Exhibit 10.39

FIRST AMENDMENT TO FACILITY AGREEMENT

AND REGISTRATION RIGHTS AGREEMENT

FIRST AMENDMENT TO FACILITY AGREEMENT AND REGISTRATION RIGHTS AGREEMENT (this
“Amendment”), dated as of February 28, 2014, by and among MANNKIND CORPORATION,
a Delaware corporation (the “Borrower”), DEERFIELD PRIVATE DESIGN FUND II, L.P.
(“DPDF”) and DEERFIELD PRIVATE DESIGN INTERNATIONAL II, L.P. (together with DPDF
collectively referred to as the “Purchasers” and together with the Borrower, the
“Parties”).

RECITALS:

1. Borrower and Purchasers have entered into that certain Facility Agreement and
Registration Rights Agreement, each dated as of July 1, 2013 (as the same may be
amended, modified, restated or otherwise supplemented from time to time, the
“Facility Agreement” and “Registration Rights Agreement”).

2. The Facility Agreement provides for the issuance of Notes in 4 Tranches of
$40 million per Tranche. Prior to the date hereof, the Purchasers have purchased
the Tranche 1 Notes, the Tranche 2 Notes and the Tranche 3 Notes in the
principal amount of $40 million each.

3. Prior to the date hereof, the Purchasers have converted the Tranche 2 Notes
into Common Stock, leaving the Tranche 1 Notes and the Tranche 3 Notes
outstanding in the aggregate principal amount of $80 million.

4. The Borrower has agreed to deliver to the Purchasers a Note Purchase Request
for the Tranche 4 Notes pursuant to the terms and conditions of the Facility
Agreement upon satisfaction of the Tranche 4 Conditions.

5. The Parties desire to amend the Tranche 1 Notes and the Tranche 3 Notes to
provide that, subject to the limitations set forth in this Amendment, up to an
additional $60 million aggregate principal amount of the Tranche 1 Notes and the
Tranche 3 Notes can be converted from time to time into Common Stock; provided,
that the Tranche 3 Notes must be fully converted prior to the conversion of the
Tranche 1 Notes(the aggregate principal amount of the Tranche 1 Notes and
Tranche 3 Notes converted after the date of this Amendment into Common Stock on
the date of determination, the “Conversion Aggregate Principal Amount”). The
Borrower desires to issue to the Purchaser Amended and Restated Tranche 1 Notes
and Tranche 3 Notes, in the form of Exhibit A, incorporating the modifications
to such Notes as referred to above (the “Amended and Restated Notes”).

6. The Parties desire to amend the Facility Agreement to provide that, prior to
December 30, 2014, the Borrower may deliver a Note Purchase Request from time to
time pursuant to the procedures outlined in Section 2.2 of the Facility
Agreement or the Purchasers to purchase a new series of Notes in the form
attached hereto as Exhibit B (the “Tranche B Notes”)

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in a maximum principal amount equal to (a) at any time after the date of this
Amendment, 33.33% of the Conversion Aggregate Principal Amount or (b) if the FDA
has approved a new drug application for the Product (“FDA Approval”) and the
Purchasers have purchased the Tranche 4 Notes, 150% of the Conversion Aggregate
Principal Amount.

7. The Tranche B Notes will bear interest at the Interest Rate (which shall be
reduced to 8.75% simple interest per year upon the Borrower entering into a
collaborative arrangement with an unrelated Person to develop and commercialize
the Product after FDA Approval) and shall be prepayable at any time commencing
two years from their date of issuance without premium or penalty.

8. The Parties desire to permit the additional issuance of unsecured convertible
senior subordinated notes.

NOW, THEREFORE, in consideration of the mutual agreements contained herein, the
Parties agree as follows:

1. Defined Terms. Capitalized terms used herein which are defined in the
Facility Agreement, unless otherwise defined herein, shall have the meanings
ascribed to them in the Facility Agreement and the Registration Rights
Agreement. The Recitals to this Amendment are incorporated herein in their
entirety by this reference thereto.

2. Amendments to Facility Agreement.

Upon the satisfaction of the conditions set forth in Section 5 to this
Amendment:

a. The definition of “Notes” in Section 1.1 of the Facility Agreement is amended
in its entirety to read as follows:

“Notes” means the Tranche 1 Notes, Tranche 2 Notes, Tranche 3 Notes, the Amended
and Restated Notes, Tranche 4 Notes in the form attached as Exhibit B to the
Facility Agreement and, unless the context indicates otherwise, the Tranche B
Senior Secured Notes in the form attached as Exhibit B to the First Amendment to
Facility Agreement and Registration Rights Agreement (the “Tranche B Notes”), in
each case, as amended, modified, restated or supplemented from time to time.”

b. The definition of Interest Rate in Section 1.1 of the Facility Agreement is
amended in its entirety to read as follows:

“Interest Rate” means with respect to the Tranche 1 Notes, Tranche 2 Notes,
Tranche 3 Notes, and Tranche 4 Notes 9.75% simple interest per annum, and with
respect to the Tranche B Notes, 9.75% simple interest per annum: provided,
however that at the effective date of a collaboration of the Borrower with an
unrelated Person to develop and commercialize the Product after FDA Approval,
the interest rate with respect to the Tranche B Notes shall thereafter be 8.75%
simple interest per annum.

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c. The defined term “Permitted Indebtedness” in Section 1.1 of the Facility
Agreement is amended to (x) renumber subsection “(xxv)” as “(xxvi)” and insert a
new subsection (xxv) to read as follows:

“(xxv) Unsecured Indebtedness in respect of unsecured convertible senior
subordinated notes in an aggregate principal amount not exceeding $250 million
that (b) provides for repayment of the outstanding principal amount only after
the last scheduled maturity date of the outstanding Notes are paid in full
(other than customary obligations to repurchase the notes upon a “fundamental
change” or obligations to settle conversions of the notes) and (b) is
subordinated to the Notes pursuant to customary subordination terms found in
standard senior subordinated convertible notes offerings; and”

d. The defined term “Transaction Documents” in Section 1.1 of the Facility
Agreement is hereby amended to include the Tranche B Notes and the Amended and
Restated Notes as additional Transaction Documents.

e. Section 1.1 of the Facility Agreement is amended to add thereto the following
additional defined terms:

“Conversion Aggregate Principal Amount” means the aggregate principal amount of
the Tranche 1 Notes and the Tranche 3 Notes that have been converted into Common
Stock commencing on and after the date of the First Amendment to Facility
Agreement and Registration Rights Agreement.

“FDA Approval” has the meaning provided in Section 2.2(e) of this Agreement.

“First Amendment to Facility Agreement” means the First Amendment to Facility
Agreement and Registration Rights Agreement dated as of February 28, 2014
between Borrower and Purchasers.

“Tranche B Notes” has the meaning provided in the definition of Notes in
Section 1.1 of this Agreement.

f. Section 2.2(b) of the Facility Agreement is hereby amended to add in the
first sentence thereof reference to the Tranche B Notes.

g. Section 2.2 of the Facility Agreement is hereby amended to add thereto a new
subsection (e) to read as follows:

“Prior to December 30, 2014, the Borrower may deliver one or more Note Purchase
Requests from time to time pursuant to the procedures outlined in Section 2.2
for the Purchasers to purchase Tranche B Notes in a maximum principal amount
equal to (i) at any time from and after the date of the First Amendment to
Facility Agreement, the excess of (x) 33.33% of the Conversion Aggregate
Principal Amount on the date of delivery of the Note Purchase

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Requests over (y) any amounts for which Tranche B Notes are issued pursuant to
Note Purchase Requests delivered under this Section 2.2(e)(i) or (ii) if the FDA
has approved a New Drug Application for the Product (“FDA Approval”) and the
Purchasers have purchased the Tranche 4 Notes, the excess of (x) 150% of the
Conversion Aggregate Principal Amount on the date of delivery of the Note
Purchase Request over (y) any amounts for which Tranche B Notes are issued
pursuant to Note Purchase Requests delivered under this Section 2.2(e)(ii) and
Section 2.2(e)(i). Each Note Purchase Request to purchase Tranche B Notes shall
be in a minimum amount of $5,000,000, or such lesser amount of the Tranche B
Notes available for purchase hereunder. The Tranche B Notes are prepayable
commencing two years after their date of issuance without premium or penalty and
not otherwise.”

h. Section 3.1(s) of the Facility Agreement is hereby amended in its entirety to
read as follows:

“Except as would not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect in each case in clauses (A) through (C), the
Borrower: (A) has not received any warning letter or other correspondence or
notice from the FDA or from any other Government Authority as of the Agreement
Date alleging or asserting noncompliance with Applicable Laws; (B) except for
approval from the FDA and other Governmental Authorities to market and sell the
Product, possesses all licenses, certificates, approvals, clearances,
authorizations, permits and supplements or amendments thereto required by any
Applicable Laws (together, the “Authorizations”), which are valid and in full
force and effect and has not received any notice from the FDA or any other
Government Authority as of the Agreement Date alleging or asserting
noncompliance with any Authorizations; and (C) has not received written notice
that any Government Authority has taken, is taking, or intends to take action to
limit, suspend, modify or revoke any outstanding Authorization and has no
knowledge that any Government Authority is considering such action.”

3. Amendments to the Registration Rights Agreement. Upon the satisfaction of the
conditions set forth in Section 5 of this Amendment:

a. The definition of “Facility Agreement” in the Registration Rights Agreement
is hereby deleted in its entirety and the following is inserted in substitution
thereof:

“Facility Agreement” means the Facility Agreement between the parties hereto,
dated as of July 1, 2013, as amended by the First Amendment to Facility
Agreement and Registration Rights Agreement, dated as of February 28, 2014, as
amended, modified, restated or supplemented from time to time.

b. The date of delivery of the Amended and Restated Notes as provided in
Section 5(a) shall be deemed an “Issuance Date” under the Registration Rights
Agreement.

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4. Covenants. Borrower covenants and agrees to execute and deliver to Purchasers
on the date of this Amendment, amended and restated Notes in the forms of
Exhibit A attached hereto (“Amended and Restated Notes”), in substitution for
and replacement of the Tranche 1 Notes and Tranche 3 Notes executed by Borrower,
which Amended and Restated Notes shall not constitute payment, settlement or
novation of the existing Tranche 1 Notes and Tranche 3 Notes. Upon execution of
the Amended and Restated Notes, the Tranche 1 Notes and Tranche 3 Notes shall be
deemed to be automatically cancelled. Lenders covenant and agree to return the
original outstanding Tranche 1 Notes and Tranche 3 Notes to Borrower.

5. Conditions Precedent. The effectiveness of this Amendment is subject to the
following conditions precedent:

a. Delivery of Documents to Purchasers. The following shall have been delivered
to Purchasers, each duly executed and in form and substance satisfactory to
Purchasers in their sole discretion:

i. this Amendment; and

ii. the Amended and Restated Notes.

b. Delivery of Documents to Borrower. The following shall have been delivered to
Borrower, each duly executed and in form and substance satisfactory to Borrower
in its sole discretion:

i. this Amendment.

c. Performance; No Default. Borrower shall have performed and complied with all
agreements and conditions contained in the Facility Agreement and the other
Transaction Documents to be performed by or complied with by Borrower prior to
the date hereof in all material respects, and, after giving effect to this
Amendment, no Event of Default shall exist or be created hereby.

6. Representations and Warranties. Borrower hereby represents and warrants to
Purchasers as follows:

a. As of the date hereof, the representations and warranties of Borrower
contained in the Transaction Documents are (i) in the case of representations
and warranties qualified by “materiality,” “Material Adverse Effect” or similar
language, true and correct in all respects and (ii) in the case of all other
representations and warranties, true and correct in all material respects, in
each case on and as of the date hereof, except to the extent that any such
representation or warranty relates to a specific date, in which case such
representation and warranty shall be true and correct in all respects or all
material respects, as applicable, as of such earlier date;

b. The execution, delivery and performance by Borrower of this Amendment and the
Amended and Restated Notes (i) are within Borrower’s corporate powers, (ii) have
been duly authorized by all necessary action pursuant to its Organizational
Documents, (iii) require no further action by or in respect of, or filing with,
any Government Authority, except for such

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registrations and filings in connection with the issuance of the shares of
Common Stock pursuant to the Notes and (iv) do not violate, conflict with or
cause a breach or a default under any provision of applicable law or regulation
or of Borrower’s Organizational Documents or of any agreement, judgment,
injunction, order, decree or other instrument binding upon Borrower, except to
the extent such violation, conflict, breach or default would not individually or
in the aggregate reasonably be expected to have a Material Adverse Effect;

c. This Amendment constitutes the valid and binding obligation of Borrower,
enforceable against Borrower in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency, or similar
laws relating to the enforcement of creditor’s rights generally and by general
equitable principles;

d. No Event of Default exists; and

e. The shares of Common Stock issuable upon conversion of the Notes, have been
duly authorized and when issued, delivered and paid for in accordance with the
terms of the Notes, will have been validly issued and will be fully paid and
nonassessable. There are no preemptive rights or other rights to subscribe for
or to purchase, or any restriction upon the voting or transfer of any shares of
Common Stock pursuant to the Borrower’s Organizational Documents or any
agreements to which the Borrower or any of its Subsidiaries is a party or by
which the Borrower or any of its Subsidiaries is bound.

7. No Further Amendments; Ratification of Liability. Except as amended hereby,
the Facility Agreement and each of the other Transaction Documents shall remain
in full force and effect in accordance with their respective terms. Borrower as
debtor, grantor, pledgor, guarantor or assignor, or in any similar capacity in
which it has granted Liens or acted as an accommodation party or guarantor, as
the case may be, hereby ratifies, confirms and reaffirms its liabilities, its
payment and performance obligations (contingent or otherwise) and its agreements
under the Facility Agreement and the other Transaction Documents, all as amended
by this Amendment, and the liens and security interests granted, created and
perfected thereby. The Purchasers’ agreement to the terms of this Amendment or
any other amendment of the Facility Agreement or any other Transaction Document
shall not be deemed to establish or create a custom or course of dealing among
Borrower, Purchasers, Assignees, or any of them. This Amendment, together with
the other Transaction Documents, contains the entire agreement among Borrower,
and Purchasers contemplated by this Amendment.

8. Purchaser Representation. The Purchasers hereby represent and warrant that
the execution of this Amendment will not cause the Purchasers to own, or be
treated as owning under the attribution rules of Section 871(h)(3)(C) of the
Code, 10% or more of the total combined voting power of the stock of Borrower
for purposes of Section 871(h)(3).

9. Incorporation by Reference. The provisions of Article 6 of the Facility
Agreement are incorporated herein by reference mutatis mutandis.

[Remainder of Page Intentionally Left Blank, signature page follows]

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IN WITNESS WHEREOF, the parties have executed this Amendment as of the date set
forth above.

 

BORROWER: MANNKIND CORPORATION By:  

/s/ Matthew J. Pfeffer

Name:  

Matthew J. Pfeffer

Title:  

CFO

PURCHASERS: DEERFIELD PRIVATE DESIGN FUND II, L.P. By:   Deerfield Mgmt., L.P.,
its General Partner By:   J.E. Flynn Capital, LLC, its General Partner By:  

/s/ David J. Clark

Name:   David Clark Title:   Authorized Signatory DEERFIELD PRIVATE DESIGN
INTERNATIONAL II, L.P. By:   Deerfield Mgmt., L.P., its General Partner By:  
J.E. Flynn Capital, LLC, its General Partner By:  

/s/ David J. Clark

Name:   David Clark Title:   Authorized Signatory

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Exhibit A

Form of Amended and Restated Notes

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Exhibit A

THIS NOTE IS BEING ISSUED WITH ORIGINAL ISSUE DISCOUNT (“OID”). THE FOLLOWING
INFORMATION IS BEING PROVIDED PURSUANT TO TREASURY REGULATION SECTION 1.1275-3:

ISSUE PRICE: $

AMOUNT OF OID: $

ISSUE DATE:

YIELD TO MATURITY:

THE SECURITY REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, OR APPLICABLE STATE SECURITIES LAWS. THIS SECURITY MAY
NOT BE SOLD, TRANSFERRED OR ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER SAID ACT, OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER
SAID ACT INCLUDING, WITHOUT LIMITATION, PURSUANT TO RULE 144 UNDER SAID ACT.”

AMENDED AND RESTATED SENIOR SECURED CONVERTIBLE NOTE

 

Issuance Date: [July 1] December 9, 2013      Principal: U.S. $[        ]

FOR VALUE RECEIVED, MANNKIND CORPORATION, a Delaware corporation (the
“Company”), hereby promises to pay to
[                                        ], or its registered assigns (the
“Holder”) the principal amount of [                                        ]
Dollars ($[        ]) (the “Principal”) pursuant to, and in accordance with, the
terms of that certain Facility Agreement, dated as of July 1, 2013, as amended
on February 28, 2014, by and among the Company and the Purchasers party thereto
(together with all exhibits and schedules thereto and as may be amended,
restated, modified and supplemented from time to time, the “Facility
Agreement”). The Company hereby promises to pay accrued and unpaid Interest (as
defined below) and premium, if any, on the Principal on the dates, at the rates
and in the manner provided for in the Facility Agreement. This Senior Secured
Convertible Note (including all Senior Secured Convertible Notes issued in
exchange, transfer or replacement hereof, and as any of the foregoing may be
amended, restated, supplemented or otherwise modified from time, this “Note”) is
one of the Senior Secured Convertible Notes issued pursuant to the Facility

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Agreement (collectively, including Senior Secured Convertible Notes to be issued
pursuant to the Facility Agreement in the future, all Senior Secured Convertible
Notes issued in exchange, transfer or replacement thereof, as well as any of the
foregoing may be amended, restated, supplemented or otherwise modified from time
to time, the “Notes”). All capitalized terms used and not otherwise defined
herein shall have the respective meanings set forth in the Facility Agreement.

Except as expressly provided in the Facility Agreement, the Company has no
right, but under certain circumstances may have an obligation, to make payments
of Principal prior to the Final Payment Date. At any time an Event of Default
exists, the Principal of this Note, together with all accrued and unpaid
Interest and any applicable premium due, if any, may be declared, or shall
otherwise become, due and payable in the manner, at the price and with the
effect provided in the Facility Agreement.

Definitions.

Certain Defined Terms. For purposes of this Note, the following terms shall have
the following meanings:

“Affiliate” means any person or entity that, directly or indirectly through one
or more intermediaries, controls or is controlled by or is under common control
with a person or entity, as such terms are used in and construed under Rule 144
under the Securities Act. With respect to a Holder, any investment fund or
managed account that is managed on a discretionary basis by the same investment
manager as such Holder will be deemed to be an Affiliate of such Holder. As used
in this definition of “Affiliate,” the term “control” means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through ownership of voting
securities or partnership or other ownership interest, by contract, or
otherwise.

“Conversion Amount” means the Principal amount to be converted.

“Conversion Commencement Date” means the eleventh full Trading Day following the
public release by the Company of Phase III Data for the Product.

“Conversion Price” means, as of any Conversion Date the average of the Volume
Weighted Average Prices per Share for the three (3) Trading Day period
immediately preceding the Conversion Date (the “Measurement Period”), provided,
that in the event that a stock split, stock combination, reclassification,
payment of stock dividend, recapitalization or other similar transaction of such
character that the Shares shall be changed into or become exchangeable for a
larger or small number of shares (a “Stock Event”) is consummated during the
Measurement Period, the Volume Weighted Average Price for all Trading Days
during the Measurement Period prior to the effectiveness of the Stock Event
shall be appropriately adjusted to reflect such Stock Event.

“Interest” means any interest (including any default interest) accrued on the
Principal pursuant to the terms of this Note and the Facility Agreement.

 

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“Issuance Date” means [July 1] [December 9], 2013, regardless of any exchange or
replacement hereof.

“Major Pharmaceutical Company” means any Person engaged in the pharmaceutical or
biotechnology industry who, for the immediately preceding fiscal year, had total
revenues in excess of $2,000,000,000 (or its equivalent in another currency).

“Market Disruption Event” means, with respect to any trading day and any
security, (a) a failure by the Principal Market to open for trading during its
entire regular trading session, (b) the occurrence or existence prior to 1:00
p.m., New York City time, on such day for such securities for more than one
half-hour period in the aggregate during regular trading hours of any suspension
or limitation imposed on trading (by reason of movements in price exceeding
limits permitted by the relevant securities exchange or otherwise) in such
securities or in any options, contracts or future contracts relating to such
securities, or (c) to the extent “Volume Weighted Average Price” is determined
in accordance with clause (b) of the definition thereof, the suspension of
trading for the one-half hour period ending on the scheduled close of trading on
such day (by reason of movements in price exceeding limits permitted by the
stock exchange or otherwise) in such securities.

“Principal” means the outstanding principal amount of this Note as of any date
of determination.

“Registration Failure” means that (A) the Company fails to file with the SEC on
or before the Filing Deadline (as defined in the Registration Rights Agreement)
any Registration Statement required to be filed pursuant to Section 2(a) of the
Registration Rights Agreement registering Conversion Shares, (B) the Company
fails to use its best efforts to obtain effectiveness with the SEC, prior to the
Registration Deadline (as defined in the Registration Rights Agreement), of any
Registration Statement (as defined in the Registration Rights Agreement) that is
required to be filed pursuant to Section 2(a) of the Registration Rights
Agreement registering Conversion Shares, or fails to use its best efforts to
keep such Registration Statement current and effective as required in Section 3
of the Registration Rights Agreement, (C) the Company fails to file any
additional Registration Statements required to be filed pursuant to
Section 2(a)(ii) of the Registration Rights Agreement registering Conversion
Shares on or before the Additional Filing Deadline or fails to use its best
efforts to cause such new Registration Statement to become effective on or
before the Additional Registration Deadline, (D) any Registration Statement
required to be filed under the Registration Rights Agreement registering
Conversion Shares, after its initial effectiveness and during the Registration
Period (as defined in the Registration Rights Agreement), lapses in effect or
sales of any Conversion Shares constituting Registrable Securities (as defined
in the Registration Rights Agreement) cannot otherwise be made thereunder
(whether by reason of the Company’s failure to amend or supplement the
prospectus included therein in accordance with the Registration Rights
Agreement, the Company’s failure to file and to obtain effectiveness with the
SEC of an additional Registration Statement registering Conversion Shares or
amended Registration Statement required pursuant to Sections 2(a)(ii) or 3(b) of
the Registration Rights Agreement, as applicable, or otherwise), other than in
each case as permitted pursuant to Section 3(q) of the Registration Rights
Agreement.

 

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“Required Note Holders” means Holders of at least 51% in interest of the Notes.

“Shares” means shares of Common Stock, $0.01 par value.

“Trading Day” means any day on which the Common Stock is traded for any period
on the Principal Market; provided that for purposes of the definition of
“Conversion Shares”, Trading Day shall not include any Trading Day on which
there is a Market Disruption Event. .

“Volume Weighted Average Price” for any security as of any Trading Day means
(a) the volume weighted average sale price of such security on the principal
U.S. national or regional securities exchange on which such security is traded
as reported by Bloomberg Financial Markets or an equivalent, reliable reporting
service mutually acceptable to and hereinafter designated by the Required Note
Holders and the Company (“Bloomberg”) or (b), if no volume weighted average sale
price is reported for such security, then the closing price per share of such
security, or, if no closing price per share is reported for such security by
Bloomberg, the average of the last bid and last ask price (or if more than one
in either case, the average of the average last bid and average last ask prices)
on such Trading Day as reported in the composite transactions for the principal
U.S. national or regional securities exchange on which such security is traded.
If the security is not listed for trading on a U.S. national or regional
securities exchange on the relevant Trading Day, then the Volume Weighted
Average Price will be the average of the mid-point of the last bid and last ask
prices of the security in the over-the-counter market on the relevant Trading
Day as reported by the OTC Markets Group, Inc. or similar organization. If the
Volume Weighted Average Price cannot be calculated for such security on such
date in the manner provided above, the Volume Weighted Average Price shall be
the fair market value as mutually determined by the Company and the Holders of a
majority in interest of the Notes being converted for which the calculation of
the Volume Weighted Average Price is required in order to determine the
Conversion Price of such Notes. Volume Weighted Average Price will be determine
without regard to after-hours trading or any other trading outside of the
regular trading hours.

Conversion Rights. This Note may be converted into Shares on the terms and
conditions set forth in this Section 2.

Conversion at Option of the Holder. On and after the Conversion Commencement
Date and until the close of business on the second business day immediately
prior to the Final Payment Date, the Holder shall be entitled to convert all or
any part of the Principal into fully paid and nonassessable Shares (the
“Conversion Shares”) in accordance with this Section 2 at the Conversion Rate
(as defined in Section 2(b)); provided that, unless otherwise agreed to by the
Company, the Holder shall not be entitled to convert any Principal if the
Conversion Price is less than $5.00 per Share [or if the Tranche 3 Notes (as
defined in the Facility Agreement) have not been converted in full]1. The
Company shall not issue any fraction of a Share upon any conversion. If the
issuance would result in the issuance of a fraction of a Share, then the Company
shall round such fraction of a Share up or down to the nearest whole share (with
0.5 rounded up).

 

1 Include bracketed language in the Tranche 1 Notes only.

 

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Conversion Rate. The number of Conversion Shares issuable upon a conversion of
any portion of this Note pursuant to Section 2 shall be determined according to
the following formula (the “Conversion Rate”):

            Conversion Amount            

Conversion Price

Mechanics of Conversion. The conversion of this Note shall be conducted in the
following manner:

Holder’s Delivery Requirements. To convert a Conversion Amount into Conversion
Shares on any date (the “Conversion Date”), the Holder shall (A) transmit by
facsimile or electronic mail (or otherwise deliver), for receipt on or prior to
5:00 p.m. New York City time on such date, a copy of an executed conversion
notice in the form attached hereto as Exhibit A (the “Conversion Notice”) to the
Company (Attention: Matthew Pfeffer, Fax: (661) 775-2099, Email:
mpfeffer@mannkindcorp.com), and (B) if required by Section 2(c)(vi), surrender
to a common carrier for delivery to the Company, no later than three
(3) Business Days after the Conversion Date, the original Note being converted
(or an indemnification undertaking in customary form with respect to this Note
in the case of its loss, theft or destruction).

Company’s Response. Upon receipt or deemed receipt by the Company of a copy of a
Conversion Notice, the Company (I) shall immediately send, via facsimile, a
confirmation of receipt of such Conversion Notice to the Holder and the
Company’s designated transfer agent (the “Transfer Agent”), which confirmation
shall constitute an instruction to the Transfer Agent to process such Conversion
Notice in accordance with the terms herein and (II) on or before the second
(2nd) Business Day following the date of receipt or deemed receipt by the
Company of such Conversion Notice (the “Share Delivery Date”) (A) provided that
the Transfer Agent is participating in The Depository Trust Company (“DTC”) Fast
Automated Securities Transfer Program and provided that the Holder is eligible
to receive Shares through DTC, credit such aggregate number of Conversion Shares
to which the Holder shall be entitled to the Holder’s or its designee’s balance
account with DTC through its Deposit Withdrawal Agent Commission system, or
(B) if the foregoing shall not apply, issue and deliver to the address as
specified in the Conversion Notice, a stock certificate, registered in the name
of the Holder or its designee, for the number of Conversion Shares to which the
Holder shall be entitled. If notwithstanding the provisions of Section 2(c)(vi),
the Holder elects to physically surrender this Note for conversion and the
Principal represented by this Note is greater than the Principal being
converted, then the Company shall, as soon as practicable and in no event later
than three (3) Business Days after receipt of this Note (the “Note Delivery
Date”) and at its own expense, issue and deliver to the Holder a new Note
representing the Principal not converted and cancel this Note. The Conversion
Shares will be freely transferable and will not contain a legend restricting the
resale or transferability of the Conversion Shares if the Unrestricted
Conditions (as defined below) are met.

 

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Dispute Resolution. In the case of a dispute as to the determination of the
Conversion Price or the arithmetic calculation of the Conversion Rate, the
Company shall instruct the Transfer Agent to issue to the Holder the number of
Conversion Shares that is not disputed and shall transmit an explanation of the
disputed determinations or arithmetic calculations to the Holder via facsimile
within two (2) Business Days of receipt or deemed receipt of the Holder’s
Conversion Notice or other date of determination. If the Holder and the Company
are unable to agree upon the determination of the Conversion Price or arithmetic
calculation of the Conversion Rate within one (1) Business Day of such disputed
determination or arithmetic calculation being transmitted to the Holder, then
the Company shall promptly (and in any event within two (2) Business Days)
submit via facsimile (A) the disputed determination of the Conversion Price to
an independent, reputable investment banking firm agreed to by the Company and
the Required Note Holders, or (B) the disputed arithmetic calculation of the
Conversion Rate to the Company’s independent registered public accounting firm,
as the case may be. The Company shall direct the investment bank or the
accounting firm, as the case may be, to perform the determinations or
calculations and notify the Company and the Holder of the results no later than
two (2) Business Days from the time it receives the disputed determinations or
calculations. Such investment bank’s or accounting firm’s determination or
calculation, as the case may be, shall be binding upon all parties absent
manifest error.

Record Holder. The person or persons entitled to receive the Conversion Shares
issuable upon a conversion of this Note shall be treated for all purposes as the
legal and record holder or holders of such Shares on the Conversion Date, or in
the case of Conversion Shares the issuance of which is subject to a bona fide
dispute that is subject to and being resolved pursuant to, and in compliance
with the time periods and other provisions of, the dispute resolution provisions
of Section 2(c)(iii), the first Business Day after the resolution of such bona
fide dispute and the fees and expenses of such investment bank or accountant
shall be paid by the Company.

Company’s Failure to Timely Convert.

Cash Damages. If within three (3) Business Days after the Company’s receipt of
the facsimile or electronic mail copy of a Conversion Notice or deemed receipt
of a Conversion Notice the Company shall fail to issue and deliver a certificate
to the Holder for, or credit the Holder’s or its designee’s balance account with
DTC with, the number of Conversion Shares (free of any restrictive legend if the
Unrestricted Conditions (as defined below) are met) to which the Holder is
entitled upon the Holder’s conversion of any Conversion Amount (a “Delivery
Failure”) then in addition to all other available remedies that the Holder may
pursue hereunder and under the Facility Agreement, the Company shall pay
additional damages to the Holder for each day after the Share Delivery Date such
conversion is not timely effected in an amount equal to one percent (1%) of the
product of (I) the number of Conversion Shares not issued to the Holder or its
designee on or prior to the Share Delivery Date and to which the Holder is
entitled and (II) the Volume Weighted Average Price of the Common Stock on the
Share Delivery Date (such product is referred to herein as the “Share Product
Amount”) Alternatively in lieu of the foregoing damages, subject to
Section 2(c)(iii), at the written election of the Holder made in the Holder’s
sole discretion, if, on or after the applicable Conversion Date, the Holder
purchases (in an open market transaction or otherwise) shares of Common Stock to

 

14

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deliver in satisfaction of a sale by such Holder of Conversion Shares that such
Holder anticipated receiving from the Company (such purchased shares, “Buy-In
Shares”), the Company shall be obligated to promptly pay to such Holder (in
addition to all other available remedies that the Holder may otherwise have),
107.5% of the amount by which (A) such Holder’s total purchase price (including
brokerage commissions, if any) for such Buy-In Shares exceeds (B) the net
proceeds received by such Holder from the sale of the number of shares equal to
up to the number of Conversion Shares such Holder was entitled to receive but
had not received on such Share Delivery Date. If the Company fails to pay the
additional damages set forth in this Section 2(c)(v)(A) within five (5) Business
Days of the date incurred, then the Holder entitled to such payments shall have
the right at any time, so long as the Company continues to fail to make such
payments, to require the Company, upon written notice, to immediately issue, in
lieu of such cash damages, the number of Shares equal to the quotient of (X) the
aggregate amount of the damages payments described herein divided by (Y) the
Conversion Price specified by the Holder in the Conversion Notice.

Void Conversion Notice. If for any reason the Holder has not received all of the
Conversion Shares prior to the tenth (10th) Business Day after the Share
Delivery Date with respect to a conversion of this Note (a “Conversion
Failure”), then the Holder, upon written notice to the Company (a “Void
Conversion Notice”), may void its Conversion Notice with respect to, and retain
or have returned, as the case may be, any portion of this Note that has not been
converted pursuant to the Holder’s Conversion Notice; provided, that the voiding
of the Holder’s Conversion Notice shall not affect the Company’s obligations to
make any payments that have accrued prior to the date of such notice pursuant to
Section 2(c)(v)(A) or otherwise.

Book-Entry. Notwithstanding anything to the contrary set forth herein, upon
conversion or repayment of this Note in accordance with the terms hereof, the
Holder shall not be required to physically surrender this Note to the Company
unless all of the Principal is being converted or repaid. The Holder and the
Company shall maintain records showing the Principal converted or repaid and the
dates of such conversions or repayments or shall use such other method,
reasonably satisfactory to the Holder and the Company, so as not to require
physical surrender of this Note upon any such partial conversion or repayment.
Notwithstanding the foregoing, if this Note is converted or repaid as aforesaid,
the Holder may not transfer this Note unless the Holder first physically
surrenders this Note to the Company, whereupon the Company will forthwith issue
and deliver upon the order of the Holder a new Note of like tenor, registered as
the Holder may request, representing in the aggregate the remaining Principal
represented by this Note. The Holder and any assignee, by acceptance of this
Note, acknowledge and agree that, by reason of the provisions of this paragraph,
following conversion or repayment of any portion of this Note, the Principal of
this Note may be less than the principal amount stated on the face hereof.

Taxes. The Company shall pay any and all taxes (excluding income taxes,
franchise taxes or other taxes levied on gross earnings, profits or the like of
the Holder) that may be payable with respect to the issuance and delivery of
Conversion Shares upon the conversion of this Note, unless the tax is due
because the Holder requests any Conversion Shares to be issued in a name other
than the Holder’s name, in which case the Holder will pay that tax.

 

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Legends.

Restrictive Legend. The Holder understands that this Note and until such time as
the Conversion Shares have been registered under the Securities Act as
contemplated by the Registration Rights Agreement or otherwise may be sold
pursuant to Rule 144 under the Securities Act or an exemption from registration
under the Securities Act without any restriction as to the number of securities
as of a particular date that can then be immediately sold, the Conversion
Shares, as applicable, may bear a restrictive legend in substantially the
following form (and a stop-transfer order may be placed against transfer of the
certificates for such securities):

THE SECURITY REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, OR APPLICABLE STATE SECURITIES LAWS. THIS SECURITY MAY
NOT BE SOLD, TRANSFERRED OR ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER SAID ACT, OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER
SAID ACT INCLUDING, WITHOUT LIMITATION, PURSUANT TO RULE 144 UNDER SAID ACT.”

Removal of Restrictive Legends. The certificates evidencing the Conversion
Shares shall not contain any legend restricting the transfer thereof (including
the legend set forth above in subsection 2(e)(i)): (A) while a registration
statement (including a Registration Statement, as defined in the Registration
Rights Agreement) covering the resale of such security by the Holder is
effective under the Securities Act, (B) following any sale of such Conversion
Shares pursuant to Rule 144, or (C) if such Conversion Shares are eligible for
sale under rule 144(b)(1) and the Holder thereof is not, and has not been during
the preceding three months, an affiliate (as such term is defined for purposes
of Rule 144 under the Securities Act) (the “Unrestricted Conditions”). The
Holder agrees that the removal of the restrictive legend from the Conversion
Shares in accordance with the immediately preceding sentence is predicated upon
the Company’s reliance that (i) the Holder will dispose of such shares pursuant
to the registration requirements of the Securities Act, including any applicable
prospectus delivery requirements, or for its own account in compliance with Rule
144, and that if such securities are sold pursuant to a registration statement,
they will be sold in compliance with the plan of distribution set forth therein,
and (ii) if, prior to the disposition of any such Conversion Shares, the Company
notifies the Holder that the Unrestricted Conditions have no longer been met,
the Holder will agree to the placement of said restrictive legend on the
certificates for such Conversion Shares until the Unrestricted Conditions have
once again been met. Promptly following the Effective Date (as defined below) or
such other time as any of the Unrestricted Conditions have been satisfied, the
Company shall cause its counsel to issue a legal opinion or other instruction to
the Transfer Agent (if required by the Transfer Agent) to effect the issuance of
the Conversion Shares without a restrictive legend or, in the case of Conversion
Shares that have previously been issued, the removal of the legend thereunder.
If the Unrestricted Conditions are met at the time of issuance of the Conversion
Shares, then the Conversion Shares shall be issued free of all legends. The
Company agrees that following the Effective Date or at such time as the
Unrestricted Conditions are met or such legend is otherwise no longer required
under this Section 2(e), it will, no later than four (4) Trading Days following
the delivery (the

 

16

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“Unlegended Shares Delivery Deadline”) by the Holder to the Company or the
Transfer Agent of any certificate representing Conversion Shares, as applicable,
issued with a restrictive legend (such fourth Trading Day, the “Legend Removal
Date”), deliver or cause to be delivered to such Holder a certificate (or
electronic transfer) representing such shares that is free from all restrictive
and other legends. For purposes hereof, “Effective Date” shall mean the date
that the Registration Statement that the Company is required to file pursuant to
the Registration Rights Agreement has been declared effective by the SEC.

Sale of Unlegended Shares. Holder agrees that the removal of the restrictive
legend from any certificates representing securities as set forth in
Section 2(e) above is predicated upon the Company’s reliance that the Holder
will sell any Conversion Shares pursuant to either the registration requirements
of the Securities Act, including any applicable prospectus delivery
requirements, or an exemption therefrom, and that if such securities are sold
pursuant to a Registration Statement, they will be sold in compliance with the
plan of distribution set forth therein.

Limitations on Conversions.

Beneficial Ownership. Notwithstanding anything herein to the contrary, the
Company shall not issue to the Holder, and the Holder may not acquire, a number
of Shares upon conversion of this Note or otherwise issue any shares of Common
Stock pursuant hereto or the Facility Agreement to the extent that, upon such
conversion, the number of Shares then beneficially owned by the Holder and its
Affiliates and any other persons or entities whose beneficial ownership of
Common Stock would be aggregated with the Holder’s for purposes of Section 13(d)
of the Exchange Act (including shares held by any “group” of which the Holder is
a member, but excluding shares beneficially owned by virtue of the ownership of
securities or rights to acquire securities that have limitations on the right to
convert, exercise or purchase similar to the limitation set forth herein) would
exceed 9.985% of the total number of shares of Common Stock then issued and
outstanding (the “9.985% Cap”), provided, however, that the 9.985% Cap shall
only apply to the extent that the Common Stock is deemed to constitute an
“equity security” pursuant to Rule 13d-1(i) promulgated under the Exchange Act,
and provided, further, that if the Holder and its Affiliates and any other
persons or entities whose beneficial ownership of Common Stock would be
aggregated with the Holder’s for purposes of Section 13(d) of the Exchange Act
beneficially own on the Issuance Date greater than 9.985% of the shares of
Common Stock then outstanding, then the 9.985% Cap shall not apply to such
Holder unless and until the beneficial ownership of the Holder and its
Affiliates and any other persons or entities whose beneficial ownership of
Common Stock would be aggregated with the Holder’s for purposes of Section 13(d)
of the Exchange Act subsequently decreases to below 9.985%. For purposes hereof,
“group” has the meaning set forth in Section 13(d) of the Exchange Act and
applicable regulations of the Securities and Exchange Commission (“SEC”), and
the percentage held by the Holder shall be determined in a manner consistent
with the provisions of Section 13(d) of the Exchange Act. Upon the written
request of the Holder, the Company shall, within two (2) Trading Days, confirm
orally and in writing to the Holder the number of Shares then outstanding.

Principal Market Regulation. The Company shall not issue any Shares upon
conversion of this Note (including pursuant to Section 2(c)(v)(A) hereof) if the

 

17

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issuance of such Shares together with any previous issuances of Shares under the
Notes would exceed 57,885,577 (the “Exchange Cap”), except that such limitation
shall not apply in the event that the Company obtains the approval of its
stockholders as required by the applicable rules of The Nasdaq Global Market and
any other Principal Market for issuances of Shares in excess of such amount.

Applicable Limits on Conversion of the Note. Notwithstanding anything to the
contrary herein, (A) unless otherwise agreed to by the Company, this Note shall
not be convertible, and the Company shall not issue Shares upon conversion of
this Note, as a Conversion Price less than $5.00 per Share, [and unless the
Tranche 3 Notes have been converted in full]2, (B) this Note shall not be
convertible, and the Company shall not issue Shares upon conversion of this
Note, if the number of shares that would otherwise be issuable upon such
conversion, together with all shares previously issued upon conversion of all
Notes or issuable upon conversion of any other Notes converted on the same
Conversion Date, exceeds 30 million shares (subject to appropriate adjustment to
reflect any Stock Event), and (C) this Note shall not be convertible, and the
Company shall not issue Shares upon conversion of this Note, if the number of
shares that would otherwise be issuable upon such conversion, together with any
shares issuable upon conversion of any other Notes converted on the same
Conversion Date, exceeds the then Applicable Limit. For purposes herein,
“Applicable Limit” shall initially mean (x) 30 million Shares (subject to
appropriate adjustment to reflect any Stock Event) for all conversions of Notes
at a “Conversion Price” of $3.33 (subject to appropriate adjustment to reflect
any Stock Event) or less, (y) 15 million Shares (subject to appropriate
adjustment to reflect any Stock Event) for all conversions of Notes at a
“Conversion Price” of $6.67 (subject to appropriate adjustment to reflect any
Stock Event) or more, and (z) $100 million of “Conversion Amounts” for all Note
conversions at a “Conversion Price” of between $3.33 and $6.67 (subject to
appropriate adjustment to reflect any Stock Event); provided, however, that,
after each Conversion Date, the Applicable Limit under all three clauses
(regardless of which clause such conversion relates to) shall be reduced by an
amount equal to the Applicable Limit immediately preceding such conversion
multiplied by a fraction, the numerator of which is the number of Shares
actually converted on such date (in the case of clauses (x) and (y)) or the
applicable “Conversion Amount” for all shares actually converted on such date
(in the case of clause (z)) and the denominator of which is the Applicable Limit
in respect of the clause under which such conversion falls immediately prior to
such conversion. For purposes of illustration: (a) If 15 million shares are
converted under any Notes at $3.00 per share, the Applicable Limit shall be
reduced by one-half to 15 million, 7.5 million and $50 million, respectively;
(b) If an additional $10 million are then converted under any Notes at $5.00 per
Share, each Applicable Limit shall then be further reduced by 20% to 12 million,
6 million and $40 million, respectively. As an additional illustration, if
10 million shares are converted under any Notes at $8.00 per share, each
Applicable Limit shall be reduced by two-thirds to 10 million, 5 million and
$33,333,333, respectively; and (b) if an additional 500,000 shares are then
converted under any Notes at $5.00 per share, each Applicable Limit shall be
further reduced by 7.5% to $9,250,000, $4,625,000 and $30,833,333, respectively.

 

2 Include bracketed language in the Tranche 1 Notes only.

 

18

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Registration Failures. Upon any Registration Failure, in addition to all other
available remedies that the Holder may pursue hereunder and under the Facility
Agreement and the Registration Rights Agreement, the Company shall pay
additional damages to the Holder for each 30-day period (prorated for any
partial period) after the date of such Registration Failure in an amount in cash
equal to one percent (1%) of such Holder’s original principal amount of this
Note on the date of such Registration Failure. Such payments shall accrue until
the earlier of (i) such time as the Registration Failure has been cured and
(ii) the date on which all of the Conversion Shares may be disposed of for such
Holder’s own account without restriction under Rule 144 (including, without
limitation, volume restrictions and without the need for the availability of
current public information under Rule 144), assuming that the Holder is not, and
has not been during the preceding three months, an affiliate (as such term is
defined for purposes of Rule 144 under the Securities Act) of the Company. All
such payments that accrue under this Section (4) shall be payable no later than
five business days following such date of accrual.

Voting Rights. Except as required by law, the Holder shall have no voting rights
with respect to any of the Conversion Shares until the Conversion Date relating
to the conversion of this Note upon which such Conversion Shares are issuable
(or in the case of Conversion Shares the issuance of which is subject to a bona
fide dispute that is subject to and being resolved pursuant to, and in
compliance with the time periods and other provisions of, the dispute resolution
provisions of Section 2(c)(iii), the first Business Day after the resolution of
such bona fide dispute).

Amendment; Waiver. The terms and provisions of this Note shall not be amended or
waived except in a writing signed by the Company and the Holder.

Remedies, Characterizations, Other Obligations, Breaches and Injunctive Relief.
The remedies provided in this Note shall be cumulative and in addition to all
other remedies available under this Note, the Facility Agreement, at law or in
equity (including a decree of specific performance and/or other injunctive
relief). No remedy contained herein shall be deemed a waiver of compliance with
the provisions giving rise to such remedy, and nothing herein shall limit the
Holder’s right to pursue actual damages for any failure by the Company to comply
with the terms of this Note. The Company covenants to the Holder that there
shall be no characterization concerning this instrument other than as expressly
provided herein. Amounts set forth or provided for herein with respect to
payments, conversion and the like (and the computation thereof) shall be the
amounts to be received by the Holder thereof and shall not, except as expressly
provided herein, be subject to any other obligation of the Company (or the
performance thereof). The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Holder and that the
remedy at law for any such breach may be inadequate. The Company therefore
agrees that, in the event of any such breach or threatened breach, the Holder
shall be entitled, in addition to all other available remedies, to an injunction
restraining any breach, without the necessity of showing economic loss and
without any bond or other security being required.

Specific Shall Not Limit General; Construction. No specific provision contained
in this Note shall limit or modify any more general provision contained herein.
This Note shall be deemed to be jointly drafted by the Company and all
purchasers of Notes pursuant to the Facility Agreement and shall not be
construed against any Person as the drafter hereof.

 

19

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Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder
in the exercise of any power, right or privilege hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such power,
right or privilege preclude other or further exercise thereof or of any other
right, power or privilege.

Notices. Whenever notice is required to be given under this Note, unless
otherwise provided herein, such notice shall be given in accordance with
Section 6.1 of the Facility Agreement.

Restrictions on Transfer.

Registration or Exemption Required. This Note has been issued in a transaction
exempt from the registration requirements of the Securities Act by virtue of
Regulation D. None of the Note or the Conversion Shares may be pledged,
transferred, sold, assigned, hypothecated or otherwise disposed of except
pursuant to an effective registration statement or an exemption to the
registration requirements of the Securities Act and applicable state laws
including, without limitation, a so-called “4(1) and a half” transaction.

Assignment. Subject to Section 10(a), the Holder may sell, transfer, assign,
pledge, hypothecate or otherwise dispose of this Note, in whole or in part;
provided that (i) the Holder shall deliver a written notice to Company,
substantially in the form of the Assignment attached hereto as Exhibit B,
indicating the Person or Persons to whom the Note shall be assigned and the
respective principal amount of the Note to be assigned to each assignee, (ii) if
such transfer is being effected as a so-called “4(1) and a half” transaction or
pursuant to Rule 144A, any such transferee Person shall make the representations
and agree to the representations set forth on Exhibit B-1 hereto and shall agree
to comply with the provisions of Section 2(c)(iii) hereof, (iii) except in the
case of any assignment or transfer pursuant to an effective registration
statement covering the disposition of the Note or pursuant to Rule 144, the
Holder shall deliver to the Company a legal opinion reasonably acceptable to the
Company which, in the case of a so-called “4(1) and a half” transaction shall be
substantially in the form attached hereto as Exhibit C, (iv) the transferee
shall have complied with Section 2.5(d) of the Facility Agreement, and
(v) unless an Event of Default shall have occurred and is continuing, no
assignment shall be permitted to any (A) Major Pharmaceutical Company and any
(B) entity principally engaged in the business of selling insulin or insulin
delivery products (an “Applicable Entity”); provided, however, that (1) entities
that own, directly or indirectly, equity interests in an Applicable Entity as
part of a brokerage, insurance business, pension fund (or other benefit fund),
investment banking, investment management, investment advisory, lobbying, or
publishing business, or (2) any non-profit research or non-profit enterprise,
shall not constitute an Applicable Entity, and (v) the Holder shall comply with
all additional assignment provisions set forth in Section 6.5 of the Facility
Agreement. The Company shall effect the assignment within three (3) business
days (the “Transfer Delivery Period”), and shall deliver to the assignee(s)
designated by Holder a Note or Notes of like tenor and terms for the appropriate
principal amount. This Note and the rights evidenced hereby shall inure to the
benefit of and be binding upon the successors and assigns of the Holder. The
provisions of this Note are intended to be for the benefit of all Holders from
time to time of this Note, and shall be enforceable by any such Holder. For
avoidance of doubt, in the event Holder notifies the Company that such sale or
transfer is a so called “4(1) and a half” transaction, the parties hereto agree
that a legal

 

20

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opinion from outside counsel for the Holder delivered to counsel for the Company
substantially in the form attached hereto as Exhibit C shall be the only
requirement to satisfy an exemption from registration under the Securities Act
to effectuate such “4(1) and half” transaction.

Payment of Collection, Enforcement and Other Costs. If (a) this Note is placed
in the hands of an attorney for collection or enforcement or is collected or
enforced through any legal proceeding; or (b) an attorney is retained to
represent the Holder in any bankruptcy, reorganization, receivership of the
Company or other proceedings affecting Company creditors’ rights and involving a
claim under this Note, then the Company shall pay the costs incurred by the
Holder for such collection, enforcement or action, including reasonable
attorneys’ fees and disbursements.

Cancellation. After all Principal, Interest and other amounts at any time owed
under, or on account of, this Note have been paid in full or converted into
Shares in accordance with the terms hereof, this Note shall automatically be
deemed cancelled, shall be surrendered to the Company for cancellation and shall
not be reissued.

Registered Note. This Note may be transferred only upon notation of such
transfer on the Register, and no assignment thereof shall be effective until
recorded therein.

Waiver of Notice. To the extent permitted by law, the Company hereby waives
demand, notice, presentment, protest and all other demands and notices in
connection with the delivery, acceptance, performance, default or enforcement of
this Note and the Facility Agreement.

Governing Law. This Note shall be governed by the laws of the State of New York
applicable to contracts made and to be performed in such State. All legal
proceedings concerning the interpretation and enforcement of this Note shall be
commenced exclusively in the state and federal courts sitting in The City of New
York. The Company hereby and each Holder (by its acceptance of this Note)
irrevocably submits to the exclusive jurisdiction of such courts for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby, and hereby irrevocably waives, and agrees not
to assert in any suit, action or other proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such suit, action
or other proceeding is improper or is an inconvenient venue for such proceeding.
The Company hereby and each Holder (by its acceptance of this Note) irrevocably
waives personal service of process and consents to process being served in any
such suit, action or other proceeding by mailing a copy thereof via registered
or certified mail or overnight delivery (with evidence of delivery) to such
person at the address in effect for notices to it under Section 6.1 of the
Facility Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained herein shall
be deemed to limit in any way any right to serve process in any other manner
permitted by law. EACH OF THE COMPANY AND THE HOLDER (BY ACCEPTANCE HEREOF)
IRREVOCABLY WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING
BROUGHT TO ENFORCE ANY PROVISION OF THIS NOTE OR ANY OTHER TRANSACTION DOCUMENT.

 

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Interpretative Matters. Unless the context otherwise requires, (a) all
references to Sections or Exhibits are to Sections or Exhibits contained in or
attached to this Note, (b) each accounting term not otherwise defined in this
Note has the meaning assigned to it in accordance with GAAP, (c) words in the
singular or plural include the singular and plural and pronouns stated in either
the masculine, the feminine or neuter gender shall include the masculine,
feminine and neuter and (d) the use of the word “including” in this Note shall
be by way of example rather than limitation. If a stock split, stock dividend,
stock combination or other similar event occurs during any period over which an
average price is being determined, then an appropriate adjustment will be made
to such average to reflect such event.

Execution. A facsimile, telecopy, PDF or other reproduction of this Note may be
delivered by the Company, and an executed copy of this Note may be delivered by
the Company by facsimile, e-mail or other similar electronic transmission device
pursuant to which the signature of or on behalf of the Company can be seen, and
such execution and delivery shall be considered valid, binding and effective for
all purposes. The Company hereby agrees that it shall not raise the execution of
facsimile, PDF or other reproduction of this Note, or the fact that any
signature was transmitted by facsimile, e-mail or other similar electronic
transmission device, as a defense to the Company’s execution of this Note.
Notwithstanding the foregoing, the Company shall be required to deliver an
originally executed Note to the Holder.

[Signature page follows]

 

22

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IN WITNESS WHEREOF, the Company has caused this Note to be duly executed as of
the date first set forth above.

 

COMPANY: MANNKIND CORPORATION By:  

 

Name:  

 

Title:  

 

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

Exhibit A

CONVERSION NOTICE

Reference is made to the Senior Secured Convertible Note (the “Note”) of
MANNKIND CORPORATION, a Delaware corporation (the “Company”), in the original
principal amount of $[            ]. In accordance with and pursuant to the
Note, the undersigned hereby elects to convert the Conversion Amount (as defined
in the Note) of the Note indicated below into Shares of Common Stock, par value
$0.01 per share (the “Common Stock”), of the Company, as of the date specified
below.

Date of Conversion:                     

 

Aggregate Conversion Amount to be converted at the Conversion Price (as defined
in the Note):

 

     

 

Principal, applicable thereto, to be converted:  

 

Please confirm the following information:

 

Conversion Price:  

 

 

Number of shares of Common Stock to be issued:  

 

Please issue the Common Stock into which the Note is being converted in the
following name and to the following address:

 

Issue to:  

 

 

Facsimile Number:  

 

 

Authorization:  

 

     

By:

 

 

     

Title:

 

 

     

 

Dated:  

 

     

 

DTC Participant Number and Name (if electronic book entry transfer):  

 

 

Account Number (if electronic book entry transfer):  

 

 

24

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ACKNOWLEDGMENT

The Company hereby acknowledges this Conversion Notice and hereby directs
[TRANSFER AGENT] to issue the above indicated number of shares of Common Stock.

 

MANNKIND CORPORATION By:  

 

Name:  

 

Title:  

 

 

25

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Exhibit B

ASSIGNMENT

(To be executed by the registered holder

desiring to transfer the Note)

FOR VALUE RECEIVED, the undersigned holder of the attached Senior Secured
Convertible Note (the “Note”) hereby sells, assigns and transfers unto the
person or persons below named the right to receive the principal amount of
$             from Mannkind Corporation, a Delaware corporation, evidenced by
the attached Note and does hereby irrevocably constitute and appoint
             attorney to transfer the said Note on the books of the Company,
with full power of substitution in the premises.

 

Dated:  

 

   

 

      Signature

Fill in for new registration of Note:

 

 

Name

 

Address

 

Please print name and address of assignee (including zip code number)

NOTICE

The signature to the foregoing Assignment must correspond to the name as written
upon the face of the attached Note in every particular, without alteration or
enlargement or any change whatsoever.

 

26

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Exhibit B-1

[FORM OF INVESTOR REPRESENTATION LETTER]

            , 20    

[                    ]

Gentlemen:

             (“            ”) has agreed to purchase $             principal
amount of Senior Secured Convertible Note (the “Note”) of [                    ]
(the “Company”) from [                    ] (“[                    ]”). We
understand that the Note is a “restricted security.” We represent and warrant
that              is a sophisticated institutional investor that would qualify
as an “Accredited Investor” as defined in Rule 501 of Regulation D under the
Securities Act of 1933, as amended (the “Securities Act”).

             represents and warrants as of the date hereof as follows:

1. That it is acquiring the Note and the shares of common stock, $0.01 par value
per share underlying such Note (the “Conversion Shares”) solely for its account
for investment and not with a view to or for sale or distribution of said Note
or Conversion Shares or any part thereof in violation of applicable securities
laws, except pursuant to sales registered or exempted under the Securities Act;
provided, however, that by making the representations herein,          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 Securities Act.          does not presently
have any agreement or understanding, directly or indirectly, with any Person to
distribute the Note or the Conversion Shares in violation of applicable
securities laws. As used in this Agreement, “Person” means an individual, a
limited liability company, a partnership, a joint venture, a corporation, a
trust, an unincorporated organization and a government or any department or
agency thereof.              also represents that the entire legal and
beneficial interests of the Note and Conversion Shares              is acquiring
is being acquired for, and will be held for, its account only;

2.              understands that the Notes and the Conversion Shares have not
been registered under the Securities Act in reliance on specific exemptions from
the registration requirements of United States federal and state securities laws
and in reliance in part upon the truth and accuracy of, and such             ’s
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of              set forth herein in order to determine the
availability of such exemptions and the eligibility of              to acquire
the securities.

3. That the Note and the Conversion Shares must be held indefinitely unless they
are subsequently registered under the Securities Act or an exemption from such
registration is available.              recognizes that the Company has no
obligation to register the Note, or to comply with any exemption from such
registration;

 

27

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4. That neither the Note nor the Conversion Shares may be sold pursuant to Rule
144 adopted under the Securities Act unless certain conditions are met,
including, among other things, the existence of a public market for the shares,
the availability of certain current public information about the Company, the
resale following the required holding period under Rule 144;

5. It is an “accredited investor” as defined in Regulation D promulgated under
the Securities Act;

 

28

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6. That it will not make any disposition of all or any part of the Note or
Conversion Shares in any event unless and until:

(i) The Company shall have received a letter secured by              from the
Securities and Exchange Commission stating that no action will be recommended to
the Securities and Exchange Commission with respect to the proposed disposition;

(ii) There is then in effect a registration statement under the Securities Act
covering such proposed disposition and such disposition is made in accordance
with said registration statement; or

(iii)              shall have notified the Company of the proposed disposition
and, in the case of a sale or transfer in a so called “4(1) and a half”
transaction, shall have furnished counsel to the Company with an opinion of
counsel, reasonably satisfactory to counsel to the Company.

We acknowledge that the Company will place stop orders with respect to the Note
and the Conversion Shares, and if a registration statement is not effective, the
Conversion Shares shall bear the following restrictive legend:

“THE SECURITY REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, OR APPLICABLE STATE SECURITIES LAWS. THIS SECURITY MAY
NOT BE SOLD, TRANSFERRED OR ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER SAID ACT, OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER
SAID ACT INCLUDING, WITHOUT LIMITATION, PURSUANT TO RULE 144 UNDER SAID ACT.”

At any time and from time to time after the date hereof,              shall,
without further consideration, execute and deliver to [            ] or the
Company such other instruments or documents and shall take such other actions as
they may reasonably request to carry out the transactions contemplated hereby.

Very truly yours,

 

29

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Exhibit C

FORM OF OPINION

            , 20    

[                    ]

 

Re: Mannkind Corporation (the “Company”)

Dear Sir:

[                    ] (“[                    ]”) intends to transfer its Senior
Secured Convertible Note in the principal amount of $             (the “Note”)
of the Company to              (“            ”) without registration under the
Securities Act of 1933, as amended (the “Securities Act”). In connection
herewith, we have examined such documents and issues of law as we have deemed
relevant.

Based on and subject to the foregoing, we are of the opinion that the transfer
of the Note by              to              may be effected without registration
under the Securities Act, provided, however, that the Note to be transferred to
             contain a legend restricting its transferability pursuant to the
Securities Act and that transfer of the Note is subject to a stop order.

The foregoing opinion is furnished only to              and may not be used,
circulated, quoted or otherwise referred to or relied upon by you for any
purposes other than the purpose for which furnished or by any other person for
any purpose, without our prior written consent.

Very truly yours,

 

30

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Exhibit B

Form of Tranche B Note

 

31

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Exhibit B

THE SECURITY REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, OR APPLICABLE STATE SECURITIES LAWS. THIS SECURITY MAY
NOT BE SOLD, TRANSFERRED OR ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER SAID ACT, OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER
SAID ACT INCLUDING, WITHOUT LIMITATION, PURSUANT TO RULE 144 UNDER SAID ACT.

THIS NOTE MAY BE ISSUED WITH ORIGINAL ISSUE DISCOUNT (“OID”) FOR U.S. FEDERAL
INCOME TAX PURPOSES. THE ISSUE PRICE OF THIS NOTE SHALL BE MUTUALLY DETERMINED
BY THE ORIGINAL HOLDER AND THE COMPANY IN GOOD FAITH AND IN ACCORDANCE WITH THE
APPLICABLE PROVISIONS OF SECTIONS 1271 THROUGH 1275 OF THE U.S. INTERNAL REVENUE
CODE. THE ISSUE PRICE, AMOUNT OF OID, ISSUE DATE AND YIELD TO MATURITY WITH
RESPECT TO THIS NOTE MAY BE OBTAINED BY WRITING TO THE BORROWER AT THE FOLLOWING
ADDRESS: 28903 NORTH AVENUE PAINE; VALENCIA, CALIFORNIA 91355; ATTENTION:
MATTHEW PFEFFER FAX NUMBER: (661) 775-2099.

TRANCHE B SENIOR SECURED NOTE

 

Issuance Date: [            ], 2014    Principal: U.S. $[            ]

FOR VALUE RECEIVED, MANNKIND CORPORATION, a Delaware corporation (the
“Company”), hereby promises to pay to [                    ], or its registered
assigns (the “Holder”) the principal amount of [                    ] Dollars
($[            ]) (the “Principal”) pursuant to, and in accordance with, the
terms of that certain Facility Agreement, dated as of July 1, 2013, as amended
on February 28, 2014, by and among the Company and the Purchasers party thereto
(together with all exhibits and schedules thereto and as may be amended,
restated, modified and supplemented from time to time, the “Facility
Agreement”). The Company hereby promises to pay accrued and unpaid Interest (as
defined below) and premium, if any, on the Principal on the dates, at the rates
and in the manner provided for in the Facility Agreement. This Tranche B Senior
Secured Note (including all Tranche B Senior Secured Notes issued in exchange,
transfer or replacement hereof, and as any of the foregoing may be amended,
restated, supplemented or otherwise modified from time, this “Note”) is one of
the Tranche B Senior Secured Notes issued pursuant to the Facility Agreement
(collectively, including Tranche B Senior Secured Notes to be issued pursuant to
the Facility Agreement in the future, all Tranche B Senior Secured Notes issued
in exchange, transfer or

 

32

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replacement thereof, as well as any of the foregoing may be amended, restated,
supplemented or otherwise modified from time to time, the “Notes”). All
capitalized terms used and not otherwise defined herein shall have the
respective meanings set forth in the Facility Agreement.

Except as expressly provided in the Facility Agreement, the Company has no
right, but under certain circumstances may have an obligation, to make payments
of Principal prior to the Final Payment Date. At any time an Event of Default
exists, the Principal of this Note, together with all accrued and unpaid
Interest and any applicable premium due, if any, may be declared, or shall
otherwise become, due and payable in the manner, at the price and with the
effect provided in the Facility Agreement.

Definitions.

Certain Defined Terms. For purposes of this Note, the following terms shall have
the following meanings:

“Affiliate” means any person or entity that, directly or indirectly through one
or more intermediaries, controls or is controlled by or is under common control
with a person or entity, as such terms are used in and construed under Rule 144
under the Securities Act. With respect to a Holder, any investment fund or
managed account that is managed on a discretionary basis by the same investment
manager as such Holder will be deemed to be an Affiliate of such Holder. As used
in this definition of “Affiliate,” the term “control” means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through ownership of voting
securities or partnership or other ownership interest, by contract, or
otherwise.

“Interest” means any interest (including any default interest) accrued on the
Principal pursuant to the terms of this Note and the Facility Agreement.

“Issuance Date” means [            ], 2014, regardless of any exchange or
replacement hereof.

“Major Pharmaceutical Company” means any Person engaged in the pharmaceutical or
biotechnology industry who, for the immediately preceding fiscal year, had total
revenues in excess of $2,000,000,000 (or its equivalent in another currency).

“Principal” means the outstanding principal amount of this Note as of any date
of determination.

Book-Entry and Legends.

a. Book-Entry. Notwithstanding anything to the contrary set forth herein, upon
repayment of this Note in accordance with the terms hereof, the Holder shall not
be required to physically surrender this Note to the Company unless all of the
Principal is being repaid. The Holder and the Company shall maintain records
showing the Principal repaid and the dates of such repayments or shall use such
other method, reasonably satisfactory to the Holder and the Company, so as not
to require physical surrender of this Note upon any such

 

33

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partial repayment. Notwithstanding the foregoing, if this Note is repaid as
aforesaid, the Holder may not transfer this Note unless the Holder first
physically surrenders this Note to the Company, whereupon the Company will
forthwith issue and deliver upon the order of the Holder a new Note of like
tenor, registered as the Holder may request, representing in the aggregate the
remaining Principal represented by this Note. The Holder and any assignee, by
acceptance of this Note, acknowledge and agree that, by reason of the provisions
of this paragraph, following repayment of any portion of this Note, the
Principal of this Note may be less than the principal amount stated on the face
hereof.

Legends. The Holder understands that this Note may bear a restrictive legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of the certificates for such securities):

“THE SECURITY REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, OR APPLICABLE STATE SECURITIES LAWS. THIS SECURITY MAY
NOT BE SOLD, TRANSFERRED OR ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER SAID ACT, OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER
SAID ACT INCLUDING, WITHOUT LIMITATION, PURSUANT TO RULE 144 UNDER SAID ACT.”

Amendment; Waiver. The terms and provisions of this Note shall not be amended or
waived except in a writing signed by the Company and the Holder.

Remedies, Characterizations, Other Obligations, Breaches and Injunctive Relief.
The remedies provided in this Note shall be cumulative and in addition to all
other remedies available under this Note, the Facility Agreement, at law or in
equity (including a decree of specific performance and/or other injunctive
relief). No remedy contained herein shall be deemed a waiver of compliance with
the provisions giving rise to such remedy, and nothing herein shall limit the
Holder’s right to pursue actual damages for any failure by the Company to comply
with the terms of this Note. The Company covenants to the Holder that there
shall be no characterization concerning this instrument other than as expressly
provided herein. Amounts set forth or provided for herein with respect to
payments and the like (and the computation thereof) shall be the amounts to be
received by the Holder thereof and shall not, except as expressly provided
herein, be subject to any other obligation of the Company (or the performance
thereof). The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Holder and that the remedy at law
for any such breach may be inadequate. The Company therefore agrees that, in the
event of any such breach or threatened breach, the Holder shall be entitled, in
addition to all other available remedies, to an injunction restraining any
breach, without the necessity of showing economic loss and without any bond or
other security being required.

Specific Shall Not Limit General; Construction. No specific provision contained
in this Note shall limit or modify any more general provision contained herein.
This Note shall be deemed to be jointly drafted by the Company and all
purchasers of Notes pursuant to the Facility Agreement and shall not be
construed against any Person as the drafter hereof.

 

34

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Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder
in the exercise of any power, right or privilege hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such power,
right or privilege preclude other or further exercise thereof or of any other
right, power or privilege.

Notices. Whenever notice is required to be given under this Note, unless
otherwise provided herein, such notice shall be given in accordance with
Section 6.1 of the Facility Agreement.

Restrictions on Transfer.

Registration or Exemption Required. This Note has been issued in a transaction
exempt from the registration requirements of the Securities Act by virtue of
Regulation D. This Note may not be pledged, transferred, sold, assigned,
hypothecated or otherwise disposed of except pursuant to an effective
registration statement or an exemption to the registration requirements of the
Securities Act and applicable state laws including, without limitation, a
so-called “4(1) and a half” transaction.

Assignment. Subject to Section 8(a), the Holder may sell, transfer, assign,
pledge, hypothecate or otherwise dispose of this Note, in whole or in part;
provided that (i) the Holder shall deliver a written notice to Company,
substantially in the form of the Assignment attached hereto as Exhibit A,
indicating the Person or Persons to whom the Note shall be assigned and the
respective principal amount of the Note to be assigned to each assignee, (ii) if
such transfer is being effected as a so-called “4(1) and a half” transaction or
pursuant to Rule 144A, any such transferee Person shall make the representations
and agree to the representations set forth on Exhibit A-1 hereto, (iii) except
in the case of any assignment or transfer pursuant to an effective registration
statement covering the disposition of the Note or pursuant to Rule 144, the
Holder shall deliver to the Company a legal opinion reasonably acceptable to the
Company which, in the case of a so-called “4(1) and a half” transaction shall be
substantially in the form attached hereto as Exhibit B, (iv) the transferee
shall have complied with Section 2.5(d) of the Facility Agreement, and
(v) unless an Event of Default shall have occurred and is continuing, no
assignment shall be permitted to any (A) Major Pharmaceutical Company and any
(B) entity principally engaged in the business of selling insulin or insulin
delivery products (an “Applicable Entity”); provided, however, that (1) entities
that own, directly or indirectly, equity interests in an Applicable Entity as
part of a brokerage, insurance business, pension fund (or other benefit fund),
investment banking, investment management, investment advisory, lobbying, or
publishing business, or (2) any non-profit research or non-profit enterprise,
shall not constitute an Applicable Entity, and (v) the Holder shall comply with
all additional assignment provisions set forth in Section 6.5 of the Facility
Agreement. The Company shall effect the assignment within three (3) business
days (the “Transfer Delivery Period”), and shall deliver to the assignee(s)
designated by Holder a Note or Notes of like tenor and terms for the appropriate
principal amount. This Note and the rights evidenced hereby shall inure to the
benefit of and be binding upon the successors and assigns of the Holder. The
provisions of this Note are intended to be for the benefit of all Holders from
time to time of this Note, and shall be enforceable by any such Holder. For
avoidance of doubt, in the event Holder notifies the Company that such sale or
transfer is a so called “4(1) and a half” transaction, the parties hereto agree
that a legal

 

35

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opinion from outside counsel for the Holder delivered to counsel for the Company
substantially in the form attached hereto as Exhibit B shall be the only
requirement to satisfy an exemption from registration under the Securities Act
to effectuate such “4(1) and half” transaction.

Payment of Collection, Enforcement and Other Costs. If (a) this Note is placed
in the hands of an attorney for collection or enforcement or is collected or
enforced through any legal proceeding; or (b) an attorney is retained to
represent the Holder in any bankruptcy, reorganization, receivership of the
Company or other proceedings affecting Company creditors’ rights and involving a
claim under this Note, then the Company shall pay the costs incurred by the
Holder for such collection, enforcement or action, including reasonable
attorneys’ fees and disbursements.

Cancellation. After all Principal, Interest and other amounts at any time owed
under, or on account of, this Note have been paid in full in accordance with the
terms hereof, this Note shall automatically be deemed cancelled, shall be
surrendered to the Company for cancellation and shall not be reissued.

Registered Note. This Note may be transferred only upon notation of such
transfer on the Register, and no assignment thereof shall be effective until
recorded therein.

Waiver of Notice. To the extent permitted by law, the Company hereby waives
demand, notice, presentment, protest and all other demands and notices in
connection with the delivery, acceptance, performance, default or enforcement of
this Note and the Facility Agreement.

Governing Law. This Note shall be governed by the laws of the State of New York
applicable to contracts made and to be performed in such State. All legal
proceedings concerning the interpretation and enforcement of this Note shall be
commenced exclusively in the state and federal courts sitting in The City of New
York. The Company hereby and each Holder (by its acceptance of this Note)
irrevocably submits to the exclusive jurisdiction of such courts for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby, and hereby irrevocably waives, and agrees not
to assert in any suit, action or other proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such suit, action
or other proceeding is improper or is an inconvenient venue for such proceeding.
The Company hereby and each Holder (by its acceptance of this Note) irrevocably
waives personal service of process and consents to process being served in any
such suit, action or other proceeding by mailing a copy thereof via registered
or certified mail or overnight delivery (with evidence of delivery) to such
person at the address in effect for notices to it under Section 6.1 of the
Facility Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained herein shall
be deemed to limit in any way any right to serve process in any other manner
permitted by law. EACH OF THE COMPANY AND THE HOLDER (BY ACCEPTANCE HEREOF)
IRREVOCABLY WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING
BROUGHT TO ENFORCE ANY PROVISION OF THIS NOTE OR ANY OTHER TRANSACTION DOCUMENT.

 

36

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Interpretative Matters. Unless the context otherwise requires, (a) all
references to Sections or Exhibits are to Sections or Exhibits contained in or
attached to this Note, (b) each accounting term not otherwise defined in this
Note has the meaning assigned to it in accordance with GAAP, (c) words in the
singular or plural include the singular and plural and pronouns stated in either
the masculine, the feminine or neuter gender shall include the masculine,
feminine and neuter and (d) the use of the word “including” in this Note shall
be by way of example rather than limitation. If a stock split, stock dividend,
stock combination or other similar event occurs during any period over which an
average price is being determined, then an appropriate adjustment will be made
to such average to reflect such event.

Execution. A facsimile, telecopy, PDF or other reproduction of this Note may be
delivered by the Company, and an executed copy of this Note may be delivered by
the Company by facsimile, e-mail or other similar electronic transmission device
pursuant to which the signature of or on behalf of the Company can be seen, and
such execution and delivery shall be considered valid, binding and effective for
all purposes. The Company hereby agrees that it shall not raise the execution of
facsimile, PDF or other reproduction of this Note, or the fact that any
signature was transmitted by facsimile, e-mail or other similar electronic
transmission device, as a defense to the Company’s execution of this Note.
Notwithstanding the foregoing, the Company shall be required to deliver an
originally executed Note to the Holder.

[Signature page follows]

 

37

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IN WITNESS WHEREOF, the Company has caused this Note to be duly executed as of
the date first set forth above.

 

COMPANY: MANNKIND CORPORATION By:  

 

Name:  

 

Title:  

 

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Exhibit A

ASSIGNMENT

(To be executed by the registered holder

desiring to transfer the Note)

FOR VALUE RECEIVED, the undersigned holder of the attached Tranche B Senior
Secured Note (the “Note”) hereby sells, assigns and transfers unto the person or
persons below named the right to receive the principal amount of $            
from MannKind Corporation, a Delaware corporation, evidenced by the attached
Note and does hereby irrevocably constitute and appoint              attorney to
transfer the said Note on the books of the Company, with full power of
substitution in the premises.

 

Dated:  

 

   

 

      Signature

Fill in for new registration of Note:

 

 

Name

 

Address

 

Please print name and address of assignee (including zip code number)

NOTICE

The signature to the foregoing Assignment must correspond to the name as written
upon the face of the attached Note in every particular, without alteration or
enlargement or any change whatsoever.

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

Exhibit A-1

[FORM OF INVESTOR REPRESENTATION LETTER]

            , 20    

[                    ]

Gentlemen:

             (“            ”) has agreed to purchase $             principal
amount of Tranche B Senior Secured Note (the “Note”) of [                    ]
(the “Company”) from [                    ] (“[                    ]”). We
understand that the Note is a “restricted security.” We represent and warrant
that             is a sophisticated institutional investor that would qualify as
an “Accredited Investor” as defined in Rule 501 of Regulation D under the
Securities Act of 1933, as amended (the “Securities Act”).

             represents and warrants as of the date hereof as follows:

1. That it is acquiring the Note solely for its account for investment and not
with a view to or for sale or distribution of said Note or any part thereof in
violation of applicable securities laws, except pursuant to sales registered or
exempted under the Securities Act; provided, however, that by making the
representations herein,              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 Securities Act.              does not presently have any agreement or
understanding, directly or indirectly, with any Person to distribute the Note in
violation of applicable securities laws. As used in this Agreement, “Person”
means an individual, a limited liability company, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization and a government
or any department or agency thereof.              also represents that the
entire legal and beneficial interests of the Note              is acquiring is
being acquired for, and will be held for, its account only;

2.             understands that the Notes have not been registered under the
Securities Act in reliance on specific exemptions from the registration
requirements of United States federal and state securities laws and in reliance
in part upon the truth and accuracy of, and such             ’s compliance with,
the representations, warranties, agreements, acknowledgments and understandings
of              set forth herein in order to determine the availability of such
exemptions and the eligibility of              to acquire the securities.

3. That the Note must be held indefinitely unless they are subsequently
registered under the Securities Act or an exemption from such registration is
available.              recognizes that the Company has no obligation to
register the Note, or to comply with any exemption from such registration;

4. That the Note may not be sold pursuant to Rule 144 adopted under the
Securities Act unless certain conditions are met, including, among other things,
the existence of a public market for the shares, the availability of certain
current public information about the Company, the resale following the required
holding period under Rule 144;

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

5. It is an “accredited investor” as defined in Regulation D promulgated under
the Securities Act;

6. That it will not make any disposition of all or any part of the Note in any
event unless and until:

(i) The Company shall have received a letter secured by              from the
Securities and Exchange Commission stating that no action will be recommended to
the Securities and Exchange Commission with respect to the proposed disposition;

(ii) There is then in effect a registration statement under the Securities Act
covering such proposed disposition and such disposition is made in accordance
with said registration statement; or

(iii)              shall have notified the Company of the proposed disposition
and, in the case of a sale or transfer in a so called “4(1) and a half”
transaction, shall have furnished counsel to the Company with an opinion of
counsel, reasonably satisfactory to counsel to the Company.

We acknowledge that the Company will place stop orders with respect to the Note
shall bear the following restrictive legend:

“THE SECURITY REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, OR APPLICABLE STATE SECURITIES LAWS. THIS SECURITY MAY
NOT BE SOLD, TRANSFERRED OR ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER SAID ACT, OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER
SAID ACT INCLUDING, WITHOUT LIMITATION, PURSUANT TO RULE 144 UNDER SAID ACT.”

At any time and from time to time after the date hereof,              shall,
without further consideration, execute and deliver to [            ] or the
Company such other instruments or documents and shall take such other actions as
they may reasonably request to carry out the transactions contemplated hereby.

Very truly yours,

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Exhibit B

FORM OF OPINION

            , 20    

[                    ]

 

Re: Mannkind Corporation (the “Company”)

Dear Sir:

[                    ] (“[                    ]”) intends to transfer its
Tranche B Senior Secured Note in the principal amount of $             (the
“Note”) of the Company to              (“            ”) without registration
under the Securities Act of 1933, as amended (the “Securities Act”). In
connection herewith, we have examined such documents and issues of law as we
have deemed relevant.

Based on and subject to the foregoing, we are of the opinion that the transfer
of the Note by              to              may be effected without registration
under the Securities Act, provided, however, that the Note to be transferred to
             contain a legend restricting its transferability pursuant to the
Securities Act and that transfer of the Note is subject to a stop order.

The foregoing opinion is furnished only to              and may not be used,
circulated, quoted or otherwise referred to or relied upon by you for any
purposes other than the purpose for which furnished or by any other person for
any purpose, without our prior written consent.

Very truly yours,