EXHIBIT 10.1

FORM OF SECURITIES PURCHASE AGREEMENT

This SECURITIES PURCHASE AGREEMENT, dated as of June 21, 2012 (this
“Agreement”), is made by and among Biodel Inc., a Delaware corporation (the
“Company”), and the Purchasers listed on Exhibit A hereto, together with their
permitted transferees (each, a “Purchaser” and collectively, the “Purchasers”).

RECITALS:

A. The Company and the Purchasers are executing and delivering this Agreement in
reliance upon the exemption from securities registration afforded by
Section 4(2) of the Securities Act, including Rule 506 of Regulation D
promulgated thereunder.

B. The Purchasers, severally and not jointly, desire to purchase and the Company
desires to sell, upon the terms and conditions stated in this Agreement, up to a
maximum of $18,500,000 of Common Stock, Series B Preferred Stock and warrants to
purchase shares of Common Stock.

C. The capitalized terms used herein and not otherwise defined have the meanings
given them in Article 7.

AGREEMENT

In consideration of the premises and the mutual covenants contained herein and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Company and the Purchasers (severally and not jointly)
hereby agree as follows:

ARTICLE 1

PURCHASE AND SALE OF SECURITIES

1.1 Purchase and Sale of Securities. At the Closing, the Company will issue and
sell to each Purchaser, and each Purchaser will, severally and not jointly,
purchase from the Company (i) the number of shares of Common Stock (the “Common
Shares”), (ii) the number of shares of Series B Preferred Stock (the “Preferred
Shares” and, together with the Common Shares, the “Shares”) and (iii) the number
of warrants (the “Warrants”) to purchase shares of Common Stock, each as set
forth opposite such Purchaser’s name on Exhibit A hereto (the Shares and
Warrants referred to collectively as the “Securities”). The purchase price for
each Security shall be $2.355 (the “Purchase Price”), which is the sum of
(i) $2.31 (the “Stock Purchase Price”), the consolidated closing bid price of
the Common Stock as reported on Nasdaq (symbol “BIOD”) on the date of this
Agreement, and (ii) 0.045. For each one Share purchased by a Purchaser, such
Purchaser shall receive a Warrant to purchase 0.35 of a share of Common Stock at
an exercise price per share equal to $2.66 (subject to adjustments as provided
in the Warrant) pursuant to a Warrant substantially in the form attached as
Exhibit B hereto.

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The Preferred Shares shall have the rights, preferences, privileges and
restrictions set forth in the Certificate of Designation substantially in the
form attached hereto as Exhibit C (the “Certificate of Designation”).

1.2 Payment. At the Closing, each Purchaser will pay the aggregate Purchase
Price set forth opposite its name on Exhibit A hereto by wire transfer of
immediately available funds in accordance with wire instructions provided by the
Company to the Purchasers prior to the Closing. On the Closing Date, the Company
will, against delivery of the aggregate Purchase Price: (i) instruct its
transfer agent to credit each Purchaser the number of Common Shares set forth on
Exhibit A (and, upon request, will deliver stock certificates to the Purchasers
representing the Common Shares), (ii) deliver stock certificates to the
Purchasers representing the number of Preferred Shares set forth on Exhibit A
and (iii) deliver the number of Warrants set forth on Exhibit A.

1.3 Closing Date. The closing of the transaction contemplated by this Agreement
will take place on June 27, 2012 (the “Closing Date”) and the closing (the
“Closing”) will be held at the offices of Wilmer Cutler Pickering Hale and Dorr
LLP, 399 Park Avenue, New York, NY 10022 or at such other time and place
(including by electronic exchange of facsimile signatures) as shall be agreed
upon by the Company and the Purchasers hereunder of a majority in interest of
the Securities.

ARTICLE 2

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

Except as specifically contemplated by this Agreement or as set forth in the SEC
Documents, the Company hereby represents and warrants to the Purchasers that:

2.1 Organization and Qualification. The Company is duly incorporated, validly
existing and in good standing under the laws of the State of Delaware, with full
corporate power and authority to conduct its business as currently conducted as
disclosed in the SEC Documents. The Company is duly qualified to do business and
is in good standing in every jurisdiction in which the nature of the business
conducted by it or property owned by it makes such qualification necessary,
except where the failure to be so qualified or in good standing, as the case may
be, would not reasonably be expected to have a Material Adverse Effect. The
Company’s only subsidiary is Biodel UK Limited, a company formed in October 2011
that has been inactive since its inception.

2.2 Authorization; Enforcement. The Company has all requisite corporate power
and authority to enter into and to perform its obligations under this Agreement,
to consummate the transactions contemplated hereby and to issue the Securities
in accordance with the terms hereof. The execution, delivery and performance of
this Agreement by the Company and the consummation by it of the transactions
contemplated hereby (including the issuance of the Securities) have been duly
authorized by the Company’s Board of Directors and no further consent or
authorization of the Company, its Board of Directors, or its stockholders is
required.

 

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This Agreement has been duly executed by the Company and constitutes a legal,
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, or moratorium or similar laws affecting
creditors’ and contracting parties’ rights generally and except as
enforceability may be subject to general principles of equity and except as
rights to indemnity and contribution may be limited by state or federal
securities laws or public policy underlying such laws. The Warrants, when issued
and delivered to the Purchasers against payment therefor as provided by this
Agreement, will constitute valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, or moratorium or similar laws affecting creditors’ and
contracting parties’ rights generally and except as enforceability may be
subject to general principles of equity and except as rights to indemnity and
contribution may be limited by state or federal securities laws or public policy
underlying such laws.

2.3 Capitalization. The authorized capital stock of the Company, as of June 11,
2012 consists of 25,000,000 shares of Common Stock, of which 9,733,053 shares
were issued and outstanding and 50,000,000 shares of blank check preferred
stock, $0.01 par value per share, 2,000,000 of which have been designated as
Series A Preferred Stock, $0.01 par value per share (the “Series A Preferred
Stock”), of which 1,813,944 shares were issued and outstanding. All of the
issued and outstanding shares of Common Stock and Series A Preferred Stock have
been duly authorized and validly issued, fully paid, and nonassessable. Options
to purchase an aggregate of 1,537,916 shares of Common Stock were outstanding as
of June 11, 2012, restricted stock units covering an aggregate of 342,353 shares
of Common Stock and warrants to purchase an aggregate of 2,267,358 shares of
Common Stock were outstanding as of June 11, 2012. As of June 11, 2012 the
outstanding shares of Series A Preferred Stock were convertible into an
aggregate of 453,486 shares of Common Stock. Except as disclosed in or
contemplated by the SEC Documents, the Company does not have outstanding any
options to purchase, or any preemptive rights or other rights to subscribe for
or to purchase, any securities or obligations convertible into, or any contracts
or commitments to issue or sell, shares of its capital stock or any such
options, rights, convertible securities or obligations other than options
granted under the Company’s stock option plans and its employee stock purchase
plan. The issuance and sale of the Shares and Warrants will not obligate the
Company to issue shares of Common Stock or other securities to any Person (other
than the Purchasers) and will not result in a right of any holder of Company
securities to adjust the exercise, conversion, exchange or reset price under any
of such securities. There are no stockholders agreements, voting agreements or
other similar agreements with respect to the Company’s capital stock to which
the Company is a party or, to the Company’s knowledge, between or among any of
the Company’s stockholders (except for joint filing agreements and other similar
arrangements disclosed in any beneficial ownership reports filed with the SEC by
the Company’s stockholders). The Company’s Second Amended and Restated
Certificate of Incorporation, as amended (the “Certificate of Incorporation”),
as in effect on the date hereof, and the Company’s Amended and Restated Bylaws
(the “Bylaws”) as in effect on the date hereof, are each filed as exhibits to
the SEC Documents.

 

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2.4 Issuance of Shares. The Shares, all of the shares of Common Stock issuable
upon exercise of the Warrants (the “Warrant Shares”) and the shares of Common
Stock issuable upon conversion of the Preferred Shares (the “Conversion Shares”)
are duly authorized and, upon issuance in accordance with the terms of this
Agreement (and in case of the Warrant Shares, the Warrants and in case of the
Conversion Shares, the Certificate of Designation), will be validly issued,
fully paid and non-assessable and free and clear of all liens, other than
restrictions on transfer provided for in this Agreement and the Warrants or
imposed by applicable securities laws, and will not be subject to preemptive
rights or other similar rights of stockholders of the Company. Assuming the
accuracy of the representations and warranties of the Purchasers in this
Agreement, the Securities will be issued in compliance in all material respects
with all applicable federal and state securities laws. As of the Closing Date,
the Company shall have reserved from its duly authorized capital stock the
number of shares of Common Stock issuable upon exercise of the Warrants (without
taking into account any limitations on the exercise of the Warrants set forth in
the Warrants). The Company shall, so long as any of the Warrants are
outstanding, take all action necessary to reserve and keep available out of its
authorized and unissued capital stock, solely for the purpose of effecting the
exercise of the Warrants, 100% of the number of shares of Common Stock issuable
upon exercise of the Warrants (without taking into account any limitations on
the exercise of the Warrants set forth in the Warrants).

2.5 No Conflicts; Government Consents and Permits.

(a) The execution, delivery and performance of this Agreement by the Company and
the consummation by the Company of the transactions contemplated hereby
(including the issuance of the Securities) will not (i) conflict with or result
in a violation of any provision of its Certificate of Incorporation (including
the Certificate of Designation for the Company’s Series A Preferred Stock) or
Bylaws or require the approval of the Company’s stockholders, (ii) violate or
conflict with, or result in a breach of any provision of, or constitute a
default under, any agreement, indenture, or instrument to which the Company is a
party, or (iii) result in a violation of any law, rule, regulation, order,
judgment or decree (including United States federal and state securities laws
and rules and regulations of any self-regulatory organizations to which the
Company or its securities are subject) applicable to the Company, except in the
case of clauses (ii) and (iii) only, for such conflicts, breaches, defaults, and
violations as would not reasonably be expected to have a Material Adverse
Effect.

(b) The Company is not required to obtain any consent, authorization or order
of, or make any filing or registration with, any court or governmental agency or
any regulatory or self regulatory agency in order for it to execute, deliver or
perform any of its obligations under this Agreement in accordance with the terms
hereof, or to issue and sell the Securities in accordance with the terms hereof,
other than such as have been made or obtained, and except for (i) the filing
prior to the Closing of the Certificate of Designation with the Secretary of
State of the State of Delaware, (ii) the registration of the Shares, the Warrant
Shares and the Conversion Shares under the Securities Act pursuant to Article 6
hereof, (iii) any filings required to be made under federal or state securities
laws, (iv) any required filings or notifications regarding the issuance or
listing of additional shares with Nasdaq and (v) the filings required in
accordance with Section 4.4 of this Agreement.

 

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(c) The Company has all franchises, permits, licenses, and any similar authority
necessary for the conduct of its business as now being conducted by it and as
currently proposed to be conducted as disclosed in the SEC Documents, except for
such franchise, permit, license or similar authority, the lack of which would
not reasonably be expected to have a Material Adverse Effect. The Company has
not received any actual notice of any proceeding relating to revocation or
modification of any such franchise, permit, license, or similar authority except
where such revocation or modification would not reasonably be expected to have a
Material Adverse Effect.

2.6 SEC Documents, Financial Statements. The Company has timely filed all
reports, schedules, forms, statements and other documents required to be filed
by it with the SEC since June 1, 2011, pursuant to the reporting requirements of
the Exchange Act (all of the foregoing filed prior to the date hereof and all
exhibits included therein and financial statements and schedules thereto and
documents (other than exhibits) incorporated by reference therein, being
hereinafter referred to herein as the “SEC Documents”). The Company is eligible
to register its Common Stock for resale using Form S-3 promulgated under the
Securities Act. Each Purchaser has had access to true and complete copies of the
SEC Documents via the SEC’s EDGAR system. As of their respective dates, the SEC
Documents complied in all material respects with the requirements of the
Exchange Act or the Securities Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with the SEC,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. As of their respective dates, the Financial Statements and the
related notes complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto. The Financial Statements and the related notes have been
prepared in accordance with accounting principles generally accepted in the
United States (“GAAP”), consistently applied, during the periods involved
(except (i) as may be otherwise indicated in the Financial Statements or the
notes thereto, or (ii) in the case of unaudited interim statements, to the
extent they may not include footnotes, may be condensed or summary statements or
may conform to the SEC’s rules and instructions for Reports on Form 10-Q) and
fairly present in all material respects the consolidated financial position of
the Company as of the dates thereof and the consolidated results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal and recurring year-end audit adjustments). All
material agreements that were required to be filed as exhibits to the SEC
Documents under Item 601 of Regulation S-K (collectively, the “Material
Agreements”) to which the Company is a party, or the property or assets of the
Company is subject, have been filed as exhibits to the SEC Documents. All
Material Agreements are valid and enforceable against the Company in accordance
with their respective terms, except (i) as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, or moratorium or similar laws
affecting creditors’ and contracting parties’ rights generally, and

 

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(ii) as enforceability may be subject to general principles of equity and except
as rights to indemnity and contribution may be limited by state or federal
securities laws or public policy underlying such laws. The Company is not in
breach of or default under any of the Material Agreements, and to the Company’s
knowledge, no other party to a Material Agreement is in breach of or default
under such Material Agreement, except in each case, for such breaches or
defaults as would not reasonably be expected to have a Material Adverse Effect.
The Company has not received a notice of termination nor is the Company
otherwise aware of any threats to terminate any of the Material Agreements.

2.7 Disclosure Controls and Procedures. Except as disclosed in the SEC
Documents, the Company has established and maintains disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) that are
effective in all material respects to ensure that material information relating
to the Company, including any consolidated Subsidiaries, is made known to its
chief executive officer and chief financial officer by others within those
entities. The Company’s certifying officers have evaluated the effectiveness of
the Company’s disclosure controls and procedures as of the end of the period
covered by the most recently filed quarterly or annual periodic report under the
Exchange Act (such date, the “Evaluation Date”). The Company presented in its
most recently filed quarterly or annual periodic report under the Exchange Act
the conclusions of the certifying officers about the effectiveness of the
disclosure controls and procedures based on their evaluations as of the
Evaluation Date. Since the Evaluation Date, there have been no significant
changes in the Company’s internal control over financial reporting (as such term
is defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) or, to the Company’s
knowledge, in other factors that could significantly affect the Company’s
internal control over financial reporting.

2.8 Accounting Controls. Except as disclosed in the SEC Documents, the Company
maintains a system of internal accounting controls sufficient to provide
reasonable assurances that (i) transactions are executed in accordance with
management’s general or specific authorization, (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
GAAP and to maintain accountability for assets, (iii) access to assets is
permitted only in accordance with management’s general or specific
authorization, and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.

2.9 Absence of Litigation. Except as disclosed in the SEC Documents, as of the
date hereof, there is no action, suit, proceeding or investigation before or by
any court, public board, government agency, self-regulatory organization or body
pending or, to the Company’s knowledge, threatened against the Company that if
determined adversely to the Company would reasonably be expected to have a
Material Adverse Effect or would reasonably be expected to impair the ability of
the Company to perform its obligations under this Agreement. Neither the
Company, nor any director or officer thereof, is or has been the subject of any
action involving a claim of violation of or liability under federal or state
securities laws or a claim of breach of fiduciary duty relating to the Company.
The Company has not received any stop order or other order suspending the
effectiveness of any registration statement filed by the Company under the
Exchange Act or the Securities Act and, to the Company’s knowledge, the SEC has
not issued any such order.

 

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2.10 Intellectual Property Rights. The Company owns or possesses, or has a
reasonable basis on which it believes it can obtain on reasonable terms,
licenses or sufficient rights to use all patents, patent applications, patent
rights, inventions, know-how, trade secrets, trademarks, trademark applications,
service marks, service names, trade names and copyrights necessary to enable it
to conduct its business as conducted as of the date hereof and, to its
knowledge, as proposed to be conducted as described in the SEC Documents (the
“Intellectual Property”); except to the extent failure to own, possess or
acquire such Intellectual Property would not result in a Material Adverse
Effect. To the Company’s knowledge, the Company has not infringed the
intellectual property rights of third parties and no third party, to the
Company’s knowledge, is infringing the Intellectual Property, in each case,
which could reasonably be expected to result in a Material Adverse Effect. There
is no pending or, to the Company’s knowledge, threatened action, suit,
proceeding or claim by a third party that the Company’s business as now
conducted infringes or otherwise violates any patent, trademark, copyright,
trade secret or other proprietary rights of another. Except as disclosed in the
SEC Documents, there are no material options, licenses or agreements relating to
the Intellectual Property, nor is the Company bound by or a party to any
material options, licenses or agreements relating to the patents, patent
applications, patent rights, inventions, know-how, trade secrets, trademarks,
trademark applications, service marks, service names, trade names or copyrights
of any other Person. To the Company’s knowledge, all patent applications and
patents within the Intellectual Property have been prosecuted with a duty of
candor, and there is no material fact known by the Company that would preclude
the issuance of patents with respect to said patent applications or that would
render any issued patents invalid or unenforceable. There is no material claim
or action or proceeding pending or, to the Company’s knowledge, threatened that
challenges any of the rights of the Company in or to, or otherwise with respect
to, any Intellectual Property. The Company has taken reasonable security
measures to protect the secrecy, confidentiality and value of all of its
Intellectual Property, except where failure to do so would not reasonably be
expected to result in a Material Adverse Effect.

2.11 Placement Agents. The Company has taken no action that would give rise to
any claim by any Person for brokerage commissions, placement agent’s fees or
similar payments relating to this Agreement or the transactions contemplated
hereby, except for dealings with the Placement Agents, whose commissions and
fees will be paid by the Company.

2.12 Investment Company. The Company is not and, after giving effect to the
offering and sale of the Securities, will not be an “investment company” as such
term is defined in the Investment Company Act of 1940, as amended (the
“Investment Company Act”). The Company shall conduct its business in a manner so
that it will not become subject to the Investment Company Act.

2.13 No Material Adverse Change. Since March 31, 2012, except as described or
referred to in the SEC Documents and except for cash expenditures in the
ordinary course of

 

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business, there has not been any change in the assets, business, properties,
financial condition or results of operations of the Company that would
reasonably be expected to have a Material Adverse Effect. Since March 31, 2012,
(i) except for the reverse stock split effective as of June 11, 2012, there has
not been any dividend or distribution of any kind declared, set aside for
payment, paid or made by the Company on any class of capital stock, (ii) the
Company has not purchased, redeemed or made any agreements to purchase or redeem
any shares of its capital stock (other than in connection with repurchases of
unvested stock issued to employees of the Company), (iii) the Company has not
issued any equity securities to any officer, director or Affiliate, except
issued pursuant to existing Company stock option or stock purchase plans or
executive and director compensation arrangements disclosed in the SEC Documents,
(iv) the Company has not sustained any material loss or interference with the
Company’s business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor disturbance or dispute or any action,
order or decree of any court or arbitrator or governmental or regulatory
authority, (v) the Company has not incurred any material liabilities except in
the ordinary course of business and (vi) the Company has not altered materially
its method of accounting or the manner in which it keeps its accounting books
and records. Except for the issuance of the Shares and Warrants contemplated by
this Agreement, no event, liability or development has occurred or exists with
respect to the Company or its business, properties, operations or financial
condition, that would be required to be disclosed by the Company under
applicable securities laws at the time this representation is made that has not
been publicly disclosed at least one Trading Day prior to the date that this
representation is made.

2.14 The Nasdaq Capital Market. The Common Stock is registered pursuant to
Section 12(b) or 12(g) of the Exchange Act, and the Company has taken no action
designed to terminate the registration of the Common Stock under the Exchange
Act, nor has the Company received any notification that the SEC is contemplating
terminating such registration. The Common Stock is listed on The Nasdaq Capital
Market, and, except as disclosed in the SEC Documents, to the Company’s
knowledge, there are no proceedings to revoke or suspend such listing or the
listing of the Shares, the Warrant Shares and the Conversion Shares. Except as
disclosed in the SEC Documents, the Company is in compliance in all material
respects with the requirements of Nasdaq for continued listing of the Common
Stock thereon and any other Nasdaq listing and maintenance requirements.

2.15 Acknowledgment Regarding Purchasers’ Purchase of Securities. The Company
acknowledges and agrees that each of the Purchasers 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 no
Purchaser is acting as a financial advisor or fiduciary of the Company (or in
any similar capacity with respect to the Company) with respect to this Agreement
and the transactions contemplated hereby and any advice given by any Purchaser
or any of their respective representatives or agents to the Company in
connection with this Agreement and the transactions contemplated hereby is
merely incidental to such Purchaser’s purchase of the Securities. The Company
further represents to each Purchaser that the Company’s decision to enter into
this Agreement has been based on the independent evaluation of the transactions
contemplated hereby by the Company and its representatives.

 

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2.16 Accountants. BDO USA, LLP, who will express their opinion with respect to
the audited financial statements and schedules to be included as a part of any
Registration Statement prior to the filing of any such Registration Statement,
are independent accountants as required by the Securities Act.

2.17 Sarbanes-Oxley Act. The Company is in compliance in all material respects
with any and all applicable requirements of the Sarbanes-Oxley Act of 2002 that
are effective as of the date hereof, and any and all applicable rules and
regulations promulgated by the SEC thereunder that are effective as of the date
hereof and as of the Closing Date.

2.18 Insurance. The Company is insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as the Company
believes are prudent and customary for a company (i) in the businesses and
location in which the Company is engaged, (ii) with the resources of the
Company, and (iii) at a similar stage of development as the Company, including
directors and officers insurance coverage at least equal to the aggregate
Purchase Price. The Company has not received any written notice of cancellation
of any such insurance, or that the Company will not be able to renew its
existing insurance coverage as and when such coverage expires. The Company
believes it will be able to obtain similar coverage at reasonable cost from
similar insurers as may be necessary to continue its business.

2.19 Foreign Corrupt Practices. Since January 1, 2007, neither the Company, nor
to the Company’s knowledge, any director, officer, agent, employee or other
Person acting on behalf of the Company has, in the course of its actions for, or
on behalf of, the Company (i) used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to
political activity; (ii) made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate funds;
(iii) violated or is in violation of in any material respect any provision of
the U.S. Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any
unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful
payment to any foreign or domestic government official or employee.

2.20 Private Placement. Neither the Company, nor any of its affiliates, nor any
Person acting on its or their behalf, has, directly or indirectly, made any
offers or sales of any security or solicited any offers to buy any security,
under any circumstances that would (i) require registration of the Securities
under the Securities Act or (ii) cause the offering of the Securities pursuant
to this Agreement to be integrated with prior offerings by the Company for
purposes of any applicable law, regulation or stockholder approval provisions,
including, without limitation, under the rules and regulations of Nasdaq.
Assuming the accuracy of the representations and warranties of the Purchasers
contained in Article 3 hereof, the issuance of the Shares, the Warrant Shares
and the Conversion Shares are exempt from registration under the Securities Act.
The issuance and sale of the Securities hereunder do not contravene in any
material respect the rules and regulations of Nasdaq.

2.21 No Registration Rights. No Person has the right to (i) prohibit the Company
from filing a Registration Statement or (ii) other than as disclosed in the SEC
Documents, require the Company to register any securities for sale under the
Securities Act by reason of the

 

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filing of a Registration Statement except in the case of clause (ii) for rights
which have been properly waived. The granting and performance of the
registration rights under this Agreement will not violate or conflict with, or
result in a breach of any provision of, or constitute a default under, any
agreement, indenture, or instrument to which the Company is a party.

2.22 Taxes. The Company has (i) accurately and timely filed (or has obtained an
extension of time within which to file) all necessary federal, state and foreign
income and franchise tax returns, (ii) paid all taxes shown as due on such tax
returns and (iii) set aside on its books provision reasonably adequate for the
payment of all material taxes for periods subsequent to the periods to which
such returns apply, except where the failure to so file, the failure to so pay
or the failure to so set aside would not reasonably be expected to have a
Material Adverse Effect. There are no unpaid taxes in any material amount
claimed by the taxing authority of any jurisdiction to be due by the Company,
and, to the Company’s knowledge, there is no basis for any such claim.

2.23 Real and Personal Property. The Company has good and marketable title to,
or has valid rights to lease or otherwise use, all items of real and personal
property that are material to the business of the Company free and clear of all
liens, encumbrances, claims and defects and imperfections of title except those
that (i) do not materially interfere with the use of such property by the
Company, (ii) are described in the SEC Documents or (iii) would not reasonably
be expected to have a Material Adverse Effect.

2.24 Application of Takeover Protections. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby will not
impose any restriction on any Purchaser, or create in any party (including any
current stockholder of the Company) any rights, under any share acquisition,
business combination, poison pill (including any distribution under a rights
agreement), or other similar anti-takeover provisions under the Company’s
charter documents or the laws of its state of incorporation.

2.25 Regulation M Compliance. The Company has not, and to its knowledge no one
acting on its behalf (other than the Placement Agents, with respect to which no
representation is made) has, (i) taken, directly or indirectly, any action
designed to cause or to result in the stabilization or manipulation of the price
of any security of the Company to facilitate the sale or resale of any of the
Securities, (ii) sold, bid for, purchased, or paid any compensation for
soliciting purchases of, any of the Securities in violation of Regulation M
under the Exchange Act, or (iii) paid or agreed to pay to any Person any
compensation for soliciting another to purchase any other securities of the
Company, other than, in the case of clauses (ii) and (iii), compensation paid to
the Placement Agents in connection with the placement of the Securities.

2.26 Related Party Transactions. Except with respect to the transactions that
are not required to be disclosed, all transactions that have occurred between or
among the Company, on the one hand, and any of its officers or directors, or any
affiliate or affiliates of any such officer or director, on the other hand,
prior to the date hereof have been disclosed in the SEC Documents.

 

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2.27 Transactions With Executive Officers, Employees and Directors. Except as
set forth in the SEC Documents, none of the executive officers or directors of
the Company, and, to the Company’s knowledge, none of the employees of the
Company is presently a party to any transaction with the Company (other than for
services as employees, executive officers and directors), including any
contract, agreement or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal property to or from,
providing for the borrowing of money from or lending of money to or otherwise
requiring payments to or from any executive officer, director or such employee
or, to the Company’s knowledge, any entity in which any executive officer,
director, or any such employee has a substantial interest or is an officer,
director, trustee, stockholder, member or partner, in each case in excess of
$120,000 other than for: (i) payment of salary or consulting fees for services
rendered, (ii) reimbursement for expenses incurred on behalf of the Company and
(iii) other employee benefits, including stock option agreements under any stock
option plan of the Company.

2.28 Compliance. The Company: (i) is not in default under or in violation of
(and no event has occurred that has not been waived that, with notice or lapse
of time or both, would result in a default by the Company), nor has the Company
received notice of a claim that it is in default under or that it is in
violation of, any indenture, loan or credit agreement or any other agreement or
instrument to which it is a party or by which it or any of its properties is
bound (whether or not such default or violation has been waived), (ii) is not in
violation of any judgment, decree, or order of any court, arbitrator or other
governmental authority or (iii) is not nor has it been in violation of any
statute, rule, ordinance or regulation of any governmental authority, including
without limitation all foreign, federal, state and local laws relating to taxes,
environmental protection, occupational health and safety, product quality and
safety and employment and labor matters, except in each case as would not
reasonably be expected to result in a Material Adverse Effect.

2.29 No Disagreements with Accountants and Lawyers. There are no disagreements
of any kind presently existing, or reasonably anticipated by the Company to
arise, between the Company and the accountants and lawyers formerly or presently
employed by the Company and the Company is current with respect to any fees owed
to its accountants and lawyers which could affect the Company’s ability to
perform any of its obligations under this Agreement.

2.30 Use of Proceeds. The Company shall use the net proceeds of the sale of the
Securities hereunder for research and development of the Company’s product
candidates, working capital and general corporate purposes.

2.31 Labor Relations. No labor dispute exists or, to the knowledge of the
Company, is imminent with respect to any of the employees of the Company, which
could reasonably be expected to result in a Material Adverse Effect. None of the
Company’s employees is a member of a union that relates to such employee’s
relationship with the Company, and the Company is not a party to a collective
bargaining agreement. To the knowledge of the Company, no executive officer of
the Company is, or is now expected to be, in violation of any material term

 

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of any employment contract, confidentiality, disclosure or proprietary
information agreement or non-competition agreement, or any other contract or
agreement or any restrictive covenant in favor of any third party, and the
continued employment of each such executive officer does not subject the Company
to any liability with respect to any of the foregoing matters. The Company is in
compliance with all U.S. federal, state, local and foreign laws and regulations
relating to employment and employment practices, terms and conditions of
employment and wages and hours, except where the failure to be in compliance
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.

2.32 Disclosure. The Company confirms that neither it, nor, to its knowledge,
any other Person acting on its behalf has provided, and the Company has not
authorized the Placement Agents to provide, any Purchaser or its respective
agents or counsel with any information that the Company believes constitutes
material, non-public information except insofar as the existence, provisions and
terms of the Placement may constitute such information. The Company understands
and confirms that the Purchasers will rely on the foregoing representations in
effecting transactions in securities of the Company. None of the disclosure
furnished by or on behalf of the Company to the Purchasers regarding the
Company, its business and the transactions contemplated hereby contains any
untrue statement of a material fact or omits to state any material fact
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading. Each press release
issued by the Company during the twelve months preceding the date of this
Agreement did not, at the time of release, 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 the light of the
circumstances under which they are made, not misleading. The Company
acknowledges and agrees that no Purchaser makes or has made any representations
or warranties with respect to the transactions contemplated hereby other than
those specifically set forth in Article 3 hereto.

2.33 Solvency. Based on the consolidated financial condition of the Company as
of the Closing Date, and except as described in the SEC Documents, immediately
after giving effect to the receipt by the Company of the proceeds from the sale
of the Securities hereunder: (i) the fair saleable value of the Company’s assets
exceeds the amount that will be required to be paid on or in respect of the
Company’s existing debts and other liabilities (including known contingent
liabilities) as they mature; (ii) the Company’s assets do not constitute
unreasonably small capital to carry on its business as now conducted and as
proposed to be conducted including its capital needs taking into account the
particular capital requirements of the business conducted by the Company,
consolidated and projected capital requirements and capital availability
thereof; and (iii) the current cash flow of the Company, together with the
proceeds the Company would receive, were it to liquidate all of its assets,
after taking into account all anticipated uses of the cash, would be sufficient
to pay all amounts on or in respect of its liabilities when such amounts are
required to be paid. The Company has no knowledge of any facts or circumstances
which lead it to believe that it will file for reorganization or liquidation
under the bankruptcy or reorganization laws of any jurisdiction within one year
from the Closing Date. The SEC Documents set forth as of the date hereof all
outstanding secured and unsecured Indebtedness of the Company, or for which the
Company has commitments. For the purposes of

 

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this Agreement, “Indebtedness” means (x) any liabilities for borrowed money or
amounts owed in excess of $50,000 (other than trade accounts payable incurred in
the ordinary course of business), (y) all guaranties, endorsements and other
contingent obligations in respect of indebtedness of others, whether or not the
same are or should be reflected in the Company’s consolidated 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 (z) the present value of any lease payments in excess of $50,000
due under leases required to be capitalized in accordance with GAAP. The Company
is not in default with respect to any Indebtedness.

2.34 FDA. As to each product subject to the jurisdiction of the U.S. Food and
Drug Administration (the “FDA”) under the Federal Food, Drug and Cosmetic Act,
as amended, and the regulations thereunder (the “FDCA”) that is manufactured,
packaged, labeled, tested, distributed, sold, and/or marketed by the Company
(each such product, a “Pharmaceutical Product”), such Pharmaceutical Product is
being manufactured, packaged, labeled, tested, distributed, sold and/or marketed
by the Company in compliance with all applicable requirements under the FDCA and
similar laws, rules and regulations relating to registration, investigational
use, premarket clearance, licensure, or application approval, good manufacturing
practices, good laboratory practices, good clinical practices, product listing,
quotas, labeling, advertising, record keeping and filing of reports, except
where the failure to be in compliance would not have or reasonably be expected
to result in a Material Adverse Effect. Except as disclosed in the SEC
Documents, there is no pending, completed or, to the Company’s knowledge,
threatened, action (including any lawsuit, arbitration, or legal or
administrative or regulatory proceeding, charge, complaint, or investigation)
against the Company, and the Company has not received any notice, warning letter
or other communication from the FDA or any other governmental entity, which
(i) contests the premarket clearance, licensure, registration, or approval of,
the uses of, the distribution of, the manufacturing or packaging of, the testing
of, the sale of, or the labeling and promotion of any Pharmaceutical Product,
(ii) withdraws its approval of, requests the recall, suspension, or seizure of,
or withdraws or orders the withdrawal of advertising or sales promotional
materials relating to, any Pharmaceutical Product, (iii) imposes a clinical hold
on any clinical investigation by the Company, (iv) enjoins production at any
facility of the Company, (v) enters or proposes to enter into a consent decree
of permanent injunction with the Company, or (vi) otherwise alleges any
violation of any such laws, rules or regulations by the Company, and which,
either individually or in the aggregate, would have or reasonably be expected to
result in a Material Adverse Effect. The properties, business and operations of
the Company have been and are being conducted in all material respects in
accordance with all applicable laws, rules and regulations of the FDA. Except as
disclosed in the SEC Documents, the Company has not been informed by the FDA
that the FDA will prohibit the marketing, sale, license or use in the United
States of any product proposed to be developed, produced or marketed by the
Company nor has the FDA expressed any concern as to approving or clearing for
marketing any product being developed or proposed to be developed by the
Company.

 

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2.35 OFAC. Neither the Company nor, to the Company’s knowledge, any director,
officer, agent, employee or affiliate of the Company is currently subject to any
U.S. sanctions administered by the Office of Foreign Assets Control of the U.S.
Treasury Department.

2.36 Real Property Holding Corporation. The Company is not and has never been a
U.S. real property holding corporation within the meaning of Section 897 of the
Internal Revenue Code of 1986, as amended, and the Company shall so certify upon
any Purchaser’s reasonable request.

2.37 Bank Holding Company Act. The Company is not subject to the Bank Holding
Company Act of 1956, as amended (the “BHCA”) and to regulation by the Board of
Governors of the Federal Reserve System (the “Federal Reserve”). The Company
does not own or control, directly or indirectly, five percent (5%) or more of
the outstanding shares of any class of voting securities or twenty-five percent
(25%) or more of the total equity of a bank or any entity that is subject to the
BHCA and to regulation by the Federal Reserve. The Company does not exercise a
controlling influence over the management or policies of a bank or any entity
that is subject to the BHCA and to regulation by the Federal Reserve.

2.38 Money Laundering Laws. The operations of the Company are and have been
conducted at all times in compliance in all material respects with applicable
financial recordkeeping and reporting requirements of the Currency and Foreign
Transactions Reporting Act of 1970, as amended, the money laundering statutes of
all jurisdictions where the Company conducts its business, the rules and
regulations thereunder and any related or similar rules, regulations or
guidelines, issued, administered or enforced by any governmental agency
(collectively, the “Money Laundering Laws”) and no action, suit or proceeding by
or before any court or governmental agency, authority or body or any arbitrator
involving the Company with respect to the Money Laundering Laws is pending, or
to the knowledge of the Company, threatened.

2.39 No General Solicitation. Neither the Company nor, to the Company’s
knowledge, any Person acting on behalf of the Company has offered or sold any of
the Securities by means of any form of general solicitation or general
advertising.

ARTICLE 3

PURCHASER’S REPRESENTATIONS AND WARRANTIES

Each Purchaser represents and warrants to the Company, severally and not
jointly, with respect to itself and its purchase hereunder, that:

3.1 Investment Purpose. The Purchaser is purchasing the Securities for its own
account and not with a present view toward the public sale or distribution
thereof and has no intention of selling or distributing any of such Securities
or any arrangement or understanding with any other Persons regarding the sale or
distribution of such Securities except in accordance with the provisions of
Article 6 and except as would not result in a violation of the Securities

 

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Act. The Purchaser will not, directly or indirectly, offer, sell, pledge,
transfer or otherwise dispose of (or solicit any offers to buy, purchase or
otherwise acquire or take a pledge of) any of the Securities except in
accordance with the provisions of Article 6 or pursuant to and in accordance
with the Securities Act.

3.2 [INTENTIONALLY OMITTED.]

3.3 Reliance on Exemptions. The Purchaser understands that the Securities are
being offered and sold to it in reliance upon specific exemptions from the
registration requirements of United States federal and state securities laws and
that the Company is relying upon the truth and accuracy of, and the Purchaser’s
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of the Purchaser set forth herein in order to determine the
availability of such exemptions and the eligibility of the Purchaser to acquire
the Securities.

3.4 Information. The Purchaser has been furnished with all relevant materials
relating to the business, finances and operations of the Company necessary to
make an investment decision, and materials relating to the offer and sale of the
Securities, that have been requested by the Purchaser, including, without
limitation, the SEC Documents, and the Purchaser has had the opportunity to
review the SEC Documents. The Purchaser has been afforded the opportunity to ask
questions of the Company regarding the Company, including without limitation,
all aspects of the Company’s business, operations, financial condition,
prospects, intellectual property and pending disputes. Neither such inquiries
nor any other investigation conducted by or on behalf of such Purchaser or its
representatives or counsel shall modify, amend or affect such Purchaser’s right
to rely on the truth, accuracy and completeness of the SEC Documents and the
Company’s representations and warranties contained in the Agreement, it being
agreed that the Company has made and does not make any representations or
warranties to any Purchaser expect as expressly set forth herein.

3.5 Acknowledgement of Risk.

(a) The Purchaser acknowledges and understands that its investment in the
Securities involves a significant degree of risk, including, without limitation,
(i) the Company remains an early stage business with limited operating history
and requires substantial funds in addition to the proceeds from the sale of the
Securities; (ii) an investment in the Company is speculative, and only
Purchasers who can afford the loss of their entire investment should consider
investing in the Company and the Securities; (iii) the Purchaser may not be able
to liquidate its investment; (iv) transferability of the Securities is extremely
limited; (v) in the event of a disposition of the Securities, the Purchaser
could sustain the loss of its entire investment; and (vi) the Company has not
paid any dividends on its Common Stock since inception and does not anticipate
the payment of dividends in the foreseeable future. The Purchaser acknowledges
that risk factors related to the Company and an investment in the Company are
more fully set forth in the SEC Documents and that Purchaser has reviewed such
risk factors;

 

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(b) The Purchaser is able to bear the economic risk of holding the Securities
for an indefinite period, and has knowledge and experience in financial and
business matters such that it is capable of evaluating the risks of the
investment in the Securities; and

(c) The Purchaser has, in connection with the Purchaser’s decision to purchase
Securities, not relied upon any representations, warranties or other information
(whether oral or written) of or related to the Company other than: (i) those
representations and warranties of the Company specifically set forth herein and
(ii) the information contained in the SEC Documents, and the Purchaser has, with
respect to all matters relating to this Agreement and the offer and sale of the
Securities, relied solely upon the advice of such Purchaser’s own counsel and
has not relied upon or consulted any counsel to the Placement Agents or counsel
to the Company.

3.6 Governmental Review. The Purchaser understands that no United States federal
or state agency or any other government or governmental agency has passed upon
or made any recommendation or endorsement of the Securities or an investment
therein.

3.7 Transfer or Resale. The Purchaser understands that:

(a) the Securities have not been and are not being registered under the
Securities Act (other than as contemplated in Article 6) or any applicable state
securities laws and, consequently, the Purchaser may have to bear the risk of
owning the Securities for an indefinite period of time because the Securities
may not be transferred unless (i) the resale of the Securities is registered
pursuant to an effective registration statement under the Securities Act, as
contemplated in Article 6; (ii) the Purchaser has delivered to the Company an
opinion of counsel (in form, substance and scope customary for opinions of
counsel in comparable transactions) to the effect that the Securities to be sold
or transferred may be sold or transferred pursuant to an exemption from such
registration; (iii) the Securities are sold or transferred pursuant to Rule 144;
or (iv) the Purchaser is a partnership transferring to its partners or former
partners in accordance with partnership interests or a limited liability company
transferring to its members or former members in accordance with their interest
in the limited liability company;

(b) any sale of the Securities made in reliance on Rule 144 may be made only in
accordance with the terms of Rule 144 and, if Rule 144 is not applicable, any
resale of the Securities under circumstances in which the seller (or the Person
through whom the sale is made) may be deemed to be an underwriter (as that term
is defined in the Securities Act) may require compliance with some other
exemption under the Securities Act or the rules and regulations of the SEC
thereunder; and

(c) except as set forth in Article 6, neither the Company nor any other Person
is under any obligation to register the resale of the Shares, the Warrant Shares
or the Conversion Shares under the Securities Act or any state securities laws
or to comply with the terms and conditions of any exemption thereunder.

 

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3.8 Legends.

(a) The Purchaser understands the certificates representing the Securities will
bear a restrictive legend in substantially the following form (and a
stop-transfer order may be placed against transfer of the certificates for such
Securities):

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE OF
THE UNITED STATES. THE SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED,
HYPOTHECATED, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER APPLICABLE SECURITIES LAWS, OR
UNLESS OFFERED, SOLD, PLEDGED, HYPOTHECATED OR TRANSFERRED PURSUANT TO AN
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THOSE LAWS. THE
COMPANY SHALL BE ENTITLED TO REQUIRE AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED TO THE EXTENT THAT SUCH OPINION
IS REQUIRED PURSUANT TO THAT CERTAIN SECURITIES PURCHASE AGREEMENT UNDER WHICH
THE SECURITIES WERE ISSUED.

(b) To the extent the resale of the Shares, the Warrant Shares or the Conversion
Shares is registered under the Securities Act pursuant to an effective
Registration Statement, the Company agrees to promptly (i) authorize the removal
of the legend set forth in Section 3.8(a) and any other legend not required by
applicable law from such Shares, the Warrant Shares or Conversion Shares and
(ii) cause its transfer agent to issue such Shares, Warrant Shares and/or
Conversion Shares without such legends to the holders thereof by electronic
delivery at the applicable balance account at the Depository Trust Company
(“DTC”) upon surrender of any stock certificates evidencing such Shares, Warrant
Shares or Conversion Shares. With respect to any Shares, Warrant Shares and
Conversion Shares for which restrictive legends are removed pursuant to this
Section 3.8(b), the holder thereof agrees to only sell such Shares, Warrant
Shares and Conversion Shares when and as permitted by the effective Registration
Statement covering such resale and in accordance with applicable securities laws
and regulations. Any fees (with respect to the Company’s transfer agent, counsel
or otherwise) associated with the removal of such legend(s) shall be borne by
the Company.

(c) The Purchaser may request that the Company remove, and the Company agrees to
authorize the removal of any legend from the Shares, the Warrant Shares and the
Conversion Shares (i) following any sale of the Shares, Warrant Shares or
Conversion Shares pursuant to Rule 144, or (ii) if such Shares, Warrant Shares
or Conversion Shares are eligible for sale under Rule 144 following the
expiration of the one-year holding requirement under subparagraphs (b)(1)(i) and
(d) thereof. Following the time a legend is no longer required for the Shares,
Warrant Shares or Conversion Shares under this Section 3.8(c), the Company will,
no later than three Business Days following the delivery by a Purchaser to the
Company or the Company’s transfer agent of a legended certificate representing
such securities, (A) deliver or cause to be delivered to such Purchaser a
certificate representing such securities that is free from all restrictive and
other legends or (B) at the request of the Purchaser, cause its transfer agent
to

 

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issue such Shares, Warrant Shares and/or Conversion Shares without such legends
to the holders thereof by electronic delivery at the applicable balance account
at the DTC. The failure to timely deliver certificates without restrictive
legends by the Legend Removal Date shall not be a breach of the foregoing
covenant if such delay is solely due to the action or inaction of the Company’s
transfer agent and if the Company has taken all reasonable steps necessary to
facilitate the removal of such legends. Certificates for the Shares, Warrant
Shares or Conversion Shares subject to legend removal hereunder may be
transmitted by the Company’s transfer agent to a Purchaser by crediting the
account of the Purchaser’s prime broker with DTC as directed by such Purchaser.

(d) If the Company shall fail for any reason or for no reason to issue to a
Purchaser unlegended certificates within three Business Days after receipt of
all documents necessary for the removal of the legend set forth above (the
“Deadline Date”), then, in addition to all other remedies available to such
Purchaser, if on or after the Business Day immediately following such three
Business Day period, such Purchaser purchases (in an open market transaction or
otherwise) shares of Common Stock to deliver in satisfaction of a sale by the
holder of shares of Common Stock that such Purchaser anticipated receiving from
the Company without any restrictive legend (a “Buy-In”), then the Company shall,
within two Business Days after such Purchaser’s request and in such Purchaser’s
sole discretion, either (i) pay cash to the Purchaser in an amount equal to such
Purchaser’s total purchase price (including brokerage commissions, if any) for
the shares of Common Stock so purchased (the “Buy-In Price”), at which point the
Company’s obligation to deliver such certificate (and to issue such shares of
Common Stock) shall terminate, or (ii) promptly honor its obligation to deliver
to such Purchaser a certificate or certificates representing such shares of
Common Stock and pay cash to the Purchaser in an amount equal to the excess (if
any) of the Buy-In Price over the product of (a) such number of shares of Common
Stock, times (b) the closing bid price of the Common Stock as reported on Nasdaq
on the Deadline Date.

3.9 Authorization; Enforcement. The Purchaser has the requisite power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The Purchaser has taken all necessary action to authorize
the execution, delivery and performance of this Agreement. Upon the execution
and delivery of this Agreement, this Agreement shall constitute a valid and
binding obligation of the Purchaser enforceable in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors’ and contracting
parties’ rights generally and except as enforceability may be subject to general
principles of equity and except as rights to indemnity and contribution may be
limited by state or federal securities laws or public policy underlying such
laws.

3.10 Residency. The Purchaser is a resident of the jurisdiction set forth
immediately below such Purchaser’s name on the signature pages hereto.

3.11 No Short Sales. Between the time the Purchaser learned about the Placement
and the public announcement of the Placement, the Purchaser has not engaged in
any short sales or

 

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similar transactions with respect to the Common Stock or any derivative thereof,
nor has the Purchaser, directly or indirectly, caused any Person to engage in
any short sales or similar transactions with respect to the Common Stock or any
derivative thereof, including, without limitation, and in each case, in any
transaction aimed, directly or indirectly, at affecting the price of the Common
Stock listed on Nasdaq for purposes of the transactions contemplated by this
Agreement.

3.12 Acknowledgements Regarding Placement Agents. The Purchaser acknowledges
that the Placement Agents are acting as the exclusive placement agents on a
“best efforts” basis for the Securities being offered hereby and will be
compensated by the Company for acting in such capacity. The Purchaser represents
that (i) if applicable, the Purchaser was contacted regarding the sale of the
Securities by the Placement Agent (or an authorized agent or representative
thereof) with which the Purchaser entered into a confidentiality agreement and
(ii) no Securities were offered or sold to it by means of any form of general
solicitation or general advertising.

3.13 Purchaser Status. At the time such Purchaser was offered the Shares and
Warrants, it was, and at the date hereof it is, an “accredited investor” as
defined in Rule 501(a) of the Securities Act.

ARTICLE 4

COVENANTS

4.1 Reporting Status. The Common Stock is registered under Section 12 of the
Exchange Act. During the Registration Period, the Company will timely file all
documents with the SEC, and the Company will not terminate its status as an
issuer required to file reports under the Exchange Act even if the Exchange Act
or the rules and regulations thereunder would permit such termination.

4.2 Expenses. The Company and each Purchaser is liable for, and will pay, its
own expenses incurred in connection with the negotiation, preparation, execution
and delivery of this Agreement, including, without limitation, attorneys’ and
consultants’ fees and expenses.

4.3 Financial Information. The financial statements of the Company to be
included in any documents filed with the SEC will be prepared in accordance with
GAAP, consistently applied (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, may be
condensed or summary statements or may conform to the SEC’s rules and
instructions for Reports on Form 10-Q), and will fairly present in all material
respects the consolidated financial position of the Company and consolidated
results of its operations and cash flows as of, and for the periods covered by,
such financial statements (subject, in the case of unaudited statements, to
normal and recurring year-end audit adjustments).

 

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4.4 Securities Laws Disclosure; Publicity. On or before 9:30 a.m., New York
local time, on the Business Day immediately following the date hereof, the
Company shall issue a press release announcing the signing of this Agreement and
describing the terms of the transactions contemplated by this Agreement. On or
before the fourth Business Day following the date hereof, the Company shall file
a Current Report on Form 8-K with the SEC describing the terms of the
transactions contemplated by this Agreement and including as an exhibit to such
Current Report on Form 8-K this Agreement, the Certificate of Designation and
the form of Warrant in the form required by the Exchange Act. The Company shall
not otherwise publicly disclose the name of any Purchaser, or include the name
of any Purchaser in any press release or filing with the SEC (other than in a
Registration Statement and any exhibits to filings made in respect of this
transaction in accordance with periodic report or current report filing
requirements under the Exchange Act) or any regulatory agency, without the prior
written consent of such Purchaser, except to the extent such disclosure is
required by law or regulations, in which case the Company shall provide the
Purchasers with prior notice of such disclosure.

4.5 Variable Rate Transactions. Prior to the date that is six months following
the Closing Date, the Company shall be prohibited from effecting or entering
into an agreement to effect any Variable Rate Transaction. “Variable Rate
Transaction” means a transaction in which the Company (i) issues or sells any
debt or equity securities that are convertible into, exchangeable or exercisable
for, or include the right to receive, shares of Common Stock either (A) at a
conversion price, exercise price, exchange rate or other price that is based
upon, and/or varies with, the trading prices of or quotations for the shares of
Common Stock at any time after the initial issuance of such debt or equity
securities or (B) with a conversion, exercise or exchange price that is subject
to being reset at some future date after the initial issuance of such debt or
equity security or upon the occurrence of specified or contingent events
directly or indirectly related to the business of the Company or the market for
the Common Stock (but excluding customary antidilution provisions) or
(ii) enters into any agreement, including, but not limited to, an equity line of
credit, whereby the Company may issue securities at a future determined price.
Any Purchaser shall be entitled to obtain injunctive relief against the Company
to preclude any such issuance, which remedy shall be in addition to any right to
collect damages.

4.6 Capital Changes. Until the date that is six months after the Closing Date,
the Company shall not undertake a reverse or forward stock split or
reclassification of the Common Stock without the prior written consent of a
majority of the Holders, provided, however, that no consent of the Holders shall
be required for a reverse stock split of the Common Stock that the Board of
Directors of the Company, in the good faith exercise of its business judgment,
determines to be necessary or advisable to list the Common Stock on Nasdaq or
another trading market.

4.7 Subsequent Equity Sales. For a period equal to the earlier of (i) one
hundred eighty (180) days following the Closing Date or (ii) sixty (60) days
after the date the Initial Registration Statement is declared effective by the
SEC (the “Lock-Up Period”), the Company will not directly or indirectly,
(1) offer to sell, hypothecate, pledge, announce the intention to

 

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sell, contract to sell, or otherwise transfer or dispose of, directly or
indirectly, any shares of Common Stock, or any securities convertible into or
exercisable or exchangeable for shares of Common Stock; (2) file or cause to
become effective a registration statement under the Securities Act relating to
the offer and sale of any shares of Common Stock or securities convertible into
or exercisable or exchangeable for shares of Common Stock (except in connection
with the Placement or in connection with a registration statement on Form S-8
relating to employee benefit plans) or (3) enter into any swap or other
agreement that transfers, in whole or in part, any of the economic consequences
of ownership of the Common Stock, whether any such transaction described in
clauses (1), (2) or (3) above is to be settled by delivery of shares of Common
Stock or such other securities, in cash or otherwise, without the prior written
consent of a majority of the Holders (not to be unreasonably withheld), other
than (i) the Securities to be sold hereunder, (ii) the issuance of Common Stock,
options to acquire Common Stock or other equity awards for Common Stock pursuant
to the Company’s employee benefit plans, qualified stock option plans or other
employee compensation plans as such plans are in existence on the date hereof
and the issuance of Common Stock pursuant to the exercise, vesting or settlement
of such options or other equity awards; (iii) the issuance of Common Stock
pursuant to the exercise of the Warrants and other warrants or rights to
purchase the Common Stock outstanding or in existence on the date hereof;
(iv) the issuance of Common Stock pursuant to the conversion of the Preferred
Shares and other preferred shares of the Company that are convertible into
Common Stock outstanding or in existence on the date hereof; (v) the issuance by
the Company of any shares of Common Stock as consideration for mergers,
acquisitions, other business combinations, or strategic alliances (including
joint ventures, marketing or distribution arrangements, collaboration agreements
or intellectual property license agreements), occurring after the date of this
Agreement; provided that each recipient of shares pursuant to this clause
(v) agrees that all such shares remain subject to restrictions substantially
similar to those contained in this Section 4.7.

4.8 Sales by Purchasers. Each Purchaser will sell any Securities, Warrant Shares
and Conversion Shares held by it in compliance with applicable prospectus
delivery requirements, if any, or otherwise in compliance with the requirements
for an exemption from registration under the Securities Act and the rules and
regulations promulgated thereunder. No Purchaser will make any sale, transfer or
other disposition of the Securities in violation of federal or state securities
laws.

4.9 No Integration. The Company shall not, and shall use its commercially
reasonable efforts to ensure that no Affiliate of the Company shall, sell, offer
for sale or solicit offers to buy or otherwise negotiate in respect of any
security (as defined in Section 2 of the Securities Act) that will be integrated
with the offer or sale of the Securities in a manner that would require the
registration under the Securities Act of the sale of the Securities to the
Purchasers, or that will be integrated with the offer or sale of the Securities
for purposes of the rules and regulations of Nasdaq such that it would require
stockholder approval prior to the closing of such other transaction unless
stockholder approval is obtained before the closing of such subsequent
transaction.

 

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4.10 Reservation of Common Stock upon Exercise of Warrants. The Company shall
reserve and keep available at all times during which the Warrants remain
exercisable, free of preemptive rights and liens, other than restrictions on
transfer provided for in this Agreement and the Warrants or imposed by
applicable securities laws, a sufficient number of shares of Common Stock for
the purpose of enabling the Company to issue Warrant Shares pursuant to this
Agreement and the Warrants.

4.11 Reservation of Common Stock upon Conversion of Preferred Shares. The
Company shall reserve and keep available at all times during which the Preferred
Shares remain outstanding, free of preemptive rights and liens, other than
restrictions on transfer provided for in this Agreement and the Warrants or
imposed by applicable securities laws, a sufficient number of shares of Common
Stock for the purpose of enabling the Company to issue Conversion Shares
pursuant to the Certificate of Designation.

4.12 Form D; Blue Sky Filings. The Company agrees to timely file a Form D with
respect to the Securities as required under Regulation D of the Securities Act
and to provide a copy thereof, promptly upon the written request of any
Purchaser. The Company, on or before the Closing Date, shall take such action as
the Company shall reasonably determine is necessary in order to obtain an
exemption from, or to qualify the Securities for, sale to the Purchasers at the
Closing pursuant to this Agreement under applicable securities or “Blue Sky”
laws of the states of the United States, and shall provide evidence of such
actions promptly upon the written request of any Purchaser.

4.13 Indemnification of Purchasers. Subject to the provisions of this
Section 4.13 and Section 6.6 with respect to indemnification under such Section,
the Company will indemnify and hold each Purchaser and its directors, executive
officers, shareholders, members, partners, employees and agents (and any other
Persons with a functionally equivalent role of a Person holding such titles
notwithstanding a lack of such title or any other title), each Person who
controls such Purchaser (within the meaning of Section 15 of the Securities Act
and Section 20 of the Exchange Act), and the directors, executive officers,
shareholders, agents, members, partners or employees (and any other Persons with
a functionally equivalent role of a Person holding such titles notwithstanding a
lack of such title or any other title) of such controlling persons (each, a
“Purchaser Party”) harmless from any and all losses, liabilities, obligations,
claims, contingencies, damages, costs and expenses, including all judgments,
amounts paid in settlements, court costs and reasonable attorneys’ fees and
costs of investigation that any such Purchaser Party may suffer or incur as a
result of or relating to (a) any breach of any of the representations,
warranties, covenants or agreements made by the Company in this Agreement or
(b) any action instituted against a Purchaser in any capacity, or any Purchaser
Party or their respective Affiliates, by any stockholder of the Company who is
not an Affiliate of such Purchaser Parties, with respect to any of the
transactions contemplated by this Agreement (unless such action is based upon a
breach of such Purchaser’s representations, warranties or covenants under this
Agreement or any agreements or understandings such Purchaser Parties may have
with any such stockholder or any violations by such Purchaser Parties of state
or federal securities laws or any conduct by such Purchaser Parties which
constitutes fraud, gross

 

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negligence, willful misconduct or malfeasance). Promptly after receipt by any
Person (the “Section 4.13 Indemnified Person”) of notice of any demand, claim or
circumstances which would or might give rise to a claim or the commencement of
any action, proceeding or investigation in respect of which indemnity may be
sought pursuant to this Section 4.13, such Section 4.13 Indemnified Person shall
promptly notify the Company in writing and the Company shall assume the defense
thereof, including the employment of counsel reasonably satisfactory to such
Section 4.13 Indemnified Person, and shall assume the payment of all reasonable
fees and expenses; provided, however, that the failure of any Section 4.13
Indemnified Person so to notify the Company shall not relieve the Company of its
obligations hereunder except to the extent that the Company is actually and
materially prejudiced by such failure to notify. In any such proceeding, any
Section 4.13 Indemnified Person shall have the right to retain its own counsel,
but the fees and expenses of such counsel shall be at the expense of such
Section 4.13 Indemnified Person unless: (i) the Company and the Section 4.13
Indemnified Person shall have mutually agreed to the retention of such counsel;
(ii) the Company shall have failed promptly to assume the defense of such
proceeding and to employ counsel reasonably satisfactory to such Section 4.13
Indemnified Person in such proceeding; or (iii) in the reasonable judgment of
counsel to such Section 4.13 Indemnified Person, representation of both parties
by the same counsel would be inappropriate due to actual or potential differing
interests between them. The Company shall not be liable for any settlement of
any proceeding effected without its written consent, which consent shall not be
unreasonably withheld, delayed or conditioned. Without the prior written consent
of the Section 4.13 Indemnified Person, which consent shall not be unreasonably
withheld, delayed or conditioned, the Company shall not effect any settlement of
any pending or threatened proceeding in respect of which any Section 4.13
Indemnified Person is or could have been a party and indemnity could have been
sought hereunder by such Section 4.13 Indemnified Party, unless such settlement
includes an unconditional release of such Section 4.13 Indemnified Person from
all liability arising out of such proceeding.

4.14 Series B Preferred Stock Beneficial Ownership Limitation. Notwithstanding
anything to the contrary set forth in the Certificate of Designation, the
Company shall not effect any conversion of the Series B Preferred Stock, and the
Purchaser shall not have the right to convert any portion of its Series B
Preferred Stock, to the extent that, after giving effect to an attempted
conversion set forth on an applicable Notice of Conversion (as defined in the
Certificate of Designation) with respect to the Series B Preferred Stock, such
Purchaser (together with such Purchaser’s Affiliates, and any other Person whose
beneficial ownership of Common Stock would be aggregated with the Purchaser’s
for purposes of Section 13(d) of the Exchange Act and the applicable rules and
regulations of the Commission, including any “group” of which the Purchaser is a
member) would beneficially own a number of shares of Common Stock in excess of
the Beneficial Ownership Limitation (as defined below). For purposes of the
foregoing sentence, the aggregate number of shares of Common Stock beneficially
owned by such Purchaser and its Affiliates shall include the number of shares of
Common Stock issuable upon conversion of the Series B Preferred Stock subject to
the Notice of Conversion with respect to which the determination of such
sentence is being made, but shall exclude the number of shares of Common Stock
which are issuable upon (i) conversion of the remaining, unconverted shares of
Series B Preferred Stock beneficially owned by such Holder or any of its
Affiliates, and (ii)

 

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exercise or conversion of the unexercised or unconverted portion of any other
securities of the Company beneficially owned by such Purchaser or any of its
Affiliates (including, without limitation, any convertible notes, convertible
stock or warrants) that are subject to a limitation on conversion or exercise
analogous to the limitation contained herein. Except as set forth in the
preceding sentence, for purposes of this Section 4.14, beneficial ownership
shall be calculated in accordance with Section 13(d) of the Exchange Act and the
applicable rules and regulations of the Commission. In addition, for purposes
hereof, “group” has the meaning set forth in Section 13(d) of the Exchange Act
and the applicable rules and regulations of the Commission. For purposes of this
Section 4.14, in determining the number of outstanding shares of Common Stock, a
Purchaser may rely on the number of outstanding shares of Common Stock as
reflected in (i) the Company’s most recent Form 10-K, Form 10-Q, Current Report
on Form 8-K or other public filing with the Commission, as the case may be,
(ii) a more recent public announcement by the Company or (iii) a more recent
notice by the Company or the Company’s transfer agent to a Purchaser setting
forth the number of shares of Common Stock then outstanding. For any reason at
any time, upon the written or oral request of a Purchaser (which may be by
email), the Corporation shall, within two (2) Business Days of such request,
confirm orally and in writing to such Purchaser (which may be by email) the
number of shares of Common Stock then outstanding. In any case, the number of
outstanding shares of Common Stock shall be determined after giving effect to
any actual conversion or exercise of securities of the Company, including shares
of Series B Preferred Stock, by such Purchaser or its Affiliates since the date
as of which such number of outstanding shares of Common Stock was last publicly
reported or confirmed to the Holder. The “Beneficial Ownership Limitation” shall
be 9.98% of the number of shares of the Common Stock outstanding immediately
after giving effect to the issuance of shares of Common Stock pursuant to such
Notice of Conversion (to the extent permitted pursuant to this Section 4.14).
The Company shall be entitled to rely on representations made to it by the
Purchaser in any Notice of Conversion regarding its Beneficial Ownership
Limitation. By written notice to the Company, a Purchaser may from time to time
increase or decrease the Beneficial Ownership Limitation to any other percentage
not in excess of 19.9% specified in such notice; provided that (i) any such
increase will not be effective until the sixty-fifth (65th) day after such
notice is delivered to the Company. The provisions of this Section 4.14 shall be
construed, corrected and implemented in a manner so as to effectuate the
intended Beneficial Ownership Limitation herein contained and the shares of
Common Stock underlying the Series B Preferred Stock in excess of the Beneficial
Ownership Limitation shall not be deemed to be beneficially owned by the
Purchaser for any purpose including for purposes of Section 13(d) or Rule
16a-1(a)(1) of the Exchange Act.

ARTICLE 5

CONDITIONS TO CLOSING

5.1 Conditions to Obligations of the Company. The Company’s obligation to
complete the purchase and sale of the Securities and deliver such Shares and
Warrants to each Purchaser is subject to the waiver by the Company or
fulfillment as of the Closing Date of the following conditions:

(a) Receipt of Funds. The Company shall have received immediately available
funds in the full amount of the aggregate Purchase Price for the Securities
being purchased hereunder as set forth opposite such Purchaser’s name on Exhibit
A hereto.

 

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(b) Representations and Warranties. The representations and warranties made by
each Purchaser in Article 3 shall be true and correct in all material respects
as of the Closing Date.

(c) Covenants. All covenants, agreements and conditions contained in this
Agreement to be performed by the Purchasers on or prior to the Closing Date
shall have been performed or complied with in all material respects.

(d) Blue Sky. The Company shall have obtained all necessary blue sky law permits
and qualifications, or secured exemptions therefrom, required by any state or
foreign or other jurisdiction for the offer and sale of the Securities.

(e) Nasdaq Qualification. The Common Shares, Warrant Shares and Conversion
Shares to be issued shall be duly authorized for listing by Nasdaq, subject to
official notice of issuance, to the extent required by the rules of Nasdaq.

(f) Absence of Litigation. No proceeding challenging this Agreement or the
transactions contemplated hereby, or seeking to prohibit, alter, prevent or
materially delay the Closing, shall have been instituted or be pending before
any court, arbitrator, governmental body, agency or official.

(g) No Governmental Prohibition. The sale of the Securities by the Company shall
not be prohibited by any law or governmental order or regulation.

(h) Consents. The Company shall have obtained in a timely fashion any and all
consents, permits, approvals, registrations and waivers necessary for
consummation of the purchase and sale of the Securities, all of which shall be
and remain so long as necessary in full force and effect.

5.2 Conditions to Purchasers’ Obligations at the Closing. Each Purchaser’s
obligation to complete the purchase and sale of the Securities is subject to the
waiver by such Purchaser or fulfillment as of the Closing Date of the following
conditions:

(a) Representations and Warranties. The representations and warranties made by
the Company in Article 2 shall be true and correct in all material respects as
of the date when made and as of the Closing Date (except for those
representations and warranties which are qualified as to materiality, in which
case such representations and warranties shall be true in correct in all
respects).

 

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(b) Covenants. All covenants, agreements and conditions contained in this
Agreement to be performed by the Company on or prior to the Closing Date shall
have been performed or complied with in all material respects.

(c) Blue Sky. The Company shall have obtained all necessary blue sky law permits
and qualifications, or secured exemptions therefrom, required by any state or
foreign or other jurisdiction for the offer and sale of the Securities.

(d) Legal Opinion. The Company shall have delivered to such Purchaser an
opinion, dated as of the Closing Date, from Wilmer Cutler Pickering Hale and
Dorr LLP, counsel to the Company, in such form as is customary in connection
with transactions of the type contemplated by this Agreement.

(e) Transfer Agent Instructions. The Company shall have delivered to its
transfer agent irrevocable instructions to issue to such Purchaser or in such
nominee name(s) as designated by such Purchaser in writing such number of Common
Shares set forth opposite such Purchaser’s name on Exhibit A hereto or, if
requested by the Purchaser, one or more certificates representing such Common
Shares; provided, however, that if such Purchaser has indicated to the Company
at the time of execution of this Agreement a need to settle “delivery versus
payment”, the Company shall deliver to such Purchaser or such Purchaser’s
designated custodian such original stock certificates and Warrants to be
acquired by such Purchaser promptly after the Closing Date.

(f) Nasdaq Qualification. The Common Shares, Warrant Shares and Conversion
Shares to be issued shall be duly authorized for listing by Nasdaq, subject to
official notice of issuance, to the extent required by the rules of Nasdaq.

(g) Absence of Litigation. No proceeding challenging this Agreement or the
transactions contemplated hereby, or seeking to prohibit, alter, prevent or
materially delay the Closing, shall have been instituted or be pending before
any court, arbitrator, governmental body, agency or official.

(h) No Governmental Prohibition. The sale of the Securities by the Company shall
not be prohibited by any law or governmental order or regulation.

(i) Minimum Aggregate Investment. The Company shall have received at the Closing
at least $18.5 million of aggregate gross proceeds from the sale of Securities
hereunder.

(j) Consents. The Company shall have obtained in a timely fashion any and all
consents, permits, approvals, registrations and waivers necessary for
consummation of the purchase and sale of the Securities, all of which shall be
and remain so long as necessary in full force and effect.

(k) No Suspensions of Trading in Common Stock. The Common Stock shall not have
been suspended, as of the Closing Date, by the SEC or Nasdaq from trading on
Nasdaq

 

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nor shall suspension by the SEC or Nasdaq have been threatened, as of the
Closing Date, either (i) in writing by the SEC or Nasdaq or (ii) by falling
below the minimum listing maintenance requirements of Nasdaq.

ARTICLE 6

REGISTRATION RIGHTS

6.1 (a) No later than 30 days after the Closing Date (the “Filing Date”), the
Company shall file a registration statement covering the resale of the
Registrable Securities with the SEC for an offering to be made on a continuous
basis pursuant to Rule 415, or if Rule 415 is not available for offers and sales
of the Registrable Securities, by such other means of distribution of
Registrable Securities as the Holders of a majority of the Registrable
Securities may reasonably specify (the “Initial Registration Statement”). The
Initial Registration Statement shall be on Form S-3 (except if the Company is
ineligible to register for resale the Registrable Securities on Form S-3, in
which case such registration shall be on another appropriate form).

(b) The Company shall use its best efforts to effect the registration (including
a declaration of effectiveness thereof by the SEC) and applicable qualifications
or compliances (including, without limitation, the execution of any required
undertaking to file post-effective amendments, appropriate qualifications or
exemptions under applicable blue sky or other state securities laws and
appropriate compliance with applicable securities laws, requirements or
regulations) prior to the date which is 90 days after the Closing Date (the
“Effectiveness Date”); provided, however, that in the event that Initial
Registration Statement is reviewed by the SEC, then the Effectiveness Date shall
be extended to 120 days following the Closing Date. For purposes of
clarification, any failure by the Company to file the Initial Registration
Statement by the Filing Date or to effect such Registration Statement by the
Effectiveness Date shall not otherwise relieve the Company of its obligations to
file or effect the Initial Registration Statement as set forth above in this
Section 6.1.

(c) In the event the SEC informs the Company that all of the Registrable
Securities cannot, as a result of the application of Rule 415, be registered for
resale as a secondary offering on a single registration statement, the Company
agrees to promptly (i) inform each of the Holders thereof, (ii) use its
reasonable efforts to file amendments to the Initial Registration Statement as
required by the SEC and/or (iii) withdraw the Initial Registration Statement and
file a new registration statement (a “New Registration Statement”), in either
case covering the maximum number of Registrable Securities permitted to be
registered by the SEC, on Form S-3 or, if the Company is ineligible to register
for resale the Registrable Securities on Form S-3, such other form available to
register for resale the Registrable Securities as a secondary
offering; provided, however, that prior to filing such amendment or New
Registration Statement, the Company shall be obligated to use its reasonable
efforts to advocate with the SEC for the registration of all of the Registrable
Securities on the Initial Registration Statement. In the event the Company
amends the Initial Registration Statement or files a New Registration Statement,
as the case may be, under clauses (ii) or (iii) above, the Company will use its

 

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reasonable efforts to file with the SEC, as promptly as allowed by the SEC, one
or more registration statements on Form S-3 or, if the Company is ineligible to
register for resale the Registrable Securities on Form S-3, such other form
available to register for resale those Registrable Securities that were not
registered for resale on the Initial Registration Statement, as amended, or the
New Registration Statement (the “Remainder Registration Statements”).
Notwithstanding any other provision of this Agreement and subject to the payment
of damages in Section 6.3, if the SEC limits the number of Registrable
Securities permitted to be registered on a particular Registration Statement
(and notwithstanding that the Company used reasonable efforts to advocate with
the SEC for the registration of all or a greater number of Registrable
Securities), any required cutback of Registrable Securities shall be applied
first to Registrable Securities not acquired pursuant to this Agreement, and
then to the Holders pro rata in accordance with the number of such Registrable
Securities sought to be included in such Registration Statement by reference to
the amount of Registrable Securities set forth opposite such Holder’s name on
Exhibit A (and in the case of a subsequent transfer, the initial Holder’s)
relative to the aggregate amount of all Registrable Securities.

6.2 All Registration Expenses incurred in connection with any registration,
qualification, exemption or compliance pursuant to Section 6.1 shall be borne by
the Company. All Selling Expenses relating to the sale of securities registered
by or on behalf of Holders shall be borne by such Holders pro rata on the basis
of the number of securities so registered.

6.3 The Company further agrees that, in the event that (i) the Initial
Registration Statement has not been filed with the SEC within 30 days after the
Closing Date, (ii) the Initial Registration Statement or the New Registration
Statement, as applicable, has not been declared effective by the SEC by the
Effectiveness Date, or (iii) after such Registration Statement is declared
effective by the SEC, it is suspended by the Company or ceases to remain
continuously effective as to all Registrable Securities for which it is required
to be effective, other than, in each case, within the time period(s) permitted
by Section 6.7(b) (each such event referred to in clauses (i), (ii) and (iii),
(a “Registration Default”)), for all or part of any thirty-day period (a
“Penalty Period”) during which the Registration Default remains uncured (which
initial thirty-day period shall commence on the second Business Day after the
date of such Registration Default if such Registration Default has not been
cured by such date), the Company shall pay to each Holder 1% of such Holder’s
aggregate Purchase Price of his or her Securities, that remain Registrable
Securities for which such Registration Statement is required to be effective and
for which there is not otherwise an effective Registration Statement at such
time, for each Penalty Period during which the Registration Default remains
uncured; provided, however, that if a Holder fails to provide the Company with
any information requested by the Company that is required to be provided in such
Registration Statement with respect to such Holder as set forth herein, then the
commencement of the Penalty Period described above with respect to such Holder
shall be extended until two Business Days following the date of receipt by the
Company of such required information from such Holder; and provided, further,
that in no event shall the Company be required hereunder to pay to any Holder
pursuant to this Agreement more than 1% of such Holder’s aggregate Purchase
Price of all of his or her Securities for which a Registration Statement is
required to be effective in any Penalty Period and in no event shall the Company
be

 

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required hereunder to pay to any Holder pursuant to this Agreement an aggregate
amount that exceeds 8.0% of the aggregate Purchase Price paid by such Holder for
such Holder’s Securities. For purposes of clarification, and solely for purposes
of calculating the liquidated damages pursuant to this Section 6.3, each
Holder’s Purchase Price for each Share shall be deemed to be the Stock Purchase
Price and each Holder’s purchase price for each Warrant Share shall be deemed to
be $0.125. The Company shall deliver said cash payment to the Holder by the
fifth Business Day after the end of such Penalty Period. If the Company fails to
pay said cash payment to any Holder in full by the fifth Business Day after the
end of such Penalty Period, the Company will pay interest thereon at a rate of
12% per annum (or such lesser maximum amount that is permitted to be paid by
applicable law, and calculated on the basis of a year consisting of 360 days) to
such Holder, accruing daily from the date such liquidated damages are due until
such amounts, plus all such interest thereon, are paid in full. Notwithstanding
the foregoing, in the event a Registration Default occurs pursuant to clause
(iii) hereof, the 1% of liquidated damages referred to above for any Penalty
Period shall be reduced to equal the percentage determined by multiplying 1% by
a fraction, the numerator of which shall be the number of Registrable Securities
covered by the Registration Statement that is suspended by the Company or ceases
to remain continuously effective as to all Registrable Securities for which it
is required to be effective which are still Registrable Securities at such time
and for which there is not otherwise an effective Registration Statement at such
time and the denominator of which shall be the number of Registrable Securities
at such time. Notwithstanding the foregoing, nothing shall preclude any Holder
from pursuing or obtaining any available remedies at law, specific performance
or other equitable relief with respect to this Section 6.3 in accordance with
applicable law.

6.4 In the case of the registration, qualification, exemption or compliance
effected by the Company pursuant to this Agreement, the Company shall, upon
reasonable request, inform each Holder as to the status of such registration,
qualification, exemption and compliance. At its expense the Company shall:

(a) except for such times as the Company is permitted hereunder to suspend the
use of the prospectus forming part of a Registration Statement, use its
commercially reasonable efforts to keep such registration, and any
qualification, exemption or compliance under state securities laws which the
Company determines to obtain, continuously effective with respect to a Holder,
and to keep the applicable Registration Statement free of any material
misstatements or omissions, until the earlier of the following: (i) the second
anniversary of the Closing Date or (ii) the date all Shares, Warrant Shares and
Conversion Shares held by such Holder may be sold without restriction under Rule
144, including without limitation, any volume and manner of sale restrictions
which may be applicable to affiliates under Rule 144. The period of time during
which the Company is required hereunder to keep a Registration Statement
effective is referred to herein as the “Registration Period.”

 

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(b) advise the Holders within three Business Days:

(i) when a Registration Statement or any amendment thereto has been filed with
the SEC and when such Registration Statement or any post-effective amendment
thereto has become effective;

(ii) of any request by the SEC for amendments or supplements to any Registration
Statement or the prospectus included therein or for additional information;

(iii) of the issuance by the SEC of any stop order suspending the effectiveness
of any Registration Statement or the initiation of any proceedings for such
purpose;

(iv) of the receipt by the Company of any notification with respect to the
suspension of the qualification of the Registrable Securities included therein
for sale in any jurisdiction or the initiation or threatening of any proceeding
for such purpose; and

(v) subject to the provisions this Agreement, of the occurrence of any event
that requires the making of any changes in any Registration Statement or
prospectus so that, as of such date, the statements therein are not misleading
and do not omit to state a material fact required to be stated therein or
necessary to make the statements therein (in the case of a prospectus, in the
light of the circumstances under which they were made) not misleading;

(c) use its commercially reasonable efforts to obtain the withdrawal of any
order suspending the effectiveness of any Registration Statement as soon as
reasonably practicable;

(d) if a Holder so requests in writing, promptly furnish to each such Holder,
without charge, at least one copy of each Registration Statement and each
post-effective amendment thereto, including financial statements and schedules,
and, if explicitly requested, all exhibits in the form filed with the SEC;

(e) during the Registration Period, promptly deliver to each such Holder,
without charge, as many copies of each prospectus included in a Registration
Statement and any amendment or supplement thereto as such Holder may reasonably
request in writing; and the Company consents to the use, consistent with the
provisions hereof, of the prospectus or any amendment or supplement thereto by
each of the selling Holders of Registrable Securities in connection with the
offering and sale of the Registrable Securities covered by a prospectus or any
amendment or supplement thereto;

(f) during the Registration Period, if a Holder so requests in writing, deliver
to each Holder, without charge, (i) one copy of the following documents, other
than those documents available via the SEC’s EDGAR system: (A) its annual report
to its stockholders, if any (which annual report shall contain financial
statements audited in accordance with GAAP by a firm of certified public
accountants of recognized standing), (B) if not included in substance in its
annual report to stockholders, its annual report on Form 10-K (or similar form),
(C) its definitive proxy statement with respect to its annual meeting of
stockholders, (D) each of its quarterly reports to its stockholders, and, if not
included in substance in its quarterly reports to

 

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stockholders, its quarterly report on Form 10-Q (or similar form), and (E) a
copy of each full Registration Statement (the foregoing, in each case, excluding
exhibits); and (ii) if explicitly requested, all exhibits excluded by the
parenthetical to the immediately preceding clause (E);

(g) prior to any public offering of Registrable Securities pursuant to any
Registration Statement, promptly take such actions as may be necessary to
register or qualify or obtain an exemption for offer and sale under the
securities or blue sky laws of such United States jurisdictions as any such
Holders reasonably request in writing, provided that the Company shall not for
any such purpose be required to qualify generally to transact business as a
foreign corporation in any jurisdiction where it is not so qualified or to
consent to general service of process in any such jurisdiction, and do any and
all other acts or things reasonably necessary or advisable to enable the offer
and sale in such jurisdictions of the Registrable Securities covered by any such
Registration Statement;

(h) upon the occurrence of any event contemplated by Section 6.4(b)(v) above,
except for such times as the Company is permitted hereunder to suspend, and has
suspended, the use of a prospectus forming part of a Registration Statement, the
Company shall use its commercially reasonable efforts to as soon as reasonably
practicable prepare a post-effective amendment to such Registration Statement or
a supplement to the related prospectus, or file any other required document so
that, as thereafter delivered to purchasers of the Registrable Securities
included therein, such prospectus will not include any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading;

(i) otherwise use its commercially reasonable efforts to comply in all material
respects with all applicable rules and regulations of the SEC which could affect
the sale of the Registrable Securities;

(j) use its commercially reasonable efforts to cause all Registrable Securities
to be listed on each securities exchange or market, if any, on which equity
securities issued by the Company have been listed;

(k) use its commercially reasonable efforts to take all other steps necessary to
effect the registration of the Registrable Securities contemplated hereby and to
enable the Holders to sell Registrable Securities under Rule 144;

(l) provide to each Holder and its representatives, if requested, the
opportunity (under cover of a confidentiality agreement, if requested by the
Company) to conduct a reasonable inquiry of the Company’s financial and other
records during normal business hours and make available its officers, directors
and employees for questions regarding information which such Holder may
reasonably request in order to fulfill any required due diligence obligation on
its part;

(m) permit a single counsel for the Holders to review any Registration Statement
and all amendments and supplements thereto, within two Business Days prior to
the

 

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filing thereof with the SEC; provided that, in the case of clauses (l) and
(m) above, the Company shall not be required (A) to delay the filing of any
Registration Statement or any amendment or supplement thereto as a result of any
ongoing diligence inquiry by or on behalf of a Holder or to incorporate any
comments to any Registration Statement or any amendment or supplement thereto by
or on behalf of a Holder if such inquiry or comments would require a delay in
the filing of such Registration Statement, amendment or supplement, as the case
may be, or (B) to provide, and shall not provide, any Holder or its
representatives with material, non-public information unless such Holder agrees
to receive such information and enters into a written confidentiality agreement
with the Company in a form reasonably acceptable to the Company; and.

(n) if requested by a Holder, cooperate with such Holder to facilitate the
timely preparation and delivery of certificates representing Registrable
Securities to be delivered to a transferee pursuant to the Registration
Statement, which certificates shall be free, to the extent permitted by this
Agreement and under law, of all restrictive legends, and to enable such
Registrable Securities to be in such denominations and registered in such names
as any such Holders may reasonably request.

6.5 The Holders shall have no right to take any action to restrain, enjoin or
otherwise delay any registration pursuant to Section 6.1 hereof as a result of
any controversy that may arise with respect to the interpretation or
implementation of this Agreement.

6.6 (a) To the extent permitted by law, the Company shall indemnify each Holder
and each Person controlling such Holder within the meaning of Section 15 of the
Securities Act, with respect to which any registration that has been effected
pursuant to this Agreement, against all claims, losses, damages and liabilities
(or action in respect thereof), including any of the foregoing incurred in
settlement of any litigation, commenced or threatened (subject to Section 6.6(c)
below), arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any Registration Statement,
prospectus, any amendment or supplement thereof, or other document prepared by
the Company and incident to any such registration, qualification or compliance
or based on any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, in light of the circumstances in which they were made, or any
violation by the Company of any rule or regulation promulgated by the Securities
Act applicable to the Company and relating to any action or inaction required of
the Company in connection with any such registration, qualification or
compliance, and will reimburse each Holder and each Person controlling such
Holder, for reasonable legal and other out-of-pocket expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action as incurred; provided that the Company will not be
liable in any such case to the extent that any untrue statement or omission or
allegation thereof is made in reliance upon and in conformity with written
information furnished to the Company by or on behalf of such Holder for use in
preparation of any Registration Statement, prospectus, amendment or supplement;
provided however, that the Company will not be liable in any such case where the
claim, loss, damage or liability arises out of or is related to the failure of
such Holder to comply with the

 

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covenants and agreements contained in this Agreement respecting sales of
Registrable Securities, and except that the foregoing indemnity agreement is
subject to the condition that, insofar as it relates to any such untrue
statement or alleged untrue statement or omission or alleged omission made in
any preliminary prospectus but eliminated or remedied in the amended prospectus
on file with the SEC at the time any Registration Statement becomes effective or
in an amended prospectus filed with the SEC pursuant to Rule 424(b) which meets
the requirements of Section 10(a) of the Securities Act (each, a “Final
Prospectus”), such indemnity shall not inure to the benefit of any such Holder
or any such controlling Person, if a copy of a Final Prospectus furnished by the
Company to the Holder for delivery was not furnished to the Person asserting the
loss, liability, claim or damage at or prior to the time such furnishing is
required by the Securities Act and a Final Prospectus would have cured the
defect giving rise to such loss, liability, claim or damage;

(b) Each Holder will severally, and not jointly, indemnify the Company, each of
its directors and officers, and each Person who controls the Company within the
meaning of Section 15 of the Securities Act, against all claims, losses, damages
and liabilities (or actions in respect thereof), including any of the foregoing
incurred in settlement of any litigation, commenced or threatened (subject to
Section 6.6(c) below), arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any Registration
Statement, prospectus, or any amendment or supplement thereof, incident to any
such registration, or based on any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, in light of the circumstances in which they
were made, and will reimburse the Company, such directors and officers, and each
Person controlling the Company for reasonable legal and any other expenses
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability or action as incurred, in each case to the
extent, but only to the extent, that such untrue statement or omission or
allegation thereof is made in reliance upon and in conformity with written
information furnished to the Company by or on behalf of the Holder for use in
preparation of any Registration Statement, prospectus, amendment or supplement;
provided that the indemnity shall not apply to the extent that such claim, loss,
damage or liability results from the fact that a current copy of a prospectus
was not made available to the Person asserting the loss, liability, claim or
damage at or prior to the time such furnishing is required by the Securities Act
and a Final Prospectus would have cured the defect giving rise to such loss,
claim, damage or liability. Notwithstanding the foregoing, a Holder’s aggregate
liability pursuant to this subsection (b) and subsection (d) shall be limited to
the net amount received by the Holder from the sale of the Registrable
Securities.

(c) Each party entitled to indemnification under this Section 6.6 (the
“Indemnified Party”) shall give notice to the party required to provide
indemnification (the “Indemnifying Party”) promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party (at its expense) to assume the defense of any such
claim or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not
unreasonably be

 

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withheld), and the Indemnified Party may participate in such defense at such
Indemnified Party’s expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Agreement, unless such failure
is materially prejudicial to the Indemnifying Party in defending such claim or
litigation. An Indemnifying Party shall not be liable for any settlement of an
action or claim effected without its written consent (which consent will not be
unreasonably withheld). No Indemnifying Party, in its defense of any such claim
or litigation, shall, except with the consent of each Indemnified Party, consent
to entry of any judgment or enter into any settlement which does not include as
an unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation.

(d) If the indemnification provided for in this Section 6.6 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 therein, then the
Indemnifying Party, in lieu of indemnifying such Indemnified Party thereunder,
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 which 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.

6.7 (a) Each Holder agrees that, upon receipt of any notice from the Company of
the happening of any event requiring the preparation of a supplement or
amendment to a prospectus relating to Registrable Securities so that, as
thereafter delivered to the Holders, such prospectus shall not contain an untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, each
Holder will forthwith discontinue disposition of Registrable Securities pursuant
to a Registration Statement and prospectus contemplated by Section 6.1 until its
receipt of copies of the supplemented or amended prospectus from the Company
and, if so directed by the Company, each Holder shall deliver to the Company all
copies, other than permanent file copies then in such Holder’s possession, of
the prospectus covering such Registrable Securities current at the time of
receipt of such notice.

(b) Each Holder shall suspend, upon request of the Company, any disposition of
Registrable Securities pursuant to any Registration Statement and prospectus
contemplated by Section 6.1 during no more than two periods of no more than 45
calendar days each during any 12-month period to the extent that the Board of
Directors of the Company determines in good faith that the sale of Registrable
Securities under any such Registration Statement would be reasonably likely to
cause a violation of the Securities Act or Exchange Act.

 

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(c) As a condition to the inclusion of its Registrable Securities, each Holder
shall furnish to the Company such information regarding such Holder and the
distribution proposed by such Holder as the Company may reasonably request in
writing, including completing a Registration Statement Questionnaire in the form
provided by the Company or in a mutually agreeable form, or as shall be required
in connection with any registration referred to in this Article 6.

(d) Each Holder hereby covenants with the Company (i) not to make any sale of
the Registrable Securities without effectively causing the prospectus delivery
requirements under the Securities Act to be satisfied, and (ii) if such
Registrable Securities are to be sold by any method or in any transaction other
than on a national securities exchange or in the over-the-counter market, in
privately negotiated transactions, or in a combination of such methods, to
notify the Company at least three Business Days prior to the date on which the
Holder first offers to sell any such Registrable Securities.

(e) Each Holder agrees not to take any action with respect to any distribution
deemed to be made pursuant to a Registration Statement which would constitute a
violation of Regulation M under the Exchange Act or any other applicable rule,
regulation or law.

(f) At the end of the Registration Period the Holders shall discontinue sales of
securities pursuant to any Registration Statement upon receipt of notice from
the Company of its intention to remove from registration the securities covered
by any such Registration Statement which remain unsold, and such Holders shall
notify the Company of the number of securities registered which remain unsold
immediately upon receipt of such notice from the Company.

6.8 With a view to making available to the Holders the benefits of certain rules
and regulations of the SEC which at any time permit the sale of the Registrable
Securities to the public without registration, so long as the Holders still own
Registrable Securities, the Company shall use its reasonable best efforts to:

(a) make and keep public information available, as those terms are understood
and defined in Rule 144 under the Securities Act, at all times;

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

(c) so long as a Holder owns any Registrable Securities, furnish to such Holder,
upon any reasonable request, a written statement by the Company as to its
compliance with Rule 144 under the Securities Act, and of the Exchange Act, a
copy of the most recent annual or quarterly report of the Company, and such
other reports and documents of the Company as such Holder may reasonably request
in availing itself of any rule or regulation of the SEC allowing a Holder to
sell any such securities without registration.

6.9 The rights to cause the Company to register Registrable Securities granted
to the Holders by the Company under Section 6.1 may be assigned by a Holder in
connection with a

 

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transfer by such Holder of all or a portion of its Registrable Securities,
provided, however, that such transfer must be made at least five days prior to
the Filing Date and that (i) such transfer may otherwise be effected in
accordance with applicable securities laws; (ii) such Holder gives prior written
notice to the Company at least five days prior to the Filing Date; and
(iii) such transferee agrees to comply with the terms and provisions of this
Agreement, and such transfer is otherwise in compliance with this Agreement.
Except as specifically permitted by this Section 6.9, the rights of a Holder
with respect to Registrable Securities as set out herein shall not be
transferable to any other Person, and any attempted transfer shall cause all
rights of such Holder therein to be forfeited.

6.10 Prior to the time that Registration Statement(s) covering the resale of all
Registrable Securities have been declared effective by the SEC, the Company
shall not file with the SEC a registration statement under the Securities Act of
any of its equity securities other than a registration statement required to be
filed pursuant to this Agreement, a registration statement on Form S-8 or, in
connection with an acquisition, a registration statement on Form S-4; provided,
however, that the foregoing restrictions in this Section 6.10 shall terminate
upon such time as all of the Registrable Securities (i) have been publicly sold
by the Holders or (ii) may be sold under Rule 144 during any 90-day period.

6.11 The rights of any Holder under any provision of this Article 6 may be
waived (either generally or in a particular instance, either retroactively or
prospectively and either for a specified period of time or indefinitely) or
amended by an instrument in writing signed by such Holder.

ARTICLE 7

DEFINITIONS

7.1 “Agreement” has the meaning set forth in the preamble.

7.2 “Affiliate” means, with respect to any Person (as defined below), any other
Person controlling, controlled by or under direct or indirect common control
with such Person (for the purposes of this definition “control,” when used with
respect to any specified Person, shall mean the power to direct the management
and policies of such Person, directly or indirectly, whether through ownership
of voting securities, by contract or otherwise; and the terms “controlling” and
“controlled” shall have meanings correlative to the foregoing).

7.3 “Beneficial Ownership Limitation” has the meaning set forth in Section 4.14.

7.4 “Business Day” means a day Monday through Friday on which banks are
generally open for business in New York City.

7.5 “Buy-In” has the meaning set forth in Section 3.8(d).

7.6 “Buy-In Price” has the meaning set forth in Section 3.8(d).

 

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7.7 “Bylaws” has the meaning set forth in Section 2.3.

7.8 “Certificate of Designation” has the meaning set forth in Section 1.1.

7.9 “Certificate of Incorporation” has the meaning set forth in Section 2.3.

7.10 “Closing” has the meaning set forth in Section 1.3.

7.11 “Closing Date” has the meaning set forth in Section 1.3.

7.12 “Common Shares” has the meaning set forth in Section 1.1.

7.13 “Common Stock” means the common stock, par value $0.01 per share, of the
Company.

7.14 “Company” means Biodel Inc., a Delaware corporation.

7.15 “Conversion Shares” has the meaning set forth in Section 2.4.

7.16 “Deadline Date” has the meaning set forth in Section 3.8(d).

7.17 “Effectiveness Date” has the meaning set forth in Section 6.1(b).

7.18 “Evaluation Date” has the meaning set forth in Section 2.7.

7.19 “Exchange Act” means the Securities Exchange Act of 1934, as amended.

7.20 “Filing Date” has the meaning set forth in Section 6.1(a).

7.21 “Final Prospectus” has the meaning set forth in Section 6.6(a).

7.22 “Financial Statements” means the financial statements of the Company
included in the SEC Documents.

7.23 “Holders” means any Person holding Registrable Securities or any Person to
whom the rights under Article 6 have been transferred in accordance with
Section 6.9 hereof.

7.24 “Indemnified Party” has the meaning set forth in Section 6.6(c).

7.25 “Indemnifying Party” has the meaning set forth in Section 6.6(c).

7.26 “Initial Registration Statement” has the meaning set forth in
Section 6.1(a).

7.27 “Intellectual Property” has the meaning set forth in Section 2.10.

7.28 “Investment Company Act” has the meaning set forth in Section 2.12.

 

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7.29 “Material Adverse Effect” means a material adverse effect on (a) the
business, operations, prospects, assets or condition (financial or otherwise) of
the Company, or (b) the ability of the Company to perform in any material
respect on a timely basis its obligations pursuant to the transactions
contemplated by this Agreement.

7.30 “Material Agreements” has the meaning set forth in Section 2.6.

7.31 “Nasdaq” means The Nasdaq Stock Market LLC.

7.32 “New Registration Statement” has the meaning set forth in Section 6.1(c).

7.33 “Penalty Period” has the meaning set forth in Section 6.3.

7.34 “Person” means any person, individual, corporation, limited liability
company, partnership, trust or other nongovernmental entity or any governmental
agency, court, authority or other body (whether foreign, federal, state, local
or otherwise).

7.35 “Placement” means the private placement of the Company’s Securities
contemplated by this Agreement.

7.36 “Placement Agents” means William Blair & Company, L.L.C. and JMP Securities
LLC.

7.37 “Preferred Shares” has the meaning set forth in Section 1.1.

7.38 “Purchasers” has the meaning set forth in the preamble to this Agreement.

7.39 “Purchase Price” has the meaning set forth in Section 1.1.

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

7.41 “Registrable Securities” means (i) the Shares, (ii) the Warrant Shares and
(iii) Conversion Shares; provided, however, that securities shall only be
treated as Registrable Securities if and only for so long as they (A) have not
been disposed of pursuant to a registration statement declared effective by the
SEC, (B) have not been sold in a transaction exempt from the registration and
prospectus delivery requirements of the Securities Act so that all transfer
restrictions and restrictive legends with respect thereto are removed upon the
consummation of such sale and (C) are held by a Holder or a permitted transferee
pursuant to Section 6.9.

7.42 “Registration Default” has the meaning set forth in Section 6.3.

7.43 “Registration Expenses” means all expenses incurred by the Company in
complying with Section 6.1 hereof, including, without limitation, all
registration, qualification and filing fees, printing expenses, escrow fees,
fees and expenses of counsel for the Company, blue sky fees and expenses and the
expense of any special audits incident to or required by any such registration
(but excluding the fees of legal counsel for any Holder).

 

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7.44 “Registration Statement” means any one or more registration statements of
the Company filed under the Securities Act that covers the resale of any of the
Registrable Securities pursuant to the provisions of this Agreement (including
without limitation the Initial Registration Statement, the New Registration
Statement and any Remainder Registration Statements) and amendments and
supplements to such Registration Statements, including post-effective
amendments.

7.45 “Registration Period” has the meaning set forth in Section 6.4(a).

7.46 “Remainder Registration Statement” has the meaning set forth in
Section 6.1(c).

7.47 “Rule 144” means Rule 144 promulgated under the Securities Act, or any
successor rule.

7.48 “Rule 415” means Rule 415 promulgated under the Securities Act, or any
successor rule.

7.49 “SEC” means the United States Securities and Exchange Commission.

7.50 “Securities” has the meaning set forth in Section 1.1.

7.51 “SEC Documents” has the meaning set forth in Section 2.6.

7.52 “Securities Act” means the Securities Act of 1933, as amended, and the
rules and regulations thereunder, or any similar successor statute.

7.53 “Selling Expenses” means all selling commissions applicable to the sale of
Registrable Securities and all fees and expenses of legal counsel for any
Holder.

7.54 “Series B Preferred Stock” means the Series B Convertible Preferred Stock,
par value $0.01 per share, of the Company.

7.55 “Shares” has the meaning set forth in Section 1.1.

7.56 “Stock Purchase Price” has the meaning set forth in Section 1.1.

7.57 “Subsidiary” of any Person shall mean any corporation, partnership, limited
liability company, joint venture or other legal entity of which such Person
(either above or through or together with any other subsidiary) owns, directly
or indirectly, more than 50% of the stock or other equity interests the holders
of which are generally entitled to vote for the election of the board of
directors or other governing body of such corporation or other legal entity.

7.58 “Third Party Rights” has the meaning set forth in Section 2.4.

 

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7.59 “Trading Day” means any day on which the Common Stock is traded on Nasdaq,
or, if Nasdaq is not the principal trading market for the Common Stock, then on
the principal securities exchange or securities market on which the Common Stock
is then traded; provided that “Trading Day” shall not include any day on which
the Common Stock is scheduled to trade on such exchange or market for less than
4.5 hours or any day that the Common Stock is suspended from trading during the
final hour of trading on such exchange or market (or if such exchange or market
does not designate in advance the closing time of trading on such exchange or
market, then during the hour ending at 4:00:00 p.m., New York time).

7.60 “Warrants” has the meaning set forth in Section 1.1.

7.61 “Warrant Shares” has the meaning set forth in Section 2.4.

ARTICLE 8

GOVERNING LAW; MISCELLANEOUS

8.1 Governing Law; Jurisdiction. This Agreement will be governed by and
interpreted in accordance with the laws of the State of New York. Each party
hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in The City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law.

8.2 Counterparts; Signatures by Facsimile. This Agreement may be executed in two
or more counterparts, all of which are considered one and the same agreement and
will become effective when counterparts have been signed by each party and
delivered to the other parties. This Agreement, once executed by a party, may be
delivered to the other parties hereto by facsimile or e-mail transmission of a
copy of this Agreement bearing the signature of the party so delivering this
Agreement.

8.3 Headings. The headings of this Agreement are for convenience of reference
only, are not part of this Agreement and do not affect its interpretation.

8.4 Severability. If any provision of this Agreement is invalid or unenforceable
under any applicable statute or rule of law, then such provision will be deemed
modified in order to conform with such statute or rule of law. Any provision
hereof that may prove invalid or unenforceable under any law will not affect the
validity or enforceability of any other provision hereof.

 

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8.5 Entire Agreement; Amendments. This Agreement (including all schedules and
exhibits hereto) constitutes the entire agreement among the parties hereto with
respect to the subject matter hereof and thereof. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein or therein. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof. No provision of this Agreement may be waived or amended other than by an
instrument in writing signed by the party to be charged with enforcement and any
amendment to Section 4.14 shall not be effective until the sixty-fifth
(65th) day after such amendment. Any amendment or waiver by a party effected in
accordance with this Section 8.5 shall be binding upon such party, including
with respect to any Securities purchased under this Agreement at the time
outstanding and held by such party (including securities into which such
Securities are convertible and for which such Securities are exercisable) and
each future holder of all such securities.

8.6 Notices. All notices required or permitted hereunder shall be in writing and
shall be deemed effectively given: (a) upon personal delivery to the party to be
notified, (b) when sent by confirmed email or facsimile transmission if sent
during normal business hours of the recipient, if not, then on the next Business
Day, (c) five days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (d) one Business Day after deposit
with a nationally recognized overnight courier, specifying next day delivery,
with written verification of receipt. The addresses for such communications are:

 

If to the Company:   

Biodel Inc.

100 Saw Mill Road

Danbury, Connecticut 06810

Facsimile: (203) 796-5001

Attention: General Counsel

With a copy (which shall not constitute notice) to:   

Wilmer Cutler Pickering Hale and Dorr LLP

399 Park Avenue

New York, NY 10022

Facsimile: (212) 230-8800

Attention: Stuart R. Nayman

If to a Purchaser:    To the address set forth immediately below such
Purchaser’s name on the signature pages hereto.

Each party will provide ten days’ advance written notice to the other parties of
any change in its address.

 

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8.7 Successors and Assigns. This Agreement is binding upon and inures to the
benefit of the parties and their successors and assigns. The Company will not
assign this Agreement or any rights or obligations hereunder without the prior
written consent of the Purchasers who purchased a majority of the Securities
sold pursuant to this Agreement; provided, however, that no such consent shall
be required in connection with any acquisition of the Company or a majority of
the outstanding shares of Common Stock or a sale of all or substantially all of
the assets of the Company, in each case in a single or series of related
transactions, or in the case of any other assignment by operation of law. No
Purchaser or Holder may assign this Agreement or any rights or obligations
hereunder without the prior written consent of the Company, except as permitted
in accordance with Section 6.9 hereof.

8.8 Third Party Beneficiaries. This Agreement is intended for the benefit of the
parties hereto, their respective permitted successors and assigns and is not for
the benefit of, nor may any provision hereof be enforced by, any other Person.

8.9 Further Assurances. Each party will do and perform, or cause to be done and
performed, all such further acts and things, and will execute and deliver all
other agreements, certificates, instruments and documents, as another party may
reasonably request in order to carry out the intent and accomplish the purposes
of this Agreement and the consummation of the transactions contemplated hereby.

8.10 No Strict Construction. The language used in this Agreement is deemed to be
the language chosen by the parties to express their mutual intent, and no rules
of strict construction will be applied against any party.

8.11 Equitable Relief. The Company recognizes that, if it fails to perform or
discharge any of its obligations under this Agreement, any remedy at law may
prove to be inadequate relief to the Purchasers and Holders. The Company
therefore agrees that the Purchasers and Holders are entitled to seek temporary
and permanent injunctive relief in any such case. Each Purchaser and each Holder
also recognizes that, if it fails to perform or discharge any of its obligations
under this Agreement, any remedy at law may prove to be inadequate relief to the
Company. Each Purchaser and each Holder therefore agrees that the Company is
entitled to seek temporary and permanent injunctive relief in any such case.

8.12 Survival of Representations and Warranties. Notwithstanding any
investigation made by any party to this Agreement, all representations and
warranties made by the Company and the Purchasers herein shall survive for a
period of one year following the date hereof.

8.13 Independent Nature of Purchasers’ Obligations and Rights. The obligations
of each Purchaser under this Agreement are several and not joint with the
obligations of any other Purchaser, and no Purchaser shall be responsible in any
way for the performance of the obligations of any other Purchaser under this
Agreement. Nothing contained herein and no action taken by any Purchaser
pursuant thereto, shall be deemed to constitute the Purchasers as a partnership,
an association, a joint venture or any other kind of entity, or create a
presumption

 

42

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that the Purchasers are in any way acting in concert or as a group, or are
deemed affiliates with respect to such obligations or the transactions
contemplated by this Agreement. Each Purchaser shall be entitled to
independently protect and enforce its rights, including without limitation the
rights arising out of this Agreement, and it shall not be necessary for any
other Purchaser to be joined as an additional party in any proceeding for such
purpose.

8.14 Waiver of Conflicts. Each Purchaser acknowledges that Wilmer Cutler
Pickering Hale and Dorr LLP, outside general counsel to the Company, has in the
past performed and is or may now or in the future represent one or more
Purchasers or their affiliates in matters unrelated to the transactions
contemplated by the Placement, including representation of such Purchasers or
their affiliates in matters of a similar nature to the Placement. The applicable
rules of professional conduct require that Wilmer Cutler Pickering Hale and Dorr
LLP inform the Purchasers hereunder of this representation and obtain their
consent. Wilmer Cutler Pickering Hale and Dorr LLP has served as outside general
counsel to the Company and has negotiated the terms of the Placement solely on
behalf of the Company. Each Purchaser hereby (a) acknowledges that they have had
an opportunity to ask for and have obtained information relevant to such
representation, including disclosure of the reasonably foreseeable adverse
consequences of such representation; (b) acknowledges that with respect to the
Placement, Wilmer Cutler Pickering Hale and Dorr LLP has represented solely the
Company, and not any Purchaser or any stockholder, director or employee of the
Company or any Purchaser; and (c) gives its informed consent to Wilmer Cutler
Pickering Hale and Dorr LLP’s representation of the Company in the Placement.

8.15 Adjustments in Share Numbers and Prices. In the event of any stock split,
subdivision, dividend or distribution payable in shares of Common Stock (or
other securities or rights convertible into, or entitling the holder thereof to
receive directly or indirectly shares of Common Stock), combination or other
similar recapitalization or event occurring after the date hereof and prior to
the Closing, each reference in this Agreement to a number of shares or a price
per share shall be deemed to be amended to appropriately account for such event.

[Signature Page Follows]

 

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

 

BIODEL INC. By:  

 

  Name:   Title:

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

44

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NAME OF PURCHASER:  

 

By:  

 

  Name:   Title:

Aggregate Purchase Price: $  

 

Number of Common Shares to be Acquired:  

 

Number of Preferred Shares to be Acquired:  

 

Underlying Shares Subject to Warrant:  

 

(    % of the number of Shares to be acquired)

Tax ID No.:  

 

Address for Notice:

 

 

 

Telephone No.:  

 

Facsimile No.:  

 

E-mail Address:  

 

Attention:  

 

 

Delivery Instructions: (if different than above)

c/o  

 

Street:  

 

City/State/Zip:  

 

Attention:  

 

Telephone No.:  

 

 

45

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EXHIBIT A

SCHEDULE OF PURCHASERS

 

Purchaser

   Common
Shares    Series B
Preferred
Shares    Warrant
Shares    Aggregate
Purchase Price                                                                  
                                                                                

 

  

 

  

 

  

 

Total:

              

 

  

 

  

 

  

 

 

A-1

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EXHIBIT B

FORM OF WARRANT

 

B-1

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EXHIBIT C

FORM OF CERTIFICATE OF DESIGNATION

 

C-1