Exhibit 10.1

SECURITIES PURCHASE AGREEMENT

This SECURITIES PURCHASE AGREEMENT (this “Agreement”) is made and entered into
as of August 8, 2016 (the “Effective Date”) by and among Arrowhead
Pharmaceuticals, Inc., a Delaware corporation (the “Company”), and each of those
persons and entities, severally and not jointly, listed as a Purchaser on the
Schedule of Purchasers attached as Schedule I hereto (each a “Purchaser” and
together the “Purchasers”). Certain terms used and not otherwise defined in the
text of this Agreement are defined in Section 11 hereof.

RECITALS

WHEREAS, the Company and the Purchasers are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities
Act”), and Rule 506 of Regulation D as promulgated by the United States
Securities and Exchange Commission (the “Commission”) under the Securities Act;

WHEREAS, the Company desires to sell to the Purchasers, and the Purchasers
desire to purchase from the Company, shares of common stock, $0.001 par value
per share (the “Common Stock”) in accordance with the terms and provisions of
this Agreement.

NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties and covenants herein contained, the parties hereto
hereby agree as follows:

Section 1. Authorization of Shares. The Company has authorized the sale and
issuance of 7,627,119 shares of Common Stock on the terms and subject to the
conditions set forth in this Agreement. The shares of Common Stock sold
hereunder at the Closing (as defined below) shall be referred to as the
“Shares.”

Section 2. Sale and Purchase of the Shares.

2.1 Upon the terms and subject to the conditions herein contained, the Company
agrees to sell to each Purchaser, and each Purchaser agrees to purchase from the
Company at the Closing (as defined in Section 3), that number of Shares set
forth opposite such Purchaser’s name on Schedule I hereto (the “Schedule of
Purchasers”) for the purchase price set forth opposite such Purchaser’s name,
which amount represents the number of Shares purchased by such Purchaser
multiplied by the price per Share of $5.90. The purchase price to be paid by
each Purchaser, as set forth on Schedule I, shall be referred to as the
“Aggregate Purchase Price.” Each Purchaser shall severally, and not jointly, be
liable for only the purchase of the Shares that appear on the Schedule of
Purchasers that relate to such Purchaser. The Company’s agreement with each of
the Purchasers, is a separate agreement, and the sale of Shares to each of the
Purchasers is a separate sale. The obligations of each Purchaser hereunder are
expressly not conditioned on the purchase by any or all of the other Purchasers
of the Shares such other Purchasers have agreed to purchase.

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2.2 At or prior to the Closing, each Purchaser will pay the purchase price set
forth opposite such Purchaser’s name on Schedule I by wire transfer of
immediately available funds in accordance with wire instructions provided by the
Company to the Purchasers prior to the Closing. On or before the Closing, the
Company will instruct its transfer agent to either deliver stock certificates to
the Purchasers or make book-entry notations representing the Shares, in each
case against delivery of the Aggregate Purchase Price. The foregoing
notwithstanding, if the Purchaser has indicated to the Company at the time of
execution of this Agreement a need to settle on a “delivery versus payment”
basis, then the Company shall either deliver to such Purchaser (or such
Purchaser’s designated custodian) the original stock certificates or make a
book-entry notation reflecting ownership of the Shares whereupon following
receipt of such certificate(s) or written confirmation from the Company’s
transfer agent that a book-entry notation has been made, then the Purchaser
shall then promptly wire the Aggregate Purchase Price as provided in this
Section 2.

Section 3. Closing. Subject to the satisfaction of the closing conditions set
forth in Section 7, the closing with respect to the transactions contemplated in
Section 2 hereof (the “Closing”), shall take place at the offices of Gibson,
Dunn & Crutcher LLP, 555 Mission Street, Suite 3000, San Francisco, California
on the third Business Day after the Effective Date (the “Closing Date”) or at
such other time and place as the Company and Purchasers may agree, including
remotely via the exchange of documents and signatures.

Section 4. Representations and Warranties of the Purchasers. Each Purchaser,
severally but not jointly, represents and warrants to the Company that the
statements contained in this Section 4 are true and correct as of the Effective
Date, and will be true and correct as of the date of the Closing Date:

4.1 Validity. The execution, delivery and performance of this Agreement and the
other instruments referred to herein, in each case to which the Purchaser is a
party, and the consummation by the Purchaser of the transactions contemplated
hereby, have been duly authorized by all necessary corporate, partnership,
limited liability or similar actions, as applicable, on the part of such
Purchaser. This Agreement has been duly executed and delivered by the Purchaser,
and the other instruments referred to herein to which it is a party will be duly
executed and delivered by the Purchaser, and each such agreement and other
instruments constitutes or will constitute a valid and binding obligation of the
Purchaser, enforceable against it in accordance with its terms, except as
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance, and any other laws of general application affecting
enforcement of creditors’ rights generally, and as limited by laws relating to
the availability of specific performance, injunctive relief, or other equitable
remedies.

4.2 Brokers. There is no broker, investment banker, financial advisor, finder or
other Person which has been retained by or is authorized to act on behalf of the
Purchaser who might be entitled to any fee or commission for which the Company
will be liable in connection with the execution of this Agreement and the
consummation of the transactions contemplated hereby.

4.3 Investment Representations and Warranties. The Purchaser understands and
agrees that the offering and sale of the Shares has not been registered under
the Securities Act or any applicable state securities laws and is being made in
reliance upon federal and state exemptions for transactions not involving a
public offering which depend upon, among other things, the bona fide nature of
the investment intent and the accuracy of the Purchaser’s representations as
expressed herein.

 

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4.4 Investor Questionnaire. In connection with the filing of a Registration
Statement, the Company may require the Purchaser to furnish to the Company such
information regarding the Purchaser and the Registrable Securities, as the
Company may reasonably request in writing and as shall reasonably be required in
connection with the filing of the Registration Statement. At least five Business
Days prior to the first anticipated filing date of such Registration Statement,
the Company shall notify the Purchaser of any information the Company reasonably
requests from the Purchaser, to the extent related to the Registration
Statement.

4.5 Acquisition for Own Account; No Control Intent. The Purchaser is acquiring
the Shares for its own account for investment and not with a view toward
distribution in a manner which would violate the Securities Act or any
applicable state securities laws. Such Purchaser is not a broker or dealer
registered pursuant to Section 15 of the Exchange Act (a “registered
broker-dealer”) and is not affiliated with a registered broker dealer. Purchaser
is not party to any agreement providing for or contemplating the distribution of
any of the Shares. The Purchaser has no present intent to effect a “change of
control” of the Company as such term is understood under the rules promulgated
pursuant to Section 13(d) of the Exchange Act.

4.6 Ability to Protect Its Own Interests and Bear Economic Risks. The Purchaser,
by reason of the business and financial experience of its management, has the
capacity to protect its own interests in connection with the transactions
contemplated by this Agreement and is capable of evaluating the merits and risks
of the investment in the Shares. The Purchaser is able to bear the economic risk
of an investment in the Shares and is able to sustain a loss of all of its
investment in the Shares without economic hardship, if such a loss should occur.

4.7 Accredited Investor; No Bad Actor. The Purchaser is an “accredited investor”
as that term is defined in Rule 501(a) under the Securities Act. Such Purchaser
has not taken any of the actions set forth in, and is not subject to, the
disqualification provisions of Rule 506(d)(1) of the Securities Act.

4.8 Access to Information. The Purchaser has been given access to Company
documents, records, and other information, and has had adequate opportunity to
ask questions of, and receive answers from, the Company’s officers, employees,
agents, accountants, and representatives concerning the Company’s business,
operations, financial condition, assets, liabilities, and all other matters
relevant to its investment in the Shares. Purchaser understands that an
investment in the Shares bears significant risk and represents that it has
reviewed the SEC Reports, which serve to qualify certain of the Company
representations set forth below.

4.9 Non-Reliance on Placement Agent. The Purchaser has, in connection with its
decision to purchase the Shares set forth on Schedule I attached hereto, relied
solely upon the representations and warranties of the Company contained herein,
and such Purchaser has not relied on any placement agent in negotiating the
terms of its investment in the Shares. In making a decision to purchase the
Shares, such Purchaser has not received or relied on any communication,
investment advice or recommendation from any placement agent.

 

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4.10 Restricted Shares.

(a) The Purchaser understands that the Shares will be characterized as
“restricted securities” under the federal securities laws inasmuch as they are
being acquired from the Company in a private placement under Section 4(a)(2) of
the Securities Act and that under such laws and applicable regulations such
Shares may be resold without registration under the Securities Act only in
certain limited circumstances.

(b) The Purchaser acknowledges that the Shares must be held indefinitely unless
subsequently registered under the Securities Act and under applicable state
securities laws or an exemption from such registration is available. The
Purchaser understands that the Company is under no obligation to register the
Shares, except as provided in this Agreement.

(c) The Purchaser is aware of the provisions of Rule 144 under the Securities
Act, which permit limited resale of securities purchased in a private placement.

4.11 Tax Advisors. The Purchaser has had the opportunity to review with the
Purchaser’s own tax advisors the federal, state and local tax consequences of
this investment, where applicable, and the transactions contemplated by this
Agreement. The Purchaser is relying solely on the Purchaser’s own determination
as to tax consequences or the advice of such tax advisors and not on any
statements or representations of the Company or any of its agents and
understands that the Purchaser (and not the Company) shall be responsible for
the Purchaser’s own tax liability that may arise as a result of this investment
or the transactions contemplated by this Agreement.

4.12 Short Sales. Between the time the Purchaser learned about the offering
contemplated by this Agreement and the public announcement of the offering, the
Purchaser has not engaged in any short sales (as defined in Rule 200 of
Regulation SHO under the Exchange Act (“Short Sales”)) or similar transactions
with respect to the Common Stock, nor has the Purchaser, directly or indirectly,
caused any Person to engage in any Short Sales or similar transactions with
respect to the Common Stock. Notwithstanding the foregoing, in the case of a
Purchaser that is a multi-managed investment vehicle whereby separate portfolio
managers manage separate portions of such Purchaser’s assets and the portfolio
managers have no direct knowledge of the investment decisions made by the
portfolio managers managing other portions of such Purchaser’s assets, the
representation set forth above shall apply only with respect to the portion of
assets managed by the portfolio managers that have knowledge about the financing
transaction contemplated by this Agreement.

4.13 No Interested Stockholder. After giving effect to the purchase of the
Shares at Closing, the Purchaser will not be deemed to be an “interested
stockholder” within the meaning of Section 203 of the Delaware General
Corporation Law.

 

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Section 5. Representations and Warranties by the Company. Assuming the accuracy
of the representations and warranties of the Purchasers set forth in Section 4
and except as set forth in the SEC Reports (defined below), which disclosures
serve to qualify these representations and warranties in their entirety, the
Company represents and warrants to the Purchasers that the statements contained
in this Section 5 are true and correct as of the Effective Date, and will be
true and correct as of the date of the Closing Date:

5.1 Organization and Good Standing. The Company and each Subsidiary: (a) is duly
incorporated or otherwise organized, validly existing and in good standing under
the laws of the jurisdiction of its formation, (b) is duly qualified to do
business as a foreign entity and is in good standing in each jurisdiction where
the nature of the property owned or leased by it or the nature of the business
conducted by it makes such qualification necessary, except where the failure to
be so qualified would not have a Material Adverse Effect, and (c) has all
requisite corporate power and authority to own or lease and operate its assets
and carry on its business as presently being conducted as disclosed in the SEC
Reports.

5.2 Corporate Power and Authority; Valid Issuance of Shares.

(a) The Company has all requisite corporate power and has taken all necessary
corporate action required for the due authorization, execution, delivery and
performance by the Company of this Agreement and the other Transaction Documents
and the consummation of the transactions contemplated hereby and thereby. The
execution, delivery and performance by the Company of this Agreement and the
consummation by the Company of the transactions contemplated hereby, have been
duly authorized by the Company’s board of directors or a duly authorized
committee thereof and no further consent or authorization of the Company, its
board of directors or its stockholders is required. This Agreement has been duly
executed and delivered by the Company, and the other instruments referred to
herein to which it is a party will be duly executed and delivered by the
Company, and each such agreement constitutes or will constitute a legal, valid
and binding obligation of the Company enforceable against it in accordance with
its terms, except to the extent that enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, and
any other laws of general application affecting enforcement of creditors’ rights
generally, and as limited by laws relating to the availability of specific
performance, injunctive relief, or other equitable remedies.

(b) The Shares have been duly and validly authorized and, when issued and paid
for pursuant to this Agreement, the Shares will be validly issued, fully paid
and non-assessable, and shall be free and clear of all encumbrances (other than
restrictions on transfer under the Transaction Documents arising under
applicable federal and state securities laws), and will not be subject to
preemptive rights or other similar rights of stockholders of the Company

5.3 Consents. Neither the execution, delivery or performance of this Agreement
by the Company, nor the consummation by it of the obligations and transactions
contemplated hereby (including, without limitation, the issuance, the
reservation for issuance and the delivery of the Shares and the provision to the
Purchaser of the rights contemplated by the Transaction Documents) requires any
consent of, authorization by, exemption from, filing with or notice to any
Governmental Entity or any other Person, other than filings required under
applicable U.S. federal and state securities laws.

 

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5.4 No Conflicts.

(a) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby (including, without
limitation, the issuance, the reservation for issuance and the delivery of the
Shares and the provision to the Purchaser of the rights contemplated by the
Transaction Documents) will not (a) result in a violation of the certificate of
incorporation, as amended, the by-laws, as amended, or any equivalent
organizational document of the Company or any Subsidiary (the “Charter
Documents”) or require the approval of the Company’s stockholders, (b) violate,
conflict with or result in the breach of the terms, conditions or provisions of
or constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give rise to any right of termination,
acceleration or cancellation under, any material agreement, lease, mortgage,
license, indenture, instrument or other contract to which the Company or any
Subsidiary is a party, (c) result in a violation of any law, rule, regulation,
order, judgment or decree (including, without limitation, U.S. federal and state
securities laws and regulations and regulations of any self-regulatory
organizations to which the Company or its securities are subject) applicable to
the Company or any Subsidiary or by which any property or asset of the Company
or any Subsidiary is bound or affected, (d) result in a violation of or require
stockholder approval under any rule or regulation of The NASDAQ Stock Market, or
(e) result in the creation of any encumbrance upon any of the Company’s or any
of its Subsidiary’s assets.

(b) Neither the Company nor any Subsidiary is (i) in violation of its Charter
Documents, (ii) in default (and no event has occurred which, with notice or
lapse of time or both, would cause the Company or any Subsidiary to be in
default) under, nor has there occurred any event giving others (with notice or
lapse of time or both) any rights of termination, amendment, acceleration or
cancellation of, any material agreement, indenture or instrument to which the
Company or any Subsidiary is a party, nor has the Company or any Subsidiary
received written notice of a claim that it is in default under, or that it is in
violation of, any Material Contract (whether or not such default or violation
has been waived), (iii) in violation of, or in receipt of written notice that it
is in violation of, any law, ordinance or regulation of any Governmental Entity,
except where the violation would not result in a Material Adverse Effect, and
(iv) in violation of any order of any Governmental Entity having jurisdictional
over the Company or any Subsidiary or any of the Company’s or any Subsidiary’s
properties or assets.

5.5 Capitalization.

(a) As of June 30, 2016, the authorized capital stock of the Company consists of
150,000,000 shares of capital stock, of which 145,000,000 are designated as
Common Stock and 5,000,000 are designated as preferred stock, $0.001 par value
per share (“Preferred Stock”). As of June 30, 2016: (i) 60,429,405 shares of
Common Stock were issued and outstanding; (ii) 6,718,056 shares of Common Stock
were issuable (and such number was reserved for issuance) upon exercise of
options to purchase Common Stock (the “Options”) outstanding as of such date;
(iii) 1,370,000 shares of Common Stock were issuable (and such number was
reserved for issuance) upon vesting of restricted stock units for the issuance
of Common Stock (the “RSUs”) outstanding as of such date; (iv) 835,534 shares of
Common Stock were issuable (and such number was reserved for issuance) upon
exercise of warrants to purchase Common Stock (the “Warrants”) outstanding as of
such date; and (v) 15,652 shares of Series C Preferred Stock were issued and
outstanding.

 

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(b) As of June 30, 2016, except for: (i) the Options, (ii) the RSUs (iii) the
Warrants, (iv) the Preferred Stock, and (v) 5,000 shares of Common Stock
issuable subject to outstanding exchange rights, there were no options, warrants
or other rights to acquire capital stock or other equity interests from the
Company, or securities convertible into or exchangeable for such capital stock
or other equity interests.

5.6 Material Contracts. Each Material Contract is the legal, valid and binding
obligation of the Company or a Subsidiary, as the case may be, enforceable
against the Company or such Subsidiary, as the case may be, in accordance with
its terms, except to the extent that enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, and
any other laws of general application affecting enforcement of creditors’ rights
generally, and as limited by laws relating to the availability of specific
performance, injunctive relief, or other equitable remedies. The Company and
each Subsidiary, as the case may be, is in compliance with all material terms of
the Material Contracts to which it is party, and there has not occurred any
breach, violation or default or any event that, with the lapse of time, the
giving of notice or the election of any Person, or any combination thereof,
would constitute a breach, violation or default by the Company or any Subsidiary
under any such Material Contract or, to the knowledge of the Company and each
Subsidiary, by any other Person to any such contract except where such breach,
violation or default would not have a Material Adverse Effect. Neither the
Company nor any Subsidiary has been notified that any party to any Material
Contract intends to cancel, terminate, not renew or exercise an option under any
Material Contract, whether in connection with the transactions contemplated
hereby or otherwise.

5.7 The Nasdaq Stock Market. The Common Stock is listed on The Nasdaq Global
Select Market. To the Company’s knowledge, there are no proceedings to revoke or
suspend such listing or the listing of the Shares. The Company is in compliance
with the requirements of Nasdaq for continued listing of the Common Stock
thereon and any other Nasdaq listing and maintenance requirements, and the
execution, delivery and performance of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby (including
the issuance of the Shares) will not result in any noncompliance by the Company
with any such requirements.

5.8 No Integrated Offering. Neither the Company, any Subsidiary, nor any of the
Company’s or any Subsidiary’s Affiliates or any other Person acting on the
Company’s or any Subsidiary’s behalf, has directly or indirectly engaged in any
form of general solicitation or general advertising with respect to the Shares,
nor have any of such Persons made any offers or sales of any security of the
Company, any Subsidiary or any of the Company’s or any Subsidiary’s Affiliates
or solicited any offers to buy any security of the Company, any Subsidiary or
any of the Company’s or any Subsidiary’s Affiliates under circumstances that
would require registration of the Shares under the Securities Act or any other
securities laws or cause this offering of Shares to be integrated with any prior
offering of securities of the Company or any Subsidiary for purposes of the
Securities Act in any manner that would affect the validity of the private
placement exemption under the Securities Act for the offer and sale of the
Shares hereunder.

 

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5.9 SEC Reports; Financial Statements; Shell Company Status.

(a) The Company’s Common Stock is registered under Section 12 of the Exchange
Act. The Company has filed all reports, schedules, forms, statements and other
documents required to be filed by the Company under the Exchange Act, including
pursuant to Section 13(a) or 15(d) thereof, since October 1, 2015 (the foregoing
materials, including the exhibits thereto and documents incorporated by
reference therein, being collectively referred to herein as the “SEC Reports”)
on a timely basis or has received a valid extension of such time of filing and
has filed any such SEC Reports prior to the expiration of any such extension. As
of their respective dates, the SEC Reports complied in all material respects
with the requirements of the Exchange Act and, in each case, to the rules
promulgated thereunder, as applicable, and none of the SEC Reports, when filed,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.

(b) The financial statements and the related notes of the Company included in
the SEC Reports comply in all material respects with applicable accounting
requirements and the rules and regulations of the Commission with respect
thereto as in effect at the time of filing. Such financial statements have been
prepared in accordance with GAAP, except as may be otherwise specified in such
financial statements or the notes thereto and except that unaudited financial
statements may not contain all footnotes required by GAAP, and fairly present
the consolidated financial position of the Company as of and for the dates
thereof and the consolidated results of operations and cash flows for the
periods then ended, subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments. There is no transaction, arrangement, or
other relationship between the Company or any Subsidiary and an unconsolidated
or other off balance sheet entity that is required to be disclosed by the
Company in SEC Reports and is not so disclosed and would have or reasonably be
expected to result in a Material Adverse Effect.

(c) The Company is not, and has never been, an issuer identified in Rule
144(i)(1) under the Securities Act.

5.10 Disclosure Controls and Procedures; Internal Controls Over Financial
Reporting.

(a) The Company has established and maintains disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) that are effective in
all material respects to ensure that material information relating to the
Company, including any consolidated Subsidiaries, is made known to its principal
executive officer and principal financial officer by others within those
entities. The Company’s certifying officers have evaluated the effectiveness of
the Company’s disclosure controls and procedures as of the end of the period
covered by the most recently filed quarterly or annual periodic report under the
Exchange Act (such date, the “Evaluation Date”). The Company presented in its
most recently filed quarterly or annual periodic report under the Exchange Act
the conclusions of the certifying officers about the effectiveness of the
disclosure controls and procedures based on their evaluations as of the
Evaluation Date.

 

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(b) The Company maintains internal control over financial reporting (as such
term is defined in Exchange Act Rule 13a-15(f) and 15d-15(f)) designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with GAAP and such internal control over financial reporting is effective. The
Company presented in its most recently filed annual report under the Exchange
Act the conclusions of the certifying officers about the effectiveness of the
Company’s internal control over financial reporting based on their evaluations
as of the end of the period covered by such report. Since the Evaluation Date,
there have been no significant changes in the Company’s internal control over
financial reporting or, to the Company’s knowledge, in other factors that could
significantly affect the Company’s internal control over financial reporting.

5.11 Absence of Litigation. There is no claim, action, suit, arbitration,
investigation or other proceeding pending against, or to the knowledge of the
Company and each Subsidiary, threatened against or affecting, the Company, any
Subsidiary or any of the Company’s or any Subsidiary’s properties or, to the
knowledge of the Company and each Subsidiary, any of its respective officers or
directors before any Governmental Entity, in each case other than legal
proceedings that are not reasonably expected to result in a Material Adverse
Effect. Neither the Company nor any Subsidiary, nor any director or officer
thereof, is or has been the subject of any action involving a claim of violation
of or liability under federal or state securities laws or a claim of breach of
fiduciary duty relating to the Company or any Subsidiary. There has not been,
and to the knowledge of the Company and each Subsidiary, there is not pending or
contemplated, any investigation by the Commission of the Company or any
Subsidiary or any current or former director or officer of the Company or any
Subsidiary. The Company has not received any stop order or other order
suspending the effectiveness of any registration statement filed by the Company
under the Exchange Act or the Securities Act and, to the Company’s knowledge,
the SEC has not issued any such order.

5.12 Taxes. The Company and each Subsidiary has properly filed all federal,
foreign, state, local, and other tax returns and reports which are required to
be filed by it, which returns and reports were properly completed and are true
and correct in all material respects, and all taxes, interest, and penalties due
and owing have been timely paid. There are no outstanding waivers or extensions
of time with respect to the assessment or audit of any tax or tax return of the
Company or any Subsidiary, or claims now pending or matters under discussion
between the Company and any taxing authority in respect of any tax of the
Company. The Company has no material uncertain tax positions pursuant to FASB
Interpretation 48 (FIN 48), Accounting for Uncertainty in Income Taxes.

5.13 Employee Matters.

(a) The Company has disclosed in the SEC Reports any “employee benefit plan”
subject to the Employee Retirement Income Security Act of 1974, as amended
(“ERISA”), that it or any Subsidiary maintains for employees.

 

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(b) No director or officer or other employee of the Company or any Subsidiary
will become entitled to any retirement, severance, change of control, or similar
benefit or enhanced or accelerated benefit (including any acceleration of
vesting) or lapse of repurchase rights or obligations with respect to any
employee benefit plan subject to ERISA or other benefit under any compensation
plan or arrangement of the Company (each, an “Employee Benefit Plan”) as a
result of the transactions contemplated in this Agreement.

(c) No executive officer, to the knowledge of the Company and each Subsidiary,
is, or is now reasonably expected to be, in violation of any term of any
employment contract, confidentiality, disclosure or proprietary information
agreement or non-competition agreement, or any other contract or agreement or
any restrictive covenant with the Company or any Subsidiary, and, to the
knowledge of the Company and each Subsidiary, the continued employment of each
such executive officer does not subject the Company or any Subsidiary to any
material liability with respect to any of the foregoing matters.

(d) The Company and each Subsidiary is in compliance with all applicable
federal, state, local and foreign statutes, laws (including, without limitation,
common law), judicial decisions, regulations, ordinances, rules, judgments,
orders and codes respecting employment, employment practices, labor, terms and
conditions of employment and wages and hours, except where the failure to comply
would not have a Material Adverse Effect, and no work stoppage or labor strike
against the Company or any Subsidiary is pending or, to their knowledge,
threatened, nor is the Company or any Subsidiary involved in or, to their
knowledge, threatened with any labor dispute, grievance or litigation relating
to labor matters involving any current or former employees of the Company, any
Subsidiary or any independent contractors. There are no suits, actions,
disputes, claims (other than routine claims for benefits), investigations or
audits pending or, to the knowledge of the Company and each Subsidiary,
threatened in connection with any Employee Benefit Plan, but excluding any of
the foregoing which would not have a Material Adverse Effect.

5.14 Compliance with Laws.

(a) Except as would not result in a Material Adverse Effect: (i) the Company is
and has been in compliance with statutes, laws, ordinances, rules and
regulations applicable to the Company for the ownership, testing, development,
manufacture, packaging, processing, use, labeling, storage, or disposal of any
product manufactured by or on behalf of the Company or out-licensed by the
Company (a “Company Product”), including without limitation, the Federal Food,
Drug, and Cosmetic Act, 21 U.S.C. § 301, et seq., the Public Health Service Act,
42 U.S.C. § 262, similar laws of other Governmental Entities and the regulations
promulgated pursuant to such laws (collectively, “Applicable Laws”); (ii) the
Company possesses all licenses, certificates, approvals, authorizations, permits
and supplements or amendments thereto required by any such Applicable Laws
and/or for the ownership of its properties or the conduct of its business as it
relates to a Company Product and as described in the SEC Reports (collectively,
“Authorizations”) and such Authorizations are valid and in full

 

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force and effect and the Company is not in violation of any term of any such
Authorizations; (iii) the Company has not received any written notice of adverse
finding, warning letter or other written correspondence or notice from the U.S.
Food and Drug Administration (the “FDA”) or any other Governmental Entity
alleging or asserting noncompliance with any Applicable Laws or Authorizations
relating to a Company Product; (iv) the Company has not received written notice
of any ongoing claim, action, suit, proceeding, hearing, enforcement,
investigation, arbitration or other action from any Governmental Entity or third
party alleging that any Company Product, operation or activity related to a
Company Product is in violation of any Applicable Laws or Authorizations or has
any knowledge that any such Governmental Entity or third party is considering
any such claim, litigation, arbitration, action, suit, investigation or
proceeding, nor, to the Company’s knowledge, has there been any noncompliance
with or violation of any Applicable Laws by the Company that would reasonably be
expected to require the issuance of any such written notice or result in an
investigation, corrective action, or enforcement action by the FDA or similar
Governmental Entity with respect to a Company Product; (v) the Company has not
received written notice that any Governmental Entity has taken, is taking or
intends to take action to limit, suspend, modify or revoke any Authorizations or
has any knowledge that any such Governmental Entity has threatened or is
considering such action with respect to a Company Product; and (vi) the Company
has filed, obtained, maintained or submitted all reports, documents, forms,
notices, applications, records, claims, submissions and supplements or
amendments as required by any Applicable Laws or Authorizations and that all
such reports, documents, forms, notices, applications, records, claims,
submissions and supplements or amendments were complete, correct and not
misleading on the date filed (or were corrected or supplemented by a subsequent
submission).

(b) To the Company’s knowledge, neither the Company nor any of its directors,
officers, employees or agents, has made, or caused the making of, any false
statements on, or material omissions from, any other records or documentation
prepared or maintained to comply with the requirements of the FDA or any other
Governmental Entity.

(c) The clinical studies and tests conducted by the Company or on behalf of the
Company, have been and, if still pending, are being conducted in all material
respects pursuant to all Applicable Laws and Authorizations; the descriptions of
the results of such clinical studies and tests contained in the SEC Reports are
accurate and complete in all material respects and fairly present the data
derived from such clinical studies and tests; the Company is not aware of any
clinical studies or tests, the results of which the Company believes reasonably
call into question the research, nonclinical or clinical study or test results
described or referred to in the SEC Reports when viewed in the context in which
such results are described; and the Company has not received any written notices
or correspondence from any Governmental Entity requiring the termination,
suspension or material modification of any clinical study or test conducted by
or on behalf of the Company.

5.15 Brokers. Except for Cantor Fitzgerald & Co., there is no investment banker,
broker, finder, financial advisor, placement agent or other Person that has been
retained by or is authorized to act on behalf of the Company or any Subsidiary
who might be entitled to any fee or commission in connection with the
transactions contemplated by this Agreement.

 

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5.16 Environmental Matters. The Company: (i) is in compliance with any and all
applicable foreign, federal, state and local laws and regulations relating to
the protection of human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants (“Environmental Laws”),
(ii) has received and is in compliance with all permits, licenses or other
approvals required of them under applicable Environmental Laws to conduct its
business and (iii) has not received notice of any actual or potential liability
under any environmental law, except where such non-compliance with Environmental
Laws, failure to receive required permits, licenses or other approvals, or
liability would not, individually or in the aggregate, have a Material Adverse
Effect, whether or not arising from transactions in the ordinary course of
business. The Company has not been named as a “potentially responsible party”
under the Comprehensive Environmental Response, Compensation, and Liability Act
of 1980, as amended.

5.17 Intellectual Property Matters. The Company owns, possesses, licenses or has
other rights to use, on reasonable terms, all patents, patent applications,
trade and service marks, trade and service mark registrations, trade names,
copyrights, licenses, inventions, trade secrets, technology, know-how and other
intellectual property (collectively, the “Intellectual Property”) necessary for
the conduct of the Company’s business as now conducted or as proposed in the SEC
Reports to be conducted (the “Company Intellectual Property”). To the knowledge
of the Company, there are no rights of third parties to any Company Intellectual
Property, other than as licensed by the Company. To the knowledge of the
Company, there is no infringement by third parties of any Company Intellectual
Property. There is no pending or, to the Company’s knowledge, threatened action,
suit, proceeding or claim by others challenging the Company’s rights in or to
any Company Intellectual Property. 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. 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 rights of others. The Company is
not aware of any facts required to be disclosed to the U.S. Patent and Trademark
Office (“USPTO”) which have not been disclosed to the USPTO and which would
preclude the grant of a patent in connection with any patent application of the
Company Intellectual Property or could form the basis of a finding of invalidity
with respect to any issued patents of the Company Intellectual Property.

5.18 Absence of Changes. Since the Evaluation Date: (a) there has not been any
Material Adverse Effect or any event or events that individually or in the
aggregate would reasonably be expected to have a Material Adverse Effect;
(b) there has not been any dividend or distribution of any kind declared, set
aside for payment, paid or made by the Company on any class of capital stock,
(c) neither the Company nor any Subsidiary has sustained any material loss or
interference with the Company’s or any Subsidiary’s business from fire,
explosion, flood or other calamity, whether or not covered by insurance, or from
any labor disturbance or dispute or any action, order or decree of any court or
arbitrator or governmental or regulatory authority, and (d) neither the Company
nor any Subsidiary has incurred any material liabilities except in the ordinary
course of business.

 

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5.19 Suppliers and Customers. Neither the Company nor any Subsidiary has any
knowledge of any termination, cancellation or threatened termination or
cancellation or limitation of, or any material dissatisfaction with, the
business relationship between the Company or any Subsidiary and any material
supplier, customer, vendor, customer or client.

5.20 Accountants. Rose, Snyder & Jacobs (“RS&J”), who expressed their opinion
with respect to the financial statements included in the SEC Reports, are
independent accountants as required by the Securities Act and the rules and
regulations promulgated thereunder. There are no disagreements of any kind
presently existing, or reasonably anticipated by the Company to arise, between
the Company and RS&J.

5.21 Application of Takeover Protections. The Company and its Board of Directors
have 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 Charter Documents or the laws of its state of incorporation
(including Section 203 of the Delaware General Corporation Law) that is or could
become applicable to each Purchaser as a result of such Purchaser and the
Company fulfilling their obligations or exercising their rights under this
Agreement, including without limitation as a result of the Company’s issuance of
the Shares and such Purchaser’s ownership of the Shares.

5.22 Foreign Corrupt Practices. Since October 1, 2015, neither the Company, its
Subsidiaries, nor to the Company’s and each Subsidiary’s knowledge, any
director, officer, agent, employee or other person acting on behalf of the
Company or any Subsidiary has, in the course of its actions for, or on behalf
of, the Company or any Subsidiary (a) used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to
political activity; (b) made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate funds;
(c) violated or is in violation of in any material respect any provision of the
U.S. Foreign Corrupt Practices Act of 1977, as amended; or (d) made any unlawful
bribe, rebate, payoff, influence payment, kickback or other unlawful payment to
any foreign or domestic government official or employee.

5.23 Private Placement. Neither the Company nor its Subsidiaries or any
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 any circumstances that would require registration of the
Shares under the Securities Act. Assuming the accuracy of the representations
and warranties of the Purchasers contained in Section 4 hereof, the issuance of
the Shares are exempt from registration under the Securities Act.

5.24 Insurance. The Company is insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as the Company
believes are prudent and customary for a company: (a) in the businesses and
location in which the Company is engaged, (b) with the resources of the Company,
and (c) at a similar stage of development as the Company. The Company has not
received any written notice that the Company will not be able to renew its
existing insurance coverage as and when such coverage expires. The Company
believes it will be able to obtain similar coverage at reasonable cost from
similar insurers as may be necessary to continue its business.

 

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5.25 No Manipulation of Stock. The Company has not taken, nor will it take,
directly or indirectly, any action designed to stabilize or manipulate the price
of the Common Stock or any security of the Company to facilitate the sale or
resale of any of the Shares.

5.26 Disclosure. The Company understands and confirms that the Purchaser will
rely on the foregoing representations in effecting transactions in securities of
the Company. No representation or warranty by the Company contained in this
Agreement contains any untrue statement of a material fact or omits to state any
material fact necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading. The Company
acknowledges and agrees that the Purchaser does not make and has not made any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in Section 4 hereof.

Section 6. Covenants.

6.1 Reasonable Best Efforts. Each party shall use its reasonable best efforts to
timely satisfy each of the conditions to be satisfied by it as provided in
Section 7 of this Agreement.

6.2 Reporting Status. During the Reporting Period, the Company shall use
reasonable best efforts to: (a) timely file all reports required to be filed
with the Commission pursuant to the Exchange Act or the rules and regulations
thereunder, and (b) not take any action or file any document (whether or not
permitted by the Securities Act or the rules promulgated thereunder) to
terminate or suspend the Company’s reporting and filing obligations under the
Exchange Act or Securities Act.

6.3 Use of Proceeds. The Company will use the proceeds from the sale of the
Shares for general corporate purposes, research and development, clinical trial
studies and related preclinical studies and drug manufacture, business
development, working capital and general and administrative expenses.

6.4 Pledge of Shares. The Company acknowledges and agrees that the Shares may be
pledged by the Purchasers in connection with a bona fide margin agreement or
other loan or financing arrangement that is secured by the Shares. The pledge of
Shares shall not be deemed to be a transfer, sale or assignment of the Shares
hereunder, and in effecting a pledge of Shares the Purchasers shall not be
required to provide the Company with any notice thereof or otherwise make any
delivery to the Company pursuant to this Agreement. The Company hereby agrees to
execute and deliver such documentation as a pledgee of the Shares may reasonably
request in connection with a pledge of the Shares to such pledgee by the
Purchasers.

6.5 Disclosure of Transactions and Other Material Information. On or before 8:30
a.m., New York City time, on the second Business Day following the date of this
Agreement, the Company shall issue a press release and file a Current Report on
Form 8-K describing the terms and conditions of the transactions contemplated by
the Transaction Documents in the form required by the Exchange Act and attaching
the Agreement as an exhibit to such filing (including all attachments, the “8-K
Filing”). The Company shall not publicly disclose the name of any Purchaser or
any affiliate or investment adviser of the Purchaser, or

 

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include the name of any Purchaser or any affiliate or investment adviser of the
Purchaser in any filing with the Commission (other than in a Registration
Statement and any exhibits to filings made in respect of this transaction in
accordance with periodic report or current report filing requirements under the
Exchange Act) or any regulatory agency, without the prior written consent of
such Purchaser, except to the extent such disclosure is required by law or
regulations, in which case the Company shall provide each Purchaser whose name
is to be disclosed with prior notice of such disclosure and a reasonable
opportunity to comment on the proposed disclosure insofar as it relates
specifically to such Purchaser. Subject to the foregoing, neither the Company
nor the Purchasers shall issue any press releases or any other public statements
with respect to the transactions contemplated hereby; provided, however, that
the Company shall be entitled, without the prior approval of the Purchasers, to
make any press release or other public disclosure with respect to such
transactions (a) in substantial conformity with the 8-K Filing and
contemporaneously therewith and (b) as is required by Applicable Law.

6.6 Short Sales. Each Purchaser covenants that neither it nor any Affiliates
acting on its behalf or pursuant to any understanding with it will execute any
Short Sales during the period from the date hereof until the earlier of such
time as: (a) after the transactions contemplated by this Agreement are first
publicly announced, or (b) this Agreement is terminated in full. Except: (i) as
required by Applicable Law or the listing rules of any applicable national or
regional securities exchange, (ii) as required to be disclosed in filings or
other submissions to any court, regulatory body, administrative agency,
governmental body, arbitrator or other legal authority having jurisdiction over
a party hereto made to obtain necessary consents, approvals or filings, or
(iii) as provided by the terms and provisions of the existing confidentiality
and non-use obligations of the parties hereto, each Purchaser covenants that
until such time as the transactions contemplated by this Agreement are publicly
disclosed by the Company, such Purchaser will maintain the confidentiality of
all disclosures made to it in connection with this transaction (including the
existence and terms of this transaction). Each Purchaser understands and
acknowledges that the Commission currently takes the position that coverage of
Short Sales of shares of the Common Stock “against the box” prior to
effectiveness of a resale registration statement with securities included in
such registration statement would be a violation of Section 5 of the Securities
Act, as set forth in Item 239.10 of the Securities Act Rules Compliance and
Disclosure Interpretations compiled by the Office of Chief Counsel, Division of
Corporation Finance.

6.7 Expenses. The Company and each Purchaser is liable for, and will pay, its
own expenses incurred in connection with the negotiation, preparation, execution
and delivery of this Agreement, including, without limitation, attorneys’ and
consultants’ fees and expenses.

Section 7. Conditions of Parties’ Obligations.

7.1 Conditions of the Purchasers’ Obligations at the Closing. The obligations of
the Purchasers under Section 2 hereof are subject to the fulfillment, prior to
the Closing, of all of the following applicable conditions, any of which may be
waived in whole or in part by the Purchasers in their absolute discretion. If
the following conditions are not satisfied on or before 5:00 p.m. (Eastern Time)
on the tenth Business Day following the Effective Date (the “Outside Date”),
then any Purchaser may terminate this Agreement with respect to that particular
Purchaser upon providing written notice to the Company.

 

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(a) Representations and Warranties. The representations and warranties of the
Company contained in this Agreement and in any certificate, if any, or other
writing, if any, delivered by the Company pursuant hereto shall be true and
correct on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of the Closing Date
(except to the extent expressly made as of an earlier date in which case as of
such earlier date).

(b) Performance. The Company shall have performed and complied in all material
respects with all covenants, agreements, obligations and conditions contained in
this Agreement that are required to be performed or complied by it on or prior
to the Closing Date.

(c) Delivery. The Company shall deliver this Agreement duly executed by the
Company.

(d) Qualification under State Securities Laws. All registrations,
qualifications, permits and approvals, if any, required under applicable state
securities laws shall have been obtained for the lawful execution, delivery and
performance of this Agreement.

(e) Consents and Waivers. The Company shall have obtained all consents or
waivers necessary to execute and perform its obligations under this Agreement.
All corporate and other action and governmental filings necessary for the
Company to effectuate the terms of this Agreement and other agreements and
instruments executed and delivered by the Company in connection herewith shall
have been made or taken by the Company, and no Material Adverse Effect has
occurred with respect to the operation of the Company’s business.

(f) Transfer Agent Instructions. The Company shall have delivered to its
transfer agent irrevocable written instructions to issue to such Purchaser (or
in such nominee’s name(s) as designated by such Purchaser) one or more
certificates representing such Shares set forth opposite such Purchaser’s name
on Schedule I hereto (or book-entry notations in lieu of such certificates);
provided, however, that if such Purchaser has indicated to the Company at the
time of execution of this Agreement a need to settle “delivery versus payment,”
the Company shall deliver to such Purchaser (or such Purchaser’s designated
custodian) such original stock certificates to be acquired by such Purchaser (or
written confirmation that such Shares have been issued in the Purchaser’s name
via book-entry notation).

(g) Absence of Litigation. No proceeding challenging this Agreement or the
transactions contemplated hereby, or seeking to prohibit, alter, prevent or
materially delay the Closing, shall have been instituted or be pending before
any court, arbitrator, governmental body, agency or official. The sale of the
Shares by the Company shall not be prohibited by any law or governmental order
or regulation.

 

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7.2 Conditions of the Company’s Obligations. The obligations of the Company
under Section 2 hereof are subject to the fulfillment prior to or on the Closing
Date of all of the following conditions, any of which may be waived in whole or
in part by the Company: (a) each Purchaser at the Closing shall have performed
all of its obligations hereunder required to be performed by it at or prior to
the Closing, and (b) the representations and warranties of the Purchasers at the
Closing contained in this Agreement shall be true and correct at and as of the
Closing as if made at and as of the Closing (except to the extent expressly made
as of an earlier date, in which case as of such earlier date). If the foregoing
conditions are not satisfied on or the Outside Date, then the Company may
terminate this Agreement upon providing written notice to the Purchasers.

Section 8. Transfer Restrictions; Restrictive Legend.

8.1 Transfer Restrictions. The Purchasers understand that the Company may, as a
condition to the transfer of any of the Shares, require that the request for
transfer be accompanied by an opinion of counsel reasonably satisfactory to the
Company, to the effect that the proposed transfer does not result in a violation
of the Securities Act, unless such transfer is covered by an effective
registration statement or by Rule 144 or Rule 144A under the Securities Act;
provided, however, that an opinion of counsel shall not be required for a
transfer by a Purchaser that is: (A) a partnership transferring to its partners
or former partners in accordance with partnership interests, (B) a corporation
transferring to a wholly owned subsidiary or a parent corporation that owns all
of the capital stock of such Purchaser, (C) a limited liability company
transferring to its members or former members in accordance with their interest
in the limited liability company, (D) an individual transferring to such
Purchaser’s family member or trust for the benefit of an individual Purchaser,
(E) transferring its Shares to any Affiliate of such Purchaser, in the case of
an institutional investor, or other Person under common management with such
Purchaser, or (F) a transfer that is made pursuant to a bona fide gift to a
third party; provided, further, that (i) the transferee in each case agrees to
be subject to the restrictions in this Section 8 and provides the Company with a
representation letter containing customary investment representations under the
Securities Act, (ii) the Company satisfies itself that the number of transferees
is sufficiently limited and (iii) in the case of transferees that are partners
or limited liability company members, the transfer is for no consideration. It
is understood that the certificates evidencing the Shares may bear substantially
the following legend:

“THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
ANY APPLICABLE STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT
WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR APPLICABLE STATE SECURITIES
LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION
IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A OF SUCH ACT.”

8.2 Unlegended Certificates. The Company shall, at its sole expense, upon
appropriate notice from any Purchaser stating that Registrable Securities have
been sold pursuant to an effective Registration Statement, timely prepare and
deliver certificates representing the Shares to be delivered to a transferee
pursuant to the Registration Statement, which certificates shall be free of any
restrictive legends and in such denominations and registered in such names as
such Purchaser may request. Further, the Company shall, at its sole expense,
cause its legal

 

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counsel or other counsel satisfactory to the transfer agent: (i) while the
Registration Statement is effective, to issue to the transfer agent a “blanket”
legal opinion to allow sales without restriction pursuant to the effective
Registration Statement, and (ii) provide all other opinions as may reasonably be
required by the transfer agent in connection with the removal of legends. A
Purchaser may request that the Company remove, and the Company agrees to
authorize the removal of, any legend from such Shares, following the delivery by
a Purchaser to the Company or the Company’s transfer agent of a legended
certificate representing such Shares: (i) following any sale of such Shares
pursuant to Rule 144, (ii) if such Shares are eligible for sale under Rule
144(b)(1), or (iii) following the time a legend is no longer required with
respect to such Shares. If a legend is no longer required pursuant to the
foregoing, the Company will, no later than three Business Days following the
delivery by a Purchaser to the Company or the Company’s transfer agent of a
legended certificate representing such Shares, deliver or cause to be delivered
to such Purchaser a certificate representing such Shares that is free from all
restrictive legends. Certificates for Shares free from all restrictive legends
may be transmitted by the Company’s transfer agent to the Purchasers by
crediting the account of the Purchaser’s prime broker with the Depository Trust
Company (“DTC”) as directed by such Purchaser. The Company warrants that the
Shares shall otherwise be freely transferable on the books and records of the
Company as and to the extent provided in this Agreement. If a Purchaser effects
a transfer of the Shares in accordance with Section 8.1, the Company shall
permit the transfer and shall promptly instruct its transfer agent to issue one
or more certificates or credit shares to the applicable balance accounts at DTC
in such name and in such denominations as specified by such Purchaser to effect
such transfer. Each Purchaser hereby agrees that the removal of the restrictive
legend pursuant to this Section 8.2 is predicated upon the Company’s reliance
that such Purchaser will sell any such Shares pursuant to either the
registration requirements of the Securities Act, including any applicable
prospectus delivery requirements, or an exemption therefrom.

Section 9. Registration, Transfer and Substitution of Certificates for Shares.

9.1 Stock Register; Ownership of Shares. The Company will keep at its principal
office, or will cause its transfer agent to keep, a register in which the
Company will provide for the registration of transfers of the Shares. The
Company may treat the Person in whose name any of the Shares are registered on
such register as the owner thereof and the Company shall not be affected by any
notice to the contrary. All references in this Agreement to a “holder” of any
Shares shall mean the Person in whose name such Shares are at the time
registered on such register.

9.2 Replacement of Certificates. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
certificate representing any of the Shares, and, in the case of any such loss,
theft or destruction, upon delivery of an indemnity agreement and surety bond
reasonably satisfactory to the Company or, in the case of any such mutilation,
upon surrender of such certificate for cancellation at the office of the Company
maintained pursuant to Section 9.1 hereof, the Company at its expense will
execute and deliver, in lieu thereof, a new certificate representing such
Shares, of like tenor.

 

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Section 10. Registration Rights of Purchasers.

10.1 Mandatory Registration. The Company shall prepare, and, as soon as
practicable but in no event later than 30 days after the Closing Date (the
“Filing Deadline”), file with the Commission a Registration Statement under the
Securities Act on appropriate form covering the resale of the full amount of the
Shares (the “Registrable Securities”). The Company shall use its commercially
reasonable efforts to have the Registration Statement declared effective by the
Commission as soon as practicable, but in no event later than the date (the
“Effectiveness Deadline”), which shall be either: (i) in the event that the
Commission does not review the Registration Statement, 90 days after the Closing
Date, or (ii) in the event that the Commission reviews the Registration
Statement, 120 days after the Closing Date (but in any event, no later than
three Business Days following the Commission indicating that it has no further
comments on the Registration Statement). Subject to any comments from the staff
of the Commission (the “Staff”), such Registration Statement shall include the
plan of distribution attached hereto as Exhibit A; provided, however, that no
Purchaser shall be named as an “underwriter” in the Registration Statement
without the Purchaser’s prior written consent. Such Registration Statement shall
not include any shares of Common Stock or other securities for the account of
any other holder without the prior written consent of the Required Holders.

10.2 Rule 415; Cutback. If at any time the Staff takes the position that the
offering of some or all of the Registrable Securities in a Registration
Statement is not eligible to be made on a delayed or continuous basis under the
provisions of Rule 415 under the Securities Act or requires any Purchaser to be
named as an “underwriter,” the Company shall use its reasonable best efforts to
persuade the Commission that the offering contemplated by the Registration
Statement is a valid secondary offering and not an offering “by or on behalf of
the issuer” as defined in Rule 415 and that none of the Purchasers is an
“underwriter.” In the event that, despite the Company’s reasonable best efforts
and compliance with the terms of this Section 10.2, the Staff refuses to alter
its position, the Company shall (i) remove from the Registration Statement such
portion of the Registrable Securities (the “Cut Back Shares”) and/or (ii) agree
to such restrictions and limitations on the registration and resale of the
Registrable Securities as the Staff may require to assure the Company’s
compliance with the requirements of Rule 415 (collectively, the “SEC
Restrictions”); provided, however, that the Company shall not agree to name any
Purchaser as an “underwriter” in such Registration Statement without the prior
written consent of such Purchaser. Any cutback imposed on the Purchasers
pursuant to this Section 10.2 shall be allocated among the Purchasers on a pro
rata basis, unless the SEC Restrictions otherwise require or provide or the
Purchasers otherwise agree. No liquidated damages shall accrue as to any Cut
Back Shares until such date as the Company is able to effect the registration of
such Cut Back Shares in accordance with any SEC Restrictions (such date, the
“Restriction Termination Date” of such Cut Back Shares). From and after the
Restriction Termination Date applicable to any Cut Back Shares, all of the
provisions of this Section 10 (including the liquidated damages provisions)
shall again be applicable to such Cut Back Shares; provided, however, that
(x) the Filing Deadline for the Registration Statement including such Cut Back
Shares shall be ten Business Days after such Restriction Termination Date, and
(y) the Effectiveness Deadline with respect to such Cut Back Shares shall be the
90th day immediately after the Restriction Termination Date or the 120th day if
the Staff reviews such Registration Statement (but in any event no later than
three Business Days from the Staff indicating it has no further comments on such
Registration Statement).

 

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10.3 Effect of Failure to File and Obtain and Maintain Effectiveness of
Registration Statement. Subject to Section 10.2, if either: (a) a Registration
Statement covering all of the Registrable Securities required to be covered
thereby and required to be filed by the Company pursuant to this Agreement is:
(i) not filed with the Commission on or before the Filing Deadline (a “Filing
Failure”), or (ii) not declared effective by the Commission on or before the
Effectiveness Deadline (an “Effectiveness Failure”), or (b) on any day during
the Reporting Period and after the Effectiveness Date, sales of all of the
Registrable Securities required to be included on such Registration Statement
cannot be made (other than (i) during an Allowable Grace Period or (ii) if the
Registration Statement is on Form S-1, for a period of 15 days following the
date the Company files a post-effective amendment to incorporate the Company’s
Annual Report on Form 10-K) pursuant to such Registration Statement (including,
without limitation, because of a failure to keep such Registration Statement
effective, to disclose such information as is necessary for sales to be made
pursuant to such Registration Statement or to register a sufficient number of
shares of Common Stock) (a “Maintenance Failure”), then, in satisfaction of the
damages to any holder of Registrable Securities by reason of any such delay in
or reduction of its ability to sell the underlying shares of Common Stock, the
Company shall pay to each holder of Registrable Securities relating to such
Registration Statement an amount in cash equal to 1.0% of such holder’s Pro Rata
Interest in the Aggregate Purchase Price on each of the following dates: (x) the
day of a Filing Failure and on every thirtieth day (prorated for periods
totaling less than 30 days) thereafter until such Filing Failure is cured;
(y) the day of an Effectiveness Failure and on every thirtieth day (prorated for
periods totaling less than 30 days) thereafter until such Effectiveness Failure
is cured; and (z) the initial day of a Maintenance Failure and on every
thirtieth day (prorated for periods totaling less than 30 days) thereafter until
such Maintenance Failure is cured. The payments to which a holder shall be
entitled pursuant to this Section 10.3 are referred to herein as “Registration
Delay Payments”; provided that no Registration Delay Payments shall be required
following the termination of the Reporting Period, and provided further that in
no event shall the aggregate Registration Delay Payments accruing under this
Section 10.3 exceed 6% of a holder’s Pro Rata Interest in the Aggregate Purchase
Price (i.e., corresponding to a total delay of six months). The first such
Registration Delay Payment shall be paid within three Business Days after the
event or failure giving rise to such Registration Delay Payment occurred and all
other Registration Delay Payments shall be paid on the earlier of (I) the last
day of the calendar month during which such Registration Delay Payments are
incurred and (II) the third Business Day after the event or failure giving rise
to the Registration Delay Payments is cured.

10.4 Related Obligations. At such time as the Company is obligated to file a
Registration Statement with the Commission pursuant to Section 10.1 hereof, the
Company will use commercially reasonable efforts to effect the registration of
the Registrable Securities in accordance with the intended method of disposition
thereof and, pursuant thereto, the Company shall have the following obligations:

(a) The Company shall submit to the Commission, within two Business Days after
the Company learns that no review of a particular Registration Statement will be
made by the staff of the Commission or that the staff has no further comments on
a particular Registration Statement, as the case may be, a request for
acceleration of effectiveness of such Registration Statement to a time and date
not later than two Business Days after the submission of such request. The
Company shall keep

 

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each Registration Statement effective pursuant to Rule 415 at all times with
respect to each Purchaser’s Registrable Securities until the expiration of the
Reporting Period. The Company shall ensure that each Registration Statement
(including any amendments or supplements thereto and prospectuses contained
therein) shall not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein, or necessary to make the
statements therein (in the case of prospectuses, in the light of the
circumstances in which they were made) not misleading.

(b) The Company shall prepare and file with the Commission such amendments
(including post-effective amendments) and supplements to a Registration
Statement and the prospectus used in connection with such Registration
Statement, which prospectus is to be filed pursuant to Rule 424 promulgated
under the Securities Act, as may be necessary to keep such Registration
Statement effective at all times during the Reporting Period, and, during such
period, comply with the provisions of the Securities Act with respect to the
disposition of all Registrable Securities of the Company covered by such
Registration Statement until such time as all of such Registrable Securities
shall have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth in such Registration
Statement.

(c) Upon request of a Purchaser, the Company shall furnish to such Purchaser
without charge, (i) promptly after the Registration Statement including such
Purchaser’s Registrable Securities is prepared and filed with the Commission, at
least one copy of such Registration Statement and any amendment(s) thereto,
including financial statements and schedules, all documents incorporated therein
by reference, and if requested by the Purchaser, all exhibits and each
preliminary prospectus, (ii) upon the effectiveness of any Registration
Statement, 10 copies of the prospectus included in such Registration Statement
and all amendments and supplements thereto (or such other number of copies as
the Purchaser may reasonably request) and (iii) such other documents, including
copies of any preliminary or final prospectus, as the Purchaser may reasonably
request from time to time in order to facilitate the disposition of the
Registrable Securities.

(d) The Company shall notify the Purchasers in writing of the happening of any
event, as promptly as practicable after becoming aware of such event, as a
result of which the prospectus included in a Registration Statement, as then in
effect, includes an untrue statement of a material fact or omission to state a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading (provided that in no event shall such notice contain any material,
nonpublic information), and promptly prepare a supplement or amendment to such
Registration Statement to correct such untrue statement or omission, and upon
request deliver 10 copies of such supplement or amendment to the Purchasers (or
such other number of copies as the Purchasers may reasonably request). Unless
such information is publicly available, the Company shall also promptly notify
the Purchasers in writing (i) when a prospectus or any prospectus supplement or
post-effective amendment has been filed, and when a Registration Statement or
any post-effective amendment has become effective (notification of such
effectiveness shall be delivered to the Purchasers by facsimile or email on the
same day

 

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of such effectiveness), (ii) of any request by the Commission for amendments or
supplements to a Registration Statement or related prospectus or related
information, and (iii) of the Company’s reasonable determination that a
post-effective amendment to a Registration Statement would be appropriate.

(e) The Company shall use commercially reasonable efforts to prevent the
issuance of any stop order or other suspension of effectiveness of a
Registration Statement, or the suspension of the qualification of any of the
Registrable Securities for sale in any jurisdiction and, if such an order or
suspension is issued, to obtain the withdrawal of such order or suspension at
the earliest possible moment and to notify the Purchaser who holds Registrable
Securities being sold of the issuance of such order and the resolution thereof
or its receipt of notice of the initiation or threat of any proceeding for such
purpose.

(f) If a Purchaser is required under applicable securities law to be described
in the Registration Statement as an underwriter, at the reasonable request of
the Purchaser, the Company shall furnish to the Purchaser, on the date of the
effectiveness of the Registration Statement and thereafter from time to time on
such dates as the Purchaser may reasonably request, (i) a letter, dated such
date, from the Company’s independent certified public accountants in form and
substance as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering, addressed to the Purchaser, and
(ii) an opinion, dated as of such date, of counsel representing the Company for
purposes of such Registration Statement, in form, scope and substance as is
customarily given in an underwritten public offering, addressed to the
Purchaser.

(g) If a Purchaser is required under applicable securities law to be described
in the Registration Statement as an underwriter, upon the written request of the
Purchaser in connection with the Purchaser’s due diligence requirements, if any,
the Company shall make available for inspection by (i) the Purchaser and its
legal counsel and (ii) one firm of accountants or other agents retained by the
Purchaser (collectively, the “Inspectors”), all pertinent financial and other
records, and pertinent corporate documents and properties of the Company
(collectively, the “Records”), as shall be reasonably deemed necessary by each
Inspector solely for the purpose of establishing a due diligence defense under
underwriter liability under the Securities Act, and cause the Company’s
officers, directors and employees to supply all information which any Inspector
may reasonably request; provided, however, that each Inspector shall agree to
hold in strict confidence and shall not make any disclosure (except to the
Purchaser) or use of any Record or other information which the Company
determines in good faith to be confidential, and of which determination the
Inspectors are so notified, unless (a) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in any Registration
Statement or is otherwise required under the Securities Act, (b) the release of
such Records is ordered pursuant to a final, non-appealable subpoena or order
from a court or government body of competent jurisdiction, or (c) the
information in such Records has been made generally available to the public
other than by disclosure in violation of this Agreement or any other agreement.
The Purchaser agrees that it shall, upon learning that disclosure of such
Records is sought in or by a court or governmental

 

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body of competent jurisdiction or through other means, give prompt notice to the
Company and allow the Company, at its expense, to undertake appropriate action
to prevent disclosure of, or to obtain a protective order preventing disclosure
of, the Records deemed confidential. Nothing herein (or in any other
confidentiality agreement between the Company and the Purchaser) shall be deemed
to limit the Purchaser’s ability to sell Registrable Securities in a manner
which is otherwise consistent with Applicable Laws.

(h) The Company shall hold in confidence and not make any disclosure of
information concerning the Purchasers provided to the Company unless
(i) disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent jurisdiction
or (iv) such information has been made generally available to the public other
than by disclosure in violation of this Agreement or any other agreement. The
Company agrees that it shall, upon learning that disclosure of such information
concerning the Purchasers is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt written notice to the
Purchasers and allow the Purchasers, at each Purchaser’s expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
preventing disclosure of, such information.

(i) The Company shall cooperate with the Purchasers and, to the extent
applicable, facilitate the timely preparation and delivery of certificates (not
bearing any restrictive legend) representing the Registrable Securities to be
offered pursuant to a Registration Statement and enable such certificates to be
in such denominations or amounts, as the case may be, as the Purchasers may
reasonably request and registered in such names as the Purchasers may request.

(j) If requested by a Purchaser, the Company shall, as soon as practicable,
(i) incorporate in a prospectus supplement or post-effective amendment such
information as the Purchaser reasonably requests to be included therein relating
to the sale and distribution of Registrable Securities, including, without
limitation, information with respect to the number of Registrable Securities
being offered or sold, the purchase price being paid therefor and any other
terms of the offering of the Registrable Securities to be sold in such offering;
(ii) make all required filings of such prospectus supplement or post-effective
amendment after being notified of the matters to be incorporated in such
prospectus supplement or post-effective amendment; and (iii) supplement or make
amendments to any Registration Statement if reasonably requested by the
Purchaser.

(k) The Company shall use commercially reasonable efforts to cause the
Registrable Securities covered by a Registration Statement to be registered with
or approved by such other governmental agencies or authorities as may be
necessary to consummate the disposition of such Registrable Securities.

 

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(l) The Company shall otherwise use commercially reasonable efforts to comply
with all applicable rules and regulations of the Commission in connection with
any registration hereunder.

(m) Within two Business Days after a Registration Statement that covers
Registrable Securities is declared effective by the Commission, the Company
shall deliver to the transfer agent for such Registrable Securities (with copies
to the Purchasers) confirmation that such Registration Statement has been
declared effective by the Commission.

(n) Notwithstanding anything to the contrary herein, at any time after the
Effectiveness Date, the Company may delay the disclosure of material, non-public
information concerning the Company the disclosure of which at the time is not,
in the good faith opinion of the Board of Directors and its counsel, in the best
interest of the Company and, in the opinion of counsel to the Company, otherwise
required (a “Grace Period”); provided, that the Company shall promptly
(i) notify the Purchasers in writing of the existence of material, non-public
information giving rise to a Grace Period (provided that in each notice the
Company will not disclose the content of such material, non-public information
to the Purchasers) and the date on which the Grace Period will begin, and
(ii) notify the Purchasers in writing of the date on which the Grace Period
ends; and, provided further, that the Grace Periods shall not exceed an
aggregate of 30 Trading Days during any 365-day period and the first day of any
Grace Period must be at least 15 days after the last day of any prior Grace
Period (each, an “Allowable Grace Period”). For purposes of determining the
length of a Grace Period above, the Grace Period shall begin on and include the
date the Purchasers receive the notice referred to in clause (i) and shall end
on and include the later of the date the Purchasers receive the notice referred
to in clause (ii) and the date referred to in such notice. The provisions of
Section 10.4(e) hereof shall not be applicable during the period of any
Allowable Grace Period. Upon expiration of the Grace Period, the Company shall
again be bound by the first sentence of Section 10.4(d) with respect to the
information giving rise thereto unless such material, non-public information is
no longer applicable. Notwithstanding anything to the contrary, the Company
shall cause its transfer agent to deliver unlegended shares of Common Stock to a
transferee of any Purchaser in accordance with the terms of this Agreement in
connection with any sale of Registrable Securities with respect to which a
Purchaser has entered into a contract for sale, and delivered a copy of the
prospectus included as part of the applicable Registration Statement (unless an
exemption from such prospectus delivery requirement exists), prior to the
Purchaser’s receipt of the notice of a Grace Period and for which the Purchaser
has not yet settled.

(o) Neither the Company nor any Subsidiary or affiliate thereof shall identify
any Purchaser as an underwriter in any public disclosure or filing with the
Commission or any applicable Trading Market without the prior written consent of
such Purchaser, and any Purchaser being deemed an underwriter by the Commission
shall not relieve the Company of any obligations it has under this Agreement.

 

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10.5 Obligations of the Purchasers.

(a) At least five Business Days prior to the first anticipated filing date of a
Registration Statement, the Company shall notify each Purchaser in writing of
any information the Company requires from such Purchaser in order to have that
Purchaser’s Registrable Securities included in such Registration Statement. It
shall be a condition precedent to the obligations of the Company to complete the
registration pursuant to this Agreement with respect to the Registrable
Securities of a particular Purchaser that the Purchaser shall furnish to the
Company such information regarding itself, the Registrable Securities held by it
and the intended method of disposition of the Registrable Securities held by it
as shall be reasonably required to effect the effectiveness of the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request.

(b) Each Purchaser, by its acceptance of the Registrable Securities, agrees to
cooperate with the Company as reasonably requested by the Company in connection
with the preparation and filing of any Registration Statement hereunder, unless
the Purchaser has notified the Company in writing of the Purchaser’s election to
exclude all of the Purchaser’s Registrable Securities from such Registration
Statement.

(c) Each Purchaser agrees that, upon receipt of any notice from the Company of
the happening of any event of the kind described in Section 10.4(e) or the first
sentence of Section 10.4(d), the Purchaser will immediately discontinue
disposition of Registrable Securities pursuant to any Registration Statement(s)
covering such Registrable Securities until the Purchaser’s receipt of the copies
of the supplemented or amended prospectus contemplated by Section 10.4(e) or the
first sentence of Section 10.4(d) or receipt of notice that no supplement or
amendment is required. Notwithstanding anything to the contrary, the Company
shall cause its transfer agent to deliver unlegended shares of Common Stock to a
transferee of the Purchaser in accordance with the terms of this Agreement in
connection with any sale of Registrable Securities with respect to which the
Purchaser has entered into a contract for sale prior to the Purchaser’s receipt
of a notice from the Company of the happening of any event of the kind described
in Section 10.4(e) or the first sentence of Section 10.4(d) and for which the
Purchaser has not yet settled.

(d) Each Purchaser covenants and agrees that it will comply with the prospectus
delivery requirements of the Securities Act as applicable to it or an exemption
therefrom in connection with sales of Registrable Securities pursuant to the
Registration Statement.

10.6 Expenses of Registration. All reasonable expenses incurred in connection
with registrations, filings or qualifications pursuant to this Section 10,
including, without limitation, all registration, listing and qualifications
fees, printers and accounting fees, and fees and disbursements of counsel for
the Company, shall be paid by the Company. Notwithstanding the foregoing, in no
event shall the Company be responsible for underwriting discounts, commissions,
placement agent fees or other similar expenses payable with respect to
Registrable Securities being sold or offered for sale by the Purchasers.

 

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10.7 Reports under the Exchange Act. With a view to making available to the
Purchasers the benefits of Rule 144 promulgated under the Securities Act or any
other similar rule or regulation of the Commission that may at any time permit
the Purchasers to sell securities of the Company to the public without
registration (“Rule 144”), the Company agrees to:

(a) make and keep public information available, as those terms are understood
and defined in Rule 144, during the Reporting Period;

(b) file with the Commission in a timely manner all reports and other documents
required of the Company under the Exchange Act; and

(c) furnish to the Purchasers, so long as any Purchaser owns Registrable
Securities, promptly upon request during the Reporting Period: (i) a written
statement by the Company, if true, that it has complied with the reporting
requirements of Rule 144, the Securities Act and the Exchange Act, (ii) a copy
of the most recent annual or quarterly report of the Company and such other
reports and documents so filed by the Company, and (iii) such other information
as may be reasonably requested to permit the Purchasers to sell such securities
pursuant to Rule 144 without registration.

10.8 Assignment of Registration Rights. The rights under Section 10 shall be
automatically assignable by a Purchaser to any transferee of all or any portion
of the Purchaser’s Registrable Securities if: (i) the Purchaser agrees in
writing with the transferee or assignee to assign such rights and a copy of such
agreement is furnished to the Company within a reasonable time after such
assignment; (ii) the Company is, within a reasonable time after such transfer or
assignment, furnished with written notice of (a) the name and address of such
transferee or assignee and (b) the securities with respect to which such
registration rights are being transferred or assigned; (iii) immediately
following such transfer or assignment the further disposition of such securities
by the transferee or assignee is restricted under the Securities Act or
applicable state securities laws; (iv) at or before the time the Company
receives the written notice contemplated by clause (ii) of this sentence the
transferee or assignee agrees in writing with the Company to be bound by all of
the provisions contained herein; and (v) such transfer shall have been made in
accordance with the applicable requirements of this Agreement. Following any
such transfer in accordance with this Section 10.8, the Company shall thereafter
use commercially reasonable efforts to amend or supplement the selling
stockholder table contained in the Registration Statement to reflect such change
in beneficial ownership of the affected Registrable Securities.

10.9 Indemnification.

(a) Company Indemnification. The Company will indemnify each Purchaser who holds
Registrable Securities (if Registrable Securities held by such Purchaser are
included in the securities as to which such registration is being effected),
each of its officers and directors, partners, members and each person
controlling such Purchaser within the meaning of Section 15 of the Securities
Act, against all expenses, claims, losses, damages or liabilities (or actions in
respect thereof), including any of the foregoing incurred in settlement of any
litigation, commenced or threatened, arising out of or based on (A) any untrue
statement (or alleged untrue statement) of a material fact

 

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contained in any Registration Statement, prospectus, offering circular or other
document, or any amendment or supplement thereto, incident to any such
Registration Statement, or based on any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading, or (B) any violation by the Company of the Securities Act, the
Exchange Act, state securities laws or any rule or regulation promulgated under
such laws applicable to the Company in connection with any such registration;
and in each case, the Company will reimburse each such Purchaser, each of its
officers and directors, partners, members and each person controlling such
Purchaser, for any legal and any other expenses reasonably incurred, as such
expenses are incurred, in connection with investigating, preparing or defending
any such claim, loss, damage, liability or action, provided that the Company
will not be liable in any such case to the extent that any such claim, loss,
damage, liability or expense arises out of or is based on (X) any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by an
instrument duly executed by such Purchaser or controlling person, and stated to
be specifically for use therein, (Y) the use by a Purchaser of an outdated or
defective prospectus after the Company has notified such Purchaser in writing
that the prospectus is outdated or defective or (Z) a Purchaser’s (or any other
indemnified person’s) failure to send or give a copy of the prospectus or
supplement (as then amended or supplemented), if required, pursuant to Rule 172
under the Securities Act (or any successor rule) to the Persons asserting an
untrue statement or alleged untrue statement or alleged untrue statement or
omission or alleged omission at or prior to the written confirmation of the sale
of Registrable Securities to such person if such statement or omission was
corrected in such prospectus or supplement.

(b) Purchaser Indemnification. Each Purchaser holding Registrable Securities
will, if Registrable Securities held by such Purchaser are included in the
securities as to which such registration is being effected, severally and not
jointly, indemnify the Company, each of its directors and officers, other
holders of the Company’s securities covered by such Registration Statement, each
person who controls the Company within the meaning of Section 15 of the
Securities Act, and each such holder, each of its officers and directors and
each person controlling such holder within the meaning of Section 15 of the
Securities Act, against all claims, losses, damages and liabilities (or actions
in respect thereof) arising out of or based on: (A) any untrue statement (or
alleged untrue statement) of a material fact contained in any such Registration
Statement, prospectus, offering circular or other document, or any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, to the extent, and
only to the extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in such Registration Statement,
prospectus, offering circular or other document in reliance upon and in
conformity with written information furnished to the Company by an instrument
duly executed by such Purchaser and stated to be specifically for use therein,
or (B) any violation by such Purchaser of the Securities Act, the Exchange Act,
state securities laws or any rule or regulation promulgated under such laws
applicable to such Purchaser, and in each case, such Purchaser will reimburse
the Company, each other holder, and directors, officers, persons, underwriters
or control

 

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persons of the Company and the other holders for any legal or any other expenses
reasonably incurred, as such expenses are incurred, in connection with
investigating or defending any such claim, loss, damage, liability or action;
provided, that the indemnity agreement contained in this Subsection 10.9(b)
shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of such
indemnifying Purchaser (which consent shall not be unreasonably withheld or
delayed). The liability of any Purchaser for indemnification under this
Subsection 10.9(b) in its capacity as a seller of Registrable Securities shall
not exceed the amount of net proceeds to such Purchaser of the securities sold
in any such registration.

(c) Notice and Procedure. Each party entitled to indemnification under this
Section 10.9 (each, an “Indemnified Party”) shall give written notice to the
party required to provide indemnification (the “Indemnifying Party”) promptly
after such Indemnified Party has actual knowledge of any claim as to which
indemnity may be sought, and shall permit the Indemnifying Party to assume the
defense of any such claim or any litigation resulting therefrom, provided that
counsel for the Indemnifying Party who shall conduct the defense of such claim
or litigation, shall be approved by the Indemnified Party (whose approval shall
not unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party’s expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Agreement unless the failure to
give such notice is materially prejudicial to an Indemnifying Party’s ability to
defend such action and provided further, that the Indemnifying Party shall not
assume the defense for matters as to which there is a conflict of interest or
there are separate and different defenses. No Indemnifying Party, in the defense
of any such claim or litigation, shall, except with the consent of each
Indemnified Party (whose consent shall not be unreasonably withheld), consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation.

(d) Contribution. If the indemnification provided for in this Section 10.9 is
held by a court of competent jurisdiction to be unavailable to an Indemnified
Party with respect to any losses, claims, damages or liabilities referred to
herein, the Indemnifying Party, in lieu of indemnifying such Indemnified Party
thereunder, shall to the extent permitted by applicable law contribute to the
amount paid or payable by such Indemnified Party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party on the one hand and of the Indemnified
Party on the other in connection with the untrue statement or omission that
resulted in such loss, claim, damage or liability, as well as any other relevant
equitable considerations. The relative fault of the Indemnifying Party and of
the Indemnified Party shall be determined by a court of law by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission to state a material fact relates to information supplied by
the Indemnifying Party or by the Indemnified Party and the parties’ relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission; provided, that in no event

 

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shall any contribution by a Purchaser hereunder exceed the proceeds from the
offering received by such Purchaser. The amount paid or payable by a party as a
result of any loss, claim, damage or liability shall be deemed to include,
subject to the limitations set forth in this Agreement, any reasonable
attorneys’ or other reasonable fees or expenses incurred by such party in
connection with any proceeding to the extent such party would have been
indemnified for such fees or expenses if the indemnification provided for in
this Section 10.9 was available to such party in accordance with its terms.

(e) Survival. The obligations of the Company and the Purchasers under this
Section 10.9 shall survive completion of any offering of Registrable Securities
in a Registration Statement and the termination of this Agreement. The indemnity
and contribution agreements contained in this Section 10.9 are in addition to
any liability that the Indemnifying Parties may have to the Indemnified Parties
and are not in diminution or limitation of other remedies or causes of action
that the parties may have under this Agreement.

Section 11. Definitions. Unless the context otherwise requires, the terms
defined in this Section 11 shall have the meanings specified for all purposes of
this Agreement. All accounting terms used in this Agreement, whether or not
defined in this Section 11, shall be construed in accordance with GAAP. If the
Company has one or more Subsidiaries, such accounting terms shall be determined
on a consolidated basis for the Company and each of its Subsidiaries, and the
financial statements and other financial information to be furnished by the
Company pursuant to this Agreement shall be consolidated and presented with
consolidating financial statements of the Company and each of its Subsidiaries.

“Affiliate” shall have the meaning ascribed to such term in Rule 12b-2 of the
General Rules and Regulations under the Exchange Act.

“Business Day” means any day other than Saturday, Sunday or other day on which
commercial banks in The City of New York are authorized or required by law to
remain closed.

“Effectiveness Date” means the date the Registration Statement pursuant to
Section 11 has been declared effective by the Commission.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“GAAP” means U.S. generally accepted accounting principles consistently applied.

“Governmental Entity” means any national, federal, state, municipal, local,
territorial, foreign or other government or any department, commission, board,
bureau, agency, regulatory authority, self-regulatory organization or
instrumentality thereof, or any court, judicial, administrative or arbitral body
or public or private tribunal.

“knowledge” by a Person of a particular fact or other matter means the
following: (a) if the Person is an individual, that such individual is actually
aware or reasonably should be aware, after due inquiry, by virtue of such
person’s office, of such fact or other matter; and (b) if the Person is an
entity, that any executive officer of such Person is actually aware or
reasonably should be aware, after due inquiry, of such fact or other matter.

 

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“Material Adverse Effect” means any (i) adverse effect on the reservation,
issuance, delivery or validity of the Shares, as applicable, or the transactions
contemplated hereby or on the ability of the Company to perform its obligations
under this Agreement, or (ii) material adverse effect on the condition
(financial or otherwise), prospects, properties, assets, liabilities, business
or operations of the Company or any of its Subsidiaries.

“Material Contract” means all written and oral contracts, agreements, deeds,
mortgages, leases, subleases, licenses, instruments, notes, commitments,
commissions, undertakings, arrangements and understandings: (i) which by their
terms involve, or would reasonably be expected to involve, aggregate payments by
or to the Company or any Subsidiary during any twelve month period in excess of
$1,000,000, (ii) the breach of which by the Company or any Subsidiary would
reasonably be expected to have a Material Adverse Effect, or (iii) which are
required to be filed as exhibits by the Company with the Commission since
September 30, 2015 pursuant to Items 601(b)(1), 601(b)(2), 601(b)(4), 601(b)(9)
or 601(b)(10) of Regulation S-K promulgated by the Commission.

“Person” means and includes all natural persons, corporations, business trusts,
associations, companies, partnerships, joint ventures, limited liability
companies and other entities and governments and agencies and political
subdivisions.

“Pro Rata Interest” means the number of Shares purchased by each Purchaser,
relative to the total number of Shares being sold hereunder, as reflected on
Schedule I attached hereto.

“Registration Statement” means a registration statement or registration
statements of the Company filed under the Securities Act pursuant to Section 10
hereof.

“Reporting Period” means the period commencing on the Closing Date and ending on
the earliest of: (i) the date as of which the Purchasers may sell all of the
Shares under Rule 144 without volume or manner-of-sale restrictions and without
the requirement for the Company to be in compliance with the current public
information requirements under Rule 144(c)(1) (or any successor thereto)
promulgated under the Securities Act; (ii) the second anniversary of the Closing
Date, or (iii) the date on which such Purchaser shall have sold all of the
Shares pursuant to a Registration Statement.

“Required Holders” means: (i) prior to the Closing, the Purchasers agreeing to
invest at least 66% of the amount invested by all the Purchasers pursuant to
this Agreement and (ii) from and after the Closing, the Purchasers beneficially
owning (as determined pursuant to Rule 13d-3 under the Exchange Act) at least
66% of the Shares.

“Subsidiary” means any corporation, association trust, limited liability
company, partnership, joint venture or other business association or entity, at
least 50% of the outstanding voting securities of which are at the time owned or
controlled directly or indirectly by the Company.

“Trading Day” means any day on which the Common Stock is traded on the Trading
Market; provided that “Trading Day” shall not include any day on which the
Common Stock is scheduled to trade on such exchange or market for less than 4.5
hours or any day that the Common Stock is suspended from trading during the
final hour of trading on such exchange or market (or if such exchange or market
does not designate in advance the closing time of trading on such exchange or
market, then during the hour ending at 4:00:00 p.m., New York time).

 

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“Trading Market” means the following markets or exchanges on which the Common
Stock is listed or quoted for trading on the date in question: NYSE Amex
Equities, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global
Select Market, the New York Stock Exchange or the OTC Markets Group Inc.

“Transaction Documents” means this Agreement and all exhibits and schedules
thereto and hereto and any other documents or agreements executed in connection
with the transactions contemplated hereunder.

Section 12. Miscellaneous.

12.1 Waivers and Amendments. Upon the approval of the Company and the written
consent of the Required Holders, the obligations of the Company and the rights
of the Purchasers under this Agreement may be waived (either generally or in a
particular instance, either retroactively or prospectively and either for a
specified period of time or indefinitely). Neither this Agreement, nor any
provision hereof, may be changed, waived, discharged or terminated orally or by
course of dealing, but only by an instrument in writing executed by the Company
and the Required Holders.

12.2 Notices. All notices, requests, consents, and other communications under
this Agreement shall be in writing and shall be deemed delivered: (a) when
delivered, if delivered personally, (b) four Business Days after being sent by
registered or certified mail, return receipt requested, postage prepaid, (c) one
Business Day after being sent via a reputable nationwide overnight courier
service guaranteeing next Business Day delivery, or (d) when receipt is
acknowledged, in the case of email, in each case to the intended recipient as
set forth below, with respect to the Company, and to the addresses set forth on
the signature pages hereto, with respect to the Purchasers.

If to the Company:

Arrowhead Pharmaceuticals, Inc.

225 South Lake Avenue, Suite 1050

Pasadena, California 91101

Attn: Chief Executive Officer

Email: canzalone@arrowheadpharma.com

with copies to:

Arrowhead Pharmaceuticals, Inc.

225 South Lake Avenue, Suite 1050

Pasadena, California 91101

Attn: General Counsel

Email: pobrien@arrowheadpharma.com

 

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Gibson, Dunn & Crutcher LLP

555 Mission Street, Suite 3000

San Francisco, California 94105

Attn: Ryan A. Murr

Email: rmurr@gibsondunn.com

or at such other address as the Company or each Purchaser may specify by written
notice to the other parties hereto in accordance with this Section 12.2.

12.3 Cumulative Remedies. None of the rights, powers or remedies conferred upon
the Purchasers on the one hand or the Company on the other hand shall be
mutually exclusive, and each such right, power or remedy shall be cumulative and
in addition to every other right, power or remedy, whether conferred by this
Agreement or now or hereafter available at law, in equity, by statute or
otherwise.

12.4 Successors and Assigns. All the terms and provisions of this Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
respective parties hereto, the successors and permitted assigns of each
Purchaser and the successors of the Company, whether so expressed or not. None
of the parties hereto may assign its rights or obligations hereof without the
prior written consent of the Company, except that a Purchaser may, without the
prior consent of the Company, assign its rights to purchase the Shares hereunder
to any of its Affiliates (provided each such Affiliate agrees to be bound by the
terms of this Agreement and makes the same representations and warranties set
forth in Section 4 hereof). This Agreement shall not inure to the benefit of or
be enforceable by any other Person.

12.5 Headings. The headings of the Sections and paragraphs of this Agreement
have been inserted for convenience of reference only and do not constitute a
part of this Agreement.

12.6 Governing Law; Jurisdiction. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without regard to
its conflict of law principles. Any suit, action or proceeding seeking to
enforce any provision of, or based on any matter arising out of or in connection
with, this Agreement or the transactions contemplated hereby may be brought in
any federal or state court located in the City of New York and State of New
York, and each of the parties hereby consents to the jurisdiction of such courts
(and of the appropriate appellate courts therefrom) in any such suit, action or
proceeding and irrevocably waives, to the fullest extent permitted by law, any
objection which it may now or hereafter have to the laying of the venue of any
such suit, action or proceeding in any such court or that any such suit, action
or proceeding which is brought in any such court has been brought in an
inconvenient forum. Process in any such suit, action or proceeding may be served
on any party anywhere in the world, whether within or without the jurisdiction
of any such court.

12.7 Counterparts; Effectiveness. This Agreement may be executed in any number
of counterparts and by different parties hereto in separate counterparts, with
the same effect as if all parties had signed the same document. All such
counterparts (including counterparts delivered by facsimile or other electronic
format) shall be deemed an original, shall be construed together and shall
constitute one and the same instrument. This Agreement shall become effective
when each party hereto shall have received counterparts hereof signed by all of
the other parties hereto.

 

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12.8 Waiver of Potential Conflicts of Interest. Each of the Purchasers and the
Company acknowledges that Gibson, Dunn & Crutcher LLP (“Gibson Dunn”) may have
represented and may currently represent certain of the Purchasers. In the course
of such representation, Gibson Dunn may have come into possession of
confidential information relating to such Purchasers. Each of the Purchasers and
the Company acknowledges that Gibson Dunn is representing only the Company in
this transaction. By executing this Agreement, each of the Purchasers and the
Company hereby waives any actual or potential conflict of interest which has or
may arise as a result of Gibson Dunn’s representation of such persons and
entities, and represents that it has had the opportunity to consult with
independent counsel concerning the giving of this waiver.

12.9 Entire Agreement. This Agreement contains the entire agreement among the
parties hereto with respect to the subject matter hereof and thereof and, except
as set forth below, this agreement supersedes and replaces all other prior
agreements, written or oral, among the parties hereto with respect to the
subject matter hereof and thereof. Notwithstanding the foregoing, this Agreement
shall not supersede any confidentiality or other non-disclosure agreements that
may be in place between the Company and any Purchaser.

12.10 Severability. If any provision of this Agreement shall be found by any
court of competent jurisdiction to be invalid or unenforceable, the parties
hereby waive such provision to the extent that it is found to be invalid or
unenforceable. Such provision shall, to the maximum extent allowable by law, be
modified by such court so that it becomes enforceable, and, as modified, shall
be enforced as any other provision hereof, all the other provisions hereof
continuing in full force and effect.

*             *             *

 

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IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed as of the Effective Date.

 

THE COMPANY: ARROWHEAD PHARMACEUTICALS, INC. By:     Name: Title:

 

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IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed as of the Effective Date.

 

PURCHASERS:   By:     Name:     Title:     Address:           Email:    

 

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EXHIBIT A

PLAN OF DISTRIBUTION

The selling stockholders, which shall include donees, pledgees, transferees or
other successors-in-interest selling shares of common stock or interests in
shares of common stock received after the date of this prospectus from a selling
stockholder as a gift, pledge, partnership distribution or other transfer, may,
from time to time, sell, transfer or otherwise dispose of any or all of their
shares of common stock or interests in shares of common stock on any stock
exchange, market or trading facility on which the shares are traded or in
private transactions. These dispositions may be at fixed prices, at prevailing
market prices at the time of sale, at prices related to the prevailing market
price, at varying prices determined at the time of sale, or at negotiated
prices.

The selling stockholders may use any one or more of the following methods when
disposing of shares or interests therein:

 

  •   ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;

 

  •   block trades in which the broker-dealer will attempt to sell the shares as
agent, but may position and resell a portion of the block as principal to
facilitate the transaction;

 

  •   purchases by a broker-dealer as principal and resale by the broker-dealer
for its own account;

 

  •   an exchange distribution in accordance with the rules of the applicable
exchange;

 

  •   privately negotiated transactions;

 

  •   short sales effected after the date the registration statement of which
this prospectus is a part is declared effective by the SEC;

 

  •   through the writing or settlement of options or other hedging
transactions, whether through an options exchange or otherwise;

 

  •   through agreements between broker-dealers and the selling stockholders to
sell a specified number of such shares at a stipulated price per share;

 

  •   a combination of any such methods of sale; and

 

  •   any other method permitted by applicable law.

The selling stockholders may, from time to time, pledge or grant a security
interest in some or all of the shares of common stock owned by them and, if they
default in the performance of their secured obligations, the pledgees or secured
parties may offer and sell the shares of common stock, from time to time, under
this prospectus, or under an amendment to this prospectus under Rule 424(b) or
other applicable provision of the Securities Act amending the list of selling
stockholders to include the pledgee, transferee or other successors in interest
as selling stockholders under this prospectus. The selling stockholders also may
transfer the shares of common stock in other circumstances, in which case the
pledgees, transferees or other successors in interest will be the selling
beneficial owners for purposes of this prospectus.

 

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In connection with the sale of our common stock or interests therein, the
selling stockholders may enter into hedging transactions with broker-dealers or
other financial institutions, which may in turn engage in short sales of the
common stock in the course of hedging the positions they assume. The selling
stockholders may also sell shares of our common stock short and deliver these
securities to close out their short positions, or loan or pledge the common
stock to broker-dealers that in turn may sell these securities. The selling
stockholders may also enter into options or other transactions with
broker-dealers or other financial institutions or the creation of one or more
derivative securities which require the delivery to each such broker-dealer or
other financial institution of shares offered by this prospectus, which shares
such broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such transaction).

The aggregate proceeds to the selling stockholders from the sale of the common
stock offered by them will be the purchase price of the common stock less
discounts or commissions, if any. Each of the selling stockholders reserves the
right to accept and, together with its agents from time to time, to reject, in
whole or in part, any proposed purchase of common stock to be made directly or
through agents. We will not receive any of the proceeds from this offering.

The selling stockholders also may resell all or a portion of the shares in open
market transactions in reliance upon Rule 144 under the Securities Act of 1933,
provided that they meet the criteria and conform to the requirements of that
rule.

The selling stockholders and any underwriters, broker-dealers or agents that
participate in the sale of the common stock or interests therein may be
“underwriters” within the meaning of Section 2(11) of the Securities Act. Any
discounts, commissions, concessions or profit they earn on any resale of the
shares may be underwriting discounts and commissions under the Securities Act.
Selling stockholders who are “underwriters” within the meaning of Section 2(11)
of the Securities Act will be subject to the prospectus delivery requirements of
the Securities Act.

To the extent required, the shares of our common stock to be sold, the names of
the selling stockholders, the respective purchase prices and public offering
prices, the names of any agents, dealer or underwriter, and any applicable
commissions or discounts with respect to a particular offer will be set forth in
an accompanying prospectus supplement or, if appropriate, a post-effective
amendment to the registration statement that includes this prospectus.

In order to comply with the securities laws of some states, if applicable, the
common stock may be sold in these jurisdictions only through registered or
licensed brokers or dealers. In addition, in some states the common stock may
not be sold unless it has been registered or qualified for sale or an exemption
from registration or qualification requirements is available and is complied
with.

We have advised the selling stockholders that the anti-manipulation rules of
Regulation M under the Exchange Act may apply to sales of shares in the market
and to the activities of the selling stockholders and their affiliates. In
addition, to the extent applicable we will make copies of this prospectus (as it
may be supplemented or amended from time to time) available to the selling
stockholders for the purpose of satisfying the prospectus delivery requirements
of the Securities Act. The selling stockholders may indemnify any broker-dealer
that participates in transactions involving the sale of the shares against
certain liabilities, including liabilities arising under the Securities Act.

 

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We have agreed to indemnify the selling stockholders against liabilities,
including liabilities under the Securities Act and state securities laws,
relating to the registration of the shares offered by this prospectus.

We have agreed with the selling stockholders to keep the registration statement
of which this prospectus constitutes a part effective until the earlier of
(1) such time as all of the shares covered by this prospectus have been disposed
of pursuant to and in accordance with the registration statement or (2) the date
on which all of the shares may be sold without restriction pursuant to Rule 144
of the Securities Act.

*             *             *

 

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