Exhibit 10.1

STOCK PURCHASE AGREEMENT

by and between

ARADIGM CORPORATION

and

GRIFOLS, S.A.

Dated as of May 20, 2013

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TABLE OF CONTENTS

 

            Page  

ARTICLE I DEFINITIONS

     2   

1.1

    

Defined Terms

     2   

1.2

    

Other Terms

     12   

1.3

    

Interpretation

     12   

ARTICLE II PURCHASE AND SALE

     13   

2.1

    

Purchase and Sale of New Shares

     13   

2.2

    

Consideration

     14   

2.3

    

Closing

     14   

2.4

    

Nature of Agreement

     14   

ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY

     14   

3.1

    

Organization of the Company

     15   

3.2

    

Capitalization

     15   

3.3

    

Subsidiaries; Investments

     16   

3.4

    

Authorization

     17   

3.5

    

Validity of New Shares

     17   

3.6

    

Title to Properties and Assets

     17   

3.7

    

Absence of Certain Activities or Changes

     18   

3.8

    

Material Contracts

     18   

3.9

    

Consents and Approvals; No Conflicts

     20   

3.10

    

SEC Reports; Financial Statements; Accounting Matters

     20   

3.11

    

No Undisclosed Liabilities

     21   

3.12

    

Taxes

     21   

3.13

    

Environmental Matters

     22   

3.14

    

Employee Benefits

     23   

3.15

    

Compliance with Law

     24   

3.16

    

Permits

     24   

3.17

    

Litigation

     24   

3.18

    

Labor Matters

     24   

3.19

    

Intellectual Property

     25   

3.20

    

Transactions with Certain Persons

     27   

3.21

    

Insurance

     27   

3.22

    

Certain Business Practices

     27   

3.23

    

No Brokers

     28   

3.24

    

Books and Records

     28   

3.25

    

Health Care Law and Regulatory Matters

     28   

3.26

    

Takeover Statutes; Rights Agreement. Application of Takeover Protections; Rights
Agreement

     30   

3.27

    

Proxy Statement

     30   

 

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3.28

    

Disclosure

     31   

3.29

    

Investment Company Status

     31   

3.30

    

Acknowledgement Regarding Such Purchaser’s Trading Activity

     31   

3.31

    

U.S. Real Property Holding Corporation

     32   

3.32

    

Registration Eligibility

     32   

3.33

    

Transfer Taxes

     32   

3.34

    

Bank Holding Company Act

     32   

3.35

    

Utility Holding Act

     32   

3.36

    

Federal Power Act

     32   

3.37

    

Shell Company Status

     32   

3.38

    

No Other Registration Rights

     32   

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PURCHASERS

     33   

4.1

    

Organization of Such Purchaser

     33   

4.2

    

Authorization

     33   

4.3

    

Consents and Approvals; No Conflicts

     33   

4.4

    

Litigation

     34   

4.5

    

No Brokers

     34   

4.6

    

Proxy Statement

     34   

4.7

    

Sufficiency of Funds

     34   

4.8

    

No Public Sale or Distribution

     34   

4.9

    

Accredited Investor Status

     34   

4.10

    

Reliance on Exemptions

     35   

4.11

    

Transfer or Resale

     35   

4.12

    

General Solicitation

     35   

ARTICLE V ADDITIONAL AGREEMENTS

     35   

5.1

    

Conduct of Business by the Company

     35   

5.2

    

Confidentiality; Access to Information; No Modification of Representations,
Warranties or Covenants

     37   

5.3

    

Regulatory Filings; Commercially Reasonable Efforts

     38   

5.4

    

Shareholders Approval; Preparation of Proxy Statement

     39   

5.5

    

Notification of Certain Matters

     41   

5.6

    

No Solicitation

     41   

5.7

    

Takeover Statutes

     42   

5.8

    

Public Disclosure

     42   

5.9

    

Third Party Manufacturer Supply Agreement

     42   

5.10

    

Further Assurances

     43   

ARTICLE VI POST-CLOSING COVENANTS OF ALL PARTIES

     43   

6.1

    

Indemnification of Directors and Officers

     43   

6.2

    

Disclosure

     44   

ARTICLE VII CONDITIONS TO OBLIGATIONS

     44   

 

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7.1

    

Conditions to the Obligations of Each Party

     44   

7.2

    

Conditions to the Company’s Obligations

     44   

7.3

    

Conditions to the Obligations of Each Purchaser

     45   

ARTICLE VIII INDEMNIFICATION

     47   

8.1

    

Indemnification

     47   

8.2

    

Remedies

     48   

ARTICLE IX TERMINATION, AMENDMENT AND WAIVER

     48   

9.1

    

Termination of the Agreement

     48   

9.2

    

Termination of Individual Purchasers

     49   

9.3

    

Notice of Termination; Effect of Termination

     49   

9.4

    

Expenses

     49   

ARTICLE X MISCELLANEOUS

     49   

10.1

    

Binding Effect; Assignment

     49   

10.2

    

Notices

     50   

10.3

    

GOVERNING LAW

     51   

10.4

    

Entire Agreement; Amendments and Waivers

     51   

10.5

    

Amendments and Waivers

     51   

10.6

    

Counterparts

     51   

10.7

    

Severability

     52   

10.8

    

Schedules

     52   

10.9

    

No Third Party Beneficiaries

     52   

10.10

    

No Strict Construction

     52   

10.11

    

Jurisdiction; Venue

     52   

10.12

    

WAIVER OF JURY TRIAL

     52   

10.13

    

Injunctive Relief; Specific Performance

     53   

EXHIBITS

   Exhibit A      Governance Agreement    Exhibit B      Ciprofloxacin License
Agreement    Exhibit C      A1AT Option Agreement    Exhibit D      Grifols
Registration Rights Agreement    Exhibit E      Other Purchasers Registration
Rights Agreement    Exhibit F      Charter Amendment    Exhibit G      Bylaws
Amendment    SCHEDULES    Schedule A      Purchasers Schedule   

 

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STOCK PURCHASE AGREEMENT

This STOCK PURCHASE AGREEMENT (this “Agreement”), dated as of May 20, 2013, is
entered into by and between the purchasers listed on the Schedule of Purchasers
attached hereto as Schedule A (individually, a “Purchaser” and collectively, the
“Purchasers”), and ARADIGM CORPORATION, a California corporation (the
“Company”). Purchasers and the Company are sometimes referred to as the
“Parties.” Certain capitalized terms used in this Agreement are defined in
Article I of this Agreement.

RECITALS

WHEREAS, Purchasers desire to purchase a number of newly-issued shares of the
Company’s common stock, no par value (the “Company Common Stock”), for a
purchase price equal to $0.124 per share (the “Per Share Purchase Price”);

WHEREAS, as a condition to Closing, Grifols, S.A., a company (sociedad anónima)
organized under the laws of Spain, one of the Purchasers (“Grifols”) and the
Company will be required to enter into a Governance Agreement, substantially in
the form attached as Exhibit A (the “Governance Agreement”), which sets forth
certain rights and obligations of the parties thereto concerning, among other
things, certain corporate governance matters and certain limitations on future
acquisition and dispositions of shares of Company Common Stock by Grifols;

WHEREAS, as a condition to Closing, Grifols and the Company will be required to
enter into a License and Collaboration Agreement, substantially in the form
attached as Exhibit B (the “Ciprofloxacin License Agreement”), under which the
Company will grant to Grifols a license to certain technology and intellectual
property related to related to inhaled ciprofloxacin and the parties thereto
will collaborate for the development and commercialization of inhaled
ciprofloxacin, and an option agreement pursuant to which the Company will grant
to Grifols an option to license the Company’s AERx Pulmonary Drug Delivery
System in the form attached as Exhibit C (the “A1AT Option Agreement”);

WHEREAS, as a condition to Closing, (i) Grifols and the Company will be required
to enter into a registration rights agreement, substantially in the form
attached as Exhibit D (the “Grifols Registration Rights Agreement”) and (ii) the
Purchasers (other than Grifols) and the Company will be required to enter into a
registration rights agreement, substantially in the form attached as Exhibit E
(the “Other Purchasers Registration Rights Agreement”), which set forth the
rights of Grifols or the other Purchasers, as applicable, to require the Company
to file with the Securities and Exchange Commission (“SEC”) certain registration
statements under the Securities Act (as defined below) and with respect to the
resale of shares of Company Common Stock acquired pursuant to this Stock
Purchase Agreement;

WHEREAS, in order for the Company to fulfill its supply obligations under the
License Agreement, the Company will be required to enter into (a) a supply
agreement with Sigma-Tau PharmaSource, Inc. or another pharmaceutical
manufacturer reasonable acceptable to Grifols (the “Third Party Manufacturer”)
under which such Third Party Manufacturer will manufacture and supply to the
Company, and the Company will purchase from the Third Party

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Manufacturer, the Aradigm Products (the “Third Party Manufacturer Supply
Agreement”) and (b) a supply agreement with Grifols under which the Company will
supply to Grifols, and Grifols will purchase from the Company, on substantially
the same terms as the Third Party Manufacturer Supply Agreement (with
appropriate modifications in light of the parties to such agreement), Grifols’
entire requirements (subject to certain limitation) of the Aradigm Products for
distribution and sale worldwide (the “Grifols Supply Agreement”).

WHEREAS, in connection with the execution and delivery of the Transaction
Documents at the Closing and the issuance of the New Shares, the Company will be
required to (i) amend the Articles of Incorporation in the form attached hereto
as Exhibit F (the “Charter Amendment”), which will be adopted, filed and become
effective at or prior to the Closing in accordance with Applicable Law;

WHEREAS, the board of directors of the Company (the “Board of Directors”) has,
by the unanimous vote of the directors present (i) determined that the issuance
of the New Shares to Purchasers is fair and to and in the best interests of the
Company and the Company’s Shareholders, (ii) approved this Agreement, the
Charter Amendment and the other Transaction Documents and the transactions
contemplated hereby and thereby, (iii) declared advisable the Charter Amendment,
(iv) amended the Bylaws in the form attached hereto as Exhibit G, (v) resolved
to submit this Agreement, the Charter Amendment and the other Transaction
Documents to a vote of the Company’s Shareholders and, subject to the terms
hereof, to recommend approval by the Shareholders of this Agreement, the Charter
Amendment and the other Transaction Documents and (vi) determined that the
consummation of Transactions (including the Ciprofloxacin License Agreement) did
not result in a sale of 90% or more of the consolidated assets of the Company
and its Subsidiaries during a single 12-month period; and

WHEREAS, concurrently with the execution and delivery of this Agreement, each of
First Eagle Investment Management, Second Round Capital and Boxer Capital are
entering into a Voting Agreement with Grifols, dated the date hereof (each, a
“Voting Agreement”), pursuant to which such each has agreed, on the terms and
conditions therein, to vote all of the shares of Company Common Stock that will
be beneficially owned or managed by it on the applicable record date in favor of
the approval of this Agreement, the Charter Amendment and the other Transaction
Documents.

NOW THEREFORE, in consideration of the respective covenants and promises
contained herein and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Parties, intending to be legally
bound, agree as follows:

ARTICLE I

DEFINITIONS

1.1 Defined Terms. As used herein, the terms below shall have the following
meanings. Any of such terms, unless the context otherwise requires, may be used
in the singular or plural, depending upon the reference.

“A1AT Option Agreement” has the meaning set forth in the Recitals.

 

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“Acquisition Proposal” means, other than the Transactions, any offer, proposal
or inquiry relating to, or any Person’s indication of interest in, (a) any
merger consolidation or other form of business combination with or involving the
Company, (b) the sale, license, disposition or acquisition of all or any
material portion of the business or assets of the Company, including the grant
of any license to any Intellectual Property of the Company, other than
non-exclusive licenses granted to contract research organizations in the
Ordinary Course of Business, or (c) the issuance, grant, disposition or
acquisition of (i) any shares of Company Capital Stock (other than issuances of
Company Common Stock upon the exercise or conversion of Company Options or
Company Warrants outstanding on the date hereof), (ii) any option, call, warrant
or right to acquire any shares of Company Capital Stock (other than the grant of
Company Options to the Company’s employees by the Company pursuant to its
existing Benefit Plans in the Ordinary Course of Business) or (iii) any other
Company Securities.

“Affiliate” means, with respect to a Person, any Person that, directly or
indirectly, controls, is controlled by or is under common control with such
first Person. For the purposes of this Agreement, Purchasers and their
Affiliates, on the one hand, shall not be deemed to be Affiliates of the Company
and its Affiliates, on the other hand.

“Agreement” has the meaning set forth in the Preamble.

“Antitrust Law” means the HSR Act, the Sherman Act, as amended, the Clayton Act,
as amended, the Federal Trade Commission Act, as amended, and any other
Applicable Laws that are designed to prohibit, restrict or regulate actions
having the purpose or effect of monopolization or restraint of trade.

“Applicable Law” means, with respect to any Person, any statute, law, ordinance,
regulation, rule, code, order, constitution, treaty, common law, judgment,
decree, other requirement or rule of law of any Governmental Entity applicable
to such Person or any of such Person’s property and assets or such Person’s
officers, directors, employees, consultants or agents in their capacity as such
Person’s officers, directors, employees, consultants or agents, respectively.

“Aradigm Products” means products developed, manufactured, marketed or
distributed by or on behalf of the Company.

“Aradigm Technology” has the meaning given such term in the Ciprofloxacin
License Agreement.

“Articles of Incorporation” means the Amended and Restated Articles of
Incorporation of the Company, as further amended from time to time.

“Benefit Plan(s)” means all “employee benefit plans” (as defined in Section 3(3)
of ERISA (whether or not subject to ERISA)), and all other employee compensation
and benefits plans, policies, programs, arrangements or payroll practices,
including multiemployer plans within the meaning of Section 3(37) of ERISA, all
equity and incentive compensation plans, all employee manuals and handbooks,
severance, retention, employment, consulting, change of control, collective
bargaining, deferred compensation, profit sharing, commission, health, welfare,
pension, vacation, retirement agreements or plans, and any other benefit plan,

 

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agreement, program or policy in respect of any present, former or retired
employee, officer, director, stockholder or other Worker of the Company or its
Subsidiaries or any of their respective ERISA Affiliates, or any beneficiary of
any of the foregoing individuals, in each case established, sponsored,
maintained, contributed or required to be contributed to (or with respect to
which any obligation to contribute has or had been undertaken) by the Company,
its Subsidiaries or any of their respective ERISA Affiliates or under which the
Company, its Subsidiaries or any of their respective ERISA Affiliates has any
current or potential Liability.

“BHCA” has the meaning set forth in Section 3.33.

“Board of Directors” has the meaning set forth in the Recitals.

“Business Day” means any day (other than a Saturday, Sunday or a legal holiday)
on which banks are open for general business in Barcelona, Spain and San
Francisco, California, USA.

“Bylaws” means the Amended and Restated Bylaws of the Company, as further
amended from time to time.

“Charter Amendment” has the meaning set forth in the Recitals.

“Charter Amendment Approval” means the affirmative vote of holders of more than
50% of the issued and outstanding shares of Company Common Stock.

“Charter Documents” has the meaning set forth in Section 3.1(b).

“Ciprofloxacin License Agreement” has the meaning set forth in the Recitals.

“Closing” has the meaning set forth in Section 2.3.

“Closing Date” has the meaning set forth in Section 2.3.

“Code” means the U.S. Internal Revenue Code of 1986, as amended, and the rules
and regulations promulgated thereunder.

“Company” has the meaning set forth in the Preamble.

“Company Capital Stock” means Company Common Stock and Company Preferred Stock.

“Company Common Stock” has the meaning set forth in the Recitals.

“Company Disclosure Letter” means the disclosure letter delivered by the Company
to Purchasers in connection with the execution of this Agreement.

“Company Option” means each outstanding stock option to purchase Company Common
Stock granted under any Company Plan.

“Company Partner” has the meaning set forth in Section 3.25(c).

 

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“Company Preferred Stock” has the meaning set forth in Section 3.2(a).

“Company Securities” has the meaning set forth in Section 3.2(b).

“Company Stock Sale” has the meaning set forth in Section 2.1.

“Company Warrant” means each outstanding warrant to purchase Company Capital
Stock.

“Confidential Information” means all information and data including, but not
limited to, proprietary materials regarding the Disclosing Party’s technology,
compounds, products, business information or objectives, that is provided by or
on behalf of the Disclosing Party to the Receiving Party hereunder, either
(a) in written or other tangible medium and designated or marked as confidential
or is of such nature or disclosed under such circumstances as it would
reasonably be understood to be Confidential Information, or (b) orally, visually
or physically, and designated as confidential at the time of such disclosure and
confirmed to be confidential in writing within thirty (30) days after such
disclosure by delivery to the Receiving Party of a written document(s)
describing the information, and referencing the place and date of such oral,
visual or physical disclosure or is of such nature or disclosed under such
circumstances as it would reasonably be understood to be Confidential
Information, except any portion of (a) or (b) that (i) is already known to the
Receiving Party, as evidenced by competent written records predating disclosure
under this Agreement; (ii) is or becomes known or available to the public other
than through acts or omissions of the Receiving Party in violation of this
Agreement; or (iii) becomes known to the Receiving Party from sources
independent of the Disclosing Party who have a lawful right to make such
disclosure

“Confidentiality Agreement” has the meaning set forth in Section 5.2(a).

“Contract” means, with respect to any Person, any agreement, understanding,
contract, note, bond, deed, mortgage, lease, sublease, license, sublicense,
instrument, commitment, promise, undertaking or other binding arrangement,
whether written or oral: (a) to which such Person is a party; (b) by which such
Person or any of its assets is or may become bound or under which such Person
has, or may become subject to, any obligation; or (c) under which such Person
has or may acquire any right or interest.

“control” (including the terms “controlling,” “controlled by” and “under common
control with”) means (a) to possess, directly or indirectly, the power to direct
the management or policies of a Person, whether through ownership of voting
securities, by contract relating to voting rights or corporate governance or
otherwise, or (b) to own, directly or indirectly, fifty percent (50%) or more of
the outstanding securities or other ownership interest of such Person.

“Default” means (a) any actual breach, violation or default, (b) the existence
of circumstances or the occurrence of an event that with the passage of time or
the giving of notice or both would constitute a breach, violation or default or
(c) the existence of circumstances or the occurrence of an event that, with or
without the passage of time or the giving of notice or both, would give rise to
a right of termination, renegotiation or acceleration.

 

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“Development Product” means as any product candidate created by or on behalf of
the Company using the Company’s Intellectual Property, including but not limited
to Aradigm Products.

“Disclosing Party” means the applicable Party in its capacity either as provider
of Confidential Information under this Agreement.

“EMA” means the European Medicines Agency and any successor agency thereto.

“Encumbrance” means any claim, lien, pledge, option, charge, easement, security
interest, deed of trust, mortgage, conditional sales agreement, encumbrance,
preemptive right, right of first refusal, restriction or other right of third
parties, whether voluntarily incurred or arising by operation of law, and
includes any agreement to give any of the foregoing in the future.

“Environmental Claim” means any claim, notice, Order, or proceeding alleging
Liability for, or an obligation with respect to, any investigation, monitoring,
remediation, removal, cleanup, response, corrective action, damages to natural
resources, personal injury, property damage, fines, penalties or other costs
resulting from, related to or arising out of (a) the presence, release or
threatened release of Hazardous Material at any location or (b) any violation or
alleged violation of or compliance or non-compliance with any Environmental Law,
and shall include any claim, notice, Order, or proceeding seeking damages,
contribution, indemnification, cost recovery, compensation or injunctive relief
resulting from, related to or arising out of the presence, release or threatened
release of Hazardous Material or alleged injury or threat of injury to health,
safety or the environment.

“Environmental Law” means all Applicable Laws relating to pollution or
protection of human health and safety or the environment, including, without
limitation (a) Comprehensive Environmental Response, Compensation and Liability
Act, 42 U.S.C. Section 9601 et seq, (b) the Emergency Planning and Community
Right-to-Know Act, 42 U.S.C. Section 11001 et seq.; (c) the U.S. Hazardous
Materials Transportation Act, 49 U.S.C. Section 1801, et seq.; (d) the U.S.
Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq.; (e) the U.S.
Occupational Safety and Health Act of 1970, 29 U.S.C. Section 651 et seq.; and
(f) any regulations promulgated under any of the above statutes.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

“ERISA Affiliate” means, with respect to any Person, any other Person that,
together with such Person, is treated as, or would be deemed to be, a single
employer under Section 414(b), (c), (m) or (o) of the Code or Section 4001 of
ERISA.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and any
successor statute thereto and the rules and regulations of the SEC promulgated
thereunder.

“FDA” means the United States Food and Drug Administration and any successor
agency thereto.

 

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“FDCA” the meaning set forth in the definition of Health Care Law.

“Federal Reserve” has the meaning set forth in Section 3.33.

“Fully Diluted Basis” means, as of any date, a calculation that gives effect to
the number of shares of Voting Stock then issued and outstanding plus the
aggregate number of all shares of Voting Stock that the Company may be required
to issue as of such date pursuant any Company Securities then outstanding,
whether or not such securities are then convertible, exercisable or exchangeable

“GAAP” means the United States generally accepted accounting principles in
effect from time to time.

“Governance Agreement” has the meaning set forth in the Recitals.

“Governmental Entity” means any: (a) nation, state, commonwealth, province,
territory, county, municipality, district or other jurisdiction of any nature;
(b) international, multinational, federal, state, local, municipal, foreign or
other government, agency or authority; or (iii) governmental or
quasi-Governmental Entity of any nature (including any governmental division,
department, agency, Regulatory Authority, commission, instrumentality, official,
organization, unit, body or Person and any court or other tribunal).

“Grant Date” has the meaning set forth in Section 3.2(e).

“Grifols” has the meaning set forth in the Recitals.

“Grifols Designees” has the meaning set forth in Section 6.1(a).

“Grifols Registration Rights Agreements” has the meaning set forth in the
Recitals.

“Grifols Supply Agreement” has the meaning set forth in the Recitals.

“Grifols Supply Agreement Term Sheet” has the meaning set forth in
Section 7.3(d)(ii).

“Hazardous Materials” has the meaning set forth in Section 3.13.

“Health Care Law” means all Applicable Laws with respect to regulatory matters
primarily relating to patient care and human health and safety, including,
without limitation, such Applicable Laws pertaining to: (i) the research,
testing, production, manufacturing, marketing, transfer, distribution and sale
of drugs and devices, including, without limitation, the United States Food Drug
and Cosmetic Act (“FDCA”) (21 U.S.C. §§ 301 et seq.), and equivalent Applicable
Laws of other Governmental Entities; (ii) Permits required to be held by
individuals and entities involved in the research, testing, production,
manufacturing, marketing, transfer, distribution and sale of health care items
and services (iii) any federal health care program (as such term is defined in
42 USC section 1320a-7b(f)), including those pertaining to providers of goods or
services that are paid for by any federal health care program, including the
federal Anti-Kickback

 

7

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Statute (42 U.S.C. § 1320a-7b(b)), the civil False Claims Act (31 U.S.C. § 3729
et seq.), the administrative False Claims Law (42 U.S.C. § 1320a-7b(a)),
Sections 1320a-7 and 1320a-7a of Title 42 of the United States Code and the
regulations promulgated pursuant to such statutes, Medicare (Title XVIII of the
Social Security Act) and the regulations promulgated thereunder; Medicaid (Title
XIX of the Social Security Act) and the regulations promulgated thereunder, and
equivalent Applicable Laws of other Governmental Entities; and (iv) the privacy
and security of patient-identifying health care information, including, without
limitation, the Health Insurance Portability and Accountability Act of 1996 (42
U.S.C. 1320d et seq.), as amended, and the regulations promulgated thereunder
and equivalent Applicable Laws of other Governmental Entities, and each of
(i) through (ix) as may be amended from time to time.

“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.

“Indebtedness” means (without duplication), as to any Person, (a) all
obligations for the payment of principal, interest, penalties, fees or other
Liabilities for borrowed money (including guarantees and notes payable),
incurred or assumed, (b) all obligations of such Person for the deferred Per
Share Purchase Price of property or services (other than current trade payables
incurred in the Ordinary Course of Business), (c) any obligations to reimburse
the issuer of any letter of credit, surety bond, debentures, promissory notes,
performance bond or other guarantee of contractual performance, in each case to
the extent drawn or otherwise not contingent, (d) all obligations of such Person
as lessee under leases that have been or should be recorded as capital leases
under U.S. generally accepted accounting principles, (e) all indebtedness of
third parties secured by an Encumbrance on property owned or acquired by such
Person under GAAP, (f) any obligation that would be required to be reflected as
debt on the balance sheet of such Person under United States generally accepted
accounting principles, (g) all obligations of such Person to purchase, redeem,
retire, defease or otherwise acquire for value any capital stock of such Person
or any warrants, rights or options to acquire such capital stock, valued, in the
case of redeemable preferred stock, at the greater of its voluntary or
involuntary liquidation preference plus accrued and unpaid dividends, and
(h) all Indebtedness of others referred to in clauses (a) through (h) above
guaranteed directly or indirectly in any manner by such Person, or in effect
guaranteed directly or indirectly by such Person through an agreement to pay or
purchase such Indebtedness, to advance or supply funds for the payment or
purchase of such Indebtedness or otherwise to assure a creditor against loss, in
each case including all accrued interest and prepayment penalties, if any.

“Indemnified Liabilities” has the meaning set forth in Section 8.1.

“Indemnitees” has the meaning set forth in Section 8.1.

“Intellectual Property” means patents and patent applications and other indicia
or ownership of an invention, trademarks, service marks, trade names, trade
dress, domain names, copyrights, trade secrets, inventions, technology,
discoveries, know-how, software, formulae, processes, confidential and
proprietary information and similar proprietary rights and registrations and
applications for registration for any of the foregoing recognized by any
Governmental Entity.

 

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“Knowledge” means, as applied to the Company, the knowledge of the Company’s
officers and, solely with respect to Section 3.19, the Company’s senior
directors, in each case, after due inquiry.

“Leased Real Property” has the meaning set forth in Section 3.6(b).

“Liability” means any direct or indirect liability, indebtedness, obligation,
commitment, expense, claim, deficiency, guaranty or endorsement of or by any
Person of any type, known or unknown, and whether accrued, absolute, contingent,
matured, unmatured or other, including “off-balance sheet” liabilities.

“Material Adverse Effect” any change, event, development, effect, state of
facts, condition, circumstance or occurrence or other matter that is, or would
reasonably be expected to have or give rise to, individually or together with
one or more contemporaneous change, event, development, effect, state of facts,
condition, circumstance or occurrence, a material adverse effect on or material
adverse change to (a) the condition (financial or otherwise), business, results
of operations, prospects, assets, Liabilities, capitalization or financial
performance of the Company and its Subsidiaries, taken as a whole, or (b) the
ability of the Company and its Subsidiaries to consummate the Transactions or to
perform any of its obligations under this Agreement and the other Transaction
Documents; provided, however, that any adverse effects attributable to any of
the following as they relate to the Company and its Subsidiaries shall not be
deemed to constitute, and the following shall not be taken into account in
determining whether there has been or will be, a Material Adverse Effect:
(a) conditions affecting the pharmaceuticals industries (other than those that
disproportionately affect the Company and its Subsidiaries relative to similarly
situated industry participants); (b) conditions affecting the U.S. economy as a
whole or affecting the financial or securities markets in the United States or
any foreign markets where the Company and its Subsidiaries has operations (other
than those that disproportionately affect the Company and its Subsidiaries
relative to similarly situated industry participants); (c) changes in GAAP (or
any interpretation thereof) (other than those that disproportionately affect the
Company and its Subsidiaries relative to similarly situated industry
participants); (d) conditions caused by acts of terrorism or war (whether or not
declared); or (e) the taking of any action specifically required by this
Agreement.

“Material Contracts” has the meaning set forth in Section 3.8(a).

“NDA” means a new drug application filed with the FDA for authorization to
market a pharmaceutical product.

“New Shares” has the meaning set forth in Section 2.1.

“Notice” has the meaning set forth in Section 10.2.

“Order” means any order, writ, judgment, injunction, ruling, decree,
stipulation, determination or award entered by or with any Governmental Entity
that is binding on any Person or its property.

“Ordinary Course of Business” means the ordinary course of the Company’s
business, consistent with the past practice of the Company.

 

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“Other Purchasers Registration Rights Agreements” has the meaning set forth in
the Recitals.

“Outside Date” has the meaning set forth in Section 9.1(b).

“Parties” has the meaning set forth in the Preamble.

“Per Share Purchase Price” has the meaning set forth in the Recitals.

“Permits” means all licenses, permits, franchises, approvals, authorizations,
easements, variances, consents, exemptions, certificates, listings,
registrations, orders, or filings of or with, any Governmental Entity or any
other Person, necessary for the conduct of, or relating to, the operation of the
business of the Company or its Subsidiaries.

“Permitted Encumbrances” means (a) liens, Taxes, assessments and other
governmental charges, in each case, not yet due and payable or which are being
contested in good faith by appropriate proceedings and are reserved for in full
on the Company Balance Sheet in accordance with GAAP, (b) statutory, mechanics’,
laborers’ and materialmen liens arising in the Ordinary Course of Business for
sums not yet due, (c) statutory and contractual landlord liens under leases
pursuant to which the Company is a lessee and not in Default, (d) with regard to
real property, any and all matters of record in the jurisdiction where the real
property is located including restrictions, reservations, covenants, conditions,
oil and gas leases, and mineral severances, in each case that do not impair the
use of such real property in the operation of the Company’s business, (e) with
regard to real property, any easements, rights-of-way, building or use
restrictions, prescriptive rights, encroachments, protrusions, rights and party
walls in each case that do materially impair the use of such real property in
the operation of the Company’s business as currently conducted, (f) liens
securing rental payments under capital lease arrangements to the extent they are
imposed only upon the leased equipment, and (g) pledges or deposits made in the
Ordinary Course of Business which do not in the aggregate materially detract
from the value of the related assets or properties or materially impair the use
thereof in the operation of the Company’s business as currently conducted.

“Person” means any natural person, corporation, general partnership, limited
partnership, limited or unlimited liability company, proprietorship, joint
venture, unincorporated organization, trust, union, association or any
Governmental Entity.

“Proceeding” has the meaning set forth in Section 3.17.

“Proxy Statement” has the meaning set forth in Section 3.27.

“Purchase Price” has the meaning set forth in Section 2.2.

“Purchaser” or “Purchasers” has the meaning set forth in the Preamble.

“Purchaser Material Adverse Effect”, means, with respect to any Purchaser, any
event, change, circumstance, effect, development or state of facts, violation,
inaccuracy or other matter that is, or would reasonably be expected to become or
give rise to, individually or in the aggregate, a material adverse effect on or
material adverse change to the ability of such

 

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Purchaser to consummate the Transactions or to perform any of its obligations
under this Agreement and the other Transaction Documents.

“Receiving Party” means the applicable Party in its capacity either as recipient
of Confidential Information under this Agreement

“Recommendation” has the meaning set forth in Section 5.4(d).

“Regulatory Authority” means any Governmental Entity responsible for Permits
with respect to any Aradigm Products, including the FDA, EMA and any
corresponding Governmental Entity.

“Related Party” means: (a) each Shareholder holding 5% or more of the issued and
outstanding shares of Company Capital Stock; (b) each individual who is, or who
was at the time of the entry into the transaction or the creation of the
interest in question an officer or director of the Company; (c) each member of
the immediate family of each of the Persons referred to in clauses (a) or
(b) above; and (d) each Person that is, or that was at the time of the entry
into the transaction or the creation of the interest in question an Affiliate of
any Shareholder holding 5% or more of the issued and outstanding shares of
Company Capital Stock.

“Representative” means, with respect to any Person, any officer, director,
principal, attorney, agent, employee or other representative of such Person.

“Safety Notice” has the meaning set forth in Section 3.25(g).

“SEC” has the meaning set forth in the Recitals.

“Securities Act” shall mean the Securities Act of 1933, as amended, and any
successor statute thereto and the rules and regulations of the SEC promulgated
thereunder

“Securities Act Exemptions” has the meaning set forth in Section 4.11.

“Shareholder” means any holder of Company Capital Stock.

“Shareholders Approval” has the meaning set forth in Section 5.4(a).

“Shareholders Meeting” has the meaning set forth in Section 5.4(a).

“Subsidiary” when used with respect to any Person, shall mean any entity,
corporation or other organization, whether incorporated or unincorporated, at
least 50% of the securities or other interests of which having by their terms
ordinary voting power to elect a majority of the board of directors or others
performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such Person or by
any one or more of its Subsidiaries.

“Tax” (including with correlative meaning, the terms “Taxes” and “Taxable”)
means all taxes and duties and similar governmental charges, levies, imposts or
withholdings (including net income, gross income, gross receipts, sales, use, ad
valorem, transfer, franchise,

 

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profits, license, lease, service, service use, withholding, payroll, employment,
excise, severance, stamp, occupation, premium, property, windfall profits,
customs, duties or other taxes) whenever and by whatever Governmental Entity
imposed, and whether of the United States or a foreign, state or local
jurisdiction, together with in any such case any interest, fines, penalties,
surcharges and charges incidental or relating to the imposing of any of such
Taxes and any additions to tax or additional amounts with respect thereto.

“Third Party Manufacturer” has the meaning set forth in the Recitals.

“Third Party Manufacturer Supply Agreement” has the meaning set forth in the
Recitals.

“Transaction Approval” means the approval of the Company Stock Sale, the
Ciprofloxacin License Agreement and the other transactions contemplated by the
Transaction Documents (other than the Charter Amendment) by a majority of the
votes cast by all Shareholders entitled to vote.

“Transaction Documents” means this Agreement, the Governance Agreement, the
Ciprofloxacin License Agreement, the Grifols Registration Rights Agreement, the
Other Purchasers Registration Rights Agreement, the Voting Agreement and the
agreements, certificates and instruments executed (or to be executed) by a Party
and delivered (or to be delivered) pursuant to this Agreement in connection with
the Closing.

“Transactions” means the transactions contemplated by this Agreement and the
other Transaction Documents.

“Voting Agreement” has the meaning given to it in the Recitals.

“Voting Stock” means shares of Company Common Stock and any other securities of
the Company having the power to vote in an election of members of the Board of
Directors.

“Worker” or “Workers” means any individual performing services for the Company
(or any of its Subsidiaries) in the capacity of an employee, director,
independent contractor and/or otherwise.

1.2 Other Terms. Other terms may be defined elsewhere in the text of this
Agreement and, unless otherwise indicated, shall have such meaning indicated
throughout this Agreement.

1.3 Interpretation.

(a) In this Agreement, unless the context otherwise requires, references:

(i) to the Recitals, Articles, Sections, Exhibits or Schedules are to a Recital,
Article or Section of, or Exhibit or Schedule to, this Agreement;

(ii) to any agreement (including this Agreement), contract, statute or
regulation are to the agreement, contract, statute or regulation as amended,
modified,

 

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supplemented or replaced from time to time, and to any section of any statute or
regulation are to any successor to the section;

(iii) to any Person include any successor to that Person or permitted assigns of
that Person; and

(iv) to this Agreement are to this Agreement and the exhibits and schedules to
it, taken as a whole.

(b) The table of contents and headings contained herein are for reference
purposes only and do not limit or otherwise affect any of the provisions of this
Agreement.

(c) Whenever the words “include,” “includes” or “including” are used in this
Agreement, they shall be deemed to be followed by the words “without
limitation.” The use of “or” is not intended to be exclusive unless expressly
indicated otherwise.

(d) Whenever the words “herein” or “hereunder” are used in this Agreement, they
shall be deemed to refer to this Agreement as a whole and not to any specific
Section, unless otherwise indicated.

(e) The terms herein defined in the singular shall have a comparable meaning
when used in the plural, and vice versa. The masculine, feminine and neuter
genders used herein shall include each other gender.

(f) The terms “dollars” and “$” shall mean dollars of the United States of
America.

(g) It is understood and agreed that neither the specifications of any dollar
amount in this Agreement nor the inclusion of any specific item in the Schedules
or Exhibits is intended to imply that such amounts or higher or lower amounts,
or the items so included or other items, are or are not material, and no Party
shall use the fact of setting of such amounts or the fact of the inclusion of
such item in the Schedules or Exhibits in any dispute or controversy between or
among the Parties as to whether any obligation, item or matter is or is not
material for purposes hereof.

ARTICLE II

PURCHASE AND SALE

2.1 Purchase and Sale of New Shares. Upon the terms and subject to the
conditions of this Agreement, at the Closing, the Company shall issue and sell,
transfer, convey and deliver to each Purchaser, free of any Encumbrances, and
each Purchaser, severally but not jointly, shall purchase from the Company, such
aggregate number of the newly-issued shares of Company Common Stock as is set
forth opposite such Purchaser’s name on Schedule A (the “Company Stock Sale”,
and such newly-issued shares, collectively, the “New Shares”). If the Company
issues additional shares of Company Common Stock between the date hereof and the
Closing (in each case, to the extent permitted under Section 5.1(b)(v)), the
number of New Shares to be purchased by Grifols at the Closing shall be adjusted
such that, after giving effect to the

 

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Company Stock Sale, the number of New Shares purchased by Grifols at the Closing
shall represent 35% of the Company Common Stock on a Fully Diluted Basis
(calculated as of immediately prior to the Closing) and Schedule A shall be
deemed to have been amended to reflect the same.

2.2 Consideration. The consideration to be paid by each Purchaser to the Company
for the number of New Shares purchased by such Purchaser at the Closing shall be
an aggregate amount equal to (a) the Per Share Purchase Price multiplied by
(b) the number New Shares being purchased by such Purchaser (such aggregate
amount, the “Purchase Price”).

2.3 Closing. Subject to the terms and conditions of this Agreement, the sale and
purchase of the New Shares contemplated hereby shall take place at a closing
(the “Closing”) at the offices of Proskauer Rose LLP, Eleven Times Square, New
York, New York 10036, U.S.A., at 9:00 a.m. New York City time on the second
Business Day following the day upon which the last of the conditions set forth
in Sections 7.1, 7.2 (solely with respect to the conditions to the obligations
of the Company to effect the Closing with respect to Grifols) and 7.3 (solely
with respect to the conditions to the obligations of Grifols to effect the
Closing) (other than those that by their terms are to be satisfied or waived at
the Closing itself) is satisfied or waived in writing, or at such other time,
date and location as Purchasers and the Company agree in writing. All Closing
transactions shall be deemed to take place simultaneously and no one of them
shall be deemed to have occurred until all shall have occurred. The Closing
shall be completed at the time the applicable Purchase Price has been paid by
each Purchaser. The date on which the Closing occurs is referred to herein as
the “Closing Date.”

2.4 Nature of Agreement. This Agreement insofar as it relates to (a) the
purchase of a particular number of New Shares by any Purchaser and (b) the
rights, duties and remedies of the Company and any Purchaser (whether with
respect to such purchase or otherwise) is a separate agreement between that
Purchaser and the Company. No Purchaser shall have any responsibility or
liability to (x) any other Purchaser with respect to its own performance of this
Agreement or any other Transaction Document, or (y) the Company with respect to
the performance hereof or thereof by any other Purchaser.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

As a material inducement to each Purchaser to enter into this Agreement, and
subject to the exceptions set forth in (a) the Company Disclosure Letter (it
being understood that the Company Disclosure Letter shall be arranged in
sections corresponding to the sections contained in this Article III, and the
disclosures in any section of the Company Disclosure Letter shall qualify the
representations in the corresponding section of this Article III and shall be
deemed made in any other section or sections of the Company Disclosure Letter to
the extent the relevance of such disclosures is readily apparent from the text
of such disclosure) or (b) the Company SEC Documents filed after March 26, 2013
and prior to the date of this Agreement (excluding, in each case, any
disclosures set forth in any risk factor section or in any other section to the
extent that they are forward-looking statements or cautionary, predictive or
forward-looking in nature), the Company hereby represents and warrants to each
Purchaser that:

 

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3.1 Organization of the Company.

(a) Each of the Company and its Subsidiaries is a legal entity duly organized,
validly existing and in good standing under the laws of its jurisdiction of
organization with all requisite power and authority to conduct its business as
it is presently being conducted, to own, license, use, lease and operate its
assets and properties, and to perform all its obligations under its Contracts.

(b) The Company has made available to such Purchaser prior to the date of this
Agreement true, correct and complete copies of the articles of incorporation,
bylaws, or other similar organizational documents or operating agreements, as
applicable, including all amendments thereto (collectively, the “Charter
Documents”) of the Company and each of its Subsidiaries. Such Charter Documents
are in full force and effect and neither the Company nor any of its Subsidiaries
is in violation of any provision thereunder.

(c) Each of the Company and its Subsidiaries is duly qualified or licensed to do
business and is in good standing in each jurisdiction where the character of its
properties owned, licensed, used, leased or operated or the nature of its
activities make such qualification necessary, except where the failure to be so
qualified or in good standing would not have a Material Adverse Effect. Schedule
3.1 sets forth each jurisdiction in which each of the Company and its
Subsidiaries is duly qualified to do business as a foreign corporation.

3.2 Capitalization.

(a) The authorized capital stock of the Company consists of 297,527,214 shares
of Company Common Stock and 5,000,000 shares of preferred stock (“Company
Preferred Stock”). At the close of business on April 22, 2013, (i) 251,693,888
shares of Company Common Stock were issued and outstanding (including an
aggregate of 1,323,917 shares of restricted stock granted under the applicable
Company Plans), (ii) no shares of Company Preferred Stock were issued and
outstanding, (iii) 6,802,100 shares of Company Common Stock were issuable upon
the exercise of all Company Options, (iv) 412,280 shares of Company Common Stock
were issuable upon the settlement of outstanding restricted stock units granted
under the applicable Company Plans, (v) 706,222 shares of Company Common Stock
were reserved and available for issuance under the Company’s Employee Stock
Purchase Plan (as amended from time to time) and (vi) 2,840,909 shares of
Company Common Stock were reserved and available for issuance pursuant to
outstanding warrant agreements. All issued and outstanding shares of capital
stock of the Company have been duly authorized and validly issued and are fully
paid and nonassessable, were issued in compliance with all applicable federal
and state securities laws, and have not been issued in violation of any
preemptive or similar rights. The Company has duly reserved an aggregate of
2,907,124, shares of Company Common Stock for issuance under the Company Plans,
2,907,124 of which shares (excluding those shares subject to outstanding
restricted stock, restricted stock units and Company Options expressly
enumerated above in this paragraph), as at the close of business on April 22,
2013, are available for future issuances under such Company Plans.

(b) Except as set forth in Section 3.2(b) above and for changes since the date
referred to above resulting from the exercise of Company Options outstanding on
such date in

 

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accordance with their terms, there are no outstanding (i) shares of capital
stock or other voting securities of the Company, (ii) securities of the Company
convertible into or exchangeable for shares of capital stock or other voting
securities of the Company or (iii) subscriptions, options, warrants, puts,
calls, phantom stock rights, stock appreciation rights, stock-based performance
units, agreements, understandings, claims or other commitments or rights of any
type granted or entered into by the Company or any of its Subsidiaries relating
to the issuance, sale, repurchase or transfer of any securities of the Company
or that give any Person the right to receive any economic benefit or right
similar to or derived from the economic benefits and rights of securities of the
Company (clauses (i) through (iii), collectively “Company Securities”).

(c) Except as described on Schedule 3.2(c), there are no Contracts or other
obligations of the Company relating to the grant, issuance, repurchase,
redemption or other acquisition by the Company of any capital stock of the
Company or any securities convertible into or exchangeable for capital stock of
the Company, and no Person has any right of first offer, right of first refusal
or preemptive right in connection with any future offer, sale or issuance of
capital stock of the Company. The Company has provided to such Purchaser true,
correct and complete copies of each Contract identified on Schedule 3.2(c).

(d) To the Company’s Knowledge, there are no voting trusts, shareholder
agreements, proxies or other restrictions that restrict or limit the voting,
sale or other disposition of any shares of capital stock of the Company. There
is no Indebtedness or any other securities of the Company with voting rights (or
convertible into, or exchangeable for, securities with voting rights) on any
matters on which Shareholders of the Company may vote. There are no declared or
accrued but unpaid dividends or distributions with respect to any capital stock
of the Company or other securities of the Company.

(e) With respect to the Company Options, (i) each grant of a Company Option was
duly authorized no later than the date on which the grant of such Company Option
was by its terms to be effective (the “Grant Date”) by all necessary corporate
action, including, as applicable, approval by the Board of Directors, or a
committee thereof, or a duly authorized delegate thereof, and any required
approval by the Shareholders of the Company by the necessary number of votes or
written consents, and material terms of such grant were communicated to the
recipient of such grant within a reasonable time following the Grant Date,
(ii) each such grant was made in accordance with the terms of and pursuant to
the applicable Company Plan and all Applicable Law, (iii) the per share exercise
price of each Company Option was not less than the fair market value of a share
of Company Common Stock on the Grant Date; (iv) no Company Option has had its
exercise date or grant date delayed or “back-dated”; (v) each such grant was
properly accounted for in all material respects in accordance with GAAP in the
financial statements of the Company and its Subsidiaries included in the Company
SEC Documents (including any related notes thereto) and in accordance with all
Applicable Laws, and (v) no modifications have been made to any such grants
after the Grant Date.

3.3 Subsidiaries; Investments.

(a) Schedule 3.3 lists each of the Subsidiaries of the Company and sets forth
with respect to each such Subsidiary the jurisdiction of organization, the
authorized and outstanding shares of capital stock of or other equity or voting
interests in such Subsidiary and

 

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the owner(s) of record of such outstanding capital stock or other equity or
voting interests. All outstanding shares of capital stock, or other equity or
voting securities in, each such Subsidiary is owned by the Company, free and
clear of all Encumbrances. Except for the capital stock of, or other equity or
voting interests in, its Subsidiaries, the Company does not own, directly or
indirectly, any capital stock of or other equity or voting interests in any
Person or hold any rights to acquire, any capital stock or any other securities,
interests or investments (other than investments that constitute cash or cash
equivalents) in any other corporation, partnership, trust, joint venture,
association, or other Person.

(b) Other than the shares of capital stock or other equity or voting interests
set forth in Schedule 3.3, no Subsidiary of the Company has outstanding
securities of any kind. No Subsidiary of the Company is party to any Contract
obligating such Subsidiary, directly or indirectly, to issue any additional
securities and there is no circumstance or condition that may give rise to a
claim by any Person that such Person is entitled to acquire the securities of
such Subsidiary. There is no Indebtedness or any other securities of any
Subsidiary of the Company with voting rights (or convertible into, or
exchangeable for, securities with voting rights) on any matters on which
Shareholders of such Subsidiary may vote.

(c) There are no obligations, contingent or otherwise, of the Company or any of
its Subsidiaries to provide funds to or make an investment (in the form of a
loan, capital contribution or otherwise) in any Person.

3.4 Authorization. The Company has all requisite corporate power and authority
to execute, deliver and perform this Agreement and each other Transaction
Document to which it is or will be a party, to consummate the Transactions and
to perform its obligations hereunder and thereunder. The execution and delivery
of this Agreement and each other Transaction Document and the consummation by
the Company of the Transactions have been or, when executed and delivered, will
be duly approved by all necessary corporate action on the part of the Company
and no other corporate proceedings on the part of the Company are necessary to
authorize the execution and delivery of this Agreement and each other
Transaction Document to which it is a party or to consummate the Transactions,
other than the Charter Amendment Approval and the Transaction Approval. This
Agreement and the other Transaction Documents have been or, when executed and
delivered, will be duly executed and delivered by the Company and are the legal,
valid and binding obligations of the Company, enforceable against the Company in
accordance with its terms, except as enforcement may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other laws affecting
creditors’ rights generally and except insofar as the availability of equitable
remedies may be limited by Applicable Law.

3.5 Validity of New Shares. When issued and paid for in accordance with the
provisions of this Agreement, the New Shares will be duly authorized and validly
issued, fully paid and nonassessable and free of any Encumbrances, other than
Encumbrances imposed under applicable securities laws.

3.6 Title to Properties and Assets.

(a) Except as described on Schedule 3.6(a), each of the Company and its
Subsidiaries has good and valid title to or, in the case of leased properties or
properties held

 

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under license, a good and valid leasehold or license interest in, all of its
material personal properties and assets material to the business of the Company
and its Subsidiaries. All of the tangible assets of each of the Company and its
Subsidiaries are in all material respects in good operating condition and repair
and are adequate for the conduct of its business in substantially the same
manner as it has heretofore been conducted. Each of the Company and its
Subsidiaries holds title to each material property and asset which it purports
to own, free and clear of any Encumbrances other than Permitted Encumbrances.
Notwithstanding the foregoing, the representations in this Section 3.6 do not
apply to the Intellectual Property rights, which rights are subject to the
representations and warranties contained in Section 3.19.

(b) Schedule 3.6(b) sets forth a true, correct and complete list of all real
property leased by the Company or any of its Subsidiaries (collectively, the
“Leased Real Property”), including the location of, and a brief description of
the nature of the activities conducted on, such Leased Real Property. The
Company or the applicable Subsidiary has a valid leasehold interest in the
Leased Real Property, free and clear of all Encumbrances, except Permitted
Encumbrances. Except as set forth on Schedule 3.6(b), to the Knowledge of the
Company, no Person other than the Company or its Subsidiaries has any right to
use, occupy or lease all or any portion of the Leased Real Property. The Company
or the applicable Subsidiary has all certificates of occupancy and Permits of
any Governmental Entity necessary for the current use and operation of the
Leased Real Property, and the Company or the applicable Subsidiary has complied
in all material respects with the conditions of such certificates of occupancy
and other Permits. No Default has occurred in the due observance of any Permit
applicable to the Leased Real Property.

(c) None of Company or any of its Subsidiaries owns, nor has the Company or any
of its Subsidiaries ever owned, any real property.

3.7 Absence of Certain Activities or Changes. Since the date of the Company
Balance Sheet through the date of this Agreement, the Company and its
Subsidiaries have conducted their operations in the Ordinary Course of Business
and there has been no: (i) Material Adverse Effect or (ii) action taken which,
if taken after the date of this Agreement without Grifols’s consent, would
violate the provisions of Section 5.1(b) of this Agreement.

3.8 Material Contracts.

(a) Schedule 3.8(a) sets forth a list, as of the date of this Agreement, of each
of the following types of Contracts to which the Company or any of its
Subsidiaries is a party and which remain in effect:

(i) Contracts material to the conduct and operations of its business and its
properties;

(ii) Contracts containing covenants not to (or otherwise restricting or limiting
the Company’s ability to) compete in any line of business or geographical area
(including any covenant not to compete with respect to the manufacture,
marketing, distribution or sale of any product or product line), solicit any
customer of any Person, solicit or hire any

 

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employee, consultant or independent contractor of any Person or transact
business or deal in any other manner with any other Person;

(iii) Contracts involving a joint venture, strategic alliance, partnership, or
limited liability company relationship;

(iv) Contracts governing or relate to Indebtedness, including guarantees for
money borrowed by others;

(v) Contracts obligating the Company or any of its Subsidiaries to develop any
product or technology;

(vi) Contracts relating to the acquisition or disposition of any material assets
entered into since January 1, 2010;

(vii) Contracts relating to any rights or obligations to undertake the
development or commercialization of any pharmaceutical product;

(viii) to the extent not otherwise set forth on Schedule 3.8(a), Contracts
relating to Aradigm Technology (as defined in the Ciprofloxacin License
Agreement) or any related products or product candidates; or

(ix) Contracts involving the payment of royalties or other amounts calculated
upon the revenues or income of the Company or any of its Subsidiaries or income
or revenues related to any product or Intellectual Property of the Company or
any of its Subsidiaries.

“Material Contracts” means any Contract required to be set forth on Schedule
3.6(b), Schedule 3.8(a) and Schedule 3.20(b) and any Contract entered into by
the Company or any of its Subsidiaries between the date of this Agreement and
the Closing Date in compliance with the provisions of this Agreement and of the
types required to be disclosed on Schedule 3.6(b), Schedule 3.8(a) or Schedule
3.20(b). Copies of each Material Contract (or, in the case of oral Contracts, a
summary of the material terms and conditions thereof), including all amendments
thereto, have been made available to Grifols and, if requested, each other
Purchaser.

(b) Each Material Contract is in full force and effect and is valid, binding and
enforceable against the Company or its Subsidiaries, as applicable, and, to the
Knowledge of the Company, against the other parties thereto in accordance with
their terms except as enforcement may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium and other laws affecting enforcement of
creditors’ rights generally and except insofar as the availability of equitable
remedies may be limited by Applicable Law, except as would reasonably be
expected not to be material to the Company and its Subsidiaries, taken as a
whole. Neither the Company nor any Subsidiary is in Default under any Material
Contract, which default would reasonably be expected to be material to the
Company and its Subsidiaries, taken as a whole. Neither the Company nor any
Subsidiaries has received any written notice of any claim of Default under a
Material Contract. To the Knowledge of the Company, no other party is in Default
under any Material Contract, which default would reasonably be expected to be
material to the Company and its Subsidiaries, taken as a whole.

 

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3.9 Consents and Approvals; No Conflicts.

(a) No consent, approval or authorization of, or filing or registration with,
any Governmental Entity or any other Person is required to be made, obtained or
given by the Company or any of its Subsidiaries in connection with the
execution, delivery and performance by the Company of this Agreement and the
other Transaction Documents and the consummation of the Transactions, except
for: (i) filings and the expiration or early termination of any waiting period
under any applicable Antitrust Law and (ii) the filing of the Proxy Statement
with the SEC in accordance with the Exchange Act, and such reports under the
Exchange Act as may be required in connection with the Transaction Documents and
Transactions.

(b) The execution, delivery and performance by the Company of this Agreement and
the other Transaction Documents to which it is or will be a party do not, and
the consummation of the Transactions will not (i) result in a violation or
breach of, or be in conflict with or constitute a violation of, the applicable
Charter Documents of the Company or any of its Subsidiaries, (ii) violate any
Applicable Laws, Orders or Permits applicable to the Company or any of its
Subsidiaries or (iii) violate, conflict with, result in a material Default
under, or give to any Person any rights of termination or acceleration under any
Material Contract of the Company or any of its Subsidiaries, other than where
any such termination or acceleration would not have a Material Adverse Effect,
or result in the creation of any Encumbrance (other than a Permitted
Encumbrance) upon any of the properties or assets of the Company or any of its
Subsidiaries, except in the case of clauses (ii) and (iii), as would not be
material to the Company and its Subsidiaries, taken as a whole.

3.10 SEC Reports; Financial Statements; Accounting Matters.

(a) The Company has filed with the SEC all reports on Form 10-K, 10-Q and 8-K,
and all proxy materials, required to be filed or furnished by it since
January 1, 2010 (collectively, the “Company SEC Documents”). None of the Company
SEC Documents, when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. No Subsidiary of the Company is required to make
any filings with the SEC or any similar Governmental Entity, or any stock
exchange or quotation service.

(b) The audited consolidated financial statements of the Company and its
Subsidiaries included in the Company SEC Documents (including any related notes
thereto) were prepared in accordance with GAAP (except, in the case of the
unaudited statements, as permitted by the SEC) applied on a consistent basis
during the periods involved (except as may be set forth in the notes thereto)
and fairly present in all material respects the consolidated financial position
of the Company and its consolidated Subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods
indicated (subject, in the case of the unaudited statements, to normal year-end
audit adjustments and to any other adjustments described therein, including the
notes thereto, the effect of which adjustments would not be material to the
Company and its Subsidiaries, taken as a whole).

 

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(c) The Company is in compliance with the applicable provisions of the
Sarbanes-Oxley Act of 2002.

(d) The Company maintains a system of internal controls over financial reporting
(as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) sufficient
to provide reasonable assurances regarding the reliability of financial
reporting and preparation of financial statements for external purposes in
accordance with GAAP. There are no significant deficiencies or material
weaknesses in the design or operation of the Company’s internal controls that
would adversely affect the Company’s ability to record, process, summarize and
report financial data. There is no fraud, whether or not material, that involves
management or other employees who have a significant role in the Company’s
internal controls. The Company has (i) implemented disclosure controls and
procedures (as defined in Rule 13a-15(e) under the Exchange Act) to ensure that
material information relating to the Company, including its consolidated
subsidiaries, is recorded, processed, summarized and reported within the time
periods specified by the SEC’s rules and forms and is accumulated and made known
to the management of the Company as appropriate to allow timely decisions
regarding required disclosure, and that all such information is accumulated and
communicated to the Company’s management as appropriate to allow timely
decisions regarding required disclosure and to make the certifications of the
Chief Executive Officer and the Chief Financial Officer of the Company required
under the Exchange Act with respect to such reports and (ii) has disclosed,
based on its most recent evaluation prior to the date of this Agreement, to the
Company’s outside auditors and the audit committee of the Board of Directors
(A) any significant deficiencies and material weaknesses in the design or
operation of internal controls over financial reporting that are reasonably
likely to adversely affect in any material respect the Company’s ability to
record, process, summarize and report financial information and (B) any fraud,
whether or not material, that involves management or other employees who have a
significant role in the Company’s internal control over financial reporting.

3.11 No Undisclosed Liabilities. The Company and its Subsidiaries have no
Liabilities of any nature which are not shown or provided for on the Company’s
audited consolidated balance sheet as of December 31, 2012, included in the 2012
Annual Report filed on Form 10-K (the “Company Balance Sheet”), except for
(a) Liabilities incurred or accrued in the Ordinary Course of Business since the
date of the Company Balance Sheet and which are not material to the Company and
its Subsidiaries, taken as a whole, or (b) Liabilities incurred under the
Transaction Documents or in connection with the Transactions. The Company has
never effected or maintained any “off-balance sheet arrangement” (as defined in
Item 303(c) of Regulation S-K of the Securities Act).

3.12 Taxes.

(a) The Company has timely filed all Tax Returns it is required to have filed.
Such Tax Returns are accurate, complete and correct in all material respects.

(b) The Company has timely paid all Taxes required to have been paid (whether or
not shown as due on any Tax Returns) and all Taxes due in connection with the
operations of the Companies until the date hereof have been or will be timely
paid in full, or, if not yet due and payable, have been or will be fully
reserved in the Company Balance Sheet.

 

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(c) All deficiencies asserted or assessments made against the Company as a
result of any examinations by any taxing authority have been fully paid.

(d) There are no Encumbrances for Taxes (other than Permitted Encumbrances) upon
the assets of the Company.

(e) The Company is not party to or bound by (i) any Tax indemnity, Tax sharing,
tax allocation or similar agreement or (ii) any closing agreement, offer in
compromise or other agreement with any taxing authority.

(f) (i) The Company has never been a member of an affiliated group of
corporations, within the meaning of Section 1504 of the Code (or any predecessor
provision or comparable provision of state, local or foreign law), or a member
of a combined, consolidated or unitary group for state, local or foreign Tax
purposes, other than the group of which the Company is the common parent;

(ii) The Company has no Liability for Taxes of any Person under Treasury
Regulations Section 1.1502-6 (or any corresponding provision of state, local or
foreign income Tax law), as transferee or successor, by Contract (excluding for
purposes of this Section 3.12(f) Liability pursuant to customary provisions in
Contracts not primarily relating to Taxes) or otherwise; and

(iii) The Company has not engaged in a transaction that constitutes a
“reportable transaction”, as such term is defined in Treasury Regulation
Section 1.6011-4(b)(1).

(g) The Company has withheld and paid all Taxes required to be withheld in
connection with any amounts paid or owing to any employee, creditor, independent
contractor or other third party.

(h) Except as described on Schedule 3.12(h), the Company has not undergone prior
ownership changes as defined in Section 382 of the Code.

3.13 Environmental Matters. The Company and its Subsidiaries have been and are
in material compliance with applicable Environmental Laws and have obtained and
are in material compliance with the terms and conditions of all Permits required
under applicable Environmental Laws for the use and operation of the Leased Real
Property and the Company’s and its Subsidiaries’ businesses. To the Knowledge of
the Company, there have been no disposal, releases or threatened releases of
Hazardous Materials (as defined below) on, at, from, near or under the Leased
Real Property or any property formerly leased or operated by the Company or any
of its Subsidiaries that would be reasonably likely to form the basis of an
Environmental Claim against the Company or any of its Subsidiaries. (a) Neither
the Company, its Subsidiaries or any third party has used, generated,
manufactured, treated or stored on, under or about the Leased Real Property or
transported to or from the Leased Real Property any Hazardous Materials in
violation of applicable Environmental Laws or that would be reasonably likely to
form the basis of an Environmental Claim against the Company of any of its
Subsidiaries, (b) there are no Environmental Claims pending or, to the Company’s
Knowledge, threatened against the Company or any of its Subsidiaries,
(c) neither the Company nor any of its Subsidiaries is subject to any Order,
letter or memorandum by or with any Governmental Entity or Contract

 

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with any Person imposing any Liability under any Environmental Law; and
(d) neither the Company nor any of its Subsidiaries has retained or assumed,
either contractually or by operation of law, any Liability or obligation that
would reasonably be expected to have formed the basis of any Environmental Claim
against the Company or any of its Subsidiaries. For purposes of this
Section 3.13, “Hazardous Materials” shall mean any hazardous or toxic substance,
material, chemical, pollutant, contaminant or waste, including medical or
infectious waste, which is regulated under any Environmental Law.

3.14 Employee Benefits.

(a) Each Benefit Plan complies in form and has been established, maintained and
administered in accordance with its terms, and in compliance in all material
respects in accordance with the requirements of Applicable Law (including ERISA
and the Code).

(b) None of the Company, its Subsidiaries, any of their respective ERISA
Affiliates or any of their respective predecessors has ever maintained,
sponsored or contributed to, maintains, sponsors or contributes to, has ever
been required to maintain, sponsor or contribute to, or otherwise participated
in or participates in or in any way, directly or indirectly, has any liability
with respect to any plan (including any Benefit Plan) subject to Section 412 or
430 of the Code, Section 302 of ERISA or Title IV of ERISA, including, without
limitation, any “multiemployer plan” (within the meaning of Sections 3(37) or
4001(a)(3) of ERISA or Section 414(f) of the Code) or any “single-employer plan”
(within the meaning of Section 4001(a)(15) of ERISA) which is subject to
Sections 4063, 4064 or 4069 of ERISA. None of the Benefit Plans provide any
material retiree health or welfare insurance benefits to any current or former
employee or other Worker of the Company or its Subsidiaries except as may be
required by Section 4980B of the Code and Section 601 of ERISA or any other
Applicable Law.

(c) The execution and delivery of any Transaction Document, or the consummation
of the Transactions (either alone or in combination with another event,
including a termination of any employee, officer, director, stockholder or other
Worker of the Company or its Subsidiaries (whether current, former or retired)
or their beneficiaries or eligible dependents) will not (i) result in any
material payment becoming due, or increase the amount of any compensation or
benefits due, to any employee, officer, director, stockholder or other Worker of
the Company or its Subsidiaries (whether current, former or retired) or their
beneficiaries or eligible dependents or with respect to any Benefit Plan;
(ii) materially increase any benefits or payments otherwise payable under any
Benefit Plan; (iii) result in the acceleration of the time of payment, funding
or vesting of any such compensation or benefits; (iv) result in a non-exempt
“prohibited transaction” within the meaning of Section 406 of ERISA or
Section 4975 of the Code; or (v) result in the forgiveness in whole or in part
of any outstanding loans made by the Company (or any of its Subsidiaries) to any
Person.

(d) None of the Company, any of its Subsidiaries or any of their respective
ERISA Affiliates has unfunded liabilities pursuant to any Benefit Plan that is
not intended to be qualified under Section 401(a) of the Code and is an
“employee pension benefit plan” within the meaning of Section 3(2) of ERISA, a
nonqualified deferred compensation plan or an excess benefit plan.

 

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3.15 Compliance with Law. The operations of the businesses of the Company and
its Subsidiaries have been and are being conducted in compliance with all
Applicable Laws, all Orders applicable to the Company or any of its Subsidiaries
or any of their businesses and all Permits required for the operations of the
Company’s and its Subsidiaries’ businesses, except where any such failure to
comply would not have a Material Adverse Effect. Neither the Company nor any of
its Subsidiaries has received any written notice to the effect that, or
otherwise been advised that, it is not in compliance with any such Applicable
Laws, Orders or Permits, and, to the Knowledge of the Company, there are no
existing circumstances that could reasonably be expected to result in violations
of any of the foregoing.

3.16 Permits. The Company and the Subsidiaries possess all certificates,
authorizations and permits issued by the appropriate regulatory authorities
necessary to conduct their respective businesses, except where the failure to
possess such certificates, authorizations or permits would not have a Material
Adverse Effect, and neither the Company nor any Subsidiary has received any
notice of proceedings relating to the revocation or modification of any such
certificate, authorization or permit. No Governmental Entity has notified the
Company that it is challenging the right of the Company or any of its
Subsidiaries to design, research, develop, pre-clinically or clinically test,
manufacture, license, offer or sell any of their products or services.

3.17 Litigation. Except as described on Schedule 3.17, there is no action, suit,
proceeding, claim, arbitration, audit of Governmental Entity, criminal
prosecution, unfair labor practice charge or complaint, examination or
investigation (“Proceeding”) pending (or, to the Company’s Knowledge,
threatened) against the Company or any of its Subsidiaries, or relating to their
activities, properties or assets or any Person whose Liability the Company or
any of its Subsidiaries has retained or assumed, either by contract or by
operation of Applicable Law or, against any officer, director or employee of the
Company or any of its Subsidiaries in connection with such officer’s, director’s
or employee’s relationship with, or actions taken on behalf of, the Company or
the relevant Subsidiary. To the Knowledge of the Company, there is no factual or
legal basis that would be reasonably expected to result in any such Proceeding
that could result in material monetary damages or any equitable remedy. Neither
the Company nor any of its Subsidiaries is a party to or subject to the
provisions of any Order, and there is no material Proceeding by the Company or
any of its Subsidiaries currently pending or which the Company or any of its
Subsidiaries intends to initiate.

3.18 Labor Matters. Neither the Company nor any of its Subsidiaries is a party
to any collective bargaining agreement or employs any member of a union. The
Company believes that its and its Subsidiaries’ relations with their respective
employees are good. No executive officer (as defined in Rule 501(f) promulgated
under the Securities Act) or other key employee of the Company or any Subsidiary
has notified the Company or any Subsidiary that such officer intends to leave
the Company or any of its Subsidiaries or otherwise terminate such officer’s
employment with the Company or any of its Subsidiaries. To the Company’s
Knowledge, no executive officer or other key employee of the Company or any of
its Subsidiaries is, or is now expected to be, in violation of any material term
of any employment contract, confidentiality, disclosure or proprietary
information agreement, non-competition agreement, or any other contract or
agreement or any restrictive covenant, and the continued employment of each such
executive officer or other key employee (as the case may be), to the Company’s
Knowledge, does not subject the Company or its Subsidiaries to any liability
with respect to any of the

 

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foregoing matters. The Company and its Subsidiaries are in compliance with all
federal, state, local and foreign laws and regulations respecting labor,
employment, classification of employees, plant closing, mass layoffs and
employment practices and benefits, terms and conditions of employment and wages
and hours, except where any such failure to comply would not have a Material
Adverse Effect. There are no material claims, disputes, grievances,
controversies, labor disputes or other Proceedings pending or, to the Company’s
Knowledge, threatened or anticipated, that involves any Worker, Benefit Plan
and/or Governmental Entity, and there have been no such claims, disputes,
grievances, controversies, labor disputes or Proceedings within the past three
(3) years.

3.19 Intellectual Property.

(a) Schedule 3.19(a) sets forth a true, correct and complete list of all
(i) patents, patent applications and other indicia of ownership of an invention
issued or filed with any Governmental Entity, together with all reissues,
divisions, continuations, continuations-in-part, revisions, extensions and
reexaminations thereof, (ii) trade names, common law trademarks, common law
service marks, registered trademarks, registered service marks, and applications
for trademark registration or service mark registration, (iii) registered and
unregistered copyrights and (iv) domain name registrations and websites in each
case owned, used or held for use by the Company in the conduct of its business,
specifying as to each such item, as applicable (w) the owner(s) of the item,
(x) the jurisdictions in which the item is issued or registered or in which any
application for issuance or registration has been filed, (y) the respective
issuance, registration, and application number of the item, and (z) the date of
application and issuance or registration of the item.

(b) Schedule 3.19(b) sets forth a true, correct and complete list of all
licenses, sublicenses, consents and other agreements (whether written or
otherwise) (i) pertaining to any Intellectual Property used by the Company in
the conduct of its business (other than licenses to commercially available
off-the-shelf software), and (ii) by which the Company licenses or otherwise
authorizes a third party to use or covenants not to sue or grants an immunity
from suit any Intellectual Property of the Company. Neither the Company nor, to
the Company’s Knowledge, any third party is in Default under any such license or
other agreement in any material respect, and except as set forth on Schedule
3.19(b), each such license or other agreement is now and immediately following
the Closing shall be in full force and effect.

(c) The operations of the Company do not and have not infringe(d),
misappropriate(d) or otherwise violate(d) the Intellectual Property rights of
any Person, or constitute unfair competition or trade practices under the laws
of any jurisdiction. To the Company’s Knowledge, no Person has infringed,
misappropriated or otherwise violated the Intellectual Property of the Company,
and the Company has not filed or threatened in writing any claims alleging that
a third party has infringed, misappropriated or otherwise violated any
Intellectual Property of the Company. No third party has filed any or, to the
Company’s Knowledge, threatened any claims alleging that the Company has
infringed, misappropriated or otherwise violated any Person’s Intellectual
Property rights and, to the Company’s Knowledge, no facts or circumstances exist
that could reasonably be expected to give rise to such an infringement,
misappropriation or violation. The Company has not given any indemnification,
release or covenant to any third party against infringement, misappropriation or
other violation of

 

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Intellectual Property of the Company. The Company has not requested (whether or
not received) any opinion of patent counsel that concerns infringement, validity
or enforceability of any Person’s patent.

(d) Except as set forth thereon, all of the items listed in Schedule 3.19(a) are
owned solely by the Company free and clear of all Encumbrances , and (i) are not
the subject of any cancellation or reexamination proceeding or any other
proceeding challenging their scope or validity, (ii) no opposition, extension of
time to oppose, interference, rejection, or refusal to register has been filed
in connection with any such application, (iii) are active, valid and
enforceable, and (iv) the ownership of the entire right, title and interest
therein is recorded with the applicable Governmental Entity solely in the name
of the Company. All fees, taxes, annuities and other payments associated with
filing, prosecuting, issuing, recording, registering or maintaining any such
Intellectual Property have been paid in full in a timely manner to the proper
Governmental Entity, and except as set forth in Schedule 3.19(a), no such fees
are due within the one year period following the date hereof. Except as set
forth in Schedule 3.19(d), none of the Intellectual Property owned or used by
the Company is the subject of any order, decree or injunction of any
Governmental Entity, and the Company has not been the subject to any order,
decree or injunction of any Governmental Entity in respect of any other Person’s
Intellectual Property.

(e) The Company has obtained from all Persons (including employees, directors,
consultants and other service providers) who have created any portion of, or
otherwise would have any rights underlying, any Intellectual Property
purportedly owned by the Company, valid and enforceable written assignments of
any such work, invention, improvement or other rights to the Company, and have
delivered true and complete copies of such assignments to the Company.

(f) None of the trade secrets or other material confidential or proprietary
information of the Company has been disclosed to any Person unless such
disclosure was made pursuant to an appropriate written confidentiality
agreement. To the Company’s Knowledge, there has not been any breach by any such
Person of any such agreement. The Company has taken commercially reasonable
measures at least commensurate with industry standards to maintain the
confidentiality of the trade secrets and other material confidential or other
proprietary information and in each such case using not less than a reasonable
degree of care under the circumstances.

(g) Except for any fees payable to a Governmental Entity to issue, register or
maintain any of the Intellectual Property listed in Schedule 3.19(a) and for any
payments required pursuant to a contract listed in Schedule 3.19(b), the Company
is not currently obligated to make any payment of any kind to any Person
(including directors, officers, employees, consultants, contractors and agents
of the Company) for the ownership or use of any Intellectual Property, and, to
the Knowledge of the Company, there exists no basis for any such obligation to
arise in the future. None of the Intellectual Property owned by the Company was
developed with funding by any Governmental Entity and no Governmental Entity has
any rights, contingent or otherwise, thereto.

 

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(h) All data and personal information used or maintained by the Company has been
collected, maintained, used and transferred in accordance with the Company’s
applicable data protection and privacy principles and policies. All such data
protection and privacy principles and policies are designed and administered in
accordance with all Applicable Laws. No Person has claimed any compensation from
the Company for the loss of or unauthorized disclosure or transfer of personal
data or information, and no facts or circumstances exist that might give rise to
such a claim.

3.20 Transactions with Certain Persons. No Related Party has or has had, either
directly or indirectly, a material interest in: (a) any Person or entity which
purchases from or sells, licenses or furnishes to the Company or any of its
Subsidiaries any goods, property, technology, intellectual or other property
rights or (b) any Contract to which the Company or any of its Subsidiaries is a
party or by which it is bound or to which any of its properties or assets is
subject. No event has occurred, and no circumstance or condition exists, that
has resulted in, or would reasonably be expected to result in, any claim by an
employee, officer or director of the Company or any of its Subsidiaries for
indemnification or advancement of expenses related thereto pursuant to (x) the
terms of the applicable Charter Documents of the Company or any of its
Subsidiaries, (y) any indemnification agreement or other Contract between the
Company or any of its Subsidiaries and any such employee or (z) any Applicable
Laws. No employee, officer or director of the Company or any of its Subsidiaries
or any member of the immediate family of any such employee, officer or director
is indebted to the Company or any of its Subsidiaries, nor is the Company or and
its Subsidiaries indebted (or committed to make loans or extend or guarantee
credit) to any of them.

3.21 Insurance. The Company and the Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as management of the Company believes to be prudent and customary in the
businesses in which the Company and the Subsidiaries are engaged. Neither the
Company nor any Subsidiary has been refused any insurance coverage sought or
applied for, and neither the Company nor any Subsidiary has any reason to
believe that it will be unable to renew its existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business at a cost that would not have a
Material Adverse Effect. The Company has made available to such Purchaser true
and complete copies of its current policies of insurance.

3.22 Certain Business Practices. None of the directors, officers, agents or
employees of the Company or any of its Subsidiaries or any of their Affiliates
has, in each case in connection with the Company’s or any of its Subsidiaries’
businesses, (a) used any funds for unlawful contributions, gifts, entertainment
or other unlawful expenses, including expenses related to political activity,
(b) made any unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns, made any
bribes or kickback payments or violated any provision of the Foreign Corrupt
Practices Act of 1977, as amended, (c) made any payment to any customer or
supplier of the Company or any of its Subsidiaries, or given any other
consideration to any such customer or supplier in respect of the Company’s or
any of its Subsidiaries’ businesses that violates Applicable Law, (d) received
any payment or any services which were not legal for the payer or provider of
such services to make or provide, (e) had any material transactions or payments
that were not recorded in its accounting

 

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books or records, (f) had any off-book bank of cash accounts or “slush funds”,
or (d) made or received any other unlawful payment.

3.23 No Brokers. Except as set forth on Schedule 3.23, none of the Company, its
Subsidiaries or any of their Representatives or Affiliates has entered into or
will enter into any contract, agreement, arrangement or understanding with any
broker, finder or similar agent or any Person which will result in an obligation
of any Purchaser, the Company, any of the Company’s Subsidiaries or any of their
respective Affiliates to pay any finder’s fee, brokerage fees or commission or
similar payment in connection with the transactions contemplated by this
Agreement or any other Transaction Document.

3.24 Books and Records. The Company and its Subsidiaries have made and kept (and
given such Purchaser access to) its true, correct and complete books and records
and accounts, which, in reasonable detail, accurately and fairly reflect the
activities of the Company and its Subsidiaries. The minute books of the Company
and its Subsidiaries made available to such Purchaser accurately reflect in all
material respects all action previously taken by the Shareholders of the
Company, its Subsidiaries, the Board of Directors and any committees of thereof.
The copies of the stock book records of the Company and its Subsidiaries
previously made available to such Purchaser are true complete, and accurately
reflect all issuance or grant of all Company Securities through and including
the date hereof.

3.25 Health Care Law and Regulatory Matters.

(a) The Company and its Subsidiaries have been and are in material compliance
with applicable Health Care Laws and have obtained and are in material
compliance with the terms and conditions of all Permits required under
applicable Health Care Laws for the use and operation of the Company’s and its
Subsidiaries’ businesses, and neither the Company nor any of its Subsidiaries
has reason to believe that any such Permit will be revoked, will not be renewed,
or will be modified on terms more burdensome than currently applicable. The
consummation of the transactions contemplated by this Agreement shall not cause
the revocation, modification or cancellation of any Permit required under
applicable Health Care Laws relating to the Company or any of its Subsidiaries,
and no additional Permit is required in connection therewith or for the ability
of the Company and its Subsidiaries to maintain the businesses and operations of
the Company and its Subsidiaries immediately following such consummation.

(b) The Company and its Subsidiaries have not received notice of any pending or
threatened claim, suit, proceeding, enforcement, investigation, or other action
from a Governmental Entity alleging that any operation or activity of the
Company or any of its Subsidiaries is in violation of any Health Care Law.
Neither the Company nor any of its Subsidiaries is a party to any corporate
integrity agreements, monitoring agreements, consent decrees, settlement orders,
or similar agreements with any Governmental Entity related to any allegation
that any operation or activity of the Company or its Subsidiaries is in
violation of any Health Care Law. This includes that neither the Company nor any
of its Subsidiaries is subject to, and has received notice of, any criminal,
injunctive, seizure or civil penalty actions begun or threatened by any
Regulatory Authority against the Company or any of its Subsidiaries.

 

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(c) Except as described on Schedule 3.25(c), there is no pending or threatened
claim, suit, proceeding, enforcement, investigation, or other action of any sort
(other than non-material routine or periodic inspections or reviews) against the
Company or any of its Subsidiaries or any Person that manufactures, develops or
distributes Aradigm Products or compounds contained in Aradigm Products pursuant
to a development, contract research, commercialization, manufacturing, supply or
other collaboration arrangement with the Company (each, a “Company Partner”) by
any Regulatory Authority. None of the Company, any of its Subsidiaries or any
Company Partner has committed or permitted to exist any material violation of
the rules and regulations of any Regulatory Authority which has not been cured
by the Company, the applicable Subsidiary or the applicable Company Partner, or
waived by the relevant Regulatory Authority.

(d) All Aradigm Products and all compounds contained in Aradigm Products are
being and have been developed, manufactured, distributed, used, processed,
packaged, labeled, stored and tested by or on behalf of the Company in
compliance in all material respects with all applicable requirements under all
Applicable Laws, including current good manufacturing practices, and all
protocols, specifications and approvals by institutional review boards (and
similar bodies). Except as described on Schedule 3.25(d), neither the Company
nor any of its Subsidiaries is conducting, or has conducted, directly or through
a Company Partner, any clinical trials of a Development Product. All studies,
tests, preclinical and clinical trials conducted by or on behalf of the Company
or any of its Subsidiaries with respect to Aradigm Products and compounds
contained in Aradigm Products are being and have been conducted in compliance in
all material respects with the required experimental protocols, procedures and
controls, and all Applicable Laws, and the Company and its Subsidiaries have not
received notice from the FDA or the EMA (or similar Governmental Authorities) or
an institutional review board (or similar body) requiring the termination,
suspension, material modification or clinical hold of any studies, tests or
preclinical or clinical trials with respect to Aradigm Products and compounds
contained in Aradigm Products conducted by or on behalf of the Company and any
of its Subsidiaries.

(e) None of the Company, any of its Subsidiaries, or any of their agents or
subcontractors, has been convicted of any crime or to the Company’s Knowledge
engaged in any conduct which could result in debarment, exclusion or
disqualification by any Regulatory Authority, and there are no claims, actions,
investigations or proceedings pending or, to the Company’s Knowledge, threatened
that would reasonably be expected to result in criminal liability or debarment
or exclusion or disqualification by any Regulatory Authority.

(f) Except as described on Schedule 3.25(f)-1, neither the Company nor any of
its Subsidiaries has imported, exported, marketed, sold, offered for sale, or
distributed for sale any products. The Company and its Subsidiaries have made
available to such Purchaser true, correct and complete copies of all material
data and information with respect to the Aradigm Products and compounds
contained in Aradigm Products, including any correspondence with the Regulatory
Authorities. Except as described on Schedule 3.25(f)-2, neither the Company nor
any of its Subsidiaries has filed any Investigational New Drug or similar
applications with respect to any compounds contained in Aradigm Products. All
applications, notifications, submissions, information, claims, reports and
statistics and other data that have been utilized, or prepared with the
intention to be utilized, as the basis for or submitted in connection with any

 

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regulatory or marketing approvals or Permits from the FDA, EMA or any other
Regulatory Authority relating to the Aradigm Products and compounds contained in
Aradigm Products were true and correct in all material respects as of the date
of preparation and submission, as applicable, and any necessary or required
updates, changes, corrections or modification to such applications, submissions,
information and data have been submitted to the FDA, EMA or other Regulatory
Authority.

(g) Neither the Company nor any of its Subsidiaries has received from any
Regulatory Authority any (i) inspection reports, (ii) notices of adverse
findings, warning, untitled letters, minutes of meetings, or (iii) other
correspondence from any Regulatory Authority concerning the Aradigm Products or
compounds contained in Aradigm Products in which any Regulatory Authority
alleged or asserted that the operations of the Company or any of its
Subsidiaries may not be in compliance with Applicable Laws or Permits, or that
Aradigm Products or compounds contained in Aradigm Products may not be safe,
effective, or approvable, and to the knowledge of the Company and its
Subsidiaries no such Regulatory Authority is considering any such action.
Neither the Company nor any of its Subsidiaries nor any Company Partner has
issued any investigator notice, safety alert or other notice relating to an
alleged lack of safety, efficacy or regulatory compliance of Aradigm Products
and all compounds contained in Aradigm Products (a “Safety Notice”), and to the
knowledge of the Company and any of its Subsidiaries there are no facts that
would be reasonably likely to result in the issuance of a Safety Notice or in
the termination or suspension of any studies, tests or preclinical or clinical
trials with respect to Aradigm Products and compounds contained in Aradigm
Products.

(h) There is no material interruption of supply or manufacturing capacity,
shortage of raw materials, components or other manufacturing problems that would
have a material effect on the subsequent development (as such development is
contemplated as of the date of the Ciprofloxacin License Agreement) of the
Aradigm Products or compounds contained in Aradigm Products, nor do any
conditions exist that reasonably could be expected to lead to such manufacturing
problems.

3.26 Takeover Statutes; Rights Agreement. Application of Takeover Protections;
Rights Agreement. The Company and the Board of Directors have taken all
necessary action, if any, in order to render inapplicable any control share
acquisition, interested shareholder, business combination, poison pill
(including any distribution under a rights agreement) or other similar
anti-takeover provision under the Articles of Incorporation, Bylaws or other
organizational documents or Applicable Law or otherwise which is or could become
applicable to such Purchases solely as a result of the transactions contemplated
by the Transaction Documents, including the Company’s issuance of the New Shares
and such Purchaser’s ownership of the New Shares. The Company and the Board of
Directors have taken all necessary action, if any, in order to render
inapplicable any shareholder rights plan or similar arrangement relating to
accumulations of beneficial ownership of the Company Capital Stock or a change
in control of the Company or any of its Subsidiaries as a result of the
transactions contemplated by the Transaction Documents.

3.27 Proxy Statement. None of the information included or incorporated by
reference in the letter to the Shareholders, notice of meeting, proxy statement
and forms of proxy (collectively, the “Proxy Statement”), to be filed with the
SEC in connection with the approval of

 

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this Agreement and the other Transactions Documents and the Transactions, at the
date it is first mailed to the Shareholders or at the time of the Shareholders
Meeting or at the time of any amendment or supplement thereof, contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading. Notwithstanding the foregoing, no
representation or warranty is made by the Company with respect to statements
made or incorporated by reference therein based on information supplied by such
Purchaser or its Affiliates expressly for inclusion or incorporation by
reference in the Proxy Statement. The Proxy Statement will comply as to form in
all material respects with the requirements of the Exchange Act.

3.28 Disclosure. This Agreement (including the Company Disclosure Letter) does
not, and none of the certificates delivered to such Purchaser in connection with
the Transactions will, (a) contain any representation, warranty or information
that is false or misleading with respect to any material fact, or (b) omit to
state any material fact necessary in order to make the representations,
warranties and information contained therein (in the light of the circumstances
under which such representations, warranties and information were or will be
made or provided) not false or misleading.

3.29 Investment Company Status. The Company is not, and upon consummation of the
sale of the New Shares will not be, an “investment company,” an affiliate of an
“investment company,” a company controlled by an “investment company” or an
“affiliated person” of, or “promoter” or “principal underwriter” for, an
“investment company” as such terms are defined in the Investment Company Act of
1940, as amended.

3.30 Acknowledgement Regarding Such Purchaser’s Trading Activity. It is
understood and acknowledged by the Company that: (a) other than as contemplated
by the Governance Agreement, following the public disclosure of the transactions
contemplated by the Transaction Documents, in accordance with the terms thereof,
such Purchaser has not been asked by the Company or any of its Subsidiaries to
agree, nor has any Purchaser agreed with the Company or any of its Subsidiaries,
to desist from effecting any transactions in or with respect to (including
purchasing or selling, long and/or short) any securities of the Company, or
“derivative” securities based on securities issued by the Company or to hold the
Company Common Stock for any specified term; (b) any Purchaser, and
counterparties in “derivative” transactions to which any such Purchaser is a
party, directly or indirectly, presently may have a “short” position in the
Company Common Stock which was established prior to such Purchaser’s knowledge
of the transactions contemplated by the Transaction Documents; and (c) each
Purchaser shall not be deemed to have any affiliation with or control over any
arm’s length counterparty in any “derivative” transaction. The Company further
understands and acknowledges that following the public disclosure of the
transactions contemplated by the Transaction Documents pursuant to the initial
press release to be issued with respect to the Transactions, except as provided
in the Governance Agreement, (x) such Purchaser may engage in hedging and/or
trading activities at various times during the period that the shares of Company
Common Stock are outstanding and (y) hedging and/or trading activities, if any,
can reduce the value of the existing shareholders’ equity interest in the
Company both at and after the time the hedging and/or trading activities are
being conducted. The Company acknowledges that such aforementioned hedging
and/or trading activities do not constitute a breach of this Agreement or

 

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any other Transaction Document or any of the documents executed in connection
herewith or therewith.

3.31 U.S. Real Property Holding Corporation. Neither the Company nor any of its
Subsidiaries is, or has ever been, and so long as any of the shares of Company
Common Stock are held by such Purchaser, shall become, a U.S. real property
holding corporation within the meaning of Section 897 of the Code, as amended,
and the Company and each of its Subsidiaries shall so certify upon any
Purchaser’s request.

3.32 Registration Eligibility. The Company is eligible to register the Company
Common Stock for resale by such Purchaser using Form S-1 promulgated under the
Securities Act.

3.33 Transfer Taxes. On the Closing Date, all stock transfer or other taxes
(other than income or similar taxes) which are required to be paid in connection
with the issuance, sale and transfer of the New Shares to be sold to each
Purchaser hereunder will be, or will have been, fully paid or provided for by
the Company, and all laws imposing such taxes will be or will have been complied
with.

3.34 Bank Holding Company Act. Neither the Company nor any of its Subsidiaries
is subject to the Bank Holding Company Act of 1956, as amended (the “BHCA”) and
to regulation by the Board of Governors of the Federal Reserve System (the
“Federal Reserve”). Neither the Company nor any of its Subsidiaries or
Affiliates owns or controls, directly or indirectly, five percent (5%) or more
of the outstanding shares of any class of voting securities or twenty-five
percent (25%) or more of the total equity of a bank or any equity that is
subject to the BHCA and to regulation by the Federal Reserve. Neither the
Company nor any of its Subsidiaries or Affiliates exercises a controlling
influence over the management or policies of a bank or any entity that is
subject to the BHCA and to regulation by the Federal Reserve.

3.35 Utility Holding Act. None of the Company or any of its Subsidiaries is a
“holding company,” or an “affiliate” of a “holding company,” as such terms are
defined in the Public Utility Holding Act of 2005.

3.36 Federal Power Act. None of the Company or any of its Subsidiaries is
subject to regulation as a “public utility” under the Federal Power Act, as
amended.

3.37 Shell Company Status. The Company is not, and has never been, an issuer
identified in, or subject to, Rule 144(i) of the Securities Act.

3.38 No Other Registration Rights. There are no agreements or arrangements under
which the Company or any of its Subsidiaries is obligated to register the sale
of any of their securities under the Securities Act (except pursuant to (a) the
Grifols Registration Rights Agreements, (b) the Other Purchasers Registration
Rights Agreement, (c) that certain Registration Rights Agreement, dated as of
July 30, 2010, between the Company and Novo Nordisk A/S, (d) that certain
Registration Rights Agreement, dated as of July 5, 2011, by and among the
Company and the investors listed on the signature pages thereto, and (e) that
certain Registration Rights Agreement, dated as of December 11, 2012, by and
among the Company and the investors listed on the signature pages thereto).

 

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ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF PURCHASERS

Each Purchaser hereby, severally and not jointly, represents and warrants to the
Company with respect to only itself that, as of the date hereof and as of the
Closing Date:

4.1 Organization of Such Purchaser. Such Purchaser is an entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization with the requisite power and authority to enter into and to
consummate the transactions contemplated by the Transaction Documents to which
it is a party and otherwise to carry out its obligations hereunder and
thereunder.

4.2 Authorization. Such Purchaser has all requisite power and authority to
execute, deliver and perform this Agreement and each other Transaction Document
to which it is or will be a party, to consummate the Transactions and to perform
its obligations hereunder and thereunder. The execution and delivery of this
Agreement and each other such Transaction Document and the consummation by such
Purchaser of the Transactions have been, or when executed and delivered, will be
duly approved by all necessary action on the part of such Purchaser and no other
proceedings on the part of such Purchaser are necessary to authorize the
execution and delivery of this Agreement and each other Transaction Document to
which it is a party or to consummate the Transactions. This Agreement and the
other Transaction Documents have been or, when executed and delivered, will be
duly executed and delivered by such Purchaser and are the legal, valid and
binding obligations of such Purchaser, enforceable against such Purchaser in
accordance with its terms, except as enforcement may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other laws affecting
creditors’ rights generally and except insofar as the availability of equitable
remedies may be limited by Applicable Law.

4.3 Consents and Approvals; No Conflicts.

(a) No consent, approval or authorization of, or filing or registration with,
any Governmental Entity, or any other Person, is required to be made, obtained
or given by such Purchaser in connection with the execution, delivery and
performance by such Purchaser of this Agreement and the other Transaction
Documents and the consummation of the Transactions, except for: (i) filings and
the expiration or early termination of any waiting period under any applicable
Antitrust Law and (ii) the filing of the Proxy Statement with the SEC in
accordance with the Exchange Act, and such reports under the Exchange Act as may
be required in connection with this Agreement, the Transaction Documents and the
Transactions.

(b) The execution, delivery and performance by such Purchaser of this Agreement
and the other Transaction Documents to which it is or will be a party do not,
and the consummation of the Transactions will not (a) result in a violation or
breach of, or be in conflict with or constitute a violation of, the applicable
Charter Documents of such Purchaser, (b) assuming the consents and approvals
referred to in Section 4.3(a) are duly obtained, violate any Applicable Laws,
Orders or Permits applicable to such Purchaser (c) violate, conflict with,
result in a material Default under, or give to any Person any rights of
termination or acceleration under

 

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any material Contract of such Purchaser, except in the case of clauses (b) and
(c), as would not be material to such Purchaser, taken as a whole.

4.4 Litigation. There are no Proceedings pending, or to the knowledge of such
Purchaser, threatened against such Purchaser which materially affects or might
be reasonably expected to materially affect such Purchaser’s ability to perform
any of its obligations under the Agreement or each other Transaction Document,
or the consummation of the Transactions.

4.5 No Brokers. Neither such Purchaser nor any of its Representatives or
Affiliates has entered into or will enter into any contract, agreement,
arrangement or understanding with any broker, finder or similar agent or any
Person which will result in an obligation of the Company to pay any finder’s
fee, brokerage fees or commission or similar payment in connection with the
transactions contemplated by this Agreement or any other Transaction Document.

4.6 Proxy Statement. None of the information with respect to such Purchaser that
such Purchaser or any of its Representatives furnishes in writing to the Company
expressly for use in the Proxy Statement, will, at the date such Proxy Statement
is first mailed to the Shareholders or at the time of the Shareholders Meeting
or at the time of any amendment or supplement thereof, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements made therein, in
light of the circumstances under which they were made, not misleading.
Notwithstanding the foregoing, no representation or warranty is made by such
Purchaser with respect to statements made or incorporated by reference therein
supplied by the Company or its Representatives expressly for inclusion or
incorporation by reference in the Proxy Statement.

4.7 Sufficiency of Funds. Such Purchaser has sufficient cash on hand or other
sources of immediately available funds to enable it to make payment of the
Purchase Price with respect to the New Shares to be purchased by such Purchaser
and to consummate the transactions contemplated by this Agreement.

4.8 No Public Sale or Distribution. Such Purchaser is acquiring New Shares to be
purchased by such Purchaser for its own account and not with a view towards, or
for resale in connection with, the public sale or distribution thereof in
violation of applicable securities laws, except pursuant to sales registered or
exempted under the Securities Act; provided, however, by making the
representations herein, such Purchaser does not agree, or make any
representation or warranty, to hold any of such New Shares for any minimum or
other specific term and reserves the right to dispose of such New Shares at any
time in accordance with or pursuant to a registration statement or an exemption
under the Securities Act. Such Purchaser is acquiring such New Shares hereunder
in the ordinary course of its business. Such Purchaser does not presently have
any agreement or understanding, directly or indirectly, with any Person to
distribute any of such New Shares in violation of applicable securities laws.

4.9 Accredited Investor Status. At the time such Purchaser was offered the New
Shares to be purchased by such Purchaser, such Purchaser was, and as of the date
hereof such Purchaser is, an “accredited investor” as that term is defined in
Rule 501(a) of Regulation D of the Securities Act. Such Purchaser is not a
registered broker-dealer under Section 15 of the

 

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Exchange Act. Such Purchaser, either alone or together with its representatives,
has such knowledge, sophistication and experience in business and financial
matters so as to be capable of evaluating the merits and risks of such
investment. Such Purchaser is able to bear the economic risk of an investment in
such New Shares.

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

4.11 Transfer or Resale. Such Purchaser understands that except as provided in
the Grifols Registration Rights Agreement and the Other Purchasers Registration
Rights Agreement: (a) the New Shares have not been and are not being registered
under the Securities Act or any state securities laws, and may not be offered
for sale, sold, assigned or transferred unless (i) subsequently registered
thereunder, (ii) such New Shares can be sold, assigned or transferred pursuant
to and in accordance with the terms and conditions of Rule 144, Rule 144A, or
Regulation S, promulgated under the Securities Act (or a successor rule thereto)
(collectively, “Securities Act Exemptions”); or (iii) if Securities Act
Exemptions are not applicable by their terms, and any resale of the New Shares
under circumstances in which the seller (or the Person (as defined below)
through whom the sale is made) may be deemed to be an underwriter (as that term
is defined in the Securities Act) may require compliance with some other
exemption under the Securities Act or the rules and regulations of the SEC
promulgated thereunder; and (b) neither the Company nor any other Person is
under any obligation to register the New Shares under the Securities Act or any
state securities, but the Company does undertake to file all required public
reports under Rule 144(c)(1) of the Securities Act so that Rule 144 of the
Securities Act is available to investors that satisfy its terms, including
applicable holding periods.

4.12 General Solicitation. Such Purchaser is not purchasing the New Shares to be
purchased by such Purchaser as a result of any advertisement, article, notice or
other communication regarding such New Shares published in any newspaper,
magazine or similar media or broadcast over television or radio or presented at
any seminar.

ARTICLE V

ADDITIONAL AGREEMENTS

5.1 Conduct of Business by the Company.

(a) During the period from the date hereof and continuing until the earlier of
the termination of this Agreement pursuant to its terms or the Closing, the
Company shall, and shall cause its Subsidiaries to, (i) conduct its business in
the Ordinary Course of Business and in material compliance with all Applicable
Law and (ii) use commercially reasonable efforts to preserve intact its present
business organization, including the services of its key employees and

 

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the goodwill of its customers, lenders, distributors, suppliers, regulators and
other Persons with whom it has business relationships.

(b) In addition, without limiting the generality of Section 5.1(a), without the
prior written consent of Grifols, during the period from the date hereof and
continuing until the earlier of the termination of this Agreement pursuant to
its terms or the Closing, the Company shall, and shall cause its Subsidiaries,
not do any of the following:

(i) propose or adopt any amendments to the Charter Documents of the Company or
any of its Subsidiaries;

(ii) adopt a plan of complete or partial liquidation or dissolution;

(iii) declare, set aside or pay any dividends on or make any other distributions
(whether in cash, stock, equity securities or property) in respect of any
Company Securities;

(iv) (A) adjust, split, combine or reclassify or otherwise amend the terms of
any capital stock of the Company or authorize the issuance of any Company
Securities in respect of, in lieu of or in substitution for any capital stock of
the Company or (B) purchase, redeem or otherwise acquire, directly or
indirectly, any Company Securities;

(v) issue, deliver, grant, sell, authorize, pledge or otherwise encumber any
Company Securities, or enter into other agreements or commitments of any
character obligating it to issue any such Company Securities, other than
issuances of Company Common Stock upon the exercise or conversion of Company
Options or Company Warrants outstanding on the date hereof in accordance with
their terms or any agreement to which the Company is a party in effect as of the
date hereof, each of which agreements have been disclosed to Purchasers;

(vi) acquire or agree to acquire by merging or consolidating with, or by,
directly or indirectly, purchasing (A) any shares of capital stock or other
voting securities in, (B) any securities convertible into or exchangeable for
share of capital stock or other voting securities in, (C) any subscriptions,
options, warrants, puts, calls, phantom stock rights, stock appreciation rights,
stock-based performance units, agreements, understandings, claims or other
commitments or rights relating to the issuance, sale, repurchase or transfer of
any such securities or (D) any material assets of or any material business or
any Person or material division thereof;

(vii) sell, lease or otherwise dispose of material assets, including by merger,
consolidation, asset sale or other business combination, except payment of
invoices in the Ordinary Course of Business;

(viii) make any loans, advances or capital contributions to, or investments in,
any other Person, which, individually, are not in excess of $5,000 and, in the
aggregate, are not in excess of $25,000;

(ix) except as required by GAAP, make any material change in its methods or
principles of accounting since the date of the last audited financial
statements;

 

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(x) revalue any of its assets other than in the Ordinary Course of Business;

(xi) grant any rights with respect to any Intellectual Property of the Company
or any of its Subsidiaries other than non-exclusive rights granted to third
party service providers solely for the purpose of conducting, on behalf of the
Company or any of its Subsidiaries, any research and development activities,
except in connection with the Company’s proposed spinout of its “nicotine
inhalation” program and GERD Aspiration Diagnostic technology;

(xii) enter into any agreement or commitment the effect of which would be to
grant to a third party following the Closing any license to any Intellectual
Property owned by Purchaser or any of its Subsidiaries, except in connection
with the Company’s proposed spinout of its “nicotine inhalation” program and
GERD Aspiration Diagnostic technology;

(xiii) disclose any trade secrets of the Company or any of its Subsidiaries
outside of an appropriate confidentiality agreement, other than only as
necessary in the Ordinary Course of Business;

(xiv) (A) incur any indebtedness for borrowed money or guarantee any such
indebtedness of another Person, (B) issue or sell any debt securities, warrants,
calls or other rights to acquire any debt securities of the Company or any of
its Subsidiaries, (C) guarantee any debt securities of another Person, (D) enter
into any “keep well” or other agreement to maintain any financial statement
condition of any other Person (other than any wholly-owned Subsidiary of it), in
each case, involving amounts in excess of $250,000, or (E) enter into any
arrangement having the economic effect of any of the foregoing;

(xv) make or commit to make capital expenditures in excess of an aggregate of
$100,000 or fail to pay its obligations or satisfy its Liabilities as the same
become due and payable; or

(xvi) agree in writing or otherwise to take any of the actions described in
clauses (i) through (xv) above.

5.2 Confidentiality; Access to Information; No Modification of Representations,
Warranties or Covenants.

(a) Confidentiality. (b) Each of Grifols and the Company shall hold, and shall
cause their respective directors, officers, employees, consultants and other
agents to hold, all information received from the other party, directly or
indirectly, in confidence in accordance with, and shall otherwise abide by and
be subject to, the terms and conditions of the Mutual Nondisclosure Agreement,
dated as of April 19, 2012, between Grifols and the Company (the
“Confidentiality Agreement”). The Confidentiality Agreement shall survive any
termination of this Agreement. No investigation pursuant to this Section 5.2
information provided or received by any party hereto pursuant to this Agreement
will affect any of the representations or warranties of the Parties contained in
this Agreement.

 

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(b) Access to Information. The Company shall, upon reasonable prior notice,
afford Grifols and Grifols’s employees, accountants, consultants, prospective
financing sources (and their advisors), agents, attorneys and other
Representatives reasonable access during normal business hours to its
properties, books, records, personnel and Representatives during the period
prior to the Closing to obtain all information concerning the business of the
Company, including the status of product development efforts, properties,
results of operations and personnel for purposes of this Agreement, as Grifols
may reasonably request; provided, however, that the Company may restrict the
foregoing access to the extent that any Applicable Law or Order applicable to
the Company requires the Company to restrict or prohibit access to any such
properties or information. In addition, any information obtained from the
Company pursuant to the access contemplated by this Section 5.2(b) shall be
subject to the Section 5.2(a).

(c) No Modification of Representations and Warranties or Covenants. No
information or knowledge obtained in any investigation or notification of a
Party shall affect or be deemed to modify any representation or warranty
contained herein, the covenants or agreements of the Parties or the conditions
to the obligations of the Parties under this Agreement.

5.3 Regulatory Filings; Commercially Reasonable Efforts.

(a) Regulatory Filings. The Parties shall coordinate and cooperate with one
another and shall each use commercially reasonable efforts to comply with, and
shall each refrain from taking any action that would impede compliance with, all
Applicable Laws, and as promptly as practicable after the date hereof, Grifols
and the Company shall make all filings, notices, petitions, statements,
registrations, submissions of information, application or submission of other
documents required by any Governmental Entity, including (i) notification and
report forms with the United States Federal Trade Commission and the Antitrust
Division of the United States Department of Justice as required by the HSR Act
and (ii) any other filings necessary to satisfy the closing condition set forth
in Section 7.1(b), in connection with the Transactions. Each of Grifols and the
Company shall cause all documents that it is responsible for filing with any
Governmental Entity under this Section 5.3(a) to comply in all material respects
with all Applicable Law.

(b) Exchange of Information. Grifols and the Company each shall promptly supply
the other with any information which may be required in order to effectuate any
filings or application pursuant to Section 5.3(a). Subject to Applicable Law
relating to the exchange of information, Section 5.2(a) of this Agreement, and
the preservation of any applicable attorney-client privilege, work product
doctrine, self-audit privilege, or other similar privilege, each of the Company
and Grifols shall use commercially reasonable efforts to collaborate in
reviewing and commenting on in advance, and to consult the other on, information
relating to the Company, Grifols or any of their Subsidiaries that appears in
any filing made with, or written materials submitted to, any third party and/or
any Governmental Entity in connection with any filing, investigation, or
proceeding in connection with this Agreement or the Transactions (including
under any Antitrust Law). In connection with such collaboration, the Company and
Grifols each shall act reasonably and as promptly as practicable.

(c) Notification. Grifols and the Company each shall notify the other promptly
upon the receipt of: (i) any comments from any officials of any Governmental
Entity

 

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in connection with any filings made pursuant hereto and (ii) any request by any
officials of any Governmental Entity for amendments or supplements to any
filings made pursuant to, or information provided to comply in all material
respects with, any Applicable Law. Whenever any event occurs that is required to
be set forth in an amendment or supplement to any filing made pursuant to
Section 5.3(a), Grifols or the Company, as the case may be, shall promptly
inform the other of such occurrence and cooperate in filing with the applicable
Governmental Entity such amendment or supplement.

(d) Commercially Reasonable Efforts. Upon the terms and subject to the
conditions set forth herein, each of the Parties agrees to use commercially
reasonable efforts to take, or cause to be taken, all reasonable actions, and to
do, or cause to be done, and to assist and cooperate with the other Party in
doing, all things reasonably necessary, proper or advisable to consummate the
Transactions, including using commercially reasonable efforts to accomplish the
following: (i) the taking of all reasonable acts necessary to cause the
conditions precedent set forth in Article VII to be satisfied; (ii) the
obtaining of all necessary, appropriate or desirable actions or nonactions,
waivers, consents, approvals, orders and authorizations from Governmental
Entities and the making of all necessary registrations, declarations and filings
with any Person (including registrations, declarations and filings with
Governmental Entities, if any); (iii) the obtaining of all necessary consents,
approvals or waivers from third parties; (iv) the defending of any suits,
claims, actions, investigations or proceedings, whether judicial or
administrative, challenging this Agreement or the consummation of the
Transactions (other than any suits, claims, actions, investigations or
proceedings brought by a Governmental Entity); and (v) the execution or delivery
of any additional instruments necessary to consummate the transactions
contemplated by, and to fully carry out the purposes of, this Agreement.
Notwithstanding anything herein to the contrary, neither Grifols nor any of its
Affiliates shall be under any obligation to, nor, without Grifols’s prior
written consent (which consent may be withheld in Grifols’s sole discretion),
shall the Company, (x) make proposals, execute, agree or consent to or carry out
agreements or submit to any Order (A) providing for the sale or other
disposition or holding separate of any assets of Grifols, any of its Affiliates
or Subsidiaries or any of their Affiliates, or the Company or the holding
separate of any capital stock of any such Person, or imposing or seeking to
impose any limitation on the ability of Grifols or any of its Affiliates, to own
such assets or to acquire, hold or exercise full rights of ownership of capital
stock of the Company, or (B) imposing or seeking to impose (1) any limitation
whatsoever on the business activities of Grifols or any of its Affiliates or
(2) any limitation on the business activities of the Company, or (y) otherwise
take any step to avoid or eliminate any impediment which may be asserted or
requested under any Applicable Law governing competition, monopolies or
restrictive trade practices.

5.4 Shareholders Approval; Preparation of Proxy Statement.

(a) The Company shall, in accordance with Applicable Law and the Articles of
Incorporation and Bylaws, as promptly as practicable following the date of this
Agreement and the date on which the Proxy Statement is cleared by the staff of
the SEC, duly call, give notice of, convene and hold a meeting of its
Shareholders (the “Shareholders Meeting”) for the Transaction Approval and
Charter Amendment Approval (collectively, the “Shareholders Approval”).

 

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(b) The Company shall, as soon as reasonably practicable following the date of
this Agreement, but no later than within twelve Business Days from the date
hereof, prepare and file a preliminary Proxy Statement with the SEC and
thereafter each of the Company and Grifols shall use their commercially
reasonable efforts to respond to any comments of the SEC or its staff, and to
any request by the SEC or its staff for amendments or supplements to the Proxy
Statement or for additional information. The Proxy Statement and any amendments
or supplements to the Proxy Statement will, when filed, comply as to form in all
material respects with the applicable requirements of the Exchange Act. If at
any time prior to the Shareholders Meeting there shall occur any event that is
required to be set forth in an amendment or supplement to the Proxy Statement,
the Company shall promptly prepare, and, after consultation with Grifols, mail
to the Shareholders such an amendment or supplement. Grifols shall cooperate
with the Company in the preparation of the Proxy Statement, including any
amendment or supplement thereto, and shall furnish the Company, promptly upon
the Company’s request, with all information reasonably requested by the Company
for inclusion in, or otherwise in respect of, the Proxy Statement. Grifols and
its counsel shall be given a reasonable opportunity to review and comment upon
the Proxy Statement and related proxy materials and any proposed amendment or
supplement to the Proxy Statement prior to its filing with the SEC or
dissemination to the Company’s Shareholders, and reasonable and good faith
consideration shall be given to any comments made by Grifols and its counsel.
The Company shall as soon as reasonably practicable (i) notify Grifols of the
receipt of any comments from the SEC with respect to the Proxy Statement and any
request by the SEC for any amendment to the Proxy Statement or for additional
information and (ii) provide Grifols with copies of all written correspondence
between the Company and its Representatives, on the one hand, and the SEC, on
the other hand, with respect to the Proxy Statement.

(c) Without limiting the generality of the foregoing, each of the Parties shall
correct promptly any information provided by it to be used in the Proxy
Statement, if and to the extent any such information shall be or have become
false or misleading in any material respect and shall take all steps necessary
to correct the same and to cause the Proxy Statement as so corrected to be
disseminated to the Shareholders, in each case to the extent required by
Applicable Law or otherwise deemed appropriate by the Company.

(d) (i) The Board of Directors shall recommend that the Company’s Shareholders
vote in favor of the Company Stock Sale, the Ciprofloxacin License Agreement,
the Charter Amendment and the other transactions contemplated by the Transaction
Documents and (ii) the Proxy Statement shall include a statement that the Board
of Directors has recommended that the Company’s Shareholders vote in favor of
the Company Stock Sale, the Ciprofloxacin License Agreement, the Charter
Amendment and the other transactions contemplated by the Transaction Documents
(this statement and the statement in the Proxy Statement, the “Recommendation”).
The Company shall submit the Company Stock Sale, the Ciprofloxacin License
Agreement, the Charter Amendment and the other transactions contemplated in the
Transaction Documents to the Shareholders for their vote. The Company shall use
commercially reasonable efforts to (x) solicit from the Shareholders proxies in
favor of the Company Stock Sale, the Ciprofloxacin License Agreement, the
Charter Amendment and the other transactions contemplated by the Transaction
Documents and (y) take all other actions necessary or advisable to secure the
vote or consent of Shareholders required by Applicable Law to obtain the
Shareholders Approval.

 

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(e) Notwithstanding anything to the contrary in this Agreement, the Shareholders
Meeting may not be postponed, except with the written consent of Grifols.

(f) As promptly as practicable following the Charter Amendment Approval, the
Company shall duly execute and file the Charter Amendment with the Secretary of
State of California in accordance with the California Corporations Code.

5.5 Notification of Certain Matters.

(a) By the Company. The Company shall promptly after obtaining Knowledge of such
matter notify Purchasers of any representation or warranty made by it contained
in this Agreement becoming untrue or inaccurate, or any failure of the Company
to comply with or satisfy in any material respect any covenant, condition or
agreement to be complied with or satisfied by it under this Agreement, in each
case, such that the conditions set forth in Section 7.3(a) or 7.3(b) would not
be satisfied; provided, however, that the delivery of any notice pursuant to
this Section 5.5(a) shall not limit or otherwise affect the remedies available
hereunder to Purchasers or the representations, warranties or covenants of the
Company or the conditions to the obligations of Purchasers.

(b) By Purchasers. Each Purchaser shall promptly after obtaining knowledge of
such matter notify the Company of any representation or warranty made by it
contained in this Agreement becoming untrue or inaccurate, or any failure of
such Purchaser to comply with or satisfy in any material respect any covenant,
condition or agreement to be complied with or satisfied by it under this
Agreement, in each case, such that the conditions set forth in Section 7.2(a) or
7.2(b) would not be satisfied; provided, however, that the delivery of any
notice pursuant to this Section 5.5(b) shall not limit or otherwise affect the
remedies available hereunder to the Company or the representations, warranties
or covenants of such Purchaser or the conditions to the obligations of the
Company.

5.6 No Solicitation.

(a) From the date of this Agreement until the earlier of (i) the Closing and
(ii) the termination of this Agreement pursuant to Section 9.1, the Company
agrees that neither it nor any of its Representatives, Affiliates nor any
Persons acting on behalf of the Company shall, directly or indirectly:

(i) initiate, solicit, seek or encourage or facilitate (including in each case
by way of providing information) any inquiries, proposals or offers with respect
to or that could reasonably be expected to lead to, or the making, announcement,
submission or the completion of, an Acquisition Proposal;

(ii) participate or engage in or continue any discussions or negotiations with,
or furnish or disclose any non-public information relating to the Company, or
otherwise cooperate with, facilitate or assist any Person in connection with an
Acquisition Proposal;

(iii) approve, endorse or recommend, or publicly announce the intent to approve,
endorse or recommend, any Acquisition Proposal;

 

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(iv) enter into any letter of intent, agreement in principle, merger agreement,
acquisition agreement, option agreement or other similar agreement relating to
an Acquisition Proposal;

(v) submit an Acquisition Proposal to the Shareholders; or

(vi) resolve, propose or agree to do any of the foregoing.

(b) The Company shall, and shall cause each of its Representatives and
Affiliates to, immediately cease any existing solicitations, discussions or
negotiations with any Person that has made or indicated an intention to make an
Acquisition Proposal. The Company shall enforce and shall not waive any rights
under any standstill, confidentiality or similar agreements to which the Company
is a party. The Company shall promptly inform its Representatives and Affiliates
of the Company’s obligations under this Section 5.6. If any Representatives or
Affiliates of the Company takes any action that the Company is obligated by this
Section 5.6 to cause such Representative or Affiliate not to take, the Company
shall be deemed to have breached this Section 5.6.

(c) The Company shall notify Purchasers promptly (and in any event within
24 hours) upon receipt by it or any of its Representatives of (i) any
Acquisition Proposal, indication by any Person that it is considering making an
Acquisition Proposal or amendment or modification to an Acquisition Proposal,
(ii) any request for non-public information relating to the Company other than
requests for information in the Ordinary Course of Business and unrelated to an
Acquisition Proposal or (iii) any inquiry or request for discussions or
negotiations regarding any Acquisition Proposal. The Company shall notify
Purchasers promptly (and in any event within 24 hours) with the identity of such
Person and a copy of such Acquisition Proposal, indication, inquiry or request
(or, where no such copy is available, a description of such Acquisition
Proposal, indication, inquiry or request), including any modifications thereto.

5.7 Takeover Statutes. If any takeover statute is or becomes applicable to this
Agreement or the Transactions, each of Grifols, the Company and their respective
boards of directors shall (a) take all necessary action to ensure that such
transactions may be consummated as promptly as practicable upon the terms and
subject to the conditions set forth in this Agreement and (b) otherwise act to
eliminate or minimize the effects of such takeover statute.

5.8 Public Disclosure. Without limiting any other provision of this Agreement,
no Party shall (and each Party shall cause its Representatives not to) make,
directly or indirectly, any public announcement with respect to this Agreement
and the Transactions, except as may be required by Applicable Law without the
consent of the other Party. The initial press release to be issued with respect
to the Transactions shall be in the form heretofore agreed to by the Parties.

5.9 Third Party Manufacturer Supply Agreement. During the period from the date
hereof and continuing until the execution and delivery of a fully negotiated
Third Party Manufacturer Supply Agreement, the Company shall use commercially
reasonable efforts to negotiate the terms of the Third Party Manufacturer Supply
Agreement with the Third Party Manufacturer and shall use commercially
reasonable efforts to obtain the terms set forth on Schedule 5.9 (it being
understood that the Third Party Manufacturer would fulfill on behalf of

 

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the Company the obligations of the Company set forth on Schedule 5.9). Grifols
and its counsel shall be given an opportunity to participate fully in such
negotiations with the Third Party Manufacturer and the Company shall provide
Grifols with a reasonably opportunity to review and comment upon any term sheets
or drafts of the Third Party Manufacturer Supply Agreement in advance of their
being exchanged between the Company and the Third Party Manufacturer.

5.10 Further Assurances. Following the Closing, each of the Parties shall, and
shall cause their respective Affiliates to, execute and deliver such additional
documents, instruments, conveyances and assurances and take such further actions
as may be reasonably required to carry out the provisions hereof and give effect
to the transactions contemplated by this Agreement and the other Transaction
Documents.

ARTICLE VI

POST-CLOSING COVENANTS OF ALL PARTIES

6.1 Indemnification of Directors and Officers.

(a) The Company agrees to indemnify (including the advancement of expenses) and
hold harmless all directors (including former directors) of the Company who have
been designated for election or appointment by Grifols under the Governance
Agreement (each, a “Grifols Designees”), to the same extent such individuals are
entitled to indemnification by the Company pursuant to the Articles of
Incorporation and Bylaws as in effect as of the date of this Agreement, for any
costs or expenses (including attorneys’ fees and expenses), judgments, fines,
losses, claims, settlements, damages or Liabilities incurred in connection with
any claim, action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of or pertaining to acts or
omissions that occurred at or prior to the Closing. This Section 6.1 shall
survive the Closing, and is intended to be for the benefit of, and shall be
enforceable by, all Grifols Designees, their respective heirs and personal
representatives and shall be binding upon the Company. The obligations of the
Company under this Section 6.1 shall not be terminated or modified in such a
manner as to adversely affect any indemnitee to whom this Section 6.1 applies
without the express written consent of such affected indemnitee.

(b) So long as Grifols is entitled to designate one or more candidates for
election or appointment as director of the Company, the Company shall maintain
in effect in the Articles of Incorporation and Bylaws of it or any successor of
it the provisions regarding the elimination of liability of directors,
indemnification of officers and directors thereof and advancement of reasonable
expenses which are, in the aggregate, no less advantageous to the intended
beneficiaries than the corresponding provisions contained in such organizational
documents of the Company as of the date of this Agreement.

(c) If the Company or any of their successors or assigns (i) consolidates with
or merges into any other Person and shall not be the continuing or surviving
corporation or entity of such consolidation or merger, or (ii) transfers or
conveys all or substantially all of their properties and assets to any Person,
then, and in each such case, to the extent necessary, proper provision shall be
made so that the successors and assigns of the Company, as the case may be,
shall assume the obligations set forth in this Section 6.1.

 

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(d) The rights of Grifols Designees of the Company under this Section 6.1 shall
be in addition to any rights such individual may have under the Articles of
Incorporation and Bylaws or under any Applicable Law.

6.2 Disclosure. In the event that the Company engages in any transaction to
which Grifols or any of Grifols’s Affiliates is a party and which requires the
disclosure by the Company to a U.S. Governmental Entity (other than the SEC) of
the identity of Grifols or such Affiliate engaged in such transaction, the
Company agrees to (a) provide a copy of any document containing such disclosure
to Grifols at least 30 days prior to the due date for submitting such document
with the appropriate U.S. Governmental Entity, and (b) incorporate any changes
to such document as reasonably requested by Grifols prior to the submission of
such document with the appropriate U.S. Governmental Entity.

ARTICLE VII

CONDITIONS TO OBLIGATIONS

7.1 Conditions to the Obligations of Each Party. The respective obligations of
the Company and each Purchaser to effect the Closing shall be subject to the
satisfaction at or prior to the Closing Date of the following conditions:

(a) No Order. No Governmental Entity of competent jurisdiction shall have
enacted, issued, promulgated, enforced or entered any statute, rule, regulation,
executive order, decree, temporary restraining Order, preliminary or permanent
injunction or other Order which (i) is in effect and (ii) has the effect of
otherwise prohibiting or preventing the consummation of the Transactions.

(b) Regulatory Approvals/HSR Act. If applicable, all waiting periods under the
HSR Act and other applicable Antitrust Law relating to the Transactions will
have expired or terminated early, and the conditions of any agreement entered
into by any Party with any Governmental Entity the effect of which is to
prohibit the Transactions pending the completion of the Governmental Entity’s
review or investigation of the Transactions shall have been satisfied or waived
in accordance with the terms thereof.

7.2 Conditions to the Company’s Obligations. The obligations of the Company to
effect the Closing with respect to each Purchaser are subject to the
satisfaction, on or prior to the Closing Date, of each of the following
conditions, any of which may be waived with respect to such Purchaser by the
Company:

(a) Representations and Warranties. (i) Each of the representations and
warranties of such Purchaser in Section 4.1 (Organization of Such Purchaser),
Section 4.2 (Authorization), and Section 4.5 (No Brokers) shall be true and
correct in all respects as of the date hereof and as of the Closing as though
made on and as of the Closing (except that those representations and warranties
which address matters only as of a particular date need only be true and correct
as of such date), and (ii) all other representations and warranties of such
Purchaser shall be true and correct as of the date hereof and as of the Closing
as though made on and as of the Closing (except that those representations and
warranties which address matters

 

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only as of a particular date need only be true and correct as of such date),
except to the extent that the failure of such representations and warranties to
be true and correct (without giving effect to any limitation as to “materiality”
or “Purchaser Material Adverse Effect” set forth therein) in all material
respects as of the date hereof and as of the Closing as though made on and as of
the Closing (except that those representations and warranties which address
matters only as of a particular date need only be true and correct in all
material respects as of such date).

(b) Covenants. Such Purchaser shall have performed or complied in all material
respects with all agreements and covenants required by this Agreement to be
performed or complied with by it on or prior to the Closing Date. The Company
shall have received a certificate with respect to the foregoing signed on behalf
of such Purchaser by an authorized executive officer of such Purchaser.

(c) Deliveries.

(i) The obligations of the Company to effect the Closing with respect to Grifols
shall be subject to the Company’s receipt of the Governance Agreement, the
Ciprofloxacin License Agreement, the A1AT Option Agreement and the Grifols
Registration Rights Agreement, each signed on behalf of Grifols.

(ii) The obligations of the Company to effect the Closing with respect to each
other Purchaser (other than Grifols), shall be subject to the Company’s receipt
of the Other Purchasers Registration Rights Agreements, signed on behalf of the
applicable Purchaser.

7.3 Conditions to the Obligations of Each Purchaser. The obligations of each
Purchaser to effect the Closing are subject to the satisfaction, on or prior to
the Closing Date, of each of the following conditions, any of which may be
waived (but only with respect to itself) by any Purchaser:

(a) Representations and Warranties. (i) Each of the representations and
warranties of the Company in Section 3.1 (Organization of the Company),
Section 3.2 (Capitalization), Section 3.3 (Subsidiaries; Investments),
Section 3.4 (Authorization), Section 3.5 (Validity of New Shares) and
Section 3.23 (No Brokers) shall be true and correct in all respects as of the
date hereof and as of the Closing as though made on and as of the Closing
(except that those representations and warranties which address matters only as
of a particular date need only be true and correct as of such date), and
(ii) all other representations and warranties of the Company contained in this
Agreement shall be true and correct (without giving effect to any limitation as
to “materiality” or “Material Adverse Effect” set forth therein) in all material
respects as of the date hereof and as of the Closing as though made on and as of
the Closing (except that those representations and warranties which address
matters only as of a particular date need only be true and correct in all
material respects as of such date).

(b) Covenants. The Company shall have performed or complied in all material
respects with all agreements and covenants required by this Agreement to be
performed or complied with by it at or prior to the Closing Date. Purchasers
shall have received a certificate to such effect signed on behalf of the Company
by an authorized executive officer of the Company.

 

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(c) Company Material Adverse Effect. Since the date of this Agreement, there
shall not have been any Material Adverse Effect on the Company.

(d) Deliveries.

(i) The obligations of Grifols to effect the Closing shall be subject to
Grifols’s receipt of the Governance Agreement, the Ciprofloxacin License
Agreement, the A1AT Option Agreement and the Grifols Registration Rights
Agreement, each signed on behalf of the Company.

(ii) The obligations of Grifols to effect the Closing shall be subject to
Grifols’s receipt of a binding term sheet addressing the material provisions to
be included in the Grifols Supply Agreement (the “Grifols Supply Agreement Term
Sheet”) or the fully negotiated Grifols Supply Agreement, in either case, signed
on behalf of the Company and which shall contain the pricing terms set forth on
Schedule 7.3(d) and other terms and conditions that are either (A) substantially
similar to and consistent with the terms set forth on Schedule 5.9 or
(B) reasonably acceptable to Grifols in its sole discretion (it being understood
that each of the terms set forth on Schedule 5.9 shall be deemed reasonably
acceptable to Grifols).

(iii) The obligations of Grifols to effect the Closing shall be subject to
Grifols’s receipt of a binding term sheet addressing the material provisions to
be included in the Third Party Manufacturer Supply Agreement or the fully
negotiated Third Party Manufacturer Supply Agreement, in either case, signed on
behalf of the Company and the Third Party Manufacturer Supply Agreement, which
shall contain substantially the same terms as the Grifols Supply Agreement Term
Sheet or Grifols Supply Agreement, as applicable, with appropriate modifications
in light of the parties to such agreement.

(iv) The obligations of each Purchaser (other than Grifols) to effect the
Closing shall be subject to such Purchaser’s receipt the Other Purchasers
Registration Rights Agreement, signed on behalf of the Company.

(v) The obligations of each Purchaser to effect the Closing shall be subject to
such Purchaser’s receipt of stock certificates evidencing the New Shares to be
purchased by such Purchaser, duly endorsed in blank, or accompanied by stock
powers duly executed in blank, in form satisfactory to such Purchaser and with
all required stock transfer tax stamps affixed.

(vi) The obligations of each Purchaser to effect the Closing shall be subject to
such Purchaser’s receipt of a certificate of the Secretary or an Assistant
Secretary of the Company certifying the names and signatures of the officers or
directors of the Company authorized to sign this Agreement and the other
documents to be delivered hereunder.

(vii) The obligations of each Purchaser to effect the Closing shall be subject
to such Purchaser’s receipt of a certificate of the Secretary or an Assistant
Secretary of the Company certifying, with respect to the Company, as to the
matters set forth in Sections 7.3(a), 7.3(b), 7.3(c), 7.3(e), and 7.3(f).

 

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(viii) The obligations of each Purchaser (other than Grifols) to effect the
Closing shall be subject to the following additional conditions: (A) there shall
have been no change from the date of this Agreement to the Closing in the
rights, preferences and privileges of the Common Stock or in the Per Share
Purchase Price, (B) the License Agreement shall have been duly executed and
delivered by the Company and Grifols and shall be in effect without any material
change to the economic terms thereof contained in Exhibit B, and (C) Grifols
shall have closed on the purchase of New Shares having a Purchase Price of at
least $25,000,000.

(e) Articles of Incorporation and Bylaws. The Articles of Incorporation and
Bylaws shall have been amended in the forms attached as Exhibit F and Exhibit G,
respectively, and each shall have become effective.

(f) Consents and Approvals. The Company shall have received (i) all Permits from
and consents of Governmental Entities that are required for the consummation of
the Transactions and (ii) the Shareholders Approval.

ARTICLE VIII

INDEMNIFICATION

8.1 Indemnification. In consideration of each Purchaser’s execution and delivery
of this Agreement and acquiring the New Shares hereunder and in addition to all
of the Company’s other obligations under the Transaction Documents, the Company
shall defend, protect, indemnify and hold harmless each Purchaser and all of its
Shareholders, partners, members, officers, directors, employees and direct or
indirect investors and any of the foregoing Persons’ agents or other
representatives (including, without limitation, those retained in connection
with the transactions contemplated by this Agreement) (collectively, the
“Indemnitees”) from and against any and all actions, causes of action, suits,
claims, losses, costs, fines, penalties, fees, liabilities and damages, and
expenses in connection therewith (irrespective of whether any such Indemnitee is
a party to the action for which indemnification hereunder is sought), and
including reasonable attorneys’ fees and disbursements (the “Indemnified
Liabilities”), incurred by any Indemnitee as a result of, or arising out of, or
relating to (a) any misrepresentation or breach of any representation or
warranty made by the Company in this Agreement, (b) any breach of any covenant,
agreement or obligation of the Company contained in this Agreement or (c) any
cause of action, suit or claim brought or made against such Indemnitee by a
third party (including for these purposes a derivative action brought on behalf
of the Company or the Subsidiaries) and arising out of or resulting from (i) the
execution, delivery, performance or enforcement of the obligations set forth in
this Agreement, (ii) any transaction financed or to be financed in whole or in
part, directly or indirectly, with the proceeds of the issuance of the New
Shares, (iii) any disclosure properly made pursuant to Section 5.5 or (iv) the
status of such Purchaser or holder of the New Shares as an investor in the
Company pursuant to the transactions contemplated by the Transaction Documents.
To the extent that the foregoing undertaking by the Company may be unenforceable
for any reason, the Company shall make the maximum contribution to the payment
and satisfaction of each of the Indemnified Liabilities which is permissible
under Applicable Law. Except as otherwise set forth herein, the mechanics and
procedures with respect to the rights and obligations under this Section 8.1
shall be the same as those set forth in

 

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Section 7(c) of the Grifols Registration Rights Agreement or the Other
Purchasers Registration Rights Agreement, as applicable.

8.2 Remedies. Subsequent to the Closing, the remedies in this Article VIII shall
be the sole and exclusive remedies of the Parties with respect to any breach of
the respective representations, warranties, covenants and agreements pursuant to
this Agreement or otherwise arising out of this Agreement, regardless of the
theory or cause of action pled, except for the remedies of specific performance,
injunction and other equitable relief; provided, however, that no Party hereto
shall be deemed to have waived any rights, claims, causes of action or remedies,
if and to the extent fraud, willful misconduct or intentional misrepresentation
is proven on the part of a Party by another Party hereto or such rights, claims,
causes of action or remedies may not be waived under Applicable Law. Each
Purchaser can separately exercise any of its rights, claims, causes of action or
remedies under this Agreement and no waiver or other action by any Purchaser
shall be binding on any other Purchaser.

ARTICLE IX

TERMINATION, AMENDMENT AND WAIVER

9.1 Termination of the Agreement. This Agreement may be terminated at any time
prior to the Closing, by action taken or authorized by the board of directors of
the terminating Party or Parties, and as provided below:

(a) by mutual written consent duly authorized by the boards of directors of
Grifols and the Company;

(b) by either the Company or Grifols if the Closing shall not have occurred by
November 20, 2013 (the “Outside Date”); provided, however, that the right to
terminate this Agreement under this Section 9.1(b) shall not be available to any
Party whose action or failure to act has been a principal cause of or resulted
in the failure of the Closing to occur on or before such date;

(c) by either the Company or Grifols if a Governmental Entity shall have issued
an Order or taken any other action (including the failure to have taken an
action) having the effect of permanently restraining, enjoining or otherwise
prohibiting the Closing of the consummation of the Transactions, which Order or
other action is final and nonappealable;

(d) by Grifols, upon a breach of any representation, warranty, covenant or
agreement on the part of the Company set forth in this Agreement, or if any
representation or warranty of the Company shall have become untrue, in either
case such that the conditions set forth in Section 7.3(a) or Section 7.3(b)
would not be satisfied as of the time of such breach or as of the time such
representation or warranty shall have become untrue, provided that if such
inaccuracy in the Company’s representations and warranties or breach by the
Company is curable by the Company, prior to the Outside Date through the
exercise of reasonable efforts, then Grifols may not terminate this Agreement
under this Section 9.1(d) prior to 30 days following the receipt of written
notice from Grifols to the Company of such breach.

 

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9.2 Termination of Individual Purchasers. The Company may terminate this
Agreement with respect to any Purchaser, by action or authorized by the board of
directors of the Company, upon a breach of any representation, warranty,
covenant or agreement on the part of each applicable Purchaser set forth in this
Agreement, or if any representation or warranty of such Purchaser shall have
become untrue, in either case such that the conditions set forth in
Section 7.2(a) or Section 7.2(b) would not be satisfied as of the time of such
breach or as of the time such representation or warranty shall have become
untrue, provided that if such inaccuracy in such Purchaser’s representations and
warranties or breach by such Purchaser is curable by such Purchaser prior to the
Outside Date through the exercise of reasonable efforts, then the Company may
not terminate this Agreement under this Section 9.2 prior to 30 days following
the receipt of written notice from the Company to such Purchaser of such breach.
For the avoidance of doubt, the Company’s exercise of its termination rights
under this Section 9.2 would terminate the rights and obligations of the Company
and the applicable Purchaser solely with respect to such Purchaser and shall
have no effect on the rights and obligations of any other Purchaser under this
Agreement.

9.3 Notice of Termination; Effect of Termination. Any termination of this
Agreement under Section 9.1 or 9.2 above shall be effective immediately upon the
delivery of a valid written notice of the terminating Party to the other Party
hereto. In the event of the termination of this Agreement as provided in
Section 9.1, this Agreement shall be of no further force or effect, except
(i) as set forth in Section 5.2(a), Section 5.9, this Section 9.3, Section 9.4
and Article X, each of which shall survive the termination of this Agreement and
(ii) nothing herein shall relieve any Party from liability for any breach of
this Agreement.

9.4 Expenses. All fees and expenses incurred in connection with this Agreement
and the Transactions, including fees and expenses of financial advisors,
financial sponsors, legal counsel and other advisors, shall be paid by the Party
incurring such expenses whether or not the Transactions are consummated.

ARTICLE X

MISCELLANEOUS

10.1 Binding Effect; Assignment. This Agreement shall be binding upon and inure
to the benefit of the Parties and their successors and permitted assigns, in
accordance with the terms hereof. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the Parties, in
whole or in part (whether by operation of law or otherwise), without the prior
written consent of the other Parties, and any attempt to make any such
assignment without such consent shall be null and void, except that (a) Grifols
may assign, in its sole discretion, any or all of its rights, interests and
obligations under this Agreement to any Affiliate of Grifols without the consent
of the Company, (b) Grifols may assign, in its sole discretion, any or all of
its rights, interests and obligations under this Agreement to any entity that
will acquire substantially all of Grifols’s assets by merger, stock purchase,
asset purchase or otherwise and (c) Grifols may assign without the consent of
the Company to any permitted assignee under Section 14.5 of the License
Agreement, provided, that, in the case of clause (a), as between Grifols and its
assignee, on the one hand, and the Company, on the other hand, Grifols shall
remain the primary obligor with respect to its and its assignee’s obligations
under

 

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this Agreement. Subject to the foregoing, this Agreement shall be binding upon
and inure to the benefit of the Parties and their respective successors and
assigns, and no other Person shall have any right, benefit or obligation
hereunder.

10.2 Notices. All notices, deliveries, requests, waivers, approvals, consents
and other communications (each, a “Notice”) pursuant to this Agreement will be
in writing and shall be delivered personally, telecopied or delivered by
globally recognized express delivery service to the parties at the addresses or
facsimile numbers set forth below or to such other address or facsimile number
as the party to whom Notice is to be given may have furnished to the other
Parties in accordance with this Section 10.2. Any such Notice will be deemed to
have been delivered and received (a) in the case of personal delivery, on the
date of such delivery, (b) in the case of telecopy, on the Business Day after
the day that the party giving notice receives electronic confirmation of sending
from the sending telecopy machine (provided that the original thereof also is
sent contemporaneously by another method set forth in this Section 10(b)), and
(c) in the case of a globally recognized express delivery service, on the
Business Day that receipt by the addressee is confirmed pursuant to the
service’s systems.

 

If to Grifols: Grifols, S.A. Avinguda de la Generalitat, 152-158 Parc de Negocis
Can Sant Joan Sant Cugat del Valles 08174 Barcelona, Spain Facsimile:   
+34.93.571.0267 Attention:    Victor Grifols with copies (which shall not
constitute Notice) to: Osborne Clarke S.L.P. Avenida Diagonal, 477 Planta 20
08036 Barcelona Spain Facsimile:    +34.93.410.2513 Attention:    Tomás Dagá   
Raimon Grifols and    Proskauer Rose LLP Eleven Times Square New York, New York
10036 U.S.A. Facsimile:    +1 (212) 969-2900 Attention:    Peter G. Samuels   
Rima R. Moawad

 

50

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If to the Company: Aradigm Corporation 3929 Point Eden Way Hayward, California
94545 Facsimile:    (510) 265-8878 Attention:    Igor Gonda    Nancy Pecota with
a copy (which shall not constitute Notice) to: Morrison & Foerster LLP 425
Market Street San Francisco, California Facsimile:    (415) 268-7197 Attention:
   John W. Campbell

All Notices to Purchasers (other than Grifols) shall be addressed to such
Purchaser at their respective mailing addresses or facsimile numbers as set
forth on Schedule A.

10.3 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, IRRESPECTIVE
OF THE CHOICE OF LAWS PRINCIPLES OF THE STATE OF NEW YORK, AS TO ALL MATTERS,
INCLUDING MATTERS OF VALIDITY, CONSTRUCTION, EFFECT, ENFORCEABILITY, PERFORMANCE
AND REMEDIES.

10.4 Entire Agreement; Amendments and Waivers. This Agreement, together with the
other Transaction Documents and the other documents and instruments referred to
herein and all exhibits and schedules hereto, constitutes the entire agreement
and understanding between the Parties pertaining to the subject matter hereof
and supersedes all prior agreements, understandings, negotiations and
discussions, whether oral or written, of the Parties.

10.5 Amendments and Waivers. This Agreement may only be amended, modified or
supplemented by an agreement in writing signed by each Party hereto, which shall
be action taken by or on behalf of the board of directors of such Party. No
waiver by any Party of any of the provisions hereof shall be effective unless
explicitly set forth in writing and signed by the Party so waiving. No waiver by
any Party shall operate or be construed as a waiver in respect of any failure,
breach or default not expressly identified by such written waiver, whether of a
similar or different character, and whether occurring before or after that
waiver. No failure to exercise, or delay in exercising, any right, remedy, power
or privilege arising from this Agreement shall operate or be construed as a
waiver thereof; nor shall any single or partial exercise of any right, remedy,
power or privilege hereunder preclude any other or further exercise thereof or
the exercise of any other right, remedy, power or privilege.

10.6 Counterparts. This Agreement may be executed (including by facsimile
transmission or e-mail of an electronic file such as .pdf) with counterpart
signature pages and in

 

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one or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.

10.7 Severability. If any provision of this Agreement is deemed or held to be
illegal, invalid or unenforceable, this Agreement shall be considered divisible
and inoperative as to such provision to the extent it is deemed to be illegal,
invalid or unenforceable, and in all other respects this Agreement shall remain
in full force and effect; provided, however, that if any provision of this
Agreement is deemed or held to be illegal, invalid or unenforceable the Parties
agree to replace such illegal, invalid or unenforceable provision with a
provision that is legal, valid and enforceable that achieves the original intent
of the Parties as closely as possible. Further, should any provision contained
in this Agreement ever be reformed or rewritten by any judicial body of
competent jurisdiction, such provision as so reformed or rewritten shall be
binding upon all Parties.

10.8 Schedules. The Schedules and the Exhibits referenced in this Agreement are
a material part hereof and shall be treated as if fully incorporated into the
body of the Agreement.

10.9 No Third Party Beneficiaries. This Agreement is for the sole benefit of the
Parties and their respective successors and assigns and, other than pursuant to
Section 6.1, nothing herein, express or implied, is intended to or shall confer
upon any other person or entity any legal or equitable right, benefit or remedy
of any nature whatsoever under or by reason of this Agreement

10.10 No Strict Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties, and no presumption or burden of proof
shall arise favoring or disfavoring any Party by virtue of the authorship of any
of the provisions of this Agreement.

10.11 Jurisdiction; Venue. Except as otherwise provided in Section 10.13, the
sole jurisdiction, venue and dispute resolution procedure for all disputes,
controversies or claims (whether in contract, tort or otherwise) arising out of,
relating to or otherwise by virtue of, this Agreement, breach of this Agreement
or the transactions contemplated by this Agreement shall be the United States
District Court for the Southern District of New York, and the Parties consent to
the jurisdiction of such court and waive any objection to the venue of such
proceeding. Each of the parties agrees that process may be served upon it in the
manner specified in Section 10.2 and irrevocably waives and covenants not to
assert or plead any objection which it might otherwise have to such
jurisdiction, or to such manner of service of process.

10.12 WAIVER OF JURY TRIAL. EXCEPT AS LIMITED BY APPLICABLE LAW, EACH PARTY
HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING
OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE ACTIONS OF ANY PARTY HERETO IN THE
NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.

 

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10.13 Injunctive Relief; Specific Performance. The Parties hereby acknowledge
that irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed in accordance with their specific terms or
were otherwise breached and that the Parties would not have any adequate remedy
at law. Accordingly, the Parties shall be entitled to an injunction or
injunctions to prevent breaches or threatened breaches of this Agreement and to
enforce specifically the terms and provisions of this Agreement, in addition to
any and all other rights and remedies at law or in equity, and all such rights
and remedies shall be cumulative. Any requirements for the securing or posting
of any bond with such remedy are waived. Without limiting the generality of the
foregoing, each Purchaser shall be entitled to an order or orders of specific
performance to enforce or prevent the breach of the Company’s affirmative
obligations with respect to the conduct of its business under Section 5.1 and
its obligations to refrain from taking certain actions under Section 5.2.

[remainder of page intentionally left blank]

 

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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
and delivered as of the day and year first above written.

 

ARADIGM CORPORATION By:  

/s/ Igor Gonda

  Name:   Igor Gonda   Title:   Chief Executive Officer

 

[Signature page to Stock Purchase Agreement]

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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
and delivered as of the day and year first above written.

 

GRIFOLS, S.A. By:  

/s/ Victor Grifols

  Name:   Victor Grifols   Title:   President and Chief Executive Officer

 

[Signature page to Stock Purchase Agreement]

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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
and delivered as of the day and year first above written.

 

21 APRIL FUND, LP By:  

/s/ Tim Tabor

  Name:   Tim Tabor   Title:   Senior Vice President – First Eagle Investment
Management, LLC, the General Partner 21 APRIL FUND, LTD. By:  

/s/ Tim Tabor

  Name:   Tim Tabor   Title:   Senior Vice President – First Eagle Investment
Management, LLC, the Investment Advisor DEF ASSOCIATES LP By:  

/s/ Tim Tabor

  Name:   Tim Tabor   Title   Senior Vice President – First Eagle Investment
Management, LLC, the General Partner

FIRST EAGLE VALUE IN BIOTECHNOLOGY MASTER FUND, LTD

By:  

/s/ Tim Tabor

  Name:   Tim Tabor   Title:   Senior Vice President – First Eagle Investment
Management, LLC, the Investment Advisor

 

[Signature page to Stock Purchase Agreement]

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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
and delivered as of the day and year first above written.

 

BOXER CAPITAL, LLC By:  

/s/ Aaron Davis

  Name:   Aaron Davis   Title:   Vice President/Member MVA INVESTORS, LLC By:  

/s/ Chris Fuglesang

  Name:   Chris Fuglesang   Title:   President

 

[Signature page to Stock Purchase Agreement]

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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
and delivered as of the day and year first above written.

 

BIOMEDICAL VALUE FUND, L.P. By:  

/s/ David Kroin

  Name:   David Kroin   Title:   Managing Director of Great Point Partners (the
Investment Manager)

BIOMEDICAL INSTITUTIONAL VALUE FUND, L.P.

By:  

/s/ David Kroin

  Name:   David Kroin   Title:   Managing Director of Great Point Partners (the
Investment Manager) BIOMEDICAL OFFSHORE VALUE FUND, LTD. By:  

/s/ David Kroin

  Name:   David Kroin   Title:   Managing Director of Great Point Partners (the
Investment Manager) WS INVESTMENTS III, LLC By:  

/s/ David Kroin

  Name:   David Kroin   Title:   Managing Director of Great Point Partners (the
Investment Manager) DAVID J. MORRISON By:  

/s/ David Kroin

  Name:   David Kroin   Title:   Managing Director of Great Point Partners (the
Investment Manager) CLASS D SERIES OF GEF-PS, L.P. By:  

/s/ David Kroin

  Name:   David Kroin   Title:   Managing Director of Great Point Partners (the
Investment Manager)

 

[Signature page to Stock Purchase Agreement]

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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
and delivered as of the day and year first above written.

 

LAURENCE W. LYTTON

/s/ Laurence W. Lytton

 

[Signature page to Stock Purchase Agreement]

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Schedule A

Purchasers

 

Purchaser

  

Address

  

Shares Purchased

 

Grifols, S.A.

  

[omitted]

     209,774,558   

First Eagle Value in Biotechnology Master Fund, Ltd.

  

[omitted]

     20,161,290   

21 April Fund, LP

  

[omitted]

     2,943,548   

21 April Fund, Ltd.

  

[omitted]

     12,177,419   

DEF Associates LP

  

[omitted]

     5,040,323   

Boxer Capital, LLC

  

[omitted]

     35,806,451   

MVA Investors, LLC

  

[omitted]

     2,096,774   

Biomedical Value Fund, L.P.

  

[omitted]

     15,269,111   

Biomedical Institutional Value Fund, L.P.

  

[omitted]

     5,609,062   

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

Biomedical Offshore Value Fund, Ltd.

  

[omitted]

     10,283,279   

WS Investments II, LLC

  

[omitted]

     806,452   

David J. Morrison

  

[omitted]

     321,334   

Class D Series of GEF-PS, L.P.

  

[omitted]

     8,033,342   

Laurence W. Lytton

  

[omitted]

     5,645,161