the
Trading Market Limit.

 

Section 2.13         Commitment Shares.
In consideration for the Investor’s execution and delivery of this Agreement,
concurrently with the execution and delivery of this Agreement on the Effective
Date, the Company shall deliver irrevocable instructions to its transfer agent
to electronically transfer the Commitment Shares to the Investor, not later
than 4:00 p.m. (New York time) on the second Trading Day immediately
following the Effective Date, by crediting the Investor’s or its designees’
account at DTC through its Deposit/Withdrawal at Custodian (DWAC) system, which
Commitment Shares shall be issued pursuant to the Registration Statement and
without any restriction on resale, provided that the Investor hereby
agrees that it shall not resell or transfer such Commitment Shares for a period
of 90 days immediately following the Effective Date, except for any transfer to
an Affiliate of the Investor. For the 

 

8

 

avoidance of doubt, all of the Commitment Shares shall be fully earned
as of the Effective Date, regardless of whether any Fixed Requests are issued
by the Company or settled hereunder.

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE INVESTOR

 

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

 

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

 

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

 

Section 3.3            No Conflicts.  The execution, delivery and performance by
the Investor of this Agreement and the consummation by the Investor of the
transactions contemplated herein do not and shall not (i) result in a violation
of such Investor’s charter documents, bylaws or other applicable organizational
instruments, (ii) conflict with, constitute a default (or an event which,
with notice or lapse of time or both, would become a default) under, or give
rise to any rights of termination, amendment, acceleration or cancellation of,
any material agreement, mortgage, deed of trust, indenture, note, bond,
license, lease agreement, instrument or obligation to which the Investor is a
party or is bound, (iii) create or impose any lien, charge or encumbrance
on any property of the Investor under any agreement or any commitment to which
the Investor is party or under which the Investor is bound or under which any
of its properties or assets are bound, or (iv) result in a violation of
any federal, state, local or foreign statute, rule, or regulation, or any
order, judgment or decree of any court or governmental agency applicable to the
Investor or by which any of its properties or assets are bound or affected,
except, in the case of clauses (ii), (iii) and (iv), for such conflicts,
defaults, terminations, amendments, acceleration, cancellations and violations
as would not, individually or in the aggregate, prohibit or otherwise interfere
with the ability of the Investor to enter into and perform its obligations
under this Agreement in any material respect. 
The Investor is not required under federal, state, local or foreign law,
rule or regulation to obtain any consent, authorization or order of, or
make any filing or registration with, any court or governmental agency in order
for it to execute, deliver or perform any of its obligations under this
Agreement or to purchase the Shares in accordance with the terms hereof.

 

9

 

 

Section 3.4            Information.  All materials relating to the business,
financial condition, management and operations of the Company and materials
relating to the offer and sale of the Securities which have been requested by
the Investor have been furnished or otherwise made available to the Investor or
its advisors (subject to Section 5.12 of this Agreement).  The Investor and its advisors have been
afforded the opportunity to ask questions of representatives of the
Company.  The Investor has sought such
accounting, legal and tax advice as it has considered necessary to make an
informed investment decision with respect to its acquisition of the
Securities.  The Investor understands
that it (and not the Company) shall be responsible for its own tax liabilities
that may arise as a result of this investment or the transactions contemplated
by this Agreement.

 

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

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

 

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

 

Section 4.2            Authorization, Enforcement.  The Company has the requisite corporate power
and authority to enter into and perform this Agreement and to issue and sell
the Securities in accordance with the terms hereof.  Except for approvals of the Company’s Board
of Directors or a committee thereof as may be required in connection with any
issuance and sale of Shares to the Investor hereunder (which approvals shall be
obtained prior to the delivery of any Fixed Request Notice), the execution,
delivery and performance by the Company of this Agreement and the consummation
by it of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action and no further consent or
authorization of the Company or its Board of Directors or stockholders is
required. This Agreement has been duly executed and delivered by the Company
and constitutes a valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation, conservatorship, receivership or similar laws relating
to, or affecting generally the enforcement of, creditor’s rights and remedies
or by other equitable principles of general application.

 

Section 4.3            Capitalization.  The authorized capital stock of the Company
and the shares thereof issued and outstanding are as set forth in the
Commission Documents as of the dates reflected therein.  All of the outstanding shares of Common Stock
have been duly 

 

10

 

authorized
and validly issued, and are fully paid and nonassessable.  Except as set forth in the Commission
Documents, as of the Effective Date, no shares of Common Stock were entitled to
preemptive rights or registration rights and there were no outstanding options,
warrants, scrip, rights to subscribe to, call or commitments of any character
whatsoever relating to, or securities or rights convertible into or
exchangeable for, any shares of capital stock of the Company, other than those
issued or granted in the ordinary course of business. Except as set forth in
the Commission Documents, as of the Effective Date, there were no contracts,
commitments, understandings, or arrangements by which the Company is or may
become bound to issue additional shares of the capital stock of the Company or
options, securities or rights convertible into or exchangeable for any shares
of capital stock of the Company.  Except
for customary transfer restrictions contained in agreements entered into by the
Company to sell restricted securities or as set forth in the Commission
Documents, as of the Effective Date, the Company was not a party to, and it had
no knowledge of, any agreement restricting the voting or transfer of any shares
of the capital stock of the Company. 
Except as set forth in the Commission Documents, the offer and sale of
all capital stock, convertible or exchangeable securities, rights, warrants or
options of the Company issued prior to the Effective Date complied with all
applicable federal and state securities laws, and no stockholder has any right
of rescission or damages or any “put” or similar right with respect thereto
that would have a Material Adverse Effect. 
The Company has furnished or made available to the Investor via the
Commission’s Electronic Data Gathering, Analysis and Retrieval System (“EDGAR”)
true and correct copies of the Company’s Articles of Incorporation as in effect
on the Effective Date (the “Charter”), and the Company’s Bylaws as in
effect on the Effective Date (the “Bylaws”), and true and correct copies
(redacted as appropriate) of all executed resolutions of the Company’s Board of
Directors (and committees thereof) relating to the capital stock of the Company
(and transactions in respect thereof) since December 31, 2005 (except with
respect to issuances of shares of capital stock of the Company to directors or
employees of the Company as fees or compensation that were duly approved by the
Company’s Board of Directors or a committee thereof).

 

Section 4.4            Issuance of Securities.  The Commitment Shares have been, and the Shares
to be issued under this Agreement have been or will be (prior to the delivery
of any Fixed Request Notice to the Investor hereunder), duly authorized by all
necessary corporate action on the part of the Company. The Commitment Shares,
when issued in accordance with the terms of this Agreement, and the Shares,
when issued by the Company against payment of the Discount Price in accordance
with the terms of this Agreement, shall be validly issued and outstanding,
fully paid and nonassessable and free from all liens, charges, taxes, security
interests, encumbrances, rights of first refusal, preemptive or similar rights
and other encumbrances with respect to the issue thereof.

 

Section 4.5            No Conflicts.  The execution, delivery and performance by
the Company of this Agreement and the consummation by the Company of the
transactions contemplated hereby do not and shall not (i) result in a
violation of any provision of the Company’s Charter or Bylaws, (ii) conflict
with, constitute a default (or an event which, with notice or lapse of time or
both, would become a default) under, or give rise to any rights of termination,
amendment, acceleration or cancellation of, any material agreement, mortgage,
deed of trust, indenture, note, bond, license, lease agreement, instrument or
obligation to which the Company or any of its Significant Subsidiaries is a
party or is bound (including, without limitation, any listing agreement with
the Trading Market), (iii) create or impose a lien, charge or encumbrance
on any 

 

11

 

property
of the Company or any of its Significant Subsidiaries under any agreement or
any commitment to which the Company or any of its Significant Subsidiaries is a
party or under which the Company or any of its Significant Subsidiaries is
bound or under which any of their respective properties or assets are bound, or
(iv) result in a violation of any federal, state, local or foreign
statute, rule, regulation, order, judgment or decree applicable to the Company or
any of its Subsidiaries or by which any property or asset of the Company or any
of its Subsidiaries are bound or affected, except, in the case of clauses (ii),
(iii) and (iv), for such conflicts, defaults, terminations, amendments,
acceleration, cancellations, liens, charges, encumbrances and violations as
would not, individually or in the aggregate, have a Material Adverse
Effect.  The Company is not required
under federal, state, local or foreign law, rule or regulation to obtain
any consent, authorization or order of, or make any filing or registration
with, any court or governmental agency in order for it to execute, deliver or
perform any of its obligations under this Agreement, or to issue and sell the
Securities to the Investor in accordance with the terms hereof (other than any
filings which may be required to be made by the Company with the Commission,
the Financial Industry Regulatory Authority (the “FINRA”) or the Trading
Market subsequent to the Effective Date, including but not limited to a Prospectus
Supplement under Sections 1.4 and 5.9 of this Agreement, and any registration
statement, prospectus or prospectus supplement which has been or may be filed
pursuant to this Agreement).

 

Section 4.6            Commission Documents, Financial Statements.  (a) The Common Stock is registered
pursuant to Section 12(b) or 12(g) of the Exchange Act and,
except as disclosed in the Commission Documents, as of the Effective Date the
Company had timely filed (giving effect to permissible extensions in accordance
with Rule 12b-25 under the Exchange Act) all Commission Documents.  The Company has delivered or made available
to the Investor via EDGAR or otherwise true and complete copies of the
Commission Documents filed with the Commission prior to the Effective Date
(including, without limitation, the 2008 Form 10-K) and has delivered or
made available to the Investor via EDGAR or otherwise true and complete copies
of all of the Commission Documents heretofore incorporated by reference in the
Registration Statement and the Prospectus. 
The Company has not provided to the Investor any information which,
according to applicable law, rule or regulation, should have been
disclosed publicly by the Company but which has not been so disclosed, other
than with respect to the transactions contemplated by this Agreement.  As of its filing date, each Commission
Document filed with the Commission and incorporated by reference in the
Registration Statement and the Prospectus (including, without limitation, the
2008 Form 10-K) complied in all material respects with the requirements of
the Securities Act or the Exchange Act, as applicable, and other federal, state
and local laws, rules and regulations applicable to it, and, as of its
filing date (or, if amended or superseded by a filing prior to the Effective
Date, on the date of such amended or superseded filing), such Commission
Document did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
were made, not misleading.  Each
Commission Document to be filed with the Commission after the Effective Date
and incorporated by reference in the Registration Statement, the Prospectus and
any Prospectus Supplement required to be filed pursuant to Sections 1.4 and 5.9
hereof during the Investment Period (including, without limitation, the Current
Report), when such document becomes effective or is filed with the Commission,
as the case may be, shall comply in all material respects with the requirements
of the Securities Act or the Exchange Act, as applicable, and other federal,
state and local laws, rules and regulations applicable to it, and shall
not contain 

 

12

 

any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.

 

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

 

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

 

(d)           KPMG LLP and Ernst &
Young, LLP, who have expressed their opinions on the audited financial statements
and related schedules included or incorporated by reference in the Registration
Statement and the Base Prospectus are, with respect to the Company, independent
public accountants as required by the Securities Act and are independent
registered public accounting firms within the meaning of SOXA as required by
the rules of the Public Company Accounting Oversight Board.

 

Section 4.7            Subsidiaries.  NeoRx Manufacturing Group, Inc. (“NMG”),
a corporation organized under the laws of the State of Washington, is the only
Subsidiary of the Company as of the Effective Date.

 

Section 4.8            No Material Adverse Effect.  Since   December 31,
2008, the Company has not experienced or suffered any Material Adverse Effect,
and there exists no current state of facts, condition or event which would have
a Material Adverse Effect, except (i) as disclosed in any Commission
Documents filed since December 31, 2008 or (ii) continued losses from
operations.

 

13

 

Section 4.9            Indebtedness.  The Company’s Quarterly Report on Form 10-Q
for its fiscal quarter ended September 30, 2009 sets forth, as of September 30,
2009, all outstanding secured and unsecured Indebtedness of the Company or any
Subsidiary, or for which the Company or any Subsidiary has commitments through
such date.  For the purposes of this
Agreement, “Indebtedness” shall mean (a) any liabilities for
borrowed money or amounts owed in excess of $10,000,000 (other than trade
accounts payable incurred in the ordinary course of business), (b) all
guaranties, endorsements, indemnities and other contingent obligations in
respect of Indebtedness of others in excess of $10,000,000, whether or not the
same are or should be reflected in the Company’s balance sheet (or the notes
thereto), except guaranties by endorsement of negotiable instruments for
deposit or collection or similar transactions in the ordinary course of
business; and (c) the present value of any lease payments in excess of
$10,000,000 due under leases required to be capitalized in accordance with
GAAP.  There is no existing or continuing
default or event of default in respect of any Indebtedness of the Company or
any of its Subsidiaries.

 

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

 

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

 

Section 4.12         Compliance With Law.  The business of the Company and the
Subsidiaries has been and is presently being conducted in compliance with all
applicable federal, state, local and foreign governmental laws, rules,
regulations and ordinances, except as set forth in the Commission Documents and
except for such non-compliance which, individually or in the aggregate, would
not have a Material Adverse Effect.

 

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

 

14

 

disclosed
in Section 4.13 of the Disclosure Schedule or in the Registration
Statement, the Prospectus or the Current Report, there are no contracts,
agreements or understandings between the Company and any person that would give
rise to a valid claim against the Company, the Investor or the Broker-Dealer
for a brokerage commission, finder’s fee or other like payment in connection
with the transactions contemplated by this Agreement or, to the Company’s
knowledge, any arrangements, agreements, understandings, payments or issuance
with respect to the Company or any of its officers, directors, stockholders,
partners, employees, Subsidiaries or Affiliates that may affect the FINRA’s
determination of the amount of compensation to be received by any FINRA member
(including, without limitation, those FINRA members set forth on Schedule 4.13
of the Disclosure Schedule) or person associated with any FINRA member in
connection with the transactions contemplated by this Agreement.  Except as set forth in this Section 4.13
or as disclosed in Section 4.13 of the Disclosure Schedule or in the
Registration Statement, the Prospectus or the Current Report, no “items of
value” (within the meaning of FINRA Rule 5110) have been received, and no
arrangements have been entered into for the future receipt of any items of
value, from the Company or any of its officers, directors, stockholders,
partners, employees, Subsidiaries or Affiliates by any FINRA member (including,
without limitation, those FINRA members set forth on Schedule 4.13 of the
Disclosure Schedule) or person associated with any FINRA member, during the
period commencing 180 days immediately preceding the Effective Date and ending
on the date this Agreement is terminated in accordance with Article VII,
that may affect the FINRA’s determination of the amount of compensation to be
received by any FINRA member or person associated with any FINRA member in
connection with the transactions contemplated by this Agreement.

 

Section 4.14         Operation of Business.  (a) The Company or one or more of its
Subsidiaries possesses such permits, licenses, approvals, consents and other
authorizations (including licenses, accreditation and other similar
documentation or approvals of any local health departments) (collectively, “Governmental
Licenses”) issued by the appropriate federal, state, local or foreign
regulatory agencies or bodies, including, without limitation, the United States
Food and Drug Administration (“FDA”), necessary to conduct the business
now operated by it, except where the failure to possess such Governmental
Licenses, individually or in the aggregate, would not have a Material Adverse
Effect.  The Company and its Subsidiaries
are in compliance with the terms and conditions of all such Governmental
Licenses and all applicable FDA rules and regulations, guidelines and
policies, and all applicable rules and regulations, guidelines and
policies of any governmental authority exercising authority comparable to that
of the FDA (including any non-governmental authority whose approval or
authorization is required under foreign law comparable to that administered by
the FDA), except where the failure to so comply, individually or in the
aggregate, would not have a Material Adverse Effect.  All of the Governmental Licenses are valid
and in full force and effect, except where the invalidity of such Governmental
Licenses or the failure of such Governmental Licenses to be in full force and
effect, individually or in the aggregate, would not have a Material Adverse
Effect.  As to each product that is
subject to FDA regulation or similar legal provisions in any foreign
jurisdiction that is developed, manufactured, tested, packaged, labeled,
marketed, sold, distributed and/or commercialized by the Company or any of its
Subsidiaries, each such product is being developed, manufactured, tested,
packaged, labeled, marketed, sold, distributed and/or commercialized in
compliance with all applicable requirements of the FDA (and any
non-governmental authority whose approval or authorization is required under
foreign law comparable to that administered by the FDA), including, but not
limited to, those relating to 

 

15

 

investigational
use, investigational device exemption, premarket notification, premarket
approval, good clinical practices, good manufacturing practices, record
keeping, filing of reports, and patient privacy and medical record security,
except where such non-compliance, individually or in the aggregate, would not
have a Material Adverse Effect.  As to
each product or product candidate of the Company or any of its Subsidiaries
subject to FDA regulation or similar legal provision in any foreign
jurisdiction, all manufacturing facilities of the Company and its Subsidiaries
are operated in compliance with the FDA’s Quality System Regulation
requirements at 21 C.F.R. Part 820, as applicable, except where such
non-compliance, individually or in the aggregate, would not have a Material
Adverse Effect.  Except as set forth in
the Commission Documents or the Registration Statement, neither the Company nor
any of its Subsidiaries has received any notice of proceedings relating to the
revocation or modification of any such Governmental Licenses or relating to a
potential violation of, failure to comply with, or request to produce additional
information under, any FDA rules and regulations, guidelines or policies
which, if the subject of any unfavorable decision, ruling or finding,
individually or in the aggregate, would have a Material Adverse Effect.  Except as set forth in the Commission
Documents or the Registration Statement, neither the Company nor any of its
Subsidiaries has received any correspondence, notice or request from the FDA,
including, without limitation, notice that any one or more products or product
candidates of the Company or any of its Subsidiaries failed to receive approval
from the FDA for use for any one or more indications.  This Section 4.14 does not relate to
environmental matters, such items being the subject of Section 4.15.

 

(b)           Except as set forth
in the Commission Documents, the Company or one or more of its Subsidiaries
owns or possesses adequate patents, patent rights, licenses, inventions,
copyrights, know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or procedures),
trademarks, service marks, trade names, trade dress, logos, copyrights and
other intellectual property, including, without limitation, all of the
intellectual property described in the Commission Documents as being owned or
licensed by the Company (collectively, “Intellectual Property”),
necessary to carry on the business now operated by it, except where the failure
to own, license, or have such rights would not, individually or in the
aggregate, have a Material Adverse Effect. 
Except as set forth in the Commission Documents, there are no actions,
suits or judicial proceedings pending, or to the Company’s knowledge
threatened, relating to patents or proprietary information to which the Company
or any of its Subsidiaries is a party or of which any property of the Company
or any of its Subsidiaries is subject, and neither the Company nor any of its
Subsidiaries has received any notice or is otherwise aware of any infringement
of or conflict with asserted rights of others with respect to any Intellectual
Property or of any facts or circumstances which would render any Intellectual
Property invalid or inadequate to protect the interest of the Company and its
Subsidiaries therein, and which infringement or conflict (if the subject of any
unfavorable decision, ruling or finding) or invalidity or inadequacy,
individually or in the aggregate, would have a Material Adverse Effect.

 

(c)           All pre-clinical and
clinical trials conducted by, or on behalf of, the Company or any of its Subsidiaries,
or in which the Company or any of its Subsidiaries has participated that are
described in the Registration Statement or the Commission Documents, or the
results of which are referred to in the Registration Statement or the
Commission Documents, if any, are the only pre-clinical and clinical trials
currently being conducted by or on behalf of 

 

16

 

the
Company and its Subsidiaries. To the Company’s knowledge, all such pre-clinical
and clinical trials have been conducted in material compliance with all
applicable federal, state, local and foreign laws, and the regulations and
requirements of any applicable governmental entity, including, but not limited
to, FDA good clinical practice and good laboratory practice requirements (or
the foreign equivalent requirements). 
Except as set forth in the Registration Statement or the Commission
Documents or as would not likely result in a Material Adverse Effect, neither the
Company nor any of its Subsidiaries has received any notices or correspondence
from the FDA or any other governmental agency requiring the termination,
suspension, delay or modification of any pre-clinical or clinical trials
conducted by, or on behalf of, the Company or any of its Subsidiaries or in
which the Company or any of its Subsidiaries has participated that are
described in the Registration Statement or the Commission Documents, if any, or
the results of which are referred to in the Registration Statement or the
Commission Documents. To the Company’s knowledge, all pre-clinical and clinical
trials previously conducted by, or on behalf of, the Company or any of its
Subsidiaries while conducted by or on behalf of the Company or any of its
Subsidiaries, were conducted in material compliance with all applicable
federal, state, local and foreign laws, and the regulations and requirements of
any applicable governmental entity, including, but not limited to, FDA good
clinical practice and good laboratory practice requirements (or the foreign equivalent
requirements).

 

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

 

Section 4.16         Material Agreements.  Except as set forth in the Commission
Documents, neither the Company nor any Subsidiary of the Company is a party to
any written or oral contract, instrument, agreement commitment, obligation,
plan or arrangement, a copy of

 

17

 

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

 

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

 

Section 4.18         Securities
Act.  The Company has complied with
all applicable federal and state securities laws in connection with the offer,
issuance and sale of the Securities contemplated by this Agreement.

 

(i)            The Company has
prepared and filed with the Commission in accordance with the provisions of the
Securities Act the Registration Statement, including a base prospectus relating
to the Securities.  The Registration
Statement was declared effective by order of the Commission on June 2,
2009. As of the date hereof, no stop order suspending the effectiveness of the
Registration Statement has been issued by the Commission or is continuing in
effect under the Securities Act and no proceedings therefor are pending before
or, to the Company’s knowledge, threatened by the Commission.  No order preventing or suspending the use of
the Prospectus or any Permitted Free Writing Prospectus has been issued by the
Commission.

 

(ii)           The Company
satisfies all of the requirements for the use of Form S-3 under the
Securities Act for the offering and sale of the Securities contemplated by this
Agreement (without reliance on General Instruction I.B.6. of Form S-3).
The Commission has not notified the Company of any objection to the use of the
form of the Registration Statement pursuant to Rule 401(g)(1) under
the Securities Act. The Registration Statement complied in all 

 

18

 

material
respects on the date on which it was declared effective by the Commission, and
will comply in all material respects at each deemed effective date with respect
to the Investor pursuant to Rule 430B(f)(2) of the Securities Act,
with the requirements of the Securities Act, and the Registration Statement
(including the documents incorporated by reference therein) did not on the date
it was declared effective by the Commission, and shall not at each deemed
effective date with respect to the Investor pursuant to Rule 430B(f)(2) of
the Securities Act, contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading; provided that this representation and
warranty does not apply to statements in or omissions from the Registration
Statement made in reliance upon and in conformity with information relating to
the Investor furnished to the Company in writing by or on behalf of the
Investor expressly for use therein. The Registration Statement, as of the
Effective Date, meets the requirements set forth in Rule 415(a)(1)(x) under
the Securities Act.  The Base Prospectus
complied in all material respects on its date and on the Effective Date, and
will comply in all material respects on each applicable Fixed Request Exercise
Date and, when taken together with the applicable Prospectus Supplement and any
applicable Permitted Free Writing Prospectus, on each applicable Settlement
Date, with the requirements of the Securities Act and did not on its date and
on the Effective Date and shall not on each applicable Fixed Request Exercise
Date and, when taken together with the applicable Prospectus Supplement and any
applicable Permitted Free Writing Prospectus, on each applicable Settlement
Date contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading; provided
that this representation and warranty does not apply to statements in or
omissions from the Base Prospectus made in reliance upon and in conformity with
information relating to the Investor furnished to the Company in writing by or
on behalf of the Investor expressly for use therein.

 

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

 

(iv)          At the earliest
time after the filing of the Registration Statement that the Company or another
offering participant made a bona fide offer (within the meaning of Rule 164(h)(2) under
the Securities Act) relating to the Securities, the Company was not and is not
an “ineligible issuer” (as defined in Rule 405 under the Securities
Act).  Each Permitted Free Writing
Prospectus (a) shall conform in all material respects to the requirements
of the Securities Act on the date of its first use, (b) when considered
together with the Prospectus on each applicable Fixed Request Exercise Date and
on each applicable Settlement Date, shall not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they are made, not misleading, and (c) shall not include any
information that conflicts with the 

 

19

 

information
contained in the Registration Statement, including any document incorporated by
reference therein and any Prospectus Supplement deemed to be a part thereof
that has not been superseded or modified. 
The immediately preceding sentence does not apply to statements in or
omissions from any Permitted Free Writing Prospectus made in reliance upon and
in conformity with information relating to the Investor furnished to the
Company in writing by or on behalf of the Investor expressly for use therein.

 

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

 

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

 

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

 

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

 

Section 4.22         ERISA.  No liability to the Pension Benefit Guaranty
Corporation has been incurred with respect to any Plan by the Company or any of
its Subsidiaries which has had or would have a Material Adverse Effect.  No “prohibited transaction” (as defined in Section 406
of ERISA or Section 4975 of the Code) or “accumulated funding deficiency”
(as defined in Section 203 of ERISA) or any of the events set forth in Section 4043(b) of
ERISA has occurred with respect to any Plan which has had or would have a
Material Adverse Effect, and the execution and delivery of this Agreement and
the issuance and sale of the Shares hereunder shall not result in any of the
foregoing events.  Each Plan is in
compliance in all material respects with applicable law, including ERISA and
the Code; the Company has not incurred and does not expect to incur liability
under Title IV of ERISA with respect to the termination of, or withdrawal from,
any Plan; and each Plan for which the Company would have any liability that is
intended to be qualified under Section 401(a) of the Code is so
qualified in all material respects and nothing has occurred, whether by action
or failure to act, which would cause the loss of such qualifications.  As used in this Section 4.22, the term “Plan”
shall mean an 

 

20

 

“employee
pension benefit plan” (as defined in Section 3 of ERISA) which is or has
been established or maintained, or to which contributions are or have been
made, by the Company or any Subsidiary or by any trade or business, whether or
not incorporated, which, together with the Company or any Subsidiary, is under
common control, as described in Section 414(b) or (c) of the
Code.

 

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

 

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

 

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

 

ARTICLE V

COVENANTS

 

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

 

Section 5.1            Securities
Compliance; FINRA Filing.

 

(i)            The Company
shall notify the Trading Market, as necessary, in accordance with its rules and
regulations, of the transactions contemplated by this Agreement, and shall take
all necessary action, undertake all proceedings and obtain all registrations, permits,
consents and approvals for the legal and valid issuance of the Securities to
the Investor in accordance with the terms of this Agreement.

 

(ii)           The Company
shall (with the Investor’s assistance) assist Reedland with the preparation and
filing with the FINRA’s Corporate Financing Department via CobraDesk (not later
than 24 hours after the Effective Date) of all documents and information
required to be filed with the FINRA pursuant to FINRA Rule 5110 with
regard to the transactions contemplated 

 

21

 

by this Agreement (the “FINRA Filing”).
In connection therewith, on the Effective Date, the Company shall pay to the
FINRA by wire transfer of immediately available funds the applicable filing fee
with respect to the FINRA Filing, and the Company shall be solely responsible
for payment of such fee.  The parties
hereby agree to provide each other and Reedland all requisite information and
otherwise to assist each other and Reedland in a timely fashion in order for
Reedland to complete the preparation and submission of the FINRA Filing in
accordance with this Section 5.1(ii) and to assist Reedland in
promptly responding to any inquiries or requests from FINRA or its staff. Each
party hereto shall (A) promptly notify the other party and Reedland of any
communication to that party or its affiliates from the FINRA, including,
without limitation, any request from the FINRA or its staff for amendments or
supplements to or additional information in respect of the FINRA Filing and
permit the other party and Reedland to review in advance any proposed written
communication to the FINRA and (B) furnish the other party and Reedland
with copies of all written correspondence, filings and communications between
them and their affiliates and their respective representatives and advisors, on
the one hand, and the FINRA or members of its staff, on the other hand, with
respect to this Agreement or the transactions contemplated hereby. Each of the
parties hereto agrees to use its commercially reasonable efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, and to assist
and cooperate with the other party and Reedland in doing, all things necessary,
proper or advisable to obtain as promptly as practicable (but in no event later
than 60 days after the Effective Date) written confirmation from the FINRA to
the effect that the FINRA’s Corporate Financing Department has determined not
to raise any objection with respect to the fairness and reasonableness of the terms
of the transactions contemplated by this Agreement; provided, however,
that the Investor shall have no responsibility for the compliance or
non-compliance of any Broker-Dealer with FINRA Rule 5110 and shall not be
required to (x) disclose to the FINRA or to any other governmental agency,
person or entity any business, financial or other information that the Investor
deems, in its sole and absolute discretion, to be proprietary, confidential or
otherwise sensitive information, (y) amend, modify or change any of the
terms or conditions of this Agreement or (z) otherwise take any other
action, including, without limitation, modifying the Discount Price thresholds
referred to in Section 2.2, the number of Commitment Shares or the amount
of fees and commissions to be paid to the Broker-Dealer in connection with the
transactions contemplated by this Agreement, in each case, in such a manner
that would, in the Investor’s sole and absolute discretion, render the terms
and conditions of this Agreement or the transactions contemplated hereby to be
no longer advisable to the Investor. Notwithstanding anything to the contrary
contained in this Agreement, the Company shall not be permitted to deliver any
Fixed Request Notice to the Investor, and the Investor shall not be obligated
to purchase any Shares pursuant to a Fixed Request Notice, unless and until the
parties hereto and Reedland shall have received written confirmation from the
FINRA to the effect that the FINRA’s Corporate Financing Department has
determined not to raise any objection with respect to the fairness and
reasonableness of the terms of the transactions contemplated by this Agreement.

 

Section 5.2            Registration
and Listing.  The Company
shall take all action necessary to cause the Common Stock to continue to be
registered as a class of securities under Sections 12(b) or 12(g) of
the Exchange Act, shall comply with its reporting and filing obligations under
the Exchange Act, and shall not take any action or file any document (whether
or not permitted by the Securities Act) to terminate or suspend such
registration or to terminate or suspend its reporting and filing obligations
under the Exchange Act or Securities Act, except as permitted 

 

22

 

herein. The Company shall take all action
necessary to continue the listing and trading of its Common Stock and the
listing of the Commitment Shares and the Shares acquired or purchased by the
Investor hereunder on the Trading Market (including, without limitation, maintaining
sufficient tangible net assets), and shall comply with the Company’s reporting,
filing and other obligations under the bylaws, listed securities maintenance
standards and other rules and regulations of the FINRA and the Trading
Market. The Company shall not take any action which would reasonably be
expected to result in the delisting or suspension of the Common Stock on the
Trading Market.

 

Section 5.3            Compliance with Laws.

 

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

 

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

 

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

 

(i)            The Company
shall keep and cause each Subsidiary to keep adequate records and books of
account, in which complete entries shall be made in accordance with GAAP
consistently applied, reflecting all financial transactions of the Company and
its Subsidiaries, and in which, for each fiscal year, all proper reserves for
depreciation, depletion, obsolescence, amortization, taxes, bad debts and other
purposes in connection with its business shall be made.  The Company shall maintain a system of
internal accounting controls that (a) pertain to the maintenance of
records that in reasonable detail accurately and fairly reflect the transactions
and dispositions of the assets of the Company; (b) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the Company are being made
only in accordance with authorizations of management and directors of the
Company; and (c) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use or disposition of the Company’s
assets that would likely have a material effect on the Company’s financial
statements.

 

23

 

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

 

(iii)          Subject to the
requirements of Section 5.12 of this Agreement, from time to time from and
after the period beginning with the third Trading Day immediately preceding
each Fixed Request Exercise Date through and including the applicable
Settlement Date, the Company shall make available for inspection and review by
the Investor, customary documentation allowing the Investor and/or its
appointed counsel or advisors to conduct due diligence.

 

Section 5.5            Limitations
on Holdings and Issuances.  Notwithstanding any other provision of this
Agreement, the Company shall not issue and the Investor shall not purchase any
shares of Common Stock which, when aggregated with all other shares of Common
Stock then beneficially owned (as calculated pursuant to Section 13(d) of
the Exchange Act and Rule 13d-3 promulgated thereunder) by the Investor
and its Affiliates, would result in the beneficial ownership by the Investor of
more than 9.9% of the then issued and outstanding shares of Common Stock.

 

Section 5.6            Other Agreements and Other
Financings.

 

(i)            The Company
shall not enter into, announce or recommend to its stockholders any agreement,
plan, arrangement or transaction in or of which the terms thereof would
restrict, materially delay, conflict with or impair the ability or right of the
Company or any Subsidiary to perform its obligations under this Agreement,
including, without limitation, the obligation of the Company to deliver the
Commitment Shares to the Investor not later than 4:00 p.m. (New York time)
on the second Trading Day immediately following the Effective Date, and the
obligation of the Company to deliver the Shares to the Investor in respect of a
Fixed Request or Optional Amount on the applicable Settlement Date.

 

(ii)           The Company
shall notify the Investor, within 48 hours, if it enters into any agreement, plan,
arrangement or transaction with a third party, the principal purpose of which
is to obtain during a Pricing Period an Other Financing not constituting an
Acceptable Financing (an “Other Financing Notice”); provided, however,
that the Company shall notify the Investor promptly (but in no event later than
24 hours) (an “Integration Notice”) if it enters into any agreement,
plan, arrangement or transaction with a third party, the principal purpose of
which is to obtain at any time during the Investment Period an Other Financing
that may be aggregated with the transactions contemplated by this Agreement for
purposes of determining whether approval of the Company’s stockholders is
required under any bylaw, listed securities maintenance standards or other rules of
the Trading Market and, if required under applicable law, including, without
limitation, Regulation FD promulgated by the Commission, or under the 

 

24

 

applicable
rules and regulations of the Trading Market, the Company shall publicly
disclose such information in accordance with Regulation FD and the applicable rules and
regulations of the Trading Market. For purposes of this Section 5.6(ii),
any press release issued by, or Commission Document filed by, the Company shall
constitute sufficient notice, provided that it is issued or filed, as the case
may be, within the time requirements set forth in the first sentence of this Section 5.6(ii) for
an Other Financing Notice or an Integration Notice, as applicable.  For greater certainty, the entry by the
Company into any agreement, plan, arrangement or transaction with a third party
to obtain an Other Financing (or any other financing) outside of a Pricing
Period shall not trigger any requirement for the Company to deliver an Other
Financing Notice (it being acknowledged and agreed that nothing contained in
this Section 5.6(ii) shall limit or modify in any respect the Company’s
obligations in Section 7.2). During any Pricing Period in which the
Company is required to provide an Other Financing Notice pursuant to the first
sentence of this Section 5.6(ii), the Investor shall (i) have the
option to purchase the Shares subject to the Fixed Request at (x) the
price therefor in accordance with the terms of this Agreement or (y) the
third party’s per share purchase price in connection with the Other Financing,
net of such third party’s discounts, Warrant Value and fees, or (ii) the
Investor may elect to not purchase any Shares subject to the Fixed Request for
that Pricing Period. An “Other Financing” shall mean (x) the
issuance of Common Stock for a purchase price less than, or the issuance of
securities convertible into or exchangeable for Common Stock at an exercise or
conversion price (as the case may be) less than, the then Current Market Price
of the Common Stock (in each case, after all fees, discounts, Warrant Value and
commissions associated with the transaction) (a “Below Market Offering”);
(y) the implementation by the Company of any mechanism in respect of any
securities convertible into or exchangeable for Common Stock for the reset of
the purchase price of the Common Stock to below the then Current Market Price
of the Common Stock (including, without limitation, any antidilution or similar
adjustment provisions in respect of any Company securities, but specifically
excluding customary adjustments for stock splits, stock dividends, stock
combinations and similar events); or (z) the issuance of options, warrants
or similar rights of subscription in each case not constituting an Acceptable
Financing. “Acceptable Financing” shall mean the issuance by the Company
of: (1) debt securities or any class or series of preferred stock of the
Company, in each case that are not convertible into or exchangeable for Common
Stock or securities convertible into or exchangeable for Common Stock; (2) shares
of Common Stock or securities convertible into or exchangeable for Common Stock
(including, without limitation, convertible debt securities) other than in
connection with a Below Market Offering and the issuance of shares of Common
Stock upon the conversion, exercise or exchange thereof; (3) shares of
Common Stock or securities convertible into or exchangeable for Common Stock
(including, without limitation, convertible debt securities) in connection with
an underwritten public offering of securities of the Company or a registered
direct public offering of securities of the Company, in each case where the
price per share of such Common Stock (or the conversion or exercise price of
such securities, as applicable) is fixed concurrently with the execution of
definitive documentation relating to such offering, and the issuance of shares
of Common Stock upon the conversion, exercise or exchange thereof; (4) shares
of Common Stock or securities convertible into or exchangeable for Common Stock
in connection with awards under the Company’s benefit and equity plans and
arrangements or pursuant to consulting or other vendor agreements and the
issuance of shares of Common Stock upon the conversion, exercise or exchange
thereof; (5) shares of Common Stock issuable upon the conversion, exercise
or exchange of equity awards or convertible, exercisable or exchangeable
securities (including, 

 

25

 

without
limitation, convertible debt securities) outstanding as of the Effective Date,
and the issuance thereof upon such conversion, exercise or exchange; (6) shares
of Common Stock or securities convertible into or exercisable or exchangeable
for Common Stock (including, without limitation, convertible debt securities)
issued in connection with the acquisition, license or sale of one or more other
companies, equipment, technologies or lines of business, and the issuance of
shares of Common Stock upon the conversion, exercise or exchange thereof; (7) shares
of Common Stock or securities convertible into or exchangeable for Common Stock
(including, without limitation, convertible debt securities) or similar rights
to subscribe for the purchase of shares of Common Stock in connection with
technology sharing, licensing, research and joint development, marketing,
manufacturing supply or other similar strategic or collaborative agreements or
arrangements (or amendments thereto) with third parties, and the issuance of
shares of Common Stock upon the conversion, exercise or exchange thereof; and (8) shares
of Common Stock and/or warrants or similar rights to subscribe for the purchase
of shares of Common Stock issued in connection with commercial credit
arrangements, equipment financings and/or real property leases or service
agreements (or amendments thereto) and the issuance of shares of Common Stock
upon the exercise thereof.

 

Section 5.7            Stop
Orders.  The Company
shall advise the Investor promptly (but in no event later than 24 hours) and
shall confirm such advice in writing: (i) of the Company’s receipt of
notice of any request by the Commission for amendment of or a supplement to the
Registration Statement, the Prospectus, any Permitted Free Writing Prospectus
or for any additional information; (ii) of the Company’s receipt of notice
of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or prohibiting or suspending the
use of the Prospectus or any Prospectus Supplement, or of the suspension of
qualification of the Securities for offering or sale in any jurisdiction, or
the initiation or contemplated initiation of any proceeding for such purpose;
and (iii) of the Company becoming aware of the happening of any event,
which makes any statement of a material fact made in the Registration
Statement, the Prospectus or any Permitted Free Writing Prospectus untrue or
which requires the making of any additions to or changes to the statements then
made in the Registration Statement, the Prospectus or any Permitted Free
Writing Prospectus in order to state a material fact required by the Securities
Act to be stated therein or necessary in order to make the statements then made
therein (in the case of the Prospectus, in light of the circumstances under
which they were made) not misleading, or of the necessity to amend the
Registration Statement or supplement the Prospectus or any Permitted Free
Writing Prospectus to comply with the Securities Act or any other law. The
Company shall not be required to disclose to the Investor the substance or
specific reasons of any of the events set forth in clauses (i) through (iii) of
the immediately preceding sentence, but rather, shall only be required to
disclose that the event has occurred. 
The Company shall not issue any Fixed Request during the continuation of
any of the foregoing events. If at any time the Commission shall issue any stop
order suspending the effectiveness of the Registration Statement or prohibiting
or suspending the use of the Prospectus or any Prospectus Supplement, the
Company shall use commercially reasonable efforts to obtain the withdrawal of
such order at the earliest possible time. The Company shall also advise the
Investor promptly (but in no event later than 24 hours) and shall confirm such
advice in writing of the Company becoming aware of the happening of any event,
which makes any statement made in the FINRA Filing untrue or which requires the
making of any additions to or changes to the statements then made in the FINRA
Filing in order to comply with FINRA Rule 5110.

 

26

 

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

 

(i)            Except as
provided in this Agreement and other than periodic reports required to be filed
pursuant to the Exchange Act, the Company shall not file with the Commission
any amendment to the Registration Statement that relates to the Investor, this
Agreement or the transactions contemplated hereby or file with the Commission
any Prospectus Supplement that relates to the Investor, this Agreement or the
transactions contemplated hereby with respect to which (a) the Investor
shall not previously have been advised, (b) the Company shall not have
given due consideration to any comments thereon received from the Investor or
its counsel, or (c) the Investor shall reasonably object after being so
advised, unless the Company has determined that it is necessary to amend the
Registration Statement or make any supplement to the Prospectus to comply with
the Securities Act or any other applicable law or regulation, in which case the
Company shall promptly (but in no event later than 24 hours) so inform the
Investor, the Investor shall be provided with a reasonable opportunity to
review and comment upon any disclosure relating to the Investor and the Company
shall expeditiously furnish to the Investor an electronic copy thereof. In
addition, for so long as, in the reasonable opinion of counsel for the
Investor, the Prospectus (or in lieu thereof, the notice referred to in Rule 173(a) under
the Securities Act) is required to be delivered in connection with any
acquisition or sale of Securities by the Investor, the Company shall not file
any Prospectus Supplement with respect to the Securities without delivering or
making available a copy of such Prospectus Supplement, together with the Base
Prospectus, to the Investor promptly.

 

(ii)           The Company has
not made, and agrees that unless it obtains the prior written consent of the
Investor it will not make, an offer relating to the Securities that would
constitute an Issuer Free Writing Prospectus or that would otherwise constitute
a Free Writing Prospectus required to be filed by the Company or the Investor
with the Commission or retained by the Company or the Investor under Rule 433
under the Securities Act.  The Investor
has not made, and agrees that unless it obtains the prior written consent of
the Company it will not make, an offer relating to the Securities that would
constitute a Free Writing Prospectus required to be filed by the Company with
the Commission or retained by the Company under Rule 433 under the
Securities Act.  Any such Issuer Free
Writing Prospectus or other Free Writing Prospectus consented to by the
Investor or the Company is referred to in this Agreement as a “Permitted
Free Writing Prospectus.”  The Company
agrees that (x) it has treated and will treat, as the case may be, each
Permitted Free Writing Prospectus as an Issuer Free Writing Prospectus and (y) it
has complied and will comply, as the case may be, with the requirements of Rules 164
and 433 under the Securities Act applicable to any Permitted Free Writing
Prospectus, including in respect of timely filing with the Commission,
legending and record keeping.

 

Section 5.9            Prospectus Delivery.  The Company shall file with the Commission a
Prospectus Supplement pursuant to Rule 424(b) under the Securities
Act on the first Trading Day immediately following the last Trading Day of each
Pricing Period.  The Company shall
provide the Investor a reasonable opportunity to comment on a draft of each
such Prospectus Supplement and any Issuer Free Writing Prospectus, shall give
due consideration to all such comments and, subject to the provisions of Section 5.8
hereof, shall deliver or make available to the Investor, without charge, an
electronic copy of each form of Prospectus Supplement, together with the Base
Prospectus, and any Permitted Free Writing Prospectus on each applicable
Settlement Date.  

 

27

 

The Company consents to the use of the
Prospectus (and of any Prospectus Supplement thereto) in accordance with the
provisions of the Securities Act and with the securities or “blue sky” laws of
the jurisdictions in which the Securities may be sold by the Investor, in
connection with the offering and sale of the Securities and for such period of
time thereafter as the Prospectus (or in lieu thereof, the notice referred to
in Rule 173(a) under the Securities Act) is required by the
Securities Act to be delivered in connection with sales of the Securities. If
during such period of time any event shall occur that in the judgment of the
Company and its counsel is required to be set forth in the Registration
Statement or the Prospectus or any Permitted Free Writing Prospectus or should
be set forth therein in order to make the statements made therein (in the case
of the Prospectus, in light of the circumstances under which they were made)
not misleading, or if it is necessary to amend the Registration Statement or
supplement or amend the Prospectus or any Permitted Free Writing Prospectus to
comply with the Securities Act or any other applicable law or regulation, the
Company shall forthwith prepare and, subject to Section 5.8 above, file
with the Commission an appropriate amendment to the Registration Statement or
Prospectus Supplement to the Prospectus (or supplement to the Permitted Free
Writing Prospectus) and shall expeditiously furnish or make available to the
Investor an electronic copy thereof.

 

Section 5.10         Selling
Restrictions.

 

(i)            Except as
expressly set forth below, the Investor covenants that from and after the date
hereof through and including the 90th day next
following the termination of this Agreement (the “Restricted Period”),
neither the Investor nor any of its Affiliates nor any entity managed or controlled
by the Investor (collectively, the “Restricted Persons” and each of the
foregoing is referred to herein as a “Restricted Person”) shall,
directly or indirectly, (i) intentionally engage in any Short Sales
involving the Company’s securities or (ii) grant any option to purchase,
or acquire any right to dispose of or otherwise dispose for value of, any
shares of Common Stock or any securities convertible into or exercisable or
exchangeable for any shares of Common Stock, or enter into any swap, hedge or other
similar agreement that transfers, in whole or in part, the economic risk of
ownership of the Common Stock. Notwithstanding the foregoing, it is expressly
understood and agreed that nothing contained herein shall (without
implication that the contrary would otherwise be true) prohibit any Restricted
Person during the Restricted Period from: (1) selling “long” (as defined
under Rule 200 promulgated under Regulation SHO) the Commitment Shares or
the Shares; (2) selling a number of shares of Common Stock equal to
the number of Shares that such Restricted Person is or may be obligated to
purchase under a pending Fixed Request Notice but has not yet taken
possession of so long as such Restricted Person (or the Broker-Dealer, as
applicable) delivers the Shares purchased pursuant to such Fixed Request Notice
to the purchaser thereof or the applicable Broker-Dealer; provided, however,
such Restricted Person (or the applicable Broker-Dealer, as applicable) shall
not be required to so deliver any such Shares subject to such Fixed Request
Notice if (a) such Fixed Request is terminated by mutual agreement of the
Company and the Investor and, as a result of such termination, no such Shares
are delivered to the Investor under this Agreement or (b) the Company
otherwise fails to deliver such Shares to the Investor on the applicable
Settlement Date upon the terms and subject to the provisions of this
Agreement; or (3) executing one or more transactions of any kind
or nature from time to time and at any time so long as such transaction or
transactions (as the case may be) do not result, at any one time
during the Restricted Period, in a then-outstanding aggregate open 

 

28

 

“short” position (within the meaning of Rule 200
under Regulation SHO) and open “put equivalent positions” (within the meaning
of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder) (without duplication) in a number of shares of Common
Stock that exceeds 121,183 shares of Common Stock (as adjusted for stock
dividends, splits, combinations and other similar events after the date hereof)
(it being understood and agreed that clause (2) above shall not be taken
into account in making determinations under this clause (3)).

 

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

 

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

 

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

 

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

 

Section 5.14         Disclosure
Schedule.

 

(i)            During the
Investment Period, the Company shall from time to time update the Disclosure
Schedule as may be required to satisfy the condition set forth in Section 6.3(i).  For purposes of this Section 5.14, any
disclosure made in a schedule to the Compliance Certificate substantially in
the form attached hereto as Exhibit D shall be deemed to be an
update of the Disclosure Schedule. 
Notwithstanding anything in this Agreement to the contrary, no update to
the Disclosure Schedule pursuant to this Section 5.14 shall cure any
breach of a representation or warranty of the Company contained in this
Agreement and shall not affect any of the Investor’s rights or remedies with
respect thereto.

 

(ii)           Notwithstanding
anything to the contrary contained in the Disclosure Schedules or in this Agreement,
the information and disclosure contained in any Schedule of the Disclosure
Schedules shall be deemed to be disclosed and incorporated by reference in any
other Schedule of the Disclosure Schedules as though fully set forth in such
Schedule for which applicability of such information and disclosure is readily
apparent on its face.  The fact that any
item of information is disclosed in the Disclosure Schedules shall not be
construed to mean that 

 

29

 

such information is required to be disclosed
by this Agreement.  Except as expressly
set forth in this Agreement, such information and the thresholds (whether based
on quantity, qualitative characterization, dollar amounts or otherwise) set
forth herein shall not be used as a basis for interpreting the terms “material”
or “Material Adverse Effect” or other similar terms in this Agreement.

 

ARTICLE VI

OPINION OF COUNSEL AND CERTIFICATE;

CONDITIONS TO THE SALE AND PURCHASE OF THE SHARES

 

Section 6.1            Issuance
of Commitment Shares; Opinion of Counsel; Certificate.  On the Effective Date, the Company shall
deliver irrevocable instructions to its transfer agent to electronically
transfer the Commitment Shares to the Investor, not later than 4:00 p.m.
(New York time) on the second Trading Day immediately following the Effective
Date, by crediting the Investor’s or its designees’ account at DTC through its
Deposit/Withdrawal at Custodian (DWAC) system, which Commitment Shares shall be
issued pursuant to the Registration Statement and without any restriction on
resale (except as expressly provided in the proviso to clause (i) of Section 2.13).
For the avoidance of doubt, all of the Commitment Shares shall be fully earned
as of the Effective Date, regardless of whether any Fixed Requests are issued
by the Company or settled hereunder. Simultaneously with the execution and
delivery of this Agreement, the Investor’s counsel has received (a) an
opinion of outside counsel to the Company, dated the Effective Date, in the
form mutually agreed to by the parties hereto, (b) a certificate from the
Company, dated the Effective Date, in the form of Exhibit C hereto,
and (c) a copy of the irrevocable instructions to the transfer agent
regarding the Commitment Shares.

 

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

 

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

 

(ii)           Registration
Statement.  The
Registration Statement is effective and neither the Company nor the Investor
shall have received notice that the Commission has issued 

 

30

 

or intends to issue a stop order with respect
to the Registration Statement.  The
Company shall have a maximum dollar amount certain of Common Stock registered
under the Registration Statement which (A) as of the Effective Date, is
sufficient to issue to the Investor not less than (1) the Total Commitment
plus (2) the Commitment Shares and (B) as of the applicable Fixed
Request Exercise Date and the applicable Settlement Date, is sufficient to
issue to the Investor not less than the maximum dollar amount worth of Shares
issuable pursuant to the applicable Fixed Request Notice and applicable
Optional Amount, if any. The Current Report shall have been filed with the
Commission, as required pursuant to Section 1.4, and all Prospectus
Supplements shall have been filed with the Commission, as required pursuant to
Sections 1.4 and 5.9 hereof, to disclose the sale of the Shares prior to each
Settlement Date, as applicable. Any other material required to be filed by the
Company or any other offering participant pursuant to Rule 433(d) under
the Securities Act shall have been filed with the Commission within the
applicable time periods prescribed for such filings by Rule 433 under the
Securities Act.

 

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

 

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

 

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

 

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

 

31

 

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

 

(viii)        No
Unresolved FINRA Objection.   There shall not exist any unresolved
objection raised by the FINRA’s Corporate Financing Department with respect to
the fairness and reasonableness of the terms of the transactions contemplated
by this Agreement, and the parties hereto and Reedland shall have obtained
written confirmation thereof from the FINRA.

 

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

 

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

 

(ii)           Registration
Statement. The Registration Statement is effective and
neither the Company nor the Investor shall have received notice that the
Commission has issued or intends to issue a stop order with respect to the
Registration Statement. The Company shall have a maximum dollar amount certain
of Common Stock registered under the Registration Statement which (A) as
of the Effective Date, is sufficient to issue to the Investor not less than (1) the
Total Commitment plus (2) the Commitment Shares and (B) as of the
applicable Fixed Request Exercise Date and the applicable Settlement Date, is
sufficient to issue to the Investor not less than the maximum dollar amount
worth of Shares issuable pursuant to the applicable Fixed Request Notice and
applicable Optional Amount, if any. As of the Effective Date, the applicable
Fixed Request Exercise Date and the applicable Settlement Date, the Investor
shall be permitted to utilize the Prospectus to resell all of the Securities it
then owns or has the right to acquire pursuant to all Fixed Request Notices
issued pursuant to this Agreement (subject, in the case of the Commitment
Shares, to the proviso to clause (i) of Section 2.13). The Current
Report shall have been filed with the Commission, as required pursuant to Section 1.4,
and all Prospectus Supplements shall have been filed with the Commission, as
required pursuant to Sections 1.4 and 5.9 hereof, to disclose the sale of the
Shares prior to each Settlement Date, as 

 

32

 

applicable, and an electronic copy of each
such Prospectus Supplement together with the Base Prospectus shall have been
delivered or made available to the Investor in accordance with Section 5.9
hereof. Any other material required to be filed by the Company or any other
offering participant pursuant to Rule 433(d) under the Securities Act
shall have been filed with the Commission within the applicable time periods
prescribed for such filings by Rule 433 under the Securities Act.

 

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

 

(iv)          Performance
of the Company.  The Company
shall have performed, satisfied and complied in all material respects with all
covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by the Company at or prior to the
applicable Fixed Request Exercise Date and the applicable Settlement Date. The
Company shall have delivered to the Investor on the applicable Settlement Date
the Compliance Certificate substantially in the form attached hereto as Exhibit D.

 

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

 

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

 

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

 

(viii)        Shares
Authorized and Delivered.  The Shares issuable pursuant to such Fixed
Request Notice or Optional Amount shall have been duly authorized by all
necessary 

 

33

 

corporate action of the Company. The Company
shall have delivered all Shares relating to all prior Fixed Request Notices and
Optional Amounts, as applicable.

 

(ix)           Listing
of Shares and Commitment Shares. All Commitment Shares shall
have been approved for listing or quotation on the Trading Market as of the
Effective Date. The Company shall have submitted to the Trading Market, at or
prior to the applicable Fixed Request Exercise Date, a notification form of
listing of additional shares related to the Shares issuable pursuant to such
Fixed Request and Optional Amount, in accordance with the bylaws, listed
securities maintenance standards and other rules of the Trading Market
and, prior to the applicable Settlement Date, such Shares shall have been
approved for listing or quotation on the Trading Market, subject only to notice
of issuance.

 

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

 

(xi)           No
Unresolved FINRA Objection.  There shall not exist any unresolved
objection raised by the FINRA’s Corporate Financing Department with respect to
the fairness and reasonableness of the terms of the transactions contemplated
by this Agreement, and the parties hereto and Reedland shall have obtained
written confirmation thereof from the FINRA.

 

(xii)          Payment
of Investor’s Counsel Fees.  On the Effective Date, the Company shall have
paid by wire transfer of immediately available funds to an account designated
by the Investor’s counsel, the fees and expenses of the Investor’s counsel in
accordance with clause (B) of the proviso to the first sentence of Section 9.1(i) of
this Agreement.

 

ARTICLE VII

TERMINATION

 

Section 7.1            Term,
Termination by Mutual Consent.  Unless earlier terminated as provided
hereunder, this Agreement shall terminate automatically on the earliest of (i) the
first day of the month next following the 18-month anniversary of the Effective
Date (the “Investment Period”), (ii) the date that the entire
dollar amount of Common Stock registered under the Registration Statement have
been issued and sold and (iii) the date the Investor shall have purchased
the Total Commitment of shares of Common Stock (subject in all cases to the
Trading Market Limit). Subject to Section 7.3, this Agreement may be
terminated at any time (A) by the mutual written consent of the parties,
effective as of the date of such mutual written consent unless otherwise
provided in such written consent, it being hereby acknowledged and agreed that
the Investor may not consent to such termination during a Pricing Period or
prior to a Settlement Date in the event the Investor has instructed the
Broker-Dealer to effect an open-market sale of Shares which are subject to a
pending Fixed Request Notice but which have not yet been physically delivered
by the Company (and/or credited by book-entry) to the Investor in accordance
with the terms and subject to the conditions of this Agreement, or (B) by
either the 

 

34

 

Company or the Investor effective upon
written notice to the other party under Section 9.4, if the FINRA’s
Corporate Financing Department has raised any objection with respect to the
fairness and reasonableness of the terms of the transactions contemplated by
this Agreement, or has otherwise failed to confirm in writing that it has
determined not to raise any such objection, and such objection shall not have been
resolved, or such confirmation of no objection shall not have been obtained,
prior to (1) the 60th day immediately following the Effective Date, in the
case of an objection raised or confirmation failure occurring prior to the
first Fixed Request Exercise Date, or (2) prior to the 60th day
immediately following the receipt by the Company or the Investor of notice of
such objection, in the case of an objection raised after the first Fixed
Request Exercise Date; provided  however, that (x) the party
seeking to terminate this Agreement pursuant to this clause (B) of Section 7.1
shall have used its commercially reasonable efforts to resolve such objection
and/or to obtain such confirmation of no objection in accordance with and
subject to the provisions of Section 5.1(ii) of this Agreement and (y) the
right to terminate this Agreement pursuant to this clause (B) of Section 7.1
shall not be available to any party whose action or failure to act has been a
principal cause of, or has resulted in, such objection or confirmation failure
and such action or failure to act constitutes a breach of this Agreement.
Subject to Section 7.3, the Company may terminate this Agreement effective
upon three Trading Days’ prior written notice to the Investor delivered in
accordance with Section 9.4; provided, however, that (i) such
termination shall not occur during a Pricing Period or, subsequent to the
issuance of a Fixed Request Notice, prior to the Settlement Date related to
such Fixed Request Notice, and (ii) prior to issuing any press release, or
making any public statement or announcement, with respect to such termination,
the Company shall consult with the Investor and shall obtain the Investor’s
consent to the form and substance of such press release or other disclosure, which
consent shall not be unreasonably delayed or withheld.

 

Section 7.2            Other
Termination.  If the
Company provides the Investor with an Other Financing Notice or an Integration
Notice, in each case pursuant to Section 5.6(ii) of this Agreement,
or if the Company otherwise enters into any agreement, plan, arrangement or
transaction with a third party, the principal purpose of which is to obtain
outside a Pricing Period, but otherwise during the Investment Period, an Other
Financing not constituting an Acceptable Financing, in which latter case the
Company shall so notify the Investor within 48 hours thereof, then in all such
cases, subject to Section 7.3, the Investor shall have the right to
terminate this Agreement within the subsequent 30-day period (the “Event
Period”), effective upon one Trading Day’s prior written notice delivered
to the Company in accordance with Section 9.4 at any time during the Event
Period. The Company shall promptly (but in no event later than 24 hours) notify
the Investor (and, if required under applicable law, including, without
limitation, Regulation FD promulgated by the Commission, or under the
applicable rules and regulations of the Trading Market, the Company shall
publicly disclose such information in accordance with Regulation FD and the
applicable rules and regulations of the Trading Market), and, subject to Section 7.3,
the Investor shall have the right to terminate this Agreement at any time after
receipt of such notification, if: (i) any condition, occurrence, state of
facts or event constituting a Material Adverse Effect has occurred; (ii) a
Fundamental Transaction has occurred or the Company enters into a definitive
agreement providing for a Fundamental Transaction; or (iii) a default or
event of default has occurred and is continuing under the terms of any
agreement, contract, note or other instrument to which the Company or any of
its Subsidiaries is a party with respect to any indebtedness for borrowed money
representing more than 10% of the

 

35

 

Company’s
consolidated assets, in any such case, upon one Trading Day’s prior written
notice delivered to the Company in accordance with Section 9.4 hereof.

 

Section 7.3            Effect of Termination.  In the event of termination by the Company or
the Investor pursuant to Section 7.1 or 7.2, as applicable, written notice
thereof shall forthwith be given to the other party as provided in Section 9.4
and the transactions contemplated by this Agreement shall be terminated without
further action by either party. If this Agreement is terminated as provided in Section 7.1
or 7.2 herein, this Agreement shall become void and of no further force and
effect, except that (i) the provisions of Article VIII
(Indemnification), Section 9.1 (Fees and Expenses), Section 9.2
(Specific Enforcement, Consent to Jurisdiction, Waiver of Jury Trial), Section 9.4
(Notices), Section 9.8 (Governing Law), Section 9.9 (Survival), Section 9.11
(Publicity), Section 9.12 (Severability) and this Article VII
(Termination) shall remain in full force and effect indefinitely
notwithstanding such termination, (ii) the covenants and agreements
contained in Section 5.1(i) (Securities Compliance; FINRA Filing), Section 5.3
(Compliance with Laws), Section 5.7 (Stop Orders), Section 5.8
(Amendments to the Registration Statement; Prospectus Supplements; Free Writing
Prospectuses), Section 5.9 (Prospectus Delivery), Section 5.11
(Effective Registration Statement), Section 5.12 (Non-Public Information)
and 5.13 (Broker/Dealer) shall remain in full force and effect notwithstanding
such termination for a period of six months following such termination, (iii) the
covenants and agreements of the Investor contained in Section 5.10
(Selling Restrictions) shall remain in full force and effect notwithstanding
such termination for a period of 90 days following such termination, and (iv) the
covenants and agreements of the Company contained in Section 5.2
(Registration and Listing) shall remain in full force and effect
notwithstanding such termination for a period of 30 days following such
termination. Notwithstanding anything in this Agreement to the contrary, no
termination of this Agreement by any party shall (a) affect any Commitment
Shares, or any rights of any holder thereof (it being hereby acknowledged and
agreed that all of the Commitment Shares shall be fully earned as of the
Effective Date, regardless of whether any Fixed Requests are issued by the
Company or settled hereunder) or (b) affect any cash fees paid to the
Investor or its counsel pursuant to Section 9.1, in each case all of which
fees shall be non-refundable, regardless of whether any Fixed Requests are
issued by the Company or settled hereunder. Nothing in this Section 7.3
shall be deemed to release the Company or the Investor from any liability for
any breach under this Agreement or to impair the rights of the Company and the
Investor to compel specific performance by the other party of its obligations
under this Agreement.

 

ARTICLE VIII

INDEMNIFICATION

 

Section 8.1            General Indemnity.

 

(i)            Indemnification by the Company.  The Company shall indemnify and hold harmless
the Investor, each Affiliate, employee, representative and advisor of and to
the Investor, and each person, if any, who controls the Investor within the
meaning of Section 15 of the Securities Act or Section 20(a) of
the Exchange Act from and against all losses, claims, damages, liabilities and
expenses (including reasonable costs of defense and investigation and all
attorneys’ fees) to which the Investor and each such other person may become subject,
under the Securities Act or otherwise, insofar as such losses, claims, damages,
liabilities and expenses (or 

 

36

 

actions
in respect thereof) arise out of or are based upon (a) any violation of United
States federal or state securities laws or the rules and regulations of
the Trading Market in connection with the transactions contemplated by this
Agreement by the Company or any of its Subsidiaries, affiliates, officers,
directors or employees, (b) any untrue statement or alleged untrue
statement of a material fact contained, or incorporated by reference, in the
Registration Statement or any amendment thereto or any omission or alleged
omission to state therein, or in any document incorporated by reference
therein, a material fact required to be stated therein or necessary to make the
statements therein not misleading, or (c) any untrue statement or alleged
untrue statement of a material fact contained, or incorporated by reference, in
the Prospectus, any Issuer Free Writing Prospectus, or in any amendment thereof
or supplement thereto, or in any “issuer information” (as defined in Rule 433
under the Securities Act) of the Company, which “issuer information” is
required to be, or is, filed with the Commission or otherwise contained in any
Free Writing Prospectus, or any amendment or supplement thereto, or any
omission or alleged omission to state therein, or in any document incorporated
by reference therein, a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; provided, however, that (A) the
Company shall not be liable under this Section 8.1(i) to the extent
that a court of competent jurisdiction shall have determined by a final
judgment (from which no further appeals are available) that such loss, claim,
damage, liability or expense resulted directly and solely from any such acts or
failures to act, undertaken or omitted to be taken by the Investor or such
person through its bad faith or willful misconduct, (B) the foregoing
indemnity shall not apply to any loss, claim, damage, liability or expense to
the extent, but only to the extent, arising out of or based upon any untrue
statement or alleged untrue statement or omission or alleged omission made in
reliance upon and in conformity with written information furnished to the
Company by the Investor expressly for use in the Current Report or any
Prospectus Supplement or Permitted Free Writing Prospectus, or any amendment
thereof or supplement thereto, and (C) with respect to the Prospectus, the
foregoing indemnity shall not inure to the benefit of the Investor or any such
person from whom the person asserting any loss, claim, damage, liability or expense
purchased Common Stock, if copies of all Prospectus Supplements required to be
filed pursuant to Section 1.4 and 5.9, together with the Base Prospectus,
were timely delivered or made available to the Investor pursuant hereto and a
copy of the Base Prospectus, together with a Prospectus Supplement (as
applicable), was not sent or given by or on behalf of the Investor or any such
person to such person, if required by law to have been delivered, at or prior
to the written confirmation of the sale of the Common Stock to such person, and
if delivery of the Base Prospectus, together with a Prospectus Supplement (as
applicable), would have cured the defect giving rise to such loss, claim,
damage, liability or expense.

 

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

 

(ii)           Indemnification by the Investor.
The Investor shall indemnify and hold harmless the Company, each of its
directors and officers, and each person, if any, who controls the Company
within the meaning of Section 15 of the Securities Act or Section 20(a) of
the Exchange Act from and against all losses, claims, damages, liabilities and
expenses (including 

 

37

 

reasonable
costs of defense and investigation and all attorneys fees) to which the Company
and each such other person may become subject, under the Securities Act or
otherwise, insofar as such losses, claims, damages, liabilities and expenses
(or actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in the
Current Report or any Prospectus Supplement or Permitted Free Writing
Prospectus, or in any amendment thereof or supplement thereto, or any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, in each case, to the
extent, but only to the extent, the untrue statement, alleged untrue statement,
omission or alleged omission was made in reliance upon, and in conformity with,
written information furnished by the Investor to the Company expressly for
inclusion in the Current Report or such Prospectus Supplement or Permitted Free
Writing Prospectus, or any amendment thereof or supplement thereto.

 

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

 

Section 8.2            Indemnification Procedures.  Promptly after a person receives notice of a
claim or the commencement of an action for which the person intends to seek
indemnification under Section 8.1, the person will notify the indemnifying
party in writing of the claim or commencement of the action, suit or
proceeding; provided, however, that failure to notify the
indemnifying party will not relieve the indemnifying party from liability under
Section 8.1, except to the extent it has been materially prejudiced by the
failure to give notice.  The indemnifying
party will be entitled to participate in the defense of any claim, action, suit
or proceeding as to which indemnification is being sought, and if the
indemnifying party acknowledges in writing the obligation to indemnify the
party against whom the claim or action is brought, the indemnifying party may
(but will not be required to) assume the defense against the claim, action,
suit or proceeding with counsel satisfactory to it.  After an indemnifying party notifies an
indemnified party that the indemnifying party wishes to assume the defense of a
claim, action, suit or proceeding, the indemnifying party will not be liable
for any legal or other expenses incurred by the indemnified party in connection
with the defense against the claim, action, suit or proceeding except that if,
in the opinion of counsel to the indemnifying party, one or more of the
indemnified parties should be separately represented in connection with a claim,
action, suit or proceeding, the indemnifying party will pay the reasonable fees
and expenses of one separate counsel for the indemnified parties.  Each indemnified party, as a condition to
receiving indemnification as provided in Section 8.1, will cooperate in
all reasonable respects with the indemnifying party in the defense of any
action or claim as to which indemnification is sought.  No indemnifying party will be liable for any
settlement of any action effected without its prior written consent.  Notwithstanding the foregoing sentence, if at
any time an indemnified party shall have requested (by written notice provided
in accordance with Section 9.4) an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement of the nature contemplated
hereby effected without its written consent if (i) such settlement is
entered into more than 45 days after receipt by such indemnifying party of the
aforesaid request, (ii) such indemnifying 

 

38

 

party
shall have received written notice of the terms of such settlement at least 30
days prior to such settlement being entered into and (iii) such
indemnifying party shall not have reimbursed such indemnified party in
accordance with such request prior to the date of such settlement.  No indemnifying party will, without the prior
written consent of the indemnified party, effect any settlement of a pending or
threatened action with respect to which an indemnified party is, or is informed
that it may be, made a party and for which it would be entitled to
indemnification, unless the settlement includes an unconditional release of the
indemnified party from all liability and claims which are the subject matter of
the pending or threatened action.

 

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

 

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

 

ARTICLE IX

MISCELLANEOUS

 

Section 9.1            Fees and Expenses.

 

(i)            Each party shall
bear its own fees and expenses related to the transactions contemplated by this
Agreement; provided, however, that the Company shall pay, on the
Effective Date, by wire transfer of immediately available funds (A) to the
FINRA, the applicable filing fee with respect to the FINRA Filing and (B) to
an account designated by the Investor’s counsel, promptly following the receipt
of an invoice therefor, all reasonable attorneys’ fees and expenses (exclusive
of disbursements and out-of-pocket expenses) incurred by the Investor, up to
$40,000, in connection with the preparation, negotiation, execution and
delivery of this Agreement, legal due diligence of the Company and review of
the Registration Statement, the Base Prospectus, the Current Report, any
Permitted Free Writing Prospectus and all other related transaction
documentation. The Company shall pay all U.S. federal, state and local stamp
and other similar transfer and other taxes and duties levied in connection with
issuance of the Securities pursuant hereto. For the avoidance of doubt, all of
the fees payable to the Investor or its counsel pursuant to this Section 9.1
shall be non-refundable, regardless of whether any Fixed Requests are issued by
the Company or settled hereunder.

 

39

 

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

 

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

 

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

 

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

 

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

 

40

 

to
enter into this Agreement by, among other things, the mutual waivers and
certifications in this Section 9.2.

 

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

 

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

 

	
  If
  to the Company:

  	
   

  	
  Poniard
  Pharmaceuticals, Inc.

  
	
   

  	
   

  	
  7000
  Shoreline Court, Suite 270

  
	
   

  	
   

  	
  South
  San Francisco, California 94080

  
	
   

  	
   

  	
  Telephone
  Number: (650) 583-3774

  
	
   

  	
   

  	
  Fax:
  (650) 583-3789

  
	
   

  	
   

  	
  Attention:
  Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
  With
  copies to:

  	
   

  	
  Perkins
  Coie LLP

  
	
   

  	
   

  	
  1201
  Third Avenue, Suite 4800

  
	
   

  	
   

  	
  Seattle,
  Washington 98101-3099

  
	
   

  	
   

  	
  Telephone
  Number: (206) 359-8000

  
	
   

  	
   

  	
  Fax:
  (206) 359-9000

  
	
   

  	
   

  	
  Attention:
  Faith M. Wilson, Esq.

  
	
   

  	
   

  	
   

  
	
  If
  to the Investor:

  	
   

  	
  Commerce
  Court Small Cap Value Fund, Ltd.

  
	
   

  	
   

  	
  Fiduciary
  Services (BVI) Limited

  
	
   

  	
   

  	
  Qwomar
  Complex, 4th Floor

  
	
   

  	
   

  	
  P.O.
  Box 3170

  
	
   

  	
   

  	
  Road
  Town, Tortola

  
	
   

  	
   

  	
  British
  Virgin Islands

  
	
   

  	
   

  	
  Telephone
  Number: (284) 494-8086

  
	
   

  	
   

  	
  Fax:
  (284) 494-9474

  
	
   

  	
   

  	
  Attention:
  Peter W. Poole

  

 

41

 

	
  With
  copies to:

  	
   

  	
  Greenberg
  Traurig, LLP

  
	
   

  	
   

  	
  The
  MetLife Building

  
	
   

  	
   

  	
  200
  Park Avenue

  
	
   

  	
   

  	
  New
  York, NY 10166

  
	
   

  	
   

  	
  Telephone
  Number: (212) 801-9200

  
	
   

  	
   

  	
  Fax:
  (212) 801-6400

  
	
   

  	
   

  	
  Attention:
  Anthony J. Marsico, Esq.

  

 

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

 

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

 

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

 

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

 

Section 9.8            Governing Law.  This Agreement shall be governed by and
construed in accordance with the internal procedural and substantive laws of
the State of New York, without giving effect to the choice of law provisions of
such state  that would cause the
application of the laws of any other jurisdiction.

 

Section 9.9            Survival.  The representations, warranties, covenants
and agreements of the Company and the Investor contained in this Agreement
shall survive the execution and delivery hereof until the termination of this
Agreement; provided, however, that (i) the provisions of Article VII
(Termination), Article VIII (Indemnification), Section 9.1 (Fees and
Expenses), Section 9.2 (Specific Enforcement, Consent to Jurisdiction,
Waiver of Jury Trial), Section 9.4 (Notices), Section 9.8 (Governing
Law), Section 9.11 (Publicity), Section 9.12 (Severability) and this Section 9.9
(Survival) shall remain in full force and effect indefinitely notwithstanding
such termination, (ii) the covenants and agreements contained in Section 5.1(i) (Securities
Compliance; FINRA Filing), Section 5.3 (Compliance with Laws), Section 5.7
(Stop Orders), Section 5.8 (Amendments to the Registration Statement;
Prospectus Supplements; Free Writing Prospectuses), Section 5.9
(Prospectus Delivery), Section 5.11 (Effective Registration Statement), Section 5.12
(Non-Public Information) and 5.13 (Broker/Dealer) shall remain in full force
and effect notwithstanding such termination for a period of six months
following such 

 

42

 

termination,
(iii) the covenants and agreements of the Investor contained in Section 5.10
(Selling Restrictions) shall remain in full force and effect notwithstanding
such termination for a period of 90 days following such termination, and (iv) the
covenants and agreements of the Company contained in Section 5.2
(Registration and Listing) shall remain in full force and effect
notwithstanding such termination for a period of 30 days following such
termination.

 

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

 

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

 

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

 

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

 

[Signature Page Follows]

 

43

 

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

 

	
   

  	
  PONIARD
  PHARMACEUTICALS, INC.:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Gregory L. Weaver

  
	
   

  	
   

  	
  Name:
  Gregory L. Weaver

  
	
   

  	
   

  	
  Title:
  CFO

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  COMMERCE
  COURT SMALL CAP VALUE FUND, LTD.:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Graham Farhina

  
	
   

  	
   

  	
  Name:
  Graham Farhina

  
	
   

  	
   

  	
  Title:
  Director

  

 

44

 

ANNEX A TO THE

COMMON STOCK PURCHASE AGREEMENT

DEFINITIONS

 

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

 

“Affiliate” shall
have the meaning assigned to such term in Rule 12b-2 under the Exchange
Act.

 

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

 

“Base
Prospectus” shall mean the Company’s prospectus, dated February 23,
2010, a preliminary form of which is included in the Registration Statement,
including the documents incorporated by reference therein.

 

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

 

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

 

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

 

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

 

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

 

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

 

“Commission
Documents” shall mean (1) all reports, schedules, registrations,
forms, statements, information and other documents filed by the Company with
the Commission pursuant to the reporting requirements of the Exchange Act,
including all material filed pursuant to Section 13(a) or 15(d) of
the Exchange Act, which have been filed by the Company since December 31,
2008 and which hereafter shall be filed by the Company during the Investment
Period, including, without limitation, the Current Report and the Form 10-K
filed by the Company for its fiscal year ended December 31, 2008 (the “2008
Form 10-K”), (2) the Registration Statement, as the same may be
amended from time to time, the Prospectus and each Prospectus Supplement, and
each Permitted Free Writing Prospectus and (3) all information contained
in such filings and all documents and disclosures that have been and heretofore
shall be incorporated by reference therein.

 

“Commitment Shares”
means 121,183 shares of duly authorized, validly issued, fully paid and
non-assessable shares of Common Stock which, concurrently with the execution
and delivery of this Agreement on the Effective Date, the Company has caused
its transfer agent to electronically transfer to the Investor not later than
4:00 p.m. (New York time) on the second Trading Day immediately following
the Effective Date.

 

 

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

 

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

 

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

 

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

 

“EDGAR”
shall have the meaning assigned to such term in Section 4.3 hereof.

 

“Effective
Date” shall mean the date of this Agreement.

 

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

 

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

 

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

 

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

 

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

 

“FINRA”
shall have the meaning assigned to such term in Section 4.5 hereof.

 

“FINRA
Filing” shall have the meaning assigned to such term in Section 5.1
hereof.

 

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

 

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

 

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

 

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

 

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

 

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

 

 

“Fundamental Transaction”
means any one or more of the following: (i) the Company shall, directly or indirectly, in one or more related transactions, (1) consolidate
or merge with or into (whether or not the Company is the surviving corporation)
another Person, with the result that the holders of the Company’s capital stock
immediately prior to such consolidation or merger together beneficially own
less than 50% of the outstanding voting power of the surviving or resulting
corporation, or (2) sell, lease, license, assign, transfer, convey or
otherwise dispose of all or substantially all of the assets of the Company to
another Person, or (3) allow another Person to make a
purchase, tender or exchange offer that is accepted by the holders of more than
50% of the outstanding shares of Common Stock (not
including any shares of Common Stock held by the Person or Persons making or
party to, or associated or affiliated with the Persons making or party to, such
purchase, tender or exchange offer), or (4) consummate a stock or share
purchase agreement or other business combination (including, without
limitation, a reorganization, recapitalization, spin-off or scheme of
arrangement) with another Person
whereby such other Person acquires more than 50% of the
outstanding shares of Common Stock
(not including any shares of Common Stock held by the other Person or other
Persons making or party to, or associated or affiliated with the other Persons
making or party to, such stock or share purchase agreement or other
business combination), or (5) reorganize,
recapitalize or reclassify its Common Stock, or (ii) any “person” or
“group” (as these terms are used for purposes of Sections 13(d) and 14(d) of
the Exchange Act) is or shall become the “beneficial owner” (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of 50% of the aggregate
ordinary voting power represented by issued and outstanding Common Stock.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Material Adverse Effect”
shall mean any condition, occurrence, state of facts or event having, or
insofar as reasonably can be foreseen would likely have, any effect on the
business, 

 

 

operations,
properties or condition (financial or otherwise) of the Company that is
material and adverse to the Company and its Subsidiaries, taken as a whole,
and/or any condition, occurrence, state of facts or event that would prohibit
or otherwise materially interfere with or delay the ability of the Company to
perform any of its obligations under this Agreement; provided, however,
that none of the following, individually or in the aggregate, shall be taken
into account in determining whether a Material Adverse Effect has occurred or
insofar as reasonably can be foreseen would likely occur: (i) changes in
conditions in the U.S. or global capital, credit or financial markets
generally, including changes in the availability of capital or currency
exchange rates, provided such changes shall not have affected the Company in a
materially disproportionate manner as compared to other similarly situated
companies; (ii) changes generally affecting the biotechnology or
pharmaceutical industries, provided such changes shall not have affected the
Company in a materially disproportionate manner as compared to other similarly
situated companies; and (iii) any effect of the announcement of this
Agreement or the consummation of the transactions contemplated by this
Agreement on the Company’s relationships, contractual or otherwise, with
customers, suppliers, vendors, bank lenders, strategic venture partners or
employees.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Pricing
Period” shall mean a period of eight (8) consecutive Trading Days
commencing on the Pricing Period start date set forth in the Fixed Request
Notice, or such other period mutually agreed upon by the Investor and the
Company.

 

 

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

 

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

 

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

 

“Reedland” shall have
the meaning assigned to such term in Section 4.13 hereof.

 

“Registration
Statement” shall mean the registration statement on Form S 3,
Commission File Number 333-159253, filed by the Company with the Commission
under the Securities Act for the registration of the Shares, as such
Registration Statement may be amended and supplemented from time to time
(including pursuant to Rule 462(b) under the Securities Act),
including all documents filed as part thereof or incorporated by reference
therein, and including all information deemed to be a part thereof at the time
of effectiveness pursuant to Rule 430A or Rule 430B under the
Securities Act.

 

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

 

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

 

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

 

“Securities” shall
mean, collectively, the Shares and the Commitment Shares.

 

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

 

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

 

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

 

“Short Sales” means “short
sales” as defined in Rule 200 promulgated under Regulation SHO under the
Exchange Act.

 

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

 

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

 

 

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

 

“Threshold
Price” is the lowest price (except to the extent otherwise provided in Section 2.6)
at which the Company may sell Shares during the applicable Pricing Period as
set forth in a Fixed Request Notice (not taking into account the applicable
percentage discount during such Pricing Period determined in accordance with Section 2.2);
provided, however, that at no time shall the Threshold Price be
lower than $1.00 per share unless the Company and the Investor mutually shall
agree.

 

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

 

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

 

“Trading
Market” means the Nasdaq Stock Market (or any successors thereto).

 

“Trading Market Limit”
means 8,423,431 shares of duly authorized, validly issued, fully paid and
non-assessable shares of Common Stock (as adjusted for any stock splits, stock
combinations, stock dividends, recapitalizations and other similar transactions
that occur on or after the date of this Agreement); provided, however,
that the Trading Market Limit shall not exceed under any circumstances that
number of shares of Common Stock that the Company may issue pursuant to this
Agreement and the transactions contemplated hereby without (a) breaching
the Company’s obligations under the rules and regulations of the Trading
Market or (b) obtaining stockholder approval under the applicable rules and
regulations of the Trading Market.

 

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

 

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

 

 

EXHIBIT A TO THE

COMMON STOCK PURCHASE AGREEMENT

FORM OF FIXED REQUEST NOTICE

 

Reference is made to the
Common Stock Purchase Agreement dated as of 
February 23, 2010, (the  “Purchase
Agreement”) between Poniard Pharmaceuticals, Inc., a corporation
organized and existing under the laws of the State of Washington (the “Company”),
and Commerce Court Small Cap Value Fund, Ltd., a business company incorporated
under the laws of the British Virgin Islands. Capitalized terms used and not
otherwise defined herein shall have the meanings given such terms in the
Purchase Agreement.

 

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

 

	
  Fixed
  Amount Requested:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Optional
  Amount Dollar Amount:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Pricing
  Period start date:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Pricing
  Period end date:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Settlement
  Date:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Fixed
  Request Threshold Price:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Optional
  Amount Threshold Price:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Dollar
  Amount of Common Stock Currently Unissued under the Registration Statement:

  	
   

  	
   

  
	
   

  	
   

  	
   

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

  	
   

  	
   

  

 

	
  Dated:

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Name:
  

  
	
   

  	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Address:
  

  
	
   

  	
   

  	
   

  	
   

  	
  Facsimile
  No.:

  

 

	
  AGREED AND ACCEPTED

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  

 

 

EXHIBIT B TO THE

COMMON STOCK PURCHASE AGREEMENT

FORM OF OPTIONAL AMOUNT NOTICE

 

	
  To:

  	
   

  
	
  Fax#:

  	
   

  

 

Reference is made to the
Common Stock Purchase Agreement dated as of February 23, 2010 (the “Purchase
Agreement”) between Poniard Pharmaceuticals, Inc., a corporation
organized and existing under the laws of the State of Washington (the “Company”),
and Commerce Court Small Cap Value Fund, Ltd., a business company incorporated
under the laws of the British Virgin Islands (the “Investor”).
Capitalized terms used and not otherwise defined herein shall have the meanings
given such terms in the Purchase Agreement.

 

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

 

	
  Optional
  Amount Dollar Amount Exercised

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Number
  of Shares to be purchased

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  VWAP
  on the date hereof:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Discount
  Price:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Settlement
  Date:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Threshold
  Price:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Dated:

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:
  

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Address:
  

  
	
   

  	
   

  	
  Facsimile
  No.:

  
					

 

 

EXHIBIT
C TO THE

COMMON STOCK PURCHASE AGREEMENT

CERTIFICATE OF THE COMPANY

 

CLOSING
CERTIFICATE

 

                  
200   

 

The undersigned, the
[                      ]
of Poniard Pharmaceuticals, Inc., a corporation organized and existing
under the laws of the State of Washington (the “Company”), delivers this
certificate in connection with the Common Stock Purchase Agreement, dated as of
February 23, 2010 (the “Agreement”), by and between the Company and
Commerce Court Small Cap Value Fund, Ltd., a business company incorporated
under the laws of the British Virgin Islands (the “Investor”), and
hereby certifies on the date hereof that (capitalized terms used herein without
definition have the meanings assigned to them in the Agreement):

 

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

 

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

 

3.                                       The Board of
Directors of the Company has approved the transactions contemplated by the
Agreement; said approval has not been amended, rescinded or modified and
remains in full force and effect as of the date hereof.

 

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

 

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

 

	
   

  	
   

  
	
   

  	
  By:

  
	
   

  	
  Title:

  

 

 

EXHIBIT
D TO THE

COMMON STOCK PURCHASE AGREEMENT

COMPLIANCE CERTIFICATE

 

In connection with the
issuance of shares of common stock of Poniard Pharmaceuticals, Inc., a
corporation organized and existing under the laws of the State of Washington
(the “Company”), pursuant to the Fixed Request Notice, dated
[                          ],
delivered by the Company to Commerce Court Small Cap Value Fund, Ltd. (the “Investor”)
pursuant to Article II of the Common Stock Purchase Agreement, dated as of
February 23, 2010, by and between the Company and the Investor (the “Agreement”),
the undersigned hereby certifies as follows:

 

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

 

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

 

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

 

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

 

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

 

	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00168-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00168-of-00352.parquet"}]]