Exhibit 10.1

IDERA PHARMACEUTICALS, INC.

CONVERTIBLE PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT

November 9, 2012

This Convertible Preferred Stock and Warrant Purchase Agreement (this
“AGREEMENT”) is entered into as of the date set forth above by and among Idera
Pharmaceuticals, Inc., a Delaware corporation (the “COMPANY”), and the
undersigned purchasers (each a “PURCHASER” and collectively, the “PURCHASERS”)
set forth on the Schedule of Purchasers attached hereto as Exhibit A (the
“SCHEDULE OF PURCHASERS”). The parties hereby agree as follows:

ARTICLE 1

AUTHORIZATION AND SALE OF SECURITIES

1.1 Authorization. The Company has duly authorized the sale and issuance to the
Purchasers, at the Closing (as defined in Section 2.1 below) and pursuant to the
terms and conditions hereof, of (i) up to 424,242 shares (the “SHARES”) of its
Series E Convertible Preferred Stock, par value $0.01 per share (the “SERIES E
PREFERRED STOCK”), and (ii) warrants to purchase up to 8,484,840 shares of its
common stock, par value $0.001 per share (the “COMMON STOCK”) in the form
attached hereto as Exhibit B (the “WARRANTS”). The Series E Preferred Stock
shall have the rights, privileges, preferences and restrictions set forth in the
Certificate of Designations, Preferences and Rights of Series E Preferred Stock
attached hereto as Exhibit C (the “CERTIFICATE OF DESIGNATIONS”). The Company
has, or before the Closing will have adopted and filed the Certificate of
Designations with the Secretary of State of the State of Delaware.

1.2 Sale of Securities. Subject to the terms and conditions hereof, at the
Closing the Company will issue and sell to each Purchaser, and each Purchaser
agrees, severally and not jointly, to purchase from the Company, the number of
Shares set forth opposite such Purchaser’s name on the Schedule of Purchasers,
at a purchase price of $14.00 per share, and Warrants to purchase the number of
shares of Common Stock set forth opposite such Purchaser’s name on the Schedule
of Purchasers, at a purchase price of $0.125 per Warrant Share, and for the
aggregate purchase price set forth thereon. Payment of the purchase price for
the Shares and the Warrants will be made by the Purchasers by wire transfer in
same day funds.

ARTICLE 2

CLOSING

2.1 Closing. Subject to the terms and conditions of this Agreement, the closing
(the “CLOSING”) of the sale and purchase of the Shares and the Warrants under
this Agreement shall take place at the offices of WilmerHale, 60 State Street,
Boston, MA 02109 (or remotely via the exchange of documents and signatures) on
the date of this Agreement (the “CLOSING DATE”). At the Closing:

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

(A) the Company and the Purchasers shall execute and deliver the Registration
Rights Agreement in the form attached hereto as Exhibit D (the “REGISTRATION
RIGHTS AGREEMENT” and together with this Agreement and the Warrants, the
“TRANSACTION DOCUMENTS”);

(B) the Company shall deliver to the Purchasers certificates, as of the most
recent practicable dates, (i) as to the corporate good standing of the Company
issued by the Secretary of State of the State of Delaware and (ii) as to the due
qualification of the Company as a foreign corporation issued by the Secretary of
State of the Commonwealth of Massachusetts;

(C) the Company shall deliver to the Purchasers the certificate of incorporation
of the Company, as amended and in effect as of the Closing Date (including the
Certificate of Designations), certified by the Secretary of the State of the
State of Delaware;

(D) the Company shall deliver to the Purchasers a Certificate of the Secretary
of the Company attesting as to (i) the bylaws of the Company; (ii) the
signatures and titles of the officers of the Company executing this Agreement or
any of the other agreements to be executed and delivered by the Company at the
Closing; and (iii) resolutions of the Board of Directors of the Company (the
“BOARD”) authorizing and approving all matters in connection with this Agreement
and the transactions contemplated hereby;

(E) WilmerHale, counsel for the Company, shall deliver to the Purchasers an
opinion, dated the Closing Date, in substantially the form attached hereto as
Exhibit E;

(F) the Company shall deliver to each of the Purchasers a certificate for the
number of Shares set forth opposite such Purchaser’s name under the heading
“Shares” on the Schedule of Purchasers and Warrants to purchase the number of
shares of Common Stock set forth opposite such Purchaser’s name under the
heading “Warrants” on the Schedule of Purchasers, in each case registered in the
name of such Purchaser; and

(G) each Purchaser shall pay to the Company, by wire transfer of immediately
available funds the aggregate purchase price set forth opposite such Purchaser’s
name under the heading “Purchase Price” on the Schedule of Purchasers for the
Shares and the Warrants being purchased by such Purchaser at the Closing. The
Closing shall not be deemed to occur, and all such payments by any Purchaser
shall be deemed to be held in escrow, until all Purchasers listed on the
Schedule of Purchasers have tendered to the Company the payment indicated
thereon.

ARTICLE 3

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company hereby represents and warrants to each Purchaser as of the date
hereof that except as set forth in the Exchange Act Reports (as defined in
Section 3.13):

3.1 Organization and Qualification. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware. The Company is qualified to do business as a foreign corporation in
each jurisdiction in which the failure to so qualify would have a Material
Adverse Effect. For purposes of this Agreement, the term “MATERIAL ADVERSE
EFFECT” shall mean a material adverse effect upon the business, financial
condition, properties or results of operations of the Company.

 

- 2 -

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

3.2 Authorized Capital Stock. Immediately prior to Closing, the Company will
have (i) authorized 140,000,000 shares of Common Stock, of which 27,641,229
shares of Common Stock were outstanding as of October 15, 2012 and
(ii) authorized 5,000,000 shares of Preferred Stock, $0.01 par value per share
(“PREFERRED STOCK”), of which 1,500,000 shares have been designated Series A
Convertible Preferred Stock, 655 shares of which are outstanding, 200,000 shares
have been designated Series C Junior Participating Preferred Stock, none of
which are outstanding, 1,124,260 shares have been designated Series D
Convertible Preferred Stock, 1,124,260 shares of which are outstanding, and
424,242 shares have been designated Series E Preferred Stock. The issued and
outstanding shares of the Common Stock and Preferred Stock have been duly
authorized and validly issued, are fully paid and nonassessable, have been
issued in compliance in material respects with all federal and state securities
laws, were not issued in violation of any preemptive rights or other rights to
subscribe for or purchase securities granted by the Company, and conform (except
with respect to the number of authorized, issued and outstanding shares) in all
material respects to the description thereof contained in the Exchange Act
Reports or in any Registration Statement on Form 8-A filed with the Securities
and Exchange Commission (the “COMMISSION” or the “SEC”) by the Company. Except
as disclosed in the Exchange Act Reports (including options granted under plans
described in the Exchange Act Reports), the Company does not have outstanding
any options to purchase, or any preemptive rights or other rights to subscribe
for or to purchase, any securities or obligations convertible into, or any
contracts or commitments requiring the Company to issue or sell, shares of its
capital stock or any such options, rights, convertible securities or
obligations.

3.3 Issuance, Sale and Delivery of the Shares. The Shares, when issued,
delivered and paid for in the manner set forth in this Agreement, will be
validly issued, fully paid and nonassessable and free and clear of all pledges,
liens, and encumbrances imposed by the Company (other than restrictions on
transfer under state and/or federal securities laws). The Common Stock issuable
upon conversion of the Shares (the “CONVERSION SHARES”) or upon exercise of the
Warrants (the “WARRANT SHARES,” and collectively with the Shares, the Warrants
and the Conversion Shares, the “SECURITIES”), have been duly reserved for
issuance, and when issued, delivered and, in the case of the Warrant Shares,
paid for, will be validly issued, fully paid and nonassessable and free and
clear of all pledges, liens, and encumbrances imposed by the Company (other than
restrictions on transfer under state and/or federal securities laws). Except as
set forth in that certain Convertible Preferred Stock and Warrant Purchase
Agreement, dated November 4, 2011, between the Company and the purchasers named
therein, no preemptive rights or other rights to subscribe for or purchase from
the Company exist with respect to the issuance and sale of the Securities by the
Company pursuant to this Agreement. Except as disclosed in the Exchange Act
Reports, no stockholder of the Company has any right (which has not been waived
or has not expired by reason of lapse of time following notification of the
Company’s intent to file the registration statement to be filed by it pursuant
to the Registration Rights Agreement (the “REGISTRATION STATEMENT”)) to require
the Company to register the sale of any shares owned by such stockholder under
the Securities Act of 1933, as amended (the “SECURITIES ACT”) in the
Registration Statement.

 

- 3 -

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

3.4 Due Execution, Delivery and Performance of this Agreement. The Company has
full legal right, corporate power and authority to enter into the Transaction
Documents and consummate the transactions contemplated hereby and thereby. The
Transaction Documents have been duly authorized, executed and delivered by the
Company. The execution and delivery of the Transaction Documents by the Company
and the consummation by the Company of the transactions contemplated herein and
therein: (i) will not violate any provision of the certificate of incorporation
or bylaws of the Company, (ii) will not result in the creation of any lien,
charge, security interest or encumbrance upon any assets of the Company pursuant
to the terms or provisions of, and will not conflict with, result in the breach
or violation of, or constitute, either by itself or upon notice or the passage
of time or both, a default under any agreement, lease, franchise, license,
permit or other instrument to which the Company is a party or by which the
Company or any of its properties are bound, except, in each case, for any lien,
charge, security interest, encumbrance, conflict, breach, violation or default
which would not have a Material Adverse Effect, or (iii) conflict with or result
in the violation of any statute or any judgment, decree, order, rule or
regulation of any court or any regulatory body, administrative agency or other
governmental body applicable to the Company or any of its properties except for
any such conflict or violation which would not have a Material Adverse Effect.
Assuming the accuracy of the representations made by the Purchasers in Article
4, no consent, approval, authorization or other order of any court, regulatory
body, administrative agency or other governmental body is required for the
execution and delivery by the Company of the Transaction Documents or the
consummation by the Company of the transactions contemplated by the Transaction
Documents, except for the filing of the Certificate of Designations, compliance
with the blue sky laws and federal securities laws, the listing of the
Conversion Shares and the Warrant Shares on the Nasdaq Global Market and the
filing of the Registration Statement. Upon the execution and delivery of the
Transaction Documents, and assuming the valid execution thereof by the
Purchasers, each Transaction Document will constitute a valid and binding
obligation of the Company, enforceable against it in accordance with their
respective terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
similar laws affecting creditors’ and contracting parties’ rights generally and
except as enforceability may be subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law) and except to the extent enforcement of the indemnification
obligations of the Company set forth in the Registration Rights Agreement may be
limited by federal or state securities laws or the public policy underlying such
laws.

3.5 Accountants. The firm of Ernst & Young LLP, which has expressed its opinion
with respect to the financial statements to be included or incorporated by
reference in the Registration Statement and the prospectus which forms a part
thereof, is an independent accountant as required by the Securities Act.

3.6 No Defaults. The Company is not in violation or default of any provision of
its certificate of incorporation or bylaws, or in breach of or default with
respect to any provision of any agreement, judgment, decree, order, lease,
franchise, license, permit or other instrument to which it is a party or by
which it or any of its properties are bound except for any violation or default
that would not have a Material Adverse Effect.

 

- 4 -

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

3.7 Contracts. There is no material contract or agreement required by the
Securities Exchange Act of 1934, as amended (the “EXCHANGE ACT”) to be described
in or filed as an exhibit to the Exchange Act Reports which is not described or
filed therein as required. Any contracts filed as exhibits to the Exchange Act
Reports that are material to the Company are in full force and effect on the
date hereof (except to the extent they have expired by their terms subsequent to
the date of the Exchange Act Reports).

3.8 No Actions. Except as disclosed in the Exchange Act Reports, (1) there are
no legal or governmental actions, suits or proceedings pending and (2) to the
Company’s knowledge, there are no inquiries or investigations pending, or any
legal or governmental actions, suits, or proceedings threatened in writing,
against the Company or of which property owned or leased by the Company is or
may be the subject (it being understood that the interaction between the Company
and the United States Food and Drug Administration and such comparable
governmental bodies relating solely to the clinical development and product
approval process shall not be deemed proceedings for purposes of this
representation), or related to environmental or discrimination matters, which
actions, suits or proceedings, individually or in the aggregate, would have a
Material Adverse Effect. No labor disturbance by the employees of the Company
exists or, to the Company’s knowledge, is imminent which would have a Material
Adverse Effect. The Company is not party to or named as subject to the
provisions of any injunction, judgment, decree or order of any court, regulatory
body, administrative agency or other governmental body specifically naming the
Company that would have a Material Adverse Effect.

3.9 No Material Change. Since June 30, 2012, and except as described in the
Exchange Act Reports or as disclosed to the Purchasers:

(A) the Company has not incurred any material liabilities or obligations,
indirect, or contingent, or entered into any material oral or written agreement
or other transaction, which was not incurred or entered into in the ordinary
course of business;

(B) the Company has not sustained any material loss or interference with its
business or properties from fire, flood, windstorm, accident or other calamity
not covered by insurance;

(C) except for dividends on shares of the Company’s Series D Convertible
Preferred Stock paid in accordance with the Series D Certificate of
Designations, Preferences and Rights of Series D Preferred Stock (the “SERIES D
CERTIFICATE OF DESIGNATIONS”), the Company has not paid or declared any
dividends or other distributions with respect to its capital stock and the
Company is not in default in the payment of principal or interest on any
outstanding debt obligations;

(D) there has not been any material change or amendment to a contract filed as
an exhibit to an Exchange Act Report that is material to the Company;

(E) there has not been any sale, assignment or transfer of all or substantially
all of the Company’s rights in any patents, trademarks, copyrights, trade
secrets or other intangible assets or other material assets, except a sale,
assignment or transfer made in the ordinary course of business that is not
material to the assets, properties, financial condition, operating results or
business of the Company;

 

- 5 -

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

(F) there has not been any waiver by the Company of a material debt owed to it;

(G) there has not been any material change in any compensation arrangement or
agreement with any officer or director;

(H) there has not been any agreement or commitment by the Company to do any of
the acts described in subsections (A) through (G) above; and

(I) there has not been any event which has caused a Material Adverse Effect
other than continued incurrence of operating losses incurred in the ordinary
course of the Company’s business.

3.10 Intellectual Property. Except as disclosed in the Exchange Act Reports,
(i) to the Company’s knowledge, the Company owns or has the right to use the
inventions, patent applications, patents, trademarks (both registered and
unregistered), trade names, copyrights and trade secrets used by it in or
necessary for the conduct of the Company’s business (collectively, the “COMPANY
INTELLECTUAL PROPERTY”), except where such failure to own or have the right to
use such intellectual property would not have a Material Adverse Effect; and
(ii) (a) to the Company’s knowledge, there are no third parties who have any
ownership rights to any Company Intellectual Property that would preclude the
Company from conducting its business as currently conducted and have a Material
Adverse Effect, except for the ownership rights of the owners of the Company
Intellectual Property licensed by the Company; (b) to the Company’s knowledge,
there are currently no sales of any products or any other uses that would
constitute an infringement by third parties of any Company Intellectual
Property, which infringement would have a Material Adverse Effect; (c) there is
no pending or, to the Company’s knowledge, threatened action, suit, proceeding
or claim by others challenging the rights of the Company in or to any Company
Intellectual Property, which action, suit, proceeding or claim would have a
Material Adverse Effect; (d) there is no pending or, to the Company’s knowledge,
threatened action, suit, proceeding or claim by others challenging the validity
or scope of any Company Intellectual Property, which action, suit, proceeding or
claim would have a Material Adverse Effect; and (e) there is no pending or, to
the Company’s knowledge, threatened action, suit, proceeding or claim by others
that the Company infringes or otherwise violates any patent, trademark,
copyright, trade secret or other proprietary right (an “INTELLECTUAL PROPERTY
RIGHT”) of others, which action, suit, proceeding or claim would have a Material
Adverse Effect. To the knowledge of the Company, the Company does not infringe
any Intellectual Property Rights of any other person. The Company has not
entered into any consent agreements, forbearance to sue or settlement agreements
with respect to the validity of the Company’s ownership or right to use Company
Intellectual Property. The Company has complied, in all material respects, with
its contractual obligations relating to the protection of the Company
Intellectual Property used pursuant to licenses. All former or current
employees, officers and consultants of the Company have entered into agreements
with the Company providing for the assignment of inventions to the Company,
except where the failure to have entered into an agreement with an employee,
officer or consultant would not have a Material Adverse Effect.

 

- 6 -

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

3.11 Compliance. The Company is conducting its business in compliance with all
applicable laws, rules and regulations of the jurisdictions in which it is
conducting its business, including, without limitation, all applicable local,
state and federal environmental laws and regulations, except where failure to be
so in compliance would not have a Material Adverse Effect.

3.12 Investment Company. The Company is not an “investment company” or an
“affiliated person” of, or “promoter” or “principal underwriter” for an
investment company, within the meaning of the Investment Company Act of 1940, as
amended.

3.13 Disclosure. The information contained in the following documents did not,
as of the date of the applicable document, include any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
in which they were made, not misleading, as of their respective dates:

(A) the Company’s Annual Report on Form 10-K for the year ended December 31,
2011;

(B) the Company’s Quarterly Reports on Form 10-Q for the quarters ended
March 31, 2012 and June 30, 2012;

(C) all other documents, if any, filed by the Company with the Commission since
December 31, 2011 pursuant to the reporting requirements of the Exchange Act
(together with Sections 3.13(A) and (B), the “EXCHANGE ACT REPORTS”).

3.14 Reporting Company; Form S-3. The Company is subject to the reporting
requirements of the Exchange Act and since June 30, 2011 has timely filed all
reports required thereby. As of their respective filing dates, all Exchange Act
Reports complied in all material respects with the requirements of the Exchange
Act. The Company is eligible to register the Conversion Shares and the Warrant
Shares for resale by the Purchaser on a registration statement on Form S-3 under
the Securities Act.

3.15 Use of Proceeds. The Company intends to use the proceeds from the sale of
the Securities for research and clinical development activities, the
manufacturing and commercialization of its product candidates, working capital
and general corporate purposes, including to fund the analysis of the data from
the Company’s ongoing phase 2 trial of IMO-3100, the conduct of a phase 1 trial
of IMO-8400 and the preparation for the further advancement of the Company’s
autoimmune disease program in at least two indications.

3.16 Related Party Transactions. No transaction has occurred between or among
the Company and its affiliates, officers or directors or any affiliate or
affiliates of any such officer or director that is required to have been
described in the Exchange Act Reports under Item 404 of Regulation S-K as
required by the Exchange Act or otherwise and is not so described in the
Exchange Act Reports.

 

- 7 -

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

3.17 Governmental Permits, Etc. The Company has all franchises, licenses,
certificates and other authorizations from such federal, state or local
government or governmental agency, department or body that are currently
required for the operation of the business of the Company as currently
conducted, except where the failure to possess currently such franchises,
licenses, certificates and other authorizations would not have a Material
Adverse Effect. The Company has not received any written notice of proceedings
relating to the revocation or modification of any such permit.

3.18 Financial Statements. The financial statements of the Company and the
related notes contained in the Exchange Act Reports (collectively, the
“FINANCIAL STATEMENTS”) present fairly in all material respects the financial
position of the Company as of the dates indicated, and the results of operations
and cash flows for the periods therein specified, subject, in the case of
unaudited financial statements for interim periods, to normal year-end audit
adjustments. The Financial Statements (including the related notes) have been
prepared in accordance with United States generally accepted accounting
principles (“GAAP”), applied on a consistent basis throughout the periods
therein specified, except that unaudited financial statements are subject to
normal year-end audit adjustments and may not contain all footnotes required by
GAAP. Since September 30, 2012, the Company has not incurred liabilities,
contingent or otherwise outside the ordinary course of business which
individually or in the aggregate, are material to the financial condition or
operating results of the Company.

3.19 Listing. The Common Stock is presently listed on the Nasdaq Global Market.
Except as set forth in the Exchange Act Reports, the Company has not, in the two
years preceding the date hereof, received any written notice from the Nasdaq
Global Market to the effect that the Company is not in compliance with the
maintenance requirements of such exchange.

3.20 Sarbanes-Oxley Act; Accounting Controls. The Company is in compliance in
all material respects with all provisions of the Sarbanes-Oxley Act of 2002
which are applicable to it. The Company maintains a system of internal
accounting controls that the Company reasonably believes is sufficient to
provide reasonable assurance 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.

3.21 Securities Law Exemptions. Assuming the accuracy of the representations and
warranties of the Purchasers contained in Article 4 hereof, the offer, sale and
issuance of the Securities are exempt from the registration requirements of the
Securities Act, and the registration, permit or qualification requirements of
any applicable state securities laws. Neither the Company nor any person acting
on its behalf has taken any action to sell, offer for sale or solicit offers to
buy any securities of the Company that would reasonably be expected to subject
the offer, issuance or sale of the Securities, as contemplated by this
Agreement, to the registration requirements of Section 5 of the Securities Act.

3.22 No Integrated Offering. Neither the Company, nor any of its affiliates, nor
any person acting on its or their behalf, has directly or indirectly made any
offers or sales of any security or solicited any offers to buy any security
under circumstances that would cause this offering of Securities to be
integrated with any prior or contemporaneous offering of securities of the
Company for purposes of the Securities Act or any applicable state securities
law or any applicable stockholder approval provisions.

 

- 8 -

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

3.23 No Brokers. The Company has taken no action which would give rise to any
claim by any person for brokerage commissions, finder’s fees or similar payments
by any Purchaser relating to this Agreement or the transactions contemplated
hereby, other than fees that may be owed to Piper Jaffray & Co. and JMP Group
Inc. as disclosed to the Purchasers.

3.24 Tax Matters. The Company has timely prepared and filed all material tax
returns required to have been filed by the Company with all appropriate
governmental agencies and timely paid all taxes shown thereon. The charges,
accruals and reserves on the books of the Company in respect of taxes for all
fiscal periods are adequate in all material respects, and there are no material
unpaid assessments against the Company nor, to the Company’s knowledge, any
basis for the assessment of any additional taxes, penalties or interest for any
fiscal period or audits by any federal, state or local taxing authority except
for any assessment which would not have a Material Adverse Effect. All material
taxes and other assessments and levies that the Company is required to withhold
or to collect for payment have been duly withheld and collected and paid to the
proper governmental entity or third party when due. There are no tax liens or
claims pending or, to the Company’s knowledge, threatened against the Company or
any of its assets or properties.

3.25 Application of Takeover Protections. The Company has taken all necessary
action, if any, in order to render inapplicable any control share acquisition,
business combination, poison pill (including any distribution under a rights
agreement) or other similar anti-takeover provision under the Company’s
certificate of incorporation (or similar charter documents) or the laws of its
state of incorporation that is or could become applicable to the Purchasers as a
result of the Purchasers and the Company fulfilling their obligations or
exercising their rights under the Transaction Documents, including without
limitation as a result of the Company’s issuance of the Securities and the
Purchasers’ ownership of the Securities.

3.26 Insurance Coverage. The Company maintains in full force and effect
insurance coverage and the Company reasonably believes such insurance coverage
is adequate.

ARTICLE 4

REPRESENTATIONS AND WARRANTIES OF PURCHASER

Each Purchaser hereby represents and warrants as follows:

4.1 This Agreement and the Registration Rights Agreement have been duly and
validly authorized, executed and delivered on behalf of such Purchaser and are
valid and binding agreements of such Purchaser enforceable against such
Purchaser in accordance with their terms except as enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or similar laws affecting creditors’ and contracting parties’ rights
generally and except as enforceability may be subject to general principles of
equity (regardless of whether such enforceability is considered in a proceeding
in equity or at law) and except to the extent enforcement of the Purchaser’s
indemnification obligations set forth in the Registration Rights Agreement may
be limited by federal or state securities laws or the public policy underlying
such laws.

 

 

- 9 -

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

4.2 The Purchaser represents and warrants to, and covenants with, the Company
that: (i) the Purchaser is knowledgeable, sophisticated and experienced in
making, and is qualified to make, decisions with respect to investments in
securities representing an investment decision like that involved in the
purchase of the Securities, including investments in securities issued by the
Company and comparable entities, and has had the opportunity to request,
receive, review and consider all information it deems relevant in making an
informed decision to purchase the Securities; (ii) the Purchaser is acquiring
the Securities set forth in Article 1 above in the ordinary course of its
business and for its own account for investment only and with no present
intention of distributing any of such Securities or any arrangement or
understanding with any other persons regarding the distribution of such
Securities (this representation and warranty not limiting the Purchaser’s right
to sell pursuant to the Registration Statement or in compliance with the
Securities Act and the rules and regulations promulgated thereunder, or the
Purchaser’s right to indemnification under the Registration Rights Agreement);
(iii) the Purchaser has not been organized, reorganized or recapitalized
specifically for the purpose of investing in the Securities; (iv) the Purchaser
has completed or caused to be completed, or will complete and deliver to the
Company within five Business Days (as defined below) after the Closing, the
Registration Statement Questionnaire attached hereto as part of Exhibit F, for
use in preparation of the Registration Statement, and the answers thereto are
true and correct as of the date such Registration Statement Questionnaire is
delivered to the Company and will be true and correct as of the effective date
of the Registration Statement and the Purchaser will notify the Company promptly
of any material change in any such information provided in the Registration
Statement Questionnaire until such time as the Purchaser has sold all of its
Securities or until the Company is no longer required to keep the Registration
Statement effective; (v) the Purchaser has had an opportunity to discuss this
investment with representatives of the Company and ask questions of them;
(vi) the Purchaser is an “accredited investor” within the meaning of Rule 501(a)
of Regulation D promulgated under the Securities Act; (vii) the Purchaser agrees
to notify the Company promptly of any change in any of the foregoing information
until such time as the Purchaser has sold all of its Securities or the Company
is no longer required to keep the Registration Statement effective; and
(viii) the Purchaser will not, directly or indirectly, offer, sell, pledge,
transfer or otherwise dispose of (or solicit any offers to buy, purchase or
otherwise acquire to take a pledge of) any of the Shares except in compliance
with the Securities Act, the Rules and Regulations, and applicable state
securities laws. The term “BUSINESS DAY” means a day, other than a Saturday or
Sunday, on which banks in New York City are open for the general transaction of
business.

4.3 The Purchaser understands that the Securities are being offered and sold to
it in reliance upon specific exemptions from the registration requirements of
the Securities Act, the Rules and Regulations and state securities laws and that
the Company is relying upon the truth and accuracy of, and the Purchaser’s
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of the Purchaser set forth herein in order to determine the
availability of such exemptions and the eligibility of the Purchaser to acquire
the Securities.

 

- 10 -

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

4.4 The Purchaser understands that its investment in the Securities involves a
significant degree of risk, including a risk of total loss of the Purchaser’s
investment, and the Purchaser has full cognizance of and understands all of the
risk factors related to the Purchaser’s purchase of the Securities. The
Purchaser understands that the market price of the Common Stock has been
volatile and that no representation is being made as to the future value of the
Common Stock. The Purchaser has the knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of an
investment in the Securities and has the ability to bear the economic risks of
an investment in the Securities.

4.5 The Purchaser understands that no United States federal or state agency or
any other government or governmental agency has passed upon or made any
recommendation or endorsement of the Securities.

4.6 The Purchaser’s principal executive offices are at the address set forth
below the Purchaser’s name on the Schedule of Purchasers.

4.7 The Purchaser further represents and warrants to, and covenants with, the
Company that (i) the Purchaser is in compliance with Executive Order 13224 and
the regulations administered by the U.S. Department of the Treasury (“TREASURY”)
Office of Foreign Assets Control, (ii) the Purchaser, its parents, subsidiaries,
affiliated companies, officers, directors and partners, and to the Purchaser’s
knowledge, its shareholders, owners, employees, and agents, are not on the List
of Specially Designated Nationals and Blocked Persons maintained by Treasury and
have not been designated by Treasury as a financial institution of primary money
laundering concern, (iii) to the Purchaser’s knowledge after reasonable
investigation, all of the funds to be used to acquire the Securities are derived
from legitimate sources and are not the product of illegal activities, and
(iv) the Purchaser is in compliance with all other applicable U.S. anti-money
laundering laws and regulations and has implemented, if applicable, an
anti-money laundering compliance program in accordance with the requirements of
the Bank Secrecy Act, as amended by the USA PATRIOT Act, Pub. L. 107-56.

4.8 If the Purchaser is not a U.S. person (as defined in Securities Act Rule
902(k)), he, she or it further makes the representations and warranties set
forth in this Section 4.8.

(A) Such Purchaser is not a U.S. person and is not acquiring the Securities for
the account or benefit of any U.S. person.

(B) Such Purchaser will not offer or sell the Securities to a U.S. person or to
for the account or benefit of a U.S. person prior to the expiration of the
six-month period after the date on which such Purchaser purchased such
Securities.

(C) Such Purchaser understands and acknowledges that the Securities have not
been registered under the Securities Act and are being offered and transferred
in reliance upon the exemptions provided in Regulation S of the Securities Act
and the rules and regulations adopted thereunder. Accordingly, the Securities
may not be offered or sold in the U.S. or to U.S. persons unless the securities
are registered under the Securities Act, or an exemption for the regulation
requirements is available. Furthermore, hedging transactions involving the
Securities may not be conducted unless in compliance with the Securities Act.

 

- 11 -

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

(D) Such Purchaser acknowledges and agrees that, notwithstanding anything in
this Agreement to the contrary, the Company shall, and shall instruct its
transfer agent to, refuse to register any transfer of Securities Act that is not
made in accordance with the provisions of Regulation S, pursuant to registration
under Securities Act or pursuant to an available exemption from registration
required under the Securities Act.

ARTICLE 5

COVENANTS

5.1 Form D; Form 8-K. The Company shall file with the SEC a Form D with respect
to the Securities as required under Regulation D. Within four trading days after
the Closing Date, the Company shall file a Form 8-K (or include in a Form 10-Q
information) concerning this Agreement and the transactions contemplated hereby,
which Form 8-K (or Form 10-Q) shall attach this Agreement, the Registration
Rights Agreement, the Certificate of Designations and the “form of Warrant” as
exhibits to such Form 8-K (or Form 10-Q).

5.2 Preemptive Rights.

(A) In the event that, on or prior to the earlier of (i) the third anniversary
of the Closing Date and (ii) with respect to any Purchaser the day that such
Purchaser holds a number of Shares (including shares of Common Stock issued upon
conversion of the Shares) which is less than 50% of the number of Shares
purchased by such Purchaser pursuant to this Agreement and set forth opposite
such Purchaser’s name on the Schedule of Purchasers (such number of Shares being
subject to adjustment for stock splits, dividends, combinations,
recapitalizations, reclassifications and other similar events), the Company
proposes to sell and issue securities of the Company in a private placement and
not pursuant to an effective registration statement filed under the Securities
Act (an “ADDITIONAL FINANCING”) each Purchaser shall have the option to
purchase, on the same terms and conditions offered by the Company to the other
purchasers of such securities in such Additional Financing, up to that
percentage of the securities sold in such Additional Financing equal to (x) the
number of shares of Common Stock then held by such Purchaser (including shares
of Common Stock then issuable upon conversion of any shares of Preferred Stock
then held by such Purchaser) as compared to (y) the total number of shares of
Common Stock then outstanding (including all shares of Common Stock then
issuable upon conversion of all shares of Preferred Stock) (such percentage
being such Purchaser’s “ADDITIONAL FINANCING PRO RATA AMOUNT”); provided,
however, that if a Purchaser’s Additional Financing Pro Rata Amount as
calculated exceeds 19.99% (prior to the date the stockholders of the Company
approve the Nasdaq Proposal (as defined by and in accordance with
Section 5.11(B)) or 35% (effective upon the date that the stockholders of the
Company approve the Nasdaq Proposal), such Purchaser’s Additional Financing Pro
Rata Amount shall be 19.99% or 35%, as the case may be.

(B) In the event that on or prior to the earlier of (i) the third anniversary of
the Closing Date and (ii) with respect to any Purchaser the day before the date
that such Purchaser holds a number of Shares which is less than 50% of the
number of Shares purchased by such Purchaser pursuant to this Agreement and set
forth opposite such Purchaser’s name on the Schedule of Purchasers (such number
of Shares being subject to adjustment for stock splits, dividends, combinations,
recapitalizations, reclassifications and other similar events), the Company
proposes to (x) enter into a loan financing for the purpose of raising capital
and not for the purpose of purchasing equipment (a “LOAN FINANCING”), or
(y) sell and issue convertible debt securities or preferred stock of the Company
that ranks senior to the Series D Preferred Stock or the Series E Preferred
Stock in a private placement and not pursuant to an effective registration
statement filed under the Securities Act (together with a Loan Financing, a
“SENIOR FINANCING,” and, together with an Additional Financing, an “ADDITIONAL
TRANSACTION”), each such Purchaser shall have the option to participate in a
Loan Financing or purchase securities in other Senior Financings, on the same
terms and conditions offered by the Company to the other participants or
purchasers of securities in such Senior Financings, up to that percentage (such
percentage being such Purchaser’s “ADDITIONAL TRANSACTION PRO RATA AMOUNT”) of
the amount of the Loan Financing or of the securities sold in such Senior
Financing equal to the product of:

 

- 12 -

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

i. a fraction, the numerator of which equals the number of Shares then held by
the Purchaser and the denominator of which equals the total number of Shares
issued to Purchasers by the Company; and

ii. if the closing date of the Senior Financing is on or prior to (i) the first
anniversary of the Closing Date, 50%, (ii) the second anniversary of the Closing
Date, 40%, or (iii) the third anniversary of the Closing Date, 30%.

(C) The terms of any Senior Financing may provide that the participants in such
Senior Financing, other than any Purchasers participating in such Senior
Financing, shall have the right to exercise control over any matter requiring
action by or on behalf of all participants in such Senior Financing without the
consent of any Purchaser.

(D) If the Board determines in good faith that the participation in the Senior
Financing by the Purchasers pursuant to the preemptive rights set forth in
Section 5.2(B) would jeopardize the consummation of such Senior Financing on
terms acceptable to the Board, then the Company will have no obligation to offer
the Purchasers the opportunity to participate in such Senior Financing pursuant
to Section 5.2(B).

(E) To the extent that a Purchaser is entitled to preemptive rights pursuant to
both of Section 5.2(A) and Section 5.2(B) with respect to a Senior Financing,
the preemptive right providing such Purchaser with the greater percentage
participation right (based on Additional Financing Pro Rata Amount as compared
to the Additional Transaction Pro Rata Amount) shall apply.

(F) Promptly after the Company determines to engage in an Additional
Transaction, the Company shall deliver a written notice (the “OFFER NOTICE”) to
the Purchasers stating (i) its bona fide intention to offer securities in an
Additional Transaction, (ii) the number of such securities to be offered or
amount to be borrowed in the Loan Financing, (iii) the price and terms, to the
extent known, upon which it proposes to offer such securities or borrow such
funds, and (iv) the anticipated closing date of the Additional Transaction. The
Company shall promptly notify each Purchaser of (i) the determination of the
price and terms upon which it proposes to offer such securities, to the extent
not set forth in the Offer Notice, and (ii) any material change in any of the
information set forth in the Offer Notice or in the price or other terms
previously communicated to such Purchaser.

 

- 13 -

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

(G) No Purchaser may participate in an Additional Transaction, in whole or in
part, unless it (i) delivers to the Company, on or prior to the date 10 days
after the date of delivery of the Offer Notice a written notice of acceptance
(an “ACCEPTANCE NOTICE”) providing a representation letter certifying that such
Purchaser is an accredited investor within the meaning of Rule 501 under the
Securities Act and indicating the portion of the Purchaser’s Additional
Financing Pro Rata Amount or Additional Transaction Pro Rata Amount, as
applicable, that such Purchaser elects to purchase and (ii) deposits in a U.S.
escrow account on terms satisfactory to the Company the amount that the
Purchaser proposes to invest pursuant to the preemptive rights set forth in this
Section 5.2 (the “ESCROW DEPOSIT”) concurrently with delivering an Acceptance
Notice indicating the amount or number of securities to be purchased by the
Purchaser; provided, that if the Company does not intend to sign the definitive
documentation for such Additional Transaction within ten days of the date such
Acceptance Notice is due pursuant to clause (i) of this Section 5.2(G), the
Purchaser must make the Escrow Deposit no later than five days after a request
from the Company for the Purchaser to make such Escrow Deposit.

(H) Any issuance of Exempted Securities (as defined in the Series D Certificate
of Designations) shall not be Additional Transactions for purposes of this
Section 5.2 and the Purchasers shall have no rights hereunder with respect to
the issuance of Exempted Securities; provided, however, that any issuance
described in clause (vi) of the definition of Exempted Securities that
constitutes a Senior Financing shall not be exempted from Section 5.2(B).

(I) No Purchaser shall have any right to purchase securities of the Company
hereunder, and the Company shall have no obligation to a Purchaser hereunder, if
(1) the Company has used its reasonable best efforts to ensure that the sale of
such securities to such Purchaser will not violate the Securities Act or the
Exchange Act and, despite such efforts, the Company reasonably determines in
good faith that the sale of such securities to such Purchaser cannot be made
without the violation of any rule or regulation promulgated thereunder or
(2) the Company reasonably determines in good faith that the sale of such
securities to such Purchaser cannot be made without requiring the approval of
the Company’s stockholders for a reason that is related to such Purchaser (or to
the Purchasers as a group) and is not related to the participation of other
participants in the Additional Transaction, including, without limitation, the
application of Nasdaq Listing Rule 5635(b).

5.3 Expenses. The Company shall pay to Pillar Pharmaceuticals II, L.P.
(“PILLAR”) at the Closing upon delivery to the Company of an invoice,
reimbursement for the out-of-pocket expenses reasonably incurred by Pillar or
its advisors in connection with the negotiation, preparation, execution and
delivery of the Transaction Documents and the other agreements to be executed in
connection herewith, and therewith, including, without limitation, reasonable
due diligence and attorneys’ fees and expenses related to the transactions
contemplated by the Transaction Documents (the “EXPENSES”); provided, however,
the maximum amount of Expenses for which the Company shall be responsible
pursuant to this Section shall be $200,000 and the balance of the expenses of
Pillar and the other Purchasers shall be borne by Pillar and the other
Purchasers.

 

- 14 -

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

5.4 Listing. The Company will use its reasonable best efforts to continue the
listing and trading of its Common Stock, including the Conversion Shares and
Warrant Shares, on the NYSE MKT (formerly known as the American Stock Exchange),
the New York Stock Exchange, the Nasdaq Global Market, the Nasdaq Capital
Market, the Nasdaq Global Select Market or other equivalent U.S. national
exchange or automated trading market (a “PERMITTED EXCHANGE”), and to comply
with the reporting, filing and other obligations under the bylaws or rules
thereof, provided, however, that in the event the Company uses its reasonable
best efforts but is unsuccessful in maintaining the listing of its Common Stock
on the Nasdaq Global Market due to the matters referenced in the letter dated
June 4, 2012 from the Nasdaq Global Market as described in the Exchange Act
Reports, then, in light of the Company’s belief that the it is in the best
interests of the Company that the Common Stock be listed on a Permitted
Exchange, the Company shall use its reasonable best efforts to seek re-listing
of its Common Stock on a Permitted Exchange.

5.5 Securities Laws; No Integrated Offerings. The Company shall not make any
offers or sales of any security under circumstances that would cause the offer
and sale of the Securities hereunder to violate the Securities Act or the rules
or regulations promulgated thereunder or cause the offer and sale of the
Securities to be subject to any stockholder approval provision applicable to the
Company or its securities.

5.6 No Short Sales. Each Purchaser agrees that beginning on the date hereof
until the earlier of (i) the first anniversary of the date hereof or (ii) the
date at which the Shares held by such Purchaser have been converted into Common
Stock, it will not enter into any Short Sales. For purposes of this Section 5.6,
a “Short Sale” by a Purchaser means a sale of Common Stock that is marked as a
short sale and that is executed at a time when such Purchaser has no equivalent
offsetting long position in the Common Stock. For purposes of determining
whether a Purchaser has an equivalent offsetting long position in the Common
Stock, all Common Stock that would be issuable upon exercise in full of all
options then held by such Purchaser (assuming that such options were then fully
exercisable, notwithstanding any provisions to the contrary, and giving effect
to any exercise price adjustments scheduled to take effect in the future) shall
be deemed to be held long by such Purchaser.

5.7 Standstill Provision. Each Purchaser hereby agrees that, to the extent that
and for so long as the total number of shares of Common Stock beneficially owned
by the Purchaser and its affiliates and any other persons whose beneficial
ownership of Common Stock would be aggregated with each Purchaser for purposes
of Section 13(d) of the Exchange Act exceeds 15%, unless specifically invited in
writing by the Company to do so, neither the Purchaser nor its affiliates will,
or will cause or knowingly permit any of its or their directors, officers,
partners, managers, employees, investment bankers, attorneys, accountants or
other advisors or representatives to, in any manner, directly or indirectly:

(A) effect or seek, initiate, offer or propose (whether publicly or otherwise)
to effect, or cause or participate in or in any way advise or, assist any other
person to effect or seek, initiate, offer or propose (whether publicly or
otherwise) to effect or cause or participate in, any acquisition of any
securities (or beneficial ownership thereof) or assets of the Company; any
tender or exchange

 

- 15 -

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

offer, merger, consolidation or other business combination involving the
Company; any recapitalization, restructuring, liquidation, dissolution or other
extraordinary transaction with respect to the Company; or any “solicitation” of
“proxies” (as such terms are used in the proxy rules of the Commission) or
consents to vote any voting securities of the Company. Notwithstanding the
foregoing, nothing in this clause (A) shall prevent or limit the ability of any
director of the Company that is affiliated with a Purchaser to (i) acquire,
exercise or dispose of any stock options or other equity securities of the
Company received as compensation for serving as a director or (ii) perform his
or her duties as a director of the Company;

(B) form, join or in any way participate in a “group” (as defined under the
Exchange Act) with respect to any securities of the Company;

(C) otherwise act, alone or in concert with others, to seek to control or
influence the management, Board or policies of the Company;

(D) take any action which could reasonably be expected to force the Company to
make a public announcement regarding any of the types of matters set forth in
this Section 5.7;

(E) nominate or otherwise support the election of any person as a director of
the Company except as approved by the Board; provided, that this covenant is not
intended to prevent any Purchaser or its affiliates from voting any shares of
capital stock it holds (other than the Excess Shares) in favor of the election
of a person not nominated by the Board as long as such Purchaser or any of its
affiliates have no arrangements with the nominee or the stockholder that
nominated the nominee and are not otherwise in breach of this Section 5.7; or

(F) enter into any agreements, discussions or arrangements with any third party
with respect to any of the foregoing.

Notwithstanding the foregoing, the Company hereby agrees that the purchase by a
Purchaser of securities of the Company after the date hereof and pursuant to
Section 5.2 of this Agreement shall not be a violation of this Section 5.7.

5.8 Voting Rights.

(A) Each Purchaser hereby agrees that, to the extent that and for so long as the
total number of shares of Common Stock beneficially owned by the Purchaser and
its affiliates and any other persons whose beneficial ownership of Common Stock
would be aggregated with the Purchaser for purposes of Section 13(d) of the
Exchange Act exceeds 19.99% (prior to the date the stockholders of the Company
approve the Nasdaq Proposal) or 25% (effective upon the date that the
stockholders of the Company approve the Nasdaq Proposal), in any election of
directors and in any other vote to be taken by the stockholders of the Company
(whether taken at an annual or special meeting of stockholders or by written
action), it and its affiliates will vote any Excess Shares (as defined below)
held in the same manner as and in the same proportion to the votes cast by the
other holders of the Company’s Common Stock or other voting securities.

 

- 16 -

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

(B) Each Purchaser hereby constitutes and appoints as the proxies of the party
and hereby grants a power of attorney to the officers of the Company, and each
of them, with full power of substitution, with respect to clause (A) above, and
hereby authorizes each of them to represent and to vote, if and only if the
Purchaser (i) fails to vote or (ii) attempts to vote (whether by proxy, in
person or by written consent), in a manner which is inconsistent with the terms
of clause (A), all of such Purchaser’s Excess Shares in accordance with the
terms of clause (A). Each of the proxy and power of attorney granted pursuant to
the immediately preceding sentence is given in consideration of the agreements
and covenants of the Company and the parties in connection with the transactions
contemplated by this Agreement and, as such, each is coupled with an interest
and shall be irrevocable unless and until this Agreement terminates or expires.
Each Purchaser hereby revokes any and all previous proxies or powers of attorney
with respect to the Excess Shares and shall not hereafter, unless and until this
Agreement terminates or expires, purport to grant any other proxy or power of
attorney with respect to any of such Excess Shares, deposit any of such Excess
Shares into a voting trust or enter into any agreement (other than this
Agreement), arrangement or understanding with any person, directly or
indirectly, to vote, grant any proxy or give instructions with respect to the
voting of any of such Excess Shares, in each case, with respect to clause
(A) above.

(C) Each Purchaser agrees to refrain from exercising (and hereby affirmatively
waives) any dissenters’ rights or rights of appraisal under applicable law at
any time with respect to any Sale of the Corporation (as defined in the
Certificate of Designations) to the extent such Sale of the Corporation has been
approved by the Board.

(D) For purposes of this Section 5.8, “Excess Shares” means for any Purchaser
the number of shares of voting stock held by the Purchaser and its affiliates
equal to (i) the total number of shares of Common Stock held by the Purchaser
and its affiliates (including the Conversion Shares and shares of Common Stock
issuable upon conversion of other series of Preferred Stock held by the
Purchaser and its affiliates), less (ii) 19.99% (prior to the date the
stockholders of the Company approve the Nasdaq Proposal) or 25% (effective upon
the date that the stockholders of the Company approve the Nasdaq Proposal) of
the total number of shares of Common Stock then outstanding (including all
Conversion Shares and all other shares of Common Stock then issuable upon
conversion of other series of Preferred Stock then outstanding).

5.9 Reservation of Common Stock. The Company shall at all times reserve and keep
available out of its authorized but unissued shares of Common Stock, solely for
the purpose of providing for the conversion of the Series E Preferred Stock and
the exercise of the Warrants, such number of shares of Common Stock as shall
from time to time equal 100% of the number of shares sufficient to permit the
conversion of the Series E Preferred Stock and the exercise of the Warrants
issued pursuant to this Agreement in accordance with their respective terms,
without regard to any exercise limitations contained therein.

5.10 Delivery of Certificates. In connection with any conversion of the Shares
by a Purchaser, the Company shall use its best efforts to issue to such
Purchaser the applicable certificate or certificates for the Conversion Shares
within three Business Days of receipt of all documents and information needed to
effect such conversion and issue such certificates.

 

- 17 -

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

5.11 Proxy Statement.

(A) The Company shall use its best efforts to file a preliminary proxy statement
with the SEC with respect to its next annual meeting of stockholders that will,
among other things, seek the Stockholder Approval (as defined below) and include
a recommendation of the Board that the stockholders approve such matters as are
included in the Stockholder Approval (unless the Board determines in good faith,
that its fiduciary duties require it to do otherwise).

(B) As used in this Agreement, the term “STOCKHOLDER APPROVAL” shall mean the
approval at a meeting of stockholders of the Company of the following matters:
(i) the issuance and sale by the Company to the Purchasers (together with all
prior issuances and sales to Pillar Pharmaceuticals I, L.P.) of a number of
shares of Common Stock (or securities convertible into or exercisable for Common
Stock) that is greater than 19.99% of the total number of issued and outstanding
shares of Common Stock and of the outstanding voting power of securities of the
Company after such issuance and sale in accordance with Nasdaq Listing Rule
5635(b) (the “NASDAQ PROPOSAL”), (ii) an amendment to the certificate of
incorporation and bylaws of the Company, as necessary, to eliminate the
classification of the Board, and (iii) an amendment to the Series D Certificate
of Designations in the form attached hereto as Exhibit G; provided, however,
that the Company shall not, and shall have no obligation to, submit the matters
contemplated by this clause (iii) to the stockholders of the Company if there
are no shares of Series D Preferred Stock then outstanding. In order to be
approved at a meeting of the stockholders of the Company:

(a) the Nasdaq Proposal shall require (y) the affirmative vote of the holders of
a majority of the combined voting power of the outstanding shares of Common
Stock and Series D Convertible Preferred Stock, voting as a single class,
calculated on an as converted to Common Stock basis, present or represented in
person or by proxy and voting at the special meeting and (z) the affirmative
vote of the holders (other than Pillar, the Company and their respective
affiliates) of a majority of the combined voting power of the outstanding shares
of Common Stock and Series D Convertible Preferred Stock, voting as a single
class, calculated on an as converted to Common Stock basis, held by such
holders;

(b) the matters described in clause (ii) above shall require the affirmative
vote of the holders of at least 75% of the combined voting power of the
outstanding shares of Common Stock and Series D Convertible Preferred Stock,
voting as a single class, calculated on an as converted to Common Stock basis;
and

(c) the matters described in clause (iii) above shall require (y) the
affirmative vote of the holders of a majority of the combined voting power of
the outstanding shares of Common Stock and Series D Convertible Preferred Stock,
voting as a single class, calculated on an as converted to Common Stock basis,
present or represented in person or by proxy and voting at the special meeting
and (z) the affirmative vote of the holders of a majority of the outstanding
shares of the Series D Convertible Preferred Stock, voting separately as a
series.

 

- 18 -

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

ARTICLE 6

RESTRICTIONS ON TRANSFERABILITY OF SECURITIES

6.1 Restrictions on Transferability.

(A) Subject to Section 6.1(B) and to any requirements of Regulation S that may
be applicable to non-U.S. persons, the Securities shall not be sold,
transferred, assigned or hypothecated unless (i) there is an effective
registration statement under the Securities Act covering such Securities,
(ii) the sale is made in accordance with Rule 144 under the Securities Act, or
(iii) the Company receives an opinion of counsel for the holder of the
Securities reasonably satisfactory to the Company stating that such sale,
transfer, assignment or hypothecation is exempt from the registration
requirements of the Securities Act, and each such case upon all other conditions
specified in this Section 6.1. Furthermore, with respect to Securities that were
initially sold by the Company in reliance on Regulation S, hedging transactions
involving such Securities may not be conducted unless in compliance with the
Securities Act. Notwithstanding the provisions of the preceding sentence, no
registration statement or opinion of counsel shall be required for any transfer
of any Securities by a Purchaser that is a partnership, a limited liability
company or a corporation to (a) a partner of such partnership, a member of such
limited liability company or a stockholder of such corporation, (b) an entity
that controls, or is controlled by, or is under common control with such
partnership, limited liability company or corporation, or (c) the estate of any
such partner, member or stockholder (collectively, clauses (a) through (c) the
“PERMITTED TRANSFEREES”); provided, that in each of the foregoing cases the
proposed transferee of the Securities held by the Purchaser agrees in writing to
take and hold such Securities subject to the provisions and upon the conditions
specified in this Article 6.

(B) Notwithstanding anything to the contrary set forth in this Agreement,
without the prior written consent of the Company, Pillar may not sell or
transfer any Securities to a person, entity or group (within the meaning of
Section 13(d) of the Exchange Act) in one or more transactions if such sale or
transfer would, in the aggregate, result in the transfer to such person, entity
or group Securities representing, or exercisable for stock of the Company
representing, more than 5% of the then outstanding combined voting power of the
outstanding securities of the Company (other than a sale or transfer to a
Permitted Transferee who agrees in writing to be bound by such restrictions or
in connection with a resale of such Securities in connection with an
underwritten public offering that has been approved by the Board).

(C) Any transfer not made in compliance with the requirements of this
Section 6.1 shall be null and void ab initio, shall not be recorded on the books
of the Company or its transfer agent and shall not be recognized by the Company.
Each Purchaser acknowledges and agrees that any breach of this Section 6.1 by a
Purchaser would result in substantial harm to the Company and its stockholders
for which monetary damages alone could not adequately compensate. Therefore,
each Purchaser unconditionally and irrevocably agrees that the Company shall be
entitled to seek protective orders, injunctive relief and other remedies
available at law or in equity (including without limitation, seeking specific
performance or the rescission of purchases, sales and other transfers of
Securities not made in compliance with this Section 6.1).

 

- 19 -

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

6.2 Restrictive Legends. Each certificate representing the Securities, and any
other securities issued in respect of the Securities upon any stock split, stock
dividend, recapitalization, merger, consolidation or similar event (except as
otherwise permitted by the provisions of this Article 6), shall be stamped or
otherwise imprinted with the following legends (as applicable with respect to
the second and third legends set forth below) in substantially the following
forms:

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE OF
THE UNITED STATES OR IN ANY OTHER JURISDICTION.”

U.S. Investors: “THE SECURITIES REPRESENTED HEREBY MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER APPLICABLE SECURITIES LAWS
UNLESS OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED PURSUANT
TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THOSE LAWS.”

Non-U.S. Investors: “THE SECURITIES REPRESENTED HEREBY MAY NOT BE OFFERED, SOLD
OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED EXCEPT IN COMPLIANCE WITH
REGULATION S UNDER THE SECURITIES ACT, AND IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER APPLICABLE SECURITIES LAWS
UNLESS OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED PURSUANT
TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THOSE LAWS.
HEDGING TRANSACTIONS INVOLVING THE SECURITIES REPRESENTED HEREBY MAY NOT BE
CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES ACT.”

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY IN
ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND THE
STOCKHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.”

6.3 Removal of Legend and Transfer Restrictions. The foregoing legends (other
than the last legend) shall be removed from the certificates representing such
Securities, at the request of the holder thereof, at such time as (a) a period
of at least one year, as determined in accordance with paragraph (d) of Rule 144
under the Securities Act, as elapsed since the later of the date the Securities
were acquired from the Company or an affiliate of the Company, and (b) the
Securities become eligible for resale pursuant to Rule 144(b)(1)(i) under the
Securities Act.

 

- 20 -

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

ARTICLE 7

MISCELLANEOUS

7.1 Survival of Representations, Warranties and Agreements. Notwithstanding any
investigation made by any party to this Agreement, all covenants, agreements,
representations and warranties made by the Company and the Purchasers herein
shall survive the execution of this Agreement, the delivery to the Purchasers of
the Shares and Warrants being purchased and the payment therefor.

7.2 Notices. All notices required or permitted hereunder shall be in writing and
shall be deemed effectively given: (i) upon delivery to the party to be
notified, (ii) when received by email or confirmed facsimile, or (iii) one
Business Day after deposit with a nationally recognized overnight carrier,
specifying next Business Day delivery, with written verification of receipt. All
communications shall be sent to the Company and the Purchasers as follows or at
such other addresses as the Company or the Purchasers may designate upon 10
days’ advance written notice to the other party:

(A) if to the Company, to:

Idera Pharmaceuticals, Inc.

167 Sidney Street

Cambridge, MA 02139

Attention: Chief Executive Officer

Facsimile: (617) 679-5592

Email: sagrawal@iderapharma.com

with a copy to:

Wilmer Cutler Pickering Hale and Dorr LLP

60 State Street

Boston, Massachusetts 02109

Attention: Stuart Falber

Facsimile: (617) 526-5000 Email: stuart.falber@wilmerhale.com

(B) if to a Purchaser, at its address as set forth on the Schedule of Purchasers
to this Agreement.

7.3 Changes. This Agreement may not be modified or amended except pursuant to an
instrument in writing signed by the Company and the Purchasers holding a
majority of the Shares then outstanding. No provision hereunder may be waived
other than in a written instrument executed by the waiving party.

 

- 21 -

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

7.4 Headings. The headings of the various sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed to be part of
this Agreement.

7.5 Severability. In case any provision contained in this Agreement should be
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby.

7.6 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without regard to principles
of conflicts of law.

7.7 Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall constitute an original, but all of which, when taken
together, shall constitute but one instrument, and shall become effective when
one or more counterparts have been signed by each party hereto and delivered
(including by facsimile) to the other parties.

7.8 Entire Agreement. This Agreement, the Registration Rights Agreement and the
instruments referenced herein contain the entire understanding of the parties
with respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither the Company nor the Purchasers
make any representation, warranty, covenant or undertaking with respect to such
matters.

7.9 Assignment. Except as otherwise expressly provided herein, the provisions
hereof shall inure to the benefit of, and be binding upon, the parties hereto
and their respective permitted successors, assigns, heirs, executors and
administrators. This Agreement and the rights of a Purchaser hereunder may not
be assigned by the Purchaser without the prior written consent of the Company,
except such consent shall not be required in cases of assignments by a Purchaser
as permitted under Section 6.1, provided that such assignee agrees in writing to
be bound by the terms of this Agreement. Notwithstanding the foregoing, the
rights set forth in Sections 5.2 and 5.11 may not be assigned or transferred.

7.10 Further Assurances. Each party agrees to cooperate fully with the other
parties and to execute such further instruments, documents and agreements and to
give such further written assurance as may be reasonably requested by any other
party to evidence and reflect the transactions described herein and contemplated
hereby and to carry into effect the intents and purposes of this Agreement.

7.11 Confidentiality. Each Purchaser agrees that it will keep confidential and
will not disclose or divulge any confidential, proprietary or secret information
which such Purchaser may obtain from the Company pursuant to reports, notices
and other materials submitted by the Company to such Purchaser pursuant to this
Agreement, otherwise pursuant to the Registration Rights Agreement, unless
(a) such information is known, or until such information becomes known, to the
public or (b) such information is required to be disclosed in legal proceedings
(such as by deposition, interrogatory, request for documents, subpoena, civil
investigation demand, filing with any governmental authority or similar
process), provided, however, that before making any use or disclosure in
reliance on this clause (b) the Purchaser shall give the Company at least 15
days’ prior written notice (or such shorter period as required by law)

 

- 22 -

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

specifying the circumstances giving rise thereto and will furnish only that
portion of the non-public information which is legally required and will
exercise its best efforts to obtain reliable assurance that confidential
treatment will be accorded any non-public information so furnished.

7.12 Use of Purchaser Name. Except as may be required by applicable law or
regulation and as may be required in the Registration Statement, the Company
shall not use any Purchaser’s name or the name of any of its affiliates in any
advertisement, announcement, press release or other similar public communication
in connection with the offering of the Securities contemplated hereby unless it
has received the prior written consent of such Purchaser for the specific use
contemplated or as otherwise required by applicable law or regulation.

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

 

- 23 -

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

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

 

IDERA PHARMACEUTICALS, INC. By:   /s/ Sudhir Agrawal   Sudhir Agrawal  
Chairman, Chief Executive Officer and President

 

- 24 -

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

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

 

PURCHASER: PILLAR PHARMACEUTICALS II, L.P. By:   /s/ Youssef El Zein

Name:

  Youssef El Zein

Title:

  General Partner

 

- 25 -

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

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

 

PURCHASER PARTICIPATIONS BESANCON   By:   Pillar Invest Corporation, as
attorney-in-fact     By:   /s/ Youssef El Zein     Name:   Youssef El Zein    
Title:   as attorney-in-fact per power signed on November 9th, 2012

 

- 26 -

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

EXHIBIT A

Schedule of Purchasers

 

     Shares      Warrants      Purchase Price  

Pillar Pharmaceuticals II, L.P.

Address:

Pillar Invest Offshore SAL Starco Center, Bloc B, Third Floor

Omar Daouk Street

Beirut 2020-3313

Lebanon

 

Tel: +961 1 363 362

Fax: +961 1 379 378

Email: pillar@pillarinvest.com

     313,341         6,266,820       $ 5,170,126.50   

Participations Besancon

Address:

Pillar Invest Offshore SAL

Starco Center, Bloc B, Third

Floor

Omar Daouk Street

Beirut 2020-3313

Lebanon

 

Tel: +961 1 363 362

Fax: +961 1 379 378

Email: pillar@pillarinvest.com

     110,901         2,218,020       $ 1,829,866.50   

Total:

     424,242         8,484,840       $ 6,999,993.00   

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

EXHIBIT B

Form of Warrant

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

EXHIBIT C

Certificate of Designations

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

EXHIBIT D

Registration Rights Agreement

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

EXHIBIT E

Legal Opinion

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

EXHIBIT F

Registration Statement Questionnaire

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

EXHIBIT G

Amendment to Series D Certificate of Designations