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Exhibit 10.1.4  

 
 

Exhibit A
  
    SCHEDULE OF PARTNERS,
  ALLOCATION OF PARTNERSHIP UNITS, PERCENTAGE INTERESTS
  AND THE AGREED UPON VALUE OF NON-CASH CAPITAL CONTRIBUTIONS    
  

	Date

Admitted
	 	Name and address of partners
	 	Value of non-cash

capital contribution
	 	Partnership

units issued
	 	Approx. Percentage

Interests
	 	Federal ID #

	2/12/1997	 	Golf Legends Ltd., Inc.

P.O. Box 2038

1500 Legends Drive

Myrtle Beach, SC 29578	 	$	30,647,030	 	1,532,352	 	 	 	57-0886834
	

4/2/2001	
 	

Legends (conversion)	
 	
 	

 	
 	

(294,613	
)	

 	
 	

 
	

7/31/2001	
 	

Redemption at disposition	
 	
$	

(14,852,868	
)	

(1,237,739	
)	

 	
 	

 
	7/31/2001	 	Residual Value	 	$	(15,794,162	)	 	 	 	 	 
	 	 	 	 	
	 	
	 	 	 	 
	 	 	Legends Total	 	$	—	 	—	 	0.00	%	 
	

2/12/1997	
 	

Seaside Resorts Ltd., Inc.

1500 Legends Drive

Myrtle Beach, SC 29578	
 	
$	

16,129,118	
 	

806,456	
 	

 	
 	

57-0729308
	

7/31/2001	
 	

Redemption at disposition	
 	
 	

(9,677,472	
)	

(806,456	
)	

 	
 	

 
	7/31/2001	 	Residual Value	 	 	(6,451,646	)	 	 	 	 	 
	 	 	 	 	
	 	
	 	 	 	 
	 	 	Seaside Resorts Ltd., Inc. Total	 	$	—	 	—	 	0.00	%	 
	

2/12/1997	
 	

Heritage Golf Club, Ltd., Inc.

1500 Legends Drive

Myrtle Beach, SC 29578	
 	
$	

16,031,230	
 	

801,561	
 	

 	
 	

57-0818596
	

1/6/1999	

 	

Heritage (conversion)	

 	

 	

 	

 	

(11,700	

)	

 	

 	

 
	

7/31/2001	
 	

Redemption at disposition	
 	
 	

(9,478,332	
)	

(789,861	
)	

 	
 	

 
	7/31/2001	 	Residual Value	 	 	(6,552,898	)	 	 	 	 	 
	 	 	 	 	
	 	
	 	 	 	 
	 	 	Heritage Golf Club, Ltd., Inc. Total	 	$	—	 	—	 	0.00	%	 
	

2/12/1997	
 	

Legends of Virginia L.C.

1500 Legends Drive

Myrtle Beach, SC 29578	
 	
$	

11,963,738	
 	

598,187	
 	

 	
 	

57-1003883
	

4/2/2001	
 	

Legends (conversion)	
 	
 	

 	
 	

(598,187	
)	

 	
 	

 
	

7/31/2001	
 	

Residual Value	
 	
 	

(11,963,738	
)	

 	
 	

0.00	
%	

 
	 	 	 	 	
	 	
	 	
	 	 
	 	 	Legends of Virgiania Total	 	$	—	 	—	 	 	 	 
	

2/12/1997	
 	

Northgate

16055 Northgate Forest Drive

Houston, TX 77068	
 	
$	

3,797,071	
 	

189,854	
 	

 	
 	

76-0527250
	

5/20/1998	
 	

Northgate (redemption)	
 	
 	

(158,969	
)	

(5,000	
)	

 	
 	

 
	

1/6/1999	
 	

Northgate (conversion)	
 	
 	

—	
 	

(30,000	
)	

 	
 	

 
	

3/2/2001	
 	

Northgate (conversion)	
 	
 	

 	
 	

(60,581	
)	

 	
 	

 
	

3/26/2002	
 	

Northgate (redemption)	
 	
 	

(534,999	
)	

(94,273	
)	

 	
 	

 
	

3/26/2002	
 	

Residual Value	
 	
 	

(3,103,103	
)	

 	
 	

 	
 	

 
	 	 	 	 	
	 	
	 	 	 	 
	 	 	Northgate Total	 	$	—	 	0	 	0.00	%	 

	

2/12/1997	
 	

Olde Atlanta Golf Club Limited Partnership

c/o The Crescent Company

1580 S. Milwaukee Ave., Suite 101

Libertyville, IL 60048	
 	
$	

1,444,926	
 	

72,246	
 	

 	
 	

36-3834881
	

4/13/1998	
 	

Olde Atlanta (redemption)	
 	
$	

(62,837.60	
)	

(2,000	
)	

 	
 	

 
	

5/20/1998	
 	

Olde Atlanta (redemption)	
 	
$	

(64,017.60	
)	

(2,000	
)	

 	
 	

 
	

8/21/1998	
 	

Olde Atlanta (redemption)	
 	
$	

(52,387.50	
)	

(1,500	
)	

 	
 	

 
	

12/10/1998	
 	

Olde Atlanta (redemption)	
 	
$	

(30,166.11	
)	

(1,150	
)	

 	
 	

 
	

1/20/1999	
 	

Olde Atlanta (redemption)	
 	
$	

(66,078.50	
)	

(2,500	
)	

 	
 	

 
	

4/6/1999	
 	

Olde Atlanta (conversion)	
 	
$	

—	
 	

(2,000	
)	

 	
 	

 
	

5/1/1999	
 	

Olde Atlanta (recapitalization)	
 	
$	

683,967	
 	

30,826	
 	

 	
 	

 
	

5/27/1999	
 	

Olde Atlanta (conversion)	
 	
 	

 	
 	

(2,000	
)	

 	
 	

 
	

7/15/1999	
 	

Olde Atlanta (conversion)	
 	
 	

 	
 	

(3,500	
)	

 	
 	

 
	

1/10/2000	
 	

Olde Atlanta (conversion)	
 	
 	

 	
 	

(3,300	
)	

 	
 	

 
	

1/26/2000	
 	

Olde Atlanta (conversion)	
 	
 	

 	
 	

(4,100	
)	

 	
 	

 
	

4/28/2000	
 	

Olde Atlanta (correction from 3/24/99)	
 	
 	

 	
 	

2,000	
 	

 	
 	

 
	

8/14/2000	
 	

Olde Atlanta (conversion)	
 	
 	

 	
 	

(10,600	
)	

 	
 	

 
	

7/9/2001	
 	

Redemption at disposition	
 	
 	

(757,036.50	
)	

(70,422	
)	

 	
 	

 
	7/9/2001	 	Residual Value	 	 	(1,096,369.48	)	 	 	 	 	 
	 	 	 	 	
	 	
	 	 	 	 
	 	 	Olde Atlanta Total	 	$	—	 	—	 	0.00	%	 
	

2/12/1997	
 	

Bright's Creek Development Co. LLC

104 Cotton Creek Drive

Gulf Shores, AL 36542	
 	
$	

2,119,005	
 	

105,950	
 	

 	
 	

63-1120089
	

5/1/2001	
 	

Redemption at disposition	
 	
 	

(1,271,400	
)	

(105,950	
)	

 	
 	

 
	

5/1/2001	
 	

Residual Value	
 	
 	

(847,605	
)	

 	
 	

 	
 	

 
	 	 	 	 	
	 	
	 	 	 	 
	 	 	Woodlands Total	 	$	—	 	—	 	0.00	%	 
	

10/31/1996	
 	

David Dick Joseph

14 North Adger's Wharf

Charleston, SC 29401	
 	
 	

—	
 	

12,500	
 	

0.00	
%	

###-##-####
	

12/14/1999	
 	

David Dick Joseph (conversion)	
 	
 	

 	
 	

(12,500	
)	

 	
 	

 
	 	 	 	 	
	 	
	 	 	 	 
	 	 	David Dick Joseph Total	 	 	—	 	—	 	 	 	 
	

2/4/1997	
 	

W. Bradley Blair, II

14 North Adger's Wharf

Charleston, SC 29401	
 	
$	

—	
 	

12,500	
 	

0.16	
%	

###-##-####
	

2/4/1997	
 	

James Hoppenrath

4221/2 Marguerite Ave.

Corona Del Mar CA 92625	
 	
$	

—	
 	

3,750	
 	

0.00	
%	

###-##-####
	

1/6/2000	
 	

James Hoppenrath (conversion)	
 	
 	

 	
 	

(3,750	
)	

 	
 	

 
	 	 	 	 	
	 	
	 	 	 	 
	 	 	James Hoppenrath Total	 	$	—	 	—	 	 	 	 
	

6/20/1997	
 	

Golf Host Resorts, Inc.

c/o Starwood Capital Group, LP

Three Pickwick Plaza, Suite 250

Greenwich, CT 06830	
 	
$	

—	
 	

274,039	
 	

0.00	
%	

84-0631130
	
 	
 	

 	
 	
 	

 	
 	

 	
 	

 	
 	

 

	

3/3/2000	
 	

Golf Host (conversion)	
 	
 	

 	
 	

(274,039	
)	

 	
 	

 
	 	 	 	 	
	 	
	 	 	 	 
	 	 	Golf Host Total	 	 	 	 	—	 	 	 	 
	

9/2/1997	
 	

John J. Rainieri, Sr.

Betty Rainieri

4350 Mayfair Road

Uniontown, OH 44685	
 	
$	

3,198,168	
 	

114,237	
 	

 	
 	

###-##-####

###-##-####
	

1/4/2001	
 	

Redemption at disposition	
 	
$	

(910,632	
)	

(75,886	
)	

 	
 	

 
	

5/16/2001	
 	

Redemption at disposition	
 	
$	

(460,212	
)	

(38,351	
)	

 	
 	

 
	5/16/2001	 	Residual Value	 	$	(1,827,324	)	 	 	 	 	 
	 	 	 	 	
	 	
	 	 	 	 
	 	 	Rainieri Total	 	$	—	 	0	 	0.00	%	 
	

9/2/1997	
 	

Raintree Country Club, Inc. 4350 Mayfair Road

Uniontown, OH 44685	
 	
$	

204,138	
 	

7,292	
 	

0.00	
%	

34-1736212
	

1/4/2001	
 	

Raintree (redemption at disposition)	
 	
$	

(87,504	
)	

(7,292	
)	

 	
 	

 
	

1/4/2001	
 	

Residual Value

(Value at Issue — Value at Redemption)	
 	
$	

(116,634	
)	

 	
 	

 	
 	

 
	 	 	 	 	
	 	
	 	 	 	 
	 	 	Raintree Country Club, Inc. Total	 	$	—	 	—	 	0.00	%	 
	

9/30/1997	
 	

Eagle Watch Golf Club, Limited Partnership

c/o E. Neal Trogdon

The Crescent Company

1580 South Milwaukee Avenue, Suite 101

Libertyville, IL 60048	
 	
$	

1,890,682	
 	

70,158	
 	

 	
 	

36-3903287
	

11/2/1998	
 	

Eagle Watch (redemption)	
 	
$	

(64,199.00	
)	

(2,150	
)	

 	
 	

 
	

5/21/1999	
 	

Eagle Watch (conversion)	
 	
 	

 	
 	

(1,250	
)	

 	
 	

 
	

4/28/2000	
 	

Eagle Watch (correction from 3/24/99)	
 	
 	

 	
 	

(2,000	
)	

 	
 	

 
	

7/9/2001	
 	

Redemption at disposition	
 	
$	

(696,148.50	
)	

(64,758	
)	

 	
 	

 
	7/9/2001	 	Residual Value	 	$	(1,130,334.50	)	 	 	 	 	 
	 	 	 	 	
	 	
	 	 	 	 
	 	 	Eagle Watch Total	 	$	—	 	—	 	0.00	%	 
	

10/17/1997	
 	

Properties of the Country, Inc.

102 West Crestview Circle, Suite 100

Louisburg, KS 66053	
 	
$	

500,000	
 	

19,231	
 	

 	
 	

48-1157265
	

3/16/2001	
 	

Redemption at disposition	
 	
 	

(230,772	
)	

(19,231	
)	

 	
 	

 
	

3/16/2001	
 	

Residual Value	
 	
 	

(269,228	
)	

 	
 	

 	
 	

 
	 	 	 	 	
	 	
	 	 	 	 
	 	 	Properties of the Country, Inc. Total	 	$	—	 	—	 	0.00	%	 
	

11/25/1997	
 	

Granite Golf Corporation

1510 N. Hayden Road, Suite 7

Scottsdale, AZ 85260	
 	
$	

650,000	
 	

24,424	
 	

 	
 	

86-0926890
	

7/2/1999	
 	

Granite Golf (redemption)	
 	
 	

(200,257	
)	

(8,393	
)	

 	
 	

 
	

7/27/1999	
 	

Granite Golf (redemption)	
 	
 	

(237,935	
)	

(10,354	
)	

 	
 	

 
	

8/13/1999	
 	

Granite Golf (redemption)	
 	
 	

(125,746	
)	

(5,677	
)	

 	
 	

 
	

8/13/1999	
 	

Residual Value

(Value at Issue — Value at Redemption)	
 	
 	

(86,062	
)	

 	
 	

 	
 	

 
	

 	
 	

Granite Total	
 	
$	

—	
 	

—	
 	

0.00	
%	

 
	 	 	 	 	
	 	
	 	 	 	 
	

12/19/1997	
 	

Stonehenge Golf Development, LLC

90 Mallet Hill Road

Columbia, SC 29223	
 	
$	

4,500,000	
 	

169,811	
 	

 	
 	

56-2027442
	
 	
 	

 	
 	
 	

 	
 	

 	
 	

 	
 	

 

	

1/10/2000	
 	

Stonehenge Golf (conversion)	
 	
 	

 	
 	

(50,000	
)	

 	
 	

 
	

6/20/2000	
 	

Stonehenge Golf (conversion)	
 	
 	

 	
 	

(25,471	
)	

 	
 	

 
	

3/26/2002	
 	

Stonehenge Golf (conversion)	
 	
 	

 	
 	

(94,340	
)	

 	
 	

 
	

8/13/1999	
 	

Equity Reclass	
 	
 	

(4,500,000	
)	

 	
 	

 	
 	

 
	

 	

 	

 	

 	

	

 	

	

 	

 	

 	

 
	

 	
 	

Stonehenge Total	
 	
$	

—	
 	

—	
 	

0.00	
%	

 
	

1/16/1998	

 	

Mystic Creek Golf Club, Limited Partnership

1303 West Commerce Road

Milford, MI 48380	

 	

$	

1,500,000	

 	

52,724	

 	

0.00	

%	

38-3187304
	

9/20/2002	
 	

Mystic Creek (redemption)	
 	
 	

(91,792	
)	

(52,724	
)	

 	
 	

 
	

9/20/2002	
 	

Residual Value	
 	
 	

(1,408,207.52	
)	

 	
 	

 	
 	

 
	 	 	(Value at Issue — Value at Redemption)	 	 	 	 	 	 	 	 	 
	 	 	 	 	
	 	
	 	 	 	 
	 	 	Mystic Creek Golf Club, LP Total	 	$	—	 	—	 	 	 	 
	

2/1/1998	
 	

Okeechobee Championship Golf, Inc.

2100 Emerald Dunes Drive

West Palm Beach, FL 33411	
 	
$	

6,138,369	
 	

227,347	
(1)	

0.00	
%	

65-0115196
	

9/7/2001	
 	

Redemption at disposition	
 	
 	

(2,289,924	
)	

(218,088	
)	

 	
 	

 
	

9/7/2001	
 	

Residual Value of Class A common OP units	
 	
 	

(3,848,445	
)	

 	
 	

 	
 	

 
	 	 	(Value at Issue — Value at Redemption)	 	 	 	 	 	 	 	 	 
	

9/10/2002	
 	

Redemption of Class B non-dividend bearing common OP units at $-0- value	
 	
 	

—	
 	

(9,259	
)	

 	
 	

 
	 	 	 	 	
	 	
	 	 	 	 
	 	 	Okeechobee Championship Golf, Inc. Total	 	$	(1,500,000	)	—	 	 	 	 
	

5/22/1998	
 	

Eagle Ridge Lease Company LLC

16100 N. Greenway-Hayden Loop

Scottsdale, AZ 85260	
 	
$	

1,198,750	
 	

35,794	
 	

0.45	
%	

52-2099405
	

5/28/1998	
 	

Golf Classic Resorts, LLC

536 South Avenue

Glencoe, IL 60022	
 	
$	

879,995	
 	

26,357	
 	

0.00	
%	

85-0453484
	

11/26/1999	
 	

Golf Classic Resorts (redemption)	
 	
$	

(199,633	
)	

(11,577	
)	

 	
 	

 
	

12/31/1999	
 	

Golf Classic Resorts (redemption)	
 	
$	

(34,517	
)	

(2,060	
)	

 	
 	

 
	

2/7/2000	
 	

Golf Classic Resorts (redemption)	
 	
$	

(221,408	
)	

(12,720	
)	

 	
 	

 
	

2/7/2000	
 	

Residual Value	
 	
$	

(424,437	
)	

 	
 	

 	
 	

 
	 	 	(Value at Issue — Value at Redemption)	 	 	 	 	 	 	 	 	 
	 	 	 	 	
	 	
	 	 	 	 
	 	 	Golf Classic Resorts, LLC Total	 	 	—	 	—	 	 	 	 
	

8/28/1998	
 	

Osage National Golf Club LLC

900 Hickory Street

St. Louis, MO 63104	
 	
$	

3,451,068	
 	

124,700	
 	

 	
 	

43-1735431
	

6/30/1999	
 	

Osage (Redemption)	
 	
$	

(1,393,382	
)	

(58,576	
)	

 	
 	

 
	

6/20/2000	
 	

Osage (Redemption)	
 	
$	

(1,055,101	
)	

(66,124	
)	

 	
 	

 
	

6/20/2000	
 	

Residual Value	
 	
$	

(1,002,585	
)	

 	
 	

 	
 	

 
	 	 	(Value at Issue — Value at Redemption)	 	 	 	 	 	 	 	 	 
	 	 	 	 	
	 	
	 	 	 	 
	 	 	Osage National Total	 	 	—	 	—	 	0.00	%	 
	

12/14/1998	
 	

Brentwood Golf & Country Club, Inc.

4801 Faircourt, West Bloomfield, MI 48322

PO Box 386, Union Lake, MI 48387	
 	
$	

650,000	
 	

24,482	
 	

0.00	
%	

38-3148750
	
 	
 	

 	
 	
 	

 	
 	

 	
 	

 	
 	

 

	

6/20/2000	
 	

Brentwood (Redemption)	
 	
$	

(390,645	
)	

(24,482	
)	

 	
 	

 
	

6/20/2000	
 	

Residual Value	
 	
$	

(259,355	
)	

 	
 	

 	
 	

 
	 	 	 	 	
	 	
	 	 	 	 
	 	 	Brentwood Total	 	 	—	 	—	 	 	 	 
	

12/22/1998	
 	

Gutta-Percha Golf, Inc.

365 W. California Blvd. Suite 2

Pasadena, CA 91105	
 	
$	

870,000	
 	

32,986	
 	

0.00	
%	

95-4493507
	

9/5/2000	
 	

Palm Desert (Redemption)	
 	
$	

(460,785	
)	

(32,986	
)	

 	
 	

 
	

9/5/2000	
 	

Residual Value	
 	
$	

(409,215	
)	

 	
 	

 	
 	

 
	 	 	 	 	
	 	 	 	 	 	 
	 	 	Gutta-Percha Total	 	$	—	 	—	 	 	 	 
	

2/4/1997	
 	

GTA LP, Inc.

14 North Adger's Wharf

Charleston, SC 29401	
 	
$	

—	
 	

7,856,289	
 	

99.19	
%	

58-2290326
	

2/4/1997	
 	

GTA GP, Inc.

14 North Adger's Wharf

Charleston, SC 29401	
 	
$	

—	
 	

16,154	
 	

0.20	
%	

58-2290217
	

Total Common OP Units	
 	
 	

 	
 	

7,920,737	
 	

100.00	
%	

 
	
Series A Preferred OP Units
	
4/2/1999	
 	

GTA LP, Inc.

14 North Adger's Wharf

Charleston, SC 29401	
 	
 	

20,000,000	
 	

800,000	
 	

100	
%	

 
	
Series B Preferred OP Units
	
5/11/1999	
 	

Metamora Golf Operating Company, L.L.C.

c/o Total Golf, Inc.

1303 W. Commerce Drive

Milford, MI 48380	
 	
 	

295,003	
 	

10,169	
 	

 	
 	

38-3462287
	

9/25/2000	
 	

Redemption at Disposition	
 	
 	

(295,003	
)	

(10,169	
)	

 	
 	

 
	

 	
 	

 	
 	

	
 	

	
 	

 	
 	

 
	

 	
 	

Metamora Total	
 	
 	

—	
 	

—	
 	

0.00	
%	

 
	
Series C Preferred OP Units
	
7/28/1999	
 	

Burning Embers Corporation

801 Aaron Smith Drive

Bridgeport, WV 26330	
 	
 	

1,350,000	
 	

48,949	
 	

 	
 	

55-0720833
	

6/20/2001	
 	

Redemption (foreclosure on collateral)	
 	
 	

(1,350,000	
)	

(48,949	
)	

 	
 	

 
	

 	
 	

 	
 	

	
 	

	
 	

 	
 	

 
	

 	
 	

Burning Embers Total	
 	
 	

—	
 	

—	
 	

0.00	
%	

 

	(1)
	Includes
218,088 Class A Common Units issued with a valuation of $5,888,376 and 9,259 Class B Common OP Units issued with a valuation of $249,993 

QuickLinks

Exhibit A SCHEDULE OF PARTNERS, ALLOCATION OF PARTNERSHIP UNITS, PERCENTAGE INTERESTS AND THE AGREED UPON VALUE OF NON-CASH CAPITAL CONTRIBUTIONSExhibit
4.21

INHALE
THERAPEUTIC SYSTEMS, INC.

 

AND

 

AFAC EQUITY, L.P.

 

	
   

  
	
   

  
	
  COMMON
  STOCK PURCHASE AGREEMENT

  
	
   

  
	
   

  

 

 

 

June 7, 2002

 

 

INHALE
THERAPEUTIC SYSTEMS, INC.

COMMON
STOCK PURCHASE AGREEMENT

 

THIS COMMON STOCK PURCHASE AGREEMENT (this
“Agreement”) is made as of June 7, 2002, by and between Inhale
Therapeutic Systems, Inc., a Delaware corporation with its principal
office at 150 Industrial Road, San Carlos, California 94070 (the “Company”),
and AFAC Equity L.P.
a Delaware limited partnership with its offices c/o McKinsey & Company,
Inc. United States at 55 East 52nd Street, 27th Floor,
New York, New York 10022 (“AFAC” or, the “Purchaser”).

RECITALS

WHEREAS, the Company and McKinsey & Company, Inc. United States, an
affiliate of AFAC (“McKinsey”) have entered into that certain Confidentiality
Agreement dated April 9, 2002 and that certain letter agreement dated May 23,
2002 with respect to the performance of certain consulting services by McKinsey
(collectively, the “Related Agreements”); and

WHEREAS, in connection with the Related Agreements, the Company desires to
issue to AFAC and AFAC desires to acquire from the Company shares of common
stock of the Company, on the terms and subject to the conditions set forth in
this Agreement.

NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants and agreements contained herein, the parties hereto, intending
to be legally bound, do hereby agree as follows:

1.             PURCHASE
OF COMMON STOCK.

1.1.         Agreement
to Sell and Purchase.  At the Closing (as hereinafter
defined), the Company will sell to AFAC and AFAC will purchase from the Company
Thirty-Two Thousand Two Hundred Eighty-Eight (32,288) shares of the common
stock of the Company (the “Common Stock”) in exchange for services rendered by
McKinsey.

1.2.         Closing;
Closing Date.  The completion of the sale and purchase
of the Common Stock (the “Closing”) shall be held at 9:00 a.m. (Pacific Time)
on the date hereof (the “Closing Date”), at the offices of Cooley Godward LLP,
3175 Hanover Street, Palo Alto, California, or at such other time and place as
the Company and the Purchasers may agree.

1.3.         Delivery.  At the Closing, subject to the terms and conditions
hereof, the Company will deliver to AFAC a stock certificate dated as of the
Closing Date.

 

 

2.             REPRESENTATIONS
AND WARRANTIES OF THE COMPANY.

Except as otherwise
specifically disclosed to the Purchasers in writing on the date hereof, the
Company hereby represents and warrants to the Purchasers as follows:

2.1.         Authorization.  All corporate action on the part of the Company, its
officers, directors and shareholders necessary for the authorization, execution
and delivery of this Agreement and the Registration Rights Agreement by and
between the Company and AFAC dated as of the date hereof in the form set forth
as Exhibit A (the “Registration Rights Agreement”) has been taken.  The Company has the requisite corporate
power to enter into this Agreement and the Registration Rights Agreement and
carry out and perform its obligations under the terms of this Agreement and the
Registration Rights Agreement.  At the
Closing, the Company will have the requisite corporate power to issue and sell
the Common Stock.  This Agreement and
the Registration Rights Agreement have been duly authorized, executed and delivered
by the Company and, upon due execution and delivery by the Purchasers, this
Agreement and the Registration Rights Agreement will be valid and binding
agreements of the Company, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors’ rights generally or by equitable principles.

2.2.         Organization,
Good Standing and Qualification.  The Company is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has all requisite corporate power and
authority to carry on its business as now conducted and as proposed to be
conducted.  The Company is duly
qualified to transact business and is in good standing in each jurisdiction in
which the failure so to qualify would have a material adverse effect on its
business or properties.

2.3.         Valid
Issuance of Common Stock.  The Common
Stock, when issued, sold and delivered in accordance with the terms hereof will
be duly and validly authorized and issued, fully paid and nonassessable.

2.4.         Offering.  Assuming the accuracy of the representations of the
Purchasers in Section 3.3 of this Agreement on the date hereof and on the
Closing Date, the offer, issue and sale of the Common Stock are and will be
exempt from the registration and prospectus delivery requirement of the
Securities Act and have been or will be registered or qualified (or are or will
be exempt from registration and qualification) under the registration, permit
or qualification requirements of all applicable state securities laws.

3.             REPRESENTATIONS
AND WARRANTIES OF THE PURCHASERS.

                Purchaser hereby represents and warrants to the
Company as follows:

3.1.         Legal
Power.  Purchaser has the requisite corporate power
and authority to enter into this Agreement and the Registration Rights
Agreement, to carry out and perform its obligations under the terms of this
Agreement and the Registration Rights Agreement.  All action on Purchaser’s part required for the lawful execution
and delivery of this Agreement and the Registration Rights Agreement have been
or will be effectively taken prior to the Closing.

3.2.         Due
Execution.  This Agreement and the Registration Rights
Agreement have been duly authorized, executed and delivered by the Purchaser, and,
upon due execution and delivery by the Company, this Agreement and Registration
Rights Agreement will be valid and

 

binding agreements
of Purchaser, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors’
rights generally or by equitable principles.

3.3.         Investment
Representations.  In connection with the sale and issuance of
the Common Stock, Purchaser makes the following representations to the Company:

                (a)           Investment for Own Account.  Purchaser is acquiring the Common Stock for its own
account, not as nominee or agent, for investment and not with a view to, or for
resale in connection with, any distribution or public offering thereof within
the meaning of the Securities Act.

                (b)           Transfer Restrictions; Legends.  Purchaser understands that (i) the Common Stock has
not been registered under the Securities Act; (ii) the Common Stock is being
offered and sold pursuant to an exemption from registration and that the Common
Stock must be held by Purchaser indefinitely, and that Purchaser must,
therefore, bear the economic risk of such investment indefinitely, unless a
subsequent disposition thereof is registered under the Securities Act or is
exempt from such registration; (iii) each certificate representing the Common
Stock will be endorsed with the following legends:

THE SECURITIES
REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE “ACT”), OR UNDER THE SECURITIES LAWS OF CERTAIN STATES.  THESE SECURITIES ARE SUBJECT TO RESTRICTIONS
ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS
PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO
REGISTRATION OR EXEMPTION THEREFROM. 
THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM
AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED
TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE
SECURITIES LAWS.

 

and (iv) the
Company will instruct any transfer agent not to register the transfer of the
Common Stock (or any portion thereof) unless the conditions specified in the
foregoing legend are satisfied, until such time as a transfer is made, pursuant
to the terms of this Agreement, and in compliance with Rule 144 under the
Securities Act or pursuant to a registration statement or, if the opinion of
counsel referred to above is to the further effect that such legend is not
required in order to establish compliance with any provisions of the Securities
Act or this Agreement, or other satisfactory assurances of such nature are
given to the Company.  Unless otherwise
required by applicable securities laws, the Company shall be obligated, at the
request of Purchaser, to cause the transfer agent to reissue unlegended
certificates with respect to the Common Stock if (A) Purchaser shall have
obtained an opinion of counsel reasonably acceptable to the Company to the
effect that the Common Stock with respect to which unlegended certificates are
to be issued may lawfully be disposed of without registration, qualification or

 

 

legend; or (B) the
Common Stock can be sold without restriction as to the number of securities
sold under Rule 144(k).  Further, the
Company will instruct the transfer agent to remove the legend on Common Stock
(A) upon the sale of such Common Stock pursuant to an effective registration
statement, provided the transfer agent and Company have received evidence or
assurances of such sale in a form satisfactory to the transfer agent and the
Company or (ii) upon the sale of such Common Stock pursuant to Rule 144 under
the Securities Act, provided the transfer agent and the Company have received
evidence or assurances from Purchaser of compliance with Rule 144 in a form
satisfactory to the transfer agent and the Company.

                (c)           Financial Sophistication.  Purchaser has such knowledge and experience in
financial or business matters that it is capable of evaluating the merits and
risks of the investment in connection with the transactions contemplated in
this Agreement.

                (d)           Accredited Investor Status.  Purchaser is an “accredited investor” as such term is
defined in Rule 501(a) of the rules and regulations promulgated under the
Securities Act.

3.4.         No Brokers.
 No broker, finder or investment banker is
entitled to any brokerage, finder’s or other fee or commission in connection
with the transactions contemplated by this Agreement based on arrangements made
by Purchaser.

 

4.             CONDITIONS
TO CLOSING.

4.1.         Conditions
to Obligations of Purchasers at Closing. AFAC’s obligation to purchase the Common Stock at the
Closing is subject to the fulfillment to the Purchaser’s satisfaction, on or
prior to the Closing, of all of the following conditions, any of which may be
waived by Purchaser:

                (a)           Representations
and Warranties True; Performance of Obligations.  The representations and warranties made by the Company
in Section 2 hereof shall be true and correct in all material respects on the
Closing Date with the same force and effect as if they had been made on and as
of said date and the Company shall have performed and complied with all
obligations and conditions herein required to be performed or complied with by
it on or prior to the Closing.

                (b)           Registration Rights Agreement.  The Company shall have
executed and delivered the Registration Rights Agreement in the form attached
hereto as Exhibit A.

(c)           Qualifications,
Legal Investment.  All authorizations, approvals, or permits, if
any, of any governmental authority or regulatory body of the United States or
of any state that are required in connection with the lawful sale and issuance
of the Common Stock shall have been duly obtained and shall be effective on and
as of the Closing.  No stop order or
other order enjoining the sale of the Common Stock shall have been issued and
no proceedings for such purpose shall be pending or, to the knowledge of the
Company, threatened by the SEC, or any commissioner of corporations or similar
officer of any state having jurisdiction over this 

 

transaction.  At the time of the Closing, the sale and
issuance of the Common Stock shall be legally permitted by all laws and
regulations to which Purchaser and the Company are subject.

4.2.         Conditions
to Obligations of the Company.  The Company’s obligation to issue and
sell the Common Stock at the Closing is subject to the fulfillment to the
Company’s satisfaction, on or prior to the Closing of the following conditions,
any of which may be waived by the Company:

                (a)           Representations and Warranties True.  The representations and warranties made by Purchaser in Section 3
hereof shall be true and correct in all material respects on the Closing Date
with the same force and effect as if they had been made on and as of said date.

                (b)           Performance
of Obligations.  Purchaser
shall have performed and complied with all agreements and conditions herein
required to be performed or complied with by them on or before the Closing.

                (c)           Registration Rights Agreement.  Purchaser shall have
executed and delivered the Registration Rights Agreement in the form attached
hereto as Exhibit A.

(d)           Qualifications,
Legal Investment.  All authorizations, approvals, or
permits, if any, of any governmental authority or regulatory body of the United
States or of any state that are required in connection with the lawful sale and
issuance of the Common Stock shall have been duly obtained and shall be
effective on and as of the Closing.  No
stop order or other order enjoining the sale of the Common Stock shall have
been issued and no proceedings for such purpose shall be pending or, to the
knowledge of the Company, threatened by the SEC, or any commissioner of
corporations or similar officer of any state having jurisdiction over this
transaction.  At the time of the
Closing, the sale and issuance of the Common Stock shall be legally permitted
by all laws and regulations to which the Purchaser and the Company are subject.

5.             MISCELLANEOUS.

5.1.         Governing
Law.  This Agreement shall be governed by and
construed in accordance with the laws of the State of California, without
regard to the choice of law provisions thereof, and the federal laws of the
United States.

5.2.         Successors
and Assigns.  Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors, and administrators of the
parties hereto.

5.3.         Entire
Agreement.  This Agreement, the Registration Rights
Agreement, the Related Agreements and the exhibits hereto and thereto, and the
other documents delivered pursuant hereto, constitutes the full and entire
understanding and agreement among the parties with regard to the subjects
hereof and no party shall be liable or bound to any other party in any manner
by any representations, warranties, covenants, or agreements except as
specifically set

 

 

forth herein or
therein.  Nothing in this Agreement,
express or implied, is intended to confer upon any party, other than the
parties hereto and their respective successors and assigns, any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided herein.

5.4.         Severability. 
In the event any provision of this Agreement shall be invalid, illegal,
or unenforceable, it shall to the extent practicable, be modified so as to make
it valid, legal and enforceable and to retain as nearly as practicable the
intent of the parties, and the validity, legality, and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.

5.5.         Amendment
and Waiver.  Except as otherwise provided herein, any
term of this Agreement may be amended and the observance of any term of this
Agreement may be waived (either generally or in a particular instance, either
retroactively or prospectively, and either for a specified period of time or
indefinitely), with the written consent of the Company and Purchaser.  Any amendment or waiver effected in
accordance with this Section shall be binding upon any holder of any securities
purchased under this Agreement, each future holder of all such securities, and
the Company.

5.6.         Notices.  Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or upon
delivery by confirmed facsimile transmission, nationally recognized overnight
courier service, or upon deposit with the United States Post Office, by
registered or certified mail, postage prepaid and addressed to the party to be
notified at the address first indicated for such party above, or at such other
address as such party may designate by ten (10) days’ advance written notice to
the other parties.

5.7.         Fees
and Expenses.  The Company and Purchaser shall bear their
own expenses and legal fees incurred on their behalf with respect to this
Agreement and the transactions contemplated hereby.  Each party hereby agrees to indemnify and to hold harmless of and
from any liability the other party for any commission or compensation in the
nature of a finder’s fee to any broker or other person or firm (and the costs
and expenses of defending against such liability or asserted liability) for
which such indemnifying party or any of its employees or representatives are
responsible.

5.8.         Counterparts.  This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one instrument.

 

1

 

In Witness Whereof, the foregoing Common Stock Purchase Agreement
is hereby executed as of the date first above written.

 

	
   

  	
   

  	
  THE COMPANY:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  INHALE
  THERAPEUTIC SYSTEMS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/  AJIT S. GILL

  
	
   

  	
   

  	
  Name: Ajit S. Gill

  
	
   

  	
   

  	
  Title: Chief Executive Officer and President

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Address:

  	
  150 Industrial Road

  
	
   

  	
   

  	
   

  	
  San Carlos, CA 94070

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  THE PURCHASER:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  AFAC
  EQUITY, L.P.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By: 

  	
  /s/  BRIAN M. FEUER

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name: 

  	
  Brian M. Feuer

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title: 

  	
  Attorney-in-Fact

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Address:

  	
  c/o McKinsey & Company

  
	
   

  	
   

  	
   

  	
  55 East 52nd Street, 27th Floor

  
	
   

  	
   

  	
   

  	
  New York, NY 10022

  
								

 

 

EXHIBIT
A

 

REGISTRATION RIGHTS AGREEMENT

 

EXHIBIT
A

REGISTRATION
RIGHTS AGREEMENT

THIS REGISTRATION
RIGHTS AGREEMENT is made as of the 7TH day of June, 2002, by and
between Inhale Therapeutic Systems, Inc., a Delaware corporation (the “Company”)
and AFAC Equity, L.P., a Delaware limited partnership (the “Investor”).

RECITALS

WHEREAS, the
Company and McKinsey & Company, Inc. United States, an affiliate of the
Investor (“McKinsey”) are parties to a certain confidentiality agreement
effective as of April 9, 2002 and a letter agreement dated May 23, 2002
(collectively, the “Consulting Agreement”); and

WHEREAS, the
Company and Investor are parties to that certain Common Stock Purchase
Agreement dated as of the date hereof the “Purchase
Agreement”) pursuant to which the Company shall issue Thirty-Two
Thousand Two Hundred Eighty-Eight (32,288) shares of Company common stock (the
“Shares”) to the Investor in partial consideration of services provided by
McKinsey to the Company; and

WHEREAS, the
Purchase Agreement provides that the Company and the Investor will enter into a
registration rights agreement in form and substance reasonably satisfactory to
both parties;

NOW, THEREFORE, in
consideration of the mutual promises and covenants set forth herein, the
parties hereto agree as follows:

                1.             Registration
Rights.

                                1.1 Definitions.  For
purposes of this Section 1:

(a)   The term “Act” means the Securities Act
of 1933, as amended.

(b)   The term “Holder” means any person
owning Registrable Securities or any assignee thereof in accordance with
Section 1.9 hereof.

(c)   The term “1934 Act” means the
Securities Exchange Act of 1934, as amended.

(d)   The terms “register,” “registered,”
and “registration”
refer to a registration effected by preparing and filing a registration
statement or similar document in compliance with the Act, and the declaration
or ordering of effectiveness of such registration statement or document.

(e)   The term “Registrable Securities” means
(i) the Shares and (ii) any Common Stock of the Company issued as (or
issuable upon the conversion or exercise of any warrant, right or other
security that is issued as) a dividend or other distribution with respect to,
or in exchange for, or in replacement of, the Shares.  Notwithstanding the foregoing, Registrable Securities shall not
include (i) any securities sold by a person to the public either pursuant to a
registration statement or Rule 144 or sold in a private transaction in which
the transferor’s rights under Section 1 of this Agreement are not assigned;
(ii) any securities for which the rights of a Holder have terminated pursuant
to Section 1.10 herein.

 

(f)    The number of shares of “Registrable
Securities” outstanding shall be determined by the number of shares of Common
Stock outstanding that are, and the number of shares of Common Stock issuable
pursuant to then exercisable or convertible securities that are, Registrable
Securities.

(g)   The term “SEC” shall mean the
Securities and Exchange Commission.

                                1.2 Company Registration.

(a)   If (but without any obligation to do so) the
Company proposes (i) to register for its own account any of its common stock
under the Act in connection with an underwritten public offering of such
securities (other than a registration relating solely to the sale of securities
to participants in a Company stock plan or a registration relating to a
corporate reorganization, merger or other transaction under Rule 145 of
the Act) (a “Company Offering”);
or (ii) to register the offering of its common stock by stockholders of the
Company other than the Holders (“Other
Selling Stockholders”) other than in connection with a Company
Offering or a registration relating solely to the sale of securities to
participants in a Company stock plan or a registration relating to a corporate
reorganization, merger or other transaction under Rule 145 of the Act (a “Secondary Offering”), the Company shall, at
such time, promptly give each Holder written notice of such Company Offering or
Secondary Offering, as applicable.  Upon
the written request of each Holder given within fifteen (15) days after mailing
of such notice by the Company in accordance with Section 2.5, the Company
shall, subject to the provisions of Section 1.2(b) and other restrictions
set forth herein, cause to be registered under the Act all of the Registrable
Securities that each such Holder has requested to be registered.  Notwithstanding the foregoing, the Company
shall have no obligation to notify the Holders, cause to be registered any
Registrable Securities, or undertake any other obligation in connection with
this Agreement in connection with (i) any proposed Company Offering in which
the proposed maximum offering price to the public exceeds [80% of Purchase Price] (as adjusted for
stock splits, combinations, dividends and the like occurring after the date
hereof); or (ii) any Secondary Offering made pursuant to that certain Preferred
Stock Purchase Agreement dated January 7, 2002 by and between the Company and
Enzon, Inc.

(b)   Underwriting Requirements.  In connection with any offering in which the
Holder would otherwise be permitted to include Registrable Securities pursuant
to this Section 1.2 involving an underwriting of shares of the Company’s
capital stock, the Company shall not be required under this Section 1.2 to
include any of the Holders’ securities in such underwriting unless they accept
the terms of the underwriting as agreed upon between the Company and the
underwriters selected by it (or by other persons entitled to select the underwriters)
and enter into an underwriting agreement in customary form with an underwriter
or underwriters selected by the Company, and then only in such quantity as the
underwriters determine in their sole discretion will not jeopardize the success
of the offering by the Company.  If the
total amount of securities, including Registrable Securities, requested by
stockholders to be included in such offering exceeds the amount of securities
sold other than by the Company that the underwriters determine in their sole
discretion is compatible with the success of the offering, then the Company
shall be required to include in the offering only that number of such
securities, including Registrable Securities, that the underwriters determine
in their sole discretion will not jeopardize the success of the offering (the
securities so included to be apportioned pro rata among the selling Holders
according to the total amount of securities entitled to be included therein
owned by each selling Holder or in such other proportions as shall mutually be
agreed to by such selling Holders), but in no event shall the amount of
securities of the selling Holders included in the offering be reduced below
fifteen percent (15%) of the total amount of securities included in such
offering. For purposes of the preceding parenthetical concerning apportionment,
for any selling stockholder that is a Holder of Registrable Securities and that
is a partnership or corporation, the partners, retired partners and
stockholders of such Holder, or the estates and family members of any such
partners and retired partners and any trusts for the benefit of any of the
foregoing persons shall be deemed to be a single “selling Holder,” and any pro
rata reduction with respect to such “selling Holder” shall be based upon the
aggregate amount of Registrable Securities owned by all such related entities
and individuals.

 

2

 

                                1.3 Obligations of the Company. 
Whenever required under this Section 1 to effect the registration of any
Registrable Securities, the Company shall, as expeditiously as reasonably
possible:

(a)   prepare and file with the SEC a registration
statement with respect to such Registrable Securities and use its best efforts
to cause such registration statement to become effective, and, upon the request
of the Holders of a majority of the Registrable Securities registered
thereunder, keep such registration statement effective until, with respect to a
Company Offering, the distribution of securities by the Company contemplated in
the registration statement is completed, or, with respect to a Secondary
Offering, the earlier of (i) the completion of the distribution contemplated in
the registration statement by the Other Selling Stockholders; (ii) the
termination of all Other Selling Stockholders’ rights to require registration
pursuant to such registration statement or (iii) the date 120 days following
the initial effective date of such registrations statement.  Notwithstanding any other provision of this
Agreement, the Holders understand and acknowledge that there may be periods
during which the Company may determine, in good faith, based on the advice of
counsel, that it is in the best interest of the Company and its stockholders to
defer disclosure of non-public information until such information has reached a
more advanced stage and that during such periods sales of Registrable
Securities and the effectiveness of any registration statement covering
Registrable Securities, may be suspended or delayed.  The Holders agree that upon receipt of any notice from the
Company of the development of any material non-public information, each Holder
will forthwith discontinue its disposition of Registrable Securities pursuant
to any such registration statement until such Holder’s receipt of copies of an
appropriately supplemented or amended prospectus and, if so directed by the
Company, each Holder will use reasonable commercial efforts to deliver to the
Company all copies, of the prospectus relating to such Registerable Shares current
at the time of receipt of such notice;

(b)   prepare and file with the SEC such amendments
and supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply with
the provisions of the Act with respect to the disposition of all securities
covered by such registration statement;

(c)   furnish to the Holders such numbers of copies
of a prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably
request in order to facilitate the disposition of Registrable Securities owned
by them;

(d)   use reasonable commercial efforts to register
and qualify the securities covered by such registration statement under such
other securities or Blue Sky laws of such jurisdictions as shall be reasonably
requested by the Holders, provided that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business or to
file a general consent to service of process in any such states or
jurisdictions;

(e)   notify each Holder of Registrable Securities
covered by such registration statement at any time when a prospectus relating
thereto is required to be delivered under the Act or the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing;

(f)    cause all such Registrable Securities
registered pursuant to this Section 1 to be listed on each securities exchange
on which similar securities issued by the Company are then listed;

(g)   provide a transfer agent and registrar for
all Registrable Securities registered pursuant to this Section 1 and a
CUSIP number for all such Registrable Securities, in each case not later than
the effective date of such registration; and

 

3

 

(h)   use reasonable commercial efforts to furnish,
at the request of any Holder requesting registration of Registrable Securities
pursuant to this Section 1, on the date that such Registrable Securities
are delivered to the underwriters for sale in connection with a registration
pursuant to this Section 1, if such securities are being sold through
underwriters, (i) an opinion, dated such date, of the counsel representing
the Company for the purposes of such registration, in form and substance as is
customarily given to underwriters in an underwritten public offering, addressed
to the underwriters, and (ii) a letter dated such date, from the
independent certified public accountants of the Company, in form and substance
as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering, addressed to the underwriters.

                                1.4 Information from Holder. 
It shall be a condition precedent to the obligations of the Company to take any
action pursuant to this Section 1 with respect to the Registrable
Securities of any selling Holder that such Holder shall furnish to the Company
such information regarding itself, the Registrable Securities held by it, and
the intended method of disposition of such securities as shall be required to
effect the registration of such Holder’s Registrable Securities.

                                1.5 Expenses of Registration. 
All expenses other than underwriting discounts, commissions and fees and
disbursements of counsel for the Selling Holders incurred in connection with
registrations, filings or qualifications pursuant to Section 1.2,
including (without limitation) all registration, filing and qualification fees,
printers’ and accounting fees, fees and disbursements of counsel for the
Company shall be borne by the Company.

                                1.6 Delay of Registration. 
No Holder shall have any right to obtain or seek an injunction restraining or
otherwise delaying any such registration as the result of any controversy that
might arise with respect to the interpretation or implementation of this
Section 1.

                                1.7 Indemnification.  In
the event any Registrable Securities are included in a registration statement
under this Section 1:

(a)   To the extent permitted by law, the Company
will indemnify and hold harmless each Holder, the partners or officers,
directors and stockholders of each Holder, any underwriter (as defined in the
Act) for such Holder and each person, if any, who controls such Holder or
underwriter within the meaning of the Act or the 1934 Act, against any losses,
claims, damages or liabilities (joint or several) to which they may become
subject under the Act, the 1934 Act or any state securities laws, insofar as
such losses, claims, damages, or liabilities (or actions in respect thereof)
arise out of or are based upon any of the following statements, omissions or
violations (collectively, a “Violation”): (i) any untrue statement
or alleged untrue statement of a material fact contained in such registration
statement, including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto, (ii) the omission or
alleged omission to state therein a material fact required to be stated
therein, or necessary to make the statements therein not misleading, or
(iii) any violation or alleged violation by the Company of the Act, the
1934 Act, any state securities laws or any rule or regulation promulgated under
the Act, the 1934 Act or any state securities laws; and the Company will
reimburse each such Holder, underwriter or controlling person for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided,
however, that the indemnity agreement contained in this
subsection l.7(a) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability or action if such settlement is effected
without the consent of the Company (which consent shall not be unreasonably
withheld), nor shall the Company be liable in any such case for any such loss,
claim, damage, liability or action to the extent that it arises out of or is
based upon a Violation that occurs in reliance upon and in conformity with
written information furnished expressly for use in connection with such
registration by any such Holder, underwriter or controlling person.

 

4

 

(b)   To the extent permitted by law, each selling
Holder will indemnify and hold harmless the Company, each of its directors,
each of its officers who has signed the registration statement, each person, if
any, who controls the Company within the meaning of the Act, any underwriter,
any other Holder selling securities in such registration statement and any
controlling person of any such underwriter or other Holder, against any losses,
claims, damages or liabilities (joint or several) to which any of the foregoing
persons may become subject, under the Act, the 1934 Act or any state securities
laws, insofar as such losses, claims, damages or liabilities (or actions in
respect thereto) arise out of or are based upon any Violation, in each case to
the extent (and only to the extent) that such Violation occurs in reliance upon
and in conformity with written information furnished by such Holder expressly
for use in connection with such registration; and each such Holder will
reimburse any person intended to be indemnified pursuant to this subsection
l.7(b), for any legal or other expenses reasonably incurred by such person in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the indemnity
agreement contained in this subsection l.7(b) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder (which consent shall
not be unreasonably withheld), provided that in no event shall any indemnity
under this subsection l.7(b) exceed the gross proceeds from the offering
received by such Holder.

(c)   Promptly after receipt by an indemnified
party under this Section 1.7 of notice of the commencement of any action
(including any governmental action), such indemnified party will, if a claim in
respect thereof is to be made against any indemnifying party under this
Section 1.7, deliver to the indemnifying party a written notice of the
commencement thereof and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume the defense
thereof with counsel mutually satisfactory to the parties; provided, however, that an
indemnified party (together with all other indemnified parties that may be
represented without conflict by one counsel) shall have the right to retain one
separate counsel, with the fees and expenses to be paid by the indemnifying
party, if representation of such indemnified party by the counsel retained by
the indemnifying party would be inappropriate due to actual or potential
differing interests between such indemnified party and any other party
represented by such counsel in such proceeding.  The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action, if prejudicial
to its ability to defend such action, shall relieve such indemnifying party of
any liability to the indemnified party under this Section 1.7, but the
omission so to deliver written notice to the indemnifying party will not
relieve it of any liability that it may have to any indemnified party otherwise
than under this Section 1.7.

(d)   If the indemnification provided for in this
Section 1.7 is held by a court of competent jurisdiction to be unavailable
to an indemnified party with respect to any loss, liability, claim, damage or
expense referred to herein, then the indemnifying party, in lieu of
indemnifying such indemnified party hereunder, shall contribute to the amount
paid or payable by such indemnified party as a result of such loss, liability,
claim, damage or expense in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the indemnified
party on the other in connection with the statements or omissions that resulted
in such loss, liability, claim, damage or expense, as well as any other
relevant equitable considerations.  The
relative fault of the indemnifying party and of the indemnified party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact
relates to information supplied by the indemnifying party or by the indemnified
party and the parties’ relative intent, knowledge, access to information, and
opportunity to correct or prevent such statement or omission.

(e)   The obligations of the Company and Holders
under this Section 1.7 shall survive the completion of any offering of
Registrable Securities in a registration statement under this Section 1,
and otherwise.

 

5

 

                                1.8 Rule 144 Reporting. 
With a view to making available to the Holders the benefits of Rule 144
promulgated under the Act and any other rule or regulation of the SEC that may
at any time permit a Holder to sell securities of the Company to the public
without registration, the Company agrees to:

(a)   file with the SEC in a timely manner all
reports and other documents required of the Company under the Act and the 1934
Act; and

(b)   furnish to any Holder, so long as the Holder
owns any Registrable Securities, forthwith upon request (i) a written
statement by the Company that it has complied with the reporting requirements
of SEC Rule 144 (at any time after ninety (90) days after the effective
date of the first registration statement filed by the Company for an offering
of its securities to the general public), the Act and the 1934 Act (at any time
after it has become subject to such reporting requirements), (ii) a copy
of the most recent annual or quarterly report of the Company and such other
reports and documents so filed by the Company, and (iii) such other
information as may be reasonably requested in availing any Holder of any rule
or regulation of the SEC that permits the selling of any such securities
without registration or pursuant to such form.

                                1.9 Assignment of Registration
Rights.  The rights to cause the Company to register Registrable
Securities pursuant to this Section 1 may be assigned (but only with all
related obligations) by a Holder only to an affiliate of the Investor or
McKinsey (an “Affiliate”),
provided: (a) the Company is, within a reasonable time after such
transfer, furnished with written notice of the name and address of such
Affiliate and the securities with respect to which such registration rights are
being assigned; (b) such Affiliate agrees in writing to be bound by and
subject to the terms and conditions of this Agreement, including without
limitation the provisions of Section 1.10 below; and (c) such assignment
shall be effective only if immediately following such transfer the further
disposition of such securities by the transferee or assignee is restricted
under the Act.

                                1.10 Termination of Registration
Rights.  The Company’s obligations under this Section 1 to effect the
registration of any Registrable Securities shall terminate as to any Holder at
such time as all the Registrable Securities held by such Holder are eligible
for sale under Rule 144.

                2.             Miscellaneous.

                                2.1 Successors and Assigns. 
Except as otherwise provided herein, the terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the respective successors and
assigns of the parties (including transferees of any shares of Registrable
Securities).  Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.

                                2.2 Governing Law.  This
Agreement shall be governed by, and construed and enforced in accordance with
the internal laws of the State of California, without reference to conflicts of
law provisions thereof.

                                2.3 Counterparts.  This
Agreement may be executed by facsimile and in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.

                                2.4 Titles and Subtitles. 
The titles and subtitles used in this Agreement are used for convenience only
and are not to be considered in construing or interpreting this Agreement.

 

6

 

                                2.5 Notices.  Unless
otherwise provided, any notice required or permitted under this Agreement shall
be given in writing and shall be deemed effectively given upon personal
delivery to the party to be notified or upon delivery by confirmed facsimile
transmission, nationally recognized overnight courier service, or upon deposit
with the United States Post Office, by registered or certified mail, postage
prepaid and addressed to the party to be notified at the address indicated for
such party on the signature page hereof, or at such other address as such party
may designate by ten (10) days’ advance written notice to the other parties.

                                2.6 Expenses.  If any
action at law or in equity is necessary to enforce or interpret the terms of
this Agreement, the prevailing party shall be entitled to reasonable attorneys’
fees, costs and necessary disbursements in addition to any other relief to
which such party may be entitled.

                                2.7 Entire Agreement: Amendments
and Waivers.  This Agreement, the Purchase Agreement, the Consulting
Agreement and the agreements referenced therein constitute the full and entire
understanding and agreement among the parties with regard to the subjects
hereof and thereof.  Any term of this
Agreement may be amended and the observance of any terms of this Agreement may
be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and the holders of at least two–thirds of the Registrable Securities. Any
amendment or waiver effected in accordance with this paragraph shall be binding
upon each holder of any Registrable Securities each future holder of all such
Registrable Securities, and the Company.

                                2.8 Severability.  If one
or more provisions of this Agreement are held to be unenforceable under
applicable law, such provision shall be excluded from this Agreement and the
balance of the Agreement shall be interpreted as if such provision were so
excluded and shall be enforceable in accordance with its terms.

                                2.9 Aggregation of Stock. 
All shares of Registrable Securities held or acquired by affiliated entities or
persons shall be aggregated together for the purpose of determining the
availability of any rights under this Agreement.

 

7

 

IN WITNESS WHEREOF, the
parties have executed this Agreement as of the date first above written.

 

	
   

  	
   

  	
  THE COMPANY:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  INHALE THERAPEUTIC SYSTEMS, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ AJIT S. GILL

  
	
   

  	
   

  	
  Name: Ajit S. Gill

  
	
   

  	
   

  	
  Title: Chief Executive Officer and President

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Address:

  	
  150 Industrial Road

  
	
   

  	
   

  	
   

  	
  San Carlos, CA 94070

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  THE
  INVESTOR:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  AFAC
  EQUITY, L.P.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/  BRIAN M.
  FEUER

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Brian M. Feuer

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Attorney-in-Fact

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Address:

  	
  c/o McKinsey & Company

  
	
   

  	
   

  	
   

  	
  55 East 52nd Street, 27th
  Floor

  
	
   

  	
   

  	
   

  	
  New York, New York 10022

  
							

 

8

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