Common use of Dilution Protection Clause in Contracts

Dilution Protection. (a) For so long as the Option has not been exercised, if, (x) during the 36- month period following the Closing Date, subject to clause (b) below, the Company issues in the aggregate, more than 8,554,345 shares of Common Stock (including, except as otherwise expressly provided herein, options, warrants, convertible stock, convertible debt and other common-stock equivalents) (the “Warrant Threshold”), and (y) any shares are issued in excess of the Warrant Threshold with consideration to Company of less than $3.75 per share (as adjusted for any stock splits, reverse splits, recapitalization, combination of shares, reclassification of shares or similar changes in capitalization) (the “Threshold Price”), then Company shall issue to BVF warrants substantially in the form attached hereto as Exhibit F (the “Warrants”) to purchase a number of shares of Common Stock equal to 50% of the number of shares of Common Stock issued and sold by Company in excess of the Warrant Threshold, with any such Warrants having an exercise price equal to 1.5 times the price per share of such shares issued in excess of the Warrant Threshold. Without limiting the generality of the foregoing, if the Company sells shares of Common Stock pursuant to an at-the-market (“ATM”) sales arrangement in excess of the Warrant Threshold and below the Threshold Price, then the Company shall be entitled to average the sale price of all such ATM sales within a calendar month that are below the Threshold Price for purposes of determining the exercise price for the Warrants to be issued for such month. (b) To the extent that the Company issues shares of Common Stock in one or more of the following transactions, such shares shall not be included in the calculation of the Warrant Threshold: (i) shares of Common Stock or securities convertible into or exercisable for shares of Common Stock upon the exercise of an option or warrant or the conversion of a security outstanding on the Closing Date, (ii) the grant of any options to purchase shares of Common Stock or other awards under a stock incentive plan or stock purchase plan described in Company’s SEC filings and (iii) shares of Common Stock upon the exercise or vesting of options or awards granted pursuant to a stock incentive plan or stock purchase plan described in Company’s SEC filings. (c) During the period in which the Company is required to issue Warrants after the Warrant Threshold, the requirement to issue Warrants contained in this subsection shall not apply to (x) the issuance by Company of shares of Common Stock or securities convertible into or exercisable for shares of Common Stock upon the exercise of an option or warrant or the conversion of a security outstanding on the Closing Date, (y) the grant of any options to purchase shares of Common Stock or other awards under a stock incentive plan or stock purchase plan described in Company’s SEC filings and the issuance by Company of shares of Common Stock upon the exercise or vesting of options or awards granted pursuant to a stock incentive plan or stock purchase plan described in Company’s SEC filings, or (z) shares of Common Stock or other securities issued in connection with a transaction with an unaffiliated third party that includes a debt financing or a bona fide commercial relationship (including joint ventures, marketing or distribution arrangements, collaboration agreements, or intellectual property license agreements) or any acquisition of assets, merger with, or acquisition of another entity; provided that in the case of clause (z), if such transaction(s) would result in the issuance of more than 20% of the Company’s pre-transaction total shares of Common Stock (including common-stock equivalents) outstanding, that the Company shall have first received shareholder approval for such transaction(s). (d) If and to the extent Warrants are issuable under Section 4.01(a), the Company shall issue and deliver the Warrants to BVF within two business days of receipt of a written notice from BVF requesting such issuance and delivery. For the avoidance of doubt, it is the intent of the Parties that the Warrant exercise price shall, in all instances, exceed the “Minimum Price,” as calculated in accordance with Nasdaq Marketplace Rule 5635(d)(1)(A). At the time the Warrants are delivered, the Company shall provide a summary of the calculations used to determine the number of Warrants being issued and the exercise price of such Warrants.

Dilution Protection. (a) For The Company acknowledges that the purchases made by Investor under this Agreement constitute an investment in 19% of the outstanding capital stock of the Company. In this regard, for so long as the Option has not been exercisedInvestor owns any Shares, ifupon any issuance of (a) Common Stock or other securities of the Company, (x) during the 36- month period following the Closing Date, subject to clause (b) belowoptions to purchase or rights to subscribe for Common Stock or other securities of the Company, (c) securities convertible into or exchangeable for Common Stock or other securities of the Company, and (d) options to purchase or rights to subscribe for such convertible or exchangeable securities (collectively, the "Covered Securities"), the Company issues shall automatically grant to the Investor sufficient Covered Securities described in subsections (a) through (d) so as to maintain the Investor's then current percentage ownership of the Company, with any convertible securities determined on an as converted basis. The purchase price for such Covered Securities shall be the par value of the securities issued (in the aggregatecase of subsection (a)) or the par value of the Common Stock into which such Covered Securities are convertible (in the case of subsections (b) through (d)). Payment for such Covered Securities shall be made by the Investor in cash upon ten (10) days prior notice from the Company of such issuance. This additional issuance right shall not apply to (A) shares of Common Stock, rights, options or warrants granted or awarded by the Company, with the approval of its Board of Directors, including the approval of the Board designee of the Investor, to employees, directors and consultants of the Company as compensation for service to the Company in any such capacities. if such rights, options or warrants are granted at an exercise price or value not less than the fair market value of a share as of the date of grant, up to and no more than 8,554,345 an aggregate of 7,036 shares of Common Stock (includingas adjusted to provide for any dividends, except as otherwise expressly provided hereinstock distributions, optionssplits, warrants, convertible stock, convertible debt and other common-stock equivalents) (the “Warrant Threshold”combinations or recapitalizations), and (yB) any shares are issued in excess of the Warrant Threshold with consideration to Company of less than $3.75 per share (as adjusted for any stock splits, reverse splits, recapitalization, combination of shares, reclassification of shares or similar changes in capitalization) (the “Threshold Price”), then Company shall issue to BVF warrants substantially in the form attached hereto as Exhibit F (the “Warrants”) to purchase a number of shares of Common Stock equal to 50% of the number of shares of Common Stock issued and sold by Company in excess of the Warrant Threshold, with any such Warrants having an exercise price equal to 1.5 times the price per share of such shares issued in excess of the Warrant Threshold. Without limiting the generality of the foregoing, if the Company sells shares of Common Stock pursuant to an at-the-market (“ATM”) sales arrangement in excess of the Warrant Threshold and below the Threshold Price, then the Company shall be entitled to average the sale price of all such ATM sales within a calendar month that are below the Threshold Price for purposes of determining the exercise price for the Warrants to be issued for such month. (b) To the extent that the Company issues shares of Common Stock in one or more of the following transactions, such shares shall not be included in the calculation of the Warrant Threshold: (i) shares issuance of Common Stock or securities convertible into or exercisable for shares of Common Stock upon in connection with any merger or acquisition involving the exercise Company, which merger or acquisition is properly authorized and approved by the Board of an option or warrant or Directors, including the conversion approval of a security outstanding on the Closing Date, (ii) Board designee of the grant of any options to purchase shares of Common Stock or other awards under a stock incentive plan or stock purchase plan described in Company’s SEC filings and (iii) shares of Common Stock upon the exercise or vesting of options or awards granted pursuant to a stock incentive plan or stock purchase plan described in Company’s SEC filings. (c) During the period in which the Company is required to issue Warrants after the Warrant Threshold, the requirement to issue Warrants contained in this subsection shall not apply to (x) the issuance by Company of shares of Common Stock or securities convertible into or exercisable for shares of Common Stock upon the exercise of an option or warrant or the conversion of a security outstanding on the Closing Date, (y) the grant of any options to purchase shares of Common Stock or other awards under a stock incentive plan or stock purchase plan described in Company’s SEC filings and the issuance by Company of shares of Common Stock upon the exercise or vesting of options or awards granted pursuant to a stock incentive plan or stock purchase plan described in Company’s SEC filingsInvestor, or (zC) shares of Common Stock or other securities issued any Covered Securities where the additional issuance rights have been waived in connection with a transaction with an unaffiliated third party that includes a debt financing or a bona fide commercial relationship (including joint ventures, marketing or distribution arrangements, collaboration agreements, or intellectual property license agreements) or any acquisition of assets, merger with, or acquisition of another entity; provided that in writing by the case of clause (z), if such transaction(s) would result in the issuance of more than 20% of the Company’s pre-transaction total shares of Common Stock (including common-stock equivalents) outstanding, that the Company shall have first received shareholder approval for such transaction(s)Investor. (d) If and to the extent Warrants are issuable under Section 4.01(a), the Company shall issue and deliver the Warrants to BVF within two business days of receipt of a written notice from BVF requesting such issuance and delivery. For the avoidance of doubt, it is the intent of the Parties that the Warrant exercise price shall, in all instances, exceed the “Minimum Price,” as calculated in accordance with Nasdaq Marketplace Rule 5635(d)(1)(A). At the time the Warrants are delivered, the Company shall provide a summary of the calculations used to determine the number of Warrants being issued and the exercise price of such Warrants.