Exhibit 10.1

5,250,000 Shares

Warrants to Purchase 5,250,000 Shares

MDRNA, INC.

Common Stock

PLACEMENT AGENCY AGREEMENT

June 9, 2009

Canaccord Adams Inc.

99 High Street

Boston, Massachusetts 02110

Ladies and Gentlemen:

MDRNA, Inc., a Delaware corporation (the “Company”), proposes, subject to the
terms and conditions stated in this Placement Agency Agreement (this
“Agreement”) and the Securities Purchase Agreement in the form of Exhibit A
attached hereto (the “Securities Purchase Agreement”) entered into with the
investors identified therein (each, an “Investor” and collectively, the
“Investors”), to issue and sell up to an aggregate of 5,250,000 shares (the
“Shares”) of the Company’s common stock, par value $0.006 per share (the “Common
Stock”). Each Investor shall also receive a warrant, in the form of Exhibit B
attached hereto, to purchase up to a number of shares of the Company’s Common
Stock (the “Warrant Shares”) equal to one hundred percent (100%) of the number
of Shares purchased by such Investor, at an exercise price equal to $2.38 per
share, exercisable beginning six months after the issuance thereof and on or
prior to the five year and six month anniversary of the issuance thereof (the
“Warrants” and together with the Shares, the “Securities”). The Company hereby
confirms its agreement with Canaccord Adams Inc. (“Canaccord” or the “Placement
Agent”) as set forth below. The Securities are more fully described in the
Prospectus (as defined below).

1. Agreement to Act as Placement Agent; Delivery and Payment. On the basis of
the representations, warranties and agreements of the Company herein contained,
and subject to the terms and conditions set forth in this Agreement:

(a) The Company hereby engages the Placement Agent, as agent of the Company, to,
on commercially reasonable efforts basis, solicit offers to purchase Securities
from the Company on the terms and subject to the conditions set forth in the
Securities Purchase Agreement and Prospectus (as defined below). The Placement
Agent shall use commercially reasonable efforts to assist the Company in
obtaining performance by each Investor whose offer to purchase the Securities
was solicited by the Placement Agent and accepted by the Company, but the
Placement Agent shall not, except as otherwise provided in this Agreement, have
any liability to the Company in the event any such purchase is not consummated
for any reason.

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Under no circumstances will the Placement Agent or any of its affiliates be
obligated to underwrite or purchase any of the Securities for its own account or
otherwise provide any financing. The Placement Agent shall act solely as the
Company’s agent and not as principal. The Placement Agent shall not have any
authority to bind the Company with respect to any prospective offer to purchase
Securities and the Company shall have the sole right to accept offers to
purchase Securities and may reject any such offer, in whole or in part.

(b) As compensation for services rendered by the Placement Agent hereunder, on
the Closing Date (as defined below), the Company shall pay or cause to be paid
to the Placement Agent by wire transfer of immediately available funds to an
account or accounts designated by the Placement Agent, an aggregate amount in
cash equal to $758,000, which when combined with $42,000 previously paid to the
Placement Agent as retainer fees, aggregates to a total cash fee equal to
$800,000. The Placement Agent agrees that the foregoing compensation, together
with any expense reimbursement payable hereunder, constitutes all of the
compensation that the Placement Agent shall be entitled to receive in connection
with the Offering contemplated hereby.

(c) The Securities are being sold to the Investors at a price of $2.00 per unit
(the “Purchase Price”) as set forth on the cover page of the Prospectus (as
defined below). The purchases of Securities by the Investors shall be evidenced
by the execution of the Securities Purchase Agreement by each of the parties
thereto in the form attached hereto as Exhibit A.

(d) Prior to the earlier of (i) the date on which this Agreement is terminated
and (ii) the Closing Date, the Company shall not, without the prior written
consent of the Placement Agent, solicit or accept offers to purchase Securities
of the Company (other than pursuant to the exercise of options or warrants to
purchase shares of Common Stock that are outstanding at the date hereof)
otherwise than through the Placement Agent in accordance herewith.

(e) No Securities which the Company has agreed to sell pursuant to this
Agreement and the Securities Purchase Agreement shall be deemed to have been
purchased and paid for, or sold by the Company, until such Securities shall have
been delivered to the Investor purchasing such Securities against payment
therefor by such Investor. If the Company shall default in its obligations to
deliver Securities to an Investor whose offer it has accepted, the Company shall
indemnify and hold the Placement Agent harmless against any loss, claim, damage
or liability directly or indirectly arising from or as a result of the default
by the Company in accordance with the procedures set forth in Section 6(c)
hereof.

(f) Payment of the purchase price for, and delivery of the Securities shall be
made at a closing (the “Closing”) at the offices of Pryor Cashman LLP, counsel
for the Company, located at 410 Park Avenue, New York, New York, at 10:00 a.m.,
local time, on June 12, 2009 or at such other time and date as the Placement
Agent and the Company determine pursuant to Rule 15c6-1(a) under the Securities
Exchange Act of 1934, as amended (the

 

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“Exchange Act”)(such date of payment and delivery being herein referred to as
the “Closing Date”). Unless otherwise specified in the applicable Securities
Purchase Agreement, the Shares will be settled through the facilities of The
Depository Trust Company’s DWAC system and the Warrants will be issued in
registered physical form. Subject to the terms hereof, payment of the purchase
price for the Securities shall be made to the Company in the manner set forth
below by Federal Funds wire transfer, against delivery of the Securities to such
persons and shall be registered in the name or names and shall be in such
denominations as the Investors may request at least one business day before the
Closing Date. Payment of the purchase price for the Securities to be purchased
by Investors shall be made by such Investors directly to the Company. Subject to
the terms and conditions hereof on the Closing Date, the Company shall pay to
the Placement Agent the Agency Fee set forth in paragraph (b) above and
reimburse the Placement Agent for the amount of expenses for which such
Placement Agent is entitled to reimbursement pursuant hereto. At least one day
prior to the Closing Date, the Placement Agent shall submit to the Company its
bona fide estimate of the amount of expenses for which the Placement Agent is
entitled to reimbursement pursuant hereto. As soon as reasonably practicable
after the Closing Date, the Placement Agent shall submit to the Company its
expense reimbursement invoice and the Company or the Placement Agent, as
applicable, shall make any necessary reconciling payment(s) within thirty days
of receipt of such invoices.

2. Representations and Warranties of the Company. The Company represents and
warrants to the Placement Agent as of the date hereof, and as of the Closing
Date and agrees with the Placement Agent, as follows:

(a) Filing of Registration Statement. The Company has prepared and filed, in
conformity with the requirements of the Securities Act of 1933, as amended (the
“Securities Act”), and the published rules and regulations thereunder (the
“Rules and Regulations”) adopted by the Securities and Exchange Commission (the
“Commission”), a registration statement, including a prospectus, on Form S-3
(File No. 333-148771), which became effective as of February 2, 2008, relating
to the Securities and the offering thereof (the “Offering”) from time to time in
accordance with Rule 415(a)(1)(x) of the Rules and Regulations, and such
amendments thereof as may have been required to the date of this Agreement. The
term “Registration Statement” as used in this Agreement means the aforementioned
registration statement, as amended at the time of such registration statement’s
effectiveness for purposes of Section 11 of the Securities Act, (the “Effective
Time”), including (i) all documents filed as a part thereof or incorporated or
deemed to be incorporated by reference therein and (ii) any information in the
corresponding Base Prospectus (as defined below) or a prospectus supplement
filed with the Commission pursuant to Rule 424(b) under the Securities Act, to
the extent such information is deemed pursuant to Rule 430A (“Rule 430A”), 430B
(“Rule 430B”) or 430C (“Rule 430C”) under the Securities Act to be a part
thereof at the Effective Time. If the Company has filed an abbreviated
registration statement to register additional Securities pursuant to Rule 462(b)
under the Rules and Regulations (the “Rule 462(b) Registration Statement”), then
any reference herein to the term “Registration Statement” shall also be deemed
to include such Rule 462(b) Registration Statement. For purposes of this
Agreement, all references to the Registration Statement, the Base Prospectus,
any Preliminary Prospectus (as defined below), the Prospectus (as defined in
below) or any amendment or supplement to any of the foregoing shall be deemed to
include the copy filed with the Commission pursuant to its Electronic Data
Gathering,

 

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Analysis and Retrieval System (“EDGAR”). All references in this Agreement to
amendments or supplements to the Registration Statement, the Base Prospectus,
any Preliminary Prospectus or the Prospectus shall be deemed to mean and include
the subsequent filing of any document under the Exchange Act and which is deemed
to be incorporated therein by reference therein or otherwise deemed to be a part
thereof.

(b) Effectiveness of Registration Statement; Certain Defined Terms. The Company
and the transactions contemplated by this Agreement meet the requirements and
comply with the conditions for the use of Form S-3 under the Securities Act. The
Company has complied, to the Commission’s satisfaction, with all requests of the
Commission for additional or supplemental information. No stop order preventing
or suspending use of the Registration Statement, any Preliminary Prospectus or
the Prospectus or the effectiveness of the Registration Statement has been
issued by the Commission, and no proceedings for such purpose pursuant to
Section 8A of the Securities Act against the Company or related to the Offering
have been instituted or are pending or, to the Company’s knowledge, are
contemplated or threatened by the Commission, and any request received by the
Company on the part of the Commission for additional information has been
complied with. As used in this Agreement:

(1) “Base Prospectus” means the prospectus included in the Registration
Statement at the Effective Time.

(2) “Disclosure Package” means (i) the Statutory Prospectus, (ii) each Issuer
Free Writing Prospectus, if any, filed or used by the Company on or before the
Effective Time and listed on Schedule I hereto (other than a roadshow that is an
Issuer Free Writing Prospectus but is not required to be filed under Rule 433 of
the Rules and Regulations) and (iii) the pricing and other information as set
forth on Exhibit C hereto, all considered together.

(3) “Issuer Free Writing Prospectus” means any “issuer free writing prospectus,”
as defined in Rule 433 of the Rules and Regulations relating to the Securities
in the form filed or required to be filed with the Commission or, if not
required to be filed, in the form retained in the Company’s records pursuant to
Rule 433(g) of the Rules and Regulations.

(4) “Preliminary Prospectus” means any preliminary prospectus supplement,
subject to completion, relating to the Securities, filed by the Company with the
Commission pursuant to Rule 424(b) under the Securities Act for use in
connection with the offering and sale of the Securities, together with the Base
Prospectus attached to or used with such preliminary prospectus supplement.

(5) “Prospectus” means the final prospectus supplement, relating to the
Securities, filed by the Company with the Commission pursuant to Rule 424(b)
under the Securities Act on or before the second business day after the date
hereof (or such earlier time as may be required under the Securities Act), in
the form furnished by the Company to the Placement Agents, for use in connection
with the offering and sale of the Securities that discloses the public offering
price and other final terms of the Securities, together with the Base Prospectus
attached to or used with such final prospectus supplement.

 

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(6) “Statutory Prospectus” means the Preliminary Prospectus, if any, and the
Base Prospectus, each as amended and supplemented immediately prior to the Time
of Sale, including any document incorporated by reference therein and any
prospectus supplement

(7) “Time of Sale” means 3:55 p.m., New York City time, on the date of this
Agreement.

(c) Contents of Registration Statement. The Registration Statement complied when
it became effective, complies as of the date hereof and, as amended or
supplemented, at the Time of Sale and at all times during which a prospectus is
required by the Securities Act to be delivered (whether physically or through
compliance with Rule 172 under the Securities Act or any similar rule) in
connection with any sale of Securities (the “Prospectus Delivery Period”), will
comply, in all material respects, with the requirements of the Securities Act
and the Rules and Regulations; the Registration Statement did not, as of the
Effective Time, contain an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary in order to make the
statements therein not misleading, provided, that the Company makes no
representation or warranty in this paragraph with respect to statements in or
omissions from the Registration Statement in reliance upon, and in conformity
with, written information furnished to the Company by the Placement Agent
specifically for inclusion therein, which information the parties hereto agree
is limited to the Placement Agent’s Information (as defined in Section 7
hereof).

(d) Contents of Prospectus. The Prospectus will comply, as of the date that it
is filed with the Commission, the date of its delivery to Investors and at all
times during the Prospectus Delivery Period, in all material respects, with the
requirements of the Securities Act; at no time during the period that begins on
the date the Prospectus is filed with the Commission and ends at the end of the
Prospectus Delivery Period will the Prospectus, as then amended or supplemented,
include an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, provided, that the
Company makes no representation or warranty with respect to statements in or
omissions from the Prospectus in reliance upon, and in conformity with, written
information furnished to the Company by the Placement Agent specifically for
inclusion therein, which information the parties hereto agree is limited to the
Placement Agent’s Information.

(e) Incorporated Documents. Each of the documents incorporated or deemed to be
incorporated by reference in the Registration Statement, at the time such
document was filed with the Commission or at the time such document became
effective, as applicable, complied, in all material respects, with the
requirements of the Exchange Act, were filed on a timely basis with the
Commission and did not include an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.

(f) Disclosure Package. The Disclosure Package, as of the Time of Sale, did not,
and at the Closing Date will not, contain any untrue statement of a material
fact or omit to

 

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state any material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading; provided, that the Company makes no representations
or warranty in this paragraph with respect to statements in or omissions from
the Disclosure Package in reliance upon, and in conformity with, written
information furnished to the Company by the Placement Agent specifically for
inclusion therein, which information the parties hereto agree is limited to the
Placement Agent’s Information.

(g) Distributed Materials; Conflict with Registration Statement. Other than the
Base Prospectus, any Preliminary Prospectus and the Prospectus, the Company has
not made, used, prepared, authorized, approved or referred to and will not make,
use, prepare, authorize, approve or refer to any “written communication” (as
defined in Rule 405 under the Securities Act) that constitutes an offer to sell
or a solicitation of an offer to buy the Securities other than (i) any document
not constituting a prospectus pursuant to Section 2(a)(10)(a) of the Securities
Act or Rule 134 under the Securities Act or (ii) the documents listed on
Schedule I hereto and other written communications approved in advance by the
Placement Agent.

(h) Issuer Free Writing Prospectuses. Each Issuer Free Writing Prospectus, if
any, conformed or will conform in all material respects to the requirements of
the Securities Act and the Rules and Regulations on the date of first use, and
the Company has complied or will comply with any filing requirements applicable
to such Issuer Free Writing Prospectus pursuant to the Rules and Regulations.
Each Issuer Free Writing Prospectus, if any, when considered together with the
Disclosure Package, as of its issue date and at all subsequent times through the
completion of the Prospectus Delivery Period did not, does not and will not
include any information that conflicted, conflicts or will conflict with the
information contained in the Registration Statement, the Statutory Prospectus or
the Prospectus, including any document incorporated by reference therein and any
prospectus supplement deemed to be a part thereof that has not been superseded
or modified, or includes an untrue statement of a material fact or omitted or
would omit to state a material fact required to be stated therein or necessary
in order to make the statements therein, in the light of the circumstances
prevailing at the subsequent time, not misleading; provided, that the Company
makes no representation or warranty with respect to statements in or omissions
from any Issuer Free Writing Prospectus in reliance upon, and in conformity
with, written information furnished to the Company by the Placement Agent
specifically for inclusion therein, which information the parties hereto agree
is limited to the Placement Agent’s Information.

(i) Not an Ineligible Issuer. (1) At the earliest time after the filing of the
Registration Statement that the Company or another offering participant made a
bona fide offer (within the meaning of Rule 164(h)(2) under the Securities Act)
of the Securities and (2) at the date hereof, the Company was not and is not an
“ineligible issuer,” as defined in Rule 405 (“Rule 405”) under the Securities
Act.

(j) Due Incorporation. The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the State of
Delaware, with the corporate power and authority to own its properties and to
conduct its business as currently being conducted and as described in the
Registration Statement, the Prospectus and the Disclosure Package. The Company
is duly qualified to transact business and is in good standing as a foreign

 

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corporation or other legal entity in each other jurisdiction in which its
ownership or leasing of property or the conduct of its business requires such
qualification, except where the failure to be so qualified and in good standing
or have such power or authority (i) would not have, individually or in the
aggregate, a material adverse effect upon, the general affairs, business,
operations, prospects, properties, financial condition, or results of operations
of the Company and its subsidiaries, taken as a whole, or (ii) impair in any
material respect the power or ability of the Company to perform its obligations
under this Agreement or to consummate any transactions contemplated by the
Agreement and the Subscription Agreements, including the issuance and sale of
the Securities (any such effect as described in clauses (i) or (ii), a “Material
Adverse Effect”).

(k) Subsidiaries. Except as otherwise described in the Registration Statement,
the Prospectus and the Disclosure Package, the Company has no subsidiaries and
does not own any beneficial interest, directly or indirectly, in any
corporation, partnership, joint venture or other business entity.

(l) Due Authorization and Enforceability. The Company has the full right, power
and authority to enter into this Agreement, and the Securities Purchase
Agreement, and to perform and discharge its obligations hereunder and
thereunder; and each of this Agreement, Escrow Agreement and the Securities
Purchase Agreement has been duly authorized, executed and delivered by the
Company, and constitutes a valid, legal and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as rights
to indemnity hereunder may be limited by federal or state securities laws and
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization or similar laws affecting the rights of creditors
generally and subject to general principles of equity.

(m) The Securities. The issuance of the Shares has been duly and validly
authorized by the Company and, when issued, delivered and paid for in accordance
with the terms of this Agreement and the Securities Purchase Agreement, will
have been duly and validly issued and will be fully paid and nonassessable, will
not be subject to any statutory or contractual preemptive rights or other rights
to subscribe for or purchase or acquire any shares of Common Stock of the
Company, which have not been waived or complied with and will conform in all
material respects to the description thereof contained in the Disclosure Package
and the Prospectus and such description conforms in all material respects to the
rights set forth in the instruments defining the same. The Warrants conform, or
when issued will conform, to the description thereof contained in the Disclosure
Package and the Prospectus and have been duly and validly authorized by the
Company and upon delivery to the Investors at the Closing Date will be valid and
binding obligations of the Company, enforceable in accordance with their terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights and remedies of
creditors generally or subject to general principles of equity. The Warrant
Shares initially issuable upon exercise of the Warrants have been duly and
validly authorized and reserved for issuance by the Company and when issued,
delivered and paid for in accordance with the terms thereof, will have been duly
and validly issued and will be fully paid and nonassessable and will not be
subject to any statutory or contractual preemptive rights or other rights to
subscribe for or to purchase or acquire any shares of Common Stock of the
Company which have not been waived or complied with.

 

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(n) Capitalization. The information set forth under the caption “Capitalization”
in the Statutory Prospectus (and any similar sections or information, if any,
contained in the Disclosure Package) is fairly presented on a basis consistent
with the Company’s financial statements. The authorized capital stock of the
Company conforms as to legal matters to the description thereof contained in the
Prospectus under the caption “Description of Capital Stock” (and any similar
sections or information, if any, contained in the Disclosure Package). The
issued and outstanding shares of capital stock of the Company have been duly
authorized and validly issued, are fully paid and nonassessable, and have been
issued in compliance with all federal and state securities laws. None of the
outstanding shares of Common Stock was issued in violation of any preemptive
rights, rights of first refusal or other similar rights to subscribe for or
purchase or acquire any securities of the Company. There are no authorized or
outstanding shares of capital stock, options, warrants, preemptive rights,
rights of first refusal or other rights to purchase, or equity or debt
securities convertible into or exchangeable for, any capital stock of the
Company other than those described in the Prospectus and the Disclosure Package.
The description of the Company’s stock option, stock bonus and other stock plans
or arrangements, and the options or other rights granted thereunder, as
described in the Prospectus and the Disclosure Package, accurately and fairly
present the information required to be shown with respect to such plans,
arrangements, options and rights.

(o) No Conflict. The execution, delivery and performance by the Company of this
Agreement, and Securities Purchase Agreement and the consummation of the
transactions contemplated hereby and thereby, including the issuance and sale by
the Company of the Securities and the issuance of the Warrant Shares upon due
exercise of the Warrants in accordance with their terms, will not conflict with
or result in a breach or violation of, or constitute a default under (nor
constitute any event which with notice, lapse of time or both would result in
any breach or violation of or constitute a default under), give rise to any
right of termination or other right or the cancellation or acceleration of any
right or obligation or loss of a benefit under, or give rise to the creation or
imposition of any lien, encumbrance, security interest, claim or charge upon any
property or assets of the Company pursuant to (i) any indenture, mortgage, deed
of trust, loan agreement or other agreement or instrument to which the Company
is a party or by which any of them or any of their respective properties may be
bound or to which any of the property or assets of the Company is subject,
(ii) result in any violation of the provisions of the charter or by-laws of the
Company, or (iii) result in any violation of any law, statute, rule, regulation,
judgment, order or decree of any court or governmental agency or body, domestic
or foreign, having jurisdiction over the Company or any of their properties or
assets.

(p) No Consents Required. No approval, authorization, consent or order of or
filing, qualification or registration with, any court or governmental agency or
body, foreign or domestic, which has not been made, obtained or taken and is not
in full force and effect, is required in connection with the execution, delivery
and performance of this Agreement, and the Securities Purchase Agreement by the
Company, the issuance and sale of the Securities and the issuance of the Warrant
Shares upon due exercise of the Warrants in accordance with their terms or the
consummation by the Company of the transactions contemplated hereby or thereby
other than (i) as may be required under the Securities Act, (ii) any necessary
qualification of the Securities under the securities or blue sky laws of the
various jurisdictions in which the Securities are being offered by any Placement
Agent, (iii) under the rules and regulations of the Financial Industry
Regulatory Authority (“FINRA”) or (iv) the NASDAQ Global.

 

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(q) Preemptive Rights. There are no preemptive rights or other rights (other
than rights which have been waived in writing in connection with the
transactions contemplated by this Agreement or otherwise satisfied) to subscribe
for or to purchase any shares of Common Stock or shares of any other capital
stock or other equity interests of the Company, or any agreement or arrangement
between the Company and any of the Company’s stockholders, or to the Company’s
knowledge, between or among any of the Company’s stockholders, which grant
special rights with respect to any shares of the Company’s capital stock or
which in any way affect any stockholder’s ability or right freely to alienate or
vote such shares.

(r) Registration Rights. There are no contracts, agreements or understandings
between the Company and any person granting such person the right (other than
rights which have been waived in writing in connection with the transactions
contemplated by this Agreement or otherwise satisfied) to require the Company to
register any securities with the Commission.

(s) Intentionally Omitted.

(t) Independent Accountants. KPMG, LLP, whose reports on the consolidated
financial statements of the Company are incorporated by reference in the
Registration Statement, the Prospectus and the Disclosure Package, is (i) an
independent public accounting firm within the meaning of the Securities Act,
(ii) a registered public accounting firm (as defined in Section 2(a)(12) of the
Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”)), and (iii) to the
Company’s knowledge, not in violation of the auditor independence requirements
of the Sarbanes-Oxley Act.

(u) Financial Statements. The financial statements of the Company, together with
the related schedules and notes thereto, set forth or incorporated by reference
in the Registration Statement, the Prospectus and the Disclosure Package, comply
in all material respects with the applicable requirements of the Securities Act
and the Exchange Act, as applicable, and present fairly in all material respects
(i) the financial condition of the Company as of the dates indicated and
(ii) the consolidated results of operations, stockholders’ equity and changes in
cash flows of the Company for the periods therein specified; and such financial
statements and related schedules and notes thereto have been prepared in
conformity with United States generally accepted accounting principles,
consistently applied throughout the periods involved (except as otherwise stated
therein and subject, in the case of unaudited financial statements, to the
absence of footnotes and normal year-end adjustments). There are no other
financial statements (historical or pro forma) that are required to be included
or incorporated by reference in the Registration Statement, the Prospectus or
the Disclosure Package; and the Company does not have any material liabilities
or obligations, direct or contingent (including any off-balance sheet
obligations), not disclosed in the Registration Statement, the Disclosure
Package and the Prospectus; and all disclosures contained in the Registration
Statement, the Disclosure Package and the Prospectus regarding “non-GAAP
financial measures” (as such term is defined by the rules and regulations of the
Commission) comply with Regulation G of the Exchange Act and Item 10(e) of
Regulation S-K under the Securities Act, to the extent applicable, and present
fairly the information shown therein and the Company’s basis for using such
measures.

 

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(v) Absence of Material Changes. Subsequent to the respective dates as of which
information is given in the Registration Statement, the Prospectus and the
Disclosure Package, and except as may be otherwise stated or incorporated by
reference in the Registration Statement, the Prospectus and the Disclosure
Package, there has not been (i) any Material Adverse Effect, (ii) any
transaction which is material to the Company, (iii) any obligation, direct or
contingent (including any off-balance sheet obligations), incurred by the
Company, which is material to the Company, (iv) any dividend or distribution of
any kind declared, paid or made on the capital stock of the Company, (v) any
change in the capital stock (other than a change in the number of outstanding
shares of Common Stock due to the issuance of shares upon the exercise of
outstanding options or warrants or the conversion of convertible indebtedness),
or material change in the short-term debt or long-term debt of the Company
(other than upon conversion of convertible indebtedness) or any issuance of
options, warrants, convertible securities or other rights to purchase the
capital stock (other than grants of stock options under the Company’s stock
option plans existing on the date hereof) of the Company.

(w) Legal Proceedings. There are no legal or governmental actions, suits, claims
or proceedings pending or, to the Company’s knowledge, threatened or
contemplated to which the Company is or would be a party or of which any of
their respective properties is or would be subject at law or in equity, before
or by any federal, state, local or foreign governmental or regulatory
commission, board, body, authority or agency, or before or by any
self-regulatory organization or other non-governmental regulatory authority
(including, without limitation, the Food and Drug Administration of the U.S.
Department of Health and Human Services (the “FDA”)) which are required to be
described in the Registration Statement, the Disclosure Package or the
Prospectus or a document incorporated by reference therein and are not so
described therein, or which, singularly or in the aggregate, if resolved
adversely to the Company, would reasonably be likely to result in a Material
Adverse Effect or prevent or materially and adversely affect the ability of the
Company to consummate the transactions contemplated hereby. To the Company’s
knowledge, no such proceedings are threatened or contemplated by governmental
authorities or threatened by others.

(x) No Violation. The Company is not in breach or violation of or in default
(nor has any event occurred which with notice, lapse of time or both would
result in any breach or violation of, or constitute a default) (i) under the
provisions of its charter or bylaws (or analogous governing instrument, as
applicable) or (ii) in the performance or observance of any term, covenant,
obligation, agreement or condition contained in any indenture, mortgage, deed of
trust, bank loan or credit agreement or other evidence of indebtedness, or any
license, lease, contract or other agreement or instrument to which the Company
is a party or by which any of them or any of their properties may be bound or
affected, or (iii) in the performance or observance of any statute, law, rule,
regulation, ordinance, judgment, order or decree of any court, regulatory body,
administrative agency, governmental body, arbitrator or other authority having
jurisdiction over the Company or any of its properties, as applicable
(including, without limitation, those administered by the FDA or by any foreign,
federal, state or local governmental or regulatory authority performing
functions similar to those performed by the FDA), except, with respect to
clauses (ii) and (iii) above, to the extent any such contravention has been
waived or would not result in a Material Adverse Effect.

 

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(y) Permits. The Company has made all filings, applications and submissions
required by, and owns or possesses all approvals, licenses, certificates,
certifications, clearances, consents, exemptions, marks, notifications, orders,
permits and other authorizations issued by, the appropriate federal, state or
foreign regulatory authorities (including, without limitation, the FDA, and any
other foreign, federal state or local government or regulatory authorities
performing functions similar to those performed by the FDA) necessary to conduct
its business as described in the Disclosure Package (collectively, “Permits”),
except for such Permits which the failure to obtain would not have a Material
Adverse Effect (the “Immaterial Permits”), and is in compliance in all material
respects with the terms and conditions of all such Permits other than the
Immaterial Permits (the “Required Permits”). All such Required Permits held by
the Company are valid and in full force and effect. The Company has not received
any notice of any proceedings relating to revocation or modification of, any
such Required Permit, which, individually or in the aggregate, if the subject of
an unfavorable decision, ruling or finding, would have a Material Adverse
Effect.

(z) Not an Investment Company. The Company is not or, after giving effect to the
offering and sale of the Securities and the application of the proceeds thereof
as described in the Disclosure Package and the Prospectus, will not be
(i) required to register as an “investment company” as defined in the Investment
Company Act of 1940, as amended (the “Investment Company Act”), and the rules
and regulations of the Commission thereunder or (ii) a “business development
company” (as defined in Section 2(a)(48) of the Investment Company Act).

(aa) No Price Stabilization. Neither the Company nor, to the Company’s
knowledge, any of its officers, directors, affiliates or controlling persons has
taken or will take, directly or indirectly, any action designed to or that might
be reasonably expected to cause or result in, or which has constituted or which
might reasonably be expected to constitute the stabilization or manipulation of
the price of any security of the Company to facilitate the sale or resale of the
Securities.

(bb) Good Title to Property. The Company has good and valid title to all
property (whether real or personal) described in the Registration Statement, the
Disclosure Package and the Prospectus as being owned by it, in each case free
and clear of all liens, claims, security interests, other encumbrances or
defects (collectively, “Liens”), except such as are described in the
Registration Statement, the Disclosure Package and the Prospectus and those that
would not, individually or in the aggregate materially affect the value of such
property and do not materially interfere with the use made and proposed to be
made of such property by the Company. All of the property described in the
Registration Statement, Disclosure Package and the Prospectus as being held
under lease by the Company is held thereby under valid, subsisting and
enforceable leases, without any liens, restrictions, encumbrances or claims,
except those that, individually or in the aggregate, are not material and do not
materially interfere with the use made and proposed to be made of such property
by the Company.

(cc) Intellectual Property Rights. The Company owns or possesses the right to
use all patents, trademarks, trademark registrations, service marks, service
mark registrations,

 

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trade names, copyrights, licenses, inventions, software, databases, know-how,
Internet domain names, trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures, and other
intellectual property (collectively, “Intellectual Property”) necessary to carry
on their respective businesses as currently conducted, and as proposed to be
conducted and described in the Disclosure Package and the Prospectus, and the
Company is not aware of any claim to the contrary or any challenge by any other
person to the rights of the Company with respect to the foregoing except for
those that could not have a Material Adverse Effect. The Intellectual Property
licenses described in the Disclosure Package and the Prospectus are, to the
knowledge of the Company, valid, binding upon, and enforceable by or against the
parties thereto in accordance to their terms. The Company has complied in all
material respects with, and is not in breach nor has received any asserted or
threatened claim of breach of, any Intellectual Property license, and the
Company has no knowledge of any breach or anticipated breach by any other person
to any Intellectual Property license. To the knowledge of the Company, the
Company’s Intellectual Property does not infringe or conflict with any patents,
trademarks, service marks, trade names, copyrights, trade secrets, licenses or
other Intellectual Property or franchise right of any person. The Company has
not received notice of any material claim against the Company alleging the
infringement by the Company of any patent, trademark, service mark, trade name,
copyright, trade secret, license in or other intellectual property right or
franchise right of any person. The Company has taken all reasonable steps to
protect, maintain and safeguard its rights in all Intellectual Property,
including the execution of appropriate nondisclosure and confidentiality
agreements. The consummation of the transactions contemplated by this Agreement
will not result in the loss or impairment of or payment of any additional
amounts with respect to, nor require the consent of any other person in respect
of, the Company’s right to own, use, or hold for use any of the Intellectual
Property as owned, used or held for use in the conduct of the businesses as
currently conducted.

(dd) No Labor Disputes. No labor problem or dispute with the employees of the
Company exists, or, to the Company’s knowledge, is threatened or imminent, which
would reasonably be expected to result in a Material Adverse Effect. The Company
is not aware that any key employee or significant group of employees of the
Company plans to terminate employment with the Company. The Company has not
engaged in any unfair labor practice; except for matters which would not,
individually or in the aggregate, result in a Material Adverse Effect, (i) there
is (A) no unfair labor practice complaint pending or, to the Company’s
knowledge, threatened against the Company before the National Labor Relations
Board, and no grievance or arbitration proceeding arising out of or under
collective bargaining agreements is pending or to the Company’s knowledge,
threatened, (B) no strike, labor dispute, slowdown or stoppage pending or, to
the Company’s knowledge, threatened against the Company and (C) no union
representation dispute currently existing concerning the employees of the
Company and (ii) to the Company’s knowledge, (A) no union organizing activities
are currently taking place concerning the employees of the Company and (B) there
has been no violation of any federal, state, local or foreign law relating to
discrimination in the hiring, promotion or pay of employees, any applicable wage
or hour laws or any provision of the Employee Retirement Income Security Act of
1974 (“ERISA”) or the rules and regulations promulgated thereunder concerning
the employees of the Company.

(ee) Taxes. The Company has (i) timely filed all necessary federal, state, local
and foreign income and franchise tax returns (or timely filed applicable
extensions therefore) that

 

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have been required to be filed and (ii) are not in default in the payment of any
taxes which were payable pursuant to said returns or any assessments with
respect thereto, other than any which the Company is contesting in good faith
and for which adequate reserves have been provided and reflected in the
Company’s financial statements included in the Registration Statement, the
Disclosure Package and the Prospectus. The Company does not have any tax
deficiency that has been or, to the knowledge of the Company, is reasonably
likely to be asserted or threatened against it that would result in a Material
Adverse Effect.

(ff) ERISA. The Company is in compliance in all material respects with all
presently applicable provisions of ERISA; no “reportable event” (as defined in
ERISA) has occurred with respect to any “pension plan” (as defined in ERISA) for
which the Company would have any liability; the Company has not incurred and
does not expect to incur liability under (i) Title IV of ERISA with respect to
termination of, or withdrawal from, any “pension plan” or (ii) Sections 412 or
4971 of the Internal Revenue Code of 1986, as amended, including the regulations
and published interpretations thereunder (the “Code”); and each “pension plan”
for which the Company would have any liability that is intended to be qualified
under Section 401(a) of the Code is so qualified in all material respects and
nothing has occurred, whether by action or by failure to act, which would cause
the loss of such qualification.

(gg) Compliance with Environmental Laws. The Company (i) is in compliance with
any and all applicable foreign, federal, state and local laws, orders, rules,
regulations, directives, decrees and judgments relating to the use, treatment,
storage and disposal of hazardous or toxic substances or waste and protection of
human health and safety or the environment which are applicable to their
businesses (“Environmental Laws”), (ii) has received and is in compliance with
all permits, licenses or other approvals required of them under applicable
Environmental Laws to conduct its business; and (iii) is in compliance with all
terms and conditions of any such permit, license or approval, except where such
noncompliance with Environmental Laws, failure to receive required permits,
licenses or other approvals or failure to comply with the terms and conditions
of such permits, licenses or approvals would not, individually or in the
aggregate, result in a Material Adverse Effect. There are no costs or
liabilities associated with Environmental Laws (including, without limitation,
any capital or operating expenditures required for clean-up, closure of
properties or compliance with Environmental Laws or any permit, license or
approval, any related constraints on operating activities and any potential
liabilities to third parties) which would, individually or in the aggregate,
result in a Material Adverse Effect.

(hh) Insurance. The Company maintains or is covered by insurance provided by
recognized, financially sound and reputable institutions with insurance policies
in such amounts and covering such risks as is adequate for the conduct of its
business and the value of its properties and as is customary for companies
engaged in similar businesses in similar industries. All such insurance is fully
in force on the date hereof and will be fully in force as of the Closing Date.
The Company has no reason to believe that it will not be able 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.

 

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

(jj) Disclosure Controls. The Company has established, maintains and evaluates
“disclosure controls and procedures” (as such term is defined in Rule 13a-15(e)
and 15d-15(e) under the Exchange Act), which (i) are designed to ensure that
material information relating to the Company is made known to the Company’s
principal executive officer and its principal financial officer by others within
those entities, particularly during the periods in which the periodic reports
required under the Exchange Act are being prepared, (ii) have been evaluated for
effectiveness as of the end of the last fiscal period covered by the
Registration Statement; and (iii) such disclosure controls and procedures are
effective to perform the functions for which they were established. There are no
significant deficiencies and material weaknesses in the design or operation of
internal controls which could adversely affect the Company’s ability to record,
process, summarize, and report financial data to management and the Board of
Directors of the Company. The Company is not aware of any fraud, whether or not
material, that involves management or other employees who have a role in the
Company’s internal controls; and since the date of the most recent evaluation of
such disclosure controls and procedures, there have been no significant changes
in internal controls or in other factors that could significantly affect
internal controls, including any corrective actions with regard to significant
deficiencies and material weaknesses.

(kk) Contracts; Off-Balance Sheet Interests. There is no document, contract,
permit or instrument, or off-balance sheet transaction (including without
limitation, any “variable interests” in “variable interest entities,” as such
terms are defined in Financial Accounting Standards Board Interpretation No. 46)
of a character required by the Securities Act or the Rules and Regulations to be
described in the Registration Statement or the Disclosure Package or to be filed
as an exhibit to the Registration Statement or document incorporated by
reference therein, which is not described or filed as required. The contracts
described in the immediately preceding sentence to which the Company is a party
have been duly authorized, executed and delivered by the Company, constitute
valid and binding agreements of the Company, are enforceable against and by the
Company in accordance with the terms thereof and are in full force and effect on
the date hereof.

(ll) No Undisclosed Relationships. No relationship, direct or indirect, exists
between or among the Company on the one hand and the directors, officers,
stockholders, customers or suppliers of the Company or any of their affiliates
on the other hand, which is required to be described in the Registration
Statement, the Disclosure Package and the Prospectus or a document incorporated
by reference therein and which has not been so described.

(mm) Brokers Fees. Except as disclosed in the Disclosure Package, there are no
contracts, agreements or understandings between the Company and any person
(other than this

 

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Agreement) that would give rise to a valid claim against the Company or the
Placement Agent for a brokerage commission, finder’s fee or other like payment
in connection with the offering and sale of the Securities.

(nn) Forward-Looking Statements. No forward-looking statements (within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act) contained in either the Disclosure Package or the Prospectus has been made
or reaffirmed without a reasonable basis or has been disclosed other than in
good faith.

(oo) NASDAQ; Exchange Act Registration. The Common Stock is registered pursuant
to Section 12(b) or 12(g) of the Exchange Act and is listed on the NASDAQ Global
Market, and the Company has taken no action designed to, or reasonably likely to
have the effect of, termination the registration of the Common Stock under the
Exchange Act or delisting the Common Stock from the NASDAQ Global Market, nor,
except as disclosed in the Disclosure Package, has the Company received any
notification that the Commission or the NASDAQ is contemplating terminating such
registration or listing. The Company has complied in all material respects with
the applicable requirements of the NASDAQ Global Market for maintenance of
inclusion of the Common Stock thereon. The Company has filed a notification of
the listing of the Shares and the Warrant Shares on the NASDAQ Global Market.

(pp) Sarbanes-Oxley Act. The Company, and to its knowledge, all of the Company’s
directors or officers, in their capacities as such, is in compliance in all
material respects with all applicable effective provisions of the Sarbanes-Oxley
Act and any related rules and regulations promulgated by the Commission. Each of
the principal executive officer and the principal financial officer of the
Company (or each former principal executive officer of the Company and each
former principal financial officer of the Company as applicable) has made all
certifications required by Sections 302 and 906 of the Sarbanes-Oxley Act with
respect to all reports, schedules, forms, statements and other documents
required to be filed by it with the Commission. For purposes of the preceding
sentence, “principal executive officer” and “principal financial officer” shall
have the meanings given to such terms in the Sarbanes-Oxley Act.

(qq) Intentionally Omitted.

(rr) Foreign Corrupt Practices. Neither the Company nor, to the Company’s
knowledge, any other person associated with or acting on behalf of the Company,
including without limitation any director, officer, agent or employee of the
Company has, directly or indirectly, while acting on behalf of the Company
(i) used any corporate funds for unlawful contributions, gifts, entertainment or
other unlawful expenses relating to political activity or failed to disclose
fully any contribution in violation of law, (ii) made any payment to any federal
or state governmental officer or official, o other person charged with similar
public or quasi-public duties, other than payments required or permitted by the
laws of the United States or any jurisdiction thereof, (iii) violated or is in
violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as
amended or (iv) made any bribe, rebate, payoff, influence payment, kickback or
other unlawful payment.

 

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(ss) Statistical or Market-Related Data. Any statistical, industry-related and
market-related data included or incorporated by reference in the Registration
Statement, the Prospectus or the Disclosure Package, are based on or derived
from sources that the Company reasonably and in good faith believes to be
reliable and accurate, and such data agree with the sources from which they are
derived.

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

(uu) OFAC. Neither the Company nor, to the knowledge of the Company, any
director, officer, agent, employee or affiliate of the Company or any of its
subsidiaries is currently subject to any U.S. sanctions administered by the
Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”); and
the Company will not directly or indirectly use the proceeds of the offering, or
lend, contribute or otherwise make available such proceeds to any affiliate,
joint venture partner or other person or entity, which, to the Company’s
knowledge, will use such proceeds for the purpose of financing the activities of
any person currently subject to any U.S. sanctions administered by OFAC.

(vv) Margin Securities. The Company does not own any “margin securities” as that
term is defined in Regulation U of the Board of Governors of the Federal Reserve
System (the “Federal Reserve Board”), and none of the proceeds of the sale of
the Securities will be used, directly or indirectly, for the purpose of
purchasing or carrying any margin security, for the purpose of reducing or
retiring any indebtedness which was originally incurred to purchase or carry any
margin security or for any other purpose which might cause any of the Securities
to be considered a “purpose credit” within the meanings of Regulation T, U or X
of the Federal Reserve Board;

(ww) Rated Securities. At the Time of Sale there were, and as of the Closing
Date there will be, no securities of or guaranteed by the Company that are rated
by a “nationally recognized statistical rating organization,” as that term is
defined in Rule 436(g)(2) promulgated under the Act;

(xx) FINRA Affiliations. There are no affiliations or associations between
(i) any member of the FINRA and (ii) the Company or any of the Company’s
officers, directors or 5% or greater securityholders or any beneficial owner of
the Company’s unregistered equity securities that were acquired at any time on
or after the one hundred eightieth (180th) day immediately preceding the date
the Registration Statement was initially filed with the Commission, except as
set forth in the Registration Statement, the Disclosure Package and the
Prospectus.

 

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(yy) Exchange Act Requirements. The Company has filed in a timely manner all
reports required to be filed pursuant to Sections 13(a), 13(e), 14 and 15(d) of
the Exchange Act during the preceding 12 months (except to the extent that
Section 15(d) requires reports to be filed pursuant to Sections 13(d) and 13(g)
of the Exchange Act, which shall be governed by the next clause of this
sentence); and the Company has filed in a timely manner all reports required to
be filed pursuant to Sections 13(d) and 13(g) of the Exchange Act since
January 1, 2004, except where the failure to timely file could not reasonably be
expected individually or in the aggregate to have a Material Adverse Effect.

(zz) Trading Market. Assuming the accuracy of the representations of the
Investors in the Subscription Agreements, no approval of the shareholders of the
Company under the rules and regulations of any trading market (including Rule
4350 of the NASDAQ Marketplace Rules) is required for the Company to issue and
deliver to the Investors the Securities.

Any certificate signed by any officer of the Company and delivered to each
Placement Agent or to counsel for the Placement Agents in connection with the
offering of the Securities shall be deemed a representation and warranty by the
Company to each Placement Agent and the Investors as to the matters covered
thereby.

3. Covenants. The Company covenants and agrees with each Placement Agent as
follows:

(a) Reporting Obligations; Exchange Act Compliance. The Company will file:
(i) each Preliminary Prospectus and the Prospectus with the Commission within
the time periods specified by Rule 424(b) and Rules 430A, 430B or 430C under the
Securities Act, as applicable, (ii) any Issuer Free Writing Prospectus to the
extent required by Rule 433 under the Securities Act, if applicable, (iii) all
reports and any definitive proxy or information statements required to be filed
by the Company with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d)
of the Exchange Act subsequent to the date of the Prospectus during the
Prospectus Delivery Period, and (iv) furnish copies of each Issuer Free Writing
Prospectus, if any, (to the extent not previously delivered) to each Placement
Agent prior to 11:00 a.m. Eastern time, on the second business day next
succeeding the date of this Agreement in such quantities as each Placement Agent
shall reasonably request.

(b) Intentionally Omitted.

(c) Continued Compliance with Securities Law. If, at any time prior to the
filing of the Prospectus pursuant to Rule 424(b), any event occurs as a result
of which the Disclosure Package as then amended or supplemented would include an
untrue statement of a material fact or omit to state any material fact necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading, the Company will (i) promptly notify the
Placement Agent so that any use of the Disclosure Package may cease until it is
amended or supplemented and (ii) amend or supplement the Disclosure Package to
correct such statements or omission. If, during the Prospectus Delivery Period,
any event occurs as a result of which the Prospectus as then amended or
supplemented would include an untrue statement of a material fact or omit to
state any material fact necessary to make the statements

 

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therein, in the light of the circumstances under which they were made, not
misleading, or if it is necessary at any time to amend the Registration
Statement or supplement the Prospectus to comply with the Securities Act, the
Company will (A) promptly notify the Placement Agent of such event and
(B) promptly prepare and file with the Commission and furnish, at its own
expense, to the Placement Agent and, to the extent applicable, the dealers and
any other dealers upon request of the Placement Agent, an amendment or
supplement which will correct such statement or omission or an amendment which
will effect such compliance.

(d) Issuer Free Writing Prospectuses. The Company will (i) not make any offer
relating to the Securities that would constitute an Issuer Free Writing
Prospectus or that would otherwise constitute a “free writing prospectus” (as
defined in Rule 405 under the Securities Act) required to be filed by the
Company with the Commission under Rule 433 under the Securities Act unless the
Placement Agent approves its use in writing prior to first use (each, a
“Permitted Free Writing Prospectus”); provided that the prior written consent of
the Placement Agent shall be deemed to have been given in respect of any
electronic road show, (ii) treat each Permitted Free Writing Prospectus as an
Issuer Free Writing Prospectus, (iii) comply with the requirements of Rules 164
and 433 under the Securities Act applicable to any Issuer Free Writing
Prospectus, including the requirements relating to timely filing with the
Commission, legending and record keeping and (iv) not take any action that would
result in the Placement Agent or the Company being required to file with the
Commission pursuant to Rule 433(d) under the Securities Act a free writing
prospectus prepared by or on behalf of the Placement Agent that the Placement
Agent otherwise would not have been required to file thereunder. The Company
will satisfy the conditions in Rule 433 under the Securities Act to avoid a
requirement to file with the Commission any electronic road show.

(e) Intentionally Omitted.

(f) Conflicting Issuer Free Writing Prospectus. If at any time following
issuance of an Issuer Free Writing Prospectus there occurred or occurs an event
or development as a result of which such Issuer Free Writing Prospectus
conflicted or would conflict with the information contained in the Registration
Statement relating to the Securities or included or would include an untrue
statement of a material fact or omitted or would omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances prevailing at that subsequent time, not misleading, the Company
promptly will notify the Placement Agent and will promptly amend or supplement,
at its own expense, such Issuer Free Writing Prospectus to eliminate or correct
such conflict, untrue statement or omission. The foregoing sentence does not
apply to statements in or omissions from any Issuer Free Writing Prospectus in
reliance upon, and in conformity with, written information furnished to the
Company by the Placement Agent specifically for inclusion therein, which
information the parties hereto agree is limited to the Placement Agent’s
Information.

(g) Intentionally Omitted.

(h) Blue Sky Laws. The Company will promptly take or cause to be taken, from
time to time, such actions as the Placement Agent may reasonably request to
qualify the Securities for offering and sale under the state securities, or blue
sky, laws of such states or other jurisdictions as the Placement Agent may
reasonably request and to maintain such qualifications

 

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in effect so long as the Placement Agent may request for the distribution of the
Securities, provided, that in no event shall the Company be obligated to qualify
as a foreign corporation in any jurisdiction in which it is not so qualified or
to file a general consent to service of process in any jurisdiction or subject
itself to taxation as doing business in any jurisdiction. The Company will
advise the Placement Agent promptly of the suspension of the qualification or
registration of (or any exemption relating to) the Securities for offering, sale
or trading in any jurisdiction or any initiation or threat of any proceeding for
any such purpose, and in the event of the issuance of any order suspending such
qualification, registration or exemption, the Company shall use its best efforts
to obtain the withdrawal thereof at the earliest possible moment.

(i) Earnings Statement. As soon as practicable, the Company will make generally
available to holders of its securities and deliver to the Placement Agent, an
earnings statement of the Company (which need not be audited) covering a period
of at least 12 months beginning after the date of this Agreement that will
satisfy the provisions of Section 11(a) of the Securities Act and the Rules and
Regulations (including, at the option of the Company, Rule 158).

(j) Use of Proceeds. The Company will apply the net proceeds from the sale of
the Securities in the manner set forth in the Registration Statement, the
Disclosure Package and the Prospectus under the heading “Use of Proceeds.”

(k) Intentionally Omitted.

(l) Intentionally Omitted.

(m) Public Communications. Prior to 9:00 a.m. New York City time on the business
day immediately subsequent to the date hereof, the Company shall issue a press
release (the “Press Release”) reasonably acceptable to the Placement Agent
disclosing the execution of this Agreement, the Securities Purchase Agreement
and the transaction contemplated hereby and thereby.

(n) Stabilization. The Company will not take directly or indirectly any action
designed, or that might reasonably be expected to cause or result in, or that
will constitute, stabilization or manipulation of the price of any security of
the Company to facilitate the sale or resale of any of the Securities.

(o) Transfer Agent. The Company shall engage and maintain, at its expense, a
transfer agent and, if necessary under the jurisdiction of incorporation of the
Company, a registrar for the Shares and Warrant Shares.

(p) Listing. The Company shall use its best efforts to cause the Shares and
Warrant Shares to be listed for quotation on the NASDAQ Global Market at the
Closing Date and to maintain such listing.

(q) Investment Company Act. The Company shall not invest, or otherwise use the
proceeds received by the Company from its sale of the Securities in such a
manner as would require the Company to register as an investment company under
the Investment Company Act.

 

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(r) Sarbanes-Oxley Act. The Company will comply with all effective applicable
provisions of the Sarbanes Oxley Act.

(s) Periodic Reports. The Company will file with the Commission such periodic
and special reports as required by the Securities Act.

(t) Reservation of Warrant Shares. The Company shall reserve and keep available
at all times a sufficient number of shares of Common Stock for the purpose of
enabling the Company to issue the Warrant Shares.

4. Costs and Expenses. The Company, whether or not the transactions contemplated
hereunder are consummated or this Agreement is terminated, will pay or reimburse
the Placement Agent all actual and accountable expenses incident to the
performance of the obligations of the Company under this Agreement and in
connection with the transactions contemplated hereby, including the reasonable
legal fees and expenses of counsel to the Placement Agent.

5. Conditions of Placement Agent’s Obligations. The obligations of the Placement
Agent hereunder and the Investors under the Securities Purchase Agreement are
subject to the following conditions:

(a) Filings with the Commission. Each Issuer Free Writing Prospectus, if any,
and the Prospectus shall have been filed with the Commission within the
applicable time period prescribed for such filing by, and in compliance with,
the Rules and Regulations and in accordance with Section 3(a) hereof.

(b) Intentionally Omitted.

(c) No Stop Orders. Prior to the Closing: (i) no stop order suspending the
effectiveness of the Registration Statement or any part thereof, preventing or
suspending the use of the Prospectus or any Issuer Free Writing Prospectus or
any part thereof shall have been issued under the Securities Act and no
proceedings for that purpose or pursuant to Section 8A under the Securities Act
shall have been initiated or threatened by the Commission, (ii) no order
suspending the qualification or registration of the Securities or the Warrant
Shares under the securities or blue sky laws of any jurisdiction shall be in
effect and (iii) all requests for additional information on the part of the
Commission (to be included or incorporated by reference in the Registration
Statement, the Disclosure Package, the Prospectus or any Issuer Free Writing
Prospectus or otherwise) shall have been complied with to the reasonable
satisfaction of the Placement Agent. On or prior to the Closing Date, the
Registration Statement or any amendment thereof or supplement thereto shall not
contain an untrue statement of material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and neither the Disclosure Package, any Issuer Free Writing
Prospectus or the Prospectus or any amendment thereof or supplement thereto
shall contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances in which they were made, not misleading.

(d) Action Preventing Issuance. No action shall have been taken and no law,
statute, rule, regulation or order shall have been enacted, adopted or issued by
any governmental

 

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agency or body which would prevent the issuance or sale of the Securities or
materially and adversely affect or potentially materially and adversely affect
the business or operations of the Company; and no injunction, restraining order
or order of any other nature by any federal or state court of competent
jurisdiction shall have been issued which would prevent the issuance or sale of
the Securities or materially and adversely affect or potentially materially and
adversely affect the business or operations of the Company.

(e) Intentionally Omitted.

(f) Material Adverse Change. Subsequent to the date of the latest audited
financial statements included or incorporated by reference in the Disclosure
Package, (i) the Company has not sustained any material loss or interference
with its business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or governmental action,
order or decree, otherwise than as set forth in the Disclosure Package,
(ii) there has not been any change in the capital stock (other than a change in
the number of outstanding shares of Common Stock due to the issuance of shares
upon the exercise of outstanding options or warrants or the conversion of
convertible indebtedness), or material change in the short–term debt or
long–term debt of the Company (other than upon conversion of convertible
indebtedness) or any material adverse change, in or affecting the business,
assets, general affairs, management, financial position, prospects,
stockholders’ equity or results of operations of the Company, otherwise than as
set forth in the Disclosure Package, the effect of which, in any such case
described in clause (i) or (ii) of this paragraph (f), is, in the reasonable
judgment of the Placement Agent, so material and adverse as to make it
impracticable or inadvisable to proceed with the sale or delivery of the
Securities on the terms and in the manner contemplated in the Disclosure
Package.

(g) Representations and Warranties. Each of the representations and warranties
of the Company contained herein shall be true and correct when made and on and
as of the Closing Date, as if made on such date (except that those
representations and warranties that address matters only as of a particular date
shall remain true and correct as of such date), and all covenants and agreements
herein contained to be performed on the part of the Company and all conditions
herein contained to be fulfilled or complied with by the Company at or prior to
the Closing Date shall have been duly performed, fulfilled or complied with.

(h) Opinions of Counsel to the Company. The Placement Agent shall have received
from Pryor Cashman LLP, counsel to the Company, such counsel’s written opinion,
addressed to the Placement Agent and the Investors and dated the Closing Date,
in form and substance satisfactory to the Placement Agent and its counsel. Such
counsel shall also have furnished to the Placement Agent a written statement
(“Negative Assurances”), addressed to each Placement Agent and dated the Closing
Date, in form and substance satisfactory to the Placement Agent and its counsel.

(i) Intentionally Omitted.

(j) Accountant’s Comfort Letter. On the Closing Date, the Placement Agent shall
have received a letter dated the date hereof, (the “Comfort Letter”), addressed
to the Placement Agent and in form and substance reasonably satisfactory to the
Placement Agent and

 

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its counsel, from KPMG LLP, (i) confirming that they are independent public
accountants with respect to the Company within the meaning of the Securities Act
and the Rules and Regulations and (ii) stating, as of the Closing Date (or, with
respect to matters involving changes or developments since the respective dates
as of which specified financial information is given in the Disclosure Package,
as of a date not more than three days prior to the Closing Date), the
conclusions and findings of such firm with respect to the financial information
and other matters ordinarily covered by accountants’ “comfort letters” to
underwriters in connection with registered public offerings.

(k) Intentionally Omitted.

(l) Officer’s Certificate. The Placement Agent shall have received on the
Closing Date a certificate, addressed to the Placement Agent and dated the
Closing Date, of the chief executive or chief operating officer and the chief
financial officer or chief accounting officer of the Company to the effect that:

(i) each of the representations, warranties and agreements of the Company in
this Agreement were true and correct when originally made and are true and
correct as of the Time of Sale and the Closing Date as if made on each such date
(except that those representations and warranties that address matters only as
of a particular date remain true and correct as of each such date); and the
Company has complied with all agreements and satisfied all the conditions on its
part required under this Agreement to be performed or satisfied at or prior to
the Closing Date;

(ii) there has not been, subsequent to the date of the most recent audited
financial statements included or incorporated by reference in the Disclosure
Package, any material adverse change in the financial position or results of
operations of the Company, or any change or development that, singularly or in
the aggregate, would involve a material adverse change or a prospective material
adverse change, in or affecting the condition (financial or otherwise), results
of operations, business, assets or prospects of the Company except as set forth
in the Prospectus;

(iii) no stop order suspending the effectiveness of the Registration Statement
or any part thereof or any amendment thereof or the qualification of the
Securities for offering or sale, nor suspending or preventing the use of the
Disclosure Package, the Prospectus or any Issuer Free Writing Prospectus shall
have been issued, and no proceedings for that purpose or pursuant to Section 8A
under the Securities Act shall be pending or to their knowledge, threatened by
the Commission or any state or regulatory body;

(iv) the Registration Statement and each amendment thereto, at the Time of Sale
and as of the date of this Agreement and as of the Closing Date did not include
any untrue statement of a material fact and did not omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading, and the Disclosure Package, as of the Time of Sale and as of the
Closing Date, any Issuer Free Writing Prospectus as of its date and as of the
Closing Date, the Prospectus and each amendment or supplement thereto, as of the
respective date thereof and as of the Closing Date, did not include any untrue
statement of a material fact and did not omit to state a material fact necessary
in order to make the statements therein, in the light of the circumstances in
which they were made, not misleading; and

 

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(v) no event has occurred as a result of which it is necessary to amend or
supplement the Registration Statement, the Prospectus or the Disclosure Package
in order to make the statements therein not untrue or misleading in any material
respect.

(m) Intentionally Omitted.

(n) Intentionally Omitted.

(o) The NASDAQ Global Market. The Shares and Warrant Shares shall have been
listed and authorized for trading on the NASDAQ Global Market, and satisfactory
evidence of such actions shall have been provided to the Placement Agent, which
shall include verbal confirmations from a member of the NASDAQ staff.

(p) Intentionally Omitted.

(q) No FINRA Objection. The Placement Agent shall have not have received any
unresolved objection from the FINRA as to the fairness and reasonableness of the
amount of compensation allowable or payable to the Placement Agent in connection
with the issuance and sale of the Securities.

(r) Securities Purchase Agreement. The Company shall have entered into the
Securities Purchase Agreement with each of the Investors, and such agreement
shall be in full force and effect on the Closing Date.

(s) Intentionally left blank.

(t) Additional Documents. Prior to the Closing Date, the Company shall have
furnished to the Placement Agent such further information, certificates or
documents as the Placement Agent shall have reasonably requested.

All opinions, letters, evidence and certificates mentioned above or elsewhere in
this Agreement shall be deemed to be in compliance with the provisions hereof
only if they are in form and substance reasonably satisfactory to counsel for
the Placement Agent.

If any condition specified in this Section 5 is not satisfied when and as
required to be satisfied, this Agreement may be terminated by the Placement
Agent by notice to the Company at any time prior to the Closing Date, which
termination shall be without liability on the part of any party to any other
party, except that Section 4, Section 6 and Section 8 hereof shall at all times
be effective and shall survive such termination.

6. Indemnification and Contribution.

(a) Indemnification of the Placement Agent. The Company agrees to indemnify,
defend and hold harmless the Placement Agent, its directors and officers, any
person who controls the Placement Agent within the meaning of Section 15 of the
Securities Act or

 

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Section 20 of the Exchange Act, and the successors and assigns of all of the
foregoing persons, from and against any losses, claims, damages, expenses or
liabilities, joint or several, to which the Placement Agent may become subject,
under the Securities Act, the Exchange Act, or other federal or state statutory
law or regulation, the common law or otherwise (including in settlement of any
litigation if such settlement is effected with the written consent of the
Company), insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon (i) any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement, any Preliminary Prospectus, the Disclosure Package, the Prospectus,
or any amendment or supplement thereto, any Issuer Free Writing Prospectus or in
any materials or information provided to Investors by, or with the approval of,
the Company in connection with the marketing of the offering of the Common Stock
(“Marketing Materials”), including any roadshow or investor presentations made
to Investors by the Company (whether in person or electronically) or arise out
of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse the Placement Agent for any legal or
other expenses reasonably incurred by it in connection with investigating or
defending against such loss, claim, damage, liability, expense or action; or
(ii) in whole or in part upon any inaccuracy in the representations and
warranties of the Company contained herein; or (iii) in whole or in part upon
any failure of the Company to perform its obligations hereunder or under law;
provided, however, that the Company shall not be liable in any such case to the
extent that any such loss, claim, damage, expense, liability or action arises
out of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in the Registration Statement, any Preliminary
Prospectus, the Disclosure Package, the Prospectus, or any such amendment or
supplement, any Issuer Free Writing Prospectus or in any Marketing Materials, in
reliance upon and in conformity with written information furnished to the
Company by the Placement Agent, specifically for use in the preparation thereof,
which information the parties hereto agree is limited to the Placement Agent’s
Information.

(b) Indemnification of the Company. The Placement Agent agrees to indemnify,
defend and hold harmless the Company against any losses, claims, damages,
expenses or liabilities to which the Company may become subject, under the
Securities Act, the Exchange Act, or other federal or state statutory law or
regulation, the common law or otherwise (including in settlement of any
litigation, if such settlement is effected with the written consent of the
Placement Agent), insofar as such losses, claims, damages, expenses or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact contained in the
Registration Statement, any Preliminary Prospectus, the Disclosure Package, the
Prospectus, or any amendment or supplement thereto or any Issuer Free Writing
Prospectus, or arise out of or are based upon the omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, in each case to the extent, but only
to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in the Registration Statement, any
Preliminary Prospectus, the Disclosure Package, the Prospectus, or any such
amendment or supplement thereto, or any Issuer Free Writing Prospectus in
reliance upon and in conformity with written information furnished to the
Company by the Placement Agent, specifically for use in the preparation thereof,
which information the parties hereto agree is limited to the Placement Agent’s
Information relating to the Placement Agent, and will reimburse the Company for
any legal or other expenses reasonably incurred by the Company in

 

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connection with investigating or defending against any such loss, claim, damage,
liability or action. Notwithstanding the provisions of this Section 6(b), in no
event shall any indemnity by the Placement Agent under this Section 6(b) exceed
the total compensation received by the Placement Agent in accordance with
Section 1(b) hereof.

(c) Notice and Procedures. If any action, suit or proceeding (each, a
“Proceeding”) is brought against a person (an “Indemnified Party”) in respect of
which indemnity may be sought against the Company or the Placement Agent (as
applicable, the “Indemnifying Party”) pursuant to subsection (a) or (b) above,
respectively, of this Section 6, such Indemnified Party shall promptly notify
such Indemnifying Party in writing of the institution of such Proceeding and
such Indemnifying Party shall assume the defense of such Proceeding, including
the employment of counsel reasonably satisfactory to such Indemnified Party (who
shall not, except with the consent of the Indemnified Party, be counsel to the
Indemnifying Party) and payment of all fees and expenses; provided, however,
that the omission to so notify such Indemnifying Party shall not relieve such
Indemnifying Party from any liability which such Indemnifying Party may have to
any Indemnified Party or otherwise, except to the extent the Indemnifying Party
has been materially prejudiced by such failure; and provided, further, that the
failure to notify the Indemnifying Party shall not relieve it from any liability
that it may have to an Indemnified Party otherwise than under subsection (a) or
(b) above. The Indemnified Party or parties shall have the right to employ its
or their own counsel in any such case, but the fees and expenses of such counsel
shall be at the expense of such Indemnified Party or parties unless (i) the
employment of such counsel shall have been authorized in writing by the
Indemnifying Party in connection with the defense of such Proceeding, (ii) the
Indemnifying Party shall not have, within a reasonable period of time in light
of the circumstances, employed counsel to defend such Proceeding or (iii) such
Indemnified Party or parties shall have reasonably concluded upon written advice
of counsel that there may be one or more legal defenses available to it or them
which are different from, additional to or in conflict with those available to
such Indemnifying Party (in which case such Indemnifying Party shall not have
the right to direct that portion of the defense of such Proceeding on behalf of
the Indemnified Party or parties, but such Indemnifying Party or parties may
employ counsel and participate in the defense thereof but the fees and expenses
of such counsel shall be at the expense of the Indemnifying Party), in any of
which events such reasonable fees and expenses shall be borne by such
Indemnifying Party and paid as incurred (it being understood, however, that such
Indemnifying Party shall not be liable for the expenses of more than one
separate counsel (in addition to any local counsel) in any one Proceeding or
series of related Proceedings in the same jurisdiction representing the
Indemnified Parties who are parties to such Proceeding). An Indemnifying Party
shall not be liable for any settlement of any Proceeding effected without its
written consent but, if settled with its written consent, such Indemnifying
Party agrees to indemnify and hold harmless the Indemnified Party or parties
from and against any loss or liability by reason of such settlement.
Notwithstanding the foregoing sentence, if at any time an Indemnified Party
shall have requested an Indemnifying Party to reimburse the Indemnified Party
for fees and expenses of counsel as contemplated by the second sentence of this
Section 6(c), then the Indemnifying Party agrees that it shall be liable for any
settlement of any Proceeding effected without its written consent if (i) such
settlement is entered into more than 60 days after receipt by such Indemnifying
Party of the aforesaid request, (ii) such Indemnifying Party shall not have
fully reimbursed the Indemnified Party in accordance with such request prior to
the date of such settlement and (iii) such Indemnified Party shall have given
the Indemnifying

 

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Party at least 30 days’ prior notice of its intention to settle. No Indemnifying
Party shall, without the prior written consent of the Indemnified Party, effect
any settlement, compromise or consent to the entry of judgment in any pending or
threatened Proceeding in respect of which any Indemnified Party is or could have
been a party and indemnity could have been sought hereunder by such Indemnified
Party, unless such settlement includes an unconditional release of such
Indemnified Party from all liability on claims that are the subject matter of
such Proceeding and does not include an admission of fault or culpability or a
failure to act by or on behalf of such Indemnified Party.

(d) Contribution. If the indemnification provided for in this Section 6 is
unavailable to an Indemnified Party under subsections (a) or (b) of this
Section 6 or insufficient to hold an Indemnified Party harmless in respect of
any losses, claims, damages, liabilities or expenses referred to therein, then
each applicable Indemnifying Party, in lieu of indemnifying such Indemnified
Party, shall contribute to the amount paid or payable by such Indemnified Party
as a result of the losses, claims, damages, liabilities or expenses referred to
in subsection (a) or (b) above, (i) in such proportion as is appropriate to
reflect the relative benefits received by the Indemnifying Party or parties on
the one hand and the Indemnified Party or parties on the other from the offering
of the Securities or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the Indemnifying Party or parties on the one hand and the Indemnified
Party or parties on the other hand in connection with the statements or
omissions that resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The relative
benefits received by the Company on the one hand and the Placement Agent on the
other hand shall be deemed to be in the same respective proportions as the total
net proceeds from the offering of the Securities (before deducting expenses)
received by the Company bear to the discounts and commissions received by the
Placement Agent. The relative fault of the Company on the one hand and the
Placement Agent on the other hand shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company, on the one hand, or by the Placement Agent,
on the other hand, and the parties’ relevant intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement,
omission act or failure to act; provided that the parties hereto agree that the
written information furnished to the Company by the Placement Agent for use in
the Registration Statement or the Prospectus, or in any amendment or supplement
thereto, consists solely of the Placement Agent’s Information relating to that
Placement Agent.

(e) Allocation. The Company and the Placement Agent agree that it would not be
just and equitable if contribution pursuant to subsection (d) above were to be
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to in the first
sentence of Section 6(d) above. Notwithstanding the provisions of this
Section 6(e), the Placement Agent shall not be required to contribute any amount
in excess of the total commissions received by the Placement Agent in accordance
with Section 1(b) less the amount of any damages which the Placement Agent has
otherwise paid or become liable to pay by reason of any untrue or alleged untrue
statement, omission or alleged omission, act or alleged act or failure to act or
alleged failure to act. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be

 

26

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entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The remedies provided for in this Section 6 are not exclusive
and shall not limit any rights or remedies which may otherwise be available to
any Indemnified Party at law or in equity.

(f) Representations and Agreements to Survive Delivery. The obligations of the
Company under this Section 6 shall be in addition to any liability which the
Company may otherwise have. The indemnity and contribution agreements contained
in this Section 6 and the covenants, agreements, warranties and representations
of the Company contained in this Agreement shall remain operative and in full
force and effect regardless of (i) any termination of this Agreement, (ii) any
investigation made by or on behalf of the Placement Agent, any person who
controls the Placement Agent within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act or any affiliate of the
Placement Agent, or by or on behalf of the Company, its directors or officers or
any person who controls the Company within the meaning of either Section 15 of
the Securities Act or Section 20 of the Exchange Act, and (iii) the issuance and
delivery of the Securities. The Company and the Placement Agent agree promptly
to notify each other of the commencement of any Proceeding against it and, in
the case of the Company, against any of the Company’s officers or directors in
connection with the issuance and sale of the Securities, or in connection with
the Registration Statement, the Disclosure Package or the Prospectus.

7. Information Furnished by Placement Agent. The Company acknowledges that the
statements set forth in the paragraph under the heading “Plan of Distribution”
in the Prospectus (the “Placement Agent’s Information”) constitute the only
information relating to the Placement Agent furnished in writing to the Company
by the Placement Agent as such information is referred to in Sections 2 and 6
hereof.

8. Termination. The Placement Agent shall have the right to terminate this
Agreement by giving notice as hereinafter specified at any time at or prior to
the Closing Date, without liability on the part of the Placement Agent to the
Company, if (i) prior to delivery and payment for the Securities (A) trading in
securities generally shall have been suspended on or by the New York Stock
Exchange, the American Stock Exchange, the NASDAQ Global Market or in the over
the counter market (each, a “Trading Market”), (B) trading in the Common Stock
of the Company shall have been suspended on any exchange, in the
over-the-counter market or by the Commission, (C) a general moratorium on
commercial banking activities shall have been declared by federal or New York
state authorities or a material disruption shall have occurred in commercial
banking or securities settlement or clearance services in the United States,
(D) there shall have occurred any outbreak or material escalation of hostilities
or acts of terrorism involving the United States or there shall have been a
declaration by the United States of a national emergency or war, (E) there shall
have occurred any other calamity or crisis or any material change in general
economic, political or financial conditions in the United States or elsewhere,
if the effect of any such event specified in clause (D) or (E), in the
reasonable judgment of the Placement Agent, is material and adverse and makes it
impractical or inadvisable to proceed with the completion of the sale of and
payment for the Securities on the Closing Date on the terms and in the manner
contemplated by this Agreement, the Disclosure Package and the Prospectus,
(ii) since the time of execution of this Agreement or the earlier respective
dates as of which information is given in the Disclosure Package or incorporated
by reference therein, there has been any Material Adverse Effect, (iii) the
Company shall have

 

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failed, refused or been unable to comply with the terms or perform any agreement
or obligation of this Agreement or any Securities Purchase Agreement, other than
by reason of a default by the Placement Agent, or (iv) any condition of the
Placement Agent’s obligations hereunder is not fulfilled. Any such termination
shall be without liability of any party to any other party except that the
provisions of Section 4, Section 6, and Section 12 hereof shall at all times be
effective notwithstanding such termination.

9. Notices. All statements, requests, notices and agreements hereunder shall be
in writing or by facsimile, and:

(a) if to the Placement Agent, shall be delivered or sent by mail, telex or
facsimile transmission as follows:

Canaccord Adams Inc.

99 High Street

Boston, MA 02110

Facsimile No.: 617 788-1553

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

Choate, Hall & Stewart LLP

Two International Place

Boston, MA 02110

Attention: Frederick P. Callori

Facsimile No.: 617-248-4000

(b) if to the Company shall be delivered or sent by mail, telex or facsimile
transmission to:

MDRNA, Inc.

3830 Monte Villa Parkway

Bothell, WA 98021

Attention: Chief Executive Officer and Chief Financial Officer

Facsimile No.:425-908-3101 and 425-908-3650

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

Pryor Cashman LLP

Until July 2, 2009 at:

410 Park Avenue

New York, NY 10022

 

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After July 2, 2009 at:

7 Times Square

New York, NY 10036

Attention: Lawrence Remmel

Facsimile No: 212-798-6365

Any such statements, requests, notices or agreements shall be effective only
upon receipt. Any party to this Agreement may change such address for notices by
sending to the parties to this Agreement written notice of a new address for
such purpose.

10. Persons Entitled to Benefit of Agreement. This Agreement shall inure to the
benefit of and shall be binding upon the Placement Agent, the Company, and their
respective successors and assigns. Nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any person other than the
persons mentioned in the preceding sentence any legal or equitable right, remedy
or claim under or in respect of this Agreement, or any provisions herein
contained, this Agreement and all conditions and provisions hereof being
intended to be and being for the sole and exclusive benefit of such persons and
for the benefit of no other person, except that (i) the representations,
warranties, covenants, agreements and indemnities of the Company contained in
this Agreement shall also be for the benefit of the controlling persons,
officers and directors referred to in Section 6(a) hereof and the indemnities of
the Placement Agent shall also be for the benefit of the controlling persons,
officers and directors referred to in Section 6(b) hereof and (ii) the Investors
are relying on the representations made by the Company under, and are intended
third party beneficiaries of, this Agreement. The term “successors and assigns”
as herein used shall not include any purchaser of the Securities by reason
merely of such purchase.

11. Governing Law; Submission to Jurisdiction. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of New York, without
giving effect to the conflicts of laws provisions thereof. Except as set forth
below, no Proceeding may be commenced, prosecuted or continued in any court
other than the courts of State of New York located in the City and County of New
York or the United States District Court for the Southern District of New York,
which courts shall have jurisdiction over the adjudication of such matters, and
the Company hereby consents to the jurisdiction of such courts and personal
service with respect thereto. The Company hereby consents to personal
jurisdiction, service and venue in any court in which any Proceeding arising out
of or in any way relating to this Agreement is brought by any third party
against the Placement Agent. The Company hereby waives all right to trial by
jury in any Proceeding (whether based upon contract, tort or otherwise) in any
way arising out of or relating to this Agreement. The Company agrees that a
final judgment in any such Proceeding brought in any such court shall be
conclusive and binding upon the Company and may be enforced in any other courts
in the jurisdiction of which the Company is or may be subject, by suit upon such
judgment.

12. No Fiduciary Relationship. The Company hereby acknowledges and agrees that:

(a) No Other Relationship. The Placement Agent has been retained solely to act
as the exclusive placement agent in connection with the offering of the
Company’s securities. The Company further acknowledges that the Placement Agent
is acting pursuant to a contractual relationship created solely by this
Agreement entered into on an arm’s length basis and in no event do the parties
intend that the Placement Agent act or be responsible as a fiduciary to the
Company, its management, stockholders, creditors or any other person in
connection with any activity that the Placement Agent may undertake or has
undertaken in furtherance of the offering of the Company’s securities, either
before or after the date hereof. The Placement Agent hereby expressly disclaims
any fiduciary or similar obligations to the Company, either in connection with
the transactions contemplated by this Agreement or any matters leading up to
such transactions, and the Company hereby confirms its understanding and
agreement to that effect.

 

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(b) Arm’s-Length Negotiations. The price of the Securities set forth in this
Agreement was established by the Company following discussions and arms-length
negotiations with the purchasers and the Placement Agent, and the Company is
capable of evaluating and understanding, and understands and accepts, the terms,
risks and conditions of the transactions contemplated by this Agreement.

(c) Absence of Obligation to Disclose. The Company has been advised that the
Placement Agent and its affiliates are engaged in a broad range of transactions
which may involve interests that differ from those of the Company and that the
Placement Agent has no obligation to disclose such interests and transactions to
the Company by virtue of any fiduciary, advisory or agency relationship; and

(d) Waiver. The Company hereby waives and releases, to the fullest extent
permitted by law, any claims that the Company may have against the Placement
Agent with respect to any breach or alleged breach of any fiduciary or similar
duty to the Company in connection with the transactions contemplated by this
Agreement or any matters leading up to such transactions and agrees that the
Placement Agent shall have no liability (whether direct or indirect) to the
Company in respect of such a fiduciary duty claim to any person asserting a
fiduciary duty claim on behalf of the Company, including stockholders, employees
or creditors of the Company.

13. Headings. The Section headings in this Agreement have been inserted as a
matter of convenience of reference and are not a part of this Agreement.

14. Amendments and Waivers. No supplement, modification or waiver of this
Agreement shall be binding unless executed in writing by the party to be bound
thereby. The failure of a party to exercise any right or remedy shall not be
deemed or constitute a waiver of such right or remedy in the future. No waiver
of any of the provisions of this Agreement shall be deemed or shall constitute a
waiver of any other provision hereof (regardless of whether similar), nor shall
any such waiver constitute a continuing waiver unless otherwise expressly
provided.

15. Counterparts. This Agreement may be executed in one or more counterparts
and, if executed in more than one counterpart, the executed counterparts shall
each be deemed to be an original and all such counterparts shall together
constitute one and the same instrument. Delivery of an executed counterpart by
facsimile shall be effective as delivery of a manually executed counterpart
thereof.

 

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16. Research Analyst Independence. The Company acknowledges that the Placement
Agent’s research analysts and research departments are required to be
independent from its investment banking division and are subject to certain
regulations and internal policies, and that the Placement Agent’s research
analysts may hold views and make statements or investment recommendations and/or
publish research reports with respect to the Company and/or the offering that
differ from the views of their respective investment banking divisions. The
Company hereby waives and releases, to the fullest extent permitted by law, any
claims that the Company may have against the Placement Agent with respect to any
conflict of interest that may arise from the fact that the views expressed by
their independent research analysts and research departments may be different
from or inconsistent with the views or advice communicated to the Company by
such Placement Agent’s investment banking division. The Company acknowledges
that the Placement Agent is a full service securities firm and as such from time
to time, subject to applicable securities laws, rules and regulations, may
effect transactions for its own account or the account of its customers and hold
long or short positions in debt or equity securities of the Company; provided,
however, that nothing in this Section 16 shall relieve the Placement Agent of
any responsibility or liability it may otherwise bear in connection with
activities in violation of applicable securities laws, rules and regulations.

17. Entire Agreement. This Agreement constitutes the entire agreement of the
parties to this Agreement and supersedes all prior written or oral and all
contemporaneous oral agreements, understandings and negotiations with respect to
the subject matter hereof.

18. Partial Unenforceability. The invalidity or unenforceability of any section,
paragraph, clause or provision of this Agreement shall not affect the validity
or enforceability of any other section, paragraph, clause or provision hereof.
If any section, paragraph, clause or provision of this Agreement is for any
reason determined to be invalid or unenforceable, there shall be deemed to be
made such minor changes (and only such minor changes) as are necessary to make
it valid and enforceable.

19. Effectiveness. This Agreement shall become effective upon the execution and
delivery hereof by the parties hereto.

[Signature Page Follows]

 

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If the foregoing is in accordance with your understanding of the agreement
between the Company and the Placement Agent, kindly indicate your acceptance in
the space provided for that purpose below.

 

Very truly yours, MDRNA, Inc. By:  

/s/ Bruce R. York

Name:  

Bruce R. York

Title:  

CFO

Accepted as of

the date first above written:

 

CANACCORD ADAMS INC. By:  

/s/ David Schechner

Name:  

David Schechner

Title:  

Managing Director

 

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Schedules and Exhibits

 

Exhibit A:

   Securities Purchase Agreement

Exhibit B:

   Form of Warrant

Exhibit C:

   Pricing Information

 

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EXHIBIT C

PRICING INFORMATION

N/A.