Document:

exv4wf

Exhibit 4(f)

AMENDMENT NO. FIVE

TO THE

ATMOS ENERGY CORPORATION

RETIREMENT SAVINGS PLAN AND TRUST

AMENDED AND RESTATED

EFFECTIVE AS OF JANUARY 1, 2005

     WHEREAS, ATMOS ENERGY CORPORATION (the “Company”) has heretofore amended and restated the
Atmos Energy Corporation Retirement Savings Plan and Trust Amended and Restated Effective as of
January 1, 2005 (the “Plan”); and

     WHEREAS, pursuant to the provisions of Section 10.01 of the Plan, the Company desires to amend
the Plan to reflect recent changes in the law, including the enactment of the Pension Protection
Act of 2006 (the “PPA”), the Heroes Earnings Assistance and Tax Relief Act of 2008 (“HEART”), and
the Worker, Retiree, and Employer Recovery Act of 2008 (“WRERA”); and

     WHEREAS, this Amendment No. Five is intended as good faith compliance with the requirements of
the PPA, HEART, and WRERA, and is intended to be construed in accordance with all official
authoritative guidance issued thereunder;

     NOW, THEREFORE, Atmos Energy Corporation does hereby amend the Plan as follows:

     1. Effective as of January 1, 2009, Section 2.01(j)(1) of the Plan is amended by adding the
following new provision to the end of such Section:

Notwithstanding any other provision of this Section 2.01(j), if a
Participant is performing service in the uniformed services (as defined in
chapter 43 of title 38 of the United States Code) while on active duty for a
period of more than thirty (30) days and is receiving amounts which
represent all or a portion of the Compensation the Participant would have
received from the Employer if the Participant were performing services for
the Employer, such amounts shall be treated as Compensation for all purposes
under the Plan.

     2. Effective January 1, 2008, Subsection 4.01(c) is amended by striking the final paragraph of
said Subsection and substituting in lieu thereof the following:

Effective for Plan Years beginning on and after January 1, 2006 and prior to
January 1, 2008, Excess Deferrals shall be adjusted for any income or loss
up to the date of distribution. The income or loss allocable to Excess
Deferrals is the sum of (i) the income or loss allocable to the
Participant’s Salary Reduction Contributions for the Plan Year, multiplied
by a fraction, the numerator of which is such Participant’s Salary Reduction
Contributions for such year and the denominator of which is the
Participant’s Salary Reduction Contribution Account balance attributable to
Elective Deferrals without regard to any income or loss occurring during
such taxable year; and (ii) 10 percent of the amount determined under (i)
multiplied by the number of whole calendar months between the end of the
Participant’s taxable year and the date of distribution, counting the month
of distribution as a whole month if the distribution occurs after the 15th day of such month. This paragraph shall
not apply

 

 

for Plan Years beginning on or after January 1, 2008, or for any
Plan Year beginning prior to January 1, 2006.

     3. Effective as of January 1, 2007, Section 6.02 of the Plan is hereby amended by adding the
following new provision to the end thereof:

Effective from and after January 1, 2007, if a Participant dies while
performing qualified military service (as defined in section 414(u) of the
Code), the Participant’s Beneficiary shall be entitled to receive any
additional benefits (other than benefit accruals relating to the period of
qualified military service) provided under the Plan had the Participant
resumed and then terminated employment on account of death.

     4. Effective January 1, 2008, Subsection 6.04(f)(2) is amended by striking said Subsection and
substituting in lieu thereof the following:

	 	(2)	 	“Eligible retirement plan” means any of the following that
accepts the distributee’s eligible rollover distribution: An individual
retirement account described in Code Section 408(a), an individual retirement
annuity described in Code Section 408(b), an annuity plan described in Code
Section 403(a), a qualified trust described in Code Section 401(a), an annuity
contract described in Code Section 403(b), an eligible plan under Code Section
457(b) which is maintained by a state, political subdivision of a state and
which agrees to account separately for amounts transferred into such plan from
this Plan, or effective January 1, 2008, a Roth individual retirement annuity
described in Section 408A(b). The foregoing definition of an “eligible
retirement plan” also shall apply in the case of an eligible rollover
distribution to the surviving spouse, or to the spouse or former spouse who is
an alternate payee under a Qualified Domestic Relations Order. Effective
January 1, 2008, notwithstanding the foregoing definition of “eligible
retirement plan”, if the distributee is a designated Beneficiary who is not the
surviving spouse of the deceased Participant, “Eligible retirement plan” shall
mean only an individual retirement account described in Code Section 408(a) ,
an individual retirement annuity described in Code Section 408(b), or a Roth
individual retirement annuity a Roth individual retirement annuity described in
Section 408A(b) that is established in the name of the deceased Participant for
the benefit of the such designated Beneficiary.

     5. Effective January 1, 2009, Section 6.04(h) of the Plan is amended by inserting the
following new subsection (6):

	 	(6)	 	Waiver of 2009 Required Minimum Distributions.
Notwithstanding the foregoing provisions of this Section 6.04(h), a Participant
or Beneficiary who would have been required to receive required minimum
distributions for 2009 but for the enactment of section 401(a)(9)(H) of the
Code (“2009 RMDs”), and who would have satisfied that requirement by receiving
distributions that are (1) equal to the 2009 RMDs or (2) one or more payments
in a series of substantially equal distributions (that include the 2009 RMDs)
made at least annually and expected to last for the life (or life expectancy)
of the Participant, the joint lives (or joint life expectancy) of the
Participant and the Participant’s Designated Beneficiary, or for a period of at
least ten (10) years (“Extended 2009 RMDs”), will not receive those
distributions for 2009 unless the Participant or Beneficiary chooses to receive
such distributions.

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	 	 	 	Participants and Beneficiaries described in the preceding sentence will be
given the opportunity to elect to receive the distributions described in the
preceding sentence. In addition, notwithstanding any provision of the Plan
to the contrary, and solely for purposes of applying the direct rollover
provisions of Section 6.04(f) of the Plan, 2009 RMDs and Extended 2009 RMDs
will be treated as eligible rollover distributions.

     6. Effective January 1. 2009, Section 6.06 of the Plan is amended by inserting the following
new subsection (c), renumbering existing subsection (c) as subsection (d), and updating all Plan
references to existing subsection (c) accordingly.

	 	(c)	 	Active Duty Distribution. Effective January 1, 2009,
during any period that a Participant is performing service in the uniformed
services (as defined in chapter 43 of title 38 of the Code) while on active
duty for a period of more than thirty (30) days, such Participant shall be
entitled to elect to receive a distribution of all or a part of the portion of
his Salary Reduction Contribution Account. If a participant elects to receive
a distribution pursuant to this Section 6.06(c), he shall not be permitted to
make any Salary Reduction Contributions pursuant to Section 4.02 during the six
(6) month period beginning on the date of such distribution.

     IN WITNESS WHEREOF, the Company has caused this AMENDMENT NO. FIVE TO THE ATMOS ENERGY
CORPORATION RETIREMENT SAVINGS PLAN AND TRUST AMENDED AND RESTATED EFFECTIVE AS OF JANUARY 1, 2005
to be executed in its name on its behalf this 16th day of December, 2009, effective as
of the dates set forth herein.

	 	 	 	 	 
	 	ATMOS ENERGY CORPORATION

 	 
	 	By:  	/s/ ROBERT W. BEST
 	 
	 	 	Robert W. Best 	 
	 	 	Chairman and Chief Executive Officer 	 
	 

3exv10w1

EXHIBIT 10.1

EXECUTION COPY

SECURITIES PURCHASE AGREEMENT

     This SECURITIES PURCHASE AGREEMENT (this “Agreement”), dated as of June 18, 2010, is by and
among Aradigm Corporation, a California corporation with offices located at 3929 Point Eden Way,
Hayward, CA 94545 (the “Company”), and the investors listed on the Schedule of Buyers attached
hereto (individually, a “Buyer” and collectively, the “Buyers”).

RECITALS

     A. The Company and each Buyer is executing and delivering this Agreement in reliance upon the
exemption from securities registration afforded by Section 4(2) of the Securities Act of 1933, as
amended (the “1933 Act”), and Rule 506 of Regulation D (“Regulation D”) as promulgated by the
United States Securities and Exchange Commission (the “SEC”) under the 1933 Act.

     B. Each Buyer wishes to purchase, and the Company wishes to sell, upon the terms and
conditions stated in this Agreement, (i) the aggregate number of shares of common stock, no par
value, of the Company (the “Common Stock”) as set forth opposite such Buyer’s name in column (3) on
the Schedule of Buyers (which aggregate amount for all Buyers shall be 34,702,512
shares of Common Stock and shall collectively be referred to herein as the “Common Shares”) and
(ii) a warrant to initially acquire up to that number of additional shares of Common Stock set
forth opposite such Buyer’s name in column (4) on the Schedule of Buyers, in the form attached
hereto as Exhibit A (the “Warrants”) (as exercised, collectively, the “Warrant Shares”).

     C. At the Closing, the parties hereto shall execute and deliver a Registration Rights
Agreement, in the form attached hereto as Exhibit B (the “Registration Rights Agreement”),
pursuant to which the Company has agreed to provide certain registration rights with respect to the
Registrable Securities (as defined in the Registration Rights Agreement), under the 1933 Act and
the rules and regulations promulgated thereunder, and applicable state securities laws.

     D. The Common Shares, the Warrants and the Warrant Shares are collectively referred to herein
as the “Securities.”

AGREEMENT

     NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein and
for other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and each Buyer hereby agree as follows:

1. PURCHASE AND SALE OF COMMON SHARES AND WARRANTS.

     (a) Common Shares and Warrants. Subject to the satisfaction (or waiver) of the conditions
set forth in Sections 6 and 7 below, the Company shall issue and sell to each Buyer, and each Buyer
severally, but not jointly, shall purchase from the Company on the Closing Date (as defined below),
such aggregate number of Common Shares as is set forth opposite such Buyer’s name in column (3) on
the Schedule of Buyers along with Warrants to initially acquire up to that aggregate number of
Warrant Shares as is set forth opposite such Buyer’s name in

 

 

column (4) on the Schedule of Buyers.

     (b) Closing. The closing (the “Closing”) of the purchase of the Common Shares and the
Warrants by the Buyers shall occur at the offices of Morrison & Foerster LLP, 425 Market Street,
San Francisco, CA 94105. The date and time of the Closing (the “Closing Date”) shall be 10:00 a.m.,
New York time, on the first (1st) Business Day on which the conditions to the Closing
set forth in Sections 6 and 7 below are satisfied or waived (or such later date as is mutually
agreed to by the Company and each Buyer). As used herein “Business Day” means any day other than a
Saturday, Sunday or other day on which commercial banks in New York, New York are required by law
to remain closed.

     (c) Purchase Price(d) . The aggregate purchase price for the Common Shares and the
Warrants to be purchased by each Buyer (the “Purchase Price”) shall be the amount set forth
opposite such Buyer’s name in column (5) on the Schedule of Buyers.

     (d) Form of Payment. On the Closing Date, (i) each Buyer shall pay its respective
Purchase Price to the Company for the Common Shares and the Warrants to be issued and sold to such
Buyer at the Closing, by wire transfer of immediately available funds in accordance with the
Company’s written wire instructions and (ii) the Company shall deliver to each Buyer certificates
representing (A) such aggregate number of Common Shares as is set forth opposite such Buyer’s name
in column (3) of the Schedule of Buyers and (B) a Warrant pursuant to which such Buyer shall have
the right to initially acquire up to such number of Warrant Shares as is set forth opposite such
Buyer’s name in column (4) of the Schedule of Buyers, in all cases, duly executed on behalf of the
Company and registered in the name of such Buyer or its designee.

2. BUYER’S REPRESENTATIONS AND WARRANTIES.

     Each Buyer, severally and not jointly, represents and warrants to the Company with respect to
only itself that, as of the date hereof and as of the Closing Date:

     (a) Organization; Authority. Such Buyer is an entity duly organized, validly existing and
in good standing under the laws of the jurisdiction of its organization with the requisite power
and authority to enter into and to consummate the transactions contemplated by the Transaction
Documents to which it is a party and otherwise to carry out its obligations hereunder and
thereunder.

     (b) No Public Sale or Distribution. Such Buyer is (i) acquiring its Common Shares and
Warrants, and (ii) upon exercise of its Warrants will acquire the Warrant Shares issuable upon
exercise thereof, in each case, for its own account and not with a view towards, or for resale in
connection with, the public sale or distribution thereof in violation of applicable securities
laws, except pursuant to sales registered or exempted under the 1933 Act; provided, however, by
making the representations herein, such Buyer does not agree, or make any representation or
warranty, to hold any of the Securities for any minimum or other specific term and reserves the
right to dispose of the Securities at any time in accordance with or pursuant to a registration
statement or an exemption under the 1933 Act. Such Buyer is acquiring the Securities hereunder in
the ordinary course of its business. Such Buyer does not presently have any agreement or
understanding, directly or indirectly, with any Person to distribute any of the

2

 

Securities in violation of applicable securities laws.

     (c) Accredited Investor Status. At the time such Buyer was offered the Securities, such
Buyer was, and as of the date hereof such Buyer is, an “accredited investor” as that term is
defined in Rule 501(a) of Regulation D. Such Buyer is not a registered broker-dealer under Section
15 of the Securities Exchange Act of 1934, as amended (the “1934 Act”). Such Buyer, either alone
or together with its representatives, has such knowledge, sophistication and experience in business
and financial matters so as to be capable of evaluating the merits and risks of such investment.
Such Buyer is able to bear the economic risk of an investment in the Securities.

     (d) Reliance on Exemptions. Such Buyer understands that the Securities are being 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 such Buyer’s compliance with, the representations, warranties, agreements,
acknowledgments and understandings of such Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of such Buyer to acquire the Securities.

     (e) Information. Such Buyer and its advisors, if any, have been furnished with all
materials relating to the business, finances and operations of the Company and materials relating
to the offer and sale of the Securities which have been requested by such Buyer. Such Buyer and its
advisors, if any, have been afforded the opportunity to ask questions of the Company. Neither such
inquiries nor any other due diligence investigations conducted by such Buyer or its advisors, if
any, or its representatives shall modify, amend or affect such Buyer’s right to rely on the
Company’s representations and warranties contained herein or any representations and warranties
contained in any other Transaction Document or any other document or instrument executed and/or
delivered in connection with this Agreement or the consummation of the transaction contemplated
hereby. Such Buyer understands that its investment in the Securities involves a high degree of
risk. Such Buyer 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.

     (f) No Governmental Review. Such Buyer 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.

     (g) Transfer or Resale. Such Buyer understands that except as provided in the Registration
Rights Agreement and Section 4(g) hereof: (i) the Securities have not been and are not being
registered under the 1933 Act or any state securities laws, and may not be offered for sale, sold,
assigned or transferred unless (A) subsequently registered thereunder, (B) such Buyer shall have
delivered to the Company (if requested by the Company) an opinion of counsel to such Buyer, in a
form reasonably acceptable to the Company, to the effect that such Securities to be sold, assigned
or transferred may be sold, assigned or transferred pursuant to an exemption from such
registration, or (C) such Buyer provides the Company with reasonable assurance that

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such Securities can be sold, assigned or transferred pursuant to Rule 144 or Rule 144A promulgated under the 1933
Act (or a successor rule thereto) (collectively, “Rule 144”); (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 (as defined below) through whom the sale is made)
may be deemed to be an underwriter (as that term is defined in the 1933 Act) may require compliance
with some other exemption under the 1933 Act or the rules and regulations of the SEC promulgated
thereunder; and (iii) neither the Company nor any other Person is under any obligation to register
the Securities under the 1933 Act or any state securities laws or to comply with the terms and
conditions of any exemption thereunder.

     (h) Validity; Enforcement. This Agreement and the Registration Rights Agreement have been
duly and validly authorized, executed and delivered on behalf of such Buyer and constitute the
legal, valid and binding obligations of such Buyer enforceable against such Buyer in accordance
with their respective terms, except as such enforceability may be limited by general principles of
equity or to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other
similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights
and remedies.

     (i) No Conflicts. The execution, delivery and performance by such Buyer of this Agreement
and the Registration Rights Agreement and the consummation by such Buyer of the transactions
contemplated hereby and thereby will not (i) result in a violation of the organizational documents
of such Buyer 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 such
Buyer is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or
decree (including federal and state securities laws) applicable to such Buyer, except in the case
of clauses (ii) and (iii) above, for such conflicts, defaults, rights or violations which would
not, individually or in the aggregate, reasonably be expected to have a material adverse effect on
the ability of such Buyer to perform its obligations hereunder.

     (j) Residency. Such Buyer is a resident of the jurisdiction specified below its address on
the Schedule of Buyers.

     (k) Certain Trading Activities. Such Buyer has not directly or indirectly, nor has
any person acting on behalf of or pursuant to any understanding with such Buyer, engaged in any
transactions in the securities of the Company (including, without limitation, Short Sales involving
the Company’s securities) since the time that such Buyer was first contacted by the Company
regarding the investment in the Company contemplated herein. “Short Sales” include, without
limitation, all “short sales” as defined in Rule 200 promulgated under Regulation SHO under the
1934 Act (“Regulation SHO”) and all types of direct and indirect stock pledges, forward sales
contracts, options, puts, calls, swaps and similar arrangements (including on a total return
basis), and sales and other transactions through non-U.S. broker dealers or foreign regulated
brokers (but shall not be deemed to include the location and/or reservation of borrowable shares of
Common Stock).

     (l) General Solicitation. Such Buyer is not purchasing the Securities as a result of

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any advertisement, article, notice or other communication regarding the Securities published in any
newspaper, magazine or similar media or broadcast over television or radio or presented at
any seminar.

     (m) Manipulation of Price. Since the time that such Buyer was first contacted by the
Company or its agent regarding the investment in the Company contemplated herein, such Buyer has
not, and, to the knowledge of such Buyer, no Person acting on its behalf has, directly or
indirectly, (i) taken any action designed to cause or to result in the stabilization or
manipulation of the price of any security of the Company to facilitate the sale or resale of any of
the Securities, (ii) sold, bid for, purchased, or paid any compensation for soliciting purchases
of, any of the Securities (other than the location and/or reservation of borrowable shares of
Common Stock by any Buyer), or (iii) paid or agreed to pay to any Person any compensation for
soliciting another to purchase any other securities of the Company (other than the location and/or
reservation of borrowable shares of Common Stock by any Buyer).

3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

     The Company represents and warrants to each of the Buyers that, as of the date hereof and as
of the Closing Date and except as set forth in the Schedules prepared by the Company and attached
hereto:

     (a) Organization and Qualification; Subsidiary. Each of the Company and the Subsidiary (as
defined below) is an entity duly organized and validly existing and in good standing under the laws
of the jurisdiction in which they are formed, and has the requisite power and authorization to own
their properties and to carry on their business as now being conducted and as presently proposed to
be conducted. Each of the Company and the Subsidiary is duly qualified as a foreign entity to do
business and is in good standing in every jurisdiction in which its ownership of property or the
nature of the business conducted by it makes such qualification necessary, except to the extent
that the failure to be so qualified or be in good standing would not have a Material Adverse
Effect. As used in this Agreement, “Material Adverse Effect” means any material adverse effect on
(i) the business, properties, assets, liabilities, operations (including results thereof),
condition (financial or otherwise) or prospects of the Company and the Subsidiary, taken as a
whole, (ii) the transactions contemplated hereby or in any of the other Transaction Documents or
(iii) the authority or ability of the Company to perform any of its respective obligations under
any of the Transaction Documents (as defined below). The Company has only one Subsidiary, which is
set forth on Schedule 3(a) (the “Subsidiary”). “Subsidiary” means any Person in which the
Company, directly or indirectly, (I) owns at least fifty percent (50% of the outstanding capital
stock or holds at least fifty percent (50%) of the equity or similar interest of such Person or
(II) controls or operates all or any part of the business, operations or administration of such
Person.

     (b) Authorization; Enforcement; Validity. The Company has the requisite power and
authority to enter into and perform its obligations under this Agreement and the other Transaction
Documents and to issue the Securities in accordance with the terms hereof and thereof. Each
Subsidiary has the requisite power and authority to enter into and perform its obligations under
the Transaction Documents to which it is a party. The execution and delivery of this Agreement and
the other Transaction Documents by the Company, and the consummation

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by the Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance of the
Common Shares and the issuance of the Warrants and the
reservation for issuance and issuance of the Warrant Shares issuable upon exercise of the
Warrants) have been duly authorized by the Company’s board of directors and (other than the filing
with the SEC of one or more Registration Statements in accordance with the requirements of the
Registration Rights Agreement, a Form D with the SEC, any other filings as may be required by any
state securities agencies, and the Shareholder Approval) no further filing, consent or
authorization is required by the Company or its board of directors or its shareholders or other
governing body. This Agreement has been, and the other Transaction Documents will be prior to the
Closing, duly executed and delivered by the Company or its agent, and each constitutes the legal,
valid and binding obligations of the Company, enforceable against the Company in accordance with
its respective 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 applicable creditors’ rights and remedies
and except as rights to indemnification and to contribution may be limited by federal or state
securities law. “Transaction Documents” means, collectively, this Agreement, the Warrants, the
Registration Rights Agreement, the Irrevocable Transfer Agent Instructions (as defined below) and
each of the other agreements and instruments entered into or delivered by any of the parties hereto
in connection with the transactions contemplated hereby and thereby, as may be amended from time to
time.

     (c) Issuance of Securities. The Common Shares, when issued, will be validly issued, fully
paid and nonassessable and free from all preemptive or similar rights, taxes, liens, charges and
other encumbrances with respect to the issue thereof, with the holders being entitled to all rights
accorded to a holder of Common Stock. The Warrants are duly authorized and upon issuance in
accordance with the terms of the Transaction Documents shall be validly issued, fully paid and
non-assessable and free from all preemptive or similar rights, taxes, liens, charges and other
encumbrances with respect to the issue thereof. Assuming the Company obtains the Shareholder
Approval (as defined below), the Company will reserve from its duly authorized capital stock not
less than 100% of the maximum number of Warrant Shares issuable upon exercise of the Warrants
(without taking into account any possible adjustments pursuant to the anti-dilution rights
attendant thereto or any limitations on the exercise of the Warrants set forth therein). Upon
exercise in accordance with the Warrants, the Warrant Shares, when issued, will be validly issued,
fully paid and nonassessable and free from all preemptive or similar rights, taxes, liens, charges
and other encumbrances with respect to the issue thereof, with the holders being entitled to all
rights accorded to a holder of Common Stock. Subject to the accuracy of the representations and
warranties of the Buyers in this Agreement, the offer and issuance by the Company of the Securities
is exempt from registration under the 1933 Act.

     (d) No Conflicts. 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 issuance of the Common Shares, the Warrants and, subject to the
Company obtaining the Shareholder Approval, the Warrant Shares and the reservation for issuance of
the Warrant Shares) will not (i) result in a violation of the Articles of Incorporation (as defined
below) or the Bylaws (as defined below), (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,

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acceleration or cancellation of, any agreement, indenture or
instrument to which the Company or the Subsidiary is a party, or (iii) result in a violation of any
law, rule, regulation, order, judgment or decree (including foreign, federal and state securities laws and regulations and the rules
and regulations of the OTC Bulletin Board (the “Principal Market”) and including all applicable
federal laws, rules and regulations) applicable to the Company or the Subsidiary or by which any
property or asset of the Company or the Subsidiary is bound or affected except, in the case of
clause (ii) or (iii) above, to the extent such violations that could not reasonably be expected to
have a Material Adverse Effect.

     (e) Consents. Other than the Shareholder Approval (as defined below), neither the Company
nor the Subsidiary is required to obtain any consent from, authorization or order of, or make any
filing or registration with (other than the filing with the SEC of one or more Registration
Statements in accordance with the requirements of the Registration Rights Agreement, a Form D with
the SEC and any other filings as may be required by any state securities agencies), any court,
governmental agency or any regulatory or self-regulatory agency or any other Person in order for it
to execute, deliver or perform any of its respective obligations under or contemplated by the
Transaction Documents, in each case, in accordance with the terms hereof or thereof. Other than
the Shareholder Approval, all consents, authorizations, orders, filings and registrations which the
Company or the Subsidiary is required to obtain pursuant to the preceding sentence have been
obtained or effected on or prior to the Closing Date, and neither the Company nor the Subsidiary is
aware of any facts or circumstances which might prevent the Company or the Subsidiary from
obtaining or effecting any of the registration, application or filings contemplated by the
Transaction Documents. The Company is not in violation of the requirements of the Principal Market
and has no knowledge of any facts or circumstances which could reasonably lead to delisting or
suspension of the Common Stock in the foreseeable future.

     (f) Acknowledgment Regarding Buyer’s Purchase of Securities. The Company acknowledges and
agrees that, to its actual knowledge, each Buyer is acting solely in the capacity of an arm’s
length purchaser with respect to the Transaction Documents and the transactions contemplated hereby
and thereby and that no Buyer is an officer or director of the Company or the Subsidiary. The
Company further acknowledges that no Buyer is acting as a financial advisor or fiduciary of the
Company or the Subsidiary (or in any similar capacity) with respect to the Transaction Documents
and the transactions contemplated hereby and thereby, and any advice given by a Buyer or any of its
representatives or agents in connection with the Transaction Documents and the transactions
contemplated hereby and thereby is merely incidental to such Buyer’s purchase of the Securities.
The Company further represents to each Buyer that the Company’s decision to enter into the
Transaction Documents to which it is a party has been based solely on the independent evaluation by
the Company and its representatives.

     (g) No General Solicitation; Placement Agent’s Fees. Neither the Company, nor the
Subsidiary or 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) in connection with
the offer or sale of the Securities. The Company shall be responsible for the payment of any
placement agent’s fees, financial advisory fees, or brokers’ commissions (other than for Persons
engaged by any Buyer or its investment advisor) relating to or arising out of the transactions
contemplated hereby. Other than Ladenburg Thalmann & Co. Inc. (the “Placement Agent”),

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neither the Company nor the Subsidiary has engaged any placement agent or other agent in connection with the
sale of the Securities.

     (h) No Integrated Offering. None of the Company, the Subsidiary or any of their
affiliates, nor any Person acting on their behalf has, directly or indirectly, made any offers or
sales of any security or solicited any offers to buy any security, under circumstances that would
require registration of the issuance of any of the Securities under the 1933 Act, whether through
integration with prior offerings or otherwise, or cause this offering of the Securities to require
approval of shareholders of the Company under any applicable shareholder approval provisions,
including, without limitation, under the rules and regulations of any exchange or automated
quotation system on which any of the securities of the Company are listed or designated. None of
the Company, the Subsidiary, their affiliates nor any Person acting on their behalf will take any
action or steps that would require registration of the issuance of any of the Securities under the
1933 Act or cause the offering of any of the Securities hereunder to be integrated with other
offerings.

     (i) Application of Takeover Protections; Rights Agreement. The Company and its board of
directors have taken all necessary action, if any, in order to render inapplicable any control
share acquisition, interested shareholder, business combination, poison pill (including any
distribution under a rights agreement) or other similar anti-takeover provision under the Articles
of Incorporation, Bylaws or other organizational documents or the laws of the jurisdiction of its
incorporation or otherwise which is or could become applicable to any Buyer solely as a result of
the transactions contemplated by this Agreement, including, without limitation, the Company’s
issuance of the Securities and any Buyer’s ownership of the Securities. The Company and its board
of directors have taken all necessary action, if any, in order to render inapplicable any
shareholder rights plan or similar arrangement relating to accumulations of beneficial ownership of
the Securities or a change in control of the Company or the Subsidiary, in each case, solely as a
result of the transactions contemplated by this Agreement.

     (j) SEC Documents; Financial Statements. During the two (2) years prior to the date
hereof, the Company has timely filed all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC pursuant to the reporting requirements of the 1934 Act (all
of the foregoing filed prior to the date hereof and all exhibits included therein and financial
statements, notes and schedules thereto and documents incorporated by reference therein being
hereinafter referred to as the “SEC Documents”). As of their respective dates, the SEC Documents
complied in all material respects with the requirements of the 1934 Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC
Documents, at the time they were filed with the SEC, 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. As of their respective dates, the financial statements of the Company included in the
SEC Documents complied as to form in all material respects with applicable accounting requirements
and the published rules and regulations of the SEC with respect thereto as in effect as of the time
of filing. Such financial statements have been prepared in accordance with generally accepted
accounting principles, consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the

8

 

notes thereto, or (ii) in the case of unaudited interim statements, to the extent they may exclude footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial position of the
Company as of the dates thereof and the results of its operations and
cash flows for the periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments which will not be material, either individually or in the aggregate). No
other information provided by or on behalf of the Company to the Buyers which is not included in
the SEC Documents (including, without limitation, information referred to in Section 2(e) of this
Agreement) contains any untrue statement of a material fact or omits to state any material fact
necessary in order to make the statements therein not misleading, in the light of the circumstance
under which they are or were made.

     (k) Absence of Certain Changes. Except as set forth in the SEC Documents, there has been
no material adverse change and no material adverse development in the business, assets,
liabilities, properties, operations (including results thereof), condition (financial or otherwise)
or prospects of the Company and the Subsidiary, taken as a whole. Since the date of the Company’s
most recent audited financial statements contained in a Form 10-K, neither the Company nor the
Subsidiary has (i) declared or paid any dividends, (ii) sold any assets, individually or in the
aggregate, outside of the ordinary course of business or (iii) made any material capital
expenditures, individually or in the aggregate. Neither the Company nor the Subsidiary has taken
any steps to seek protection pursuant to any law or statute relating to bankruptcy, insolvency,
reorganization, receivership, liquidation or winding up, nor does the Company or the Subsidiary
have any knowledge or reason to believe that any of their respective creditors intend to initiate
involuntary bankruptcy proceedings or any actual knowledge of any fact which would reasonably lead
a creditor to do so. The Company is not as of the date hereof, and after giving effect to the
transactions contemplated hereby to occur at the Closing, will not be Insolvent (as defined below).
For purposes of this Section 3(k), “Insolvent” means (I) with respect to the Company and the
Subsidiary, on a consolidated basis, (i) the present fair saleable value of the Company’s and the
Subsidiary’s assets is less than the amount required to pay the Company’s and the Subsidiary’s
total Indebtedness (as defined below), (ii) the Company and the Subsidiary are unable to pay their
debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become
absolute and matured or (iii) the Company and the Subsidiary intend to incur or believe that they
will incur debts that would be beyond their ability to pay as such debts mature; and (II) with
respect to the Company and he Subsidiary, individually, (i) the present fair saleable value of the
Company’s assets is less than the amount required to pay the Company’s total Indebtedness (as
defined below), (ii) the Company is unable to pay its debts and liabilities, subordinated,
contingent or otherwise, as such debts and liabilities become absolute and matured or (iii) the
Company intends to incur or believes that it will incur debts that would be beyond its ability to
pay as such debts mature. Neither the Company nor the Subsidiary has engaged in any business or in
any transaction, and is not about to engage in any business or in any transaction, for which the
Company’s or the Subsidiary’s remaining assets constitute unreasonably small capital.

     (l) No Undisclosed Events, Liabilities, Developments or Circumstances. Except as set forth
in the SEC Documents, no event, liability, development or circumstance has occurred or exists, or
is reasonably expected to exist or occur with respect to the Company, the Subsidiary or their
respective business, properties, liabilities, prospects, operations (including results thereof) or
condition (financial or otherwise), that (i) would be required to be disclosed by the Company

9

 

under applicable securities laws on a registration statement on Form S-3 filed with the SEC
relating to an issuance and sale by the Company of its Common Stock and which has not been publicly
announced, (ii) would reasonably be expected to have a Material Adverse Effect or (iii) would
reasonably be expected to have a material adverse effect on any Buyer’s investment hereunder.

     (m) Conduct of Business; Regulatory Permits. Neither the Company nor the Subsidiary is in
violation of any term of or in default under its Articles of Incorporation, Bylaws, any certificate
of designation, preferences or rights of any other outstanding series of preferred stock of the
Company or the Subsidiary or their organizational charter, certificate of formation or certificate
of incorporation or bylaws, respectively. Neither the Company nor the Subsidiary is in violation of
any judgment, decree or order or any statute, ordinance, rule or regulation applicable to the
Company or the Subsidiary, and neither the Company nor the Subsidiary will conduct its business in
violation of any of the foregoing, except in all cases for possible violations which could not,
individually or in the aggregate, have a Material Adverse Effect. Without limiting the generality
of the foregoing, the Company is not in violation of any of the rules, regulations or requirements
of the Principal Market and has no knowledge of any facts or circumstances that could reasonably
lead to delisting or suspension of the Common Stock by the Principal Market in the foreseeable
future. Since January 1, 2008, other than as set forth in the SEC Documents, (i) the Common Stock
has been listed or designated for quotation on the Principal Market, (ii) trading in the Common
Stock has not been suspended by the SEC or the Principal Market and (iii) the Company has received
no communication, written or oral, from the SEC or the Principal Market regarding the suspension or
delisting of the Common Stock from the Principal Market. The Company and the Subsidiary possess all
certificates, authorizations and permits issued by the appropriate regulatory authorities necessary
to conduct their respective businesses, except where the failure to possess such certificates,
authorizations or permits would not have, individually or in the aggregate, a Material Adverse
Effect, and neither the Company nor the Subsidiary has received any notice of proceedings relating
to the revocation or modification of any such certificate, authorization or permit.

     (n) Foreign Corrupt Practices. Neither the Company nor the Subsidiary nor, to the
Company’s knowledge, any director, officer, agent, employee or other Person acting on behalf of the
Company or the Subsidiary has, in the course of its actions for, or on behalf of, the Company or
the Subsidiary (i) used any corporate funds for any unlawful contribution, gift, entertainment or
other unlawful expenses relating to political activity; (ii) made any direct or indirect unlawful
payment to any foreign or domestic government official or employee from corporate funds; (iii)
violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as
amended; or (iv) made any unlawful bribe, rebate, payoff, influence payment, kickback or other
unlawful payment to any foreign or domestic government official or employee.

     (o) Sarbanes-Oxley Act. Other than as disclosed in the SEC Documents, the Company and each
Subsidiary is in compliance with all applicable requirements of the Sarbanes-Oxley Act of 2002 that
are effective as of the date hereof, and all applicable rules and regulations promulgated by the
SEC thereunder that are effective as of the date hereof.

     (p) Transactions With Affiliates. Other than as disclosed in the SEC Documents, none of
the officers, directors or employees of the Company or the Subsidiary is presently a

10

 

party to any transaction with the Company or the Subsidiary (other than for ordinary course
services as employees, officers or 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 such officer, director
or employee or, to the knowledge of the Company or the Subsidiary, any corporation, partnership,
trust or other Person in which any such officer, director, or employee has a substantial interest
or is an employee, officer, director, trustee or partner.

     (q) Equity Capitalization. As of the date hereof, the authorized capital stock of the
Company consists of (i) 150,000,000 shares of Common Stock, of which 103,076,452 are issued and
outstanding and 12,221,036 shares are reserved for issuance pursuant to securities (other than the
Warrants) exercisable or exchangeable for, or convertible into, shares of Common Stock and (ii)
2,950,000 shares of Preferred Stock, no par value, of which none are outstanding. No shares of
Common Stock are held in treasury. All of such outstanding shares are duly authorized and have
been, or upon issuance will be, validly issued and are fully paid and nonassessable. None of the
Company’s or the Subsidiary’s capital stock is subject to preemptive rights or any other similar
rights or any liens or encumbrances suffered or permitted by the Company or the Subsidiary. Except
as disclosed in the SEC Documents, 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, or exercisable or exchangeable for, any capital stock of the Company or the
Subsidiary, or contracts, commitments, understandings or arrangements by which the Company or the
Subsidiary is or may become bound to issue additional capital stock of the Company or the
Subsidiary or options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, or exercisable or
exchangeable for, any capital stock of the Company or the Subsidiary. Except as disclosed in the
SEC Documents, there are no outstanding debt securities, notes, credit agreements, credit
facilities or other agreements, documents or instruments evidencing Indebtedness of the Company or
the Subsidiary or by which the Company or the Subsidiary is or may become bound. There are no
financing statements securing obligations in any amounts filed in connection with the Company or
the Subsidiary. There are no agreements or arrangements under which the Company or the Subsidiary
is obligated to register the sale of any of their securities under the 1933 Act (except pursuant to
the Registration Rights Agreement). Except as disclosed in the SEC Documents, there are no
outstanding securities or instruments of the Company or the Subsidiary which contain any redemption
or similar provisions, and there are no contracts, commitments, understandings or arrangements by
which the Company or the Subsidiary is or may become bound to redeem a security of the Company or
the Subsidiary. There are no securities or instruments containing anti-dilution or similar
provisions that will be triggered by the issuance of the Securities. Neither the Company nor the
Subsidiary has any stock appreciation rights or “phantom stock” plans or agreements or any similar
plan or agreement. Neither the Company nor the Subsidiary has any liabilities or obligations
required to be disclosed in the SEC Documents which are not so disclosed in the SEC Documents,
other than those incurred in the ordinary course of the Company’s or the Subsidiary’s respective
businesses and which, individually or in the aggregate, do not or could not have a Material Adverse
Effect. Copies of the Company’s Articles of Incorporation, as amended and as in effect on the date
hereof (the “Articles of Incorporation”), and the Company’s bylaws, as amended and as in effect on
the date hereof (the “Bylaws”), have been filed as exhibits with the SEC and are available on the
SEC’s website at www.sec.gov.

11

 

     (r) Indebtedness and Other Contracts. Except as disclosed in the SEC Documents, neither
the Company nor the Subsidiary (i) has any outstanding Indebtedness (as defined below), (ii) is a
party to any contract, agreement or instrument, the violation of which, or default under which, by
the other party(ies) to such contract, agreement or instrument could reasonably be expected to
result in a Material Adverse Effect, (iii) is in violation of any term of, or in default under, any
contract, agreement or instrument relating to any Indebtedness, except where such violations and
defaults would not result, individually or in the aggregate, in a Material Adverse Effect, or (iv)
is a party to any contract, agreement or instrument relating to any Indebtedness, the performance
of which, in the judgment of the Company’s officers, has or is expected to have a Material Adverse
Effect. For purposes of this Agreement: (x) “Indebtedness” of any Person means, without
duplication (A) all indebtedness for borrowed money, (B) all obligations issued, undertaken or
assumed as the deferred purchase price of property or services (including, without limitation,
“capital leases” in accordance with generally accepted accounting principles) (other than trade
payables entered into in the ordinary course of business), (C) all reimbursement or payment
obligations with respect to letters of credit, surety bonds and other similar instruments, (D) all
obligations evidenced by notes, bonds, debentures or similar instruments, including obligations so
evidenced incurred in connection with the acquisition of property, assets or businesses, (E) all
indebtedness created or arising under any conditional sale or other title retention agreement, or
incurred as financing, in either case with respect to any property or assets acquired with the
proceeds of such indebtedness (even though the rights and remedies of the seller or bank under such
agreement in the event of default are limited to repossession or sale of such property), (F) all
monetary obligations under any leasing or similar arrangement which, in connection with generally
accepted accounting principles, consistently applied for the periods covered thereby, is classified
as a capital lease, (G) all indebtedness referred to in clauses (A) through (F) above secured by
(or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be
secured by) any mortgage, lien, pledge, charge, security interest or other encumbrance upon or in
any property or assets (including accounts and contract rights) owned by any Person, even though
the Person which owns such assets or property has not assumed or become liable for the payment of
such indebtedness, and (H) all Contingent Obligations in respect of indebtedness or obligations of
others of the kinds referred to in clauses (A) through (G) above; (y) “Contingent Obligation”
means, as to any Person, any direct or indirect liability, contingent or otherwise, of that Person
with respect to any indebtedness, lease, dividend or other obligation of another Person if the
primary purpose or intent of the Person incurring such liability, or the primary effect thereof, is
to provide assurance to the obligee of such liability that such liability will be paid or
discharged, or that any agreements relating thereto will be complied with, or that the holders of
such liability will be protected (in whole or in part) against loss with respect thereto; and (z)
“Person” means an individual, a limited liability company, a partnership, a joint venture, a
corporation, a trust, an unincorporated organization, any other entity and a government or any
department or agency thereof.

     (s) Absence of Litigation. Except as disclosed in the SEC Documents, there is no action,
suit, proceeding, inquiry or investigation before or by the Principal Market, any court, public
board, government agency, self-regulatory organization or body pending or, to the knowledge of the
Company, threatened against or affecting the Company or the Subsidiary, the Common Stock or any of
the Company’s or the Subsidiary’s officers or directors which is outside of the ordinary course of
business or individually or in the aggregate material to the Company or the Subsidiary. There has
not been, and to the knowledge of the Company, there is

12

 

not pending or contemplated, any investigation by the SEC involving the Company, the
Subsidiary or any current or former director or officer of the Company or the Subsidiary. The SEC
has not issued any stop order or other order suspending the effectiveness of any registration
statement filed by the Company under the 1933 Act or the 1934 Act.

     (t) Insurance. The Company and the Subsidiary 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 the
Subsidiary are engaged. Neither the Company nor the Subsidiary has been refused any insurance
coverage sought or applied for, and neither the Company nor the Subsidiary has any reason to
believe that it will be unable to renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not have a Material Adverse Effect.

     (u) Employee Relations. Neither the Company nor the Subsidiary is a party to any
collective bargaining agreement or employs any member of a union. The Company believes that its and
the Subsidiary’s relations with their respective employees are good. No executive officer (as
defined in Rule 501(f) promulgated under the 1933 Act) or other key employee of the Company or the
Subsidiary has notified the Company or the Subsidiary that such officer intends to leave the
Company or the Subsidiary or otherwise terminate such officer’s employment with the Company or the
Subsidiary. To the Company’s knowledge, no executive officer or other key employee of the Company
or the Subsidiary is, or is now expected to be, in violation of any material term of any employment
contract, confidentiality, disclosure or proprietary information agreement, non-competition
agreement, or any other contract or agreement or any restrictive covenant, and the continued
employment of each such executive officer or other key employee (as the case may be), to the
Company’s knowledge, does not subject the Company or the Subsidiary to any liability with respect
to any of the foregoing matters. The Company and the Subsidiary are in compliance with all
federal, state, local and foreign laws and regulations respecting labor, employment and employment
practices and benefits, terms and conditions of employment and wages and hours, except where
failure to be in compliance would not, either individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect.

     (v) Title. The Company and the Subsidiary have good and marketable title in fee simple to
all real property, and have good and marketable title to all personal property (exclusive of
intellectual property), owned by them which is material to the business of the Company and the
Subsidiary, in each case, free and clear of all liens, encumbrances and defects except such as do
not materially affect the value of such property and do not interfere with the use made and
proposed to be made of such property by the Company and the Subsidiary. Any real property and
facilities held under lease by the Company or the Subsidiary 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 or the
Subsidiary.

     (w) Intellectual Property Rights. The Company and the Subsidiary own or possess adequate
rights or licenses to use all trademarks, trade names, service marks, service mark registrations,
service names, patents, patent rights, copyrights, original works, inventions, licenses, approvals,
governmental authorizations, trade secrets and other intellectual property

13

 

rights and all applications and registrations therefor (“Intellectual Property Rights”)
necessary to conduct their respective businesses as now conducted and as presently proposed to be
conducted. None of the Company’s or the Subsidiary’s Intellectual Property Rights necessary to
conduct their respective businesses as now conducted and as presently proposed to be conducted have
expired, terminated or been abandoned, or are expected to expire, terminate or be abandoned, within
three years from the date of this Agreement. The Company has no knowledge of any infringement by
the Company or the Subsidiary of Intellectual Property Rights of others. There is no claim, action
or proceeding being made or brought, or to the knowledge of the Company or the Subsidiary, being
threatened, against the Company or the Subsidiary regarding their Intellectual Property Rights
except as disclosed in the SEC Documents. The Company is not aware of any facts or circumstances
which might give rise to any of the foregoing infringements or claims, actions or proceedings. The
Company and the Subsidiary have taken reasonable security measures to protect the secrecy,
confidentiality and value of all of their Intellectual Property Rights.

     (x) Environmental Laws. The Company and the Subsidiary (i) are in compliance with all
Environmental Laws (as defined below), (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
where, in each of the foregoing clauses (i), (ii) and (iii), the failure to so comply could be
reasonably expected to have, individually or in the aggregate, a Material Adverse Effect. The term
“Environmental Laws” means all federal, state, local or foreign laws relating to pollution or
protection of human health or the environment (including, without limitation, ambient air, surface
water, groundwater, land surface or subsurface strata), including, without limitation, laws
relating to emissions, discharges, releases or threatened releases of chemicals, pollutants,
contaminants, or toxic or hazardous substances or wastes (collectively, “Hazardous Materials”) into
the environment, or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous Materials, as well as all
authorizations, codes, decrees, demands or demand letters, injunctions, judgments, licenses,
notices or notice letters, orders, permits, plans or regulations issued, entered, promulgated or
approved thereunder.

     (y) Subsidiary Rights. The Company has the unrestricted right to vote, and (subject to
limitations imposed by applicable law) to receive dividends and distributions on, all capital
securities of the Subsidiary as owned by the Company.

     (z) Tax Status. The Company and the Subsidiary (i) has timely made or filed all foreign,
federal and state income and all other tax returns, reports and declarations required by any
jurisdiction to which it is subject, (ii) has timely 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 (iii) 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 except in each case where the failure
to file, pay or set aside would not have a Material Adverse Effect. 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 and the Subsidiary know of no basis for any such claim. The Company is not operated
in such a manner as to qualify as a passive foreign investment

14

 

company, as defined in Section 1297 of the U.S. Internal Revenue Code of 1986, as amended.

     (aa) Internal Accounting and Disclosure Controls. The Company and the Subsidiary maintains
internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the 1934
Act) that is effective to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles, including that (i) transactions are executed in
accordance with management’s general or specific authorizations, (ii) transactions are recorded as
necessary to permit preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset and liability accountability, (iii) access to assets or
incurrence of liabilities is permitted only in accordance with management’s general or specific
authorization and (iv) the recorded accountability for assets and liabilities is compared with the
existing assets and liabilities at reasonable intervals and appropriate action is taken with
respect to any difference. The Company maintains disclosure controls and procedures (as such term
is defined in Rule 13a-15(e) under the 1934 Act) that are effective in ensuring that information
required to be disclosed by the Company in the reports that it files or submits under the 1934 Act
is recorded, processed, summarized and reported, within the time periods specified in the rules and
forms of the SEC, including, without limitation, controls and procedures designed to ensure that
information required to be disclosed by the Company in the reports that it files or submits under
the 1934 Act is accumulated and communicated to the Company’s management, including its principal
executive officer or officers and its principal financial officer or officers, as appropriate, to
allow timely decisions regarding required disclosure. Since January 1, 2008, neither the Company
nor the Subsidiary has received any notice or correspondence from any accountant relating to any
potential material weakness in any part of the internal controls over financial reporting of the
Company or the Subsidiary.

     (bb) Off Balance Sheet Arrangements. There is no transaction, arrangement, or other
relationship between the Company or the Subsidiary and an unconsolidated or other off balance sheet
entity that is required to be disclosed by the Company in its 1934 Act filings and is not so
disclosed or that otherwise could be reasonably likely to have a Material Adverse Effect.

     (cc) Investment Company Status. The Company is not, and upon consummation of the sale of
the Securities will not be, an “investment company,” an affiliate of an “investment company,” a
company controlled by an “investment company” or an “affiliated person” of, or “promoter” or
“principal underwriter” for, an “investment company” as such terms are defined in the Investment
Company Act of 1940, as amended.

     (dd) Acknowledgement Regarding Buyers’ Trading Activity. It is understood and acknowledged
by the Company that: (i) other than as contemplated by Section 2(k), following the public
disclosure of the transactions contemplated by the Transaction Documents, in accordance with the
terms thereof, none of the Buyers have been asked by the Company or the Subsidiary to agree, nor
has any Buyer agreed with the Company or the Subsidiary, to desist from effecting any transactions
in or with respect to (including, without limitation, purchasing or selling, long and/or short) any
securities of the Company, or “derivative” securities based on securities issued by the Company or
to hold the Securities for any specified term; (ii) any Buyer, and counterparties in “derivative”
transactions to which any such Buyer is a party, directly or indirectly, presently may have a
“short” position in the Common Stock which was established

15

 

prior to such Buyer’s knowledge of the transactions contemplated by the Transaction Documents;
and (iii) each Buyer shall not be deemed to have any affiliation with or control over any arm’s
length counterparty in any “derivative” transaction. The Company further understands and
acknowledges that following the public disclosure of the transactions contemplated by the
Transaction Documents pursuant to the Press Release (as defined below) one or more Buyers may
engage in hedging and/or trading activities at various times during the period that the Securities
are outstanding, including, without limitation, during the periods that the value and/or number of
the Warrant Shares deliverable with respect to the Securities are being determined and (b) such
hedging and/or trading activities, if any, can reduce the value of the existing shareholders’
equity interest in the Company both at and after the time the hedging and/or trading activities are
being conducted. The Company acknowledges that such aforementioned hedging and/or trading
activities do not constitute a breach of this Agreement or any other Transaction Document or any of
the documents executed in connection herewith or therewith.

     (ee) Manipulation of Price. Neither the Company nor the Subsidiary has, and, to the
knowledge of the Company, no Person acting on their behalf has, directly or indirectly, (i) taken
any action designed to cause or to result in the stabilization or manipulation of the price of any
security of the Company or the Subsidiary to facilitate the sale or resale of any of the
Securities, (ii) sold, bid for, purchased, or paid any compensation for soliciting purchases of,
any of the Securities (other than the Placement Agent), or (iii) paid or agreed to pay to any
Person any compensation for soliciting another to purchase any other securities of the Company or
the Subsidiary.

     (ff) U.S. Real Property Holding Corporation. Neither the Company nor the Subsidiary is, or
has ever been, and so long as any of the Securities are held by any of the Buyers, shall become, a
U.S. real property holding corporation within the meaning of Section 897 of the Internal Revenue
Code of 1986, as amended, and the Company and each Subsidiary shall so certify upon any Buyer’s
request.

     (gg) Registration Eligibility. The Company is eligible to register the
Registrable Securities for resale by the Buyers using Form S-1 promulgated under the 1933 Act.

     (hh) Transfer Taxes. On the Closing Date, all stock transfer or other taxes (other
than income or similar taxes) which are required to be paid in connection with the issuance, sale
and transfer of the Securities to be sold to each Buyer hereunder will be, or will have been, fully
paid or provided for by the Company, and all laws imposing such taxes will be or will have been
complied with.

     (ii) Bank Holding Company Act. Neither the Company nor the Subsidiary is subject
to the Bank Holding Company Act of 1956, as amended (the “BHCA”) and to regulation by the Board of
Governors of the Federal Reserve System (the “Federal Reserve”). Neither the Company nor the
Subsidiary or affiliates owns or controls, directly or indirectly, five percent (5%) or more of the
outstanding shares of any class of voting securities or twenty-five percent (25%) or more of the
total equity of a bank or any equity that is subject to the BHCA and to regulation by the Federal
Reserve. Neither the Company nor the Subsidiary or affiliates exercises a controlling influence
over the management or policies of a bank or any entity that is subject to the BHCA and to
regulation by the Federal Reserve.

16

 

     (jj) Public Utility Holding Act. None of the Company nor the Subsidiary is a
“holding company,” or an “affiliate” of a “holding company,” as such terms are defined in the
Public Utility Holding Act of 2005.

     (kk) Federal Power Act. None of the Company nor the Subsidiary is subject to
regulation as a “public utility” under the Federal Power Act, as amended.

     (ll) No Additional Agreements. The Company does not have any agreement or
understanding with any Buyer with respect to the transactions contemplated by the Transaction
Documents other than as specified in the Transaction Documents.

     (mm) Disclosure. The Company confirms that neither it nor any other Person acting on its
behalf has provided any of the Buyers or their agents or counsel with any information that
constitutes or could reasonably be expected to constitute material, non-public information
concerning the Company or the Subsidiary, other than the existence of the transactions contemplated
by this Agreement and the other Transaction Documents. The Company understands and confirms that
each of the Buyers will rely on the foregoing representations in effecting transactions in
securities of the Company. All disclosure provided to the Buyers regarding the Company and the
Subsidiary, their businesses and the transactions contemplated hereby, including the schedules to
this Agreement, furnished by or on behalf of the Company or the Subsidiary 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 the light of the circumstances under
which they were made, not misleading. No event or circumstance has occurred or information exists
with respect to the Company or the Subsidiary or its or their business, properties, liabilities,
prospects, operations (including results thereof) or conditions (financial or otherwise), which,
under applicable law, rule or regulation, requires public disclosure at or before the date hereof
or announcement by the Company but which has not been so publicly disclosed. The Company
acknowledges and agrees that no Buyer makes or has made any representations or warranties with
respect to the transactions contemplated hereby other than those specifically set forth in Section
2.

     (nn) Shell Company Status. The Company is not, and has never been, an issuer
identified in, or subject to, Rule 144(i) of the 1933 Act.

     (oo) No Other Registration Rights. There are no agreements or arrangements under
which the Company or the Subsidiary is obligated to register the sale of any of their securities
under the 1933 Act (except pursuant to the Registration Rights Agreement).

     (pp) FDA Matters. As to each product subject to the jurisdiction of the U.S. Food
and Drug Administration (“FDA”) under the Federal Food, Drug and Cosmetic Act, as amended, and the
regulations thereunder (“FDCA”) that is manufactured, packaged, labeled, tested, distributed, sold,
and/or marketed by the Company or any of its Subsidiaries (each such product, a “Pharmaceutical
Product”), such Pharmaceutical Product is being manufactured, packaged, labeled, tested,
distributed, sold and/or marketed by the Company in compliance with all applicable requirements
under FDCA and similar laws, rules and regulations relating to registration, investigational use,
premarket clearance, licensure, or application approval, good manufacturing practices, good
laboratory practices, good clinical practices, product listing,

17

 

quotas, labeling, advertising, record keeping and filing of reports, except where the failure
to be in compliance would not have or reasonably be expected to result in a Material Adverse
Effect. There is no pending, completed or, to the Company’s knowledge, threatened, action
(including any lawsuit, arbitration, or legal or administrative or regulatory proceeding, charge,
complaint, or investigation) against the Company or any of its Subsidiaries, and none of the
Company or any of its Subsidiaries has received any notice, warning letter or other communication
from the FDA or any other governmental entity, which (i) contests the premarket clearance,
licensure, registration, or approval of, the uses of, the distribution of, the manufacturing or
packaging of, the testing of, the sale of, or the labeling and promotion of any Pharmaceutical
Product, (ii) withdraws its approval of, requests the recall, suspension, or seizure of, or
withdraws or orders the withdrawal of advertising or sales promotional materials relating to, any
Pharmaceutical Product, (iii) imposes a clinical hold on any clinical investigation by the Company
or any of its Subsidiaries, (iv) enjoins production at any facility of the Company or any of its
Subsidiaries, (v) enters or proposes to enter into a consent decree of permanent injunction with
the Company or any of its Subsidiaries, or (vi) otherwise alleges any violation of any laws, rules
or regulations by the Company or any of its Subsidiaries, and which, either individually or in the
aggregate, would have or reasonably be expected to result in a Material Adverse Effect. The
properties, business and operations of the Company have been and are being conducted in all
material respects in accordance with all applicable laws, rules and regulations of the FDA. The
Company has not been informed by the FDA that the FDA will prohibit the marketing, sale, license or
use in the United States of any product proposed to be developed, produced or marketed by the
Company nor has the FDA expressed any concern as to approving or clearing for marketing any product
being developed or proposed to be developed by the Company.

	4.	 	COVENANTS.

     (a) Efforts. Each Buyer shall use its reasonable best efforts to timely satisfy each of
the conditions to be satisfied by it as provided in Section 6 of this Agreement. The Company shall
use its reasonable best efforts to timely satisfy each of the conditions to be satisfied by it as
provided in Section 7 of this Agreement.

     (b) Form D and Blue Sky. The Company agrees to file with the SEC a Form D with respect to
the Securities as required under Regulation D and to provide a copy thereof to each Buyer promptly
after such filing. The Company shall, on or before the Closing Date, take such action as the
Company shall reasonably determine is necessary in order to obtain an exemption for, or to, qualify
the Securities for sale to the Buyers at the Closing pursuant to this Agreement under applicable
securities or “Blue Sky” laws of the states of the United States (or to obtain an exemption from
such qualification), and shall provide evidence of any such action so taken to the Buyers on or
prior to the Closing Date. The Company shall make any filings and reports relating to the offer
and sale of the Securities required under applicable securities or “Blue Sky” laws of the states of
the United States following the Closing Date.

     (c) Use of Proceeds. The Company shall use the proceeds from the sale of the Securities
for the payment of the fees and expenses described in Section 4(f) below and general corporate
purposes.

     (d) Financial Information. The Company agrees to send the following to each

18

 

Investor (as defined in the Registration Rights Agreement) during the Reporting Period, unless
the following are filed with or furnished to the SEC through EDGAR and are available to the public
through the EDGAR system, within one (1) Business Day after the filing thereof with the SEC, a copy
of its Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q, any interim reports or any
consolidated balance sheets, income statements, stockholders’ equity statements and/or cash flow
statements for any period other than annual that are made publicly available, any Current Reports
on Form 8-K and any registration statements (other than on Form S-8) or amendments filed pursuant
to the 1933 Act.

     (e) Listing. The Company shall use its reasonable best efforts to promptly secure the
listing or designation for quotation (as the case may be) of all of the Registrable Securities
(other than the Warrants, which are addressed below) upon each national securities exchange and
automated quotation system, if any, upon which the Common Stock is then listed or designated for
quotation (as the case may be) (subject to official notice of issuance) and shall maintain such
listing or designation for quotation (as the case may be) of all Registrable Securities from time
to time issuable under the terms of the Transaction Documents on such national securities exchange
or automated quotation system. The Company shall use its reasonable best efforts to maintain the
Common Stock’s listing or authorization for quotation (as the case may be) on the Principal Market,
the NYSE Amex, The New York Stock Exchange, the Nasdaq Global Market, the Nasdaq Global Select
Market or the Nasdaq Capital Market (each, an “Eligible Market”). The Company shall not take any
action which could be reasonably expected to result in the delisting or suspension of the Common
Stock on an Eligible Market. The Company shall pay all fees and expenses in connection with
satisfying its obligations under this Section 4(e).

     (f) Fees. The Company shall be responsible for the payment of any placement agent’s fees,
financial advisory fees, transfer agent fees, DTC (as defined below) fees or broker’s commissions
(other than for Persons engaged by any Buyer) relating to or arising out of the transactions
contemplated hereby (including, without limitation, any fees payable to the Placement Agent, who is
the Company’s sole placement agent in connection with the transactions contemplated by this
Agreement). The Company shall pay, and hold each Buyer harmless against, any liability, loss or
expense (including, without limitation, reasonable attorneys’ fees and out-of-pocket expenses)
arising in connection with any claim relating to any such payment. Except as otherwise set forth in
the Transaction Documents, each party to this Agreement shall bear its own expenses in connection
with the sale of the Securities to the Buyers.

     (g) Pledge of Securities. Notwithstanding anything to the contrary contained in Section
2(g), the Company acknowledges and agrees that the Securities may be pledged by a Buyer in
connection with a bona fide margin agreement or other bona fide loan or financing arrangement that
is secured by the Securities. The pledge of Securities shall not be deemed to be a transfer, sale
or assignment of the Securities hereunder except as may otherwise be required under applicable
securities laws, and no Buyer effecting a pledge of Securities shall be required to provide the
Company with any notice thereof or otherwise make any delivery to the Company pursuant to this
Agreement or any other Transaction Document. The Company hereby agrees to execute and deliver such
documentation as a pledgee of the Securities may reasonably request in connection with a pledge of
the Securities to such pledgee by a Buyer.

19

 

     (h) Disclosure of Transactions and Other Material Information. The Company shall, on or
before 9:30 a.m., New York time, on the first (1st) Business Day after the date of this
Agreement, issue a press release (the “Press Release”) reasonably acceptable to the Buyers
disclosing all the material terms of the transactions contemplated by the Transaction Documents. On
or before 5:30 p.m., New York time, on the first (1st) Business Day following the date
of this Agreement, the Company shall file a Current Report on Form 8-K describing all the material
terms of the transactions contemplated by the Transaction Documents in the form required by the
1934 Act and attaching all the material Transaction Documents (including, without limitation, this
Agreement (and all schedules to this Agreement), the form of the Warrants and the form of the
Registration Rights Agreement) (including all attachments, the “8-K Filing”). From and after the
issuance of the 8-K Filing, the Company shall have disclosed all material, non-public information
(if any) delivered to any of the Buyers by the Company or any of its Subsidiaries, or any of their
respective officers, directors, employees or agents in connection with the transactions
contemplated by the Transaction Documents. The Company shall not, and the Company shall cause each
of its officers, directors, employees and agents not to, provide any Buyer with any material,
non-public information regarding the Company or the Subsidiary from and after the issuance of the
Press Release without the express prior written consent of such Buyer. Subject to the foregoing,
neither the Company, the Subsidiary nor any Buyer shall issue any press releases or any other
public statements with respect to the transactions contemplated hereby; provided,
however, (i) the Company shall be entitled, without the prior approval of any Buyer, to
make any press release or other public disclosure with respect to such transactions (A) in
substantial conformity with the 8-K Filing and contemporaneously therewith and (B) as is required
by applicable law and regulations (provided that in the case of clause (A) each Buyer shall receive
an advanced draft of any such press release or other public disclosure prior to its release) and
(ii) each Buyer may make such filings as may be required under Section 13 and Section 16 of the
1934 Act. Without the prior written consent of the applicable Buyer, the Company shall not (and
shall cause the Subsidiary and affiliates to not) disclose the name of such Buyer in any filing,
announcement, release or otherwise, except as otherwise required by any law, rule or regulation
applicable to the Company after consultation with the Buyer.

     (i) Additional Registration Statements. Until the Applicable Date (as defined
below) and at any time thereafter while any Registration Statement is not effective or the
prospectus contained therein is not available for use, the Company shall not file a registration
statement under the 1933 Act (other than any registration statement on Form S-8) unless such
registration statement relates to the Registrable Securities (other than any registration statement
on Form S-8); provided, however that this Section 4(i) shall not in any way
prohibit the Company from filing amendments to registration statements filed prior to the date of
this Agreement so long as any such amendment does not increase the number of securities covered
thereby or effect the issuance of any securities thereunder (other than pursuant to any
registration statement on Form S-8). “Applicable Date” means the earlier of (i) the first date on
which the resale by the Buyers of all Registrable Securities is covered by one or more effective
Registration Statements (as defined in the Registration Rights Agreement) (and each prospectus
contained therein is available for use on such date) and (ii) the date on which the Buyers of all
Registrable Securities can freely sell such Registrable Securities under Rule 144.

     (j) Reservation of Shares. So long as any Warrants remain outstanding, from and after the
Shareholder Approval Date, the Company shall use reasonable best efforts to at all

20

 

times have authorized, and reserved for the purpose of issuance, no less than 100% of the
maximum number of shares of Common Stock issuable upon exercise of all the Warrants as of the date
hereof (without regard to any limitations on the exercise of the Warrants set forth therein), less
the number of Warrant Shares represented by any such Warrants that have been exercised.

     (k) Conduct of Business. The business of the Company and the Subsidiary shall not be
conducted in violation of any law, ordinance or regulation of any governmental entity, except where
such violations would not result, either individually or in the aggregate, in a Material Adverse
Effect.

     (l) Variable Rate Transaction. Until none of the Warrants are outstanding, the
Company and each Subsidiary shall be prohibited from effecting or entering into an agreement to
effect any Subsequent Placement involving a Variable Rate Transaction. “Variable Rate Transaction”
means a transaction in which the Company or the Subsidiary (i) issues or sells any
Convertible Securities either (A) at a conversion, exercise or exchange rate or other price that is
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 Convertible 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 Convertible Securities 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,
other than pursuant to a customary “weighted average” anti-dilution provision or (ii) enters into
any agreement (including, without limitation, an equity line of credit) whereby the Company or
the Subsidiary may sell securities at a future determined price (other than standard and
customary “preemptive” or “participation” rights). Each Buyer shall be entitled to obtain
injunctive relief against the Company and the Subsidiary to preclude any such issuance,
which remedy shall be in addition to any right to collect damages.

     (m) Passive Foreign Investment Company. The Company shall conduct its business in
such a manner as will ensure that the Company will not be deemed to constitute a passive foreign
investment company within the meaning of Section 1297 of the U.S. Internal Revenue Code of 1986, as
amended.

     (n) Corporate Existence. So long as any Buyer owns any Warrants, the Company shall
not be party to any Fundamental Transaction (as defined in the Warrants) unless the Company is in
compliance with the applicable provisions governing Fundamental Transactions set forth in the
Warrants.

     (o) Shareholder Approval; Voting of Shares. As soon as reasonably practicable
after the Closing, the Company shall cause a special meeting of shareholders of the Company (the
“Shareholder Meeting”) to be called and held to vote on a proposal (the “Shareholder Proposal”) to
approve an amendment to the Company’s Articles of Incorporation to increase the authorized number
of shares of Common Stock by up to 15 million shares. In connection with the Shareholder Meeting,
the Company shall, as soon as reasonably practicable after the Closing, prepare and file with the
SEC a preliminary proxy statement that shall include the Shareholder Proposal and a recommendation
by the Company’s board of directors for a vote in favor of the Shareholder Proposal. The Company
shall use its reasonable best efforts (i) to respond to any

21

 

comments of the SEC or its staff to such preliminary proxy statement, (ii) to cause the
definitive proxy statement related to the Shareholder Meeting to be mailed to the Company’s
stockholders and (iii) to solicit shareholders to vote in favor of the Shareholder Proposal (the
requisite shareholder approval of the Shareholder Proposal being referred to herein as the
“Shareholder Approval”, and the date such Shareholder Approval is obtained, the “Shareholder
Approval Date”).

	5.	 	REGISTER; TRANSFER AGENT INSTRUCTIONS; LEGEND.

     (a) Register. The Company shall maintain at its principal executive offices (or such other
office or agency of the Company as it may designate by notice to each holder of Securities), a
register for the Warrants in which the Company shall record the name and address of the Person in
whose name the Warrants have been issued (including the name and address of each transferee, to the
extent it is appropriately notified of transfers) and the number of Warrant Shares issuable upon
exercise of the Warrants held by such Person. The Company shall keep the register open and
available at all times during normal business hours for inspection of any Buyer or its legal
representatives so long as Buyer continues to hold any Warrants.

     (b) Transfer Agent Instructions. The Company shall issue irrevocable instructions to its
transfer agent and any subsequent transfer agent in a form reasonably acceptable to each of the
Buyers (the “Irrevocable Transfer Agent Instructions”) to issue certificates or credit shares to
the applicable balance accounts at The Depository Trust Company (“DTC”), registered in the name of
each Buyer or its respective nominee(s), for the Warrant Shares in such amounts as specified from
time to time by each Buyer to the Company upon the exercise of the Warrants (as the case may be).
The Company represents and warrants that no instruction other than the Irrevocable Transfer Agent
Instructions referred to in this Section 5(b), and stop transfer instructions to give effect to
Section 2(g) hereof, will be given by the Company to its transfer agent with respect to the
Securities, and that the Securities shall otherwise be freely transferable on the books and records
of the Company, as applicable, to the extent provided in this Agreement and the other Transaction
Documents. If a Buyer effects a sale, assignment or transfer of the Securities in accordance with
Section 2(g), the Company shall permit the transfer and shall promptly instruct its transfer agent
to issue one or more certificates or credit shares to the applicable balance accounts at DTC in
such name and in such denominations as specified by such Buyer to effect such sale, transfer or
assignment. In the event that such sale, assignment or transfer involves Warrant Shares sold,
assigned or transferred pursuant to an effective registration statement or in compliance with Rule
144 (assuming the transferor is not then an affiliate of the Company), the transfer agent shall
issue such shares to such Buyer, assignee or transferee (as the case may be) without any
restrictive legend in accordance with Section 5(d) below. The Company acknowledges that a breach by
it of its obligations hereunder will cause irreparable harm to a Buyer. Accordingly, the Company
acknowledges that the remedy at law for a breach of its obligations under this Section 5(b) will be
inadequate and agrees, in the event of a breach or threatened breach by the Company of the
provisions of this Section 5(b), that a Buyer shall be entitled, in addition to all other available
remedies, to seek an order and/or injunction restraining any breach and requiring immediate
issuance and transfer, without the necessity of showing economic loss and without any bond or other
security being required. The Company shall cause its counsel to issue the legal opinion referred to
in the Irrevocable Transfer Agent Instructions to the Company’s transfer agent promptly following
each Effective Date (as defined

22

 

in the Registration Rights Agreement). Any fees (with respect to the transfer agent, counsel
to the Company or otherwise) associated with the issuance of such opinion or the removal of any
legends on any of the Securities shall be borne by the Company.

     (c) Legends. Each Buyer understands that the Securities have been issued (or will be
issued in the case of the Warrant Shares) pursuant to an exemption from registration or
qualification under the 1933 Act and applicable state securities laws, and except as set forth
below, the Securities shall bear any legend as required by the “blue sky” laws of any state and a
restrictive legend in substantially the following form (and a stop-transfer order may be placed
against transfer of such stock certificates):

[NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR
THE SECURITIES INTO WHICH THESE SECURITIES ARE [CONVERTIBLE] [EXERCISABLE] HAVE
BEEN][THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN] REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE
ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL TO THE HOLDER (IF
REQUESTED BY THE COMPANY), IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD OR ELIGIBLE TO BE
SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE
FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

     (d) Removal of Legends. Certificates evidencing Securities shall not be required to
contain the legend set forth in Section 5(c) above or any other legend (i) while a registration
statement (including a Registration Statement) covering the resale of such Securities is effective
under the 1933 Act, (ii) following any sale of such Securities pursuant to Rule 144 (assuming the
transferor is not an affiliate of the Company), (iii) if such Securities are eligible to be sold,
assigned or transferred under Rule 144 (provided that a Buyer provides the Company with reasonable
assurances that such Securities are eligible for sale, assignment or transfer under Rule 144 which
shall not include an opinion of counsel), (iv) in connection with a sale, assignment or other
transfer (other than under Rule 144), provided that such Buyer provides the Company with an opinion
of counsel to such Buyer, in a generally acceptable form, to the effect that such sale, assignment
or transfer of the Securities may be made without registration under the applicable requirements of
the 1933 Act or (v) if such legend is not required under applicable requirements of the 1933 Act
(including, without limitation, controlling judicial interpretations and pronouncements issued by
the SEC). If a legend is not required pursuant to the foregoing, the Company shall no later than
three (3) Trading Days following the delivery by a Buyer to the Company or the transfer agent (with
notice to the Company) of a legended certificate representing such Securities (endorsed or with
stock powers attached, signatures guaranteed, and

23

 

otherwise in form necessary to affect the reissuance and/or transfer, if applicable), together
with any other deliveries from such Buyer as may be required above in this Section 5(d), as
directed by such Buyer, either: (A) provided that the Company’s transfer agent is participating in
the DTC Fast Automated Securities Transfer Program and such Securities are Common Shares or Warrant
Shares, credit the aggregate number of shares of Common Stock to which such Buyer shall be entitled
to such Buyer’s or its designee’s balance account with DTC through its Deposit/Withdrawal at
Custodian system or (B) if the Company’s transfer agent is not participating in the DTC Fast
Automated Securities Transfer Program, issue and deliver (via reputable overnight courier) to such
Buyer, a certificate representing such Securities that is free from all restrictive and other
legends, registered in the name of such Buyer or its designee (the date by which such credit is so
required to be made to the balance account of such Buyer’s or such Buyer’s nominee with DTC or such
certificate is required to be delivered to such Buyer pursuant to the foregoing is referred to
herein as the “Required Delivery Date”).

     (e) Buy-In. If the Company fails to so properly deliver such unlegended certificates or so
properly credit the balance account of such Buyer’s or such Buyer’s nominee with DTC by the
Required Delivery Date, and if on or after the Required Delivery Date such Buyer purchases (in an
open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale
by such Buyer of shares of Common Stock that such Buyer anticipated receiving from the Company
without any restrictive legend, then, in addition to all other remedies available to such Buyer,
the Company shall, within three (3) Trading Days after such Buyer’s request and in such Buyer’s
sole discretion, either (i) pay cash to such Buyer in an amount equal to such Buyer’s total
purchase price (including brokerage commissions, if any) for the shares of Common Stock so
purchased (the “Buy-In Price”), at which point the Company’s obligation to deliver such certificate
or credit such Buyer’s balance account shall terminate and such shares shall be cancelled, or (ii)
promptly honor its obligation to deliver to such Buyer a certificate or certificates or credit such
Buyer’s DTC account representing such number of shares of Common Stock that would have been issued
if the Company timely complied with its obligations hereunder and pay cash to such Buyer in an
amount equal to the excess (if any) of the Buy-In Price over the product of (A) such number of
shares of Common Shares or Warrant Shares (as the case may be) that the Company was required to
deliver to such Buyer by the Required Delivery Date times (B) the Closing Sale Price (as defined in
the Warrants) of the Common Stock on the Trading Day immediately preceding the Required Delivery
Date.

	6.	 	CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL.

     (a) The obligation of the Company hereunder to issue and sell the Common Shares and the
related Warrants to each Buyer at the Closing is subject to the satisfaction, at or before the
Closing Date, of each of the following conditions, provided that these conditions are for the
Company’s sole benefit and may be waived by the Company at any time in its sole discretion by
providing each Buyer with prior written notice thereof:

     (i) Such Buyer shall have executed each of the other Transaction Documents to which
it is a party and delivered the same to the Company.

     (ii) Such Buyer and each other Buyer shall have delivered to the Company the
Purchase Price for the Common Shares and the related Warrants being purchased by such

24

 

Buyer at the Closing by wire transfer of immediately available funds pursuant to the
wire instructions provided by the Company.

     (iii) The representations and warranties of such Buyer shall be true and correct in all
material respects as of the date when made and as of the Closing Date as though originally
made at that time (except for representations and warranties that speak as of a specific
date, which shall be true and correct as of such date), and such Buyer shall have performed,
satisfied and complied in all material respects with the covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied with by such
Buyer at or prior to the Closing Date.

7. CONDITIONS TO EACH BUYER’S OBLIGATION TO PURCHASE.

     (a) The obligation of each Buyer hereunder to purchase its Common Shares and its related
Warrants at the Closing is subject to the satisfaction, at or before the Closing Date, of each of
the following conditions, provided that these conditions are for each Buyer’s sole benefit and may
be waived by such Buyer at any time in its sole discretion by providing the Company with prior
written notice thereof:

     (i) The Company shall have duly executed and delivered to such Buyer each of the
Transaction Documents to which it is a party and the Company shall have duly executed and
delivered to such Buyer the Common Shares in such aggregate number of Common Shares as is
set forth across from such Buyer’s name in column (3) of the Schedule of Buyers and the
related Warrants, (initially for such aggregate number of shares of Warrant Shares as is set
forth across from such Buyer’s name in column (4) of the Schedule of Buyers, respectively)
being purchased by such Buyer at the Closing pursuant to this Agreement.

     (ii) Such Buyer shall have received the opinion of Morrison & Foerster LLP, the
Company’s counsel, dated as of the Closing Date, in the form reasonably acceptable to such
Buyer.

     (iii) The Company shall have delivered to such Buyer a copy of the Irrevocable Transfer
Agent Instructions, in the form reasonably acceptable to such Buyer, which instructions
shall have been delivered to and acknowledged in writing by the Company’s transfer agent.

     (iv) The Company shall have delivered to such Buyer a certificate evidencing the good
standing of the Company issued by the Secretary of State of the State of California as of a
date within ten (10) days of the Closing Date.

     (v) The Company shall have delivered to such Buyer a certified copy of the Articles of
Incorporation as certified by the California Secretary of State within ten (10) days of the
Closing Date.

     (vi) The Company shall have delivered to such Buyer a certificate, in the form
reasonably acceptable to such Buyer, duly executed by the Secretary of the Company and
dated as of the Closing Date, as to (i) the resolutions consistent with Section 3(b) as

25

 

adopted by the Company’s board of directors, in a form reasonably acceptable to such Buyer,
(ii) the Articles of Incorporation of the Company and (iii) the Bylaws of the Company, each
as in effect at the Closing.

     (vii) Each and every representation and warranty of the Company shall be true and
correct in all material respects as of the date when made and as of the Closing Date as
though originally made at that time (except for representations and warranties that speak as
of a specific date, which shall be true and correct as of such date) and the Company shall
have performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required to be performed, satisfied or complied with by the
Company at or prior to the Closing Date. Such Buyer shall have received a certificate, duly
executed by either the Chief Executive Officer or the Chief Financial Officer of the
Company, dated as of the Closing Date, to the foregoing effect and as to such other matters
as may be reasonably requested by such Buyer in the form reasonably acceptable to such
Buyer.

     (viii) The Company shall have delivered to such Buyer a letter from the Company’s
transfer agent certifying the number of shares of Common Stock outstanding on the Closing
Date immediately prior to the Closing.

     (ix) The Common Stock (I) shall be designated for quotation or listed on the Principal
Market and (II) shall not have been suspended, as of the Closing Date, by the SEC or the
Principal Market from trading on the Principal Market nor shall suspension by the SEC or the
Principal Market have been threatened, as of the Closing Date, either (A) in writing by the
SEC or the Principal Market or (B) by falling below the minimum maintenance requirements of
the Principal Market.

     (x) The Company shall have obtained all governmental, regulatory or third party
consents and approvals, if any, necessary for the sale of the Securities, including without
limitation, those required by the Principal Market, except for the Shareholder Approval.

     (xi) No statute, rule, regulation, executive order, decree, ruling or injunction shall
have been enacted, entered, promulgated or endorsed by any court or governmental authority
of competent jurisdiction that prohibits the consummation of any of the transactions
contemplated by the Transaction Documents.

     (xii) Since the date of execution of this Agreement, no event or series of events shall
have occurred that reasonably would have or result in a Material Adverse Effect.

     (xiii) Such Buyer shall have received a letter on the letterhead of the Company, duly
executed by either the Chief Executive Officer or the Chief Financial Officer of the
Company, setting forth the wire instructions of the Company.

     (xiv) The Company shall have delivered to such Buyer such other documents relating to
the transactions contemplated by this Agreement as such Buyer or its counsel may reasonably
request.

26

 

     (xv) The Company shall have received, and provided to such Buyer copies of, executed
counterparts of this Agreement from a sufficient number of Buyers (including such Buyer)
such that the sum of the aggregate purchase prices for the Common Shares and the Warrants to
be purchased by all Buyers as contemplated by the terms of this Agreement, plus the
aggregate exercise prices for the Warrant Shares to be purchased by all Buyers upon exercise
of the Warrants as contemplated by the terms of this Agreement shall be $4,999,999.56.

     (xvi) Such Buyer’s acquisition of the Securities hereunder (assuming the acquisition of
the Warrant Shares upon exercise of such Buyer’s Warrant) would not result in such Buyer
having beneficial ownership of more than 49.9% of the Common Stock.

8. TERMINATION.

     In the event that the Closing shall not have occurred with respect to a Buyer within five (5)
business days of the date hereof, then such Buyer shall have the right to terminate its obligations
under this Agreement with respect to itself at any time on or after the close of business on such
date without liability of such Buyer to any other party; provided, however, (i) the right to
terminate this Agreement under this Section 8 shall not be available to such Buyer if the failure
of the transactions contemplated by this Agreement to have been consummated by such date is the
result of such Buyer’s breach of this Agreement and (ii) the abandonment of the sale and purchase
of the Common Shares and the Warrants shall be applicable only to such Buyer providing such written
notice, provided further that no such termination shall affect any obligation of the Company under
this Agreement to reimburse such Buyer for the expenses described in Section 4(f) above. Nothing
contained in this Section 8 shall be deemed to release any party from any liability for any breach
by such party of the terms and provisions of this Agreement or the other Transaction Documents or
to impair the right of any party to compel specific performance by any other party of its
obligations under this Agreement or the other Transaction Documents.

9. MISCELLANEOUS.

     (a) Governing Law; Jurisdiction; Jury Trial. All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be governed by the internal laws
of the State of New York, without giving effect to any choice of law or conflict of law provision
or rule (whether of the State of New York or any other jurisdictions) that would cause the
application of the laws of any jurisdictions other than the State of New York. Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in The
City of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in
connection herewith 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

27

 

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 TO, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH 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. In the event that any
signature is delivered by facsimile transmission or by an e-mail which contains a portable document
format (.pdf) file of an executed signature page, such signature page shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is executed) with the
same force and effect as if such signature page were an original thereof.

     (c) Headings; Gender. The headings of this Agreement are for convenience of reference and
shall not form part of, or affect the interpretation of, this Agreement. Unless the context clearly
indicates otherwise, each pronoun herein shall be deemed to include the masculine, feminine,
neuter, singular and plural forms thereof. The terms “including,” “includes,” “include” and words
of like import shall be construed broadly as if followed by the words “without limitation.” The
terms “herein,” “hereunder,” “hereof” and words of like import refer to this entire Agreement
instead of just the provision in which they are found.

     (d) Severability. If any provision of this Agreement is prohibited by law or otherwise
determined to be invalid or unenforceable by a court of competent jurisdiction, the provision that
would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the
broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of
such provision shall not affect the validity of the remaining provisions of this Agreement so long
as this Agreement as so modified continues to express, without material change, the original
intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity or
unenforceability of the provision(s) in question does not substantially impair the respective
expectations or reciprocal obligations of the parties or the practical realization of the benefits
that would otherwise be conferred upon the parties. The parties will endeavor in good faith
negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid
provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or
unenforceable provision(s).

     (e) Entire Agreement; Amendments. This Agreement, the other Transaction Documents and the
schedules and exhibits attached hereto and thereto and the instruments referenced herein and
therein supersede all other prior oral or written agreements between the Buyers, the Company, their
affiliates and Persons acting on their behalf solely with respect to the matters contained herein
and therein, and this Agreement, the other Transaction Documents, the schedules and exhibits
attached hereto and thereto and the instruments referenced herein and therein contain the entire
understanding of the parties solely with respect to the matters covered herein and therein;
provided, however, nothing contained in this Agreement or any other Transaction Document shall (or
shall be deemed to) (i) have any effect on any agreements any Buyer has entered into with the
Company prior to the date hereof with respect to any prior

28

 

investment made by such Buyer in the Company or (ii) waive, alter, modify or amend in any
respect any obligations of the Company, or any rights of or benefits to any Buyer or any other
Person, in any agreement entered into prior to the date hereof between or among the Company and any
Buyer and all such agreements shall continue in full force and effect. Except as specifically set
forth herein or therein, neither the Company nor any Buyer makes any representation, warranty,
covenant or undertaking with respect to such matters. For clarification purposes, the Recitals are
part of this Agreement. No provision of this Agreement may be amended or waived other than by an
instrument in writing signed by the Company and the holders of at least 81% of the Registrable
Securities (excluding any Registrable Securities held by the Company or the Subsidiary) issued or
issuable hereunder or pursuant to the Warrants, and any amendment or to, or waiver of any provision
of, this Agreement made in conformity with the provisions of this Section 9(e) shall be binding on
all Buyers and holders of Securities, as applicable, provided that any party may give a waiver in
writing as to itself. Notwithstanding anything to the contrary contained in this Agreement, in the
event that the Company shall deliver written or e-mail notice to a holder of Registrable Securities
who is a natural person requesting such holder’s consent, approval or agreement with respect to any
such requested amendment or waiver, such holder shall be deemed to have consented, approved and
agreed with respect to such amendment or waiver if such holder does not provide written or e-mail
notice to the Company indicating such Holder’s non-consent within five (5) Business Days of
delivery by the Company of such written or e-mail notice. No such amendment or waiver (unless
given pursuant to the foregoing proviso in the case of a waiver) shall be effective to the extent
that it applies to less than all of the holders of the Warrants then outstanding. The Company has
not, directly or indirectly, made any agreements with any Buyers relating to the terms or
conditions of the transactions contemplated by the Transaction Documents except as set forth in the
Transaction Documents. Without limiting the foregoing, the Company confirms that, except as set
forth in this Agreement, no Buyer has made any commitment or promise or has any other obligation to
provide any financing to the Company, the Subsidiary or otherwise.

     (f) Notices. Any notices, consents, waivers 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 (1) Business Day after deposit with an overnight courier
service with next day delivery specified, 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:

Aradigm Corporation

3929 Point Eden Way

Hayward, CA 94545

Telephone: (510) 265-9000

Facsimile: 510-265-0277

Attention: Chief Executive Officer

29

 

With a copy (for informational purposes only) to:

Morrison & Foerster LLP

425 Market Street

San Francisco, CA 94105

Telephone: (415) 268-7197

Facsimile: (415) 268-7522

Attention: John W. Campbell, Esq.

If to a Buyer, to its address and facsimile number set forth on the Schedule of Buyers, with copies
to such Buyer’s representatives as set forth on the Schedule of Buyers,

or to 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 five (5) days prior
to the effectiveness of such change. Written confirmation of receipt (A) given by the recipient of
such notice, consent, waiver or other communication, (B) mechanically or electronically generated
by the sender’s facsimile machine containing the time, date, recipient facsimile number and an
image of the first page of such transmission or (C) provided by an overnight courier service shall
be rebuttable evidence of personal service, receipt by facsimile or receipt from an overnight
courier 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, including any purchasers of any of the
Securities. The Company shall not assign this Agreement or any rights or obligations hereunder
without the prior written consent of holders of a majority of the Registrable Securities (excluding
any Registrable Securities held by the Company or the Subsidiary) issued or issuable hereunder or
pursuant to the Warrants, including, without limitation, by way of a Fundamental Transaction (as
defined in the Warrants) (unless the Company is in compliance with the applicable provisions
governing Fundamental Transactions set forth in the Warrants). A Buyer shall not assign this
Agreement or any rights or obligations hereunder except to (a) an Affiliate of the Buyer who is an
accredited investor within the meaning of Regulation D of the 1933 Act or (b) such other person
upon the prior written consent of the Company. For purposes hereof, an “Affiliate” means an entity
controlling, controlled by, or under common control with the Buyer, and control means the power to
control more than half of the voting power.

     (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, other than the Indemnitees
referred to in Section 9(k).

     (i) Survival. The representations, warranties, agreements and covenants shall survive the
Closing. Each Buyer shall be responsible only for its own representations, warranties, agreements
and covenants hereunder.

     (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 any other party may reasonably request

30

 

in order to carry out the intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.

     (k) Indemnification. In consideration of each Buyer’s execution and delivery of the
Transaction Documents and acquiring the Securities thereunder and in addition to all of the
Company’s other obligations under the Transaction Documents, the Company shall defend, protect,
indemnify and hold harmless each Buyer and each holder of any Securities and all of their
stockholders, partners, members, officers, directors, employees and direct or indirect investors
and any of the foregoing Persons’ 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 any of the
Transaction Documents, (b) any breach of any covenant, agreement or obligation of the Company
contained in any of the Transaction Documents or (c) any cause of action, suit or claim brought or
made against such Indemnitee by a third party (including for these purposes a derivative action
brought on behalf of the Company or the Subsidiary) and arising out of or resulting from (i) the
execution, delivery, performance or enforcement of any of the Transaction Documents, (ii) any
transaction financed or to be financed in whole or in part, directly or indirectly, with the
proceeds of the issuance of the Securities, (iii) any disclosure properly made pursuant to Section
4(h) or (iv) the status of such Buyer or holder of the Securities as an investor in the Company
pursuant to the transactions contemplated by the Transaction Documents. 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. Except as otherwise set forth herein, the mechanics and
procedures with respect to the rights and obligations under this Section 9(k) shall be the same as
those set forth in Section 6 of the Registration Rights Agreement.

     (l) 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. Each Buyer and each holder of any Securities shall have all rights and
remedies set forth in the Transaction Documents and all rights and remedies which such holders have
been granted at any time under any other agreement or contract and all of the rights which such
holders have under any law. Any Person having any rights under any provision of this Agreement
shall be entitled to enforce such rights specifically (without posting a bond or other security),
to recover damages by reason of any breach of any provision of this Agreement and to exercise all
other rights granted by law. Furthermore, the Company recognizes that in the event that it fails to
perform, observe, or discharge any or all of its obligations under the Transaction Documents, any
remedy at law may prove to be inadequate relief to the Buyers. The Company therefore agrees that
the Buyers shall be entitled to seek specific performance and/or temporary, preliminary and
permanent injunctive or other equitable relief from any court of competent

31

 

jurisdiction in any such case without the necessity of proving actual damages and without
posting a bond or other security.

     (n) Withdrawal Right. Notwithstanding anything to the contrary contained in (and without
limiting any similar provisions of) the Transaction Documents, whenever any Buyer exercises a
right, election, demand or option under a Transaction Document and the Company does not timely
perform its related obligations within the periods therein provided, then such Buyer may rescind or
withdraw, in its sole discretion from time to time upon written notice to the Company, any relevant
notice, demand or election in whole or in part without prejudice to its future actions and rights

     (o) Payment Set Aside; Currency. To the extent that the Company makes a payment or
payments to any Buyer hereunder or pursuant to any of the other Transaction Documents or any of the
Buyers enforce or exercise their rights hereunder or thereunder, and such payment or payments or
the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside, recovered from, disgorged by or are required
to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other
Person under any law (including, without limitation, any bankruptcy law, foreign, state or federal
law, common law or equitable cause of action), then to the extent of any such restoration the
obligation or part thereof originally intended to be satisfied shall be revived and continued in
full force and effect as if such payment had not been made or such enforcement or setoff had not
occurred. Unless otherwise expressly indicated, all dollar amounts referred to in this Agreement
and the other Transaction Documents are in United States Dollars (“U.S. Dollars”), and all amounts
owing under this Agreement and all other Transaction Documents shall be paid in U.S. Dollars. All
amounts denominated in other currencies (if any) shall be converted in the U.S. Dollar equivalent
amount in accordance with the Exchange Rate on the date of calculation. “Exchange Rate” means, in
relation to any amount of currency to be converted into U.S. Dollars pursuant to this Agreement,
the U.S. Dollar exchange rate as published in the Wall Street Journal on the relevant date of
calculation.

     (q) Independent Nature of Buyers’ Obligations and Rights. The obligations of each Buyer
under the Transaction Documents are several and not joint with the obligations of any other Buyer,
and no Buyer shall be responsible in any way for the performance of the obligations of any other
Buyer under any Transaction Document. Nothing contained herein or in any other Transaction
Document, and no action taken by any Buyer pursuant hereto or thereto, shall be deemed to
constitute the Buyers as, and the Company acknowledges that the Buyers do not so constitute, a
partnership, an association, a joint venture or any other kind of group or entity, or create a
presumption that the Buyers are in any way acting in concert or as a group or entity with respect
to such obligations or the transactions contemplated by the Transaction Documents or any matters,
and the Company acknowledges that the Buyers are not acting in concert or as a group, and the
Company shall not assert any such claim, with respect to such obligations or the transactions
contemplated by the Transaction Documents. The decision of each Buyer to purchase Securities
pursuant to the Transaction Documents has been made by such Buyer independently of any other Buyer.
Each Buyer acknowledges that no other Buyer has acted as agent for such Buyer in connection with
such Buyer making its investment hereunder and that no other Buyer will be acting as agent of such
Buyer in connection with monitoring such Buyer’s investment in the Securities or enforcing its
rights under the Transaction Documents. The

32

 

Company and each Buyer confirms that each Buyer has independently participated with the
Company and the Subsidiary in the negotiation of the transaction contemplated hereby with the
advice of its own counsel and advisors. Each Buyer shall be entitled to independently protect and
enforce its rights, including, without limitation, the rights arising out of this Agreement or out
of any other Transaction Documents, and it shall not be necessary for any other Buyer to be joined
as an additional party in any proceeding for such purpose. The use of a single agreement to
effectuate the purchase and sale of the Securities contemplated hereby was solely in the control of
the Company, not the action or decision of any Buyer, and was done solely for the convenience of
the Company and the Subsidiary and not because it was required or requested to do so by any Buyer.
It is expressly understood and agreed that each provision contained in this Agreement and in each
other Transaction Document is between the Company, each Subsidiary and a Buyer, solely, and not
between the Company, the Subsidiary and the Buyers collectively and not between and among the
Buyers.

     (r) Judgment Currency.

     (i) If for the purpose of obtaining or enforcing judgment against the Company in any
court in any jurisdiction it becomes necessary to convert into any other currency (such
other currency being hereinafter in this Section 9(r) referred to as the “Judgment
Currency”) an amount due in U.S. Dollars under this Agreement or any other Transaction
Document, the conversion shall be made at the Exchange Rate prevailing on the Trading Day
immediately preceding: (1) the date of actual payment of the amount due, in the case of any
proceeding in the courts of New York or in the courts of any other jurisdiction that will
give effect to such conversion being made on such date or (2) the date on which the foreign
court determines, in the case of any proceeding in the courts of any other jurisdiction (the
date as of which such conversion is made pursuant to this Section 9(r)(i) being hereinafter
referred to as the “Judgment Conversion Date”).

     (ii) If in the case of any proceeding in the court of any jurisdiction referred to in
Section 9(r)(i) above, there is a change in the Exchange Rate prevailing between the
Judgment Conversion Date and the date of actual payment of the amount due, the applicable
party shall pay such adjusted amount as may be necessary to ensure that the amount paid in
the Judgment Currency, when converted at the Exchange Rate prevailing on the date of
payment, will produce the amount of U.S. Dollars which could have been purchased with the
amount of Judgment Currency stipulated in the judgment or judicial order at the Exchange
Rate prevailing on the Judgment Conversion Date.

     (iii) Any amount due from the Company under this provision shall be due as a separate
debt and shall not be affected by judgment being obtained for any other amounts due under or
in respect of this Agreement or any other Transaction Document.

[signature pages follow]

33

 

     IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to
this Agreement to be duly executed as of the date first written above.

	 	 	 	 	 
	 	COMPANY:

ARADIGM CORPORATION

 	 
	 	By:  	/s/ Nancy Pecota
 	 
	 	 	Name:  	Nancy Pecota 	 
	 	 	Title:  	Vice President, Finance and

 Chief Financial Officer 	 
	 

 

 

     IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature
page to this Agreement to be duly executed as of the date first written above.

	 	 	 	 	 	 	 

	 	 	BUYER:	 	 
	 
	 	 	 	 	 	 
	 	 	[NAME OF BUYER]	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name:	 	 
	 

	 	 	 	Title:	 	 

	 	 	 	 	 	 	 

	 

	 	TAX ID NO:
	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	ADDRESS AND CONTACT INFORMATION (including for purposes of notice under the
	 	 	Transaction Documents):
	 

	 	c/o:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Street:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	City/State/Zip:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Attention:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Tel:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Fax:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	E-mail:	 	 	 	 
	 

	 	 	 	 	 	 

	 	 	 	 	 

	 

	 	NUMBER OF COMMON SHARES:
	 	                                                                 
               

	 	 	 	 	 

	 

	 	NUMBER OF WARRANT SHARES UNDERLYING WARRANT:	 
	 
	 	 	 	 	 

	 	 	 

	 

	 	AGGREGATE PURCHASE PRICE FOR BUYER’S COMMON SHARES
	 

	 	AND BUYER’S WARRANT: $                                                                    
             
	 
	 	 
	 

	 	LEGAL REPRESENTATIVE’S ADDRESS AND CONTACT INFORMATION
	 

	 	(if applicable):

	 	 	 	 	 	 	 

	 

	 	c/o:
	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Street:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	City/State/Zip:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Attention:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Tel:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Fax:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	E-mail:	 	 	 	 
	 

	 	 	 	 	 	 

 

 

Schedule of Buyers

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	(5)	 
	 	 	 	 	 	 	 	 	 	 	 	 	Aggregate	 
	 	 	 	 	 	 	 	 	 	 	 	 	Purchase	 
	 	 	 	 	 	 	 	 	 	 	 	 	Price for	 
	 	 	 	 	 	 	 	 	 	 	 	 	Buyer's	 
	 	 	 	 	(3)	 	 	(4)	 	 	Common	 
	 	 	 	 	Number of	 	 	Number of	 	 	Shares and	 
	(1)	 	(2)	 	Common	 	 	Warrant	 	 	Buyer's	 
	Buyer	 	Address and Contact Information	 	Shares	 	 	Shares	 	 	Warrants	 
	FIRST EAGLE VALUE
IN BIOTECHNOLOGY
MASTER FUND, LTD
	 	[OMITTED]	 	 	9,716,704	 	 	 	2,107,620	 	 	$	1,150,457.75	 
	DEF ASSOCIATES N.V.
	 	[OMITTED]	 	 	2,776,201	 	 	 	602,177	 	 	$	328,702.20	 
	21 APRIL FUND, LP
	 	[OMITTED]	 	 	1,526,911	 	 	 	331,197	 	 	$	180,786.26	 
	21 APRIL FUND, LTD.
	 	[OMITTED]	 	 	5,413,592	 	 	 	1,174,245	 	 	$	640,969.29	 
	BISON TRADING, LLC
	 	[OMITTED]	 	 	1,388,100	 	 	 	301,089	 	 	$	164,351.04	 
	THE CONUS FUND, L.P.
	 	[OMITTED]	 	 	2,572,506	 	 	 	557,994	 	 	$	304,584.71	 
	THE CONUS FUND
(QP), L.P.
	 	[OMITTED]	 	 	3,854,645	 	 	 	836,100	 	 	$	456,389.97	 
	THE CONUS FUND
OFFSHORE MASTER
FUND LTD.
	 	[OMITTED]	 	 	513,351	 	 	 	111,349	 	 	$	60,780.76	 
	LAURENCE LYTTON
	 	[OMITTED]	 	 	6,940,502	 	 	 	1,505,443	 	 	$	821,755.44	 
	TOTAL
	 	 	 	 	34,702,512	 	 	 	7,527,214	 	 	$	4,108,777.42

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