Purchase Agreement, dated as of October 20, 2011



 Exhibit 10.1 
 PURCHASE AGREEMENT 
 PURCHASE AGREEMENT (the
“Agreement”), dated as of October 20, 2011, by and between ARROWHEAD RESEARCH CORPORATION, a Delaware corporation (the “Company”), and LINCOLN PARK CAPITAL FUND, LLC, an Illinois limited liability
company (the “Investor”). 
 WHEREAS: 
 Subject to the terms and conditions set forth in this Agreement, the Company has the right to sell to the Investor, and the Investor has the obligation to buy from the Company, up to Fifteen Million
Dollars ($15,000,000) of the Company’s common stock, $.001 par value per share (the “Common Stock”), subject in all cases to the Maximum Share Cap. The shares of Common Stock to be purchased hereunder are referred to herein as
the “Purchase Shares.” 
 NOW THEREFORE, the Company and the Investor hereby agree as follows: 

 

	 	1.	CERTAIN DEFINITIONS. 

 For
purposes of this Agreement, the following terms shall have the following meanings: 
 (a) “Available Amount”
means initially Fifteen Million Dollars ($15,000,000) in the aggregate which amount shall be reduced by the Purchase Amount each time the Investor purchases shares of Common Stock pursuant to Section 2 hereof. 

(b) “Bankruptcy Law” means Title 11, U.S. Code, or any similar federal or state law for the relief of debtors.

 (c) “Business Day” means any day on which the Principal Market is open for trading including any day on
which the Principal Market is open for trading for a period of time less than the customary time. 
 (d) “Closing Sale
Price” means, for any security as of any date, the last closing sale price for such security on the Principal Market as reported by the Principal Market, or, if the Principal Market is not the principal securities exchange or trading market
for such security, the last closing sale price of such security on the principal securities exchange or trading market where such security is listed or traded as reported by the Principal Market. 

(e) “Confidential Information” means any information disclosed by either party to the other party, either directly or
indirectly, in writing, orally or by inspection of tangible objects (including, without limitation, documents, prototypes, samples, plant and equipment), which is designated as “Confidential,” “Proprietary” or some similar
designation. Information communicated orally shall be considered Confidential Information if such information is confirmed in writing as being Confidential Information within ten (10) Business Days after the initial disclosure. Confidential
Information may also include information disclosed to a disclosing party by third parties. Confidential Information shall not, however, include any information which (i) was publicly known and made generally available in the public domain prior
to the time of disclosure by the disclosing party; (ii) becomes publicly known and made generally available after disclosure by the disclosing party to the receiving party through no action or inaction of the receiving party; (iii) is
already in the possession of the receiving party at the time of disclosure by the disclosing party as shown by the receiving party’s files and records immediately prior to 







 
the time of disclosure; (iv) is obtained by the receiving party from a third party without a breach of such third party’s obligations of confidentiality; (v) is independently
developed by the receiving party without use of or reference to the disclosing party’s Confidential Information, as shown by documents and other competent evidence in the receiving party’s possession; or (vi) is required by law to be
disclosed by the receiving party, provided that the receiving party gives the disclosing party prompt written notice of such requirement prior to such disclosure and assistance in obtaining an order protecting the information from public disclosure.

 (f) “Custodian” means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy
Law. 
 (g) “Exchange Act” means the Securities Exchange Act of 1934, as amended. 

(h) “Maturity Date” means the date that is 720 Business Days (36 Monthly Periods) from the Commencement Date.

 (i) “Monthly Period” means each successive 20 Business Day period commencing with the Commencement Date.

 (j) “Person” means an individual or entity including but not limited to any limited liability company, a
partnership, a joint venture, a corporation, a trust, an unincorporated organization and a government or any department or agency thereof. 
 (k) “Principal Market” means the Nasdaq Capital Market; provided however, that in the event the Company’s Common Stock is ever listed or traded on the Nasdaq Global Market, the
Nasdaq Global Select Market, the New York Stock Exchange, the NYSE Amex, or the OTC Bulletin Board (it being understood that as used herein “OTC Bulletin Board” shall also mean any successor or comparable market quotation system or
exchange to the OTC Bulletin Board such as the OTCQB operated by the OTC Markets Group, Inc.), then the “Principal Market” shall mean such other market or exchange on which the Company’s Common Stock is then listed or traded.

 (l) “Purchase Amount” means, with respect to any particular purchase made hereunder, the Regular Purchase to
be purchased by the Investor pursuant to Section 2 hereof multiplied by the Purchase Price. 
 (m) “Purchase
Date” means with respect to any particular purchase made hereunder, the Business Day on which the Investor receives by 12:00 p.m. eastern time of such Business Day a valid Purchase Notice that the Investor is to buy Purchase Shares pursuant
to Section 2 hereof. 
 (n) “Purchase Price” means the lower of: (A) the lowest Sale Price of the
Common Stock on the Purchase Date and (B) the arithmetic average of the three (3) lowest Closing Sale Prices for the Common Stock during the twelve (12) consecutive Business Days ending on the Business Day immediately preceding such
Purchase Date (to be appropriately adjusted for any reorganization, recapitalization, non-cash dividend, stock split or other similar transaction). 
 (o) “Purchase Notice” shall mean a written notice from the Company to the Investor directing the Investor to buy such Purchase Amount in Purchase Shares as specified by the Company
therein on the Purchase Date. 

  
 -2-









 (p) “Sale Price” means any sale price for the shares of Common Stock on the
Principal Market as reported by the Principal Market. 
 (q) “SEC” means the United States Securities and
Exchange Commission. 
 (r) “Securities Act” means the Securities Act of 1933, as amended. 

(s) “Signing Market Price” means $0.4207, representing the consolidated closing bid price of the Common Stock on the
Nasdaq Stock Market on the date of this Agreement. 
 (t) “Transfer Agent” means the transfer agent of the
Company as set forth in Section 11(f) hereof or such other person who is then serving as the transfer agent for the Company in respect of the Common Stock. 
  

	 	2.	PURCHASE OF COMMON STOCK. 


Subject to the terms and conditions set forth in this Agreement, the Company has the right to sell to the Investor, and the Investor has
the obligation to purchase from the Company, Purchase Shares as follows: 
 (a) Purchases. Beginning four
(4) Business Days following the satisfaction of the conditions (the “Commencement”) as set forth in Sections 7 and 8 below (the date of satisfaction of such conditions, the “Commencement Date”), the Company
shall have the right but not the obligation on each Business Day during the term of this Agreement to direct the Investor by its delivery to the Investor of a Purchase Notice from time to time to buy up to $500,000 of common stock (each such
purchase a “Regular Purchase” and each such shares “Purchase Shares”) at the Purchase Price on the Purchase Date. The Regular Purchase Amount may be increased to up to $600,000 per Purchase Notice if the Closing
Sale Price of the Common Stock is equal to or greater than $.90 (subject to equitable adjustment for any reorganization, recapitalization, non-cash dividend, stock split or other similar transaction) on the Purchase Date. The Regular Purchase Amount
may be increased to up to $800,000 per Purchase Notice if the Closing Sale Price of the Common Stock is equal to or greater than $1.20 (subject to equitable adjustment for any reorganization, recapitalization, non-cash dividend, stock split or other
similar transaction) on the Purchase Date. The Regular Purchase Amount may be increased to up to $1,000,000 per Purchase Notice if the Closing Sale Price of the Common Stock is equal to or greater than $1.50 (subject to equitable adjustment for any
reorganization, recapitalization, non-cash dividend, stock split or other similar transaction) on the Purchase Date. Each Regular Purchase is subject in all cases to the Maximum Share Cap. With respect to each such Regular Purchase, the Company must
deliver the Purchase Shares before 1:00 p.m. eastern time on the Business Day following the Purchase Date. If on any Purchase Date the Closing Sale Price of the Common Stock is below the Regular Purchase threshold price, such Regular Purchase shall
automatically be reduced to the next lowest applicable Regular Purchase Amount. The Company may deliver multiple Regular Purchase Notices to the Investor so long as at least four (4) Business Days have passed since the most recent Regular
Purchase was completed. 
 (b) Payment for Purchase Shares. The Investor shall pay to the Company an amount equal to the
Purchase Amount with respect to such Purchase Shares as full payment for such Purchase Shares via wire transfer of immediately available funds on the same Business Day that the Investor receives such Purchase Shares if they are received by the
Investor before 1:00 p.m. eastern time or if received by the Investor after 1:00 p.m. eastern time, the next Business Day. The Company shall not issue any fraction of a share of Common Stock upon any purchase. If the issuance would result in the
issuance of a fraction of a share of Common Stock, the Company shall round such fraction of a share of Common 

  
 -3-









 
Stock up or down to the nearest whole share. All payments made under this Agreement shall be made in lawful money of the United States of America or wire transfer of immediately available funds
to such account as the Company may from time to time designate by written notice in accordance with the provisions of this Agreement. Whenever any amount expressed to be due by the terms of this Agreement is due on any day that is not a Business
Day, the same shall instead be due on the next succeeding day that is a Business Day. 
 (c) Compliance with Registration
Statement Eligibility Requirements and Rules of Principal Market. 
 (i) Maximum Share Cap. The Company shall not
issue or sell any shares of Common Stock pursuant to this Agreement, and the Investor shall not purchase or acquire any shares of Common Stock pursuant to this Agreement, to the extent that after giving effect thereto, the aggregate number of all
shares of Common Stock that would be issued pursuant to this Agreement, together with all shares of Common Stock issued pursuant to any transactions that may be aggregated with the transactions contemplated by this Agreement under applicable rules
of The Nasdaq Stock Market or any other Principal Market on which the Common Stock may be listed or quoted, would exceed the lesser of: (A) subject to Section 2(c)(ii) below, the maximum number of shares of Common Stock that
the Company may issue pursuant to this Agreement and the transactions contemplated hereby without (1) breaching the Company’s obligations under the applicable rules of The Nasdaq Stock Market or any other Principal Market on which the
Common Stock may be listed or quoted or (2) obtaining stockholder approval under the applicable rules of The Nasdaq Stock Market or any other Principal Market on which the Common Stock may be listed or quoted (the “Exchange
Cap”), unless and until the Company elects to solicit stockholder approval of the transactions contemplated by this Agreement and the stockholders of the Company have in fact approved the transactions contemplated by this Agreement in
accordance with the applicable rules and regulations of The Nasdaq Stock Market, any other Principal Market on which the Common Stock may be listed or quoted, and the Certificate of Incorporation and By-laws of the Company; and (B) the maximum
number of shares of Common Stock that the Company may issue pursuant to this Agreement and the transactions contemplated hereby without causing the Company to exceed the limitations set forth in General Instruction I.B.6. of Form S-3 and the
interpretations of the SEC’s staff set forth in response to questions 139.23 and 139.24 of the Compliance and Disclosure Interpretations of Securities Act Sections of the Division of Corporation Finance of the Commission dated March 4,
2011 (the “Registration Statement Eligibility Cap”). For all purposes of this Agreement, the term “Maximum Share Cap” shall mean the lesser of (i) the Exchange Cap, to the extent applicable to the
transactions contemplated by this Agreement, and (ii) the Registration Statement Eligibility Cap (it being hereby acknowledged and agreed that the Registration Statement Eligibility Cap shall be applicable for all purposes of this Agreement and
the transactions contemplated hereby at all times during the term of this Agreement). For the avoidance of doubt, the Company may, but shall be under no obligation to, request its stockholders to approve the transactions contemplated by this
Agreement; provided, that if stockholder approval is not obtained in accordance with this Section 2(c)(i), the Exchange Cap shall be applicable for all purposes of this Agreement and the transactions contemplated hereby at all times
during the term of this Agreement (except as set forth in Section 2(c)(ii) below). 
 (ii) At-Market
Transaction. Notwithstanding Section 2(c)(i) above, the Exchange Cap shall not be applicable for any purposes of this Agreement and the transactions contemplated hereby, solely to the extent that (and only for so long as) the Average
Price shall equal or exceed the Base Price (it being hereby acknowledged and agreed that the Exchange Cap shall be applicable for all purposes of this Agreement and the transactions contemplated hereby at all other times during the term of this
Agreement, unless the stockholder approval referred to in Section 2(c)(i) is obtained). “Average Price” means a price per Purchase Share (rounded to the nearest tenth of a cent) equal to the quotient obtained by


  
 -4-









 
dividing (A) the aggregate gross Purchase Price paid by the Investor for all Purchase Shares purchased pursuant to this Agreement, by (B) the aggregate number of Purchase Shares issued
pursuant to this Agreement. “Base Price” means a price per Purchase Share equal to the sum of (A) the Signing Market Price and (B) $0.042, (subject to adjustment for any reorganization, recapitalization, non-cash dividend,
stock split, reverse stock split or other similar transaction that occurs on or after the date of this Agreement). 
 (iii)
General. The Company shall not issue any shares of Common Stock pursuant to this Agreement if such issuance would reasonably be expected to result in (A) non-compliance with General Instruction I.B.6. of Form S-3 and the interpretations
of the SEC’s staff set forth in response to questions 139.23 and 139.24 of the Compliance and Disclosure Interpretations of Securities Act Sections of the Division of Corporation Finance of the Commission dated March 4, 2011 or (B) a
breach of the rules and regulations of The Nasdaq Stock Market or any other Principal Market on which the Common Stock may be listed or quoted. The provisions of this Section 2(c) shall be implemented in a manner otherwise than in strict
conformity with the terms hereof only if necessary to ensure compliance with the rules and regulations of The Nasdaq Stock Market or any other Principal Market on which the Common Stock may be listed or quoted. The parties hereby acknowledge and
agree that the Available Amount and the Maximum Share Cap shall not be amended or waived. 
 (d) Beneficial Ownership
Limitation. Notwithstanding anything to the contrary contained in this Agreement, the Company shall not issue or sell, and the Investor shall not purchase or acquire, any shares of Common Stock under this Agreement which, when
aggregated with all other shares of Common Stock then beneficially owned by the Investor and its affiliates (as calculated pursuant to Section 13(d) of the Exchange Act and Rule 13d-3 promulgated thereunder), would result in the beneficial
ownership by the Investor and its affiliates of more than 9.99% of the then issued and outstanding shares of Common Stock (the “Beneficial Ownership Limitation”). Upon the written or oral request of the Investor, the
Company shall confirm orally or in writing to the Investor within two (2) Business Days of such request the number of shares of Common Stock then outstanding. The Investor and the Company shall each cooperate in good faith in the determinations
required hereby and the application hereof. For the avoidance of doubt, the limitations set forth in this Section 2(d) shall limit the beneficial ownership by the Investors and its affiliates of Common Stock (as calculated pursuant
to Section 13(d) of the Exchange Act and Rule 13d-3 promulgated thereunder), but, subject to such limitation, shall not otherwise necessarily limit the total number of shares of Common Stock that may be issued and sold hereunder
during the term of this Agreement (which total number is subject to the Available Amount and the provisions of Section 2(a), Section 2(c)(1) and Section 2(c)(iii)). 

(e) Purchase Price Floor. The Company and the Investor shall not effect any sales and purchases under this Agreement on any
Purchase Date where the Purchase Price for any purchases of Purchase Shares would be less than the Floor Price. “Floor Price” means $0.20, which shall be appropriately adjusted for any reorganization, recapitalization, non-cash
dividend, stock split or other similar transaction. 

  
 -5-










	 	3.	INVESTOR’S REPRESENTATIONS AND WARRANTIES. 

 The Investor represents and warrants to the Company that as of the date hereof and as of the Commencement Date: 
 (a) Investment Purpose. The Investor is acquiring the Commitment Shares and the Purchase Shares (collectively, the “Securities”) as principal for its own account and not with a
view to or for distributing or reselling such Securities or any part thereof in violation of the Securities Act or any applicable state securities law, has no present intention of distributing any of such Securities in violation of the Securities
Act or any applicable state securities law and has no direct or indirect arrangement or understandings with any other persons to distribute or regarding the distribution of such Securities in violation of the Securities Act or any applicable state
securities law (this representation and warranty not limiting the Investor’s right to sell the Securities at any time pursuant to the registration statement described herein or otherwise in compliance with applicable federal and state
securities laws and with respect to the Commitment Shares, subject to Section 5(e) hereof). The Investor is acquiring the Securities hereunder in the ordinary course of its business. 

(b) Accredited Investor Status. The Investor is an “accredited investor” as that term is defined in Rule 501(a)(3) of
Regulation D. 
 (c) Reliance on Exemptions. The Investor understands that the Securities may be offered and sold to it
in reliance on specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying in part upon the truth and accuracy of, and the Investor’s compliance with, the
representations, warranties, agreements, acknowledgments and understandings of the Investor set forth herein in order to determine the availability of such exemptions and the eligibility of the Investor to acquire the Securities. 

(d) Information. The Investor understands that its investment in the Securities involves a high degree of risk. The Investor
(i) is able to bear the economic risk of an investment in the Securities including a total loss, (ii) has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the proposed
investment in the Securities and (iii) has had an opportunity to ask questions of and receive answers from the officers of the Company concerning the financial condition and business of the Company and others matters related to an investment in
the Securities. Neither such inquiries nor any other due diligence investigations conducted by the Investor or its representatives shall modify, amend or affect the Investor’s right to rely on the Company’s representations and warranties
contained in Section 4 below. The Investor has sought such accounting, legal and tax advice as it has considered necessary to make an informed investment decision with respect to its acquisition of the Securities. 

(e) No Governmental Review. The Investor understands that no United States federal or state agency or any other government or
governmental agency has passed on or made any recommendation or endorsement of the Securities or the fairness or suitability of the investment in the Securities nor have such authorities passed upon or endorsed the merits of the offering of the
Securities. 
 (f) Transfer or Sale. The Investor understands that (i) the Securities may not be offered for sale,
sold, assigned or transferred unless (A) registered pursuant to the Securities Act or (B) an exemption exists permitting such Securities to be sold, assigned or transferred without such registration; (ii) any sale of the Securities
made in reliance on Rule 144 may be made only in accordance with the terms of Rule 144 and further, if Rule 144 is not applicable, any resale of the Securities under circumstances in which the seller (or the person through whom the sale is made) may
be deemed to be an underwriter (as that 

  
 -6-









 
term is defined in the Securities Act) may require compliance with some other exemption under the Securities Act or the rules and regulations of the SEC thereunder. 

(g) Validity; Enforcement. This Agreement has been duly and validly authorized, executed and delivered on behalf of the Investor
and is a valid and binding agreement of the Investor enforceable against the Investor in accordance with its terms, subject as to enforceability to general principles of equity and to applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation and other similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies. 
 (h) Residency. The Investor is a resident of the State of Illinois. 
 (i)
No Prior Short Selling. The Investor represents and warrants to the Company that at no time prior to the date of this Agreement has any of the Investor, its agents, representatives or affiliates engaged in or effected, in any manner
whatsoever, directly or indirectly, any (i) “short sale” (including any “short sale exempt”) (as such term is defined in Section 242.200 of Regulation SHO of the Exchange Act) of the Common Stock or (ii) hedging
transaction, which establishes a net short position with respect to the Common Stock. 
  

	 	4.	REPRESENTATIONS AND WARRANTIES OF THE COMPANY. 

 The Company represents and warrants to the Investor that as of the date hereof and as of the Commencement Date (except as set forth in the SEC Documents which are incorporated ) by reference herein:

 (a) Organization and Qualification. The Company and each of the Subsidiaries (which for purposes of this Agreement
means any entity in which the Company, directly or indirectly, owns 50% or more of the voting stock or capital stock or other similar equity interests) is an entity duly incorporated or otherwise organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or organization, with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted. Neither the Company nor any Subsidiary
is in violation nor default of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents. Each of the Company and the Subsidiaries is duly qualified to conduct business
and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good
standing, as the case may be, could not have or reasonably be expected to result in: (i) a material adverse effect on the legality, validity or enforceability of any Transaction Document, (ii) a material adverse effect on the results of
operations, assets, business, prospects or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole, or (iii) a material adverse effect on the Company’s ability to perform in any material respect on a timely
basis its obligations under any Transaction Document (any of (i), (ii) or (iii), a “Material Adverse Effect”) and no Proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke,
limit or curtail such power and authority or qualification. The Company has no Subsidiaries except as set forth on Schedule 4(a). 
 (b) Authorization; Enforcement; Validity. (i) The Company has the requisite corporate power and authority to enter into and perform its obligations under this Agreement, the Registration
Rights Agreement and each of the other agreements entered into by the parties on the Commencement Date and attached hereto as exhibits to this Agreement (collectively, the “Transaction Documents”), and to issue the Securities in
accordance with the terms hereof and thereof, (ii) the execution and delivery of 

  
 -7-









 
the Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby, including without limitation, the issuance of the Commitment Shares and
the reservation for issuance and the issuance of the Purchase Shares issuable under this Agreement, have been duly authorized by the Company’s Board of Directors and no further consent or authorization is required by the Company, its Board of
Directors or its stockholders, (iii) this Agreement has been, and each other Transaction Document shall be on the Commencement Date, duly executed and delivered by the Company and (iv) this Agreement constitutes, and each other Transaction
Document upon its execution on behalf of the Company, shall constitute, the valid and binding obligations of the Company enforceable against the Company in accordance with their terms, except as such enforceability may be limited by general
principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of creditors’ rights and remedies. The Board of Directors of the Company has
approved the resolutions (the “Signing Resolutions”) substantially in the form as set forth as Exhibit C attached hereto to authorize this Agreement and the transactions contemplated hereby. The Signing Resolutions are valid,
in full force and effect and have not been modified or supplemented in any respect. No other approvals or consents of the Company’s Board of Directors and/or stockholders is necessary under applicable laws and the Company’s Certificate of
Incorporation and/or Bylaws to authorize the execution and delivery of this Agreement or any of the transactions contemplated hereby, including, but not limited to, the issuance of the Commitment Shares and the issuance of the Purchase Shares.

 (c) Capitalization. As of the date hereof, the authorized capital stock of the Company is set forth on Schedule
4(c). Except as disclosed in Schedule 4(c), (i) no shares of the Company’s capital stock are subject to preemptive rights or any other similar rights or any liens or encumbrances suffered or permitted by the Company,
(ii) there are no outstanding debt securities, (iii) there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company or any of its Subsidiaries, or contracts, commitments, understandings or arrangements by which the Company or any of its Subsidiaries is or may become bound to issue additional shares of capital stock of the
Company or any of its Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company or any of its
Subsidiaries, (iv) there are no agreements or arrangements under which the Company or any of its Subsidiaries is obligated to register the sale of any of their securities under the Securities Act (except the Registration Rights Agreement),
(v) there are no outstanding securities or instruments of the Company or any of its Subsidiaries which contain any redemption or similar provisions, and there are no contracts, commitments, understandings or arrangements by which the Company or
any of its Subsidiaries is or may become bound to redeem a security of the Company or any of its Subsidiaries, (vi) there are no securities or instruments containing anti-dilution or similar provisions that will be triggered by the issuance of
the Securities as described in this Agreement and (vii) the Company does not have any stock appreciation rights or “phantom stock” plans or agreements or any similar plan or agreement. The Company has furnished or made available to
the Investor true and correct copies of the Company’s Certificate of Incorporation, as amended and as in effect on the date hereof (the “Certificate of Incorporation”), and the Company’s By-laws, as amended and as in
effect on the date hereof (the “By-laws”), and summaries of the terms of all securities convertible into or exercisable for Common Stock, if any, and copies of any documents containing the material rights of the holders thereof in
respect thereto. 
 (d) Issuance of Securities. Upon issuance and payment therefor in accordance with the terms and
conditions of this Agreement, the Purchase Shares shall be validly issued, fully paid and nonassessable and free from all taxes, liens and charges with respect to the issue thereof, with the holders being entitled to all rights accorded to a holder
of Common Stock. The Commitment Shares have been 

  
 -8-









 
duly authorized and, upon issuance in accordance with the terms hereof, the Commitment Shares shall be (i) validly issued, fully paid and non-assessable and (ii) free from all taxes,
liens and charges with respect to the issue thereof. 1,000,000 shares of Common Stock have been duly authorized and reserved for issuance upon purchase under this Agreement as Purchase Shares and an additional 49,000,000 shares of Common Stock
(pre-split) will be authorized and reserved for issuance pursuant to this Agreement and Purchase Shares following the Company’s implementation of a reverse stock split, which will reduce the issued and outstanding Common Stock but will not
affect the total number of shares of Common Stock authorized for issuance (the “Reverse Stock Split”). 886,189 shares of Common Stock (subject to equitable adjustment for any reorganization, recapitalization, non-cash dividend,
stock split or other similar transaction) have been duly authorized and reserved for issuance as Additional Commitment Shares in accordance with this Agreement. The Reverse Stock Split has been authorized by the Company’s stockholders at a
meeting held on August 8, 2011 and may be implemented at the discretion of the Board of Directors at any time through August 8, 2012 at a range between 1-for-2 and 1-for-15 

(e) No Conflicts. Except as disclosed in Schedule 4(e), the execution, delivery and performance of the Transaction
Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, the reservation for issuance and issuance of the Purchase Shares and Additional Commitment Shares) will
not (i) result in a violation of the Certificate of Incorporation, any Certificate of Designations, Preferences and Rights of any outstanding series of preferred stock of the Company or the By-laws or (ii) conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company or
any of its Subsidiaries is a party, or result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations and the rules and regulations of the Principal Market applicable to the
Company or any of its Subsidiaries) or by which any property or asset of the Company or any of its Subsidiaries is bound or affected, except in the case of conflicts, defaults, terminations, amendments, accelerations, cancellations and violations
under clause (ii), which could not reasonably be expected to result in a Material Adverse Effect. Except as disclosed in Schedule 4(e), neither the Company nor its Subsidiaries is in violation of any term of or in default under its
Certificate of Incorporation, any Certificate of Designation, Preferences and Rights of any outstanding series of preferred stock of the Company or By-laws or their organizational charter or by-laws, respectively. Except as disclosed in Schedule
4(e), neither the Company nor any of its Subsidiaries is in violation of any term of or is in default under any material contract, agreement, mortgage, indebtedness, indenture, instrument, judgment, decree or order or any statute, rule or
regulation applicable to the Company or its Subsidiaries, except for possible conflicts, defaults, terminations or amendments which could not reasonably be expected to have a Material Adverse Effect. The business of the Company and its Subsidiaries
is not being conducted, and shall not be conducted, in violation of any law, ordinance, regulation of any governmental entity, except for possible violations, the sanctions for which either individually or in the aggregate could not reasonably be
expected to have a Material Adverse Effect. Except as specifically contemplated by this Agreement and as required under the Securities Act or applicable state securities laws, the Company is not required to obtain any consent, authorization or order
of, or make any filing or registration with, any court or governmental agency or any regulatory or self-regulatory agency in order for it to execute, deliver or perform any of its obligations under or contemplated by the Transaction Documents in
accordance with the terms hereof or thereof. Except as disclosed in Schedule 4(e), all consents, authorizations, orders, filings and registrations which the Company is required to obtain pursuant to the preceding sentence shall be obtained or
effected on or prior to the Commencement Date. Except as listed in Schedule 4(e), since one year prior to the date hereof, the Company has not received nor delivered any notices or correspondence from or to the Principal Market relating to
the non-compliance with exchange listing standards or rules. The Principal Market has not commenced any delisting proceedings against the Company. 

  
 -9-









 (f) SEC Documents; Financial Statements. Except as disclosed in Schedule
4(f) the Company has filed all reports, schedules, forms, statements and other documents required to be filed by the Company under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the
two years preceding the date hereof (or such shorter period as the Company was required by law or regulation to file such material) (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, being
collectively referred to herein as the “SEC Documents”) on a timely basis or has received a valid extension of such time of filing and has filed any such SEC Documents prior to the expiration of any such extension. As of their
respective dates, the SEC Documents complied in all material respects with the requirements of the Securities Act and the Exchange Act, as applicable, and none of the SEC Documents, when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The financial statements of the Company included in
the SEC Documents 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 United States generally accepted accounting principles applied on a consistent basis during the periods involved (“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 in all material respects the financial position of the Company and its consolidated Subsidiaries as of and for the dates thereof and the
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. Except as listed in Schedule 4(f), the Company has received no notices or
correspondence from the SEC for the one year preceding the date hereof. The SEC has not commenced any enforcement proceedings against the Company or any of its subsidiaries. 

(g) Absence of Certain Changes. Except as disclosed in Schedule 4(g), since the filing of the Company’s Form 10-Q for
the period ending June 30, 2011, there has been no material adverse change in the business, properties, operations, financial condition or results of operations of the Company or its Subsidiaries. The Company has not taken any steps, and does
not currently expect to take any steps, to seek protection pursuant to any Bankruptcy Law nor does the Company or any of its Subsidiaries have any knowledge or reason to believe that its creditors intend to initiate involuntary bankruptcy or
insolvency proceedings. The Company is financially solvent and is generally able to pay its debts as they become due.  

(h) Absence of Litigation. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body pending or, to the knowledge of the Company or any of its Subsidiaries, threatened against or affecting the Company, the Common Stock or any of the Company’s Subsidiaries or any of the
Company’s or the Company’s Subsidiaries’ officers or directors in their capacities as such, which could reasonably be expected to have a Material Adverse Effect. A description of each action, suit, proceeding, inquiry or investigation
before or by any court, public board, government agency, self-regulatory organization or body which, as of the date of this Agreement, is pending or threatened in writing against or affecting the Company, the Common Stock or any of the
Company’s Subsidiaries or any of the Company’s or the Company’s Subsidiaries’ officers or directors in their capacities as such, is set forth in Schedule 4(h). 

(i) Acknowledgment Regarding Investor’s Status. The Company acknowledges and agrees that the Investor is acting solely in the
capacity of arm’s length purchaser with respect to the Transaction Documents and the transactions contemplated hereby and thereby. The Company further acknowledges that the Investor is not acting as a financial advisor or fiduciary of the
Company (or in any similar 

  
 -10-









 
capacity) with respect to the Transaction Documents and the transactions contemplated hereby and thereby and any advice given by the Investor or any of its representatives or agents in connection
with the Transaction Documents and the transactions contemplated hereby and thereby is merely incidental to the Investor’s purchase of the Securities. The Company further represents to the Investor that the Company’s decision to enter into
the Transaction Documents has been based solely on the independent evaluation by the Company and its representatives and advisors. 
 (j) No General Solicitation. Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf, has engaged in any form of general solicitation or general advertising
(within the meaning of Regulation D under the Securities Act) in connection with the offer or sale of the Securities. 
 (k)
Intellectual Property Rights. The Company and its Subsidiaries own or possess adequate rights or licenses to use all material trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights,
copyrights, inventions, licenses, approvals, governmental authorizations, trade secrets and rights necessary to conduct their respective businesses as now conducted. Except as set forth on Schedule 4(k), none of the Company’s material
trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, inventions, licenses, approvals, government authorizations, trade secrets or other intellectual property rights have expired or
terminated, or, by the terms and conditions thereof, could expire or terminate within two years from the date of this Agreement. The Company and its Subsidiaries do not have any knowledge of any infringement by the Company or its Subsidiaries of any
material trademark, trade name rights, patents, patent rights, copyrights, inventions, licenses, service names, service marks, service mark registrations, trade secret or other similar rights of others, or of any such development of similar or
identical trade secrets or technical information by others and, except as set forth on Schedule 4(k), there is no claim, action or proceeding being made or brought against, or to the Company’s knowledge, being threatened against, the
Company or its Subsidiaries regarding trademark, trade name, patents, patent rights, invention, copyright, license, service names, service marks, service mark registrations, trade secret or other infringement, which could reasonably be expected to
have a Material Adverse Effect. 
 (l) Environmental Laws. The Company and its Subsidiaries (i) are 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) have received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (iii) are in compliance with all terms and conditions of any such
permit, license or approval, except where, in each of the three foregoing clauses, the failure to so comply could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. 

(m) Title. The Company and the Subsidiaries have good and marketable title in fee simple to all real property owned by them and
good and marketable title in all personal property owned by them that is material to the business of the Company and the Subsidiaries, in each case free and clear of all liens, encumbrances and defects (“Liens”), except for Liens as
do not materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by the Company and the Subsidiaries, and Liens for the payment of federal, state or other taxes, the
payment of which is neither delinquent nor subject to penalties. Any real property and facilities held under lease by the Company and the Subsidiaries are held by them under valid, subsisting and enforceable leases with which the Company and
the Subsidiaries are in compliance with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company and its Subsidiaries. Any real property and facilities held
under lease by the Company and 

  
 -11-









 
any of its Subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of
such property and buildings by the Company and its Subsidiaries. 
 (n) Insurance. The Company and each of its
Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as management of the Company believes to be prudent and customary in the businesses in which the Company and its
Subsidiaries are engaged. Neither the Company nor any such Subsidiary has been refused any insurance coverage sought or applied for and neither the Company nor any such Subsidiary has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not materially and adversely affect the condition, financial or
otherwise, or the earnings, business or operations of the Company and its Subsidiaries, taken as a whole. 
 (o) Regulatory
Permits. The Company and its Subsidiaries possess all material certificates, authorizations and permits issued by the appropriate federal, state or foreign regulatory authorities necessary to conduct their respective businesses, and neither the
Company nor any such Subsidiary has received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit. 
 (p) Tax Status. The Company and each of its Subsidiaries has made or filed all federal and state income and all other material tax returns, reports and declarations required by any jurisdiction to
which it is subject (unless and only to the extent that the Company and each of its Subsidiaries has set aside on its books provisions reasonably adequate for the payment of all unpaid and unreported taxes) and has paid all taxes and other
governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and has set aside on its books provision reasonably adequate for
the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of
the Company know of no basis for any such claim. 
 (q) Transactions With Affiliates. Except as set forth in the SEC
Documents, none of the officers or directors of the Company and, to the knowledge of the Company, none of the employees of the Company is presently a party to any transaction with the Company or any Subsidiary (other than for services as employees,
officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner, in each case in excess of $120,000 other than
for (i) payment of salary or consulting fees for services rendered, (ii) reimbursement for expenses incurred on behalf of the Company and (iii) other employee benefits, including stock option agreements under any stock option plan of
the Company. 
 (r) Application of Takeover Protections. The Company and its board of directors have taken or will take
prior to the Commencement Date 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 Certificate of Incorporation or the laws of the state of its incorporation which is or could become applicable to the Investor as a result of the transactions contemplated by this Agreement, including, without limitation, the
Company’s issuance of 

  
 -12-









 
the Securities and the Commitment Shares and the Investor’s ownership of the Securities and the Commitment Shares. 
 (s) Disclosure. Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents and with respect to information provided in any Offering
Notice, the Company confirms that as of the Commencement Date neither it nor any other Person acting on its behalf has provided the Investor or its agents or counsel with any information that it believes constitutes or might constitute material,
non-public information which is not otherwise disclosed in the Registration Statement or prospectus supplements thereto or otherwise made publicly available. The Company understands and confirms that the Investor will rely on the foregoing
representation in effecting purchases and sales of securities of the Company. All of the disclosure furnished by or on behalf of the Company to the Investor regarding the Company, its business and the transactions contemplated hereby, including
the disclosure schedules to this Agreement, is true and correct and does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances
under which they were made, not misleading. The press releases disseminated by the Company during the twelve months preceding the date of this Agreement taken as a whole do not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made and when made, not misleading. The Company acknowledges and agrees that the Investor
neither makes nor has made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in Section 3 hereof. 

(t) Foreign Corrupt Practices. Neither the Company, nor to the knowledge of the Company, any agent or other person acting on
behalf of the Company, has (i) directly or indirectly, used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity, (ii) made any unlawful payment to foreign
or domestic government officials or employees or to any foreign or domestic political parties or campaigns from corporate funds, (iii) failed to disclose fully any contribution made by the Company (or made by any person acting on its behalf of
which the Company is aware) which is in violation of law, or (iv) violated in any material respect any provision of the Foreign Corrupt Practices Act of 1977, as amended. 

 

	 	5.	COVENANTS. 

 (a) Filing
of Form 8-K and Registration Statement. The Company agrees that it shall, within the time required under the Exchange Act file a Report on Form 8-K disclosing this Agreement and the transaction contemplated hereby. The Company shall also file
within twenty (20) Business Days from the date hereof a new registration statement (“Registration Statement”) covering only the resale of the Purchase Shares and the Commitment Shares, in accordance with the terms of the
Registration Rights Agreement between the Company and the Investor, dated as of the date hereof (“Registration Rights Agreement”). Any securities issuable under this Agreement that have not been registered under the Securities Act
shall bear the following restrictive legend (the “Restrictive Legend”), which such Restrictive Legend may be removed in accordance with applicable Securities Act rules and regulations upon delivery of a reasonably acceptable opinion
from counsel to the Investor: 
 THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES 

  
 -13-









 
LAWS, AND NO SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION, GIFT, TRANSFER OR OTHER DISPOSITION OR OFFER TO DO ANY OF THE FOREGOING MAY BE MADE UNLESS A REGISTRATION STATEMENT UNDER THE SECURITIES ACT
AND OTHER APPLICABLE SECURITIES LAWS WITH RESPECT TO SUCH SECURITIES IS THEN IN EFFECT, OR IN THE OPINION OF COUNSEL, ACCEPTABLE TO THE ISSUER, SUCH REGISTRATION UNDER THE SECURITIES ACT AND OTHER APPLICABLE SECURITIES LAWS IS NOT REQUIRED.

 (b) Blue Sky. The Company has taken all such action, if any, as is reasonably necessary in order to obtain an
exemption for or to qualify (i) the initial issuance of the Initial Commitment Shares to the Investor under this Agreement and (ii) any subsequent resale of the Initial Commitment Shares by the Investor, in each case, under applicable
securities or “Blue Sky” laws of the states of the United States in such states as reasonably requested by the Investor, and has provided evidence of any such action so taken to the Investor, and the Company shall continue to use its best
efforts to maintain in effect such exemption or qualification, as applicable. The Company shall use its best efforts to take such action, if any, as is reasonably necessary in order to obtain an exemption for or to qualify (x) the initial
issuance or sale of any Additional Commitment Shares and any Purchase Shares to the Investor under this Agreement and (y) any subsequent resale of any Additional Commitment Shares and any Purchase Shares by the Investor, in each case, under
applicable securities or “Blue Sky” laws of the states of the United States in such states as is reasonably requested by the Investor from time to time, and shall provide evidence of any such action so taken to the Investor, and the
Company shall continue to use its best efforts to maintain in effect such exemption or qualification, as applicable. 
 (c)
Listing. The Company shall promptly secure the listing of all of the Purchase Shares and Commitment Shares upon each national securities exchange and automated quotation system, if any, upon which shares of Common Stock are then listed
(subject to official notice of issuance) and shall maintain, so long as any other shares of Common Stock shall be so listed, such listing of all such securities from time to time issuable under the terms of the Transaction Documents. The Company
shall maintain the Common Stock’s authorization for quotation on the Principal Market. The Company shall promptly, and in no event later than the following Business Day, provide to the Investor copies of any notices it receives from the
Principal Market regarding the continued eligibility of the Common Stock for listing on such automated quotation system or securities exchange. The Company shall pay all fees and expenses in connection with satisfying its obligations under this
Section. 
 (d) Limitation on Short Sales and Hedging Transactions. The Investor agrees that beginning on the date of
this Agreement and ending on the date of termination of this Agreement as provided in Section 11, the Investor and its agents, representatives and affiliates shall not in any manner whatsoever enter into or effect, directly or indirectly, any
(i) “short sale” (including any “short sale exempt”) (as such term is defined in Section 242.200 of Regulation SHO of the Exchange Act) of the Common Stock or (ii) hedging transaction, that establishes a net short
position with respect to the Common Stock. 
 (e) Issuance of Commitment Shares. On or before October 20, 2011, the
Company shall pay to the Investor, as consideration for the Investor entering into this Agreement, a commitment fee of $269,500 (the “Initial Commitment Fee”). The Company may pay the Initial Commitment Fee in cash, or in lieu of a
cash payment, issue to the Investor 689,258 shares of Common Stock (the “Initial Commitment Shares”) valued at $0.391 per share and shall deliver to the Transfer Agent a letter in the form as set forth as Exhibit E attached hereto
with respect to the issuance of the Initial Commitment Shares. In connection with each purchase of Purchase Shares hereunder, the Company agrees to issue to the Investor a number of shares of Common Stock (the “Additional Commitment
Shares” and together 

  
 -14-









 
with the Initial Commitment Shares, the “Commitment Shares”) equal to the product of (x) 886,189 and (y) the Purchase Amount Fraction. The “Purchase Amount
Fraction” shall mean a fraction, the numerator of which is the Purchase Amount purchased by the Investor with respect to such purchase of Purchase Shares and the denominator of which is Fifteen Million Dollars ($15,000,000). The Additional
Commitment Shares shall be equitably adjusted for any reorganization, recapitalization, non-cash dividend, stock split or other similar transaction. The Initial Commitment Shares shall be issued in certificated form and shall bear the Restrictive
Legend. The Investor agrees that the Investor shall not pledge, transfer or sell the Commitment Shares until the earlier of (a) 720 Business Days (36 Monthly Periods) from the date hereof or (b) the date on which this Agreement has been
terminated, provided, however, that such restrictions shall not apply: (i) if an Event of Default has occurred, or any event which, after notice and/or lapse of time, would become an Event of Default, including any failure by the Company to
timely issue Purchase Shares under this Agreement, or (iii) in the event that the Registration Statement is not declared effective by the SEC within 180 days from the date hereof. Notwithstanding the forgoing, the Investor may transfer
Commitment Shares to a third party in order to settle a sale made by the Investor where the Investor reasonably expects the Company to deliver additional Purchase Shares to the Investor under this Agreement so long as the Investor maintains
ownership of the amount of Commitment Shares received up to that point by “replacing” such Commitment Shares so transferred with new Purchase Shares when the new Purchase Shares are actually issued by the Company to the Investor.

 (f) Due Diligence. The Investor shall have the right, from time to time as the Investor may reasonably deem
appropriate, to perform reasonable due diligence on the Company during normal business hours at any time prior to the Commencement. The Company and its officers and employees shall provide information and reasonably cooperate with the Investor in
connection with any reasonable request by the Investor related to the Investor’s due diligence of the Company. Each party hereto agrees not to disclose any Confidential Information of the other party to any third party and shall not use the
Confidential Information for any purpose other than in connection with, or in furtherance of, the transactions contemplated hereby. Each party hereto acknowledges that the Confidential Information shall remain the property of the disclosing party
and agrees that it shall take all reasonable measures to protect the secrecy of any Confidential Information disclosed by the other party. Except with respect to information provided in any Offering Notice, the Company confirms that neither it nor
any other Person acting on its behalf shall provide the Investor or its agents or counsel with any information that it believes constitutes or might constitute material, non-public information which is not otherwise disclosed in the Registration
Statement or prospectus supplements thereto or otherwise publicly disclosed. 
 (g) Purchase Records. The Investor and
the Company shall each maintain records showing the remaining Available Amount at any given time and the dates and Purchase Amounts for each purchase or shall use such other method, reasonably satisfactory to the Investor and the Company.

 (h) Taxes. The Company shall pay any and all transfer, stamp or similar taxes that may be payable with respect to the
issuance and delivery of any shares of Common Stock to the Investor made under this Agreement. 
 (i) No Variable Rate
Transactions. From the date hereof until the date that is twelve (12) months from the date hereof, the Company shall be prohibited from effecting or entering into an agreement to effect any issuance by the Company or any of its Subsidiaries
of Common Stock or Common Stock Equivalents for cash consideration (or a combination of units thereof) involving a Variable Rate Transaction other than in connection with an Exempt Issuance. “Variable Rate Transaction” means a
transaction in which the Company (i) issues or sells any debt or equity securities that are convertible into, exchangeable or exercisable for, or include the right to receive additional shares of Common Stock either (A) at a conversion
price, exercise price or exchange rate or other price that is 

  
 -15-









 
based upon and/or varies with the trading prices of or quotations for the shares of Common Stock at any time after the initial issuance of such debt or equity securities, or (B) with a
conversion, exercise or exchange price that is subject to being reset at some future date after the initial issuance of such debt or equity security or upon the occurrence of specified or contingent events directly or indirectly related to the
business of the Company or the market for the Common Stock (excluding customary anti-dilution provisions) or (ii) enters into any agreement, including, but not limited to, an equity line of credit or at the market offering, whereby the Company
may sell securities at a future determined price. “Exempt Issuance” means the issuance of (a) shares of Common Stock or options to employees, officers, directors or vendors of the Company pursuant to any stock or option plan
duly adopted for such purpose, by the Board of Directors or a majority of the members of a committee of directors established for such purpose, (b) securities upon the exercise or exchange of or conversion of any Securities issued hereunder
and/or other securities exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding on the date of this Agreement, provided that such securities have not been amended since the date of this Agreement to increase
the number of such securities or to decrease the exercise price, exchange price or conversion price of such securities (other than pursuant to anti-dilution adjustments contained in such securities as of the date of this Agreement), and
(c) securities issued pursuant to acquisitions or strategic transactions approved by the directors of the Company, which acquisitions or strategic transactions can have a Variable Rate Transaction component, provided that any such issuance
shall only be to a Person (or to the equity holders of a Person) which is, itself or through its subsidiaries, is either, (i) an operating company or an asset in a business synergistic with the business of the Company (a “Strategic
Entity”), or (ii) a Person who is a stockholder of a Strategic Entity and shall provide to the Company additional benefits in addition to the investment of funds, but shall not include a transaction in which the Company is issuing
securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities. The Company agrees that, from the date hereof until the date that is twelve (12) months from the date hereof, prior to
entering into each and any definitive agreement for the sale directly or indirectly of any debt, Common Stock or Common Stock Equivalents for cash, but excluding any Exempt Issuance, a (“Subsequent Transaction”), the Company shall
to the extent permitted under the Securities Act and without requiring the Company to file any prospectus (whether preliminary or final) or free writing prospectus, provide notice to the Investor (“Offering Notice”) not less than
three (3) Business Days nor more than five (5) Business Days prior to entering into any such Subsequent Transaction, including the relevant terms and conditions of such Subsequent Transaction, and the Investor shall, to the extent
permitted under the Securities Act, have the right to participate on equivalent terms and conditions in up to 10% of such Subsequent Transaction (the “Right of Participation”) by delivering notice to the Company not later than one
(1) Business Days after receipt of the Offering Notice, which notice from Investor shall indicate Investor’s intention to participate in the Subsequent Transaction and the amount of its participation. In the event that the Investor does
not provide notice within the two (2) day period and the Company does not enter into such Subsequent Transaction within ten (10) Business Days from the Offering Notice, the Company shall again be required to provide an Offering Notice as
set forth herein. The Company shall deliver an Offering Notice for each and any Subsequent Transaction and agrees that it shall not execute any definitive documentation for any Subsequent Transaction whatsoever, unless it has first complied with
this Section 5(i). Notwithstanding anything to the contrary in this Section 5(i) and unless otherwise agreed to by Investor, the Company shall either confirm in writing to Investor that the transaction with respect to the Subsequent
Transaction has been abandoned or shall publicly disclose its intention to enter into the Subsequent Transaction, in either case in such a manner such that Investor will not be in possession of any material, non-public information, by the tenth
(10th) Business Day following delivery of the
Offering Notice. If by such tenth (10th) Business
Day, no public disclosure regarding a transaction with respect to the Subsequent Transaction has been made, and no notice regarding the abandonment of such transaction has been received by Investor, such transaction shall be deemed to have been
abandoned and Investor shall not be in possession of any material, non-public information with respect to the Company or any of its Subsidiaries. Should the Company decide to 

  
 -16-









 
pursue such transaction with respect to the Subsequent Transaction, the Company shall provide Investor with another Offering Notice in accordance with, and subject to, the terms of this
Section 5(i) and Investor will again have the right of participation set forth in this Section 5(i). 
  

	 	6.	TRANSFER AGENT INSTRUCTIONS. 

 On the Commencement Date, the Company shall cause any restrictive legend on the Initial Commitment Shares to be removed and all of the Purchase Shares and Additional Commitment Shares, to be issued under
this Agreement shall be issued without any restrictive legend unless the Investor expressly consents otherwise. The Company shall issue irrevocable instructions to the Transfer Agent, and any subsequent transfer agent, to issue Additional Commitment
Shares and Purchase Shares in the name of the Investor in the form agreed to by the parties prior to the Commencement Date (the “Irrevocable Transfer Agent Instructions”) (and for each Regular Purchase to be valid the Transfer Agent
must receive such executed instructions from the Company). The Company warrants to the Investor that no instruction other than the Irrevocable Transfer Agent Instructions referred to in this Section 6, will be given by the Company to the
Transfer Agent with respect to the Purchase Shares and the Additional Commitment Shares, and that Commitment Shares and the Purchase Shares shall otherwise be freely transferable on the books and records of the Company as and to the extent provided
in this Agreement. The Investor acknowledges that the Company’s undertakings pursuant to this Section 6 are made in reliance on the Investor’s representations set forth in Section 3 of this Agreement. 

 

	 	7.	CONDITIONS TO THE COMPANY’S RIGHT TO COMMENCE SALES OF SHARES OF COMMON STOCK. 


The right of the Company hereunder to commence sales of the Purchase Shares is subject to the satisfaction of each of the following
conditions: 
 (a) The Investor shall have executed each of the Transaction Documents and delivered the same to the Company; and

 (b) A registration statement covering the resale by the Investor of all of the Commitment Shares and Purchase Shares shall
have been declared effective under the Securities Act by the SEC and no stop order with respect to the registration statement shall be pending or threatened by the SEC. 

 

	 	8.	CONDITIONS TO THE INVESTOR’S OBLIGATION TO PURCHASE SHARES OF COMMON STOCK. 


The obligation of the Investor to buy Purchase Shares under this Agreement is subject to the satisfaction of each of the following
conditions and once such conditions have been initially satisfied, there shall not be any ongoing obligation to satisfy such conditions after the Commencement has occurred: 
 (a) The Company shall have executed each of the Transaction Documents and delivered the same to the Investor; 
 (b) The Company shall have issued to the Investor the Initial Commitment Shares without restrictive legend; 

  
 -17-









 (c) The Common Stock shall be authorized for quotation on the Principal Market, trading in
the Common Stock shall not have been within the last 365 days suspended by the SEC or the Principal Market and the Purchase Shares and the Commitment Shares shall be approved for listing upon the Principal Market; 

(d) The Investor shall have received the opinions of the Company’s legal counsel dated as of the Commencement Date substantially in
the form of Exhibit A attached hereto; 
 (e) The representations and warranties of the Company shall be true and
correct in all material respects (except to the extent that any of such representations and warranties is already qualified as to materiality in Section 4 above, in which case, such representations and warranties shall be true and correct
without further qualification) as of the date when made and as of the Commencement Date as though made at that time (except for representations and warranties that speak as of a specific date) and the Company shall have performed, satisfied and
complied with the covenants, agreements and conditions required by the Transaction Documents to be performed, satisfied or complied with by the Company at or prior to the Commencement Date and the Company shall have provided the Buyer a written
notice that the Company has not disclosed any material non-public information to the Buyer that has not otherwise been publicly disclosed in accordance with applicable securities laws. The Investor shall have received a certificate, executed by the
CEO, President or CFO of the Company, dated as of the Commencement Date, to the foregoing effect in the form attached hereto as Exhibit B; 
 (f) The Board of Directors of the Company shall have adopted resolutions in the form attached hereto as Exhibit C which shall be in full force and effect without any amendment or supplement
thereto as of the Commencement Date; 
 (g) As of the Commencement Date, the Company shall have reserved out of its authorized
and unissued Common Stock, (A) solely for the purpose of effecting purchases of Purchase Shares hereunder, a number of shares equal to the Purchase Shares to be purchase hereunder and (B) as Additional Commitment Shares in accordance with
Section 5(e) hereof, 886,189 shares of Common Stock; 
 (h) The Irrevocable Transfer Agent Instructions, in form
acceptable to the parties shall have been delivered to and acknowledged in writing by the Company and the Company’s Transfer Agent; 
 (i) The Company shall have delivered to the Investor a certificate evidencing the incorporation and good standing of the Company in the State of Delaware issued by the Secretary of State of the State of
Delaware as of a date within ten (10) Business Days of the Commencement Date; 
 (j) The Company shall have delivered to
the Investor a certified copy of the Certificate of Incorporation as certified by the Secretary of State of the State of Delaware within ten (10) Business Days of the Commencement Date; 

(k) The Company shall have delivered to the Investor a secretary’s certificate executed by the Secretary of the Company, dated as of
the Commencement Date, in the form attached hereto as Exhibit D; 
 (l) A registration statement covering the
resale by the Investor of all of the Purchase Shares and the Commitment Shares shall have been declared effective under the Securities Act by the SEC and no stop order with respect to the registration statement shall be pending or threatened by the
SEC. The 

  
 -18-









 
Company shall have prepared and delivered to the Investor a final and complete form of prospectus, dated and current as of the Commencement Date, to be used by the Investor in connection with any
sales of the Commitment Shares and any Purchase Shares by the Investor, and to be filed by the Company one (1) Business Day after the Commencement Date. The Company shall have made all filings under all applicable federal and state securities
or “Blue Sky” laws necessary to consummate the issuance of the Commitment Shares and the Purchase Shares pursuant to this Agreement in compliance with such laws; 
 (m) No Event of Default has occurred, or any event which, after notice and/or lapse of time, would become an Event of Default has occurred; 

(n) On or prior to the Commencement Date, the Company shall take all necessary action, if any, and such actions as reasonably requested
by the Investor, in order to render inapplicable any control share acquisition, business combination, stockholder rights plan or poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the
Certificate of Incorporation or the laws of the state of its incorporation which is or could become applicable to the Investor as a result of the transactions contemplated by this Agreement, including, without limitation, the Company’s issuance
of the Commitment Shares and the Purchase Shares and the Investor’s ownership of such securities; and 
 (o) The Company
shall have provided the Investor with the information requested by the Investor in connection with its due diligence requests made prior to, or in connection with, the Commencement, in accordance with the terms of Section 5(f) hereof.

  

	 	9.	INDEMNIFICATION. 

 In
consideration of the Investor’s execution and delivery of the Transaction Documents and acquiring the Securities hereunder and in addition to all of the Company’s other obligations under the Transaction Documents, the Company shall defend,
protect, indemnify and hold harmless the Investor and all of its affiliates, stockholders, officers, directors, employees and direct or indirect investors and any of the foregoing person’s agents or other representatives (including, without
limitation, those retained in connection with the transactions contemplated by this Agreement) (collectively, the “Indemnitees”) from and against any and all actions, causes of action, suits, claims, losses, costs, penalties, fees,
liabilities and damages, and expenses in connection therewith (irrespective of whether any such Indemnitee is a party to the action for which indemnification hereunder is sought), and including reasonable attorneys’ fees and disbursements (the
“Indemnified Liabilities”), incurred by any Indemnitee as a result of, or arising out of, or relating to (a) any misrepresentation or breach of any representation or warranty made by the Company in the Transaction Documents or
any other certificate, instrument or document contemplated hereby or thereby, (b) any breach of any covenant, agreement or obligation of the Company contained in the Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby, or (c) any cause of action, suit or claim brought or made against such Indemnitee and arising out of or resulting from the execution, delivery, performance or enforcement of the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby, other than with respect to Indemnified Liabilities which result from the gross negligence or willful misconduct of the Indemnitee. To the extent that the foregoing undertaking by
the Company may be unenforceable for any reason, the Company shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law. Payment under this indemnification
shall be made within thirty (30) days from the date Investor makes written request for it. 

  
 -19-










	 	10.	EVENTS OF DEFAULT. 

 An
“Event of Default” shall be deemed to have occurred at any time as any of the following events occurs: 
 (a)
the effectiveness of a registration statement registering any of the Commitment Shares or the Purchase Shares lapses for any reason (including, without limitation, the issuance of a stop order) or is unavailable to the Investor for the resale of any
or all of the Commitment Shares or the Purchase Shares, and such lapse or unavailability continues for a period of ten (10) consecutive Business Days or for more than an aggregate of thirty (30) Business Days in any 365-day period;

 (b) the suspension from trading or failure of the Common Stock to be listed on the Principal Market for a period of three
(3) consecutive Business Days; 
 (c) the delisting of the Company’s Common Stock from the Principal Market, provided,
however, that the Common Stock is not immediately thereafter trading on the New York Stock Exchange, the Nasdaq Capital Market, the Nasdaq Global Select Market, the OTC Bulletin Board (or nationally recognized successor thereto), or the NYSE Amex;

 (d) the failure for any reason by the Transfer Agent to issue Purchase Shares or Additional Commitment Shares to the Investor
within five (5) Business Days after the applicable Purchase Date which the Investor is entitled to receive; 
 (e) the
Company breaches any representation, warranty, covenant or other term or condition under any Transaction Document if such breach could reasonably be expected to have a Material Adverse Effect and except, in the case of a breach of a covenant which
is reasonably curable, only if such breach continues for a period of at least five (5) Business Days; 
 (f) if any Person
commences a proceeding against the Company pursuant to or within the meaning of any Bankruptcy Law; 
 (g) if the Company
pursuant to or within the meaning of any Bankruptcy Law; (A) commences a voluntary case, (B) consents to the entry of an order for relief against it in an involuntary case, (C) consents to the appointment of a Custodian of it or for
all or substantially all of its property, (D) makes a general assignment for the benefit of its creditors or is generally unable to pay its debts as the same become due; 
 (h) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that (A) is for relief against the Company in an involuntary case, (B) appoints a Custodian of the
Company or for all or substantially all of its property, or (C) orders the liquidation of the Company or any Subsidiary; or 
 (i) if at any time after the Commencement Date, the Exchange Cap is reached (to the extent such Exchange Cap is applicable pursuant to Section 2(c) hereof). 

In addition to any other rights and remedies under applicable law and this Agreement, including the Investor termination rights under Section 11
hereof, so long as an Event of Default has occurred and is continuing, or if any event which, after notice and/or lapse of time, would become an Event of Default, has occurred and is continuing, the Investor shall not be permitted or obligated to
purchase any shares of Common Stock under this Agreement. If pursuant to or within the meaning of any Bankruptcy Law, the 

  
 -20-









 
Company commences a voluntary case or any Person commences a proceeding against the Company, a Custodian is appointed for the Company or for all or substantially all of its property, or the
Company makes a general assignment for the benefit of its creditors, (any of which would be an Event of Default as described in Sections 10(f), 10(g) and 10(h) hereof) this Agreement shall automatically terminate without any liability or payment to
the Company without further action or notice by any Person. No such termination of this Agreement under Section 11(a) or 11(d) shall affect the Company’s or the Investor’s obligations under this Agreement with respect to pending
purchases and the Company and the Investor shall complete their respective obligations with respect to any pending purchases under this Agreement. 
  

	 	11.	TERMINATION 

 This
Agreement may be terminated only as follows: 
 (a) If pursuant to or within the meaning of any Bankruptcy Law, the Company
commences a voluntary case or any Person commences a proceeding against the Company, a Custodian is appointed for the Company or for all or substantially all of its property, or the Company makes a general assignment for the benefit of its
creditors, (any of which would be an Event of Default as described in Sections 10(f), 10(g) and 10(h) hereof) this Agreement shall automatically terminate without any liability or payment to the Company without further action or notice by any
Person. No such termination of this Agreement under this Section 11(a) shall affect the Company’s or the Investor’s obligations under this Agreement with respect to pending purchases and the Company and the Investor shall complete
their respective obligations with respect to any pending purchases under this Agreement. 
 (b) In the event that the
Commencement shall not have occurred, the Company shall have the option to terminate this Agreement for any reason or for no reason without any liability whatsoever of any party to any other party under this Agreement. 

(c) In the event that the Commencement shall not have occurred within 180 days from the date of this Agreement, due to the failure to
satisfy the conditions set forth in Sections 7 and 8 above with respect to the Commencement, the non-breaching party shall have the option to terminate this Agreement at the close of business on such date or thereafter without liability of any party
to any other party. 
 (d) At any time after the Commencement Date, the Company shall have the option to terminate this
Agreement for any reason or for no reason by delivering notice (a “Company Termination Notice”) to the Investor electing to terminate this Agreement without any liability whatsoever of any party to any other party under this
Agreement. The Company Termination Notice shall not be effective until one (1) Business Day after it has been received by the Investor. No such termination of this Agreement under this Section 11(d) shall affect the Company’s or the
Investor’s obligations under this Agreement with respect to pending purchases and the Company and the Investor shall complete their respective obligations with respect to any pending purchases under this Agreement. 

(e) This Agreement shall automatically terminate on the date that the Company sells and the Investor purchases the full Available Amount
as provided herein, without any action or notice on the part of any party and without any liability whatsoever of any party to any other party under this Agreement. 
 (f) If by the Maturity Date for any reason or for no reason the full Available Amount under this Agreement has not been purchased as provided for in Section 2 of this Agreement, this Agreement shall
automatically terminate on the Maturity Date, without any action or notice on the part of any party and without any liability whatsoever of any party to any other party under this Agreement. 

  
 -21-









 Except as set forth in Sections 11(a) (in respect of an Event of Default under Sections 10(f), 10(g) and
10(h)), 11(c) and 11(f), any termination of this Agreement pursuant to this Section 11 shall be effected by written notice from the Company to the Investor, or the Investor to the Company, as the case may be, setting forth the basis for the
termination hereof. The representations and warranties and covenants of the Company and the Investor contained in Sections 3, 4, 5, and 6 hereof, the indemnification provisions set forth in Section 9 hereof and the agreements and covenants set
forth in Sections 10, 11 and 12 shall survive the Commencement and any termination of this Agreement. No termination of this Agreement shall affect the Company’s or the Investor’s rights or obligations (i) under the Registration
Rights Agreement which shall survive any such termination or (ii) under this Agreement with respect to pending purchases and the Company and the Investor shall complete their respective obligations with respect to any pending purchases under
this Agreement. 
  

	 	12.	MISCELLANEOUS. 

 (a)
Governing Law; Jurisdiction; Jury Trial. The corporate laws of the State of Delaware shall govern all issues concerning the relative rights of the Company and its stockholders. All other questions concerning the construction, validity,
enforcement and interpretation of this Agreement and the other Transaction Documents shall be governed by the internal laws of the State of Illinois, without giving effect to any choice of law or conflict of law provision or rule (whether of the
State of Illinois or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of Illinois. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts
sitting in the City of Chicago, for the adjudication of any dispute hereunder or under the other Transaction Documents or in connection herewith or therewith, or with any transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such
suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such
notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner
permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY. 
 (b) Counterparts. This Agreement may be executed in two or more identical counterparts, all
of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party; provided that a facsimile signature or signature delivered by e-mail in a
“.pdf” format data file shall be considered due execution and shall be binding upon the signatory thereto with the same force and effect as if the signature were an original, not a facsimile signature or a signature in a “.pdf”
format data file. 
 (c) Headings. The headings of this Agreement are for convenience of reference and shall not form
part of, or affect the interpretation of, this Agreement. 
 (d) Severability. If any provision of this Agreement shall
be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the 

  
 -22-









 
remainder of this Agreement in that jurisdiction or the validity or enforceability of any provision of this Agreement in any other jurisdiction. 

(e) Entire Agreement. This Agreement supersedes all other prior oral or written agreements between the Investor, the Company,
their affiliates and persons acting on their behalf with respect to the matters discussed herein, and this Agreement, the other Transaction Documents and the instruments referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor the Investor makes any representation, warranty, covenant or undertaking with respect to such matters. The Company
acknowledges and agrees that is has not relied on, in any manner whatsoever, any representations or statements, written or oral, other than as expressly set forth in the Transaction Documents. 

(f) Notices. Any notices, consents or other communications required or permitted to be given under the terms of this Agreement
must be in writing and will be deemed to have been delivered: (i) upon receipt when delivered personally; (ii) upon receipt when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept
on file by the sending party); or (iii) one Business Day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same. The addresses and facsimile numbers for such
communications shall be: 
 If to the Company: 
 Arrowhead Research Corporation 
 225 S. Lake Avenue, Suite 300 

Pasadena, CA 91101 

	 	Telephone:	626-304-3400 

 Attention:

 With a copy to: 
 Ropes & Gray LLP 
 Three Embarcadero Center 

San Francisco, CA 94111 

	 	Telephone:	415-315-6395 


	 	Facsimile:	415-315-6026 


	 	Attention:	Ryan A. Murr 

 If to the
Investor: 
 Lincoln Park Capital Fund, LLC 
 440 North Wells, Suite 620 
 Chicago, IL 60654 

	 	Telephone:	312-822-9300 


	 	Facsimile:	312-822-9301 


	 	Attention:	Josh Scheinfeld/Jonathan Cope 


With a copy to: 

Greenberg Traurig, LLP 
 The MetLife Building 
 200 Park Avenue 

New York, NY 10166 

	 	Telephone:	212-801-9200 


  
 -23-










	 	Facsimile:	212-801-6400 


	 	Attention:	Anthony J. Marsico 

 If to the
Transfer Agent: 
 Computershares, Inc. 
 250 Royall Street 

	 	Telephone:	818-254-3160 


	 	Attention:	Jim Hunter 


	 	Email:	jim.hunter@computershare.com 

 or at such other
address and/or facsimile number and/or to the attention of such other person as the recipient party has specified by written notice given to each other party three (3) Business Days prior to the effectiveness of such change. Written
confirmation of receipt (A) given by the recipient of such notice, consent or other communication, (B) mechanically or electronically generated by the sender’s facsimile machine containing the time, date, and recipient facsimile
number or (C) provided by a nationally recognized overnight delivery service, shall be rebuttable evidence of personal service, receipt by facsimile or receipt from a nationally recognized overnight delivery service in accordance with clause
(i), (ii) or (iii) above, respectively. 
 (g) Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns. The Company shall not assign this Agreement or any rights or obligations hereunder without the prior written consent of the Investor, including by merger or
consolidation. The Investor may not assign its rights or obligations under this Agreement. 
 (h) No Third Party
Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other person. 

(i) Publicity. The Investor shall have the right to approve before issuance any press release, SEC filing or any other public
disclosure made by or on behalf of the Company whatsoever with respect to, in any manner, the Investor, its purchases hereunder or any aspect of this Agreement or the transactions contemplated hereby; provided, however, that the Company shall be
entitled, without the prior approval of the Investor, to make any press release or other public disclosure (including any filings with the SEC) with respect to such transactions as is required by applicable law and regulations so long as the Company
and its counsel consult with the Investor in connection with any such press release or other public disclosure at least two (2) Business Days prior to its release. The Investor must be provided with a copy thereof at least two (2) Business
Days prior to any release or use by the Company thereof. The Company agrees and acknowledges that its failure to fully comply with this provision constitutes a material adverse effect on its ability to perform its obligations under this Agreement.

 (j) Further Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and
things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation
of the transactions contemplated hereby. 
 (k) No Financial Advisor, Placement Agent, Broker or Finder. The Company
represents and warrants to the Investor that it has not engaged any financial advisor, placement agent, broker or finder in connection with the transactions contemplated hereby. The Company shall be responsible for the payment of any fees or
commissions, if any, of any financial advisor, placement agent, broker or 

  
 -24-









 
finder relating to or arising out of the transactions contemplated hereby. The Company shall pay, and hold the Investor harmless against, any liability, loss or expense (including, without
limitation, attorneys’ fees and out of pocket expenses) arising in connection with any such claim. 
 (l) No Strict
Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party. 

(m) Remedies, Other Obligations, Breaches and Injunctive Relief. The Investor’s remedies provided in this Agreement shall be
cumulative and in addition to all other remedies available to the Investor under this Agreement, at law or in equity (including a decree of specific performance and/or other injunctive relief), no remedy of the Investor contained herein shall be
deemed a waiver of compliance with the provisions giving rise to such remedy and nothing herein shall limit the Investor’s right to pursue actual damages for any failure by the Company to comply with the terms of this Agreement. The Company
acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Investor and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or
threatened breach, the Investor shall be entitled, in addition to all other available remedies, to an injunction restraining any breach, without the necessity of showing economic loss and without any bond or other security being required.

 (n) Enforcement Costs. If an attorney is retained to represent the Investor in any bankruptcy, reorganization,
receivership or other proceedings affecting creditors’ rights and involving a claim under this Agreement then the Company shall pay to the Investor, as incurred by the Investor, all reasonable costs and expenses including attorneys’ fees
incurred in connection therewith, in addition to all other amounts due hereunder. In any dispute arising under or relating to this Agreement, the prevailing party shall be awarded its reasonable costs and expenses, including attorneys’ fees,
incurred in connection therewith, in addition to all other amounts due hereunder 
 (o) Failure or Indulgence Not Waiver.
No failure or delay in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any
other right, power or privilege. 

*    *    *    *    * 

  
 -25-









 IN WITNESS WHEREOF, the Investor and the Company have caused this Purchase Agreement
to be duly executed as of the date first written above. 
  

					
	THE COMPANY:	 	
	
	ARROWHEAD RESEARCH CORPORATION



					
			
	By:	 	  
	 	



					
	Name:	 		 	
	Title:	 		 	
		
	INVESTOR:	 	
	
	LINCOLN PARK CAPITAL FUND, LLC
	BY: LINCOLN PARK CAPITAL, LLC
	BY: ROCKLEDGE CAPITAL CORPORATION



					
			
	By:	 	  
	 	



					
	Name: Josh Scheinfeld	 	
	Title: President	 	



  
 -26-









 SCHEDULES 

 

			
	Schedule 4(a)	 	Subsidiaries
	Schedule 4(c)	 	Capitalization
	Schedule 4(e)	 	Conflicts
	Schedule 4(f)	 	Exchange Act Filings
	Schedule 4(g)	 	Material Changes
	Schedule 4(h)	 	Litigation
	Schedule 4(k)	 	Intellectual Property
	
	EXHIBITS
		
	Exhibit A	 	Form of Company Counsel Opinion
	Exhibit B	 	Form of Officer’s Certificate
	Exhibit C	 	Form of Resolutions of Board of Directors of the Company
	Exhibit D	 	Form of Secretary’s Certificate
	Exhibit E	 	Form of Letter to Transfer Agent








 SCHEDULE 4(a) 

SUBSIDIARIES 
 Calando
Pharmaceuticals, Inc. 
 Tego Biosciences Corporation 
 Agonn Systems, Inc. 
 Ablaris Therapeutics, Inc. 







 SCHEDULE 4(c) 

CAPITALIZATION 
 As of
the date hereof, without giving effect to the Closing, the authorized capital stock of the Company consists of 145,000,000 shares of Common Stock, par value $0.001 per share, and 5,000,000 shares of preferred stock, par value $0.001 per share
(“Preferred Stock”). As of the date hereof, there are: (i) 87,804,443 shares of Common Stock issued and outstanding, (ii) no shares of Preferred Stock issued and outstanding, and (iii) up to 31,640,991 shares
of Common Stock reserved for issuance upon exercise of options, warrants and other rights to acquire Common Stock outstanding as of the date hereof. All of the outstanding shares of capital stock of the Company have been validly issued and are fully
paid and non-assessable. 







 SCHEDULE 4(e) 

CONFLICTS 

Not Applicable 







 SCHEDULE 4(f) 

EXCHANGE ACT FILINGS AND SEC CORRESPONDENCE 
 Not Applicable 







 SCHEDULE 4(g) 

MATERIAL CHANGES 
 Not Applicable 







 SCHEDULE 4(h) 

LITIGATION 

Not Applicable 







 SCHEDULE 4(k) 

INTELLECTUAL PROPERTY 
 Not Applicable 







 DISCLOSURE SCHEDULES 

Schedule 4(a) – Subsidiaries 
 Schedule 4(c) – Capitalization 
 Schedule 4(e) – No Conflicts 

Schedule 4(f) – Exchange Act Filings 
 Schedule 4(g) – Absence of Certain Changes 
 Schedule 4(h) – Litigation

 Schedule 4(k) – Intellectual Property Rights 







 EXHIBIT A 

FORM OF COMPANY COUNSEL OPINION1 
 Capitalized terms used herein but not defined herein, have the meaning set forth in the Purchase Agreement. Based on the foregoing, and subject to the assumptions and qualifications set forth herein, we
are of the opinion that: 
 1. The Company is a corporation existing and in good standing under the laws of the State of
Delaware. 
 2. The Company has the corporate power to execute and deliver, and perform its obligations under, each Transaction
Document2 to which it is a party. The Company has the
corporate power to conduct its business as described in the Company’s Annual Report on Form 10-K for the year ended September 30, 2010 and to own and use the properties owned and used by it. 

3. The execution, delivery and performance by the Company of the Transaction Documents to which it is a party have been duly authorized
by all necessary corporate action on the part of the Company. The execution and delivery of the Transaction Documents by the Company, the performance of the obligations of the Company thereunder and the consummation by it of the transactions
contemplated therein have been duly authorized and approved by the Company’s Board of Directors and no further consent, approval or authorization of the Company, its Board of Directors or its stockholders is required. The Transaction Documents
to which the Company is a party have been duly executed and delivered by the Company and are valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, except as such enforceability may be limited
by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting creditor’s rights and remedies or other reasonable exceptions to be set forth in such
opinion. 
 4. The execution, delivery and performance by the Company of the Transaction Documents and the consummation by the
Company of the transactions contemplated thereby does not: (i) conflict with, constitute a breach of or default under (or an event which, with the giving of notice or lapse of time or both, constitutes or could constitute a breach or a
default): (a) the Certificate of Incorporation or the Bylaws of the Company, (b) any material agreement, note, lease, mortgage, deed or other material instrument listed on Annex I attached hereto (the “Material
Agreements”)3, or (ii) result in any violation
of any statute, law, rule or regulation applicable to the Company. 
 5. The issuance of the Purchase Shares and the Commitment
Shares pursuant to the terms and conditions of the Transaction Documents has been duly authorized and the Initial Commitment 

 

	1 	Set forth below are the agreed upon opinion points that will be provided by Company counsel prior to the Commencement Date in an opinion letter in such counsel’s
customary form. Additionally, Company counsel will provide a customary negative assurance letter, reciting the participation of Company counsel in the due diligence review for the transaction, as well as counsel’s involvement in the preparation
of the relevant offering documents. 


	2 	Transaction Documents to mean the Purchase Agreement and the Registration Rights Agreement. 


	3 	Material Agreements to consist of material contracts listed as exhibits to issuer’s most recent Form 10-K and subsequent ’34 Act filings.









 
Shares are validly issued, fully paid and non-assessable, and free of any preemptive rights arising under the Company’s Certificate of Incorporation, Bylaws or the Delaware General
Corporation Law (the “DGCL”). 
 6. The Board of Directors has adopted a resolution reserving 50,000,000 shares of
Common Stock for issuance under the Purchase Agreement. When issued and paid for in accordance with the Purchase Agreement, and assuming the availability of a sufficient number of authorized and unissued shares of Common Stock at such time, the
Purchase Shares shall be validly issued, fully paid and non-assessable, and free of any preemptive rights arising under the Company’s Certificate of Incorporation, Bylaws or the DGCL. 

7. The Board of Directors has adopted a resolution reserving 886,189 shares of Common Stock for issuance as Additional Commitment Shares
under the Purchase Agreement. When issued in accordance with the Purchase Agreement, and assuming the availability of a sufficient number of authorized and unissued shares of Common Stock at such time, the Additional Commitment Shares shall be
validly issued, fully paid and non-assessable and free of any preemptive rights arising under the Company’s Certificate of Incorporation, Bylaws or the DGCL. 
 8. The execution and delivery of the Registration Rights Agreement does not, and the performance by the Company of its obligations thereunder will not, give rise to any rights of any other person under
the Material Contracts for the registration under the Securities Act of any shares of Common Stock or other securities of the Company, which rights have not been waived. 
 9. As of the date hereof, the authorized capital stock of the Company consists of 145,000,000 shares of common stock, $.001 par value, and 5,000,000 shares of preferred stock, $.001 par value. 

10. Assuming the accuracy of the representations and warranties made by you and the Company in the Purchase Agreement and your compliance
with the covenants made by you and the Company in the Transaction Documents, the offering, sale and issuance of the Commitment Shares and the Purchase Shares in accordance with the Stock Purchase Agreement does not require registration under the
Securities Act. 
 11. Other than that which has been obtained and completed prior to the date hereof, no authorization,
approval, consent or filing of any federal or state governmental body is required to be obtained by the Company to enter into and perform its obligations under the Transaction Documents, or for the Company to issue and sell the Commitment Shares and
the Purchase Shares as contemplated by the Transaction Documents. 
 12. To our knowledge, there is no action, suit or
proceeding pending against the Company before or by any California or federal or, with respect to the DGCL, Delaware, court governmental body, agency or official, that questions the validity or enforceability of the Purchase Agreement or the
Registration Rights Agreement.4 

*        *        * 

 

	4 	This paragraph may either be included in the legal opinion or in the Rule 10b-5 negative assurance letter from company counsel to be delivered prior to the Commencement
Date. The parties acknowledge and agree that company counsel shall provide to the Investor a Rule 10b-5 negative assurance letter prior to the Commencement Date, the form of which shall be reasonably acceptable to the Investor and its counsel.



  
 -37-









 EXHIBIT B 

FORM OF OFFICER’S CERTIFICATE 
 This Officer’s Certificate (“Certificate”) is being delivered pursuant to Section 8(e) of that certain Purchase Agreement dated as of October 20, 2011, (“Purchase
Agreement”), by and between ARROWHEAD RESEARCH CORPORATION, a Delaware corporation (the “Company”), and LINCOLN PARK CAPITAL FUND, LLC (the “Investor”). Terms used herein and not otherwise
defined shall have the meanings ascribed to them in the Purchase Agreement. 
 The undersigned,
                    ,                      of the
Company, hereby certifies as follows: 
 1. I am the
            of the Company and make the statements contained in this Certificate; 
 2. The representations and warranties of the Company are true and correct in all material respects (except to the extent that any of such representations and warranties is already qualified as to
materiality in Section 4 of the Purchase Agreement, in which case, such representations and warranties are true and correct without further qualification) as of the date when made and as of the Commencement Date as though made at that time
(except for representations and warranties that speak as of a specific date); 
 3. The Company has performed,
satisfied and complied in all material respects with covenants, agreements and conditions required by the Transaction Documents to be performed, satisfied or complied with by the Company at or prior to the Commencement Date. 

4. The Company has not taken any steps, and does not currently expect to take any steps, to seek protection pursuant to
any Bankruptcy Law nor does the Company or any of its Subsidiaries have any knowledge or reason to believe that its creditors intend to initiate involuntary bankruptcy or insolvency proceedings. The Company is financially solvent and is generally
able to pay its debts as they become due. 
 IN WITNESS WHEREOF, I have hereunder signed my name on this
         day of             . 
  

	
	  

	Name:
	Title:


 The undersigned as Secretary of ARROWHEAD RESEARCH CORPORATION, a Delaware corporation,
hereby certifies that             is the duly elected, appointed, qualified and acting             of
            and that the signature appearing above is his genuine signature. 

	
	  

	Secretary









 EXHIBIT C 

FORM OF COMPANY RESOLUTIONS 
 FOR SIGNING PURCHASE AGREEMENT 
 WHEREAS, there has been presented to the
Board of Directors of ARROWHEAD RESEARCH CORPORATION, a Delaware corporation (the “Corporation”) a draft of the Purchase Agreement (the “Purchase Agreement”) by and between the Corporation and Lincoln Park Capital Fund, LLC
(“Lincoln Park”), providing for the purchase by Lincoln Park of up to Fifteen Million Dollars ($15,000,000) of the Corporation’s common stock, $.001 par value per share (the “Common Stock”); and 

WHEREAS, after consideration and review of the Purchase Agreement, the documents attached thereto and other factors deemed relevant by
the Board of Directors, the Board of Directors has determined that it is advisable and in the best interests of the Corporation to engage in the transactions contemplated by the Purchase Agreement, including, but not limited to, the issuance of
689,258 shares of Common Stock to Lincoln Park as an initial commitment fee (the “Initial Commitment Shares”) and the sale of up to $15,000,000 worth of shares of Common Stock to Lincoln Park (the “Purchase Shares”). 

Transaction Documents 
 NOW, THEREFORE, BE IT RESOLVED, that the transactions described in the Purchase Agreement are hereby approved and each of
                     (the “Authorized Officers”) are severally authorized to execute and deliver the Purchase Agreement on behalf of the
Company, and any other agreements or documents contemplated thereby including, without limitation, a registration rights agreement (the “Registration Rights Agreement”) providing for the registration of the shares of the Company’s
Common Stock issuable in respect of the Purchase Agreement on behalf of the Corporation, with such amendments, changes, additions and deletions as the Authorized Officers may deem to be appropriate and approve on behalf of, the Corporation, such
approval to be conclusively evidenced by the signature of an Authorized Officer thereon; and 
 FURTHER RESOLVED, that the terms
and provisions of the Registration Rights Agreement by and among the Corporation and Lincoln Park, a draft of which has been provided to the Board, are hereby approved and the Authorized Officers are authorized to execute and deliver the
Registration Rights Agreement on behalf of the Company, with such amendments, changes, additions and deletions as the Authorized Officer may deem appropriate and approve on behalf of, the Corporation, such approval to be conclusively evidenced by
the signature of an Authorized Officer thereon; and 
 FURTHER RESOLVED, that the terms and provisions of the Form of
Irrevocable Transfer Agent Instructions (the “Instructions”), a draft of which has been provided to the Board, are hereby approved and the Authorized Officers are authorized to execute and deliver the Instructions on behalf of the Company,
with such amendments, changes, additions and deletions as the Authorized Officers may deem appropriate and approve on behalf of, the Corporation, such approval to be conclusively evidenced by the signature of an Authorized Officer thereon; and

 Issuance of Common Stock 
 FURTHER RESOLVED, that the Corporation is hereby authorized to issue to Lincoln Park 







 
689,258 shares of Common Stock as Initial Commitment Shares pursuant to the Purchase Agreement, and the Initial Commitment Shares shall be duly authorized, validly issued, fully paid and
nonassessable with no personal liability attaching to the ownership thereof; and 
 FURTHER RESOLVED, that the Corporation is
hereby authorized to issue to Lincoln Park up to 50,000,000 shares of Common Stock as the Purchase Shares and upon issuance of the Purchase Shares pursuant to the Purchase Agreement, the Purchase Shares will be duly authorized, validly issued, fully
paid and nonassessable with no personal liability attaching to the ownership thereof; and 
 FURTHER RESOLVED, that the
Corporation shall initially reserve 1,000,000 shares of Common Stock for issuance as Purchase Shares under the Purchase Agreement; and 
 FURTHER RESOLVED, that the Corporation is hereby authorized to issue 886,189 shares of Common Stock (subject to equitable adjustment for any reorganization, recapitalization, non-cash dividend, stock
split or other similar transaction) in connection with the purchase of Purchase Shares (the “Additional Commitment Shares”) in accordance with the terms of the Purchase Agreement and that, upon issuance of the Additional Commitment Shares
pursuant to the Purchase Agreement, the Additional Commitment Shares will be duly authorized, validly issued, fully paid and nonassessable with no personal liability attaching to the ownership thereof; and 

FURTHER RESOLVED, that the Corporation shall initially reserve 886,189 shares of Common Stock (subject to equitable adjustment for any
reorganization, recapitalization, non-cash dividend, stock split or other similar transaction) for issuance as Additional Commitment Shares under the Purchase Agreement; and 
 Approval of Actions 
 FURTHER RESOLVED, that, without limiting the
foregoing, the Authorized Officers are, and each of them hereby is, authorized and directed to proceed on behalf of the Corporation and to take all such steps as deemed necessary or appropriate, with the advice and assistance of counsel, to cause
the Corporation to consummate the agreements referred to herein and to perform its obligations under such agreements; and 

FURTHER RESOLVED, that the Authorized Officers be, and each of them hereby is, authorized, empowered and directed on behalf of and in the
name of the Corporation, to take or cause to be taken all such further actions and to execute and deliver or cause to be executed and delivered all such further agreements, amendments, documents, certificates, reports, schedules, applications,
notices, letters and undertakings and to incur and pay all such fees and expenses as in their judgment shall be necessary, proper or desirable to carry into effect the purpose and intent of any and all of the foregoing resolutions, and that all
actions heretofore taken by any officer or director of the Corporation in connection with the transactions contemplated by the agreements described herein are hereby approved, ratified and confirmed in all respects. 







 EXHIBIT D 

FORM OF SECRETARY’S CERTIFICATE 
 This Secretary’s Certificate (“Certificate”) is being delivered pursuant to Section 7(k) of that certain Purchase Agreement dated as of October 20, 2011, (“Purchase
Agreement”), by and between ARROWHEAD RESEARCH CORPORATION, a Delaware corporation (the “Company”) and LINCOLN PARK CAPITAL FUND, LLC (the “Investor”), pursuant to which the Company may sell to the Investor up
to Fifteen Million Dollars ($15,000,000) of the Company’s Common Stock, $.001 par value per share (the “Common Stock”). Terms used herein and not otherwise defined shall have the meanings ascribed to them in the Purchase Agreement.

 The undersigned,             , Secretary of the Company, hereby
certifies as follows: 
 1. I am the Secretary of the Company and make the statements contained in this
Secretary’s Certificate. 
 2. Attached hereto as Exhibit A and Exhibit B are true, correct
and complete copies of the Company’s bylaws (“Bylaws”) and Certificate of Incorporation (“Articles”), in each case, as amended through the date hereof, and no action has been taken by the Company, its directors, officers or
stockholders, in contemplation of the filing of any further amendment relating to or affecting the Bylaws or Articles. 
 3. Attached hereto as Exhibit C are true, correct and complete copies of the resolutions duly adopted by the Board of Directors of the Company on
                    , at which a quorum was present and acting throughout. Such resolutions have not been amended, modified or rescinded and remain
in full force and effect and such resolutions are the only resolutions adopted by the Company’s Board of Directors, or any committee thereof, or the stockholders of the Company relating to or affecting (i) the entering into and performance
of the Purchase Agreement, or the issuance, offering and sale of the Purchase Shares and the Commitment Shares and (ii) and the performance of the Company of its obligation under the Transaction Documents as contemplated therein. 

4. As of the date hereof, the authorized, issued and reserved capital stock of the Company is as set forth on Exhibit D hereto. 

IN WITNESS WHEREOF, I have hereunder signed my name on this          day of
                    . 
  

	
	  

	Secretary


 The undersigned as              of ARROWHEAD RESEARCH
CORPORATION, a Delaware corporation, hereby certifies that              is the duly elected, appointed, qualified and acting Secretary of
            , and that the signature appearing above is his genuine signature. 
  

	
	  










 EXHIBIT E 

FORM OF LETTER TO THE TRANSFER AGENT FOR THE ISSUANCE OF THE INITIAL 

COMMITMENT SHARES AT SIGNING OF THE PURCHASE AGREEMENT 
 [COMPANY LETTERHEAD] 
 [DATE] 
 [TRANSFER AGENT] 
  

 
  

Re: Issuance of Common Shares to Lincoln Park Capital Fund, LLC 
 Dear             , 
 On behalf of
ARROWHEAD RESEARCH CORPORATION, (the “Company”), you are hereby instructed to issue as soon as possible 689,258 shares of our common stock as Initial Commitment Shares in the name of Lincoln Park Capital Fund,
LLC. The share certificate should be dated October 20, 2011. I have included a true and correct copy of the resolutions adopted by the Board of Directors of the Company adopting resolutions approving the issuance of these shares. The
shares should be issued subject to the following restrictive legend: 
 THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS, AND NO SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION, GIFT, TRANSFER OR OTHER DISPOSITION OR OFFER TO DO ANY OF THE FOREGOING
MAY BE MADE UNLESS A REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND OTHER APPLICABLE SECURITIES LAWS WITH RESPECT TO SUCH SECURITIES IS THEN IN EFFECT, OR IN THE OPINION OF COUNSEL, ACCEPTABLE TO THE ISSUER, SUCH REGISTRATION UNDER THE
SECURITIES ACT AND OTHER APPLICABLE SECURITIES LAWS IS NOT REQUIRED. 







 The share certificate should be sent as soon as possible via overnight mail to the following
address: 
 Lincoln Park Capital Fund, LLC 
 440 North Wells, Suite 620 
 Chicago, IL 60654 

Attention: Josh Scheinfeld/Jonathan Cope 
 Thank you very much for your help. Please call me at                     if you have any questions or
need anything further. 
  

			
	ARROWHEAD RESEARCH CORPORATION
		
	BY:	 	 
		 	[name]
		 	[title]