Document:

exv10w1

Exhibit 10.1

SECURITIES PURCHASE AGREEMENT

     This Securities Purchase Agreement (this “Agreement”) is dated as of December 17, 2008, by and
among Ardea Biosciences, Inc., a Delaware corporation (the “Company”), and each purchaser
identified on the signature pages hereto (each, including its successors and assigns, a “Purchaser”
and collectively, the “Purchasers”).

RECITALS

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

          B. Each Purchaser, severally and not jointly, wishes to purchase, and the Company wishes to
sell, upon the terms and conditions stated in this Agreement, (i) that aggregate number of shares
of common stock, par value $0.001 per share (the “Common Stock”), of the Company, set forth below
such Purchaser’s name on the signature page of this Agreement (which aggregate amount for all
Purchasers together shall be 2,737,336 shares of Common Stock and shall be collectively referred to
herein as the “Shares”) and warrants substantially in the form attached hereto as Exhibit A
to purchase that aggregate number of shares of Common Stock set forth below such Purchaser’s name
on the signature page of this Agreement (which aggregate number of warrants for all Purchasers
together shall be warrants to purchase 684,332 shares of Common Stock and shall be collectively
referred to herein as the “Warrants"). The Shares and the Warrants are collectively referred to
herein as the “Securities.”

          C. Contemporaneously with the execution and delivery of this Agreement, the parties hereto are
executing and delivering a Registration Rights Agreement, substantially in the form attached hereto
as Exhibit B (the “Registration Rights Agreement), pursuant to which, among other things,
the Company will agree to provide certain registration rights with respect to the Shares and the
shares of Common Stock issuable upon exercise of the Warrants (the “Warrant Shares") under the
Securities Act and the rules and regulations promulgated thereunder and applicable state securities
laws.

     NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for
other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged,
the Company and the Purchasers hereby agree as follows:

ARTICLE I.

DEFINITIONS

     1.1 Definitions. In addition to the terms defined elsewhere in this Agreement, for
all purposes of this Agreement, the following terms shall have the meanings indicated in this
Section 1.1:

          “Action” means any action, suit, inquiry, notice of violation, proceeding (including any
partial proceeding such as a deposition) or investigation pending or, to the Company’s Knowledge,
threatened in writing against the Company, any Subsidiary or any of their respective properties or
any officer, director or employee of the Company or any Subsidiary acting in his or her capacity as
an officer, director or employee before or by any federal, state, county, local or foreign court,
arbitrator, governmental or administrative agency, regulatory authority, stock market, stock
exchange or trading facility.

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          “Affiliate” means, with respect to any Person, any other Person that, directly or indirectly
through one or more intermediaries, Controls, is controlled by or is under common control with such
Person, as such terms are used in and construed under Rule 144. With respect to a Purchaser, any
investment fund or managed account that is managed on a discretionary basis by the same investment
manager as such Purchaser will be deemed to be an Affiliate of such Purchaser.

          “Agreement” shall have the meaning ascribed to such term in the Preamble.

          “Business Day” means a day, other than a Saturday or Sunday, on which banks in New York City
are open for the general transaction of business.

          “Buy-In” has the meaning set forth in Section 4.1(f).

          “Buy-In Price” has the meaning set forth in Section 4.1(f).

          “Closing” means the closing of the purchase and sale of the Securities pursuant to this
Agreement.

          “Closing Bid Price” means, for any security as of any date, the last closing price for such
security on the Principal Trading Market, as reported by Bloomberg, or, if the Principal Trading
Market begins to operate on an extended hours basis and does not designate the closing bid price
then the last bid price of such security prior to 4:00 p.m., New York City Time, as reported by
Bloomberg, or, if the Principal Trading Market is not the principal securities exchange or trading
market for such security, the last closing price of such security on the principal securities
exchange or trading market where such security is listed or traded as reported by Bloomberg, or if
the foregoing do not apply, the last closing price of such security in the over-the-counter market
on the electronic bulletin board for such security as reported by Bloomberg, or, if no closing bid
price is reported for such security by Bloomberg, the average of the bid prices of any market
makers for such security as reported in the “pink sheets” by Pink Sheets LLC (formerly the National
Quotation Bureau, Inc.). If the Closing Bid Price cannot be calculated for a security on a
particular date on any of the foregoing bases, the Closing Bid Price of such security on such date
shall be the fair market value as mutually determined by the Company and the holder. If the Company
and the holder are unable to agree upon the fair market value of such security, then the Company
shall, within two (2) Business Days submit via facsimile (a) the disputed determination to an
independent, reputable investment bank selected by the Company and approved by the holder or (b)
the disputed arithmetic calculation to the Company’s independent, outside accountant. The Company
shall cause at its expense the investment bank or the accountant, as the case may be, to perform
the determinations or calculations and notify the Company and the holder of the results no later
than ten (10) Business Days from the time it receives the disputed determinations or calculations.
Such investment bank’s or accountant’s determination or calculation, as the case may be, shall be
binding upon all parties absent demonstrable error. All such determinations shall be appropriately
adjusted for any stock dividend, stock split, stock combination or other similar transaction during
the applicable calculation period.

          “Closing Date” means the Trading Day when all of the Transaction Documents have been executed
and delivered by the applicable parties thereto, and all of the conditions set forth in Sections
2.1, 2.2, 5.1 and 5.2 hereof are satisfied, or such other date as the parties may agree.

          “Commission” has the meaning set forth in the Recitals.

          “Common Stock” has the meaning set forth in the Recitals, and also includes any securities
into which the Common Stock may hereafter be reclassified or changed.

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          “Common Stock Equivalents” means any securities of the Company or any Subsidiary which would
entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any
debt, preferred stock, rights, options, warrants or other instrument that is at any time
convertible into or exchangeable for, or otherwise entitles the holder thereof to receive, Common
Stock or other securities that entitle the holder to receive, directly or indirectly, Common Stock.

          “Company Counsel” means Cooley Godward Kronish LLP.

          “Company Deliverables” has the meaning set forth in Section 2.2(a).

          “Company’s Knowledge” means with respect to any statement made to the knowledge of the
Company, that the statement is based upon the actual knowledge of the executive officers of the
Company having responsibility for the matter or matters that are the subject of the statement.

          “Control” (including the terms “controlling”, “controlled by” or “under common control with”)
means the possession, direct or indirect, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.

          “Disclosure Materials” has the meaning set forth in Section 3.1(h).

          “Effective Date” means the date on which the initial Registration Statement required by
Section 2(a) of the Registration Rights Agreement applicable to such Purchaser is first declared
effective by the Commission.

          “Environmental Laws” has the meaning set forth in Section 3.1(l).

          “Exchange Act” means the Securities Exchange Act of 1934, as amended, or any successor
statute, and the rules and regulations promulgated thereunder.

          “GAAP” means U.S. generally accepted accounting principles, as applied by the Company.

          “Indemnified Person” has the meaning set forth in Section 4.8(b).

          “Intellectual Property” has the meaning set forth in Section 3.1(r).

          “Irrevocable Transfer Agent Instructions” means, with respect to the Company, the Irrevocable
Transfer Agent Instructions, in the form of Exhibit E, executed by the Company and
delivered to and acknowledged in writing by the Transfer Agent.

          “Lien” means any lien, charge, claim, encumbrance, security interest, right of first refusal,
preemptive right or other restrictions of any kind.

          “Material Adverse Effect” means a material adverse effect on the results of operations,
assets, business or financial condition of the Company, except that any of the following, either
alone or in combination, shall not be deemed a Material Adverse Effect: (i) effects caused by
changes or circumstances affecting general market conditions in the U.S. economy or which are
generally applicable to the industry in which the Company operates, (ii) effects resulting from or
relating to the announcement or disclosure of the sale of the Securities or other transactions
contemplated by this Agreement, or (iii) effects caused by any event, occurrence or condition
resulting from or relating to the taking of any action in accordance with this Agreement.

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          “Material Contract” means any contract of the Company that was filed as an exhibit to the SEC
Reports pursuant to Item 601(b)(4) or Item 601(b)(10) of Regulation S-K.

          “Material Permits” has the meaning set forth in Section 3.1(p).

          “New York Courts” means the state and federal courts sitting in the City of New York, Borough
of Manhattan.

          “Outside Date” means the 30th day following the date of this Agreement.

          “Person” means an individual, corporation, partnership, limited liability company, trust,
business trust, association, joint stock company, joint venture, sole proprietorship,
unincorporated organization, governmental authority or any other form of entity not specifically
listed herein.

          “Principal Trading Market” means the Trading Market on which the Common Stock is primarily
listed on and quoted for trading, which, as of the date of this Agreement and the Closing Date,
shall be the NASDAQ Global Market.

          “Proceeding” means an action, claim, suit, investigation or proceeding (including, without
limitation, an investigation or partial proceeding, such as a deposition), whether commenced or
threatened.

          “Purchaser Deliverables” has the meaning set forth in Section 2.2(b).

          “Purchaser Party” has the meaning set forth in Section 4.8(a).

          “Registration Rights Agreement” has the meaning set forth in the Recitals.

          “Registration Statement” means a registration statement meeting the requirements set forth in
the Registration Rights Agreement applicable to such Purchaser and covering the resale by such
Purchaser of the Registrable Securities (as defined in the Registration Rights Agreement).

          “Required Approvals” has the meaning set forth in Section 3.1(e).

          “Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as
such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by
the Commission having substantially the same effect as such Rule.

          “SEC Reports” has the meaning set forth in Section 3.1(h).

          “Secretary’s Certificate” has the meaning set forth in Section 2.2(a)(vi).

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

          “Share Purchase Price” means $11.14 per share.

          “Short Sales” include, without limitation, all “short sales” as defined in Rule 200
promulgated under Regulation SHO under the Exchange Act, whether or not against the box, and all
types of direct and indirect stock pledges, forward sale contracts, options, puts, calls, short
sales, swaps, “put equivalent positions” (as defined in Rule 16a-1(h) under the Exchange Act) and
similar arrangements (including on a total return basis), and sales and other transactions through
non-U.S. broker dealers or foreign regulated brokers.

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          “Subscription Amount” means with respect to each Purchaser, the aggregate amount to be paid
for the Shares and the Warrants purchased hereunder as indicated on such Purchaser’s signature page
to this Agreement next to the heading “Aggregate Purchase Price (Subscription Amount)”.

          “Subsidiary” means any entity in which the Company, directly or indirectly, owns capital stock
or holds an equity or similar interest.

          “Trading Affiliate” has the meaning set forth in Section 3.2(h).

          “Trading Day” means (i) a day on which the Common Stock is listed or quoted and traded on its
Principal Trading Market (other than the OTC Bulletin Board), or (ii) if the Common Stock is not
listed on a Trading Market (other than the OTC Bulletin Board), a day on which the Common Stock is
traded in the over-the-counter market, as reported by the OTC Bulletin Board, or (iii) if the
Common Stock is not quoted on any Trading Market, a day on which the Common Stock is quoted in the
over-the-counter market as reported in the “pink sheets” by Pink Sheets LLC (or any similar
organization or agency succeeding to its functions of reporting prices); provided, that in the
event that the Common Stock is not listed or quoted as set forth in (i), (ii) and (iii) hereof,
then Trading Day shall mean a Business Day.

          “Trading Market” means whichever of the New York Stock Exchange, the American Stock Exchange,
the NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ Capital Market or the OTC
Bulletin Board on which the Common Stock is listed or quoted for trading on the date in question.

          “Transaction Documents” means this Agreement, the schedules and exhibits attached hereto, the
Warrants, the Registration Rights Agreement, the Irrevocable Transfer Agent Instructions and any
other documents or agreements executed in connection with the transactions contemplated hereunder.

          “Transfer Agent” means Computershare Trust Company N.A., or any successor transfer agent for
the Company.

ARTICLE II.

PURCHASE AND SALE

     2.1 Closing.

          (a) Amount. Subject to the terms and conditions set forth in this Agreement, at the
Closing, the Company shall issue and sell to each Purchaser, and each Purchaser shall, severally
and not jointly, purchase from the Company, such number of (A) Shares equal to the quotient
resulting from dividing (i) the Subscription Amount for such Purchaser by (ii) the sum of (y) the
Share Purchase Price and (z) 0.03125, rounded down to the nearest whole Share and (B) Warrants to
purchase such number of Warrant Shares equal to the quotient resulting from muliplying (i) the
number of Shares to be acquired by such Purchaser pursuant hereto, by (ii) 0.25, rounded down to
the nearest whole Warrant Share.

          (b) Closing. The Closing of the purchase and sale of the Securities shall take place
at the offices of Cooley Godward Kronish LLP, 4401 Eastgate Mall, San Diego, California on the
Closing Date or at such other locations or remotely by facsimile transmission or other electronic
means as the parties may mutually agree.

          (c) Form of Payment. On the Closing Date (i) each Purchaser that has agreed to wire
funds directly to the Company shall wire such Purchaser’s Subscription Amount to the Company in
accordance with the written directions from the Company, and (ii) the Company shall (A) deliver or
cause to

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be delivered to each Purchaser a duly executed Warrant to purchase the number of Warrant
Shares set forth below such Purchaser’s name on the signature page of this Agreement and (B)
irrevocably instruct the Transfer Agent to deliver to each Purchaser one or more stock
certificates, free and clear of all restrictive and other legends (except as expressly provided in
Section 4.1(b) hereof), evidencing the number of Shares such Purchaser is purchasing as is set
forth on such Purchaser’s signature page to this Agreement next to the heading “Number of Shares to
be Acquired”, within three (3) Business Days after the Closing, duly executed on behalf of the
Company and registered in the name of such Purchaser.

     2.2 Closing Deliveries.

          (a) On or prior to the Closing, the Company shall issue, deliver or cause to be delivered to
each Purchaser the following (the “Company Deliverables”):

               (i) this Agreement, duly executed by the Company;

               (ii) facsimile copies of one or more stock certificates, free and clear of all restrictive and
other legends (except as provided in Section 4.1(b) hereof), evidencing the Shares
subscribed for by Purchaser hereunder, registered in the name of such Purchaser as set forth on the
Stock Certificate Questionnaire included as Exhibit C-2 hereto (the “Stock Certificates”),
with the original Stock Certificates sent within three (3) Business Days of Closing;

               (iii) a Warrant to purchase the number of Warrant Shares set forth below such Purchaser’s name
on the signature page of this Agreement, duly executed by the Company;

               (iv) a legal opinion of Company Counsel, dated as of the Closing Date and in the form attached
hereto as Exhibit D, executed by such counsel and addressed to the Purchasers;

               (v) the Registration Rights Agreement, duly executed by the Company;

               (vi) duly executed Irrevocable Transfer Agent Instructions acknowledged in writing by the
Transfer Agent;

               (vii) a certificate of the Secretary of the Company (the “Secretary’s Certificate”), dated as
of the Closing Date, certifying (a) the resolutions adopted by the Board of Directors of the
Company or a duly authorized committee thereof approving the transactions contemplated by this
Agreement and the other Transaction Documents and the issuance of the Securities, (b) the current
versions of the certificate of incorporation and by-laws of the Company, each as amended, and (c)
as to the signatures and authority of persons signing the Transaction Documents and related
documents on behalf of the Company, in the form attached hereto as Exhibit F;

               (viii) the Compliance Certificate referred to in Section 5.1(g);

               (ix) a certificate evidencing the formation and good standing of the Company in its
jurisdiction of formation issued by the Secretary of State (or comparable office) of such
jurisdiction, as of a date within five (5) Business Days of the Closing Date;

               (x) a certificate evidencing the Company’s qualification as a foreign corporation and good
standing issued by the Secretary of State of the State of California, as of a date within ten (10)
Business Days of the Closing Date; and

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               (xi) a certified copy of the certificate of incorporation, as certified by the Secretary of
State of the State (or comparable office) of the Company’s jurisdiction of formation, as of a date
within ten (10) Business Days of the Closing Date.

          (b) On or prior to the Closing, each Purchaser shall deliver or cause to be delivered to the
Company the following (the “Purchaser Deliverables”):

               (i) this Agreement, duly executed by such Purchaser;

               (ii) its Subscription Amount, in United States dollars and in immediately available funds, in
the amount set forth as the “Purchase Price” indicated below such Purchaser’s name on the
applicable signature page hereto under the heading “Aggregate Purchase Price (Subscription Amount)”
by wire transfer to the escrow account set forth on Exhibit H attached hereto or to the
account of the Company pursuant to Section 2.1(c);

               (iii) the Registration Rights Agreement, duly executed by such Purchaser;

               (iv) a fully completed and duly executed Selling Stockholder Questionnaire in the form
attached as Annex B to the Registration Rights Agreement; and

               (v) a fully completed and duly executed Accredited Investor Questionnaire, reasonably
satisfactory to the Company, and Stock Certificate Questionnaire in the forms attached hereto as
Exhibits B-1 and B-2, respectively.

ARTICLE III.

REPRESENTATIONS AND WARRANTIES

     3.1 Representations and Warranties of the Company. The Company hereby represents and
warrants as of the date hereof and the Closing Date (except for the representations and warranties
that speak as of a specific date, which shall be made as of such date), to each of the Purchasers
that, except as set forth in the Schedules delivered herewith or disclosed in the SEC Reports:

          (a) Subsidiaries. The Company has no direct or indirect Subsidiaries other than those
listed in Schedule 3.1(a) hereto. Except as disclosed in Schedule 3.1(a) hereto,
the Company owns, directly or indirectly, all of the capital stock or comparable equity interests
of each Subsidiary free and clear of any and all Liens which could reasonably be expected to have a
Material Adverse Effect, and all the issued and outstanding shares of capital stock or comparable
equity interest of each Subsidiary are validly issued and are fully paid, non-assessable and free
of preemptive and similar rights to subscribe for or purchase securities.

          (b) Organization and Qualification. The Company and each of its Subsidiaries is an
entity duly incorporated or otherwise organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation or organization (as applicable), with the requisite
corporate power and authority to own or lease and use its properties and assets and to carry on its
business as currently conducted. Neither the Company nor any Subsidiary is in violation of any of
the provisions of its respective certificate or articles of incorporation, bylaws or other
organizational or charter documents. The Company and each of its Subsidiaries is duly qualified to
conduct business and is in good standing as a foreign corporation or other entity in each
jurisdiction in which the nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in good standing, as the
case may be, would not have a Material Adverse Effect.

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          (c) Authorization; Enforcement; Validity. The Company has the requisite corporate
power and authority to enter into and to consummate the transactions contemplated by each of the
Transaction Documents to which it is a party and otherwise to carry out its obligations hereunder
and thereunder. The Company’s execution and delivery of each of the Transaction Documents to which
it is a party and the consummation by it of the transactions contemplated hereby and thereby
(including, but not limited to, the sale and delivery of the Securities and the reservation for
issuance and the subsequent issuance of the Warrant Shares) have been duly authorized by all
necessary corporate action on the part of the Company, and no further corporate action is required
by the Company, its Board of Directors or its stockholders in connection therewith other than in
connection with the Required Approvals. Each of the Transaction Documents to which it is a party
has been (or upon delivery will have been) duly executed by the Company and is, or when delivered
in accordance with the terms hereof, will constitute the legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its terms, except (i) as such
enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally the enforcement of, creditors’
rights and remedies or by other equitable principles of general , (ii) as limited by laws relating
to the availability of specific performance, injunctive relief or other equitable remedies and
(iii) insofar as indemnification and contribution provisions may be limited by applicable law.
Except for Material Contracts and as set forth on Schedule 3.1(c) hereto, there are no
stockholder agreements, voting agreements, or other similar arrangements with respect to the
Company’s capital stock to which the Company is a party or, to the Company’s Knowledge, between or
among any of the Company’s stockholders.

          (d) No Conflicts. The execution, delivery and performance by the Company of the
Transaction Documents to which it is a party and the consummation by the Company of the
transactions contemplated hereby or thereby (including, without limitation, the issuance of the
Securities and the Warrant Shares) do not and will not (i) conflict with or violate any provisions
of the Company’s or any Subsidiary’s certificate or articles of incorporation, bylaws or otherwise
result in a violation of the organizational documents of the Company, (ii) conflict with, or
constitute a default (or an event that with notice or lapse of time or both would result in a
default) under, result in the creation of any Lien upon any of the properties or assets of the
Company or give to others any rights of termination, amendment, acceleration or cancellation (with
or without notice, lapse of time or both) of, any Material Contract, or (iii) subject to the
Required Approvals, conflict with or result in a violation of any law, rule, regulation, order,
judgment, injunction, decree or other restriction of any court or governmental authority to which
the Company is subject (including federal and state securities laws and regulations and the rules
and regulations, assuming the correctness of the representations and warranties made by the
Purchasers herein, of any self-regulatory organization to which the Company or its securities are
subject, including all applicable Trading Markets), or by which any property or asset of the
Company is bound or affected, except in the case of clauses (ii) and (iii) such as would not,
individually or in the aggregate, have a Material Adverse Effect.

          (e) Filings, Consents and Approvals. Neither the Company nor any of its Subsidiaries
is required to obtain any consent, waiver, authorization or order of, give any notice to, or make
any filing or registration with, any court or other federal, state, local or other governmental
authority or other Person in connection with the execution, delivery and performance by the Company
of the Transaction Documents (including the issuance of the Securities and the Warrant Shares),
other than (i) the filing with the Commission of one or more Registration Statements in accordance
with the requirements of the Registration Rights Agreement, (ii) filings required by applicable
state securities laws, (iii) the filing of a Notice of Sale of Securities on Form D with the
Commission under Regulation D of the Securities Act, (iv) the filing of any requisite notices
and/or application(s) to the Principal Trading Market for the issuance and sale of the Common Stock
and the listing of the Common Stock for trading or quotation, as the case may be, thereon in the
time and manner required thereby, (v) the filings required in accordance with Section 4.7 of this
Agreement and (vi) those that have been made or obtained prior to the date of this Agreement
(collectively, the “Required Approvals”).

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          (f) Issuance of the Shares and the Warrant Shares. The Shares and the Warrant Shares
have been duly authorized and, when issued and paid for in accordance with the terms of the
Transaction Documents, will be duly and validly issued, fully paid and nonassessable and free and
clear of all Liens, other than restrictions on transfer provided for in the Transaction Documents
or imposed by applicable securities laws, and shall not be subject to preemptive or similar rights.
Assuming the accuracy of the representations and warranties of the Purchasers in this Agreement,
the Shares, Warrants and the Warrant Shares will be issued in compliance with all applicable
federal and state securities laws. The Warrants have been duly authorized and, when issued and
paid for in accordance with the terms of the Transaction Documents, will be duly and validly
issued, free and clear of all Liens, other than restrictions on transfer provided for in the
Transaction Documents or imposed by applicable securities laws, and shall not be subject to
preemptive or similar rights of stockholders. As of the Closing Date, the Company shall have
reserved from its duly authorized capital stock the number of shares of Common Stock issuable upon
exercise of the Warrants (without taking into account any limitations on the exercise of the
Warrants set forth in the Warrants). The Company shall, so long as any of the Warrants are
outstanding, take all action necessary to reserve and keep available out of its authorized and
unissued capital stock, solely for the purpose of effecting the exercise of the Warrants, 100% of
the number of shares of Common Stock issuable upon exercise of the Warrants.

          (g) Capitalization. The number of shares and type of all authorized, issued and
outstanding capital stock, options and other securities of the Company (whether or not presently
convertible into or exercisable or exchangeable for shares of capital stock of the Company) has
been set forth in the SEC Reports and has changed since the date of such SEC Reports only due to
stock grants or other equity awards or stock option and warrant exercises that do not, individually
or in the aggregate, have a material effect on the issued and outstanding capital stock, options
and other securities. All of the outstanding shares of capital stock of the Company are duly
authorized, validly issued, fully paid and non-assessable, have been issued in compliance in all
material respects with all applicable federal and state securities laws, and none of such
outstanding shares was issued in violation of any preemptive rights or similar rights to subscribe
for or purchase any capital stock of the Company. Except as specified in the SEC Reports: (i) no
shares of the Company’s outstanding capital stock are subject to preemptive rights or any other
similar rights; (ii) there are no outstanding options, warrants, scrip, rights to subscribe to,
calls or commitments of any character whatsoever relating to, or securities or rights convertible
into, or exercisable or exchangeable for, any shares of capital stock of the Company, or contracts,
commitments, understandings or arrangements by which the Company is or may become bound to issue
additional shares of capital stock of the Company or options, warrants, scrip, rights to subscribe
to, calls or commitments of any character whatsoever relating to, or securities or rights
convertible into, or exercisable or exchangeable for, any shares of capital stock of the Company,
other than those issued or granted pursuant to Material Contracts or equity or incentive plans or
arrangements described in the SEC Reports; (iii) there are no material outstanding debt securities,
notes, credit agreements, credit facilities or other agreements, documents or instruments
evidencing indebtedness of the Company or by which the Company is bound; (iv) to the Company’s
Knowledge, there are no financing statements securing obligations in any material amounts, either
singly or in the aggregate, filed in connection with the Company; (v) there are no agreements or
arrangements under which the Company is obligated to register the sale of any of their securities
under the Securities Act (except the Registration Rights Agreement); (vi) there are no outstanding
securities or instruments of the Company or which contain any redemption or similar provisions, and
there are no contracts, commitments, understandings or arrangements by which the Company is or may
become bound to redeem a security of the Company; (vii) there are no securities or instruments
containing anti-dilution or similar provisions that will be triggered by the issuance of the
Shares; (viii) the Company does not have any stock appreciation rights or “phantom stock” plans or
agreements or any similar plan or agreement; and (ix) the Company has no liabilities or obligations
required to be disclosed in the SEC Reports but not so disclosed in the SEC Reports, other than
those incurred in the ordinary course of the Company’s businesses and which, individually or in the
aggregate, do not or would not have a Material Adverse Effect.

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          (h) SEC Reports. The Company has filed all reports, schedules, forms, statements and
other documents required to be filed by it under the Exchange Act, including pursuant to Section
13(a) or 15(d) thereof, for the twelve months preceding the date hereof (or such shorter period as
the Company was required by law or regulation to file such material) (the foregoing materials,
including the exhibits thereto and documents incorporated by reference therein, being collectively
referred to herein as the “SEC Reports” and together with this Agreement and the Schedules to this
Agreement (if any), the “Disclosure Materials”), on a timely basis or has received a valid
extension of such time of filing and has filed any such SEC Reports prior to the expiration of any
such extension. As of their respective filing dates, or to the extent corrected by a subsequent
restatement, the SEC Reports complied in all material respects with the requirements of the
Securities Act and the Exchange Act and the rules and regulations of the Commission promulgated
thereunder, and none of the SEC Reports, when filed, contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were made, not
misleading.

          (i) Financial Statements. The financial statements of the Company included in the SEC
Reports comply in all material respects with applicable accounting requirements and the rules and
regulations of the Commission with respect thereto as in effect at the time of filing (or to the
extent corrected by a subsequent restatement). Such financial statements have been prepared in
accordance with GAAP applied on a consistent basis during the periods involved, except as may be
otherwise specified in such financial statements or the notes thereto and except that unaudited
financial statements may not contain all footnotes required by GAAP, and fairly present in all
material respects the financial position of the Company and its consolidated subsidiaries taken as
a whole as of and for the dates thereof and the results of operations and cash flows for the
periods then ended, subject, in the case of unaudited statements, to normal, year-end audit
adjustments.

          (j) Tax Matters. The Company (i) has prepared and filed all foreign, federal and
state income and all other tax returns, reports and declarations required by any jurisdiction to
which it is subject, (ii) has paid all taxes and other governmental assessments and charges that
are material in amount, shown or determined to be due on such returns, reports and declarations,
except those being contested in good faith, with respect to which adequate reserves have been set
aside on the books of the Company and (iii) has set aside on its books provisions reasonably
adequate for the payment of all taxes for periods subsequent to the periods to which such returns,
reports or declarations apply, except, in the case of clauses (i) and (ii) above, where the failure
to so pay or file any such tax, assessment, charge or return would not have a Material Adverse
Effect.

          (k) Material Changes. Since the date of the latest financial statements included
within the SEC Reports, except as specifically disclosed in the SEC Reports or as set forth in
Schedule 3.1(k) hereto, (i) there have been no events, occurrences or developments that
have had or would reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect, (ii) the Company has not incurred any material liabilities (contingent or
otherwise) other than (A) trade payables, accrued expenses and other liabilities incurred in the
ordinary course of business consistent with past practice and (B) liabilities not required to be
reflected in the Company’s financial statements pursuant to GAAP or required to be disclosed in
filings made with the Commission, (iii) the Company has not altered materially its method of
accounting or the manner in which it keeps its accounting books and records, (iv) the Company has
not declared or made any dividend or distribution of cash or other property to its stockholders or
purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock
(other than in connection with repurchases of unvested stock issued to employees of the Company),
(v) the Company has not issued any equity securities to any officer, director or Affiliate, except
Common Stock issued in the ordinary course as dividends on outstanding preferred stock or issued
pursuant to existing Company stock option or stock purchase plans or executive and director
corporate arrangements disclosed in the SEC Reports and (vi) there has not been any material change
or amendment to, or any waiver of any material right

10

 

by the Company under, any Material Contract under which the Company or any of its Subsidiaries
is bound or subject. Except for the transactions contemplated by this Agreement or as set forth in
Schedule 3.1(k) hereto, no event, liability or development has occurred or exists with
respect to the Company or its Subsidiaries or their respective business, properties, operations or
financial condition that would be required to be disclosed by the Company under applicable
securities laws at the time this representation is made that has not been publicly disclosed at
least one Trading Day prior to the date that this representation is made.

          (l) Environmental Matters. To the Company’s Knowledge, neither the Company nor any of
its Subsidiaries (i) is in violation of any statute, rule, regulation, decision or order of any
governmental agency or body or any court, domestic or foreign, relating to the use, disposal or
release of hazardous or toxic substances or relating to the protection or restoration of the
environment or human exposure to hazardous or toxic substances (collectively, “Environmental
Laws”), (ii) owns or operates any real property contaminated with any substance that is in
violation of any Environmental Laws, (iii) is liable for any off-site disposal or contamination
pursuant to any Environmental Laws, or (iv) is subject to any claim relating to any Environmental
Laws; which violation, contamination, liability or claim has had or would have, individually or in
the aggregate, a Material Adverse Effect; and, to the Company’s Knowledge, there is no pending or
threatened investigation that might lead to such a claim.

          (m) Litigation. To the Company’s Knowledge, there is no Action which (i) adversely
affects or challenges the legality, validity or enforceability of any of the Transaction Documents
or the Securities or (ii) except as specifically disclosed in the SEC Reports, could, if there were
an unfavorable decision, individually or in the aggregate, have a Material Adverse Effect. Neither
the Company nor any Subsidiary, nor to the Company’s Knowledge any director or officer thereof, is
or has been the subject of any Action involving a claim of violation of or liability under federal
or state securities laws or a claim of breach of fiduciary duty. There has not been, and to the
Company’s Knowledge there is not pending or contemplated, any investigation by the Commission
involving the Company or any current or former director or officer of the Company. The Commission
has not issued any stop order or other order suspending the effectiveness of any registration
statement filed by the Company or any of its Subsidiaries under the Exchange Act or the Securities
Act.

          (n) Employment Matters. No material labor dispute exists or, to the Company’s
Knowledge, is imminent with respect to any of the employees of the Company which would have a
Material Adverse Effect. None of the Company’s employees is a member of a union that relates to
such employee’s relationship with the Company, and neither the Company nor any of its Subsidiaries
is a party to a collective bargaining agreement, and the Company and each Subsidiary believes that
its relationship with its employees is good. No executive officer of the Company (as defined in
Rule 501(f) of the 1933 Act) has notified the Company that such officer intends to leave the
Company or otherwise terminate such officer’s employment with the Company. To the Company’s
Knowledge, it is in compliance with all U.S. federal, state, local and foreign laws and regulations
relating to employment and employment practices, terms and conditions of employment and wages and
hours, except where the failure to be in compliance would not, individually or in the aggregate,
have a Material Adverse Effect.

          (o) Compliance. Neither the Company nor any of its Subsidiaries (i) is in default
under or in violation of (and no event has occurred that has not been waived that, with notice or
lapse of time or both, would result in a default by the Company or any of its Subsidiaries under),
nor has the Company or any of its Subsidiaries received written notice of a claim that it is in
default under or that it is in violation of, any Material Contract (whether or not such default or
violation has been waived), (ii) is in violation of any order of which the Company has been made
aware in writing of any court, arbitrator or governmental body having jurisdiction over the Company
or its properties or assets, or (iii) is in violation of, or in receipt of written notice that it
is in violation of, any statute, rule or regulation of any governmental authority applicable to the
Company, except in each case as would not, individually or in the aggregate, have a Material
Adverse Effect.

11

 

          (p) Regulatory Permits. The Company and each of its Subsidiaries possess or have
applied for all certificates, authorizations and permits issued by the appropriate federal, state,
local or foreign regulatory authorities necessary to conduct its respective businesses as currently
conducted and as described in the SEC Reports, except where the failure to possess such permits,
individually or in the aggregate, has not and would not have, individually or in the aggregate, a
Material Adverse Effect (“Material Permits”), and (i) neither the Company nor any of its
Subsidiaries has received any notice in writing of proceedings relating to the revocation or
material adverse modification of any such Material Permits and (ii) the Company is unaware of any
facts or circumstances that would give rise to the revocation or material adverse modification of
any Material Permits.

          (q) Title to Assets. The Company and its Subsidiaries do not own any real property.
The Company and its Subsidiaries have good and marketable title to all tangible personal property
owned by them which is material to the business of the Company and its Subsidiaries, taken as
whole, in each case free and clear of all Liens except such as do not materially affect the value
of such property and do not interfere with the use made and proposed to be made of such property by
the Company and any of its Subsidiaries. Any real property and facilities held under lease by the
Company and any of its Subsidiaries are held by them under valid, subsisting and enforceable leases
with such exceptions as are not material and do not interfere with the use made and proposed to be
made of such property and buildings by the Company and its Subsidiaries.

          (r) Patents and Trademarks. To the Company’s Knowledge, the Company and its
Subsidiaries own, possess, license or have other rights to use all foreign and domestic patents,
patent applications, trade and service marks, trade and service mark registrations, trade names,
copyrights, inventions, trade secrets, technology, Internet domain names, know-how and other
intellectual property (collectively, the “Intellectual Property”) necessary for the conduct of
their respective businesses as now conducted or as proposed to be conducted. Except as set forth
in the SEC Reports and except where such violations or infringements would not have, either
individually or in the aggregate, a Material Adverse Effect, (i) to the Company’s Knowledge, there
are no rights of third parties to any such Intellectual Property; (ii) to the Company’s Knowledge,
there is no infringement by third parties of any such Intellectual Property; (iii) to the Company’s
Knowledge, there is no pending or threatened action, suit, proceeding or claim by others
challenging the Company’s and its Subsidiaries’ rights in or to any such Intellectual Property;
(iv) to the Company’s Knowledge, there is no pending or threatened action, suit, proceeding or
claim by others challenging the validity or scope of any such Intellectual Property; and (v) to the
Company’s Knowledge, there is no pending or threatened action, suit, proceeding or claim by others
that the Company and/or any Subsidiary infringes or otherwise violates any patent, trademark,
copyright, trade secret or other proprietary rights of others.

          (s) Insurance. The Company and each of the Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such amounts as the
Company believes to be prudent and customary in the businesses and locations in which the Company
and the Subsidiaries are engaged. Neither the Company nor any of its Subsidiaries has received any
notice of cancellation of any such insurance, nor, to the Company’s Knowledge, will it or any
Subsidiary be unable to renew their respective existing insurance coverage as and when such
coverage expires or to obtain similar coverage from similar insurers as may be necessary to
continue its business.

          (t) Transactions With Affiliates and Employees. Except as set forth in the SEC
Reports and other than the grant of stock options or other equity awards that are not individually
or in the aggregate material in amount, none of the officers or directors of the Company and, to
the Company’s Knowledge, none of the employees of the Company, is presently a party to any
transaction with the Company or any Subsidiary or to a presently contemplated transaction (other
than for services as employees, officers and

12

 

directors) that would be required to be disclosed pursuant to Item 404 of Regulation S-K
promulgated under the Securities Act.

          (u) Internal Accounting Controls. The Company maintains a system of internal
accounting controls sufficient to provide reasonable assurance that (i) transactions are executed
in accordance with management’s general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with GAAP and to maintain
asset and liability accountability, (iii) access to assets or incurrence of liabilities is
permitted only in accordance with management’s general or specific authorization, and (iv) the
recorded accountability for assets and liabilities is compared with the existing assets and
liabilities at reasonable intervals and in the Company’s good faith judgment appropriate action is
taken with respect to any differences. Since the most recently filed periodic report under the
Exchange Act, there have been no changes in the Company’s internal control over financial reporting
(as such term is defined in the Exchange Act) that have materially affected, or is reasonably
likely to materially affect, the Company’s internal control over financial reporting.

          (v) Sarbanes-Oxley; Disclosure Controls. To the Company’s Knowledge, the Company is
in compliance in all material respects with all of the provisions of the Sarbanes-Oxley Act of 2002
which are applicable to it, except where such noncompliance would not have, individually or in the
aggregate, a Material Adverse Effect. The Company maintains disclosure controls and procedures (as
such term is defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act).

          (w) Certain Fees. No person or entity will have, as a result of the transactions
contemplated by this Agreement, any valid right, interest or claim against or upon the Company or a
Purchaser for any commission, fee or other compensation pursuant to any agreement, arrangement or
understanding entered into by or on behalf of the Company with respect to the offer and sale of the
Securities or the Warrant Shares. The Company shall indemnify, pay, and hold each Purchaser
harmless against, any liability, loss or expense (including, without limitation, attorneys’ fees
and out-of-pocket expenses) arising in connection with any such right, interest or claim.

          (x) Private Placement. Assuming the accuracy of the Purchasers’ representations and
warranties set forth in Section 3.2 of this Agreement and the accuracy of the information disclosed
in the Accredited Investor Questionnaires, no registration under the Securities Act is required for
the offer and sale of the Securities or the Warrant Shares by the Company to the Purchasers under
the Transaction Documents.

          (y) Registration Rights. Other than as set forth in the SEC Reports and other than
each of the Purchasers or as set forth in Schedule 3.1(y) hereto, no Person has any right
to cause the Company to effect the registration under the Securities Act of any securities of the
Company other than those securities which are currently registered on an effective registration
statement on file with the Commission.

          (z) No Integrated Offering. Assuming the accuracy of the Purchasers’ representations
and warranties set forth in Section 3.2, none of the Company, its Subsidiaries nor, to the
Company’s Knowledge, any of its Affiliates or any Person acting on its behalf has, directly or
indirectly, at any time within the past six months, made any offers or sales of any Company
security or solicited any offers to buy any security under circumstances that would (i) eliminate
the availability of the exemption from registration under Regulation D under the Securities Act in
connection with the offer and sale by the Company of the Securities as contemplated hereby or (ii)
cause the offering of the Securities pursuant to the Transaction Documents to be integrated with
prior offerings by the Company for purposes of any applicable law, regulation or stockholder
approval provisions, including, without limitation, under the rules and regulations of any Trading
Market on which any of the securities of the Company are listed or designated. Neither the Company
nor, to the Company’s Knowledge, any person acting on behalf of the Company has offered or sold any
of the Securities by any form of general solicitation or general advertising.

13

 

          (aa) Listing and Maintenance Requirements. The Company’s Common Stock is registered
pursuant to Section 12(b) or 12(g) of the Exchange Act, and the Company has taken no action
designed to terminate the registration of the Common Stock under the Exchange Act nor has the
Company received any notification that the Commission is contemplating terminating such
registration. The Company has not, in the twelve (12) months preceding the date hereof, received
written notice from any Trading Market on which the Common Stock is listed or quoted to the effect
that the Company is not in compliance with the listing or maintenance requirements of such Trading
Market. The Company is in compliance in all material respects with the listing and maintenance
requirements for continued trading of the Common Stock on the Principal Trading Market.

          (bb) Investment Company. Neither the Company nor any of its Subsidiaries is required
to be registered as, and is not an Affiliate of, and immediately following the Closing will not be
required to register as, an “investment company” within the meaning of the Investment Company Act
of 1940, as amended.

          (cc) Questionable Payments. To the Company’s Knowledge, neither the Company nor any
of its Subsidiaries, nor any directors, officers, employees, agents or other Persons acting at the
direction of the Company has, in the course of its actions for, or on behalf of, the Company: (i)
directly or indirectly, used any material corporate funds for unlawful contributions, gifts,
entertainment or other unlawful expenses relating to foreign or domestic political activity; (ii)
made any material direct or indirect unlawful payments to any foreign or domestic governmental
officials or employees or to any foreign or domestic political parties or campaigns from corporate
funds; (iii) violated in any material respect any provision of the Foreign Corrupt Practices Act of
1977, as amended, or (iv) made any other material unlawful bribe, rebate, payoff, influence
payment, kickback or other material unlawful payment to any foreign or domestic government official
or employee.

          (dd) Application of Takeover Protections; Rights Agreements. The Company and its
board of directors have taken all necessary action, if any, in order to render inapplicable any
control share acquisition, business combination, poison pill (including any distribution under a
rights agreement) or other similar anti-takeover provision under the Company’s charter documents or
the laws of its state of incorporation that is applicable to any of the Purchasers as a result of
the Purchasers and the Company fulfilling their obligations or exercising their rights under the
Transaction Documents, including, without limitation, the Company’s issuance of the Securities and
the Purchasers’ ownership of the Securities. The Company has not adopted a stockholder rights plan
or similar arrangement relating to accumulations of beneficial ownership of Common Stock or a
change in control of the Company.

          (ee) Disclosure. To the Company’s Knowledge, no event or circumstance has occurred or
information exists with respect to the Company or any of its Subsidiaries or its or their business,
properties, operations or financial conditions, which, under applicable law, rule or regulation,
requires public disclosure or announcement by the Company but which has not been so publicly
announced or disclosed (assuming for this purpose that the Company’s reports filed under the
Exchange Act are being incorporated into an effective registration statement filed by the Company
under the Securities Act), except for the announcement of this Agreement and related transactions
and as may be disclosed on the Form 8-K filed pursuant to Section 4.6.

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

14

 

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

          (hh) Regulation M Compliance. In the last thirty (30) calendar days, the Company has
not, and to the Company’s Knowledge no one acting on its behalf has, (i) taken, directly or
indirectly, any action designed to cause or to result in the stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale of any of the Securities,
(ii) sold, bid for, purchased, or paid any compensation for soliciting purchases of, any of the
securities of the Company or (iii) paid or agreed to pay to any Person any compensation for
soliciting another to purchase any other securities of the Company.

          (ii) OFAC. Neither the Company nor any Subsidiary nor, to the Company’s Knowledge, any
director, officer, agent, employee, Affiliate or Person acting on behalf of the Company or any
Subsidiary is currently subject to any U.S. sanctions administered by the Office of Foreign Assets
Control of the U.S. Treasury Department (“OFAC”); and the Company will not knowingly directly or
indirectly use the proceeds of the sale of the Securities, or lend, contribute or otherwise make
available such proceeds to any Subsidiary, joint venture partner or other Person or entity, towards
any sales or operations in Cuba, Iran, Syria, Sudan, Myanmar or any other country sanctioned by
OFAC or for the purpose of financing the activities of any Person currently subject to any U.S.
sanctions administered by OFAC.

          (jj) Money Laundering Laws. To the Company’s Knowledge, the operations of each of the
Company and any Subsidiary are and have been conducted at all times in compliance with the money
laundering statutes of applicable jurisdictions, the rules and regulations thereunder and any
related or similar rules, regulations or guidelines, issued, administered or enforced by any
applicable governmental agency (collectively, the “Money Laundering Laws”) and to the Company’s
Knowledge, no action, suit or proceeding by or before any court or governmental agency, authority
or body or any arbitrator involving the Company and/or any Subsidiary with respect to the Money
Laundering Laws is pending or threatened.

          (kk) FDA. To the Company’s Knowledge, there is no pending, completed or threatened,
action (including any lawsuit, arbitration, or legal or administrative or regulatory proceeding,
charge, complaint, or investigation) against the Company or any of its Subsidiaries, and none of
the Company or any of its Subsidiaries has received any notice, warning letter or other
communication from the U.S. Food and Drug Administration (“FDA”) or any other governmental entity,
which (i) contests the premarket clearance, licensure, registration, or approval of, the uses of,
the distribution of, the manufacturing or packaging of, the testing of, the sale of, or the
labeling and promotion of any product subject to the jurisdiction of the FDA under the Federal
Food, Drug and Cosmetic Act, as amended, and the regulations thereunder that is manufactured,
packaged, labeled, tested, distributed, sold, and/or marketed by the Company or any of its
Subsidiaries (each such product, a “Pharmaceutical Product”), (ii) imposes a clinical hold on any
clinical investigation by the Company or any of its Subsidiaries, (iii) enjoins production at any
facility of the Company or any of its Subsidiaries, (iv) enters or proposes to enter into a consent
decree of permanent injunction with the Company or any of its Subsidiaries, or (v) otherwise
alleges any violation of any laws, rules or regulations by the Company or any of its Subsidiaries,
and which, either individually or in the aggregate, would have a Material Adverse Effect. The
Company has not been informed in writing by the FDA that the FDA will prohibit the marketing, sale,
license or use in the United States of any product proposed to be developed, produced or marketed
by the Company.

15

 

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

     3.2 Representations and Warranties of the Purchasers. Each Purchaser hereby, for
itself and for no other Purchaser, represents and warrants as of the date hereof and as of the
Closing Date to the Company as follows:

          (a) Organization; Authority. Such Purchaser is an entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its organization with the
requisite corporate or partnership power and authority to enter into and to consummate the
transactions contemplated by the applicable Transaction Documents and otherwise to carry out its
obligations hereunder and thereunder. The execution, delivery and performance by such Purchaser of
the transactions contemplated by this Agreement have been duly authorized by all necessary
corporate or, if such Purchaser is not a corporation, such partnership, limited liability company
or other applicable like action, on the part of such Purchaser. Each of this Agreement and the
Registration Rights Agreement applicable to such Purchaser has been duly executed by such
Purchaser, and when delivered by such Purchaser in accordance with the terms hereof, will
constitute the valid and legally binding obligation of such Purchaser, enforceable against it in
accordance with its terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting
generally the enforcement of, creditors’ rights and remedies or by other equitable principles of
general application.

          (b) No Conflicts. The execution, delivery and performance by such Purchaser of this
Agreement and the Registration Rights Agreement applicable to such Purchaser and the consummation
by such Purchaser of the transactions contemplated hereby and thereby will not (i) result in a
violation of the organizational documents of such Purchaser, (ii) conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which such Purchaser is a party, or (iii) result in a
violation of any law, rule, regulation, order, judgment or decree (including federal and state
securities laws) applicable to such Purchaser, except in the case of clauses (ii) and (iii) above,
for such conflicts, defaults, rights or violations which would not, individually or in the
aggregate, reasonably be expected to have a material adverse effect on the ability of such
Purchaser to perform its obligations hereunder.

          (c) Investment Intent. Such Purchaser understands that the Securities are “restricted
securities” and have not been registered under the Securities Act or any applicable state
securities law and is acquiring the Securities as principal for its own account and not with a view
to, or for distributing or reselling such Securities or any part thereof in violation of the
Securities Act or any applicable state securities laws, provided, however, that by making the
representations herein, such Purchaser does not agree to hold any of the Securities for any minimum
period of time and reserves the right, subject to the provisions of this Agreement and the
Registration Rights Agreement applicable to such Purchaser, at all times to sell or otherwise
dispose of all or any part of such Securities and the Warrant Shares pursuant to an effective
registration statement under the Securities Act or under an exemption from such registration and in
compliance with applicable federal and state securities laws. Such Purchaser is acquiring the
Securities hereunder in the ordinary course of its business. Such Purchaser does not presently have
any agreement, plan or understanding, directly or indirectly, with any Person to distribute or
effect any distribution of any of the Securities (or any securities which are derivatives thereof,
including the Warrant Shares) to or through any person or entity; such Purchaser is not a
registered broker-dealer under Section 15 of the Exchange Act or an entity engaged in a business
that would require it to be so registered as a broker-dealer.

16

 

          (d) Purchaser Status. At the time such Purchaser was offered the Securities, it was,
and at the date hereof it is, an “accredited investor” as defined in Rule 501(a) under the
Securities Act.

          (e) General Solicitation. Such Purchaser is not purchasing the Securities as a result
of any advertisement, article, notice or other communication regarding the Securities published in
any newspaper, magazine or similar media or broadcast over television or radio or presented at any
seminar or any other general advertisement.

          (f) Experience of Such Purchaser. Such Purchaser, either alone or together with its
representatives, has such knowledge, sophistication and experience in business and financial
matters so as to be capable of evaluating the merits and risks of the prospective investment in the
Securities, and has so evaluated the merits and risks of such investment. Such Purchaser is able
to bear the economic risk of an investment in the Securities and, at the present time, is able to
afford a complete loss of such investment.

          (g) Access to Information. Such Purchaser acknowledges that it has had the
opportunity to review the Disclosure Materials and has been afforded (i) the opportunity to ask
such questions as it has deemed necessary of, and to receive answers from, representatives of the
Company concerning the terms and conditions of the offering of the Securities and the merits and
risks of investing in the Securities; (ii) access to information about the Company and the
Subsidiaries and their respective financial condition, results of operations, business, properties,
management and prospects sufficient to enable it to evaluate its investment; and (iii) the
opportunity to obtain such additional information that the Company possesses or can acquire without
unreasonable effort or expense that is necessary to make an informed investment decision with
respect to the investment. Neither such inquiries nor any other investigation conducted by or on
behalf of such Purchaser or its representatives or counsel shall modify, amend or affect such
Purchaser’s right to rely on the truth, accuracy and completeness of the Disclosure Materials and
the Company’s representations and warranties contained in the Transaction Documents. Such
Purchaser has sought such accounting, legal and tax advice as it has considered necessary to make
an informed decision with respect to its acquisition of the Securities.

          (h) Certain Trading Activities. Other than with respect to the transactions
contemplated herein, since the time that such Purchaser was first contacted by the Company or any
other Person regarding the transactions contemplated hereby, neither the Purchaser nor any
Affiliate of such Purchaser which (x) had knowledge of the transactions contemplated hereby, (y)
has or shares discretion relating to such Purchaser’s investments or trading or information
concerning such Purchaser’s investments, including in respect of the Securities, and (z) is subject
to such Purchaser’s review or input concerning such Affiliate’s investments or trading
(collectively, “Trading Affiliates”) has directly or indirectly, nor has any Person acting on
behalf of or pursuant to any understanding with such Purchaser or Trading Affiliate, effected or
agreed to effect any purchases or sales of the securities of the Company (including, without
limitation, any Short Sales involving the Company’s securities). Notwithstanding the foregoing, in
the case of a Purchaser and/or Trading Affiliate that is, individually or collectively, a
multi-managed investment bank or vehicle whereby separate portfolio managers manage separate
portions of such Purchaser’s or Trading Affiliate’s assets and the portfolio managers have no
direct knowledge of the investment decisions made by the portfolio managers managing other portions
of such Purchaser’s or Trading Affiliate’s assets, the representation set forth above shall apply
only with respect to the portion of assets managed by the portfolio manager that have knowledge
about the financing transaction contemplated by this Agreement. Other than to other Persons party
to this Agreement, such Purchaser has maintained the confidentiality of all disclosures made to it
in connection with this transaction (including the existence and terms of this transaction).
Notwithstanding the foregoing, except as provided in Section 4.11, no Purchaser makes any
representation, warranty or covenant hereby that it will not engage in Short Sales in the
securities of the Company after the time that the Initial Registration Statement becomes effective.

17

 

          (i) Brokers and Finders. No Person will have, as a result of the transactions
contemplated by this Agreement, any valid right, interest or claim against or upon the Company or
any Purchaser for any commission, fee or other compensation pursuant to any agreement, arrangement
or understanding entered into by or on behalf of the Purchaser.

          (j) Independent Investment Decision. Such Purchaser has independently evaluated the
merits of its decision to purchase Securities (including the Warrant Shares) pursuant to the
Transaction Documents, and such Purchaser confirms that it has not relied on the advice of any
other Purchaser’s business and/or legal counsel in making such decision. Such Purchaser
understands that nothing in this Agreement or any other materials presented by or on behalf of the
Company to the Purchaser in connection with the purchase of the Securities constitutes legal, tax
or investment advice. Such Purchaser has consulted such legal, tax and investment advisors as it,
in its sole discretion, has deemed necessary or appropriate in connection with its purchase of the
Securities.

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

          (l) No Governmental Review. Such Purchaser understands that no United States federal
or state agency or any other government or governmental agency has passed on or made any
recommendation or endorsement of the Securities or the fairness or suitability of the investment in
the Securities nor have such authorities passed upon or endorsed the merits of the offering of the
Securities.

          (m) Regulation M. Such Purchaser is aware that the anti-manipulation rules of
Regulation M under the Exchange Act may apply to sales of Common Stock and other activities with
respect to the Common Stock by the Purchasers.

          (n) Residency. Such Purchaser’s residence (if an individual) or office in which its
investment decision with respect to the Securities was made (if an entity) is located at the
address immediately below such Purchaser’s name on its signature page hereto.

The Company and each of the Purchasers acknowledge and agree that no party to this Agreement has
made or makes any representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Article III and the Transaction Documents.

ARTICLE IV.

OTHER AGREEMENTS OF THE PARTIES

     4.1 Transfer Restrictions.

          (a) Compliance with Laws. Notwithstanding any other provision of this Article IV,
each Purchaser covenants that the Securities and, if applicable, the Warrant Shares may be disposed
of only pursuant to an effective registration statement under, and in compliance with the
requirements of, the Securities Act, or pursuant to an available exemption from, or in a
transaction not subject to, the registration requirements of the Securities Act, and in compliance
with any applicable state and federal securities laws. In connection with any transfer of the
Securities or the Warrant Shares other than (i) pursuant to an effective registration statement,
(ii) to the Company, (iii) pursuant to Rule 144 (provided that the Purchaser provides the Company
with reasonable assurances (in the form of seller and broker representation letters) that the

18

 

securities may be sold pursuant to such rule) or Rule 144A, or (iv) in connection with a bona
fide pledge, the Company may require the transferor thereof to provide to the Company and the
Transfer Agent an opinion of counsel selected by the transferor and reasonably acceptable to the
Company and the Transfer Agent, the form and substance of which opinion shall be reasonably
satisfactory to the Company and the Transfer Agent, to the effect that such transfer does not
require registration of such transferred Securities or Warrant Shares under the Securities Act. As
a condition of transfer, any such transferee shall agree in writing to be bound by the terms of
this Agreement and the Warrant, if applicable, and shall have the rights of a Purchaser under this
Agreement and the Registration Rights Agreement applicable to the transferring Purchaser.

          (b) Legends. Certificates evidencing the Securities and Warrant Shares shall bear any
legend as required by the “blue sky” laws of any state and a restrictive legend in substantially
the following form, until such time as they are not required under Section 4.1(c):

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”), OR APPLICABLE STATE SECURITIES
LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR
ASSIGNED EXCEPT AS PROVIDED BY SECTION 4 OF THAT CERTAIN SECURITIES
PURCHASE AGREEMENT, DATED AS OF DECEMBER 17, 2008, BY AND AMONG ARDEA
BIOSCIENCES, INC. AND EACH PURCHASER IDENTIFIED ON THE SIGNATURE PAGES
THERETO.

          (c) Removal of Legends. The legend set forth in Section 4.1(b) above shall be removed
and the Company shall issue a certificate without such legend or any other legend to the holder of
the applicable Securities or Warrant Shares upon which it is stamped or issue to such holder by
electronic delivery at the applicable balance account at the Depository Trust Company (“DTC”), if
(i) such Securities or Warrant Shares are registered for resale under the Securities Act (provided
that the Purchaser agrees to only sell such Securities and Warrant Shares when, and as permitted,
by the effective registration statement permitting such resale), (ii) such Securities or Warrant
Shares are sold or transferred pursuant to Rule 144 (if the transferor is not an Affiliate of the
Company), or (iii) such Securities or Warrant Shares are eligible for sale under Rule 144 following
the expiration of the one-year holding requirement under subparagraphs (b)(1)(i) and (d) thereof
(if the transferor is not an Affiliate of the Company). Any fees (with respect to the Transfer
Agent, Company Counsel or otherwise) associated with the removal of such legend shall be borne by
the Company. Following the Effective Date applicable to such Securities or Warrant Shares, or at
such earlier time as a legend is no longer required for certain Securities or Warrant Shares, the
Company will no later than three (3) Trading Days following the delivery by a Purchaser to the
Company or the Transfer Agent (with notice to the Company) of (i) a legended certificate
representing such Securities or Warrant Shares (endorsed or with stock powers attached, signatures
guaranteed, and otherwise in form necessary to affect the reissuance and/or transfer) or (ii) an
Exercise Notice in the manner stated in the Warrants to effect the exercise of such Warrant in
accordance with its terms and an opinion of counsel to the extent required by Section 4.1(a) (such
third Trading Day, the “Legend Removal Date”), deliver or cause to be delivered to such Purchaser
or the transferee of such Purchaser, as applicable, a certificate representing such Securities or
Warrant Shares that is free from all restrictive and other legends. The Company may not make any
notation on its records or give instructions to the Transfer Agent that enlarge the restrictions on
transfer set forth in this Section. Certificates for Securities or Warrant Shares subject to
legend removal hereunder may be transmitted by the Transfer Agent to the Purchasers by crediting
the account of the Purchaser’s prime broker with DTC.

          (d) Irrevocable Transfer Agent Instructions. The Company shall issue irrevocable
instructions to its Transfer Agent, and any subsequent transfer agent in the form of Exhibit
E attached hereto (the “Irrevocable Transfer Agent Instructions”). The Company represents and
warrants that no instruction

19

 

other than the Irrevocable Transfer Agent Instructions referred to in this Section 4.1(d) or
instructions that are not contradictory therewith will be given by the Company to its transfer
agent in connection with this Agreement, and that the Securities and Warrant Shares shall otherwise
be freely transferable on the books and records of the Company as and to the extent provided in
this Agreement and the other Transaction Documents and applicable law. The Company acknowledges
that a breach by it of its obligations under this Section 4.1(d) will cause irreparable harm to a
Purchaser. Accordingly, the Company acknowledges that the remedy at law for a breach of its
obligations under this Section 4.1(d) will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Section 4.1(d), that a Purchaser shall
be entitled, in addition to all other available remedies, to an order and/or injunction restraining
any breach and requiring immediate issuance and transfer, without the necessity of showing economic
loss and without any bond or other security being required.

          (e) Acknowledgement. Each Purchaser hereunder acknowledges its primary
responsibilities under the Securities Act and accordingly will not sell or otherwise transfer the
Securities or Warrant Shares or any interest therein without complying with the requirements of the
Securities Act. Except as otherwise provided below, while the above-referenced registration
statement remains effective, each Purchaser hereunder may sell the Securities or Warrant Shares in
accordance with the plan of distribution contained in the registration statement and if it does so
it will comply therewith and with the related prospectus delivery requirements unless an exemption
therefrom is available. Each Purchaser, severally and not jointly with the other Purchasers,
agrees that if it is notified by the Company in writing at any time that the registration statement
registering the resale of the Shares or Warrant Shares is not effective or that the prospectus
included in such registration statement no longer complies with the requirements of Section 10 of
the Securities Act, the Purchaser will refrain from selling such Shares or Warrant Shares until
such time as the Purchaser is notified by the Company that such registration statement is effective
or such prospectus is compliant with Section 10 of the Exchange Act, unless such Purchaser is able
to, and does, sell such Shares or Warrant Shares pursuant to an available exemption from the
registration requirements of Section 5 of the Securities Act. Both the Company and its Transfer
Agent, and their respective directors, officers, employees and agents, may rely on this subsection
(e) and each Purchaser hereunder will indemnify and hold harmless each of such persons from any
breaches or violations of this paragraph.

          (f) Buy-In. If the Company shall fail for any reason or for no reason to issue to a
Purchaser unlegended certificates within three (3) Business Days of receipt of all documents
necessary for the removal of the legend set forth above (the “Deadline Date”), then, in addition to
all other remedies available to such Purchaser, if on or after the Business Day immediately
following such three (3) Business Day period, such Purchaser purchases (in an open market
transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the holder
of shares of Common Stock that such Purchaser anticipated receiving from the Company without any
restrictive legend (a “Buy-In”), then the Company shall, within three (3) Business Days after such
Purchaser’s request and in such Purchaser’s sole discretion, either (i) pay cash to the Purchaser
in an amount equal to such Purchaser’s total purchase price (including brokerage commissions, if
any) for the shares of Common Stock so purchased (the “Buy-In Price”), at which point the Company’s
obligation to deliver such certificate (and to issue such shares of Common Stock) shall terminate,
or (ii) promptly honor its obligation to deliver to such Purchaser a certificate or certificates
representing such shares of Common Stock and pay cash to the Purchaser in an amount equal to the
excess (if any) of the Buy-In Price over the product of (a) such number of shares of Common Stock,
times (b) the Closing Bid Price on the Deadline Date.

     4.2 Reservation of Common Stock. The Company shall take all action necessary to at all
times have authorized, and reserved for the purpose of issuance from and after the Closing Date,
the number of shares of Common Stock issuable upon exercise of the Warrants issued at the Closing.

20

 

     4.3 Acknowledgment of Dilution. The Company acknowledges that the issuance of the
Shares and the Warrant Shares may result in dilution of the outstanding shares of Common Stock.
The Company further acknowledges that its obligations under the Transaction Documents, including
without limitation its obligation to issue the Shares and Warrant Shares pursuant to the
Transaction Documents, are unconditional and absolute and not subject to any right of set off,
counterclaim, delay or reduction, regardless of the effect of any such dilution or any claim the
Company may have against any Purchaser and regardless of the dilutive effect that such issuance may
have on the ownership of the other stockholders of the Company.

     4.4 Furnishing of Information. In order to enable the Purchasers to sell the
Securities and the Warrant Shares under Rule 144 of the Securities Act, for a period of one year
from the Closing, the Company shall use its commercially reasonable efforts to timely file (or
obtain extensions in respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to the Exchange Act. During
such one-year period, if the Company is not required to file reports pursuant to such laws, it will
prepare and furnish to the Purchasers and make publicly available in accordance with Rule 144(c)
such information as is required for the Purchasers to sell the Securities and Warrant Shares under
Rule 144.

     4.5 Form D and Blue Sky. The Company agrees to timely file a Form D with respect to
the Securities as required under Regulation D. The Company, on or before the Closing Date, shall
take such action as the Company shall reasonably determine is necessary in order to obtain an
exemption for or to qualify the Securities for sale to the Purchasers at the Closing pursuant to
this Agreement under applicable securities or “Blue Sky” laws of the states of the United States
(or to obtain an exemption from such qualification). The Company shall make all filings and
reports relating to the offer and sale of the Securities required under applicable securities or
“Blue Sky” laws of the states of the United States following the Closing Date.

     4.6 No Integration. The Company shall not, and shall use its commercially reasonable
efforts to ensure that no Affiliate of the Company shall, sell, offer for sale or solicit offers to
buy or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities
Act) that will be integrated with the offer or sale of the Securities in a manner that would
require the registration under the Securities Act of the sale of the Securities to the Purchasers,
or that will be integrated with the offer or sale of the Securities for purposes of the rules and
regulations of any Trading Market such that it would require stockholder approval prior to the
closing of such other transaction unless stockholder approval is obtained before the closing of
such subsequent transaction.

     4.7 Securities Laws Disclosure; Publicity. By 9:00 a.m., New York City time, on the
Trading Day immediately following the execution of this Agreement, the Company shall issue a press
release (the “Press Release”) disclosing all material terms of the transactions contemplated
hereby. On or before 9:00 a.m., New York City time, on the Trading Day immediately following the
execution of this Agreement, the Company will file a Current Report on Form 8-K with the Commission
describing the terms of the Transaction Documents (and including as exhibits to such Current Report
on Form 8-K the material Transaction Documents (including, without limitation, this Agreement, the
Warrant and the Registration Rights Agreement)). Notwithstanding the foregoing, the Company shall
not publicly disclose the name of any Purchaser or an Affiliate of any Purchaser, or include the
name of any Purchaser or an Affiliate of any Purchaser in any press release or filing with the
Commission (other than the Registration Statements) or any regulatory agency or Trading Market,
without the prior written consent of such Purchaser, except (i) as required by federal securities
law in connection with (A) any registration statement contemplated by the Registration Rights
Agreement and (B) the filing of final Transaction Documents (including signature pages thereto)
with the Commission and (ii) to the extent such disclosure is required by law, request of the Staff
of the Commission or Trading Market regulations, in which case the Company shall provide the
Purchasers with prior written notice of such disclosure permitted under this subclause (ii). From
and after the issuance

21

 

of the Press Release, no Purchaser shall be in possession of any material, non-public
information received from the Company, any Subsidiary or any of their respective officers,
directors, employees or agents, that is not disclosed in the Press Release unless a Purchaser shall
have executed a written agreement regarding the confidentiality and use of such information. Each
Purchaser, severally and not jointly with the other Purchasers, covenants that until such time as
the transactions contemplated by this Agreement are publicly disclosed by the Company as described
in this Section 4.6, such Purchaser will maintain the confidentiality of all disclosures made to it
in connection with this transaction (including the existence and terms of this transaction).

     4.8 Non-Public Information. Except with respect to the material terms and conditions
of the transactions contemplated by the Transaction Documents, and except with the express written
consent of such Purchaser and unless prior thereto such Purchaser shall have executed a written
agreement regarding the confidentiality and use of such information the Company shall not, and
shall cause each Subsidiary and each of their respective officers, directors, employees and agents,
not to, and each Purchaser shall not directly solicit the Company, any of its Subsidiaries or any
of their respective officers, directors, employees or agents to provide any Purchaser with any
material, non-public information regarding the Company or any of its Subsidiaries from and after
the filing of the Press Release.

     4.9 Indemnification.

          (a) Indemnification of Purchasers. In addition to the indemnity provided in the
Registration Rights Agreement applicable to such Purchaser, the Company will indemnify and hold
each Purchaser and its directors, officers, stockholders, members, partners, employees and agents
(and any other Persons with a functionally equivalent role of a Person holding such titles
notwithstanding a lack of such title or any other title), each Person who controls such Purchaser
(within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and
the directors, officers, stockholders, agents, members, partners or employees (and any other
Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack
of such title or any other title) of such controlling person (each, a “Purchaser Party”) harmless
from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and
expenses, including all judgments, amounts paid in settlements, court costs and reasonable
attorneys’ fees and costs of investigation that any such Purchaser Party may suffer or incur as a
result of (a) any breach of any of the representations, warranties, covenants or agreements made by
the Company in this Agreement or in the other Transaction Documents; provided that such a claim for
indemnification relating to any breach of any of the representations or warranties made by the
Company in this Agreement is made within one year from Closing or (b) any action instituted against
a Purchaser, or any of them or their respective Affiliates, by any stockholder of the Company who
is not an Affiliate of such Purchaser, with respect to any of the transactions contemplated by the
Transaction Documents (unless such action is based upon any agreements or understandings such
Purchaser may have with any such stockholder or any violations by the Purchaser of state or federal
securities laws or any conduct by such Purchaser which constitutes fraud, gross negligence, willful
misconduct or malfeasance). The Company will not be liable to any Purchaser Party under this
Agreement to the extent, but only to the extent that a loss, claim, damage or liability is
attributable to any Purchaser Party’s breach of any of the representations, warranties, covenants
or agreements made by such Purchaser Party in this Agreement or in the other Transaction Documents.

          (b) Conduct of Indemnification Proceedings. Promptly after receipt by any Person (the
"Indemnified Person”) of notice of any demand, claim or circumstances which would or might give
rise to a claim or the commencement of any action, proceeding or investigation in respect of which
indemnity may be sought pursuant to Section 4.8(a), such Indemnified Person shall promptly notify
the Company in writing and the Company shall assume the defense thereof, including the employment
of counsel reasonably satisfactory to such Indemnified Person, and shall assume the payment of all
fees and expenses; provided, however, that the failure of any Indemnified Person so to notify the
Company shall not relieve the Company

22

 

of its obligations hereunder except to the extent that the Company is actually and materially
prejudiced by such failure to notify. In any such proceeding, any Indemnified Person shall have
the right to retain its own counsel, but the fees and expenses of such counsel shall be at the
expense of such Indemnified Person unless: (i) the Company and the Indemnified Person shall have
mutually agreed to the retention of such counsel; (ii) the Company shall have failed promptly to
assume the defense of such proceeding and to employ counsel reasonably satisfactory to such
Indemnified Person in such proceeding; or (iii) in the reasonable judgment of counsel to such
Indemnified Person, representation of both parties by the same counsel would be inappropriate due
to actual or potential differing interests between them. The Company shall not be liable for any
settlement of any proceeding effected without its written consent, which consent shall not be
unreasonably withheld, delayed or conditioned. Without the prior written consent of the
Indemnified Person, which consent shall not be unreasonably withheld, delayed or conditioned, the
Company shall not effect any settlement of any pending or threatened proceeding in respect of which
any Indemnified Person is or could have been a party and indemnity could have been sought hereunder
by such Indemnified Party, unless such settlement includes an unconditional release of such
Indemnified Person from all liability arising out of such proceeding.

     4.10 Listing of Shares and Warrant Shares. In the time and manner required by the
Principal Trading Market, the Company shall prepare and file with such Trading Market an additional
shares listing application covering all of the Shares and Warrant Shares and shall use its
commercially reasonable efforts to take all steps necessary to cause the Shares and Warrant Shares
to be approved for listing on the Principal Trading Market as soon as possible thereafter.

     4.11 Use of Proceeds. The Company intends to use the net proceeds from the sale of
the Securities hereunder for working capital and general corporate purposes.

     4.12 Dispositions After The Date Hereof. Each Purchaser shall not, and shall cause
its Trading Affiliates not to, prior to the effectiveness of the Initial Registration Statement:
(a) sell, offer to sell, solicit offers to buy, dispose of, loan, pledge or grant any right with
respect to (collectively, a “Disposition") the Securities or the Warrant Shares unless pursuant to
an exemption from the registration requirements under the Securities Act; or (b) engage in any
hedging or other transaction which is designed or could reasonably be expected to lead to or result
in a Disposition of the Securities or the Warrant Shares by such Purchaser or an Affiliate. In
addition, prior to the effectiveness of the Initial Registration Statement, Purchaser agrees that
it will not enter into any short sale of Shares executed at a time when the Purchaser has no
equivalent offsetting long position in the Common Stock. For purposes of determining whether the
Purchaser has an equivalent offsetting long position in the Common Stock, shares that the Purchaser
is entitled to receive within sixty (60) calendar days (whether pursuant to contract or upon
conversion or exercise of convertible securities) will be included as if held long by the
Purchaser. Such Purchaser covenants that neither it nor any Person acting on its behalf or pursuant
to any understanding with it will engage in any transactions in the Company’s securities
(including, without limitation, any Short Sales involving the Company’s securities) during the
period from the date hereof until the earlier of such time as (i) the transactions contemplated by
this Agreement are first publicly announced as described in Section 4.6 or (ii) this Agreement is
terminated in full pursuant to Section 6.17. Notwithstanding the foregoing, in the case of a
Purchaser that is a multi-managed investment vehicle whereby separate portfolio managers manage
separate portions of such Purchaser’s assets and the portfolio managers have no direct knowledge of
the investment decisions made by the portfolio managers managing other portions of such Purchaser’s
assets, the representation set forth above shall apply only with respect to the portion of assets
managed by the portfolio manager that have knowledge about the financing transaction contemplated
by this Agreement. Each Purchaser understands and acknowledges, severally and not jointly with any
other Purchaser, that the Commission currently takes the position that covering a short position
established prior to effectiveness of a resale registration statement with shares included in such
registration statement would be a violation of Section 5 of the Securities Act, as set

23

 

forth in Item 65, Section 5 under Section A, of the Manual of Publicly Available Telephone
Interpretations, dated July 1997, compiled by the Office of Chief Counsel, Division of Corporation
Finance.

ARTICLE V.

CONDITIONS PRECEDENT TO CLOSING

     5.1 Conditions Precedent to the Obligations of the Purchasers to Purchase Securities.
The obligation of each Purchaser to acquire Securities at the Closing is subject to the fulfillment
to such Purchaser’s satisfaction, on or prior to the Closing Date, of each of the following
conditions, any of which may be waived by such Purchaser (as to itself only):

          (a) Representations and Warranties. The representations and warranties of the Company
contained herein shall be true and correct in all material respects (except for those
representations and warranties which are qualified as to materiality, in which case such
representations and warranties shall be true and correct in all respects) as of the date when made
and as of the Closing Date, as though made on and as of such date, except for such representations
and warranties that speak as of a specific date.

          (b) Performance. The Company shall have performed, satisfied and complied in all
material respects with all covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by it at or prior to the Closing.

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

          (d) Consents. The Company shall have obtained in a timely fashion any and all
consents, permits, approvals, registrations and waivers necessary for consummation of the purchase
and sale of the Securities at the Closing (including all Required Approvals), all of which shall be
and remain so long as necessary in full force and effect.

          (e) No Suspensions of Trading in Common Stock; Listing. The Common Stock (i) shall be
designated for quotation or listed on the Principal Trading Market and (ii) shall not have been
suspended, as of the Closing Date, by the Commission or the Principal Trading Market from trading
on the Principal Trading Market nor shall suspension by the Commission or the Principal Trading
Market have been threatened, as of the Closing Date, either (A) in writing by the Commission or the
Principal Trading Market or (B) by falling below the minimum listing maintenance requirements of
the Principal Trading Market.

          (f) Company Deliverables. The Company shall have delivered the Company Deliverables
in accordance with Section 2.2(a).

          (g) Compliance Certificate. The Company shall have delivered to each Purchaser a
certificate, dated as of the Closing Date and signed by its Chief Executive Officer or its Chief
Financial Officer, dated as of the Closing Date, certifying to the fulfillment of the conditions
specified in Sections 5.1(a) and (b) in the form attached hereto as Exhibit G.

          (h) Termination. This Agreement shall not have been terminated as to such Purchaser in
accordance with Section 6.17 herein.

24

 

     5.2 Conditions Precedent to the Obligations of the Company to sell Securities. The
Company’s obligation to sell and issue the Securities at the Closing is subject to the fulfillment
to the satisfaction of the Company on or prior to the Closing Date of the following conditions, any
of which may be waived by the Company:

          (a) Representations and Warranties. The representations and warranties made by the
Purchaser in Section 3.2 hereof shall be true and correct in all material respects as of the date
when made, and as of the Closing Date as though made on and as of such date, except for
representations and warranties that speak as of a specific date.

          (b) Performance. Such Purchaser shall have performed, satisfied and complied in all
material respects with all covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by such Purchaser at or prior to the Closing
Date.

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

          (d) Consents. The Company shall have obtained in a timely fashion any and all
consents, permits, approvals, registrations and waivers necessary for consummation of the purchase
and sale of the Securities, all of which shall be and remain so long as necessary in full force and
effect.

          (e) Purchasers Deliverables. Such Purchaser shall have delivered its Purchaser
Deliverables in accordance with Section 2.2(b).

          (f) Termination. This Agreement shall not have been terminated as to such Purchaser in
accordance with Section 6.17 herein.

ARTICLE VI.

MISCELLANEOUS

     6.1 Fees and Expenses. The Company and the Purchasers shall each pay the fees and
expenses of their respective advisers, counsel, accountants and other experts, if any, and all
other expenses incurred by such party in connection with the negotiation, preparation, execution,
delivery and performance of this Agreement. The Company shall pay all Transfer Agent fees, stamp
taxes and other taxes and duties levied in connection with the sale and issuance of the Securities
to the Purchasers.

     6.2 Entire Agreement. The Transaction Documents, together with the Exhibits and
Schedules thereto, contain the entire understanding of the parties with respect to the subject
matter hereof and supersede all prior agreements, understandings, discussions and representations,
oral or written, with respect to such matters, which the parties acknowledge have been merged into
such documents, exhibits and schedules. At or after the Closing, and without further
consideration, the Company and the Purchasers will execute and deliver to the other such further
documents as may be reasonably requested in order to give practical effect to the intention of the
parties under the Transaction Documents.

     6.3 Notices. Any and all notices or other communications or deliveries required or
permitted to be provided hereunder shall be in writing and shall be deemed given and effective on
the earliest of (a) the date of transmission, if such notice or communication is delivered via
facsimile (provided the sender receives a machine-generated confirmation of successful
transmission) at the facsimile number specified in this

25

 

Section prior to 5:00 p.m., New York City time, on a Trading Day, (b) the next Trading Day
after the date of transmission, if such notice or communication is delivered via facsimile at the
facsimile number specified in this Section on a day that is not a Trading Day or later than 5:00
p.m., New York City time, on any Trading Day, (c) the Trading Day following the date of mailing, if
sent by U.S. nationally recognized overnight courier service with next day delivery specified, or
(d) upon actual receipt by the party to whom such notice is required to be given. The address for
such notices and communications shall be as follows:

	 	 	 	 	 
	 

	 	If to the Company:
	 	Ardea Biosciences, Inc.
	 

	 	 	 	4939 Directors Place
	 

	 	 	 	San Diego, CA 92121
	 

	 	 	 	Telephone No.: (858) 652-6500
	 

	 	 	 	Facsimile No.: (858) 625-0745
	 

	 	 	 	Attention: Barry D. Quart, Pharm.D
	 

	 	 	 	E-mail: bquart@ardeabio.com
	 
	 	 	 	 
	 

	 	With a copy to:
	 	Cooley Godward Kronish LLP
	 

	 	 	 	4401 Eastgate Mall
	 

	 	 	 	San Diego, CA 92121-1909
	 

	 	 	 	Telephone No.: (858) 550-6067
	 

	 	 	 	Facsimile No.: (858) 550-6420
	 

	 	 	 	Attention: Ethan Christensen
	 

	 	 	 	E-mail: echristensen@cooley.com
	 
	 	 	 	 
	 

	 	If to a Purchaser:
	 	To the address set forth under such Purchaser’s name on the signature page hereof;

or such other address as may be designated in writing hereafter, in the same manner, by such
Person.

     6.4 Amendments; Waivers; No Additional Consideration. No provision of this Agreement
may be waived or amended except in a written instrument signed, in the case of an amendment, by the
Company and each of the Purchasers holding or having the right to acquire a majority of the Shares
and the Warrant Shares on a fully diluted basis at the time of such amendment or, in the case of a
waiver, by the party against whom enforcement of any such waiver is sought. No waiver of any
default with respect to any provision, condition or requirement of this Agreement shall be deemed
to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any
other provision, condition or requirement hereof, nor shall any delay or omission of either party
to exercise any right hereunder in any manner impair the exercise of any such right. No
consideration shall be offered or paid to any Purchaser to amend or consent to a waiver or
modification of any provision of any Transaction Document unless the same consideration is also
offered to all Purchasers who then hold Shares or Warrant Shares.

     6.5 Construction. The headings herein are for convenience only, do not constitute a
part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.
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.
This Agreement shall be construed as if drafted jointly by the parties, and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any
provisions of this Agreement or any of the Transaction Documents.

     6.6 Successors and Assigns. The provisions of this Agreement shall inure to the
benefit of and be binding upon the parties and their successors and permitted assigns. This
Agreement, or any rights or obligations hereunder, may not be assigned by the Company without the
prior written consent of the Purchasers. Any Purchaser may assign its rights hereunder in whole or
in part to any Person to whom such

26

 

Purchaser assigns or transfers any Securities or Warrant Shares in compliance with the
Transaction Documents and applicable law, provided such transferee shall agree in writing to be
bound, with respect to the transferred Securities or Warrant Shares, by the terms and conditions of
this Agreement that apply to the “Purchasers”.

     6.7 No Third-Party Beneficiaries. This Agreement is intended for the benefit of the
parties hereto and their respective successors and permitted assigns and is not for the benefit of,
nor may any provision hereof be enforced by, any other Person.

     6.8 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 Proceedings concerning the interpretations, enforcement
and defense of the transactions contemplated by this Agreement and any other Transaction Documents
(whether brought against a party hereto or its respective Affiliates, employees or agents) shall be
commenced exclusively in the New York Courts. Each party hereto hereby irrevocably submits to the
exclusive jurisdiction of the New York Courts for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed herein (including with
respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and
agrees not to assert in any Proceeding, any claim that it is not personally subject to the
jurisdiction of any such New York Court, or that such Proceeding has been commenced in an improper
or inconvenient forum. Each party hereto hereby irrevocably waives personal service of process and
consents to process being served in any such 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 manner permitted by law. EACH PARTY HERETO
HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO
TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.

     6.9 Survival. Subject to applicable statute of limitations, the representations,
warranties, agreements and covenants contained herein shall survive the Closing and the delivery of
the Securities, except that the representations and warranties contained herein shall terminate
upon the one year anniversary of the Closing Date.

     6.10 Execution. This Agreement may be executed in two or more counterparts, all of
which when taken together shall be considered one and the same agreement and shall become effective
when counterparts have been signed by each party and delivered to the other party, it being
understood that both parties need not sign the same counterpart. In the event that any signature
is delivered by facsimile transmission, or by e-mail delivery of a “.pdf” format data file, such
signature shall create a valid and binding obligation of the party executing (or on whose behalf
such signature is executed) with the same force and effect as if such facsimile signature page were
an original thereof.

     6.11 Severability. If any provision of this Agreement is held to be invalid or
unenforceable in any respect, the validity and enforceability of the remaining terms and provisions
of this Agreement shall not in any way be affected or impaired thereby and the parties will attempt
to agree upon a valid and enforceable provision that is a reasonable substitute therefor, and upon
so agreeing, shall incorporate such substitute provision in this Agreement.

     6.12 Replacement of Securities. If any certificate or instrument evidencing any
Securities or Warrant Shares is mutilated, lost, stolen or destroyed, the Company shall issue or
cause to be issued in

27

 

exchange and substitution for and upon cancellation thereof, or in lieu of and substitution
therefor, a new certificate or instrument, but only upon receipt of evidence reasonably
satisfactory to the Company and the Transfer Agent of such loss, theft or destruction and the
execution by the holder thereof of a customary lost certificate affidavit of that fact and an
agreement to indemnify and hold harmless the Company and the Transfer Agent for any losses in
connection therewith or, if required by the Transfer Agent, a bond in such form and amount as is
required by the Transfer Agent. The applicants for a new certificate or instrument under such
circumstances shall also pay any reasonable third-party costs associated with the issuance of such
replacement Shares or Warrant Shares. If a replacement certificate or instrument evidencing any
Securities or Warrant Shares is requested due to a mutilation thereof, the Company may require
delivery of such mutilated certificate or instrument as a condition precedent to any issuance of a
replacement.

     6.13 Remedies. In addition to being entitled to exercise all rights provided herein
or granted by law, including recovery of damages, each of the Purchasers and the Company will be
entitled to specific performance under the Transaction Documents. The parties agree that monetary
damages may not be adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agree to waive in any action for
specific performance of any such obligation (other than in connection with any action for a
temporary restraining order) the defense that a remedy at law would be adequate.

     6.14 Payment Set Aside. To the extent that the Company makes a payment or payments to
any Purchaser pursuant to any Transaction Document or a Purchaser enforces or exercises its rights
thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any
part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside,
recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the
Company, a trustee, receiver or any other person under any law (including, without limitation, any
bankruptcy law, state or federal law, common law or equitable cause of action), then to the extent
of any such restoration the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.

     6.15 Adjustments in Share Numbers and Prices. In the event of any stock split,
subdivision, dividend or distribution payable in shares of Common Stock (or other securities or
rights convertible into, or entitling the holder thereof to receive directly or indirectly shares
of Common Stock), combination or other similar recapitalization or event occurring after the date
hereof and prior to the Closing, each reference in any Transaction Document to a number of shares
or a price per share shall be deemed to be amended to appropriately account for such event.

     6.16 Independent Nature of Purchasers’ Obligations and Rights. The obligations of
each Purchaser under any Transaction Document are several and not joint with the obligations of any
other Purchaser, and no Purchaser shall be responsible in any way for the performance of the
obligations of any other Purchaser under any Transaction Document. The decision of each Purchaser
to purchase Securities pursuant to the Transaction Documents has been made by such Purchaser
independently of any other Purchaser and independently of any information, materials, statements or
opinions as to the business, affairs, operations, assets, properties, liabilities, results of
operations, condition (financial or otherwise) or prospects of the Company or any Subsidiary which
may have been made or given by any other Purchaser or by any agent or employee of any other
Purchaser, and no Purchaser and any of its agents or employees shall have any liability to any
other Purchaser (or any other Person) relating to or arising from any such information, materials,
statement or opinions. Nothing contained herein or in any Transaction Document, and no action
taken by any Purchaser pursuant thereto, shall be deemed to constitute the Purchasers as a
partnership, an association, a joint venture or any other kind of entity, or create a presumption
that the Purchasers are in any way acting in concert or as a group with respect to such obligations
or the transactions contemplated by the Transaction Documents. Each Purchaser acknowledges that no
other Purchaser has acted as agent for such

28

 

Purchaser in connection with making its investment hereunder and that no Purchaser will be
acting as agent of such Purchaser in connection with monitoring its investment in the Securities or
enforcing its rights under the Transaction Documents. Each Purchaser shall be entitled to
independently protect and enforce its rights, including without limitation the rights arising out
of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any
other Purchaser to be joined as an additional party in any proceeding for such purpose. The
Company acknowledges that each of the Purchasers has been provided with the same Transaction
Documents for the purpose of closing a transaction with multiple Purchasers and not because it was
required or requested to do so by any Purchaser. The Company’s obligations to each Purchaser under
this Agreement are identical to its obligations to each other Purchaser other than such differences
resulting solely from the number of Securities purchased by such Purchaser, but regardless of
whether such obligations are memorialized herein or in another agreement between the Company and a
Purchaser.

     6.17 Termination. This Agreement may be terminated and the sale and purchase of the
Securities abandoned at any time prior to the Closing by either the Company or any Purchaser (with
respect to itself only) upon written notice to the other, if the Closing has not been consummated
on or prior to 5:00 p.m., New York City time, on the Outside Date; provided, however, that the
right to terminate this Agreement under this Section 6.17 shall not be available to any Person
whose failure to comply with its obligations under this Agreement has been the cause of or resulted
in the failure of the Closing to occur on or before such time. Nothing in this Section 6.17 shall
be deemed to release any party from any liability for any breach by such party of the terms and
provisions of this Agreement or the other Transaction Documents or to impair the right of any party
to compel specific performance by any other party of its obligations under this Agreement or the
other Transaction Documents. In the event of a termination pursuant to this Section, the Company
shall promptly notify all non-terminating Purchasers. Upon a termination in accordance with this
Section, the Company and the terminating Purchaser(s) shall not have any further obligation or
liability (including arising from such termination) to the other, and no Purchaser will have any
liability to any other Purchaser under the Transaction Documents as a result therefrom.

     6.18 Waiver of Conflicts. Each party to this Agreement acknowledges that Company
Counsel, outside general counsel to the Company, has in the past performed and is or may now or in
the future represent one or more Purchasers or their affiliates in matters unrelated to the
transactions contemplated by the Transaction Documents, including representation of such Purchasers
or their affiliates in matters of a similar nature to the transactions contemplated by the
Transaction Documents. The applicable rules of professional conduct require that Company Counsel
inform the parties hereunder of this representation and obtain their consent. Company Counsel has
served as outside general counsel to the Company and has negotiated the terms of the transactions
contemplated by the Transaction Documents solely on behalf of the Company. The Company and each
Purchaser hereby (a) acknowledge that they have had an opportunity to ask for and have obtained
information relevant to such representation, including disclosure of the reasonably foreseeable
adverse consequences of such representation; (b) acknowledge that with respect to the transactions
contemplated by the Transaction Documents, Company Counsel has represented solely the Company, and
not any Purchaser or any stockholder, director or employee of the Company or any Purchaser; and (c)
gives its informed consent to Company Counsel’s representation of the Company in the transactions
contemplated by the Transaction Documents.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

[COMPANY SIGNATURE PAGE FOLLOWS]

29

 

     IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be
duly executed by their respective authorized signatories as of the date first indicated above.

	 	 	 	 	 
	 	ARDEA BIOSCIENCES, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

[SIGNATURE PAGES FOR PURCHASERS FOLLOW]

30

 

	 	 	 
	 

	 	NAME OF PURCHASER:                                                             

	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Name:
	 	 

	 	 
	 

	 	Title:	 	 	 	 

	 	 	 
	 

	 	Aggregate Purchase Price (Subscription Amount): $                    
	 
	 	 
	 

	 	Number of Shares to be Acquired:                                         
	 
	 	 
	 

	 	Warrants to be Acquired:                                         
	 
	 	 
	 

	 	Tax ID No.:                                         
	 
	 	 
	 

	 	Address for Notice:
	 
	 	 
	 

	 	                                                            
	 

	 	                                                            
	 

	 	                                                            
	 
	 	 
	 

	 	Telephone No.:                                         
	 
	 	 
	 

	 	Facsimile No.:                                         
	 
	 	 
	 

	 	E-mail Address:                                         
	 
	 	 
	 

	 	Attention:                                         

Delivery Instructions:

(if different than above)

c/o                                                          

Street:                                                     

City/State/Zip:                                        

Attention:                                                

Telephone No.:                                                             

[PURCHASER SIGNATURE PAGE – SECURITIES PURCHASE AGREEMENT]

 

 

EXHIBITS:

	 	 	 
	A:

	 	Form of Warrant
	 
	 	 
	B:

	 	Form of Registration Rights Agreement
	 
	 	 
	C-1:

	 	Accredited Investor Questionnaire
	 
	 	 
	C-2:

	 	Stock Certificate Questionnaire
	 
	 	 
	D:

	 	Form of Opinion of Company Counsel
	 
	 	 
	E:

	 	Irrevocable Transfer Agent Instructions
	 
	 	 
	F:

	 	Form of Secretary’s Certificate
	 
	 	 
	G:

	 	Form of Officer’s Certificate
	 
	 	 
	H:

	 	Wire Instructions

 

 

EXHIBIT A

Form of Warrant

 

 

EXHIBIT B

Form of Registration Rights Agreement

 

 

Instruction Sheet

(to be read in conjunction with the entire Securities Purchase Agreement and Registration Rights
Agreement applicable to Purchaser)

A. Complete the following items in the Securities Purchase Agreement and Registration Rights
Agreement applicable to Purchaser:

	 	1.	 	Provide the information regarding the Purchaser requested on the signature
page. The Securities Purchase Agreement and the Registration Rights Agreement
applicable to Purchaser must be executed by an individual authorized to bind the
Purchaser.
	 
	 	2.	 	Exhibit C-1 – Accredited Investor Questionnaire:
	 
	 	 	 	Provide the information requested by the Accredited Investor Questionnaire
	 
	 	3.	 	Exhibit C-2 Stock Certificate Questionnaire:
	 
	 	 	 	Provide the information requested by the Stock Certificate Questionnaire
	 
	 	4.	 	Annex B to the Registration Rights Agreement applicable to Purchaser — Selling
Securityholder Notice and Questionnaire
	 
	 	 	 	Provide the information requested by the Selling Securityholder Notice and
Questionnaire
	 
	 	5.	 	Return the signed Securities Purchase Agreement and Registration Rights
Agreement applicable to Purchaser to:

Ethan E. Christensen

Cooley Godward Kronish LLP

4401 Eastgate Mall

San Diego, California 92121

Tel: (858) 550-6076

Fax: (858) 550-6420

Email: echristensen@cooley.com

	B.	 	Instructions regarding the transfer of funds for the purchase of Shares are set forth on
Exhibit H to the Securities Purchase Agreement.

 

 

EXHIBIT C-1

ACCREDITED INVESTOR QUESTIONNAIRE

(ALL INFORMATION WILL BE TREATED CONFIDENTIALLY)

To:      Ardea Biosciences, Inc.

This Investor Questionnaire (“Questionnaire”) must be completed by each potential investor in
connection with the offer and sale of the shares of the common stock, par value $0.001 per share
(the “Securities”), of Ardea Biosciences, Inc., a Delaware corporation (the “Corporation”). The
Securities are being offered and sold by the Corporation without registration under the Securities
Act of 1933, as amended (the “Act”), and the securities laws of certain states, in reliance on the
exemptions contained in Section 4(2) of the Act and on Regulation D promulgated thereunder and in
reliance on similar exemptions under applicable state laws. The Corporation must determine that a
potential investor meets certain suitability requirements before offering or selling Securities to
such investor. The purpose of this Questionnaire is to assure the Corporation that each investor
will meet the applicable suitability requirements. The information supplied by you will be used
in determining whether you meet such criteria, and reliance upon the private offering exemptions
from registration is based in part on the information herein supplied.

This Questionnaire does not constitute an offer to sell or a solicitation of an offer to buy any
security. Your answers will be kept strictly confidential. However, by signing this
Questionnaire, you will be authorizing the Corporation to provide a completed copy of this
Questionnaire to such parties as the Corporation deems appropriate in order to ensure that the
offer and sale of the Securities will not result in a violation of the Act or the securities laws
of any state and that you otherwise satisfy the suitability standards applicable to purchasers of
the Securities. All potential investors must answer all applicable questions and complete, date
and sign this Questionnaire. Please print or type your responses and attach additional sheets of
paper if necessary to complete your answers to any item.

PART A. BACKGROUND INFORMATION

Name of Beneficial Owner of the Securities:                                                                            
                                                                             

Business Address:                                                                
             
               
                                                                               
                     

                                                            (Number and Street)

 

(City)                                        (State)                                   
                          (Zip Code)

Telephone Number: (                       )                                         
                           
                                                                             

If a corporation, partnership, limited liability company, trust or other entity:

Type of entity:
                              
                                                                                
                                                                

State of formation:                                          Approximate Date of formation:                            
                                 
          

Set forth in the space provided below the (i) state(s), if any, in the United States in which you
maintained your principal office during the past two years and the dates during which you
maintained your office in each state, and (ii) state(s), if any, in which you pay income taxes:

 

 

	 	 	 
	 

	 	 
	 
	 	 
	 

	 	 
	 
	 	 
	 

	 	 

Were you formed for the purpose of investing in the securities being offered?

               Yes                                 No                     

If an individual:

	 	 	 	 	 
	Residence Address:
	 	 	 	 
	 	 	 
	 

	 	(Number and Street)	 	 

	 	 	 	 	 
	 
	(City)
	 	(State)
	 	(Zip Code)

	 	 	 
	Telephone Number: (___)
	 	 
	 

	 	 

	 	 	 	 	 
	Age:                     

	 	Citizenship:                     
	 	Where registered to vote:                     

Set forth in the space provided below the state(s), if any, in the United States in which you
maintained your residence during the past two years and the dates during which you resided in each
state:

Are you a director or executive officer of the Corporation?

               Yes                                 No                     

	 	 	 
	Social Security or Taxpayer Identification No.
	 	 
	 

	 	 

PART B. ACCREDITED INVESTOR QUESTIONNAIRE

     In order for the Company to offer and sell the Securities in conformance with state and
federal securities laws, the following information must be obtained regarding your investor status.
Please initial each category applicable to you as a Purchaser of Securities of the Company.

	 	 	 	 	 	 	 	 	 
	 

	 	___
	 	 	(1	)	 	A bank as defined in Section 3(a)(2) of the Securities Act,
or any savings and loan association or other institution as defined in Section
3(a)(5)(A) of the Securities Act whether acting in its individual or fiduciary
capacity;
	 
	 	 	 	 	 	 	 	 
	 

	 	___
	 	 	(2	)	 	A broker or dealer registered pursuant to Section 15 of the
Securities Exchange Act of 1934;
	 
	 	 	 	 	 	 	 	 
	 

	 	___
	 	 	(3	)	 	An insurance company as defined in Section 2(13) of the
Securities Act;
	 
	 	 	 	 	 	 	 	 
	 

	 	___
	 	 	(4	)	 	An investment company registered under the Investment Company
Act of 1940 or a business development company as defined in Section 2(a)(48) of
that Act;
	 
	 	 	 	 	 	 	 	 
	 

	 	___
	 	 	(5	)	 	A Small Business Investment Company licensed by the U.S.
Small Business Administration under Section 301(c) or (d) of the Small Business
Investment Act of 1958;

 

 

	 	 	 	 	 	 	 	 	 
	 

	 	___
	 	 	(6	)	 	A plan established and maintained by a state, its political
subdivisions, or any agency or instrumentality of a state or its political
subdivisions, for the benefit of its employees, if such plan has total assets in
excess of $5,000,000;
	 
	 	 	 	 	 	 	 	 
	 

	 	___
	 	 	(7	)	 	An employee benefit plan within the meaning of the Employee
Retirement Income Security Act of 1974, if the investment decision is made by a
plan fiduciary, as defined in Section 3(21) of such act, which is either a bank,
savings and loan association, insurance company, or registered investment
adviser, or if the employee benefit plan has total assets in excess of
$5,000,000 or, if a self-directed plan, with investment decisions made solely by
persons that are accredited investors;
	 
	 	 	 	 	 	 	 	 
	 

	 	___
	 	 	(8	)	 	A private business development company as defined in Section
202(a)(22) of the Investment Advisers Act of 1940;
	 
	 	 	 	 	 	 	 	 
	 

	 	___
	 	 	(9	)	 	An organization described in Section 501(c)(3) of the
Internal Revenue Code, a corporation, Massachusetts or similar business trust,
or partnership, not formed for the specific purpose of acquiring the Securities,
with total assets in excess of $5,000,000;
	 
	 	 	 	 	 	 	 	 
	 

	 	___
	 	 	(10	)	 	A trust, with total assets in excess of $5,000,000, not
formed for the specific purpose of acquiring the Securities, whose purchase is
directed by a sophisticated person who has such knowledge and experience in
financial and business matters that such person is capable of evaluating the
merits and risks of investing in the Company;
	 
	 	 	 	 	 	 	 	 
	 

	 	___
	 	 	(11	)	 	A natural person whose individual net worth, or joint net worth with that person’s
spouse, at the time of his purchase exceeds $1,000,000;
	 
	 	 	 	 	 	 	 	 
	 

	 	___
	 	 	(12	)	 	A natural person who had an individual income in excess of $200,000 in each of the two
most recent years, or joint income with that person’s spouse in excess of $300,000, in each of
those years, and has a reasonable expectation of reaching the same income level in the current
year;
	 
	 	 	 	 	 	 	 	 
	 

	 	___
	 	 	(13	)	 	An executive officer or director of the Company;
	 
	 	 	 	 	 	 	 	 
	 

	 	___
	 	 	(14	)	 	An entity in which all of the equity owners qualify under any of the above
subparagraphs. If the undersigned belongs to this investor category only, list
the equity owners of the undersigned, and the investor category which each such
equity owner satisfies.

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	A.	 	FOR EXECUTION BY AN INDIVIDUAL:	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	By	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 

	 	Date	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	Print
	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 	 	 

	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	B.	 	FOR EXECUTION BY AN ENTITY:	 	 	 	 
	 	 	 	 	 	 	 	Entity
Name:
	 	 
	 

	 	 	 	 	 	 	 	 	 	 	 	 

	 	 
	 

	 	 	 	 	 	 	 	By	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 

	 	Date	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	Print
	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 	 	Title:
	 	 
	 	 

	 	 
	 

	 	 	 	 	 	 	 	 	 	 	 	 

	 	 

 

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	C.	 	ADDITIONAL SIGNATURES (if required by partnership, corporation or trust document):
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	Entity Name:
	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 	 	 

	 	 	 	 
	 

	 	 	 	 	 	 	 	By	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	Date	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	Print
	 	Name:	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	Title:
	 	 
	 	 

	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 	 	 

	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	Entity Name:
	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 	 	 

	 	 	 	 
	 

	 	 	 	 	 	 	 	By	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	Date	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	Print
	 	Name:	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	Title:
	 	 
	 	 

	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 	 	 

	 	 	 	 

 

 

EXHIBIT C-2

Stock Certificate Questionnaire

          Pursuant to Section 2.2(b) of the Agreement, please provide us with the following information:

	 	 	 	 	 
	1.

	 	The exact name that the Shares are to be registered in (this is the
name that will appear on the stock certificate(s)). You may use a
nominee name if appropriate:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	2.

	 	The relationship between the Purchaser of the Shares and the
Registered Holder listed in response to Item 1 above:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	3.

	 	The mailing address, telephone and telecopy number of the Registered
Holder listed in response to Item 1 above:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	4.

	 	The Tax Identification Number (or, if an individual, the Social
Security Number) of the Registered Holder listed in response to Item 1
above:	 	 
	 

	 	 	 	 

 

 

EXHIBIT D

Form of Opinion of Company Counsel

1. The Company has been duly incorporated and is a validly existing corporation in good
standing under the laws of the State of Delaware.

2. The Company has the requisite corporate power to own its property and assets and to
conduct its business as it is currently being conducted.

3. The Company is duly qualified to do business as a foreign corporation and is in good
standing under the laws of the State of California.

4. The Company has the requisite corporate power to execute, deliver and perform its
obligations under the Financing Agreements, including, without limitation, to issue, sell and
deliver the Shares and Warrants under the Purchase Agreement.

5. Each of the Financing Agreements has been duly and validly authorized, executed and
delivered by the Company and each such agreement constitutes a valid and binding agreement of the
Company enforceable against the Company in accordance with its terms.

6. The Company’s authorized capital stock consists of 70,000,000 shares of Common
Stock, par value $0.001 per share, and 5,000,000 shares of Preferred Stock, par value $0.001 per
share. The Shares have been duly authorized, and upon issuance and delivery against payment
therefor in accordance with the terms of the Purchase Agreement, the Shares will be validly issued,
outstanding, fully paid and nonassessable, and free of any preemptive right or similar rights
contained in the Company’s Certificate of Incorporation or Bylaws or any Material Agreement. The
Warrants Shares have been duly authorized, and upon issuance and delivery upon exercise of the
Warrants in accordance with the terms of the Warrants, the Warrant Shares will be validly issued,
outstanding, fully paid and nonassessable, and free of any preemptive right or similar rights
contained in the Company’s Certificate of Incorporation or Bylaws or any Material Agreement.

7. The execution and delivery of the Financing Agreements by the Company and the
issuance of the Shares and Warrants pursuant thereto do not violate any provision of the Company’s
Certificate of Incorporation or Bylaws, do not constitute a default under or a material breach of
any Material Agreement, and do not violate (a) any governmental statute, rule or regulation which
in our experience is typically applicable to transactions of the nature contemplated by the
Financing Agreements or (b) any order, writ, judgment, injunction, decree, determination or award
which has been entered against the Company and of which we are aware, in each case to the extent
the violation of which would materially and adversely affect the Company and its subsidiaries,
taken as a whole.

 

 

8. To our knowledge, there is no action, proceeding or investigation pending or overtly threatened
against the Company before any court or administrative agency that questions the validity or
enforceability of the Financing Agreements, or seeks to enjoin the performance of the Financing
Agreements or that could reasonably be expected to result, either individually or in the aggregate,
in a Material Adverse Effect on the Company and its subsidiaries, taken as a whole.

9. All consents, approvals, authorizations, or orders of, and filings, registrations,
and qualifications with any U.S. Federal or California regulatory authority or governmental body or
the under the DGCL required for the issuance of the Shares and Warrants, have been made or
obtained, except (a) for the filing of a Form D pursuant to Securities and Exchange Commission
Regulation D, and (b) for the filing of the notice to be filed under California Corporations Code
Section 25102.1(d).

10. The offer and sale of the Shares and Warrants are exempt from the
registration requirements of the Securities Act of 1933, as amended, subject to the timely filing
of a Form D pursuant to Securities and Exchange Commission Regulation D.

11. To our knowledge, there are no written contracts, agreements or
understandings between the Company and any person granting such person the right (other than rights
which have been waived in writing or otherwise satisfied) to require the Company to include any
securities of the Company in any registration statement contemplated by Section 2 of the
Registration Rights Agreement.

 

 

EXHIBIT E

Form of Irrevocable Transfer Agent Instructions

As of                     , ____

Computershare Trust Company N.A.

[Address]

[Address]

Attn:                                         

Ladies and Gentlemen:

     Reference is made to that certain Securities Purchase Agreement, dated as of                      ___,
2008 (the “Agreement”), by and among Ardea Biosciences, Inc., a Delaware corporation (the
“Company”), and the purchasers named on the signature pages thereto (collectively, and including
permitted transferees, the “Holders”), pursuant to which the Company is issuing to the Holders
shares (the “Shares”) of Common Stock of the Company, par value $0.001 per share (the “Common
Stock”).

     This letter shall serve as our irrevocable authorization and direction to you (provided that
you are the transfer agent of the Company at such time and the conditions set forth in this letter
are satisfied), subject to any stop transfer instructions that we may issue to you from time to
time, if any, to issue certificates representing shares of Common Stock upon transfer or resale of
the Shares.

     You acknowledge and agree that so long as you have received (a) written confirmation from the
Company that either (1) a registration statement covering resales of the Shares has been declared
effective by the Securities and Exchange Commission (the “Commission”) under the Securities Act of
1933, as amended (the “Securities Act”), or (2) the Shares have been sold in conformity with Rule
144 under the Securities Act (“Rule 144”) or are eligible for sale under Rule 144 following the
expiration of the one-year holding requirement under subparagraphs (b)(1)(i) and (d) thereof (if
the transferor is not an affiliate) and (b) if applicable, a copy of such registration statement,
then, unless otherwise required by law, within three (3) business days of your receipt of a notice
of transfer, you shall issue the certificates representing the Shares registered in the names of
such Holders or transferees, as the case may be, and such certificates shall not bear any legend
restricting transfer of the Shares thereby and should not be subject to any stop-transfer
restriction; provided, however, that if such Shares are not registered for resale under the
Securities Act or able to be sold under Rule 144, then the certificates for such Shares shall bear
the following legend:

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF

1933, AS AMENDED (THE “SECURITIES ACT”), OR APPLICABLE STATE SECURITIES

LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR

ASSIGNED EXCEPT AS PROVIDED BY SECTION 4 OF THAT CERTAIN SECURITIES

PURCHASE AGREEMENT, DATED AS OF                      __, 2008, BY AND AMONG ARDEA

BIOSCIENCES, INC. AND EACH PURCHASER IDENTIFIED ON THE SIGNATURE PAGES

THERETO.

     A form of written confirmation from the Company’s outside legal counsel that a registration
statement covering resales of the Shares has been declared effective by the Commission under the
Securities Act is attached hereto as Annex I.

     Please be advised that the Holders are relying upon this letter as an inducement to enter into
the Agreement and, accordingly, each Holder is a third-party beneficiary to these instructions.

 

 

     Please execute this letter in the space indicated to acknowledge your agreement to act in
accordance with these instructions.

	 	 	 	 	 	 	 
	 	 	Very truly yours,	 	 
	 
	 	 	 	 	 	 
	 	 	ARDEA BIOSCIENCES, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 

	 	 

Acknowledged and Agreed:

COMPUTERSHARE TRUST COMPANY N.A.

	 	 	 	 	 
	By:

	 	 	 	 
	 

	 	 	 	 
	Name:
	 	 	 	 
	 

	 	 	 	 
	Title:
	 	 	 	 
	 

	 	 

	 	 
	 
	 	 	 	 
	Date:
	 	                                             ,          
	 	 

 

 

Annex I

FORM OF NOTICE OF EFFECTIVENESS OF REGISTRATION STATEMENT

Computershare Trust Company N.A.

[Address]

[Address]

Attn:                                                             

	 	 	 	 	 
	 

	 	Re:
	 	Ardea Biosciences, Inc.

Ladies and Gentlemen:

     Reference is made to that certain Securities Purchase Agreement, dated as of                      ___,
2008, entered into by and among Ardea Biosciences, Inc. (the “Company”) and the buyers named
therein (collectively, the “Purchasers”) pursuant to which the Company issued to the Purchasers
shares of the Company’s common stock, $0.001 par value per share (the “Common Stock”). Pursuant to
that certain Registration Rights Agreement of even date, the Company agreed to register the resale
of the Common Stock (the “Registrable Securities”), under the Securities Act of 1933, as amended
(the “Securities Act”). In connection with the Company’s obligations under the Registration Rights
Agreement, on                                         ,                     , the Company filed a Registration Statement on
Form [S-3] (File No. 333-                                        ) (the “Registration Statement”) with the
Securities and Exchange Commission (the “Commission”) relating to the Registrable Securities which
names each of the Purchasers as a selling stockholder thereunder.

     In connection with the foregoing, we advise you that a member of the Commission’s staff has
advised us by telephone that the Commission has entered an order declaring the Registration
Statement effective under the Securities Act at ___[a.m.][p.m.] on                     , ___.

	 	 	 	 	 	 	 
	 	 	Very truly yours,	 	 
	 
	 	 	 	 	 	 
	 	 	Ardea Biosciences, Inc.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

	 	 

CC:   Purchasers

 

 

EXHIBIT F

Form of Secretary’s Certificate

The undersigned hereby certifies that he is the duly elected, qualified and acting Secretary of
Ardea Biosciences, Inc., a Delaware corporation (the “Company”), and that as such he is authorized
to execute and deliver this certificate in the name and on behalf of the Company and in connection
with the Securities Purchase Agreement, dated as of ___, 2008, by and among the Company
and the investors party thereto (the “Securities Purchase Agreement”), and further certifies in his
official capacity, in the name and on behalf of the Company, the items set forth below.
Capitalized terms used but not otherwise defined herein shall have the meaning set forth in the
Securities Purchase Agreement.

	1.	 	Attached hereto as Exhibit A is a true, correct and complete copy of the resolutions
duly adopted by the Board of Directors of the Company or the Pricing Committee of the Board of
Directors of the Company, as applicable, at meetings held on ___, 2008. Such resolutions
have not in any way been amended, modified, revoked or rescinded, have been in full force and
effect since their adoption to and including the date hereof and are now in full force and
effect.
	 
	2.	 	Attached hereto as Exhibit B is a true, correct and complete copy of the Certificate
of Incorporation of the Company, together with any and all amendments thereto currently in
effect, and no action has been taken to further amend, modify or repeal such Certificate of
Incorporation, the same being in full force and effect in the attached form as of the date
hereof.
	 
	3.	 	Attached hereto as Exhibit C is a true, correct and complete copy of the Bylaws of
the Company and any and all amendments thereto currently in effect, and no action has been
taken to further amend, modify or repeal such Bylaws, the same being in full force and effect
in the attached form as of the date hereof.
	 
	4.	 	Each person listed below has been duly elected or appointed to the position(s) indicated
opposite his name and is duly authorized to sign the Securities Purchase Agreement and each of
the Transaction Documents on behalf of the Company, and the signature appearing opposite such
person’s name below is such person’s genuine signature.

	 	 	 	 	 	 	 
	Name	 	Position	 	Signature	 	 
	 
	 	 	 	 	 	 
	Barry D. Quart, Pharm.D

	 	President and Chief Executive Officer
	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Christopher W. Krueger, J.D. 

	 	Secretary 
	 	 

	 	 

IN WITNESS
WHEREOF, the undersigned has hereunto set his hand as of this ___ day of                     , 2008.

	 	 	 	 	 
	 

	 	 

Secretary
	 	  

 

 

I, Barry D. Quart, Pharm.D, President and Chief Executive Officer, hereby certify that Christopher
W. Krueger, J.D. is the duly elected, qualified and acting Secretary of the Company and that the
signature set forth above is his true signature.

	 	 	 	 	 
	 

	 	 

Barry D. Quart, Pharm.D
	 	 
	 

	 	President and Chief Executive Officer	 	 

 

 

EXHIBIT A

Resolutions

 

 

EXHIBIT B

Certificate of Incorporation

 

 

EXHIBIT C

Bylaws

 

 

EXHIBIT G

Form of Officer’s Certificate

The undersigned, the President and Chief Executive Officer of Ardea Biosciences, Inc., a Delaware
corporation (the “Company”), pursuant to Section 5.1(g) of the Securities Purchase Agreement, dated
as of                      ___, 2008, by and among the Company and the investors signatory thereto (the
"Securities Purchase Agreement”), hereby represents, warrants and certifies as follows (capitalized
terms used but not otherwise defined herein shall have the meaning set forth in the Securities
Purchase Agreement):

	 	1.	 	The representations and warranties of the Company contained in the Securities
Purchase Agreement are true and correct in all material respects as of the date when
made and as of the Closing Date, as though made on and as of such date, except for such
representations and warranties that speak as of a specific date.
	 
	 	2.	 	The Company has performed, satisfied and complied in all material respects with
all covenants, agreements and conditions required by the Transaction Documents to be
performed, satisfied or complied with by it at or prior to the Closing.

IN WITNESS WHEREOF, the undersigned has executed this certificate this ___day of                     , 2008.

	 	 	 	 	 
	 

	 	 

Barry D. Quart, Pharm.D
	 	 
	 

	 	President and Chief Executive Officer	 	 

 

 

EXHIBIT H

Wire Instructionsexv10w2

Exhibit 10.2

REGISTRATION RIGHTS AGREEMENT

          This Registration Rights Agreement (this “Agreement”) is made and entered into as of December
17, 2008, by and among Ardea Biosciences, Inc., a Delaware corporation (the “Company”), and the
several purchasers signatory hereto (each a “Purchaser” and collectively, the “Purchasers”).

          This Agreement is made pursuant to the Securities Purchase Agreement, dated as of the date
hereof between the Company and each Purchaser (the “Purchase Agreement”).

          NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for
other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged,
the Company and each of the Purchasers agree as follows:

     1. Definitions. Capitalized terms used and not otherwise defined herein that are
defined in the Purchase Agreement shall have the meanings given such terms in the Purchase
Agreement. As used in this Agreement, the following terms shall have the following meanings:

          “Advice” shall have the meaning set forth in Section 6(e).

          “Affiliate” means, with respect to any person, any other person which directly or indirectly
controls, is controlled by, or is under common control with, such person.

          “Business Day” means a day, other than a Saturday or Sunday, on which banks in New York City
are open for the general transaction of business.

          “Closing” has the meaning set forth in the Purchase Agreement.

          “Closing Date” has the meaning set forth in the Purchase Agreement.

          “Commission” means the Securities and Exchange Commission.

          “Common Stock” means the common stock of the Company, par value $0.001 per share, and any
securities into which such common stock may hereinafter be reclassified.

          “Effective Date” means the date that the Registration Statement filed pursuant to Section 2(a)
is first declared effective by the Commission.

          “Effectiveness Deadline” means, with respect to the Initial Registration Statement or the New
Registration Statement, the 90th calendar day following the Closing Date (or, in the
event the Commission reviews and has written comments to the Initial Registration Statement or the
New Registration Statement, the 120th calendar day following the Closing Date);
provided, however, that if the Company is notified by the Commission that a Registration Statement
will not be reviewed or is no longer subject to further review and comments, the Effectiveness
Deadline as to such Registration Statement shall be the 10th Trading Day following the
date on which the Company is so notified if such date precedes the dates otherwise required above;
provided, further, that if the Effectiveness Deadline falls on a Saturday, Sunday or other day that
the Commission is closed for business, the Effectiveness Deadline shall be extended to the next
Business Day on which the Commission is open for business.

1

 

          “Effectiveness Period” shall have the meaning set forth in Section 2(b).

          “Event” shall have the meaning set forth in Section 2(c).

          “Event Date” shall have the meaning set forth in Section 2(c).

          “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.

          “Filing Deadline” means, with respect to the Initial Registration Statement required to be
filed pursuant to Section 2(a), the 30th calendar day following the Closing Date,
provided, however, that if the Filing Deadline falls on a Saturday, Sunday or other day that the
Commission is closed for business, the Filing Deadline shall be extended to the next Business Day
on which the Commission is open for business.

          “Holder” or “Holders” means the holder or holders, as the case may be, from time to time of
Registrable Securities.

          “Indemnified Party” shall have the meaning set forth in Section 5(c).

          “Indemnifying Party” shall have the meaning set forth in Section 5(c).

          “Initial Registration Statement” means the initial Registration Statement filed pursuant to
Section 2(a) of this Agreement.

          “Liquidated Damages” shall have the meaning set forth in Section 2(c).

          “Losses” shall have the meaning set forth in Section 5(a).

          “New York Courts” means the state and federal courts sitting in the City of New York, Borough
of Manhattan.

          “Person” means an individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint stock company,
government (or an agency or subdivision thereof) or other entity of any kind.

          “Principal Market” means the Trading Market on which the Common Stock is primarily listed on
and quoted for trading, which, as of the Closing Date, shall be the NASDAQ Global Market.

          “Proceeding” means an action, claim, suit, investigation or proceeding (including, without
limitation, an investigation or partial proceeding, such as a deposition), whether commenced or
threatened.

          “Prospectus” means the prospectus included in a Registration Statement (including, without
limitation, a prospectus that includes any information previously omitted from a prospectus filed
as part of an effective registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Registrable Securities covered by a Registration Statement,
and all other amendments and supplements to the Prospectus, including post-effective amendments,
and all material incorporated by reference or deemed to be incorporated by reference in such
Prospectus.

2

 

          “Registrable Securities” means all of (i) the Shares and (ii) any securities issued or
issuable upon any stock split, dividend or other distribution, recapitalization or similar event
with respect to the foregoing, provided, that the Holder has completed and delivered to the Company
a Selling Stockholder Questionnaire; and provided, further, that Shares shall cease to be
Registrable Securities upon the earliest to occur of the following: (A) sale pursuant to a
Registration Statement or Rule 144 under the Securities Act (in which case, only such security sold
shall cease to be a Registrable Security); or (B) becoming eligible for sale by the Holder pursuant
to Rule 144 without being subject to the volume limitations of Rule 144(e) (or any successor rule)
or the manner of sale limitations of Rule 144(f) and following the expiration of the one-year
holding requirement under Rule 144(b)(1)(i) and Rule 144(d).

          “Registration Statement” means any one or more registration statements of the Company filed
under the Securities Act that covers the resale of any of the Registrable Securities pursuant to
the provisions of this Agreement (including without limitation the Initial Registration Statement,
the New Registration Statement and any Remainder Registration Statements), amendments and
supplements to such Registration Statements, including post-effective amendments, all exhibits and
all material incorporated by reference or deemed to be incorporated by reference in such
Registration Statements.

          “Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as
such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by
the Commission having substantially the same effect as such Rule.

          “Rule 415” means Rule 415 promulgated by the Commission pursuant to the Securities Act, as
such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by
the Commission having substantially the same effect as such Rule.

          “Rule 424” means Rule 424 promulgated by the Commission pursuant to the Securities Act, as
such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by
the Commission having substantially the same effect as such Rule.

          “SEC Guidance” means (i) any publicly-available written or oral guidance, comments,
requirements or requests of the Commission staff and (ii) the Securities Act.

          “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.

          “Selling Stockholder Questionnaire” means a questionnaire in the form attached as Annex
B hereto, or such other form of questionnaire as may reasonably be adopted by the Company from
time to time.

          “Shares” means the shares of Common Stock issued or issuable to the Purchasers pursuant to the
Purchase Agreement or upon exercise of the Warrants issued pursuant to the Purchasers pursuant to
the Purchase Agreement.

          “Trading Day” means (i) a day on which the Common Stock is listed or quoted and traded on its
Principal Market (other than the OTC Bulletin Board), or (ii) if the Common Stock is not listed on
a Trading Market (other than the OTC Bulletin Board), a day on which the Common Stock is traded in
the over-the-counter market, as reported by the OTC Bulletin Board, or (iii) if the Common Stock is
not quoted on any Trading Market, a day on which the Common Stock is quoted in the over-the-counter
market as reported in the “pink sheets” by Pink Sheets LLC (or any similar organization or agency
succeeding to its functions of reporting prices); provided, that in the event that the Common

3

 

Stock is not listed or quoted as set forth in (i), (ii) and (iii) hereof, then Trading Day
shall mean a Business Day.

          “Trading Market” means whichever of the New York Stock Exchange, the American Stock Exchange,
the NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ Capital Market or OTC
Bulletin Board on which the Common Stock is listed or quoted for trading on the date in question.

     2. Registration.

          (a) On or prior to the Filing Deadline, the Company shall prepare and file with the Commission
a Registration Statement covering the resale of all of the Registrable Securities not already
covered by an existing and effective Registration Statement for an offering to be made on a
continuous basis pursuant to Rule 415 or, if Rule 415 is not available for offers and sales of the
Registrable Securities, by such other means of distribution of Registrable Securities as the
Holders may reasonably specify (the “Initial Registration Statement”). The Initial Registration
Statement shall be on Form S-3 (except if the Company is then ineligible to register for resale the
Registrable Securities on Form S-3, in which case such registration shall be on another appropriate
form in accordance with Section 2(e)) and shall contain (except if otherwise required pursuant to
written comments received from the Commission upon a review of such Registration Statement) the
“Plan of Distribution” section attached hereto as Annex A. Notwithstanding the
registration obligations set forth in this Section 2, in the event the Commission informs the
Company that all of the Registrable Securities cannot, as a result of the application of Rule 415,
be registered for resale as a secondary offering on a single registration statement, the Company
agrees to promptly (i) inform each of the holders thereof, (ii) use its commercial reasonable
efforts to file amendments to the Initial Registration Statement as required by the Commission
and/or (iii) withdraw the Initial Registration Statement and file a new registration statement (a
"New Registration Statement”), in either case covering the maximum number of Registrable Securities
permitted to be registered by the Commission, on Form S-3 or such other form available to register
for resale the Registrable Securities as a secondary offering; provided, however, that prior to
filing such amendment or New Registration Statement, the Company shall be obligated to use its
commercially reasonable efforts to advocate with the Commission for the registration of all of the
Registrable Securities in accordance with the SEC Guidance, including without limitation, the
Manual of Publicly Available Telephone Interpretations D.29. In the event the Company amends the
Initial Registration Statement or files a New Registration Statement, as the case may be, under
clauses (ii) or (iii) above, the Company will use its commercially reasonable efforts to file with
the Commission, as promptly as allowed by Commission or staff guidance provided to the Company or
to registrants of securities in general, one or more registration statements on Form S-3 or such
other form available to register for resale those Registrable Securities that were not registered
for resale on the Initial Registration Statement, as amended, or the New Registration Statement
(the “Remainder Registration Statements”).

          (b) The Company shall use its commercially reasonable efforts to cause each Registration
Statement to be declared effective by the Commission as soon as practicable and, with respect to
the Initial Registration Statement or the New Registration Statement, as applicable, no later than
the Effectiveness Deadline (including filing with the Commission a request for acceleration of
effectiveness in accordance with Rule 461 promulgated under the Securities Act within five (5)
Business Days after the date that the Company is notified (orally or in writing, whichever is
earlier) by the Commission that such Registration Statement will not be “reviewed,” or not be
subject to further review and the effectiveness of such Registration Statement may be accelerated)
and shall use its commercially reasonable efforts to keep each Registration Statement continuously
effective under the Securities Act until the earlier of (i) such time as all of the Registrable
Securities covered by such Registration Statement have been publicly sold by the Holders or (ii)
the date that all Registrable Securities covered by such

4

 

Registration Statement may be sold by pursuant to Rule 144, or any successor thereto without
being subject to the volume limitations of Rule 144(e) or the manner of sale limitations of Rule
144(f) and following the expiration of the one-year holding requirement under Rule 144(b)(1)(i) and
Rule 144(d) (the “Effectiveness Period”). The Company shall request effectiveness of a
Registration Statement as of 5:00 p.m. New York City time on a Trading Day. The Company shall
promptly notify the Holders via facsimile or electronic mail of a “.pdf” format data file of the
effectiveness of a Registration Statement on or before one (1) Trading Day after the day the
Company telephonically confirms effectiveness with the Commission, which confirmation shall be the
date requested for effectiveness of a Registration Statement. The Company shall, by 9:30 a.m. New
York City Time on the 2nd Trading Day after the Effective Date, file a final Prospectus with the
Commission, as required by Rule 424(b). Notwithstanding any other provision of this Agreement and
subject to the payment of liquidated damages in Section 2(c), if any SEC Guidance sets forth a
limitation of the number of Registrable Securities permitted to be registered on a particular
Registration Statement (and notwithstanding that the Company used diligent efforts to advocate with
the Commission for the registration of all or a greater number of Registrable Securities) any
required cutbacks of Shares shall be applied to the Purchasers pro-rata in accordance with the
number of such Shares sought to be included in such Registration Statement by reference to such
Purchaser’s (and in the case of a subsequent transfer the initial Purchaser’s) aggregate
Subscription Amount relative to all Purchasers’ Subscription Amounts, and first to the shares of
Common Stock issuable upon exercise of the Warrants.

          (c) If: (i) the Initial Registration Statement is not filed with the Commission on or prior to
the Filing Deadline, (ii) the Initial Registration Statement or the New Registration Statement, as
applicable, is not declared effective by the Commission (or otherwise does not become effective)
for any reason on or prior to the Effectiveness Deadline or (iii) after its Effective Date, (A)
such Registration Statement ceases for any reason (including without limitation by reason of a stop
order, or the Company’s failure to update the Registration Statement), but excluding the inability
of any Holder to sell the Registrable Securities covered thereby due to market conditions, to
remain continuously effective as to all Registrable Securities for which it is required to be
effective or (B) the Holders are not permitted to utilize the Prospectus therein to resell such
Registrable Securities, in the case of (A) and (B), for an aggregate of more than twenty (20)
consecutive Trading Days or for more than an aggregate of forty (40) Trading Days during any twelve
(12) month period (which need not be consecutive), other than as a result of a breach of this
Agreement by a Holder or a Holder’s failure to return a Selling Stockholder Questionnaire within
the time period provided by Section 2(c) hereof (any such failure or breach in clauses (i) through
(iii) above being referred to as an “Event,” and, for purposes of clauses (i) or (ii), the date on
which such Event occurs, or for purposes of clause (iii), the date on which such twenty (20)
consecutive day or forty (40) Trading Day period (as applicable) is exceeded, being referred to as
“Event Date”), then in lieu of any other rights the Holders may have hereunder or under applicable
law, within five (5) Trading Days of each such Event Date and each monthly anniversary of each such
Event Date (if the applicable Event shall not have been cured by such date) until the applicable
Event is cured, the Company shall pay to each Holder an amount in cash, as liquidated damages and
not as a penalty (“Liquidated Damages”), equal to 1.0% of the aggregate purchase price paid by such
Holder pursuant to the Purchase Agreement for any Registrable Securities then held by such Holder
(which remedy shall be exclusive of any other remedies available under this Agreement or under
applicable law). The parties agree that (1) in no event shall the Company be liable in any 30-day
period for Liquidated Damages under this Agreement in excess of 1.0% of the aggregate purchase
price paid by the Holders pursuant to the Purchase Agreement and (2) the maximum aggregate
Liquidated Damages payable to a Holder under this Agreement shall be six percent (6%) of the
aggregate purchase price paid by such Holder pursuant to the Purchase Agreement. If the Company
fails to pay any Liquidated Damages pursuant to this Section in full within five (5) Business Days
after the date payable, the Company will pay interest thereon at a rate of 1.5% per month (or such
lesser maximum amount that is permitted to be paid by applicable law) to the Holder, accruing daily
from the date such Liquidated Damages are due until such amounts, plus all such interest thereon,
are paid in

5

 

full. The Liquidated Damages pursuant to the terms hereof shall apply on a daily pro-rata
basis for any portion of a month prior to the cure of an Event, except in the case of the first
Event Date. In the event that the Company registers some but not all of the Registrable
Securities, the 1.0% of liquidated damages referred to above for any monthly period shall be
reduced to equal the percentage determined by multiplying 1.0% by a fraction, the numerator of
which shall be the number of Registrable Securities for which there is not an effective
Registration Statement at such time and the denominator of which shall be the number of Registrable
Securities at such time. The Effectiveness Deadline for a Registration Statement shall be extended
without default or liquidated damages hereunder in the event that the Company’s failure to obtain
the effectiveness of the Registration Statement on a timely basis results from (i) the failure of a
Purchaser to timely provide the Company with information requested by the Company and necessary to
complete the Registration Statement in accordance with the requirements of the Securities Act (in
which the Effectiveness Deadline would be extended with respect to Registrable Securities held by
such Purchaser) or (ii) events or circumstances that are not in any way attributable to the
Company.

          (d) Each Holder agrees to furnish to the Company a completed Selling Stockholder Questionnaire
not more than five (5) Trading Days following the date of this Agreement. Each Holder further
agrees that it shall not be entitled to be named as a selling security holder in the Registration
Statement or use the Prospectus for offers and resales of Registrable Securities at any time,
unless such Holder has returned to the Company a completed and signed Selling Stockholder
Questionnaire. If a Holder of Registrable Securities returns a Selling Stockholder Questionnaire
after the deadline specified in the previous sentence, the Company shall use its commercially
reasonable efforts to take such actions as are required to name such Holder as a selling security
holder in the Registration Statement or any pre-effective or post-effective amendment thereto and
to include (to the extent not theretofore included) in the Registration Statement the Registrable
Securities identified in such late Selling Stockholder Questionnaire. Each Holder acknowledges and
agrees that the information in the Selling Stockholder Questionnaire will be used by the Company in
the preparation of the Registration Statement and hereby consents to the inclusion of such
information in the Registration Statement.

          (e) In the event that Form S-3 is not available for the registration of the resale of
Registrable Securities hereunder, the Company shall (i) register the resale of the Registrable
Securities on another appropriate form and (ii) undertake to register the Registrable Securities on
Form S-3 promptly after such form is available, provided that the Company shall maintain the
effectiveness of the Registration Statement then in effect until such time as a Registration
Statement on Form S-3 covering the Registrable Securities has been declared effective by the
Commission.

     3. Registration Procedures

          In connection with the Company’s registration obligations hereunder, the Company shall:

          (a) Not less than five (5) Trading Days prior to the filing of a Registration Statement and
not less than one (1)Trading Day prior to the filing of any related Prospectus or any amendment or
supplement thereto (except for Annual Reports on Form 10-K, and Quarterly Reports on Form 10-Q and
Current Reports on Form 8-K and any similar or successor reports), the Company shall, furnish to
the Holder copies of such Registration Statement, Prospectus or amendment or supplement thereto, as
proposed to be filed, which documents will be subject to the review of such Holder (it being
acknowledged and agreed that if a Holder does not object to or comment on the aforementioned
documents within such five (5) Trading Day or one (1) Trading Day period, as the case may be, then
the Holder shall be deemed to have consented to and approved the use of such documents). The
Company shall not file any Registration Statement or amendment or supplement thereto in a form to
which a Holder

6

 

reasonably objects in good faith, provided that, the Company is notified of such objection in
writing within the five (5) Trading Day or one (1) Trading Day period described above, as
applicable.

          (b) (i) Prepare and file with the Commission such amendments (including post-effective
amendments) and supplements, to each Registration Statement and the Prospectus used in connection
therewith as may be necessary to keep such Registration Statement continuously effective as to the
applicable Registrable Securities for its Effectiveness Period and prepare and file with the
Commission such additional Registration Statements in order to register for resale under the
Securities Act all of the Registrable Securities; (ii) cause the related Prospectus to be amended
or supplemented by any required Prospectus supplement (subject to the terms of this Agreement),
and, as so supplemented or amended, to be filed pursuant to Rule 424; (iii) respond as promptly as
reasonably practicable to any comments received from the Commission with respect to each
Registration Statement or any amendment thereto and, as promptly as reasonably possible, provide
the Holders true and complete copies of all correspondence from and to the Commission relating to
such Registration Statement that pertains to the Holders as “Selling Stockholders” but not any
comments that would result in the disclosure to the Holders of material and non-public information
concerning the Company; and (iv) comply with the provisions of the Securities Act and the Exchange
Act with respect to the disposition of all Registrable Securities covered by a Registration
Statement until such time as all of such Registrable Securities shall have been disposed of
(subject to the terms of this Agreement) in accordance with the intended methods of disposition by
the Holders thereof as set forth in such Registration Statement as so amended or in such Prospectus
as so supplemented; provided, however, that each Purchaser shall be responsible for the delivery of
the Prospectus to the Persons to whom such Purchaser sells any of the Shares (including in
accordance with Rule 172 under the Securities Act), and each Purchaser agrees to dispose of
Registrable Securities in compliance with the plan of distribution described in the Registration
Statement and otherwise in compliance with applicable federal and state securities laws. In the
case of amendments and supplements to a Registration Statement which are required to be filed
pursuant to this Agreement (including pursuant to this Section 3(b)) by reason of the Company
filing a report on Form 10-K, Form 10-Q or Form 8-K or any analogous report under the Exchange Act,
the Company shall have incorporated such report by reference into such Registration Statement, if
applicable, or shall file such amendments or supplements with the Commission on the same day on
which the Exchange Act report which created the requirement for the Company to amend or supplement
such Registration Statement was filed.

          (c) Notify the Holders (which notice shall, pursuant to clauses (iii) through (vi) hereof, be
accompanied by an instruction to suspend the use of the Prospectus until the requisite changes have
been made) as promptly as reasonably practicable (and, in the case of (i)(A) below, not less than
three (3) Trading Days prior to such filing, in the case of (iii) and (iv) below, not more than one
(1) Trading Day after such issuance or receipt, in the case of (v) below, not less than one (1)
Trading Day after a determination by the Company that the financial statements in any Registration
Statement have become ineligible for inclusion therein and, in the case of (vi) below, not more
than one (1) Trading Day after the occurrence or existence of such development) and (if requested
by any such Person) confirm such notice in writing no later than one (1) Trading Day following the
day (i)(A) when a Prospectus or any Prospectus supplement or post-effective amendment to a
Registration Statement is proposed to be filed; (B) when the Commission notifies the Company
whether there will be a “review” of such Registration Statement and whenever the Commission
comments in writing on any Registration Statement (in which case the Company shall provide to the
Holders true and complete copies of all comments that pertain to the Holders as a “Selling
Stockholder” or to the “Plan of Distribution” and all written responses thereto, but not
information that the Company believes would constitute material and non-public information); and
(C) with respect to each Registration Statement or any post-effective amendment, when the same has
become effective; (ii) of any request by the Commission or any other Federal or state governmental
authority for amendments or supplements to a Registration Statement or Prospectus or for additional
information that pertains to the Holders as “Selling Stockholders” or the

7

 

“Plan of Distribution”; (iii) of the issuance by the Commission or any other federal or state
governmental authority of any stop order suspending the effectiveness of a Registration Statement
covering any or all of the Registrable Securities or the initiation of any Proceedings for that
purpose; (iv) of the receipt by the Company of any notification with respect to the suspension of
the qualification or exemption from qualification of any of the Registrable Securities for sale in
any jurisdiction, or the initiation or threatening of any Proceeding for such purpose; (v) of the
occurrence of any event or passage of time that makes the financial statements included in a
Registration Statement ineligible for inclusion therein or any statement made in such Registration
Statement or Prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires any revisions to such Registration
Statement, Prospectus or other documents so that, in the case of such Registration Statement or the
Prospectus, as the case may be, it will not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make the statements
therein (in the case of any Prospectus, form of prospectus or supplement thereto, in light of the
circumstances under which they were made), not misleading; and (vi) the occurrence or existence of
any pending development with respect to the Company that the Company believes may be material and
that, in the determination of the Company, makes it not in the best interest of the Company to
allow continued availability of a Registration Statement or Prospectus, provided, that any and all
of such information shall remain confidential to each Holder until such information otherwise
becomes public, unless disclosure by a Holder is required by law; provided, further, that
notwithstanding each Holder’s agreement to keep such information confidential, the Holders make no
acknowledgement that any such information is material, non-public information.

          (d) Use commercially reasonable efforts to avoid the issuance of, or, if issued, obtain the
withdrawal of (i) any order suspending the effectiveness of a Registration Statement, or (ii) any
suspension of the qualification (or exemption from qualification) of any of the Registrable
Securities for sale in any jurisdiction, as soon as practicable.

          (e) If requested by a Holder, furnish to such Holder, without charge, at least one conformed
copy of each Registration Statement and each amendment thereto and all exhibits to the extent
requested by such Person (including those previously furnished or incorporated by reference)
promptly after the filing of such documents with the Commission; provided, that the Company shall
have no obligation to provide any document pursuant to this clause that is available on the
Commission’s EDGAR system.

          (f) Prior to any resale of Registrable Securities by a Holder, use its commercially reasonable
efforts to register or qualify or cooperate with the selling Holders in connection with the
registration or qualification (or exemption from the registration or qualification) of such
Registrable Securities for the resale by the Holder under the securities or Blue Sky laws of such
jurisdictions within the United States as any Holder reasonably requests in writing, to keep each
registration or qualification (or exemption therefrom) effective during the Effectiveness Period
and to do any and all other acts or things reasonably necessary to enable the disposition in such
jurisdictions of the Registrable Securities covered by each Registration Statement; provided, that
the Company shall not be required to qualify generally to do business in any jurisdiction where it
is not then so qualified, subject the Company to any material tax in any such jurisdiction where it
is not then so subject or file a general consent to service of process in any such jurisdiction.

          (g) If requested by a Holder, cooperate with such Holder to facilitate the timely preparation
and delivery of certificates representing Registrable Securities to be delivered to a transferee
pursuant to a Registration Statement, which certificates shall be free, to the extent permitted by
the Purchase Agreement and under law, of all restrictive legends, and to enable such Registrable
Securities to be in such denominations and registered in such names as any such Holders may
reasonably request.

8

 

          (h) Following the occurrence of any event contemplated by Section 3(c)(iii)-(vi), as promptly
as reasonably practicable, prepare a supplement or amendment, including a post-effective amendment,
to the affected Registration Statements or a supplement to the related Prospectus or any document
incorporated or deemed to be incorporated therein by reference, and file any other required
document so that, as thereafter delivered, no Registration Statement nor any Prospectus will
contain an untrue statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein (in the case of any Prospectus, form of
prospectus or supplement thereto, in light of the circumstances under which they were made), not
misleading.

          (i) Comply with all applicable rules and regulations of the Commission.

          (j) The Company may require each selling Holder to furnish to the Company a certified
statement as to (i) the number of shares of Common Stock beneficially owned by such Holder any
Affiliate thereof, (ii) any Financial Industry Regulatory (“FINRA”) affiliations, (iii) any natural
persons who have the power to vote or dispose of the common stock and (iv) any other information as
may be requested by the Commission, FINRA or any state securities commission. During any periods
that the Company is unable to meet its obligations hereunder with respect to the registration of
the Registrable Securities because any Holder fails to furnish such information within three (3)
Trading Days of the Company’s request, any liquidated damages that are accruing at such time as to
such Holder only shall be tolled and any Event that may otherwise occur solely because of such
delay shall be suspended as to such Holder only, until such information is delivered to the
Company.

          (k) The Company shall cooperate with any registered broker through which a Holder proposes to
resell its Registrable Securities in effecting a filing with FINRA pursuant to FINRA Rule 5110 as
reasonably requested by an such Holder, and the Company shall pay the filing fee required for the
first such filing within five (5) Trading Days of the request therefor.

     4. Registration Expenses. All fees and expenses incident to the Company’s performance
of or compliance with its obligations under this Agreement (excluding any underwriting discounts
and selling commissions and all legal fees and expenses of legal counsel for any Holder) shall be
borne by the Company whether or not any Registrable Securities are sold pursuant to a Registration
Statement. The fees and expenses referred to in the foregoing sentence shall include, without
limitation, (i) all registration and filing fees (including, without limitation, fees and expenses
(A) with respect to filings required to be made with any Trading Market on which the Common Stock
is then listed for trading, (B) with respect to compliance with applicable state securities or Blue
Sky laws (including, without limitation, fees and disbursements of counsel for the Company in
connection with Blue Sky qualifications or exemptions of the Registrable Securities and
determination of the eligibility of the Registrable Securities for investment under the laws of
such jurisdictions as requested by the Holders) and (C) if not previously paid by the Company
pursuant to Section 3(k) hereof, with respect to any filing that may be required to be made by an
broker through which a Holder intends to make sales of Registrable Securities with FINRA pursuant
to FINRA Rule 5110, so long as the broker is receiving no more than a customary brokerage
commission in connection with such sale, (ii) printing expenses (including, without limitation,
expenses of printing certificates for Registrable Securities and of printing prospectuses if the
printing of prospectuses is reasonably requested by the Holders of a majority of the Registrable
Securities included in the Registration Statement), (iii) messenger, telephone and delivery
expenses, (iv) fees and disbursements of counsel for the Company, (v) Securities Act liability
insurance, if the Company so desires such insurance, and (vi) fees and expenses of all other
Persons retained by the Company in connection with the consummation of the transactions
contemplated by this Agreement. In addition, the Company shall be responsible for all of its
internal expenses incurred in connection with the consummation of the transactions contemplated by
this Agreement (including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expense of any annual audit and the

9

 

fees and expenses incurred in connection with the listing of the Registrable Securities on any
securities exchange as required hereunder. In no event shall the Company be responsible for any
underwriting, broker or similar fees or commissions of any Holder or, except to the extent provided
for in the Transaction Documents, any legal fees or other costs of the Holders.

     5. Indemnification.

          (a) Indemnification by the Company. The Company shall, notwithstanding any
termination of this Agreement, indemnify, defend and hold harmless each Holder, the officers,
directors, agents, partners, members, managers, stockholders, Affiliates and employees of each of
them, each Person who controls any such Holder (within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act) and the officers, directors, partners, members, managers,
stockholders, agents and employees of each such controlling Person, to the fullest extent permitted
by applicable law, from and against any and all losses, claims, damages, liabilities, costs
(including, without limitation, reasonable costs of preparation and investigation and reasonable
attorneys’ fees) and expenses (collectively, “Losses”), as incurred, that arise out of or are based
upon any untrue or alleged untrue statement of a material fact contained in any Registration
Statement, any Prospectus or any form of prospectus or in any amendment or supplement thereto or in
any preliminary prospectus, or arising out of or relating to any omission or alleged omission to
state a material fact required to be stated therein or necessary to make the statements therein (in
the case of any Prospectus or form of prospectus or supplement thereto, in light of the
circumstances under which they were made) not misleading, or (ii) any violation or alleged
violation by the Company of the Securities Act, Exchange Act, any state securities law, any “blue
sky” laws of any jurisdiction in which Registrable Securities are offered or any rule or regulation
thereunder relating to the offer or sale of the Registrable Securities pursuant to a Registration
Statement or any violation of this Agreement except to the extent, but only to the extent, that (A)
such untrue statements, alleged untrue statements, omissions or alleged omissions are based upon
information regarding such Holder furnished in writing to the Company by such Holder expressly for
use therein, or to the extent that such information relates to such Holder or such Holder’s
proposed method of distribution of Registrable Securities and was reviewed and approved by such
Holder expressly for use in a Registration Statement, such Prospectus or such form of Prospectus or
in any amendment or supplement thereto (it being understood that the Holder has approved Annex
A hereto for this purpose), (B) in the case of an occurrence of an event of the type specified
in Section 3(c)(iii)-(vi), related to the use by a Holder of an outdated or defective Prospectus
after the Company has notified such Holder in writing that the Prospectus is outdated or defective
and prior to the receipt by such Holder of the Advice contemplated and defined in Section 6(e)
below, but only if and to the extent that following the receipt of the Advice the misstatement or
omission giving rise to such Loss would have been corrected or (C) any such Losses arise out of the
Purchaser’s (or any other indemnified Person’s) failure to send or give a copy of the Prospectus or
supplement (as then amended or supplemented), if required pursuant to Rule 172 under the Securities
Act (or any successor rule), to the Persons asserting an untrue statement or alleged untrue
statement or alleged untrue statement or omission or alleged omission at or prior to the written
confirmation of the sale of Registrable Securities to such Person if such statement or omission was
corrected in such Prospectus or supplement. The Company shall notify the Holders promptly of the
institution, threat or assertion of any Proceeding arising from or in connection with the
transactions contemplated by this Agreement of which the Company is aware. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on behalf of an
Indemnified Party (as defined in Section 5(c)) and shall survive the transfer of the Registrable
Securities by the Holders.

          (b) Indemnification by Holders. Each Holder shall, notwithstanding any termination of
this Agreement, severally and not jointly, indemnify and hold harmless the Company, its directors,
officers, agents and employees, each Person who controls the Company (within the meaning of Section
15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, agents
or

10

 

employees of such controlling Persons, to the fullest extent permitted by applicable law, from
and against all Losses, as incurred, arising out of or are based solely upon (x) such Holder’s
failure to comply with the prospectus delivery requirements of the Securities Act or (y) any untrue
or alleged untrue statement of a material fact contained in any Registration Statement, any
Prospectus, or any form of prospectus, or in any amendment or supplement thereto or in any
preliminary prospectus, or arising out of or relating to any omission or alleged omission of a
material fact required to be stated therein or necessary to make the statements therein (in the
case of any Prospectus, or any form of prospectus or supplement thereto, in light of the
circumstances under which they were made) not misleading (i) to the extent, but only to the extent,
that such untrue statements or omissions are based solely upon information regarding such Holder
furnished in writing to the Company by such Holder expressly for use therein or (ii) to the extent
that such information relates to such Holder or such Holder’s proposed method of distribution of
Registrable Securities and was reviewed and approved by such Holder expressly for use in a
Registration Statement (it being understood that the Holder has approved Annex A hereto for
this purpose), such Prospectus or such form of Prospectus or in any amendment or supplement thereto
or (iii) in the case of an occurrence of an event of the type specified in Section 3(c)(iii)-(vi),
to the extent, but only to the extent, related to the use by such Holder of an outdated or
defective Prospectus after the Company has notified such Holder in writing that the Prospectus is
outdated or defective and prior to the receipt by such Holder of the Advice contemplated in Section
6(e). In no event shall the liability of any selling Holder hereunder be greater in amount than
the dollar amount of the net proceeds received by such Holder upon the sale of the Registrable
Securities giving rise to such indemnification obligation.

          (c) Conduct of Indemnification Proceedings. If any Proceeding shall be brought or
asserted against any Person entitled to indemnity hereunder (an “Indemnified Party”), such
Indemnified Party shall promptly notify the Person from whom indemnity is sought (the “Indemnifying
Party”) in writing, and the Indemnifying Party shall have the right to assume the defense thereof,
including the employment of counsel reasonably satisfactory to the Indemnified Party and the
payment of all reasonable fees and expenses incurred in connection with defense thereof; provided,
that the failure of any Indemnified Party to give such notice shall not relieve the Indemnifying
Party of its obligations or liabilities pursuant to this Agreement, except (and only) to the extent
that such failure shall have materially and adversely prejudiced the Indemnifying Party.

          An Indemnified Party shall have the right to employ separate counsel in any such Proceeding
and to participate in the defense thereof, but the fees and expenses of such counsel shall be at
the expense of such Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed in
writing to pay such fees and expenses; (2) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably satisfactory to such
Indemnified Party in any such Proceeding; or (3) the named parties to any such Proceeding
(including any impleaded parties) include both such Indemnified Party and the Indemnifying Party,
and such Indemnified Party shall have been advised by counsel that a conflict of interest exists if
the same counsel were to represent such Indemnified Party and the Indemnifying Party (in which
case, if such Indemnified Party notifies the Indemnifying Party in writing that it elects to employ
separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall not have
the right to assume the defense thereof and such counsel shall be at the expense of the
Indemnifying Party); provided, that the Indemnifying Party shall not be liable for the fees and
expenses of more than one separate firm of attorneys at any time for all Indemnified Parties. The
Indemnifying Party shall not be liable for any settlement of any such Proceeding effected without
its written consent, which consent shall not be unreasonably withheld, delayed or conditioned. No
Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any
settlement of any pending Proceeding in respect of which any Indemnified Party is a party, unless
such settlement includes an unconditional release of such Indemnified Party from all liability on
claims that are the subject matter of such Proceeding.

11

 

          Subject to the terms of this Agreement, all fees and expenses of the Indemnified Party
(including reasonable fees and expenses to the extent incurred in connection with investigating or
preparing to defend such Proceeding in a manner not inconsistent with this Section) shall be paid
to the Indemnified Party, as incurred, within twenty (20) Trading Days of written notice thereof to
the Indemnifying Party; provided, that the Indemnified Party shall promptly reimburse the
Indemnifying Party for that portion of such fees and expenses applicable to such actions for which
such Indemnified Party is not entitled to indemnification hereunder). The failure to deliver
written notice to the Indemnifying Party within a reasonable time of the commencement of any such
action shall not relieve such Indemnifying Party of any liability to the Indemnified Party under
this Section 5, except to the extent that the Indemnifying Party is prejudiced in its ability to
defend such action.

          (d) Contribution. If the indemnification under Sections 5(a) or 5(b) is unavailable
to an Indemnified Party, then each Indemnifying Party, in lieu of indemnifying such Indemnified
Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such
Losses, in such proportion as is appropriate to reflect the relative fault of the Indemnifying
Party and Indemnified Party in connection with the actions, statements or omissions that resulted
in such Losses as well as any other relevant equitable considerations. The relative fault of such
Indemnifying Party and Indemnified Party shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement of a material fact
or omission or alleged omission of a material fact, has been taken or made by, or relates to
information supplied by, such Indemnifying Party or Indemnified Party, and the parties’ relative
intent, knowledge, access to information and opportunity to correct or prevent such action,
statement or omission. The amount paid or payable by a party as a result of any Losses shall be
deemed to include, subject to the limitations set forth in this Agreement, any reasonable
attorneys’ or other reasonable fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for such fees or expenses if the
indemnification provided for in this Section was available to such party in accordance with its
terms.

          The parties hereto agree that it would not be just and equitable if contribution pursuant to
this Section 5(d) were determined by pro rata allocation or by any other method of allocation that
does not take into account the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 5(d), no Holder shall be required to
contribute, in the aggregate, any amount in excess of the amount by which the net proceeds actually
received by such Holder from the sale of the Registrable Securities subject to the Proceeding
exceeds the amount of any damages that such Holder has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be
entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.

          The indemnity and contribution agreements contained in this Section are in addition to any
liability that the Indemnifying Parties may have to the Indemnified Parties and are not in
diminution or limitation of the indemnification provisions under the Purchase Agreement.

     6. Miscellaneous.

          (a) Remedies. In the event of a breach by the Company or by a Holder of any of their
obligations under this Agreement, each Holder or the Company, as the case may be, in addition to
being entitled to exercise all rights granted by law and under this Agreement, including recovery
of damages, will be entitled to specific performance of its rights under this Agreement. The
Company and each Holder agree that monetary damages would not provide adequate compensation for any
losses incurred by reason of a breach by it of any of the provisions of this Agreement and hereby
further agrees

12

 

that, in the event of any action for specific performance in respect of such breach, it shall
waive the defense that a remedy at law would be adequate.

          (b) No Piggyback on Registrations. Neither the Company nor any of its security
holders (other than the Holders in such capacity pursuant hereto) may include securities of the
Company in a Registration Statement other than the Registrable Securities and the Company shall not
prior to the Effective Date enter into any agreement other than the Purchase Agreement and this
Agreement providing any such right to any of its security holders. The Company shall not, from the
date hereof until the date that is 60 days after the Effective Date of the Registration Statement,
prepare and file with the Commission a registration statement relating to an offering for its own
account under the Securities Act of any of its equity securities other than a registration
statement on Form S-8 or, in connection with an acquisition, on Form S-4.

          (c) Compliance. Each Holder covenants and agrees that it will comply with the
prospectus delivery requirements of the Securities Act as applicable to it in connection with sales
of Registrable Securities pursuant to a Registration Statement and shall sell the Registrable
Securities only in accordance with a method of distribution described in the Registration
Statement.

          (d) Suspension of Trading. At any time after the Registrable Securities are covered by
an effective Registration Statement, the Company may deliver to the Holders of such Registrable
Securities a certificate (the “Suspension Certificate”) approved by the Chief Executive Officer or
Chief Financial Officer of the Company and signed by an officer of the Company stating that the
effectiveness of and sales of Registrable Securities under the Registration Statement would:

               (i) materially interfere with any transaction that would require the Company to prepare
financial statements under the Securities Act that the Company would otherwise not be required to
prepare in order to comply with its obligations under the Exchange Act, or

               (ii) require public disclosure of a material transaction or event prior to the time such
disclosure might otherwise be required.

Upon receipt of a Suspension Certificate by Holders of Registrable Securities, such Holders of
Registrable Securities shall refrain from selling or otherwise transferring or disposing of any
Registrable Securities then held by such Holders for a specified period of time (a “Suspension
Period”) that is customary under the circumstances (not to exceed thirty (30) calendar days).
Notwithstanding the foregoing sentence, the Company shall be permitted to cause Holders of
Registrable Securities to so refrain from selling or otherwise transferring or disposing of any
Registrable Securities on only two (2) occasions during each twelve (12) consecutive month period
that the Registration Statement remains effective with no less than twenty (20) calendar days in
between Suspension Periods. The Company may impose stop transfer instructions to enforce any
required agreement of the Holders under this Section 6(d).

          (e) Discontinued Disposition. By its acquisition of Registrable Securities, each
Holder agrees that, upon receipt of a notice from the Company of the occurrence of any event of the
kind described in Section 3(c)(iii)-(vi), such Holder will forthwith discontinue disposition of
such Registrable Securities under a Registration Statement until it is advised in writing (the
"Advice”) by the Company that the use of the applicable Prospectus (as it may have been
supplemented or amended) may be resumed. The Company may provide appropriate stop orders to
enforce the provisions of this paragraph. The Company agrees and acknowledges that any periods
during which the Holder is required to discontinue the disposition of the Registrable Securities
hereunder shall be subject to the provisions of Section 2(c) as qualified by Section 3(a).

13

 

          (f) No Inconsistent Agreements. Other than as described in the SEC Reports (as
defined in the Purchase Agreement), neither the Company nor any of its Subsidiaries has entered, as
of the date hereof, nor shall the company or any of its Subsidiaries, on or after the date hereof,
enter into any agreement with respect to its securities, that would have the effect of impairing
the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions
hereof.

          (g) Amendments and Waivers. The provisions of this Agreement, including the
provisions of this sentence, may not be amended, modified, supplemented or waived unless the same
shall be in writing and signed by the Company and Holders holding a majority of the then
outstanding Registrable Securities. Notwithstanding the foregoing, a waiver or consent to depart
from the provisions hereof with respect to a matter that relates exclusively to the rights of
Holders and that does not directly or indirectly affect the rights of other Holders may be given by
Holders of all of the Registrable Securities to which such waiver or consent relates; provided,
however, that the provisions of this sentence may not be amended, modified, or supplemented except
in accordance with the provisions of the immediately preceding sentence.

          (h) Termination. The registration rights provided to the Holders of Registrable
Securities hereunder, and the Company’s obligation to keep the Registration Statements effective,
shall terminate at such time as there are no Registrable Securities outstanding. Notwithstanding
the foregoing, Section 2(c), Section 4, Section 5, Section 6(i), Section 6(l), Section 6(m),
Section 6(n), Section 6(o) and Section 6(p) shall survive the termination of this Agreement.

          (i) Notices. Any and all notices or other communications or deliveries required or
permitted to be provided hereunder shall be delivered as set forth in the Purchase Agreement.

          (j) Successors and Assigns. This Agreement shall inure to the benefit of and be
binding upon the successors and permitted assigns of each of the parties and shall inure to the
benefit of each Holder. Nothing in this Agreement, express or implied, is intended to confer upon
any party other than the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly
provided in this Agreement. The Company may not assign its rights or obligations hereunder without
the prior written consent of all the Holders of the then outstanding Registrable Securities (other
than by merger or consolidation or to an entity which acquires the Company including by way of
acquiring all or substantially all of the Company’s assets). The rights of the Holders hereunder,
including the right to have the Company register Registrable Securities pursuant to this Agreement,
may be assigned by each Holder to transferees or assignees of all or any portion of the Registrable
Securities, but only if (i) the Holder agrees in writing with the transferee or assignee to assign
such rights and related obligations under this Agreement, and for the transferee or assignee to
assume such obligations, 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 the name and address of such transferee or
assignee and the securities with respect to which such registration rights are being transferred or
assigned, (iii) at or before the time the Company received 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 and (iv) the transferee is an “accredited
investor,” as that term is defined in Rule 501 of Regulation D.

          (k) Execution and Counterparts. This Agreement may be executed in two or more
counterparts, each of which when so executed shall be deemed to be an original and, all of which
taken together shall constitute one and the same Agreement and shall become effective when
counterparts have been signed by each party and delivered to the other party, it being understood
that both parties need not sign the same counterpart. In the event that any signature is delivered
by facsimile transmission or by e-

14

 

mail delivery of a “.pdf” format data file, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is executed) with the same
force and effect as if such facsimile or “.pdf” signature were the original thereof.

          (l) Governing Law. All questions concerning the construction, validity, enforcement
and interpretation of this Agreement shall be determined in accordance with the provisions of the
Purchase Agreement.

          (m) Cumulative Remedies. The remedies provided herein are cumulative and not
exclusive of any other remedies provided by law.

          (n) Severability. If any term, provision, covenant or restriction of this Agreement is
held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in
full force and effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their good faith reasonable efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the intention of the parties
that they would have executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or unenforceable.

          (o) Headings. The headings in this Agreement are for convenience only and shall not
limit or otherwise affect the meaning hereof.

          (p) Independent Nature of Purchasers’ Obligations and Rights. The obligations of each
Purchaser under this Agreement are several and not joint with the obligations of any other
Purchaser hereunder, and no Purchaser shall be responsible in any way for the performance of the
obligations of any other Purchaser hereunder. The decision of each Purchaser to purchase the
Shares and the Warrants pursuant to the Transaction Documents has been made independently of any
other Purchaser. Nothing contained herein or in any other agreement or document delivered at any
closing, and no action taken by any Purchaser pursuant hereto or thereto, shall be deemed to
constitute the Purchasers as a partnership, an association, a joint venture or any other kind of
entity, or create a presumption that the Purchasers are in any way acting in concert with respect
to such obligations or the transactions contemplated by this Agreement. Each Purchaser
acknowledges that no other Purchaser has acted as agent for such Purchaser in connection with
making its investment hereunder and that no Purchaser will be acting as agent of such Purchaser in
connection with monitoring its investment in the Shares and Warrants or enforcing its rights under
the Transaction Documents. Each Purchaser shall be entitled to protect and enforce its rights,
including, without limitation, the rights arising out of this Agreement, and it shall not be
necessary for any other Purchaser to be joined as an additional party in any Proceeding for such
purpose. The Company acknowledges that each of the Purchasers has been provided with the same
Registration Rights Agreement for the purpose of closing a transaction with multiple Purchasers and
not because it was required or requested to do so by any Purchaser.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK-

SIGNATURE PAGES TO FOLLOW]

15

 

     IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the
date first written above.

	 	 	 	 	 
	 	ARDEA BIOSCIENCES, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	Barry D. Quart, Pharm. D. 	 
	 	 	Title:  	President and Chief Executive Officer 	 
	 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK-

SIGNATURE PAGES OF HOLDERS TO FOLLOW]

 

 

     IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the
date first written above.

	 	 	 	 	 	 	 
	 	 	NAME OF INVESTING ENTITY	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	AUTHORIZED SIGNATORY	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name:

Title:
	 	 
	 
	 	 	 	 	 	 
	 	 	ADDRESS FOR NOTICE	 	 

	 	 	 	 	 	 	 
	 

	 	c/o:	 	 	 	 
	 

	 	 	 	 

	 	 

	 	 	 	 	 	 	 
	 

	 	Street:	 	 	 	 
	 

	 	 	 	 

	 	 

	 	 	 	 	 	 	 
	 

	 	City/State/Zip:	 	 	 	 
	 

	 	 	 	 

	 	 

	 	 	 	 	 	 	 
	 

	 	Attention:	 	 	 	 
	 

	 	 	 	 

	 	 

	 	 	 	 	 	 	 
	 

	 	Tel:	 	 	 	 
	 

	 	 	 	 

	 	 

	 	 	 	 	 	 	 
	 

	 	Fax:	 	 	 	 
	 

	 	 	 	 

	 	 

	 	 	 	 	 	 	 
	 

	 	Email:	 	 	 	 
	 

	 	 	 	 

	 	 

 

 

Annex A

PLAN OF DISTRIBUTION

     We are registering the shares of Common Stock issued to the selling stockholders to permit the
resale of these shares of Common Stock by the holders of the shares of Common Stock from time to
time after the date of this prospectus. We will not receive any of the proceeds from the sale by
the selling stockholders of the shares of Common Stock. We will bear all fees and expenses
incident to our obligation to register the shares of Common Stock.

     The selling stockholders may sell all or a portion of the shares of Common Stock beneficially
owned by them and offered hereby from time to time directly or through one or more underwriters,
broker-dealers or agents. If the shares of Common Stock are sold through underwriters or
broker-dealers, the selling stockholders will be responsible for underwriting discounts or
commissions or agent’s commissions. The shares of Common Stock may be sold on any national
securities exchange or quotation service on which the securities may be listed or quoted at the
time of sale, in the over-the-counter market or in transactions otherwise than on these exchanges
or systems or in the over-the-counter market and in one or more transactions at fixed prices, at
prevailing market prices at the time of the sale, at varying prices determined at the time of sale,
or at negotiated prices. These sales may be effected in transactions, which may involve crosses or
block transactions. The selling stockholders may use any one or more of the following methods when
selling shares:

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

     The selling stockholders also may resell all or a portion of the shares in open market
transactions in reliance upon Rule 144 under the Securities Act, as permitted by that rule, or
Section 4(1) under the Securities Act, if available, rather than under this prospectus, provided
that they meet the criteria and conform to the requirements of those provisions.

 

 

     Broker-dealers engaged by the selling stockholders may arrange for other broker-dealers to
participate in sales. If the selling stockholders effect such transactions by selling shares of
Common Stock to or through underwriters, broker-dealers or agents, such underwriters,
broker-dealers or agents may receive commissions in the form of discounts, concessions or
commissions from the selling stockholders or commissions from purchasers of the shares of Common
Stock for whom they may act as agent or to whom they may sell as principal. Such commissions will
be in amounts to be negotiated, but, except as set forth in a supplement to this Prospectus, in the
case of an agency transaction will not be in excess of a customary brokerage commission in
compliance with NASD Rule 2440; and in the case of a principal transaction a markup or markdown in
compliance with NASD IM-2440.

     In connection with sales of the shares of Common Stock or otherwise, the selling stockholders
may enter into hedging transactions with broker-dealers or other financial institutions, which may
in turn engage in short sales of the shares of Common Stock in the course of hedging in positions
they assume. The selling stockholders may also sell shares of Common Stock short and if such short
sale shall take place after the date that this Registration Statement is declared effective by the
Commission, the selling stockholders may deliver shares of Common Stock covered by this prospectus
to close out short positions and to return borrowed shares in connection with such short sales.
The selling stockholders may also loan or pledge shares of Common Stock to broker-dealers that in
turn may sell such shares, to the extent permitted by applicable law. The selling stockholders may
also enter into option or other transactions with broker-dealers or other financial institutions or
the creation of one or more derivative securities which require the delivery to such broker-dealer
or other financial institution of shares offered by this prospectus, which shares such
broker-dealer or other financial institution may resell pursuant to this prospectus (as
supplemented or amended to reflect such transaction). Notwithstanding the foregoing, the selling
stockholders have been advised that they may not use shares registered on this registration
statement to cover short sales of our common stock made prior to the date the registration
statement, of which this prospectus forms a part, has been declared effective by the SEC.

     The selling stockholders may, from time to time, pledge or grant a security interest in some
or all of the shares of Common Stock owned by them and, if they default in the performance of their
secured obligations, the pledgees or secured parties may offer and sell the shares of Common Stock
from time to time pursuant to this prospectus or any amendment to this prospectus under Rule
424(b)(3) or other applicable provision of the Securities Act of 1933, as amended, amending, if
necessary, the list of selling stockholders to include the pledgee, transferee or other successors
in interest as selling stockholders under this prospectus. The selling stockholders also may
transfer and donate the shares of Common Stock in other circumstances in which case the
transferees, donees, pledgees or other successors in interest will be the selling beneficial owners
for purposes of this prospectus.

     The selling stockholders and any broker-dealer or agents participating in the distribution of
the shares of Common Stock may be deemed to be “underwriters” within the meaning of Section 2(11)
of the Securities Act in connection with such sales. In such event, any commissions paid, or any
discounts or concessions allowed to, any such broker-dealer or agent and any profit on the resale
of the shares purchased by them may be deemed to be underwriting commissions or discounts under the
Securities Act. Selling Stockholders who are “underwriters” within the meaning of Section 2(11) of
the Securities Act will be subject to the applicable prospectus delivery requirements of the
Securities Act including Rule 172 thereunder and may be subject to certain statutory liabilities
of, including but not limited to, Sections 11, 12 and 17 of the Securities Act and Rule 10b-5 under
the Securities Exchange Act of 1934, as amended, or the Exchange Act.

     Each selling stockholder has informed the Company that it is not a registered broker-dealer
and does not have any written or oral agreement or understanding, directly or indirectly, with any
person to distribute the Common Stock. Upon the Company being notified in writing by a selling
stockholder that any material

 

 

arrangement has been entered into with a broker-dealer for the sale of common stock through a
block trade, special offering, exchange distribution or secondary distribution or a purchase by a
broker or dealer, a supplement to this prospectus will be filed, if required, pursuant to Rule
424(b) under the Securities Act, disclosing (i) the name of each such selling stockholder and of
the participating broker-dealer(s), (ii) the number of shares involved, (iii) the price at which
such the shares of Common Stock were sold, (iv) the commissions paid or discounts or concessions
allowed to such broker-dealer(s), where applicable, (v) that such broker-dealer(s) did not conduct
any investigation to verify the information set out or incorporated by reference in this
prospectus, and (vi) other facts material to the transaction. In no event shall any broker-dealer
receive fees, commissions and markups, which, in the aggregate, would exceed eight percent (8%).

     Under the securities laws of some states, the shares of Common Stock may be sold in such
states only through registered or licensed brokers or dealers. In addition, in some states the
shares of Common Stock may not be sold unless such shares have been registered or qualified for
sale in such state or an exemption from registration or qualification is available and is complied
with.

     There can be no assurance that any selling stockholder will sell any or all of the shares of
Common Stock registered pursuant to the shelf registration statement, of which this prospectus
forms a part.

     Each selling stockholder and any other person participating in such distribution will be
subject to applicable provisions of the Securities Exchange Act of 1934, as amended, and the rules
and regulations thereunder, including, without limitation, Regulation M of the Exchange Act, which
may limit the timing of purchases and sales of any of the shares of Common Stock by the selling
stockholder and any other participating person. Regulation M may also restrict the ability of any
person engaged in the distribution of the shares of Common Stock to engage in market-making
activities with respect to the shares of Common Stock. All of the foregoing may affect the
marketability of the shares of Common Stock and the ability of any person or entity to engage in
market-making activities with respect to the shares of Common Stock.

     We will pay all expenses of the registration of the shares of Common Stock pursuant to the
registration rights agreement, including, without limitation, Securities and Exchange Commission
filing fees and expenses of compliance with state securities or “blue sky” laws; provided, however,
that each selling stockholder will pay all underwriting discounts and selling commissions, if any
and any related legal expenses incurred by it. We will indemnify the selling stockholders against
certain liabilities, including some liabilities under the Securities Act, in accordance with the
registration rights agreements, or the selling stockholders will be entitled to contribution. We
may be indemnified by the selling stockholders against civil liabilities, including liabilities
under the Securities Act, that may arise from any written information furnished to us by the
selling stockholders specifically for use in this prospectus, in accordance with the related
registration rights agreements, or we may be entitled to contribution.

 

 

Annex B

Ardea Biosciences, Inc.

SELLING STOCKHOLDER NOTICE AND QUESTIONNAIRE

     The undersigned holder of shares of the common stock, par value $0.001 per share of Ardea
Biosciences, Inc. (the “Company”) issued pursuant to a certain Securities Purchase Agreement by and
among the Company and the Purchasers named therein, dated as of December 17, 2008 (the
“Agreement”), understands that the Company intends to file with the Securities and Exchange
Commission a registration statement on Form S-3 (except if the Company is ineligible to register
for resale the Registrable Securities on Form S-3, in which case such registration shall be on
another appropriate form, the “Resale Registration Statement”) for the registration and the resale
under Rule 415 of the Securities Act of 1933, as amended (the “Securities Act”), of the Registrable
Securities in accordance with the terms of the Agreement. All capitalized terms not otherwise
defined herein shall have the meanings ascribed thereto in the Agreement.

     In order to sell or otherwise dispose of any Registrable Securities pursuant to the Resale
Registration Statement, a holder of Registrable Securities generally will be required to be named
as a selling stockholder in the related prospectus or a supplement thereto (as so supplemented, the
“Prospectus”), deliver the Prospectus to purchasers of Registrable Securities (which delivery may
be deemed to have been made as set forth in Rule 172 under the Securities Act) and be bound by the
provisions of the Agreement (including certain indemnification provisions, as described below).
Holders must complete and deliver this Notice and Questionnaire in order to be named as selling
stockholders in the Prospectus. Holders of Registrable Securities who do not complete, execute and
return this Notice and Questionnaire within five (5) Trading Days following the date of the
Agreement (1) will not be named as selling stockholders in the Resale Registration Statement or the
Prospectus and (2) may not use the Prospectus for resales of Registrable Securities.

     Certain legal consequences arise from being named as a selling stockholder in the Resale
Registration Statement and the Prospectus. Holders of Registrable Securities are advised to
consult their own securities law counsel regarding the consequences of being named or not named as
a selling stockholder in the Resale Registration Statement and the Prospectus.

NOTICE

     The undersigned holder (the “Selling Stockholder”) of Registrable Securities hereby gives
notice to the Company of its intention to sell or otherwise dispose of Registrable Securities owned
by it and listed below in Item (3), unless otherwise specified in Item (3), pursuant to the Resale
Registration Statement. The undersigned, by signing and returning this Notice and Questionnaire,
understands and agrees that it will be bound by the terms and conditions of this Notice and
Questionnaire and the Agreement.

     The undersigned hereby provides the following information to the Company and represents and
warrants that such information is accurate and complete:

QUESTIONNAIRE

	1.	 	Name.

	 	(a)	 	Full Legal Name of Selling Stockholder:
	 
	 	 	 	 

 

 

	 	 	 	 

	 	(b)	 	Full Legal Name of Registered Holder (if not the same as (a) above) through
which Registrable Securities Listed in Item 3 below are held:
	 
	 	 	 	 

	 
	 	(c)	 	Full Legal Name of Natural Control Person (which means a natural person who
directly or indirectly alone or with others has power to vote or dispose of the
securities covered by the questionnaire):
	 
	 
	 	 	 	 

2. Address for Notices to Selling Stockholder:

	 	 	 
	 
	 
	 	 
	 
	 
	 	 
	 
	Telephone:
	 	 
	 

	 	 
	Fax:
	 	 
	 

	 	 
	Contact Person:
	 	 
	 

	 	 

	 	 	 
	E-mail address of Contact Person:
	 	 
	 

	 	 

3. Beneficial Ownership of Registrable Securities Issuable Pursuant to the Agreement:

	 	(a)	 	Type and Number of Registrable Securities beneficially owned and issued
pursuant to the Agreement:
	 
	 	 	 	 

	 
	 	 	 	 

	 
	 	 	 	 

	 
	 	(b)	 	Number of shares of Common Stock to be registered pursuant to this Notice for
resale:
	 
	 	 	 	 

	 
	 	 	 	 

	 
	 	 	 	 

4. Broker-Dealer Status:

	 	(a)	 	Are you a broker-dealer?

Yes o      No o

	 	(b)	 	If “yes” to Section 4(a), did you receive your Registrable Securities as compensation
for investment banking services to the Company?

Yes o      No o

 

 

	 	 	 
	Note:

	 	If no, the Commission’s staff has indicated that you should be
identified as an underwriter in the Registration Statement.

	 	(c)	 	Are you an affiliate of a broker-dealer?

Yes o      No o

	 	Note: If yes, provide a narrative explanation below:
	 
	 	 	 	 

	 
	 	 	 	 

	 
	 	(c)	 	If you are an affiliate of a broker-dealer, do you certify that you bought the
Registrable Securities in the ordinary course of business, and at the time of the
purchase of the Registrable Securities to be resold, you had no agreements or
understandings, directly or indirectly, with any person to distribute the Registrable
Securities?

Yes o      No o

	 	Note: If no, the Commission’s staff has indicated that you should be
identified as an underwriter in the Registration Statement.

5. Beneficial Ownership of Other Securities of the Company Owned by the Selling Stockholder.

	 	 	 	Except as set forth below in this Item 5, the undersigned is not the beneficial or
registered owner of any securities of the Company other than the Registrable Securities
listed above in Item 3.
	 
	 	 	 	Type and amount of other securities beneficially owned:
	 
	 	 	 	 

	 
	 	 	 	 

6. Relationships with the Company:

	 	 	 	Except as set forth below, neither the undersigned nor any of its affiliates, officers,
directors or principal equity holders (owners of 5% of more of the equity securities of the
undersigned) has held any position or office or has had any other material relationship with
the Company (or its predecessors or affiliates) during the past three years.
	 
	 	 	 	State any exceptions here:
	 
	 	 	 	 

	 
	 	 	 	 

 

 

7. Plan of Distribution:

	 	 	 	The undersigned has reviewed the form of Plan of Distribution attached as Annex A to the
Registration Rights Agreement, and hereby confirms that, except as set forth below, the
information contained therein regarding the undersigned and its plan of distribution is
correct and complete.
	 
	 	 	 	State any exceptions here:
	 
	 	 	 	 

	 
	 	 	 	 

***********

The undersigned agrees to promptly notify the Company of any inaccuracies or changes in the
information provided herein that may occur subsequent to the date hereof and prior to the effective
date of any applicable Resale Registration Statement. All notices hereunder and pursuant to the
Agreement shall be made in writing, by hand delivery, confirmed or facsimile transmission,
first-class mail or air courier guaranteeing overnight delivery at the address set forth below. In
the absence of any such notification, the Company shall be entitled to continue to rely on the
accuracy of the information in this Notice and Questionnaire.

By signing below, the undersigned consents to the disclosure of the information contained herein in
its answers to Items (1) through (7) above and the inclusion of such information in the Resale
Registration Statement and the Prospectus. The undersigned understands that such information will
be relied upon by the Company in connection with the preparation or amendment of any such
Registration Statement and the Prospectus.

By signing below, the undersigned acknowledges that it understands its obligation to comply, and
agrees that it will comply, with the provisions of the Exchange Act and the rules and regulations
thereunder, particularly Regulation M in connection with any offering of Registrable Securities
pursuant to the Resale Registration Statement. The undersigned also acknowledges that it
understands that the answers to this Questionnaire are furnished for use in connection with
Registration Statements filed pursuant to the Registration Rights Agreement and any amendments or
supplements thereto filed with the Commission pursuant to the Securities Act.

The undersigned hereby acknowledges and is advised of the following Interpretation A.65 of the July
1997 SEC Manual of Publicly Available Telephone Interpretations regarding short selling:

“An Issuer filed a Form S-3 registration statement for a secondary offering of common stock which
is not yet effective. One of the selling stockholders wanted to do a short sale of common stock
“against the box” and cover the short sale with registered shares after the effective date. The
issuer was advised that the short sale could not be made before the registration statement become
effective, because the shares underlying the short sale are deemed to be sold at the time such sale
is made. There would, therefore, be a violation of Section 5 if the shares were effectively sold
prior to the effective date.”

By returning this Questionnaire, the undersigned will be deemed to be aware of the foregoing
interpretation.

I confirm that, to the best of my knowledge and belief, the foregoing statements (including without
limitation the answers to this Questionnaire) are correct.

 

 

IN WITNESS WHEREOF the undersigned, by authority duly given, has caused this Questionnaire to be
executed and delivered either in person or by its duly authorized agent.

	 	 	 	 	 	 	 	 	 	 	 
	Dated:	 	 	 	Beneficial Owner: 	 	 	 
	 

	 	 

	 	 	 	 	 	 

	 	 
	 

	 	 	 	By:	 	 	 	 	 	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	Name:	 	 	 	 
	 

	 	 	 	 	Title:	 	 	 	 

PLEASE FAX A COPY OF THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE, AND RETURN THE ORIGINAL
BY OVERNIGHT MAIL, TO:

Ethan E. Christensen

Cooley Godward Kronish LLP

4401 Eastgate Mall

San Diego, California 92121

Tel: (858) 550-6076

Fax: (858) 550-6420

Email: echristensen@cooley.com

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