Document:

EX-10.70

 

EXHIBIT 10.70

SECURITIES PURCHASE AGREEMENT

     This Securities Purchase Agreement (this “Agreement”), dated as of
December 21, 2006,
is made by and among Columbia Laboratories, Inc., a Delaware corporation (the “Company”),
and the Purchasers listed on Exhibit A hereto, together with their permitted transferees (each, a
“Purchaser” and collectively, the “Purchasers”).

Recitals:

     A. The Company and the Purchasers are executing and delivering this Agreement in reliance upon
the exemption from securities registration afforded by Section 4(2) of the Securities Act and/or
Regulation D under the Securities Act.

     B. The Purchasers, severally but not jointly, desire to purchase, and the Company desires to
sell, upon the terms and conditions stated in this Agreement, up to a maximum amount of up to
$40,000,000.00 principal amount of subordinated notes convertible into shares of Common Stock (as
defined herein) and warrants to purchase shares of Common Stock.

     C. The capitalized terms used herein and not otherwise defined have the meanings given them in
Article 7.

AGREEMENT

     In consideration of the premises and the mutual covenants contained herein and other good and
valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company
and the Purchasers (severally and not jointly) hereby agree as follows:

ARTICLE 1

PURCHASE AND SALE OF SECURITIES

     1.1 Purchase and Sale of Securities. At the Closing, the Company will issue and sell to each
Purchaser, and each Purchaser will, severally and not jointly, purchase from the Company (i)
subordinated notes convertible into shares of Common Stock in accordance with the terms of the
notes (the “Notes”), and (ii) warrants (the “Warrants”) to purchase shares of Common Stock, in the
amounts set forth opposite such Purchaser’s name on Exhibit A hereto (the Notes, the Warrants, the
Conversion Shares and the Warrant Shares are referred to collectively as the “Securities”). The
aggregate purchase price for the Notes and the Warrants to be purchased by such Purchaser at the
Closing (the “Purchase Price”) shall be the amount set forth opposite such Purchaser’s name on
Exhibit A hereto, such Purchase Price being (i) a price of $1.00 for each $1.00 of principal amount
of Notes and (ii) a price for related Warrant equal to $0.01 for each share of Common Stock subject
to the Warrant to be purchased by such Purchaser at the Closing.

     1.2 Payment. At the Closing, each Purchaser will pay the aggregate Purchase Price set forth
opposite its name on Exhibit A hereto by wire transfer of immediately available funds in accordance
with wire instructions provided by the Company to the Purchasers prior to the Closing. The Company
will deliver to each Purchaser at the Closing (i) a Note, substantially in the form attached hereto
as Exhibit B, in the amount set forth opposite such Purchaser’s name on Exhibit A and (ii) a
Warrant, substantially in the form attached hereto as Exhibit C, to
purchase the number of shares of Common Stock set forth opposite such Purchaser’s name on
Exhibit A.

 

 

     1.3 Closing Date. The closing of the transaction contemplated by this Agreement will take
place on December 22, 2006 (the “Closing Date”) and the closing (the “Closing”) will be held at the
offices of Kaye Scholer LLP, 425 Park Avenue, New York, New York, or at such other time and place
as shall be agreed upon by the Company and the Purchasers hereunder of a majority in interest of
the Securities.

ARTICLE 2

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

     Except as specifically contemplated by this Agreement, the Company hereby represents and
warrants to the Purchasers that:

     2.1 Organization and Qualification. The Company is duly incorporated, validly existing and in
good standing under the laws of the State of Delaware, with full corporate power and authority to
conduct its business as currently conducted as disclosed in the SEC Documents. The Company is duly
qualified to do business and is in good standing in every jurisdiction in which the nature of the
business conducted by it or property owned by it makes such qualification necessary, except where
the failure to be so qualified or in good standing, as the case may be, would not reasonably be
expected to have a Material Adverse Effect.

     2.2 Authorization; Enforcement. The Company has all requisite corporate power and authority
to enter into and to perform its obligations under this Agreement, the Notes, the Irrevocable
Transfer Agent Instructions (as defined in Section 4.10(b)), and the Warrants, (collectively, the
“Transaction Documents”) to consummate the transactions contemplated hereby and thereby
and to issue the Securities in accordance with the terms hereof. The execution, delivery and
performance of this Transaction Documents by the Company and the consummation by it of the
transactions contemplated thereby (including the issuance of the Securities) have been duly
authorized by the Company’s Board of Directors and no further consent or authorization of the
Company, its Board of Directors, or its stockholders is required. This Agreement has been and
other Transaction Documents, at the Closing, will be duly executed by the Company and constitutes a
legal, valid and binding obligation of the Company, enforceable against the Company in accordance
with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or moratorium or similar laws affecting creditors’ and contracting parties’ rights
generally, and except as enforceability may be subject to general principles of equity and except
as rights to indemnity and contribution may be limited by state or federal securities laws or
public policy underlying such laws.

     2.3 Capitalization. The authorized capital stock of the Company, as of December 20, 2006,
consisted of (i) 100,000,000 shares of Common Stock, of which 49,694,213 shares were issued and
outstanding, (ii) 151,000 shares of Series A Convertible Preferred Stock, par value $0.01 per
share, none of which were issued or outstanding, (iii) 150,000 shares of Series B Convertible
Preferred Stock, par value $0.01 per share, of which 130 shares were issued and outstanding, (iv)
6,660 shares of Series C Convertible Preferred Stock, par value $0.01 per share, of which 3,250
shares were issued and outstanding, (v) 100,000 shares of Series D Junior Participating Preferred
Stock, none of which were issued or outstanding and (vi) 100,000 shares of Series E Convertible
Preferred Stock, par value $0.01 per share, of which 69,000 shares were issued and outstanding
(clauses (ii) through (vi), collectively, the “Preferred

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Stock”). All of the issued and outstanding shares of Common Stock and Preferred Stock have
been duly authorized, validly issued and are fully paid and nonassessable. Options to purchase an
aggregate of 4,771,802 shares of Common Stock were outstanding as of December 20, 2006. Except as
disclosed in or contemplated by the SEC Documents, the Company does not have outstanding any
options to purchase, or any preemptive rights or other rights to subscribe for or to purchase, any
securities or obligations convertible into, or exercisable or exchangeable for, or any contracts or
commitments to issue or sell, shares of its capital stock or any such options, rights, convertible
securities or obligations other than (i) options granted under the Company’s stock option plans,
(ii) pursuant to the Preferred Stock, (iii) pursuant to warrants exercisable for 2,582,041 shares
of Common Stock as of December 20, 2006 and (iv) pursuant to the Investment and Royalty Agreement,
dated as of March 5, 2003, between the Company and PharmaBio Development Inc. (“PharmaBio”), a
corporation organized under the laws of the State of North Carolina. The Company’s Restated
Certificate of Incorporation (as amended, the “Certificate of Incorporation”), as in effect on the
date hereof, and the Company’s Bylaws (the “Bylaws”) as in effect on the date hereof, are each
filed as exhibits to the SEC Documents.

     2.4 Issuance of Securities. The Notes and Warrants are duly authorized and are free from all
taxes, liens and charges with respect to the issue thereof. The shares of Common Stock issuable
upon conversion of the Notes (“Conversion Shares”) and the shares of Common Stock issuable upon
exercise of the Warrants (the “Warrant Shares” and, collectively with the Conversion Shares, the
“Shares”) are duly authorized and, upon issuance in accordance with the terms of the Notes and the
Warrants, as applicable, the Shares will be validly issued, fully paid and non-assessable and will
not be subject to preemptive rights or other similar rights of stockholders of the Company.

     2.5 No Conflicts; Government Consents and Permits.

          (a) The execution, delivery and performance of the Transaction Documents by the Company and
the consummation by the Company of the transactions contemplated hereby and thereby (including the
issuance of the Securities) will not (i) conflict with or result in a violation of any provision of
its Certificate of Incorporation or Bylaws or require the approval of the Company’s stockholders,
(ii) violate or conflict with, or result in a breach of any provision of, or constitute a default
under, any agreement, indenture or instrument to which the Company is a party or (iii) result in a
violation of any law, rule, regulation, order, judgment or decree (including United States federal
and state securities laws and regulations and regulations of any self-regulatory organizations to
which the Company or its securities are subject) applicable to the Company, except in the case of
clauses (ii) and (iii) only, for such conflicts, breaches, defaults and violations as would not
reasonably be expected to have a Material Adverse Effect.

          (b) The Company is not required to obtain any consent, authorization or order of, or make any
filing or registration with, any court or governmental agency or any regulatory or self regulatory
agency in order for it to execute, deliver or perform any of its obligations under the Transaction
Documents in accordance with the terms hereof, or to issue and sell the Securities in accordance
with the terms hereof other than such as have been made or obtained, and except for the
registration of the Shares under the Securities Act pursuant to Section 6 hereof, any filings
required to be made under federal or state securities laws, and any required filings or
notifications regarding the issuance or listing of additional shares with Nasdaq.

          (c) The Company has all franchises, permits, licenses and any similar authority necessary for
the conduct of its business as now being conducted by it, except for such

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franchise, permit, license or similar authority, the lack of which would not reasonably be
expected to have a Material Adverse Effect. The Company has not received any written notice of any
proceeding relating to revocation or modification of any such franchise, permit, license or similar
authority except where such revocation or modification would not reasonably be expected to have a
Material Adverse Effect.

     2.6 SEC Documents, Financial Statements. The Company has timely filed all reports, schedules,
forms, statements and other documents required to be filed by it with the SEC since January 1,
2005, pursuant to the reporting requirements of the Exchange Act (all of the foregoing filed prior
to the date hereof and all exhibits included therein and financial statements and schedules thereto
and documents (other than exhibits) incorporated by reference therein, being hereinafter referred
to herein as the “SEC Documents”). As of their respective dates, the SEC Documents complied as to
form in all material respects with the requirements of the Exchange Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents, and included, to the
extent required, detailed descriptions of material indebtedness for borrowed money, and, except as
otherwise disclosed therein, none of the SEC Documents, at the time they were filed with the SEC,
contained any untrue statement of a material fact or omitted to state a material fact required to
be stated therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Financial Statements and the related
notes have been prepared in accordance with accounting principles generally accepted in the United
States, consistently applied, during the periods involved (except (i) as may be otherwise indicated
in the Financial Statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they may not include footnotes, may be condensed or summary statements or
may otherwise conform to the SEC’s rules and instructions for Reports on Form 10-Q) and fairly
present in all material respects the consolidated financial position of the Company as of the dates
thereof and the consolidated results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal and recurring year-end audit adjustments).
All material agreements that were required to be filed as exhibits to the SEC Documents under Item
601 of Regulation S-K (collectively, the “Material Agreements”) to which the Company or any
Subsidiary of the Company is a party, or the property or assets of the Company or any Subsidiary of
the Company are subject, have been filed as exhibits to the SEC Documents. To the Company’s
knowledge, all Material Agreements are valid and enforceable against the Company in accordance with
their respective terms, except (i) as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization or moratorium or similar laws affecting creditors’ and contracting
parties’ rights generally, and (ii) as enforceability may be subject to general principles of
equity and except as rights to indemnity and contribution may be limited by state or federal
securities laws or public policy underlying such laws. The Company is not in breach of or in
default under any of the Material Agreements and, to the Company’s knowledge, no other party to a
Material Agreement is in breach of or default under such Material Agreement, except in each case,
for such breaches or defaults as would not reasonably be expected to have a Material Adverse
Effect. The Company has not received a notice of termination of any of the Material Agreements.

     2.7 Disclosure Controls and Procedures. Except as disclosed in the SEC Documents, the Company
has established and maintains disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) that are effective in all material respects to ensure that material
information relating to the Company, including any consolidated Subsidiaries, that is required to
be disclosed by the Company in the reports that it files or submits under the Exchange Act is
recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules
and forms, including, without limitation, controls and

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procedures designed to ensure that information required to be disclosed by the Company in the
reports that it files or submits under the Exchange Act is accumulated and communicated to the
Company’s management, including its principal executive officer or officers and its principal
financial officer or officers, as appropriate, to allow timely decisions regarding required
disclosure. The Company’s certifying officers have evaluated the effectiveness of the Company’s
controls and procedures as of the end of the period covered by the most recently filed quarterly or
annual periodic report under the Exchange Act (such date, the “Evaluation Date”). The Company
presented in its most recently filed quarterly or annual periodic report under the Exchange Act the
conclusions of the certifying officers about the effectiveness of the disclosure controls and
procedures based on their evaluations as of the Evaluation Date. Since the Evaluation Date, there
have been no significant changes in the Company’s internal control over financial reporting
identified in connection with such evaluation that occurred during the Company’s last fiscal
quarter that has materially affected, or is reasonably likely to materially affect, the Company’s
internal control over financial reporting.

     2.8 Accounting Controls. Except as disclosed in the SEC Documents, the Company maintains a
system of accounting controls sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management’s general or specific authorization, (ii) transactions are
recorded as necessary to permit preparation of financial statements in conformity with generally
accepted accounting principles as applied in the United States and to maintain accountability for
assets, (iii) access to assets is permitted only in accordance with management’s general or
specific authorization, and (iv) the recorded accountability for assets is compared with existing
assets at reasonable intervals and appropriate action is taken with respect to any differences.

     2.9 Absence of Litigation. As of the date hereof, there is no action, suit, proceeding or
investigation before or by any court, public board, government agency, self-regulatory organization
or body pending or, to the Company’s knowledge, threatened against the Company that if determined
adversely to the Company would reasonably be expected to have a Material Adverse Effect. To the
knowledge of the Company, there has not been and there is not pending any investigation by the SEC
involving the Company or any current or former director or officer of the Company. The Company has
not received any stop order or other order suspending the effectiveness of any registration
statement filed by the Company under the Exchange Act or the Securities Act and, to the Company’s
knowledge, the SEC has not issued any such order.

     2.10 Intellectual Property Rights. To the Company’s knowledge, the Company owns or possesses
licenses or sufficient rights to use all patents, patent applications, patent rights, inventions,
know-how, trade secrets, trademarks, trademark applications, service marks, service names, trade
names and copyrights necessary to enable it to conduct its business in all material respects as
conducted as of the date hereof (the “Intellectual Property”), except for such Intellectual
Property, the inability to use would not have a Material Adverse Effect. To the Company’s
knowledge, the Company has not infringed the intellectual property rights of third parties and no
third party, to the Company’s knowledge, is infringing the Intellectual Property, in each case,
which could reasonably be expected to result in a Material Adverse Effect. Except as disclosed in
the SEC Documents, there are no material options, licenses or agreements relating to the
Intellectual Property, nor is the Company bound by or a party to any material options, licenses or
agreements relating to the patents, patent applications, patent rights, inventions, know-how, trade
secrets, trademarks, trademark applications, service marks, service names, trade names or
copyrights of any other person or entity. As of the date hereof, there is no material claim or
action or proceeding pending or, to the Company’s knowledge, threatened that challenges the right
of the Company with respect to any Intellectual Property.

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     2.11 Placement Agent. The Company has taken no action that would give rise to any claim by
any person for brokerage commissions, placement agent’s fees or similar payments relating to the
Transaction Documents or the transactions contemplated thereby, except for dealings with the
Placement Agent, whose commissions and fees will be paid by the Company.

     2.12 Investment Company. The Company is not and, after giving effect to the offering and sale
of the Securities, will not be an “investment company” as such term is defined in the Investment
Company Act of 1940, as amended (the “Investment Company Act”). The Company shall conduct its
business in a manner so that it will not become subject to the Investment Company Act.

     2.13 No Material Adverse Change. Since December 31, 2005, except as described or referred to
in the SEC Documents, there has not been any Material Adverse Effect. Since December 31, 2005, (i)
there has not been any dividend or distribution of any kind declared, set aside for payment, paid
or made by the Company on any class of capital stock (except for the regular quarterly dividend
payable on the Company’s Series C Convertible Preferred Stock), (ii) the Company has not sustained
any material loss or interference with the Company’s business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor disturbance or dispute or any
action, order or decree of any court or arbitrator or governmental or regulatory authority, and
(iii) the Company has not incurred any material liabilities except in the ordinary course of
business and except for liabilities arising from or in connection with the Transaction Documents.
The Company has not taken any steps to seek protection pursuant to any bankruptcy law nor does the
Company have any knowledge or reason to believe that its creditors intend to initiate involuntary
bankruptcy proceedings or any actual knowledge of any fact which would reasonably lead a creditor
to do so. The Company and its Subsidiaries, individually and on a consolidated basis, are not as
of the date hereof, and after giving effect to the transactions contemplated hereby to occur at the
Closing will not be, Insolvent.

     2.14 Nasdaq Global Market. The issued and outstanding shares of Common Stock are listed on
Nasdaq, and, to the Company’s knowledge, there are no proceedings to revoke or suspend such
listing. The Company is in compliance in all material respects with the requirements of Nasdaq for
continued listing of the Common Stock thereon and any other Nasdaq listing and maintenance
requirements.

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

     2.16 Accountants. Goldstein Golub Kessler LLP, who will express their opinion with respect to
the audited financial statements and schedules to be included as a part of the

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Registration Statement prior to the filing of the Registration Statement, are independent
accountants as required by the Securities Act.

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

     2.18 Foreign Corrupt Practices. Since January 1, 2005, neither the Company, nor to the
Company’s knowledge, 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 in any
material respect 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.

     2.19 Private Placement. Neither the Company nor any of its Subsidiaries or Affiliates, nor
any Person acting on its or their behalf, has, directly or indirectly, made any offers or sales of
any security or solicited any offers to buy any security, under any circumstances that would
require registration of the Securities under the Securities Act.

     2.20 No Registration Rights. No person has the right to (i) prohibit the Company from filing
the Registration Statement or (ii) other than as disclosed in the SEC Documents, require the
Company to register any securities for sale under the Securities Act by reason of the filing of the
Registration Statement. The granting and performance of the registration rights under this
Agreement will not violate or conflict with, or result in a breach of any provision of, or
constitute a default under, any agreement, indenture or instrument to which the Company is a party.

     2.21 Taxes. The Company has filed (or has obtained an extension of time within which to file)
all necessary federal, state and foreign income and franchise tax returns and has paid all taxes
shown as due on such tax returns, except where the failure to so file or the failure to so pay
would not reasonably be expected to have a Material Adverse Effect.

     2.22 Real and Personal Property. The Company has good and marketable title to, or has valid
rights to lease or otherwise use, all items of real and personal property that are material to the
business of the Company free and clear of all liens, encumbrances, claims and defects and
imperfections of title except those that (i) do not materially interfere with the use of such
property by the Company or (ii) would not reasonably be expected to have a Material Adverse Effect.

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

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     2.24 Related Party Transactions. Since September 30, 2006, except with respect to the
transactions (i) that are not required to be disclosed and (ii) contemplated hereby to the extent
an affiliate of any director purchases Securities hereunder, all transactions that have occurred
between or among the Company, on the one hand, and any of its officers or directors, or any
affiliate or affiliates of any such officer or director, on the other hand, prior to the date
hereof have been disclosed in the SEC Documents.

     2.25 No Integrated Offering. None of the Company, its Subsidiaries, any of their Affiliates,
nor any Person acting on their behalf has, directly or indirectly, made any offers or sales of any
security or solicited any offers to buy any security, under circumstances that would require
registration of any of the Securities under the Securities Act or cause this offering of the
Securities to be integrated with prior offerings by the Company for purposes of the Securities Act
or any applicable stockholder approval provisions, including, without limitation, under the rules
and regulations of any exchange or automated quotation system on which any of the securities of the
Company are listed or designated. None of the Company, its Subsidiaries, their Affiliates nor any
Person acting on their behalf will take any action or steps referred to in the preceding sentence
that would require registration of any of the Securities under the Securities Act or cause the
offering of the Securities to be integrated with other offerings.

     2.26 Application of Takeover Protections; Rights Agreement. The Company and its board of
directors have taken all necessary action, if any, in order to render inapplicable any control
share acquisition, business combination, poison pill (including any distribution under a rights
agreement) or other similar anti-takeover provision under the Certificate of Incorporation or the
laws of the jurisdiction of its formation which is or could become applicable to any Purchaser as a
result of the transactions contemplated by the Transaction Documents, including, without
limitation, the Company’s issuance of the Securities and any Purchaser’s ownership of the
Securities.

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

     2.28 Form S-3 Eligibility. The Company is eligible to register the Conversion Shares and the
Warrant Shares for resale by the Purchasers using Form S-3 promulgated under the Securities Act.

ARTICLE 3

PURCHASER’S REPRESENTATIONS AND WARRANTIES

     Each Purchaser represents and warrants to the Company, severally and not jointly, with respect
to itself and its purchase hereunder, that:

     3.1 Investment Purpose; Status. The Purchaser is an “accredited investor” as such term is
defined in Rule 501(a) of the Securities Act. The Purchaser is purchasing the Securities for its
own account and not with a present view toward the public sale or distribution thereof and has no
intention of selling or distributing any of such Securities or any arrangement or understanding
with any other persons regarding the sale or distribution of such Securities, except as would not
result in a violation of the Securities Act; provided, however, that by making the representations
herein, such Purchaser does not agree to hold any of the Securities for any

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minimum or other specific term and reserves the right to dispose of the Securities at any time
in accordance with or pursuant to a registration statement or an exemption under the Securities
Act. The Purchaser will not, directly or indirectly, offer, sell, pledge, transfer or otherwise
dispose of (or solicit any offers to buy, purchase or otherwise acquire or take a pledge of) any of
the Securities except pursuant to and in accordance with the Securities Act. The Purchaser
acknowledges that no Securities were offered or sold to it by means of any form of general
solicitation or general advertising.

     3.2 Questionnaire. The Investor Questionnaire (the “Investor Questionnaire”) submitted by
Purchaser to the Company in connection with its purchase of the Securities was accurate and correct
when delivered and is accurate and correct as of the date hereof.

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

     3.4 Acknowledgement of Risk.

          (a) The Purchaser acknowledges and understands that its investment in the Securities involves
a significant degree of risk, including, without limitation, (i) the Company remains a development
stage business with limited operating history and requires substantial funds in addition to the
proceeds from the sale of the Securities; (ii) an investment in the Company is speculative, and
only Purchasers who can afford the loss of their entire investment should consider investing in the
Company and the Securities; (iii) the Purchaser may not be able to liquidate its investment; (iv)
transferability of the Securities is extremely limited; (v) in the event of a disposition of the
Securities, the Purchaser could sustain the loss of its entire investment; and (vi) the Company has
not paid any dividends on its Common Stock since January 1, 2001, and does not anticipate the
payment of dividends in the foreseeable future. Such risks are more fully set forth in the SEC
Documents;

          (b) The Purchaser is able to bear the economic risk of holding the Securities for an
indefinite period, and has knowledge and experience in financial and business matters such that it
is capable of evaluating the risks of the investment in the Securities; and

          (c) The Purchaser has, in connection with the Purchaser’s decision to purchase Securities, not
relied upon any representations or other information (whether oral or written) other than as set
forth in the representations and warranties of the Company contained herein, and the Purchaser has,
with respect to all matters relating to this Agreement and the offer and sale of the Securities,
relied solely upon the advice of such Purchaser’s own counsel and has not relied upon or consulted
any counsel to the Placement Agent or counsel to the Company.

     3.5 Governmental Review. The Purchaser understands that no United States federal or state
agency or any other government or governmental agency has passed upon or made any recommendation or
endorsement of the Securities or an investment therein.

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     3.6 Transfer or Resale.

          (a) The Purchaser understands that the Securities have not been and are not being registered
under the Securities Act or any applicable state securities laws and, consequently, the Purchaser
may have to bear the risk of owning the Securities for an indefinite period of time because the
Securities may not be transferred unless (i) the resale thereof is registered pursuant to an
effective registration statement under the Securities Act; or (ii) the Purchaser has delivered to
the Company an opinion of counsel (in form, substance and scope reasonably acceptable to the
Company) to the effect that the Securities to be sold or transferred may be sold or transferred
pursuant to an exemption from such registration; and

          (b) Neither the Company nor any other person is under any obligation to register the resale of
the Securities or under the Securities Act or any state securities laws or to comply with the terms
and conditions of any exemption thereunder; provided it is acknowledged that the Company is
obligated to register the Shares for resale pursuant to Article 6 hereof.

     3.7 Legends. The Purchaser understands the certificates representing the Securities will bear
a restrictive legend in substantially the following form (and a stop-transfer order may be placed
against transfer of the certificates for such Securities):

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES. THE SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED,
HYPOTHECATED, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER APPLICABLE SECURITIES LAWS, OR UNLESS OFFERED,
SOLD, PLEDGED, HYPOTHECATED OR TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THOSE LAWS. THE COMPANY SHALL BE ENTITLED TO
REQUIRE AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS
NOT REQUIRED TO THE EXTENT THAT SUCH OPINION IS REQUIRED PURSUANT TO THAT CERTAIN
SECURITIES PURCHASE AGREEMENT UNDER WHICH THE SECURITIES WERE ISSUED.

and, the Notes will additionally bear the following restrictive legend:

THE RIGHT OF THE HOLDER OF THIS CONVERTIBLE SUBORDINATED NOTE TO RECEIVE PAYMENT
HEREUNDER IS SUBJECT AND SUBORDINATED IN PAYMENT TO THE SENIOR DEBT TO THE EXTENT
AND IN THE MANNER SET FORTH IN PARAGRAPH 3 OF THIS NOTE.

     3.8 Authorization; Enforcement. The Purchaser is duly organized, validly existing and in good
standing under the laws of its jurisdiction of formation, and has the requisite power and authority
to enter into the Transaction Documents and to consummate the transactions contemplated thereby.
The Purchaser has taken all necessary action to authorize the execution, delivery and performance
of the Transaction Documents. Upon the execution and delivery of the Transaction Documents, the
Transaction Documents shall constitute a valid and binding obligation of the Purchaser enforceable
in accordance with their respective terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ and
contracting parties’ rights generally and except as enforceability may be subject to general
principles of equity and except as rights to
indemnity and contribution may be limited by state or federal securities laws or public policy
underlying such laws

10

 

     3.9 Residency. The Purchaser is a resident of the jurisdiction set forth
immediately below such Purchaser’s name on the signature pages hereto.

     3.10 No Short Sales. Between the time the Purchaser learned about the Offering and the public
announcement of the Offering, the Purchaser has not engaged in any short sales or similar
transactions with respect to the Common Stock, nor has the Purchaser, directly or indirectly,
knowingly caused any Person to engage in any short sales or similar transactions with respect to
the Common Stock.

     3.11 Status. The Purchaser is not an “interested stockholder” (as such term is defined in
Section 203 of the Delaware General Corporation Law) of the Company.

     3.12 Rights Agreement. The Purchaser (other than Affiliates of Perry Corp.), its Affiliates
and Associates collectively Beneficially Own (as defined in the Rights Agreement, dated as of March
13, 2002, between the Company and First Union National Bank, as rights agent, as amended), and,
immediately after the Closing will Beneficially Own, less than 15% of the outstanding shares of
Common Stock.

ARTICLE 4

COVENANTS

     4.1 Reporting Status. The Common Stock is registered under Section 12 of the Exchange Act.
During the Registration Period, the Company agrees to use commercially reasonable efforts to timely
file with the SEC all reports required to be filed by the Company under the Exchange Act, and the
Company will not terminate its status as an issuer required to file reports under the Exchange Act
even if the Exchange Act or the rules and regulations thereunder would permit such termination.

     4.2 Expenses. The Company and each Purchaser is liable for, and each will pay, its own
expenses incurred in connection with the negotiation, preparation, execution and delivery of the
Transaction Documents; provided, that the Company will pay the reasonable attorneys’ fees and
expenses incurred in connection with the negotiation, execution and delivery of the Transaction
Documents by the Purchaser identified as the lead investor on Exhibit A hereto.

     4.3 Financial Information. The Company will use commercially reasonable efforts to cause the
financial statements of the Company included in any documents filed with the SEC (i) to be prepared
in accordance with accounting principles generally accepted in the United States, consistently
applied (except (x) as may be otherwise indicated in such financial statements or the notes
thereto, or (y) in the case of unaudited interim statements, to the extent they may not include
footnotes, may be condensed or summary statements or may otherwise conform to the SEC’s rules and
instructions for Reports on Form 10-Q), and (ii) to fairly present in all material respects the
consolidated financial position of the Company and consolidated results of its operations and cash
flows as of, and for the periods covered by, such financial statements (subject, in the case of
unaudited statements, to normal and recurring year-end audit adjustments).

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     4.4 Securities Laws Disclosure; Publicity. On or before 9:30 a.m., New York local time, on the
first Business Day following the date of this Agreement, the Company shall issue a press release
and, on or before Tuesday, December 26, 2007, shall file a Current Report on Form 8-K with the SEC,
in each case announcing the signing of this Agreement and describing the terms of the transactions
contemplated by this Agreement and including as an exhibit to such Current Report on Form 8-K the
material Transaction Documents, in the form required by the Exchange Act (the “8-K Filing”). At
the time of the filing of the 8-K Filing with the SEC, no Purchaser shall be in possession of any
material, nonpublic information received from the Company, any of its Subsidiaries or any of their
respective officers, directors, employees or agents, that is not disclosed in the 8-K Filing. The
Company shall not otherwise publicly disclose the name of any Purchaser, or include the name of any
Purchaser in any filing with the SEC (other than the Registration Statement and any exhibits to
filings made in respect of this transaction in accordance with periodic filing requirements under
the Exchange Act) or any regulatory agency, without the prior written consent of such Purchaser,
except to the extent such disclosure is required by law, regulations or the rules of any securities
exchange, in which case the Company shall provide the Purchasers with prior notice of such
disclosure.

     4.5 Sales by Purchasers. Each Purchaser will sell any Securities and Shares held by it in
compliance with applicable prospectus delivery requirements, if any, or otherwise in compliance
with the requirements for an exemption from registration under the Securities Act and the rules and
regulations promulgated thereunder. No Purchaser will make any sale, transfer or other disposition
of the Securities or Shares in violation of federal or state securities laws.

     4.6 Use of Proceeds. The Company will use the proceeds from the sale of the Securities (i) to
make the payments required pursuant to the Serono Agreement in order to terminate the rights of
Ares Trading SA. (“Ares”) to market, use and sell Crinone in the United States and to repurchase
inventory of Crinone held by Ares, and (ii) otherwise, for working capital and not for the
prepayment (at any time within six months of the Closing) of any other outstanding indebtedness of
the Company or any of its Subsidiaries.

     4.7 Furnishing of Information. As long as any Purchaser owns Securities, the Company
covenants to use reasonable commercial efforts to timely file (or obtain extensions in respect
thereof and file within the applicable grace period) all reports required to be filed by the
Company pursuant to the Exchange Act. As long as any Purchaser owns Securities, if the Company is
not required to file reports pursuant to the Exchange Act, the Company will use reasonable
commercial efforts to prepare and furnish to the Purchasers and make publicly available in
accordance with Rule 144(c) such information as is required for the Purchasers to sell the
Securities under Rule 144. The Company further covenants that it will use reasonable commercial
efforts to take such further action as any holder of Securities may reasonably request, to the
extent required from time to time to enable such Person to sell such Securities without
registration under the Securities Act within the requirements of the exemption provided by Rule
144.

     4.8 Reservation of Shares. So long as any Purchaser owns any Securities, the Company shall
take all action necessary to at all times have authorized, and reserved for the purpose of
issuance, no less than 100% of the number of shares of Common Stock issuable (i) as Conversion
Shares upon conversion of the Notes then outstanding and (ii) as Warrant Shares upon exercise of
the Warrants then outstanding (without taking into account any limitations on the conversion of the
Notes or exercise of the Warrants set forth in the Notes and Warrants, respectively).

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     4.9 Pledge of Securities. The Company will not object if the Securities are pledged by a
Holder in connection with a bona fide margin agreement or other loan or financing arrangement that
is secured by the Securities. The pledge of Securities shall not be deemed to be a transfer, sale
or assignment of the Securities hereunder, and no Holder effecting a pledge of Securities shall be
required to provide the Company with any notice thereof or otherwise make any delivery to the
Company pursuant to this Agreement or any other Transaction Document, including, without
limitation, Section 3.6 hereof; provided that a Holder and its pledgee shall be required to comply
with the provisions of Section 3.6 hereof in order to effect a sale, transfer or assignment of
Securities to such pledgee. The Company hereby agrees to execute and deliver such documentation as
a pledgee of the Securities may reasonably request in connection with an acknowledgement of a
pledge of the Securities to such pledgee by a Holder.

     4.10 Register; Transfer Agent Instructions.

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

          (b) Transfer Agent Instructions. The Company shall issue irrevocable instructions to
its transfer agent, and any subsequent transfer agent, to issue certificates or credit shares to
the applicable balance accounts at The Depository Trust Company (“DTC”), registered in the name of
each Purchaser or its respective nominee(s), for the Conversion Shares and the Warrant Shares
issued at the Closing or upon conversion of the Notes or exercise of the Warrants in such amounts
as specified from time to time by each Purchaser to the Company upon conversion of the Notes or
exercise of the Warrants in the form of Exhibit E attached hereto (the “Irrevocable Transfer Agent
Instructions”). The Company warrants that no instruction other than the Irrevocable Transfer Agent
Instructions referred to in this Section 4.10(b), and stop transfer instructions to give effect to
Section 3.6(a) hereof, will be given by the Company to its transfer agent, and that the Securities
shall otherwise be freely transferable on the books and records of the Company as and to the extent
provided in this Agreement and the other Transaction Documents. If a Purchaser effects a sale,
assignment or transfer of the Securities in accordance with Section 3.6(a), the Company shall
permit the transfer and shall promptly instruct its transfer agent to issue one or more
certificates or credit shares to the applicable balance accounts at DTC in such name and in such
denominations as specified by such Purchaser to effect such sale, transfer or assignment. In the
event that such sale, assignment or transfer involves Conversion Shares or Warrant Shares sold,
assigned or transferred pursuant to an effective registration statement or pursuant to Rule 144,
the transfer agent shall issue such Securities to the Purchaser, assignee or transferee, as the
case may be, without any restrictive legend. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to a Purchaser. Accordingly, the Company
acknowledges that the remedy at law for a breach of its obligations under this Section 4.10(b) will
be inadequate and agrees, in the event of a breach or threatened breach by the Company of the
provisions of this Section 4.10(b), that a Purchaser shall be entitled, in addition to all other
available remedies, to an order and/or injunction restraining any breach and requiring immediate
issuance and transfer, without the necessity of showing economic loss and without any bond or
other security being required.

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     4.11 Certain Approvals with Respect to Perry Purchaser. If the Purchaser is a Perry Purchaser,
the provisions of this Section 4.11(d) shall apply.

          (a) Reference is made to that certain Rights Agreement, dated as of March 13, 2002, between
the Company and First Union National Bank, as rights agent (the “Rights Agreement”). Capitalized
terms used but not defined in this Section 4.11 shall have the meanings given to them in the Rights
Agreement.

          (b) Perry Corp., a New York corporation (the “Perry Purchaser”), hereby represents and
warrants to the Company that, immediately prior to the Closing, it, its Affiliates and Associates
do not Beneficially Own more than 19.9% of the outstanding shares of Common Stock.

          (c) The Company hereby waives, for purposes of the transactions contemplated by this Agreement
only, any restriction imposed on the Perry Purchaser under the Standstill Agreement that would
prohibit the Perry Purchaser from acquiring the Shares hereunder.

          (d) The Company hereby represents and warrants and the Perry Purchaser acknowledges that (i)
the board of directors of the Company has approved for purposes of clause (ii) (A) of the first
proviso of the definition of “Acquiring Person” in the Rights Agreement, the Perry Purchaser,
together with its Affiliates and Associates, becoming the Beneficial Owner, in the aggregate, of up
to, but no more than, an aggregate of 27% of the outstanding Voting Stock, subject to the Perry
Purchaser and its Affiliates and Associates, as of the date hereof, being eligible to report
Beneficial Ownership of all such stock on Schedule 13G under the Exchange Act and not, as of the
date hereof, being required to report such ownership on Schedule 13D under the Exchange Act and
(ii) the board of directors of the Company has approved the transaction for purposes of Section 203
of the Delaware General Corporation Law.

ARTICLE 5

CONDITIONS TO CLOSING

     5.1 Conditions to Obligations of the Company. The Company’s obligation to complete the
purchase and sale of the Securities and deliver such Notes and Warrants to each Purchaser is
subject to the fulfillment or waiver as of the Closing Date of the following conditions:

          (a) Receipt of Funds. The Company shall have received immediately available funds in
the full amount of the purchase price for the Securities being purchased hereunder as set forth
opposite such Purchaser’s name on Exhibit A hereto.

          (b) Representations and Warranties. The representations and warranties made by each
Purchaser in Article 3 which are qualified as to materiality must be true and correct as written
and the representations and warranties of each Purchaser contained in this Agreement which are not
qualified as to materiality must be true and correct in all material respects as of the Closing
Date except to the extent that the representations and warranties relate to an earlier date in
which case the representations and warranties must be true and correct as written or true and
correct in all material respects, as the case may be, as of the earlier date.

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          (c) Covenants. All covenants, agreements and conditions contained in this Agreement
to be performed by the Purchasers on or prior to the Closing Date shall have been performed or
complied with in all material respects.

          (d) Blue Sky. The Company shall have obtained all necessary blue sky law permits and
qualifications, or secured exemptions therefrom, required by any state for the offer and sale of
the Securities.

          (e) Nasdaq Qualification. The Shares to be issued shall be duly authorized for
listing by Nasdaq, subject to official notice of issuance, to the extent required by the rules of
Nasdaq.

          (f) Absence of Litigation. No proceeding challenging this Agreement or the
transactions contemplated hereby, or seeking to prohibit, alter, prevent or materially delay the
Closing, shall have been instituted or be pending before any court, arbitrator, governmental body,
agency or official.

          (g) No Governmental Prohibition. The sale of the Securities by the Company shall not
be prohibited by any law or governmental order or regulation.

          (h) Minimum Aggregate Investment. The Company shall have received at the Closing at
least $40 million of aggregate proceeds from the sale of Securities hereunder.

          (i) Acquisition of Crinone. The transactions contemplated by the Serono Agreement
shall have been consummated at or prior to the Closing.

          (j) PharmaBio Consent. PharmaBio shall have consented to the issuance of the
Securities on the terms set forth herein at or prior to the Closing.

     5.2 Conditions to Purchasers’ Obligations at the Closing. Each Purchaser’s obligation to
complete the purchase and sale of the Securities is subject to the fulfillment or waiver as of the
Closing Date of the following conditions:

          (a) Representations and Warranties. The representations and warranties made by the
Company in Article 2 which are qualified as to materiality must be true and correct as written and
the representations and warranties of the Company contained in this Agreement which are not
qualified as to materiality must be true and correct in all material respects as of the Closing
Date except to the extent that the representations and warranties relate to an earlier date in
which case the representations and warranties must be true and correct as written or true and
correct in all material respects, as the case may be, as of the earlier date.

          (b) Covenants. All covenants, agreements and conditions contained in this Agreement
to be performed by the Company on or prior to the Closing Date shall have been performed or
complied with in all material respects.

          (c) Blue Sky. The Company shall have obtained all necessary blue sky law permits and
qualifications, or secured exemptions therefrom, required by any state or foreign or other
jurisdiction for the offer and sale of the Securities.

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          (d) Legal Opinion. The Company shall have delivered to such Purchaser an opinion,
dated as of the Closing Date, from Kaye Scholer LLP, counsel to the Company, in substantially the
form attached hereto as Exhibit D hereto.

          (e) Transfer Agent Instructions. The Company shall have delivered to such Purchaser a
copy of the Irrevocable Transfer Agent Instructions, in the form of Exhibit E hereto, which
instructions shall have been delivered to and acknowledged in writing by the Company’s transfer
agent.

          (f) Nasdaq Qualification. The Shares shall be duly authorized for listing by Nasdaq,
subject to official notice of issuance, to the extent required by the rules of Nasdaq.

          (g) Absence of Litigation. No proceeding challenging this Agreement or the
transactions contemplated hereby, or seeking to prohibit, alter, prevent or materially delay the
Closing, shall have been instituted or be pending before any court, arbitrator, governmental body,
agency or official.

          (h) Acquisition of Crinone. The transactions contemplated by the Serono Agreement
shall have been consummated at or prior to the Closing.

          (i) PharmaBio Consent. PharmaBio shall have consented to the issuance of the
Securities on the terms set forth herein at or prior to the Closing.

          (j) No Governmental Prohibition. The sale of the Securities by the Company shall not
be prohibited by any law or governmental order or regulation.

ARTICLE 6

REGISTRATION RIGHTS

     6.1 The Company shall use commercially reasonable efforts to file, as soon as reasonably
practicable, but in no event later than 30 days after the Closing Date (the “Filing Date”), a
registration statement (the “Registration Statement”) with the SEC covering the resale of the
Registrable Securities, and effect the registration, qualifications or compliances (including,
without limitation, the execution of any required undertaking to file post-effective amendments,
appropriate qualifications or exemptions under applicable blue sky or other state securities laws
and appropriate compliance with applicable securities laws, requirements or regulations) of the
Shares as promptly as possible after the filing thereof, but in any event prior to the
Effectiveness Deadline. The Registration Statement will be on Form S-3; provided, that if Form S-3
is not available for use by the Company on the Filing Date, then the Registration Statement will be
on such form as is then available.

     6.2 All Registration Expenses incurred in connection with any registration, qualification,
exemption or compliance pursuant to Section 6.1 shall be borne by the Company. All Selling
Expenses relating to the sale of securities registered by or on behalf of Holders shall be borne by
such Holders pro rata on the basis of the number of securities so registered.

     6.3 In the event the number of shares available under a Registration Statement filed pursuant
to Section 6.1 is insufficient to cover all of the Registrable Securities required to be covered by
such Registration Statement, the Company shall amend the applicable Registration Statement, or file
a new Registration Statement (on the short form available therefor, if

16

 

applicable), or both, so as to cover at least the Required Registration Amount as of the
trading day immediately preceding the date of the filing of such amendment or new Registration
Statement, in each case, as soon as practicable, but in any event not later than fifteen days after
the necessity therefor arises. The Company shall use commercially reasonable efforts to cause such
amendment and/or new Registration Statement to become effective as soon as practicable following
the filing thereof. For purposes of the foregoing provision, the number of shares available under
a Registration Statement shall be deemed “insufficient to cover all of the Registrable Securities”
if at any time the number of shares of Common Stock available for resale under the Registration
Statement is less than the product determined by multiplying (i) the Required Registration Amount
as of such time by (ii) 0.90. The calculation set forth in the foregoing sentence shall be made
without regard to any limitations on the conversion of the Notes or the exercise of the Warrants
and such calculation shall assume that the Notes are then convertible for shares of Common Stock at
the then prevailing Conversion Price (as defined in the Notes) and that the Warrants are then
exercisable for shares of Common Stock at the then prevailing Exercise Price (as defined in the
Warrants).

     6.4 The Company further agrees that, in the event that the Registration Statement (i) has not
been filed with the SEC on or before the Filing Date, (ii) has not been declared effective by the
SEC on or before the Effectiveness Deadline, or (iii) after the Registration Statement is declared
effective by the SEC, is suspended by the Company or ceases to remain continuously effective during
the Registration Period as to all Registrable Securities for which it is required to be effective,
other than, in each case, within the time period(s) permitted by Section 6.8(b) (each such event
referred to in clauses (i), (ii) and (iii), (a “Registration Default”)), for all or part of any
thirty-day period (a “Non-Liquidity Payment Period”) during which the Registration Default remains
uncured (which initial thirty-day period shall commence on the fifth Business Day after the date of
such Registration Default if such Registration Default has not been cured by such date), the
Company shall pay to each Purchaser 1% of such Purchaser’s aggregate Purchase Price of his or her
Securities for each Non-Liquidity Payment Period during which the Registration Default remains
uncured; provided, however, that if a Purchaser fails to provide the Company with any information
that is required to be provided in the Registration Statement with respect to such Purchaser as set
forth herein, then the commencement of the Non-Liquidity Payment Period described above shall be
extended until two Business Days following the date of receipt by the Company of such required
information; and provided, further, that in no event shall the Company be required hereunder to pay
to any Purchaser pursuant to this Agreement an aggregate amount that exceeds 8% of the aggregate
Purchase Price paid by such Purchaser for such Purchaser’s Securities. The Company shall deliver
said cash payment to the Purchaser by the fifth Business Day after the end of such Non-Liquidity
Payment Period. If the Company fails to pay said cash payment to the Purchasers in full by the
fifth Business Day after the end of such Non-Liquidity Payment Period, the Company will pay
interest thereon at a rate of 10.0% per annum (or such lesser maximum amount that is permitted to
be paid by applicable law) to the Purchasers, accruing daily from the date such liquidated damages
are due until such amounts, plus all such interest thereon, are paid in full. The provisions of
this Section 6.4 are the Purchasers’ exclusive remedy for any Registration Default.

     6.5 In the case of the registration, qualification, exemption or compliance effected by the
Company pursuant to this Agreement, the Company shall, upon reasonable request, inform each Holder
as to the status of such registration, qualification, exemption and compliance. At its expense,
during the Registration Period, the Company shall:

          (a) except for such times as the Company is permitted hereunder to suspend the use of the
prospectus forming part of the Registration Statement, use commercially reasonable

17

 

efforts to keep such registration, and any qualification, exemption or compliance under state
securities laws which the Company determines to obtain, continuously effective with respect to a
Holder, and to keep such Registration Statement free of any material misstatements or omissions,
until the earlier of the following: (i) the fifth anniversary of the Closing Date or (ii) the date
all Shares held by such Holder may be sold under Rule 144 during any 90 day period. The period of
time during which the Company is required hereunder to keep the Registration Statement effective is
referred to herein as the “Registration Period.”

          (b) advise the Holders within three Business Days:

               (i) when the Registration Statement or any amendment thereto has been filed with the SEC
and
when the Registration Statement or any post-effective amendment thereto has become effective;

               (ii) of any request by the SEC for amendments or supplements to the Registration
Statement or
the prospectus included therein;

               (iii) of the issuance by the SEC of any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceedings for such purpose;

               (iv) of the receipt by the Company of any notification with respect to the suspension of
the
qualification of the Registrable Securities included therein for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose; and

               (v) of the occurrence of any event that requires the making of any changes in the
Registration
Statement or the prospectus so that, as of such date, the Registration Statement and the
prospectus, as applicable, do not contain an untrue statement of material fact, and do not omit to
state a material fact required to be stated therein or necessary to make the statements therein (in
the case of the prospectus, in the light of the circumstances under which they were made) not
misleading;

          (c) The Company shall notify each Holder in writing of the happening of any event, as promptly
as practicable after becoming aware of such event, as a result of which the prospectus included in
a Registration Statement, as then in effect, includes an untrue statement of a material fact or
omission to state a material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not misleading (provided
that in no event shall such notice contain any material, nonpublic information), and promptly
prepare a supplement or amendment to such Registration Statement to correct such untrue statement
or omission, and deliver ten copies of such supplement or amendment to each Holder (or such other
number of copies as such Holder may reasonably request). The Company shall also promptly notify
each Holder in writing (i) when a prospectus or any prospectus supplement or post-effective
amendment has been filed, and when a Registration Statement or any post-effective amendment has
become effective (notification of such effectiveness shall be delivered to each Holder by facsimile
or e-mail on the same day of such effectiveness and by overnight mail), (ii) of any request by the
SEC for amendments or supplements to a Registration Statement or related prospectus or related
information, and (iii) of the Company’s reasonable determination that a post-effective amendment to
a Registration Statement would be appropriate.

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          (d) use commercially reasonable efforts to obtain the withdrawal of any order suspending the
effectiveness of any Registration Statement as soon as reasonably practicable;

          (e) if a Holder so requests in writing, promptly furnish to each such Holder, without charge,
at least one copy of such Registration Statement and any post-effective amendment thereto,
including financial statements and schedules, and, if explicitly requested, all exhibits in the
form filed with the SEC (other than those exhibits available via EDGAR);

          (f) during the Registration Period, promptly deliver to each such Holder, without charge, as
many copies of the prospectus included in such Registration Statement and any amendment or
supplement thereto as such Holder may reasonably request in writing; and the Company consents to
the use, consistent with the provisions hereof, of the prospectus or any amendment or supplement
thereto by each of the selling Holders of Registrable Securities in connection with the offering
and sale of the Registrable Securities covered by the prospectus or any amendment or supplement
thereto;

          (g) during the Registration Period, if a Holder so requests in writing, deliver to each
Holder, without charge, (i) one copy of the following documents, other than those documents
available via EDGAR: (A) its annual report to its stockholders, if any (which annual report shall
contain financial statements audited in accordance with generally accepted accounting principles in
the United States of America by an independent registered public accounting firm of recognized
standing), (B) if not included in substance in its annual report to stockholders, its annual report
on Form 10-K (or similar form), (C) its definitive proxy statement with respect to its annual
meeting of stockholders, (D) each of its quarterly report(s) on Form 10-Q (or similar form), and
(E) a copy of the full Registration Statement (the foregoing, in each case, excluding exhibits);
and (ii) if explicitly requested, all exhibits excluded by the parenthetical to the immediately
preceding clause (E);

          (h) prior to any public offering of Registrable Securities pursuant to any Registration
Statement, promptly take such actions as may be necessary to register or qualify or obtain an
exemption for offer and sale under the securities or blue sky laws of such United States
jurisdictions as any such Holders reasonably request in writing, provided that the Company shall
not for any such purpose be required to qualify generally to transact business as a foreign
corporation in any jurisdiction where it is not so qualified or to consent to general service of
process in any such jurisdiction, and do any and all other acts or things reasonably necessary or
advisable to enable the offer and sale in such jurisdictions of the Registrable Securities covered
by such Registration Statement;

          (i) upon the occurrence of any event contemplated by Section 6.5(b)(v) or 6.5(c) above, except
for such times as the Company is permitted hereunder to suspend the use of the prospectus forming
part of the Registration Statement, the Company shall use commercially reasonable efforts to as
soon as reasonably practicable prepare a post-effective amendment to the Registration Statement or
a supplement to the related prospectus, or file any other required document so that, as thereafter
delivered to purchasers of the Registrable Securities included therein, the prospectus will not
include any untrue statement of a material fact or omit to state any material fact necessary to
make the statements therein, in the light of the circumstances under which they were made, not
misleading;

          (j) otherwise use commercially reasonable efforts to comply in all material respects with all
applicable rules and regulations of the SEC which could affect the sale of the Registrable
Securities;

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          (k) use commercially reasonable efforts to cause all Registrable Securities to be listed on
each securities exchange or market, if any, on which equity securities issued by the Company have
been listed;

          (l) use commercially reasonable efforts to take all other steps necessary to effect the
registration of the Registrable Securities contemplated hereby and to enable the Holders to sell
Registrable Securities under Rule 144; and

          (m) if requested by the Holders, cooperate with the Holders to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to be delivered to a
transferee pursuant to a Registration Statement, which certificates shall be free of all
restrictive legends, and to enable such Registrable Securities to be in such denominations and
registered in such names as any such Holders may request; and

          (n) if a Holder so requests in writing, permit a single counsel for the Purchasers designated
by Holders of a majority of the Registrable Securities to review the Registration Statement and all
amendments and supplements thereto, within two Business Days prior to the filing thereof with the
SEC;

provided that, in the case of clause (n) above, the Company shall not be required (A) to delay the
filing of the Registration Statement or any amendment or supplement thereto to incorporate any
comments to the Registration Statement or any amendment or supplement thereto by or on behalf of a
Holder if such comments would require or result in a delay in the filing of such Registration
Statement, amendment or supplement, as the case may be, or (B) to provide, and shall not provide,
any Purchaser or its representatives with material, non-public information unless such Purchaser
agrees to receive such information and enters into a written confidentiality agreement with the
Company in a form reasonably acceptable to the Company.

     6.6 The Holders shall have no right to take any action to restrain, enjoin or otherwise delay
any registration pursuant to Section 6.1 hereof as a result of any controversy that may arise with
respect to the interpretation or implementation of this Agreement.

     6.7 (a) To the extent permitted by law, the Company shall indemnify each Holder and each
person controlling such Holder within the meaning of Section 15 of the Securities Act, with respect
to which any registration that has been effected pursuant to this Agreement, against all claims,
losses, damages and liabilities (or action in respect thereof), including any of the foregoing
incurred in settlement of any litigation, commenced or threatened (subject to Section 6.7(c)
below), arising out of or based on any untrue statement (or alleged untrue statement) of a material
fact contained in the Registration Statement, prospectus or any amendment or supplement thereof, or
based on any omission (or alleged omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading (in case of any prospectus, in
light of the circumstances in which they were made), or any violation by the Company of any rule or
regulation promulgated under the Securities Act, the Exchange Act or any state securities law, or
any rule or regulation thereunder, in connection with the performance of its obligations under this
Agreement, and will reimburse each Holder and each person controlling such Holder, for reasonable
legal and other out-of-pocket expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action as incurred; provided that the Company
will not be liable in any such case to the extent that any untrue statement or omission or
allegation thereof is made in reliance upon and in conformity with written information furnished to
the Company by or on behalf of such Holder specifically for use in preparation of such Registration
Statement, prospectus,

20

 

amendment or supplement; provided further that the Company will not be liable in any such case
where the claim, loss, damage or liability arises out of or is related to the failure of such
Holder to comply with the covenants and agreements contained in this Agreement respecting sales of
Registrable Securities, and except that the foregoing indemnity agreement is subject to the
condition that, insofar as it relates to any such untrue statement or alleged untrue statement or
omission or alleged omission made in the preliminary prospectus but eliminated or remedied in the
amended prospectus on file with the SEC at the time the Registration Statement becomes effective or
in the amended prospectus filed with the SEC pursuant to Rule 424(b) or in the prospectus subject
to completion under Rule 424 of the Securities Act, which together meet the requirements of Section
10(a) of the Securities Act (the “Final Prospectus”), such indemnity shall not inure to the benefit
of any such Holder or any such controlling person, if a copy of the Final Prospectus furnished by
the Company to the Holder for delivery was not furnished to the person or entity asserting the
loss, liability, claim or damage at or prior to the time such furnishing is required by the
Securities Act and the Final Prospectus would have cured the defect giving rise to such loss,
liability, claim or damage.

          (b) Each Holder will severally, and not jointly, indemnify the Company, each of its directors
and officers, and each person who controls the Company within the meaning of Section 15 of the
Securities Act, against all claims, losses, damages and liabilities (or actions in respect
thereof), including any of the foregoing incurred in settlement of any litigation, commenced or
threatened (subject to Section 6.8(c) below), arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in the Registration Statement, prospectus,
or any amendment or supplement thereof, or based on any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the statements therein
not misleading (in case of any prospectus, in light of the circumstances in which they were made),
and will reimburse the Company, such directors and officers, and each person controlling the
Company for reasonable legal and any other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability or action as incurred, in each
case to the extent, but only to the extent, that such untrue statement or omission or allegation
thereof is made in reliance upon and in conformity with written information furnished to the
Company by or on behalf of the Holder specifically for use in preparation of the Registration
Statement, prospectus, amendment or supplement. Notwithstanding the foregoing, a Holder’s
aggregate liability pursuant to this subsection (b) and subsection (d) shall be limited to the net
amount received by the Holder from the sale of the Registrable Securities pursuant to the
Registration Statement.

          (c) Each party entitled to indemnification under this Section 6.8 (the “Indemnified Party”)
shall give notice to the party required to provide indemnification (the “Indemnifying Party”)
promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may
be sought, and shall permit the Indemnifying Party (at its expense) to assume the defense of any
such claim or any litigation resulting therefrom, provided that counsel for the Indemnifying Party,
who shall conduct the defense of such claim or litigation, shall be approved by the Indemnified
Party (whose approval shall not unreasonably be withheld), and the Indemnified Party may
participate in such defense at such Indemnified Party’s expense, and provided further that the
failure of any Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Agreement, except to the extent such failure is
materially prejudicial to the Indemnifying Party in defending such claim or litigation. An
Indemnifying Party shall not be liable for any settlement of an action or claim effected without
its written consent (which consent will not be unreasonably withheld). No Indemnifying Party, in
its defense of any such claim or litigation, shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any

21

 

settlement which does not include as an unconditional term thereof the giving by the claimant
or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or
litigation.

          (d) If the indemnification provided for in this Section 6.8 is held by a court of competent
jurisdiction to be unavailable to an Indemnified Party with respect to any loss, liability, claim,
damage or expense referred to therein, then the Indemnifying Party, in lieu of indemnifying such
Indemnified Party thereunder, shall contribute to the amount paid or payable by such Indemnified
Party as a result of such loss, liability, claim, damage or expense in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party on the one hand and of the
Indemnified Party on the other in connection with the statements or omissions which resulted in
such loss, liability, claim, damage or expense as well as any other relevant equitable
considerations. The relative fault of the Indemnifying Party and of the Indemnified Party shall be
determined by reference to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission to state a material fact relates to information supplied by the
Indemnifying Party or by the Indemnified Party and the parties’ relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or omission.

     6.8 (a) Each Holder agrees that, upon receipt of any notice from the Company of the happening
of any event requiring the preparation of a supplement or amendment to a prospectus relating to
Registrable Securities so that, as thereafter delivered to the Holders, such prospectus shall not
contain an untrue statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, each Holder will
forthwith discontinue disposition of Registrable Securities pursuant to the Registration Statement
and prospectus contemplated by Section 6.1 until its receipt of copies of the supplemented or
amended prospectus from the Company and, if so directed by the Company, each Holder shall deliver
to the Company all copies, other than permanent file copies then in such Holder’s possession, of
the prospectus covering such Registrable Securities current at the time of receipt of such notice.

          (b) Notwithstanding anything in this Agreement to the contrary, if the Company shall notify
the Holders participating in a registration that the Board of Directors of the Company has made the
good faith determination (i) that continued use by such Holders of the Registration Statement for
purposes of effecting offers or sales of Shares pursuant thereto would require, under the
Securities Act, premature disclosure in the Registration Statement (or the prospectus relating
thereto) of material, nonpublic information concerning the Company, its business or prospects or
any proposed material transaction involving the Company, (ii) that such premature disclosure would
be materially adverse to the Company, its business or prospects or any such proposed material
transaction or would make the successful consummation by the Company of any such material
transaction significantly less likely and (iii) that it is therefore desirable to suspend the use
by such Holders of such Registration Statement (and the prospectus relating thereto) for purposes
of effecting offers or sales of Shares pursuant thereto, then the right of such Holders to use the
Registration Statement (and the prospectus relating thereto) for purposes of effecting offers or
sales of Shares pursuant thereto shall be suspended. Notwithstanding the foregoing, the Company
shall not under any circumstances be entitled to exercise its right to suspend the use of the
Registration Statement on more than three occasions during any 12-month period or for more than 20
days per such occasion. Each Holder hereby covenants and agrees that it will not sell any Shares
pursuant to the Registration Statement during the periods the Registration Statement is withdrawn
or the ability to sell thereunder is suspended as set forth in this Section 6.9(b).

22

 

          (c) As a condition to the inclusion of its Registrable Securities, each Holder shall furnish
to the Company such information regarding such Holder and the distribution proposed by such Holder
as the Company may reasonably request in writing, including completing an Investor Questionnaire in
the form provided by the Company, or as shall be required in connection with any registration
referred to in this Article 6.

          (d) Each Holder acknowledges and agrees that the Registrable Securities sold pursuant to the
Registration Statement are not transferable on the books of the Company unless the stock
certificate submitted to the transfer agent evidencing such Registrable Securities is accompanied
by a certificate reasonably satisfactory to the Company to the effect that (i) the Registrable
Securities have been sold in accordance with such Registration Statement and (ii) the requirement
of delivering a current prospectus has been satisfied.

          (e) Each Holder agrees not to take any action with respect to any distribution deemed to be
made pursuant to such Registration Statement which would constitute a violation of Regulation M
under the Exchange Act or any other applicable rule, regulation or law.

          (f) At the end of the Registration Period the Holders shall discontinue sales of shares
pursuant to such Registration Statement upon receipt of notice from the Company of its intention to
remove from registration the shares covered by such Registration Statement which remain unsold, and
such Holders shall notify the Company of the number of shares registered which remain unsold
immediately upon receipt of such notice from the Company.

     6.9 With a view to making available to the Holders the benefits of certain rules and
regulations of the SEC which at any time permit the sale of the Registrable Securities to the
public without registration, so long as the Holders still own Registrable Securities, the Company
shall use commercially reasonable efforts to:

          (a) make and keep public information available, as those terms are understood and defined in
Rule 144 under the Securities Act, at all times;

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

          (c) so long as a Holder owns any Registrable Securities, furnish to such Holder, upon any
reasonable request, a written statement by the Company as to its compliance with Rule 144 under the
Securities Act, and of the Exchange Act, a copy of the most recent annual or quarterly report of
the Company, and such other reports and documents of the Company as such Holder may reasonably
request in availing itself of any rule or regulation of the SEC allowing a Holder to sell any such
securities without registration.

     6.10 The rights to cause the Company to register Registrable Securities granted to the Holders
by the Company under Section 6.1 may be assigned by a Holder in connection with a transfer by such
Holder of all or a portion of its Registrable Securities, provided, however, that such transfer
must be made at least three Business Days prior to the Filing Date and that (i) such transfer must
otherwise be effected in accordance with applicable securities laws; (ii) such Holder gives prior
written notice to the Company at least three Business Days prior to the Filing Date; and (iii) such
transferee agrees in writing to comply with the terms and provisions of this Agreement, has
provided the Company with a completed Investor Questionnaire in such form as is reasonably
requested by the Company, and such transfer is otherwise in compliance with this Agreement.

23

 

     6.11 The rights of the Holders under any provision of this Article 6 may be waived (either
generally or in a particular instance, either retroactively or prospectively and either for a
specified period of time or indefinitely) or amended by an instrument in writing signed by Holders
of at least a majority of the number of Registrable Securities; provided, that any rights of the
Holders relating to payment obligations of the Company may only be waived or amended by an
instrument in writing signed by all Holders.

ARTICLE 7

DEFINITIONS

     As used herein, the following capitalized terms have the following meanings:

     “Affiliate” means, with respect to any Person (as defined below), any other Person
controlling, controlled by or under direct or indirect common control with such Person (for the
purposes of this definition “control,” when used with respect to any specified Person, shall mean
the power to direct the management and policies of such person, directly or indirectly, whether
through ownership of voting securities, by contract or otherwise; and the terms “controlling” and
“controlled” shall have meanings correlative to the foregoing).

     “Business Day” means a day Monday through Friday on which banks are generally open for
business in New York City.

     “Bylaws” has the meaning set forth in Section 2.3.

     “Certificate of Incorporation” has the meaning set forth in Section 2.3.

     “Closing” has the meaning set forth in Section 1.3.

     “Closing Date” has the meaning set forth in Section 1.3.

     “Common Stock” means the common stock, par value $0.01 per share, of the Company.

     “Company” means Columbia Laboratories, Inc.

     “Effectiveness Deadline” means the earlier of (i) the date which is 120 calendar days after
the Closing Date and (ii) the date which is five Business Days from the date the Company receives
written notice from the SEC that no review of the Registration Statement will be made by the staff
of the SEC or that the staff has no further comments to the Registration Statement, as the case may
be.

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

     “Filing Date” has the meaning set forth in Section 6.1.

     “Final Prospectus” has the meaning set forth in Section 6.7(a).

     “Financial Statements” means the financial statements of the Company included in the SEC
Documents.

24

 

     “Holder” means any Purchaser for so long as such Purchaser holds Registrable Securities, or
any person to whom the rights under Article 6 have been transferred in accordance with Section 6.9
hereof.

     “Indemnified Party” has the meaning set forth in Section 6.7(c).

     “Indemnifying Party” has the meaning set forth in Section 6.7(c).

     “Insolvent” means, with respect to any Person, (a) the present fair saleable value of such
Person’s assets is less than the amount required to pay such Person’s total Indebtedness, (b) such
Person is unable to pay its debts and liabilities, subordinated, contingent or otherwise, as such
debts and liabilities become absolute and matured, (c) such Person intends to incur or believes
that it will incur debts that would be beyond its ability to pay as such debts mature or (d) such
Person has unreasonably small capital with which to conduct the business in which it is engaged as
such business is now conducted and is proposed to be conducted.

     “Intellectual Property” has the meaning set forth in Section 2.10.

     “Material Adverse Effect” means a material adverse effect on the business, properties, assets,
operations, results of operations, condition (financial or otherwise) of the Company and its
Subsidiaries, taken as a whole, or on the transactions contemplated hereby and the other
Transaction Documents or by the agreements and instruments to be entered into in connection
herewith or therewith or on the authority or ability of the Company to perform its obligations
under the Transaction Documents.

     “Nasdaq” means The Nasdaq Global Market or any successor thereto.

     “Non-Liquidity Payment Period” has the meaning set forth in Section 6.4.

     “Notes” has the meaning set forth in Section 1.1.

     “Offering” means the private placement of the Company’s Securities contemplated by this
Agreement.

     “Person” means any person, individual, corporation, limited liability company, partnership,
trust or other nongovernmental entity or any governmental agency, court, authority or other body
(whether foreign, federal, state, local or otherwise).

     “PharmaBio” has the meaning set forth in Section 2.3.

     “Placement Agent” means Rodman & Renshaw LLC.

     “Purchasers” mean the Purchasers whose names are set forth on the signature pages of this
Agreement, and their permitted transferees.

     “Purchase Price” has the meaning set forth in Section 1.1.

     The terms “register,” “registered” and “registration” refer to the registration effected by
preparing and filing a registration statement in compliance with the Securities Act, and the
declaration or ordering of the effectiveness of such registration statement.

25

 

     “Registrable Securities” means the Shares and any capital stock of the Company issued or
issuable with respect to the Notes, the Shares or the Warrants as a result of any split, dividend,
recapitalization, exchange or similar event or otherwise, without regard to any limitations on
conversion of the Notes or exercise of the Warrants; provided, however, that securities shall only
be treated as Registrable Securities if and only for so long as they (A) have not been disposed of
pursuant to a registration statement declared effective by the SEC, (B) have not been sold in a
transaction exempt from the registration and prospectus delivery requirements of the Securities Act
so that all transfer restrictions and restrictive legends with respect thereto are removed upon the
consummation of such sale or (C) are held by a Holder or a permitted transferee pursuant to Section
6.10.

     “Registration Default” has the meaning set forth in Section 6.4.

     “Registration Expenses” means all expenses incurred by the Company in complying with Section
6.1 hereof, including, without limitation, all registration, qualification and filing fees,
printing expenses, escrow fees, fees and expenses of counsel for the Company, blue sky fees and
expenses and the expense of any special audits incident to or required by any such registration
(but, for the avoidance of doubt, excluding the fees of legal counsel for any Holder).

     “Registration Statement” has the meaning set forth in Section 6.1.

     “Registration Period” has the meaning set forth in Section 6.5(a).

     “Required Registration Amount” means 100% of the sum of (i) the maximum number of Conversion
Shares issued or issuable upon conversion of the Notes as of the trading day immediately preceding
the applicable date of determination and (ii) the maximum number of Warrant Shares issued and
issuable pursuant to the Warrants as of the trading day immediately preceding the applicable date
of determination, (without regard to any limitation on conversion of the Notes or exercise of the
Warrants).

     “Rule 144” means Rule 144 promulgated under the Securities Act, or any successor rule.

     “SEC” means the United States Securities and Exchange Commission.

     “SEC Documents” has the meaning set forth in Section 2.6.

     “Securities” has the meaning set forth in Section 1.1.

     “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute.

     “Selling Expenses” means all selling commissions applicable to the sale of Registrable
Securities and all fees and expenses of legal counsel for any Holder.

     “Serono Agreement” means the Agreement, dated the date hereof, by and among Ares Trading S.A.,
Serono, Inc., the Company and Columbia Laboratories (Bermuda), Ltd.

     “Shares” has the meaning set forth in Section 2.4.

26

 

     “Subsidiary” of any person shall mean any corporation, partnership, limited liability company,
joint venture or other legal entity of which such Person (either above or through or together with
any other subsidiary) owns, directly or indirectly, more than 50% of the stock or other equity
interests the holders of which are generally entitled to vote for the election of the board of
directors or other governing body of such corporation or other legal entity.

     “Warrants” has the meaning set forth in Section 1.1.

ARTICLE 8

GOVERNING LAW; MISCELLANEOUS

     8.1 Governing Law; Jurisdiction; Jury Trial. This Agreement will be governed by and
interpreted in accordance with the laws of the State of New York without regard to the principles
of conflict of laws. Each party hereby irrevocably submits to the exclusive jurisdiction of the
state and federal courts sitting in The City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in
any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, that such suit, action or proceeding is brought in an inconvenient forum or that
the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives
personal service of process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address for such notices to it under this
Agreement and agrees that such service shall constitute good and sufficient service of process and
notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY
HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

     8.2 Counterparts; Signatures by Facsimile. This Agreement may be executed in two or more
counterparts, all of which are considered one and the same agreement and will become effective when
counterparts have been signed by each party and delivered to the other parties. This Agreement,
once executed by a party, may be delivered to the other parties hereto by facsimile transmission of
a copy of this Agreement bearing the signature of the party so delivering this Agreement.

     8.3 Headings. The headings of this Agreement are for convenience of reference only, are not
part of this Agreement and do not affect its interpretation.

     8.4 Severability. If any provision of this Agreement is invalid or unenforceable under any
applicable statute or rule of law, then such provision will be deemed modified in order to conform
with such statute or rule of law. Any provision hereof that may prove invalid or unenforceable
under any law will not affect the validity or enforceability of any other provision hereof.

     8.5 Entire Agreement; Amendments. This Agreement (including all schedules and exhibits
hereto) constitutes the entire agreement among the parties hereto with respect to the subject
matter hereof. There are no restrictions, promises, warranties or undertakings, other than those
set forth or referred to herein or therein. This Agreement supersedes all prior

27

 

agreements and understandings among the parties hereto with respect to the subject matter
hereof. This Agreement and any provision hereof may be changed, waived, discharged or terminated
only by an instrument in writing signed by the Company and Purchasers holding a majority of the
Registrable Securities. Any amendment or waiver effected in accordance with this Section 8.5 shall
be binding upon each holder of any Securities purchased under this Agreement at the time
outstanding (including securities into which such Securities are convertible and for which such
Securities are exercisable), each future holder of all such securities, and the Company.

     8.6 Notices. All notices required or permitted hereunder shall be in writing and shall be
deemed effectively given: (a) upon personal delivery to the party to be notified, (b) when sent by
confirmed email, telex or facsimile if sent during normal business hours of the recipient, if not,
then on the next business day, (c) five days after having been sent by registered or certified
mail, return receipt requested, postage prepaid, or (d) one business day after deposit with a
nationally recognized overnight courier, specifying next day delivery, with written verification of
receipt. The addresses for such communications are:

	 	 	 	 	 
	 

	 	If to the Company:
	 	Columbia Laboratories, Inc.
	 

	 	 	 	354 Eisenhower Parkway
	 

	 	 	 	Livingston, New Jersey 07039
	 

	 	 	 	Telecopier No.: (973) 994-3001
	 

	 	 	 	Telephone No.: (973) 994-3999
	 

	 	 	 	Attention: General Counsel
	 
	 	 	 	 
	 

	 	With a copy to:
	 	Kaye Scholer LLP
	 

	 	 	 	425 Park Avenue
	 

	 	 	 	New York, New York 10022
	 

	 	 	 	Telecopier No.: (212) 836-8689
	 

	 	 	 	Telephone No.: (212) 836-8673
	 

	 	 	 	Attention: Adam H. Golden, Esq.

     If to a Purchaser: To the address set forth immediately below such Purchaser’s name on the
signature pages hereto. Each party will provide ten days’ advance written notice to the other
parties of any change in its address.

     8.7 Successors and Assigns. This Agreement is binding upon and inures to the benefit of the
parties and their successors and permitted assigns. The Company will not assign this Agreement or
any rights or obligations hereunder without the prior written consent of the Purchasers, and no
Purchaser may assign this Agreement or any rights or obligations hereunder without the prior
written consent of the Company, except as permitted in accordance with Section 6.9 hereof.

     8.8 Third Party Beneficiaries. This Agreement is intended for the benefit of the parties
hereto, their respective permitted successors and assigns and the Placement Agent, and is not for
the benefit of, nor may any provision hereof be enforced by, any other person.

     8.9 Further Assurances. Each party will do and perform, or cause to be done and performed,
all such further acts and things, and will execute and deliver all other agreements, certificates,
instruments and documents, as another party may reasonably request in order to carry out the intent
and accomplish the purposes of this Agreement and the consummation of the transactions contemplated
hereby.

28

 

     8.10 No Strict Construction. The language used in this Agreement is deemed to be the language
chosen by the parties to express their mutual intent, and no rules of strict construction will be
applied against any party.

     8.11 Equitable Relief. The Company recognizes that, if it fails to perform or discharge any
of its obligations under this Agreement, any remedy at law may prove to be inadequate relief to the
Purchasers. The Company therefore agrees that the Purchasers are entitled to seek temporary and
permanent injunctive relief in any such case. Each Purchaser also recognizes that, if it fails to
perform or discharge any of its obligations under this Agreement, any remedy at law may prove to be
inadequate relief to the Company. Each Purchaser therefore agrees that the Company is entitled to
seek temporary and permanent injunctive relief in any such case

     8.12 Survival of Representations and Warranties. Notwithstanding any investigation made by
any party to this Agreement, all representations and warranties made by the Company and the
Purchasers herein shall survive for a period of three years following the date hereof, except for
Sections 2.1, 2.2, 2.11 and 2.19 which representations and warranties shall survive the Closing
until the lapse of the statute of limitations.

     8.13 Independent Nature of Purchasers’ Obligations and Rights. The obligations of the
Purchaser under this Agreement and the other Transaction Documents 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 this Agreement or any other Transaction
Document. Nothing contained herein and no action taken by any Purchaser pursuant thereto, 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 under the Exchange Act) with respect to
such obligations or the transactions contemplated by this Agreement or the other Transaction
Documents. Each Purchaser shall be entitled to independently protect and enforce its rights,
including without limitation the rights arising out of this Agreement and the other Transaction
Documents, and it shall not be necessary for any other Purchaser to be joined as an additional
party in any proceeding for such purpose.

[Signature Page Follows]

29

 

     In Witness Whereof, the undersigned Purchasers and the Company have caused this
Agreement to be duly executed as of the date first above written.

	 	 	 	 	 
	 
	 	 	 	 
	 	 	COLUMBIA LABORATORIES, INC.
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Robert S. Mills
	 

	 	 	 	 
	 

	 	Name:
	 	Robert S. Mills
	 

	 	Title:
	 	President and Chief Executive Officer
	 
	 	 	 	 
	 

	 		 	 

Securities Purchase Agreement

Signature Page

 

 

	 	 	 	 	 
	 
	 	 	 	 
	 	 	Purchaser
	 
	 	 	 	 
	 	 	14159, L.P.
	 	 	 
	 	 	(investor name)

	 
	 	 	 	 
	 

	 	By:
	 	14159 Capital, L.P., (General Partner)
	 

	 	By:
	 	14159 Capital (GP), LLC, (General Partner)
	 

	 	By:
	 	Julian Baker, Managing Member
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Julian Baker
	 

	 	 	 	 
	 

	 	 	 	(signature)
	 
	 	 	 	 
	 	 	 
	 	 	(print name and title)

	 
	 	 	 	 
	 

	 	Address:
	 	667 Madison Ave, 17th Floor
	 

	 	 	 	 
	 

	 	 	 	New York, NY, 10021
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 

	 	Facsimile:
	 	(212) 339-5688
	 

	 	 	 	 

Securities Purchase Agreement

Signature Page

 

	 	 	 	 	 
	 
	 	 	 	 
	 	 	Purchaser
	 
	 	 	 	 
	 	 	Baker Brothers Life Sciences, L.P.
	 	 	 
	 	 	(investor name)

	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	Bakers Brothers Life Sciences Capital, L.P.,
(General Partner)
	 

	 	By:	 	 
	 

	 	 	 	Bakers Brothers Life Sciences Capital (GP), LLC,

(General Partner)
	 

	 	By:	 	 
	 

	 	 	 	Felix Baker, Ph.D., Managing Member
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Felix Baker
	 

	 	 	 	 
	 

	 	 	 	(signature)
	 
	 	 	 	 
	 	 	 
	 	 	(print name and title)

	 
	 	 	 	 
	 

	 	Address:
	 	667 Madison Ave, 17th Floor
	 

	 	 	 	 
	 

	 	 	 	New York, NY, 10021
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 

	 	Facsimile:
	 	(212) 339-5688
	 

	 	 	 	 

Securities Purchase Agreement

Signature Page

 

	 	 	 	 	 
	 
	 	 	 	 
	 	 	Purchaser
	 
	 	 	 	 
	 	 	Baker Biotech Fund I, L.P.
	 	 	 
	 	 	(investor name)

	 
	 	 	 	 
	 

	 	By:
	 	Bakers Biotech Capital, L.P., (General Partner)
	 

	 	By:
	 	Bakers Biotech Capital (GP), LLC, (General Partner)
	 

	 	By
	 	Julian Baker, Managing Member
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Julian Baker
	 

	 	 	 	 
	 

	 	 	 	(signature)
	 
	 	 	 	 
	 	 	 
	 	 	(print name and title)

	 
	 	 	 	 
	 

	 	Address:
	 	667 Madison Ave, 17th Floor
	 

	 	 	 	 
	 

	 	 	 	New York, NY, 10021
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 

	 	Facsimile:
	 	 (212) 339-5688
	 

	 	 	 	 

Securities Purchase Agreement

Signature Page

 

 

	 	 	 	 	 
	 
	 	 	 	 
	 	 	Purchaser
	 
	 	 	 	 
	 	 	Baker/Tisch Investments, L.P.
	 	 	 
	 	 	(investor name)

	 
	 	 	 	 
	 

	 	By:
	 	Bakers/Tisch Capital, L.P., (General Partner)
	 

	 	By:
	 	Bakers/Tisch Capital (GP), LLC, (General Partner)
	 

	 	By:
	 	Felix Baker, Ph.D., Managing Member
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Felix Baker
	 

	 	 	 	 
	 

	 	 	 	(signature)
	 
	 	 	 	 
	 	 	 
	 	 	(print name and title)

	 
	 	 	 	 
	 

	 	Address:
	 	667 Madison Ave, 17th Floor
	 

	 	 	 	 
	 

	 	 	 	New York, NY, 10021
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 

	 	Facsimile:
	 	 (212) 339-5688
	 

	 	 	 	 

Securities Purchase Agreement

Signature Page

 

 

	 	 	 	 	 
	 
	 	 	 	 
	 	 	Purchaser
	 
	 	 	 	 
	 	 	Curran Family Partners II
	 	 	 
	 	 	(investor name)

	 
	 	 	 	 
	 

	 	By:
	 	/s/ John P. Curran
	 

	 	 	 	 
	 

	 	 	 	(signature)
	 
	 	 	 	 
	 	 	John P. Curran, General Partner
	 	 	 
	 	 	(print name and title)

	 
	 	 	 	 
	 

	 	Address:
	 	100 Scarborough Sta. Rd.
	 

	 	 	 	 
	 

	 	 	 	Briarcliff Manor, NY 10510
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 	 	Facsimile: (914) 944-1471
	 

	 	 	 	 

Securities Purchase Agreement

Signature Page

 

 

	 	 	 	 	 
	 
	 	 	 	 
	 	 	Purchaser
	 
	 	 	 	 
	 	 	Knott Partner, LP
	 	 	 
	 	 	(investor name)

	 
	 	 	 	 
	 

	 	By:
	 	/s/ David M. Knott
	 

	 	 	 	 
	 

	 	 	 	(signature)
	 
	 	 	 	 
	 	 	David M. Knott, General Partner
	 	 	 
	 	 	(print name and title)

	 
	 	 	 	 
	 

	 	Address:
	 	485 Underhill Blvd, Suite 205
	 

	 	 	 	 
	 

	 	 	 	Syosset, NY 11791
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 

	 	Facsimile:
	 	(516) 364-0879
	 

	 	 	 	 

Securities Purchase Agreement

Signature Page

 

	 	 	 	 	 
	 
	 	 	 	 
	 	 	Purchaser
	 
	 	 	 	 
	 	 	Matterhorn Offshore Fund, Ltd.
	 	 	 
	 	 	(investor name)

	 
	 	 	 	 
	 

	 	By:   /s/ David M. Knott
	 

	   	 
	 

	 	 	 	(signature)
	 
	 	 	 	 
	 	 	David M. Knott,
President
	 	 	 
	 	 	(print name and title)

	 
	 	 	 	 
	 	 	Dorset Management
Corp.

Investment Advisor
	 
	 	 	 	 
	 

	 	Address:
	 	485 Underhill Blvd, Suite 205
	 

	 	 	 	 
	 

	 	 	 	Syosset, NY 11791
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 

	 	Facsimile:
	 	(516) 364-0879
	 

	 	 	 	 

Securities Purchase Agreement

Signature Page

 

	 	 	 	 	 
	 
	 	 	 	 
	 	 	Purchaser
	 
	 	 	 	 
	 	 	Shoshone Partners, LP
	 	 	 
	 	 	(investor name)

	 
	 	 	 	 
	 

	 	By:
	 	/s/ David M. Knott
	 

	 	 	 	 
	 

	 	 	 	(signature)
	 
	 	 	 	 
	 	 	David M. Knott, President
	 	 	 
	 	 	(print name and title)

	 
	 	 	 	 
	 	 	Dorset Management Corp.
	 	 	Investment Advisor
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	Address:
	 	485 Underhill Blvd, Suite 205
	 

	 	 	 	 
	 

	 	 	 	Syosset, NY 11791
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 

	 	Facsimile:
	 	(516) 364-0879
	 

	 	 	 	 

Securities Purchase Agreement

Signature Page

 

	 	 	 	 	 
	 
	 	 	 	 
	 	 	Purchaser
	 
	 	 	 	 
	 	 	Finderne, LLC
	 	 	 
	 	 	(investor name)

	 
	 	 	 	 
	 

	 	By:
	 	/s/ David M. Knott
	 

	 	 	 	 
	 

	 	 	 	(signature)
	 
	 	 	 	 
	 	 	David M. Knott, President
	 	 	 
	 	 	(print name and title)

	 
	 	 	 	 
	 	 	Dorset Management Corp.
	 	 	Investment Advisor
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	Address:
	 	485 Underhill Blvd, Suite 205
	 

	 	 	 	 
	 

	 	 	 	Syosset, NY 11791
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 

	 	Facsimile:
	 	(516) 364-0879
	 

	 	 	 	 

Securities Purchase Agreement

Signature Page

 

 

	 	 	 	 	 
	 
	 	 	 	 
	 	 	Purchaser
	 
	 	 	 	 
	 	 	CommonFund Hedged Equity Company
	 	 	 
	 	 	(investor name)

	 
	 	 	 	 
	 

	 	By:
	 	/s/ David M. Knott
	 

	 	 	 	 
	 

	 	 	 	(signature)
	 
	 	 	 	 
	 	 	David M. Knott, President
	 	 	 
	 	 	(print name and title)

	 
	 	 	 	 
	 	 	Dorset Management Corp.
	 	 	Investment Advisor
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	Address:
	 	485 Underhill Blvd, Suite 205
	 

	 	 	 	 
	 

	 	 	 	Syosset, NY 11791
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 

	 	Facsimile:
	 	(516) 364-0879
	 

	 	 	 	 

Securities Purchase Agreement

Signature Page

 

	 	 	 	 	 
	 
	 	 	 	 
	 	 	Purchaser
	 
	 	 	 	 
	 	 	Mulsanne Partners, LP
	 	 	 
	 	 	(investor name)

	 
	 	 	 	 
	 

	 	By:
	 	/s/ David M. Knott
	 

	 	 	 	 
	 

	 	 	 	(signature)
	 
	 	 	 	 
	 	 	David M. Knott, President
	 	 	 
	 	 	(print name and title)

	 
	 	 	 	 
	 	 	Dorset Management Corp.
	 	 	Investment Advisor
	 
	 	 	 	 
	 

	 	Address:
	 	485 Underhill Blvd, Suite 205
	 

	 	 	 	 
	 

	 	 	 	Syosset, NY 11791
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 

	 	Facsimile:
	 	(516) 364-0879
	 

	 	 	 	 

Securities Purchase Agreement

Signature Page

 

 

	 	 	 	 	 
	 
	 	 	 	 
	 	 	Purchaser
	 
	 	 	 	 
	 	 	Kenneth E. Beebe and Janet E. Beebe
	 	 	 
	 	 	(investor name)

	 
	 	 	 	 
	 

	 	By:
	 	/s/ K. E. Beebe
	 

	 	 	 	 
	 

	 	 	 	(signature)
	 
	 	 	 	 
	 	 	K. E. Beebe
	 	 	 
	 	 	(print name and title)

	 
	 	 	 	 
	 

	 	Address:
	 	2555 Joseph Drive
	 

	 	 	 	 
	 

	 	 	 	Alamo, CA 94507
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 

	 	Facsimile:	 	 
	 

	 	 	 	 

Securities Purchase Agreement

Signature Page

 

 

	 	 	 	 	 
	 
	 	 	 	 
	 	 	Purchaser
	 
	 	 	 	 
	 	 	Kirk and Dana Beebe
	 	 	 
	 	 	(investor name)

	 
	 	 	 	 
	 

	 	By:
	 	/s/ Kirk Beebe
	 

	 	 	 	 
	 

	 	 	 	(signature)
	 
	 	 	 	 
	 	 	Kirk Beebe
	 	 	 
	 	 	(print name and title)

	 
	 	 	 	 
	 

	 	Address:
	 	2732 Falconview Ct
	 

	 	 	 	 
	 

	 	 	 	Alamo, CA 94507
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 

	 	Facsimile:	 	 
	 

	 	 	 	 

Securities Purchase Agreement

Signature Page

 

 

	 	 	 	 	 
	 
	 	 	 	 
	 	 	Purchaser
	 
	 	 	 	 
	 	 	Beebe 88 Partners
	 	 	 
	 	 	(investor name)

	 
	 	 	 	 
	 

	 	By:
	 	/s/ Kirk Beebe
	 

	 	 	 	 
	 

	 	 	 	(signature)
	 
	 	 	 	 
	 	 	Kirk Beebe, Partner
	 	 	 
	 	 	(print name and title)

	 
	 	 	 	 
	 

	 	Address:
	 	2555 Joseph Drive
	 

	 	 	 	 
	 

	 	 	 	Alamo, CA 94507
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 

	 	Facsimile:	 	 
	 

	 	 	 	 

Securities Purchase Agreement

Signature Page

 

 

	 	 	 	 	 
	 
	 	 	 	 
	 	 	Purchaser
	 
	 	 	 	 
	 	 	Beebe 98 Partners
	 	 	 
	 	 	(investor name)

	 
	 	 	 	 
	 

	 	By:
	 	/s/ Kirk Beebe
	 

	 	 	 	 
	 

	 	 	 	(signature)
	 
	 	 	 	 
	 	 	Kirk Beebe, Partner
	 	 	 
	 	 	(print name and title)

	 
	 	 	 	 
	 

	 	Address:
	 	2555 Joseph Drive
	 

	 	 	 	 
	 

	 	 	 	Alamo, CA 94507
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 

	 	Facsimile:	 	 
	 

	 	 	 	 

Securities Purchase Agreement

Signature Page

 

	 	 	 	 	 
	 
	 	 	 	 
	 	 	Purchaser
	 
	 	 	 	 
	 	 	Morrison Family Trust dtd 51593
	 	 	 

	 

	 	 	 	(investor name)
	 
	 	 	 	 
	 	 	By: /s/ Richard H. Morrison
	 	 	 

	 

	 	 	 	(signature)
	 
	 	 	 	 
	 	 	Richard H. Morrison, ttee
	 	 	 

	 

	 	 	 	(print name and title)
	 
	 	 	 	 
	 

	 	Address:
	 	c/o Morrison Frazier 

3658 Mt Diablo Blvd 

Lafayette, CA 94549 

	 

	 	Facsimile:
	 	(925) 283-1502 

Securities Purchase Agreement

Signature Page

 

 

	 	 	 	 	 
	 
	 	 	 	 
	 	 	Purchaser
	 
	 	 	 	 
	 	 	The Ascend Fund
	 	 	 

	 

	 	 	 	(investor name)
	 
	 	 	 	 
	 	 	By: /s/ Richard H. Morrison
	 	 	 

	 

	 	 	 	(signature)
	 
	 	 	 	 
	 	 	Richard H. Morrison, General Partner
	 	 	 

	 

	 	 	 	(print name and title)
	 
	 	 	 	 
	 

	 	Address:
	 	3658 Mt Diablo Blvd 

Lafayette, CA 94549 
  

	 

	 	Facsimile:
	 	(925) 283-1502 

Securities Purchase Agreement

Signature Page

 

 

	 	 	 	 	 
	 
	 	 	 	 
	 	 	Purchaser
	 
	 	 	 	 
	 	 	Morrison 1997 CRT
	 	 	 

	 

	 	 	 	(investor name)
	 
	 	 	 	 
	 	 	By: /s/ Richard H. Morrison
	 	 	 

	 

	 	 	 	(signature)
	 
	 	 	 	 
	 	 	Richard H. Morrison, ttee
	 	 	 

	 

	 	 	 	(print name and title)
	 
	 	 	 	 
	 

	 	Address:
	 	3658 Mt Diablo Blvd 

Lafayette, CA 94549 
  

	 

	 	Facsimile:
	 	(925) 283-1502 

Securities Purchase Agreement

Signature Page

 

 

	 	 	 	 	 
	 
	 	 	 	 
	 	 	Purchaser
	 
	 	 	 	 
	 	 	Laurie C. Morrison Trust
	 	 	 

	 

	 	 	 	(investor name)
	 
	 	 	 	 
	 	 	By: /s/ Laurie C. Morrison
	 	 	 

	 

	 	 	 	(signature)
	 
	 	 	 	 
	 	 	Laurie Morrison, ttee
	 	 	 

	 

	 	 	 	(print name and title)
	 
	 	 	 	 
	 

	 	Address:
	 	1708 Chapparal Ln. 

Lafayette, CA 94549 
  

	 

	 	Facsimile:
	 	(925) 947-5502 

Securities Purchase Agreement

Signature Page

 

 

	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	Purchaser
	 
	 	 	 	 	 	 
	 	 	Perry Partners International Inc.
	 	 	 

	 

	 	 	 	 	 	(investor name)
	 
	 	 	 	 	 	 
	 	 	By:	 	Perry Corp., Investment Manager of Perry Partners
International Inc.
	 
	 	 	 	 	 	 
	 	 	By:	 	/s/ Michael Neus
	 	 	 	 	 

	 

	 	 	 	 	 	(signature)
	 
	 	 	 	 	 	 
	 	 	Michael Neus, General Counsel
	 	 	 

	 

	 	 	 	 	 	(print name and title)
	 
	 	 	 	 	 	 
	 	 	Address:	 	767 5th Ave., 19th Floor 

	 

	 	 	 	 	 	New York, NY, 10153 
  

	 	 	Facsimile:	 	(212) 583-4146 

Securities Purchase Agreement

Signature Page

 

 

	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	Purchaser
	 
	 	 	 	 	 	 
	 	 	Perry Commitment Fund L.P.
	 	 	 

	 

	 	 	 	 	 	(investor name)
	 
	 	 	 	 	 	 
	 	 	By:	 	Perry Commitment Associates L.L.C., General Partner of Perry Commitment Fund L.P.
	 	 	By:	 	Perry Corp., Managing Member of Perry Commitment Associates L.L.C.
	 
	 	 	 	 	 	 
	 	 	By:	 	/s/ Michael Neus
	 	 	 	 	 

	 

	 	 	 	 	 	(signature)
	 
	 	 	 	 	 	 
	 	 	Michael Neus, General Counsel
	 	 	 

	 

	 	 	 	 	 	(print name and title)
	 
	 	 	 	 	 	 
	 	 	Address:	 	767 5th Ave., 19th Floor 

New York, NY, 10153 

  

	 	 	Facsimile:	 	(212) 583-4146 

Securities Purchase Agreement

Signature Page

 

 

	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	Purchaser
	 
	 	 	 	 	 	 
	 	 	Perry Commitment Master Fund L.P.
	 	 	 

	 

	 	 	 	 	 	(investor name)
	 
	 	 	 	 	 	 
	 	 	By:	 	Perry Commitment International Associates L.L.C.,
General Partner of Perry Commitment Master Fund
L.P.
	 	 	By:	 	Perry Corp., Managing Member of Perry Commitment
Associates L.L.C.
	 
	 	 	 	 	 	 
	 	 	By:	 	/s/ Michael Neus
	 	 	 	 	 

	 

	 	 	 	 	 	(signature)
	 
	 	 	 	 	 	 
	 	 	Michael Neus, General Counsel
	 	 	 

	 

	 	 	 	 	 	(print name and title)
	 
	 	 	 	 	 	 
	 	 	Address:	 	767 5th Ave., 19th Floor 

New York, NY, 10153 

  

	 	 	Facsimile:	 	(212) 583-4146 

Securities Purchase Agreement

Signature Page

 

 

	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	Purchaser
	 
	 	 	 	 	 	 
	 	 	Perry Partners L.P.
	 	 	 

	 

	 	 	 	 	 	(investor name)
	 
	 	 	 	 	 	 
	 	 	By:	 	Perry Corp., General Partner of Perry Partners L.P.
	 
	 	 	 	 	 	 
	 	 	By:	 	/s/ Michael Neus
	 	 	 	 	 

	 

	 	 	 	 	 	(signature)
	 
	 	 	 	 	 	 
	 	 	Michael Neus, General Counsel
	 	 	 

	 

	 	 	 	 	 	(print name and title)
	 
	 	 	 	 	 	 
	 	 	Address:	 	767 5th Ave., 19th Floor 

New York, NY, 10153 

  

	 	 	Facsimile:	 	(212) 583-4146 

Securities Purchase Agreement

Signature Page

 

 

	 	 	 	 	 
	 
	 	 	 	 
	 	 	Purchaser
	 
	 	 	 	 
	 	 	HighBridge International LLC
	 	 	 

	 

	 	 	 	(investor name)
	 
	 	 	 	 
	 	 	By: HighBridge Capital Management, LLC
	 
	 	 	 	 
	 	 	By: /s/ Adam J. Chill
	 	 	 

	 

	 	 	 	(signature)
	 
	 	 	 	 
	 	 	Adam J. Chill, Managing Director
	 	 	 

	 

	 	 	 	(print name and title)
	 
	 	 	 	 
	 

	 	Address:
	 	c/o Highbridge Capital Management, LLC 

9 West 57th Street, 27th Floor 

New York, New York 10019 

	 

	 	Facsimile:
	 	(212) 751-0755 

	 	 	Attn: Ari J Storch / Adam J. Chill

Securities Purchase Agreement

Signature Page

 

 

EXHIBIT A

SCHEDULE OF PURCHASERS

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Aggregate Principal	 	 	 	 	 	 	Aggregate Purchase	 
	Purchaser	 	Amount of Notes	 	 	Warrants	 	 	Price	 
	 
	14159, L.P.
	 	$	140,000.00	 	 	 	8,000.00	 	 	$	140,000.00	 
	Baker Brothers Life Sciences, L.P.
	 	$	4,256,000.00	 	 	 	243,200.00	 	 	$	4,256,000.00	 
	Baker Biotech Fund I, L.P.
	 	$	719,000.00	 	 	 	41,085.71	 	 	$	719,000.00	 
	Baker Biotech Fund I, L.P.
	 	$	805,000.00	 	 	 	46,000.00	 	 	$	805,000.00	 
	Baker/Tisch Investments, L.P.
	 	$	38,000.00	 	 	 	2,171.43	 	 	$	38,000.00	 
	Baker/Tisch Investments, L.P.
	 	$	42,000.00	 	 	 	2,400.00	 	 	$	42,000.00	 
	Curran Family Partners II
	 	$	2,000,000.00	 	 	 	114,285.71	 	 	$	2,000,000.00	 
	Knott Partners, LP
	 	$	136,000.00	 	 	 	7,771.43	 	 	$	136,000.00	 
	Matterhorn Offshore Fund, Ltd.
	 	$	3,940,000.00	 	 	 	225,142.86	 	 	$	3,940,000.00	 
	Shoshone Partners, LP
	 	$	158,000.00	 	 	 	9,028.57	 	 	$	158,000.00	 
	Finderne, LLC
	 	$	628,000.00	 	 	 	35,885.71	 	 	$	628,000.00	 
	CommonFund Hedged Equity Company
	 	$	55,000.00	 	 	 	3,142.86	 	 	$	55,000.00	 
	Mulsanne Partners, LP
	 	$	83,000.00	 	 	 	4,742.86	 	 	$	83,000.00	 
	Kenneth E. Beebe and Janet E. Beebe
	 	$	100,000.00	 	 	 	5,714.29	 	 	$	100,000.00	 
	Kirk & Dana Beebe
	 	$	100,000.00	 	 	 	5,714.29	 	 	$	100,000.00	 
	Beebe 88 Partners
	 	$	30,000.00	 	 	 	1,714.29	 	 	$	30,000.00	 
	Beebe 98 Partners
	 	$	40,000.00	 	 	 	2,285.71	 	 	$	40,000.00	 
	Morrison Family Trust dtd 51593
	 	$	700,000.00	 	 	 	40,000.00	 	 	$	700,000.00	 
	The Ascend Fund
	 	$	1,500,000.00	 	 	 	85,714.29	 	 	$	1,500,000.00	 
	Morrison 1997 CRT
	 	$	430,000.00	 	 	 	24,571.43	 	 	$	430,000.00	 
	Laurie C. Morrison Trust
	 	$	100,000.00	 	 	 	5,714.29	 	 	$	100,000.00	 
	Perry Partners International Inc.
	 	$	10,399,903.50	 	 	 	594,280.20	 	 	$	10,399,903.50	 
	Perry Commitment Fund L.P.
	 	$	825,998.25	 	 	 	47,199.90	 	 	$	825,998.25	 
	Perry Commitment Master Fund L.P.
	 	$	2,016,000.00	 	 	 	115,200.00	 	 	$	2,016,000.00	 
	Perry Partners L.P.
	 	$	4,758,096.00	 	 	 	271,891.20	 	 	$	4,758,096.00	 
	Highbridge International LLC
	 	$	6,000,000.00	 	 	 	342,857.14	 	 	$	6,000,000.00	 
	Total
	 	$	39,999,997.75	 	 	 	2,285,714.16	 	 	$	39,999,997.75	 

 

EXHIBIT B

FORM OF NOTE

 

 

EXHIBIT C

FORM OF WARRANT

 

 

EXHIBIT D

FORM OF LEGAL OPINION

 

 

EXHIBIT E

FORM OF TRANSFER AGENT INSTRUCTIONSexv10w1

 

Exhibit 10.1

EMPLOYMENT AGREEMENT

     THIS EMPLOYMENT AGREEMENT (the “Agreement”) is entered into
this 22nd day of December,
2006 by and between Countrywide Financial Corporation, a Delaware corporation (the “Company”), and
Angelo R. Mozilo (“Executive”).

WITNESSETH:

     WHEREAS, Executive currently holds the offices of Chairman of the Board of Directors and Chief
Executive Officer of the Company;

     WHEREAS, the Company and Executive have set forth the terms and conditions of Executive’s
current employment with the Company under an employment agreement entered into as of September 2,
2004 (the “Current Employment Agreement”);

     WHEREAS, under the terms of the Current Employment Agreement, Executive’s employment as
Chairman of the Board of Directors and Chief Executive Officer of the Company extends until
December 31, 2006, at which point it was anticipated that Executive would serve as Chairman of the
Board until December 31, 2011;

     WHEREAS, the Board of Directors of the Company (the “Board”) has determined that it is in the
Company’s best interest and that of its stockholders to extend Executive’s employment as Chief
Executive Officer until December 16, 2009, with the possibility of a further extension to December
16, 2010 if mutually agreed to by Executive and the Company, and to extend Executive’s service as
Chairman of the Board of Directors of the Company (“Chairman
of the Board” or “Chair”) until
December 31, 2011;

     WHEREAS, the Company and Executive desire to set forth the continued terms and conditions of
Executive’s relationship with the Company for the period from January 1, 2007 to December 31, 2011
under this Agreement, while deferring to a later date their agreement as to the provisions that
will govern the terms of any period beyond December 16, 2009 that Executive may serve as the
Company’s Chief Executive Officer;

     WHEREAS, the Current Employment Agreement provides that the terms of a Consulting Agreement
(the “Consulting Agreement”), which was attached as an appendix to the employment agreement entered
into as of March 1, 2001 by and between Executive and the Company and provides that Executive will
become a consultant to the Company for a period of five years beginning on March 1, 2006, will be
waived by the Company and Executive for so long as Executive serves as Chair pursuant to the
Current Employment Agreement; and

     WHEREAS, the Company and Executive desire to continue to waive the provisions of the
Consulting Agreement for so long as Executive continues to serve the Company as Chief Executive
Officer and/or Chair as set forth in this Agreement.

     NOW, THEREFORE, in consideration of the mutual promises and covenant herein contained, the
parties hereto agree as follows:

- 1 -

 

     1. Effective Date. This Agreement shall be binding on the parties immediately but the
provisions hereof shall govern the parties’ relationship beginning effective January 1, 2007 (the
“Effective Date”) provided that Executive is employed by the Company under his Current Employment
Agreement on December 31, 2006.

     2. Term.

          (a) The Company agrees to employ Executive, and Executive agrees to serve the Company, in
accordance with the terms hereof beginning on January 1, 2007 and continuing until December 31,
2011 (the “Expiration Date”), unless earlier terminated in accordance with the provisions hereof
(the “Employment Termination Date”). From and after the Employment Termination Date, Executive
shall cease to be an employee of the Company and all of its subsidiaries.

          (b) The period from January 1, 2007 to December 16, 2009 shall be referred to herein as the
“CEO Term.” The CEO Term may be extended for an additional one-year period ending on December 16,
2010 upon the mutual written agreement of the parties on or before June 30, 2009. Executive shall
be named and shall serve as Chairman of the Board during any period when he is serving as a
director during the term of this Agreement.

          (c) The parties intend that Executive shall continue to serve as Chairman of the Board until
December 31, 2011 and that he shall serve as a non-employee Chair during any period that he is a
director and not serving Chief Executive Officer of the Company. Provided Executive is then
serving as Chairman of the Board, the term “Non-Employee Chair Term” shall mean the period
beginning immediately following the end of the CEO Term and ending on the earlier of the date on
which Executive ceases to serve as the Chairman of the Board or the Expiration Date.

     3. The CEO Term: Duties and Responsibilities and Outside Affiliates.

          (a) Specific Position; Duties and Responsibilities. The Company and Executive hereby
agree that, subject to the provisions of this Agreement, the Company will employ Executive and
Executive will serve the Company and its subsidiaries as Chairman of the Board and Chief Executive
Officer of the Company during the CEO Term. The Company agrees that Executive’s duties hereunder
shall be the usual and customary duties of the offices of Chairman of the Board and Chief Executive
Officer and such further duties consistent therewith as may be designated from time to time by the
Board and shall not be inconsistent with the provisions of the charter documents of the Company or
applicable law. Executive shall have such executive power and authority as shall reasonably be
required to enable him to discharge his duties in the offices that he may hold. All compensation
paid to Executive by the Company or any of its subsidiaries shall be aggregated in determining
whether Executive has received the benefits provided for herein.

          (b) Scope of this Agreement and Outside Affiliations.

               (i) During the CEO Term, Executive shall devote his full business time and energy, except as
expressly provided below, to the business, affairs and interests of the Company and its
subsidiaries, and matters related thereto. Executive agrees that he will

- 2 -

 

endeavor to promote the business, affairs and interests of the Company and its subsidiaries
and perform services contemplated hereby in accordance with the policies established by Board,
which policies shall be consistent with this Agreement. Executive agrees to serve in the capacity
of Chief Executive Officer for one or more (direct or indirect) subsidiaries of the Company as the
Board may from time to time request, subject to appropriate authorization by the subsidiary or
subsidiaries involved and any limitation under applicable law. Executive agrees that the
remuneration provided for in Sections 4 and 5 shall be in full satisfaction of any and all of the
services contemplated to be provided by Executive during the CEO Term including, without
limitation, those described in the preceding sentence. Executive’s failure to discharge an order
or perform a function because Executive reasonably and in good faith believes such order or
function would violate a law or regulation or be dishonest shall not be deemed a breach by him of
his obligations or duties pursuant to any of the provisions of this Agreement, including without
limitation pursuant to Section 6(d) hereof.

               (ii) During the CEO Term, Executive shall not, without the consent of the Board, compete,
directly or indirectly, with the Company in the businesses then conducted by the Company.

               (iii) Executive may serve as a director or in any other capacity of any business enterprise,
including an enterprise whose activities may involve or relate to the business of the Company,
provided that such service is expressly approved by the Board. Executive may, without seeking or
obtaining approval by the Board, (i) make and manage personal business investments of his choice
and (ii) serve in any capacity with any civic, educational or charitable organization, or any
governmental entity or trade association.

     4. CEO Term: Compensation and Benefits.

          (a) Base Salary. During the CEO Term, the Company shall pay to Executive a base
salary at the annual rate of $1,900,000. Executive’s base salary shall be reviewed annually by the
Board or the Compensation Committee of the Board (the “Committee”), and may be increased in the
discretion of the Board or the Committee (but may not be decreased).

          (b) Incentive Compensation.

               (i) The Company shall pay to Executive for each calendar year ending during the CEO Term and,
if the CEO Term ends on December 16, 2009, for the 2009 calendar year, an incentive compensation
award in an amount determined pursuant to the terms and conditions of the Amended and Restated
Countrywide Financial Corporation Annual Incentive Plan, or such other annual incentive plan
designated by the Compensation Committee (the “Annual Incentive Plan”) based on the Company’s
Return on Equity and Net Income (as such terms are defined for purposes of the Company’s Annual
Incentive Plan). The incentive compensation award opportunity for each year described herein shall
have a target value of $4,000,000 and a maximum value of $10,000,000. The specific Return on Equity
and Net Income performance targets for each calendar year during the CEO Term shall be determined
by the Committee in accordance with the terms of the Annual Incentive Plan. For calendar year
2007, the Compensation Committee has established performance goals such that the annual incentive
opportunity will be equal to the amount of the Net Income (“NI”) shown in the column of the table
shown below with respect to the corresponding levels of the Company Return on

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Equity (“ROE”); provided, however that the maximum payout value of Executive’s annual
incentive award for 2007 and for any other calendar year during the CEO Term shall not exceed
$10,000,000.

	 	 	 
	 	 	Share Rate on Net Income Above Return on
	Company’s Return on Equity	 	Equity Target
	<10%
	 	0.00% of NI
	10%-12%
	 	0.44% of NI over 10% ROE
	>12%
	 	0.44% of NI between 10% and 12% ROE, plus 0.64% of NI over 12% ROE

The Company’s total equity value for purposes of Executive’s 2007 incentive compensation award
opportunity shall be determined as of December 31, 2006. In the event that an acquisition,
reorganization, merger, consolidation, share repurchase or other similar transaction occurs during
the CEO Term, or in the event of any other material non-recurring or unanticipated event during the
CEO Term, the Committee shall adjust the Return on Equity and Net Income targets in the table above
to preserve (but not increase) the potential value of Executive’s incentive compensation award,
provided that such adjustment shall only be made if the Committee reasonably determines, after
consultation with Executive, that the adjustment will not affect the deductibility of the incentive
compensation award under Section 162(m) of the Internal Revenue Code of 1986, as amended (the
“Code”).

               (ii) Any amount payable under this Section 4(b) that would exceed the applicable limit for
performance-based compensation under the Annual Incentive Plan or that the Company otherwise
reasonably determines not to be deductible for federal income tax purposes under Section 162(m) of
the Code shall be deferred as set forth in Section 4(g) hereof.

               (iii) In the event that Executive’s employment hereunder shall terminate during the CEO Term,
other than (a) pursuant to Section 6(d) (Cause) below or (b) by reason of Executive’s resignation
without Good Reason, Executive or his estate shall be entitled to receive an incentive compensation
payment for such portion of the calendar year in which the Employment Termination Date occurs on
the same terms as set forth in the foregoing provisions of this Section 4(b) except that the amount
payable hereunder shall be adjusted by multiplying it by a fraction, the numerator of which is the
number of days during such year that Executive was employed by the Company and the denominator of
which is 365.

          (c) Equity Awards.

               (i) Grants of Equity Awards. Effective on April 1 (or the next business day following April
1, if April 1 is not a business day) of each calendar year beginning during the CEO Term, Executive
shall receive a long-term incentive compensation award in the form of performance-based restricted
stock units (“RSUs”) and stock appreciation rights (“SARs”). The RSU awards and SAR awards shall be
granted pursuant to the terms of the Countrywide Financial Corporation 2006 Equity Incentive Plan,
or such other equity incentive plan or plans as may be in effect or come into effect prior to the
end of the CEO Term (the “Equity Plan”). The number of shares of the Company’s common stock
subject to each annual RSU award and SAR award shall be that number of whole shares that results in
a grant date

- 4 -

 

value for each award of no less than $5,000,000, resulting in an annual aggregate grant date
value for the long-term incentive compensation opportunity of no less than $10,000,000. The grant
date value of an RSU award will be determined by the Committee based on the fair market value (as
defined in the Equity Plan) of the Company’s common stock on the grant date, and the grant date
value of an SAR award shall be determined by the Committee in accordance with the same assumptions
and methodologies used to determine similar awards to the Company’s other senior officers and used
to value such awards in the Company’s financial statements for the reporting period preceding the
grant date.

               (ii) Vesting and Payment of RSUs. Not later than 90 days after January 1 of each calendar
year beginning during the CEO Term, the Committee shall provide that each annual RSU grant shall
become earned and vested in three equal annual installments subject to the service and performance
conditions set forth below. Each annual RSU grant shall be evidenced by an award agreement that
sets forth the vesting terms approved by the Committee and provides that each annual RSU grant
shall be paid out as described herein:

               (A) One-third of the RSUs subject to the award shall become earned and vested
on the date the Committee determines that the Company’s Return on Equity (as defined
for purposes of the Equity Plan) for the calendar year in which the RSU award is
granted equals or exceeds 12%, provided that Executive remains employed by the
Company as Chief Executive Officer through December 16 of such year of grant.
Another one-third of the RSUs subject to the award shall become earned and vested on
the date that the Committee determines that the Company’s Return on Equity for the
first calendar year following the year of grant of the award equals or exceeds 12%,
provided that Executive remains employed by the Company as Chief Executive Officer
through December 16 of the first year following the year of grant. The final
one-third of the RSUs subject to the award shall become earned and vested on the
date that the Committee determines that the Company’s Return on Equity for the
second calendar year following the year of grant of the award equals or exceeds 12%,
provided that Executive remains employed by the Company as Chief Executive Officer
through December 16 of the second year following the year of grant. Upon the
determination by the Committee that the Company’s Return on Equity for any calendar
year during the three-year vesting period failed to equal at least 12% (and the
vesting of the RSU award has not previously been accelerated pursuant to the
provision of Section 4(c)(ii)(B) below), then the one-third of the RSUs originally
subject to the award that would have otherwise vested shall immediately terminate
and be forfeited. In the event that an acquisition, reorganization, merger,
consolidation, share repurchase or other similar transaction occurs during any
calendar year in the CEO Term, or in the event any other material non-recurring or
unanticipated event occurs during any calendar year in the CEO Term, the Committee
shall adjust the 12% Return on Equity vesting target described above for such year
and future years, if applicable, to preserve (but not increase) the intended
incentives and potential value of Executive’s RSU award, provided that any such
adjustment shall only be made if the Committee reasonably determines, after
consultation with Executive, that the

- 5 -

 

adjustment will not affect the deductibility of Executive’s RSU award under
Section 162(m) of the Code.

               (B) Upon a Change in Control as defined in the Equity Plan (provided
Executive’s employment as the Company’s Chief Executive Officer has not earlier
terminated) or upon Executive’s termination of employment pursuant to Section 6(a)
(Disability), Section 6(b) (death), Section 6(c) (Expiration of CEO Term) or Section
6(e) (Good Reason or without Cause), the unvested portion of an RSU award granted
under this Section 4(c) that has not previously been forfeited shall immediately
become 100% vested.

               (C) If Executive resigns without Good Reason prior to December 16 of a calendar
year during the three-year vesting period for an RSU award, and the Committee
determines that the Company’s Return on Equity for the calendar year in which
Executive’s employment terminates (his “Termination Year”) is at least 12% (or such
other percentage determined in accordance with Section 4(c)(ii)(A)), then the RSU
award shall, upon the date the Committee makes such determination, become vested as
to the number of RSUs that is equal to the total number of RSUs that would have
become vested if Executive had remained employed by the Company as Chief Executive
Officer until December 16 of his Termination Year multiplied by a fraction, the
numerator of which is the number of days Executive was employed by the Company as
Chief Executive Officer during his Termination Year and the denominator of which is
350.

               (D) The RSUs shall be paid in the form of shares of the Company’s common stock
as soon as practicable, and in any event within two (2) months, following the
vesting date, provided that payment shall be delayed as provided in Section 4(g) to
the extent the Company reasonably determines, after consultation with Executive,
that the delivery of such shares would not be deductible for federal income tax
purposes under Section 162(m) of the Code.

               (iii) Vesting and Exercise of SARs.

               (A) Each annual SAR grant shall (i) be granted with an exercise price equal to
fair market value (as defined under the Equity Plan) of the Company’s common stock
on the date of grant, (ii) have a term of five (5) years and (iii) provide that the
value of the SAR award (if any) shall be settled in shares of the Company’s common
stock. Each grant of an SAR award shall be evidenced by an award agreement that
provides that the SAR award shall become vested and exercisable in three equal
annual installments beginning on the December 16 immediately following the grant
date, subject to Executive’s continued employment as the Company’s Chief Executive
Officer through each such vesting date.

               (B) The vesting of each SAR award shall be accelerated upon a Change in Control
as defined in the Equity Plan (provided Executive’s employment as the Company’s
Chief Executive Officer has not earlier

- 6 -

 

terminated) or upon Executive’s termination of employment pursuant to Section
6(a) (Disability), Section 6(b) (death), Section 6(c) (Expiration of CEO Term) or
Section 6(e) (Good Reason or without Cause).

               (C) If Executive resigns without Good Reason prior to December 16 of a year
during the three-year vesting period for an SAR award, the SAR award shall thereupon
become vested and exercisable as to the number of shares the Company’s common stock
that is equal to the total number of shares as to which the SAR award would have
become vested and exercisable if Executive had remained employed by the Company as
Chief Executive Officer until December 16 of his Termination Year multiplied by a
fraction, the numerator of which is the number of days Executive was employed by the
Company as Chief Executive Officer during his Termination Year and the denominator
of which is 350.

               (D) Any SARs that are vested and exercisable upon Executive’s termination of
employment as the Company’s Chief Executive Officer for any reason other than Cause
shall remain exercisable for the duration of such five year term.

               (iv) Other Terms of Equity Awards. The award agreements for each annual grant of RSUs and
SARs shall also contain such other terms and provisions as reasonably determined by the Committee
that are not inconsistent with the foregoing or the other provisions of this Agreement.

          (d) Term Extension Award. In exchange for Executive’s agreement to extend his term as
the Company’s Chief Executive Officer beyond December 31, 2006, the Company shall make an award to
Executive as set forth in this Section 4(d).

               (i) The term extension award shall be in the form of restricted stock units, which shall be
granted as soon as practicable after January 1, 2007 under the Equity Plan (the “RSU Award”). The
number of shares of the Company’s common stock subject to the RSU Award shall be that number of
whole shares that results in a grant date value for the award of no less than $10,000,000. The
value of the RSU Award shall be determined based on the fair market value (as defined under the
Equity Plan) of the Company’s common stock on the grant date.

               (ii) The RSU Award shall be evidenced by an award agreement that provides that the RSUs shall
become earned and vested in accordance with and subject to the service and performance conditions
set forth below and paid out as described herein.

               (A) One-half of the RSUs shall become earned and vested on December 16, 2009 if
Executive has continuously remained employed by the Company as its Chief Executive
Officer from January 1, 2007 through such date. The other one-half of the RSUs
shall become earned and vested on the date the Committee determines that the
Company’s total shareholder return (as determined pursuant to Appendix A) for the
period from January 1, 2007 through December 31, 2009 exceeds the 50th
percentile of the total shareholder returns (as

- 7 -

 

determined pursuant to Appendix A) for that period of the companies comprising
the S&P Financial Services Index on December 31, 2009, provided that Executive has
continuously remained employed by the Company as its Chief Executive Officer from
January 1, 2007 through December 16, 2009. Any RSUs that do not vest in accordance
with these provisions (or the provisions of Section 4(d)(ii)(B) below) shall
terminate and be forfeited as of the earlier of Executive’s termination of
employment as the Company’s Chief Executive Officer or December 31, 2009. The
Committee shall make all interpretive determinations regarding the calculation of
the Company’s total shareholder return and the extent to which the vesting criteria
are satisfied, consistent with the provisions of this Section and with the
requirements of Section 162(m) of the Code

               (B) Upon a Change in Control as defined in the Equity Plan (provided
Executive’s employment as the Company’s Chief Executive Officer has not earlier
terminated) or upon Executive’s termination of employment pursuant to Section 6(a)
(Disability), Section 6(b) (death) or Section 6(e) (Good Reason or without Cause), a
pro rata portion of the RSU Award shall immediately become vested, based on the
number of days employed from January 1, 2007 through the date of the Change in
Control or termination of employment.

               (C) The RSUs that become vested shall be paid in the form of shares of the
Company’s common stock as soon as practicable, and in any event within two (2)
months, following the vesting date, provided that payment shall be delayed as
provided in Section 4(g) to the extent that the Company reasonably determines, after
consultation with Executive, that the delivery of such shares would not be
deductible for federal income tax purposes under Section 162(m) of the Code.

               (D) The RSU award agreement shall also contain such other terms and provisions
as reasonably determined by the Committee that are not inconsistent with the
foregoing or the other provisions of this Agreement.

          (e) Additional Benefits. Except as provided in Section 5 hereof, Executive shall also
be entitled to all rights and benefits for which he is otherwise eligible during the CEO Term under
any bonus plan, stock purchase plan, participation or extra compensation plan, executive
compensation plan, pension plan, profit-sharing plan, life and medical insurance policy,
second-to-die life insurance coverage, executive medical examination program, executive long-term
disability policy, financial planning services program or other plans or benefits, which the
Company or its subsidiaries may provide for him, or provided he is eligible to participate therein,
for senior officers generally or for employees generally during the CEO Term (collectively,
“Additional Benefits”). Except as provided in Sections 4(g), 4(h) and 5 hereof, this Agreement
shall not affect the provision of any other compensation, retirement or other benefit program or
plan of the Company.

          (f) Continuation of Benefits. If Executive’s employment is terminated during the CEO
Term pursuant to Section 6(a) (Disability), 6(b) (death) or 6(e) (Good Reason or without Cause)
hereof, the Company shall continue for the period specified in Section 6(a) or 6(b) hereof or three
years in the case of a termination pursuant to Section 6(e) hereof (the

- 8 -

 

“Continuation Period”), as the case may be, to provide the same or substantially similar
health and life insurance benefits (the “Welfare Benefits”) that were being provided to Executive
and his dependents and beneficiaries immediately prior to Executive’s Employment Termination Date
(or in the case of a termination after a Change in Control, those benefits that were being provided
immediately preceding the Change in Control), but (i) only to the extent that Executive is not
entitled to comparable benefits from other employment and (ii) such benefits shall not include any
arrangements that, by their terms, terminate at termination of employment. If Executive’s
employment is terminated during the CEO Term pursuant to Section 6(a), 6(b) or 6(e) hereof or
pursuant to Section 6(c) (Expiration of CEO Term), the Company shall provide to Executive and his
spouse (or solely to Executive’s spouse in the case of a termination pursuant to Section 6(b))
Special Medical Coverage (as hereinafter defined) following the end of the Continuation Period or,
in the case of a termination pursuant to Section 6(c), following the end of the CEO Term. As used
in this Section 4(f) “Special Medical Coverage” shall mean medical insurance coverage for each of
Executive’s and his spouse’s lifetime (or solely for his spouse’s lifetime in the case of a
termination pursuant to Section 6(b)) that, in conjunction with the coverage available to Executive
and his spouse pursuant to Medicare Part B, if any, is substantially similar in the aggregate to
the coverage provided to Executive and his spouse immediately prior to the Employment Termination
Date or the end of the CEO Term, as the case may be. The Company shall use its reasonable best
efforts to provide the Special Medical Coverage in a manner that results in the exclusion of such
benefits from the income of Executive and his spouse. The Company shall use its reasonable best
efforts to provide the Special Medical Coverage such that Section 105(h) will not apply. If such
Special Medical Coverage is provided through reimbursement of premiums paid by Executive and/or his
spouse (as a result of agreement of Executive and the Company), Executive and/or his spouse shall
provide to the Company evidence of coverage under any applicable health insurance policy or
Medicare supplemental health policy.

          (g) Deferral of Amounts Payable Hereunder. Except with respect to Executive’s base
salary pursuant to Section 4(a), the payment or distribution of any compensation or benefits
provided for in this Agreement that, after consultation with Executive, the Committee reasonably
anticipates would not be deductible under Section 162(m) of the Code shall be deferred until the
first date that the limitations of Section 162(m) on the Company’s deduction for amounts paid to
Executive no longer apply. In the event Executive should desire to defer receipt of any other cash
payments to which he would otherwise be entitled hereunder, he may do so in accordance with the
terms and conditions of the Countrywide Financial Corporation Amended and Restated Deferred
Compensation Plan (the “Deferred Compensation Plan”), or in the absence of such Deferred
Compensation Plan or any successor plan that is substantially similar to the Deferred Compensation
Plan, he may present such a written request to the Compensation Committee which, in its sole
discretion, may enter into a separate deferred compensation agreement with Executive. All amounts
deferred as set forth in the first sentence of this Section 4(g) shall be deferred in accordance
with the terms of the plan described in the immediately preceding sentence.

          (h) Coordination with Current Employment Agreement. Notwithstanding anything in this
Agreement, Executive’s Current Employment Agreement or any prior employment agreement to the
contrary, (i) there shall be no duplication of benefits or payments under this Agreement of any
benefits or payments provided under the Current Employment

- 9 -

 

Agreement or any prior employment agreement, and (ii) Executive shall receive medical coverage
and other Welfare Benefits during his employment as an employee under this Agreement, with
continuation of such Welfare Benefits after termination of employment, as and to the extent
provided in this Agreement and shall not receive Special Medical Coverage until such time as
provided in this Agreement. Nothing contained herein shall affect the timing of the payment of
incentive compensation under Section 4(b) of the Current Employment Agreement.

          (i) Business Travel Expenses. During the CEO Term, the Company shall bear the cost of
business-related travel expenses for Executive (and his spouse) on Company owned or leased aircraft
in accordance with the terms of the Company’s aircraft policy in effect on the date hereof.

     5. Enhanced SERP. In lieu of Executive’s current supplemental retirement benefit
entitlement under the 1998 Amendment and Restatement of the Company’s Supplemental Executive
Retirement Plan, as amended by the First Amendment to the SERP effective January 1, 1999, the
Second Amendment to the SERP effective as of June 30, 1999, the Third Amendment to the SERP
effective as of January 1, 2002, the Fourth Amendment to the SERP executed on August 13, 2002 and
any subsequent amendment thereto (the “Plan”) and incorporating by reference any Plan Agreement (as
defined in the Plan) entered into by Executive (collectively, the “Current SERP”), the Company
shall provide to Executive an enhanced supplemental retirement benefit under the Plan (the
“Enhanced SERP”) (except as provided in subsection (c) below) as follows:

          (a) Full Benefit. If Executive’s employment terminates for any reason other than
pursuant to Section 6(d) (Cause) , the Enhanced SERP shall be governed by the terms of the Plan in
all respects except that the Benefit Amount (defined in Section 1.3 of Plan) shall equal the New
Benefit Amount (as hereinafter defined).

          (b) Lump Sum Benefit. Notwithstanding anything to the contrary in the Plan, in the
event that, under the terms of the Plan, the Enhanced SERP shall be payable in a lump sum, the
amount of such lump sum shall be determined using a discount rate equal to 7%.

          (c) Cause. If Executive’s employment terminates pursuant to Section 6(d) hereof,
Executive shall not be entitled to the Enhanced SERP and Executive’s supplemental retirement
benefit shall be governed by the terms of the Current SERP; provided, however, that the amount
determined under Section 1.3(i) of the Plan shall in no event exceed $3,000,000.

          (d) Coordination with Plan. The Enhanced SERP provided by this Section 5 shall be
deemed in all respects to be provided under, and be part of, the Plan and to the extent the
provisions of the Plan are inconsistent with the provisions of this Section 5, the provisions of
this Section 5 shall govern and, as it affects Executive, the Plan shall be deemed amended
accordingly.

          (e) Definition of New Benefit Amount. As used in this Section 5, “New Benefit Amount”
shall mean an amount equal to the Benefit Amount calculated (A) without regard to Section 1.3(v) of
the Plan, (B) using a discount rate equal to 7% and the 1983 Group Annuity Mortality Table for
determining the actuarial equivalence of the annual amounts in

- 10 -

 

Sections 1.3(ii), 1.3(iii) and 1.3(iv) of the Plan, and (C) with Section 1.3(i) of the Plan
being deemed to read in its entirety follows:

“60% of the average of Participant’s three (3) highest fiscal years
of combined annual base salary and annual bonus (whether paid
currently or deferred) during the ten (10) fiscal years preceding
Participant’s termination of employment with all Employers; provided
that the amount determined pursuant to this clause (i) shall in no
event exceed $3,000,000; less.”

     6. Termination During CEO Term. The compensation and benefits provided for herein and
the employment of Executive by the Company shall be terminated during or at the end of the CEO Term
only as provided for below in this Section 6:

          (a) Disability.

               (i) In the event that Executive shall have failed, because of illness, injury or similar
incapacity (“Disability”), to render for four (4) consecutive calendar months ending during the CEO
Term, or for shorter periods aggregating one hundred eighty (180) or more calendar days in any
twelve (12) month period ending during the CEO Term, services contemplated by this Agreement,
Executive’s employment hereunder may be terminated, by written Notice of Termination from the
Company to Executive. If such Notice of Termination is delivered to Executive prior to December
16, 2009, the Company shall thereafter continue, from the Termination Date until Executive’s death
or December 16, 2009, whichever first occurs (the “Disability Payment Period”), (i) to pay
compensation to Executive, in the same manner as in effect immediately prior to the Termination
Date, in an amount equal to (A) fifty percent (50%) of the Eligible Base Salary (as defined below),
minus (B) the amount of any cash payments to him under the terms of the Company’s disability
insurance or other disability benefit plans or the Company’s tax-qualified Defined Benefit Pension
Plan, and any compensation he may receive pursuant to any other employment, and (ii) to provide
during the Disability Payment Period the benefits specified in Section 4(f) hereof.

               (ii) The determination of Disability shall be made only after 30 days notice to Executive and
only if Executive has not returned to performance of his duties during such 30-day period. In
order to determine Disability, both the Company and Executive shall have the right to provide
medical evidence to support their respective positions, with the ultimate decision regarding
Disability to be made by a majority of the Company’s disinterested directors.

               (iii) The term “Eligible Base Salary” shall mean Executive’s base salary as in effect
immediately prior to the Termination Date.

          (b) Death. In the event that Executive shall die during the CEO Term, Executive’s
employment shall terminate as of the date of death subject to the provisions of this Section 6(b).
In such event, the Company shall pay Executive’s Eligible Base Salary (as defined in Section 6(a)
above) for a period of twelve (12) months following the date of Executive’s death in the manner
otherwise payable hereunder, to such person or persons as Executive shall have directed in writing
or, in the absence of a designation, to his estate (the “Beneficiary”). The Company shall also
provide to the Beneficiary during such twelve-month period following the

- 11 -

 

date of Executive’s death the benefits specified in Section 4(f) hereof. If Executive’s death
occurs while he is receiving payments for Disability under Section 6(a) above, such payments shall
cease and the Beneficiary shall be entitled to the payments and benefits under this subsection (b),
which shall continue for a period of twelve months thereafter at the full rate of Executive’s
Eligible Base Salary (as defined in Section 6(a)(iii)).

          (c) Expiration of CEO Term. Unless extended, Executive’s employment hereunder shall
terminate at the expiration of the CEO Term, and the Non-Employee Chair Term shall commence as set
forth in Section 7 if Executive is then serving as Chairman of the Board. In such event, the
Company shall, from the end of the CEO Term, provide to Executive and his spouse the Special
Medical Coverage as defined in Section 4(f). Following the expiration of Executive’s employment
pursuant to this Section 6(c), all of the Company’s other obligations with respect to his
employment shall terminate, provided, however, that the termination of Executive’s employment
pursuant to this Section 6(c) shall not affect Executive’s entitlement to benefits in which he has
become vested (including, without limitation, rights of indemnification and amounts (if any) due
under Section 6(h)) or which are otherwise payable in respect of periods ending prior to his
termination of employment, or the vested equity grants under Section 4(c) hereof.

          (d) Cause. The Company may terminate Executive’s employment under this Agreement for
“Cause.” A termination for Cause is a termination by reason of (i) a material breach of this
Agreement by Executive (other than as a result of incapacity due to physical or mental illness)
which is committed in bad faith or without reasonable belief that such breach is in the best
interests of the Company and which is not remedied within a reasonable period of time after receipt
of written notice from the Company specifying such breach, or (ii) Executive’s conviction by a
court of competent jurisdiction of a felony, or (iii) entry of an order duly issued by any federal
or state regulatory agency having jurisdiction in the matter removing Executive from office of the
Company or its subsidiaries or permanently prohibiting him from participating in the conduct of the
affairs of the Company or any of its subsidiaries, or (iv) any purported termination by Executive
of his employment hereunder other than pursuant to Section 6(e) hereof. If Executive shall be
convicted of a felony or shall be removed from office and/or temporarily prohibited from
participating in the conduct of the Company’s or any of its subsidiaries’ affairs by any federal or
state regulatory authority having jurisdiction in the matter, the Company’s obligations under
Sections 4(a), 4(b), 4(c) and 4(d) hereof shall be automatically suspended; provided, however, that
if the charges resulting in such removal or prohibition are finally dismissed or if a final
judgment on the merits of such charges is issued in favor of Executive, or if the conviction is
overturned on appeal, then Executive shall be reinstated in full with back pay for the removal
period plus accrued interest at the rate then payable on judgments. During the period that the
Company’s obligations under Section 4(a), 4(b), (4)(c) and 4(d) are suspended, Executive shall
continue to be entitled to receive Additional Benefits under Section 4(e) until the conviction of
the felony or removal from office has become final and non-appealable. When the conviction of the
felony or removal from office has become final and non-appealable, all of the Company’s obligations
hereunder shall terminate; provided, however, that the termination of Executive’s employment
pursuant to this Section 6(d) shall not affect Executive’s entitlement to all benefits in which he
has become vested (including, without limitation, rights of indemnification and amounts due under
Section 6(h)) or which are otherwise payable in respect of periods ending prior to his termination
of employment.

- 12 -

 

          (e) Without Cause; Good Reason. Executive may terminate his employment for Good
Reason and the Company may terminate Executive’s employment without Cause. For purposes of this
Agreement, and except as provided in the following sentence, “Good Reason” shall be deemed to occur
if the Company notifies Executive of a termination of his employment other than pursuant to
Sections 6(a), 6(c), 6(d) or 6(e) hereof, or if the Company breaches this Agreement in any material
respect, which breach is not remedied within a reasonable period of time after receipt of written
notice from Executive specifying such breach, or if the Board (i) elects a person other than
Executive to commence service before December 16, 2009, as the Company’s Chairman of the Board (if
Executive is then serving as a director of the Company) or Chief Executive Officer without
Executive’s consent, (ii) reorganizes management so as to require him to report to a person or
persons other than the Board, (iii) requires that Executive be based anywhere that is more than
fifty (50) miles from the office where Executive is located as of the Effective Date, (iv) takes an
action that results in Executive not being able to travel domestically by private aircraft at the
Company’s expense, or (v) takes any other action which, in Executive’s reasonable judgment, results
in the diminution in Executive’s status, title, position and responsibilities other than an
insubstantial action not taken in bad faith and which is remedied by the Company promptly after
receipt of notice from Executive. Executive shall not have Good Reason to terminate employment
with the Company (or otherwise have the right to claim that he has been constructively terminated
from employment) due solely to (i) the change in his duties hereunder following the expiration of
the CEO Term, (ii) the fact that the Company shall cease to be a public company and shall become a
subsidiary of another publicly-traded corporation or (iii) a person being appointed as lead
director at any time during the CEO Term. Notwithstanding the foregoing, Executive may terminate
his employment for any or no reason during the CEO Term within two years following a Change in
Control, and such termination shall be considered a termination for Good Reason hereunder. If
Executive’s employment shall be terminated during the CEO Term by the Company other than for Cause
or Disability or by Executive for Good Reason, then the Company shall pay Executive in a single
payment, as severance pay and in lieu of any further salary and incentive compensation for periods
subsequent to the Termination Date, an amount in cash equal to the sum of (A) three times the sum
of Executive’s Eligible Base Salary (as defined in Section 6(a)(iii) above) and (B) the target
incentive compensation that would be payable to him under Section 4(b) above for the year in which
the Employment Termination Date occurs; provided, however, that if the Termination Date occurs
following a Change in Control or during a “Protected Period” (as defined in Appendix A to this
Agreement) with respect to a Change in Control, then such cash amount shall be equal to three times
the sum of (A) Executive’s Eligible Base Salary and (B) the greater of (x) the average of the
aggregate bonus and/or incentive award, if any, paid or payable to Executive for each of the two
(2) fiscal years of the Company preceding the fiscal year in which Executive’s termination of
employment occurs and (y) the bonus and/or incentive award paid for the fiscal year immediately
preceding the date of the Change in Control. For purposes of Section 4(f), this Section 6(e) and
Section 12, “Change in Control” shall be as defined in the Company’s Change in Control Severance
Plan, as amended and restated June 14, 2006.

          (f) Notice of Termination. Any purported termination by the Company or Executive
shall be communicated by a written Notice of Termination to the other party hereto which indicates
the specific termination provision in this Agreement, if any, relied upon and which sets forth in
reasonable detail the facts and circumstances, if any, claimed to provide a basis for termination
of Executive’s employment under the provision so indicated. For purposes

- 13 -

 

of this Agreement, no such purported termination shall be effective without such Notice of
Termination. The “Termination Date” shall mean the date specified in the Notice of Termination,
which shall be no less than 30 or more than 60 days following the date of the Notice of
Termination. Notwithstanding any other provision of this Agreement, in the event of any
termination of Executive’s employment hereunder for any reason, the Company shall pay Executive his
full base salary through the Termination Date, plus any Additional Benefits that have been earned
or become payable, but which have not yet been paid as of such Termination Date.

          (g) Payments. Except (i) as otherwise provided herein (including Section 11) and (ii)
in the case of the payments pursuant to Section 4(f) hereof, all payments payable under this
Agreement as a result of the termination of Executive’s employment hereunder shall be made within
15 days after the Termination Date or, if any portion is not then reasonably determinable, within
five (5) days after such portion is so determinable. In the event of a dispute concerning the
validity of a purported termination which is maintained in good faith, the Termination Date shall
mean the date the dispute is finally resolved and the Company will continue to provide Executive
with the compensation and benefits provided for under this Agreement, until the dispute is finally
resolved without any obligation by Executive to repay any of such amounts to the Company,
notwithstanding the final outcome of the dispute. Payments required to be made by this Section
6(g) are in addition to all other amounts due under Section 6 of this Agreement and shall not be
offset against or reduce any other amounts due under Section 6 of this Agreement. The Company may
require Executive to perform his then current duties to, and services for, the Company during the
period following a purported termination but before the dispute concerning such purported
termination is finally resolved, in which event the Company shall provide Executive with a
reasonable opportunity to perform his duties under this Agreement during such period.

          (h) Excise Tax Gross-Up.

               (i) Except as provided in subsection (ii), in the event it shall be determined that any
payment or distribution of any type, including accelerated vesting, to or for the benefit of
Executive, by the Company, any “affiliate” (as defined in Rule 405 of the Securities Act of 1933,
as amended) of the Company, any “person” (as the term “person” is used for purposes of Section
13(d) or 14(d) of the Securities Exchange Act of 1934, as amended) who acquires ownership or
effective control of the Company or ownership of a substantial portion of the Company’s assets
(within the meaning of Section 280G of the Code), and the regulations thereunder) or any
“affiliate” of such “person,” whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement or otherwise (the “Payments”), is or will be subject to the excise tax
imposed by Section 4999 of the Code or any interest or penalties with respect to such excise tax
(such excise tax, together with any such interest and penalties, are collectively referred to as
the “Excise Tax”), then Executive shall be entitled to receive an additional payment (a “Gross-Up
Payment”) in an amount such that after payment by Executive of all taxes (including any interest or
penalties imposed with respect to such taxes), including any income tax, employment tax or Excise
Tax imposed upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal to
the Excise Tax imposed upon the Payments.

               (ii) Notwithstanding subsection (i) or any other provision of this Agreement to the contrary,
in the event that the Payments (excluding the payment provided for in

- 14 -

 

subsection (i)) exceed by less than the greater of 10% or $100,000, the maximum amount of
Payments which if made or provided to Executive would not be subject to an Excise Tax, Executive
will not be entitled to a Gross-Up Payment and the Payments shall be reduced (but not below zero)
to the extent necessary so that no Payment to be made or benefit to be provided to Executive shall
be subject to the Excise Tax; it being the intent of the parties that the Payments shall be reduced
only if the economic detriment to Executive (on a pre-tax basis) is less than the greater of
$100,000 or 10% of the Payments. Unless Executive shall have given prior written notice to the
Company specifying a different order to effectuate the foregoing, the Company shall reduce or
eliminate the Payments, first by reducing or eliminating the portion of the Payments which are
payable in cash, second by reducing or eliminating the portion of the Payments which are not
payable in cash (other than Payments as to which Treasury Regulations Section 1.280G-1 Q/A-24(c)
(or any successor provision thereto) applies (“Q/A-24(c) Payments”)), and third by reducing Q/A
24(c) Payments, in each case in reverse order beginning with payments or benefits which are to be
paid the farthest in time from the “Determination” (as defined below). Any notice given by
Executive pursuant to the preceding sentence shall take precedence over the provisions of any other
plan, arrangement or agreement governing Executive’s rights and entitlements to any benefits or
compensation.

               (iii) The determination of whether the Payments shall be reduced pursuant to this Agreement
and the amount of such reduction, all mathematical determinations, and all determinations as to
whether any of the Payments are “parachute payments” (within the meaning of Section 280G of the
Code), that are required to be made under this Section, including determinations as to whether a
Gross-Up Payment is required, the amount of such Gross-Up Payment and amounts relevant to the last
sentence of this subsection (iii), shall be made by an independent accounting firm selected by
Executive from among the four (4) largest accounting firms in the United States or any nationally
recognized financial planning and benefits consulting company (the “Accounting Firm”), which shall
provide its determination (the “Determination”), together with detailed supporting calculations
regarding the amount of any Gross-Up Payment and any other relevant matter, both to the Company and
Executive by no later than ten (10) days following the Termination Date, if applicable, or such
earlier time as is requested by the Company or Executive (if Executive reasonably believes that any
of the Payments may be subject to the Excise Tax). If the Accounting Firm determines that no
Excise Tax is payable by Executive, it shall furnish Executive and the Company with an opinion
reasonably acceptable to Executive and the Company that no Excise Tax is payable (including the
reasons therefor) and that Executive has substantial authority not to report any Excise Tax on his
federal income tax return. If a Gross-Up Payment is determined to be payable, it shall be paid
(including through withholding of taxes) to Executive no later than the due date for payment of the
Excise Tax. Any determination by the Accounting Firm shall be binding upon the Company and
Executive, absent manifest error. As a result of uncertainty in the application of Section 4999 of
the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible
that Gross-Up Payments not made by the Company should have been made (“Underpayment”), or that
Gross-Up Payments will have been made by the Company which should not have been made
(“Overpayment”). In either such event, the Accounting Firm shall determine the amount of the
Underpayment or Overpayment that has occurred. In the case of an Underpayment, the amount of such
Underpayment (together with any interest and penalties payable by Executive as a result of such
Underpayment) shall be promptly paid by the Company to or for the benefit of Executive. In the
case of an Overpayment, Executive shall, at the

- 15 -

 

direction and expense of the Company, take such steps as are reasonably necessary (including
the filing of returns and claims for refund), follow reasonable instructions from, and procedures
established by, the Company, and otherwise reasonably cooperate with the Company to correct such
Overpayment, provided, however, that (A) Executive shall not in any event be obligated to return to
the Company an amount greater than the net after-tax portion of the Overpayment that he has
retained or has recovered as a refund from the applicable taxing authorities and (B) if a Gross-Up
Payment is determined to be payable, this provision shall be interpreted in a manner consistent
with an intent to make Executive whole, on an after-tax basis, from the application of the Excise
Tax, it being understood that the correction of an Overpayment may result in Executive repaying to
the Company an amount which is less than the Overpayment. The cost of all such determinations made
pursuant to this Section shall be paid by the Company.

     7. Non-Employee Chair Term.

          (a) Service as Non-Employee Director. The parties anticipate that Executive will be
nominated as a director of the Company at such times as are necessary to enable Executive to serve
continuously on the Board through December 31, 2011. The parties agree that he will continue to
serve as Chairman of the Board through December 31, 2011 so long as he is a director. However,
both parties recognize that the decision to nominate Executive as a director must be made in
accordance with the governance procedures of the Company then in effect. Executive agrees to serve
on the Board and as Chair during the Non-Employee Chair Term, if and while elected as both a
director and Chair, except to the extent he determines in good faith that compelling ethical,
liability, health, family or similar circumstances preclude him from doing so.

          (b) Compensation. During the Non-Employee Chair Term, the Company agrees to pay to
Executive the same compensation, and to provide to Executive the same benefits, that it pays or
provides to the other non-employee members of the Board. In addition, the Company agrees to pay
Executive for each calendar year during the Non-Employee Chair Term an additional retainer of at
least $200,000 per year (pro rated for any period of time during the Non-Employee Chair Term that
is less than a full calendar year).

          (c) Benefits and Perquisites. During the Non-Employee Chair Term, the Company shall
additionally provide Executive with the following benefits and perquisites:

     (i) On-site office space and secretarial support services;

     (ii) Use of a private jet for purposes that, in the good faith judgment of
Executive, are Company business purposes;

     (iii) Financial consulting services of AYCO (or another comparable financial
consulting firm selected by Executive) substantially similar to such services made
available to senior executives of the Company from time to time; and

     (iv) Payment of Executive’s annual country club dues at Bel Air Country Club in
Los Angeles, CA.

- 16 -

 

          (d) Applicability of Director Policies. During the Non-Employee Chair Term, Executive
shall be subject to the same rules applicable to other directors who are not employees of the
Company, including with respect to fiduciary duties and outside activities; provided that any
activity that was approved during the CEO Term shall be deemed to be an approved activity during
the Non-Employee Chair Term.

          (e) Director Emeritus. Upon the termination of Executive’s service as a director of
the Company, Executive shall be eligible for the Company’s Director Emeritus program as then in
effect (but in any event, such program shall result in continuing the vesting of any equity grants
he received in connection with his employment with the Company prior to the execution of this
Agreement). To the extent that at any time (whether or not Executive ever serves as a non-employee
Chairman of the Board) Executive is not then eligible for the Director Emeritus program, he shall
serve as Chairman Emeritus with all the same benefits and conditions that would apply if he were a
Director Emeritus. Notwithstanding anything to the contrary in this Section 7(e), the vesting of
all equity grants pursuant to this Agreement shall be as provided herein, and shall not be altered
by the terms of the Company’s Director Emeritus program.

     8. Waiver of Rights and Obligations under Consulting Agreement. The Company and
Executive agree and confirm that the Consulting Agreement (as amended by the Current Employment
Agreement), which was deemed to be executed on February 28, 2006, will terminate on February 28,
2011 unless terminated earlier as provided therein; provided, however, that notwithstanding
anything to the contrary in the Consulting Agreement, the Company and Executive hereby fully waive
all of their rights and claims, and fully waive, release and discharge the other’s obligations,
under the Consulting Agreement until the first day after the date on which Executive ceases to be
Chairman of the Board.

     9. Reimbursement of Business Expenses. During the term of this Agreement, the Company
shall reimburse Executive promptly for all expenditures (including travel, entertainment, parking
and business meetings and the monthly costs (including dues) of maintaining memberships at
appropriate clubs) to the extent that such expenditures meet the requirements of the Code for
deductibility by the Company for federal income tax purposes or are otherwise in compliance with
the rules and policies of the Company and are substantiated by Executive as required by the
Internal Revenue Service and rules and policies of the Company.

     10. Indemnity; Directors and Officer’s Insurance.

          (a) To the fullest extent permitted by applicable law, the Certificate of Incorporation and
the By-Laws of the Company (as from time to time in effect) and any indemnity agreements entered
into from time to time between the Company and Executive, the Company shall indemnify Executive and
hold him harmless for any acts or decisions made by him in good faith while performing services for
the Company, and shall use reasonable efforts to obtain coverage for him under liability insurance
policies now in force or hereafter obtained during the term of this Agreement covering the other
officers or directors of the Company.

          (b) The Company shall, to the extent it is available on commercially reasonable terms,
maintain Director’s and Executive’s liability insurance during the term of this Agreement that is
substantially similar in the aggregate to that in effect as of the Effective Date. Any such
insurance shall cover Executive’s acts and omissions as an officer and/or director of

- 17 -

 

the Company, and such coverage at any time shall be no less favorable than the coverage then
provided to any other director or officer of the Company.

          (c) The provisions of this Section 10 shall also apply to all of Executive’s prior service
with the Company and shall be in addition to, and, to the extent not duplicative, not in lieu of,
any other rights to indemnification to which Executive is otherwise entitled.

     11. Section 409A.

          Notwithstanding any provision of this Agreement to the contrary, but subject to the last
sentence of this Section 11, upon Executive’s termination of employment with the Company for any
reason other than death, Executive shall not be entitled to receive any payments of, or benefits
that constitute, deferred compensation (as defined in Section 409A of the Code (“Section 409A”))
until the earlier of (i) the date which is six (6) months after his termination of employment or
(ii) the date of his death (the “Section 409A Period”), at which time the Company shall pay all
delayed payments to Executive in a lump sum. With respect to any benefit that the Company cannot
provide during the Section 409A Period pursuant to the preceding sentence, Executive shall pay the
cost or premium for such benefit during the Section 409A Period and be reimbursed by the Company
therefor promptly after the end of the Section 409A Period. The Company shall pay Executive
interest on any payments or benefits that are deferred pursuant to this Section 11 at a rate per
annum equal to 110% of the applicable short-term Federal rate under Section 1274(d) of the Code in
effect for the month in which Executive’s employment terminates. The provisions of this Section 11
shall apply only if, and only to the extent, required to avoid subjecting Executive to additional
taxes and/or penalties under Section 409A.

     12. Miscellaneous.

          (a) Succession. This Agreement shall inure to the benefit of and shall be binding
upon the Company, its successors and assigns, but without the prior written consent of Executive,
this Agreement may not be assigned other than in connection with a merger or sale of substantially
all the assets of the Company or similar transaction. The Company shall not agree to any such
transaction unless the successor to or assignee of the Company’s business and/or assets in such
transaction expressly assumes all obligations of the Company hereunder. The obligations and duties
of Executive hereby shall be personal and not assignable.

          (b) Notices. Any notices provided for in this Agreement shall be sent to the Company
at 4500 Park Granada, Calabasas, CA 91302 Attention: General Counsel/Secretary, with a copy to the
Chairman of the Compensation Committee at the same address, or to such other address as the Company
may from time to time in writing designate, and to Executive at his home address as reflected in
the Company’s records or at such other address as he may from time to time in writing designate.
All notices shall be deemed to have been given two (2) business days after they have been deposited
as certified mail, return receipt requested, postage paid and properly addressed to the designated
address of the party to receive the notices.

          (c) Entire Agreement; Modified Applicability of Consulting Agreement. This instrument
(including the Arbitration Agreement described in Section 12(n) hereof and the Consulting
Agreement) contains the entire agreement of the parties relating to the subject matter

- 18 -

 

hereof, and, on the Effective Date, it replaces and supersedes any prior agreements between
the parties relating to said subject matter, including, but not limited to, the Current Employment
Agreement but only as to the employment or other service-related provisions for periods on and
after the Effective Date and without effect on non-duplicative provisions of the Current Employment
Agreement (such as Section 4(f) and Section 4(c)) that provide rights that survive Executive’s
termination of employment thereunder. No modifications or amendments of this Agreement shall be
valid unless made in writing and signed by the parties hereto. The Company and Executive
acknowledge and agree that the benefits payable under this Agreement replace and supersede in full
any and all benefits payable under the Current Employment Agreement with regard to the employment
period under this Agreement and any post-employment period to the extent duplicative, and that the
Current Employment Agreement shall be null and void and of no force or effect on the Effective
Date.

          (d) Waiver. The waiver of the breach of any term or of any condition of this
Agreement shall not be deemed to constitute the waiver of any other breach of same or any other
term or condition.

          (e) California Law. This Agreement shall be construed and interpreted in accordance
with the laws of California without giving effect to the conflicts of laws principles thereof.

          (f) Attorneys’ Fees in Action on Contract. If any litigation shall occur between
Executive and the Company, which litigation arises out of or as a result of this Agreement or the
acts of the parties hereto pursuant to this Agreement, or which seeks an interpretation of this
Agreement, the arbitrator hearing the matter shall, in his sole discretion, determine the
prevailing party in such litigation and, in addition to any other judgment or award, may, in his
sole discretion, award such prevailing party such sums as he shall find to be reasonable as and for
the prevailing party’s attorneys’ fees and disbursements.

          (g) Non-solicitation. Until the date that is 24 months after the later of (i) last
date of Executive’s employment by the Company or (ii) the date Executive ceases to be a director of
the Company, Executive shall not interfere with the Company’s relationship with, or endeavor to
entice away from the Company for competitive purposes, any person who was an employee or customer
of the Company or otherwise had a material business relationship with the Company within the final
12 months in which Executive was an employee or director of the Company; provided that after a
Change in Control the reference to competitive purposes shall be limited to the Company’s material
activities prior to the Change in Control and further provided that the foregoing shall not be
violated by general advertising not specifically targeted at the above persons and entities.

          (h) Confidentiality. Executive agrees that he will not use or divulge or otherwise
disclose, directly or indirectly, any trade secret or other confidential information concerning the
business or policies of the Company or any of its subsidiaries which he may have learned as a
result of his employment during the term of this Agreement or prior thereto as an employee, officer
or director of or consultant to the Company or any of its subsidiaries, except to the extent such
use or disclosure is (i) necessary or appropriate (in his good faith judgment) to the performance
of this Agreement and in furtherance of the Company’s best interests, (ii) required by applicable
law, (iii) lawfully obtainable from other sources, or (iv) authorized by the

- 19 -

 

Company. The provisions of this subsection shall survive the expiration, suspension or
termination, for any reason, of this Agreement.

          (i) Non-Disparagement. Executive agrees that while he is employed by the Company or
serving as a director of the Company and thereafter (including following a termination of
employment or service for any reason), he shall not, with willful intent to damage economically or
as to reputation, make any public false, defamatory or disparaging statement about the Company or
any of its subsidiaries, or, prior to a Change in Control, the officers or directors of the Company
or its subsidiaries; provided that the foregoing shall not apply to (A) statements made in
compliance with legal process or governmental inquiry, (B) statements made while employed or a
serving as a director in the course and scope of his duties and (C) statements made to rebut to the
extent necessary any misleading or untrue public statements. The Company agrees that, while
Executive is employed by the Company or serving as a director of the Company and thereafter, that
it shall not, and it shall use its best efforts to cause its directors, officers and employees to
not, make or cause to be made any public false, defamatory or disparaging statement about
Executive; provided that the foregoing shall not apply to (A) statements made in compliance with
legal process or governmental inquiry or (B) statements made to rebut to the extent necessary any
misleading or untrue public statements. Notwithstanding the foregoing, should Executive compete
with the Company and such activity is not a breach of Executive’s obligations to the Company,
normal and accurate competitive statements he may make about the Company or any of its subsidiaries
shall not be deemed a breach of this Section 12(i). This Section 12(i) shall have no third party
beneficiaries.

          (j) Continued Availability and Cooperation. Executive will reasonably cooperate with
the Company, during the term of his employment, during his service as a director and thereafter
(including following Executive’s termination of employment or service for any reason), by making
himself reasonably available to testify on behalf of the Company or any subsidiary or affiliate of
the Company in any action, suit, or proceeding, whether civil, criminal, administrative, or
investigative, involving any matter of which he had knowledge as a result of his employment with,
or service as a director of, the Company and to reasonably assist the Company or any such
subsidiary or affiliate in any such action, suit or proceeding by providing information and meeting
and consulting with the Board or its representatives or counsel, or representatives or counsel to
the Company or any such subsidiary or affiliate, as reasonably requested; provided, however, that
the same does not materially interfere with his then current business activities (or if it involves
a matter in which his relationship is adversarial to the Company). The Company will reimburse
Executive for all expenses reasonably incurred by him in connection with his provision of testimony
or assistance, including reasonable attorneys’ fees incurred by Executive in connection with such
testimony. Nothing in this Section 12(j) shall impair Executive’s rights under Section 10 of this
Agreement.

          (k) Remedies of the Company. Executive acknowledges that the services he is obligated
to render under the provisions of this Agreement are of a special, unique, unusual, extraordinary
and intellectual character, which gives this Agreement peculiar value to the Company. The loss of
these services cannot be reasonably or adequately compensated in damages in an action at law and it
would be difficult (if not impossible) to replace these services. By reason thereof, Executive
agrees and consents that if he violates any of the material provisions of this Agreement, the
Company, in addition to any other rights and remedies

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available under this Agreement or under applicable law, shall be entitled during the remainder
of the term of this Agreement to seek injunctive relief, from a tribunal of competent jurisdiction,
restraining Executive from committing or continuing any violation of this Agreement.

          (l) Severability. If any provision of this Agreement is held invalid or
unenforceable, the remainder of this Agreement shall nevertheless remain in full force and effect,
and if any provision is held invalid or unenforceable with respect to particular circumstances, it
shall nevertheless remain in full force and effect in all other circumstances.

          (m) No Obligation to Mitigate; Set-off. Executive shall not be required to mitigate
the amount of any payment provided for in this Agreement by seeking other employment or otherwise
and, except as provided in Section 6(a) hereof, no payment hereunder shall be offset or reduced by
the amount of any compensation or benefits provided to Executive in any subsequent employment. In
addition, the amount of any payments or any benefits payable or provided hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other right which the Company may
have against Executive for any reason.

          (n) Arbitration. The parties acknowledge that they have previously entered into a
Mutual Agreement to Arbitrate Claims (the “Arbitration Agreement”). The parties hereby incorporate
herein by reference the terms of the Arbitration Agreement. Any dispute arising regarding this
Agreement and/or any other matter covered by the Arbitration Agreement shall be subject to binding
arbitration pursuant to the terms of the Arbitration Agreement, except as expressly provided
herein.

          (o) Representation by Counsel; Interpretation. The Company and Executive each
acknowledge that each party to this Agreement has been represented by counsel in connection with
this Agreement and the matters contemplated by this Agreement. Accordingly, any rule of law,
including but not limited to Section 1654 of the California Civil Code, or any legal decision that
would require interpretation of any claimed ambiguities in this Agreement against the party that
drafted it has no application and is expressly waived. The provisions of this Agreement shall be
interpreted in a reasonable manner to effect the intent of the parties.

          (p) Counterparts. This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original but all of which together shall constitute one and the same
instrument.

          (q) Survivorship. The respective rights and duties of the parties hereunder shall
survive any termination of this Agreement or Executive’s service as Chairman of the Board to the
extent necessary to the intended preservation of such rights and obligations.

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     IN WITNESS WHEREOF, the parties have entered into this Agreement as of the date first above
written.

	 	 	 
	ATTEST:

	 	 
	 
	 
	/s/ Michael S. Udovic
	 	 
	 

Asst. Secretary

	 	 

	 	 	 
	COUNTRYWIDE FINANCIAL CORPORATION
	 
	 	 
	By:

	 	/s/ Eric P. Sieracki
	 

	 	 
	 

	 	Eric P. Sieracki
	 
	Title:

	 	Executive Managing Director and
Chief Financial Officer
	 

	 	 
	 
	Date:

	 	December 22, 2006
	 

	 	 
	 
	 	 
	EXECUTIVE:

	 
	 	 
	/s/ Angelo R. Mozilo

	 
	Angelo R. Mozilo, in his individual capacity

	 
	 	 
	Date:

	 	December 22, 2006
	 

	 	 

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APPENDIX A

To Angelo R. Mozilo Employment Agreement

     1. For purposes of determining the vesting of Executive’s RSU Award, total shareholder return
shall be calculated as a function of the increase in the capital value of the Company over the
performance period, including share price appreciation plus dividends declared per share of stock.
The definition shall be applied uniformly to all of the companies in the peer group, including the
Company, as follows:

     Total shareholder return = (Share price at end of performance period — share price at
beginning of period) + dividends per share declared over the performance period)/Share price at the
beginning of the performance period.

     For this purpose, dividends shall include regular dividend payments and special or one-time
dividends, and all dividends distributed by the applicable company during the performance period
shall be presumed to be reinvested in shares of the applicable company’s stock on the date such
dividends are distributed to shareholders. Share price at the beginning of the performance period
shall be the closing share price on the first day of the performance period, and share price at the
end of the performance period shall be the closing share price on the last day of the performance
period. The Compensation Committee shall equitably adjust the determination of total shareholder
return in response to unusual or nonrecurring events in order to prevent unintended dilution or
enlargement of rights.

          2. The “Protected Period” corresponding to a Change in Control of the Company shall be a
period of time determined in accordance with the following:

	 	(a)	 	If the Change in Control is triggered by a tender offer for
shares of the Company’s stock or by the offeror’s acquisition of shares
pursuant to such a tender offer, the Protected Period shall commence on the
date of the initial tender offer and shall continue through and including the
date of the Change in Control; provided that in no case will the Protected
Period commence earlier than the date that is six (6) months prior to the
Change in Control.
	 
	 	(b)	 	If the Change in Control is triggered by a merger,
consolidation, or reorganization of the Company with or involving any other
corporation, the Protected Period shall commence on the date that serious and
substantial discussions first take place to effect the merger, consolidation,
or reorganization and shall continue through and including the date of the
Change in Control; provided that in no case will the Protected Period commence
earlier than the date that is six (6) months prior to the Change in Control.
	 
	 	(c)	 	In the case of any Change in Control not described in clause
(a) or (b) above, the Protected Period shall commence on the date that is six
(6) months prior to the Change in Control and shall continue through and
including the date of the Change in Control.

Appendix A-1

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