Document:

exv4w1

Exhibit 4.1

THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT
OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY OTHER APPLICABLE SECURITIES LAWS AND HAVE BEEN
ISSUED IN RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
SUCH OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE
REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED, HYPOTHECATED OR OTHERWISE DISPOSED OF,
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO A
TRANSACTION WHICH IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION, IN EACH CASE IN ACCORDANCE
WITH ALL APPLICABLE SECURITIES LAWS, AND IN THE CASE OF A TRANSACTION EXEMPT FROM, OR NOT SUBJECT
TO, SUCH REGISTRATION, UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO IT THAT SUCH TRANSACTION DOES NOT REQUIRE REGISTRATION UNDER THE SECURITIES ACT AND
SUCH OTHER APPLICABLE LAWS. NOTWITHSTANDING THE FOREGOING, THE SECURITIES AND THE SECURITIES
ISSUABLE UPON EXERCISE OF THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY SUCH SECURITIES.

	 	 	 	 	 
	WARRANT NO. 2009-«WarrantNumber»

	 	NUMBER OF SHARES:
	 	 
	«Number_of_Shares»
	 	 	 	 
	DATE OF ISSUANCE: July 8, 2009

	 	(subject to adjustment hereunder)	 	 

WARRANT TO PURCHASE SHARES

OF COMMON STOCK OF

SOMAXON PHARMACEUTICALS, INC.

     This Warrant is issued to «Purchaser», or its registered assigns (including any successors or
assigns, the “Purchaser”), pursuant to that certain Securities Purchase Agreement, dated as of July
2, 2009, between Somaxon Pharmaceuticals, Inc., a Delaware corporation (the “Company”), the
Purchaser and certain other purchasers thereunder (the “Purchase Agreement”) and is subject to the
terms and conditions of the Purchase Agreement.

     1. EXERCISE OF WARRANT.

          (a) Method of Exercise. Subject to the terms and conditions herein set forth, upon
surrender of this Warrant at the principal office of the Company and upon payment of the Warrant
Price (as defined below) by wire transfer to the Company or cashier’s check drawn on a
United States bank made payable to the order of the Company, or upon exercise of the right to
credit the Warrant Price against the fair market value of the Warrant Shares (as defined below) at

 

 

the time of exercise (the “Net Exercise Right”) pursuant to Section 1(b), the Purchaser is entitled
to purchase from the Company, at any time after the date hereof and on or before 5:00 p.m. New York
City time on July 8, 2016 (the “Expiration Date”) (subject to earlier termination of this Warrant
as set forth herein), up to «Number_of_Shares» fully paid nonassessable shares (as adjusted from
time to time pursuant to the provisions of this Warrant) of Common Stock (as defined below) of the
Company (the “Warrant Shares”), at a purchase price of $1.155 per share (the “Warrant Price”).

          (b) Net Exercise Right. If the Company shall receive written notice from the
Purchaser at the time of exercise of this Warrant that the holder elects to exercise the Net
Exercise Right, the Company shall deliver to such holder (without payment by the holder of any
exercise price in cash) that number of fully paid and nonassessable shares of Common Stock, par
value $0.0001 per share, of the Company (“Common Stock”) equal to the quotient obtained by dividing
(i) the value of this Warrant (or the specified portion thereof) on the date of exercise, which
value shall be determined by subtracting (A) the aggregate Warrant Price of the Warrant Shares (or
the specified portion thereof) immediately prior to the exercise of this Warrant from (B) the
Aggregate Fair Market Value (as defined below) of the Warrant Shares (or the specified portion
thereof) issuable upon exercise of this Warrant (or specified portion thereof) on the date of
exercise by (ii) the Fair Market Value (as defined below) of one share of Common Stock. The “Fair
Market Value” of a share of Common Stock shall mean the average of the last reported sale price
and, if there are no sales, the last reported bid price, of the Common Stock for the five Trading
Days immediately prior to (but not including) the date of exercise as reported by the NASDAQ
Capital Market or such other principal exchange or quotation system on which the Common Stock is
then traded or, if the Common Stock is not publicly traded, the price determined in good faith by
the Company’s Board of Directors. The “Aggregate Fair Market Value” of the Warrant Shares shall be
determined by multiplying the number of Warrant Shares by the Fair Market Value of one Warrant
Share. For purposes of this Warrant, “Trading Day” shall mean any day on which the Common Stock is
traded on the NASDAQ Capital Market, or, if the NASDAQ Capital Market is not the principal trading
market for the Common Stock, then on the principal securities exchange or securities market on
which the Common Stock is then traded.

     2. CERTAIN ADJUSTMENTS.

          (a) Mergers or Consolidations. If at any time after the date hereof there shall be,
in one or more related transactions, a capital reorganization (other than a combination or
subdivision of Warrant Shares otherwise provided for herein) (a “Reorganization”), or (i) a merger
or consolidation of the Company with another corporation (other than a merger effected exclusively
for the purpose of changing the domicile of the Company) if the holders of the voting power
immediately prior to such consolidation or merger shall hold or have rights to direct the voting of
less than 50% of the voting securities of such other surviving person immediately following such
transaction, (ii) the sale, assignment, transfer, conveyance, exclusive license or other disposal
of all or substantially all of the assets of the Company, (iii) a purchase, tender or exchange
offer accepted by the holders of a majority of the outstanding voting securities of the Company or
(iv) a “person” or “group” (as terms are used for purposes of Section 13(d) and
14(d) of the Exchange Act) is or shall become the “beneficial owner” (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of a majority of the aggregate voting power

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represented by issued and outstanding Common Stock (any of the foregoing, directly or indirectly,
in one or more related transactions “Merger”), then, as a part of such Reorganization or Merger,
lawful provision shall be made so that the Purchaser shall thereafter be entitled to receive upon
exercise of this Warrant, during the period specified in this Warrant and upon payment of the
Warrant Price (unless the Purchaser has elected the Net Exercise Right), the number of shares of
stock or other securities or property of the Company or the successor corporation resulting from
such Reorganization or Merger, to which a holder of the Common Stock deliverable upon exercise of
this Warrant would have been entitled pursuant to such Reorganization or Merger if this Warrant had
been exercised immediately before such Reorganization or Merger. In any such case, appropriate
adjustment (as determined in good faith by the Company’s Board of Directors) shall be made to the
provisions of this Warrant with respect to the rights and interests of the Purchaser after the
Reorganization or Merger to the end that the provisions of this Warrant (including adjustment of
the Warrant Price then in effect and the number of Warrant Shares) shall be applicable after that
event, as near as reasonably may be, in relation to any shares or other property deliverable after
that event upon exercise of this Warrant. The above provisions of this paragraph shall similarly
apply to successive Reorganizations and Mergers, if any. The Company shall not enter into any
Reorganization or Merger unless the successor corporation assumes this Warrant in accordance with
the provisions of this Section 2.

          (b) Splits and Subdivisions; Stock Dividends. In the event the Company should at any
time, or from time to time, fix a record date for the effectuation of a split or subdivision of the
outstanding shares of Common Stock or the determination of the holders of Common Stock entitled to
receive a dividend or other distribution payable in additional shares of Common Stock or other
securities or rights convertible into, or entitling the holder thereof to receive directly or
indirectly, additional shares of Common Stock (hereinafter referred to as the “Common Stock
Equivalents”) without payment of any consideration by such holder for the additional shares of
Common Stock or Common Stock Equivalents (including the additional shares of Common Stock issuable
upon conversion or exercise thereof), then, as of such record date (or the date of such
distribution, split or subdivision if no record date is fixed), the per share Warrant Price shall
be appropriately decreased and the number of Warrant Shares shall be appropriately increased in
proportion to such increase (or potential increase) of outstanding shares.

          (c) Combination of Shares. If the number of shares of Common Stock outstanding at any
time after the date hereof is decreased by a combination of the outstanding shares of Common Stock,
the per share Warrant Price shall be appropriately increased and the number of Warrant Shares shall
be appropriately decreased in proportion to such decrease in outstanding shares.

          (d) Adjustments for Other Distributions. In the event the Company shall declare a
distribution payable in securities of other persons, evidences of indebtedness issued by the
Company or other persons, assets or options or rights not referred to in Section 2(b), then, in
each such case for the purpose of this Section 2(d), upon exercise of this Warrant the holder
hereof shall be entitled to a proportionate share of any such distribution as though such holder
was the holder of the number of shares of Common Stock into which this Warrant may be
exercised as of the record date fixed for the determination of the holders of Common Stock
entitled to receive such distribution.

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     3. NO FRACTIONAL SHARES. No fractional Warrant Shares will be issued in connection with any
exercise of this Warrant. In lieu of any fractional shares which would otherwise be issuable, the
Company shall pay cash equal to the product of such fraction multiplied by the Fair Market Value of
one Warrant Share.

     4. NO STOCKHOLDER RIGHTS. Until the exercise of this Warrant or any portion of this Warrant,
the Purchaser shall not have nor exercise any rights as a stockholder of the Company (including
without limitation the right to notification of stockholder meetings or the right to receive any
notice or other communication concerning the business and affairs of the Company), except as
provided in Section 11 below. In addition, nothing contained in this Warrant shall be construed as
imposing any liabilities on the Purchaser to purchase any securities (upon exercise of this Warrant
or otherwise) or as a shareholder of the Company, whether such liabilities are asserted by the
Company or by creditors of the Company.

     5. RESERVATION OF STOCK. The Company covenants that during the period this Warrant is
exercisable, the Company will reserve from its authorized and unissued Common Stock a sufficient
number of shares of Common Stock (or other securities, if applicable) to provide for the issuance
of Warrant Shares (or other securities) upon the exercise of this Warrant. The Company agrees that
its issuance of this Warrant shall constitute full authority to its officers who are charged with
the duty of executing stock certificates to execute and issue the necessary certificates for the
Warrant Shares upon the exercise of this Warrant.

     6. MECHANICS OF EXERCISE. This Warrant may be exercised by the holder hereof, in whole or in
part, by the surrender of this Warrant and the Notice of Exercise attached hereto as Exhibit
A duly completed and executed on behalf of the holder hereof, at the principal office of the
Company together with payment in full of the Warrant Price (unless the Purchaser has elected the
Net Exercise Right) then in effect with respect to the number of Warrant Shares as to which the
Warrant is being exercised. This Warrant shall be deemed to have been exercised immediately prior
to the close of business on the date of its surrender for exercise as provided above, and the
person entitled to receive the Warrant Shares issuable upon such exercise shall be treated for all
purposes as the holder of such shares of record as of the close of business on such date. As
promptly as practicable on or after such date, the Company at its expense shall cause to be issued
and delivered to the person or persons entitled to receive the same a certificate or certificates
for the number of full Warrant Shares issuable upon such exercise, together with cash in lieu of
any fraction of a share as provided above. The Warrant Shares issuable upon exercise hereof shall,
upon their issuance, be validly issued, fully paid and nonassessable, and free from all preemptive
rights, taxes, liens and charges with respect to the issue thereof. The Company shall pay any and
all taxes (other than taxes based upon the income of the Purchaser) which may be payable with
respect to the issuance and delivery of Warrant Shares upon exercise of this Warrant. In the event
that this Warrant is exercised in part, the Company at its expense will execute and deliver a new
Warrant of like tenor exercisable for the remaining number of shares for which this Warrant may
then be exercised. At 5:00 P.M., New York time on the Expiration Date, the portion of this Warrant
not exercised prior thereto shall be and become void and of no value provided that, if the average
of the closing price per share on
the NASDAQ Capital Market or such exchange or quotation system on which the Common Stock is
then listed or quoted for the five Trading Days immediately prior to (but not including) the
Expiration Date exceeds the Exercise Price on the Expiration Date, then this Warrant shall be

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deemed to have been exercised in full (to the extent not previously exercised) on a “cashless
exercise” basis at 5:00 P.M., New York time on the Expiration Date. In the event of a “cashless
exercise” pursuant to the previous sentence, the Purchaser shall not be required to deliver the
original Warrant prior to its expiration but shall deliver such original Warrant for surrender
promptly thereafter. In the case of a dispute as to the determination of the Exercise Price or the
arithmetic calculation of the Warrant Shares, the Company shall promptly issue to the Purchaser the
number of Warrant Shares that are not disputed prior to the resolution of such dispute.

     7. DELIVERY OF SHARES. In addition to any other rights available to a Purchaser, if the
Company fails to deliver to the Purchaser a certificate representing Warrant Shares by the third
Trading Day after the date on which delivery of such certificate is required by this Warrant, and
if after such third Trading Day the Purchaser purchases (in an open market transaction or
otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Purchaser of the
Warrant Shares that the Purchaser anticipated receiving from the Company (a “Buy-In”), then the
Company shall, within five Trading Days after the Purchaser’s request and in the Purchaser’s
discretion, either (i) pay cash to the Purchaser in an amount equal to the Purchaser’s total
purchase price (including reasonable 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 (and to issue such Common Stock) shall terminate, or (ii) promptly honor its obligation
to deliver to the Purchaser a certificate or certificates representing such Common Stock and pay
cash to the Purchaser 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 Stock, times (B) the Closing Price on the date of
the event giving rise to the Company’s obligation to deliver such certificate. The Company’s
obligations to issue and deliver Warrant Shares in accordance with the terms hereof are absolute
and unconditional, irrespective of any action or inaction by the holder hereof to enforce the same,
any waiver or consent with respect to any provision hereof, the recovery of any judgment against
any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation
or termination, or any breach or alleged breach by the holder hereof or any other Person of any
obligation to the Company or any violation or alleged violation of law by the Purchaser or any
other Person, and irrespective of any other circumstance which might otherwise limit such
obligation of the Company to the Purchaser in connection with the issuance of Warrant Shares.
Nothing herein shall limit the Purchaser’s right to pursue any other remedies available to it
hereunder, at law or in equity including, without limitation, a decree of specific performance
and/or injunctive relief with respect to the Company’s failure to timely deliver certificates
representing shares of Common Stock upon exercise of this Warrant as required pursuant to the terms
hereof.

     8. CERTIFICATE OF ADJUSTMENT. Whenever the Warrant Price or number or type of securities
issuable upon exercise of this Warrant is adjusted, as herein provided, the Company shall, at its
expense, promptly deliver to the Purchaser a certificate of an officer of the Company setting forth
the nature of such adjustment and showing in detail the facts upon which such adjustment is based.

     9. REPRESENTATIONS OF PURCHASER. As of the date hereof, the Purchaser hereby confirms the
representations and warranties made by the Purchaser in Section 5 of the Purchase Agreement.

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     10. COMPLIANCE WITH SECURITIES LAWS.

          (a) The Purchaser understands that this Warrant and the Warrant Shares are characterized as
“restricted securities” under the federal securities laws inasmuch as they are being acquired from
the Company in a transaction not involving a public offering and that under such laws and
applicable regulations this Warrant and the Warrant Shares may be resold without registration under
the Securities Act of 1933, as amended (the “Securities Act”) only in certain limited
circumstances. In this connection, the Purchaser represents that it is familiar with Rule 144
under the Securities Act, as presently in effect, and understands the resale limitations imposed
thereby and by the Securities Act.

          (b) Prior and as a condition to the sale or transfer of the Warrant Shares issuable upon
exercise of this Warrant, the Purchaser shall furnish to the Company such certificates,
representations, agreements and other information, including an opinion of counsel, as the Company
or the Company’s transfer agent reasonably may require to confirm that such sale or transfer is
being made pursuant to an exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act, unless such Warrant Shares are being sold or transferred
pursuant to an effective registration statement.

          (c) Subject to Section 5.4 of the Purchase Agreement, the Purchaser acknowledges that the
Company may place a restrictive legend on the Warrant Shares issuable upon exercise of this Warrant
in order to comply with applicable securities laws, unless such Warrant Shares are otherwise freely
tradable under Rule 144 of the Securities Act.

     11. NOTICES OF RECORD DATE. In the event of:

          (a) any taking by the Company of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any dividend or other
distribution, or any right to subscribe for, purchase or otherwise acquire any shares of stock of
any class or any other securities or property, or to receive any other right; or

          (b) any Reorganization or Merger; or

          (c) any voluntary or involuntary dissolution, liquidation or winding-up of the Company,

then and in each such event the Company will mail or cause to be delivered to the Purchaser (or a
permitted transferee in compliance with Section 10 above) a notice specifying (i) the date on which
any such record is to be taken for the purpose of such dividend, distribution or right, and stating
the amount and character of such dividend, distribution or right, or (ii) the date on which any
such Reorganization, Merger, dissolution, liquidation or winding-up is to take place, and the time,
if any, as of which the holders of record of Common Stock (or other securities) shall be entitled
to exchange their shares of Common Stock (or other securities) for securities or other
property deliverable upon such Reorganization, Merger, dissolution, liquidation or winding-up.
Such notice shall be delivered at least ten (10) Trading Days prior to the date therein specified.

     12. REPLACEMENT OF WARRANTS. On receipt of evidence reasonably satisfactory to the Company of
the loss, theft, destruction or mutilation of this Warrant and, in the case of any

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such loss, theft
or destruction of this Warrant, on delivery of an indemnity agreement reasonably satisfactory in
form to the Company or, in the case of any such mutilation, on surrender and cancellation of such
Warrant, the Company at its expense will execute and deliver, in lieu thereof, a new Warrant of
like tenor.

     13. NO IMPAIRMENT. Except to the extent as may be waived by the holder of this Warrant, the
Company will not, by amendment of its charter or through a Reorganization, Merger, dissolution,
sale of assets or any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out
of all such terms and in the taking of all such action as may be necessary or appropriate in order
to protect the rights of the Purchaser against impairment.

     14. TRADING DAYS. If the last or appointed day for the taking of any action or the expiration
of any right required or granted herein shall be other than a Trading Day, then such action may be
taken or such right may be exercised on the next succeeding Trading Day.

     15. TRANSFERS; EXCHANGES. (a) Subject to compliance with applicable federal and state
securities laws and Section 10 hereof, this Warrant may be transferred by the Purchaser with
respect to any or all of the Warrant Shares purchasable hereunder. For a transfer of this Warrant
as an entirety by Purchaser, upon surrender of this Warrant to the Company, together with the
Notice of Assignment in the form attached hereto as Exhibit B duly completed and executed
on behalf of the Purchaser, the Company shall issue a new Warrant of the same denomination to the
assignee. For a transfer of this Warrant with respect to a portion of the Warrant Shares
purchasable hereunder, upon surrender of this Warrant to the Company, together with the Notice of
Assignment in the form attached hereto as Exhibit B duly completed and executed on behalf
of the Purchaser, the Company shall issue a new Warrant to the assignee, in such denomination as
shall be requested by the Purchaser, and shall issue to the Purchaser a new Warrant covering the
number of shares in respect of which this Warrant shall not have been transferred.

     (b) This Warrant is exchangeable, without expense, at the option of the Purchaser, upon
presentation and surrender hereof to the Company for other warrants of different denominations
entitling the holder thereof to purchase in the aggregate the same number of shares of Common Stock
purchasable hereunder. This Warrant may be divided or combined with other warrants that carry the
same rights upon presentation hereof at the principal office of the Company together with a written
notice specifying the denominations in which new warrants are to be issued to the Purchaser and
signed by the Purchaser hereof. The term “Warrants” as used herein includes any warrants into
which this Warrant may be divided or exchanged.

     16. AMENDMENT AND WAIVER. This Warrant may be amended only upon the written consent of the
Company and the Purchaser.

     17. MISCELLANEOUS. This Agreement shall be governed by and construed in accordance with the
internal laws of the State of New York, without the application of principles of conflicts of laws
that would result in any law other than the laws of the State of New York being applied. All
notices, requests, consents and other communications hereunder shall be in writing, shall be sent
by confirmed facsimile or electronic mail, or mailed by first-class

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registered or certified
airmail, or nationally recognized overnight express courier, postage prepaid, and shall be deemed
given when so sent in the case of facsimile or electronic mail transmission, or when so received in
the case of mail or courier, and addressed as follows: (a) if to the Company, at 3830 Valley
Centre Drive, Suite 705-461, California 92130, Attention: President and Chief Executive Officer;
Facsimile: (858) 509-1761; with a copy to (which shall not constitute notice) Latham & Watkins
LLP, 12636 High Bluff Drive, Suite 400, San Diego, California 92130, Attention: Cheston J.
Larson; Facsimile: (858) 523-5450; E-Mail: cheston.larson@lw.com and (b) if to the Purchaser, at
such address or addresses as may have been furnished by the Purchaser to the Company in writing.
The invalidity or unenforceability of any provision hereof shall in no way affect the validity or
enforceability of any other provisions.

[Signature Page Follows]

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     IN WITNESS WHEREOF, this Common Stock Purchase Warrant is issued effective as of the date
first set forth above.

	 	 	 	 	 	 	 
	 	 	SOMAXON PHARMACEUTICALS, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Name:
	 	 

Richard W. Pascoe
	 	 
	 

	 	Title:
	 	President and Chief Executive Officer	 	 

Signature Page to Warrant No. 2009-«WarrantNumber»

 

 

EXHIBIT A

NOTICE OF INTENT TO EXERCISE

(To be signed only upon exercise of Warrant)

To: Somaxon Pharmaceuticals, Inc.

     The undersigned, the Purchaser of the attached Warrant, hereby irrevocably elects to exercise
the purchase right represented by such Warrant for, and to purchase thereunder,
                                                             (                    )
shares of Common Stock of Somaxon Pharmaceuticals, Inc. and
(choose one)

                          herewith makes payment of                                           
                   Dollars ($                    ) thereof

     or

                          exercises the Net Exercise Right pursuant to Section 1(b) thereof.

     The undersigned requests that the certificates for the shares to be acquired pursuant to such
exercise be issued in the name of, and delivered to                                         , whose address is
                                        .

     By its signature below the undersigned hereby represents and warrants that it is an
“accredited investor” as defined in Rule 501(a) of Regulation D promulgated under the Securities
Act of 1933, as amended, and agrees to be bound by the terms and conditions of the attached Warrant
as of the date hereof, including Section 10 thereof.

DATED:                                         

	 	 	 	 	 	 	 
	 	 	(Signature must conform in all	 	 
	 	 	respects to name of the Purchaser	 	 
	 	 	as specified on the face of the Warrant)	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	«Purchaser»	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	Address:	 	 
	 
	 	 	 	 

	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 

 

 

EXHIBIT B

NOTICE OF ASSIGNMENT FORM

     FOR VALUE RECEIVED, (the “Assignor”) hereby sells, assigns and transfers all of the
rights of the undersigned Assignor under the attached Warrant with respect to the number of shares
of common stock of Somaxon Pharmaceuticals, Inc. (the “Company”) covered thereby set forth
below, to the following “Assignee” and, in connection with such transfer, represents and
warrants to the Company that the transfer is in compliance with Section 10 of the Warrant and
applicable federal and state securities laws:

	 	 	 	 	 	 	 	 	 	 	 	 	 
	NAME OF ASSIGNEE
	 	 	 	ADDRESS/FAX NUMBER
	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Number of shares:	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 

	 	 	 	 	 	 	 	 
	Dated:
	 	 	 	 	 	 	 	Signature:	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	Witness:	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 

ASSIGNEE ACKNOWLEDGMENT

     The undersigned Assignee acknowledges that it has reviewed the attached Warrant and by its
signature below it hereby represents and warrants that it is an “accredited investor” as defined in
Rule 501(a) of Regulation D promulgated under the Securities Act of 1933, as amended, and agrees to
be bound by the terms and conditions of the Warrant as of the date hereof, including Section 10
thereof.

	 	 	 	 	 	 	 
	 	 	Signature:	 	 
	 
	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 
	 	By:	 	 	 	 
	 
	 	 

	 	 
	 
	 	Its:	 	 	 	 
	 
	 	 

	 	 

	 	 	 
	Address:exv10w1

Exhibit 10.1

EXECUTION COPY

SECURITIES PURCHASE AGREEMENT

     This Securities Purchase Agreement (“Agreement”) is made as of July 2, 2009 (the “Effective
Date”), by and among Somaxon Pharmaceuticals, Inc., a Delaware corporation (the “Company”), and
each of those persons and entities, severally and not jointly, listed as a Purchaser on the
Schedule of Purchasers attached as Exhibit A hereto (the “Schedule of Purchasers”). Such
persons and entities are hereinafter collectively referred to as “Purchasers” and each individually
as a “Purchaser”.

AGREEMENT

     In consideration of the mutual covenants contained in this Agreement, and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the Company and each Purchaser
(severally and not jointly) hereby agree as follows:

SECTION 1. AUTHORIZATION OF SALE OF SECURITIES.

     The Company has authorized the sale and issuance of 5,106,375 shares of its Common Stock, par
value $0.0001 per share (the “Common Stock”), and warrants in the form of Exhibit B hereto
to purchase an aggregate of 5,106,375 shares of Common Stock (each a “Warrant,” and collectively,
the “Warrants”), on the terms and subject to the conditions set forth in this Agreement. The
shares of Common Stock sold hereunder at the Closing (as defined below) shall be referred to as the
“Shares.” The Shares and the Warrants shall be referred to collectively as the “Securities.”

SECTION 2. AGREEMENT TO SELL AND PURCHASE THE SECURITIES.

     2.1 Sale of Securities. At the Closing (as defined in Section 3), the Company will sell to
each Purchaser, and each Purchaser will purchase from the Company, (a) the number of Shares set
forth opposite such Purchaser’s name on the Schedule of Purchasers at a purchase price of $1.05 per
Share and (b) a Warrant to purchase the number of shares of Common Stock set forth opposite such
Purchaser’s name on the Schedule of Purchasers (such shares of Common Stock, the “Warrant Shares”),
which Warrant shall have an exercise price equal to $1.155 per Warrant Share, and which Warrant
shall have a purchase price equal to $0.125 per Warrant Share.

     2.2 Separate Agreement. Each Purchaser shall severally, and not jointly, be liable for only
the purchase of the Securities that appear on the Schedule of Purchasers that relate to such
Purchaser. The Company’s agreement with each of the Purchasers is a separate agreement, and the
sale of Securities to each of the Purchasers is a separate sale. Subject to the satisfaction of
the closing condition set forth in Section 7.6, the obligations of each Purchaser hereunder are
expressly not conditioned on the purchase by any or all of the other Purchasers of the
Securities such other Purchasers have agreed to purchase.

 

 

SECTION 3. CLOSING AND DELIVERY.

     3.1 Closing. The closing of the purchase and sale of the Securities (which Securities are set
forth in the Schedule of Purchasers) pursuant to this Agreement (the “Closing”) shall be held on
July 8, 2009 at the offices of Latham & Watkins LLP, 12636 High Bluff Drive, Suite 400, San Diego,
California 92130, or on such other date and place as may be agreed to by the Company and the
Purchasers. At or prior to the Closing, each Purchaser shall execute any related agreements or
other documents required to be executed hereunder, dated as of the date of the Closing (the
“Closing Date”).

     3.2 Issuance of the Securities. The Company shall issue to each Purchaser (a) promptly
following the Closing Date, stock certificates registered in the name of such Purchaser, or in such
nominee name(s) as designated by such Purchaser, representing the number of Shares to be purchased
by such Purchaser at such Closing as set forth in the Schedule of Purchasers, against payment of
the purchase price for such Shares and (b) at the Closing, a Warrant registered in the name of such
Purchaser, or in such nominee name(s) as designated by such Purchaser, representing the number of
Warrant Shares as set forth in the Schedule of Purchasers. The name(s) in which the stock
certificates and Warrant are to be issued to each Purchaser are set forth in the Stock Certificate
Questionnaire and the Registration Statement Questionnaire in the form attached hereto as
Exhibits C and D, respectively (the “Stock Certificate Questionnaire” and the
“Registration Statement Questionnaire,” respectively), as completed by each Purchaser, which shall
be provided to the Company no later than the Closing Date. The physical delivery of the stock
certificates and Warrants to each Purchaser shall be made promptly following the Closing Date.

SECTION 4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.

     Except as otherwise expressly described in the Company’s filings on EDGAR with the Securities
and Exchange Commission (the “Commission”) since December 31, 2008 (the “Commission Documents”), or
in the Company’s press releases as posted on the website of the Company in the News Section since
December 31, 2008 (the “Press Releases,” and together with the Commission Documents, the “Company
Information”), which qualify the following representations and warranties in their entirety, the
Company hereby represents and warrants to, and covenants with, each Purchaser, as follows:

     4.1 Organization and Standing. The Company has been duly organized and is validly existing as
a corporation in good standing under the laws of the State of Delaware, has full corporate power
and authority to own or use its properties and assets and to conduct its business as presently
conducted, and is duly qualified as a foreign corporation and in good standing in all jurisdictions
in which the character of the property owned or leased or the nature of the business transacted by
it makes qualification necessary, except where the failure to be so qualified would not be
reasonably expected to have a material adverse effect on the business, prospects,
properties, condition, financial or otherwise, or results of operations of the Company or
materially impairs the Company’s ability to complete its obligations pursuant to this Agreement or
the Warrants (a “Company Material Adverse Effect”).

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     4.2 Corporate Power; Authorization. The Company has the requisite power and authority to
enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry
out its obligations hereunder and thereunder. The execution and delivery of this Agreement, the
Warrants and the other documents required to be delivered pursuant hereto or thereto (the
“Transaction Documents”) by the Company and the consummation by it of the transactions contemplated
hereunder and thereunder have been duly authorized by all necessary corporate action on the part of
the Company, and no further consent or action is required by the Company, its Board of Directors or
its stockholders. Each of the Transaction Documents to which it is a party have been duly executed
by the Company and, when delivered in accordance with the terms hereof and thereof, will constitute
the valid and binding obligation of the Company, enforceable against the Company in accordance with
their terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws relating to or affecting the enforcement of creditors’ rights generally; and (ii)
as limited by equitable principles generally, including any specific performance.

     4.3 No Conflicts or Violations. The execution, delivery and performance of the Transaction
Documents to which it is a party by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby do not and will not (i) conflict with or violate any
provision of the Company’s Amended and Restated Certificate of Incorporation (the “Certificate of
Incorporation”) or Amended and Restated Bylaws (the “Bylaws”); (ii) conflict with, or constitute a
default (or an event that 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 (with or without
notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument
(evidencing a Company debt or otherwise) to which the Company is a party or by which any property
or asset of the Company is bound or affected; or (iii) result in a violation of any law, rule,
regulation, order, judgment, injunction, decree or other restriction of any court or governmental
authority to which the Company is subject (including federal and state securities laws and
regulations) and the rules and regulations of any self-regulatory organization to which the Company
or its securities are subject, or by which any property or asset of the Company is bound or
affected, except in the case of clauses (ii) and (iii), such as would not, individually or in the
aggregate, be reasonably expected to result in a Company Material Adverse Effect.

     4.4 Governmental Consents. No consent, approval, authorization, filing with or order of or
registration with, any court or governmental agency or body is required in connection with the
transactions contemplated herein, except such as have been or will be obtained or made under the
Securities Act of 1933, as amended (the “Securities Act”), or the Securities Exchange Act of 1934,
as amended (the “Exchange Act”), and such as may be required under the securities, or blue sky,
laws of any jurisdiction in connection with the offer and sale of the Securities by the Company in
the manner contemplated herein or the issuance of the Warrant Shares in the manner contemplated in
the Warrants.

     4.5 Issuance and Delivery of the Securities. The Securities have been duly authorized and,
when issued and paid for in compliance with the provisions of the Transaction Documents to which it
is a party, will be validly issued, fully paid and nonassessable. The Warrant Shares have been
duly authorized and, upon exercise of the Warrants in accordance with

3

 

their terms, including
payment of the exercise price therefore, will be validly issued, fully paid and nonassessable. The
Company has reserved from its duly authorized capital stock the maximum number of shares of Common
Stock issuable upon the exercise of the Warrants. The Company shall maintain a reserve from its
duly authorized shares of Common Stock in such amount as may be required to fulfill its obligations
to issue the Warrant Shares under the Warrants. In the event that at any time the then authorized
shares of Common Stock are insufficient for the Company to satisfy its obligations to issue the
Warrant Shares, the Company shall promptly take such actions as may be required to increase the
number of authorized shares. The issuance and delivery of neither the Securities nor the Warrant
Shares is subject to preemptive, co-sale, right of first refusal or any other similar rights of the
stockholders of the Company or any liens or encumbrances. Assuming the accuracy of the
representations made by each Purchaser in Section 5, the offer and issuance by the Company of the
Securities pursuant to this Agreement and, in the case of the Warrant Shares, pursuant to the
Warrants, is exempt from registration under the Securities Act.

     4.6 Capitalization. All of the Company’s outstanding shares of capital stock have been duly
authorized and validly issued and are fully paid and nonassessable, have been issued in compliance
with all federal and state securities laws, and were not issued in violation of or subject to any
preemptive right, co-sale right or other rights to subscribe for or purchase securities. The
authorized capital stock of the Company consists of 100,000,000 shares of Common Stock and
10,000,000 shares of undesignated Preferred Stock. As of the Effective Date, there are no shares
of Preferred Stock issued and outstanding and there are 18,460,975 shares of Common Stock issued,
consisting of 18,415,247 shares of Common Stock outstanding and 45,728 shares of Common Stock held
in treasury. There are no other shares of any other class or series of capital stock of the
Company issued or outstanding. The Company has no capital stock reserved for issuance, except
that, as of the Effective Date: (i) 604,452 shares of Common Stock are reserved for issuance upon
the exercise of outstanding warrants; (ii) 584,045 shares of Common Stock are subject to currently
outstanding stock options issued under the Company’s 2004 Equity Incentive Award Plan (the “2004
Plan”), and no shares of Common Stock remain available for future issuance under the 2004 Plan;
(iii) 3,164,560 shares of Common Stock are subject to currently outstanding stock options issued
under the Company’s 2005 Equity Incentive Award Plan (the “2005 Plan”), 120,000 shares of Common
Stock are outstanding as unvested restricted stock under the 2005 Plan, 1,372,916 shares of Common
Stock are subject to currently outstanding restricted stock units under the 2005 Plan, and
1,869,272 shares of Common Stock remain available for future issuance under the 2005 Plan; and (iv)
849,454 shares of Common Stock remain available for future issuance under the Company’s 2005
Employee Stock Purchase Plan. Except as stated above, there are no outstanding options, warrants,
or other rights to purchase, or equity or debt securities convertible into or exchangeable or
exercisable for, any capital stock of the Company that have been granted by the Company. As of the
date hereof, except as set forth above or as otherwise provided herein, the Company has not entered
into any agreement giving any Person the right to subscribe for or acquire, any shares of Common
Stock, or securities or rights convertible or exchangeable into Shares of Common Stock, other than
agreements that have expired or terminated. The issuance of Common Stock or other securities
pursuant to any provision of this Agreement or the Warrants will not give rise to any preemptive
rights, rights of first refusal or any other similar rights on behalf of any person or result in
the triggering of any anti-dilution, the right of any holder of securities to adjust the exercise,

4

 

conversion exchange or reset price under any such securities or other similar rights. There are no
agreements or arrangements under which the Company or any of its Subsidiaries is obligated to
register the sale or resale of any of their securities under the Securities Act. There are no
securities or instruments containing anti-dilution provisions that will be triggered by the
issuance of the Securities or the Warrant Shares.

     4.7 Commission Documents; Financial Statements. The Company has filed all reports required to
be filed by it under the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for
the 12 months preceding the date hereof on a timely basis. Each such documents and any document
incorporated into any Registration Statement (as defined below) complies or will comply in all
material respects with the Exchange Act, and none of such documents, when filed by the Company,
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. Except as otherwise disclosed in the
Commission Documents, (i) since December 31, 2008,the Company has not incurred any liabilities
(contingent or otherwise) other than (A) trade payables, accrued expenses and other liabilities
incurred in the ordinary course of business consistent with past practice, (B) liabilities not
required to be reflected in the Company’s financial statements pursuant to GAAP or required to be
disclosed in filings made with the Commission, (C) liabilities incurred in connection with events
disclosed in the Company Information, and (D) other liabilities that would not, individually or in
the aggregate, result in a Company Material Adverse Effect; (ii) the Company has not altered its
critical accounting policies from those disclosed in the Company’s Annual Report on Form 10-K for
the fiscal year ended December 31, 2008 (the “2008 10-K”); (iii) since December 31, 2008, the
Company has not declared or made any dividend or distribution of cash or other property to its
stockholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its
capital stock, except with respect to the one-time option exchange offer completed by the Company
on June 9, 2009; and (iv) since December 31, 2008, the Company has not issued any equity securities
to any officer, director or affiliate of the Company, except pursuant to existing Company stock
incentive or purchase plans. The Company does not have pending before the Commission any request
for confidential treatment of information or documents. The Company has not taken any steps to
seek protection pursuant to any bankruptcy law nor does the Company believe that its creditors
intend to initiate involuntary bankruptcy proceedings. The Company, after giving effect to the
transactions contemplated hereby, will not be Insolvent (as defined below). For purposes of this
Section 4.7, “Insolvent” means (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 in Section 4.8), (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.

     4.8 Indebtedness. The Company has no outstanding Indebtedness (as defined below) which is
expected to have a Company Material Adverse Effect, and is not a party to any contract,
agreement or instrument relating to any Indebtedness, the performance of which, has or is
expected to have a Company 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

5

 

property or
services (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 GAAP, 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; and (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.

     4.9 No Proceedings or Investigations. There is no proceeding, or, to the knowledge of the
executive officers of the Company, inquiry or investigation, before or by any court, public board,
government agency, self-regulatory organization or body pending or, to the knowledge of the
executive officers of the Company, threatened against or affecting the Company (other than any
proceeding, inquiry or investigation existing as of the date hereof relating to the Company’s
resubmission of its New Drug Application for Silenor to the U.S. Food and Drug Administration
(“FDA”)) that (i) could result in a Company Material Adverse Effect or (ii) could impair the
ability of the Company to perform in any material respect its obligations under this Agreement.
Neither the Company nor any director or officer is, or within the last ten years has been, the
subject of any action involving a claim of violation of or liability under federal or state
securities laws relating to the Company or a claim of breach of fiduciary duty relating to the
Company.

     4.10 NASDAQ Compliance. The Company has not, in the twelve months preceding the date hereof,
received notice (written or oral) from the Financial Industry Regulatory Authority or NASDAQ to the
effect that the Company is not in compliance with the listing or maintenance requirements of the
NASDAQ Capital Market. Other than the failure to meet the stockholders’ equity requirement in
accordance with NASDAQ Listing Rule 5550(b)(1) for the quarter ending
June 30, 2009, the Company is in compliance with all such listing and maintenance requirements
that have not been suspended by the NASDAQ Capital Market. The issuance and sale of the Securities
under this Agreement does not, and the issuance of the Warrant Shares pursuant to the Warrant will
not, contravene the rules and regulations of the NASDAQ Capital Market, and no

6

 

approval of the
stockholders of the Company thereunder is required for the Company to issue and deliver the
Securities or, if applicable, the Warrant Shares to the Purchasers.

     4.11 Sarbanes-Oxley Act. The Company is in compliance in all material respects with the
requirements of the Sarbanes-Oxley Act of 2002 that are effective and applicable to the Company as
of the date hereof, and the rules and regulations promulgated by the Commission thereunder that are
effective and applicable to the Company as of the date hereof.

     4.12 Disclosure Controls and Procedures; Internal Control Over Financial Reporting. The
Company has established and maintains disclosure controls and procedures (as defined in Exchange
Act Rules 13a-15(e) and 15d-15(e)) that comply in all material respects with the Exchange Act and
are effective in all material respects to ensure that material information relating to the Company,
including its subsidiaries, is made known to its principal executive officer and principal
financial officer by others within those entities. The Company’s certifying officers have
evaluated the effectiveness of the Company’s disclosure controls and procedures as of December 31,
2008. The Company presented in the 2008 10-K the conclusions of the certifying officers about the
effectiveness of the disclosure controls and procedures based on their evaluations as of December
31, 2008. Since December 31, 2008, there have been no significant changes in the Company’s
internal controls over financial reporting (as would be required to be disclosed pursuant to Item
308(c) of Regulation S-K under the Exchange Act) or, to the Company’s knowledge, in other factors,
that could adversely and significantly affect the Company’s internal control over financial
reporting.

     4.13 No Integrated Offering. Neither the Company, nor any person acting on its behalf, has,
directly or indirectly, made any offers or sales of any security or solicited any offers to buy any
security, under circumstances that would cause the offering of Shares contemplated by this
Agreement to be integrated or aggregated with prior offerings by the Company for purposes of the
Securities Act or the rules and regulations of the Nasdaq Capital Market. Additionally, the
Company hereby covenants that it shall not, and shall ensure that no affiliate thereof shall, sell,
offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as
defined in Section 2 of the Securities Act) that would be integrated with the offer or sale of the
Securities in a manner that would require stockholder consent to be obtained in connection with the
issuance of the Securities pursuant to this Agreement.

     4.14 Price of Common Stock. The Company has not taken, and will not take, directly or
indirectly, any action designed to cause or result in, or that has constituted or that might
reasonably be expected to constitute, the stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the Shares or the Warrant Shares.

     4.15 No General Solicitation. Neither the Company, nor any of its affiliates, nor any person
acting on its or their behalf, has engaged in any form of general solicitation or general
advertising (within the meaning of Regulation D promulgated under the Securities Act) in
connection with the offer or sale of the Securities.

7

 

     4.16 No Registration Rights. No holder of any security of the Company has any right, which has
not been waived, to have any security owned by such holder included in the Registration Statements
(as such term is defined in Section 8.1(a)(i)).

     4.17 Publicity. Except as required by law or as otherwise provided in this Section 4.17, the
Company shall not issue any press release or make any public statement (excluding information
contained in the Registration Statements (as defined below)) listing any Purchaser as a purchaser
of the Shares without the prior approval of such Purchaser. The Company shall, on or before 8:30
a.m., Eastern time, on the second Trading Day following execution of this Agreement, issue a press
release disclosing all material terms of the transactions contemplated hereby. The Company shall
file a Current Report on Form 8-K with the SEC (the “8-K Filing”) describing the terms of the
transactions contemplated by the Transaction Documents and including as exhibits to such Current
Report on Form 8-K this Agreement and the form of Warrant (including the schedules and the names,
and addresses of the Investors and the amount(s) of Securities respectively purchased), in the
form, and within the timeframe, required by the Exchange Act. Thereafter, the Company shall timely
file any filings and notices required by the SEC or applicable law with respect to the transactions
contemplated hereby. Except as herein provided, the Company shall not publicly disclose the name
of any Investor, or include the name of any Investor in any press release without the prior written
consent of such Investor, unless otherwise required by law.

     4.18 Disclosure. Except for any information provided to a Purchaser pursuant to a specific
due diligence request by such Purchaser to receive material nonpublic information or pursuant to a
binding non-disclosure agreement, the Company confirms that neither it nor any officers, directors
or affiliates, has provided any of the Purchasers or their agents or counsel with any information
that constitutes material, nonpublic information (other than the existence and terms of the
issuance of Securities, as contemplated by this Agreement). The Company understands and confirms
that each of the Purchasers will rely on the foregoing representations in effecting transactions in
securities of the Company. To the Company’s knowledge, except for the transactions contemplated by
this Agreement, no event or circumstance has occurred or information exists with respect to the
Company or its business, properties, operations or financial condition, which, under applicable
law, rule or regulation, requires public disclosure or announcement by the Company prior to the
date hereof but which has not been so publicly announced or disclosed. The Company acknowledges
and agrees that no Purchaser makes or has made any representations or warranties to the Company
with respect to the transactions contemplated hereby other than those set forth in the Transaction
Documents.

     4.19 Title to Assets. The Company has good and marketable title in all personal property
owned by it that is material to the business of the Company, in each case free and clear of all
liens, encumbrances and defects, except as described in the Commission Documents or as do not
individually or in the aggregate have or result in a Company Material Adverse Effect. Any real
property and facilities held under lease by the Company are held by it under valid, subsisting
and enforceable leases of which the Company is in material compliance. The Company does not
own any real property.

8

 

     4.20 Intellectual Property.

          (a) The Company owns or possesses valid and enforceable rights to use, or can acquire on
reasonable terms such ownership of or rights to use, all patents, patent applications, patent
rights, licenses, inventions, know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, data, systems or procedures), copyrights,
trademarks, service marks, service names, trade names and other intellectual property necessary
for the conduct of the Company’s business as now conducted or as currently proposed to be
conducted, and all other rights reasonably necessary for the development, manufacture, use or sale
of its current products and currently proposed products, as described in the Commission Documents
(collectively, “Intellectual Property”), except in each case where the failure to so own or possess
such rights would not reasonably be expected to have a Company Material Adverse Effect.

          (b) In connection with Intellectual Property owned by or licensed to the Company, and to the
Company’s knowledge:

          (i) except as would not reasonably be expected to have a Company Material Adverse
Effect, there are no valid and enforceable rights of third parties to such Intellectual
Property that are or would be infringed by the business currently conducted by the Company
or in the manufacture, use, sale, offer for sale or import of its presently proposed
products, as described in the Commission Documents;

          (ii) there is no pending or threatened action, suit, proceeding or claim by third
parties challenging the Company’s rights in or to any Intellectual Property, which if
adversely determined would reasonably be expected to have a Company Material Adverse Effect,
and the Company is unaware of any facts which could form a reasonable basis for any such
action, suit, proceeding or claim;

          (iii) except as would not be reasonably expected to have a Company Material Adverse
Effect, there is no patent or published patent application which contains claims that
dominate or would dominate any patent of the Intellectual Property, that would interfere
with the issued or pending claims of any patent of the Intellectual Property or that the
Company expects would result in the invalidity or unenforceability of any of the
Intellectual Property;

          (iv) there is no infringement by third parties of any Intellectual Property; and

          (v) there is no pending or threatened action, suit, proceeding or claim by third
parties that the Company infringes or otherwise violates, or would, upon the
commercialization of any product or service described in the Commission Documents, if any,
as under development, infringe or violate, any patent, trademark, tradenames,
service name, copyright, trade secret or other proprietary rights of others, which if
adversely determined would reasonably be expected to have a Company Material

9

 

Adverse Effect,
and the Company is unaware of any facts which could form a reasonable basis for any such
action, suit, proceeding or claim.

          (c) To the Company’s knowledge and except as would not be reasonably expected to have a
Company Material Adverse Effect:

          (i) all patents and patent applications filed by or on behalf of the Company are owned,
or co-owned by the Company free and clear of all liens, encumbrances, defects or other
restrictions, except with respect to licenses granted in the ordinary course of business as
described in the Commission Documents;

          (ii) except with respect to actions taken by the USPTO or other applicable governmental
departments in the course of the prosecution of patent and trademark applications or as
disclosed in the Commission Documents, the Intellectual Property owned by or exclusively
licensed to the Company is not subject to any judgment, order, writ, injunction or decree of
any court or any federal, state, local, foreign or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, or any
arbitrator; and

          (iii) all prior art references known to the Company that could reasonably be considered
relevant to the patentability of any claim in any patent application or patent within the
Intellectual Property have been or will be disclosed to the U.S. Patent and Trademark Office
to the extent required by and in accordance with 37 C.F.R. Section 1.56; and neither the
Company nor to the Company’s knowledge any other person has made any material
misrepresentations or concealed any material information from the USPTO in such
applications, or in connection with the prosecution of such applications, in violation of 37
C.F.R. Section 1.56.

          (d) In connection with Intellectual Property licensed to the Company, the Company has complied
in all material respects with the terms of each agreement pursuant to which Intellectual Property
has been licensed to the Company, and all such agreements are in full force and effect.

     4.21 Regulatory Compliance.

          (a) The Company is not in violation of the Federal Food, Drug, and Cosmetic Act, 42 U.S.C.
Sec. 1320a-7b (the United States anti-kickback statute), or the regulations and regulatory guidance
promulgated thereunder or similar legal requirements of any foreign jurisdiction (collectively,
“Drug Laws”), including but not limited to those relating to good laboratory practices, good
clinical practices, adverse event reporting, good manufacturing practices, advertising and
promotion, recordkeeping, and filing of reports.

          (b) All drug products being manufactured or developed by or on behalf of the Company are being
manufactured, labeled, stored, tested, and developed in compliance with applicable Drug Laws.

10

 

          (c) The Company has not received written notice or other communication, whether written or
non-written, from the FDA or any other similar foreign governmental regulatory authority (i)
alleging or asserting noncompliance with any Drug Laws or any licenses, certificates, approvals,
clearances, authorizations, or permits required by any such Drug Laws necessary for the conduct of
the Company’s business; (ii) indicating an intention to conduct an investigation, audit, or review;
or (iii) notifying the Company of any inspectional observation (including those recorded on form
FDA-483), establishment inspection report, warning letter, untitled letter, penalty, fine,
sanction, request for recall or other remedial action. There are no lawsuits, actions,
arbitrations, proceedings, or charges pending or, to the Company’s knowledge, threatened against
the Company with respect to a violation by the Company of any Drug Law.

          (d) The Company has delivered or made available to the Purchasers all material correspondence
and material meeting minutes received from or sent to FDA or any other similar foreign governmental
authority, and all written reports of telephone conversations, visits or other contact with FDA and
any other similar foreign governmental authority, relating to the Company’s development of Silenor
(doxepin HCl) for commercial marketing, in each case other than any raw data delivered or made
available to the FDA in connection therewith.

          (e) Neither the Company nor any director, officer, employee, or, to the Company’s knowledge,
any agent of the Company has made an untrue statement of a material fact or fraudulent statement to
FDA or any other similar foreign governmental authority, failed to disclose a material fact
required to be disclosed to FDA or any other similar governmental authority, or committed any act,
made any statement, or failed to make any statement, that would reasonably be expected to provide a
basis for FDA to invoke its policy respecting “Fraud, Untrue Statements of Material Fact, Bribery,
and Illegal Gratuities,” set forth in FDA’s Compliance Policy Guide Sec. 120.100 (CPG 7150.09).

          (f) Neither the Company nor, to the knowledge of the Company, any director, officer,
employee, or agent of the Company has been convicted of any crime or engaged in any conduct that
would reasonably be expected to result in or that has resulted in (i) permanent debarment under 21
U.S.C. Sec. 335a or any similar state or federal law or (ii) exclusion from participation in
federal health care programs under 42 U.S.C. Sec. 1320a-7 or any similar state or federal law.

     4.22 Investment Company Act. The Company is not required to be registered as, and is not an
affiliate of, an “investment company” within the meaning of the Investment Company Act of 1940, as
amended.

     4.23 Form S-3 Eligibility. Except as may be limited by written guidance, rules of general
applicability of the Commission staff, or comments, requirements or requests of the Commission, the
Company satisfies the registrant requirements for the use of a registration
statement on Form S-3 to register the Shares and the Warrant Shares for resale by the
Purchasers under the Securities Act.

     4.24 Transactions With Affiliates and Employees. Except as set forth or incorporated by
reference in the Commission Documents or described in this Agreement, none of

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the officers,
directors or employees of the Company is presently a party to any transaction that would be
required to be reported pursuant to Item 404 of Regulation S-K promulgated under the Securities
Act.

     4.25 Internal Accounting Controls. The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurance 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 GAAP and to maintain
asset accountability, (iii) access to assets is permitted only in accordance with management’s
general or specific authorization, and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with respect to any
differences.

     4.26 Environmental Laws. The Company (i) is in compliance in all material respects with any
and all Environmental Laws (as hereinafter defined), (ii) has received all permits, licenses or
other approvals required of it under applicable Environmental Laws to conduct its business and
(iii) is in compliance in all material respects 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 would be reasonably expected to have, individually or in the aggregate, a Company 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.

     4.27 Employment Matters. The Company is in compliance in all material respects 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. All nonqualified
deferred compensation plans maintained by the Company or any of its affiliates which plans are or
have been subject to Section 409A of the Internal Revenue Code are and have at all time been in
compliance in all material respects therewith.

     4.28 Foreign Corrupt Practices. Neither the Company nor, to the knowledge of the Company, any
director, officer, agent, employee or other Person acting on behalf of the Company has, in the
course of its actions for, or on behalf of, the Company (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.

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     4.29 Encumbered Securities. The Company will not object to and shall permit (except as
prohibited by law) a Purchaser to pledge or grant a security interest in some or all of the
Securities and/or Warrant Shares in connection with a bona fide margin agreement or other loan or
financing arrangement secured by the Securities and/or Warrant Shares, and if required under the
terms of such agreement, loan or arrangement, the Company will not object to and shall permit
(except as prohibited by law) such Purchaser to transfer pledged or secured Securities and/or
Warrant Shares to the pledges or secured parties. Except as required by law, such a pledge or
transfer would not be subject to approval of the Company, no legal opinion of the pledgee, secured
party or pledgor shall be required in connection therewith, and no notice shall be required of such
pledge. Each Purchaser acknowledges that the Company shall not be responsible for any pledges
relating to, or the grant of any security interest in, any of the Securities and/or Warrant Shares
or for any agreement, understanding or arrangement between any Purchaser and its pledgee or secured
party. At the appropriate Purchaser’s expense, the Company will execute and deliver such
reasonable documentation as a pledgee or secured party of Securities and/or Warrant Shares may
reasonably request in connection with a pledge or transfer of the Securities and/or Warrant Shares,
including the preparation and filing of any required prospectus supplement under Rule 424(b)(3) of
the Securities Act or other applicable provision of the Securities Act to appropriately amend the
list of selling stockholders thereunder. Provided that the Company is in compliance with the terms
of this Section 4.29, the Company’s indemnification obligations pursuant to Section 10.1(b) shall
not extend to any losses arising out of or related to this Section 4.29.

     4.30 Pre-Emptive Rights.

          (a) So long as a Purchaser holds at least 250,000 Shares (as adjusted for any stock splits,
stock dividends, stock combinations, and similar events occurring after the Closing Date) (each
such Purchaser, an “Eligible Purchaser”), such Eligible Purchaser shall have the right to
participate in any offer and sale by the Company of any equity securities (any such offer and sale
being referred to as a “Subsequent Placement”) up to such Eligible Purchaser’s Pro Rata Portion (as
defined below) on the same terms, conditions and price provided for in the Subsequent Placement
(the “Right of First Refusal”). For purposes of this Agreement, an “Eligible Purchaser’s Pro Rata
Portion” shall mean the ratio that (x) the number of Shares issued at the Closing to the Eligible
Purchaser, bears to (y) the aggregate number of Shares issued at the Closing to all of the Eligible
Purchasers.

          (b) The Company shall deliver, at least ten Trading Days (as defined below) prior to the
anticipated pricing of a Subsequent Placement, to each Eligible Purchaser, a written notice (the
“Subsequent Financing Notice”) of any proposed Subsequent Placement, which Subsequent Financing
Notice shall (i) identify and describe the securities being offered (the “Offered Securities”);
(ii) describe in reasonable detail, if known, the price (or anticipated price range), the expected
pricing date, the number or amount of Offered Securities proposed to be
issued, sold or exchanged and other terms upon which the Offered Securities are to be issued,
sold or exchanged; and (iii) offer to issue and sell to such Eligible Purchaser a portion of such
Offered Securities equal to such Eligible Purchaser’s Pro Rata Portion (as amended in accordance
with any additional notice provided under this Section 4.30(b), the “Offer”). For purposes of this
Agreement, “Trading Day” shall mean a day that is not a weekend or holiday and the Nasdaq Capital
Market (or subsequent principal securities exchange on which the

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Company’s Common Stock is then
traded) is not closed. Each Eligible Purchaser shall within five Trading Days of its receipt of
the Subsequent Financing Notice provide written notice to the Company setting forth the portion of
such Eligible Purchaser’s Pro Rata Portion of such Offered Securities that the Eligible Purchaser
elects to purchase in the Subsequent Placement. Each Eligible Purchaser acknowledges that the
Subsequent Financing Notice may not contain the price or other terms upon which the Offered
Securities will ultimately be issued; provided that the Company shall deliver to the Eligible
Purchaser written or oral notice of the price and other definitive terms of the Offered Securities
and the deadline for acceptance of the Offer contemporaneously with, and in substantially the same
form and manner as, all other purchasers of the Offered Securities. If the Company delivers
additional notice of the definitive terms of the Offered Securities, an Eligible Purchaser which
has properly delivered a notice to the Company within the five-Trading Day period after its receipt
of the Subsequent Financing Notice may accept the Offer by providing the Company written or oral
notice of such acceptance on or before the deadline established by the Company for all other
purchasers of the Offered Securities.

          (c) The rights and obligations contained in this Section 4.30 shall not apply to: (i) shares
of restricted stock, stock options or other stock awards granted to officers, directors, employees,
advisors or consultants pursuant to the Company’s equity incentive plans approved by its Board of
Directors; (ii) shares of capital stock issued by the Company upon the exercise or conversion of
options or other stock awards outstanding immediately prior to the Closing or issued after the
Closing in accordance with clause (i) of this Section 4.30(c); (iii) shares of capital stock issued
by the Company upon the exercise or conversion of the Warrants or warrants to purchase capital
stock of the Company or other convertible securities outstanding immediately prior to the Closing;
(iv) securities issued after the Closing pursuant to license or co-promotion arrangements,
equipment lease financing arrangements, credit agreements, debt financings, royalty interest
financings or other commercial transactions approved by the Company’s Board of Directors; (v)
securities issued pursuant to a merger, consolidation, acquisition or similar business combination
approved by the Company’s Board of Directors; or (vi) securities issued in connection with any
stock split, stock dividend, or recapitalization of the Company.

          (d) Notwithstanding anything to the contrary set forth in this Section 4.30, this Section 4.30
shall not prohibit the Company from consummating a Subsequent Placement if the Company has been
advised, by an investment bank, underwriter, placement agent or other financial advisor that
compliance with the terms of this Section 4.30 could reasonably be expected to jeopardize the
ability of the Company to consummate such Subsequent Placement; provided, however, that, subject to
the rules and regulations of the Commission or the Nasdaq Stock Market LLC, immediately following
the consummation of such Subsequent Placement, each Eligible Purchaser shall have the right to
purchase up to Eligible Purchaser’s Pro Rata
Portion of the Offered Securities in such Subsequent Placement on the same terms, conditions
and price provided for in the Subsequent Placement.

          (e) The Right of First Refusal granted under this Section 4.30 shall cease to apply, and shall
terminate and be of no further force or effect, upon the earlier of (i) June 30, 2010 and (ii) the
closing of a sale, lease, exclusive license or other disposition, in a single transaction or a
series of related transactions, of all or substantially all of the Company’s assets

14

 

or the
Company’s merger into or consolidation with any other corporation or other entity, or any other
corporate reorganization, in which the holders of the Company’s outstanding voting stock
immediately prior to such transaction own, immediately after such transaction, securities
representing less than 50% of the voting power of the corporation or other entity surviving such
transaction, provided that this Section 4.30(e) shall not apply to a merger effected exclusively
for the purpose of changing the domicile of the Company.

          (f) Notwithstanding anything set forth herein, the Right of First Refusal granted under this
Section 4.30 may be waived with respect to any Subsequent Placement for all Eligible Purchasers by
the written consent of a majority in interest of the Eligible Purchasers.

SECTION 5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASERS.

     5.1 Each Purchaser, severally and not jointly, represents and warrants to and covenants with
the Company that:

          (a) Such Purchaser, taking into account the personnel and resources it can practically bring
to bear on the purchase of the Securities contemplated hereby, is knowledgeable, sophisticated and
experienced in making, and is qualified to make, decisions with respect to investments in
securities presenting an investment decision like that involved in the purchase of the Securities,
including investments in securities issued by the Company, and has requested, received, reviewed
and considered all information such Purchaser deems relevant (including the Company Information) in
making an informed decision to purchase the Securities.

          (b) Such Purchaser is acquiring the Securities pursuant to this Agreement in the ordinary
course of its business and for its own account for investment only and with no present intention of
distributing any of such Securities or any arrangement or understanding with any other persons
regarding the distribution of such Securities, except in compliance with Section 5.1(c).

          (c) Such Purchaser will not, directly or indirectly, offer, sell, pledge, transfer or
otherwise dispose of (or solicit any offers to buy, purchase or otherwise acquire or take a pledge
of) any of the securities purchased hereunder except in compliance with the Securities Act,
applicable blue sky laws, and the rules and regulations promulgated thereunder.

          (d) Such Purchaser has, in connection with its decision to purchase the Securities, relied
with respect to the Company and its affairs solely upon the Commission Documents and the
representations and warranties of the Company contained herein.

          (e) Such Purchaser is an “accredited investor” within the meaning of Rule 501 of Regulation D
promulgated under the Securities Act or a Qualified Institutional Buyer within the meaning of Rule
144A promulgated under the Securities Act.

          (f) Such Purchaser is an entity duly organized and validly existing in good standing (to the
extent such concepts are applicable) under the laws of its jurisdiction of organization. Such
Purchaser has the requisite right, power, authority and capacity to enter into

15

 

this Agreement and
to consummate the transactions contemplated by this Agreement and has taken all necessary action to
authorize the execution, delivery and performance of this Agreement. Upon the execution and
delivery of this Agreement by Purchaser, this Agreement shall constitute a valid and binding
obligation of Purchaser, enforceable in accordance with its terms, except (i) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or
affecting the enforcement of creditors’ rights generally; and (ii) as limited by equitable
principles generally, including any specific performance.

          (g) Such Purchaser is not a broker or dealer registered pursuant to Section 15 of the Exchange
Act (a “registered broker-dealer”) and, except as otherwise disclosed in writing to the Company in
the Registration Statement Questionnaire executed by such Purchaser, is not affiliated with a
registered broker dealer. The Purchaser is not party to any agreement for distribution of any of
the Securities.

          (h) Such Purchaser shall have completed or caused to be completed and delivered to the Company
at no later than the Effective Date, the Stock Certificate Questionnaire and the Registration
Statement Questionnaire for use in preparation of the Registration Statement, and the answers to
the Stock Certificate Questionnaire and the Registration Statement Questionnaire are true and
correct in all material respects as of the Effective Date and will be true and correct as of the
Closing Date and the effective date of the Registration Statement; provided that such Purchaser
shall be entitled to update such information by providing notice thereof to the Company before the
effective date of such Registration Statement.

          (i) Such Purchaser (including any person controlling, controlled by, or under common control
with such Purchaser, as the term “control” is defined pursuant to the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and its implementing regulations (the “HSR Act”)) does not,
and upon the consummation of the transactions contemplated by this Agreement will not, hold voting
securities of the Company exceeding an aggregate fair market value as of the Closing Date of
sixty-five million two hundred thousand dollars ($65,200,000), calculated pursuant to the HSR Act.

     5.2 Each Purchaser, severally and not jointly, represents and warrants to and covenants with
the Company that such Purchaser has not engaged and will not engage in any short sales of the
Company’s Common Stock prior to the effectiveness of the Registration Statement (either directly or
indirectly through an affiliate, agent or representative).

     5.3 Each Purchaser, severally and not jointly, understands that nothing in this Agreement or
any other materials presented to such Purchaser in connection with the purchase and sale of the
Securities constitutes legal, tax or investment advice. Such Purchaser has
consulted such legal, tax and investment advisors as it, in its sole discretion, has deemed
necessary or appropriate in connection with its purchase of the Securities.

     5.4 Legends. It is understood that the Shares, the Warrant and the Warrant Shares may bear
one or more legends in substantially the following form and substance:

16

 

“THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY OTHER
APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN RELIANCE UPON AN EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER SECURITIES LAWS.
NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED,
SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED, HYPOTHECATED OR OTHERWISE DISPOSED
OF, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OR PURSUANT TO A TRANSACTION WHICH IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH
REGISTRATION, IN EACH CASE IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS, AND IN
THE CASE OF A TRANSACTION EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION, UNLESS
THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT
SUCH TRANSACTION DOES NOT REQUIRE REGISTRATION UNDER THE SECURITIES ACT AND SUCH
OTHER APPLICABLE LAWS.”

          In addition, stock certificates representing the Securities or the Warrant Shares may
contain:

          (a) Any legend required by the laws of the State of California, including any legend required
by the California Department of Corporations;

          (b) Any legend required by the blue sky laws of any other state to the extent such laws are
applicable to the sale of such Securities or Warrant Shares hereunder; and

          (c) A legend regarding affiliate status, if applicable.

     Notwithstanding the foregoing, certificates evidencing Securities or the Warrant Shares shall
not be required to contain such legend or any other legend (i) while a registration statement
(including the Registration Statement) covering the resale of the Securities or the Warrant Shares
is effective under the Securities Act, (ii) following any sale of such Securities and/or Warrant
Shares pursuant to Rule 144 if the holder provides the Company with a legal opinion (and the
documents upon which the legal opinion is based) reasonably acceptable to the Company to the effect
that the Securities and/or the Warrant Shares can be sold under Rule 144, (iii) if the holder
provides the Company with a legal opinion (and the documents upon which the legal opinion is based)
reasonably acceptable to the Company to the effect that the Securities and/or the Warrant
Shares are eligible for sale under Rule 144 in a three-month period, or (iv) if the holder
provides the Company with a legal opinion (and the documents upon which the legal opinion is based)
reasonably acceptable to the Company to the effect that the legend is not required under applicable
requirements of the Securities Act (including controlling judicial interpretations and
pronouncements issued by the staff of the Commission). Upon the occurrence of any of the events
set forth in (i) — (iv) above, the Company shall, or shall cause its counsel to, issue a legal

17

 

opinion or instruction letter to that effect to its transfer agent upon the effective date of the
Registration Statement. Following the effective date of the Registration Statement or at such
earlier time as a legend is no longer required for certain Securities and/or Warrant Shares, the
Company will no later than three Trading Days following the delivery by a Purchaser to the Company
or the transfer agent of (i) a legended certificate representing such Securities and/or warrant
shares, and (ii) an opinion of counsel to the extent required pursuant to Section 8.4, deliver or
cause to be delivered to such Purchaser a certificate representing such Securities and/or Warrant
Shares that is free from all restrictive and other legends, or shall cause uncertificated
Securities and/or Warrant Shares to be credited to such Purchaser’s account. The Company may not
make any notation on its records or give instructions to the transfer agent that enlarge the
restrictions on transfer set forth in this Section 5.4.

     If within three Trading Days after the Company’s receipt of a legended certificate and the
other documents as specified in Clauses (i) and (ii) of the paragraph immediately above, the
Company shall fail to issue and deliver to such Purchaser a certificate representing such
Securities and/or Warrant Shares that is free from all restrictive and other legends, and if on or
after such Trading Day the Purchaser purchases (in an open market transaction or otherwise) shares
of Common Stock to deliver in satisfaction of a sale by the Purchaser of shares of Common Stock
that the Purchaser anticipated receiving from the Company without any restrictive legend (the
“Covering Shares”), then the Company shall, within three Trading Days after the Purchaser’s
request, pay cash to the Purchaser in an amount equal to the excess (if any) of the Purchaser’s
total purchase price (including brokerage commissions, if any) for the Covering Shares, over the
product of (A) the number of Covering Shares, times (B) the closing bid price on the date of
delivery of such certificate and the other documents as specified in Clauses (i) and (ii) of the
paragraph immediately above.

     5.5 Restricted Securities. Purchaser understands that the Securities and the Warrant Shares
are characterized as “restricted securities” under the federal securities laws inasmuch as they are
being acquired from the Company in a transaction not involving a public offering and that under
such laws and applicable regulations such securities may be resold without registration under the
Securities Act only in certain limited circumstances. In this connection, such Purchaser
represents that it is familiar with Rule 144 promulgated under the Securities Act (“Rule 144”), as
presently in effect, and understands the resale limitations imposed thereby and by the Securities
Act.

SECTION 6. CONDITIONS TO COMPANY’S OBLIGATIONS AT THE CLOSING.

     The Company’s obligation to complete the sale and issuance of the Securities and deliver
Securities to each Purchaser, individually, as set forth in the Schedule of Purchasers at the
Closing shall be subject to the following conditions to the extent not waived by the Company:

     6.1 Receipt of Payment. The Company shall have received payment, by wire transfer of
immediately available funds, in the full amount of the purchase price for the number of Securities
being purchased by each Purchaser at the Closing as set forth in the Schedule of Purchasers.

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     6.2 Representations and Warranties. The representations and warranties made by each Purchaser
in Section 5 hereof shall be true and correct in all material respects (except to the extent that
such representations and warranties are qualified by materiality which shall be true and correct in
all respects) as of, and as if made on, the date of this Agreement and as of the Closing Date.

     6.3 Receipt of Executed Documents. Each Purchaser shall have executed and delivered to the
Company the Stock Certificate Questionnaire and the Registration Statement Questionnaire.

     6.4 Nasdaq Approval. The Shares and the Warrant Shares shall have been approved for listing
on the Nasdaq Capital Market, subject to official notice of issuance.

SECTION 7. CONDITIONS TO PURCHASERS’ OBLIGATIONS AT THE CLOSING.

     Each Purchaser’s obligation to accept delivery of the Securities being purchased by such
Purchaser at the Closing as set forth in the Schedule of Purchasers and to pay for such Securities
shall be subject to the following conditions to the extent not waived by such Purchaser:

     7.1 Representations and Warranties Correct. The representations and warranties made by the
Company in Section 4 hereof shall be true and correct in all material respects (except for such
representations and warranties that are qualified as to materiality which shall be true and correct
in all respects) as of, and as if made on, the date of this Agreement and as of the Closing Date.

     7.2 Legal Opinion. The Purchasers shall have received an opinion of Latham & Watkins LLP,
special counsel to the Company, in the form agreed upon by the Purchasers and Latham & Watkins LLP.

     7.3 Certificate. Each Purchaser shall have received a certificate signed by the Company’s
Chief Executive Officer to the effect that the representations and warranties of the Company in
Section 4 hereof are true and correct in all material respects (except for such representations and
warranties that are qualified as to materiality which shall be true and correct in all respects) as
of, and as if made on, the date of this Agreement and as of the Closing Date and that the Company
has satisfied in all material respects all of the conditions set forth in this Section 7.

     7.4 Good Standing. The Company is validly existing as a corporation in good standing under
the laws of Delaware.

     7.5 Nasdaq Approval. The Shares and the Warrant Shares shall have been approved for listing
on the Nasdaq Capital Market, subject to official notice of issuance.

     7.6 Minimum Investment. The Purchasers shall agree to purchase hereunder Common Stock and
Warrants for an aggregate purchase price of at least $5,000,000.

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     7.7 Material Adverse Effect. No Company Material Adverse Effect shall have occurred.

SECTION 8. REGISTRATION OF THE SECURITIES; COMPLIANCE WITH THE SECURITIES ACT.

     8.1 Registration Procedures and Expenses.

          (a) Except during a Suspension (as defined below), the Company will, subject to receipt of
necessary information from the Purchasers:

          (i) as soon as practicable, but in any event no later than the 30th day
after the Closing Date, prepare and file with the Commission a registration statement on
Form S-3 or other applicable form available to the Company (the “Initial Registration
Statement”) covering the resale of the Shares and the Warrant Shares of each Purchaser that
has complied with Section 8.5 (or such other number of Shares and Warrant Shares as a
majority in interest of the Purchasers shall direct the Company to register), together with
any shares of capital stock issued or issuable, from time to time, upon any
reclassification, share combination, share subdivision, stock split, share dividend or
similar transaction or event or otherwise as a distribution on, in exchange for or with
respect to any of the foregoing, in each case held at the relevant time by a Purchaser (the
“Registrable Securities”); provided, however, that in the event that the
Commission takes the position that the offering of some or all or the applicable Registrable
Securities in the Registration Statement is not eligible to be made on a delayed or
continuous basis under the provisions of Rule 415 or requires any Purchaser to be named as
an “underwriter” (the “Staff Interpretation”) (provided that, the Company shall use
reasonable best efforts to persuade the staff of the Commission that the offering
contemplated by the Registration Statement is a valid secondary offering and not an offering
“by or on behalf of the issuer” as defined in Rule 415 and that none of the Purchasers is an
“underwriter,” to the extent the same is in fact true), then the Company will use reasonable
best efforts to file such additional Registration Statements (the “Subsequent Registration
Statements,” together with the Initial Registration Statement, the “Registration
Statements”) promptly after the earliest date on which the Company is able to persuade the
Commission that the Staff Interpretation does not apply to such Subsequent Registration
Statement (the “Subsequent Filing Dates”). If the Commission sets forth a limitation on the
number of Registrable Securities to be registered on a particular Registration Statement,
the number of Registrable Securities to be registered on such Registration Statement will
first be reduced by the Registrable Securities represented by Warrant Shares on a pro rata
basis based on the total number of unregistered Warrant Shares held by such Purchasers on a
fully diluted basis, and second by the Registrable Securities represented by Shares on a pro
rata basis based on the total number of unregistered Shares held by such Purchasers.
Registrable Securities of any Purchaser will cease to be Registrable Securities when they
can be sold pursuant to Rule 144 without
volume or manner of sales limitations or when such securities have been sold under an
effective Registration Statement.

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          (ii) use reasonable best efforts to cause (A) the Initial Registration Statement, as
amended, to become effective under the Securities Act as soon as practicable after the
Initial Registration Statement is filed by the Company, but in any event no later than 4:00
p.m. Eastern Time on the 60th day after the filing of the Initial Registration
Statement, or if the Initial Registration Statement is reviewed by the Commission, on the
90th day thereafter and (B) any Subsequent Registration Statements, as amended,
which may be required to be filed hereunder pursuant to Section 8.1(a)(i) to become
effective under the Securities Act as soon as practicable but in any event no later than
4:00 p.m. Eastern Time on the 60th day after such Subsequent Filing Date, or if
such Subsequent Registration Statement is reviewed by the Commission, on the 90th
day after such Subsequent Filing Date (each, its “Required Effective Date”) provided that,
upon notification by the Commission that a Registration Statement will not be reviewed, the
Company shall request acceleration of such Registration Statement such that it becomes
effective within five (5) Trading Days after receipt of such notice;

          (iii) use reasonable best efforts to cause any prospectus used in connection with any
Registration Statement (a “Prospectus”) to be filed with the Commission pursuant to Rule
424(b) under the Securities Act as soon as practicable but in any event no later than 9:00
a.m. Eastern Time the next Trading Day following the date such Registration Statement is
declared effective by the Commission;

          (iv) use its reasonable best efforts to promptly prepare and file with the Commission
such amendments and supplements to the Registration Statements and any Prospectus used in
connection therewith (A) as may be necessary to keep such Registration Statements
continuously effective until the earlier of (1) the second anniversary of the Closing Date,
(2) such time as all Registrable Securities have been sold pursuant to such Registration
Statements, or (3) the date on which all of the Shares and Warrant Shares may be resold by
each of the Purchasers without registration pursuant to Rule 144 without volume or manner of
sale limitations and (B) as may be reasonably requested by a Purchaser in order to
incorporate information concerning such Purchaser or such Purchaser’s intended method of
distribution;

          (v) so long as any Registration Statement is effective covering the resale of
Registrable Securities owned by the Purchasers, furnish to each Purchaser with respect to
the Registrable Securities registered under such Registration Statement (and to each
underwriter, if any, of such Registrable Securities) such reasonable number of copies of
Prospectuses and such other documents as such Purchaser may reasonably request in order to
facilitate the public sale or other disposition of all or any of the Registrable Securities
by such Purchaser. The Company hereby consents to the use of such Prospectus and each
amendment or supplement thereto by each of the selling Purchasers in connection with the
offering and sale of the Registrable Securities covered by such Prospectus and any amendment
or supplement thereto to the extent permitted by federal and state securities laws and
regulations;

          (vi) use commercially reasonable efforts to file documents required of the Company for
offer and sale of the Registrable Securities under the Blue Sky clearance

21

 

in any states
specified in writing by any of the Purchasers and to keep such registration, qualification
or exemption effective for so long as required, but not longer than the time period set
forth in Section 8.1(a)(iv); provided, however, that the Company shall not be required to
qualify to do business generally in any jurisdiction in which the Company is not now so
qualified;

          (vii) bear all expenses in connection with the procedures in paragraphs (i) through
(vi) of this Section 8.1(a) and the registration of the Registrable Securities pursuant to
the Registration Statements, other than fees and expenses, if any, of counsel (except as
provided by Section 12.9 below) or other advisers to the Purchasers or underwriting
discounts, brokerage fees and commissions incurred by the Purchasers, if any, in connection
with an underwritten offering of the Registrable Securities;

          (viii) use reasonable best efforts to prevent the issuance of any stop order or other
order suspending the effectiveness of the Registration Statements or any suspension of the
qualification (or exemption from qualification) of any of the Registrable Securities for
sale in any jurisdiction and, if such an order is issued, to obtain the withdrawal thereof
at the earliest possible time and to notify each Purchaser of the issuance of such order and
the resolution thereof;

          (ix) furnish to each Purchaser, two Trading Days after the date that any Registration
Statement becomes effective, a letter, dated such date, of outside counsel representing the
Company addressed to such Purchaser, confirming the effectiveness of such Registration
Statement and, to the knowledge of such counsel, the absence of any stop order;

          (x) provide to each Purchaser and its representatives, if requested, the opportunity to
conduct a reasonable inquiry of the Company’s financial and other records during normal
business hours and make available its officers, directors and employees for questions
regarding information which such Purchaser may reasonably request in order to fulfill any
due diligence obligation on its part, provided, that in the case of this clause (x), the
Company shall not be required to provide, and shall not provide, any Purchaser with
material, non-public information unless such Purchaser agrees to receive such information
and enters into an agreement to keep such material, nonpublic information confidential and
refrain from trading in any Company security for so long as such information remains
material, nonpublic information;

          (xi) not less than three Trading Days prior to the filing of a Registration Statement
and not less than two Trading Days prior to the filing of any related Prospectus or any
amendment or supplement thereto or, in the case of comments made by the staff of the
Commission and the Company’s responses thereto, within a reasonable period of time following
the receipt thereof by the Company, furnish to each Purchaser copies of all such documents
proposed to be filed or copies of such correspondence from and to the Commission relating to
such Registration Statement, as the case may be, which
documents (other than those incorporated or deemed to be incorporated by reference)
will be subject to the review of such Purchasers. The Company shall reflect in each such

22

 

document when so filed with the Commission such comments relating to such Purchaser and its
plan of distribution of Registrable Securities as such Purchaser may reasonably propose;
provided, however, that such comments from such Purchaser must be received by the Company no
later than one Trading Day prior to the filing of such document with the Commission.
Notwithstanding any other provision of this Agreement, the Company will have no obligation
to deliver or make available to any Purchaser any Registration Statement or Prospectus
containing any material, nonpublic information unless such Purchaser specifically consents
in advance in writing to receive such material, nonpublic information and such Purchaser has
executed an agreement to keep such material, nonpublic information confidential and refrain
from trading in any Company security for so long as such information remains material,
nonpublic information;

          (xii) Notify the Purchasers as promptly as reasonably possible, and if requested by the
Purchasers, confirm such notice in writing no later than five Trading Days thereafter, of
any of the following events: (i) the Commission notifies the Company in writing whether
there will be a “review” of any Registration Statement; (ii) any Registration Statement or
any post-effective amendment is declared effective; (iii) the Commission issues any stop
order suspending the effectiveness of any Registration Statement or initiates any
proceedings for that purpose; (iv) the Company receives written notice of any suspension of
the qualification or exemption from qualification of any Registrable Securities for sale in
any jurisdiction, or the initiation or threat of any proceeding for such purpose; or (v) the
financial statements included in any Registration Statement become ineligible for inclusion
therein or any Registration Statement or Prospectus or other document contains any untrue
statement of a material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein, in the light of the circumstances under
which they were made, not misleading, provided that, subject to Section 8.1(b) below, if
such an event occurs, as promptly as reasonably possible, the Company shall prepare a
supplement or amendment, including a post-effective amendment, to the Registration Statement
or a supplement to the related Prospectus or any document incorporated or deemed to be
incorporated therein by reference, and file any other required document so that, as
thereafter delivered, neither the Registration Statement nor such Prospectus will contain an
untrue statement of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the circumstances under
which they were made, not misleading; and

          (xiii) The Company shall comply with all applicable rules and regulations of the
Commission under the Securities Act and the Exchange Act, including, without limitation,
Rule 172 under the Securities Act, file any final Prospectus, including any supplement or
amendment thereof, with the Commission pursuant to Rule 424 under the Securities Act,
promptly inform the Purchasers in writing if, at any time during the Effectiveness Period,
the Company does not satisfy the conditions specified in Rule 172 and, as a result thereof,
the Purchasers are required to make available a Prospectus in connection with any
disposition of Registrable Securities and take such other actions as
may be reasonably necessary to facilitate the registration of the Registrable
Securities hereunder.

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          (b) The Company shall be permitted after the Initial Registration Statement’s Required
Effective Date, to suspend for one or more periods (each such period, a “Suspension”) the actions
required under Sections 8.1(a)(i) through (vi) and the use of a Prospectus forming a part of a
Registration Statement to the extent that the Company is engaged in a material merger, acquisition,
sale, licensing, partnering, collaboration or other similar transaction and the Board of Directors
determines in good faith, by appropriate resolutions, that, as a result of such activity, (A) it
would be materially detrimental to the Company (other than as relating solely to the price of the
Common Stock) to maintain a Registration Statement at such time or (B) it is in the best interests
of the Company to suspend sales under such registration at such time. Upon receipt of a notice of
Suspension, each Purchaser shall immediately discontinue any sales of Registrable Securities
pursuant to such registration until such Purchaser is advised in writing by the Company that the
current Prospectus or amended Prospectus, as applicable, may be used. In no event, however, shall
this right be exercised to suspend sales beyond the period during which (in the good faith
determination of the Company’s Board of Directors) the failure to require such suspension would be
materially detrimental to the Company. Notwithstanding the foregoing, the Company agrees that no
Suspension shall be for a period of longer than thirty days and no suspension or suspensions shall
be for an aggregate in any 365-day period of longer than sixty days. Immediately after the end of
any Suspension, the Company shall take all reasonably necessary actions (including filing any
required supplemental prospectus) to restore the effectiveness of the applicable Registration
Statement and the ability of the Purchasers to publicly resell their Registrable Securities
pursuant to such effective Registration Statement.

          (c) With a view to making available to the Purchasers the benefits of Rule 144 (or its
successor rule) and any other rule or regulation of the Commission that may at any time permit the
Purchaser to sell Registrable Securities to the public without registration, the Company covenants
and agrees to: (A) make and keep public information available, as those terms are understood and
defined in Rule 144, until the earlier of (1) the second anniversary of the Closing Date, (2) six
months after such date as all of the Purchasers’ Registrable Securities may be resold without
volume or manner of sale limitations pursuant to Rule 144(b) or any other rule of similar effect or
(3) such date as all of the Purchasers’ Registrable Securities shall have been resold; (B) file
with the Commission in a timely manner all reports and other documents required of the Company
under the Exchange Act; and (C) furnish to the Purchaser upon request, as long as the Purchaser
owns any Registrable Securities, (1) a written statement by the Company that it has complied with
the reporting requirements of the Exchange Act, (2) a copy of the Company’s most recent Annual
Report on Form 10-K or Quarterly Report on Form 10-Q, except to the extent that such documents are
available from the Commission on its EDGAR website, and (3) such other information as may be
reasonably requested in order to avail the Purchaser of any rule or regulation of the Commission
that permits the selling of any such Registrable Securities without registration.

     8.2 Delay in Effectiveness of Registration Statement. If a Registration Statement is not
declared effective by the Commission on or prior to its Required Effective Date, then, in addition
to any other rights available to the Purchasers, on each such Required Effective Date and
on each monthly anniversary of each such Required Effective Date (if the Registration
Statement shall not have been declared effective by the Commission by such date) until the
Registration Statement has been declared effective by the Commission, the Company shall pay to each

24

 

Purchaser, as liquidated damages and not as a penalty, a cash payment equal to 1% of the aggregate
purchase price paid by such Purchaser to the Company with respect to the Shares then held by such
Purchaser that are Registrable Securities. The parties agree that the Company will not be liable
for liquidated damages under this Section 8.2 in respect of the Warrants or the Warrant Shares.
The liquidated damages pursuant to the terms hereof shall apply on a pro rata basis for any portion
of a month prior to the Registration Statement being declared effective by the Commission; provided
that the maximum aggregate liquidated damages payable to a Purchaser under this Section 8.2 shall
not exceed 8% of the aggregate purchase price of the Shares purchased by such Purchaser pursuant to
this Agreement. The parties agree that such liquidated damages shall not be the exclusive damages
under this Agreement with respect to the Registration Statement not being declared effective by the
Commission on or prior to its Required Effective Date. Notwithstanding the foregoing or anything
to the contrary contained herein, no liquidated or other damages shall be due in respect of the
failure to have any Registration Statement declared effective on the Required Effective Date in the
event that such failure results from (i) the Commission specifically prohibiting the use of such
Registration Statement to register the Registrable Securities, provided that the Company is
complying with its obligations pursuant to Section 8.1(a)(i) or (ii) a breach by the Purchaser of
its obligations under this Agreement.

     8.3 Maintenance of Effectiveness of Registration Statement; Listing on Permitted Securities
Exchange. If at any time after a Registration Statement is declared effective by the Commission,
(i) sales cannot be made thereunder due to the failure of the Company to maintain the effectiveness
of such Registration Statement (other than during a permissible Suspension), or (ii) the Common
Stock is not listed or included for quotation on the Nasdaq Capital Market, the Nasdaq Global
Market, the New York Stock Exchange or the American Stock Exchange (each, a “Permitted Securities
Exchange”), in each case for a period of longer than 10 days, or for an aggregate in any 365-day
period of longer than 30 days (each such period, a “Maintenance Period” and the final day of each
such period, a “Maintenance Date”), then, in addition to any other rights available to the
Purchasers, on each such Maintenance Date and on each successive Maintenance Date, (A) until the
Registration Statement has been declared effective by the Commission (if the Registration Statement
shall not have been declared effective by the Commission by such date), or (B) until the Common
Stock is listed or included for quotation on a Permitted Securities Exchange (if the Common Stock
is not listed or included for quotation on a Permitted Securities Exchange), the Company shall pay
to each Purchaser, as liquidated damages and not as a penalty, a cash payment equal to 1% of the
aggregate purchase price paid by such Purchaser to the Company with respect to the Shares then held
by such Purchaser that are Registrable Securities. The parties agree that the Company will not be
liable for liquidated damages under this Section 8.3 in respect of the Warrants or the Warrant
Shares. The liquidated damages pursuant to the terms hereof shall apply on a pro rata basis for
any portion of a Maintenance Period prior to the Registration Statement being declared effective by
the Commission or prior to the Common Stock being listed or included for quotation on a Permitted
Securities Exchange, as the case may be; provided that the maximum aggregate liquidated damages
payable to a Purchaser under this Section 8.3 shall not exceed, per calendar year, 8% of
the aggregate purchase price paid by such Purchaser to the Company with respect to the Shares
then held by such Purchaser that are Registrable Securities. The parties agree that such
liquidated damages shall not be the exclusive damages under this Agreement with respect to the
failure of

25

 

the Company to maintain for any Maintenance Period the effectiveness of such
Registration Statement (other than during a permissible Suspension), or for the failure of the
Common Stock to be listed or included for quotation on a Permitted Securities Exchange for any
Maintenance Period. Notwithstanding the foregoing or anything to the contrary contained herein, no
liquidated or other damages shall be due to a Purchaser in respect of the failure to maintain the
effectiveness of any Registration Statement for any Maintenance Period or the failure of the Common
Stock to be listed or included for quotation on a Permitted Securities Exchange for any Maintenance
Period in the event that such failure results from (i) the Commission specifically prohibiting the
use of such Registration Statement to register the Registrable Securities, provided that the
Company is complying with its obligations pursuant to Section 8.1(a)(i) or (ii) a breach by such
Purchaser of its obligations under this Agreement.

     8.4 Restrictions on Transferability.

          (a) Each Purchaser agrees that it will not effect any disposition of the Securities or the
Warrant Shares or its right to purchase the Securities or the Warrant Shares that would constitute
a sale within the meaning of the Securities Act or pursuant to any applicable state securities or
Blue Sky laws of any state, except (i) as contemplated in the Registration Statement referred to in
Section 8.1 above, (ii) pursuant to the requirements of Rule 144 (in which case such Purchaser will
provide the Company with reasonable evidence of such Purchaser’s compliance therewith) or (iii)
pursuant to a written opinion of legal counsel reasonably satisfactory to the Company and addressed
to the Company to the effect that registration under Section 5 of the Securities Act is not
required in connection with the proposed transfer; whereupon the holder of such securities shall be
entitled to transfer such securities. Notwithstanding the foregoing, the Company hereby consents
to and agrees to register on the books of the Company and with its transfer agent, without any such
legal opinion, except to the extent that the transfer agent requests such legal opinion, any
transfer of Securities or the Warrant Shares by a Purchaser to an affiliate (as such term is
defined pursuant to Rule 12b-2 promulgated under the Exchange Act) of such Purchaser, provided that
the transferee (i) certifies to the Company that it is an “accredited investor” as defined in Rule
501(a) under the Securities Act, (ii) does not request any removal of any existing legends on any
certificate evidencing the Securities or the Warrant Shares, and (iii) agrees in writing to be
bound, with respect to the transferred Securities, by the provisions hereof that apply to the
“Purchasers.” Each certificate evidencing the securities transferred as above provided shall bear
the appropriate restrictive legends as may be required by Section 5.4.

          (b) Each Purchaser hereby covenants that such Purchaser will not sell any Securities or
Warrant Shares pursuant to any Prospectus during a Suspension.

          (c) None of the Securities or Warrant Shares shall be transferable except upon the conditions
specified in this Section 8, which are intended to ensure compliance with the provisions of the
Securities Act. Each Purchaser will cause any proposed transferee of the Securities or Warrant
Shares held by such Purchaser to agree to take and hold such Securities or
Warrant Shares subject to the provisions and upon the conditions specified in this Section 8
if and to the extent that such Securities continue to be restricted securities in the hands of the
transferee. In the case of a partnership distribution by any Purchaser, the foregoing agreement

26

 

may be evidenced by a unilateral instruction letter or similar notice provided by the Purchaser to
each transferee referencing this Agreement and informing the transferee that, by accepting the
distribution of the Securities or the Warrant Shares, the transferee will be subject to the
provisions and conditions specified in this Section 8 if and to the extent that such Securities or
Warrant Shares continue to be restricted securities in the hands of the transferee.

          (d) Each Purchaser covenants that such Purchaser will sell or transfer any Securities and
Warrant Shares in accordance with the applicable Registration Statement (to the extent such
Purchaser is not relying on clauses (ii) or (iii) of Section 8.4(a) hereof), the Securities Act,
applicable state securities laws and, to the extent the exemption from prospectus delivery
requirements in Rule 172 under the Securities Act is not available, the requirement of delivering a
current prospectus in connection with any proposed transfer or sale of the Securities or Warrant
Shares; provided however, notwithstanding anything to the contrary herein, in no event shall the
Purchaser be liable for any violation of such laws, rules or regulations to the extent such
violation results from a breach by the Company of any representation, warranty or covenant of the
Company in any Transaction Document or the failure by such Purchaser is directly caused by the
Company’s failure to provide written notice of a Suspension to such Purchaser.

     8.5 Furnish Information. It shall be a condition to the Company’s obligations to take any
action under this Agreement with respect to the registration of a Purchaser’s Registrable
Securities that such Purchaser shall promptly furnish to the Company, upon request, such reasonable
and customary information regarding itself, such Purchaser’s Registrable Securities, and the
intended method of disposition of such Registrable Securities. In connection therewith, each
Purchaser shall be required to represent to the Company that all such information which is given is
both complete and accurate in all material respects when made.

SECTION 9. BROKER’S FEE.

     The Company and each Purchaser (severally and not jointly) hereby agree to indemnify the other
party for any compensation required to be paid by such other party to any brokers or finders
entitled to compensation as a result of any action or inaction of the indemnifying party in
connection with the sale of the Securities.

SECTION
10. INDEMNIFICATION AND CONTRIBUTION

     10.1 (a) For purposes of this Section 10 only:

               (i) the term “Purchaser” shall include the Purchaser and each of its partners, each
person who controls any such Purchaser (within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act) and any affiliate (as such term is defined pursuant
to Rule 12b-2 promulgated under the Exchange Act) of such Purchaser;

               (ii) the term “Prospectus” shall mean the prospectus and any amendment or supplement
thereto in the form first filed with the Commission pursuant to Rule 424(b) promulgated
under the Securities Act or, if no Rule 424(b) filing is required,

27

 

filed as part of the
Registration Statement at the time of effectiveness, as supplemented or amended from time to
time; and

               (iii) the term “Registration Statement” shall include any final prospectus, exhibit,
supplement or amendment included in or relating to a Registration Statement.

          (b) The Company agrees to indemnify and hold harmless each of the Purchasers against any
losses, claims, damages, liabilities or expenses, joint or several, to which such Purchasers may
become subject, under the Securities Act, the Exchange Act, or any other federal or state statutory
law or regulation, or at common law or otherwise (including in settlement of any litigation, if
such settlement is effected with the written consent of the Company, such consent not to be
unreasonably withheld, conditioned or delayed), insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof as contemplated below) (i) arise out of or
are based upon any untrue statement or alleged untrue statement of any material fact contained in a
Registration Statement or Prospectus; (ii) arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made, not misleading; (iii)
arise out of or are based in whole or in part on any inaccuracy in the representations and
warranties of the Company contained in the Transaction Documents; or (iv) arise out of any failure
of the Company to perform its obligations under any Transaction Document, and will reimburse each
Purchaser for any legal and other expenses reasonably incurred as such expenses are reasonably
incurred by such Purchaser in connection with investigating, defending, settling, compromising or
paying any such loss, claim, damage, liability, expense or action; provided, however, that the
Company will not be liable in any such case to the extent that any such loss, claim, damage,
liability or expense arises out of or is based upon (i) an untrue statement or alleged untrue
statement or omission or alleged omission made in a Registration Statement or Prospectus in
reliance upon (and prior to the furnishing by the Purchaser of corrective information to the
Company) and in conformity with written information furnished to the Company by or on behalf of the
Purchaser expressly for use therein; (ii) the failure of such Purchaser to comply with the
covenants and agreements contained in Section 8.4 above respecting sale of the Securities or
Warrant Shares unless such failure by such Purchaser results from a breach by the Company of any
representation, warranty or covenant of the Company in any Transaction Document or is caused by the
Company’s failure to provide proper written notice of a Suspension to such Purchaser; or (iii) the
inaccuracy of any representations made by such Purchaser herein.

          (c) Each Purchaser shall severally, and not jointly, indemnify and hold harmless the other
Purchasers and the Company, each of its directors, each of its officers who signed a Registration
Statement and each person, if any, who controls the Company within the meaning of the Securities
Act, against any losses, claims, damages, liabilities or expenses to which the Company, each of its
directors, each of its officers who signed a Registration Statement or controlling person may
become subject, under the Securities Act, the Exchange
Act, or any other federal or state statutory law or regulation, or at common law or otherwise
(including in settlement of any litigation, if such settlement is effected with the written consent
of such Purchaser) insofar as such losses, claims, damages, liabilities or expenses (or actions in

28

 

respect thereof as contemplated below) arise out of or are based upon (i) any failure by such
Purchaser to comply with the covenants and agreements contained in Section 8.4 above respecting the
sale of the Securities or the Warrant Shares unless such failure by such Purchaser results from a
breach by the Company of any representation, warranty or covenant of the Company in any Transaction
Document or is caused by the Company’s failure to provide proper written notice of a Suspension to
such Purchaser; (ii) the inaccuracy of any representation made by such Purchaser herein; or (iii)
any untrue statement or alleged untrue statement of any material fact contained in a Registration
Statement or the Prospectus, or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or alleged omission was
made in a Registration Statement or Prospectus in reliance upon (and prior to the furnishing by the
Purchaser of corrective information to the Company) and in conformity with written information
furnished to the Company by or on behalf of such Purchaser expressly for use therein, and will
reimburse the Company, each of its directors, each of its officers who signed a Registration
Statement or controlling persons for any legal and other expense reasonably incurred, as such
expenses are reasonably incurred by the Company, each of its directors, each of its officers who
signed a Registration Statement or controlling persons in connection with investigating, defending,
settling, compromising or paying any such loss, claim, damage, liability, expense or action. No
Purchaser shall be liable for the indemnification obligations of any other Purchaser.

          (d) Promptly after receipt by an indemnified party under this Section 10 of notice of the
threat or commencement of any action, such indemnified party will, if a claim in respect thereof is
to be made against an indemnifying party under this Section 10, promptly notify the indemnifying
party in writing thereof, but the omission so to notify the indemnifying party will not relieve it
from any liability which it may have to any indemnified party hereunder or otherwise to the extent
it is not prejudiced as a result of such failure. In case any such action is brought against any
indemnified party and such indemnified party seeks or intends to seek indemnity from an
indemnifying party, the indemnifying party will be entitled to participate in, and, to the extent
that it may wish, jointly with all other indemnifying parties similarly notified, to assume the
defense thereof with counsel reasonably satisfactory to such indemnified party; provided, however,
if the defendants in any such action include both the indemnified party and the indemnifying party
and the indemnified party shall have reasonably concluded that there may be a conflict between the
positions of the indemnifying party and the indemnified party in conducting the defense of any such
action or that there may be legal defenses available to it and/or other indemnified parties which
are different from or additional to those available to the indemnifying party, the indemnified
party or parties shall have the right to select separate counsel to assume such legal defenses and
to otherwise participate in the defense of such action on behalf of such indemnified party or
parties. Upon receipt of notice from the indemnifying party to such indemnified party of its
election to assume the defense of such action and approval by the indemnified party of counsel, the
indemnifying party will not be liable to such indemnified party under this Section 10 for any legal
or other expenses subsequently incurred by
such indemnified party in connection with the defense thereof unless (i) the indemnified party
shall have employed such counsel in connection with the assumption of legal defenses in accordance
with the proviso to the preceding sentence (it being understood, however, that the

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indemnifying party shall not be liable for the expenses of more than one separate counsel, reasonably
satisfactory to the indemnifying party, representing the indemnified parties who are parties to
such action) or (ii) the indemnifying party shall not have employed counsel reasonably satisfactory
to the indemnified party to represent the indemnified party within a reasonable time after notice
of commencement of action, in each of which cases the reasonable fees and expenses of counsel shall
be at the expense of the indemnifying party. No indemnifying party, in the defense of any claim
covered by this Section 10, shall, except with the prior written consent of the indemnified party,
consent to entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a
release from all liability in respect to such claim. The indemnifying party shall not be liable
for any settlement effected without its written consent, which consent shall not be unreasonably
withheld. All reasonable fees and expenses of the indemnified party (including reasonable fees and
expenses to the extent incurred in connection with investigating or preparing to defend such
proceeding in a manner not inconsistent with this Section) shall be paid to the indemnified party,
as incurred, within 20 Trading Days of written notice thereof to the indemnifying party (regardless
of whether it is ultimately determined that an indemnified party is not entitled to indemnification
hereunder; provided, that the indemnifying party may require such indemnified party to undertake to
reimburse all such fees and expenses to the extent it is finally judicially determined that such
indemnified party is not entitled to indemnification hereunder).

          (e) If the indemnification provided for in this Section 10 is unavailable to or insufficient
to hold harmless an indemnified party under subsection (b) or (c) above in respect of any losses,
claims, damages, liabilities or expenses (or actions in respect thereof) referred to therein, then
each indemnifying party shall contribute to the amount paid or payable by such indemnified party as
a result of such losses, claims, damages, liabilities or expenses (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative fault of the Company on the one hand
and each Purchaser on the other in connection with the statements or omissions or other matters
which resulted in such losses, claims, damages, liabilities or expenses (or actions in respect
thereof), as well as any other relevant equitable considerations. The relative fault shall be
determined by reference to, among other things, in the case of an untrue statement, whether the
untrue statement relates to information supplied by the Company on the one hand or each Purchaser
on the other and the parties’ relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statement. The Company and the Purchasers agree that it would not
be just and equitable if contribution pursuant to this subsection (e) were determined by pro rata
allocation (even if the Purchasers were treated as one entity for such purpose) or by any other
method of allocation which does not take into account the equitable considerations referred to
above in this subsection (e). The amount paid or payable by an indemnified party as a result of
the losses, claims, damages, liabilities or expenses (or actions in respect thereof) referred to
above in this subsection (e) shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or defending any such action or
claim. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Purchasers’ obligations in this
subsection to contribute are several in proportion to their sales of Securities to which such loss
relates and not joint.

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          (f) Notwithstanding the foregoing or anything to the contrary contained herein, no Purchaser
will be liable for any losses, claims, damages, liabilities or expenses (or actions in respect
thereof) in excess of the net amount received by such Purchaser from the sale of the Registrable
Securities giving rise to such indemnification obligation.

          (g) Except as otherwise required by law, the parties hereto agree to treat any indemnification
payments (including the amount of any contributions) made pursuant to this Section 10, and any
liquidated damages payments made pursuant to Section 8.2 or 8.3 of this Agreement, as an adjustment
to the purchase price for income tax purposes. Any indemnification payment or liquidated damages
payment treated as an adjustment to the purchase price shall be reflected as an adjustment to the
consideration allocated to the Warrants or Shares, as applicable, and if any such adjustment does
not relate specifically to either the Warrants or Shares, such adjustment shall be allocated among
the Warrants and Shares pro rata in proportion to the purchase price paid in respect of such
Warrants and Shares.

SECTION 11. NOTICES.

     All notices, requests, consents and other communications hereunder shall be in writing, shall
be sent by confirmed facsimile or electronic mail, or mailed by first-class registered or certified
airmail, or nationally recognized overnight express courier, postage prepaid, and shall be deemed
given when so sent in the case of facsimile or electronic mail transmission, or when so received in
the case of mail or courier, and addressed as follows:

          (a) if to the Company, to:

Somaxon Pharmaceuticals, Inc.

3830 Valley Centre Drive, Suite 705-461

San Diego, California 92130

Attention: Richard W. Pascoe, Chief Executive Officer

Facsimile: (858) 509-1761

E-Mail: rwpascoe@somaxon.com

     with a copy to (which shall not constitute notice):

Somaxon Pharmaceuticals, Inc.

3830 Valley Centre Drive, Suite 705-461

San Diego, California 92130

Attn: Matthew W. Onaitis, General Counsel

Fax: (858) 509-1761

Email: monaitis@somaxon.com, and

Latham & Watkins LLP

12636 High Bluff Drive, Suite 400

San Diego, California 92130

Attn: Cheston J. Larson, Esquire

Fax: (858) 523-5450

Email: cheston.larson@lw.com

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     or to such other person at such other place as the Company shall designate to the Purchasers
in writing; and

          (b) if to the Purchasers, at the address as set forth at the end of this Agreement, or at such
other address or addresses as may have been furnished to the Company in writing.

SECTION 12. MISCELLANEOUS.

     12.1 Waivers and Amendments. Neither this Agreement nor any provision hereof may be changed,
waived, discharged, terminated, modified or amended except upon the written consent of the Company
and each of the Purchasers, or, in the case of a waiver, by the party against whom enforcement of
the waiver is sought. Notwithstanding the foregoing, a waiver or consent to depart from the
provisions hereof with respect to a matter that relates exclusively to the rights of the Purchasers
under Section 8 may be given by Purchasers holding at least a majority of the then-outstanding
Shares and Warrant Shares (assuming the exercise of the then-outstanding Warrants) that are
Registrable Securities to which such waiver relates.

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

     12.3 Severability. In case any provision contained in this Agreement should be invalid,
illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired thereby and the parties
will attempt to agree upon a valid and enforceable provision that is a reasonable substitute
therefor, and upon so agreeing, shall incorporate such substitute provisions in this Agreement.

     12.4 Independent Nature of Purchasers’ Obligations and Rights. The obligations of each
Purchaser under this Agreement are several and not joint with the obligations of any other
Purchaser, and no Purchaser shall be responsible in any way for the performance of the obligations
of any other Purchaser under any Transaction Document. The decision of each Purchaser to purchase
Securities pursuant to this Agreement has been made by such Purchaser independently of any other
Purchaser and independently of any information, materials, statements or opinions as to the
business, affairs, operations, assets, properties, liabilities, results of operations, condition
(financial or otherwise) or prospects of the Company which may have been made or given by any other
Purchaser or by any agent or employee of any other Purchaser, and no Purchaser or any of its agents
or employees shall have any liability to any other Purchaser (or any other person) relating to or
arising from any such information, materials, statements or opinions. Nothing contained herein and
no action taken by any Purchaser pursuant hereto, shall be deemed to constitute the Purchasers as a
partnership, an association, a joint venture or any
other kind of entity, or create a presumption that the Purchasers are in any way acting in
concert or as a group, or are deemed affiliates (as such term is defined pursuant to Rule 12b-2

32

 

promulgated under the Exchange Act) with respect to such obligations or the transactions
contemplated by the Transaction Documents. Each Purchaser acknowledges that no other Purchaser has
acted as agent for such Purchaser in making its investment hereunder and that no other Purchaser
will be acting as agent of such Purchaser in connection with monitoring its investment hereunder.
Each Purchaser shall be entitled to independently protect and enforce its rights, including without
limitation the rights arising out of this Agreement or any other Transaction Document, and it shall
not be necessary for any other Purchaser to be joined as an additional party in any proceeding for
such purpose.

     12.5 Governing Law. This Agreement shall be governed by and construed in accordance with the
internal laws of the State of New York, without regard to any principles of conflict of laws that
would result in the application of any law other than the laws of the State of New York.

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

     12.7 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of
the parties and their successors and permitted assigns. The Company may not assign this Agreement
or any rights or obligations hereunder without the prior written consent of the Purchasers,
provided, however, that the Company may assign this Agreement without the prior written consent of
the Purchasers to the acquirer of all or substantially all of its assets, or to its successor
entity or acquirer in the event of a merger, consolidation or change in control of the Company.
Any Purchaser may assign its rights under this Agreement to any person to whom such Purchaser
assigns or transfers any Securities or Warrant Shares, provided (i) such transferor agrees in
writing with the transferee or assignee to assign such rights, and a copy of such agreement is
furnished to the Company after such assignment, (ii) the Company is furnished with written notice
of (x) the name and address of such transferee or assignee and (y) the Registrable Securities with
respect to which such registration rights are being transferred or assigned, (iii) following such
transfer or assignment, the further disposition of such securities by the transferee or assignee is
restricted under the Securities Act and applicable state securities laws, (iv) such transferee
agrees in writing to be bound, with respect to the transferred Securities, by the provisions hereof
that apply to the “Purchasers” and (v) such transfer shall have been made in accordance with the
applicable requirements of this Agreement and with all laws applicable thereto.

     12.8 Entire Agreement. This Agreement and other documents delivered pursuant hereto,
including the exhibits, constitute the full and entire understanding and agreement between the
parties with regard to the subjects hereof and thereof.

     12.9 Expenses. Each party hereto shall pay all costs and expenses incurred by it in
connection with the execution and delivery of this Agreement, and all the transactions
contemplated thereby, including fees of legal counsel; provided, however, that in the event
the Closing occurs, the Company shall pay the reasonable and documented legal fees and expenses of

33

 

Ropes & Gray LLP, special counsel to the Purchasers, such fees and expenses not to exceed $100,000
in the aggregate, and if such fees and expenses are less than $100,000 in the aggregate, the
Company shall pay the reasonable and documented legal fees and expenses of any other counsel to any
Purchaser, provided that in no event shall the Company be obligated to pay amounts in excess of
$100,000 in the aggregate.

[signature pages follow]

34

 

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

	 	 	 	 	 	 	 
	 	 	SOMAXON PHARMACEUTICALS, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Richard W. Pascoe	 	 
	 

	 	Name:
	 	 

Richard W. Pascoe
	 	 
	 

	 	Title:
	 	President and Chief Executive Officer	 	 

SIGNATURE PAGE TO

SECURITIES PURCHASE AGREEMENT

 

 

PURCHASER:

Print or Type:

Name of Investor (Individual or Institution):

Prospect Venture Partners III, L.P.

Name of Individual representing Investor (if an Institution):

Dave Markland

Title of Individual representing Investor (if an Institution):

CFO & Administrative Parnter

Signature by Individual Investor or Individual Representing Investor:

	 	 	 
	/s/ Dave Markland, Attorney-In-Fact
	 	 
	 

	 	 

	 	 	 
	Address:
	 	435 Tasso Street, Suite 200
	 
	 	Palo Alto, CA 94301
	 
	 	 
	Telephone
	 	(650) 327-8800
	 
	 	 
	Telecopier:
	 	(650) 324-8838
	 
	 	 
	e-mail:
	 	dmarkland@prospectventures.com

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Price Per	 	 
	Shares to be	 	Warrants to be	 	Price Per Share in	 	Warrant in	 	 
	Purchased	 	Purchased	 	Dollars	 	Dollars	 	Aggregate Price
	425,531	 	425,531	 	$1.05	 	$0.125	 	$499,998.93

SIGNATURE PAGE TO
SECURITIES PURCHASE AGREEMENT

 

 

PURCHASER:

Print or Type:

Name of Investor (Individual or Institution):

BAVP, LP

Name of Individual representing Investor (if an Institution):

Louis C. Bock

Title of Individual representing Investor (if an Institution):

BAVP, LP

By: Scale Venture Management I, LLC

Its general partner

Name: Louis C. Bock

Title: Managing Director

Signature by Individual Investor or Individual Representing Investor:

	 	 	 
	/s/ Louis C. Bock
	 	 
	 

	 	 

	 	 	 
	Address:
	 	950 Tower Lane, Suite 700
	 
	 	Foster City, CA 94404
	 
	 	 
	Telephone:
	 	(650) 378-6068
	 
	 	 
	Telecopier:
	 	(650) 378-6040
	 
	 	 
	e-mail:
	 	Lou@scalevp.com

	 	 	 	 	 	 	 	 	 
	Shares to be	 	Warrants to be	 	Price Per Share in	 	Price Per Warrant	 	 
	Purchased	 	Purchased	 	Dollars	 	in Dollars	 	Aggregate Price
	510,638
	 	510,638
	 	$1.05
	 	$0.125
	 	$599,999.65

SIGNATURE PAGE TO

SECURITIES PURCHASE AGREEMENT

 

 

PURCHASER:

Print or Type:

Name of Investor (Individual or Institution):

MVA Investors LLC

Name of Individual representing Investor (if an Institution):

Christopher Fuglesang

Title of Individual representing Investor (if an Institution):

Member and President

Signature by Individual Investor or Individual Representing Investor:

	 	 	 
	/s/ C. Fuglesang
	 	 
	 

	 	 

	 	 	 
	Address:
	 	991-C Lomas Santa Fe, 411
	 
	 	Solana Beach, CA 92075
	 
	 	 
	Telephone:
	 	(858) 400-3114
	 
	 	 
	Telecopier:
	 	                                        
	 
	 	 
	e-mail:
	 	cfuglesang@tavistock.com

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Price Per	 	 
	Shares to be	 	Warrants to be	 	Price Per Share in	 	Warrant in	 	 
	Purchased	 	Purchased	 	Dollars	 	Dollars	 	Aggregate Price
	305,106	 	305,106	 	$1.05	 	$0.125	 	$358,499.55

SIGNATURE PAGE TO
SECURITIES PURCHASE AGREEMENT

 

 

PURCHASER:

Print or Type:

Name of Investor (Individual or Institution):

Boxer Capital LLC

Name of Individual representing Investor (if an Institution):

Christopher Fuglesang

Title of Individual representing Investor (if an Institution):

Member

Signature by Individual Investor or Individual Representing Investor:

	 	 	 
	/s/ C. Fuglesang
	 	 
	 

	 	 

	 	 	 
	Address:
	 	991-C Lomas Santa Fe, 411
	 
	 	Solana Beach, CA 92075
	 
	 	 
	Telephone:
	 	(858) 400-3114
	 
	 	 
	Telecopier:
	 	                                        
	 
	 	 
	e-mail:
	 	cfuglesang@tavistock.com

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Price Per	 	 
	Shares to be	 	Warrants to be	 	Price Per Share in	 	Warrant in	 	 
	Purchased	 	Purchased	 	Dollars	 	Dollars	 	Aggregate Price
	971,489	 	971,489	 	$1.05	 	$0.125	 	$1,141,499.58

SIGNATURE PAGE TO
SECURITIES PURCHASE AGREEMENT

 

 

PURCHASER:

Print or Type:

Name of Investor (Individual or Institution):

E&M RP Trust

Name of Individual representing Investor (if an Institution):

Edmund H. Shea, Jr.

Title of Individual representing Investor (if an Institution):

Manager

Signature by Individual Investor or Individual Representing Investor:

	 	 	 
	/s/ Edmund H. Shea, Jr.
	 	 
	 

	 	 

	 	 	 
	Address:
	 	655 Brea Canyon Road
	 
	 	Walnut, CA 91789
	 
	 	 
	Telephone:
	 	(909) 594-0924
	 
	 	 
	Telecopier:
	 	                                                            
	 
	 	 
	e-mail:
	 	 

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Price Per	 	 
	Shares to be	 	Warrants to be	 	Price Per Share in	 	Warrant in	 	 
	Purchased	 	Purchased	 	Dollars	 	Dollars	 	Aggregate Price
	255,319
	 	255,319
	 	$1.05
	 	$0.125
	 	$299,999.83

SIGNATURE PAGE TO

SECURITIES PURCHASE AGREEMENT

 

 

PURCHASER:

Print or Type:

Name of Investor (Individual or Institution):

Freidenrich Family Trust

Name of Individual representing Investor (if an Institution):

John Freidenrich

Title of Individual representing Investor (if an Institution):

Trustee

Signature by Individual Investor or Individual Representing Investor:

	 	 	 
	/s/ John Freidenrich
	 	 
	 

	 	 

	 	 	 
	Address:
	 	300 Hamilton Ave., 4th Floor
	 
	 	Palo Alto, CA 94301
	 
	 	 
	Telephone:
	 	(650) 838-1030
	 
	 	 
	Telecopier:
	 	(650) 328-8044
	 
	 	 
	e-mail:
	 	 

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Price Per	 	 
	Shares to be	 	Warrants to be	 	Price Per Share in	 	Warrant in	 	 
	Purchased	 	Purchased	 	Dollars	 	Dollars	 	Aggregate Price
	170,212	 	170,212	 	$1.05	 	$0.125	 	$199,999.10

SIGNATURE PAGE TO
SECURITIES PURCHASE AGREEMENT

 

 

PURCHASER:

Print or Type:

Name of Investor (Individual or Institution):

Konrad Hans von Emster III & Elizabeth F. von Emster

Revocable Trust Dated January 18, 2005

Name of Individual representing Investor (if an Institution):

Konrad H. von Emster III & Elizabeth F. von Emster

Title of Individual representing Investor (if an Institution):

Trustees

Signature by Individual Investor or Individual Representing Investor:

/s/ Konrad Hans von Emster III and Elizabeth F. von Emster

	 	 	 
	Address:

	 	1647 Ralston Ave.
	 

	 	Belmont, CA 94002
	 
	 	 
	Telephone:

	 	(650) 591-4646
	 
	 	 
	Telecopier:

	 	(650) 591-5646
	 
	 	 
	e-mail:

	 	 

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Price Per	 	 
	Shares to be	 	Warrants to be	 	Price Per Share in	 	Warrant in	 	 
	Purchased	 	Purchased	 	Dollars	 	Dollars	 	Aggregate Price
	42,553
	 	42,553
	 	$1.05
	 	$0.125
	 	$49,999.78

SIGNATURE PAGE TO

SECURITIES PURCHASE AGREEMENT

 

 

PURCHASER:

MPM BIOVENTURES III, L.P.

By: MPM BioVentures III GP, L.P., its General Partner

By: MPM BioVentures III LLC, its General Partner

	 	 	 
	By: /s/ Kurt Wheeler
	 	 
	 

Name: Kurt Wheeler

	 	 
	Title: Series A Member
	 	 

	 	 	 
	Address:

	 	200 Clarendon Street, 54th Floor
	 

	 	Boston, MA 02116
	 
	 	 
	Telephone:

	 	(617) 425-9200
	 
	 	 
	Telecopier:

	 	(617) 425-9201
	 
	 	 
	e-mail:

	 	kwheeler@clarusventures.com

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Price Per	 	 
	Shares to be	 	Warrants to be	 	Price Per Share in	 	Warrant in	 	 
	Purchased	 	Purchased	 	Dollars	 	Dollars	 	Aggregate Price
	71,553
	 	71,553
	 	$1.05
	 	$0.125
	 	$84,074.78

SIGNATURE PAGE TO

SECURITIES PURCHASE AGREEMENT

 

 

PURCHASER:

MPM BIOVENTURES III-QP, L.P.

By: MPM BioVentures III GP, L.P., its General Partner

By: MPM BioVentures III LLC, its General Partner

	 	 	 
	By: /s/ Kurt Wheeler
	 	 
	 

Name: Kurt Wheeler

	 	 
	Title: Series A Member
	 	 

	 	 	 
	Address:

	 	200 Clarendon Street, 54th Floor
	 

	 	Boston, MA 02116
	 
	 	 
	Telephone:

	 	(617) 425-9200
	 
	 	 
	Telecopier:

	 	(617) 425-9201
	 
	 	 
	e-mail:

	 	kwheeler@clarusventures.com

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Price Per	 	 
	Shares to be	 	Warrants to be	 	Price Per Share in	 	Warrant in	 	 
	Purchased	 	Purchased	 	Dollars	 	Dollars	 	Aggregate Price
	1,064,125
	 	1,064,125
	 	$1.05
	 	$0.125
	 	$1,250,346.88

SIGNATURE PAGE TO

SECURITIES PURCHASE AGREEMENT

 

 

PURCHASER:

MPM BIOVENTURES III GMBH & CO. BETEILIGUNGS KG

By: MPM BioVentures III GP, L.P., in its capacity as the Managing Limited Partner

By: MPM BioVentures III LLC, its General Partner

	 	 	 
	By: /s/ Kurt Wheeler
	 	 
	 

Name: Kurt Wheeler

	 	 
	Title: Series A Member
	 	 

	 	 	 
	Address:

	 	200 Clarendon Street, 54th Floor
	 

	 	Boston, MA 02116
	 
	 	 
	Telephone:

	 	(617) 425-9200
	 
	 	 
	Telecopier:

	 	(617) 425-9201
	 
	 	 
	e-mail:

	 	kwheeler@clarusventures.com

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Price Per	 	 
	Shares to be	 	Warrants to be	 	Price Per Share in	 	Warrant in	 	 
	Purchased	 	Purchased	 	Dollars	 	Dollars	 	Aggregate Price
	89,923
	 	89,923
	 	$1.05
	 	$0.125
	 	$105,659.53

SIGNATURE PAGE TO

SECURITIES PURCHASE AGREEMENT

 

 

PURCHASER:

MPM BIOVENTURES III PARALLEL FUND, L.P.

By: MPM BioVentures III GP, L.P., its General Partner

By: MPM BioVentures III LLC, its General Partner

	 	 	 
	By: /s/ Kurt Wheeler
	 	 
	 

Name: Kurt Wheeler
	 	 
	Title: Series A Member
	 	 

	 	 	 
	Address:
	 	200 Clarendon Street, 54th Floor
	 
	 	Boston, MA 02116
	 
	 	 
	Telephone:
	 	(617) 425-9200
	 
	 	 
	Telecopier:
	 	(617) 425-9201
	 
	 	 
	e-mail:
	 	kwheeler@clarusventures.com

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Price Per	 	 
	Shares to be	 	Warrants to be	 	Price Per Share in	 	Warrant in	 	 
	Purchased	 	Purchased	 	Dollars	 	Dollars	 	Aggregate Price
	32,144
	 	32,144
	 	$1.05
	 	$0.125
	 	$37,769.20

SIGNATURE PAGE TO

SECURITIES PURCHASE AGREEMENT

 

 

PURCHASER:

MPM ASSET MANAGEMENT INVESTORS 2005 BVIII LLC

	 	 	 
	By: /s/ Kurt Wheeler
	 	 
	 

Name: Kurt Wheeler
	 	 
	Title: Manager
	 	 

	 	 	 
	Address:
	 	200 Clarendon Street, 54th Floor
	 
	 	Boston, MA 02116
	 
	 	 
	Telephone:
	 	(617) 425-9200
	 
	 	 
	Telecopier:
	 	(617) 425-9201
	 
	 	 
	e-mail:
	 	kwheeler@clarusventures.com

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Price Per	 	 
	Shares to be	 	Warrants to be	 	Price Per Share in	 	Warrant in	 	 
	Purchased	 	Purchased	 	Dollars	 	Dollars	 	Aggregate Price
	18,848
	 	18,848
	 	$1.05
	 	$0.125
	 	$22,146.40

SIGNATURE PAGE TO

SECURITIES PURCHASE AGREEMENT

 

 

PURCHASER:

DOMAIN PARTNERS VI, L.P.

By: One Palmer Square Associates VI, L.L.C.,

its General Partner

	 	 	 
	By: /s/ Kathleen K. Schoemaker
	 	 
	 

Name: Kathleen K. Schoemaker
	 	 
	Title: Managing Member
	 	 

	 	 	 
	Address:
	 	One Palmer Square, Suite 515
	 
	 	Princeton, NJ 08542
	 
	 	 
	Telephone:
	 	(609) 683-5656
	 
	 	 
	Telecopier:
	 	(609) 683-4581
	 
	 	 
	e-mail:
	 	schoemaker@domainvc.com

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Price Per	 	 
	Shares to be	 	Warrants to be	 	Price Per Share in	 	Warrant in	 	 
	Purchased	 	Purchased	 	Dollars	 	Dollars	 	Aggregate Price
	294,714
	 	294,714
	 	$1.05
	 	$0.125
	 	$346,288.95

SIGNATURE PAGE TO

SECURITIES PURCHASE AGREEMENT

 

 

PURCHASER:

DP VI ASSOCIATES, L.P.

By: One Palmer Square Associates VI, L.L.C.,

its General Partner

	 	 	 
	By: /s/ Kathleen K. Schoemaker
	 	 
	 

Name: Kathleen K. Schoemaker
	 	 
	Title: Managing Member
	 	 

	 	 	 
	Address:
	 	One Palmer Square, Suite 515
	 
	 	Princeton, NJ 08542
	 
	 	 
	Telephone:
	 	(609) 683-5656
	 
	 	 
	Telecopier:
	 	(609) 683-4581
	 
	 	 
	e-mail:
	 	schoemaker@domainvc.com

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Price Per	 	 
	Shares to be	 	Warrants to be	 	Price Per Share in	 	Warrant in	 	 
	Purchased	 	Purchased	 	Dollars	 	Dollars	 	Aggregate Price
	3,158
	 	3,158
	 	$1.05
	 	$0.125
	 	$3,710.65

SIGNATURE PAGE TO

SECURITIES PURCHASE AGREEMENT

 

 

PURCHASER:

MONTREUX EQUITY PARTNERS II SBIC, LP

By: Montreux Equity Management II SBIC, LLC,

its General Partner

	 	 	 
	By: /s/ Daniel K. Turner
	 	 
	 

Name: Daniel K. Turner III

	 	 
	Title: Managing Member
	 	 

	 	 	 
	Address:

	 	3000 Sand Hill Road, Building 1, Suite 260
	 

	 	Menlo Park, CA 94025
	 
	 	 
	Telephone:

	 	                                                            
	 
	 	 
	Telecopier:

	 	                                                            
	 
	 	 
	e-mail:

	 	                                                            

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Price Per	 	 
	Shares to be	 	Warrants to be	 	Price Per Share in	 	Warrant in	 	 
	Purchased	 	Purchased	 	Dollars	 	Dollars	 	Aggregate Price
	425,531
	 	425,531
	 	$1.05
	 	$0.125
	 	$499,998.93

SIGNATURE PAGE TO

SECURITIES PURCHASE AGREEMENT

 

 

PURCHASER:

MONTREUX EQUITY PARTNERS III SBIC, LP

By: Montreux Equity Management III SBIC, LLC,

its General Partner

	 	 	 
	By: /s/ Daniel K. Turner
	 	 
	 

Name: Daniel K. Turner III
	 	 
	Title: Managing Member
	 	 

	 	 	 
	Address:
	 	3000 Sand Hill Road, Building 1, Suite 260
	 
	 	Menlo Park, CA 94025
	 
	 	 
	Telephone:
	 	                                                            
	 
	 	 
	Telecopier:
	 	                                                            
	 
	 	 
	e-mail:
	 	                                                            

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Price Per	 	 
	Shares to be	 	Warrants to be	 	Price Per Share in	 	Warrant in	 	 
	Purchased	 	Purchased	 	Dollars	 	Dollars	 	Aggregate Price
	425,531
	 	425,531
	 	$1.05
	 	$0.125
	 	$499,998.93

SIGNATURE PAGE TO

SECURITIES PURCHASE AGREEMENT

 

 

EXHIBIT A

SCHEDULE OF PURCHASERS

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Aggregate
	 	 	 	 	 	 	Aggregate	 	 	 	 	 	Aggregate	 	Purchase
	 	 	 	 	 	 	Purchase	 	 	 	 	 	Purchase	 	Price of
	 	 	Number of	 	Price of	 	Number of	 	Price of	 	Warrants
	Name and Address	 	Shares	 	Shares	 	Warrants	 	Warrants	 	and Shares
	MPM BioVentures
III, L.P.

200 Clarendon Street,

54th Floor, Boston,

MA 02116
	 	 	71,553	 	 	$	75,130.65	 	 	 	71,553	 	 	$	8,944.13	 	 	$	84,074.78	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	MPM Bioventures
III-QP, L.P.

200 Clarendon Street,

54th Floor, Boston,

MA 02116
	 	 	1,064,125	 	 	$	1,117,331.25	 	 	 	1,064,125	 	 	$	133,015.63	 	 	$	1,250,346.88	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	MPM Bioventures III
GMBH & Co.

Beteiligungs KG

200 Clarendon Street,

54th Floor, Boston,

MA 02116
	 	 	89,923	 	 	$	94,419.15	 	 	 	89,923	 	 	$	11,240.38	 	 	$	105,659.53	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	MPM Bioventures III
Parallel Fund, L.P.

200 Clarendon Street,

54th Floor, Boston,

MA 02116
	 	 	32,144	 	 	$	33,751.20	 	 	 	32,144	 	 	$	4,018.00	 	 	$	37,769.20	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	MPM Asset
Management Investors 2005 BVIII LLC

200 Clarendon Street,

54th Floor, Boston,

MA 02116
	 	 	18,848	 	 	$	19,790.40	 	 	 	18,848	 	 	$	2,356.00	 	 	$	22,146.40	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	MVA Investors LLC

445 Marine View

Ave., Suite 100

Del Mar, CA 92014
	 	 	305,106	 	 	$	320,361.30	 	 	 	305,106	 	 	$	38,138.25	 	 	$	358,499.55	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Boxer Capital LLC

445 Marine View

Ave., Suite 100

Del Mar, CA 92014
	 	 	971,489	 	 	$	1,020,063.45	 	 	 	971,489	 	 	$	121,436.13	 	 	$	1,141,499.58	 

A-1

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Aggregate
	 	 	 	 	 	 	Aggregate	 	 	 	 	 	Aggregate	 	Purchase
	 	 	 	 	 	 	Purchase	 	 	 	 	 	Purchase	 	Price of
	 	 	Number of	 	Price of	 	Number of	 	Price of	 	Warrants
	Name and Address	 	Shares	 	Shares	 	Warrants	 	Warrants	 	and Shares
	Montreux Equity
Partners II SBIC,
LP

3000 Sand Hill Road,

Building 1, Suite 260,

Menlo
Park, CA 94025
	 	 	425,531	 	 	$	446,807.55	 	 	 	425,531	 	 	$	53,191.38	 	 	$	499,998.93	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Montreux Equity
Partners III SBIC,
LP

3000 Sand Hill Road,

Building 1, Suite 260,

Menlo
Park, CA 94025
	 	 	425,531	 	 	$	446,807.55	 	 	 	425,531	 	 	$	53,191.38	 	 	$	499,998.93	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	BAVP, LP

950 Tower Lane,

Suite 700, Foster

City, CA 94404
	 	 	510,638	 	 	$	536,169.90	 	 	 	510,638	 	 	$	63,829.75	 	 	$	599,999.65	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Prospect Venture
Partners III, L.P.

435 Tasso Street,

Suite 200, Palo Alto,

CA 94301
	 	 	425,531	 	 	$	446,807.55	 	 	 	425,531	 	 	$	53,191.38	 	 	$	499,998.93	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Domain Partners VI,
L.P.

One Palmer Square,

Suite 515, Princeton,

NJ 08542
	 	 	294,714	 	 	$	309,449.70	 	 	 	294,714	 	 	$	36,839.25	 	 	$	346,288.95	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	DP VI Associates,
L.P.

One Palmer Square,

Suite 515, Princeton,

NJ 08542
	 	 	3,158	 	 	$	3,315.90	 	 	 	3,158	 	 	$	394.75	 	 	$	3,710.65	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Konrad Hans von
Emster III and
Elizabeth F von
Emster Revocable Trust Dated January
18, 2005

1647 Ralston Ave,

Belmont, CA 94002
	 	 	42,553	 	 	$	44,680.65	 	 	 	42,553	 	 	$	5,319.13	 	 	$	49,999.78	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Freidenrich Family
Trust

300 Hamilton Ave.,

4th Floor, Palo Alto,

CA 94301
	 	 	170,212	 	 	$	178,722.60	 	 	 	170,212	 	 	$	21,276.50	 	 	$	199,999.10	 

A-2

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Aggregate
	 	 	 	 	 	 	Aggregate	 	 	 	 	 	Aggregate	 	Purchase
	 	 	 	 	 	 	Purchase	 	 	 	 	 	Purchase	 	Price of
	 	 	Number of	 	Price of	 	Number of	 	Price of	 	Warrants
	Name and Address	 	Shares	 	Shares	 	Warrants	 	Warrants	 	and Shares
	E & M RP Trust

655 Brea Canyon Rd,

Walnut, CA 91789
	 	 	255,319	 	 	$	268,084.95	 	 	 	255,319	 	 	$	31,914.88	 	 	$	299,999.83	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Total
	 	 	5,106,375	 	 	$	5,361,693.75	 	 	 	5,106,375	 	 	$	638,297.88	 	 	$	5,999,990.63	 

A-3

 

EXHIBIT B

FORM OF WARRANT

B-1

 

EXHIBIT C

STOCK CERTIFICATE QUESTIONNAIRE

Pursuant to Section 5 of the Agreement, please provide us with the following information:

	 	 	 	 	 	 	 	 	 
	 	1.	 	 	The exact name that your Shares and Warrants are to be
registered in (this is the name that will appear on your
stock certificate(s)). You may use a nominee name if
appropriate:
	 	 	                                        	 
	 	 	 	 	 
	 	 	 	 
	 	2.	 	 	The relationship between the Investors and the registered
holder listed in response to item 1 above:
	 	 	                                        	 
	 	 	 	 	 
	 	 	 	 
	 	3.	 	 	The mailing address of the registered holder listed in
response to item 1 above:
	 	 	                                        	 
	 	 	 	 	 
	 	 	 	 
	 	4.	 	 	The Social Security Number or Tax Identification Number of
the registered holder listed in the response to item 1 above:
	 	 	                                        	 
	 	 	 	 	 
	 	 	 	 
	 	5.	 	 	The number of shares that you or your organization will own
immediately after Closing, including those Shares purchased
by you or your organization pursuant to this Purchase
Agreement and those shares purchased by you or your
organization through other transactions:
	 	 	                                        	 
	 	 	 	 	 
	 	 	 	 
	 	6.	 	 	The number of warrants that you or your organization will own
immediately after Closing, including those Warrants purchased
by you or your organization pursuant to this Purchase
Agreement and those warrants purchased by you or your
organization through other transactions:
	 	 	 	 

C-1

 

EXHIBIT D

REGISTRATION STATEMENT QUESTIONNAIRE

In connection with the preparation of the Registration Statement, please provide us with the
following information:

Plan of Distribution

Attached as Exhibit D-I hereto is a draft of the “Plan of Distribution” section of the Registration
Statement. Do you propose to offer or sell any Shares of Common Stock to be registered on the
Registration Statement by means other than those described in Exhibit D-I?

          o Yes                o No

If “yes”, please describe the manner in which you propose to offer or sell such Shares of Common
Stock:

	 	 	 
	 

	 	 
	 
	 	 
	 

	 	 
	 
	 	 
	 

	 	 

Selling Stockholders

Pursuant to the “Selling Stockholder” section of the Registration Statement, please state your or
your organization’s name exactly as it should appear in the Registration Statement:

	 	 	 
	 

	 	 

Please provide the number of shares that you or your organization will own immediately after
Closing, including those Shares purchased by you or your organization pursuant to this Purchase
Agreement and those shares purchased by you or your organization through other transactions:

	 	 	 
	 

	 	 

Exhibit D

1

 

Please provide the number of warrants that you or your organization will own immediately after
Closing, including those Warrants purchased by you or your organization pursuant to this Purchase
Agreement and warrants purchased by you or your organization through other transactions:

	 	 	 
	 

	 	 

Have you or your organization had any position, office or other material relationship within the
past three years with the Company or its affiliates?

          o Yes                o No

If yes, please indicate the nature of any such relationships below:

	 	 	 
	 

	 	 
	 
	 	 
	 

	 	 
	 
	 	 
	 

	 	 

Are you (i) a FINRA Member (see definition), (ii) a Controlling (see definition) shareholder of a
FINRA Member, (iii) a Person Associated with a Member of the FINRA (see definition), (iv) an
Underwriter or a Related Person (see definition) with respect to the proposed offering; (v) do you
own any shares or other securities of any FINRA Member not purchased in the open market; or (vi)
have you made any outstanding subordinated loans to any FINRA Member?

Answer: o Yes o No If “yes” to any of such questions, please identify the question and
describe below:

	 	 	 
	 

	 	 
	 
	 	 
	 

	 	 
	 
	 	 
	 

	 	 

FINRA Member. The term “FINRA member” means either any broker or dealer admitted to membership in
the Financial Industry Regulatory Authority (“FINRA”). (FINRA Manual, By-laws Article I,
Definitions)

Control. The term “control” (including the terms “controlling,” “controlled by” and “under common
control with”) means the possession, direct or indirect, of the power, either individually or with
others, to direct or cause the direction of the management and policies of a person, whether
through the ownership of voting securities, by contract, or otherwise. (Rule 405 under the
Securities Act of 1933, as amended)

Exhibit D

2

 

Person Associated with a member of the FINRA. The term “person associated with a member of the
FINRA” means every sole proprietor, partner, officer, director, branch manager or executive
representative of any FINRA Member, or any natural person occupying a similar status or performing
similar functions, or any natural person engaged in the investment banking or securities business
who is directly or indirectly controlling or controlled by a FINRA Member, whether or not such
person is registered or exempt from registration with the FINRA pursuant to its by-laws. (FINRA
Manual, By-laws Article I, Definitions)

Underwriter or a Related Person. The term “underwriter or a related person” means, with respect to
a proposed offering, underwriters, underwriters’ counsel, financial consultants and advisors,
finders, members of the selling or distribution group, and any and all other persons associated
with or related to any of such persons. (FINRA Interpretation)

Exhibit D

3

 

EXHIBIT D-1

FORM OF PLAN OF DISTRIBUTION

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

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

	 	•	 	ordinary brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
	 
	 	•	 	block trades in which the broker-dealer will attempt to sell the shares as
agent, but may position and resell a portion of the block as principal to facilitate
the transaction;
	 
	 	•	 	purchases by a broker-dealer as principal and resale by the broker-dealer for
its account;
	 
	 	•	 	an exchange distribution in accordance with the rules of the applicable
exchange;
	 
	 	•	 	privately negotiated transactions;
	 
	 	•	 	short sales effected after the date the registration statement of which this
prospectus is a part is declared effective by the SEC;
	 
	 	•	 	through the writing or settlement of options or other hedging transactions,
whether through an options exchange or otherwise;
	 
	 	•	 	broker-dealers may agree with the selling stockholders to sell a specified
number of such shares at a stipulated price per share;
	 
	 	•	 	a combination of any such methods of sale; or
	 
	 	•	 	any other method permitted pursuant to applicable law.

     The selling stockholders may also sell shares under Rule 144 under the Securities Act, if
available, rather than under this prospectus. The selling stockholders are not obligated to, and

Exhibit D-1

1

 

there is no assurance that the selling stockholders will, sell all or any of the shares we are
registering. The selling stockholders may transfer, devise or gift such shares by other means not
described in this prospectus.

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

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

     Broker-dealers engaged by the selling stockholders may arrange for other brokers-dealers to
participate in sales. Broker-dealers may receive commissions or discounts from the selling
stockholders (or, if any broker-dealer acts as agent for the purchaser of shares, from the
purchaser) in amounts to be negotiated. The selling stockholders do not expect these commissions
and discounts to exceed what is customary in the types of transactions involved. Any profits on
the resale of shares by a broker-dealer acting as principal might be deemed to be underwriting
discounts or commissions under the Securities Act. Discounts, concessions, commissions and similar
selling expenses, if any, attributable to the sale of shares will be borne by a selling
stockholder. The selling stockholders may agree to indemnify any agent, dealer or broker-dealer
that participates in transactions involving sales of the shares against certain liabilities,
including liabilities arising under the Securities Act.

     The Company is required to pay certain fees and expenses incurred by the Company incident to
the registration of the shares. The Company has agreed to indemnify the selling stockholders
against certain losses, claims, damages and liabilities, including liabilities under the Securities
Act.

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

Exhibit D-1

2

 

prospectus delivery requirements of the Securities Act. There is no underwriter or
coordinating broker acting in connection with the proposed sale of the resale shares by the selling
stockholders.

     The selling stockholders may from time to time pledge or grant a security interest in some or
all of the shares owned by them and, if they default in the performance of any of their secured
obligations, the pledgees or secured parties may offer and sell the shares from time to time under
this prospectus as it may be supplemented from time to time, or under an amendment to this
prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act amending the
list of selling stockholders to include the pledgee, transferee or other successors in interest as
selling stockholders under this prospectus.

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

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

     The anti-manipulation rules of Regulation M under the Exchange Act may apply to sales of
shares in the market and to the activities of the selling stockholders and their affiliates. In
addition, we will make copies of this prospectus (as it may be supplemented or amended from time to
time) available to the selling stockholders for the purpose of satisfying the prospectus delivery
requirements of the Securities Act.

     We have agreed with the selling stockholders to keep the registration statement of which this
prospectus constitutes a part effective until the earlier of (1) July 8, 2011, (2) such time as all
of the shares covered by this prospectus have been disposed of pursuant to and in accordance with
the registration statement, or (3) the date on which all of the shares may be sold pursuant to Rule
144 of the Securities Act.

Exhibit D-1

3

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