EXHIBIT 10.1
EXECUTION COPY
SECURITIES PURCHASE AGREEMENT
     This SECURITIES PURCHASE AGREEMENT (this “Agreement”), dated as of June 18,
2010, is by and among Aradigm Corporation, a California corporation with offices
located at 3929 Point Eden Way, Hayward, CA 94545 (the “Company”), and the
investors listed on the Schedule of Buyers attached hereto (individually, a
“Buyer” and collectively, the “Buyers”).
RECITALS
     A. The Company and each Buyer is executing and delivering this Agreement in
reliance upon the exemption from securities registration afforded by
Section 4(2) of the Securities Act of 1933, as amended (the “1933 Act”), and
Rule 506 of Regulation D (“Regulation D”) as promulgated by the United States
Securities and Exchange Commission (the “SEC”) under the 1933 Act.
     B. Each Buyer wishes to purchase, and the Company wishes to sell, upon the
terms and conditions stated in this Agreement, (i) the aggregate number of
shares of common stock, no par value, of the Company (the “Common Stock”) as set
forth opposite such Buyer’s name in column (3) on the Schedule of Buyers (which
aggregate amount for all Buyers shall be 34,702,512 shares of Common Stock and
shall collectively be referred to herein as the “Common Shares”) and (ii) a
warrant to initially acquire up to that number of additional shares of Common
Stock set forth opposite such Buyer’s name in column (4) on the Schedule of
Buyers, in the form attached hereto as Exhibit A (the “Warrants”) (as exercised,
collectively, the “Warrant Shares”).
     C. At the Closing, the parties hereto shall execute and deliver a
Registration Rights Agreement, in the form attached hereto as Exhibit B (the
“Registration Rights Agreement”), pursuant to which the Company has agreed to
provide certain registration rights with respect to the Registrable Securities
(as defined in the Registration Rights Agreement), under the 1933 Act and the
rules and regulations promulgated thereunder, and applicable state securities
laws.
     D. The Common Shares, the Warrants and the Warrant Shares are collectively
referred to herein as the “Securities.”
AGREEMENT
     NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and each Buyer hereby
agree as follows:
1. PURCHASE AND SALE OF COMMON SHARES AND WARRANTS.
     (a) Common Shares and Warrants. Subject to the satisfaction (or waiver) of
the conditions set forth in Sections 6 and 7 below, the Company shall issue and
sell to each Buyer, and each Buyer severally, but not jointly, shall purchase
from the Company on the Closing Date (as defined below), such aggregate number
of Common Shares as is set forth opposite such Buyer’s name in column (3) on the
Schedule of Buyers along with Warrants to initially acquire up to that aggregate
number of Warrant Shares as is set forth opposite such Buyer’s name in

 

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column (4) on the Schedule of Buyers.
     (b) Closing. The closing (the “Closing”) of the purchase of the Common
Shares and the Warrants by the Buyers shall occur at the offices of Morrison &
Foerster LLP, 425 Market Street, San Francisco, CA 94105. The date and time of
the Closing (the “Closing Date”) shall be 10:00 a.m., New York time, on the
first (1st) Business Day on which the conditions to the Closing set forth in
Sections 6 and 7 below are satisfied or waived (or such later date as is
mutually agreed to by the Company and each Buyer). As used herein “Business Day”
means any day other than a Saturday, Sunday or other day on which commercial
banks in New York, New York are required by law to remain closed.
     (c) Purchase Price(d) . The aggregate purchase price for the Common Shares
and the Warrants to be purchased by each Buyer (the “Purchase Price”) shall be
the amount set forth opposite such Buyer’s name in column (5) on the Schedule of
Buyers.
     (d) Form of Payment. On the Closing Date, (i) each Buyer shall pay its
respective Purchase Price to the Company for the Common Shares and the Warrants
to be issued and sold to such Buyer at the Closing, by wire transfer of
immediately available funds in accordance with the Company’s written wire
instructions and (ii) the Company shall deliver to each Buyer certificates
representing (A) such aggregate number of Common Shares as is set forth opposite
such Buyer’s name in column (3) of the Schedule of Buyers and (B) a Warrant
pursuant to which such Buyer shall have the right to initially acquire up to
such number of Warrant Shares as is set forth opposite such Buyer’s name in
column (4) of the Schedule of Buyers, in all cases, duly executed on behalf of
the Company and registered in the name of such Buyer or its designee.
2. BUYER’S REPRESENTATIONS AND WARRANTIES.
     Each Buyer, severally and not jointly, represents and warrants to the
Company with respect to only itself that, as of the date hereof and as of the
Closing Date:
     (a) Organization; Authority. Such Buyer is an entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization with the requisite power and authority to enter into and to
consummate the transactions contemplated by the Transaction Documents to which
it is a party and otherwise to carry out its obligations hereunder and
thereunder.
     (b) No Public Sale or Distribution. Such Buyer is (i) acquiring its Common
Shares and Warrants, and (ii) upon exercise of its Warrants will acquire the
Warrant Shares issuable upon exercise thereof, in each case, for its own account
and not with a view towards, or for resale in connection with, the public sale
or distribution thereof in violation of applicable securities laws, except
pursuant to sales registered or exempted under the 1933 Act; provided, however,
by making the representations herein, such Buyer does not agree, or make any
representation or warranty, to hold any of the Securities for any minimum or
other specific term and reserves the right to dispose of the Securities at any
time in accordance with or pursuant to a registration statement or an exemption
under the 1933 Act. Such Buyer is acquiring the Securities hereunder in the
ordinary course of its business. Such Buyer does not presently have any
agreement or understanding, directly or indirectly, with any Person to
distribute any of the

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Securities in violation of applicable securities laws.
     (c) Accredited Investor Status. At the time such Buyer was offered the
Securities, such Buyer was, and as of the date hereof such Buyer is, an
“accredited investor” as that term is defined in Rule 501(a) of Regulation D.
Such Buyer is not a registered broker-dealer under Section 15 of the Securities
Exchange Act of 1934, as amended (the “1934 Act”). Such Buyer, either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of such investment. Such Buyer is able to bear the economic
risk of an investment in the Securities.
     (d) Reliance on Exemptions. Such Buyer understands that the Securities are
being offered and sold to it in reliance on specific exemptions from the
registration requirements of United States federal and state securities laws and
that the Company is relying in part upon the truth and accuracy of, and such
Buyer’s compliance with, the representations, warranties, agreements,
acknowledgments and understandings of such Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of such Buyer
to acquire the Securities.
     (e) Information. Such Buyer and its advisors, if any, have been furnished
with all materials relating to the business, finances and operations of the
Company and materials relating to the offer and sale of the Securities which
have been requested by such Buyer. Such Buyer and its advisors, if any, have
been afforded the opportunity to ask questions of the Company. Neither such
inquiries nor any other due diligence investigations conducted by such Buyer or
its advisors, if any, or its representatives shall modify, amend or affect such
Buyer’s right to rely on the Company’s representations and warranties contained
herein or any representations and warranties contained in any other Transaction
Document or any other document or instrument executed and/or delivered in
connection with this Agreement or the consummation of the transaction
contemplated hereby. Such Buyer understands that its investment in the
Securities involves a high degree of risk. Such Buyer has sought such
accounting, legal and tax advice as it has considered necessary to make an
informed investment decision with respect to its acquisition of the Securities.
     (f) No Governmental Review. Such Buyer understands that no United States
federal or state agency or any other government or governmental agency has
passed on or made any recommendation or endorsement of the Securities or the
fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.
     (g) Transfer or Resale. Such Buyer understands that except as provided in
the Registration Rights Agreement and Section 4(g) hereof: (i) the Securities
have not been and are not being registered under the 1933 Act or any state
securities laws, and may not be offered for sale, sold, assigned or transferred
unless (A) subsequently registered thereunder, (B) such Buyer shall have
delivered to the Company (if requested by the Company) an opinion of counsel to
such Buyer, in a form reasonably acceptable to the Company, to the effect that
such Securities to be sold, assigned or transferred may be sold, assigned or
transferred pursuant to an exemption from such registration, or (C) such Buyer
provides the Company with reasonable assurance that

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such Securities can be sold, assigned or transferred pursuant to Rule 144 or
Rule 144A promulgated under the 1933 Act (or a successor rule thereto)
(collectively, “Rule 144”); (ii) any sale of the Securities made in reliance on
Rule 144 may be made only in accordance with the terms of Rule 144, and further,
if Rule 144 is not applicable, any resale of the Securities under circumstances
in which the seller (or the Person (as defined below) through whom the sale is
made) may be deemed to be an underwriter (as that term is defined in the 1933
Act) may require compliance with some other exemption under the 1933 Act or the
rules and regulations of the SEC promulgated thereunder; and (iii) neither the
Company nor any other Person is under any obligation to register the Securities
under the 1933 Act or any state securities laws or to comply with the terms and
conditions of any exemption thereunder.
     (h) Validity; Enforcement. This Agreement and the Registration Rights
Agreement have been duly and validly authorized, executed and delivered on
behalf of such Buyer and constitute the legal, valid and binding obligations of
such Buyer enforceable against such Buyer in accordance with their respective
terms, except as such enforceability may be limited by general principles of
equity or to applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation and other similar laws relating to, or affecting generally, the
enforcement of applicable creditors’ rights and remedies.
     (i) No Conflicts. The execution, delivery and performance by such Buyer of
this Agreement and the Registration Rights Agreement and the consummation by
such Buyer of the transactions contemplated hereby and thereby will not
(i) result in a violation of the organizational documents of such Buyer or
(ii) conflict with, or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which such Buyer is a party, or
(iii) result in a violation of any law, rule, regulation, order, judgment or
decree (including federal and state securities laws) applicable to such Buyer,
except in the case of clauses (ii) and (iii) above, for such conflicts,
defaults, rights or violations which would not, individually or in the
aggregate, reasonably be expected to have a material adverse effect on the
ability of such Buyer to perform its obligations hereunder.
     (j) Residency. Such Buyer is a resident of the jurisdiction specified below
its address on the Schedule of Buyers.
     (k) Certain Trading Activities. Such Buyer has not directly or indirectly,
nor has any person acting on behalf of or pursuant to any understanding with
such Buyer, engaged in any transactions in the securities of the Company
(including, without limitation, Short Sales involving the Company’s securities)
since the time that such Buyer was first contacted by the Company regarding the
investment in the Company contemplated herein. “Short Sales” include, without
limitation, all “short sales” as defined in Rule 200 promulgated under
Regulation SHO under the 1934 Act (“Regulation SHO”) and all types of direct and
indirect stock pledges, forward sales contracts, options, puts, calls, swaps and
similar arrangements (including on a total return basis), and sales and other
transactions through non-U.S. broker dealers or foreign regulated brokers (but
shall not be deemed to include the location and/or reservation of borrowable
shares of Common Stock).
     (l) General Solicitation. Such Buyer is not purchasing the Securities as a
result of

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any advertisement, article, notice or other communication regarding the
Securities published in any newspaper, magazine or similar media or broadcast
over television or radio or presented at any seminar.
     (m) Manipulation of Price. Since the time that such Buyer was first
contacted by the Company or its agent regarding the investment in the Company
contemplated herein, such Buyer has not, and, to the knowledge of such Buyer, no
Person acting on its behalf has, directly or indirectly, (i) taken 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 (other than the location and/or
reservation of borrowable shares of Common Stock by any Buyer), 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 the location and/or reservation
of borrowable shares of Common Stock by any Buyer).
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
     The Company represents and warrants to each of the Buyers that, as of the
date hereof and as of the Closing Date and except as set forth in the Schedules
prepared by the Company and attached hereto:
     (a) Organization and Qualification; Subsidiary. Each of the Company and the
Subsidiary (as defined below) is an entity duly organized and validly existing
and in good standing under the laws of the jurisdiction in which they are
formed, and has the requisite power and authorization to own their properties
and to carry on their business as now being conducted and as presently proposed
to be conducted. Each of the Company and the Subsidiary is duly qualified as a
foreign entity to do business and is in good standing in every jurisdiction in
which its ownership of property or the nature of the business conducted by it
makes such qualification necessary, except to the extent that the failure to be
so qualified or be in good standing would not have a Material Adverse Effect. As
used in this Agreement, “Material Adverse Effect” means any material adverse
effect on (i) the business, properties, assets, liabilities, operations
(including results thereof), condition (financial or otherwise) or prospects of
the Company and the Subsidiary, taken as a whole, (ii) the transactions
contemplated hereby or in any of the other Transaction Documents or (iii) the
authority or ability of the Company to perform any of its respective obligations
under any of the Transaction Documents (as defined below). The Company has only
one Subsidiary, which is set forth on Schedule 3(a) (the “Subsidiary”).
“Subsidiary” means any Person in which the Company, directly or indirectly,
(I) owns at least fifty percent (50% of the outstanding capital stock or holds
at least fifty percent (50%) of the equity or similar interest of such Person or
(II) controls or operates all or any part of the business, operations or
administration of such Person.
     (b) Authorization; Enforcement; Validity. The Company has the requisite
power and authority to enter into and perform its obligations under this
Agreement and the other Transaction Documents and to issue the Securities in
accordance with the terms hereof and thereof. Each Subsidiary has the requisite
power and authority to enter into and perform its obligations under the
Transaction Documents to which it is a party. The execution and delivery of this
Agreement and the other Transaction Documents by the Company, and the
consummation

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by the Company of the transactions contemplated hereby and thereby (including,
without limitation, the issuance of the Common Shares and the issuance of the
Warrants and the reservation for issuance and issuance of the Warrant Shares
issuable upon exercise of the Warrants) have been duly authorized by the
Company’s board of directors and (other than the filing with the SEC of one or
more Registration Statements in accordance with the requirements of the
Registration Rights Agreement, a Form D with the SEC, any other filings as may
be required by any state securities agencies, and the Shareholder Approval) no
further filing, consent or authorization is required by the Company or its board
of directors or its shareholders or other governing body. This Agreement has
been, and the other Transaction Documents will be prior to the Closing, duly
executed and delivered by the Company or its agent, and each constitutes the
legal, valid and binding obligations of the Company, enforceable against the
Company in accordance with its respective terms, except as such enforceability
may be limited by general principles of equity or applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating to,
or affecting generally, the enforcement of applicable creditors’ rights and
remedies and except as rights to indemnification and to contribution may be
limited by federal or state securities law. “Transaction Documents” means,
collectively, this Agreement, the Warrants, the Registration Rights Agreement,
the Irrevocable Transfer Agent Instructions (as defined below) and each of the
other agreements and instruments entered into or delivered by any of the parties
hereto in connection with the transactions contemplated hereby and thereby, as
may be amended from time to time.
     (c) Issuance of Securities. The Common Shares, when issued, will be validly
issued, fully paid and nonassessable and free from all preemptive or similar
rights, taxes, liens, charges and other encumbrances with respect to the issue
thereof, with the holders being entitled to all rights accorded to a holder of
Common Stock. The Warrants are duly authorized and upon issuance in accordance
with the terms of the Transaction Documents shall be validly issued, fully paid
and non-assessable and free from all preemptive or similar rights, taxes, liens,
charges and other encumbrances with respect to the issue thereof. Assuming the
Company obtains the Shareholder Approval (as defined below), the Company will
reserve from its duly authorized capital stock not less than 100% of the maximum
number of Warrant Shares issuable upon exercise of the Warrants (without taking
into account any possible adjustments pursuant to the anti-dilution rights
attendant thereto or any limitations on the exercise of the Warrants set forth
therein). Upon exercise in accordance with the Warrants, the Warrant Shares,
when issued, will be validly issued, fully paid and nonassessable and free from
all preemptive or similar rights, taxes, liens, charges and other encumbrances
with respect to the issue thereof, with the holders being entitled to all rights
accorded to a holder of Common Stock. Subject to the accuracy of the
representations and warranties of the Buyers in this Agreement, the offer and
issuance by the Company of the Securities is exempt from registration under the
1933 Act.
     (d) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby (including, without limitation, the
issuance of the Common Shares, the Warrants and, subject to the Company
obtaining the Shareholder Approval, the Warrant Shares and the reservation for
issuance of the Warrant Shares) will not (i) result in a violation of the
Articles of Incorporation (as defined below) or the Bylaws (as defined below),
(ii) conflict with, or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment,

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acceleration or cancellation of, any agreement, indenture or instrument to which
the Company or the Subsidiary is a party, or (iii) result in a violation of any
law, rule, regulation, order, judgment or decree (including foreign, federal and
state securities laws and regulations and the rules and regulations of the OTC
Bulletin Board (the “Principal Market”) and including all applicable federal
laws, rules and regulations) applicable to the Company or the Subsidiary or by
which any property or asset of the Company or the Subsidiary is bound or
affected except, in the case of clause (ii) or (iii) above, to the extent such
violations that could not reasonably be expected to have a Material Adverse
Effect.
     (e) Consents. Other than the Shareholder Approval (as defined below),
neither the Company nor the Subsidiary is required to obtain any consent from,
authorization or order of, or make any filing or registration with (other than
the filing with the SEC of one or more Registration Statements in accordance
with the requirements of the Registration Rights Agreement, a Form D with the
SEC and any other filings as may be required by any state securities agencies),
any court, governmental agency or any regulatory or self-regulatory agency or
any other Person in order for it to execute, deliver or perform any of its
respective obligations under or contemplated by the Transaction Documents, in
each case, in accordance with the terms hereof or thereof. Other than the
Shareholder Approval, all consents, authorizations, orders, filings and
registrations which the Company or the Subsidiary is required to obtain pursuant
to the preceding sentence have been obtained or effected on or prior to the
Closing Date, and neither the Company nor the Subsidiary is aware of any facts
or circumstances which might prevent the Company or the Subsidiary from
obtaining or effecting any of the registration, application or filings
contemplated by the Transaction Documents. The Company is not in violation of
the requirements of the Principal Market and has no knowledge of any facts or
circumstances which could reasonably lead to delisting or suspension of the
Common Stock in the foreseeable future.
     (f) Acknowledgment Regarding Buyer’s Purchase of Securities. The Company
acknowledges and agrees that, to its actual knowledge, each Buyer is acting
solely in the capacity of an arm’s length purchaser with respect to the
Transaction Documents and the transactions contemplated hereby and thereby and
that no Buyer is an officer or director of the Company or the Subsidiary. The
Company further acknowledges that no Buyer is acting as a financial advisor or
fiduciary of the Company or the Subsidiary (or in any similar capacity) with
respect to the Transaction Documents and the transactions contemplated hereby
and thereby, and any advice given by a Buyer or any of its representatives or
agents in connection with the Transaction Documents and the transactions
contemplated hereby and thereby is merely incidental to such Buyer’s purchase of
the Securities. The Company further represents to each Buyer that the Company’s
decision to enter into the Transaction Documents to which it is a party has been
based solely on the independent evaluation by the Company and its
representatives.
     (g) No General Solicitation; Placement Agent’s Fees. Neither the Company,
nor the Subsidiary or affiliates, nor any Person acting on its or their behalf,
has engaged in any form of general solicitation or general advertising (within
the meaning of Regulation D) in connection with the offer or sale of the
Securities. The Company shall be responsible for the payment of any placement
agent’s fees, financial advisory fees, or brokers’ commissions (other than for
Persons engaged by any Buyer or its investment advisor) relating to or arising
out of the transactions contemplated hereby. Other than Ladenburg Thalmann & Co.
Inc. (the “Placement Agent”),

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neither the Company nor the Subsidiary has engaged any placement agent or other
agent in connection with the sale of the Securities.
     (h) No Integrated Offering. None of the Company, the Subsidiary or any of
their affiliates, nor any Person acting on their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of the
issuance of any of the Securities under the 1933 Act, whether through
integration with prior offerings or otherwise, or cause this offering of the
Securities to require approval of shareholders of the Company under any
applicable shareholder approval provisions, including, without limitation, under
the rules and regulations of any exchange or automated quotation system on which
any of the securities of the Company are listed or designated. None of the
Company, the Subsidiary, their affiliates nor any Person acting on their behalf
will take any action or steps that would require registration of the issuance of
any of the Securities under the 1933 Act or cause the offering of any of the
Securities hereunder to be integrated with other offerings.
     (i) Application of Takeover Protections; Rights Agreement. The Company and
its board of directors have taken all necessary action, if any, in order to
render inapplicable any control share acquisition, interested shareholder,
business combination, poison pill (including any distribution under a rights
agreement) or other similar anti-takeover provision under the Articles of
Incorporation, Bylaws or other organizational documents or the laws of the
jurisdiction of its incorporation or otherwise which is or could become
applicable to any Buyer solely as a result of the transactions contemplated by
this Agreement, including, without limitation, the Company’s issuance of the
Securities and any Buyer’s ownership of the Securities. The Company and its
board of directors have taken all necessary action, if any, in order to render
inapplicable any shareholder rights plan or similar arrangement relating to
accumulations of beneficial ownership of the Securities or a change in control
of the Company or the Subsidiary, in each case, solely as a result of the
transactions contemplated by this Agreement.
     (j) SEC Documents; Financial Statements. During the two (2) years prior to
the date hereof, the Company has timely filed all reports, schedules, forms,
statements and other documents required to be filed by it with the SEC pursuant
to the reporting requirements of the 1934 Act (all of the foregoing filed prior
to the date hereof and all exhibits included therein and financial statements,
notes and schedules thereto and documents incorporated by reference therein
being hereinafter referred to as the “SEC Documents”). As of their respective
dates, the SEC Documents complied in all material respects with the requirements
of the 1934 Act 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 the light of the circumstances under
which they were made, not misleading. As of their respective dates, the
financial statements of the Company included in the SEC Documents complied as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto as in effect as
of the time of filing. Such financial statements have been prepared in
accordance with generally accepted accounting principles, consistently applied,
during the periods involved (except (i) as may be otherwise indicated in such
financial statements or the

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notes thereto, or (ii) in the case of unaudited interim statements, to the
extent they may exclude footnotes or may be condensed or summary statements) and
fairly present in all material respects the financial position of the Company as
of the dates thereof and the results of its operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments which will not be material, either individually or in
the aggregate). No other information provided by or on behalf of the Company to
the Buyers which is not included in the SEC Documents (including, without
limitation, information referred to in Section 2(e) of this Agreement) contains
any untrue statement of a material fact or omits to state any material fact
necessary in order to make the statements therein not misleading, in the light
of the circumstance under which they are or were made.
     (k) Absence of Certain Changes. Except as set forth in the SEC Documents,
there has been no material adverse change and no material adverse development in
the business, assets, liabilities, properties, operations (including results
thereof), condition (financial or otherwise) or prospects of the Company and the
Subsidiary, taken as a whole. Since the date of the Company’s most recent
audited financial statements contained in a Form 10-K, neither the Company nor
the Subsidiary has (i) declared or paid any dividends, (ii) sold any assets,
individually or in the aggregate, outside of the ordinary course of business or
(iii) made any material capital expenditures, individually or in the aggregate.
Neither the Company nor the Subsidiary has taken any steps to seek protection
pursuant to any law or statute relating to bankruptcy, insolvency,
reorganization, receivership, liquidation or winding up, nor does the Company or
the Subsidiary have any knowledge or reason to believe that any of their
respective creditors intend to initiate involuntary bankruptcy proceedings or
any actual knowledge of any fact which would reasonably lead a creditor to do
so. The Company is not as of the date hereof, and after giving effect to the
transactions contemplated hereby to occur at the Closing, will not be Insolvent
(as defined below). For purposes of this Section 3(k), “Insolvent” means
(I) with respect to the Company and the Subsidiary, on a consolidated basis,
(i) the present fair saleable value of the Company’s and the Subsidiary’s assets
is less than the amount required to pay the Company’s and the Subsidiary’s total
Indebtedness (as defined below), (ii) the Company and the Subsidiary are unable
to pay their debts and liabilities, subordinated, contingent or otherwise, as
such debts and liabilities become absolute and matured or (iii) the Company and
the Subsidiary intend to incur or believe that they will incur debts that would
be beyond their ability to pay as such debts mature; and (II) with respect to
the Company and he Subsidiary, individually, (i) the present fair saleable value
of the Company’s assets is less than the amount required to pay the Company’s
total Indebtedness (as defined below), (ii) the Company is unable to pay its
debts and liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured or (iii) the Company intends to incur or
believes that it will incur debts that would be beyond its ability to pay as
such debts mature. Neither the Company nor the Subsidiary has engaged in any
business or in any transaction, and is not about to engage in any business or in
any transaction, for which the Company’s or the Subsidiary’s remaining assets
constitute unreasonably small capital.
     (l) No Undisclosed Events, Liabilities, Developments or Circumstances.
Except as set forth in the SEC Documents, no event, liability, development or
circumstance has occurred or exists, or is reasonably expected to exist or occur
with respect to the Company, the Subsidiary or their respective business,
properties, liabilities, prospects, operations (including results thereof) or
condition (financial or otherwise), that (i) would be required to be disclosed
by the Company

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under applicable securities laws on a registration statement on Form S-3 filed
with the SEC relating to an issuance and sale by the Company of its Common Stock
and which has not been publicly announced, (ii) would reasonably be expected to
have a Material Adverse Effect or (iii) would reasonably be expected to have a
material adverse effect on any Buyer’s investment hereunder.
     (m) Conduct of Business; Regulatory Permits. Neither the Company nor the
Subsidiary is in violation of any term of or in default under its Articles of
Incorporation, Bylaws, any certificate of designation, preferences or rights of
any other outstanding series of preferred stock of the Company or the Subsidiary
or their organizational charter, certificate of formation or certificate of
incorporation or bylaws, respectively. Neither the Company nor the Subsidiary is
in violation of any judgment, decree or order or any statute, ordinance, rule or
regulation applicable to the Company or the Subsidiary, and neither the Company
nor the Subsidiary will conduct its business in violation of any of the
foregoing, except in all cases for possible violations which could not,
individually or in the aggregate, have a Material Adverse Effect. Without
limiting the generality of the foregoing, the Company is not in violation of any
of the rules, regulations or requirements of the Principal Market and has no
knowledge of any facts or circumstances that could reasonably lead to delisting
or suspension of the Common Stock by the Principal Market in the foreseeable
future. Since January 1, 2008, other than as set forth in the SEC Documents,
(i) the Common Stock has been listed or designated for quotation on the
Principal Market, (ii) trading in the Common Stock has not been suspended by the
SEC or the Principal Market and (iii) the Company has received no communication,
written or oral, from the SEC or the Principal Market regarding the suspension
or delisting of the Common Stock from the Principal Market. The Company and the
Subsidiary possess all certificates, authorizations and permits issued by the
appropriate regulatory authorities necessary to conduct their respective
businesses, except where the failure to possess such certificates,
authorizations or permits would not have, individually or in the aggregate, a
Material Adverse Effect, and neither the Company nor the Subsidiary has received
any notice of proceedings relating to the revocation or modification of any such
certificate, authorization or permit.
     (n) Foreign Corrupt Practices. Neither the Company nor the Subsidiary nor,
to the Company’s knowledge, any director, officer, agent, employee or other
Person acting on behalf of the Company or the Subsidiary has, in the course of
its actions for, or on behalf of, the Company or the Subsidiary (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 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.
     (o) Sarbanes-Oxley Act. Other than as disclosed in the SEC Documents, the
Company and each Subsidiary is in compliance with all applicable requirements of
the Sarbanes-Oxley Act of 2002 that are effective as of the date hereof, and all
applicable rules and regulations promulgated by the SEC thereunder that are
effective as of the date hereof.
     (p) Transactions With Affiliates. Other than as disclosed in the SEC
Documents, none of the officers, directors or employees of the Company or the
Subsidiary is presently a

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party to any transaction with the Company or the Subsidiary (other than for
ordinary course services as employees, officers or 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,
or otherwise requiring payments to or from any such officer, director or
employee or, to the knowledge of the Company or the Subsidiary, any corporation,
partnership, trust or other Person in which any such officer, director, or
employee has a substantial interest or is an employee, officer, director,
trustee or partner.
     (q) Equity Capitalization. As of the date hereof, the authorized capital
stock of the Company consists of (i) 150,000,000 shares of Common Stock, of
which 103,076,452 are issued and outstanding and 12,221,036 shares are reserved
for issuance pursuant to securities (other than the Warrants) exercisable or
exchangeable for, or convertible into, shares of Common Stock and (ii) 2,950,000
shares of Preferred Stock, no par value, of which none are outstanding. No
shares of Common Stock are held in treasury. All of such outstanding shares are
duly authorized and have been, or upon issuance will be, validly issued and are
fully paid and nonassessable. None of the Company’s or the Subsidiary’s capital
stock is subject to preemptive rights or any other similar rights or any liens
or encumbrances suffered or permitted by the Company or the Subsidiary. Except
as disclosed in the SEC Documents, there are no outstanding options, warrants,
scrip, rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, or exercisable or
exchangeable for, any capital stock of the Company or the Subsidiary, or
contracts, commitments, understandings or arrangements by which the Company or
the Subsidiary is or may become bound to issue additional capital stock of the
Company or the Subsidiary or options, warrants, scrip, rights to subscribe to,
calls or commitments of any character whatsoever relating to, or securities or
rights convertible into, or exercisable or exchangeable for, any capital stock
of the Company or the Subsidiary. Except as disclosed in the SEC Documents,
there are no outstanding debt securities, notes, credit agreements, credit
facilities or other agreements, documents or instruments evidencing Indebtedness
of the Company or the Subsidiary or by which the Company or the Subsidiary is or
may become bound. There are no financing statements securing obligations in any
amounts filed in connection with the Company or the Subsidiary. There are no
agreements or arrangements under which the Company or the Subsidiary is
obligated to register the sale of any of their securities under the 1933 Act
(except pursuant to the Registration Rights Agreement). Except as disclosed in
the SEC Documents, there are no outstanding securities or instruments of the
Company or the Subsidiary which contain any redemption or similar provisions,
and there are no contracts, commitments, understandings or arrangements by which
the Company or the Subsidiary is or may become bound to redeem a security of the
Company or the Subsidiary. There are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the Securities. Neither the Company nor the Subsidiary has any stock
appreciation rights or “phantom stock” plans or agreements or any similar plan
or agreement. Neither the Company nor the Subsidiary has any liabilities or
obligations required to be disclosed in the SEC Documents which are not so
disclosed in the SEC Documents, other than those incurred in the ordinary course
of the Company’s or the Subsidiary’s respective businesses and which,
individually or in the aggregate, do not or could not have a Material Adverse
Effect. Copies of the Company’s Articles of Incorporation, as amended and as in
effect on the date hereof (the “Articles of Incorporation”), and the Company’s
bylaws, as amended and as in effect on the date hereof (the “Bylaws”), have been
filed as exhibits with the SEC and are available on the SEC’s website at
www.sec.gov.

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     (r) Indebtedness and Other Contracts. Except as disclosed in the SEC
Documents, neither the Company nor the Subsidiary (i) has any outstanding
Indebtedness (as defined below), (ii) is a party to any contract, agreement or
instrument, the violation of which, or default under which, by the other
party(ies) to such contract, agreement or instrument could reasonably be
expected to result in a Material Adverse Effect, (iii) is in violation of any
term of, or in default under, any contract, agreement or instrument relating to
any Indebtedness, except where such violations and defaults would not result,
individually or in the aggregate, in a Material Adverse Effect, or (iv) is a
party to any contract, agreement or instrument relating to any Indebtedness, the
performance of which, in the judgment of the Company’s officers, has or is
expected to have a Material Adverse Effect. For purposes of this Agreement: (x)
“Indebtedness” of any Person means, without duplication (A) all indebtedness for
borrowed money, (B) all obligations issued, undertaken or assumed as the
deferred purchase price of property or services (including, without limitation,
“capital leases” in accordance with generally accepted accounting principles)
(other than trade payables entered into in the ordinary course of business),
(C) all reimbursement or payment obligations with respect to letters of credit,
surety bonds and other similar instruments, (D) all obligations evidenced by
notes, bonds, debentures or similar instruments, including obligations so
evidenced incurred in connection with the acquisition of property, assets or
businesses, (E) all indebtedness created or arising under any conditional sale
or other title retention agreement, or incurred as financing, in either case
with respect to any property or assets acquired with the proceeds of such
indebtedness (even though the rights and remedies of the seller or bank under
such agreement in the event of default are limited to repossession or sale of
such property), (F) all monetary obligations under any leasing or similar
arrangement which, in connection with generally accepted accounting principles,
consistently applied for the periods covered thereby, is classified as a capital
lease, (G) all indebtedness referred to in clauses (A) through (F) above secured
by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any mortgage, lien, pledge, charge,
security interest or other encumbrance upon or in any property or assets
(including accounts and contract rights) owned by any Person, even though the
Person which owns such assets or property has not assumed or become liable for
the payment of such indebtedness, and (H) all Contingent Obligations in respect
of indebtedness or obligations of others of the kinds referred to in clauses
(A) through (G) above; (y) “Contingent Obligation” means, as to any Person, any
direct or indirect liability, contingent or otherwise, of that Person with
respect to any indebtedness, lease, dividend or other obligation of another
Person if the primary purpose or intent of the Person incurring such liability,
or the primary effect thereof, is to provide assurance to the obligee of such
liability that such liability will be paid or discharged, or that any agreements
relating thereto will be complied with, or that the holders of such liability
will be protected (in whole or in part) against loss with respect thereto; and
(z) “Person” means an individual, a limited liability company, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization, any other
entity and a government or any department or agency thereof.
     (s) Absence of Litigation. Except as disclosed in the SEC Documents, there
is no action, suit, proceeding, inquiry or investigation before or by the
Principal Market, any court, public board, government agency, self-regulatory
organization or body pending or, to the knowledge of the Company, threatened
against or affecting the Company or the Subsidiary, the Common Stock or any of
the Company’s or the Subsidiary’s officers or directors which is outside of the
ordinary course of business or individually or in the aggregate material to the
Company or the Subsidiary. There has not been, and to the knowledge of the
Company, there is

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not pending or contemplated, any investigation by the SEC involving the Company,
the Subsidiary or any current or former director or officer of the Company or
the Subsidiary. The SEC has not issued any stop order or other order suspending
the effectiveness of any registration statement filed by the Company under the
1933 Act or the 1934 Act.
     (t) Insurance. The Company and the Subsidiary are insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as management of the Company believes to be prudent and customary in the
businesses in which the Company and the Subsidiary are engaged. Neither the
Company nor the Subsidiary has been refused any insurance coverage sought or
applied for, and neither the Company nor the Subsidiary has any reason to
believe that it will be unable to renew its existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business at a cost that would not have a
Material Adverse Effect.
     (u) Employee Relations. Neither the Company nor the Subsidiary is a party
to any collective bargaining agreement or employs any member of a union. The
Company believes that its and the Subsidiary’s relations with their respective
employees are good. No executive officer (as defined in Rule 501(f) promulgated
under the 1933 Act) or other key employee of the Company or the Subsidiary has
notified the Company or the Subsidiary that such officer intends to leave the
Company or the Subsidiary or otherwise terminate such officer’s employment with
the Company or the Subsidiary. To the Company’s knowledge, no executive officer
or other key employee of the Company or the Subsidiary is, or is now expected to
be, in violation of any material term of any employment contract,
confidentiality, disclosure or proprietary information agreement,
non-competition agreement, or any other contract or agreement or any restrictive
covenant, and the continued employment of each such executive officer or other
key employee (as the case may be), to the Company’s knowledge, does not subject
the Company or the Subsidiary to any liability with respect to any of the
foregoing matters. The Company and the Subsidiary are in compliance with all
federal, state, local and foreign laws and regulations respecting labor,
employment and employment practices and benefits, terms and conditions of
employment and wages and hours, except where failure to be in compliance would
not, either individually or in the aggregate, reasonably be expected to result
in a Material Adverse Effect.
     (v) Title. The Company and the Subsidiary have good and marketable title in
fee simple to all real property, and have good and marketable title to all
personal property (exclusive of intellectual property), owned by them which is
material to the business of the Company and the Subsidiary, in each case, free
and clear of all liens, encumbrances and defects except such as do not
materially affect the value of such property and do not interfere with the use
made and proposed to be made of such property by the Company and the Subsidiary.
Any real property and facilities held under lease by the Company or the
Subsidiary are held by them under valid, subsisting and enforceable leases with
such exceptions as are not material and do not interfere with the use made and
proposed to be made of such property and buildings by the Company or the
Subsidiary.
     (w) Intellectual Property Rights. The Company and the Subsidiary own or
possess adequate rights or licenses to use all trademarks, trade names, service
marks, service mark registrations, service names, patents, patent rights,
copyrights, original works, inventions, licenses, approvals, governmental
authorizations, trade secrets and other intellectual property

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rights and all applications and registrations therefor (“Intellectual Property
Rights”) necessary to conduct their respective businesses as now conducted and
as presently proposed to be conducted. None of the Company’s or the Subsidiary’s
Intellectual Property Rights necessary to conduct their respective businesses as
now conducted and as presently proposed to be conducted have expired, terminated
or been abandoned, or are expected to expire, terminate or be abandoned, within
three years from the date of this Agreement. The Company has no knowledge of any
infringement by the Company or the Subsidiary of Intellectual Property Rights of
others. There is no claim, action or proceeding being made or brought, or to the
knowledge of the Company or the Subsidiary, being threatened, against the
Company or the Subsidiary regarding their Intellectual Property Rights except as
disclosed in the SEC Documents. The Company is not aware of any facts or
circumstances which might give rise to any of the foregoing infringements or
claims, actions or proceedings. The Company and the Subsidiary have taken
reasonable security measures to protect the secrecy, confidentiality and value
of all of their Intellectual Property Rights.
     (x) Environmental Laws. The Company and the Subsidiary (i) are in
compliance with all Environmental Laws (as defined below), (ii) have received
all permits, licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and (iii) are in
compliance with all terms and conditions of any such permit, license or approval
where, in each of the foregoing clauses (i), (ii) and (iii), the failure to so
comply could be reasonably expected to have, individually or in the aggregate, a
Material Adverse Effect. The term “Environmental Laws” means all federal, state,
local or foreign laws relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including, without limitation,
laws relating to emissions, discharges, releases or threatened releases of
chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes
(collectively, “Hazardous Materials”) into the environment, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials, as well as all
authorizations, codes, decrees, demands or demand letters, injunctions,
judgments, licenses, notices or notice letters, orders, permits, plans or
regulations issued, entered, promulgated or approved thereunder.
     (y) Subsidiary Rights. The Company has the unrestricted right to vote, and
(subject to limitations imposed by applicable law) to receive dividends and
distributions on, all capital securities of the Subsidiary as owned by the
Company.
     (z) Tax Status. The Company and the Subsidiary (i) has timely made or filed
all foreign, federal and state income and all other tax returns, reports and
declarations required by any jurisdiction to which it is subject, (ii) has
timely paid all taxes and other governmental assessments and charges that are
material in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith and (iii) has set aside
on its books provision reasonably adequate for the payment of all taxes for
periods subsequent to the periods to which such returns, reports or declarations
apply except in each case where the failure to file, pay or set aside would not
have a Material Adverse Effect. There are no unpaid taxes in any material amount
claimed to be due by the taxing authority of any jurisdiction, and the officers
of the Company and the Subsidiary know of no basis for any such claim. The
Company is not operated in such a manner as to qualify as a passive foreign
investment

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company, as defined in Section 1297 of the U.S. Internal Revenue Code of 1986,
as amended.
     (aa) Internal Accounting and Disclosure Controls. The Company and the
Subsidiary maintains internal control over financial reporting (as such term is
defined in Rule 13a-15(f) under the 1934 Act) that is effective to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles, including that (i) transactions are
executed in accordance with management’s general or specific authorizations,
(ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain asset and liability accountability, (iii) access to assets or
incurrence of liabilities is permitted only in accordance with management’s
general or specific authorization and (iv) the recorded accountability for
assets and liabilities is compared with the existing assets and liabilities at
reasonable intervals and appropriate action is taken with respect to any
difference. The Company maintains disclosure controls and procedures (as such
term is defined in Rule 13a-15(e) under the 1934 Act) that are effective in
ensuring that information required to be disclosed by the Company in the reports
that it files or submits under the 1934 Act is recorded, processed, summarized
and reported, within the time periods specified in the rules and forms of the
SEC, including, without limitation, controls and procedures designed to ensure
that information required to be disclosed by the Company in the reports that it
files or submits under the 1934 Act is accumulated and communicated to the
Company’s management, including its principal executive officer or officers and
its principal financial officer or officers, as appropriate, to allow timely
decisions regarding required disclosure. Since January 1, 2008, neither the
Company nor the Subsidiary has received any notice or correspondence from any
accountant relating to any potential material weakness in any part of the
internal controls over financial reporting of the Company or the Subsidiary.
     (bb) Off Balance Sheet Arrangements. There is no transaction, arrangement,
or other relationship between the Company or the Subsidiary and an
unconsolidated or other off balance sheet entity that is required to be
disclosed by the Company in its 1934 Act filings and is not so disclosed or that
otherwise could be reasonably likely to have a Material Adverse Effect.
     (cc) Investment Company Status. The Company is not, and upon consummation
of the sale of the Securities will not be, an “investment company,” an affiliate
of an “investment company,” a company controlled by an “investment company” or
an “affiliated person” of, or “promoter” or “principal underwriter” for, an
“investment company” as such terms are defined in the Investment Company Act of
1940, as amended.
     (dd) Acknowledgement Regarding Buyers’ Trading Activity. It is understood
and acknowledged by the Company that: (i) other than as contemplated by
Section 2(k), following the public disclosure of the transactions contemplated
by the Transaction Documents, in accordance with the terms thereof, none of the
Buyers have been asked by the Company or the Subsidiary to agree, nor has any
Buyer agreed with the Company or the Subsidiary, to desist from effecting any
transactions in or with respect to (including, without limitation, purchasing or
selling, long and/or short) any securities of the Company, or “derivative”
securities based on securities issued by the Company or to hold the Securities
for any specified term; (ii) any Buyer, and counterparties in “derivative”
transactions to which any such Buyer is a party, directly or indirectly,
presently may have a “short” position in the Common Stock which was established

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prior to such Buyer’s knowledge of the transactions contemplated by the
Transaction Documents; and (iii) each Buyer shall not be deemed to have any
affiliation with or control over any arm’s length counterparty in any
“derivative” transaction. The Company further understands and acknowledges that
following the public disclosure of the transactions contemplated by the
Transaction Documents pursuant to the Press Release (as defined below) one or
more Buyers may engage in hedging and/or trading activities at various times
during the period that the Securities are outstanding, including, without
limitation, during the periods that the value and/or number of the Warrant
Shares deliverable with respect to the Securities are being determined and
(b) such hedging and/or trading activities, if any, can reduce the value of the
existing shareholders’ equity interest in the Company both at and after the time
the hedging and/or trading activities are being conducted. The Company
acknowledges that such aforementioned hedging and/or trading activities do not
constitute a breach of this Agreement or any other Transaction Document or any
of the documents executed in connection herewith or therewith.
     (ee) Manipulation of Price. Neither the Company nor the Subsidiary has,
and, to the knowledge of the Company, no Person acting on their behalf has,
directly or indirectly, (i) taken any action designed to cause or to result in
the stabilization or manipulation of the price of any security of the Company or
the Subsidiary 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 (other than the Placement Agent), or (iii) paid or
agreed to pay to any Person any compensation for soliciting another to purchase
any other securities of the Company or the Subsidiary.
     (ff) U.S. Real Property Holding Corporation. Neither the Company nor the
Subsidiary is, or has ever been, and so long as any of the Securities are held
by any of the Buyers, shall become, 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 and each Subsidiary shall so certify upon any Buyer’s
request.
     (gg) Registration Eligibility. The Company is eligible to register the
Registrable Securities for resale by the Buyers using Form S-1 promulgated under
the 1933 Act.
     (hh) Transfer Taxes. On the Closing Date, all stock transfer or other taxes
(other than income or similar taxes) which are required to be paid in connection
with the issuance, sale and transfer of the Securities to be sold to each Buyer
hereunder will be, or will have been, fully paid or provided for by the Company,
and all laws imposing such taxes will be or will have been complied with.
     (ii) Bank Holding Company Act. Neither the Company nor the Subsidiary is
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”). Neither the Company nor the Subsidiary or affiliates owns or
controls, 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 equity that is subject to the BHCA and to
regulation by the Federal Reserve. Neither the Company nor the Subsidiary or
affiliates exercises 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.

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     (jj) Public Utility Holding Act. None of the Company nor the Subsidiary is
a “holding company,” or an “affiliate” of a “holding company,” as such terms are
defined in the Public Utility Holding Act of 2005.
     (kk) Federal Power Act. None of the Company nor the Subsidiary is subject
to regulation as a “public utility” under the Federal Power Act, as amended.
     (ll) No Additional Agreements. The Company does not have any agreement or
understanding with any Buyer with respect to the transactions contemplated by
the Transaction Documents other than as specified in the Transaction Documents.
     (mm) Disclosure. The Company confirms that neither it nor any other Person
acting on its behalf has provided any of the Buyers or their agents or counsel
with any information that constitutes or could reasonably be expected to
constitute material, non-public information concerning the Company or the
Subsidiary, other than the existence of the transactions contemplated by this
Agreement and the other Transaction Documents. The Company understands and
confirms that each of the Buyers will rely on the foregoing representations in
effecting transactions in securities of the Company. All disclosure provided to
the Buyers regarding the Company and the Subsidiary, their businesses and the
transactions contemplated hereby, including the schedules to this Agreement,
furnished by or on behalf of the Company or the Subsidiary is true and correct
and does not contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading. No event
or circumstance has occurred or information exists with respect to the Company
or the Subsidiary or its or their business, properties, liabilities, prospects,
operations (including results thereof) or conditions (financial or otherwise),
which, under applicable law, rule or regulation, requires public disclosure at
or before the date hereof or announcement by the Company but which has not been
so publicly disclosed. The Company acknowledges and agrees that no Buyer makes
or has made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in Section 2.
     (nn) Shell Company Status. The Company is not, and has never been, an
issuer identified in, or subject to, Rule 144(i) of the 1933 Act.
     (oo) No Other Registration Rights. There are no agreements or arrangements
under which the Company or the Subsidiary is obligated to register the sale of
any of their securities under the 1933 Act (except pursuant to the Registration
Rights Agreement).
     (pp) FDA Matters. As to each product subject to the jurisdiction of the
U.S. Food and Drug Administration (“FDA”) under the Federal Food, Drug and
Cosmetic Act, as amended, and the regulations thereunder (“FDCA”) that is
manufactured, packaged, labeled, tested, distributed, sold, and/or marketed by
the Company or any of its Subsidiaries (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 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,

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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. 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 or any of its Subsidiaries, and none of the
Company or any of its Subsidiaries has 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 or any of its Subsidiaries,
(iv) enjoins production at any facility of the Company or any of its
Subsidiaries, (v) enters or proposes to enter into a consent decree of permanent
injunction with the Company or any of its Subsidiaries, or (vi) otherwise
alleges any violation of any laws, rules or regulations by the Company or any of
its Subsidiaries, 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. 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.

4.   COVENANTS.

     (a) Efforts. Each Buyer shall use its reasonable best efforts to timely
satisfy each of the conditions to be satisfied by it as provided in Section 6 of
this Agreement. The Company shall use its reasonable best efforts to timely
satisfy each of the conditions to be satisfied by it as provided in Section 7 of
this Agreement.
     (b) Form D and Blue Sky. The Company agrees to file with the SEC a Form D
with respect to the Securities as required under Regulation D and to provide a
copy thereof to each Buyer promptly after such filing. The Company shall, on or
before the Closing Date, take such action as the Company shall reasonably
determine is necessary in order to obtain an exemption for, or to, qualify the
Securities for sale to the Buyers at the Closing pursuant to this Agreement
under applicable securities or “Blue Sky” laws of the states of the United
States (or to obtain an exemption from such qualification), and shall provide
evidence of any such action so taken to the Buyers on or prior to the Closing
Date. The Company shall make any filings and reports relating to the offer and
sale of the Securities required under applicable securities or “Blue Sky” laws
of the states of the United States following the Closing Date.
     (c) Use of Proceeds. The Company shall use the proceeds from the sale of
the Securities for the payment of the fees and expenses described in Section
4(f) below and general corporate purposes.
     (d) Financial Information. The Company agrees to send the following to each

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Investor (as defined in the Registration Rights Agreement) during the Reporting
Period, unless the following are filed with or furnished to the SEC through
EDGAR and are available to the public through the EDGAR system, within one
(1) Business Day after the filing thereof with the SEC, a copy of its Annual
Reports on Form 10-K and Quarterly Reports on Form 10-Q, any interim reports or
any consolidated balance sheets, income statements, stockholders’ equity
statements and/or cash flow statements for any period other than annual that are
made publicly available, any Current Reports on Form 8-K and any registration
statements (other than on Form S-8) or amendments filed pursuant to the 1933
Act.
     (e) Listing. The Company shall use its reasonable best efforts to promptly
secure the listing or designation for quotation (as the case may be) of all of
the Registrable Securities (other than the Warrants, which are addressed below)
upon each national securities exchange and automated quotation system, if any,
upon which the Common Stock is then listed or designated for quotation (as the
case may be) (subject to official notice of issuance) and shall maintain such
listing or designation for quotation (as the case may be) of all Registrable
Securities from time to time issuable under the terms of the Transaction
Documents on such national securities exchange or automated quotation system.
The Company shall use its reasonable best efforts to maintain the Common Stock’s
listing or authorization for quotation (as the case may be) on the Principal
Market, the NYSE Amex, The New York Stock Exchange, the Nasdaq Global Market,
the Nasdaq Global Select Market or the Nasdaq Capital Market (each, an “Eligible
Market”). The Company shall not take any action which could be reasonably
expected to result in the delisting or suspension of the Common Stock on an
Eligible Market. The Company shall pay all fees and expenses in connection with
satisfying its obligations under this Section 4(e).
     (f) Fees. The Company shall be responsible for the payment of any placement
agent’s fees, financial advisory fees, transfer agent fees, DTC (as defined
below) fees or broker’s commissions (other than for Persons engaged by any
Buyer) relating to or arising out of the transactions contemplated hereby
(including, without limitation, any fees payable to the Placement Agent, who is
the Company’s sole placement agent in connection with the transactions
contemplated by this Agreement). The Company shall pay, and hold each Buyer
harmless against, any liability, loss or expense (including, without limitation,
reasonable attorneys’ fees and out-of-pocket expenses) arising in connection
with any claim relating to any such payment. Except as otherwise set forth in
the Transaction Documents, each party to this Agreement shall bear its own
expenses in connection with the sale of the Securities to the Buyers.
     (g) Pledge of Securities. Notwithstanding anything to the contrary
contained in Section 2(g), the Company acknowledges and agrees that the
Securities may be pledged by a Buyer in connection with a bona fide margin
agreement or other bona fide loan or financing arrangement that is secured by
the Securities. The pledge of Securities shall not be deemed to be a transfer,
sale or assignment of the Securities hereunder except as may otherwise be
required under applicable securities laws, and no Buyer effecting a pledge of
Securities shall be required to provide the Company with any notice thereof or
otherwise make any delivery to the Company pursuant to this Agreement or any
other Transaction Document. The Company hereby agrees to execute and deliver
such documentation as a pledgee of the Securities may reasonably request in
connection with a pledge of the Securities to such pledgee by a Buyer.

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     (h) Disclosure of Transactions and Other Material Information. The Company
shall, on or before 9:30 a.m., New York time, on the first (1st) Business Day
after the date of this Agreement, issue a press release (the “Press Release”)
reasonably acceptable to the Buyers disclosing all the material terms of the
transactions contemplated by the Transaction Documents. On or before 5:30 p.m.,
New York time, on the first (1st) Business Day following the date of this
Agreement, the Company shall file a Current Report on Form 8-K describing all
the material terms of the transactions contemplated by the Transaction Documents
in the form required by the 1934 Act and attaching all the material Transaction
Documents (including, without limitation, this Agreement (and all schedules to
this Agreement), the form of the Warrants and the form of the Registration
Rights Agreement) (including all attachments, the “8-K Filing”). From and after
the issuance of the 8-K Filing, the Company shall have disclosed all material,
non-public information (if any) delivered to any of the Buyers by the Company or
any of its Subsidiaries, or any of their respective officers, directors,
employees or agents in connection with the transactions contemplated by the
Transaction Documents. The Company shall not, and the Company shall cause each
of its officers, directors, employees and agents not to, provide any Buyer with
any material, non-public information regarding the Company or the Subsidiary
from and after the issuance of the Press Release without the express prior
written consent of such Buyer. Subject to the foregoing, neither the Company,
the Subsidiary nor any Buyer shall issue any press releases or any other public
statements with respect to the transactions contemplated hereby; provided,
however, (i) the Company shall be entitled, without the prior approval of any
Buyer, to make any press release or other public disclosure with respect to such
transactions (A) in substantial conformity with the 8-K Filing and
contemporaneously therewith and (B) as is required by applicable law and
regulations (provided that in the case of clause (A) each Buyer shall receive an
advanced draft of any such press release or other public disclosure prior to its
release) and (ii) each Buyer may make such filings as may be required under
Section 13 and Section 16 of the 1934 Act. Without the prior written consent of
the applicable Buyer, the Company shall not (and shall cause the Subsidiary and
affiliates to not) disclose the name of such Buyer in any filing, announcement,
release or otherwise, except as otherwise required by any law, rule or
regulation applicable to the Company after consultation with the Buyer.
     (i) Additional Registration Statements. Until the Applicable Date (as
defined below) and at any time thereafter while any Registration Statement is
not effective or the prospectus contained therein is not available for use, the
Company shall not file a registration statement under the 1933 Act (other than
any registration statement on Form S-8) unless such registration statement
relates to the Registrable Securities (other than any registration statement on
Form S-8); provided, however that this Section 4(i) shall not in any way
prohibit the Company from filing amendments to registration statements filed
prior to the date of this Agreement so long as any such amendment does not
increase the number of securities covered thereby or effect the issuance of any
securities thereunder (other than pursuant to any registration statement on Form
S-8). “Applicable Date” means the earlier of (i) the first date on which the
resale by the Buyers of all Registrable Securities is covered by one or more
effective Registration Statements (as defined in the Registration Rights
Agreement) (and each prospectus contained therein is available for use on such
date) and (ii) the date on which the Buyers of all Registrable Securities can
freely sell such Registrable Securities under Rule 144.
     (j) Reservation of Shares. So long as any Warrants remain outstanding, from
and after the Shareholder Approval Date, the Company shall use reasonable best
efforts to at all

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times have authorized, and reserved for the purpose of issuance, no less than
100% of the maximum number of shares of Common Stock issuable upon exercise of
all the Warrants as of the date hereof (without regard to any limitations on the
exercise of the Warrants set forth therein), less the number of Warrant Shares
represented by any such Warrants that have been exercised.
     (k) Conduct of Business. The business of the Company and the Subsidiary
shall not be conducted in violation of any law, ordinance or regulation of any
governmental entity, except where such violations would not result, either
individually or in the aggregate, in a Material Adverse Effect.
     (l) Variable Rate Transaction. Until none of the Warrants are outstanding,
the Company and each Subsidiary shall be prohibited from effecting or entering
into an agreement to effect any Subsequent Placement involving a Variable Rate
Transaction. “Variable Rate Transaction” means a transaction in which the
Company or the Subsidiary (i) issues or sells any Convertible Securities either
(A) at a conversion, exercise or 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 Convertible
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
Convertible Securities 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, other than pursuant to a customary “weighted average”
anti-dilution provision or (ii) enters into any agreement (including, without
limitation, an equity line of credit) whereby the Company or the Subsidiary may
sell securities at a future determined price (other than standard and customary
“preemptive” or “participation” rights). Each Buyer shall be entitled to obtain
injunctive relief against the Company and the Subsidiary to preclude any such
issuance, which remedy shall be in addition to any right to collect damages.
     (m) Passive Foreign Investment Company. The Company shall conduct its
business in such a manner as will ensure that the Company will not be deemed to
constitute a passive foreign investment company within the meaning of
Section 1297 of the U.S. Internal Revenue Code of 1986, as amended.
     (n) Corporate Existence. So long as any Buyer owns any Warrants, the
Company shall not be party to any Fundamental Transaction (as defined in the
Warrants) unless the Company is in compliance with the applicable provisions
governing Fundamental Transactions set forth in the Warrants.
     (o) Shareholder Approval; Voting of Shares. As soon as reasonably
practicable after the Closing, the Company shall cause a special meeting of
shareholders of the Company (the “Shareholder Meeting”) to be called and held to
vote on a proposal (the “Shareholder Proposal”) to approve an amendment to the
Company’s Articles of Incorporation to increase the authorized number of shares
of Common Stock by up to 15 million shares. In connection with the Shareholder
Meeting, the Company shall, as soon as reasonably practicable after the Closing,
prepare and file with the SEC a preliminary proxy statement that shall include
the Shareholder Proposal and a recommendation by the Company’s board of
directors for a vote in favor of the Shareholder Proposal. The Company shall use
its reasonable best efforts (i) to respond to any

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comments of the SEC or its staff to such preliminary proxy statement, (ii) to
cause the definitive proxy statement related to the Shareholder Meeting to be
mailed to the Company’s stockholders and (iii) to solicit shareholders to vote
in favor of the Shareholder Proposal (the requisite shareholder approval of the
Shareholder Proposal being referred to herein as the “Shareholder Approval”, and
the date such Shareholder Approval is obtained, the “Shareholder Approval
Date”).

5.   REGISTER; TRANSFER AGENT INSTRUCTIONS; LEGEND.

     (a) Register. The Company shall maintain at its principal executive offices
(or such other office or agency of the Company as it may designate by notice to
each holder of Securities), a register for the Warrants in which the Company
shall record the name and address of the Person in whose name the Warrants have
been issued (including the name and address of each transferee, to the extent it
is appropriately notified of transfers) and the number of Warrant Shares
issuable upon exercise of the Warrants held by such Person. The Company shall
keep the register open and available at all times during normal business hours
for inspection of any Buyer or its legal representatives so long as Buyer
continues to hold any Warrants.
     (b) Transfer Agent Instructions. The Company shall issue irrevocable
instructions to its transfer agent and any subsequent transfer agent in a form
reasonably acceptable to each of the Buyers (the “Irrevocable Transfer Agent
Instructions”) to issue certificates or credit shares to the applicable balance
accounts at The Depository Trust Company (“DTC”), registered in the name of each
Buyer or its respective nominee(s), for the Warrant Shares in such amounts as
specified from time to time by each Buyer to the Company upon the exercise of
the Warrants (as the case may be). The Company represents and warrants that no
instruction other than the Irrevocable Transfer Agent Instructions referred to
in this Section 5(b), and stop transfer instructions to give effect to Section
2(g) hereof, will be given by the Company to its transfer agent with respect to
the Securities, and that the Securities shall otherwise be freely transferable
on the books and records of the Company, as applicable, to the extent provided
in this Agreement and the other Transaction Documents. If a Buyer effects a
sale, assignment or transfer of the Securities in accordance with Section 2(g),
the Company shall permit the transfer and shall promptly instruct its transfer
agent to issue one or more certificates or credit shares to the applicable
balance accounts at DTC in such name and in such denominations as specified by
such Buyer to effect such sale, transfer or assignment. In the event that such
sale, assignment or transfer involves Warrant Shares sold, assigned or
transferred pursuant to an effective registration statement or in compliance
with Rule 144 (assuming the transferor is not then an affiliate of the Company),
the transfer agent shall issue such shares to such Buyer, assignee or transferee
(as the case may be) without any restrictive legend in accordance with Section
5(d) below. The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to a Buyer. Accordingly, the Company
acknowledges that the remedy at law for a breach of its obligations under this
Section 5(b) will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Section 5(b), that a
Buyer shall be entitled, in addition to all other available remedies, to seek an
order and/or injunction restraining any breach and requiring immediate issuance
and transfer, without the necessity of showing economic loss and without any
bond or other security being required. The Company shall cause its counsel to
issue the legal opinion referred to in the Irrevocable Transfer Agent
Instructions to the Company’s transfer agent promptly following each Effective
Date (as defined

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in the Registration Rights Agreement). Any fees (with respect to the transfer
agent, counsel to the Company or otherwise) associated with the issuance of such
opinion or the removal of any legends on any of the Securities shall be borne by
the Company.
     (c) Legends. Each Buyer understands that the Securities have been issued
(or will be issued in the case of the Warrant Shares) pursuant to an exemption
from registration or qualification under the 1933 Act and applicable state
securities laws, and except as set forth below, the Securities shall bear any
legend as required by the “blue sky” laws of any state and a restrictive legend
in substantially the following form (and a stop-transfer order may be placed
against transfer of such stock certificates):
[NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE [CONVERTIBLE] [EXERCISABLE]
HAVE BEEN][THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN]
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
OF COUNSEL TO THE HOLDER (IF REQUESTED BY THE COMPANY), IN A FORM REASONABLY
ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
(II) UNLESS SOLD OR ELIGIBLE TO BE SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER
SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES.
     (d) Removal of Legends. Certificates evidencing Securities shall not be
required to contain the legend set forth in Section 5(c) above or any other
legend (i) while a registration statement (including a Registration Statement)
covering the resale of such Securities is effective under the 1933 Act,
(ii) following any sale of such Securities pursuant to Rule 144 (assuming the
transferor is not an affiliate of the Company), (iii) if such Securities are
eligible to be sold, assigned or transferred under Rule 144 (provided that a
Buyer provides the Company with reasonable assurances that such Securities are
eligible for sale, assignment or transfer under Rule 144 which shall not include
an opinion of counsel), (iv) in connection with a sale, assignment or other
transfer (other than under Rule 144), provided that such Buyer provides the
Company with an opinion of counsel to such Buyer, in a generally acceptable
form, to the effect that such sale, assignment or transfer of the Securities may
be made without registration under the applicable requirements of the 1933 Act
or (v) if such legend is not required under applicable requirements of the 1933
Act (including, without limitation, controlling judicial interpretations and
pronouncements issued by the SEC). If a legend is not required pursuant to the
foregoing, the Company shall no later than three (3) Trading Days following the
delivery by a Buyer to the Company or the transfer agent (with notice to the
Company) of a legended certificate representing such Securities (endorsed or
with stock powers attached, signatures guaranteed, and

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otherwise in form necessary to affect the reissuance and/or transfer, if
applicable), together with any other deliveries from such Buyer as may be
required above in this Section 5(d), as directed by such Buyer, either:
(A) provided that the Company’s transfer agent is participating in the DTC Fast
Automated Securities Transfer Program and such Securities are Common Shares or
Warrant Shares, credit the aggregate number of shares of Common Stock to which
such Buyer shall be entitled to such Buyer’s or its designee’s balance account
with DTC through its Deposit/Withdrawal at Custodian system or (B) if the
Company’s transfer agent is not participating in the DTC Fast Automated
Securities Transfer Program, issue and deliver (via reputable overnight courier)
to such Buyer, a certificate representing such Securities that is free from all
restrictive and other legends, registered in the name of such Buyer or its
designee (the date by which such credit is so required to be made to the balance
account of such Buyer’s or such Buyer’s nominee with DTC or such certificate is
required to be delivered to such Buyer pursuant to the foregoing is referred to
herein as the “Required Delivery Date”).
     (e) Buy-In. If the Company fails to so properly deliver such unlegended
certificates or so properly credit the balance account of such Buyer’s or such
Buyer’s nominee with DTC by the Required Delivery Date, and if on or after the
Required Delivery Date such Buyer purchases (in an open market transaction or
otherwise) shares of Common Stock to deliver in satisfaction of a sale by such
Buyer of shares of Common Stock that such Buyer anticipated receiving from the
Company without any restrictive legend, then, in addition to all other remedies
available to such Buyer, the Company shall, within three (3) Trading Days after
such Buyer’s request and in such Buyer’s sole discretion, either (i) pay cash to
such Buyer in an amount equal to such Buyer’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 or credit such Buyer’s balance account shall terminate and such
shares shall be cancelled, or (ii) promptly honor its obligation to deliver to
such Buyer a certificate or certificates or credit such Buyer’s DTC account
representing such number of shares of Common Stock that would have been issued
if the Company timely complied with its obligations hereunder and pay cash to
such Buyer 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 Shares or Warrant Shares (as
the case may be) that the Company was required to deliver to such Buyer by the
Required Delivery Date times (B) the Closing Sale Price (as defined in the
Warrants) of the Common Stock on the Trading Day immediately preceding the
Required Delivery Date.

6.   CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL.

     (a) The obligation of the Company hereunder to issue and sell the Common
Shares and the related Warrants to each Buyer at the Closing is subject to the
satisfaction, at or before the Closing Date, of each of the following
conditions, provided that these conditions are for the Company’s sole benefit
and may be waived by the Company at any time in its sole discretion by providing
each Buyer with prior written notice thereof:
     (i) Such Buyer shall have executed each of the other Transaction Documents
to which it is a party and delivered the same to the Company.
     (ii) Such Buyer and each other Buyer shall have delivered to the Company
the Purchase Price for the Common Shares and the related Warrants being
purchased by such

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Buyer at the Closing by wire transfer of immediately available funds pursuant to
the wire instructions provided by the Company.
     (iii) The representations and warranties of such Buyer shall be true and
correct in all material respects as of the date when made and as of the Closing
Date as though originally made at that time (except for representations and
warranties that speak as of a specific date, which shall be true and correct as
of such date), and such Buyer shall have performed, satisfied and complied in
all material respects with the covenants, agreements and conditions required by
this Agreement to be performed, satisfied or complied with by such Buyer at or
prior to the Closing Date.
7. CONDITIONS TO EACH BUYER’S OBLIGATION TO PURCHASE.
     (a) The obligation of each Buyer hereunder to purchase its Common Shares
and its related Warrants at the Closing is subject to the satisfaction, at or
before the Closing Date, of each of the following conditions, provided that
these conditions are for each Buyer’s sole benefit and may be waived by such
Buyer at any time in its sole discretion by providing the Company with prior
written notice thereof:
     (i) The Company shall have duly executed and delivered to such Buyer each
of the Transaction Documents to which it is a party and the Company shall have
duly executed and delivered to such Buyer the Common Shares in such aggregate
number of Common Shares as is set forth across from such Buyer’s name in column
(3) of the Schedule of Buyers and the related Warrants, (initially for such
aggregate number of shares of Warrant Shares as is set forth across from such
Buyer’s name in column (4) of the Schedule of Buyers, respectively) being
purchased by such Buyer at the Closing pursuant to this Agreement.
     (ii) Such Buyer shall have received the opinion of Morrison & Foerster LLP,
the Company’s counsel, dated as of the Closing Date, in the form reasonably
acceptable to such Buyer.
     (iii) The Company shall have delivered to such Buyer a copy of the
Irrevocable Transfer Agent Instructions, in the form reasonably acceptable to
such Buyer, which instructions shall have been delivered to and acknowledged in
writing by the Company’s transfer agent.
     (iv) The Company shall have delivered to such Buyer a certificate
evidencing the good standing of the Company issued by the Secretary of State of
the State of California as of a date within ten (10) days of the Closing Date.
     (v) The Company shall have delivered to such Buyer a certified copy of the
Articles of Incorporation as certified by the California Secretary of State
within ten (10) days of the Closing Date.
     (vi) The Company shall have delivered to such Buyer a certificate, in the
form reasonably acceptable to such Buyer, duly executed by the Secretary of the
Company and dated as of the Closing Date, as to (i) the resolutions consistent
with Section 3(b) as

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adopted by the Company’s board of directors, in a form reasonably acceptable to
such Buyer, (ii) the Articles of Incorporation of the Company and (iii) the
Bylaws of the Company, each as in effect at the Closing.
     (vii) Each and every representation and warranty of the Company shall be
true and correct in all material respects as of the date when made and as of the
Closing Date as though originally made at that time (except for representations
and warranties that speak as of a specific date, which shall be true and correct
as of such date) and the Company shall have performed, satisfied and complied in
all material respects with the covenants, agreements and conditions required to
be performed, satisfied or complied with by the Company at or prior to the
Closing Date. Such Buyer shall have received a certificate, duly executed by
either the Chief Executive Officer or the Chief Financial Officer of the
Company, dated as of the Closing Date, to the foregoing effect and as to such
other matters as may be reasonably requested by such Buyer in the form
reasonably acceptable to such Buyer.
     (viii) The Company shall have delivered to such Buyer a letter from the
Company’s transfer agent certifying the number of shares of Common Stock
outstanding on the Closing Date immediately prior to the Closing.
     (ix) The Common Stock (I) shall be designated for quotation or listed on
the Principal Market and (II) shall not have been suspended, as of the Closing
Date, by the SEC or the Principal Market from trading on the Principal Market
nor shall suspension by the SEC or the Principal Market have been threatened, as
of the Closing Date, either (A) in writing by the SEC or the Principal Market or
(B) by falling below the minimum maintenance requirements of the Principal
Market.
     (x) The Company shall have obtained all governmental, regulatory or third
party consents and approvals, if any, necessary for the sale of the Securities,
including without limitation, those required by the Principal Market, except for
the Shareholder Approval.
     (xi) No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction that prohibits the
consummation of any of the transactions contemplated by the Transaction
Documents.
     (xii) Since the date of execution of this Agreement, no event or series of
events shall have occurred that reasonably would have or result in a Material
Adverse Effect.
     (xiii) Such Buyer shall have received a letter on the letterhead of the
Company, duly executed by either the Chief Executive Officer or the Chief
Financial Officer of the Company, setting forth the wire instructions of the
Company.
     (xiv) The Company shall have delivered to such Buyer such other documents
relating to the transactions contemplated by this Agreement as such Buyer or its
counsel may reasonably request.

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     (xv) The Company shall have received, and provided to such Buyer copies of,
executed counterparts of this Agreement from a sufficient number of Buyers
(including such Buyer) such that the sum of the aggregate purchase prices for
the Common Shares and the Warrants to be purchased by all Buyers as contemplated
by the terms of this Agreement, plus the aggregate exercise prices for the
Warrant Shares to be purchased by all Buyers upon exercise of the Warrants as
contemplated by the terms of this Agreement shall be $4,999,999.56.
     (xvi) Such Buyer’s acquisition of the Securities hereunder (assuming the
acquisition of the Warrant Shares upon exercise of such Buyer’s Warrant) would
not result in such Buyer having beneficial ownership of more than 49.9% of the
Common Stock.
8. TERMINATION.
     In the event that the Closing shall not have occurred with respect to a
Buyer within five (5) business days of the date hereof, then such Buyer shall
have the right to terminate its obligations under this Agreement with respect to
itself at any time on or after the close of business on such date without
liability of such Buyer to any other party; provided, however, (i) the right to
terminate this Agreement under this Section 8 shall not be available to such
Buyer if the failure of the transactions contemplated by this Agreement to have
been consummated by such date is the result of such Buyer’s breach of this
Agreement and (ii) the abandonment of the sale and purchase of the Common Shares
and the Warrants shall be applicable only to such Buyer providing such written
notice, provided further that no such termination shall affect any obligation of
the Company under this Agreement to reimburse such Buyer for the expenses
described in Section 4(f) above. Nothing contained in this Section 8 shall be
deemed to release any party from any liability for any breach by such party of
the terms and provisions of this Agreement or the other Transaction Documents or
to impair the right of any party to compel specific performance by any other
party of its obligations under this Agreement or the other Transaction
Documents.
9. MISCELLANEOUS.
     (a) Governing Law; Jurisdiction; Jury Trial. All questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall
be governed by the internal laws of the State of New York, without giving effect
to any choice of law or conflict of law provision or rule (whether of the State
of New York or any other jurisdictions) that would cause the application of the
laws of any jurisdictions other than 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

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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. EACH PARTY HEREBY IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF
THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
     (b) Counterparts. This Agreement may be executed in two or more identical
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party. In the event that any signature is delivered by
facsimile transmission or by an e-mail which contains a portable document format
(.pdf) file of an executed signature page, such signature page shall create a
valid and binding obligation of the party executing (or on whose behalf such
signature is executed) with the same force and effect as if such signature page
were an original thereof.
     (c) Headings; Gender. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement. Unless the context clearly indicates otherwise, each pronoun herein
shall be deemed to include the masculine, feminine, neuter, singular and plural
forms thereof. The terms “including,” “includes,” “include” and words of like
import shall be construed broadly as if followed by the words “without
limitation.” The terms “herein,” “hereunder,” “hereof” and words of like import
refer to this entire Agreement instead of just the provision in which they are
found.
     (d) Severability. If any provision of this Agreement is prohibited by law
or otherwise determined to be invalid or unenforceable by a court of competent
jurisdiction, the provision that would otherwise be prohibited, invalid or
unenforceable shall be deemed amended to apply to the broadest extent that it
would be valid and enforceable, and the invalidity or unenforceability of such
provision shall not affect the validity of the remaining provisions of this
Agreement so long as this Agreement as so modified continues to express, without
material change, the original intentions of the parties as to the subject matter
hereof and the prohibited nature, invalidity or unenforceability of the
provision(s) in question does not substantially impair the respective
expectations or reciprocal obligations of the parties or the practical
realization of the benefits that would otherwise be conferred upon the parties.
The parties will endeavor in good faith negotiations to replace the prohibited,
invalid or unenforceable provision(s) with a valid provision(s), the effect of
which comes as close as possible to that of the prohibited, invalid or
unenforceable provision(s).
     (e) Entire Agreement; Amendments. This Agreement, the other Transaction
Documents and the schedules and exhibits attached hereto and thereto and the
instruments referenced herein and therein supersede all other prior oral or
written agreements between the Buyers, the Company, their affiliates and Persons
acting on their behalf solely with respect to the matters contained herein and
therein, and this Agreement, the other Transaction Documents, the schedules and
exhibits attached hereto and thereto and the instruments referenced herein and
therein contain the entire understanding of the parties solely with respect to
the matters covered herein and therein; provided, however, nothing contained in
this Agreement or any other Transaction Document shall (or shall be deemed to)
(i) have any effect on any agreements any Buyer has entered into with the
Company prior to the date hereof with respect to any prior

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investment made by such Buyer in the Company or (ii) waive, alter, modify or
amend in any respect any obligations of the Company, or any rights of or
benefits to any Buyer or any other Person, in any agreement entered into prior
to the date hereof between or among the Company and any Buyer and all such
agreements shall continue in full force and effect. Except as specifically set
forth herein or therein, neither the Company nor any Buyer makes any
representation, warranty, covenant or undertaking with respect to such matters.
For clarification purposes, the Recitals are part of this Agreement. No
provision of this Agreement may be amended or waived other than by an instrument
in writing signed by the Company and the holders of at least 81% of the
Registrable Securities (excluding any Registrable Securities held by the Company
or the Subsidiary) issued or issuable hereunder or pursuant to the Warrants, and
any amendment or to, or waiver of any provision of, this Agreement made in
conformity with the provisions of this Section 9(e) shall be binding on all
Buyers and holders of Securities, as applicable, provided that any party may
give a waiver in writing as to itself. Notwithstanding anything to the contrary
contained in this Agreement, in the event that the Company shall deliver written
or e-mail notice to a holder of Registrable Securities who is a natural person
requesting such holder’s consent, approval or agreement with respect to any such
requested amendment or waiver, such holder shall be deemed to have consented,
approved and agreed with respect to such amendment or waiver if such holder does
not provide written or e-mail notice to the Company indicating such Holder’s
non-consent within five (5) Business Days of delivery by the Company of such
written or e-mail notice. No such amendment or waiver (unless given pursuant to
the foregoing proviso in the case of a waiver) shall be effective to the extent
that it applies to less than all of the holders of the Warrants then
outstanding. The Company has not, directly or indirectly, made any agreements
with any Buyers relating to the terms or conditions of the transactions
contemplated by the Transaction Documents except as set forth in the Transaction
Documents. Without limiting the foregoing, the Company confirms that, except as
set forth in this Agreement, no Buyer has made any commitment or promise or has
any other obligation to provide any financing to the Company, the Subsidiary or
otherwise.
     (f) Notices. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered: (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one (1) Business Day after deposit
with an overnight courier service with next day delivery specified, in each
case, properly addressed to the party to receive the same. The addresses and
facsimile numbers for such communications shall be:
If to the Company:
Aradigm Corporation
3929 Point Eden Way
Hayward, CA 94545
Telephone: (510) 265-9000
Facsimile: 510-265-0277
Attention: Chief Executive Officer

29

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With a copy (for informational purposes only) to:
Morrison & Foerster LLP
425 Market Street
San Francisco, CA 94105
Telephone: (415) 268-7197
Facsimile: (415) 268-7522
Attention: John W. Campbell, Esq.
If to a Buyer, to its address and facsimile number set forth on the Schedule of
Buyers, with copies to such Buyer’s representatives as set forth on the Schedule
of Buyers,
or to such other address and/or facsimile number and/or to the attention of such
other Person as the recipient party has specified by written notice given to
each other party five (5) days prior to the effectiveness of such change.
Written confirmation of receipt (A) given by the recipient of such notice,
consent, waiver or other communication, (B) mechanically or electronically
generated by the sender’s facsimile machine containing the time, date, recipient
facsimile number and an image of the first page of such transmission or
(C) provided by an overnight courier service shall be rebuttable evidence of
personal service, receipt by facsimile or receipt from an overnight courier
service in accordance with clause (i), (ii) or (iii) above, respectively.
     (g) Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their respective successors and assigns,
including any purchasers of any of the Securities. The Company shall not assign
this Agreement or any rights or obligations hereunder without the prior written
consent of holders of a majority of the Registrable Securities (excluding any
Registrable Securities held by the Company or the Subsidiary) issued or issuable
hereunder or pursuant to the Warrants, including, without limitation, by way of
a Fundamental Transaction (as defined in the Warrants) (unless the Company is in
compliance with the applicable provisions governing Fundamental Transactions set
forth in the Warrants). A Buyer shall not assign this Agreement or any rights or
obligations hereunder except to (a) an Affiliate of the Buyer who is an
accredited investor within the meaning of Regulation D of the 1933 Act or
(b) such other person upon the prior written consent of the Company. For
purposes hereof, an “Affiliate” means an entity controlling, controlled by, or
under common control with the Buyer, and control means the power to control more
than half of the voting power.
     (h) No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, other than the Indemnitees referred to in Section 9(k).
     (i) Survival. The representations, warranties, agreements and covenants
shall survive the Closing. Each Buyer shall be responsible only for its own
representations, warranties, agreements and covenants hereunder.
     (j) Further Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
any other party may reasonably request

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in order to carry out the intent and accomplish the purposes of this Agreement
and the consummation of the transactions contemplated hereby.
     (k) Indemnification. In consideration of each Buyer’s execution and
delivery of the Transaction Documents and acquiring the Securities thereunder
and in addition to all of the Company’s other obligations under the Transaction
Documents, the Company shall defend, protect, indemnify and hold harmless each
Buyer and each holder of any Securities and all of their stockholders, partners,
members, officers, directors, employees and direct or indirect investors and any
of the foregoing Persons’ agents or other representatives (including, without
limitation, those retained in connection with the transactions contemplated by
this Agreement) (collectively, the “Indemnitees”) from and against any and all
actions, causes of action, suits, claims, losses, costs, penalties, fees,
liabilities and damages, and expenses in connection therewith (irrespective of
whether any such Indemnitee is a party to the action for which indemnification
hereunder is sought), and including reasonable attorneys’ fees and disbursements
(the “Indemnified Liabilities”), incurred by any Indemnitee as a result of, or
arising out of, or relating to (a) any misrepresentation or breach of any
representation or warranty made by the Company in any of the Transaction
Documents, (b) any breach of any covenant, agreement or obligation of the
Company contained in any of the Transaction Documents or (c) any cause of
action, suit or claim brought or made against such Indemnitee by a third party
(including for these purposes a derivative action brought on behalf of the
Company or the Subsidiary) and arising out of or resulting from (i) the
execution, delivery, performance or enforcement of any of the Transaction
Documents, (ii) any transaction financed or to be financed in whole or in part,
directly or indirectly, with the proceeds of the issuance of the Securities,
(iii) any disclosure properly made pursuant to Section 4(h) or (iv) the status
of such Buyer or holder of the Securities as an investor in the Company pursuant
to the transactions contemplated by the Transaction Documents. To the extent
that the foregoing undertaking by the Company may be unenforceable for any
reason, the Company shall make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is permissible under
applicable law. Except as otherwise set forth herein, the mechanics and
procedures with respect to the rights and obligations under this Section 9(k)
shall be the same as those set forth in Section 6 of the Registration Rights
Agreement.
     (l) Construction. The language used in this Agreement will be 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.
     (m) Remedies. Each Buyer and each holder of any Securities shall have all
rights and remedies set forth in the Transaction Documents and all rights and
remedies which such holders have been granted at any time under any other
agreement or contract and all of the rights which such holders have under any
law. Any Person having any rights under any provision of this Agreement shall be
entitled to enforce such rights specifically (without posting a bond or other
security), to recover damages by reason of any breach of any provision of this
Agreement and to exercise all other rights granted by law. Furthermore, the
Company recognizes that in the event that it fails to perform, observe, or
discharge any or all of its obligations under the Transaction Documents, any
remedy at law may prove to be inadequate relief to the Buyers. The Company
therefore agrees that the Buyers shall be entitled to seek specific performance
and/or temporary, preliminary and permanent injunctive or other equitable relief
from any court of competent

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jurisdiction in any such case without the necessity of proving actual damages
and without posting a bond or other security.
     (n) Withdrawal Right. Notwithstanding anything to the contrary contained in
(and without limiting any similar provisions of) the Transaction Documents,
whenever any Buyer exercises a right, election, demand or option under a
Transaction Document and the Company does not timely perform its related
obligations within the periods therein provided, then such Buyer may rescind or
withdraw, in its sole discretion from time to time upon written notice to the
Company, any relevant notice, demand or election in whole or in part without
prejudice to its future actions and rights
     (o) Payment Set Aside; Currency. To the extent that the Company makes a
payment or payments to any Buyer hereunder or pursuant to any of the other
Transaction Documents or any of the Buyers enforce or exercise their rights
hereunder or thereunder, and such payment or payments or the proceeds of such
enforcement or exercise or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside, recovered from, disgorged
by or are required to be refunded, repaid or otherwise restored to the Company,
a trustee, receiver or any other Person under any law (including, without
limitation, any bankruptcy law, foreign, state or federal law, common law or
equitable cause of action), then to the extent of any such restoration the
obligation or part thereof originally intended to be satisfied shall be revived
and continued in full force and effect as if such payment had not been made or
such enforcement or setoff had not occurred. Unless otherwise expressly
indicated, all dollar amounts referred to in this Agreement and the other
Transaction Documents are in United States Dollars (“U.S. Dollars”), and all
amounts owing under this Agreement and all other Transaction Documents shall be
paid in U.S. Dollars. All amounts denominated in other currencies (if any) shall
be converted in the U.S. Dollar equivalent amount in accordance with the
Exchange Rate on the date of calculation. “Exchange Rate” means, in relation to
any amount of currency to be converted into U.S. Dollars pursuant to this
Agreement, the U.S. Dollar exchange rate as published in the Wall Street Journal
on the relevant date of calculation.
     (q) Independent Nature of Buyers’ Obligations and Rights. The obligations
of each Buyer under the Transaction Documents are several and not joint with the
obligations of any other Buyer, and no Buyer shall be responsible in any way for
the performance of the obligations of any other Buyer under any Transaction
Document. Nothing contained herein or in any other Transaction Document, and no
action taken by any Buyer pursuant hereto or thereto, shall be deemed to
constitute the Buyers as, and the Company acknowledges that the Buyers do not so
constitute, a partnership, an association, a joint venture or any other kind of
group or entity, or create a presumption that the Buyers are in any way acting
in concert or as a group or entity with respect to such obligations or the
transactions contemplated by the Transaction Documents or any matters, and the
Company acknowledges that the Buyers are not acting in concert or as a group,
and the Company shall not assert any such claim, with respect to such
obligations or the transactions contemplated by the Transaction Documents. The
decision of each Buyer to purchase Securities pursuant to the Transaction
Documents has been made by such Buyer independently of any other Buyer. Each
Buyer acknowledges that no other Buyer has acted as agent for such Buyer in
connection with such Buyer making its investment hereunder and that no other
Buyer will be acting as agent of such Buyer in connection with monitoring such
Buyer’s investment in the Securities or enforcing its rights under the
Transaction Documents. The

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Company and each Buyer confirms that each Buyer has independently participated
with the Company and the Subsidiary in the negotiation of the transaction
contemplated hereby with the advice of its own counsel and advisors. Each Buyer
shall be entitled to independently protect and enforce its rights, including,
without limitation, the rights arising out of this Agreement or out of any other
Transaction Documents, and it shall not be necessary for any other Buyer to be
joined as an additional party in any proceeding for such purpose. The use of a
single agreement to effectuate the purchase and sale of the Securities
contemplated hereby was solely in the control of the Company, not the action or
decision of any Buyer, and was done solely for the convenience of the Company
and the Subsidiary and not because it was required or requested to do so by any
Buyer. It is expressly understood and agreed that each provision contained in
this Agreement and in each other Transaction Document is between the Company,
each Subsidiary and a Buyer, solely, and not between the Company, the Subsidiary
and the Buyers collectively and not between and among the Buyers.
     (r) Judgment Currency.
     (i) If for the purpose of obtaining or enforcing judgment against the
Company in any court in any jurisdiction it becomes necessary to convert into
any other currency (such other currency being hereinafter in this Section 9(r)
referred to as the “Judgment Currency”) an amount due in U.S. Dollars under this
Agreement or any other Transaction Document, the conversion shall be made at the
Exchange Rate prevailing on the Trading Day immediately preceding: (1) the date
of actual payment of the amount due, in the case of any proceeding in the courts
of New York or in the courts of any other jurisdiction that will give effect to
such conversion being made on such date or (2) the date on which the foreign
court determines, in the case of any proceeding in the courts of any other
jurisdiction (the date as of which such conversion is made pursuant to this
Section 9(r)(i) being hereinafter referred to as the “Judgment Conversion
Date”).
     (ii) If in the case of any proceeding in the court of any jurisdiction
referred to in Section 9(r)(i) above, there is a change in the Exchange Rate
prevailing between the Judgment Conversion Date and the date of actual payment
of the amount due, the applicable party shall pay such adjusted amount as may be
necessary to ensure that the amount paid in the Judgment Currency, when
converted at the Exchange Rate prevailing on the date of payment, will produce
the amount of U.S. Dollars which could have been purchased with the amount of
Judgment Currency stipulated in the judgment or judicial order at the Exchange
Rate prevailing on the Judgment Conversion Date.
     (iii) Any amount due from the Company under this provision shall be due as
a separate debt and shall not be affected by judgment being obtained for any
other amounts due under or in respect of this Agreement or any other Transaction
Document.
[signature pages follow]

33

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     IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Agreement to be duly executed as of the date first
written above.

            COMPANY:

ARADIGM CORPORATION
      By:   /s/ Nancy Pecota         Name:   Nancy Pecota        Title:   Vice
President, Finance and
Chief Financial Officer     

 

--------------------------------------------------------------------------------

 

     IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Agreement to be duly executed as of the date first
written above.

                  BUYER:    
 
                [NAME OF BUYER]    
 
           
 
  By:        
 
           
 
      Name:    
 
      Title:    

             
 
  TAX ID NO:        
 
                  ADDRESS AND CONTACT INFORMATION (including for purposes of
notice under the     Transaction Documents):
 
  c/o:        
 
           
 
  Street:        
 
           
 
  City/State/Zip:        
 
           
 
  Attention:        
 
           
 
  Tel:        
 
           
 
  Fax:        
 
           
 
  E-mail:        
 
           

         
 
  NUMBER OF COMMON SHARES:  
                                                                 
               

         
 
  NUMBER OF WARRANT SHARES UNDERLYING WARRANT:              

     
 
  AGGREGATE PURCHASE PRICE FOR BUYER’S COMMON SHARES
 
  AND BUYER’S WARRANT: $
                                                                   
             
 
   
 
  LEGAL REPRESENTATIVE’S ADDRESS AND CONTACT INFORMATION
 
  (if applicable):

             
 
  c/o:        
 
           
 
  Street:        
 
           
 
  City/State/Zip:        
 
           
 
  Attention:        
 
           
 
  Tel:        
 
           
 
  Fax:        
 
           
 
  E-mail:        
 
           

 

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Schedule of Buyers

                                                      (5)                      
    Aggregate                           Purchase                           Price
for                           Buyer's           (3)     (4)     Common          
Number of     Number of     Shares and   (1)   (2)   Common     Warrant    
Buyer's   Buyer   Address and Contact Information   Shares     Shares    
Warrants  
FIRST EAGLE VALUE IN BIOTECHNOLOGY MASTER FUND, LTD
  [OMITTED]     9,716,704       2,107,620     $ 1,150,457.75  
DEF ASSOCIATES N.V.
  [OMITTED]     2,776,201       602,177     $ 328,702.20  
21 APRIL FUND, LP
  [OMITTED]     1,526,911       331,197     $ 180,786.26  
21 APRIL FUND, LTD.
  [OMITTED]     5,413,592       1,174,245     $ 640,969.29  
BISON TRADING, LLC
  [OMITTED]     1,388,100       301,089     $ 164,351.04  
THE CONUS FUND, L.P.
  [OMITTED]     2,572,506       557,994     $ 304,584.71  
THE CONUS FUND (QP), L.P.
  [OMITTED]     3,854,645       836,100     $ 456,389.97  
THE CONUS FUND OFFSHORE MASTER FUND LTD.
  [OMITTED]     513,351       111,349     $ 60,780.76  
LAURENCE LYTTON
  [OMITTED]     6,940,502       1,505,443     $ 821,755.44  
TOTAL
        34,702,512       7,527,214     $ 4,108,777.42