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EXHIBIT 4.2

REGISTRATION RIGHTS AGREEMENT

REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as of November 7, 2007, by and between
MIDDLEBROOK PHARMACEUTICALS, INC., a Delaware corporation (the “Company”), and DEERFIELD PRIVATE
DESIGN FUND, L.P. (“Deerfield Design”), DEERFIELD PRIVATE DESIGN INTERNATIONAL, L.P. (“Deerfield
Design International”), DEERFIELD SPECIAL SITUATIONS FUND, L.P. (“Deerfield Special Situations”),
DEERFIELD SPECIAL SITUATIONS FUND INTERNATIONAL LIMITED (“Deerfield Special Situations
International”).

WHEREAS:

A. In connection with the Asset Purchase Agreement by and between the parties hereto of even date
herewith (the “Purchase Agreement”), the Company has agreed, upon the terms and subject to the
conditions contained therein, to issue and sell to the Buyer a Warrant in the amount described in
the Purchase Agreement, where the Warrant is exercisable into shares of the Company’s common stock,
par value $0.01 per share (the “Common Stock”), upon the terms and conditions and subject
to the limitations and conditions set forth in the Warrant, all subject to the terms and conditions
of the Purchase Agreement; and

B. To induce the Buyer to execute and deliver the Purchase Agreement, the Company has agreed to
provide certain registration rights under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute (collectively, the “Securities Act”), and
applicable state securities laws,

NOW, THEREFORE, 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 Buyer hereby agree as follows:

1. DEFINITIONS.

a. As used in this Agreement, the following terms shall have the following meanings:

(i) “Buyer” means the purchaser of Warrant pursuant to the Purchase Agreement specified on the
signature page hereof, and any transferee or assignee who agrees to become bound by the provisions
of this Agreement in accordance with Section 10 hereof.

(ii) “Filing Deadline,” for each Registration Statement required to be filed hereunder, shall mean
a date that is twenty (20) calendar days following the date the Warrant is issued.

(iii) “Registration Deadline” shall mean the earlier of (i) the date that is ninety (90) days after
the date that the Registration Statement is actually filed or (ii) the date that is ninety (90)
days after the Filing Deadline.

(iv) “Warrant(s)” means the warrants issued by the Company pursuant to the Purchase Agreement.

(v) “Register,” “Registered,” and “Registration” refer to a registration effected by preparing and
filing a Registration Statement or Statements in compliance with the Securities Act and pursuant to
Rule 415 under the Securities Act or any successor rule providing for offering securities on a
continuous basis, and the declaration or ordering of effectiveness of such Registration Statement
by the United States Securities and Exchange Commission (the “SEC”).

(vi) “Registrable Securities,” for a given Registration, means (a) the Warrant, (b) any shares of
Common Stock (the “Warrant Shares”) issued or issuable upon exercise of or otherwise pursuant to
the Warrant, (c) any shares of capital stock issued or issuable as a dividend on or in exchange for
or otherwise with respect to any of the foregoing, (d) any additional shares of Common Stock
issuable in connection with any anti-dilution provisions in the Warrant (without giving effect to
any limitations on exercise set forth in the Warrant), (e) any other warrants or shares of common
stock issued pursuant to the terms of the Purchase Agreement, the Warrant or this Registration
Rights Agreement, and (f) any securities issued or issuable upon any stock split, dividend or other
distribution, recapitalization or similar event with respect to the foregoing.

 

 

(vii) “Registration Statement(s)” means a registration statement(s) of the Company under the
Securities Act required to be filed hereunder.

2. REGISTRATION.

a. MANDATORY REGISTRATION. Following the issuance of the Warrant pursuant to the Purchase
Agreement, the Company shall prepare, and, on or prior to the applicable Filing Deadline (as
defined above) file with the SEC a Registration Statement (the “Mandatory Registration Statement”)
on Form S-3 (or, if Form S-3 is not then available, on such form of Registration Statement as is
then available to effect a registration of the Registrable Securities, subject to the consent of
the Buyer, which consent will not be unreasonably withheld) covering the resale of the Registrable
Securities issued on the applicable Issuance Date (as defined below) which Registration Statement,
to the extent allowable under the Securities Act and the rules and regulations promulgated
thereunder (including Rule 416), shall state that such Registration Statement also covers such
indeterminate number of additional shares of Common Stock as may become issuable upon exercise of
or otherwise pursuant to the Warrant to prevent dilution resulting from stock splits, stock
dividends or similar transactions. The Warrant and the number of shares of Common Stock initially
included in such Registration Statement shall be no less than the Warrant issued on the Issuance
Date (as defined herein) and the aggregate number of Warrant Shares that are then issuable upon
exercise of or otherwise pursuant to the Warrant issued on the Issuance Date, without regard to any
limitation on the Buyer’s ability to exercise the Warrant, respectively. The Company acknowledges
that the number of shares initially included in the Registration Statement represents a good faith
estimate of the maximum number of shares issuable upon exercise of or otherwise pursuant to the
Warrant issued on the Issuance Date and shall be amended if not sufficient. The Registration
Statement (and each amendment or supplement thereto, and each request for acceleration of
effectiveness thereof) shall be provided to (and subject to the approval of) the Buyer and its
counsel prior to its filing or other submission.

b. PIGGY-BACK REGISTRATIONS. If at any time prior to the expiration of the Registration Period (as
hereinafter defined) the Company shall determine to file with the SEC a Registration Statement
relating to an offering for its own account or the account of others under the Securities Act of
any of its equity securities (other than on Form S-4 or Form S-8 or their then equivalents relating
to equity securities to be issued solely in connection with any acquisition of any entity or
business or equity securities issuable in connection with stock option or other employee benefit
plans), the Company shall send to Buyer written notice of such determination and, if within fifteen
(15) days after the effective date of such notice, the Buyer shall so request in writing, the
Company shall include in such Registration Statement all or any part of the Registrable Securities
the Buyer requests to be registered, except that if, in connection with any underwritten public
offering for the account of the Company, the managing underwriter(s) thereof shall impose a
limitation on the number of Registrable Securities which may be included in the Registration
Statement because, in such underwriter(s)’ judgment, marketing or other factors dictate such
limitation is necessary to facilitate public distribution, then the Company shall be obligated to
include in such Registration Statement only such limited portion of the Registrable Securities with
respect to which the Buyer has requested inclusion hereunder as the underwriter shall permit;

PROVIDED, HOWEVER, that the Company shall not exclude any Registrable Securities unless the Company
has first excluded all outstanding securities, the holders of which are not entitled by contract to
inclusion of such securities in such Registration Statement or are not entitled to pro rata
inclusion with the Registrable Securities; and

PROVIDED, FURTHER, HOWEVER, that, after giving effect to the immediately preceding proviso, any
exclusion of Registrable Securities shall be made pro rata with holders of other securities having
the contractual right to include such securities in the Registration Statement other than holders
of securities entitled to inclusion of their securities in such Registration Statement by reason of
demand registration rights. No right to registration of Registrable Securities under this Section
2(b) shall be construed to limit any registration required under Section 2(a) hereof. If an
offering in connection with which the Buyer is entitled to registration under this Section 2(b) is
an underwritten offering, then the Buyer shall, unless otherwise agreed by the Company, offer and
sell such Registrable Securities in an underwritten offering using the same underwriter or
underwriters and, subject to the provisions of this Agreement, on the same terms and conditions as
other shares of Common Stock included in such underwritten offering. Notwithstanding anything to
the contrary set forth herein, the registration rights of the Buyer pursuant to this Section 2(b)
shall only be available in the event the Company fails to timely file, obtain effectiveness or

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maintain effectiveness of any Registration Statement to be filed pursuant to Section 2(a) in
accordance with the
terms of this Agreement.

3. OBLIGATIONS OF THE COMPANY. In connection with the registration of the Registrable Securities,
the Company shall have the following obligations:

a. The Company shall prepare promptly, and file with the SEC as soon as practicable after the date
that the Warrant is issued under the Purchase Agreement (an “Issuance Date”) (but no later than the
Filing Deadline), a Registration Statement with respect to the number of Registrable Securities
provided in Section 2(a), and thereafter use its best efforts to cause each such Registration
Statement relating to Registrable Securities to become effective as soon as possible after such
filing, but in any event shall cause each such Registration Statement relating to Registrable
Securities to become effective no later than the Registration Deadline, and shall keep the
Registration Statement current and effective pursuant to Rule 415 at all times until such date as
is the earlier of (i) the date on which all of the Registrable Securities for such Registration
Statement have been sold and (ii) the date on which all of the Registrable Securities for such
Registration Statement (in the opinion of counsel to the Buyer) may be immediately sold to the
public without registration or restriction (including without limitation as to volume by each
holder thereof) under the Securities Act (the “Registration Period”), which Registration Statement
(including any amendments or supplements thereto and prospectuses contained therein) shall not
contain any untrue statement of a material fact or omit to state a material fact required to be
stated therein, or necessary to make the statements therein not misleading.

b. The Company shall prepare and file with the SEC such amendments (including post-effective
amendments) and supplements to the Registration Statement and the prospectus used in connection
with the Registration Statement as may be necessary to keep the Registration Statement current and
effective at all times during the Registration Period, and, during such period, comply with the
provisions of the Securities Act with respect to the disposition of all Registrable Securities of
the Company covered by the Registration Statement until such time as all of such Registrable
Securities have been disposed of in accordance with the intended methods of disposition by the
seller or sellers thereof as set forth in the Registration Statement. In the event that on any
Trading Day (as defined below) (the “Registration Trigger Date”) the number of shares available
under the Registration Statements filed pursuant to this Agreement is insufficient to cover all of
the Registrable Securities issued or issuable upon exercise of or otherwise pursuant to the
Warrant, without giving effect to any limitations on the Buyer’ ability to exercise the Warrant,
the Company shall amend the Registration Statements, or file a new Registration Statement (on the
short form available therefore, if applicable), or both, so as to cover the total number of
Registrable Securities so issued or issuable (without giving effect to any limitations on exercise
contained in the Warrant or limitations on conversion or exercise) as of the Registration Trigger
Date as soon as practicable, but in any event within twenty (20) days after the Registration
Trigger Date (based on the Exercise Price (as defined in the Warrant) of the Warrant, and other
relevant factors on which the Company reasonably elects to rely). The Company shall use its best
efforts to cause such amendment and/or new Registration Statement to become effective as soon as
practicable following the filing thereof, but in any event the Company shall cause such amendment
and/or new Registration Statement to become effective within sixty (60) days of the Registration
Trigger Date or as promptly as practicable in the event the Company is required to increase its
authorized shares. “Trading Day” shall mean any day on which the Common Sock is traded for any
period on the NASDAQ Global Market, or on the principal securities exchange or other securities
market on which the Common Stock is then being traded.

c. The Company shall furnish to the Buyer and its legal counsel (i) promptly after the same is
prepared and publicly distributed, filed with the SEC, or received by the Company, one copy of the
Registration Statement and any amendment thereto, each preliminary prospectus and prospectus and
each amendment or supplement thereto, and, in the case of a Registration Statement referred to in
Section 2(a), each letter written by or on behalf of the Company to the SEC or the staff of the
SEC, and each item of correspondence from the SEC or the staff of the SEC, in each case relating to
such Registration Statement (other than any portion of any thereof which contains information for
which the Company has sought confidential treatment), and (ii) such number of copies of a
prospectus, including a preliminary prospectus, and all amendments and supplements thereto and such
other documents as the Buyer may reasonably request in order to facilitate the disposition of the
Registrable Securities owned by the Buyer. The Company will immediately notify the Buyer by
facsimile of the effectiveness of each Registration Statement or any post-effective amendment. The
Company will promptly respond to any and all comments received from the SEC, with a view towards
causing each Registration Statement or any amendment thereto to be declared effective by the

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SEC as
soon as practicable and shall file an acceleration request as soon as practicable, but no later
than three (3)business days, following the resolution or clearance of all SEC comments or, if applicable,
following notification by the SEC that any such Registration Statement or any amendment thereto
will not be subject to review.

d. The Company shall use best efforts to (i) register and qualify the Registrable Securities
covered by the Registration Statements under such other securities or “blue sky” laws of such
jurisdictions in the United States as the Buyer shall reasonably request, (ii) prepare and file in
those jurisdictions such amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the effectiveness thereof during
the Registration Period, (iii) take such other actions as may be necessary to maintain such
registrations and qualifications in effect at all times during the Registration Period, and (iv)
take all other actions reasonably necessary or advisable to qualify the Registrable Securities for
sale in such jurisdictions.

e. As promptly as practicable after becoming aware of such event, the Company shall notify the
Buyer of the happening of any event, of which the Company has knowledge, as a result of which the
prospectus included in the Registration Statement, as then in effect, includes an untrue statement
of a material fact or omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, and use its best efforts promptly to prepare a
supplement or amendment to the Registration Statement to correct such untrue statement or omission,
and deliver such number of copies of such supplement or amendment to the Buyer as the Buyer may
reasonably request.

f. The Company shall use its best efforts to prevent the issuance of any stop order or other
suspension of effectiveness of the Registration Statement, and, if such an order is issued, to
obtain the withdrawal of such order and to notify the Buyer who holds Registrable Securities being
sold (or, in the event of an underwritten offering, the managing underwriters) of the issuance of
such order and the resolution thereof.

g. The Company shall permit a single firm of counsel designated by the Buyer to review such
Registration Statement and all amendments and supplements thereto, at Buyer’s own cost, three
business days prior to their filing with the SEC and will not file any document in a form to which
such counsel reasonably objects and will not request acceleration of such Registration Statement
without prior notice to such counsel.

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

i. The Company shall use its best efforts to cause all the Registrable Securities covered by the
Registration Statement to be listed on each securities exchange on which securities of the same
class or series issued by the Company are then listed, if any, if the listing of such Registrable
Securities is then permitted under the rules of such exchange, and, if listed on a national
exchange, to arrange for at least two market makers to register with the National Association of
Securities Dealers, Inc. (“NASD”) as such with respect to such Registrable Securities.

j. The Company shall provide a transfer agent and registrar, which may be a single entity, for the
Registrable Securities not later than the effective date of the Registration Statement.

k. The Company shall cooperate with the Buyer who holds Registrable Securities being offered and
the managing underwriter or underwriters with respect to a Registration Statement, if any, to
facilitate the timely preparation and delivery of certificates (not bearing any restrictive
legends) representing Registrable Securities to be offered pursuant to such Registration Statement
and enable such certificates to be in such denominations or amounts, as the case may be, as the
managing underwriter or underwriters, if any, or the Buyer may reasonably request and registered in
such names as the managing underwriter or underwriters, if any, or the Buyer may request, and,
within

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three (3) business days after a Registration Statement which includes Registrable Securities
is ordered effective by
the SEC, the Company shall deliver, and shall cause legal counsel selected by the Company to
deliver, to the transfer agent for the Registrable Securities (with copies to the Buyer) an
appropriate instruction and an opinion of such counsel in the form required by the transfer agent
in order to issue the Registrable Securities free of restrictive legends.

l. At the request of the Buyer, the Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to a Registration Statement and any
prospectus used in connection with the Registration Statement as may be necessary in order to
change the plan of distribution set forth in such Registration Statement.

m. The Company shall not, and shall not agree to, allow the holders of any securities of the
Company to include any of their securities in a Registration Statement under Section 2(a) hereof or
any amendment or supplement thereto under Section 3(b) hereof without the consent of the Buyer,
except for such holders to whom the Company has previously granted such participation rights. In
addition, the Company shall not offer any securities for its own account or the account of others
in a Registration Statement under Section 2(a) hereof or any amendment or supplement thereto under
Section 3(b) hereof without the consent of the Buyer.

n. The Company shall take all other reasonable actions necessary to expedite and facilitate
disposition by the Buyer of Registrable Securities pursuant to a Registration Statement.

o. The Company shall comply with all applicable laws related to a Registration Statement and
offering and sale of securities and all applicable rules and regulations of governmental
authorities in connection therewith (including without limitation the Securities Act and the
Exchange Act and the rules and regulations promulgated by the SEC).

p. NASD Rule 2710 Filing; Broker Compensation. If required by the National Association of
Securities Dealers, Inc. Corporate Financing Department, the Company shall promptly effect a filing
with the NASD pursuant to NASD Rule 2710 with respect to the public offering contemplated by
resales of securities under the Registration Statement (an “Issuer Filing”), and pay the filing fee
required by such Issuer Filing. The Company shall use commercially reasonable efforts to pursue the
Issuer Filing until the NASD issues a letter confirming that it does not object to the terms of the
offering contemplated by the Registration Statement.

4. OBLIGATIONS OF THE BUYER. In connection with the registration of the Registrable Securities, the
Buyer shall have the following obligations:

a. It shall be a condition precedent to the obligations of the Company to complete the registration
pursuant to this Agreement with respect to the Registrable Securities of the Buyer that the Buyer
shall furnish to the Company such information regarding itself, the Registrable Securities held by
it and the intended method of disposition of the Registrable Securities held by it as shall be
reasonably required to effect the registration of such Registrable Securities and shall execute
such documents in connection with such registration as the Company may reasonably request. At least
five (5) business days prior to the first anticipated filing date of the Registration Statement,
the Company shall notify the Buyer of the information the Company requires from each Buyer.

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

c. In the event of an underwritten offering pursuant to Section 2(b) in which any Registrable
Securities are to be included, the Buyer agrees to enter into and perform the Buyer’s obligations
under an underwriting agreement, in usual and customary form, including, without limitation,
customary indemnification and contribution obligations, with the managing underwriter of such
offering and take such other actions as are reasonably required in order to expedite or facilitate
the disposition of the Registrable Securities, unless the Buyer has notified the Company in writing
of the Buyer’s election to exclude all of the Buyer’s Registrable Securities from such Registration
Statement.

d. The Buyer agrees that, upon receipt of any notice from the Company of the happening of any event
of the kind

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described in Section 3(e) or 3(f), the Buyer will immediately discontinue disposition
of Registrable Securities
pursuant to the Registration Statement covering such Registrable Securities until the Buyer’s
receipt of the copies of the supplemented or amended prospectus contemplated by Section 3(e) or
3(f) and, if so directed by the Company, the Buyer shall deliver to the Company (at the expense of
the Company) or destroy (and deliver to the Company a certificate of destruction) all copies in the
Buyer’s possession, of the prospectus covering such Registrable Securities current at the time of
receipt of such notice.

5. REGISTRATION FAILURE. In the event of a Registration Failure (as defined in the Warrant), the
Buyer shall be entitled to Failure Payments (as defined in the Warrant) and such other rights as
set forth in the Warrant.

6. EXPENSES OF REGISTRATION. All reasonable expenses, other than underwriting discounts and
commissions, incurred in connection with registrations, filings or qualifications pursuant to
Sections 2 and 3, including, without limitation, all registration, listing and qualification fees,
printers and accounting fees, and the fees and disbursements of counsel for the Company shall be
borne by the Company.

7. INDEMNIFICATION. In the event any Registrable Securities are included in a Registration
Statement under this Agreement:

a. The Company will indemnify, hold harmless and defend (i) the Buyer, (ii) the directors,
officers, partners, managers, members, employees, agents and each person who controls any Buyer
within the meaning of the Securities Act or the Exchange Act, if any, (iii) any underwriter (as
defined in the Securities Act) for the Buyer in connection with an underwritten offering pursuant
to Section 2(b) hereof, and (iv) the directors, officers, partners, employees and each person who
controls any such underwriter within the meaning of the Securities Act or the Exchange Act, if any
(each, an “Indemnified Person”), against any joint or several losses, claims, damages, liabilities
or expenses (collectively, together with actions, proceedings or inquiries by any regulatory or
self-regulatory organization, whether commenced or threatened, in respect thereof, “Claims”) to
which any of them may become subject insofar as such Claims arise out of or are based upon: (i) any
untrue statement or alleged untrue statement of a material fact in a Registration Statement or the
omission or alleged omission to state therein a material fact required to be stated or necessary to
make the statements therein not misleading; (ii) any untrue statement or alleged untrue statement
of a material fact contained in any preliminary prospectus if used prior to the effective date of
such Registration Statement, or contained in the final prospectus (as amended or supplemented, if
the Company files any amendment thereof or supplement thereto with the SEC) or the omission or
alleged omission to state therein any material fact necessary to make the statements made therein,
in light of the circumstances under which the statements therein were made, not misleading; or
(iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act,
any other law, including, without limitation, any state securities law, or any rule or regulation
thereunder relating to the offer or sale of the Registrable Securities (the matters in the
foregoing clauses (i) through (iii) being, collectively, “Violations”). The Company shall reimburse
the Indemnified Person, promptly as such expenses are incurred and are due and payable, for any
reasonable legal fees or other reasonable expenses incurred by them in connection with
investigating or defending any such Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 7(a) shall not apply to a Claim
arising out of or based upon a Violation to the extent that such Violation occurs in reliance upon
and in conformity with information furnished in writing to the Company by any Indemnified Person
for use in connection with the preparation of such Registration Statement or any such amendment
thereof or supplement thereto. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of the Indemnified Person and shall survive the transfer of
the Registrable Securities by the Buyer pursuant to Section 10.

b. Promptly after receipt by an Indemnified Person under this Section 7 of notice of the
commencement of any action (including any governmental action), such Indemnified Person shall, if a
Claim in respect thereof is to be made against the Company under this Section 7, deliver to the
Company a written notice of the commencement thereof, and the Company shall have the right to
participate in, and, to the extent the Company so desires, to assume control of the defense thereof
with counsel mutually satisfactory to the Company and the Indemnified Person, as the case may be.

PROVIDED, HOWEVER, that an Indemnified Person shall have the right to retain its own counsel with
the reasonable fees and expenses to be paid by the Company, if, in the reasonable opinion of
counsel for the Buyer, the representation by such counsel of the Indemnified Person and the Company
would be inappropriate due to actual or

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potential differing interests between such Indemnified
Person and any other party represented by such counsel in
such proceeding. The Company shall pay for only one separate legal counsel for the Indemnified
Persons, and such legal counsel shall be selected by Buyer. The failure to deliver written notice
to the Company within a reasonable time of the commencement of any such action shall not relieve
the Company of any liability to the Indemnified Person under this Section 7, except to the extent
that the Company is actually prejudiced in its ability to defend such action. The indemnification
required by this Section 7 shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as such expense, loss, damage or liability is incurred and
is due and payable.

d. To the extent permitted by law, the Buyer will indemnify, hold harmless and defend (i) the
Company, and (ii) the directors, officers, partners, managers, members, employees, or agents of the
Company, if any (each, a “Company Indemnified Person”), against any losses, claims, damages or
liabilities to which the Company or any Company Indemnified Person may become subject to, under the
Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereto) arise out of or are based upon any untrue or alleged untrue statement of any
material fact contained in a Registration Statement or any preliminary prospectus or final
prospectus, relating thereto or in any amendments or supplements to a Registration Statement or any
such preliminary prospectus or final prospectus, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, in each case to the extent and only to the extent that
such untrue statement or alleged untrue statement or omission or alleged omission (i) was made in a
Registration Statement, in any preliminary prospectus or final prospectus relating thereto or in
any amendments or supplements to a Registration Statement or any such preliminary prospectus or
final prospectus, and was furnished by the Buyer expressly for use in connection with a
Registration Statement, or any preliminary prospectus or final prospectus, or (ii) was corrected in
any subsequent amendment or supplement to the Registration Statement or prospectus (whether
preliminary or final) that was delivered to the Buyer before the pertinent sale or sales by the
Buyer, such corrected amendment or supplement to the Registration Statement or prospectus was not
delivered to the purchaser and the timely delivery of such amendment or supplement would have
constituted a complete defense to the claim asserted; and the Buyer will reimburse any legal or
other expenses reasonably incurred by the Company or any Company Indemnified Party in connection
with investigating or defending any such loss, claim, damage, liability or action.

8. CONTRIBUTION. To the extent any indemnification by the Company is prohibited or limited by law,
the Company agrees to make the maximum contribution with respect to any amounts for which it would
otherwise be liable under Section 7 to the fullest extent permitted by law, based upon a
comparative fault standard.

9. REPORTS UNDER THE 1934 ACT. With a view to making available to the Buyer the benefits of Rule
144 promulgated under the Securities Act or any other similar rule or regulation of the SEC that
may at any time permit the Buyer to sell securities of the Company to the public without
registration the Company agrees to:

a. make and keep public information available, as those terms are understood and defined in Rule
144;

b. file with the SEC in a timely manner all reports and other documents required of the Company
under the Securities Act and the Exchange Act so long as the Company remains subject to such
requirements and the filing of such reports and other documents is required for the applicable
provisions of Rule 144; and

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

10. ASSIGNMENT OF REGISTRATION RIGHTS. The rights under this Agreement shall be automatically
assignable by the Buyers to any transferee of all or any portion of the Registrable Securities if:
(i) the Buyer agrees in writing with the transferee or assignee to assign such rights, and a copy
of such agreement is furnished to the Company within a reasonable time after such assignment, (ii)
the Company is, within a reasonable time after such transfer or assignment, furnished with written
notice of (a) the name and address of such transferee or assignee, and

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(b) the securities with
respect to which such registration rights are being transferred or assigned, and (iii) at or before
the time the Company receives the written notice contemplated by clause (ii) of this sentence, the
transferee or assignee agrees in writing with the Company to be bound by all of the provisions
contained herein. [In the event that the Buyer transfers all or any portion of its Registrable
Securities pursuant to this Section, the Company shall have at least ten (10) days to file any
amendments or supplements necessary to keep the Registration Statement current and effective
pursuant to Rule 415, and the commencement date of any Event of Failure (as defined in the Warrant)
or Event of Default (as defined in the Warrant) under the Warrant caused thereby will be extended
by ten (10) days.]

11. AMENDMENT OF REGISTRATION RIGHTS. Provisions of this Agreement may be amended and the
observance thereof may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with written consent of the Company and the Buyer (to the
extent such Buyer still owns Registrable Securities). Any amendment or waiver effected in
accordance with this Section 11 shall be binding upon the Buyer and the Company.

12. MISCELLANEOUS.

a. A person or entity is deemed to be a holder of Registrable Securities whenever such person or
entity owns of record or beneficially through a “street name” holder such Registrable Securities.
If the Company receives conflicting instructions, notices or elections from two or more persons or
entities with respect to the same Registrable Securities, the Company shall act upon the basis of
instructions, notice or election received from the registered owner of such Registrable Securities.

b. Any notices required or permitted to be given under the terms hereof shall be sent by certified
or registered mail (return receipt requested) or delivered personally or by courier (including a
recognized overnight delivery service) or by facsimile and shall be effective five days after being
placed in the mail, if mailed by regular United States mail, or upon receipt, if delivered
personally or by courier (including a recognized overnight delivery service) or by facsimile, in
each case addressed to a party. The addresses for such communications shall be:

If to the Company:

MiddleBrook Pharmaceuticals, Inc.

20425 Seneca Meadows Parkway

Germantown, MD 20876

Fax: (301) 944-6700

Attn: Edward M. Rudnic

With copy to:

Dewey & LeBoeuf LLP

1301 Avenue of the Americas

New York, New York 10019

Fax: (212) 359-6333

Attn: Frederick W. Kanner

If to a Buyer:

c/o Deerfield Capital, L.P.

780 Third Avenue, 37th Floor

New York, New York 10017

Fax: (212) 599-1248

Attn: Alexander Karnal

With a copy to:

Katten Muchin Rosenman LLP

575 Madison Avenue

New York, New York 10022

Fax: (212) 940-8776

Attn: Elliot Press, Esq.

8

 

Each party shall provide notice to the other party of any change in address.

c. Failure of any party to exercise any right or remedy under this Agreement or otherwise, or delay
by a party in exercising such right or remedy, shall not operate as a waiver thereof.

d. Governing Law. All questions concerning the construction, validity, enforcement and
interpretation of this Agreement shall be governed by and construed and enforced in accordance with
the internal laws of the State of New York, without regard to the principles of conflicts of law
thereof. Each party agrees that all legal proceedings concerning the interpretations, enforcement
and defense of the transactions contemplated by this Agreement (whether brought against a party
hereto or its respective affiliates, directors, officers, shareholders, employees or agents) shall
be commenced exclusively in the state and federal courts sitting in the City of New York. Each
party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts
sitting in the City of New York, borough of Manhattan for the adjudication of any dispute hereunder
or in connection herewith or with any transaction contemplated hereby or discussed herein, and
hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that such suit, action or
proceeding is improper or is an inconvenient venue for such proceeding. 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 via registered or certified mail or overnight
delivery (with evidence of delivery) to such party at the address in effect for 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 other manner permitted by law. The parties hereby waive all rights to a trial by
jury. If either party shall commence an action or proceeding to enforce any provisions of the this
Agreement, then the prevailing party in such action or proceeding shall be reimbursed by the other
party for its reasonable attorneys’ fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such action or proceeding.

e. This Agreement, the Warrant and the Purchase Agreement (including all schedules and exhibits
thereto) constitute the entire agreement among the parties hereto with respect to the subject
matter hereof and thereof. There are no restrictions, promises, warranties or undertakings, other
than those set forth or referred to herein and therein. This Agreement, the Warrant and the
Purchase Agreement supersede all prior agreements and understandings among the parties hereto with
respect to the subject matter hereof and thereof.

f. Subject to the requirements of Section 10 hereof, this Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties hereto.

g. The headings in this Agreement are for convenience of reference only and shall not limit or
otherwise affect the meaning hereof.

h. This Agreement may be executed in two or more counterparts, each of which shall be deemed an
original but all of which shall constitute one and the same agreement. This Agreement, once
executed by a party, may be delivered to the other party hereto by facsimile transmission of a copy
of this Agreement bearing the signature of the party so delivering this Agreement.

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

j. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable
harm to the Buyer by vitiating the intent and purpose of the transactions contemplated hereby.
Accordingly, the Company acknowledges that the remedy at law for breach of its obligations
hereunder will be inadequate and agrees, in the event of a breach or threatened breach by the
Company of any of the provisions hereunder, that the Buyer shall be

9

 

entitled, in addition to all
other available remedies in law or in equity, to an injunction or injunctions to prevent or
cure breaches of the provisions of this Agreement and to enforce specifically the terms and
provisions hereof, without the necessity of showing economic loss and without any bond or other
security being required.

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

l. In the event that any provision of this Agreement is invalid or unenforceable under any
applicable statute or rule of law, then such provision shall be deemed inoperative to the extent
that it may conflict therewith and shall be deemed modified to conform with such statute or rule of
law. Any provision hereof which may prove invalid or unenforceable under any law shall not affect
the validity or enforceability of any other provision hereof.

m. In the event a Buyer shall sell or otherwise transfer any of such holder’s Registrable
Securities, each transferee shall be allocated a pro rata portion of the number of Registrable
Securities included in a Registration Statement for such transferor.

n. There shall be no oral modifications or amendments to this Agreement. This Agreement may be
modified or amended only in writing.

Remainder of page left intentionally blank.

Signature page follows.

10

 

IN WITNESS WHEREOF, the undersigned Buyer and the Company have caused this Agreement to be duly
executed as of the 7th day of November, 2007.

	 	 	 	 	 	 	 	 	 	 	 
	COMPANY:	 	 	 	BUYER:	 	 
	MIDDLEBROOK PHARMACEUTICALS, INC.	 	 	 	DEERFIELD PRIVATE DESIGN FUND, L.P.	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ Edward M. Rudnic
	 	 	 	By:
	 	/s/ James Flynn	 	 
	 

	 	 

Name: Edward M. Rudnic, Ph.D.
	 	 	 	 	 	 

Name: James Flynn
	 	 
	 

	 	Title: President and Chief
Executive Officer
	 	 	 	 	 	Title: General Partner	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	DEERFIELD PRIVATE DESIGN INTERNATIONAL, L.P.	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:
	 	/s/ James Flynn	 	 
	 

	 	 	 	 	 	 	 	 

Name: James Flynn
	 	 
	 

	 	 	 	 	 	 	 	Title: General Partner	 	 
	 
	 	 	 	 	 	 	DEERFIELD SPECIAL SITUATIONS FUND, L.P.	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:
	 	/s/ James Flynn	 	 
	 

	 	 	 	 	 	 	 	 

Name: James Flynn
	 	 
	 

	 	 	 	 	 	 	 	Title: General Partner	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	DEERFIELD SPECIAL SITUATIONS FUND	 	 
	 	 	 	 	 	 	INTERNATIONAL LIMITED	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:
	 	/s/ James Flynn	 	 
	 

	 	 	 	 	 	 	 	 

Name: James Flynn
	 	 
	 

	 	 	 	 	 	 	 	Title: General Partner	 	 

11exv10w1

 

EXHIBIT 10.1

STOCK PURCHASE AGREEMENT

among

DEERFIELD PRIVATE DESIGN INTERNATIONAL FUND, L.P.,

DEERFIELD SPECIAL SITUATIONS FUND, L.P.,

DEERFIELD SPECIAL SITUATIONS INTERNATIONAL LIMITED,

DEERFIELD PRIVATE DESIGN FUND, L.P.,

DEERFIELD MANAGEMENT, L.P.,

KEF PHARMACEUTICALS, INC.

and

MIDDLEBROOK PHARMACEUTICALS, INC.

Dated as of November 7, 2007

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	ARTICLE I
	 	 	 	 
	 
	 	 	 	 
	DEFINITIONS AND CONSTRUCTION
	 	 	 	 
	 
	 	 	 	 
	1.1 Definitions
	 	 	1	 
	1.2 Construction
	 	 	1	 
	 
	 	 	 	 
	ARTICLE II
	 	 	 	 
	 
	 	 	 	 
	PURCHASE, TERMS OF PAYMENT AND CLOSING
	 	 	 	 
	 
	 	 	 	 
	2.1 Purchase and Sale
	 	 	2	 
	2.2 Consideration for Stock Purchase Right
	 	 	2	 
	2.3 Consideration for Stock Purchase
	 	 	3	 
	2.4 Term and Extensions
	 	 	4	 
	2.5 Termination
	 	 	4	 
	2.6 Closing
	 	 	5	 
	2.7 Closing Obligations
	 	 	5	 
	2.8 Required Stock Purchase Upon Change in Control
	 	 	5	 
	 
	ARTICLE III
	 	 	 	 
	 
	 	 	 	 
	REPRESENTATIONS RELATING TO THE CORPORATION
	 	 	 	 
	 
	 	 	 	 
	ARTICLE IV
	 	 	 	 
	 
	 	 	 	 
	REPRESENTATIONS RELATING TO THE STOCKHOLDERS
	 	 	 	 
	 
	 	 	 	 
	4.1 Organization
	 	 	9	 
	4.2 Authority; Enforceability
	 	 	9	 
	4.3 No Violation; Enforceability
	 	 	9	 
	4.4 No Proceedings
	 	 	9	 
	4.5 Financial Condition
	 	 	9	 
	4.6 Consents and Approvals; No Violation
	 	 	9	 
	4.7 Capital Stock
	 	 	10	 
	4.8 Brokers, Etc
	 	 	10	 
	4.9 No Other Representations or Warranties
	 	 	10	 
	 
	 	 	 	 
	ARTICLE V
	 	 	 	 
	 
	 	 	 	 
	REPRESENTATIONS RELATING TO THE BUYER
	 	 	 	 
	 
	 	 	 	 
	5.1 Organization
	 	 	10	 

i

 

	 	 	 	 	 
	5.2 Authority; Enforceability
	 	 	10	 
	5.3 Consents and Approvals; No Violation
	 	 	11	 
	5.4 Compliance With Laws
	 	 	11	 
	5.5 Litigation
	 	 	11	 
	5.6 Investment Interest
	 	 	11	 
	5.7 Brokers
	 	 	12	 
	5.8 No Other Representations
	 	 	12	 
	 
	 	 	 	 
	ARTICLE VI
	 	 	 	 
	 
	 	 	 	 
	COVENANTS
	 	 	 	 
	 
	 	 	 	 
	6.1 Tax
	 	 	12	 
	6.2 Operations During Purchase Period
	 	 	13	 
	6.3 Preservation of Shares
	 	 	14	 
	6.4 Further Assurances
	 	 	14	 
	 
	 	 	 	 
	ARTICLE VII
	 	 	 	 
	 
	 	 	 	 
	CLOSING CONDITIONS
	 	 	 	 
	 
	 	 	 	 
	7.1 Mutual Condition
	 	 	15	 
	7.2 Buyer’s Conditions
	 	 	15	 
	7.3 Stockholders’ Conditions
	 	 	16	 
	 
	 	 	 	 
	ARTICLE VIII
	 	 	 	 
	 
	 	 	 	 
	INDEMNIFICATION
	 	 	 	 
	 
	 	 	 	 
	8.1 Survival
	 	 	16	 
	8.2 Indemnification by the Stockholders
	 	 	16	 
	8.3 Indemnification by Buyer
	 	 	17	 
	8.4 Procedure for Indemnification – Third-Party Claims
	 	 	17	 
	8.5 Limitation on Damages
	 	 	18	 
	8.6 Tax Treatment of Indemnity
	 	 	19	 
	 
	 	 	 	 
	ARTICLE IX
	 	 	 	 
	 
	GENERAL PROVISIONS
	 	 	 	 
	 
	 	 	 	 
	9.1 No Joint Venture
	 	 	19	 
	9.2 Expenses
	 	 	19	 
	9.3 Amendment and Modification
	 	 	19	 
	9.4 Waiver of Compliance; Consents
	 	 	19	 
	9.5 Stockholder Representative
	 	 	19	 
	9.6 Notices
	 	 	20	 
	9.7 Publicity
	 	 	21	 
	9.8 Assignment; No Third-Party Rights
	 	 	21	 

ii

 

	 	 	 	 	 
	9.9 Governing Law
	 	 	21	 
	9.10 Access to Records
	 	 	21	 
	9.11 Severability
	 	 	21	 
	9.12 Construction
	 	 	21	 
	9.13 Counterparts
	 	 	22	 
	9.14 Entire Agreement
	 	 	22	 

APPENDICES

	 	 	 
	Appendix 1

	 	Stockholders
	Appendix 2

	 	Definitions
	 
	 	 
	Annex A

	 	Buyer’s Knowledge
	Annex B

	 	Stockholders’ Knowledge

iii

 

STOCK PURCHASE AGREEMENT

     This STOCK PURCHASE AGREEMENT (this “Agreement”), dated as of November 7, 2007, is
between MiddleBrook Pharmaceuticals, Inc., a Delaware corporation (the “Buyer”), the Persons set
forth on Appendix 1 (each a “Stockholder” and together, the “Stockholders”),
Deerfield Management, L.P., a Delaware limited partnership (the “Stockholder
Representative”) and Kef Pharmaceuticals, Inc., a Delaware corporation (the
“Corporation”).

Background Statement

     The Stockholders own all of the issued and outstanding capital stock of the Corporation.
Concurrently with the execution of this Agreement, the Parties are executing an Asset Purchase
Agreement (the “Kef Asset Purchase Agreement”) whereby the Corporation agrees to purchase,
and Buyer agrees to sell, certain assets of Buyer. As inducement for Buyer to enter into the Kef
Asset Purchase Agreement, the Parties have agreed to enter into this Agreement granting the Buyer
the option to purchase all of the issued and outstanding capital stock of the Corporation,
consisting of 10,000 shares of common stock with a par value of $0.001 per share (the
“Shares”), for the consideration and on the terms set forth herein. Furthermore,
concurrently with the execution of this Agreement, the Buyer, the Stockholders and Lex
Pharmaceuticals, Inc., a Delaware corporation (all of the issued and outstanding capital stock of
which is owned by the Stockholders) (“Lex”) are entering into a Stock Purchase Agreement
(the “Lex Stock Purchase Agreement”) pursuant to which Buyer shall have the right to
purchase all of the capital stock of Lex, as such agreement may be extended, amended or
supplemented.

Statement of Agreement

     The parties agree as follows:

ARTICLE I

DEFINITIONS AND CONSTRUCTION

     1.1 Definitions. Capitalized terms used in this Agreement have the meanings given to
them in Appendix 2 to this Agreement.

     1.2 Construction.

     (a) The article and section headings contained in this Agreement are solely for the purpose of
reference and convenience, are not part of the agreement of the parties and shall not in any way
limit, modify or otherwise affect the meaning or interpretation of this Agreement.

     (b) References to “Sections” or “Articles” refer to corresponding sections or articles of this
Agreement unless otherwise specified.

     (c) Unless the context requires otherwise, the words “include,” “including” and variations
thereof mean including without limitation; and the words “hereof,” “hereby,” “herein,”

 

 

“hereunder”
and similar terms refer to this Agreement as a whole and not any particular section or article in
which such words appear.

     (d) Unless the context requires otherwise, words in the singular include the plural, words in
the plural include the singular, and words indicating gender shall be applicable to all genders.

     (e) If a term is defined as one part of speech (such as a noun), it shall have a corresponding
meaning when used as another part of speech (such as a verb).

     (f) Any reference to any law, statute or regulation shall be to such law, statute or
regulation as in effect on the date hereof.

     (g) Currency amounts referred to herein are in United States Dollars.

     (h) References to a number of days mean calendar days unless Business Days are specified.
Except as otherwise specified, whenever any action must be taken on or by a day that is not a
Business Day, then such action may be validly taken on or by the next day that is a Business Day.

     (i) All accounting terms used herein and not expressly defined herein shall have the meanings
given to them under GAAP.

     (j) The parties acknowledge that the parties and their attorneys have reviewed this Agreement
and have had the opportunity to negotiate fully all of its provisions, and that any rule of
construction to the effect that any ambiguities are to be resolved against the drafting party, or
any similar rule operating against the drafter of an agreement, shall not be applicable to the
construction or interpretation of this Agreement.

ARTICLE II

PURCHASE, TERMS OF PAYMENT AND CLOSING

     2.1 Purchase and Sale. On the terms and subject to the conditions of this Agreement,
the Stockholders hereby grant to Buyer an option (the “Stock Purchase Right”) which when
exercised, shall obligate the Stockholders to sell and deliver to the Buyer, and the Buyer to
purchase and accept from the Stockholders, all of the Shares, in exchange for payment of the
Purchase Price (the “Stock Purchase”).

     2.2 Consideration for Stock Purchase Right. In consideration of the grant by the
Stockholders to Buyer of the Stock Purchase Right, the Buyer shall immediately upon the execution
of this Agreement (i) deliver to the Stockholder
Representative upon the execution of this Agreement (A) the Warrants substantially in the form
of Exhibit A (the “Warrants”)(it being understood that Thirty Percent (30%) of all warrants
delivered pursuant to this Agreement and the Lex Stock Purchase Agreement, collectively, shall be
delivered to the Stockholders in respect of the Stock Purchase Right granted hereunder, and the
remainder shall be delivered in respect of the Lex Stock Purchase Agreement, such that on the date
hereof Warrants for the purchase of

2

 

Nine Hundred Thousand (900,000) shares of common stock of Buyer
(as may be adjusted pursuant to the terms and condition of such Warrant) are being delivered to the
Stockholders pursuant to this Agreement, and warrants for the purchase of Two Million One Hundred
Thousand (2,100,000) shares of common stock of Buyer (as may be adjusted pursuant to the terms and
conditions of such warrant) are being delivered to the Stockholders pursuant to the Lex Stock
Purchase Agreement) and (B) the Registration Rights Agreement substantially in the form of Exhibit
B (“Registration Rights”) and (ii) pay to the Stockholder Representative One Hundred and
Fifty Thousand Dollars ($150,000) by wire transfer of immediately available funds to the following
account:

	 	 	 
	Bank Name:
	 	CITIBANK NA
	ABA/Routing#:
	 	021000089
	Account #:
	 	34828068
	Account Name:
	 	Deerfield Management Co. LP
	Ref:
	 	Series C

     2.3 Consideration for Stock Purchase.

     (a) In the event the Buyer exercises the Stock Purchase Right, the aggregate consideration to
be paid by the Buyer to the Stockholders for the Shares shall be equal to (i) if the Patent
Sublicense has been executed as of the Closing Date, an amount equal to (A) Three Million Six
Hundred Thousand Dollars ($3,600,000), plus (B) the amount of Cash held by the Corporation
on the Closing Date, minus (C) the amount of accrued, unpaid Taxes owed by the Corporation,
minus (D) all accrued payment obligations then owed under Contracts, other than the Related
Agreements, entered into by the Corporation, and minus (E) the amount of any Stock Purchase
Period Extension Payments made by Buyer, or (ii) if the Patent Sublicense has not been executed as
of the Closing Date, an amount equal to (v) Two Million Seven Hundred Thousand Dollars
($2,700,000), plus (w) the amount of Cash held by the Corporation on the Closing Date,
minus (x) the amount of accrued, unpaid Taxes owed by the Corporation, minus (y) all
accrued payment obligations then owed under Contracts, other than the Related Agreements, entered
into by the Corporation, and minus (z) the amount of any Stock Purchase Period Extension
Payments made by Buyer (as applicable under clause (i) or (ii), the “Purchase Price”). The
Stockholder Representative shall provide written notice (the “Adjustment Notice”) of the
amount of any adjustments made pursuant to clauses (B), (C) and (D) or clauses (w), (x) and (y), as
appropriate, no later than five (5) Business Days prior to the Closing Date. At Closing, the Buyer
shall pay the Purchase Price to the Stockholders by wire transfer of immediately available funds to
an account or accounts designated in writing by the Stockholder Representative at least two (2)
Business Days prior to the Closing Date. The Purchase Price shall be allocated among the
Stockholders pro rata in accordance with the number of the Shares held by each Stockholder.

     (b) The Buyer shall be entitled to deduct and withhold from the consideration otherwise
payable to any Person pursuant to this Agreement such amounts as it is required to
deduct and withhold with respect to the making of such payment under any provision of U.S.
federal, state or local tax Law. If the Buyer so deducts and withholds amounts, such amounts shall
be treated for all purposes of this Agreement as having been paid to the Stockholder in respect of
which the Buyer made such deduction and withholding. The Parties shall reasonably cooperate to
minimize such withholding amounts.

3

 

     2.4 Term and Extensions. The Buyer shall have the authority to exercise the Stock
Purchase Right solely according to the following timetable:

     (a) The Stock Purchase Right shall terminate at 5:00 p.m. on June 30, 2008 (the “Initial
Termination Time”); provided, that Buyer shall have the option to extend the Stock
Purchase Right beyond the Initial Termination Time to 5:00 p.m. on December 31, 2008 (the
“First Extended Termination Time”), by delivering to the Corporation prior to the Initial
Termination Time a written notice of extension and a Stock Purchase Period Extension Payment in an
amount equal to (i) Five Hundred Forty Thousand Dollars ($540,000) if the Patent Sublicense has
been executed at the time of such payment or (ii) Four Hundred Thousand Dollars ($400,000) if the
Patent Sublicense has not been executed at the time of such payment.

     (b) In the event that Buyer exercises its option to extend the Stock Purchase Right, as set
forth in Section 2.4(a), the Stock Purchase Right shall terminate on the First Extended Termination
Time; provided, that Buyer shall have the option to further extend the Stock Purchase Right
beyond the First Extended Termination Time to 5:00 p.m. on September 30, 2009 (the “Second
Extended Termination Time”), by delivering to the Corporation prior to the First Extended
Termination Time, a written notice of extension along with a Stock Purchase Period Extension
Payment in an amount equal to (i) One Million Eight Hundred Thousand Dollars ($1,800,000) if the
Patent Sublicense has been executed at the time of such payment or (ii) One Million Three Hundred
Fifty Thousand Dollars ($1,350,000) if the Patent Sublicense has not been executed at the time of
such payment.

     (c) Notwithstanding Sections 2.4(a) and 2.4(b), no Stock Purchase Period Extension Payment
shall extend the Stock Purchase Right unless an extension payment is simultaneously made pursuant
to Section 2.4(a) or Section 2.4(b), as applicable, of the Lex Stock Purchase Agreement.

     (d) At any time prior to the expiration of the Stock Purchase Period, the Buyer may exercise
the Stock Purchase Right by delivery to the Stockholder Representative of a written notice (the
“Stock Purchase Notice”) substantially in the form of Exhibit C. The Stock Purchase Notice
shall constitute a binding obligation of the Buyer to purchase, and the Stockholders to sell, all
of the Shares pursuant to the terms and conditions of this Agreement. The Stock Purchase Notice
may be delivered on any Business Day during the Stock Purchase Period and shall specify a Closing
Date for the Stock Purchase, which shall be a Business Day not earlier than ten (10), nor later
than thirty (30), days after the date of the Stock Purchase Notice (the “Target Closing
Date”).

     2.5 Termination. Notwithstanding the term of the Stock Purchase Right, including any extension of the Stock
Purchase Right pursuant to Section 2.4(a) and Section 2.4(b), the Stock Purchase Right shall
terminate immediately and in its entirety if:

     (a) The Registration License terminates; or

     (b) The Patent Sublicense between Kef and Buyer, having previously been executed, terminates;

4

 

     2.6 Closing. The closing of the purchase and sale of the Shares (the
“Closing”) shall take place at the offices of Robinson, Bradshaw & Hinson, P.A., in
Charlotte, North Carolina, commencing at 10:00 a.m., local time, on the Target Closing Date or on
such other date or at such other time or place as the Buyer and the Stockholder Representative
shall agree. The Closing shall be effective as of 5:00 p.m. on the Closing Date (the
“Effective Time”), and all actions scheduled in this Agreement for the Closing Date shall
be deemed to occur simultaneously at the Effective Time, except as otherwise contemplated hereby or
as expressly agreed in writing by the parties.

     2.7 Closing Obligations. At the Closing:

     (a) The Stockholders shall deliver to the Buyer:

     (i) To the extent the Shares are certificated, certificates representing the Shares,
duly endorsed in blank (or accompanied by duly executed stock powers in blank), and to the
extent the Shares are not certificated, duly executed instruments of assignment in form and
substance reasonably satisfactory to the Buyer, in each case in proper form for transfer
free and clear of all Encumbrances;

     (ii) each document required to be delivered by the Stockholders and the Stockholder
Representative to the Buyer under Section 7.2.

     (iii) a certification issued by the Corporation substantially in the form of Exhibit D
attached hereto pursuant to Treasury Regulation Section 1.1445-2(c) certifying that the
Corporation is not and has not been a United States real property holding corporation (as
defined in Section 897(c)(2) of the Code) during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code.

     (b) The Buyer shall deliver to the Stockholders:

     (i) the Purchase Price by wire transfer of immediately available funds to an account or
accounts specified by the Stockholder Representative in writing to the Buyer not later than
two (2) Business Days prior to the Closing Date;

     (ii) each document required to be delivered by the Buyer to the Stockholders under
Section 7.3.

     2.8 Required Stock Purchase Upon Change in Control. If at any time prior to the
expiration or termination of the Stock Purchase Right, Buyer enters into an agreement that would,
upon consummation, result in a Change in Control of Buyer, or if a Change in Control of Buyer
occurs, Buyer shall give written notice of such event to the Stockholder Representative, including
the date of the anticipated or actual Change in Control. Upon a Change in Control of Buyer at any
time during the Stock Purchase Period, Buyer shall be required to exercise its Stock Purchase Right
and shall consummate the Stock Purchase (i) if practicable, simultaneously with the Change in
Control, or (ii) if (i) is not practicable, as soon as possible thereafter, in all cases subject to
the Conditions set forth in Sections 7.1, 7.2 and 7.3.

5

 

ARTICLE III

REPRESENTATIONS RELATING TO THE CORPORATION

     The Stockholders and the Corporation jointly and severally represent to the Buyer that:

     3.1 The Corporation is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. The Corporation has the requisite corporate power and
authority to own, lease and use the properties and assets that it owns, leases and uses and to
conduct its business as presently conducted.

     3.2 The authorized, issued and outstanding capital stock of the Corporation consists only of
the Shares. All of the Shares have been duly authorized and validly issued and are fully paid and
nonassessable and free of preemptive and similar rights. All of the Shares are owned by the
Stockholders as set forth in Appendix 1. Except as set forth above, there are no outstanding (i)
shares of capital stock, debt securities or other voting securities of the Corporation; (ii)
securities of the Corporation which are or may become convertible into or exchangeable for shares
of capital stock, debt securities or voting securities or ownership interests in the Corporation;
(iii) subscriptions, calls, contracts, commitments, understandings, restrictions, arrangements,
rights, warrants, options, or other rights that grant or may grant the right to acquire from the
Corporation, or obligations of the Corporation to issue any capital stock, debt securities, voting
securities or other ownership interests in, or any securities convertible into or exchangeable or
exercisable for any capital stock, voting securities, debt securities or ownership interests in,
the Corporation, or obligations of the Corporation to grant, extend or enter into any such
agreement or commitment; or (iv) obligations of the Corporation to repurchase, redeem or otherwise
acquire any outstanding securities of the Corporation, or to vote or to dispose of any shares of
the capital stock of the Corporation. There is no capital stock of the Corporation reserved for
issuance for any purpose. All of the outstanding equity securities of the Corporation have been
offered and issued in compliance with all applicable federal and state securities laws, including
“blue sky” laws.

     3.3 There are no agreements, arrangements, proxies or understandings that restrict or
otherwise affect the transfer of any of the Shares except as set forth in this Agreement.

     3.4 The Corporation has all requisite corporate power and authority to execute, deliver and
perform its obligations under this Agreement, and the execution and delivery of this Agreement and
the performance of all of its obligations hereunder have been duly authorized by the Corporation
and the Stockholders. This Agreement has been duly executed and delivered by the Corporation and
constitutes the legal, valid and binding obligation of the Corporation, enforceable against the
Corporation in accordance with its terms, except as enforceability may be limited or affected by
applicable bankruptcy, insolvency, moratorium, reorganization or other laws of general application
relating to or affecting creditors’ rights generally.

     3.5 The signing, delivery and performance of this Agreement by the Corporation is not
prohibited or limited by, and will not result in the breach of or a default under, any provision of
the certificate of incorporation, bylaws or other formation documents of the Corporation, or of any
material agreement or instrument binding on the Corporation, or of any applicable law,

6

 

Order, writ,
injunction or decree of any Governmental Authority, except for such prohibition, limitation or
default as would not prevent consummation by the Corporation of the transactions contemplated
hereby. The execution, delivery and performance of this Agreement by the Corporation, and the
Corporation’s compliance with the terms and provisions hereof, do not and will not conflict with or
result in a breach of any of the terms and provisions of or constitute a default, with or without
the passage of time and the giving of notice, under any Contract or other instrument or obligation
binding or affecting the Corporation or the Corporation’s property, including the Purchased Assets.

     3.6 There is no action, suit, litigation, Proceeding, claim, governmental investigation or
administrative action pending or, to the Stockholders’ Knowledge, threatened, directly or
indirectly involving the Corporation or the transactions contemplated hereby or the Corporation’s
ability to perform its obligations hereunder. The Corporation is not a party or subject to or in
default under any judgment, Order, injunction or decree of any Governmental Authority or
arbitration tribunal applicable to the Corporation or its property.

     3.7 No insolvency Proceeding of any character, including, without limitation, bankruptcy,
receivership, reorganization, composition or arrangement with creditors, voluntary or involuntary,
has been commenced by or against the Corporation or any of its assets or properties, nor, to the
Stockholders’ Knowledge, is any such Proceeding threatened. Neither the Stockholders nor the
Corporation contemplates, nor has the Corporation or any Stockholder taken any action in
contemplation of, the institution of any such insolvency Proceedings.

     3.8 No broker, investment banker, agent, finder or other intermediary acting on behalf of the
Corporation or under the authority of the Corporation is or will be entitled to any broker’s or
finder’s fee or any other commission or similar fee directly or indirectly in connection with any
of the transactions contemplated hereby.

     3.9 The Corporation’s assets, other than Cash, consist solely of the Purchased Assets. The
Corporation has no Liabilities or obligations of any nature, whether or not accrued, absolute,
contingent, unliquidated or otherwise, whether due or to become due and whether or not required to
be closed, other than those Liabilities and obligations created by this Agreement and the Related
Agreements. The Corporation does not own any interest in any other corporation, partnership,
association, joint venture or other entity and, thus, has no subsidiaries.

     3.10 There are no Encumbrances upon any of the Shares other than those created by this
Agreement.

     3.11 None of the Shares has been issued in violation of any Legal Requirement, the certificate
of incorporation or bylaws of the Corporation, or any Contract to which the Corporation may be
subject, bound or a party or in violation of any preemptive, subscription or similar rights.

     3.12 Except as set forth on Schedule 3.12, from the date of the Corporation’s incorporation,
except as contemplated by this Agreement there has not been any:

     (a) change in the Corporation’s authorized or issued capital stock;

7

 

     (b) disposition by the Corporation of any of the Purchased Assets; or

     (c) agreement, whether oral or written, by the Corporation to do any of the foregoing.

     3.13 The Corporation is in compliance with all applicable Legal Requirements except Legal
Requirements to be performed or satisfied by the Buyer pursuant to the Related Agreements.

     3.14 The Corporation has not received any written notice from any Governmental Authority
regarding any violation of, or failure to comply with, any Legal Requirement.

     3.15 The Corporation was formed solely for the purpose of engaging in the transactions
contemplated by this Agreement and the Related Agreements. The Corporation has not owned, operated
or conducted and, other than its acquisition of the Purchased Assets pursuant to the Asset Purchase
Agreement, will not own, operate or conduct any assets, businesses or activities other than in
connection with its organization, the negotiation and execution of this Agreement and the Related
Agreements and the consummation of the transactions contemplated hereby and thereby.

     3.16 No Governmental Authorization is required by the Corporation in connection with the
execution or delivery by the Corporation of this Agreement or the performance by the Corporation of
the Corporation’s obligations under this Agreement, except for any Governmental Authorizations that
result from the specific legal or regulatory status of the Buyer or as a result of any other facts
that specifically relate to the business or activities in which the Buyer is engaged. Neither the
execution and delivery of this Agreement by the Corporation nor the performance of the
Corporation’s obligations hereunder or thereunder shall (with or without notice or lapse of time)
(i) result in the creation of any Encumbrance upon the Shares or (ii) conflict with or violate any
Legal Requirement applicable to the Corporation, except for any Legal Requirements that result from
the specific legal or regulatory status of the Buyer or as a result of any other facts that
specifically relate to the business or activities in which the Buyer is engaged.

     3.17 The Board of Directors of the Corporation and the Stockholders have approved this
Agreement and the transactions contemplated hereby.

     3.18 EXCEPT AS EXPRESSLY SET FORTH IN THIS ARTICLE III AND IN ARTICLE IV, NEITHER THE
STOCKHOLDERS NOR THE CORPORATION MAKES, AND NO PARTY SHALL BE ENTITLED TO RELY UPON, ANY
REPRESENTATION OR WARRANTY AS TO ANY FACT OR MATTER ABOUT THE CORPORATION.

ARTICLE IV

REPRESENTATIONS RELATING TO THE STOCKHOLDERS

     Each Stockholder represents to the Buyer, solely with respect to itself, that:

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     4.1 Organization. Such Stockholder is a limited partnership, corporation or limited
company, as applicable, and is duly organized, validly existing and in good standing under the laws
of the jurisdiction of its organization. Such Stockholder has all requisite power and authority to
own, lease and operate its properties and assets that it owns, leases and uses and to conduct its
business as presently conducted.

     4.2 Authority; Enforceability. Such Stockholder has the requisite legal power and
authority to (i) execute and deliver this Agreement and each certificate, document and agreement to
be executed by such Stockholder in connection herewith (collectively, the “Stockholder
Documents”) and (ii) perform its obligations hereunder and thereunder, and such execution,
delivery and performance have been duly and validly authorized by such Stockholder. This Agreement
has been duly and validly executed and delivered by such Stockholder and constitutes, and upon
execution and delivery by such Stockholder of each Stockholder Document to which such Stockholder
is a party, each such Stockholder Document will constitute, a legal, valid and binding obligation
of such Stockholder, enforceable against the Stockholder in accordance with its terms, except as
the enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer or other laws relating to or limiting creditors’ rights generally or by general principles
of equity.

     4.3 No Violation; Enforceability. The signing, delivery and performance of this
Agreement by such Stockholder is not prohibited or limited by, and will not result in the breach of
or a default under, any provision of the limited partnership agreement or other formation documents
of such Stockholder, or of any material agreement or instrument binding on such Stockholder, or of
any applicable law, Order, writ, injunction or decree of any Governmental Authority, except for
such prohibition, limitation or default as would not prevent consummation by such Stockholder of
the transactions contemplated hereby. The execution, delivery and performance of this Agreement by
such Stockholder and such Stockholder’s compliance with the terms and provisions hereof, do not and
will not conflict with or result in a breach of any of the terms and provisions of or constitute a
default, with or without the passage of time and the giving of notice, under any Contract or other
instrument or obligation binding or affecting such Stockholder or such Stockholder’s property.

     4.4 No Proceedings. There is no action, suit, litigation, Proceeding, claim,
governmental investigation or administrative action pending or, to the Stockholders’ Knowledge,
threatened, directly or indirectly involving such Stockholder or the transactions contemplated
hereby or such Stockholder’s ability to perform its obligations hereunder. Such Stockholder is not
a party or subject to or in default under any judgment, Order, injunction or decree of any
Governmental Authority or arbitration tribunal applicable to such Stockholder or its property.

     4.5 Financial Condition. No insolvency Proceeding of any character, including,
without limitation, bankruptcy, receivership, reorganization, composition or arrangement with
creditors, voluntary or involuntary, has been commenced by or against such Stockholder or any of
its assets or properties, nor, to the Stockholders’ Knowledge, is any such Proceeding threatened.
Such Stockholder does not contemplate, and has not taken any action in contemplation of, the
institution of any such insolvency Proceedings.

     4.6 Consents and Approvals; No Violation.

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     (a) No Governmental Authorization is required by such Stockholder in connection with the
execution or delivery by such Stockholder of this Agreement or the Stockholder Documents to which
such Stockholder is a party, or the performance by such Stockholder of the Stockholder’s
obligations under this Agreement or the Stockholder Documents to which such Stockholder is a party,
except for any Governmental Authorizations (i) that are not material or (ii) that result from the
specific legal or regulatory status of the Buyer or as a result of any other facts that
specifically relate to the business or activities in which the Buyer is engaged.

     (b) Neither the execution and delivery of this Agreement and the Stockholder Documents by such
Stockholder nor the performance of such Stockholder’s obligations hereunder or thereunder shall
(with or without notice or lapse of time) conflict with or violate any Legal Requirement applicable
to such Stockholder, except for any Legal Requirements (i) that are not material or (ii) that
result from the specific legal or regulatory status of the Buyer or as a result of any other facts
that specifically relate to the business or activities in which the Buyer is engaged.

     4.7 Capital Stock. Such Stockholder is the record and beneficial owner of the number
of Shares listed next to its name on Appendix 1, free and clear of any Encumbrances or adverse
claims (other than restrictions under applicable Legal Requirements).

     4.8 Brokers, Etc. No broker, investment banker, agent, finder or other intermediary
acting on behalf of such Stockholder or under the authority of such Stockholder is or will be
entitled to any broker’s
or finder’s fee or any other commission or similar fee directly or indirectly in connection
with any of the transactions contemplated hereby.

     4.9 No Other Representations or Warranties. EXCEPT AS EXPRESSLY SET FORTH IN ARTICLE
III AND THIS ARTICLE IV, NEITHER THE STOCKHOLDERS NOR THE CORPORATION MAKES, AND NO PARTY SHALL BE
ENTITLED TO RELY UPON, ANY REPRESENTATION OR WARRANTY AS TO ANY FACT OR MATTER ABOUT THE
STOCKHOLDERS.

ARTICLE V

REPRESENTATIONS RELATING TO THE BUYER

     The Buyer represents to the Stockholders and the Stockholder Representative:

     5.1 Organization. The Buyer is a corporation duly organized, validly existing and in
good standing under the laws of the state of its organization. The Buyer has the requisite
corporate power and authority to own, lease and use the properties and assets that it owns, leases
and uses and to conduct its business as presently conducted.

     5.2 Authority; Enforceability. The Buyer has the requisite legal power and authority
to (i) execute and deliver this Agreement and each certificate, document and agreement to be
executed by the Buyer in connection herewith (collectively, the “Buyer Documents”) and
(ii) perform its obligations hereunder and thereunder. The execution and delivery of this
Agreement and the Buyer Documents and the consummation of the transactions contemplated

10

 

hereby and
thereby have been duly and validly authorized by all necessary corporate action on the part of the
Buyer, and no other Proceedings on the part of the Buyer are necessary to authorize this Agreement
or any of the Buyer Documents or to consummate the transactions contemplated hereby or thereby.
This Agreement has been duly and validly executed and delivered by the Buyer and constitutes, and
upon execution and delivery by the Buyer of each Buyer Document, each Buyer Document will
constitute, a legal, valid and binding obligation of the Buyer, enforceable against it in
accordance with its terms, except as the enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer or other laws relating to or limiting
creditors’ rights generally or by general principles of equity.

     5.3 Consents and Approvals; No Violation.

     (a) No Governmental Authorization is required by the Buyer in connection with the execution or
delivery by the Buyer of this Agreement or the Buyer Documents, or the performance of the Buyer’s
obligations under this Agreement or the Buyer Documents.

     (b) Neither the execution and delivery of this Agreement and the Buyer Documents by the Buyer
nor the performance of the Buyer’s obligations hereunder or thereunder shall (with or without
notice or lapse of time): (i) conflict with or violate any provision of the articles or
certificate of incorporation or bylaws of the Buyer or any resolution adopted by the board of
directors or stockholders of the Buyer, (ii) conflict with or breach any of the terms or provisions
of, or give any Person a right to declare a default or exercise any remedy under, any Contract
binding on the Buyer or (iii) conflict with or violate any Legal Requirement applicable to the
Buyer, but excluding from the foregoing clauses (ii) and (iii) conflicts, breaches, defaults,
remedies and violations that would not be reasonably likely, either individually or in the
aggregate, to adversely affect the Buyer’s ability to consummate the transactions contemplated by
this Agreement.

     5.4 Compliance With Laws. Except as set forth on Schedule 5.4, the Buyer is in
compliance with all Legal Requirements applicable to the Buyer, except where any such
non-compliance would not adversely affect the Buyer’s ability to consummate the transactions
contemplated by this Agreement. Except as set forth on Schedule 5.4, the Buyer has not received,
at any time since October ___, 2007, any written notice from any Governmental Authority regarding
any violation of, or failure to comply with, any Legal Requirement, except with respect to any
violations or failures to comply that would not adversely affect the Buyer’s ability to consummate
the transactions contemplated by this Agreement.

     5.5 Litigation. Except as set forth on Schedule 5.5, there are no Proceedings that
are pending against or, to the Buyer’s Knowledge, threatened against the Buyer that would adversely
affect its ability to consummate the transactions contemplated by this Agreement. The Buyer is not
subject to any Order that could affect the enforceability of this Agreement against the Buyer or
that would adversely affect the Buyer’s ability to consummate the transactions contemplated by this
Agreement.

     5.6 Investment Interest. The Buyer is an “accredited investor” within the meaning of
Regulation D promulgated under the Securities Act and is acquiring the Shares for its own account
for investment purposes only and not with a view to, or for sale or resale in connection

11

 

with, any
distribution within the meaning of Section 2(11) of the Securities Act. The Buyer understands that
the Shares are characterized as “restricted securities” under the federal securities laws inasmuch
as they are being acquired from the Stockholders in a transaction not involving a public offering
and that under such laws and applicable regulations such securities may be resold without
registration under the Securities Act only in certain limited circumstances.

     5.7 Brokers. No broker, investment banker, agent, finder or other intermediary acting
on behalf of Buyer or under the authority of Buyer is or will be entitled to any broker’s or
finder’s fee or any
other commission or similar fee directly or indirectly in connection with any of the
transactions contemplated hereby.

     5.8 No Other Representations. EXCEPT AS EXPRESSLY SET FORTH IN THIS ARTICLE V, THE
BUYER DOES NOT MAKE, AND NO PARTY SHALL BE ENTITLED TO RELY UPON, ANY REPRESENTATION AS TO ANY FACT
OR MATTER ABOUT THE BUYER.

ARTICLE VI

COVENANTS

     6.1 Tax.

     (a) From the date the Stock Purchase Right is exercised to the Closing Date, the Corporation
will not:

     (1) make any new Tax election except as described in Section 6.1(b)(4) below;

     (2) consent to any claim or assessment relating to any material taxes or any waiver of
the statute of limitations for any such claim or assessment;

     (3) settle or compromise any Tax Liability or refund;

     (4) change or adopt a Tax accounting method or file any amended Tax Return without the
Buyer’s prior written consent (which consent may not be unreasonably withheld, conditioned
or delayed); or

     (5) amend, refile or otherwise modify any Tax election or Tax Return.

     (b) From the date the Stock Purchase Right is exercised to the Closing Date, the Corporation
will:

     (1) accrue a Liability in its books and records and financial statements in accordance
with GAAP for Taxes payable by the Corporation for the period ending with the Closing Date;

12

 

     (2) promptly notify the Buyer of any Tax Proceeding initiated against the Corporation
where an adverse determination could result in a material Tax Liability or materially and
adversely affect the Tax attributes of the Corporation;

     (3) provide the Buyer with copies of any income Tax Return that the Corporation is
required to file or elects to file prior to the Effective Time; or

     (4) For purposes of apportioning a Tax to any Straddle Period, the parties hereto shall
treat the Closing Date as the last day of such Straddle Period (i.e., the parties shall
“close the books” on such date) and shall elect to do so if permitted by applicable law.

     (c) From the date hereof to the Closing Date, the Corporation will timely file all Tax Returns
required to be filed by it during such period and will pay when due all Taxes due and payable by
the Corporation during such period.

     6.2 Operations During Purchase Period. From the date of this Agreement through the
expiration or termination of the Stock Purchase Right, the Corporation shall, and the Stockholders
and Stockholder Representative shall cause the Corporation to, preserve its business organization
intact. Without limiting the foregoing, the Corporation shall not, and the Stockholders and
Stockholder Representative shall not cause the Corporation to, do any of the following without the
prior written consent of the Buyer:

     (a) amend its Certificate of Incorporation, By-laws or other similar organizational and
operational documents;

     (b) redeem or otherwise acquire any shares of its capital stock, equity securities or other
equity interests or issue any capital stock or any option, warrant or right relating thereto or any
securities convertible into or exchangeable for any shares of capital stock, equity securities or
other equity interests;

     (c) incur or assume any Liabilities for borrowed money or obligations for borrowed money;

     (d) permit, allow or suffer any of its assets to be subject to any Encumbrance other than any
Encumbrance created by the activities of Buyer under any of the Related Agreements;

     (e) cancel any material indebtedness or waive any claims or rights of substantial value;

     (f) sell, transfer or lease any of the Purchased Assets except pursuant to the Related
Agreements;

     (g) make any material change in any method of accounting or accounting practice or policy
other than those required by GAAP;

13

 

     (h) acquire or agree to acquire by merging or consolidating with, or by purchasing a
substantial portion of the assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division thereof;

     (i) acquire or agree to acquire any assets or incur or agree to incur any Liabilities other
than (A) pursuant to the Related Agreements or (B) Liabilities under Contracts for services related
to the ongoing management of the Purchased Assets; provided, however, that any such
Contract is entered into only to the extent that the Corporation has made a good faith
determination that the Stock Purchase Right will not be exercised;

     (j) sell, lease or otherwise dispose of, or agree to sell, lease or otherwise dispose of, any
of its assets (excluding sales of inventory in the ordinary course of business consistent with past
practices) other than pursuant to the Related Agreements;

     (k) enter into, amend, revise, renew or terminate any Contract other than (A) the Related
Agreements or (B) Contracts for services related to the ongoing management of the Purchased Assets;
provided, however, that any such Contract is entered into only to the extent that the
Corporation has made a good faith determination that the Stock Purchase Right will not be
exercised;

     (l) make any commitments for capital expenditures;

     (m) fail to use its best efforts to preserve its present business organization intact;

     (n) initiate or settle any litigation;

     (o) otherwise own, operate or conduct any assets, businesses or activities other than in
connection with its organization, the negotiation and execution of this Agreement and the Related
Agreements and the consummation of the transactions contemplated hereby and thereby; or

     (p) agree to any of the foregoing.

     6.3 Preservation of Shares. No Shareholder shall (a) sell, lease or otherwise dispose
of any Shares or (b) permit, allow or suffer any Shares to be subject to any Encumbrance, in each
case until the expiration or termination of the Stock Purchase Right.

     6.4 Further Assurances. Upon the terms and subject to the conditions of this
Agreement, each Party shall use commercially reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper or advisable under applicable
Legal Requirements to consummate and make effective the transactions contemplated by this Agreement
and the Related Agreements as promptly as practicable, including, without limitation, the prompt
preparation and filing of all forms, registrations and notices required to be filed to consummate
the transactions contemplated by this Agreement and the Related Agreements and the taking of such
commercially reasonable actions as are necessary to obtain any requisite consents, Orders,
exemptions or waivers by any Governmental Authority or any other Person. Each Party shall promptly
consult with the other Party with respect to, provide the other Party any necessary information
with respect to and provide the other Party (or its counsel) copies of,

14

 

all filings made by such
Party with any Governmental Authority or any other Person or any other information supplied by such
Party to a Governmental Authority or any other Person in connection with this Agreement and the
Related Agreements and the transactions contemplated by this Agreement
and the Related Agreements. From time to time after the Closing, without additional
consideration, each Party will execute and deliver such further instruments and take such other
action as may be necessary or reasonably requested by each other Party to make effective the
transactions contemplated by this Agreement and to provide each other Party with the benefits of
this Agreement.

ARTICLE VII

CLOSING CONDITIONS

     7.1 Mutual Condition. The obligation of the Parties to consummate the transactions
contemplated by this Agreement shall be subject to the satisfaction (or waiver, if permissible
under applicable Legal Requirements) of the following conditions:

     (a) No Legal Requirement, temporary restraining Order, preliminary injunction or permanent
injunction, judgment or ruling enacted, promulgated, issued, entered, amended or enforced by any
Governmental Authority shall be in effect enjoining, restraining, preventing or prohibiting the
consummation of the transactions contemplated by this Agreement.

     (b) The Buyer shall have delivered to the Stockholder Representative the Stock Purchase
Notice.

     7.2 Buyer’s Conditions. The obligation of the Buyer to consummate the transactions
contemplated by this Agreement shall be subject to the satisfaction (or waiver, if permissible
under applicable Legal Requirements) of the following conditions:

     (a) Each of the representations and warranties of the Corporation and each Stockholder set
forth in this Agreement, disregarding all qualifications and exceptions contained therein relating
to materiality or Material Adverse Effect, shall be true and correct in all respects, in each case
as of (i) the date of this Agreement; (ii) the Closing Date as though made on and as of the Closing
Date; and (iii) in the case of Section 3.13 only, the date of the Stock Purchase Notice, as though
made on and as of the date of the Stock Purchase Notice, except where the failure or failures to be
true and correct would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.

     (b) The Corporation and each Stockholder shall have performed in all material respects all
obligations and complied with all covenants required to be performed by it under this Agreement at
or prior to the Closing.

     (c) The Stockholder Representative shall have delivered to the Buyer a certificate certifying
the matters set forth in Sections 7.2(a) and 7.2(b).

     (d) The Stockholders shall have delivered the items required to be delivered pursuant to
Section 2.7(a).

15

 

     (e) Since the date of the Stock Purchase Notice, there shall not have occurred any event or
existed any circumstances that has had or that could reasonably be expected to have a Material
Adverse Effect.

     (f) Other than the Shares, all equity securities and options, rights, warrants and other
rights, claims upon or interests in or to the equity of the Corporation shall have been terminated
or canceled prior to or in connection with the Closing, with no Liability to the Buyer therefor.

     7.3 Stockholders’ Conditions. The obligation of the Corporation and the Stockholders
to consummate the transactions contemplated by this Agreement shall be subject to the satisfaction
(or waiver, if permissible under applicable Legal Requirements) of the following conditions:

     (a) Each of the representations and warranties of the Buyer set forth in this Agreement,
disregarding all qualifications and exceptions contained therein relating to materiality or
Material Adverse Effect, shall be true and correct in all respects, in each case as of the date of
this Agreement and as of the Closing Date as though made on and as of the Closing Date, except
where the failure or failures to be true and correct would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.

     (b) The Buyer shall have performed in all material respects all obligations and complied with
all covenants required to be performed by it under this Agreement at or prior to the Closing.

     (c) The Buyer shall have delivered to the Stockholders a certificate certifying the matters
set forth in Sections 7.3(a) and 7.3(b) executed by a duly authorized officer of the Buyer.

ARTICLE VIII

INDEMNIFICATION

     8.1 Survival. All representations, warranties, covenants and agreements made by
Seller and Buyer in this Agreement and the documents to be executed in connection with this
Agreement shall survive the Closing.

     8.2 Indemnification by the Stockholders. Subject to the limitations set forth in this
ARTICLE VIII, after the Closing the Stockholders shall indemnify and hold harmless the Buyer from,
and shall pay to the Buyer, any and all Damages arising, directly or indirectly, from or in
connection with:

     (a) the breach of any of the representations, warranties, covenants or agreements of any
Shareholder or the Corporation contained in this Agreement or the Related Agreements;

     (b) any Liability of the Corporation arising prior to the Closing Date other than (i)
obligations arising solely from the Corporation’s ownership of the Purchased Assets, (ii)
Liabilities that have been reflected in the computation of the Purchase Price, and (iii)
Liabilities

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caused by the acts or omissions of Buyer, but only to the extent such Liabilities are
caused by the acts or omissions of Buyer;

     (c) the violation by the Corporation or any Stockholder of any Legal Requirement, or any gross
negligence or willful misconduct of the Corporation or any Stockholder, or the performance by the
Corporation or any Stockholder of its obligations under this Agreement or any of the Related
Agreements; and

     (d) any Liability of the Corporation under Contracts, other than the Related Agreements,
entered into by the Corporation that is not included as an adjustment to the Purchase Price
pursuant to Section 2.3(a).

     8.3 Indemnification by Buyer. Subject to the limitations set forth in this ARTICLE
VIII, after the Closing the Buyer shall indemnify and hold harmless the Stockholders for, and shall
pay to the Stockholders, any and all Damages arising, directly or indirectly, from or in connection
with:

     (a) the breach of any of the representations, warranties, covenants or agreements of the Buyer
contained in this Agreement or the Related Agreements; and

     (b) the violation by the Buyer of any Legal Requirement, or any gross negligence or willful
misconduct of the Buyer, or the performance by the Buyer of its obligations under this Agreement or
any of the Related Agreements.

     8.4 Procedure for Indemnification – Third-Party Claims.

     (a) If any Person shall claim indemnification hereunder arising from any claim or demand of a
third party, the party seeking indemnification (the “Indemnified Party”) shall notify the
party from whom indemnification is sought (the “Indemnifying Party”) in writing of the
basis for such claim or demand and such notice shall set forth the nature of the claim or demand in
reasonable detail. The failure of the Indemnified Party to so notify the Indemnifying Party shall
not relieve the Indemnifying Party of any indemnification obligation hereunder except to the extent
that the defense of such claim or demand is prejudiced by the failure to give such notice.

     (b) If any Proceeding is brought by a third party against an Indemnified Party and the
Indemnified Party gives notice to the Indemnifying Party pursuant to Section 8.4(a), the
Indemnifying Party may assume the settlement or defense of such Proceeding. The Indemnified Party
shall, in its sole discretion, have the right to employ separate counsel (who may be selected by
the Indemnified Party in its sole discretion) in any such Proceeding and to participate in the
defense thereof, and the fees and expenses of such counsel shall be paid by such Indemnified Party.
If the Indemnified Party assumes the defense of such Proceeding because of the failure of
the Indemnifying Party to conduct such defense in good faith, the fees and expenses of such
counsel shall be paid by the Indemnifying Party. The Indemnified Party shall cooperate fully with
the Indemnifying Party and its counsel in the defense or settlement of such Proceeding. If the
Indemnifying Party assumes the defense of a Proceeding, no compromise or settlement of such claims
may be effected by the Indemnifying Party without the Indemnified Party’s consent unless (i) there
is no finding or admission of any violation of Legal Requirements or the rights of any Person by
the Indemnified Party and no Material Adverse Effect on the Indemnified Party

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with respect to any
other claims that may be made against it, and (ii) the sole relief provided is monetary damages
that are paid in full by the Indemnifying Party.

     (c) If (i) notice is given to the Indemnifying Party of the commencement of any third-party
Proceeding and the Indemnifying Party does not, within ten (10) days after the Indemnified Party’s
notice is given, give notice to the Indemnified Party of its election to assume the defense of such
Proceeding, or (ii) having assumed the defense of such Proceeding, the Indemnifying Party fails to
conduct such defense in good faith, then the Indemnified Party shall (upon notice to the
Indemnifying Party) have the right to undertake the defense, compromise or settlement of such
claim; provided that no compromise or settlement of such claim may be affected by the
Indemnified Party without the Indemnifying Party’s consent, if (A) the Indemnifying Party will be
liable for any amounts to be paid to compromise or settle the claim, (B) there is a finding or
admission of any violation by the Indemnifying Party of any Legal Requirement or the rights of any
Person, or (C) the compromise or settlement would have a Material Adverse Effect on the
Indemnifying Party with respect to any other claims that may be made against it. The Indemnifying
Party shall reimburse the Indemnified Party for the costs and expenses of defending against the
third-party claim (including reasonable attorneys’ fees and expenses) and the Indemnifying Party
shall remain responsible for any Damages arising from or related to such third-party claim to the
extent provided in this ARTICLE VIII. The Indemnifying Party may elect to participate in such
Proceedings, negotiations or defense at any time at its own expense.

     8.5 Limitation on Damages.

     (a) Notwithstanding anything set forth herein to the contrary, all Damages recoverable by an
Indemnified Party shall be net of any proceeds such Indemnified Party recovers, or is entitled to
recover, under any applicable insurance coverage and any amounts such Indemnified Party recovers,
or is entitled to recover, from third parties, except to the extent such recoveries have or are
reasonably expected to result in future or retroactive premium increases (any such net recovered
amount, an “Insurance Recovery”). Accordingly, the amount that an Indemnifying Party is
required to pay to any Indemnified Party will be reduced by any Insurance Recovery;
provided, however, that any Damages described in Section 8.2 or 8.3 that are
incurred by an Indemnified Party shall be paid or, in the case of amounts that may be insured,
advanced, promptly by the Indemnifying Party and shall not be delayed pending any determination as
to the availability of any Insurance Recovery. If an Indemnified Party receives a payment required
to be made under this ARTICLE VIII from an Indemnifying Party in respect of any Losses and
subsequently receives any Insurance Recovery, then the Indemnified Party shall promptly pay such
Insurance Recovery to the Indemnifying Party.

     (b) Upon any payment of Damages to an Indemnified Party, the Indemnifying Party shall be
subrogated to all rights of the Indemnified Party with respect to the Damages to which such
indemnification relates to the extent of the amount of such payment.

     (c) The Indemnified Party shall have no right to recover consequential, punitive or multiplied
damages except to the extent the Indemnified Party is liable to a third party for such damages.

18

 

     8.6 Tax Treatment of Indemnity. Notwithstanding anything to the contrary in ARTICLE
VIII, any Tax or other amount for which indemnification is provided under this Agreement shall be
treated as an adjustment to the Purchase Price.

ARTICLE IX

GENERAL PROVISIONS

     9.1 No Joint Venture. The relationship between the Parties is that of independent
contractors. The Parties are not joint venturers, partners, principal and agent, master and
servant, employer or employee, and have no relationship other than as independent contracting
parties. No Party shall have the power to bind or obligate any other in any manner.

     9.2 Expenses. Each Party shall pay all costs and expenses incurred by such Party in
connection with this Agreement and the transactions contemplated hereby, including in each case all
fees and expenses of investment bankers, finders, brokers, agents, representatives, consultants,
counsel and accountants.

     9.3 Amendment and Modification. This Agreement may be amended, modified or
supplemented only by an agreement in writing signed by the Party against whom such amendment,
modification or supplement is sought to be enforced.

     9.4 Waiver of Compliance; Consents. The rights and remedies of the Parties are
cumulative and not alternative and may be exercised concurrently or separately. No failure or
delay by any Party in exercising any right, power or privilege under this Agreement shall operate
as a waiver of such right, power or privilege, and no single or partial exercise of any such right,
power or privilege shall preclude any other or further exercise of such right, power or privilege
or the exercise of any other right, power or privilege. To the maximum extent permitted by
applicable law, (i) no claim or right arising out of this Agreement can be discharged by one Party,
in whole or in part, by a waiver or
renunciation of the claim or right unless in writing signed by the other Party; (ii) no waiver
that may be given by a Party shall be applicable except in the specific instance for which it is
given; and (iii) no notice to or demand on one Party shall be deemed to be a waiver of any
obligation of such Party or of the right of the Party giving such notice or demand to take further
action without notice or demand as provided in this Agreement. Any consent required or permitted
by this Agreement is binding only if in writing.

     9.5 Stockholder Representative. Each Stockholder hereby irrevocably appoints and
authorizes the Stockholder Representative to act as its representative and attorney-in-fact with
full authority, in the Stockholder Representative’s sole discretion, to (i) negotiate, defend,
pursue, settle and pay any indemnification claims, (ii) execute and deliver, as Stockholder
Representative and as attorney-in-fact for each Stockholder, and to take all actions required of
the Stockholders under, this Agreement and any other agreement or document required to be executed
by the Stockholders in connection with the transactions contemplated by this Agreement and (iii)
take any other action that may be necessary or desirable on behalf of the Stockholders in
connection with this Agreement or any other agreement or document required to be delivered in
connection herewith or in connection with the transactions contemplated by this Agreement. The
appointment of the Stockholder Representative by each Stockholder as its

19

 

attorney-in-fact hereunder
is coupled with an interest and irrevocable. Subject to the limitations set forth in this Section
9.5, the Stockholder Representative shall act as the representative of the Stockholders with
respect to any such act or decision to be taken or made hereunder, and the Buyer shall be entitled
conclusively to rely upon any representation of the Stockholder Representative with respect to any
act, decision, consent or approval of the Stockholders. Notice sent to the Stockholder
Representative pursuant to Section 9.6 shall have the same force and effect as if delivered to each
of the Stockholders. The Stockholders shall be responsible for all costs and expenses incurred by
the Stockholder Representative in connection with his duties contemplated by this Agreement.
Neither the Buyer nor the Corporation shall be held liable or accountable for any act or omission
of the Stockholder Representative.

     9.6 Notices. All notices, consents, waivers and other communications hereunder shall
be in writing and shall be (i) delivered by hand, (ii) sent by facsimile transmission, or (iii)
sent certified mail or by a nationally recognized overnight delivery service, charges prepaid, to
the address set forth below (or such other address for a Party as shall be specified by like
notice):

     If to the Stockholders or Stockholder Representative, to:

	 	 	 
	 

	 	Deerfield Management L.P.
	 

	 	780 3rd Avenue, 37th Floor
	 

	 	New York, New York 10017
	 

	 	Attention: James E. Flynn
	 

	 	Facsimile:
	 
	 	 
	Copy to:

	 	Robinson, Bradshaw & Hinson, P.A.
	 

	 	101 North Tryon Street, Suite 1900
	 

	 	Charlotte, North Carolina 28246
	 

	 	Attention: David J. Clark
	 

	 	Facsimile: (704) 373-3990
	 
	 	 
	If to Buyer, to:

	 	MiddleBrook Pharmaceuticals, Inc.
	 

	 	20425 Seneca Meadows Parkway
	 

	 	Germantown, Maryland 20876
	 

	 	Attention: Edward M. Rudnic, Ph.D.
	 

	 	Facsimile: (301) 944-6700
	 
	 	 
	Copy to:

	 	Dewey & LeBoeuf LLP
	 

	 	1301 Avenue of the Americas
	 

	 	New York, New York 10019
	 

	 	Attn: Frederick W. Kanner, Esq.
	 

	 	Facsimile: (212) 259-6333

Each such notice or other communication shall be deemed to have been duly given and to be effective
(x) if delivered by hand, immediately upon delivery if delivered on a Business Day during normal
business hours and, if otherwise, on the next Business Day; (y) if sent by facsimile transmission,
immediately upon confirmation that such transmission has been successfully transmitted on a
Business Day before or during normal business hours and, if otherwise, on the

20

 

Business Day
following such confirmation; or (z) if sent by a nationally recognized overnight delivery service,
on the day of delivery by such service or, if not a Business Day, on the first Business Day after
delivery. Notices and other communications sent via facsimile must be followed by notice delivered
by hand or by overnight delivery service as set forth herein within five (5) Business Days.

     9.7 Publicity. Neither Party shall issue any press release or any other form of
public disclosure regarding the existence of this Agreement or the terms hereof, or use the name of
the other Party hereto in any press release or other public disclosure without the prior written
consent of the other Party, except (i) for those disclosures and notifications contemplated by this
Agreement and (ii) as required by any Legal Requirement and solely to the extent necessary to
satisfy such Legal Requirement.

     9.8 Assignment; No Third-Party Rights. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the Parties hereto and their respective
successors and permitted assigns, but neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any Party hereto without the prior written consent of
each other Party; provided, however, that the Stockholders may transfer any number of
Shares to any other Stockholder without prior written consent. This Agreement and its provisions
are for the sole benefit of the Parties to this Agreement and their successors and permitted
assigns and shall not give any other Person any legal or equitable right, remedy or claim.

     9.9 Governing Law. The execution, interpretation and performance of this Agreement,
and any disputes with respect to the transactions contemplated by this Agreement, including any
fraud claims, shall be governed by the internal laws and judicial decisions of the State of New
York, without regard to principles of conflicts of laws.

     9.10 Access to Records. Each Party shall provide the other Party with access to all
relevant documents and other information pertaining to the Purchased Assets that are needed by such
other Party for the purposes of preparing Tax Returns or responding to an audit by any Governmental
Authority or for any other reasonable purpose.

     9.11 Severability. If any provision contained in this Agreement shall for any reason
be held invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of this Agreement, and this Agreement shall
be construed as if such invalid, illegal or unenforceable provision had never been contained
herein, unless the invalidity of any such provision substantially deprives any Party of the
practical benefits intended to be conferred by this Agreement. Notwithstanding the foregoing, any
provision of this Agreement held invalid, illegal or unenforceable only in part or degree shall
remain in full force and effect to the extent not held invalid or unenforceable, and the
determination that any provision of this Agreement is invalid, illegal or unenforceable as applied
to particular circumstances shall not affect the application of such provision to circumstances
other than those as to which it is held invalid, illegal or unenforceable.

     9.12 Construction. Each Party acknowledges that it and its attorneys have been given
an equal opportunity to negotiate the terms and conditions of this Agreement and that any rule of
construction to the effect that ambiguities are to be resolved against the drafting Party or any

21

 

similar rule operating against the drafter of an agreement shall not be applicable to the
construction or interpretation of this Agreement.

     9.13 Counterparts. This Agreement may be executed in multiple counterparts, each of
which shall be deemed an original, but all of which together shall constitute one and the same
instrument. This Agreement may be executed on signature pages exchanged by facsimile, in which
event each Party shall promptly deliver to the others such number of original executed copies as
the other Party may reasonably request.

     9.14 Entire Agreement. This Agreement, including the Related Agreements, Appendices,
Schedules, Annexes and Exhibits, constitutes the entire agreement and understanding of the Parties
hereto in respect
of the subject matter hereof. The Related Agreements, Appendices, Schedules, Annexes and
Exhibits hereto are an integral part of this Agreement and are incorporated by reference herein.
This Agreement supersedes all prior agreements, understandings, promises, representations and
statements between the Parties and their representatives with respect to the transactions
contemplated by this Agreement.

[The remainder of this page is left blank intentionally.]

22

 

     IN WITNESS WHEREOF, the Parties have executed this Stock Purchase Agreement as of the date
first written above.

	 	 	 	 	 
	 	The Buyer:

MIDDLEBROOK PHARMACEUTICALS, INC.

 	 
	 	By:  	/s/ Edward M. Rudnic
 	 
	 	 	Name:  	Edward M. Rudnic, Ph.D.  	 
	 	 	Title:  	President and Chief
Executive Officer	 
	 

	 	 	 	 	 
	 	The Corporation:

KEF PHARMACEUTICALS, INC.

 	 
	 	By:  	/s/ Peter W. Steelman
 	 
	 	 	Name:  	Peter W. Steelman  	 
	 	 	Title:  	President 	 
	 

	 	 	 	 	 
	 	The Stockholder Representative:

DEERFIELD MANAGEMENT, L.P.

 	 
	 	By:  	/s/ James Flynn
 	 
	 	 	Name:  	James Flynn  	 
	 	 	Title:  	General Partner 	 
	 

Signature Page to Stock Purchase Agreement

 

 

	 	 	 	 	 
	 	The Stockholders:

DEERFIELD PRIVATE DESIGN INTERNATIONAL FUND, L.P.

 	 
	 	By:  	/s/ James Flynn
 	 
	 	 	Name:  	James Flynn  	 
	 	 	Title:  	General Partner 	 
	 
	 	DEERFIELD SPECIAL SITUATIONS FUND, L.P.

 	 
	 	By:  	/s/ James Flynn
 	 
	 	 	Name:  	James Flynn  	 
	 	 	Title:  	General Partner 	 
	 
	 	DEERFIELD SPECIAL SITUATIONS INTERNATIONAL LIMITED

 	 
	 	By:  	/s/ James Flynn
 	 
	 	 	Name:  	James Flynn  	 
	 	 	Title:  	General Partner 	 
	 
	 	DEERFIELD PRIVATE DESIGN FUND, L.P.

 	 
	 	By:  	/s/ James Flynn
 	 
	 	 	Name:  	James Flynn  	 
	 	 	Title:  	General Partner 	 
	 

Signature Page to Stock Purchase Agreement

 

 

APPENDIX 2

Definitions

     “Adjustment Notice” has the meaning set forth in Section 2.3(a).

     “Affiliate” means with respect to any Person, each of the Persons that directly or
indirectly, through one or more intermediaries, owns or controls, is controlled by or is under
common control with, such Person. For the purpose of this Agreement, “control” means the
possession, directly or indirectly, of the power to direct or cause the direction of management and
policies, whether through the ownership of voting securities, by contract or otherwise.

     “Agreement” means this Stock Purchase Agreement, as it may hereafter be amended in
accordance with its terms.

     “Business Day” means a day other than a Saturday, Sunday or day on which banks in the
City of New York are authorized or required to be closed.

     “Buyer” has the meaning set forth in the introductory paragraph of this Agreement.

     “Buyer Documents” has the meaning set forth in Section 5.2.

     “Buyer’s Knowledge” means the actual knowledge of the Persons set forth on Annex A.

     “Cash” means unrestricted funds in bank accounts and financial instruments of high
liquidity and safety.

     “Change in Control” means, a transaction or series of transactions (excluding any
transactions solely among Affiliates of a Person) resulting in (i) a change in the ownership or
control of 50% or more of its voting securities, (ii) a direct or indirect change in the power to
elect 50% or more of the members of the Board of Directors or similar governing body of a Person,
(iii) the sale, lease or other disposition of all or substantially all of its assets, (iv) a
merger, consolidation or reorganization with or into another entity after which Affiliates of the
original entity do not have “control” (as defined in the definition of “Affiliate”) of the
surviving entity, or (v) any transfer, assignment, sale, lease, license or other disposition of any
interests or rights in the Licensed Patents, except to the extent such interests or rights relate
to the Products, as defined in the Kef Asset Purchase Agreement.

     “Closing” has the meaning set forth in Section 2.6.

     “Closing Date” means the date the Closing actually takes place.

     “Code” means the Internal Revenue Code of 1986, as amended.

     “Contract” means any note, bond, mortgage, indenture, contract, agreement, guaranty,
lien, pledge, permit, license, lease, purchase order, sales order, arrangement or other commitment,
obligation or understanding, written or oral, to which a Person is a party or by which a Person or
its assets or properties are bound.

A-2-1

 

     “Corporation” has the meaning set forth in the introductory paragraph of this
Agreement.

     “Effective Time” has the meaning set forth in Section 2.6.

     “Encumbrance” means any security interest, mortgage, lien, pledge, charging order,
warrant, option, conversion right, purchase right or other encumbrance of any sort.

     “First Extended Termination Time” has the meaning set forth in Section 2.4(a).

     “GAAP” means generally accepted accounting principles as recognized by the American
Institute of Certified Public Accountants, applied on a basis consistent with the basis on which
the Financial Statements were prepared.

     “Governmental Authority” means any nation or government, any state or other political
subdivision thereof, any municipal, local, city or county government, any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or pertaining to
government.

     “Governmental Authorization” means any approval, consent, license, permit, waiver or
other authorization issued, granted or given by or under the authority of any Governmental
Authority.

     “Indemnified Party” has the meaning set forth in Section 8.4(a).

     “Indemnifying Party” has the meaning set forth in Section 8.4(a).

     “Initial Termination Time” has the meaning set forth in Section 2.4(a).

     “Insurance Recovery” has the meaning set forth in Section 8.5(a).

     “Kef Asset Purchase Agreement” has the meaning set forth in the Background Statement.

     “Law” means any foreign, federal, national, supranational, state, provincial, local or
similar statute, law, ordinance, regulation, rule, code, Order, requirement or rule of law
(including common law), as amended and in effect from time to time.

     “Legal Requirement” means any federal, state, local or foreign statute, law, treaty,
rule, regulation, Order, decree, writ, injunction or determination of any arbitrator, court or
Governmental Authority and, with respect to any Person, includes all such Legal Requirements
applicable or binding upon such Person, its business or the ownership or use of any of its assets.

     “Lex” has the meaning set forth in the Background Statement.

     “Lex Asset Purchase Agreement” means the certain Asset Purchase Agreement, dated as of
the date hereof, between Lex and Buyer.

     “Lex Stock Purchase Agreement” has the meaning set forth in the Background Statement.

A-2-2

 

     “Liabilities” means any and all debts, liabilities and obligations or any sort,
whether accrued or fixed, absolute or contingent, matured or unmatured, determined or determinable,
including those arising under any Legal Requirement or Contract or otherwise.

     “Licensed Patents” has the meaning given such term in Section Error! Reference source
not found. of the Kef Asset Purchase Agreement.

     “Material Adverse Effect” means (i) a material adverse effect on the condition
(financial or otherwise), results of operations, business, properties or Liabilities of a Person,
and (ii) with respect to the Part 2 Assets, a material adverse effect on the value of such assets;
provided, however, that none of the following shall be deemed to constitute, and
none of the following shall be taken into account in determining whether there has occurred, a
Material Adverse Effect: (a) any adverse effect, change or circumstance arising from or relating to
(i) general business or economic conditions, including any such conditions as they relate to the
Corporation or the Purchased Assets, (ii) national or international political or social conditions,
including the engagement by the United States in hostilities, whether or not pursuant to the
declaration of a national emergency or war, or the occurrence of any military or terrorist attack
upon the United States, or any of its territories, possessions, or diplomatic or consular offices
or upon any military installation, equipment or personnel of the United States, (iii) financial,
banking, or securities markets (including any disruption thereof and any decline in the price of
any security or any market index), (iv) changes in generally accepted accounting principles, (v)
changes in any Legal Requirements, (vi) the negotiation, execution, delivery, public announcement
or the pendency of this Agreement, the Related Agreements or the transactions contemplated
hereunder or thereunder, (vii) the loss of the services of any employee by reason of resignation,
retirement, death or permanent disability, (viii) the taking of any action required by this
Agreement or the Related Agreements in connection with the transactions contemplated hereunder or
thereunder, or (viii) the financial performance or results of operations of such Person or any
indicators or measures thereof and (b) any adverse effect, change, circumstance or effect on the
Purchased Assets or the business of such Person that is cured by such Person before the earlier of
(i) the Closing Date and (ii) the expiration of the Stock Purchase Period.

     “Order” means any binding order, judgment, ruling, subpoena or verdict rendered by any
Governmental Authority or by any arbitrator.

     “Party” means the Buyer, any Stockholder or the Stockholder Representative, and
“Parties” means all such Persons.

     “Patent Sublicense” means the Patent Sublicense Agreement, if any, executed pursuant
to Section 3.4(e)(iii) of the Kef Asset Purchase Agreement.

     “Permitted Encumbrances” means (i) all Encumbrances approved in writing by the Buyer;
(ii) mechanics’, materialmen’s, carriers’, workmen’s, warehousemen’s, repairmen’s, landlords’ liens
or other like Encumbrances arising or incurred in the ordinary course of business for amounts which
are not material and not yet due and payable; (iii) Encumbrances for Taxes and other governmental
charges that are not due and payable or delinquent or which are being contested in good faith
through appropriate Proceedings and (iv) Encumbrances arising under

A-2-3

 

sales Contracts and equipment leases with third parties entered into in the ordinary course of
business in respect of amounts still owing.

     “Person” means any corporation, association, joint venture, partnership, limited
liability company, organization, business, individual, trust, Governmental Authority or other legal
entity.

     “Proceeding” means any action, arbitration, audit, hearing, investigation, litigation
or suit (whether civil, criminal or administrative) commenced, conducted, or heard by or before any
Governmental Authority or arbitrator.

     “Purchase Price” has the meaning set forth in Section 2.3.

     “Purchased Assets” has the meaning given such term in the Kef Asset Purchase
Agreement.

     “Registration License” means the Registration and Trademark License Agreement, dated
as of the date of this Agreement, between the Buyer and Lex Pharmaceuticals, Inc., as extended,
amended or supplemented.

     “Registration Rights” has the meaning set forth in Section 2.2.

     “Related Agreement(s)” means each and all of the agreements set forth in Exhibits to
this Agreement as well as the Kef Asset Purchase Agreement, the Lex Asset Purchase Agreement and
the Lex Stock Purchase Agreement and all of the agreements set forth in Exhibits thereto.

     “Second Extended Termination Time” has the meaning set forth in Section 2.4(b).

     “Securities Act” means the Securities Act of 1933, as amended.

     “Shares” has the meaning set forth in the Background Statement.

     “Stock Purchase” has the meaning set forth in Section 2.1.

     “Stock Purchase Notice” has the meaning set forth in Section 2.4(c).

     “Stock Purchase Period” means the period beginning as of the date of this Agreement
and ending upon the earlier of (i) the exercise of the Stock Purchase Right or (ii) at the Initial
Termination Time, unless extended pursuant to Section 2.4(a) or 2.4(b), or earlier if terminated
pursuant to Section 2.5.

     “Stock Purchase Period Extension Payment” means any and all payments made pursuant to
Section 2.4(a) and 2.4(b) in connection with an extension of the Stock Purchase Period.

     “Stock Purchase Right” has the meaning set forth in Section 2.1.

     “Stockholder” and “Stockholders” have the meaning set forth in the
introductory paragraph of this Agreement.

     “Stockholder Documents” has the meaning set forth in Section 4.2.

A-2-4

 

     “Stockholder Representative” has the meaning set forth in the introductory paragraph
of this Agreement, as supplemented by [Section 10.5].

     “Stockholders’ Knowledge” means the actual knowledge of the Persons set forth on Annex
B.

     “Straddle Period” means any Taxable Period that begins on or before, and ends after,
the Closing Date.

     “Taxable Period” shall mean any taxable year or any other period that is treated as a
taxable year (or other period, or portion thereof, in the case of a Tax imposed with respect to
such other period; e.g., a quarter) with respect to which any Tax may be imposed under any
applicable statute, rule, or regulation.

     “Taxes” means any and all federal, provincial, state, local and foreign taxes,
assessments and other governmental charges, duties, impositions, levies and Liabilities, including,
without limitation, taxes based upon or measured by gross receipts, income profits, sales, use and
occupation, and value added, goods and services, ad valorem, transfer, gains, franchise,
withholding, payroll, recapture, employment, excise, unemployment, insurance, social security,
business license, occupation, business organization, stamp, environmental and property taxes,
together with all any interest, penalties and additions imposed with respect to such amounts. For
purposes of this Agreement, “Taxes” also includes any obligations under any agreements or
arrangements with any person with respect to the Liability for, or sharing of, Taxes (including,
without limitation, pursuant to Treas. Reg. § 1.1502-6 or comparable provisions of state, local or
foreign Tax law) and including, without limitation, any Liability for Taxes as a transferee or
successor, by contract or otherwise.

     “Tax Return” means any return, statement, declaration, report, estimate, notice, form,
schedule or other document (including estimated Tax returns and reports, withholding Tax returns
and reports, any schedule or attachment, information returns and reports and any amendment to any
of the foregoing) relating to taxes.

     “Warrants” has the meaning set forth in Section 2.2.

A-2-5

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