Exhibit 4.1
CELLEGY PHARMACEUTICALS, INC.
COMMON STOCK PURCHASE AGREEMENT
THIS COMMON STOCK PURCHASE AGREEMENT (this "Agreement") is made and
entered into as of November 6, 2002, by and among Cellegy Pharmaceuticals, Inc.,
a California corporation (the "Company"), and the parties listed on the Schedule
of Investors separately delivered to the Investors (the "Schedule of Investors")
(each hereinafter individually referred to as an "Investor" and collectively
referred to as the "Investors").
1. AGREEMENT TO PURCHASE AND SELL STOCK.
1.1 Authorization. As of the Closing (as defined below) the
Company will have authorized the issuance, pursuant to the terms and conditions
of this Agreement, of up to 2,200,000 shares of the Company's Common Stock, no
par value (the "Common Stock").
1.2 Agreement to Purchase and Sell. The Company agrees to sell
to each Investor at the Closing, and each Investor agrees, severally and not
jointly, to purchase from the Company at the Closing, the number of shares of
Common Stock set forth beside such Investor's name on the Schedule of Investors,
at the price per share for such Investor set forth on the Schedule of Investors.
The shares of Common Stock purchased and sold pursuant to this Agreement will be
collectively hereinafter referred to as the "Purchased Shares."
2. CLOSING.
2.1 The Closing. The purchase and sale of the Purchased Shares
will take place at the offices of Fenwick & West LLP, 000 Xxxxxxxxxxx Xxxxxx,
Xxxxx 000, Xxxxxxxxxx, X.X., at 4:30 p.m., Eastern Standard Time, on November 6,
2002, or at such other time and place as the Company and Investors who have
agreed to purchase a majority of the Purchased Shares listed on the Schedule of
Investors mutually agree upon (which time and place are referred to in this
Agreement as the "Closing"), provided that the closing may not be delayed for
more than five business days without the consent of all Investors. At the
Closing, the Investor will purchase the number of Purchased Shares shown on the
Schedule of Investors against delivery to the Investor (or its designated
custodian) by the Company of a certificate representing such Purchased Shares
and/or a copy of the Company's irrevocable instructions to its transfer agent to
prepare and issue such certificate, with delivery of such certificate to occur
within three (3) business days thereafter. The full purchase price for such
Purchased Shares shall be paid at Closing by (i) a check payable to the
Company's order, (ii) wire transfer of funds to the Company or (iii) any
combination of the foregoing, in each case subject to reasonable prior
notification.
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3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to Investor that, except as set forth in the Disclosure
Schedule and Schedule of Exceptions (the "Disclosure Schedule") separately
delivered by the Company to the Investors, the statements in the following
paragraphs of this Section 3 are all true and correct:
3.1 Organization, Good Standing and Qualification. Each of the
Company and the Subsidiaries is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction under which it is
incorporated, and has all requisite corporate power and authority to conduct its
business as currently conducted and to execute, deliver and perform all of its
obligations under this Agreement and to consummate the transactions contemplated
hereby. Each of the Company and the Subsidiaries is qualified to do business as
a foreign corporation in each jurisdiction where failure to be so qualified
could, individually or in the aggregate, reasonably be expected to have a
material adverse effect on the business, assets, financial condition, results of
operations, or assets of the Company and the Subsidiaries, taken as a whole (the
"Business") (such effect referred to as a "Material Adverse Effect"). For
purposes of this Agreement, "Material Adverse Effect" shall not include any
effect attributable to changes in the trading prices for the Company's Common
Stock.
3.2 Capitalization. Immediately before the Closing, the
capitalization of the Company will consist of the following:
(a) Preferred Stock. A total of 5,000,000 authorized
shares of Preferred Stock, no par value per share (the "Preferred Stock"), none
of which are issued and outstanding.
(b) Common Stock. A total of 35,000,000 authorized
shares of Common Stock, of which approximately 17,304,976 shares were issued and
outstanding as of October 31, 2002.
(c) Options, Warrants, Reserved Shares. Except for:
(i) the approximately 4,173,750 shares of Common Stock issuable upon exercise of
options outstanding under the Company's 1995 Equity Incentive Plan and 284,500
shares of Common Stock issuable upon exercise of options outstanding under the
1995 Directors' Stock Option Plan, as of October 31, 2002, (ii) approximately
44,822 additional shares of Common Stock reserved for issuance under the
Company's 1995 Directors Stock Option Plan, (iii) approximately 178,840
additional shares of Common Stock reserved for issuance under the Company's 1995
Equity Incentive Plan and (iv) warrants to purchase an aggregate of
approximately 394,100 shares of Common Stock, there are not outstanding any
options, warrants, rights or agreements for the purchase or acquisition from the
Company of any shares of its capital stock or any securities convertible into or
ultimately exchangeable or exercisable for any shares of the Company's capital
stock. All of such outstanding shares of capital stock have been duly authorized
and validly issued and are fully paid and nonassessable and all of such options,
warrants and other rights to acquire Common Stock have been duly authorized by
the Company. None of the outstanding shares of capital stock and options,
warrants and other rights to acquire Common Stock has been issued in violation
of the preemptive rights of any security holder of the Company.
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3.3 Subsidiaries. Except for Cellisis Pharmaceuticals, Inc.,
Cellegy Australia Pty Ltd, Cellegy International Holdings Ltd., Cellegy UK
Limited, and Cellegy Canada, Inc. (collectively, the "Subsidiaries"), each of
which is not a "significant subsidiary" as defined in Rule 1-02 of Regulation
S-X, the Company does not presently own or control, directly or indirectly, any
interest in any other corporation, partnership, trust, joint venture,
association, or other entity. All the outstanding shares of capital stock of, or
other equity interests in, each Subsidiary have been validly issued and are
fully paid and nonassessable and are owned directly or indirectly by the Company
free and clear of all pledges, claims, liens, charges, encumbrances or security
interests of any kind or nature whatsoever, and free of any restriction on the
right to vote, sell or otherwise dispose of such capital stock or other equity
interests.
3.4 Due Authorization; No Violation. All corporate action on
the part of the Company and its officers, directors and shareholders necessary
for the authorization, execution and delivery of, and the performance of all
obligations of the Company under, this Agreement and the transactions
contemplated hereby, and the authorization, issuance, reservation for issuance
and delivery of all of the Purchased Shares being sold under this Agreement, has
been taken or will be taken prior to the Closing, and this Agreement constitutes
a valid and legally binding obligation of the Company, enforceable against the
Company in accordance with its terms, except as enforceability may be limited by
(i) applicable bankruptcy, insolvency, reorganization or other laws of general
application relating to or affecting the enforcement of creditors' rights
generally and (ii) the effect of rules of law governing the availability of
equitable remedies. Neither the execution, delivery or performance by the
Company of this Agreement nor the consummation by the Company of the
transactions contemplated hereby will (i) conflict with or result in a breach of
any provision of the Restated Articles of Incorporation of the Company (the
"Restated Articles") or the Company's Bylaws or the comparable organizational
documents of any of the Subsidiaries, (ii) conflict with, result in a violation
or breach of, or cause a default (or give rise to any right of termination,
cancellation or acceleration), or result in the creation or imposition of any
lien, security interest, charge or encumbrance upon any of the properties or
assets of the Company or any of the Subsidiaries, under any of the terms,
conditions or provisions of any agreement, instrument or obligation to which the
Company or any of the Subsidiaries is a party, which default could, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect or
(iii) violate any law, statute, rule or regulation or judgment, order, writ,
injunction or decree of any governmental authority, in each case under this
clause (iii) applicable to the Company or any of the Subsidiaries or any of
their respective properties or assets and which, individually or in the
aggregate, could, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect. The business and operations of the Company and
the Subsidiaries have been conducted in accordance with all applicable laws,
rules and regulations of all governmental authorities, except for such
violations which could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
3.5 Valid Issuance of Stock. The Purchased Shares, when
issued, sold and delivered in accordance with the terms of this Agreement for
the consideration provided for herein, will be duly and validly issued, fully
paid and nonassessable and free and clear of all pledges, liens, encumbrances
and restrictions (other than those arising under federal or state securities
laws as a result of the private placement of the Purchased Shares to the
Investors) and are not subject to preemptive or other similar rights of any
shareholder of the Company.
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3.6 Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or local governmental authority on the part of
the Company or any of the Subsidiaries is required in connection with the valid
execution and delivery of this Agreement, the offer, sale and issuance of the
Purchased Shares, or the consummation of the transactions contemplated by this
Agreement, except for qualifications or filings under the Securities Act of
1933, as amended (the "Act") and the applicable rules and regulations (the
"Rules and Regulations") of the Securities and Exchange Commission (the
"Commission") under the Act, and all other applicable securities laws as may be
required in connection with the transactions contemplated by this Agreement. All
such qualifications will be effective on the Closing, and all such filings will
be made within the time prescribed by law.
3.7 Absence of Changes. After the respective dates as of which
information is given in the Company's Proxy Statement for the annual meeting of
shareholders held on June 5, 2002, the Company's Annual Report on Form 10-K for
the year ended December 31, 2001, the Company's Quarterly Report on Form 10-Q
for the quarters ended March 31, 2002 and June 30, 2002, and the Company's
Reports on Form 8-K filed on April 26, 2002 and April 29, 2002, respectively
(such documents, together with the Disclosure Schedule, referred to collectively
as the "Disclosure Documents"), there has not been (i) any Material Adverse
Effect on the Business, (ii) any transaction that is material to the Company or
any of the Subsidiaries, (iii) any obligation, direct or contingent, that is
material to the Company or any of the Subsidiaries, incurred by the Company or
such Subsidiary, (iv) any change in the outstanding indebtedness of the Company
or any of the Subsidiaries that is material to the Company or such Subsidiary,
(v) any dividend declared, paid or made on the capital stock of the Company,
(vi) any loss or damage (whether or not insured) to the property of the Company
or any of the Subsidiaries which has been sustained which could, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect or
(vii) any other event which could reasonably be expected to adversely affect the
validity or enforceability of, or the authority or the ability of the Company to
perform its obligations under, this Agreement.
3.8 Litigation. Except as disclosed in the Disclosure
Documents, there is no action, suit, proceeding, claim, arbitration or
investigation ("Action") pending (or, to the Company's knowledge, currently
threatened) against the Company or any of the Subsidiaries, or their respective
activities, properties or assets, which (i) might prevent the consummation of
the transactions contemplated hereby or (ii) if adversely resolved against the
Company or such Subsidiary could adversely affect the validity or enforceability
of, or the authority or ability of the Company to perform its obligations under,
this Agreement, or could, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
3.9 NASDAQ Listing. The Company's Common Stock is registered
pursuant to Section 12(g) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") and is listed on The Nasdaq Stock Market, Inc. National
Market (the "Nasdaq National Market"). The Company will use its best efforts to
comply with all requirements of the National Association of Securities Dealers,
Inc. with respect to the issuance of the Purchased Shares and the listing
thereof on the Nasdaq National Market; provided, however, that the Company makes
no representations that it will continue to meet all of the requirements for
listing of the Common Stock on the Nasdaq National Market. The Company shall use
its best efforts to take such
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actions as may be necessary, and as soon as practicable and in no event later
than 30 days after the Closing Date, to file with Nasdaq any necessary
application or other document required by Nasdaq in order to list the Purchased
Shares on the market on which they are traded and to pay any required listing
fees within the required time.
3.10 Commission Filings. The Company has filed in a timely
manner all reports and other information required to be filed ("Filings") with
the Commission pursuant to the Exchange Act during the preceding twelve calendar
months. On their respective dates of filing, to the Company's knowledge the
Filings complied in all material respects with the requirements of the Exchange
Act, and the published rules and regulations of the Commission promulgated
thereunder. To the Company's knowledge, on their respective dates of filing, the
Filings did not include any untrue statement of a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, and all financial
statements contained in the Filings fairly present the financial position of the
Company on the dates of such statements and the results of operations for the
periods covered thereby in accordance with generally accepted accounting
principles consistently applied throughout the periods involved and prior
periods, except as otherwise indicated in the notes to such financial
statements.
3.11 Disclosure. To the Company's knowledge, the
representations and warranties made by the Company in this Agreement (including
the Disclosure Schedule) and the Filings when read together do not contain any
untrue statement of a material fact and do not omit to state a material fact
necessary to make the statements herein as a whole not misleading.
3.12 Governmental Permits, Etc. The Company and the
Subsidiaries possesses all licenses, franchises, governmental approvals, permits
or other governmental authorizations (collectively, "Authorizations") relating
to the operation of the Business, except for those Authorizations the failure of
which to possess could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. The Company and the Subsidiaries are
in compliance with the terms of all Authorizations and all laws, ordinances,
regulations and decrees which are applicable to the Business, except for such
non-compliance which could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
3.13 Insurance. The Company and the Subsidiaries are covered
by, and will continue to be covered by, insurance with companies the Company
believes to be responsible and in such amounts and covering such risks as it
believes to be adequate for the conduct of the Business and the value of the
Company's and the Subsidiaries' properties and as is customary for companies
engaged in similar businesses in similar industries, all of which insurance is
in full force and effect. The Company has no knowledge that any such carrier has
grounds or intends to cancel or fail to renew such policies on terms acceptable
to the Company.
3.14 Intellectual Property. The Company or one of the
Subsidiaries owns or possesses the patents, patent rights, licenses, inventions,
copyrights, trademarks, know-how (including trade secrets and other unpatented
and/or unpatentable proprietary or confidential information, systems or
procedures) and other rights or interests in items of intellectual property that
are material to the Business as operated by the Company and the Subsidiaries,
and as expected to be operated by the Company and the Subsidiaries in the next
12 months with respect
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to the Company's Cellegesic and Tostrex product candidates (collectively, the
"Patent and Proprietary Rights"); neither the Company nor any of the
Subsidiaries has received notice of any asserted material rights with respect to
any of the Patent and Proprietary Rights; and neither the Company nor any of the
infringement of or material conflict with asserted rights of others with respect
to any of the Patent and Proprietary Rights. To the Company's knowledge, neither
the Company nor any of the Subsidiaries infringes upon the proprietary rights of
others in any material respect.
3.15 Financial Statements. The financial statements of the
Company and the related notes thereto included in the Disclosure Documents
present fairly, in accordance with generally accepted accounting principles, the
financial position of the Company as of the dates indicated, and the results of
its operations and cash flows for the periods therein specified (except that the
unaudited financial statements do not contain all notes required by generally
accepted accounting principles and are subject to normal year-end audit
adjustments). Such financial statements (including the related notes) have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods therein specified ("GAAP"), subject in
the case of unaudited financial statements, to normal year-end audit
adjustments. Except as set forth in the financial statements included in the
Disclosure Documents, neither the Company nor any of the Subsidiaries has any
material liabilities of any nature (whether accrued, absolute, contingent or
otherwise) that are required by GAAP to be included in such financial statements
other than liabilities arising after the date of the most recent balance sheet
included in such financial statements which were incurred in the ordinary course
of business consistent with past practice.
3.16 Internal Accounting Controls. The Company maintains a
system of internal accounting controls sufficient, in the judgment of the
Company's board of directors, to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management's general or specific
authorization, and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
3.17 Title. The Company or one of the Subsidiaries has good
and marketable title in fee simple to all real property and personal property
owned by them which is material to the business of the Company and the
Subsidiaries, taken as a whole, in each case free and clear of all liens and
encumbrances, except for liens that do not materially affect the value of such
property and do not interfere with the use made and proposed to be made of such
property by the Company or such Subsidiary or for equipment leases or operating
leases entered into in the ordinary course of the Company's or a Subsidiary's
business. Any real property and facilities held under lease by the Company or a
Subsidiary are held by it under valid, subsisting and enforceable leases, with
such exceptions as are not material and do not interfere with the use made and
proposed to be made of such property and facilities by the Company or such
Subsidiary.
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3.18. Form S-3. The Company meets the requirements for the use
of Form S-3 for the registration of the resale of the Purchased Shares and will
use its best efforts to maintain S-3 status with the Commission during the
Registration Period (as defined in Section 7.2(a)). The Company does not know of
any current facts or circumstances that would prohibit or delay the preparation
and filing of a registration statement on Form S-3 with respect to the
Registrable Securities (as defined in Section 7.1(d)).
3.19. Tax Matters. The Company and the Subsidiaries have filed
all federal, state and local income and franchise and other tax returns required
to be filed and have paid all taxes due, and no tax deficiency has been
determined adversely to the Company or any of the Subsidiaries which,
individually or in the aggregate, has had (nor does the Company or any of the
Subsidiaries have any knowledge of any tax deficiency which, if determined
adversely to the Company or a Subsidiary, could, individually or in the
aggregate, reasonably be expected to have) a Material Adverse Effect.
3.20. Investment Company. The Company is not an "investment
company" within the meaning of such term under the Investment Company Act of
1940 and the rules and regulations of the Commission thereunder.
3.21. No General Solicitation; No Integration. No form of
general solicitation or general advertising was used by the Company or, to its
knowledge, any other person acting on behalf of the Company, in respect of the
Purchased Shares or in connection with the offer and sale of the Purchased
Shares. The Company has not sold, offered to sell, solicited offers to buy or
otherwise negotiated in respect of any "security" (as defined in the Act) that
is or could be integrated with the sale of the Purchased Shares in a manner that
would require the registration of the Purchased Shares under the Act.
3.22. No Registration. Assuming the accuracy of the
representations and warranties made by, and compliance with the covenants of,
the Investors in Section 4 hereof, no registration of the Purchased Shares under
the Act is required in connection with the sale of the Purchased Shares to the
Investors as contemplated by this Agreement.
3.23. FDA Matters and Clinical Trials.
(a) Neither the Company nor any of the Subsidiaries
has received any notices or correspondence from any federal, state, local or
foreign regulatory body that regulates the types of matters subject to the
jurisdiction of the U.S. Food and Drug Administration ("Health Authorities")
which have not been resolved requiring or threatening the termination,
suspension or modification of any animal studies, preclinical tests or clinical
trials conducted by or on behalf of the Company or any of the Subsidiaries or in
which the Company or any of the Subsidiaries has participated that are described
in the Disclosure Documents or the results of which are referred to in the
Disclosure Documents. To the knowledge of the Company, the currently pending
clinical trials, studies and other preclinical tests conducted by or on behalf
of the Company or any of the Subsidiaries or in which the Company or any of the
Subsidiaries has participated and that are described in the Disclosure Documents
or the results of which are referred to in the Disclosure Documents, are being
conducted in accordance with experimental
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protocols, procedures and controls generally used by qualified experts in the
preclinical or clinical study of new drugs.
(b) The Company has no knowledge of any adverse event
that has resulted from any of such studies, tests or trials that was not
disclosed as required to any Health Authority.
3.24. Material Contracts. All material contracts of the
Company and the Subsidiaries that are required by applicable rules and
regulations of the Commission to be filed as exhibits to the Filings ("Material
Contracts") have been so filed and, except for the Material Contracts that have
been terminated or are no longer in effect in accordance with their terms, are
valid, subsisting, in full force and effect and binding upon the Company or one
of the Subsidiaries and the other parties thereto (subject to the exceptions set
forth in the first sentence of Section 3.4 above), and the Company or one of the
Subsidiaries has paid in full or accrued all amounts due thereunder and have
satisfied in full or provided for all of its liabilities and obligations
thereunder in all material respects. Neither the Company nor any of the
Subsidiaries has received notice of a default and is not in default under, or
with respect to, any Material Contract. To the knowledge of the Company, no
other party to any Material Contract is in default thereunder, nor does any
condition exist that with notice or lapse of time or both would constitute a
default by such other party thereunder.
3.25. State Takeover Statutes. The Board of Directors of the
Company has approved this Agreement and the transactions contemplated hereby,
and such approval is sufficient to render inapplicable to this Agreement and the
transactions contemplated hereby any state takeover or similar statute or
regulation that would otherwise be applicable to this Agreement or the
transactions contemplated hereby.
4. REPRESENTATIONS, WARRANTIES AND CERTAIN AGREEMENTS OF INVESTORS.
Each Investor hereby severally and not jointly represents and warrants to, and
agrees with, the Company, that:
4.1 Authorization. All action (corporate or otherwise) on the
part of the Investor and its officers, directors and stockholders necessary for
the authorization, execution and delivery of, and the performance of all
obligations of the Investor under, this Agreement has been taken or will be
taken prior to the Closing, and this Agreement constitutes a valid and legally
binding obligation of the Investor, enforceable against the Investor in
accordance with its terms, except as enforceability may be limited by (i)
applicable bankruptcy, insolvency, reorganization or other laws of general
application relating to or affecting the enforcement of creditors' rights
generally and (ii) the effect of rules of law governing the availability of
equitable remedies.
4.2 Purchase for Own Account. The Purchased Shares to be
purchased by such Investor hereunder will be acquired for investment for such
Investor's own account, not as a nominee or agent, and not with a view to the
public resale or distribution thereof within the meaning of the Act, and such
Investor has no present intention of selling, granting any participation in, or
otherwise distributing the same in violation of the Act. If not an individual,
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such Investor also represents that such Investor has not been formed for the
specific purpose of acquiring Purchased Shares.
4.3 Disclosure of Information. The Investor has received
and/or had full access to a copy of the Disclosure Documents and has received or
has had full access to all the information it considers necessary or appropriate
to make an informed investment decision with respect to the Purchased Shares to
be purchased by the Investor under this Agreement. Investor further has had an
opportunity to ask questions and receive answers from the Company regarding the
terms and conditions of the offering of the Purchased Shares and to obtain
additional information (to the extent the Company possessed such information or
could acquire it without unreasonable effort or expense) necessary to verify any
information furnished to the Investor or to which the Investor had access. The
foregoing, however, does not in any way limit or modify the representations and
warranties made by the Company in Section 3. In connection with its decision to
purchase the Purchased Shares, the Investor has relied solely on the Disclosure
Documents, the representations, warranties and agreements of the Company set
forth in this Agreement, as well as any investigation of the Company completed
by the Investor or its advisors; and the Investor has not relied on any oral
statement made by the Company.
4.4 Investment Experience. Such Investor understands that the
purchase of the Purchased Shares involves substantial risk. Such Investor: (i)
has experience as an investor in securities of companies in the development
stage and acknowledges that such Investor is able to fend for itself, can bear
the economic risk of such Investor's investment in the Purchased Shares and has
such knowledge and experience in financial or business matters that such
Investor is capable of evaluating the merits and risks of this investment in the
Purchased Shares and protecting its own interests in connection with this
investment, and/or (ii) has a preexisting personal or business relationship with
the Company or one or more of its officers or directors.
4.5 Accredited Investor Status. Such Investor is an
"accredited investor" within the meaning of Regulation D promulgated under the
Act.
4.6 Restricted Securities. Such Investor understands that the
Purchased Shares are characterized as "restricted securities" under the Act
inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and that under the Act and the Rules and Regulations
such securities may be resold without registration under the Act only in certain
limited circumstances. In this connection, such Investor represents that such
Investor is familiar with Rule 144 of the Commission and understands the resale
limitations imposed thereby and by the Act and understands that the Shelf
Registration Statement (as defined in Section 7.2(a)) and any other registration
statement contemplated by this Agreement to effect the registration of the
Purchased Shares for purposes of resale thereunder may never become effective
under the Act.
4.7 Further Limitations on Disposition. Without in any way
limiting the representations set forth above, such Investor further agrees not
to make any disposition of all or any portion of the Purchased Shares unless and
until:
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(a) there is then in effect a registration statement
under the Act covering such proposed disposition and such disposition is made in
accordance with such registration statement and the provisions of Section 7 of
this Agreement; or
(b) (i) such Investor shall have notified the Company
of the proposed disposition and shall have furnished the Company with a
statement of the circumstances surrounding the proposed disposition, and (ii)
such Investor shall have furnished the Company, at the expense of such Investor
or its transferee, with an opinion of counsel, reasonably satisfactory to the
Company, that such disposition will not require registration of such securities
under the Act.
Notwithstanding the provisions of paragraphs (a) and (b) above,
no such registration statement or opinion of counsel shall be required: (i) for
any routine transfer of any Purchased Shares in compliance with Rule 144 or Rule
144A (except that an opinion of counsel may be required for other than routine
Rule 144 transactions), or (ii) for any transfer of Purchased Shares by an
Investor that is a partnership, limited liability corporation ("LLC") or a
corporation to (A) a partner of such partnership, member of such LLC or
shareholder of such corporation on a basis proportionate to their ownership
interests in such partnership, LLC or corporation, or (B) the estate of any such
partner, member or shareholder, or (iii) for the transfer by gift, will or
intestate succession by any Investor to his or her spouse or lineal descendants
or ancestors or any trust for any of the foregoing; provided, that in each of
the foregoing cases the transferee agrees in writing to be subject to the terms
of this Agreement to the same extent as if the transferee were an original
Investor hereunder.
4.8 Legends. It is understood that the certificates evidencing
the Purchased Shares will bear the legends set forth below:
(a) THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER
THE SECURITIES LAWS OF CERTAIN STATES. THESE SECURITIES ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD
EXCEPT AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS,
PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT
THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION
OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT
ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE
STATE SECURITIES LAWS.
(b) THE SHARES EVIDENCED BY THIS CERTIFICATE ARE
SUBJECT TO THE PROVISIONS OF, AND MAY HAVE CERTAIN REGISTRATION RIGHTS PURSUANT
TO, THE PROVISIONS OF A PURCHASE AGREEMENT BETWEEN THE COMPANY AND THE HOLDER,
WHICH MAY RESTRICT THE TRANSFER OF SUCH SHARES IN CERTAIN CIRCUMSTANCES. A COPY
OF SUCH AGREEMENT MAY BE OBTAINED, WITHOUT CHARGE, AT THE COMPANY'S PRINCIPAL
OFFICE.
10
The legends set forth in (a) and (b) above shall, upon the request of
an Investor, be promptly removed by the Company from any certificate evidencing
Purchased Shares upon delivery to the Company of an opinion of counsel to the
Investor, reasonably satisfactory to the Company, that the legended security can
be freely transferred in a public sale without a registration statement being in
effect under the Act and in compliance with exemption requirements under
applicable state securities laws and that such transfer will not jeopardize the
exemption or exemptions from registration pursuant to which the Company issued
the Purchased Shares; provided, however, that no such opinion shall be required
in connection with routine sales of Purchased Shares pursuant to the Shelf
Registration Statement (as defined below) (provided that customary forms of
brokers' and sellers' representation letters are provided in connection with
such sales) or routine requests for legend removal where the Purchased Shares
can be sold by an Investor pursuant to the provisions of Rule 144. In connection
with any such opinion, the Investor shall provide such certifications as may be
reasonably be deemed necessary for the delivery of such opinion.
4.9 Resale Restrictions. Except as provided in Section 4.7,
the Investor will not, prior to the effectiveness of the Shelf Registration
Statement (as defined below), directly or indirectly offer, sell, contract or
grant an option to sell, pledge, encumber, or otherwise dispose of or otherwise
transfer, or enter into any swap or other arrangement that transfers to another,
in whole or in part, any of the economic consequences of ownership of (whether
any such transaction described above is to be settled by delivery of Common
Stock or such other securities, in cash or otherwise) (a "Disposition"), any
Purchased Shares (other than to donees, shareholders or partners of the Investor
who agree to be similarly bound), and after the effective date of the Shelf
Registration Statement the Investor will not make any Disposition of Purchased
Shares in violation of the Act.
5. CONDITIONS TO INVESTOR'S OBLIGATIONS AT CLOSING.
5.1 Closing. The obligations of each Investor under Section 2
of this Agreement to purchase the Purchased Shares at the Closing are subject to
the fulfillment or waiver, on or before the Closing, of each of the following
conditions, and the Company shall use its best efforts to cause such conditions
to be satisfied on or before the Closing:
5.1.1 Representations and Warranties True. Each of
the representations and warranties of the Company contained in Section 3
qualified as to materiality shall be true and correct and those not so qualified
shall be true and correct in all material respects on and as of the Closing with
the same effect as though such representations and warranties had been made on
and as of the Closing.
5.1.2 Performance. The Company shall have performed
and complied in all material respects with all agreements, obligations and
conditions contained in this Agreement that are required to be performed or
complied with by it on or before the Closing and shall have obtained all
approvals, consents and qualifications necessary to complete the purchase and
sale described herein.
5.1.3 Compliance Certificate. The Company shall have
delivered to the Investors at the Closing a certificate signed on its behalf by
its President, Chief Executive
11
Officer, or Chief Financial Officer certifying that the conditions specified in
Sections 5.1.1 and 5.1.2 have been fulfilled.
5.1.4 Registration; Securities Exemptions. The offer
and sale of the Purchased Shares to the Investors pursuant to this Agreement
shall be exempt from the registration requirements under the Act and the
California Corporate Securities Law of 1968, as amended, and the rules
thereunder (the "Law") and the registration and/or qualification requirements of
all other applicable state securities laws.
5.1.5 No Material Change. There shall have been no
Material Adverse Effect on the Business from the date of this Agreement.
5.1.6 Opinion of Counsel. The Investors shall have
received an opinion of counsel to the Company substantially in the form of
Exhibit A attached hereto.
6. CONDITIONS TO THE COMPANY'S OBLIGATIONS AT CLOSING.
6.1. Closing. The obligations of the Company under this
Agreement to sell the Purchased Shares to the Investors at the Closing are
subject to the fulfillment or waiver, on or before the Closing, of the following
condition by the Investor, and each Investor shall use its best efforts to cause
such conditions to be satisfied on or before the Closing:
6.1.1 Representations and Warranties. The
representations and warranties of the Investor contained in Section 4 qualified
as to materiality shall be true and correct and those not so qualified shall be
true and correct in all material respects on and as of the Closing with the same
effect as though such representations and warranties had been made on and as of
the Closing.
6.1.2 Payment of Purchase Price. The Investor shall
have delivered to the Company the purchase price for the Purchased Shares
specified for such Investor on the Schedule of Investors attached hereto, in
accordance with the provisions of Section 2, subject to the Company's delivery
of certificates for such shares.
7. REGISTRATION RIGHTS.
7.1 Definitions. For purposes of this Agreement:
(a) Form S-3. The term "Form S-3" means such form
under the Act as is in effect on the date hereof or any successor registration
form under the Act subsequently adopted by the Commission that permits inclusion
or incorporation of substantial information by reference to other documents
filed by the Company with the Commission.
(b) Holder. The term "Holders" shall mean holders of
Registrable Securities that have registration rights pursuant to this Agreement.
(c) Registration. The terms "register," "registered,"
and "registration" refer to a registration effected by preparing and filing a
registration statement in compliance with the Act, and the declaration or
ordering of effectiveness of such registration statement.
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(d) Registrable Securities. The term "Registrable
Securities" means: (1) all of the Purchased Shares, (2) any additional shares
issued pursuant to Section 7.2(a) and (3) any shares of Common Stock of the
Company issued or issuable, from time to time, upon any reclassification, share
combination, share subdivision, stock split, share dividend, or similar
transaction or event, or otherwise as a distribution on, in exchange for or with
respect to any of the foregoing; provided, however, that the term "Registrable
Securities" shall exclude in all events (and such securities shall not
constitute "Registrable Securities") (i) any Registrable Securities sold or
transferred by a person in a transaction in which the registration rights
granted under this Agreement are not assigned in accordance with the provisions
of this Agreement, (ii) any Registrable Securities sold in a public offering
pursuant to a registration statement filed with the Commission or sold pursuant
to Rule 144 promulgated under the Act ("Rule 144") or (iii) as to any Holder,
the Registrable Securities held by such Holder if all of such Registrable
Securities can be publicly sold without restriction (including, without
limitation, as to volume, but by complying with the manner of sale and Form 144
filing requirements, if applicable) within a three-month period pursuant to Rule
144.
(e) Prospectus: The term "Prospectus" shall mean the
prospectus included in any Shelf Registration Statement (including, without
limitation, a prospectus that discloses information previously omitted from a
prospectus filed as part of an effective registration statement in reliance upon
Rule 430A promulgated under the Act), as amended or supplemented by any
prospectus supplement (including, without limitation, any prospectus supplement
with respect to the terms of the offering of any portion of the Registrable
Securities covered by such Shelf Registration Statement), and all other
amendments and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.
(f) Shelf Registration Statement. See Section 7.2(a).
7.2 Form S-3 Shelf Registration.
(a) Registration. The Company shall prepare and file
with the Commission within 45 days following the Closing and use its best
efforts (i) to have declared effective as soon as practicable thereafter (but in
any event within 90 days after filing), a registration statement on Form S-3
(or, if the Company is not then eligible to use Form S-3, then another
appropriate form) providing for the resale by the Holders of all of the
Registrable Securities (the "Shelf Registration Statement"), and (ii) to provide
a transfer agent and registrar for all securities registered pursuant to the
Shelf Registration Statement. The Shelf Registration Statement may include
securities other than those held by Holders. The Company shall use its best
efforts to keep the Shelf Registration Statement continuously effective (subject
to Section 7.2(b)), pursuant to the Act and the Rules and Regulations
promulgated thereunder, until the earliest to occur of (i) the second
anniversary of the Closing Date, (ii) as to a particular Holder, the date on
which the Holder may sell all Registrable Securities then held by the Holder
without restriction (including, without limitation, as to volume, but by
complying with the manner of sale and Form 144 filing requirements, if
applicable) within a three-month period pursuant to Rule 144 and (iii) as to a
particular Holder, such time as all Registrable Securities held by such Holder
have been sold (A) pursuant to the Shelf Registration Statement, (B) to or
through a broker or dealer or underwriter in a public distribution or a public
securities transaction, and/or (C) in a
13
transaction exempt from the registration and prospectus delivery requirements of
the Securities Act under Section 4(1) thereof so that all transfer restrictions
and restrictive legends with respect thereto, if any, are removed upon the
consummation of such sale (such period, the "Registration Period"). In the event
that the Shelf Registration Statement shall cease to be effective during the
Registration Period, the Company shall promptly prepare and file a new
registration statement covering all Registrable Securities and shall use its
best efforts to have such registration statement declared effective as soon as
possible. Any such registration statement shall be considered a "Shelf
Registration Statement" hereunder.
(b) Liquidated Damages. In the event that the Shelf
Registration Statement (i) is not reviewed by the Commission or, if it has been
selected for review, that the Company is not using all commercially reasonable
efforts to have the Shelf Registration Statement declared effective, and (ii)
has not been declared effective prior to the six-month anniversary of the
Closing, then the Company (i) shall immediately pay to the Investor $100,000 in
cash (such payment, the "Liquidated Damages"), by wire transfer to an account or
accounts and in such respective percentages as the Investor instructs the
Company in writing. The Company and the Investor agree that, in the event that
under the circumstances described above the Shelf Registration Statement is not
declared effective within six months of the Closing, it would be impracticable
or extremely difficult to fix or determine the Investor's actual damages.
Therefore, the Company and the Investor each agree that the amount of the
Liquidated Damages has been agreed upon as liquidated damages after negotiation
as to the parties' reasonable estimate of the Investor's damages. The Company
and the Investor agree that the amount of Liquidated Damages is reasonable in
light of the circumstances existing at the execution of this Agreement. The
Company and the Investor each acknowledge that the payment of such Liquidated
Damages is not intended as a forfeiture or penalty. If the Company fails to
immediately pay to the Investor any amounts due under this Section 7.2(b), then
in addition to any amounts paid or payable pursuant to this Section, the Company
shall also pay all costs and expenses (including legal fees and expenses) in
connection with any action, including the filing of any lawsuit or other legal
action, taken to enforce or collect payment, together with interest on such
payment at the maximum rate permitted by applicable law, from the date such
payment was required to be paid.
Initialed by _____ for the InvestorInitialed by _____ for the Company
(c) Permitted Window. (i) The Holders agree that they
will sell the Registrable Securities pursuant to such registration only during a
"Permitted Window" (as defined below). For the purposes of this Agreement, a
"Permitted Window" with respect to a Holder is a period of 30 consecutive
calendar days commencing upon delivery to the Holder of the Company's written
notification to the Holder in response to a Notice of Resale that the Prospectus
contained in the Shelf Registration Statement is available for resale. In order
to cause a Permitted Window to commence, a Holder must first give written notice
to the Company of its bona fide present intention to sell part or all of the
Registrable Securities pursuant to such registration (a "Notice of Resale").
Upon delivery of such Notice of Resale, the Company will give written notice to
the Holders as soon as practicable, but in no event not more than two (2)
business days after such delivery, that (A) the Permitted Window will commence
on the date such notice is delivered to the Holder, (B) the Company believes it
is appropriate for the
14
Company to supplement the Prospectus or make an appropriate filing under the
Exchange Act so as to cause the Prospectus to become current (unless a
certificate of the President or Chief Executive Officer is delivered as provided
in subparagraph (ii) below), or (C) the Company believes it is required under
the Act and the Rules and Regulations thereunder to amend the Shelf Registration
Statement in order to cause the Prospectus to be current (unless a certificate
of the President or Chief Executive Officer is delivered as provided in
subparagraph (ii) below). If the Company determines that a supplement to the
Prospectus, the filing of a report pursuant to the Exchange Act or an amendment
to the Shelf Registration Statement required under the Act, as provided above,
is necessary, it will take such actions as soon as reasonably practicable
(subject to subparagraph (ii) below and paragraph (d) below), and the Company
will notify the Holder of the filing of such supplement, report or amendment,
and, in the case of an amendment, the effectiveness thereof, and the Permitted
Window will then commence.
(ii) If the Company furnishes to the Holders a
certificate signed by the President or Chief Executive Officer of the Company
stating that, in the good faith judgment of the Company, it would be seriously
detrimental to the Company and its shareholders for sales to be made from such
Shelf Registration Statement at such time (or, in the case a Notice of Resale
has been given, that would be seriously detrimental to the Company and its
shareholders for the Permitted Window to commence at such time), or that there
exists (A) a material development or potential material development involving
the Company which the Company would be obligated to disclose in the Prospectus
contained in the Shelf Registration Statement, which disclosure would, in the
good faith judgment of the President or Chief Executive Officer or the Board of
Directors of the Company, be premature or otherwise inadvisable at such time or
(B) a concurrent public filing by the Company with the Commission of a
registration statement (other than on Form S-8) registering the offer and sale
of shares by the Company, then the Company will have the right (the "Deferral
Right") to defer the commencement of a Permitted Window for a period of not more
than 60 days after the date of delivery of the Notice of Resale; provided,
however, that the Company will not utilize the Deferral Right more than four (4)
times in any twelve month period, that the total number of days covered by
exercise of the Deferral Rights in any twelve month period shall not exceed 180
days, and that the Company will exercise all good faith efforts to minimize the
period of such delays, consistent with the Company's good faith business
judgment, including without limitation concerning premature public disclosure of
confidential or sensitive information; and provided further, however, that the
Company may defer the commencement of the Permitted Window for up to 60 days if
so requested by an underwriter in connection with an underwritten offering of
the Company's securities so long as any selling shareholders in such
underwritten offering are subject to a lock-up agreement of the same duration
(other than with respect to the Company securities to be sold by such selling
shareholders in such underwritten offering). In connection with any such
underwritten offering described in the preceding sentence where commencement of
a Permitted Window is deferred, the Holders shall be given the opportunity to
participate in the first three such offerings that may occur after the Closing
Date by including all or any of their Registrable Securities for sale in any
such offering, provided that the right to include any Registrable Securities in
any such offering shall be subject to (i) the rights of other shareholders of
the Company who also have rights to include shares in such offering, (ii) the
ability of the underwriter for such offering to exclude some or all of the
shares requested to be registered on the basis of a good faith determination
that inclusion of such securities might adversely affect the success of the
offering or otherwise adversely affect the Company (with any
15
such exclusion to be pro rata among all Holders who are requested to sell
Registrable Securities in such registration), and (iii) the execution by the
Holders of the underwriting agreement and other customary documents requested by
the managing underwriter that are executed by other holders selling securities
in such offering, and the furnishing of such information and documents as the
Company or the managing underwriter may reasonably request in connection with
such offering. The Holders shall be responsible for their pro rata share of
registration fees and underwriters' and brokers' discounts and commissions
relating to any Registrable Securities included in such registration.
(d) Closing of Permitted Window. During a Permitted
Window and in the event (i) of the happening of any event of the kind described
in Section 7.2(c)(ii) hereof or (ii) that, in the judgment of the President,
Chief Executive Officer or the Company's Board of Directors, it is advisable to
suspend use of the Prospectus for a discrete period of time due to undisclosed
pending corporate developments or pending public filings with the Commission
(which need not be described in detail), the Company shall deliver a certificate
in writing to the Holder to the effect of the foregoing and, upon delivery of
such certificate, the Permitted Window shall terminate. The Permitted Window
shall resume upon the Holder's receipt of copies of the supplemented or amended
Prospectus, or at such time as the Holder is advised in writing by the Company
that the Prospectus may be used, and at such time as the Holder has received
copies of any additional or supplemental filings that are incorporated or deemed
incorporated by reference in such Prospectus and which are required to be
delivered as part of the Prospectus. In any event, the Permitted Window shall
resume no later than 60 days after it has been terminated pursuant to this
Section. If the Company has previously terminated a Permitted Window pursuant to
this subsection within 90 days of the date that it delivers another notice
pursuant this subsection terminating another Permitted Window, then the time
period set forth in the preceding sentence shall be shortened so that the
Permitted Window shall resume no later than 30 days after it has been terminated
pursuant to such second notice.
(e) Expenses. The registration fees and expenses
incurred by the Company in connection with the Shelf Registration Statement and
actions taken by the Company in connection with any Blackout Notice, including,
without limitation, all registration, qualification and filing fees, printing
expenses, escrow fees, fees and disbursements of counsel for the Company, blue
sky fees and expenses, and the expense of any special audits incident to or
required by any such registration, shall be borne by the Company. Each Holder
shall be responsible for any fees and expenses of its counsel or other advisers.
7.3 Obligations of the Company. The Company shall furnish to
the Holder such number of copies of a Prospectus, including a preliminary
Prospectus, in conformity with the requirements of the Act, and such other
documents (including supplements or prospectus amendments) as the Holder may
reasonably request in order to facilitate the public sale or other disposition
of the Registrable Securities owned by it that are included in such
registration. In addition, whenever required to effect the registration of any
Registrable Securities under this Agreement, the Company shall, as expeditiously
as reasonably possible:
(a) Use its best efforts to (i) register and qualify
the securities covered by such registration statement under such other
securities or Blue Sky laws of such jurisdictions as shall be reasonably
requested by the Holder, provided that the Company shall not be required
16
in connection therewith or as a condition thereto to qualify to do business or
to file a general consent to service of process in any such states or
jurisdictions, (ii) to keep such registration or qualification in effect for so
long as the Shelf Registration Statement remains in effect, and (iii) to take
any other action which may be reasonably necessary or advisable to enable the
Holders to consummate the disposition in such jurisdictions of the securities to
be sold by the Holders, consistent with the plan of distribution described in
the prospectus included in the Shelf Registration Statement, except that the
Company shall not for any such purpose be required to qualify generally to do
business as a foreign corporation in any jurisdiction where it is not so
qualified, or to subject itself to taxation in any such jurisdiction, or to
execute a general consent to service of process in effecting such registration,
qualification or compliance, unless the Company is already subject to service in
such jurisdiction and except as may be required by the Act or applicable rules
or regulations thereunder.
(b) Notify the Holder promptly (and in any event
within one business day, by email, fax or other type of communication) (i) of
any request by the Commission or any other federal or state governmental
authority during the period of effectiveness of a registration statement for
amendments or supplements to such registration statement or related prospectus
or for additional information, (ii) of the issuance by the Commission or any
other federal or state governmental authority of any stop order or similar
action suspending the effectiveness of a registration statement or the
initiation of any proceedings for that purpose and (iii) of the receipt by the
Company from the Commission or any other federal or state governmental authority
of any notification with respect to the suspension of the qualification or
exemption from qualification of any of the Registrable Securities for sale in
any jurisdiction or the initiation or threatening of any proceeding for such
purpose.
(c) Use its best efforts to obtain the withdrawal of
any order suspending the effectiveness of the Shelf Registration Statement at
the earliest possible time.
(d) Subject to the limitations described in the
second sentence of Section 3.9, use all its best efforts to cause all
Registrable Securities to be listed continuously throughout the Registration
Period on each securities exchange or market, if any, on which equity securities
issued by the company are then listed.
(e) Subject to the provisions of Section 7.2(b),
promptly file such amendments to the Shelf Registration Statement and the
Prospectus, file such documents as may be required to be incorporated by
reference in any of such documents, and take all other actions as may be
necessary to ensure to the holders of Registrable Securities the ability to
effect the public resale of their Registrable Securities (including, without
limitation, taking any actions necessary to ensure the availability of a
Prospectus meeting the requirements of Section 10(a) of the Act) continuously
throughout the Registration Period; and provide each holder of Registrable
Securities copies of any documents prepared pursuant to the foregoing promptly
after such preparation.
7.4 Furnish Information. It shall be a condition precedent to
the obligations of the Company to take any action pursuant to Section 7.2 that
the Holder shall furnish to the Company such information regarding it, the
Registrable Securities held by it, and the intended
17
method of disposition of such securities as shall be required to timely effect
the registration of its Registrable Securities.
7.5 Indemnification. For the purposes of this Section 7.5, the
term "registration statement" shall include any final Prospectus, exhibit,
supplement, amendment or other document included in, filed as part of, deemed to
be a part of, incorporated by reference in, or otherwise relating to the Shelf
Registration Statement referred to in this Section 7.
(a) By the Company. To the extent permitted by law,
the Company will indemnify and hold harmless the Investor, each Holder, the
officers and directors, trustees, each person, if any, who controls any Holder
and any underwriter for each (as defined in the Act) (such persons and entities
collectively referred to as "Holder Indemnified Parties"), against any losses,
expenses (including, without limitation, reasonable legal fees and expenses),
damages or liabilities (including in settlement of any claim) to which they may
become subject under the Act, the Exchange Act or other federal or state law (a
"Loss"), insofar as such Losses (or actions in respect thereof) arise out of any
claim, action or proceeding brought by a third party arising out of or based
upon any of the following (collectively, a "Violation"):
(i) any untrue statement or alleged untrue statement
of a material fact contained in a registration statement filed
pursuant to this Section 7;
(ii) the omission or alleged omission to state in a
registration statement filed pursuant to this Section 7 a
material fact required to be stated therein, or necessary to
make the statements therein not misleading;
(iii) any violation or alleged violation by the
Company of the Act, the Exchange Act, any federal or state
securities law or any rule or regulation promulgated under the
Act, the Exchange Act or any federal or state securities law,
in each case in connection with the offering covered by such
registration statement;
(iv) any failure by the Company to fulfill any
undertaking included in a registration statement; or
(v) any material breach of any representation,
warranty or covenant made by the Company in this Agreement;
and the Company will reimburse each Holder Indemnified Party for any legal or
other expenses reasonably incurred by them, as incurred, in connection with
investigating or defending or settling, compromising or paying an award granted
in any proceeding relating to any such Violation; provided, however, that the
indemnity agreement contained in this subsection shall not apply to amounts paid
in settlement of any such Loss, if such settlement is effected without the
consent of the Company, nor shall the Company be liable in any such case for any
such Loss to the extent that it arises out of or is based upon a Violation
caused by reliance upon and in conformity with written information furnished
expressly for use in connection with such registration statement by the Holder
Indemnified Party; and provided further, that the Company
18
will not be liable for the reasonable legal fees and expenses of more than one
counsel to the Holder Indemnified Parties.
(b) By the Holder. To the extent permitted by law,
each Holder (severally and not jointly with any other Holder) will indemnify and
hold harmless the Company, each of its directors, each of its officers who have
signed the Shelf Registration Statement, and each person, if any, who controls
the Company within the meaning of the Act (such persons and entities
collectively referred to as "Company Indemnified Parties") against any Losses to
which such Company Indemnified Parties may become subject under the Act, the
Exchange Act or other federal or state law, insofar as such Losses (or actions
in respect thereto) arise out of or are based upon any Violation, in each case
to the extent (and only to the extent) that such Violation is caused by reliance
upon and in conformity with written information furnished by the Holder
expressly for use in connection with such registration statement; and the Holder
will reimburse any legal or other expenses reasonably incurred by such Company
Indemnified Parties in connection with investigating or defending any such
Violation; provided, however, that the indemnity agreement contained in this
subsection shall not apply to amounts paid in settlement of any such Loss if
such settlement is effected without the consent of the Holder; provided further,
that the Holder shall not be liable for the reasonable legal fees and expenses
of more than one counsel to the Company Indemnified Parties; and provided
further, that in no event shall the total amounts payable in indemnity by the
Holder under this subsection in respect of any Violation exceed the net proceeds
(i.e., proceeds net of underwriting discounts, fees and commissions payable by
such Holder) received by the Holder in the registered offering out of which such
Violation arises.
(c) Notice. Promptly after receipt by an indemnified
party under this Section of notice of the commencement of any action (including
any governmental action), such indemnified party will, if a claim for
indemnification in respect thereof is to be made against any indemnifying party
under this Section, deliver to the indemnifying party a written notice of the
commencement of such an action 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 the defense
thereof with counsel selected by the indemnifying party and reasonably
acceptable to a majority in interest of the indemnified parties; provided,
however, that an indemnified party shall have the right to retain its own
counsel, with the reasonable fees and expenses to be paid by the indemnifying
party, if the indemnified party has been advised in writing by counsel that
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual conflict of interests
between such indemnified party and any other party represented by such counsel
in such proceeding. The failure to deliver written notice to the indemnifying
party within a reasonable time of the commencement of any such action shall
relieve such indemnifying party of liability to the indemnified party under this
Section to the extent, and only to the extent that, such delay caused material
prejudice to the indemnified party, but the omission so to deliver written
notice to the indemnifying party will not relieve it of any liability that it
may have to any indemnified party otherwise than under this Section.
(d) Defect Eliminated in Final Prospectus. The
foregoing indemnity agreements of the Company and the Holder are subject to the
condition that, insofar as they relate to any Violation made in a preliminary
prospectus but eliminated or remedied in the
19
amended prospectus on file with the Commission at the time the registration
statement in question becomes effective or in the amended prospectus filed with
the Commission pursuant to Rule 424(b) of the Commission (the "Final
Prospectus"), such indemnity agreements shall not inure to the benefit of any
person if a copy of the Final Prospectus was furnished in a timely manner to the
indemnified party and was not furnished to the person asserting the loss,
liability, claim or damage at or prior to the time such action is required by
the Act.
(e) Contribution. If the indemnification provided for
in this Section 7.5 is unavailable to or insufficient to hold harmless an
indemnified party under subsection (a) or (b) above in respect of any losses,
claims, damages, liabilities or expenses (or actions or proceedings in respect
thereof) referred to therein, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) in such
proportion as is appropriate to reflect the relative fault of the Company on the
one hand and the Holder on the other in connection with the statements or
omissions or other matters which resulted in such losses, claims, damages,
liabilities or expenses (or actions in respect thereof), as well as any other
relevant equitable considerations. The relative fault shall be determined by
reference to, among other things, in the case of an untrue statement, whether
the untrue statement relates to information supplied by the Company on the one
hand or a Holder on the other and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such untrue
statement. The Company and the Investors agree that it would not be just and
equitable if contribution pursuant to this subsection (e) were determined by pro
rata allocation (even if all Holders were treated as one entity for such
purpose) or by any other method of allocation which does not take into account
the equitable considerations referred to above in this subsection (e). The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to above
in this subsection (e) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
subsection (e), no Holder shall be required to contribute any amount in excess
of the net amount of proceeds (i.e., proceeds net of underwriting discounts,
fees and commissions payable by such Holder) received by the Holder from the
sale of the Registrable Securities. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. Contribution (together with any indemnification or
other obligations under this Agreement) by any Holder (including any Indemnified
Person associated with such Holder) shall be limited in amount to the net amount
of proceeds (i.e., proceeds net of underwriting discounts, fees and commissions
payable by such Holder) received by such Holder from the sale of the Registrable
Securities
(f) Survival. The obligations of the Company and the
Holder under this Section shall survive the completion of any offering of
Registrable Securities in a registration statement, and otherwise.
7.6 Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission, which may at any
time permit the sale of the Registrable Securities to the public without
registration, the Company agrees to:
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(a) Make and keep adequate, current public
information available, as those terms are understood and defined in Rule 144
under the Act, at all times;
(b) File with the Commission in a timely manner all
reports and other documents required of the Company under the Exchange Act; and
(c) So long as the Holder owns any Registrable
Securities, to furnish to the Holder forthwith upon request a written statement
by the Company as to its compliance with the reporting requirements of said Rule
144, a copy of the most recent annual or quarterly report of the Company, and
such other reports and documents of the Company as the Holder may reasonably
request in availing itself of any rule or regulation of the Commission allowing
a Holder to sell any such securities without registration.
7.7 Termination of Company's Obligations. The Company shall
have no obligation to register, or maintain, a registration statement governing
Registrable Securities and the restrictive legend described in Section 4.8 will
be removed from any certificate representing the Purchased Shares, (i) if all
Registrable Securities have been registered and sold pursuant to registrations
effected pursuant to this Agreement, or (ii) with respect to any particular
Holder, at such time as all Registrable Securities held by such Holder may be
sold without restriction (including, without limitation, as to volume, but by
complying with the manner of sale and Form 144 filing requirements, if
applicable) within a three-month period pursuant to Rule 144, as it may be
amended from time to time, including but not limited to amendments that reduce
that period of time that securities must be held before such securities may be
sold pursuant to such rule.
8. ASSIGNMENT. Notwithstanding anything herein to the contrary, the
registration rights of the Holder under Section 7 hereof shall be automatically
assigned by such Investor to any transferee of all or any portion of such
Investor's Registrable Securities who is a Permitted Transferee (as defined
below); provided, however, that (w) no party may be assigned any of the
foregoing rights until the Company is given written notice by the assigning
party at the time of such assignment stating the name and address of the
assignee and identifying the securities of the Company as to which the rights in
question are being assigned; (x) that any such assignee shall receive such
assigned rights subject to all the terms and conditions of this Agreement; and
(y) no such assignment or assignments shall increase the obligations of the
Company hereunder. For purposes of this Agreement, a "Permitted Transferee"
shall mean any person who (a) is (i) an "accredited investor" as that term is
defined in Rule 501(a) of Regulation D under the Act; (ii) a partner of such
Holder, an affiliate of such Holder or a partner of an affiliate or any
corporation, partnership, limited liability company or other entity or person
controlling, controlled by, or under common control with, such Holder; or (iii)
any other direct transferee from such Holder of at least 25% of the Registrable
Securities held by such Holder and (b) is a transferee of the Registrable
Securities as permitted under the securities laws of the United States.
9. MISCELLANEOUS.
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9.1 Survival of Warranties. The representations, warranties
and covenants of the Company and the Investors contained in or made pursuant to
this Agreement shall survive the execution and delivery of this Agreement and
the Closing and shall in no way be affected by any investigation of the subject
matter thereof made by or on behalf of the Investors, their counsel or the
Company, as the case may be.
9.2 Successors and Assigns. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties.
9.3 Governing Law; Consent to Jurisdiction. This Agreement
shall be governed by and construed under the internal laws of the State of
California as applied to agreements among California residents entered into and
to be performed entirely within California, without reference to principles of
conflict of laws or choice of laws.
9.4 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.5 Headings. The headings and captions used in this Agreement
are used for convenience only and are not to be considered in construing or
interpreting this Agreement. All references in this Agreement to sections,
paragraphs, exhibits, and schedules shall, unless otherwise provided, refer to
sections and paragraphs hereof and exhibits and schedules attached hereto, all
of which exhibits and schedules are incorporated herein by this reference.
9.6 Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified, by
telecopier or upon deposit with the United States Post Office, by registered or
certified mail, postage prepaid and addressed to the party to be notified in the
case of the Company, at 000 Xxxxxx Xxxxx Xxxxxxxxx, Xxxxx Xxx Xxxxxxxxx, XX
00000, Attention: President, with a copy to C. Xxxxx Xxxxx, Xxxxxxx & West LLP,
000 Xxxxxxxxxxx Xxxxxx X.X., Xxxxx 000, Xxxxxxxxxx, X.X. 00000, or in the case
of Investor, at the record address for such Investor as reflected on the books
of the Company, with copies to Xxxx Xxxxx, Esq., General Counsel, SJ Strategic
Investments LLC, 000 Xxxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxx, XX 00000, or at such
other address as any party may designate by giving ten (10) days advance written
notice to the other party. Notices shall be deemed delivered upon delivery if
personally delivered, one business day after transmission with confirmation of
receipt if sent by telecopier, or three days after deposit in the mails if
mailed.
9.7 No Finder's Fees. Except as may be disclosed by the
Company in the Disclosure Schedule: each party represents that it neither is nor
will be obligated for any finder's or broker's fee or commission in connection
with this transaction; each Investor agrees to indemnify and to hold harmless
the Company from any liability for any commission or compensation in the nature
of a finder's or broker's fee (and any asserted liability) for which such
Investor or any of its officers, partners, employees, or representatives is
responsible; and the Company agrees to indemnify and to hold harmless each
Investor from any liability for any commission or compensation in the nature of
a finder's or broker's fee (and any asserted
22
liability) for which the Company or any of its officers, employees or
representatives is responsible.
9.8 Costs, Expenses. Each party's costs in connection with the
preparation, execution delivery and performance of this Agreement (including
without limitation legal fees) shall be borne by that party.
9.9 Amendments and Waivers. 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 and either retroactively or
prospectively), only with the written consent of the Company and Investors
holding a majority of the Purchased Shares purchased hereunder; provided,
however, that no amendment or waiver of the Company's obligations under Section
7 of this Agreement that materially and adversely affects the rights of a holder
of Purchased Shares shall be binding upon that holder unless that holder has
consented in writing to such amendment or waiver. Subject to the limitations set
forth in the preceding sentence, any amendment or waiver effected in accordance
with this Section shall be binding upon each holder of any Purchased Shares at
the time outstanding (even if such Investor or other holder did not vote with
respect to, or voted against, such amendment or waiver), each future holder of
such securities, and the Company. The Investors acknowledge that by virtue of
this provision, holders of a majority of the Purchased Shares may bind other
holders to amendment or waivers that such other holders may have voted to
oppose.
9.10 Severability. If one or more provisions of this Agreement
are held to be invalid, illegal or unenforceable under applicable law, such
provision(s) shall be excluded from this Agreement and the balance of the
Agreement shall be interpreted as if such provision(s) were so excluded and
shall be enforceable in accordance with its terms.
9.11 Entire Agreement. This Agreement, together with any
exhibits or schedules hereto, constitutes the entire agreement and understanding
of the parties with respect to the subject matter hereof and supersedes any and
all prior negotiations, correspondence, agreements, understandings, duties or
obligations between the parties with respect to the subject matter hereof.
9.12 Further Assurances. From and after the date of this
Agreement, upon the request of an Investor or the Company, the Company and the
Investors shall execute and deliver such instruments, documents or other
writings as may be reasonably necessary or desirable to confirm and carry out
and to effectuate fully the intent and purposes of this Agreement.
9.13 Termination.
(a) By the Investor: The Investor may terminate this
Agreement immediately if, at any time prior to the Closing, (i) the Company
shall cease conducting business in the normal course; become insolvent or become
unable to meet its obligations as they become due; make a general assignment for
the benefit of creditors; petition, apply for, suffer or permit with or without
its consent the appointment of a custodian, receiver, trustee in bankruptcy or
similar officer for all or any substantial part of its business or assets; avail
itself or become subject to any proceeding under the Federal Bankruptcy Code or
any similar state, federal or
23
foreign statute relating to bankruptcy, insolvency, reorganization,
receivership, arrangement, adjustment of debts, dissolutions or liquidation or
(ii) the Company shall have breached or failed to perform any of its
representations, warranties, covenants or agreements set forth in this
Agreement, which breach or failure to perform (A) would give rise to the failure
of a condition set forth in Section 5.1.1 or Section 5.1.2 and (B) is incapable
of being cured or has not been cured by the Company within 10 calendar days
following receipt of written notice of such breach or failure to perform from
the Investor.
(b) By the Company or the Investor: The Company or
the Investor may terminate this Agreement at any time after November 30, 2002 if
the Closing has not occurred prior to such date, or such later date as the
Company and the Investor shall have agreed to extend the offering.
(c) By the Company: The Company may terminate this
Agreement if the Investor shall have breached or failed to perform any of its
representations, warranties, covenants or agreements set forth in this
Agreement, which breach or failure to perform (i) would give rise to the failure
of a condition set forth in Section 6.1.1 and (ii) is incapable of being cured
or has not been cured by the Investor within 10 calendar days following receipt
of written notice of such breach or failure to perform from the Company.
9.14. Public Announcements. The parties agree that the initial
press release to be issued with respect to the transactions contemplated by this
Agreement shall be in the form heretofore agreed to by the parties. The Investor
and the Company shall consult with each other before issuing, and give each
other the opportunity to review and comment upon, any subsequent press release
primarily relating to the transactions contemplated by this Agreement, and shall
not issue any such press release prior to such consultation, except as may be
required by applicable law, court process or by obligations pursuant to any
listing agreement with any national securities exchange or national securities
quotation system.
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IN WITNESS WHEREOF, the parties hereto have executed this Common Stock
Purchase Agreement as of the date first above written.
THE COMPANY: INVESTOR:
----------- --------
Cellegy Pharmaceuticals, Inc.,
a California corporation Xxxx Xxxxxxx
Name of Investor
By: /s/ K. Xxxxxxx Xxxxxxx By: /s/ Xxxx X. Xxxxxxx
---------------------- -------------------
Title: Chairman of the Board, CEO & President
--------------------------------------
[COUNTERPART SIGNATURE PAGE
COMMON STOCK PURCHASE AGREEMENT]
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