Exhibit 10.2
AGREEMENT REGARDING REDEMPTION OF WARRANTS AND EXERCISE
OF STOCK PURCHASE RIGHT
     This Agreement Regarding Redemption of Warrants and Exercise of Stock
Purchase Right (“Agreement”) is dated as of the 1st day of July, 2008 (the
“Effective Date”) by and among (i) MiddleBrook Pharmaceuticals, Inc., a Delaware
corporation (the “Company”), and (ii) Deerfield Private Design Fund, L.P., a
Delaware limited partnership (“Deerfield Design”), Deerfield Private Design
International, L.P., a British Virgin Islands limited partnership (“Deerfield
Design International”), Deerfield Special Situations Fund, L.P., a Delaware
limited partnership (“Deerfield Special Situations”), Deerfield Special
Situations Fund International Limited, a British Virgin Islands limited company
(“Deerfield Special Situations International” and collectively with Deerfield
Design, Deerfield Design International and Deerfield Special Situations, the
“Deerfield Entities”), Kef Pharmaceuticals, Inc., a Delaware corporation
(“Kef”), Lex Pharmaceuticals, Inc., a Delaware corporation (“Lex”), and
Deerfield Management, L.P., a Delaware limited partnership (“Deerfield
Management”).
     WHEREAS, the Company has entered into (i) the Asset Purchase Agreement,
dated November 7, 2007, by and between the Company and Kef, (ii) the Asset
Purchase Agreement, dated November 7, 2007, by and between the Company and Lex,
(iii) the Stock Purchase Agreement, dated November 7, 2007, among the Company,
Kef, the Deerfield Entities and Deerfield Management (the “Kef SPA”), (iv) the
Stock Purchase Agreement, dated November 7, 2007, among the Company, Lex, the
Deerfield Entities and Deerfield Management (the “Lex SPA”), (v) the Inventory
Consignment Agreement, dated November 7, 2007, by and between the Company and
Kef, (vi) the Registration and Trademark License Agreement, dated November 7,
2007, by and between the Company and Lex, (vii) the Regulatory Responsibility
Agreement, dated November 7, 2007, by and between the Company and Lex,
(viii) the Keflex Products Transition Agreement, dated November 7, 2007, by and
between the Company and Kef, (ix) the Contingent Manufacturing Assignment, dated
November 7, 2007, between the Company and Lex, and (x) the Registration Rights
Agreement, dated November 7, 2007, by and among the Company and the Deerfield
Entities (collectively with the Deerfield Warrants (as defined below), the
“Deerfield Agreements”); and
     WHEREAS, on November 7, 2007, the Company issued to the Deerfield Entities
warrants (the “Deerfield Warrants”) to purchase an aggregate of 3,000,000 shares
of common stock, $0.01 par value per share, of the Company (the “Common Stock”)
at an exercise price of $1.34 per Warrant Share; and
     WHEREAS, pursuant to the terms of the Deerfield Warrants, in the event of a
Major Transaction (as defined in the Deerfield Warrants), the Deerfield Entities
have the right to require the Company to redeem all of the outstanding Deerfield
Warrants;
     WHEREAS, pursuant to a Securities Purchase Agreement (the “EGI SPA”) to be
entered into contemporaneously with the execution of this Agreement, and as may
be amended from time to time, by and between the Company and EGI-MBRK,

 

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L.L.C., a Delaware limited liability company (“EGI”), the Company proposes to
issue and sell to EGI, and EGI proposes to purchase from the Company, for an
aggregate purchase price of $99,999,999 (the “EGI Financing”), (i) 30,303,030
shares of Common Stock and (ii) a warrant to purchase an aggregate of 12,121,212
shares of Common Stock.
     NOW, THEREFORE, in order to induce the Company and EGI to enter into the
EGI SPA, the parties hereto agree as follows:

1.   Purchase of Kef and Lex. On or prior to the consummation of the EGI
Financing pursuant to the terms of the EGI SPA (the “EGI Closing”), the Company
shall exercise the Stock Purchase Right (in each case as Stock Purchase Right is
defined in Section 2.1 of the Kef SPA and the Lex SPA, respectively) pursuant to
the terms of the Kef SPA and the Lex SPA, respectively.

2.   Deerfield Warrants. The Deerfield Entities and the Company agree,
notwithstanding anything to the contrary set forth in the Deerfield Warrants and
to the extent the provisions of this Agreement are inconsistent with any
provision of the Deerfield Warrants, such provision shall be deemed to be
amended by the provisions of this Section 2, that:

  2.1   The EGI Financing shall constitute a “Major Transaction” pursuant to
Section 5(c)(i)(D) of the Deerfield Warrants and the execution of this Agreement
shall constitute notice of such proposed Major Transaction as contemplated by
Section 5(c)(iii) of the Deerfield Warrants.

  2.2   Except as hereinafter provided, each of the Deerfield Entities hereby
irrevocably exercises its option pursuant to Section 5(c)(i) of the Deerfield
Warrants to require the Company to redeem, upon the occurrence of the EGI
Closing, all the outstanding Deerfield Warrants for an aggregate redemption
price equal to $8,814,000 (the “Aggregate Redemption Price”), and the execution
of this Agreement by the Deerfield Entities shall constitute the redemption
notice contemplated by Section 5(c)(iii) of the Deerfield Warrants; provided,
however, that the Deerfield Entities shall be entitled to revoke such exercise
upon the earlier of (i) the termination of the EGI SPA and (ii) December 31,
2008. The Deerfield Entities hereby represent and warrant to the Company that
they hold all of the issued and outstanding Deerfield Warrants and that,
immediately following the EGI Closing, all of the issued and outstanding
Deerfield Warrants will have been redeemed by the Company pursuant to the terms
of this Agreement.

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  2.3   Upon the occurrence of the EGI Closing, the Company shall cause EGI to
pay to the Deerfield Entities (i) the Aggregate Redemption Price and (ii) to the
extent not previously paid by the Company, the Purchase Price (in each case as
Purchase Price is defined in Section 2.3(a) of the Kef SPA and Lex SPA,
respectively) due to the Deerfield Entities upon the Closing of the Kef SPA and
the Lex SPA (in each case as Closing is defined in Section 2.6 of the Kef SPA
and Lex SPA, respectively), and the Deerfield Entities shall accept such
payments from EGI as if paid by the Company.     2.4   Notwithstanding the
provisions of Section 5(c)(iv) of the Deerfield Warrants, the Company shall not
be required to place the Aggregate Redemption Price in an escrow account with an
independent escrow agent three Business Days prior to the EGI Closing.

3.   Deerfield Voting Agreement. Simultaneously with the execution of this
Agreement, each of the Deerfield Entities (other than Deerfield Management,
L.P.) as well as Deerfield Partners, L.P. and Deerfield International Limited
shall enter into the Voting Agreement in the form attached hereto as Exhibit A.

4.   Termination of this Agreement. This Agreement shall automatically terminate
on the earlier of (a) the termination of the EGI SPA pursuant to its terms or
(b) the agreement of the parties hereto to terminate this Agreement; provided,
however, that termination of this Agreement shall not prevent any party
hereunder from seeking any remedies (at law or in equity) against the other
party hereto for such party’s breach of any of the terms of this Agreement.
Deerfield Management may terminate this Agreement upon written notice to the
Company if there shall have occurred a material breach by the Company of any of
the Deerfield Agreements, which breach is not cured prior to the EGI Closing.

5.   Termination of Deerfield Agreements. The parties hereby acknowledge and
agree that, following the latest of (i) the receipt by the Deerfield Entities of
the Aggregate Redemption Price, (ii) the Closing (as defined in the Kef SPA) and
(iii) the Closing (as defined in the Lex SPA), each of the Deerfield Agreements
shall terminate and there shall be no further rights or obligations of any party
to any Deerfield Agreement with respect thereto.

6.   Miscellaneous.

  6.1   Entire Agreement; Third Party Beneficiaries. This Agreement and the
documents and instruments and other agreements among the parties hereto as
contemplated by or referred to herein (i) constitute the entire agreement among
the parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, among the

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      parties with respect to the subject matter hereof and (ii) are not
intended to confer upon any other person any rights or remedies hereunder other
than EGI, which shall be a third party beneficiary hereof.

  6.2   Successors and Assigns. This Agreement shall not be assigned by any of
the parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Without relieving any party hereto of any
obligation hereunder, this Agreement will be binding upon, inure to the benefit
of and be enforceable by the parties and their respective successors and
assigns.     6.3   Amendment and Modification. This Agreement may not be
amended, altered, supplemented or otherwise modified or terminated except upon
the execution and delivery of a written agreement executed by the parties
hereto.     6.4   Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally or by commercial
delivery service, or sent via telecopy (receipt confirmed) to the parties at the
following addresses or telecopy numbers (or at such other address or telecopy
numbers for a party as shall be specified by like notice):

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                  (i)   if to the Company:
 
                    20425 Seneca Meadows Parkway         Germantown, Maryland
20876
 
      Attention:   Edward M. Rudnic, Ph.D.
 
          President and Chief Executive Officer
 
      Facsimile:   (301) 944-6700
 
                    with a copy to
 
                    Dewey & LeBoeuf LLP         1301 Avenue of the Americas    
    New York, New York
 
      Attention:   Frederick W. Kanner, Esq.
 
      Facsimile:   (212) 259-6333
 
              (ii)   if to the Deerfield Entities:
 
                    Deerfield Management L.P.         780 3rd Avenue, 37th Floor
        New York, New York 10017         Attention: James E. Flynn        
Facsimile: (212) 599-1248
 
                    with a copy to:
 
                    Robinson, Bradshaw & Hinson, P.A.         101 North Tryon
Street, Suite 1900         Charlotte, North Carolina 28246         Attention:
David J. Clark         Facsimile: (704) 373-3990

  6.5   Severability. In the event that any provision of this Agreement or the
application thereof becomes or is declared by a court of competent jurisdiction
to be illegal, void or unenforceable, the remainder of this Agreement will
continue in full force and effect and the application of such provision to other
persons or circumstances will be interpreted so as reasonably to effect the
intent of the parties hereto. The parties further agree to replace such void or
unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the extent possible, the economic, business and other
purposes of such void or unenforceable provision.

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  6.6   Other Remedies; Specific Performance. Except as otherwise provided
herein, any and all remedies herein expressly conferred upon a party will be
deemed cumulative with and not exclusive of any other remedy conferred hereby,
or by law or equity upon such party, and the exercise by a party of any one
remedy will not preclude the exercise of any other remedy. The parties hereto
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to seek an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
hereof in any court of the United States or any state having jurisdiction, this
being in addition to any other remedy to which they are entitled at law or in
equity.     6.7   No Waiver; Remedies Cumulative. No failure or delay on the
part of any party hereto in the exercise of any right hereunder will impair such
right or be construed to be a waiver of, or acquiescence in, any breach of any
representation, warranty or agreement herein, nor will any single or partial
exercise of any such right preclude other or further exercise thereof or of any
other right. All rights and remedies existing under this Agreement are
cumulative to, and not exclusive to, and not exclusive of, any rights or
remedies otherwise available.     6.8   Governing Law; Consent to Jurisdiction;
Waiver of Jury Trial.         This Agreement shall be governed by and construed
in accordance with the internal and substantive laws of the State of Delaware,
without regard to any conflicts of laws concepts which would apply the
substantive law of some other jurisdiction.         Each of the parties hereto
irrevocably submits to the exclusive jurisdiction of the Court of Chancery in
the State of Delaware and the Federal courts of the United States of America
located in the State of Delaware for the purpose of any suit, action, proceeding
or judgment relating to or arising out of this Agreement and the transactions
contemplated hereby. Service of process in connection with any such suit, action
or proceeding may be served on each party hereto anywhere in the world by the
same methods as are specified for the giving of notices under this Agreement.
Each of the parties hereto irrevocably consents to the jurisdiction of any such
court in any such suit, action or proceeding and to the laying of venue in such
court. Each party hereto irrevocably waives any objection to the laying of venue
of any such suit, action or proceeding brought in such courts and irrevocably
waives any claim that any such suit, action or proceeding brought in any such
court has been brought in an inconvenient forum. EACH OF THE PARTIES HERETO
WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO
THIS AGREEMENT AND REPRESENTS THAT

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      COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER.     6.9  
Descriptive Heading. The descriptive headings used herein are for reference
purposes only and will not affect in any way the meaning or interpretation of
this Agreement.     6.10   Expenses. All costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such expenses.     6.11   Counterparts. This
Agreement may be executed in two or more counterparts, and by facsimile, all of
which shall be considered one and the same agreement and shall become effective
when one or more counterparts have been signed by each of the parties and
delivered to the other party, it being understood that all parties need not sign
the same counterpart.     6.12   Rules of Construction. The parties hereto agree
that they have been represented by counsel during the negotiation and execution
of this Agreement and, therefore, waive the application of any law, regulation,
holding or rule of construction providing that ambiguities in an agreement or
other document will be construed against the party drafting such agreement or
document.

[Signature page follows.]

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

            MIDDLEBROOK PHARMACEUTICALS, INC.
      By:   /s/ Edward M. Rudnic         Name:   Edward M. Rudnic, Ph.D.       
Title:   President & Chief Executive Officer     

[Signature Page to Deerfield Agreement]

 

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                  DEERFIELD PRIVATE DESIGN FUND, L.P.    
 
           
 
  By:   Deerfield Capital, L.P.    
 
           
 
  By:   J.E. Flynn Capital LLC,    
 
      General Partner    
 
           
 
  By:   /s/ James E. Flynn    
 
           
 
      James E. Flynn, Authorized Signatory    
 
                DEERFIELD PRIVATE DESIGN INTERNATIONAL, L.P.    
 
           
 
  By:   Deerfield Capital, L.P.    
 
           
 
  By:   J.E. Flynn Capital LLC,    
 
      General Partner    
 
           
 
  By:   /s/ James E. Flynn    
 
           
 
      James E. Flynn, Authorized Signatory    
 
                DEERFIELD SPECIAL SITUATIONS FUND, L.P.    
 
           
 
  By:   Deerfield Capital, L.P.    
 
           
 
  By:   J.E. Flynn Capital LLC,    
 
      General Partner    
 
           
 
  By:   /s/ James E. Flynn    
 
           
 
      James E. Flynn, Authorized Signatory    

[Signature Page to Deerfield Agreement]

 

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                  DEERFIELD SPECIAL SITUATIONS FUND INTERNATIONAL LIMITED    
 
           
 
  By:   Deerfield Management Company    
 
           
 
  By:   Flynn Management LLC,    
 
      General Partner    
 
           
 
  By:   /s/ James E. Flynn    
 
           
 
      James E. Flynn, Authorized Signatory    
 
                LEX PHARMACEUTICALS, INC.    
 
           
 
  By:   /s/ Jeff Kaplan    
 
           
 
      Name: Jeff Kaplan
Title: Treasurer/Secretary    
 
                KEF PHARMACEUTICALS, INC.    
 
           
 
  By:   /s/ Jeff Kaplan    
 
           
 
      Name: Jeff Kaplan    
 
      Title: Treasurer/Secretary    
 
                DEERFIELD MANAGEMENT, L.P.    
 
           
 
  By:   /s/ James Flynn    
 
           
 
      Name: James Flynn    
 
      Title: General Partner    

[Signature Page to Deerfield Agreement]