Document:

exv10w2

EXHIBIT 10.2

FORM OF REGISTRATION RIGHTS AGREEMENT

     This REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as of June 21, 2010, is by and
among Aradigm Corporation, a California corporation with offices located at 3929 Point Eden Way,
Hayward, CA 94545 (the “Company”), and each of the undersigned buyers (each, a “Buyer,” and
collectively, the “Buyers”).

RECITALS

     A. In connection with the Securities Purchase Agreement by and among the parties hereto, dated
as of June 18, 2010 (the “Securities Purchase Agreement”), the Company has agreed, upon the terms
and subject to the conditions of the Securities Purchase Agreement, to issue and sell to each Buyer
(i) the Common Shares (as defined in the Securities Purchase Agreement) and (ii) the Warrants (as
defined in the Securities Purchase Agreement) which will be exercisable to purchase Warrant Shares
(as defined in the Securities Purchase Agreement) in accordance with the terms of the Warrants.

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

AGREEMENT

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

	1.	 	Definitions.

     Capitalized terms used herein and not otherwise defined herein shall have the respective
meanings set forth in the Securities Purchase Agreement. As used in this Agreement, the following
terms shall have the following meanings:

     (a) “Business Day” means any day other than Saturday, Sunday or any other day on which
commercial banks in New York, New York are authorized or required by law to remain closed.

     (b) “Closing Date” shall have the meaning set forth in the Securities Purchase Agreement.

     (c) “Effective Date” means the date that the applicable Registration Statement has been
declared effective by the SEC.

     (d) “Effectiveness Deadline” means (i) with respect to the initial Registration Statement
required to be filed pursuant to Section 2(a), the earlier of the (A) 60th calendar day
after the Closing Date (or the 120th calendar day after the Closing Date in the event
that such Registration Statement is subject to a full review by the SEC) and (B) 2nd
Business Day after the

 

 

date the Company is notified (orally or in writing, whichever is earlier) by
the SEC that such Registration Statement will not be reviewed or will not be subject to further
review and (ii) with respect to any additional Registration Statements that may be required to be
filed by the Company pursuant to this Agreement, the earlier of the (A) 60th calendar
day following the date on which the Company was required to file such additional Registration
Statement (or the 120th calendar day after such date in the event that such Registration
Statement is subject to full review by the SEC) and (B) 2nd Business Day after the date
the Company is notified (orally or in writing, whichever is earlier) by the SEC that such
additional Registration Statement will not be reviewed or will not be subject to further review.

     (e) “Filing Deadline” means (i) with respect to the initial Registration Statement required to
be filed pursuant to Section 2(a), the 30th calendar day after the Closing Date and (ii)
with respect to any additional Registration Statements that may be required to be filed by the
Company pursuant to this Agreement, the date on which the Company was required to file such
additional Registration Statement pursuant to the terms of this Agreement.

     (f) “Investor” means a Buyer or any transferee or assignee of any Registrable Securities or
Warrants, as applicable, to whom a Buyer assigns its rights in accordance with this Agreement and
who agrees to become bound by the provisions of this Agreement in accordance with Section 9 and any
transferee or assignee thereof to whom a transferee or assignee of any Registrable Securities or
Warrants, as applicable, assigns its rights under this Agreement and who agrees to become bound by
the provisions of this Agreement in accordance with Section 9.

     (g) “Person” means an individual, a limited liability company, a partnership, a joint venture,
a corporation, a trust, an unincorporated organization or a government or any department or agency
thereof.

     (h) “register,” “registered,” and “registration” refer to a registration effected by preparing
and filing one or more Registration Statements in compliance with the 1933 Act and pursuant to Rule
415 and the declaration of effectiveness of such Registration Statement(s) by the SEC.

     (i) “Registrable Securities” means (i) the Common Shares, (ii) the Warrant Shares, and (iii)
any capital stock of the Company issued or issuable with respect to the Common Shares or the
Warrant Shares, including, without limitation, (1) as a result of any stock split, stock dividend,
recapitalization, exchange or similar event or otherwise and (2) shares of capital stock of the
Company into which the shares of Common Stock are converted or exchanged and shares of capital
stock of a Successor Entity (as defined in the Warrants) into which the shares of Common Stock are
converted or exchanged, in each case, without regard to any limitations on exercise of the
Warrants.

     (j) “Registration Statement” means a registration statement or registration statements of the
Company filed under the 1933 Act covering Registrable Securities.

     (k) “Required Holders” means the holders of at least 81% of the Registrable Securities
(excluding any Registrable Securities held by the Company or any of its Subsidiaries).
Notwithstanding anything to the contrary contained in this Agreement, in the event that the

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Company
shall deliver written or e-mail notice to a holder of Registrable Securities who is a natural
person requesting such holder’s consent, approval or agreement with respect to any matter requiring
the consent, approval or agreement of the Required Holders under the terms of this Agreement, such
holder shall be deemed to have consented, approved and agreed with respect to such matter if such
holder does not provide written or e-mail notice to the Company indicating such Holder’s
non-consent within five (5) Business Days of delivery by the Company of such written or e-mail
notice.

     (l) “Required Registration Amount” means the sum of (i) the number of Common Shares issued
pursuant to the Securities Purchase Agreement and (ii) the number of Warrant Shares issued and
issuable pursuant to the Warrants as of the Trading Day (as defined in the Warrants) immediately
preceding the applicable date of determination (without taking into account any limitations on the
exercise of the Warrants set forth therein), all subject to adjustment as provided in Section 2(d).

     (m) “Rule 144” means Rule 144 promulgated by the SEC under the 1933 Act, as such rule may be
amended from time to time, or any other similar or successor rule or regulation of the SEC that may
at any time permit the Investors to sell securities of the Company to the public without
registration.

     (n) “Rule 415” means Rule 415 promulgated by the SEC under the 1933 Act, as such rule may be
amended from time to time, or any other similar or successor rule or regulation of the SEC
providing for offering securities on a continuous or delayed basis.

     (o) “SEC” means the United States Securities and Exchange Commission or any successor thereto.

	2.	 	Registration.

     (a) Mandatory Registration. The Company shall prepare and, as soon as practicable,
but in no event later than the Filing Deadline, file with the SEC an initial Registration Statement
on Form S-1 covering the resale of the Required Registration Amount of Registrable Securities. Such
initial Registration Statement, and each other Registration Statement required to be filed pursuant
to the terms of this Agreement, shall contain (except if otherwise directed by the Required
Holders) the “Selling Shareholders” and “Plan of Distribution” sections in
substantially the form attached hereto as Exhibit B. The Company shall use its reasonable
best efforts to have such initial Registration Statement, and each other Registration Statement
required to be filed pursuant to the terms of this Agreement, declared effective by the SEC as soon
as practicable, but in no event later than the applicable Effectiveness Deadline for such
Registration Statement.

     (b) Legal Counsel. Subject to Section 5 hereof, First Eagle Investment Management, LLC
(the “Lead Investor”) shall have the right to select one (1) legal counsel to review and oversee,
solely on its behalf, any registration pursuant to this Section 2 (“Legal Counsel”).

     (c) Use Form S-3. The Company shall undertake to register the resale of the
Registrable Securities on Form S-3 as soon as such form is available, provided that the
Company shall maintain the effectiveness of all Registration Statements then in effect until such
time as a Registration Statement on Form S-3 covering the resale of all the Registrable Securities
has been declared effective by the SEC.

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     (d) Sufficient Number of Shares Registered. In the event the number of shares
available under any Registration Statement is insufficient to cover all of the Registrable
Securities required to be covered by such Registration Statement or an Investor’s allocated portion
of the Registrable Securities pursuant to Section 2(h), the Company shall amend such Registration
Statement (if permissible), or file with the SEC a new Registration Statement (on the short form
available therefor, if applicable), or both, so as to cover at least the Required Registration
Amount as of the Trading Day immediately preceding the date of the filing of such amendment or new
Registration Statement, in each case, as soon as practicable, but in any event not later than
fifteen (15) days after the Company, acting in good faith, first becomes aware of the necessity
therefor (but taking account of any Staff position with respect to the date on which the Staff will
permit such amendment to the Registration Statement and/or such new Registration Statement (as the
case may be) to be filed with the SEC). The Company shall use its reasonable best efforts to cause
such amendment to such Registration Statement and/or such new Registration Statement (as the case
may be) to become effective as soon as practicable following the filing thereof with the SEC, but
in no event later than the applicable Effectiveness Deadline for such Registration Statement. For
purposes of the foregoing provision, the number of shares available under a Registration Statement
shall be deemed “insufficient to cover all of the Registrable Securities” if at any time the number
of shares of Common Stock available for resale under the applicable Registration Statement is less
than the product determined by multiplying (i) the Required Registration Amount as of such time by
(ii) 0.90. The calculation set forth in the foregoing sentence shall be made without regard to any
limitations on exercise of the Warrants (and such calculation shall assume that the Warrants are
then fully exercisable for shares of Common Stock at the then-prevailing applicable Exercise
Price).

     (e) Effect of Failure to File and Obtain and Maintain Effectiveness of any Registration
Statement. If (i) a Registration Statement covering the resale of all of the Registrable
Securities required to be covered thereby and required to be filed by the Company pursuant to this
Agreement is (A) not filed with the SEC on or before the Filing Deadline for such Registration
Statement (a “Filing Failure”) (it being understood that if the Company files a Registration
Statement without affording each Investor the opportunity to review and comment on the same as
required by Section 3(c) hereof, the Company shall be deemed to not have satisfied this clause
(i)(A) and such event shall be deemed to be a Filing Failure) or (B) not declared effective by the
SEC on or before the Effectiveness Deadline for such Registration Statement (an “Effectiveness
Failure”) (it being understood that if on the Business Day immediately following the Effective Date
for such Registration Statement the Company shall not have filed a “final” prospectus for such
Registration Statement with the SEC under Rule 424(b) in accordance with Section 3(b) (whether or
not such a prospectus is technically required by such rule), the Company shall be deemed to not
have satisfied this clause (i)(B) and such event shall be deemed to be an Effectiveness Failure),
(ii) other than during an Allowable Grace Period (as defined below), on any day after the Effective
Date of a Registration Statement sales of all of the Registrable Securities required to be included
on such Registration Statement cannot be made pursuant to such Registration Statement (including,
without limitation, because of a failure to
keep such Registration Statement effective, a failure to disclose such information as is
necessary for sales to be made pursuant to such Registration Statement, a suspension or delisting
of (or a failure to timely list) the shares of Common Stock on the Principal Market (as defined in
the

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Securities Purchase Agreement), or a failure to register a sufficient number of shares of
Common Stock or by reason of a stop order) or the prospectus contained therein is not available for
use for any reason (a “Maintenance Failure”), or (iii) if a Registration Statement is not effective
for any reason or the prospectus contained therein is not available for use for any reason, the
Company fails to file with the SEC any required reports under Section 13 or 15(d) of the 1934 Act
such that it is not in compliance with Rule 144(c)(1) (or Rule 144(i)(2), if applicable) (a
“Current Public Information Failure”) as a result of which any of the Investors are unable to sell
Registrable Securities without restriction under Rule 144 (including, without limitation, volume
restrictions), then, as partial relief for the damages to any holder by reason of any such delay
in, or reduction of, its ability to sell the underlying shares of Common Stock (which remedy shall
not be exclusive of any other remedies available at law or in equity), the Company shall pay to
each holder of Registrable Securities relating to such Registration Statement an amount in cash
equal to one and one-half percent (1.5%) of the aggregate Purchase Price (as such term is defined
in the Securities Purchase Agreement) of such Investor on each of the following dates: (1) on the
date of such Filing Failure, Effectiveness Failure, Maintenance Failure or Current Public
Information Failure, as applicable, and (2) on every thirty (30) day anniversary of (I) a Filing
Failure until such Filing Failure is cured; (II) an Effectiveness Failure until such Effectiveness
Failure is cured; (III) a Maintenance Failure until such Maintenance Failure is cured; and (IV) a
Current Public Information Failure until the earlier of (i) the date such Current Public
Information Failure is cured and (ii) such time that such public information is no longer required
pursuant to Rule 144 (in each case, pro rated for periods totaling less than thirty (30) days);
provided, however, that the Company shall not be liable for any Registration Delay
Payments (as defined below) under this Agreement as to any Registrable Securities which are not
permitted by the Staff or the SEC to be included in a Registration Statement due solely to the
Staff or the SEC seeking to characterize any offering pursuant to a Registration Statement filed
pursuant to this Agreement as constituting an offering of securities by, or on behalf of, the
Company from the time that it is determined that such Registrable Securities are not permitted to
be registered until such time as the registration statements contemplated by the last sentence of
Section 2(f) are required to be filed hereunder, in which case the
provisions of this Section 2 shall once again apply, subject to this proviso, with respect to such Registrable
Securities; and provided, further that the maximum amount of all Registration Delay
Payments (as defined below) payable to an Investor under this Agreement shall be ten percent (10%)
of the aggregate Purchase Price (as such term is defined in the Securities Purchase Agreement) paid
by such Investor pursuant to the Securities Purchase Agreement. The payments to which a holder of
Registrable Securities shall be entitled pursuant to this Section 2(e) are referred to herein as
“Registration Delay Payments.” Following the initial Registration Delay Payment for any particular
event or failure (which shall be paid on the date of such event or failure, as set forth above),
without limiting the foregoing, if an event or failure giving rise to the Registration Delay
Payments is cured prior to any thirty (30) day anniversary of such event or failure, then such
Registration Delay Payment shall be
 made on the third (3rd) Business Day after such
cure. In the event the Company fails to make Registration Delay Payments in a timely manner in
accordance with the foregoing, such Registration Delay Payments shall bear interest at the rate of
one percent (1%) per month (prorated for partial months) until paid in full. Notwithstanding the
foregoing, no Registration Delay Payments shall be owed to an Investor (other than with
respect to a Maintenance Failure resulting from a suspension or delisting of (or a failure to
timely list) the shares of Common Stock on the Principal Market) with respect to any period during
which

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all of such Investor’s Registrable Securities may be sold by such Investor without
restriction under Rule 144 (including, without limitation, volume restrictions) and without the
need for current public information required by Rule 144(c)(1) (or Rule 144(i)(2), if applicable).

     (f) Offering. Notwithstanding anything to the contrary contained in this Agreement,
but subject to the payment of the Registration Delay Payments pursuant to Section 2(e), in the
event the staff of the SEC (the “Staff”) or the SEC seeks to characterize any offering pursuant to
a Registration Statement filed pursuant to this Agreement as constituting an offering of securities
by, or on behalf of, the Company, or in any other manner, such that the Staff or the SEC do not
permit such Registration Statement to become effective and used for resales in a manner that does
not constitute such an offering and that permits the continuous resale at the market by the
Investors participating therein (or as otherwise may be acceptable to each Investor) without being
named therein as an “underwriter,” then the Company shall reduce the number of shares to be
included in such Registration Statement by all Investors until such time as the Staff and the SEC
shall so permit such Registration Statement to become effective as aforesaid. In making such
reduction, the Company shall reduce the number of shares to be included by all Investors on a pro
rata basis (based upon the number of Registrable Securities otherwise required to be included for
each Investor) unless the inclusion of shares by a particular Investor or a particular set of
Investors are resulting in the Staff or the SEC’s “by or on behalf of the Company” offering
position, in which event the shares held by such Investor or set of Investors shall be the only
shares subject to reduction (and if by a set of Investors on a pro rata basis by such Investors or
on such other basis as would result in the exclusion of the least number of shares by all such
Investors). In addition, in the event that the Staff or the SEC requires any Investor seeking to
sell securities under a Registration Statement filed pursuant to this Agreement to be specifically
identified as an “underwriter” in order to permit such Registration Statement to become effective,
and such Investor does not consent to being so named as an underwriter in such Registration
Statement, then, in each such case, the Company shall reduce the total number of Registrable
Securities to be registered on behalf of such Investor, until such time as the Staff or the SEC
does not require such identification or until such Investor accepts such identification and the
manner thereof. Any reduction pursuant to this paragraph will first reduce all Registrable
Securities other than those issued pursuant to the Securities Purchase Agreement. In the event of
any reduction in Registrable Securities pursuant to this paragraph, an affected Investor shall have
the right to require, upon delivery of a written request to the Company signed by such Investor,
the Company to file a registration statement within thirty (30) days of such request (subject to
any restrictions imposed by Rule 415 or required by the Staff or the SEC) for resale by such
Investor in a manner acceptable to such Investor, and the Company shall following such request use
its reasonable best efforts to cause to be declared effective and to keep effective such
registration statement in the same manner as otherwise contemplated in this Agreement for
registration statements hereunder, in each case until such time as: (i) all Registrable Securities
held by such Investor have been registered and sold pursuant to an effective Registration Statement
in a manner acceptable to such Investor or (ii) all Registrable Securities may be resold by such
Investor without restriction (including, without limitation, volume limitations) pursuant to Rule
144 (taking account of any Staff position with respect to “affiliate” status) and without the need
for current public information required by Rule 144(c)(1) (or Rule 144(i)(2), if
applicable) or (iii) such Investor agrees to be named as an underwriter in any such
Registration Statement in a manner acceptable to such Investor as to all Registrable Securities
held by such Investor and that have not theretofore been included in a Registration Statement under
this Agreement.

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     (g) Piggyback Registrations. Without limiting any obligation of the Company hereunder
or under the Securities Purchase Agreement, if there is not an effective Registration Statement
covering all of the Registrable Securities or the prospectus contained therein is not available for
use and the Company shall determine to prepare and file with the SEC a registration statement
relating to an offering for its own account or the account of others under the 1933 Act of any of
its equity securities (other than on Form S-4 or Form S-8 (each as promulgated under the 1933 Act)
or their then equivalents relating to equity securities to be issued solely in connection with any
acquisition of any entity or business or equity securities issuable in connection with the
Company’s equity compensation or other employee benefit plans), then the Company shall deliver to
each Investor a written notice of such determination and, if within fifteen (15) days after the
date of the delivery of such notice, any such Investor shall so request in writing, the Company
shall include in such registration statement all or any part of such Registrable Securities such
Investor requests to be registered; provided, however, the Company shall not be required to
register any Registrable Securities pursuant to this Section 2(g) that are eligible for resale
pursuant to Rule 144 without restriction (including, without limitation, volume restrictions) and
without the need for current public information required by Rule 144(c)(1) (or Rule 144(i)(2), if
applicable) or that are the subject of a then-effective Registration Statement.

     (h) Allocation of Registrable Securities. The initial number of Registrable Securities
included in any Registration Statement and any increase in the number of Registrable Securities
included therein shall be allocated pro rata among the Investors based on the number of Registrable
Securities held by each Investor at the time such Registration Statement covering such initial
number of Registrable Securities or increase thereof is declared effective by the SEC. In the event
that an Investor sells or otherwise transfers any of such Investor’s Registrable Securities, each
transferee or assignee (as the case may be) that becomes an Investor shall be allocated a pro rata
portion of the then-remaining number of Registrable Securities included in such Registration
Statement for such transferor or assignee (as the case may be). Any shares of Common Stock included
in a Registration Statement and which remain allocated to any Person which ceases to hold any
Registrable Securities covered by such Registration Statement shall be allocated to the remaining
Investors, pro rata based on the number of Registrable Securities then held by such Investors which
are covered by such Registration Statement.

     (i) No Inclusion of Other Securities. In no event shall the Company include any
securities other than Registrable Securities on any Registration Statement without the prior
written consent of the Required Holders.

	3.	 	Related Obligations.

     The Company shall use its reasonable best efforts to effect the registration of the
Registrable Securities in accordance with the intended method of disposition thereof, and, pursuant
thereto, the Company shall have the following obligations:

     (a) The Company shall promptly prepare and file with the SEC a Registration Statement with
respect to all the Registrable Securities (but in no event later than the applicable Filing
Deadline) and use its reasonable best efforts to cause such Registration Statement to

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become effective as soon as practicable after such filing (but in no event later than the Effectiveness
Deadline). Subject to Allowable Grace Periods, the Company shall keep each Registration Statement
effective (and the prospectus contained therein available for use) pursuant to Rule 415 for resales
by the Investors on a delayed or continuous basis at then-prevailing market prices (and not fixed
prices) at all times until the earlier of (i) the date as of which all of the Investors may sell
all of the Registrable Securities required to be covered by such Registration Statement without
restriction pursuant to Rule 144 (including, without limitation, volume restrictions) and without
the need for current public information required by Rule 144(c)(1) (or Rule 144(i)(2), if
applicable) or (ii) the date on which the Investors shall have sold all of the Registrable
Securities covered by such Registration Statement (the “Registration Period”). Notwithstanding
anything to the contrary contained in this Agreement, the Company shall ensure that, when filed and
at all times while effective, each Registration Statement (including, without limitation, all
amendments and supplements thereto) and the prospectus (including, without limitation, all
amendments and supplements thereto) used in connection with such Registration Statement (1) shall
not contain any untrue statement of a material fact or omit to state a material fact required to be
stated therein, or necessary to make the statements therein (in the case of prospectuses, in the
light of the circumstances in which they were made) not misleading and (2) will disclose (whether
directly or through incorporation by reference to other SEC filings to the extent permitted) all
material information regarding the Company and its securities. The Company shall submit to the SEC,
within one (1) Business Day after the later of the date that (i) the Company learns that no review
of a particular Registration Statement will be made by the Staff or that the Staff has no further
comments on a particular Registration Statement (as the case may be) and (ii) the consent of Legal
Counsel is obtained pursuant to Section 3(c) (which consent shall be immediately sought), a request
for acceleration of effectiveness of such Registration Statement to a time and date not later than
forty-eight (48) hours after the submission of such request.

     (b) Subject to Section 3(r) of this Agreement, the Company shall prepare and file with the SEC
such amendments (including, without limitation, post-effective amendments) and supplements to each
Registration Statement and the prospectus used in connection with each such Registration Statement,
which prospectus is to be filed pursuant to Rule 424 promulgated under the 1933 Act, as may be
necessary to keep each such Registration Statement effective at all times during the Registration
Period for such Registration Statement, and, during such period, comply with the provisions of the
1933 Act with respect to the disposition of all Registrable Securities of the Company required to
be covered by such Registration Statement until such time as all of such Registrable Securities
shall have been disposed of in accordance with the intended methods of disposition by the seller or
sellers thereof as set forth in such Registration Statement; provided, however, by 8:30 a.m. (New
York time) on the Business Day immediately following each Effective Date, the Company shall file
with the SEC in accordance with Rule 424(b) under the 1933 Act the final prospectus to be used in
connection with sales pursuant to the applicable Registration Statement (whether or not such a
prospectus is technically required by such rule). In the case of amendments and supplements to any
Registration Statement which are required to be filed pursuant to this Agreement (including,
without limitation, pursuant to this Section 3(b)) by reason of the Company filing a report on Form
10-Q or Form 10-K or any analogous report
under the Securities Exchange Act of 1934, as amended (the “1934 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 SEC within two business days of the day on

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which the 1934 Act report is filed which created the requirement for the Company to amend or supplement such
Registration Statement.

     (c) The Company shall (A) permit Legal Counsel and legal counsel for each other Investor to
review and comment upon (i) each Registration Statement at least five (5) Business Days prior to
its filing with the SEC and (ii) all amendments and supplements to each Registration Statement
(including, without limitation, the prospectus contained therein) (except for Annual Reports on
Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any similar or
successor reports) within a reasonable number of days prior to their filing with the SEC, and (B)
not file any Registration Statement or amendment or supplement thereto in a form to which Legal
Counsel or any legal counsel for any other Investor reasonably objects. The Company shall not
submit a request for acceleration of the effectiveness of a Registration Statement or any amendment
or supplement thereto or to any prospectus contained therein without the prior consent of Legal
Counsel, which consent shall not be unreasonably withheld. The Company shall promptly furnish to
Legal Counsel and legal counsel for each other Investor, without charge, (i) copies of any
correspondence from the SEC or the Staff to the Company or its representatives relating to each
Registration Statement, provided that such correspondence shall not contain any material,
non-public information regarding the Company or any of its Subsidiaries (as defined in the
Securities Purchase Agreement), (ii) after the same is prepared and filed with the SEC, one (1)
copy of each Registration Statement and any amendment(s) and supplement(s) thereto, including,
without limitation, financial statements and schedules, all documents incorporated therein by
reference, if requested by an Investor, and all exhibits and (iii) upon the effectiveness of each
Registration Statement, one (1) copy of the prospectus included in such Registration Statement and
all amendments and supplements thereto. The Company shall reasonably cooperate with Legal Counsel
and legal counsel for each other Investor in performing the Company’s obligations pursuant to this
Section 3.

     (d) The Company shall promptly furnish to each Investor whose Registrable Securities are
included in any Registration Statement, without charge, to the extent that such documents are not
available on the SEC’s EDGAR system, (i) after the same is prepared and filed with the SEC, at
least one (1) copy of each Registration Statement and any amendment(s) and supplement(s) thereto,
including, without limitation, financial statements and schedules, all documents incorporated
therein by reference, if requested by an Investor, all exhibits and each preliminary prospectus,
(ii) upon the effectiveness of each Registration Statement, ten (10) copies of the prospectus
included in such Registration Statement and all amendments and supplements thereto (or such other
number of copies as such Investor may reasonably request from time to time) and (iii) such other
documents, including, without limitation, copies of any preliminary or final prospectus, as such
Investor may reasonably request from time to time in order to facilitate the disposition of the
Registrable Securities owned by such Investor.

     (e) The Company shall use its reasonable best efforts to (i) register and qualify, unless an
exemption from registration and qualification applies, the resale by Investors of the Registrable
Securities covered by a Registration Statement under such other securities or “blue sky” laws of
all applicable jurisdictions in the United States, (ii) prepare and file in those
jurisdictions, such amendments (including, without limitation, post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (iii) take such other actions as may be

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necessary to maintain such registrations and qualifications in effect at all times during the
Registration Period, and (iv) take all other actions reasonably necessary or advisable to qualify
the Registrable Securities for sale in such jurisdictions; provided, however, the Company shall not
be required in connection therewith or as a condition thereto to (x) qualify to do business in any
jurisdiction where it would not otherwise be required to qualify but for this Section 3(e), (y)
subject itself to general taxation in any such jurisdiction, or (z) file a general consent to
service of process in any such jurisdiction. The Company shall promptly notify Legal Counsel, legal
counsel for each other Investor and each Investor who holds Registrable Securities of the receipt
by the Company of any notification with respect to the suspension of the registration or
qualification of any of the Registrable Securities for sale under the securities or “blue sky” laws
of any jurisdiction in the United States or its receipt of actual notice of the initiation or
threatening of any proceeding for such purpose.

     (f) The Company shall notify Legal Counsel, legal counsel for each other Investor and each
Investor in writing or e-mail of the happening of any event, as promptly as practicable after
becoming aware of such event, as a result of which the prospectus included in a Registration
Statement, as then in effect, includes an untrue statement of a material fact or omission to state
a material fact required to be stated therein or necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading (provided that in no event
shall such notice contain any material, non-public information regarding the Company or any of its
Subsidiaries), and, subject to Section 3(r), promptly prepare a supplement or amendment to such
Registration Statement and such prospectus contained therein to correct such untrue statement or
omission and deliver ten (10) copies of such supplement or amendment to Legal Counsel, legal
counsel for each other Investor and each Investor (or such other number of copies as Legal Counsel,
legal counsel for each other Investor or such Investor may reasonably request). The Company shall
also promptly notify Legal Counsel, legal counsel for each other Investor and each Investor in
writing or e-mail (i) when a prospectus or any prospectus supplement or post-effective amendment
has been filed, when a Registration Statement or any post-effective amendment has become effective
(notification of such effectiveness shall be delivered to Legal Counsel, legal counsel for each
other Investor and each Investor by facsimile or e-mail on the same day of such effectiveness and
by overnight mail), and when the Company receives written notice from the SEC that a Registration
Statement or any post-effective amendment will be reviewed by the SEC, (ii) of any request by the
SEC for amendments or supplements to a Registration Statement or related prospectus or related
information, (iii) of the Company’s reasonable determination that a post-effective amendment to a
Registration Statement would be appropriate; and (iv) of the receipt of any request by the SEC or
any other federal or state governmental authority for any additional information relating to the
Registration Statement or any amendment or supplement thereto or any related prospectus. The
Company shall respond as promptly as practicable to any comments received from the SEC with respect
to each Registration Statement or any amendment thereto, but in no event later than twenty (20)
Business Days after the Company’s receipt of such comments.

     (g) The Company shall (i) use its reasonable best efforts to prevent the issuance of any stop
order or other suspension of effectiveness of each Registration Statement or the use of
any prospectus contained therein, or the suspension of the qualification, or the loss of an
exemption from qualification, of any of the Registrable Securities for sale in any jurisdiction
and, if such an order or suspension is issued, to obtain the withdrawal of such order or suspension
at

10

 

the earliest possible moment and (ii) notify Legal Counsel, legal counsel for each other
Investor and each Investor who holds Registrable Securities of the issuance of such order and the
resolution thereof or its receipt of actual notice of the initiation or threat of any proceeding
for such purpose.

     (h) If any Investor may be required under applicable securities law to be described in any
Registration Statement as an underwriter and such Investor consents to so being named an
underwriter, at the request of any Investor, the Company shall furnish to such Investor, on the
date of the effectiveness of such Registration Statement and thereafter from time to time on such
dates as an Investor may reasonably request (i) a letter, dated such date, from the Company’s
independent certified public accountants in form and substance as is customarily given by
independent certified public accountants to underwriters in an underwritten public offering,
addressed to the Investors, and (ii) an opinion, dated as of such date, of counsel representing the
Company for purposes of such Registration Statement, in form, scope and substance as is customarily
given in an underwritten public offering, addressed to the Investors.

     (i) If any Investor may be required under applicable securities law to be described in any
Registration Statement as an underwriter and such Investor consents to so being named an
underwriter, upon the written request of such Investor, the Company shall make available for
inspection by (i) such Investor, (ii) legal counsel for such Investor and (iii) one (1) firm of
accountants or other agents retained by such Investor (collectively, the “Inspectors”), all
pertinent financial and other records, and pertinent corporate documents and properties of the
Company (collectively, the “Records”), as shall be reasonably deemed necessary by each Inspector,
and cause the Company’s officers, directors and employees to supply all information which any
Inspector may reasonably request; provided, however, each Inspector shall agree in writing to hold
in strict confidence and not to make any disclosure (except to such Investor) or use of any Record
or other information which the Company’s board of directors determines in good faith to be
confidential, and of which determination the Inspectors are so notified, unless (1) the disclosure
of such Records is necessary to avoid or correct a misstatement or omission in any Registration
Statement or is otherwise required under the 1933 Act, (2) the release of such Records is ordered
pursuant to a final, non-appealable subpoena or order from a court or government body of competent
jurisdiction, or (3) the information in such Records has been made generally available to the
public other than by disclosure in violation of this Agreement or any other Transaction Document
(as defined in the Securities Purchase Agreement). Such Investor agrees that it shall, upon
learning that disclosure of such Records is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt notice to the Company and allow the
Company, at its expense, to undertake appropriate action to prevent disclosure of, or to obtain a
protective order for, the Records deemed confidential. Nothing herein (or in any other
confidentiality agreement between the Company and such Investor, if any) shall be deemed to limit
any Investor’s ability to sell Registrable Securities in a manner which is otherwise consistent
with applicable laws and regulations.

     (j) The Company shall hold in confidence and not make any disclosure of information concerning
an Investor provided to the Company unless (i) disclosure of such
information is necessary to comply with federal or state securities laws, (ii) the disclosure
of such information is necessary to avoid or correct a misstatement or omission in any Registration
Statement or is otherwise required to be disclosed in such Registration Statement pursuant to the

11

 

1933 Act, (iii) the release of such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent jurisdiction, or (iv) such
information has been made generally available to the public other than by disclosure in violation
of this Agreement or any other Transaction Document. The Company agrees that it shall, upon
learning that disclosure of such information concerning an Investor is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt written notice to
such Investor and allow such Investor, at such Investor’s expense, to undertake appropriate action
to prevent disclosure of, or to obtain a protective order for, such information.

     (k) Without limiting any obligation of the Company under the Securities Purchase Agreement,
the Company shall use its reasonable best efforts either to (i) cause all of the Registrable
Securities covered by each Registration Statement to be listed on each securities exchange on which
securities of the same class or series issued by the Company are then listed, if any, if the
listing of such Registrable Securities is then permitted under the rules of such exchange, (ii)
secure designation and quotation of all of the Registrable Securities covered by each Registration
Statement on an Eligible Market (as defined in the Securities Purchase Agreement), or (iii) if,
despite the Company’s reasonable best efforts to satisfy the preceding clauses (i) or (ii) the
Company is unsuccessful in satisfying the preceding clauses (i) or (ii), without limiting the
generality of the foregoing, to use its reasonable best efforts to arrange for at least two market
makers to register with the Financial Industry Regulatory Authority (“FINRA”) as such with respect
to such Registrable Securities. In addition, the Company shall cooperate with each Investor and any
broker or dealer through which any such Investor proposes to sell its Registrable Securities in
effecting a filing with FINRA pursuant to FINRA Rule 5110 as requested by such Investor. The
Company shall pay all fees and expenses in connection with satisfying its obligations under this
Section 3(k).

     (l) The Company shall cooperate with the Investors who hold Registrable Securities being
offered and, to the extent applicable, facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legend) representing the Registrable Securities to be
offered pursuant to a Registration Statement and enable such certificates to be in such
denominations or amounts (as the case may be) as the Investors may reasonably request from time to
time and registered in such names as the Investors may request.

     (m) If requested by an Investor, the Company shall as soon as practicable after receipt of
notice from such Investor and subject to Section 3(r) hereof, (i) incorporate in a prospectus
supplement or post-effective amendment such information as an Investor reasonably requests to be
included therein relating to the sale and distribution of Registrable Securities, including,
without limitation, information with respect to the number of Registrable Securities being offered
or sold, the purchase price being paid therefor and any other terms of the offering of the
Registrable Securities to be sold in such offering; (ii) make all required filings of such
prospectus supplement or post-effective amendment after being notified of the matters to be
incorporated in such prospectus supplement or post-effective amendment; and (iii) supplement or
make amendments to any Registration Statement or prospectus contained therein if reasonably
requested by an Investor holding any Registrable Securities.

     (n) The Company shall use its reasonable best efforts to cause the Registrable Securities
covered by a Registration Statement to be registered with or approved by such other

12

 

governmental
agencies or authorities as may be necessary to consummate the disposition of such Registrable
Securities.

     (o) The Company shall make generally available to its security holders as soon as practical,
but not later than ninety (90) days after the close of the period covered thereby, an earnings
statement (in form complying with, and in the manner provided by, the provisions of Rule 158 under
the 1933 Act) covering a twelve-month period beginning not later than the first day of the
Company’s fiscal quarter next following the applicable Effective Date of each Registration
Statement.

     (p) The Company shall otherwise use its reasonable best efforts to comply with all applicable
rules and regulations of the SEC in connection with any registration hereunder.

     (q) Within two (2) Business Day after a Registration Statement which covers Registrable
Securities is declared effective by the SEC, the Company shall deliver, and shall cause legal
counsel for the Company to deliver, to the transfer agent for such Registrable Securities (with
copies to the Investors whose Registrable Securities are included in such Registration Statement)
confirmation that such Registration Statement has been declared effective by the SEC in the form
attached hereto as Exhibit A.

     (r) Notwithstanding anything to the contrary herein (but subject to the last sentence of this
Section 3(r)), at any time after the Effective Date of a particular Registration Statement, the
Company may delay the disclosure of material, non-public information concerning the Company or any
of its Subsidiaries the disclosure of which at the time is not, in the good faith opinion of the
board of directors of the Company, in the best interest of the Company and, upon the advice of
counsel to the Company, otherwise required (a “Grace Period”), provided that the Company shall
promptly notify the Investors in writing or e-mail of the (i) existence of material, non-public
information giving rise to a Grace Period (provided that in each such notice the Company shall not
disclose the content of such material, non-public information to any of the Investors) and the date
on which such Grace Period will begin and (ii) date on which such Grace Period ends, provided
further that (I) no Grace Period shall exceed ten (10) consecutive days and during any three
hundred sixty five (365) day period all such Grace Periods shall not exceed an aggregate of thirty
(30) days, (II) the first day of any Grace Period must be at least five (5) Trading Days after the
last day of any prior Grace Period and (III) no Grace Period may exist during the sixty (60)
Trading Day period immediately following the Effective Date of such Registration Statement
(provided that such sixty (60) Trading Day period shall be extended by the number of Trading Days
during such period and any extension thereof contemplated by this proviso during which such
Registration Statement is not effective or the prospectus contained therein is not available for
use) (each, an “Allowable Grace Period”). For purposes of determining the length of a Grace Period
above, such Grace Period shall begin on and include the date the Investors receive the notice
referred to in clause (i) above and shall end on and include the later of the date the Investors
receive the notice referred to in clause (ii) above and the date referred to in such notice. The
provisions of Section 3(g) hereof shall not be applicable during the period of any Allowable Grace
Period. Upon expiration of each Grace Period, the Company shall again be bound by the first
sentence of Section 3(f) with respect to the
information giving rise thereto unless such material, non-public information is no longer
applicable. Notwithstanding anything to the contrary contained in this Section 3(r), the Company

13

 

shall cause its transfer agent to deliver unlegended shares of Common Stock to a transferee of an
Investor in accordance with the terms of the Securities Purchase Agreement in connection with any
sale of Registrable Securities with respect to which such Investor has entered into a contract for
sale, and delivered a copy of the prospectus included as part of the particular Registration
Statement to the extent applicable, prior to such Investor’s receipt of the notice of a Grace
Period and for which the Investor has not yet settled.

     (s) The Company shall take all other reasonable actions necessary to expedite and facilitate
disposition by each Investors of its Registrable Securities pursuant to each Registration
Statement.

	4.	 	Obligations of the Investors.

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

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

     (c) Each Investor agrees that, upon receipt of any notice from the Company of the happening of
any event of the kind described in Section 3(g) or the first sentence of 3(f), such Investor will
immediately discontinue disposition of Registrable Securities pursuant to any Registration
Statement(s) covering such Registrable Securities until such Investor’s receipt of the copies of
the supplemented or amended prospectus contemplated by Section 3(g) or the first sentence of
Section 3(f) or receipt of notice that no supplement or amendment is required. Notwithstanding
anything to the contrary in this Section 4(c), the Company shall cause its transfer agent to
deliver unlegended shares of Common Stock to a transferee of an Investor in accordance with the
terms of the Securities Purchase Agreement in connection with any sale of Registrable Securities
with respect to which such Investor has entered into a contract for sale prior to the Investor’s
receipt of a notice from the Company of the happening of any event of the kind described in Section
3(g) or the first sentence of Section 3(f) and for which such Investor has not yet settled.

     (d) Each Investor covenants and agrees that it will comply with the prospectus
delivery requirements of the 1933 Act as applicable to it in connection with sales of
Registrable Securities pursuant to a Registration Statement.

14

 

	5.	 	Expenses of Registration.

     All reasonable expenses, other than underwriting discounts and commissions, incurred in
connection with registrations, filings or qualifications pursuant to Sections 2 and 3, including,
without limitation, all registration, listing and qualifications fees, printers and accounting
fees, FINRA filing fees (if any) and fees and disbursements of counsel for the Company shall be
paid by the Company. The Company shall also reimburse the fees and disbursements of Legal Counsel
in connection with registration, filing or qualification pursuant to Sections 2 and 3 of this
Agreement which amount shall be limited to $10,000.

	6.	 	Indemnification.

     (a) In the event any Registrable Securities are included in any Registration Statement under
this Agreement, to the fullest extent permitted by law, the Company will, and hereby does,
indemnify, hold harmless and defend each Investor and each of its directors, officers,
shareholders, members, partners, employees, agents, advisors, representatives (and any other
Persons with a functionally equivalent role of a Person holding such titles notwithstanding the
lack of such title or any other title) and each Person, if any, who controls such Investor within
the meaning of the 1933 Act or the 1934 Act and each of the directors, officers, shareholders,
members, partners, employees, agents, advisors, representatives (and any other Persons with a
functionally equivalent role of a Person holding such titles notwithstanding the lack of such title
or any other title) of such controlling Persons (each, an “Indemnified Person”), against any
losses, obligations, claims, damages, liabilities, contingencies, judgments, fines, penalties,
charges, costs (including, without limitation, court costs, reasonable attorneys’ fees and costs of
defense and investigation), amounts paid in settlement or expenses, joint or several,
(collectively, “Claims”) incurred in investigating, preparing or defending any action, claim, suit,
inquiry, proceeding, investigation or appeal taken from the foregoing by or before any court or
governmental, administrative or other regulatory agency, body or the SEC, whether pending or
threatened, whether or not an indemnified party is or may be a party thereto (“Indemnified
Damages”), to which any of them may become subject insofar as such Claims (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon:
(i) any untrue statement or alleged untrue statement of a material fact in a Registration Statement
or any post-effective amendment thereto or in any filing made in connection with the qualification
of the offering under the securities or other “blue sky” laws of any jurisdiction in which
Registrable Securities are offered (“Blue Sky Filing”), or the omission or alleged omission to
state a material fact required to be stated therein or necessary to make the statements therein not
misleading, (ii) any untrue statement or alleged untrue statement of a material fact contained in
any preliminary prospectus if used prior to the effective date of such Registration Statement, or
contained in the final prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission to state therein
any material fact necessary to make the statements made therein, in light of the circumstances
under which the statements therein were made, not misleading or (iii) any violation or alleged
violation by the Company of the 1933 Act, the 1934 Act, any other law, including, without
limitation, any state securities law, or any rule or regulation thereunder
relating to the offer or sale of the Registrable Securities pursuant to a Registration
Statement (the matters in the foregoing clauses (i) through (iii) being, collectively,
“Violations”). Subject to Section 6(c), the Company shall reimburse the Indemnified Persons,
promptly as such expenses

15

 

are incurred and are due and payable, for any legal fees or other
reasonable expenses incurred by them in connection with investigating or defending any such Claim.
Notwithstanding anything to the contrary contained herein, the indemnification agreement contained
in this Section 6(a): (i) shall not apply to a Claim by an Indemnified Person arising out of or
based upon a Violation which occurs in reliance upon and in conformity with information furnished
in writing to the Company by such Indemnified Person for such Indemnified Person expressly for use
in connection with the preparation of such Registration Statement or any such amendment thereof or
supplement thereto and (ii) shall not be available to a particular Investor to the extent such
Claim is based on a failure of such Investor to deliver or to cause to be delivered the prospectus
made available by the Company (to the extent applicable), including, without limitation, a
corrected prospectus, if such prospectus or corrected prospectus was timely made available by the
Company pursuant to Section 3(d) and then only if, and to the extent that, following the receipt of
the corrected prospectus no grounds for such Claim would have existed; and (iii) shall not apply to
amounts paid in settlement of any Claim if such settlement is effected without the prior written
consent of the Company, which consent shall not be unreasonably withheld or delayed. Such indemnity
shall remain in full force and effect regardless of any investigation made by or on behalf of the
Indemnified Person and shall survive the transfer of any of the Registrable Securities by any of
the Investors pursuant to Section 9.

     (b) In connection with any Registration Statement in which an Investor is participating, such
Investor agrees to severally and not jointly indemnify, hold harmless and defend, to the same
extent and in the same manner as is set forth in Section 6(a), the Company, each of its directors,
each of its officers who signs the Registration Statement and each Person, if any, who controls the
Company within the meaning of the 1933 Act or the 1934 Act (each, an “Indemnified Party”), against
any Claim or Indemnified Damages to which any of them may become subject, under the 1933 Act, the
1934 Act or otherwise, insofar as such Claim or Indemnified Damages arise out of or are based upon
any Violation, in each case, to the extent, and only to the extent, that such Violation occurs in
reliance upon and in conformity with written information furnished to the Company by such Investor
expressly for use in connection with such Registration Statement; and, subject to Section 6(c) and
the below provisos in this Section 6(b), such Investor will reimburse an Indemnified Party any
legal or other expenses reasonably incurred by such Indemnified Party in connection with
investigating or defending any such Claim; provided, however, the indemnity agreement contained in
this Section 6(b) and the agreement with respect to contribution contained in Section 7 shall not
apply to amounts paid in settlement of any Claim if such settlement is effected without the prior
written consent of such Investor, which consent shall not be unreasonably withheld or delayed,
provided further that such Investor shall be liable under this Section 6(b) for only that amount of
a Claim or Indemnified Damages as does not exceed the net proceeds to such Investor as a result of
the applicable sale of Registrable Securities pursuant to such Registration Statement. Such
indemnity shall remain in full force and effect regardless of any investigation made by or on
behalf of such Indemnified Party and shall survive the transfer of any of the Registrable
Securities by any of the Investors pursuant to Section 9.

     (c) Promptly after receipt by an Indemnified Person or Indemnified Party (as the case
may be) under this Section 6 of notice of the commencement of any action or proceeding
(including, without limitation, any governmental action or proceeding) involving a Claim, such
Indemnified Person or Indemnified Party (as the case may be) shall, if a Claim in respect thereof

16

 

is to be made against any indemnifying party under this Section 6, deliver to the indemnifying
party a written notice of the commencement thereof, and the indemnifying party shall have the right
to participate in, and, to the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the Indemnified Person or the Indemnified Party
(as the case may be); provided, however, an Indemnified Person or Indemnified Party (as the case
may be) shall have the right to retain its own counsel with the fees and expenses of such counsel
to be paid by the indemnifying party if: (i) the indemnifying party has agreed in writing to pay
such fees and expenses; (ii) the indemnifying party shall have failed promptly to assume the
defense of such Claim and to employ counsel reasonably satisfactory to such Indemnified Person or
Indemnified Party (as the case may be) in any such Claim; or (iii) the named parties to any such
Claim (including, without limitation, any impleaded parties) include both such Indemnified Person
or Indemnified Party (as the case may be) and the indemnifying party, and such Indemnified Person
or such Indemnified Party (as the case may be) shall have been advised by counsel that a conflict
of interest is likely to exist if the same counsel were to represent such Indemnified Person or
such Indemnified Party and the indemnifying party (in which case, if such Indemnified Person or
such Indemnified Party (as the case may be) notifies the indemnifying party in writing that it
elects to employ separate counsel at the expense of the indemnifying party, then 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 further that in the case of clause (iii) above the
indemnifying party shall not be responsible for the reasonable fees and expenses of more than one
(1) separate legal counsel for such Indemnified Person or Indemnified Party (as the case may be).
The Indemnified Party or Indemnified Person (as the case may be) shall reasonably cooperate with
the indemnifying party in connection with any negotiation or defense of any such action or Claim by
the indemnifying party and shall furnish to the indemnifying party all information reasonably
available to the Indemnified Party or Indemnified Person (as the case may be) which relates to such
action or Claim. The indemnifying party shall keep the Indemnified Party or Indemnified Person (as
the case may be) reasonably apprised at all times as to the status of the defense or any settlement
negotiations with respect thereto. No indemnifying party shall be liable for any settlement of any
action, claim or proceeding effected without its prior written consent; provided, however, the
indemnifying party shall not unreasonably withhold, delay or condition its consent. No
indemnifying party shall, without the prior written consent of the Indemnified Party or Indemnified
Person (as the case may be), consent to entry of any judgment or enter into any settlement or other
compromise which does not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party or Indemnified Person (as the case may be) of a release from
all liability in respect to such Claim or litigation, and such settlement shall not include any
admission as to fault on the part of the Indemnified Party. Following indemnification as provided
for hereunder, the indemnifying party shall be subrogated to all rights of the Indemnified Party or
Indemnified Person (as the case may be) with respect to all third parties, firms or corporations
relating to the matter for which indemnification has been made. 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 Person or Indemnified
Party (as the case may be) under this Section 6, except to the extent that the indemnifying party is
materially and adversely prejudiced in its ability to defend such action.

     (d) No Person involved in the sale of Registrable Securities who is guilty of

17

 

fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) in connection with such
sale shall be entitled to indemnification from any Person involved in such sale of Registrable
Securities who is not guilty of fraudulent misrepresentation.

     (e) The indemnification required by this Section 6 shall be made by periodic payments of the
amount thereof during the course of the investigation or defense, as and when bills are received or
Indemnified Damages are incurred.

     (f) The indemnity and contribution agreements contained herein shall be in addition to (i) any
cause of action or similar right of the Indemnified Party or Indemnified Person against the
indemnifying party or others, and (ii) any liabilities the indemnifying party may be subject to
pursuant to the law.

	7.	 	Contribution.

     To the extent any indemnification by an indemnifying party is prohibited or limited by law,
the indemnifying party agrees to make the maximum contribution with respect to any amounts for
which it would otherwise be liable under Section 6 to the fullest extent permitted by law;
provided, however: (i) no contribution shall be made under circumstances where the maker would not
have been liable for indemnification under the fault standards set forth in Section 6 of this
Agreement, (ii) no Person involved in the sale of Registrable Securities which Person is guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) in connection
with such sale shall be entitled to contribution from any Person involved in such sale of
Registrable Securities who was not guilty of fraudulent misrepresentation; and (iii) contribution
by any seller of Registrable Securities shall be limited in amount to the amount of net proceeds
received by such seller from the applicable sale of such Registrable Securities pursuant to such
Registration Statement. Notwithstanding the provisions of this Section 7, no Investor shall be
required to contribute, in the aggregate, any amount in excess of the amount by which the net
proceeds actually received by such Investor from the applicable sale of the Registrable Securities
subject to the Claim exceeds the amount of any damages that such Investor has otherwise been
required to pay, or would otherwise be required to pay under Section 6(b), by reason of such untrue
or alleged untrue statement or omission or alleged omission.

	8.	 	Reports Under the 1934 Act.

     With a view to making available to the Investors the benefits of Rule 144, the Company agrees
to:

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

     (b) file with the SEC in a timely manner all reports and other documents required of the
Company under the 1933 Act and the 1934 Act so long as the Company remains subject to
such requirements (it being understood and agreed that nothing herein shall limit any
obligations of the Company under the Securities Purchase Agreement) and the filing of such reports
and other documents is required for the applicable provisions of Rule 144; and

18

 

     (c) furnish to each Investor so long as such Investor owns Registrable Securities,
promptly upon request, (i) a written statement by the Company, if true, that it has complied with
the reporting, submission and posting requirements of Rule 144 and the 1934 Act, (ii) a copy of the
most recent annual or quarterly report of the Company and such other reports and documents so filed
by the Company with the SEC if such reports are not publicly available via EDGAR, and (iii) such
other information as may be reasonably requested to permit the Investors to sell such securities
pursuant to Rule 144 without registration.

9. Assignment of Registration Rights.

     All or any portion of the rights under this Agreement shall be automatically assignable by
each Investor to any transferee or assignee (as the case may be) of all or any portion of such
Investor’s Registrable Securities or Warrants if: (i) such Investor agrees in writing with such
transferee or assignee (as the case may be) to assign all or any portion of such rights, and a copy
of such agreement is furnished to the Company within a reasonable time after such transfer or
assignment (as the case may be); (ii) the Company is, within a reasonable time after such transfer
or assignment (as the case may be), furnished with written notice of (a) the name and address of
such transferee or assignee (as the case may be), and (b) the securities with respect to which such
registration rights are being transferred or assigned (as the case may be); (iii) immediately
following such transfer or assignment (as the case may be) the further disposition of such
securities by such transferee or assignee (as the case may be) is restricted under the 1933 Act or
applicable state securities laws if so required; (iv) at or before the time the Company receives
the written notice contemplated by clause (ii) of this sentence such transferee or assignee (as the
case may be) agrees in writing with the Company to be bound by all of the provisions contained
herein; (v) such transfer or assignment (as the case may be) shall have been made in accordance
with the applicable requirements of the Securities Purchase Agreement and the Warrants (as the case
may be); and (vi) such transfer or assignment (as the case may be) shall have been conducted in
accordance with all applicable federal and state securities laws.

10. Amendment of Registration Rights.

     Provisions of this Agreement may be amended only with the written consent of the Company and
the Required Holders. Any amendment effected in accordance with this Section 10 shall be binding
upon each Investor and the Company, provided that no such amendment shall be effective to the
extent that it (1) applies to less than all of the holders of the holders of Registrable
Securities, (2) imposes any obligation or liability on any Investor without such Investor’s prior
written consent (which may be granted or withheld in such Investor’s sole discretion) or (3)
applies retroactively. No waiver shall be effective unless it is in writing and signed by an
authorized representative of the waiving party. No consideration shall be offered or paid to any
Person to amend or consent to a waiver or modification of any provision of this Agreement unless
the same consideration also is offered to all of the parties to this Agreement.

11. Miscellaneous.

     (a) Solely for purposes of this Agreement, a Person is deemed to be a holder of Registrable
Securities whenever such Person owns, or is deemed to own, of record such Registrable Securities.
If the Company receives conflicting instructions, notices or elections from

19

 

two or more Persons with respect to the same Registrable Securities, the Company shall act
upon the basis of instructions, notice or election received from such record owner of such
Registrable Securities.

     (b) Any notices, consents, waivers or other communications required or permitted to be given
under the terms of this Agreement must be in writing and will be deemed to have been delivered: (i)
upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and kept on file by the
sending party); (iii) with respect to Section 3(c), by electronic mail (provided confirmation of
transmission is electronically generated and kept on file by the sending party); or (iv) one (1)
Business Day after deposit with a nationally recognized overnight delivery service with next day
delivery specified, in each case, properly addressed to the party to receive the same. The
addresses and facsimile numbers for such communications shall be:

If to the Company:

Aradigm Corporation

3929 Point Eden Way

Hayward, CA 94545

Telephone: (510) 265-9000

Facsimile: 510-265-0277

Attention: Chief Executive Officer

With a copy (for informational purposes only) to:

Morrison & Foerster LLP

425 Market Street

San Francisco, CA 94105

Telephone: (415) 268-7197

Facsimile: (415) 268-7522

Attention: John W. Campbell, Esq.

If to a Buyer, to its address and facsimile number set forth on the Schedule of Buyers attached to
the Securities Purchase Agreement, with copies to such Buyer’s representatives as set forth on the
Schedule of Buyers, or to such other address and/or facsimile number and/or to the attention of
such other Person as the recipient party has specified by written notice given to each other party
five (5) days prior to the effectiveness of such change. Written confirmation of receipt (A) given
by the recipient of such notice, consent, waiver or other communication, (B) mechanically or
electronically generated by the sender’s facsimile machine or electronic mail transmission
containing the time, date, recipient facsimile number or electronic mail address and an image of
the first page of such transmission or (C) provided by a courier or overnight courier service shall
be rebuttable evidence of personal service, receipt by facsimile or receipt from a nationally
recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above,
respectively.

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

20

 

thereof. The Company and each Investor acknowledge and agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not performed in accordance
with their specific terms or were otherwise breached. It is accordingly agreed that each party
hereto shall be entitled to an injunction or injunctions to prevent or cure breaches of the
provisions of this Agreement by any other party hereto and to enforce specifically the terms and
provisions hereof (without the necessity of showing economic loss and without any bond or other
security being required), this being in addition to any other remedy to which any party may be
entitled by law or equity.

     (d) All questions concerning the construction, validity, enforcement and interpretation of
this Agreement shall be governed by the internal laws of the State of New York, without giving
effect to any choice of law or conflict of law provision or rule (whether of the State of New York
or any other jurisdictions) that would cause the application of the laws of any jurisdictions other
than the State of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of
the state and federal courts sitting in The City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in
any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, that such suit, action or proceeding is brought in an inconvenient forum or that
the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives
personal service of process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address for such notices to it under this
Agreement and agrees that such 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. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the
validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity
or enforceability of any provision of this Agreement in any other jurisdiction. EACH PARTY HEREBY
IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR
ANY TRANSACTION CONTEMPLATED HEREBY.

     (e) This Agreement, the other Transaction Documents, the schedules and exhibits attached
hereto and thereto and the instruments referenced herein and therein constitute the entire
agreement among the parties hereto and thereto solely with respect to the subject matter hereof and
thereof. There are no restrictions, promises, warranties or undertakings, other than those set
forth or referred to herein and therein. This Agreement, the other Transaction Documents, the
schedules and exhibits attached hereto and thereto and the instruments referenced herein and
therein supersede all prior agreements and understandings among the parties hereto solely with
respect to the subject matter hereof and thereof; provided, however, nothing contained in this
Agreement or any other Transaction Document shall (or shall be deemed to) (i) have any effect on
any agreements any Investor has entered into with the Company or any of its Subsidiaries prior to
the date hereof with respect to any prior investment made by such Investor in the Company, (ii)
waive, alter, modify or amend in any respect any obligations of the Company or any of its
Subsidiaries or any rights of or benefits to any Investor or any other Person in any agreement
entered into prior to the date hereof between or among the Company and/or any of its

21

 

Subsidiaries and any Investor and all such agreements shall continue in full force and effect
or (iii) limit any obligations of the Company under any of the other Transaction Documents.

     (f) Subject to compliance with Section 9 (if applicable), this Agreement shall inure to the
benefit of and be binding upon the permitted successors and assigns of each of the parties hereto.
This Agreement is not for the benefit of, nor may any provision hereof be enforced by, any Person,
other than the parties hereto, their respective permitted successors and assigns and the Persons
referred to in Sections 6 and 7 hereof.

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

     (h) This Agreement may be executed in two or more identical counterparts, all of which shall
be considered one and the same agreement and shall become effective when counterparts have been
signed by each party and delivered to the other party. In the event that any signature is delivered
by facsimile transmission or by an e-mail which contains a portable document format (.pdf) file of
an executed signature page, such signature page shall create a valid and binding obligation of the
party executing (or on whose behalf such signature is executed) with the same force and effect as
if such signature page were an original thereof.

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

     (j) The 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. Notwithstanding anything to the contrary set forth in Section 10, terms used in this
Agreement but defined in the other Transaction Documents shall have the meanings ascribed to such
terms on the Closing Date in such other Transaction Documents unless otherwise consented to in
writing by each Investor.

     (k) All consents and other determinations required to be made by the Investors pursuant to
this Agreement shall be made, unless otherwise specified in this Agreement, by the Required
Holders.

     (l) The obligations of each Investor under this Agreement and the other Transaction Documents
are several and not joint with the obligations of any other Investor, and no Investor shall be
responsible in any way for the performance of the obligations of any other Investor under this
Agreement or any other Transaction Document. Nothing contained herein or in any other Transaction
Document, and no action taken by any Investor pursuant hereto or thereto,

22

 

shall be deemed to constitute the Investors as, and the Company acknowledges that the
Investors do not so constitute, a partnership, an association, a joint venture or any other kind of
group or entity, or create a presumption that the Investors are in any way acting in concert or as
a group or entity with respect to such obligations or the transactions contemplated by the
Transaction Documents or any matters, and the Company acknowledges that the Investors are not
acting in concert or as a group, and the Company shall not assert any such claim, with respect to
such obligations or the transactions contemplated by this Agreement or any of the other the
Transaction Documents. Each Investor shall be entitled to independently protect and enforce its
rights, including, without limitation, the rights arising out of this Agreement or out of any other
Transaction Documents, and it shall not be necessary for any other Investor to be joined as an
additional party in any proceeding for such purpose. The use of a single agreement with respect to
the obligations of the Company contained herein was solely in the control of the Company, not the
action or decision of any Investor, and was done solely for the convenience of the Company and not
because it was required or requested to do so by any Investor. It is expressly understood and
agreed that each provision contained in this Agreement and in each other Transaction Document is
between the Company and an Investor, solely, and not between the Company and the Investors
collectively and not between and among Investors.

[signature pages follow]

23

 

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

	 	 	 	 	 
	 	COMPANY:

ARADIGM CORPORATION

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 

 

 

	 	 	 	 	 

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

	 	 	 	 	 
	 	BUYERS:

[BUYER

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 

 

 

	 	 	 	 	 

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

	 	 	 	 	 
	 	[OTHER BUYER

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 

 

 

	 	 	 	 	 

EXHIBIT A

FORM OF NOTICE OF EFFECTIVENESS

OF REGISTRATION STATEMENT

	 	 	 	 	 

	 	 	 
	 
	 	 	 	 
	 	 	 
	 
	 	 	 	 
	 	 	 
	Attention:
	 	 	 	 
	 

	 	 

	 	 

          Re: Aradigm Corporation

Ladies and Gentlemen:

          [We are][I am] counsel to Aradigm Corporation, a California corporation (the “Company”), and
have represented the Company in connection with that certain Securities Purchase Agreement (the
“Securities Purchase Agreement”) entered into by and among the Company and the buyers named therein
(collectively, the “Holders”) pursuant to which the Company issued to the Holders certain shares
(the “Common Shares”) of common stock, no par value per share (the “Common Stock”), and warrants
exercisable for shares of Common Stock (the “Warrants”). Pursuant to the Securities Purchase
Agreement, the Company also has entered into a Registration Rights Agreement with the Holders (the
“Registration Rights Agreement”) pursuant to which the Company agreed, among other things, to
register the Registrable Securities (as defined in the Registration Rights Agreement), including
the Common Shares and the shares of Common Stock issuable upon exercise of the Warrants, under the
Securities Act of 1933, as amended (the “1933 Act”). In connection with the Company’s obligations
under the Registration Rights Agreement, on                      ___, 20___, the Company filed a
Registration Statement on Form S-3 (File No. 333-                    ) (the “Registration Statement”) with
the Securities and Exchange Commission (the “SEC”) relating to the Registrable Securities which
names each of the Holders as a selling shareholder thereunder.

          In connection with the foregoing, [we][I] advise you that a member of the SEC’s staff has
advised [us][me] by telephone that the SEC has entered an order declaring the Registration
Statement effective under the 1933 Act at [ENTER TIME OF EFFECTIVENESS] on [ENTER DATE OF
EFFECTIVENESS] and [we][I] have no knowledge, after telephonic inquiry of a member of the SEC’s
staff, that any stop order suspending its effectiveness has been issued or that any proceedings for
that purpose are pending before, or threatened by, the SEC and the Registrable Securities are
available for resale under the 1933 Act pursuant to the Registration Statement.

          This letter shall serve as our standing opinion to you that the Common Shares and the shares
of Common Stock underlying the Warrants are freely transferable by the Holders pursuant to the
Registration Statement. You need not require further letters from us to effect any future
legend-free issuance or reissuance of such shares of Common Stock to the Holders as

 

 

contemplated by the Company’s Irrevocable Transfer Agent Instructions dated                      ___, 20_.

	 	 	 	 	 
	 	Very truly yours,

[ISSUER’S COUNSEL]

 	 
	 	By:  	 	 
	 	 	 	 
	 	 	 	 
	 

CC: [LIST NAMES OF HOLDERS]

 

 

EXHIBIT B

SELLING SHAREHOLDERS

     The shares of common stock being offered by the selling shareholders are those previously
issued to the selling shareholders and those issuable to the selling shareholders upon exercise of
the warrants. For additional information regarding the issuance of common stock and the warrants,
see “Private Placement of Common Shares and Warrants” above. We are registering the shares of
common stock in order to permit the selling shareholders to offer the shares for resale from time
to time. Except for the ownership of the common stock and the warrants issued pursuant to the
Securities Purchase Agreement, the selling shareholders have not had any material relationship with
us within the past three years.

     The table below lists the selling shareholders and other information regarding the beneficial
ownership (as determined under Section 13(d) of the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder) of the shares of common stock held by each of the selling
shareholders. The second column lists the number of shares of common stock beneficially owned by
the selling shareholders, based on their respective ownership of shares of common stock and
warrants, as of                     , 2010, assuming exercise of the warrants held by each such selling
shareholder on that date but taking account of any limitations on exercise set forth therein.

     The third column lists the shares of common stock being offered by this prospectus by the
selling shareholders and does not take in account any limitations on exercise of the warrants set
forth therein.

     In accordance with the terms of a registration rights agreement with the holders of the common
stock and the warrants, this prospectus generally covers the resale of the (i) the number of shares
of common stock issued at the closing of the Securities Purchase Agreement and (ii) the number of
shares of common stock issued or issuable upon exercise of the warrants, in each case, determined
as if the outstanding warrants were exercised in full (without regard to any limitations on
exercise contained therein) as of the trading day immediately preceding the date this registration
statement was initially filed with the SEC. Because the exercise price of the warrants may be
adjusted, the number of shares that will actually be issued may be more or less than the number of
shares being offered by this prospectus. The fourth column assumes the sale of all of the shares
offered by the selling shareholders pursuant to this prospectus.

     The selling shareholders may sell all, some or none of their shares in this offering. See
“Plan of Distribution.”

 

 

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Maximum Number of	 	 
	 	 	 	 	 	 	 	 	Shares of Common	 	Number of Shares
	 	 	 	 	Number of Shares of	 	Stock to be Sold	 	of Common Stock
	 	 	 	 	Common Stock Owned	 	Pursuant to this	 	Owned After
	Name of Selling Shareholder	 	Prior to Offering	 	Prospectus	 	Offering

 

 

PLAN OF DISTRIBUTION

     We are registering the shares of common stock previously issued and the shares of common stock
issuable upon exercise of the warrants to permit the resale of these shares of common stock by the
holders of the common stock and warrants from time to time after the date of this prospectus. We
will not receive any of the proceeds from the sale by the selling shareholders 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 shareholders may sell all or a portion of the shares of common stock held 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 shareholders will be responsible for underwriting discounts or commissions or agent’s
commissions. The shares of common stock may be sold 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, pursuant to one or more of the following methods:

	 	•	 	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;
	 
	 	•	 	in transactions otherwise than on these exchanges or systems or in the
over-the-counter market;
	 
	 	•	 	through the writing or settlement of options, whether such options are listed on an
options exchange or otherwise;
	 
	 	•	 	ordinary brokerage transactions and transactions in which the broker-dealer solicits
purchasers;
	 
	 	•	 	block trades in which the broker-dealer will attempt to sell the shares as agent but
may position and resell a portion of the block as principal to facilitate the
transaction;
	 
	 	•	 	purchases by a broker-dealer as principal and resale by the broker-dealer for its
account;
	 
	 	•	 	an exchange distribution in accordance with the rules of the applicable exchange;
	 
	 	•	 	privately negotiated transactions;
	 
	 	•	 	short sales made after the date the Registration Statement is declared effective by
the SEC;
	 
	 	•	 	agreements between broker-dealers and the selling securityholders to sell a
specified number of such shares at a stipulated price per share;

 

 

	 	•	 	a combination of any such methods of sale; and
	 
	 	•	 	any other method permitted pursuant to applicable law.

     The selling shareholders may also sell shares of common stock under Rule 144 promulgated under
the Securities Act of 1933, as amended, if available, rather than under this prospectus. In
addition, the selling shareholders may transfer the shares of common stock by other means not
described in this prospectus. If the selling shareholders 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 shareholders 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 (which discounts,
concessions or commissions as to particular underwriters, broker-dealers or agents may be in excess
of those customary in the types of transactions involved). In connection with sales of the shares
of common stock or otherwise, the selling shareholders may enter into hedging transactions with
broker-dealers, 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 shareholders may also sell shares of common stock
short and 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 shareholders may
also loan or pledge shares of common stock to broker-dealers that in turn may sell such shares.

     The selling shareholders may pledge or grant a security interest in some or all of the
warrants or 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 amending, if necessary, the list of
selling shareholders to include the pledgee, transferee or other successors in interest as selling
shareholders under this prospectus. The selling shareholders 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.

     To the extent required by the Securities Act and the rules and regulations thereunder, the
selling shareholders and any broker-dealer participating in the distribution of the shares of
common stock may be deemed to be “underwriters” within the meaning of the Securities Act, and any
commission paid, or any discounts or concessions allowed to, any such broker-dealer may be deemed
to be underwriting commissions or discounts under the Securities Act. At the time a particular
offering of the shares of common stock is made, a prospectus supplement, if required, will be
distributed, which will set forth the aggregate amount of shares of common stock being offered and
the terms of the offering, including the name or names of any broker-dealers or agents, any
discounts, commissions and other terms constituting compensation from the selling shareholders and
any discounts, commissions or concessions allowed or re-allowed or paid to broker-dealers.

     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 shareholder will sell any or all of the shares of
common stock registered pursuant to the registration statement, of which this prospectus forms a
part.

     The selling shareholders 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, to the extent applicable, 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 shareholders and any other participating person. To the extent
applicable, 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, estimated to be $[ ] in total, including, without limitation,
Securities and Exchange Commission filing fees and expenses of compliance with state securities or
“blue sky” laws; provided, however, a selling shareholder will pay all underwriting discounts and
selling commissions, if any. We will indemnify the selling shareholders against liabilities,
including some liabilities under the Securities Act in accordance with the registration rights
agreements or the selling shareholders will be entitled to contribution. We may be indemnified by
the selling shareholders against civil liabilities, including liabilities under the Securities Act
that may arise from any written information furnished to us by the selling shareholder specifically
for use in this prospectus, in accordance with the related registration rights agreements or we may
be entitled to contribution.

     Once sold under the registration statement, of which this prospectus forms a part, the shares
of common stock will be freely tradable in the hands of persons other than our affiliates.exv10w3

EXHIBIT 10.3

FORM OF WARRANT

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

ARADIGM CORPORATION

Warrant To Purchase Common Stock

Warrant No.:                     

Date of Issuance: June ___, 2010 (“Issuance Date”)

     Aradigm Corporation, a California corporation (the “Company”), hereby certifies that, for good
and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, [               ],
the registered holder hereof or its permitted assigns (the “Holder”), is entitled,
subject to the terms set forth below, to purchase from the Company, at the Exercise Price (as
defined below) then in effect, upon exercise of this Warrant to Purchase Common Stock (including
any Warrants to Purchase Common Stock issued in exchange, transfer or replacement hereof, the
“Warrant”), at any time or times after the Shareholder Approval Date (as defined in the Securities
Purchase Agreement (as defined below)), but not after 11:59 p.m., New York time, on the Expiration
Date (as defined below), [          ] (subject to adjustment as provided herein) fully
paid and nonassessable shares of Common Stock (as defined below) (the “Warrant Shares”). Except as
otherwise defined herein, capitalized terms in this Warrant shall have the meanings set forth in
Section 16. This Warrant is one of the Warrants to Purchase Common Stock (the “SPA Warrants”)
issued pursuant to Section 1 of that certain Securities Purchase Agreement, dated as of June ___,
2010 (the “Subscription Date”), by and among the Company and the investors (the “Buyers”) referred
to therein (the “Securities Purchase Agreement”).

1. EXERCISE OF WARRANT.

     (a) Mechanics of Exercise. Subject to the terms and conditions hereof, this Warrant may
be exercised by the Holder on any day after the Shareholder Approval Date, in whole or in part, by
delivery (whether via facsimile or otherwise) of a written notice, in the form attached

 

 

hereto as
Exhibit A (the “Exercise Notice”), of the Holder’s election to exercise this Warrant. Within one
(1) Trading Day following an exercise of this Warrant as aforesaid, the Holder shall deliver
payment to the Company of an amount equal to the Exercise Price in effect on the date of such
exercise multiplied by the number of Warrant Shares as to which this Warrant was so exercised (the
“Aggregate Exercise Price”) in cash or via wire transfer of immediately available funds. The Holder
shall not be required to deliver the original of this Warrant in order to effect an exercise
hereunder. Execution and delivery of an Exercise Notice with respect to less than all of the
Warrant Shares shall have the same effect as cancellation of the original of this Warrant and
issuance of a new Warrant evidencing the right to purchase the remaining number of Warrant Shares.
Execution and delivery of an Exercise Notice for all of the then-remaining Warrant Shares shall
have the same effect as cancellation of the original of this Warrant after delivery of the Warrant
Shares in accordance with the terms hereof. On or before the first (1st) Trading Day
following the date on which the Company has received an Exercise Notice, the Company shall transmit
by facsimile an acknowledgment of confirmation of receipt of such Exercise Notice to the Holder and
the Company’s transfer agent (the “Transfer Agent”). On or before the third (3rd)
Trading Day following the date on which the Company has received such Exercise Notice, the Company
shall (X) provided that the Transfer Agent is participating in The Depository Trust Company (“DTC”)
Fast Automated Securities Transfer Program, upon the request of the Holder, credit such aggregate
number of shares of Common Stock to which the Holder is entitled pursuant to such exercise to the
Holder’s or its designee’s balance account with DTC through its Deposit/ Withdrawal at Custodian
system, or (Y) if the Transfer Agent is not participating in the DTC Fast Automated Securities
Transfer Program, issue and deliver to the Holder or, at the Holder’s instruction pursuant to the
Exercise Notice, the Holder’s agent or designee, in each case, sent by reputable overnight courier
to the address as specified in the applicable Exercise Notice, a certificate, registered in the
Company’s share register in the name of the Holder or its designee (as indicated in the applicable
Exercise Notice), for the number of shares of Common Stock to which the Holder is entitled pursuant
to such exercise. Upon delivery of an Exercise Notice, the Holder shall be deemed for all corporate
purposes to have become the holder of record of the Warrant Shares with respect to which this
Warrant has been exercised, irrespective of the date such Warrant Shares are credited to the
Holder’s DTC account or the date of delivery of the certificates evidencing such Warrant Shares (as
the case may be). If this Warrant is submitted in connection with any exercise pursuant to this
Section 1(b) and the number of Warrant Shares represented by this Warrant submitted for exercise is
greater than the number of Warrant Shares being acquired upon such exercise, then, at the request
of the Holder, the Company shall as soon as practicable and in no event later than three (3)
Business Days after any exercise and at its own expense, issue and deliver to the Holder (or its
designee) a new Warrant (in accordance with Section 7(d)) representing the right to purchase the
number of Warrant Shares purchasable immediately prior to such exercise under this Warrant, less
the number of Warrant Shares with respect to which this Warrant is exercised. No fractional shares
of Common Stock are to be issued upon the exercise of this Warrant, but rather the number of shares
of Common Stock to be issued shall be
 rounded up to the nearest whole number. The Company shall pay
any and all taxes which may be payable with respect to the issuance and delivery of Warrant Shares
upon exercise of this Warrant. Notwithstanding the foregoing, the
Company’s failure to deliver Warrant Shares to the Holder on or prior to the second (2nd)
Trading Day after the Company’s receipt of the Aggregate Exercise Price shall not be deemed to be a
breach of this Warrant.

2

 

     (b) Mandatory Exercise. Commencing on or after the Shareholder Approval Date (the
“Mandatory Exercise Eligibility Date”), the Company shall have the right to require the Holder to
exercise all, but not less than all, of this Warrant for all of the then-remaining Warrant Shares
in accordance with Section 1 hereof (a “Mandatory Exercise”). The Company may exercise its
right to require exercise under this Section 1(b) on one occasion by delivering a written
notice thereof by facsimile and overnight courier to the Holder (the “Mandatory Exercise Notice”
and the date the Holder receives such notice by facsimile is referred to as the “Mandatory Exercise
Notice Date”). The Mandatory Exercise Notice shall be irrevocable. The Mandatory Exercise Notice
shall (1) state the Trading Day selected for the Mandatory Exercise in accordance with this
Section 1(b), which Trading Day shall be at least five (5) Trading Days but not more than
fifteen (15) Trading Days following the Mandatory Exercise Notice Date (the “Mandatory Exercise
Date”), (2) state the number of shares of Common Stock to be issued to the Holder on the Mandatory
Exercise Date, (3) contain a certification from either the Chief Executive Officer or the Chief
Financial Officer of the Company that the Shareholder Approval Date has occurred and (4) contain a
certification from either the Chief Executive Officer or the Chief Financial Officer of the Company
that the Company has simultaneously taken the same action with respect to all of the SPA Warrants.
Any portion of this Warrant exercised by the Holder after the Mandatory Exercise Notice Date shall
reduce the number of Warrant Shares for which this Warrant is required to be exercised on the
Mandatory Exercise Date. If the Company has elected a Mandatory Exercise, the mechanics of exercise
set forth in this Section 1 shall apply, to the extent applicable, as if the Company had
received from the Holder on the Mandatory Exercise Date an Exercise Notice with respect to all of
the then-remaining Warrant Shares. If the Company elects to cause a Mandatory Exercise of this
Warrant pursuant to this Section 1(b), then it must simultaneously take the same action
with respect to all of the other SPA Warrants.

     (c) Exercise Price. For purposes of this Warrant, “Exercise Price” means $0.1184, subject
to adjustment as provided herein.

     (d) Company’s Failure to Timely Deliver Securities. If the Company shall fail, for any
reason or for no reason, to issue to the Holder within the later of (i) three (3) Trading Days
after receipt of the applicable Exercise Notice and (ii) two (2) Trading Days after the Company’s
receipt of the Aggregate Exercise Price (such later date, the “Share Delivery Deadline”), a
certificate for the number of shares of Common Stock to which the Holder is entitled and register
such shares of Common Stock on the Company’s share register or to credit the Holder’s balance
account with DTC for such number of shares of Common Stock to which the Holder is entitled upon the
Holder’s exercise of this Warrant (as the case may be) (a “Delivery Failure”), and if on or after
such Share Delivery Deadline the Holder 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
issuable upon such exercise that the Holder anticipated receiving from the Company, then, in
addition to all other remedies available to the Holder, the Company shall, within three (3)
Business Days after the Holder’s request and in the Holder’s discretion, either (i) pay cash to the
Holder in an amount equal to the Holder’s total purchase price (including
brokerage commissions, if any) for the shares of Common Stock so purchased (the “Buy-In
Price”), at which point the Company’s obligation to deliver such certificate or credit the Holder’s
balance account with DTC for the number of shares of Common Stock to which the Holder is entitled
upon the Holder’s exercise hereunder (as the case may be) (and to issue such

3

 

shares of Common
Stock) shall terminate, or (ii) promptly honor its obligation to deliver to the Holder a
certificate or certificates representing such shares of Common Stock or credit the Holder’s balance
account with DTC for the number of shares of Common Stock to which the Holder is entitled upon the
Holder’s exercise hereunder (as the case may be) and pay cash to the Holder 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 Sale Price of the Common Stock on the Trading Day immediately preceding
the date of the applicable Exercise Notice.

     (e) Disputes. In the case of a dispute as to the determination of the Exercise Price or
the arithmetic calculation of the number of Warrant Shares to be issued pursuant to the terms
hereof, the Company shall promptly issue to the Holder the number of Warrant Shares that are not
disputed and resolve such dispute in accordance with Section 13.

     (f) Insufficient Authorized Shares. From and after the Shareholder Approval Date, the
Company shall at all times keep reserved for issuance under this Warrant a number of shares of
Common Stock as shall be necessary to satisfy the Company’s obligation to issue shares of Common
Stock hereunder (without regard to any limitation otherwise contained herein with respect to the
number of shares of Common Stock that may be acquirable upon exercise of this Warrant). If,
notwithstanding the foregoing, and not in limitation thereof, at any time while any of the SPA
Warrants remain outstanding the Company does not have a sufficient number of authorized and
unreserved shares of Common Stock (an “Authorized Share Failure”) to satisfy its obligation to
reserve for issuance upon exercise of the SPA Warrants at least a number of shares of Common Stock
equal to the number of shares of Common Stock as shall from time to time be necessary to effect the
exercise of all of the SPA Warrants then outstanding (the “Required Reserve Amount”), then the
Company shall promptly take all action necessary to increase the Company’s authorized shares of
Common Stock to an amount sufficient to allow the Company to reserve the Required Reserve Amount
for all the SPA Warrants then outstanding. Without limiting the generality of the foregoing
sentence, as soon as practicable after the date of the occurrence of an Authorized Share Failure,
but in no event later than ninety (90) days after the occurrence of such Authorized Share Failure,
the Company shall hold a meeting of its shareholders for the approval of an increase in the number
of authorized shares of Common Stock. In connection with such meeting, the Company shall provide
each shareholder with a proxy statement and shall use its reasonable best efforts to solicit its
shareholders’ approval of such increase in authorized shares of Common Stock and to cause its board
of directors to recommend to the shareholders that they approve such proposal.

2. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES. The Exercise Price
and number of Warrant Shares issuable upon exercise of this Warrant are subject to adjustment from
time to time as set forth in this Section 2.

     (a) Stock Dividends and Splits. Without limiting any provision of Section 4, if the
Company, at any time on or after the date of the Securities Purchase Agreement, (i) pays a stock
dividend on one or more classes of its then outstanding shares of Common Stock or otherwise
makes a distribution on any class of capital stock that is payable in shares of Common Stock,
(ii) subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more
classes of its then outstanding shares of Common Stock into a larger number of shares or (iii)
combines (by combination, reverse stock split or otherwise) one or more classes of its then
outstanding

4

 

shares of Common Stock into a smaller number of shares, then in each such case the
Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding immediately before such event and of which the denominator shall
be the number of shares of Common Stock outstanding immediately after such event. Any adjustment
made pursuant to clause (i) of this paragraph shall become effective immediately after the record
date for the determination of shareholders entitled to receive such dividend or distribution, and
any adjustment pursuant to clause (ii) or (iii) of this paragraph shall become effective
immediately after the effective date of such subdivision or combination. If any event requiring an
adjustment under this paragraph occurs during the period that an Exercise Price is used in any
calculation hereunder, then in such calculation such Exercise Price shall be adjusted appropriately
to reflect such event.

     (b) Number of Warrant Shares. Simultaneously with any adjustment to the Exercise Price
pursuant to paragraphs (a) of this Section 2, the number of Warrant Shares that may be purchased
upon exercise of this Warrant shall be increased or decreased proportionately, so that after such
adjustment the aggregate Exercise Price payable hereunder for the adjusted number of Warrant Shares
shall be the same as the aggregate Exercise Price in effect immediately prior to such adjustment
(without regard to any limitations on exercise contained herein).

3. RIGHTS UPON DISTRIBUTION OF ASSETS. Except with respect to such dividends or other
distributions in which an adjustment has been made to the Exercise Price pursuant to Section 2(a)
above, if the Company shall declare or make any dividend or other distribution of its assets (or
rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or
otherwise (including, without limitation, any distribution of cash, stock or other securities,
property or options by way of a dividend, spin off, reclassification, corporate rearrangement,
scheme of arrangement or other similar transaction) (a “Distribution”), at any time after the
issuance of this Warrant, then, in each such case, the Holder shall be entitled to participate in
such Distribution to the same extent that the Holder would have participated therein if the Holder
had held the number of shares of Common Stock acquirable upon a complete exercise of this Warrant
immediately before the date on which a record is taken for such Distribution, or, if no such record
is taken, the date as of which the record holders of shares of Common Stock are to be determined
for the participation in such Distribution.

4. PURCHASE RIGHTS; FUNDAMENTAL TRANSACTIONS.

     (a) Purchase Rights. In addition to any adjustments pursuant to Section 2 above, if at
any time the Company grants, issues or sells any Options, Convertible Securities or rights to
purchase stock, warrants, securities or other property pro rata to the record holders of any class
of shares of Common Stock (the “Purchase Rights”), then the Holder will be entitled to acquire,
upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder
could have acquired if the Holder had held the number of shares of Common Stock acquirable upon a
complete exercise of this Warrant immediately before the date on which a record is taken for the
grant, issuance or sale of such Purchase Rights, or, if no such record is
taken, the date as of which the record holders of shares of Common Stock are to be determined
for the grant, issue or sale of such Purchase Rights.

5

 

     (b) Fundamental Transactions. Prior to the consummation of each Fundamental Transaction
pursuant to which holders of shares of Common Stock are entitled to receive securities or other
assets with respect to or in exchange for shares of Common Stock (a “Corporate Event”), the Company
shall make appropriate provision to insure that the Holder will thereafter have the right to
receive upon an exercise of this Warrant at any time after the consummation of the applicable
Fundamental Transaction but prior to the Expiration Date, in lieu of the shares of the Common Stock
(or other securities, cash, assets or other property (except such items still issuable under
Sections 3 and 4(a) above, which shall continue to be receivable thereafter)) issuable upon the
exercise of the Warrant prior to such Fundamental Transaction, such shares of stock, securities,
cash, assets or any other property whatsoever (including warrants or other purchase or subscription
rights) which the Holder would have been entitled to receive upon the happening of the applicable
Fundamental Transaction had this Warrant been exercised immediately prior to the applicable
Fundamental Transaction (without regard to any limitations on the exercise of this Warrant).
Provision made pursuant to the preceding sentence shall be in a form and substance reasonably
satisfactory to the Holder.

     (c) Application. The provisions of this Section 4 shall apply similarly and equally to
successive Fundamental Transactions and Corporate Events and shall be applied as if this Warrant
(and any such subsequent warrants) were fully exercisable and without regard to any limitations on
the exercise of this Warrant.

5. NONCIRCUMVENTION. The Company hereby covenants and agrees that the Company will not, by
amendment of its Articles of Incorporation (as defined in the Securities Purchase Agreement),
Bylaws (as defined in the Securities Purchase Agreement) or through any reorganization, transfer of
assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or
any other voluntary action, avoid or seek to avoid the observance or performance of any of the
terms of this Warrant, and will at all times in good faith carry out all the provisions of this
Warrant and take all action as may be required to protect the rights of the Holder. Without
limiting the generality of the foregoing, the Company (i) shall not increase the par value of any
shares of Common Stock receivable upon the exercise of this Warrant above the Exercise Price then
in effect, (ii) shall take all such actions as may be reasonably necessary or appropriate in order
that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock
upon the exercise of this Warrant, and (iii) shall, so long as any of the SPA Warrants are
outstanding, take all action necessary to reserve and keep available out of its authorized and
unissued shares of Common Stock, solely for the purpose of effecting the exercise of the SPA
Warrants, the maximum number of shares of Common Stock as shall from time to time be necessary to
effect the exercise of the SPA Warrants then outstanding (without regard to any limitations on
exercise).

6. WARRANT HOLDER NOT DEEMED A SHAREHOLDER. Except as otherwise specifically provided
herein, the Holder, solely in its capacity as a holder of this Warrant, shall not be entitled to
vote or receive dividends or be deemed the holder of share capital of the Company for any purpose,
nor shall anything contained in this Warrant be construed to confer upon the Holder, solely in its
capacity as the Holder of this Warrant, any of the rights of a
shareholder of the Company or any right to vote, give or withhold consent to any corporate action
(whether any reorganization, issue of stock, reclassification of stock, consolidation, merger,
conveyance or otherwise), receive notice of meetings, receive dividends or subscription

6

 

rights, or
otherwise, prior to the issuance to the Holder of the Warrant Shares which it is then entitled to
receive upon the due exercise of this Warrant. In addition, nothing contained in this Warrant
shall be construed as imposing any liabilities on the Holder to purchase any securities (upon
exercise of this Warrant or otherwise) or as a shareholder of the Company, whether such liabilities
are asserted by the Company or by creditors of the Company. Notwithstanding this Section 6, the
Company shall provide the Holder with copies of the same notices and other information given to the
shareholders of the Company generally, contemporaneously with the giving thereof to the
shareholders.

7. REISSUANCE OF WARRANTS.

     (a) Transfer of Warrant. If this Warrant is to be transferred, the Holder shall surrender
this Warrant to the Company, whereupon the Company will forthwith issue and deliver upon the order
of the Holder a new Warrant (in accordance with Section 7(d)), registered as the Holder may
request, representing the right to purchase the number of Warrant Shares being transferred by the
Holder and, if less than the total number of Warrant Shares then underlying this Warrant is being
transferred, a new Warrant (in accordance with Section 7(d)) to the Holder representing the right
to purchase the number of Warrant Shares not being transferred.

     (b) Lost, Stolen or Mutilated Warrant. Upon receipt by the Company of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant (as to
which a written certification and the indemnification contemplated below shall suffice as such
evidence), and, in the case of loss, theft or destruction, of any indemnification undertaking by
the Holder to the Company in customary and reasonable form and, in the case of mutilation, upon
surrender and cancellation of this Warrant, the Company shall execute and deliver to the Holder a
new Warrant (in accordance with Section 7(d)) representing the right to purchase the Warrant Shares
then underlying this Warrant.

     (c) Exchangeable for Multiple Warrants. This Warrant is exchangeable, upon the surrender
hereof by the Holder at the principal office of the Company, for a new Warrant or Warrants (in
accordance with Section 7(d)) representing in the aggregate the right to purchase the number of
Warrant Shares then underlying this Warrant, and each such new Warrant will represent the right to
purchase such portion of such Warrant Shares as is designated by the Holder at the time of such
surrender; provided, however, no warrants for fractional shares of Common Stock shall be given.

     (d) Issuance of New Warrants. Whenever the Company is required to issue a new Warrant
pursuant to the terms of this Warrant, such new Warrant (i) shall be of like tenor with this
Warrant, (ii) shall represent, as indicated on the face of such new Warrant, the right to purchase
the Warrant Shares then underlying this Warrant (or in the case of a new Warrant being issued
pursuant to Sections 7(a) or 7(c), the Warrant Shares designated by the Holder which, when added to
the number of shares of Common Stock underlying the other new Warrants issued in connection with
such issuance, does not exceed the number of Warrant Shares then underlying this Warrant), (iii)
shall have an issuance date, as indicated on the face of such new Warrant
which is the same as the Issuance Date, and (iv) shall have the same rights and conditions as
this Warrant.

7

 

8. NOTICES. Whenever notice is required to be given under this Warrant, unless otherwise
provided herein, such notice shall be given in accordance with Section 9(f) of the Securities
Purchase Agreement. The Company shall provide the Holder with prompt written notice of all actions
taken pursuant to this Warrant, including in reasonable detail a description of such action and the
reason therefor. Without limiting the generality of the foregoing, the Company will give written
notice to the Holder (i) immediately upon each adjustment of the Exercise Price and the number of
Warrant Shares, setting forth in reasonable detail, and certifying, the calculation of such
adjustment(s) and (ii) at least fifteen (15) days prior to the date on which the Company closes its
books or takes a record (A) with respect to any dividend or distribution upon the shares of Common
Stock, (B) with respect to any grants, issuances or sales of any Options, Convertible Securities or
rights to purchase stock, warrants, securities or other property to holders of shares of Common
Stock or (C) for determining rights to vote with respect to any Fundamental Transaction,
dissolution or liquidation, provided in each case that such information shall be made known to the
public prior to or in conjunction with such notice being provided to the Holder and (iii) at least
ten (10) Trading Days prior to the consummation of any Fundamental Transaction. To the extent that
any notice provided hereunder constitutes, or contains, material, non-public information regarding
the Company or any of its subsidiaries, the Company shall simultaneously file such notice with the
SEC (as defined in the Securities Purchase Agreement) pursuant to a Current Report on Form 8-K. It
is expressly understood and agreed that the time of execution specified by the Holder in each
Exercise Notice shall be definitive and may not be disputed or challenged by the Company.

9. AMENDMENT AND WAIVER. Except as otherwise provided herein, the provisions of this
Warrant may be amended and the Company may take any action herein prohibited, or omit to perform
any act herein required to be performed by it, only if the Company has obtained the written consent
of the Holder. No waiver shall be effective unless it is in writing and signed by an authorized
representative of the waiving party.

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

11. GOVERNING LAW. This Warrant shall be governed by and construed and enforced in
accordance with, and all questions concerning the construction, validity, interpretation and
performance of this Warrant shall be governed by, the internal laws of the State of New York,
without giving effect to any choice of law or conflict of law provision or rule (whether of the

8

 

State of New York or any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York.

12. CONSTRUCTION; HEADINGS. The headings of this Warrant are for convenience of reference
and shall not form part of, or affect the interpretation of, this Warrant. Terms used in this
Warrant but defined in the other Transaction Documents shall have the meanings ascribed to such
terms on the Closing Date (as defined in the Securities Purchase Agreement) in such other
Transaction Documents unless otherwise consented to in writing by the Holder.

13. DISPUTE RESOLUTION. In the case of a dispute as to the determination of the Exercise
Price, the Closing Bid Price, the Closing Sale Price or fair market value or the arithmetic
calculation of the Warrant Shares (as the case may be), the Company or the Holder (as the case may
be) shall submit the disputed determinations or arithmetic calculations (as the case may be) via
facsimile (i) within two (2) Business Days after receipt of the applicable notice giving rise to
such dispute to the Company or the Holder (as the case may be) or (ii) if no notice gave rise to
such dispute, at any time after the Holder learned of the circumstances giving rise to such dispute
(including, without limitation, as to whether any issuance or sale or deemed issuance or sale was
an issuance or sale or deemed issuance or sale of Excluded Securities). If the Holder and the
Company are unable to agree upon such determination or calculation (as the case may be) of the
Exercise Price, the Closing Bid Price, the Closing Sale Price or fair market value or the number of
Warrant Shares (as the case may be) within three (3) Business Days of such disputed determination
or arithmetic calculation being submitted to the Company or the Holder (as the case may be), then
the Company shall, within two (2) Business Days submit via facsimile (a) the disputed determination
of the Exercise Price, the Closing Bid Price, the Closing Sale Price or fair market value (as the
case may be) to an independent, reputable investment bank selected by the Company and approved by
the Holder or (b) the disputed arithmetic calculation of the Warrant Shares 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 (as the case may be)
and notify the Company and the Holder of the results no later than ten (10) Business Days from the
time it receives such disputed determinations or calculations (as the case may be). Such investment
bank’s or accountant’s determination or calculation (as the case may be) shall be binding upon all
parties absent demonstrable error.

14. REMEDIES, CHARACTERIZATION, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The
remedies provided in this Warrant shall be cumulative and in addition to all other remedies
available under this Warrant and the other Transaction Documents, at law or in equity (including a
decree of specific performance and/or other injunctive relief), and nothing herein shall limit the
right of the Holder to pursue actual damages for any failure by the Company to comply with the
terms of this Warrant. The Company covenants to the Holder that there shall be no characterization
concerning this instrument other than as expressly provided herein. Amounts set forth or provided
for herein with respect to payments, exercises and the like (and the computation thereof) shall be
the amounts to be received by the Holder and shall not, except as expressly provided herein, be
subject to any other obligation of the Company (or the performance thereof). The Company
acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach
may be inadequate. The Company therefore agrees that, in the event of any such breach

9

 

or threatened
breach, the holder of this Warrant shall be entitled, in addition to all other available remedies,
to an injunction restraining any breach, without the necessity of showing economic loss and without
any bond or other security being required. The Company shall provide all information and
documentation to the Holder that is requested by the Holder to enable the Holder to confirm the
Company’s compliance with the terms and conditions of this Warrant (including, without limitation,
compliance with Section 2 hereof). The issuance of shares and certificates for shares as
contemplated hereby upon the exercise of this Warrant shall be made without charge to the Holder or
such shares for any issuance tax or other costs in respect thereof, provided that the Company shall
not be required to pay any tax which may be payable in respect of any transfer involved in the
issuance and delivery of any certificate in a name other than the Holder or its agent on its
behalf.

15. TRANSFER. This Warrant may not be offered for sale, sold, transferred or assigned by
the Holder except in a manner consistent with the restrictive legend on the first page of this
Warrant; provided, however, that no such assignment shall relieve the Holder of its
obligations hereunder if such assignee fails to perform such obligations.

16. CERTAIN DEFINITIONS. For purposes of this Warrant, the following terms shall have the
following meanings:

     (a) “Bloomberg” means Bloomberg, L.P.

     (b) “Business Day” means any day other than Saturday, Sunday or other day on which commercial
banks in The City of New York are authorized or required by law to remain closed.

     (c) “Closing Bid Price” and “Closing Sale Price” means, for any security as of any date, the
last closing bid price and last closing trade price, respectively, for such security on the
Principal Market, as reported by Bloomberg, or, if the Principal Market begins to operate on an
extended hours basis and does not designate the closing bid price or the closing trade price (as
the case may be) then the last bid price or last trade price, respectively, of such security prior
to 4:00:00 p.m., New York time, as reported by Bloomberg, or, if the Principal Market is not the
principal securities exchange or trading market for such security, the last closing bid price or
last trade price, respectively, 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 bid price or last trade price, respectively, 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 or last trade price, respectively, is reported for such
security by Bloomberg, the average of the bid prices, or the ask prices, respectively, 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 or the Closing Sale Price cannot be
calculated for a security on a particular date on any of the foregoing bases, the Closing Bid Price
or the Closing Sale Price (as the case may be) 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 such dispute shall be
resolved in accordance with the procedures in Section 13. All such determinations shall be appropriately

10

 

adjusted for any stock dividend, stock split, stock combination or other similar
transaction during such period.

     (d) “Common Shares” shall have the meaning as set forth in the Securities Purchase Agreement.

     (e) “Common Stock” means (i) the Company’s shares of common stock, no par value per share, and
(ii) any capital stock into which such common stock shall have been changed or any share capital
resulting from a reclassification of such common stock.

     (f) “Convertible Securities” means any stock or other security (other than Options) that is at
any time and under any circumstances, directly or indirectly, convertible into, exercisable or
exchangeable for, or which otherwise entitles the holder thereof to acquire, any shares of Common
Stock.

     (g) “Eligible Market” means The New York Stock Exchange, the NYSE Amex, the Nasdaq Global
Market, the Nasdaq Global Select Market, the Nasdaq Capital Market or the Principal Market.

     (h) “Expiration Date” means the earlier to occur of ten (10) Business Days after the
Shareholder Approval Date and 90 days after the Issuance Date; provided, however,
if such date falls on a day other than a Business Day or on which trading does not take place on
the Principal Market (a “Holiday”), the Expiration Date shall be the next date that is not a
Holiday.

     (i) “Fundamental Transaction” means that (i) the Company or any of its Subsidiaries shall,
directly or indirectly, in one or more related transactions, (1) consolidate or merge with or into
(whether or not the Company or any of its Subsidiaries is the surviving corporation) any other
Person, or (2) sell, lease, license, assign, transfer, convey or otherwise dispose of all or
substantially all of its respective properties or assets to any other Person, or (3) allow any
other Person to make a purchase, tender or exchange offer that is accepted by the holders of more
than 50% of the outstanding shares of Voting Stock of the Company (not including any shares of
Voting Stock of the Company held by the Person or Persons making or party to, or associated or
affiliated with the Persons making or party to, such purchase, tender or exchange offer), or (4)
consummate a stock or share purchase agreement or other business combination (including, without
limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with any other
Person whereby such other Person acquires more than 50% of the outstanding shares of Voting Stock
of the Company (not including any shares of Voting Stock of the Company held by the other Person or
other Persons making or party to, or associated or affiliated with the other Persons making or
party to, such stock or share purchase agreement or other business combination), or (5) reorganize,
recapitalize or reclassify the Common Stock, or (ii) any “person” or “group” (as these terms are
used for purposes of Sections 13(d) and 14(d) of the 1934 Act and the rules and regulations
promulgated thereunder) is or shall become the “beneficial owner” (as defined in Rule 13d-3 under
the 1934 Act), directly or indirectly, of 50% of the aggregate ordinary voting power represented by
issued and outstanding Voting Stock of the Company.

11

 

     (j) “Options” means any rights, warrants or options to subscribe for or purchase shares of
Common Stock or Convertible Securities.

     (k) “Parent Entity” of a Person means an entity that, directly or indirectly, controls the
applicable Person and whose common stock or equivalent equity security is quoted or listed on an
Eligible Market, or, if there is more than one such Person or Parent Entity, the Person or Parent
Entity with the largest public market capitalization as of the date of consummation of the
Fundamental Transaction.

     (l) “Person” means an individual, a limited liability company, a partnership, a joint venture,
a corporation, a trust, an unincorporated organization, any other entity or a government or any
department or agency thereof.

     (m) “Principal Market” means the OTC Bulletin Board.

     (n) “Successor Entity” means the Person (or, if so elected by the Holder, the Parent Entity)
formed by, resulting from or surviving any Fundamental Transaction or the Person (or, if so elected
by the Holder, the Parent Entity) with which such Fundamental Transaction shall have been entered
into.

     (o) “Trading Day” means any day on which the Common Stock is traded on the Principal Market,
or, if the Principal Market is not the principal trading market for the Common Stock, then on the
principal securities exchange or securities market on which the Common Stock is then traded,
provided that “Trading Day” shall not include any day on which the Common Stock is scheduled to
trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is
suspended from trading during the final hour of trading on such exchange or market (or if such
exchange or market does not designate in advance the closing time of trading on such exchange or
market, then during the hour ending at 4:00:00 p.m., New York time) unless such day is otherwise
designated as a Trading Day in writing by the Holder.

     (p) “Voting Stock” of a Person means capital stock of such Person of the class or classes
pursuant to which the holders thereof have the general voting power to elect, or the general power
to appoint, at least a majority of the board of directors, managers or trustees of such Person
(irrespective of whether or not at the time capital stock of any other class or classes shall have
or might have voting power by reason of the happening of any contingency).

[signature page follows]

12

 

     IN WITNESS WHEREOF, the Company and the Holder have caused this Warrant to Purchase Common
Stock to be duly executed as of the Issuance Date set out above.

	 	 	 	 	 
	 	ARADIGM CORPORATION

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	[HOLDER]

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 

 

 

EXHIBIT A

EXERCISE NOTICE

TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS

WARRANT TO PURCHASE COMMON STOCK

ARADIGM CORPORATION

     The undersigned holder hereby exercises the right to purchase                                          of the shares
of Common Stock (“Warrant Shares”) of Aradigm Corporation, a California corporation (the
“Company”), evidenced by Warrant No.                      (the “Warrant”). Capitalized terms used herein and
not otherwise defined shall have the respective meanings set forth in the Warrant.

     1. Payment of Exercise Price. The Holder shall pay the Aggregate Exercise Price in the
sum of $                                         to the Company in accordance with the terms of the Warrant.

     2. Delivery of Warrant Shares. The Company shall deliver to Holder, or its designee
or agent as specified below,                      Warrant Shares in accordance with the terms of the Warrant.
Delivery shall be made to Holder, or for its benefit, to the following address:

	 	 	 	 	 
	 
	 

	 	 

	 	 
	 
	 	 	 	 
	 

	 	 

	 	 
	 
	 	 	 	 
	 

	 	 

	 	 
	 
	 	 	 	 
	 

	 	 

	 	 

Date:                                          ___,                     

	 	 	 	 	 
	 	 
	 	 
	    Name of Registered Holder 	 
	 	 
	 	 
	By:  	 	 
	 	Name:  	 	 
	 	Title:  	 	 

 

 

	 	 	 	 	 

ACKNOWLEDGMENT

     The Company hereby acknowledges this Exercise Notice and hereby directs                                          to
issue the above indicated number of shares of Common Stock in accordance with the Transfer Agent
Instructions dated June ___, 2010, from the Company and acknowledged and agreed to by
                                        .

	 	 	 	 	 
	 	ARADIGM CORPORATION

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:

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