EXHIBIT 1
STOCK PURCHASE AGREEMENT
ARADIGM CORPORATION
October 22, 2001
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made and entered into
as of October 22, 2001 (the "Effective Date"), by and between ARADIGM
CORPORATION, a California corporation ("Aradigm"), and NOVO NORDISK
PHARMACEUTICALS, INC. a Delaware corporation ("Novo Nordisk").
RECITALS
A. Aradigm and Novo Nordisk are parties to that certain Development and
License Agreement dated June 2, 1998 (the "Development Agreement").
B. In connection with the Development Agreement, Aradigm desires to sell
and issue to Novo Nordisk, and Novo Nordisk desires to buy, shares of Aradigm's
common stock, no par value (the "Common Stock") as provided herein.
NOW, THEREFORE, the parties hereto agree as follows:
1. PURCHASE AND SALE.
Subject to the terms and conditions hereof, and in reliance upon the
representations, warranties and agreements contained herein, Aradigm hereby
agrees to issue and sell to Novo Nordisk, and Novo Nordisk hereby agrees to
purchase from Aradigm, the aggregate number of shares of Aradigm's Common Stock
(the "Shares") determined in accordance with Sections 1.1 and 1.4 hereof.
1.1 Initial Shares. On the First Closing Date (as defined in Section 1.2),
Aradigm shall issue and sell to Novo Nordisk, and Novo Nordisk shall purchase
from Aradigm for twenty million dollars ($20,000,000) (the "Initial Purchase
Price"), the number of shares of Aradigm's Common Stock (the "Initial Shares")
equal to the quotient of twenty million dollars ($20,000,000) divided by the
First Market Price (as hereinafter defined). In the event the number of Initial
Shares includes a fraction of a share, the number of Initial Shares shall be
increased to the nearest whole number of shares and the Initial Purchase Price
shall be increased to equal the First Market Price times such whole number of
Initial Shares. The "First Market Price" shall be the greater of (a) the
average of the closing prices of Aradigm's Common Stock on the NASDAQ National
Market, as reported by The Wall Street Journal, Western Edition, for the thirty
(30) trading days immediately prior to the Effective Date, and (b) the average
of such closing prices for the five (5) trading days immediately prior to the
Effective Date.
1.2 First Closing Date. The closing of the sale and purchase of the
Initial Shares (the "First Closing") shall take place on the date (the "First
Closing Date") that is ten (10) business days after the Effective Date, subject
to fulfillment of the closing conditions set forth in Article 6.
1.3 Delivery. At the First Closing, Aradigm will deliver to Novo Nordisk a
certificate registered in the name of Novo Nordisk, representing the Initial
Shares to be
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purchased by Novo Nordisk from Aradigm, dated the First Closing Date, against
payment of the Initial Purchase Price by wire transfer, a check made payable to
the order of Aradigm, or any combination thereof.
1.4 Additional Shares.
(a) At any time following the First Closing Date, Aradigm shall have the
right, but not the obligation, to sell to Novo Nordisk the Additional Shares,
as provided below. Such right shall be effected by Aradigm's delivery to Novo
Nordisk of a written notice specifying its election to sell to Novo Nordisk
such Additional Shares (a "Shares Sale Notice"). Notwithstanding the foregoing,
Novo Nordisk may cancel such right by written notice to Aradigm on or before
November 14, 2001 in the event the board of directors of Novo Nordisk A/S does
not approve Novo Nordisk's agreement to purchase such Additional Shares.
Effective immediately upon such cancellation, the Patent Agreement and the
Supply Agreement, each of even date herewith by and between Aradigm and Novo
Nordisk, shall automatically terminate and be of no further force or effect.
(b) Provided that Aradigm has delivered to Novo Nordisk a Shares Sale
Notice in compliance with subsection 1.4(a) and subject to the provisions of
subsections 1.4(c) and 1.4(d), on each Additional Closing Date (as defined in
Section 1.5), Aradigm shall issue and sell to Novo Nordisk, and Novo Nordisk
shall purchase from Aradigm for an amount specified in such Shares Sale Notice,
which amount shall be no less than five million dollars ($5,000,000) and no
more than ten million dollars ($10,000,000) (such amount, the "Additional
Purchase Price"), the number of shares of Aradigm's Common Stock (the
"Additional Shares") equal to the quotient of such Additional Purchase Price
divided by the Additional Market Price (as hereinafter defined); provided,
however, that the aggregate Additional Purchase Price for all Additional Shares
purchased hereunder shall not exceed twenty-five million dollars ($25,000,000)
(the "Maximum Amount"). The "Additional Market Price" for each Additional
Closing shall be the average of the closing prices of Aradigm's Common Stock on
the NASDAQ National Market, as reported by The Wall Street Journal, Western
Edition for the thirty (30) trading days immediately prior to the date of the
Shares Sale Notice. In the event the number of Additional Shares issuable
pursuant to this Section 1.4 includes a fractional share, the number of
Additional Shares shall be increased to the nearest whole number of shares, and
the Additional Purchase Price shall be increased to equal the Additional Market
Price times such whole number of Additional Shares.
(c) Aradigm shall not deliver a Shares Sale Notice if it would result in
(i) the aggregate Below Market Shares (as defined below) being greater than or
equal to nineteen and nine-tenths percent (19.9%) of the then currently
outstanding Common Stock or (ii) Novo Nordisk beneficially owning forty-five
percent (45%) or more of the then currently outstanding Common Stock, based
upon the number of shares of Common Stock currently beneficially owned by Novo
Nordisk plus any Shares purchased by Novo Nordisk or any of its affiliates
pursuant to this Agreement, less any shares of Common Stock sold or otherwise
disposed of by Novo Nordisk or any of its affiliates. During the period that
Aradigm has the right to sell Additional Shares to Novo Nordisk, Novo Nordisk
hereby agrees to promptly notify Aradigm of any sale or disposition of any
shares of Common Stock held by it or any or its affiliates. "Below
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Market Shares" shall be any Additional Shares sold at an Additional Market
Price that is less than the First Market Price.
(d) Aradigm shall not deliver a Shares Sale Notice at any time when the
representation set forth in Section 2.8 would not be true as of the date of
delivery of the Shares Sale Notice.
(e) Aradigm may deliver a Shares Sale Notice no more than once every three
(3) months beginning December 1, 2001 until the Maximum Amount has been
exhausted.
1.5 Additional Closing Dates. Each closing of the sale and purchase of
Additional Shares (each, an "Additional Closing") shall take place no later
than fifteen (15) business days after the date of delivery of a Share Sales
Notice to Novo Nordisk (each, an "Additional Closing Date"), subject to the
fulfillment of the closing conditions set forth in Article 7.
1.6 Delivery. At each Additional Closing, Aradigm will deliver to Novo
Nordisk a certificate registered in the name of Novo Nordisk, representing the
Additional Shares to be purchased by Novo Nordisk from Aradigm, dated the
Additional Closing Date, against payment of the Additional Purchase Price by
wire transfer, a check made payable to the order of Aradigm, or any combination
of the above.
1.7 Rule 144 Reporting. With a view to making available to Novo Nordisk
the benefits of certain rules and regulations of the Securities and Exchange
Commission (the "SEC") which may permit the sale of the Shares to the public
without registration, Aradigm agrees to use its best efforts to:
(a) Comply with the current public information requirement, as those terms
are understood and defined in Rule 144 ("Rule 144") under the Securities Act of
1933, as amended (the "1933 Act") or any similar or analogous rule promulgated
under the 1933 Act, as long as the Shares are outstanding; and
(b) File with the SEC, in a timely manner, all reports and other documents
required of Aradigm under the 1933 Act and the Securities Act of 1934, as
amended (the "1934 Act").
1.8 "Market Stand-Off" Agreements. Subject to the last sentence of this
Section 1.8, Novo Nordisk hereby agrees that (a) prior to the second
anniversary of the Effective Date or until its ownership interest has been
diluted to less than five percent (5%) of the Common Stock outstanding, if
earlier, it shall not sell or otherwise transfer or dispose of any of the
shares of Common Stock held by it, and (b) prior to the second anniversary of
each Additional Closing Date or until its ownership interest has been diluted
to less than five percent (5%) of the Common Stock outstanding, if earlier, it
shall not sell or otherwise transfer or dispose of any of the Additional Shares
purchased at such Additional Closing (the periods described in clauses (a) and
(b) being hereinafter referred to as the "Market-Stand Off Periods"). Aradigm
may impose stop-transfer instructions with respect to securities subject to the
foregoing restriction until the end of the applicable period. The foregoing
notwithstanding, Novo Nordisk (or any of its affiliates) may at any time sell
shares of Common Stock owned by it in any sale, transfer or other disposition
made (i) to an affiliate of Novo Nordisk that agrees to be
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bound by the provisions of this Agreement, (ii) in connection with the
acquisition of all, or substantially all, of the Company's outstanding Common
Stock by a third party, (iii) no later than six (6) months after the completion
of any transaction or series of related transactions in which shareholders of
Aradigm other than Novo Nordisk have transferred in excess of thirty percent
(30%) of the outstanding Common Stock of Aradigm to a third party acquiror, of
up to the percentage of shares of Common Stock then owned by Novo Nordisk that
equals the percentage of the outstanding shares of Common Stock held by
shareholders other than Novo Nordisk that have been so acquired or (vi) after
termination of the Development Programme (as defined in the Development
Agreement).
1.9 Public Offering Lock-Up. In addition, Novo Nordisk hereby agrees that
during the time period recommended by the underwriter not to exceed one hundred
eighty (180) days following the effective date of a registration statement of
Aradigm filed under the 1933 Act, it shall not, to the extent requested by the
underwriter, sell or otherwise transfer or dispose of any Common Stock of
Aradigm held by it at any time during such period (except Common Stock included
in such registration or any sale, transfer or other disposition of Shares made
to an affiliate of Novo Nordisk that agrees to be bound by the provisions of
this Agreement); provided, however, that:
(a) Such agreement shall be applicable only to registration statements of
Aradigm which cover Common Stock (or other securities) to be sold on its behalf
to the public;
(b) Such agreement shall be applicable only if Novo Nordisk holds at least
five percent (5%) of the Common Stock of Aradigm then outstanding; and
(c) All officers and directors of Aradigm and any other stockholders
owning at least five percent (5%) of the Common Stock of Aradigm then
outstanding (excluding stockholders that acquired their positions in the public
market) enter into similar agreements.
During the period in which this Section 1.9 remains in effect, if Novo Nordisk
is requested to enter into such a lock-up agreement in connection with a public
offering of Aradigm Common Stock in which any other shareholders of Aradigm are
allowed to sell shares held by them, Novo Nordisk shall have a "piggyback"
right at its option to include shares then held by it in such offering on a pro
rata basis with such other selling shareholders.
1.10 Demand Registration. (a) If Novo Nordisk desires to effect the
registration on Form S-3 under the 1933 Act of any of the shares of Common
Stock owned by it or any of its affiliates ("Registrable Shares"), it may make
one (1) written request, subject to adjustment under Section 1.10(b) below (the
"Demand Request"), that Aradigm effect such registration; provided that such
request is made no earlier than (i) sixty (60) days prior to the expiration of
the Market Stand-Off Period relating to such Shares or (ii) sixty (60) days
prior to the expiration of any "lock-up" period required by the underwriters in
connection with a public offering by Aradigm. The Demand Request will specify
the number of Registrable Shares proposed to be sold and will also specify the
intended method of disposition thereof. Upon receipt of such Demand Request,
Aradigm shall, at its own expense (which expense shall include all fees and
expenses of counsel, public accountants or other advisors or experts retained
by Aradigm, all reasonable fees and expenses of counsel for Novo Nordisk (which
counsel shall be selected by
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Novo Nordisk) in an amount which shall not exceed fifty thousand dollars
($50,000), all filing fees, all fees and expenses incurred to comply with blue
sky or other securities laws, all printing expenses and all internal expenses
of Aradigm, but shall not include underwriting fees, discounts or commissions
attributable to the sale of the Registrable Shares, out-of-pocket expenses of
Novo Nordisk or any of its affiliates, transfer taxes or the fees and expenses
of underwriter's counsel) prepare and file with the SEC a registration
statement on Form S-3 (the "Resale Registration Statement") under the 1933 Act
to provide for the resale by Novo Nordisk and its affiliates of the number of
Registrable Shares specified in the Demand Request. In the event Novo Nordisk
delivers to Aradigm a Demand Request prior to the end of a Market Stand-Off
Period or a "lock-up" period, Aradigm shall use its reasonable efforts to file
and cause the Resale Registration Statement to be effective prior to the
expiration of such Market Stand-Off Period or "lock-up" period, as the case may
be. In all other cases, Aradigm will use its reasonable efforts to cause the
Resale Registration Statement to be filed and become effective as soon as
reasonably practicable after receipt of the Demand Request. Aradigm shall cause
the Resale Registration Statement filed pursuant to this Section 1.10 to remain
effective for no less than six (6) months (or, if earlier, until the date all
of the Registrable Shares covered by the Resale Registration Statement have
been sold); provided, however, Aradigm may suspend the use of, or delay the
effective date of, any Resale Registration Statement by giving written notice
to Novo Nordisk, if Aradigm shall have determined, in its good faith reasonable
judgment, that such suspension or delay in the effective date of the Resale
Registration Statement is advisable because the filing or effectiveness of the
Resale Registration Statement would be detrimental to Aradigm and its
shareholders; and provided further that Aradigm suspends the use of or delays
the effective date of all other registration statements of Aradigm that
register the securities of Aradigm being or to be resold by the holders
thereof. Any suspension or delay in the effective date of the Resale
Registration Statement by Aradigm pursuant to this Section 1.10 shall be for
the shortest reasonable period of time (but not exceeding one hundred twenty
(120) days).
(a) Novo Nordisk shall have the right to make one (1) additional Demand
Request in accordance with this Section 1.10 for each Additional Closing that
occurs hereunder.
(b) The Demand Request may not relate to an underwritten offering, unless
Novo Nordisk proposes to sell Registered Shares for a minimum aggregate amount
of twenty million dollars ($20,000,000). In the event of an underwritten
offering pursuant to this Section 1.10(c), the managing underwriters of any
offering effected pursuant to this Section 1.10(c) shall be selected by Novo
Nordisk, and the price, terms and provisions of the offering shall be subject
to approval by Novo Nordisk In order to facilitate any underwritten offering
pursuant to this Section 1.10(c), Aradigm agrees to enter into customary
agreements (including an underwriting agreement in customary form and an
agreement with Novo Nordisk containing customary indemnification provisions and
provisions regarding the registration procedures to be followed in effecting
any offering under this Section 1.10(c)) and take such other actions as are
reasonably required in order to facilitate the disposition of the Registrable
Shares. In order to participate in an underwritten offering effected pursuant
to this Section 1.10(c), Novo Nordisk agrees that it shall (and shall cause any
of its affiliates participating in such offering to) (i) sell the Registrable
Shares subject to such offer on the basis provided in the underwriting
arrangements approved by Novo Nordisk and (ii) complete and execute all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements.
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2. REPRESENTATIONS AND WARRANTIES OF ARADIGM.
Except as otherwise set forth on the Schedule of Exceptions attached
hereto as Exhibit A, Aradigm hereby represents and warrants to Novo Nordisk as
of the date hereof and as of the First Closing Date as follows:
2.1 Organization and Standing; Articles and Bylaws. Aradigm is a
corporation duly organized, validly existing and in good standing under the
laws of the State of California, and has full power and authority to own and
operate its properties and assets and to carry on its business as presently
conducted and as proposed to be conducted. Aradigm is qualified as a foreign
corporation to do business in each jurisdiction in the United States in which
the ownership of its property or the conduct of its business requires such
qualification, except where any statutory fines or penalties or any corporate
disability imposed for the failure to qualify would not materially adversely
affect Aradigm, its assets, financial condition or operations. True and correct
copies of Aradigm's Amended and Restated Articles of Incorporation and Bylaws
currently in effect have been delivered to Novo Nordisk.
2.2 Authorization. All corporate action on the part of Aradigm, its
officers, directors and stockholders necessary for the authorization, execution
and delivery of this Agreement, the performance of all Aradigm's obligations
hereunder, and for the authorization, issuance, sale and delivery of the
Initial Shares and the Additional Shares has been taken or will be taken prior
to each of the First Closing and each Additional Closing, respectively. This
Agreement, when executed and delivered, shall constitute a valid and legally
binding obligation of Aradigm in accordance with its terms, subject to laws of
general application relating to bankruptcy, insolvency and the relief of
debtors, and subject to general equity principles.
2.3 Validity of Shares. The sale of the Shares is not subject to any
preemptive rights or rights of first refusal that have not been waived and,
when issued, sold and delivered in compliance with the provisions of this
Agreement, the Shares will be validly issued, fully paid and nonassessable, and
will be free of any liens or encumbrances created by Aradigm; provided,
however, that the Shares may be subject to restrictions on transfer under state
and/or federal securities laws as set forth herein or as otherwise required by
such laws at the time a transfer is proposed.
2.4 Offering. Assuming the accuracy of the representations and warranties
of Novo Nordisk contained in Article 3 hereof, the offer, issue, and sale of
Shares are exempt from the registration and prospectus delivery requirements of
the 1933 Act, and the Initial Shares have been and the Additional Shares will
be registered or qualified (or are exempt from registration and qualification)
under the registration, permit, or qualification requirements of all applicable
state securities laws.
2.5 Full Disclosure.
(a) As of the First Closing, Aradigm has furnished to Novo Nordisk the
following documents, and the information contained in such documents, as of
their respective dates (or if amended prior to the date of the First Closing,
as of the date of such amendment), did not contain any untrue statement of a
material fact, did not omit to state any material fact
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necessary to make any statement, in light of the circumstances under which such
statement was made, not misleading, and complied in all material respects with
the requirements of the 1934 Act and the rules and regulations of the SEC
promulgated thereunder:
Aradigm's annual report on Form 10-K as amended by Form 10-K/A for the fiscal
year ended December 31, 2000; and Aradigm's quarterly reports on Form 10-Q for
the quarters ended March 31, 2001 and June 30, 2001, and any additional
quarterly report on Form 10-Q or current reports on Form 8-K filed after the
Effective Date but prior to the First Closing Date (the "Current SEC
Documents").
The financial statements of Aradigm included in the Current SEC Documents
(the "Financial Statements") comply as to form in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto. The Financial Statements have been prepared in
accordance with generally accepted accounting principles consistently applied
and fairly present the consolidated financial position of Aradigm and any
subsidiaries at the dates thereof and the consolidated results of their
operations and consolidated cash flows for the periods then ended (subject, in
the case of unaudited statements, to normal, recurring adjustments or to the
extent that such unaudited statements do not include footnotes).
(b) As of each Additional Closing, Aradigm shall have furnished to Novo
Nordisk the following documents, and the information contained in such
documents, as of their respective dates (or if amended prior to the date of the
relevant Additional Closing, as of the date of such amendment), will not
contain any untrue statement of a material fact, or omit to state any material
fact necessary to make any statement, in light of the circumstances under which
such statement is made, not misleading, and will comply in all material
respects with the requirements of the 1934 Act and the rules and regulations of
the SEC promulgated thereunder:
Aradigm's annual report on Form 10-K for the most recent fiscal year prior to
such Additional Closing Date for which such document is publicly available; and
Aradigm's quarterly reports on Form 10-Q for, and any current reports on Form
8-K filed during, the quarters after such fiscal year, to the extent publicly
available (the "Additional SEC Documents" and together with the Current SEC
Documents, the "SEC Documents").
The financial statements of Aradigm included in the Additional SEC
Documents (the "Additional Financial Statements") will comply as to form in all
material respects with applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto. The Additional
Financial Statements will have been prepared in accordance with generally
accepted accounting principles consistently applied and will fairly present the
consolidated financial position of Aradigm and any subsidiaries at the dates
thereof and the consolidated results of their operations and consolidated cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal, recurring adjustments or to the extent that such unaudited
statements do not include footnotes).
2.6 No Conflict; No Violation. The execution, delivery and performance of
this Agreement and consummation of the transactions contemplated hereby will
not (a) conflict with any provisions of the Amended and Restated Certificate of
Incorporation or Bylaws of Aradigm;
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(b) result in any material violation or default of, or permit the acceleration
of any obligation under (in each case, upon the giving of notice, the passage
of time, or both), any material mortgage, indenture, lease, agreement or other
instrument, permit, franchise, license, judgment, order, decree, law,
ordinance, rule or regulation applicable to Aradigm or its properties.
2.7 Consents and Approvals. All consents, approvals, orders, or
authorizations of, or registrations, qualifications, designations,
declarations, or filings with, any governmental authority, required on the part
of Aradigm in connection with the valid execution and delivery of this
Agreement, the offer, sale or issuance of the Shares, or the consummation of
any other transaction contemplated hereby have been obtained, or will be
effective at the First Closing or each Additional Closing, as applicable, other
than compliance with any applicable requirements of the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and except for
notices required or permitted to be filed with certain state and federal
securities commissions after the First Closing or each Additional Closing, as
the case may be, which notices will be filed on a timely basis.
2.8 Absence of Certain Developments. Except as disclosed in previously
filed SEC Documents, with respect to the First Closing, since June 30, 2001,
and with respect to each Additional Closing, since the end of the last fiscal
quarter prior to such Additional Closing for which Aradigm's filing on Form
10-Q is publicly available, Aradigm has not (a) incurred or become subject to
any material liabilities (absolute or contingent) except current liabilities
incurred, and liabilities under contracts entered into, in the ordinary course
of business, consistent with past practices; (b) mortgaged, pledged or
subjected to lien, charge or any other encumbrance any of its material assets,
tangible or intangible; (c) sold, assigned or transferred any of its material
assets or canceled any material debts or obligations except in the ordinary
course of business, consistent with past practices; (d) suffered any
extraordinary losses, or waived any rights of substantial value; (e) entered
into any material transaction other than in the ordinary course of business,
consistent with past practices; or (f) otherwise had any material change in its
condition, financial or otherwise, except for changes in the ordinary course of
business, consistent with past practices, none of which individually or in the
aggregate has been materially adverse to Aradigm.
3. REPRESENTATIONS AND WARRANTIES OF NOVO NORDISK.
Novo Nordisk hereby represents and warrants to Aradigm as of the date
hereof and as of the First Closing Date as follows:
3.1 Legal Power. It has the requisite legal power to enter into this
Agreement, to purchase the Shares hereunder, and to carry out and perform its
obligations under the terms of this Agreement.
3.2 Due Execution. This Agreement has been duly authorized, executed and
delivered by it, and, upon due execution and delivery by Aradigm, this
Agreement will be a valid and binding agreement of it.
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3.3 Investment Representations.
(a) It is acquiring the Shares for its own account, not as nominee or
agent, for investment and not with a view to, or for resale in connection with,
any distribution or public offering thereof within the meaning of the 1933 Act.
(b) It understands that (i) the Shares have not been registered under the
1933 Act by reason of a specific exemption therefrom, that they may be resold
only in accordance with the rules and regulations under the 1933 Act and
subject to Section 1.8 and 1.9 and that it must, therefore, bear the economic
risk of such investment indefinitely, unless a subsequent disposition there of
is registered under the 1933 Act or is exempt from such registration; (ii) each
certificate representing the Initial Shares and the Additional Shares will be
endorsed with the following legend:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"),
AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS (A)
PURSUANT TO RULE 144 PROMULGATED UNDER THE 1933 ACT OR (B) THERE IS AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT COVERING SUCH
SECURITIES OR (C) ARADIGM RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF
THESE SECURITIES REASONABLY SATISFACTORY TO ARADIGM, STATING THAT SUCH
SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE 1933 ACT."
and (iii) Aradigm will instruct any transfer agent not to register the transfer
of any of the Shares unless one of the conditions specified in the foregoing
legend are satisfied.
Novo Nordisk shall have the right to require removal of the foregoing
legend with respect to any or all of the Shares if it delivers an opinion of
counsel reasonably acceptable to Aradigm that removal of such legend is
permitted by the rules and regulations of the SEC.
(c) It has been furnished with such materials and has been given access to
such information relating to Aradigm as it or its qualified representative has
requested and it has been afforded the opportunity to ask questions regarding
Aradigm and the Shares, all as it has found necessary to make an informed
investment decision.
(d) It is an "accredited investor" within the meaning of Regulation D
under the 1933 Act.
(e) It was not formed for the specific purpose of acquiring the Shares
offered hereunder.
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4. COVENANTS OF ARADIGM
4.1 Updating of Schedule of Exceptions. Aradigm shall update the Schedule
of Exceptions prior to each Additional Closing by delivering (i) a draft of
such updated Schedule of Exceptions (which draft shall highlight any deletions
or additions made since the last Schedule of Exceptions was delivered to Novo
Nordisk) to Novo Nordisk no later than five (5) days after delivery of the
relevant Shares Sale Notice and (ii) a final copy of such revised Schedule of
Exceptions (which copy shall highlight any deletions or additions made since
the delivery of the draft Schedule of Exceptions pursuant to clause (i) above)
to Novo Nordisk no later than the day prior to such Additional Closing.
4.2 Access to Information. So long as Novo Nordisk owns at least five
percent (5%) of the Common Stock outstanding, Aradigm will afford promptly to
Novo Nordisk and its authorized agents reasonable access to the properties,
books, records, employees and auditors of Aradigm to the extent reasonably
related to Novo Nordisk's holding of Shares. Without limiting the generality of
the foregoing, Aradigm agrees to make its auditors and appropriate employees
available to Novo Nordisk to discuss the accounting practices and policies of
Aradigm with respect to certain items in order allow Novo Nordisk to properly
account for such items in its books and records as may be necessary.
4.3 Delivery of Certain Information. (a) So long as Novo Nordisk is
required to report its share of Aradigm's earnings or loss from its investment
in Aradigm under the equity method of accounting, Aradigm shall cause to be
prepared and delivered to Novo Nordisk the following information, which, in the
case of financial information, shall be prepared in accordance with generally
accepted accounting principles consistently applied:
(i) no later than thirty (30) business days after the end of each fiscal
month, an unaudited consolidated balance sheet of Aradigm as of the end of such
fiscal month and the related unaudited consolidated statements of income and
cash flows for such fiscal month and for the elapsed portion of the fiscal year
ended with the last day of such month, and where Aradigm prepares such
financial information, setting forth in comparative form the figures for the
corresponding periods in the previous fiscal year for the periods in such
fiscal year and providing corresponding information indicating the total number
of shares of Common Stock issued and outstanding, the total number of shares of
Common Stock issuable upon exercise of issued and outstanding incentive stock
options, the total changes reflected in the consolidated statements of income
due to the grant or exercise of incentive stock options (if any) and a summary
narrative explaining the reason for and the financial impact of changes in
accounting principles having a material impact on Aradigm's operations (if
any); provided that if Aradigm believes that the financial information required
to be delivered to Novo Nordisk pursuant to this Section 4.3(a) will not be
available for delivery within the time prescribed by this Section 4.3(a), then
Aradigm shall (i) promptly (but in no event later than thirty (30) business
days after the end of the relevant fiscal month) deliver to Novo Nordisk an
estimated unaudited consolidated balance sheet of Aradigm as of the end of such
fiscal month and the related estimated unaudited consolidated statements of
income and cash flows for such fiscal month and for the elapsed portion of the
fiscal year ended with the last day of such month (in each case clearly
indicating that such financial information represents estimates) and (ii)
deliver to Novo Nordisk the final
10
version of such financial information no later than five (5) business days
after Aradigm prepares the final version of the estimated financial
information; and
(ii) within ten (10) days of receipt, any notice or other communication
from any lender, bank or other person to whom Aradigm is indebted, alleging the
existence of any facts or circumstances that, individually or in the aggregate,
constitute or with the passing of time would constitute, a default under, or
give rise to any termination, cancellation or acceleration of any right or
obligation of Aradigm or to a loss of any benefit to which Aradigm is entitled
under any provision of any note, loan, credit or similar instrument or
agreement.
(b) Aradigm agrees to provide to Novo Nordisk a condensed forecasted
statement of income representing one (1) quarterly forecast for a three (3)
month period only once every three (3) months beginning January 1, 2002 no
later than thirty (30) days after the beginning of each such three month
period; provided, that Aradigm will provide such information to Novo Nordisk
only as long as Novo Nordisk is required to report its share of Aradigm's
earnings or loss from its investment in Aradigm under the equity method of
accounting.
5. COVENANTS OF NOVO NORDISK.
5.1 Voting Agreement.
(a) Novo Nordisk agrees that at each election of directors of Aradigm in
which the shareholders are entitled to elect directors of Aradigm, Novo Nordisk
will not nominate, and will not vote any of the shares of Common Stock held by
it so as to elect, any individual person who is employed by Novo Nordisk or any
of its affiliates, including without limitation any of their respective current
and past directors and officers, and current employees, advisors and sales
agents.
(b) Novo Nordisk understands that each certificate representing the
Initial Shares and the Additional Shares will be endorsed with the following
restrictive legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND
CONDITIONS OF A VOTING AGREEMENT WHICH PLACES CERTAIN RESTRICTIONS ON THE
VOTING OF THE SHARES REPRESENTED HEREBY. ANY PERSON ACCEPTING ANY INTEREST
IN SUCH SHARES SHALL BE DEEMED TO AGREE AND SHALL BECOME BOUND BY ALL THE
PROVISIONS OF SUCH AGREEMENT. A COPY OF SUCH VOTING AGREEMENT WILL BE
FURNISHED TO THE RECORD HOLDER OF THIS CERTIFICATE WITHOUT CHARGE UPON
WRITTEN REQUEST TO THE COMPANY AT ITS PRINCIPAL PLACE OF BUSINESS."
(c) The provisions of this Section 5.1 shall not be binding upon
successors in interest to any of the Shares who are not affiliates of Novo
Nordisk.
11
6. CONDITIONS TO FIRST CLOSING.
6.1 Conditions to Obligations of Novo Nordisk. Novo Nordisk's obligation
to purchase the Initial Shares at the First Closing is subject to the
fulfillment, at or prior to the First Closing, of all of the following
conditions:
(a) Representations and Warranties True; Performance of Obligations. The
representations and warranties made by Aradigm in Section 2 hereof shall be
true and correct in all material respects on and as of the First Closing Date
with the same force and effect as if they had been made on and as of said date;
and Aradigm shall have performed all obligations and conditions herein required
to be performed by it on or prior to the First Closing.
(b) Opinion of Aradigm's Counsel. Novo Nordisk shall have received from
Xxxxxx Godward LLP, counsel to Aradigm, an opinion letter substantially in the
form attached hereto as Exhibit B, addressed to it, dated the First Closing
Date.
(c) Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated at the First Closing hereby and
all documents and instruments incident to such transactions shall be reasonably
satisfactory in substance and form to Novo Nordisk, and Novo Nordisk shall have
received all such counterpart originals or certified or other copies of such
documents as it may reasonably request.
(d) Qualifications, Legal Investment. All authorizations, approvals, or
permits, if any, of any governmental authority or regulatory body of the United
States or of any state that are required in connection with the lawful sale and
issuance of the Initial Shares pursuant to this Agreement shall have been duly
obtained and shall be effective on and as of the First Closing. No stop order
or other order enjoining the sale of the Initial Shares shall have been issued
and no proceedings for such purpose shall be pending or, to the knowledge of
Aradigm, threatened by the SEC or any commissioner of corporations or similar
officer of any other state having jurisdiction over this transaction. At the
time of the First Closing, the sale and issuance of the Initial Shares shall be
legally permitted by all laws and regulations to which Novo Nordisk and Aradigm
are subject.
(e) No Termination of Development Agreement. A termination of the
Development Agreement pursuant to Section 9.2 or Section 9.6 thereof by Novo
Nordisk shall not have become effective.
(f) Compliance Certificate. Aradigm shall have delivered to Novo Nordisk a
Certificate, executed by the President of Aradigm, dated the date of the First
Closing, certifying to the fulfillment of the conditions specified in
paragraphs (a) and (d) of this Section 6.1.
(g) No Action. There shall not be threatened, instituted or pending any
action or proceeding by any person before any court or governmental authority
or agency, domestic or foreign, (i) seeking to impose or confirm limitations
that would materially impair the ability of Novo Nordisk to exercise full
rights of ownership of any Shares or (ii) seeking to require divestiture by
Novo Nordisk of any Shares, nor shall there by any action taken, or any
statute, rule, regulation, injunction, order or decree proposed, enacted,
enforced, promulgated, issued or deemed applicable to the purchase of the
Shares, by any court, government or governmental
12
authority or agency, domestic or foreign, other than the application of the
waiting period provisions of the HSR Act to the purchase of the Shares, that,
in the reasonable judgment of Novo Nordisk could, directly or indirectly,
result in any of the consequences referred to in clause (i) or (ii) above.
6.2 Conditions to Obligations of Aradigm. Aradigm's obligation to issue
and sell the Initial Shares at the First Closing is subject to the fulfillment
to Aradigm's satisfaction, on or prior to the First Closing, of the following
conditions:
(a) Representations and Warranties True. The representations and
warranties made by Novo Nordisk in Section 3 hereof shall be true and correct
in all material respects on and as of the First Closing Date with the same
force and effect as if they had been made on and as of said date.
(b) Performance of Obligations. Novo Nordisk shall have performed and
complied with all agreements and conditions herein required to be performed or
complied with by it on or before the First Closing.
(c) Qualifications, Legal Investment. All authorizations, approvals, or
permits, if any, of any governmental authority or regulatory body of the United
States or of any state that are required in connection with the lawful sale and
issuance of the Initial Shares pursuant to this Agreement shall have been duly
obtained and shall be effective on and as of the First Closing. No stop order
or other order enjoining the sale of the Initial Shares shall have been issued
and no proceedings for such purpose shall be pending or, to the knowledge of
Aradigm, threatened by the SEC or any commissioner of corporations or similar
officer of any other state having jurisdiction over this transaction. At the
time of the First Closing, the sale and issuance of the Initial Shares shall be
legally permitted by all laws and regulations to which Novo Nordisk and Aradigm
are subject.
7. CONDITIONS TO ADDITIONAL CLOSINGS.
7.1 Conditions to Obligations of Novo Nordisk. Novo Nordisk's obligation
to purchase Additional Shares at each Additional Closing is subject to the
fulfillment, at or prior to the Additional Closing, of all of the following
conditions:
(a) Representations and Warranties True; Performance of Obligations. The
representations and warranties made by Aradigm in Section 2 hereof, as updated
pursuant to Section 4.1 hereof, shall be true and correct in all material
respects on and as of the Additional Closing Date with the same force and
effect as if they had been made on and as of said date; and Aradigm shall have
performed all obligations and conditions herein required to be performed by it
on or prior to the Additional Closing.
(b) Opinion of Aradigm's Counsel. Novo Nordisk shall have received from
Xxxxxx Godward LLP, counsel to Aradigm, an opinion letter substantially in the
form attached hereto as Exhibit B, addressed to it, dated the Additional
Closing Date.
(c) Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated at the Additional Closing hereby
and all
13
documents and instruments incident to such transactions shall be reasonably
satisfactory in substance and form to Novo Nordisk, and Novo Nordisk shall have
received all such counterpart originals or certified or other copies of such
documents as it may reasonably request.
(d) Qualifications, Legal Investment. All authorizations, approvals, or
permits, if any, of any governmental authority or regulatory body of the United
States or of any state that are required in connection with the lawful sale and
issuance of the Additional Shares pursuant to this Agreement shall have been
duly obtained and shall be effective on and as of the Additional Closing. No
stop order or other order enjoining the sale of the Additional Shares shall
have been issued and no proceedings for such purpose shall be pending or, to
the knowledge of Aradigm, threatened by the SEC or any commissioner of
corporations or any similar officer of any state having jurisdiction over this
transaction. At the Additional Closing, the sale and issuance of the Additional
Shares shall be legally permitted by all laws and regulations to which Novo
Nordisk and Aradigm are subject.
(e) Compliance Certificate. Aradigm shall have delivered to Novo Nordisk a
Certificate, executed by the President of Aradigm, dated the date of the
Additional Closing, certifying to the fulfillment of the conditions specified
in paragraphs (a) and (d) of this Section 7.1.
(f) No Termination of Development Agreement; No Breach. A termination of
the Development Agreement pursuant to Section 9.2 or Section 9.6 thereof (by
Novo Nordisk) shall not have become effective. In addition, Aradigm shall not
have committed a material breach of the Development Agreement as to which Novo
Nordisk has provided Aradigm with written notice pursuant to Section 9.4
thereof, unless such breach has been cured by Aradigm or waived by Novo
Nordisk.
(g) No Insolvency. Aradigm shall not have (i) filed in any court or agency
pursuant to any statute or regulation of any state or country, a petition in
bankruptcy or insolvency or for reorganization or for an arrangement or for the
appointment of a receiver or trustee of the party or of its assets, or (ii)
been served with an involuntary petition against it, filed in any insolvency
proceeding, which petition has not been dismissed as of the Additional Closing
Date.
(h) Certain Agreements. The Patent Agreement, the Supply Agreement and the
Amendment to the Development Agreement, each of even date herewith by and
between Aradigm and Novo Nordisk, as amended from time to time, shall each be
in full force and effect.
(i) No Action. There shall not be threatened, instituted or pending any
action or proceeding by any person before any court or governmental authority
or agency, domestic or foreign, (i) seeking to impose or confirm limitations
that would materially impair the ability of Novo Nordisk to exercise full
rights of ownership of any Shares or (ii) seeking to require divestiture by
Novo Nordisk of any Shares, nor shall there by any action taken, or any
statute, rule, regulation, injunction, order or decree proposed, enacted,
enforced, promulgated, issued or deemed applicable to the purchase of the
Shares, by any court, government or governmental authority or agency, domestic
or foreign, other than the application of the waiting period provisions of the
HSR Act to the purchase of the Shares, that, in the reasonable judgment of
14
Novo Nordisk could, directly or indirectly, result in any of the consequences
referred to in clause (i) or (ii) above.
(j) No Material Adverse Change. Since the date of the First Closing or the
latest Additional Closing, if later, no change, event, effect or set of
circumstances, which has not been disclosed in a publicly available document
filed by Aradigm with the SEC, shall have occurred or exist that has had or is
reasonably likely to have a material adverse effect on the condition (financial
or otherwise), business, assets or results of operations of Aradigm.
(k) No Apparent Business Failure. No event, fact or circumstance has
occurred or exists which makes it likely in the reasonable judgment of Novo
Nordisk that Aradigm (i) is no longer viable and that its business operations
will need to be discontinued or reorganized in a bankruptcy proceeding or (ii)
will no longer be able to continue to operate its pulmonary drug delivery
business in generally the same fashion as it currently anticipates operating
such business, taking into account the ordinary course of development of
biotechnology and medical device companies; provided, however, that the need
for additional capital shall not in and of itself constitute an event, fact or
circumstance described in clauses (i) and (ii).
(l) Good Progress Determination. Within ten (10) business days after
Aradigm's delivery of the applicable Shares Sale Notice to Novo Nordisk, Novo
Nordisk's Executive Committee shall have determined that the Development
Programme is making good progress and shall have delivered written notice of
such determination to Aradigm, such determination not to be unreasonably
withheld or delayed.
7.2 Conditions to Obligations of Aradigm. Aradigm's obligation to issue
and sell the Additional Shares at each Additional Closing is subject to the
fulfillment to Aradigm's satisfaction, on or prior to each Additional Closing,
of the following conditions:
(a) Representations and Warranties True. The representations and
warranties made by Novo Nordisk in Section 3 hereof shall be true and correct
in all material respects on and as of the Additional Closing Date, with the
same force and effect as if they had been made on and as of said date.
(b) Performance of Obligations. Novo Nordisk shall have performed and
complied with all agreements and conditions herein required to be performed or
complied with by it on or before the Additional Closing.
(c) Qualifications, Legal Investment. All authorizations, approvals, or
permits, if any, of any governmental authority or regulatory body of the United
States or of any state that are required in connection with the lawful sale and
issuance of the Additional Shares pursuant to this Agreement shall have been
duly obtained and shall be effective on and as of the Additional Closing. No
stop order or other order enjoining the sale of the Additional Shares shall
have been issued and no proceedings for such purpose shall be pending of, to
the knowledge of Aradigm, threatened by the SEC or any commissioner of
corporations or similar officer of any other state having jurisdiction over
this transaction. At the time of each Additional
15
Closing, the sale and issuance of the Additional Shares shall be legally
permitted by all laws and regulations to which Novo Nordisk and Aradigm are
subject.
8. MISCELLANEOUS.
8.1 Governing Law. This Agreement shall be governed by and construed under
the laws of the State of California as applied to agreements among California
residents, made and to be performed entirely within the State of California.
8.2 Successors and Assigns. Except as otherwise expressly provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors, and administrators of the parties
hereto. The foregoing not withstanding, no party may assign its rights or
obligations hereunder to any other person, except that Novo Nordisk may assign
its right to purchase any or all of the Shares to be purchased by it hereunder
to one or more of its affiliates; provided, that such affiliate(s) agree to be
bound by the provisions of this Agreement.
8.3 Entire Agreement. This Agreement and the Exhibits hereto, and the
other documents delivered pursuant hereto constitute the full and entire
understanding and agreement among the parties with regard to the subjects
hereof, and no party shall be liable or bound to any other party in any manner
by any representations, warranties, covenants, or agreements except as
specifically set forth herein or therein. Nothing in this Agreement, express or
implied, is intended to confer upon any party, other than the parties hereto
and their respective successors and assigns, any rights, remedies, obligations,
or liabilities under or by reason of this Agreement, except as expressly
provided herein.
8.4 Severability. In case any provision of this Agreement shall be
invalid, illegal, or unenforceable, it shall, to the extent practicable, be
modified so as to make it valid, legal and enforceable and to retain as nearly
as practicable the intent of the parties, and the validity, legality, and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
8.5 Amendment and Waiver. Any term of this Agreement may be amended and
the observance of any term of this Agreement may be waived (either generally or
in a particular instance, either retroactively or prospectively, and either for
a specified period of time or indefinitely), with the written consent of
Aradigm and Novo Nordisk. Any amendment or waiver effected in accordance with
this Section shall be binding upon Novo Nordisk, each future holder of the
Shares, and Aradigm.
8.6 Delays or Omissions. No delay or omission to exercise any right, power
or remedy accruing to Novo Nordisk or any subsequent holder of any Shares upon
any breach, default or noncompliance of Aradigm under this Agreement, shall
impair any such right, power, or remedy, nor shall it be construed to be a
waiver of any such breach, default or noncompliance, or any acquiescence
therein, or of any similar breach, default or noncompliance thereafter
occurring. It is further agreed that any waiver, permit, consent, or approval
of any kind or character on Novo Nordisk's part of any breach, default or
noncompliance under this Agreement or any waiver on Novo Nordisk's part of any
provisions or conditions of this Agreement must be
16
in writing and shall be effective only to the extent specifically set forth in
such writing, and that all remedies, either under this Agreement, by law, or
otherwise afforded to Novo Nordisk, shall be cumulative and not alternative.
8.7 Notices, etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be deemed effectively given
(a) upon personal delivery, (b) on report of successful transmission by
facsimile machine that automatically generates a printed report indicating
whether transmission was completed successfully, at the conclusion of each
transmission, (c) on the first business day after receipted delivery to a
courier service which guarantees next business-day delivery, under
circumstances in which such guaranty is applicable, or (d) on the earlier of
delivery or five (5) business days after mailing by United States certified by
mail, postage and fees prepaid, to the appropriate party at the address set
forth below or to such other address as the part so notifies the other in
writing:
(a) if to Aradigm, to:
ARADIGM CORPORATION
0000 Xxxxx Xxxx Xxx
Xxxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: President and Chief Executive Officer
with a copy to:
XXXXXX GODWARD LLP
5 Palo Alto Square
0000 Xx Xxxxxx Xxxx
Xxxx Xxxx, XX 00000-0000
Attention: Xxxxx X. Xxxxx, Esq.
Facsimile: (000) 000-0000
(b) if to Novo Nordisk, to:
NOVO NORDISK PHARMACEUTICALS, INC.
000 Xxxxxxx Xxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxxx Xxxxxxx
Telephone: (000) 000-0000
Telefax: (000) 000-0000
or to such other addresses and telecopier numbers as may from time to time be
notified by either party to the other hereunder.
8.8 Finder's Fees.
(a) Aradigm (i) represents and warrants that it has retained no finder or
broker in connection with the transactions contemplated by this Agreement and
(ii) hereby agrees to
17
indemnify and to hold Novo Nordisk harmless of and from any liability for any
commission or compensation in the nature of a finder's fee to any broker or
other person or firm (and the costs and expenses of defending against such
liability or asserted liability) for which Aradigm or any of its employees or
representatives is responsible.
(b) Novo Nordisk (i) represents and warrants that it has retained no
finder or broker in connection with the transactions contemplated by this
Agreement, and (ii) hereby agrees to indemnify and to hold Aradigm harmless of
and from any liability for any commission or compensation in the nature of a
finder's fee to any broker or other person or firm (and the costs and expenses
of defending against such liability or asserted liability) for which Novo
Nordisk or any of its employees or representatives are responsible.
8.9 Information Confidential. Novo Nordisk acknowledges that any
non-public information received by it pursuant hereto is confidential and for
Novo Nordisk's use only, and it will refrain from using such information or
reproducing, disclosing, or disseminating such information to any other person
(other than its employees, affiliates, agents, or partners having a need to
know the contents of such information and its attorneys, in each case who agree
to be bound by this Section 8.9), except in connection with the exercise of
rights under this Agreement, unless such information becomes available to the
public generally or it is required by a governmental body to disclose such
information.
8.10 Specific Performance. The parties hereto hereby declare that it is
impossible to measure in money the damages which will accrue to a party hereto
or to its successors or assigns by reason of a failure to perform any of the
obligations under Article 5 of this Agreement and agree that the terms of
Article 5 of this Agreement shall be specifically enforceable. If any party
hereto or its successors or assigns institutes any action or proceeding to
specifically enforce the provisions of Article 5 hereof, any party against whom
such action or proceeding is brought hereby waives the claim or defense therein
that such party or such successor or assign has an adequate remedy at law, and
such party shall not offer in any such action or proceeding the claim or
defense that such remedy at law exists.
8.11 Titles and Subtitles. The titles of the sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
8.12 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one instrument.
18
The foregoing Agreement is hereby executed as of the date first above
written.
Hayward, 2001-- _____________, 2001--
ARADIGM CORPORATION NOVO NORDISK PHARMACEUTICALS, INC.
By: By:
-------------------------------------- --------------------------------
Xxxxxxx X. Xxxxxxxx Xxxxxx Xxxxxxx
Chairman, President and President North America
Chief Executive Officer
19
EXHIBIT A
SCHEDULE OF EXCEPTIONS
This is the Schedule of Exceptions to that certain Stock Purchase Agreement,
dated as of October 22, 2001, by and between Aradigm Corporation and Novo
Nordisk Pharmaceuticals, Inc.
NO EXCEPTIONS
EXHIBIT B
OPINION OF ARADIGM'S COUNSEL
[Letterhead of Xxxxxx Godward LLP]
November ___, 2001
Novo Nordisk Pharmaceuticals, Inc.
000 Xxxxxxx Xxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxxx Xxxxxxx
Re: Aradigm Corporation
Dear Ladies and Gentlemen:
We have acted as counsel to Aradigm Corporation, a California corporation (the
"Company"), in connection with the issuance and sale to you of the Initial
Shares (as defined in the Stock Purchase Agreement between you and the Company,
dated as of October 22, 2001 (the "Purchase Agreement")), such issuance and
sale to take place pursuant to the terms and conditions of the Purchase
Agreement. We are rendering this opinion pursuant to Section 6.1(b) of the
Purchase Agreement. Except as otherwise defined herein, capitalized terms used
but not defined herein have the respective meanings given to them in the
Purchase Agreement.
In connection with this opinion, we have examined and relied upon the
representations and warranties as to factual matters contained in and made
pursuant to the Purchase Agreement by the various parties and originals or
copies certified to our satisfaction, of such records, documents, certificates,
opinions, memoranda and other instruments as in our judgment are necessary or
appropriate to enable us to render the opinion expressed below. Where we render
an opinion "to the best of our knowledge" or concerning an item "known to us"
or our opinion otherwise refers to our knowledge, it is based solely upon (i)
an inquiry of attorneys within this firm who perform legal services for the
Company, (ii) receipt of a certificate executed by an officer of the Company
covering such matters, and (iii) such other investigation, if any, that we
specifically set forth herein.
In rendering this opinion, we have assumed the genuineness and authenticity of
all signatures on original documents; the authenticity of all documents
submitted to us as originals; the conformity to originals of all documents
submitted to us as copies; the accuracy, completeness and authenticity of
certificates of public officials; and the due authorization, execution and
delivery of all documents (except the due authorization, execution and delivery
by the Company of the Purchase Agreement) where authorization, execution and
delivery are prerequisites to the effectiveness of such documents. We have also
assumed that all individuals executing and delivering documents in their
individual capacities had the legal capacity to so execute and deliver; that
you have received all documents you were to receive under the Purchase
Agreement; that the Purchase Agreement is an obligation binding upon you; that
you have filed any required California franchise or income tax
returns and have paid any required California franchise or income taxes; and
that there are no extrinsic agreements or understandings among the parties to
the Purchase Agreement that would modify or interpret the terms of the Purchase
Agreement or the respective rights or obligations of the parties thereunder.
Our opinion is expressed only with respect to the federal laws of the United
States of America and the laws of the State of California. We express no
opinion as to whether the laws of any particular jurisdiction apply, and no
opinion to the extent that the laws of any jurisdiction other than those
identified above are applicable to the subject matter hereof. We are not
rendering any opinion as to compliance with any antifraud law, rule or
regulation relating to securities, or to the sale or issuance thereof.
With respect to the opinion in paragraph 3 hereof regarding issued and
outstanding capital stock of the Company, we have examined and have relied
solely on a certificate furnished by the Company's transfer agent, Boston
Equiserve, LP, a copy of which has been made available to you. We have
undertaken no independent verification with respect thereto.
With regard to our opinion in paragraph 4 below with respect to material
defaults under any of the Material Agreements (as defined below), we have
relied solely upon (i) inquiries of officers of the Company, (ii) a list
supplied to us by the Company of material agreements to which the Company is a
party, or by which it is bound (the "Material Agreements"), and (iii) an
examination of the items on the aforementioned list; we have made no further
investigation.
With regard to our opinion in paragraph 6 below, we express no opinion with
respect to any required consents, approvals, authorizations, orders, filings,
registrations and qualifications under any antitrust laws, rules or regulations
of the United States.
On the basis of the foregoing, in reliance thereon and with the foregoing
qualifications, we are of the opinion that:
1. The Company has been duly incorporated and is a validly existing
corporation in good standing under the laws of the State of California. The
Company has the requisite corporate power to own its property and assets and to
conduct its business as, to the best of our knowledge, it is currently being
conducted and, to the best of our knowledge, is qualified as a foreign
corporation to do business and is in good standing in each jurisdiction in the
United States in which the ownership of its property or the conduct of its
business requires such qualification and where any statutory fines or penalties
or any corporate disability imposed for the failure to disqualify would
materially and adversely affect the Company, its assets, financial condition or
operations.
2. The Purchase Agreement has been duly and validly authorized, executed
and delivered by the Company and constitutes a legal, valid and binding
agreement of the Company enforceable against the Company in accordance with its
terms, except as enforcement may be limited by applicable bankruptcy,
insolvency, reorganization, arrangement with creditors, moratorium or other
similar laws affecting creditors' rights, and subject to general equity
principles and to limitations on availability of equitable relief, including
specific performance.
3. As of October ___, 2001, the Company's authorized capital stock
consists of forty million (40,000,000) shares of Common Stock, of which
(excluding the Initial Shares) _________________ (_____________) shares are
issued and outstanding; and five million (5,000,000) shares of Preferred Stock,
of which two hundred thirty thousand (230,000) shares have been designated
Series A Junior Participating Preferred, none of which is issued and
outstanding. The Initial Shares have been duly and validly authorized, and upon
issuance and delivery against payment therefor in accordance with the Purchase
Agreement will be validly issued, outstanding, fully paid and nonassessable. To
the best of our knowledge, there are no options, warrants, conversion
privileges, preemptive rights or other rights outstanding to purchase any
shares of the authorized but unissued capital stock of the Company, other than
rights granted under the Company's Equity Incentive Plan, Non-Employee
Directors Stock Option Plan and Employee Stock Purchase Plan, for which the
Company has reserved four million seven hundred seventeen thousand two hundred
eight (4,717,208) shares of its Common Stock, warrants to purchase an aggregate
of six hundred seventy-seven thousand nineteen (677,019) shares of Common
Stock, rights created in connection with the Common Stock Purchase Agreement,
dated as of November 3, 2000, by and between the Company and Acqua Wellington
North American Equities Fund, Ltd., and the rights created in connection with
the transactions contemplated by the Purchase Agreement.
4. The execution and delivery of the Purchase Agreement by the Company and
the offer, issuance and sale of the Initial Shares pursuant thereto (a) do not
constitute a material default under the provisions of any of the Material
Agreements, (b) do not violate any provision of the Company's Articles of
Incorporation or Bylaws, and (c) do not violate or contravene (i) any
governmental statute, rule or regulation applicable to the Company or (ii) any
order, writ, judgment, injunction, decree, determination or award which has
been entered against the Company and of which we are aware, the violation or
contravention of which would materially and adversely affect the Company, its
assets, financial condition or operations.
5. To the best of our knowledge, there is no action, proceeding or
investigation pending or overtly threatened against the Company before any
court or administrative agency that questions the validity of the Purchase
Agreement or might result, either individually or in the aggregate, in any
material adverse change in the assets, financial condition or operations of the
Company.
6. All consents, approvals, authorizations or orders of, and filings,
registrations and qualifications with any regulatory authority or governmental
body in the United States required for the issuance of the Initial Shares have
been made or obtained.
7. The offer and sale of the Initial Shares is exempt from the
registration requirements of the Securities Act of 1933, as amended.
This opinion is intended solely for your benefit and is not to be made
available to or be relied upon by any other person, firm, or entity without our
prior written consent.
Very truly yours,
XXXXXX GODWARD LLP
By:
--------------------------------------
EXHIBITS INDEX
Exhibit A - SCHEDULE OF EXCEPTIONS
Exhibit B - OPINION OF ARADIGM'S COUNSEL
TABLE OF CONTENTS
PAGE
1. PURCHASE AND SALE..................................................1
1.1 Initial Shares............................................1
1.2 First Closing Date........................................1
1.3 Delivery..................................................1
1.4 Additional Shares.........................................2
1.5 Additional Closing Dates..................................3
1.6 Delivery..................................................3
1.7 Rule 144 Reporting........................................3
1.8 "Market Stand-Off" Agreements.............................3
1.9 Public Offering Lock-Up...................................4
1.10 Demand Registration.......................................4
2. REPRESENTATIONS AND WARRANTIES OF ARADIGM..........................6
2.1 Organization and Standing; Articles and Bylaws............6
2.2 Authorization.............................................6
2.3 Validity of Shares........................................6
2.4 Offering..................................................6
2.5 Full Disclosure...........................................6
2.6 No Conflict; No Violation.................................7
2.7 Consents and Approvals....................................8
2.8 Absence of Certain Developments...........................8
3. REPRESENTATIONS AND WARRANTIES OF NOVO NORDISK.....................8
3.1 Legal Power...............................................8
3.2 Due Execution.............................................8
3.3 Investment Representations................................9
4. COVENANTS OF ARADIGM..............................................10
4.1 Updating of Schedule of Exceptions.......................10
4.2 Access to Information....................................10
4.3 Delivery of Certain Information..........................10
5. COVENANTS OF NOVO NORDISK.........................................11
5.1 Voting Agreement.........................................11
TABLE OF CONTENTS
(CONTINUED)
PAGE
6. CONDITIONS TO FIRST CLOSING.......................................12
6.1 Conditions to Obligations of Novo Nordisk................12
6.2 Conditions to Obligations of Aradigm.....................13
7. CONDITIONS TO ADDITIONAL CLOSINGS.................................13
7.1 Conditions to Obligations of Novo Nordisk................13
7.2 Conditions to Obligations of Aradigm.....................15
8. MISCELLANEOUS.....................................................16
8.1 Governing Law............................................16
8.2 Successors and Assigns...................................16
8.3 Entire Agreement.........................................16
8.4 Severability.............................................16
8.5 Amendment and Waiver.....................................16
8.6 Delays or Omissions......................................16
8.7 Notices, etc.............................................17
8.8 Finder's Fees............................................17
8.9 Information Confidential.................................18
8.10 Specific Performance.....................................18
8.11 Titles and Subtitles.....................................18
8.12 Counterparts.............................................18
ii.
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