Execution Copy
Exhibit 10.9
COMMON STOCK PURCHASE AGREEMENT
by and between
KINGSBRIDGE CAPITAL LIMITED
and
CELLEGY PHARMACEUTICALS, INC.
dated as of January 16, 2004
Table of Contents
Page
ARTICLE I DEFINITIONS.......................................................................2
Section 1.01. "Articles"...................................................................2
Section 1.02. "Blackout Amount"............................................................2
Section 1.03. "Blackout Shares"............................................................2
Section 1.04. "Closing Date"...............................................................2
Section 1.05. "Commission".................................................................2
Section 1.06. "Commission Documents".......................................................2
Section 1.07. "Commitment Period"..........................................................2
Section 1.08. "Common Stock"...............................................................2
Section 1.09. "Condition Satisfaction Date"................................................2
Section 1.10. "Damages"....................................................................2
Section 1.11. "Draw Down"..................................................................2
Section 1.12. "Draw Down Amount"...........................................................2
Section 1.13. "Draw Down Discount Price"...................................................2
Section 1.14. "Draw Down Notice"...........................................................3
Section 1.15. "Draw Down Pricing Period"...................................................3
Section 1.16. "Effective Date".............................................................3
Section 1.17. "Exchange Act"...............................................................3
Section 1.18. "Knowledge"..................................................................3
Section 1.19. "Legend".....................................................................3
Section 1.20. "Make Whole Amount"..........................................................3
Section 1.21. "Market Capitalization"......................................................3
Section 1.22. "Market Cap Increase Quotient"...............................................3
Section 1.23. "Material Adverse Effect"....................................................3
Section 1.24. "Maximum Commitment Amount"..................................................3
Section 1.25. "Maximum Draw Down Amount"...................................................3
Section 1.26. "NASD".......................................................................3
Section 1.27. "New Market Cap".............................................................4
Section 1.28. "Other Financing"............................................................4
Section 1.29. "Old Market Cap".............................................................4
Section 1.30. "Permitted Transaction"......................................................4
Section 1.31. "Person".....................................................................4
Section 1.32. "Principal Market"...........................................................4
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Table of Contents
(Continued)
Page
Section 1.33. "Prohibited Transaction".....................................................4
Section 1.34. "Prospectus".................................................................4
Section 1.35. "Registrable Securities".....................................................4
Section 1.36. "Registration Rights Agreement"..............................................4
Section 1.37. "Registration Statement".....................................................4
Section 1.38. "Regulation D"...............................................................5
Section 1.39. "Section 4(2)"...............................................................5
Section 1.40. "Securities Act".............................................................5
Section 1.41. "Settlement Date"............................................................5
Section 1.42. "Shares".....................................................................5
Section 1.43. "Threshold Price"............................................................5
Section 1.44. "Trading Day"................................................................5
Section 1.45. "Underwriter"................................................................5
Section 1.46. "VWAP".......................................................................5
Section 1.47. "Warrant"....................................................................5
Section 1.48. "Warrant Shares".............................................................5
ARTICLE II PURCHASE AND SALE OF COMMON STOCK.................................................5
Section 2.01. Purchase and Sale of Stock...................................................5
Section 2.02. Closing......................................................................5
Section 2.03. Registration Statement and Prospectus........................................6
Section 2.04. Warrant......................................................................6
Section 2.05. Blackout Shares..............................................................6
ARTICLE III DRAW DOWN TERMS...................................................................6
Section 3.01. Draw Down Notice.............................................................6
Section 3.02. Number of Shares.............................................................6
Section 3.03. Limitation on Draw Downs.....................................................6
Section 3.04. Trading Cushion..............................................................7
Section 3.05. Expiration of Draw Downs.....................................................7
Section 3.06. Settlement...................................................................7
Section 3.07. Delivery of Shares; Payment of Draw Down Amount..............................7
Section 3.08. Threshold Price..............................................................7
Section 3.09. Other Issuances..............................................................7
ii
Table of Contents
(Continued)
Page
Section 3.10. Failure to Deliver Shares....................................................7
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY.....................................8
Section 4.01. Organization, Good Standing and Power........................................8
Section 4.02. Authorization; Enforcement...................................................8
Section 4.03. Capitalization...............................................................9
Section 4.04. Issuance of Shares...........................................................9
Section 4.05. No Conflicts.................................................................9
Section 4.06. Commission Documents, Financial Statements..................................10
Section 4.07. No Material Adverse Change..................................................11
Section 4.08. No Undisclosed Liabilities..................................................11
Section 4.09. No Undisclosed Events or Circumstances......................................11
Section 4.10. Actions Pending.............................................................11
Section 4.11. Compliance with Law.........................................................11
Section 4.12. Certain Fees................................................................11
Section 4.13. Disclosure..................................................................11
Section 4.14. Material Non-Public Information.............................................12
Section 4.15. Exemption from Registration; Valid Issuances................................12
Section 4.16. No General Solicitation or Advertising in
Regard to this Transaction................................................12
Section 4.17. No Integrated Offering......................................................12
Section 4.18. Acknowledgment Regarding Investor's Purchase of Shares......................12
ARTICLE V REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE INVESTOR........................13
Section 5.01. Organization and Standing of the Investor...................................13
Section 5.02. Authorization and Power.....................................................13
Section 5.03. No Conflicts................................................................13
Section 5.05. Information.................................................................14
Section 5.06. Selling Restrictions........................................................14
Section 5.07. Statutory Underwriter Status................................................14
ARTICLE VI COVENANTS OF THE COMPANY.........................................................14
Section 6.01. Securities..................................................................14
Section 6.02. Reservation of Common Stock.................................................14
Section 6.03. Registration and Listing....................................................15
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Table of Contents
(Continued)
Page
Section 6.04. Registration Statement......................................................15
Section 6.05. Compliance with Laws........................................................15
Section 6.06. Reporting Requirements......................................................15
Section 6.07. Other Financing.............................................................15
Section 6.08. Prohibited Transactions.....................................................16
Section 6.09. Corporate Existence.........................................................16
Section 6.10. Non-Disclosure of Non-Public Information....................................16
Section 6.11. Notice of Certain Events Affecting Registration;
Suspension of Right to Request a Draw Down................................16
Section 6.12. Amendments to the Registration Statement....................................16
Section 6.13. Prospectus Delivery.........................................................17
Section 6.14. Expectations Regarding Draw Downs...........................................17
ARTICLE VII CONDITIONS TO THE OBLIGATION OF THE INVESTOR TO ACCEPT A DRAW DOWN...............17
Section 7.01. Accuracy of the Company's Representations and Warranties....................17
Section 7.02. Performance by the Company..................................................17
Section 7.03. Compliance with Law.........................................................18
Section 7.04. Effective Registration Statement............................................18
Section 7.05. No Knowledge................................................................18
Section 7.06. No Suspension...............................................................18
Section 7.07. No Injunction...............................................................18
Section 7.08. No Proceedings or Litigation................................................18
Section 7.09. Section 16 Limitation.......................................................18
Section 7.10. Sufficient Shares Registered for Resale.....................................19
Section 7.11. Warrant.....................................................................19
Section 7.12. Opinion of Counsel..........................................................19
ARTICLE VIII LEGENDS..........................................................................19
Section 8.01. Legends.....................................................................19
Section 8.02. No Other Legend or Stock Transfer Restrictions..............................20
ARTICLE IX TERMINATION......................................................................20
Section 9.01. Term........................................................................20
Section 9.02. Other Termination...........................................................20
Section 9.03. Effect of Termination.......................................................21
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Table of Contents
(Continued)
Page
ARTICLE X INDEMNIFICATION..................................................................22
Section 10.01. Indemnification.............................................................22
Section 10.02. Notification of Claims for Indemnification..................................23
Section 10.03. Dispute Resolution..........................................................24
ARTICLE XI MISCELLANEOUS....................................................................25
Section 11.01. Fees and Expenses...........................................................25
Section 11.02. Reporting Entity for the Common Stock.......................................25
Section 11.03. Brokerage...................................................................25
Section 11.04. Notices.....................................................................25
Section 11.05. Assignment..................................................................26
Section 11.06. Amendment; No Waiver........................................................27
Section 11.07. Entire Agreement............................................................27
Section 11.08. Severability................................................................27
Section 11.09. Title and Subtitles.........................................................27
Section 11.10. Counterparts................................................................27
Section 11.11. Choice of Law...............................................................27
Section 11.12. Specific Enforcement, Consent to Jurisdiction...............................27
Section 11.13. Survival....................................................................28
Section 11.14. Publicity...................................................................28
Section 11.15. Further Assurances..........................................................28
iv
COMMON STOCK PURCHASE AGREEMENT
by and between
KINGSBRIDGE CAPITAL LIMITED
and
CELLEGY PHARMACEUTICALS, INC.
dated as of January 16, 2004
This COMMON STOCK PURCHASE AGREEMENT is entered into as of the 16th day
of January, 2004 (this "Agreement"), by and between Kingsbridge Capital Limited,
an company organized and existing under the laws of the British Virgin Islands
(the "Investor") and CELLEGY PHARMACEUTICALS, INC., a corporation organized and
existing under the laws of the State of California (the "Company").
WHEREAS, the parties desire that, upon the terms and subject
to the conditions set forth herein, the Company may issue and sell to the
Investor, from time to time as provided herein, and the Investor shall purchase
from the Company, up to 3,740,000 shares of Common Stock (as defined below); and
WHEREAS, such investments will be made in reliance upon the
provisions of Section 4(2) ("Section 4(2)") and Regulation D ("Regulation D") of
the United States Securities Act of 1933, as amended and the rules and
regulations promulgated thereunder (the "Securities Act"), and/or upon such
other exemption from the registration requirements of the Securities Act as may
be available with respect to any or all of the investments in Common Stock to be
made hereunder; and
WHEREAS, the parties hereto are concurrently entering into a
Registration Rights Agreement in the form of Exhibit A hereto (the "Registration
Rights Agreement") pursuant to which the Company shall register the Common Stock
issued and sold to the Investor under this Agreement and under the Warrant (as
defined below), upon the terms and subject to the conditions set forth therein;
and
WHEREAS, in consideration for the Investor's execution and
delivery of, and its performance of its obligations under, this Agreement, the
Company is concurrently issuing to the Investor a Warrant in the form of Exhibit
B hereto (the "Warrant") pursuant to which the Investor may purchase from the
Company up to 260,000 shares of Common Stock, upon the terms and subject to the
conditions set forth therein;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01 "Articles" shall have the meaning assigned to such term in
Section 4.03 hereof.
Section 1.02 "Blackout Amount" shall have the meaning assigned to such
term in the Registration Rights Agreement.
Section 1.03 "Blackout Shares" shall have the meaning assigned to such
term in the Registration Rights Agreement.
Section 1.04 "Closing Date" means the date on which this Agreement is
executed and delivered by the Company and the Investor.
Section 1.05 "Commission" means the United States Securities Exchange
Commission.
Section 1.06 "Commission Documents" shall have the meaning assigned to
such term in Section 4.06 hereof.
Section 1.07 "Commitment Period" means the period commencing on the
Effective Date and expiring on the earliest to occur of (x) the date on which
the Investor shall have purchased Shares pursuant to this Agreement for an
aggregate purchase price equal to the Maximum Commitment Amount, (y) the date
this Agreement is terminated pursuant to Article IX hereof, and (z) the date
occurring 24 months from the Effective Date.
Section 1.08 "Common Stock" means the common stock of the Company, no
par value.
Section 1.09 "Condition Satisfaction Date" shall have the meaning
assigned to such term in Article VII hereof.
Section 1.10 "Damages" means any loss, claim, damage, liability, costs
and expenses (including, without limitation, reasonable attorneys' fees and
expenses and costs and reasonable expenses of expert witnesses and
investigation).
Section 1.11 "Draw Down" shall have the meaning assigned to such term
in Section 3.01 hereof.
Section 1.12 "Draw Down Amount" means the actual amount of a Draw Down
paid to the Company.
Section 1.13 "Draw Down Discount Price" means (i) 88% of the VWAP on
any Trading Day during the Draw Down Pricing Period when the VWAP equals to or
exceeds $1.25 but is less than or equal to $2.50, (ii) 90% of the VWAP on any
Trading Day during the Draw Down Pricing Period when the VWAP exceeds $2.50 but
is less than or equal to $7.00, and (iii) 92% of the VWAP on any Trading Day
during the Draw Down Pricing Period when the VWAP exceeds $7.00.
2
Section 1.14 "Draw Down Notice" shall have the meaning assigned to such
term in Section 3.01 hereof.
Section 1.15 "Draw Down Pricing Period" shall mean, with respect to
each Draw Down, a period of fifteen (15) consecutive Trading Days beginning on
the first Trading Day specified in a Draw Down Notice.
Section 1.16 "Effective Date" means the first Trading Day immediately
following the date on which the Registration Statement is declared effective by
the Commission.
Section 1.17 "Exchange Act" means the U.S. Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder.
Section 1.18 "Knowledge" means the actual knowledge of the Chief
Executive Officer, Chief Financial Officer or any Senior Vice President or Vice
President of the Company.
Section 1.19 "Legend" shall have the meaning specified in Section 8.1.
Section 1.20 "Make Whole Amount" shall have the meaning specified in
Section 3.10.
Section 1.21 "Market Capitalization" means, as of any Trading Day, the
product of (i) the closing sale price of the Company's Common Stock as reported
by Bloomberg L.P. using the AQR function and (ii) the number of outstanding
shares of Common Stock of the Company as reported by Bloomberg L.P. using the
DES function.
Section 1.22 "Market Cap Increase Quotient" means the quotient of (x)
the New Market Cap divided by (y) the Old Market Cap.
Section 1.23 "Material Adverse Effect" means any effect on the
business, operations, properties or financial condition of the Company and its
consolidated subsidiaries that is material and adverse to the Company and such
subsidiaries, taken as a whole, and/or any condition, circumstance, or situation
that would prohibit or otherwise interfere with the ability of the Company to
perform any of its obligations under this Agreement, the Registration Rights
Agreement or the Warrant in any material respect; provided, that none of the
following shall constitute a "Material Adverse Effect": (i) the effects of
conditions or events that are generally applicable to the capital, financial,
banking or currency markets, (ii) any changes or effects resulting from the
announcement or consummation of the transactions contemplated by this Agreement,
including, without limitation, any changes or effects associated with any
particular Draw Down, and (iii) changes in the market price of the Company's
Common Stock.
Section 1.24 "Maximum Commitment Amount" means $15 million in aggregate
Draw Down Amounts; provided, however, that in the event that the New Market Cap
is higher than the Old Market Cap as of the date the Company files the
Registration Statement with the Commission, "Maximum Commitment Amount" shall
mean the product of (i) $15 million multiplied by (ii) the Market Cap Increase
Quotient.
Section 1.25 "Maximum Draw Down Amount" means 2.5% of the Company's
Market Capitalization at the time of the Draw Down; provided, however, that such
amount shall not exceed $5 million in respect of any Draw Down.
Section 1.26 "NASD" means the National Association of Securities
Dealers, Inc.
3
Section 1.27 "New Market Cap" means the Company's Market Capitalization
as of the end of the Trading Day immediately preceding the date on which the
Company files the Registration Statement with the Commission
Section 1.28 "Other Financing" shall have the meaning assigned to such
term in Section 6.07 hereof.
Section 1.29 "Old Market Cap" means the Company's Market Capitalization
as of the date hereof
Section 1.30 "Permitted Transaction" shall have the meaning assigned to
such term in Section 6.07 hereof.
Section 1.31 "Person" means any individual, corporation, partnership,
limited liability company, association, trust or other entity or organization,
including any government or political subdivision or an agency or
instrumentality thereof.
Section 1.32 "Principal Market" means the Nasdaq National Market, the
Nasdaq SmallCap Market, the American Stock Exchange or the New York Stock
Exchange, whichever is at the time the principal trading exchange or market for
the Common Stock.
Section 1.33 "Prohibited Transaction" shall have the meaning assigned
to such term in Section 6.08 hereof.
Section 1.34 "Prospectus" as used in this Agreement means the
prospectus in the form included in the Registration Statement, as supplemented
from time to time pursuant to Rule 424(b) of the Securities Act.
Section 1.35 "Registrable Securities" means (i) the Shares, (ii) the
Warrant Shares, and (iii) any securities issued or issuable with respect to any
of the foregoing by way of exchange, stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger, consolidation
or other reorganization or otherwise. As to any particular Registrable
Securities, once issued such securities shall cease to be Registrable Securities
when (w) the Registration Statement has been declared effective by the SEC and
such Registrable Securities have been disposed of pursuant to the Registration
Statement, (x) such Registrable Securities have been sold under circumstances
under which all of the applicable conditions of Rule 144 (or any similar
provision then in force) under the Securities Act ("Rule 144") are met, (y) such
time as such Registrable Securities have been otherwise transferred to holders
who may trade such shares without restriction under the Securities Act, and the
Company has delivered a new certificate or other evidence of ownership for such
securities not bearing a restrictive legend or (z) in the opinion of counsel to
the Company such Registrable Securities may be sold without registration and
without any time, volume or manner limitations pursuant to Rule 144(k) (or any
similar provision then in effect) under the Securities Act.
Section 1.36 "Registration Rights Agreement" shall have the meaning set
forth in the recitals of this Agreement.
Section 1.37 "Registration Statement" shall have the meaning assigned
to such term in the Registration Rights Agreement.
4
Section 1.38 "Regulation D" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.39 "Section 4(2)" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.40 "Securities Act" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.41 "Settlement Date" shall have the meaning assigned to such
term in Section 3.06 hereof.
Section 1.42 "Shares" means the shares of Common Stock of the Company
that are and/or may be purchased hereunder.
Section 1.43 "Threshold Price" means the lowest "Draw Down Discount
Price" (as specified in a Draw Down Notice) at which the Company will agree to
sell Shares during the applicable Draw Down Pricing Period, which price shall
not be less than $1.25 per share.
Section 1.44 "Trading Day" means any day other than a Saturday or a
Sunday on which the Principal Market is open for trading in equity securities.
Section 1.45 "Underwriter" shall mean any underwriter (other than the
Investor, to the extent it is deemed to be a statutory underwriter)
participating in any disposition of the Registrable Securities on behalf of the
Investor pursuant to the Registration Statement.
Section 1.46 "VWAP" means the volume weighted average price (the
aggregate sales price of all trades of Common Stock during each Trading Day
divided by the total number of shares of Common Stock traded during such Trading
Day) of the Common Stock during any Trading Day as reported by Bloomberg, L.P.
using the AQR function.
Section 1.47 "Warrant" shall have the meaning set forth in the recitals
of this Agreement.
Section 1.48 "Warrant Shares" means the shares of Common Stock issuable
to the Investor upon exercise of the Warrant.
ARTICLE II
PURCHASE AND SALE OF COMMON STOCK
Section 2.01 Purchase and Sale of Stock. Upon the terms and subject to
the conditions set forth in this Agreement, the Company shall issue and sell to
the Investor and the Investor shall purchase from the Company Common Stock for
an aggregate (in Draw Down Amounts) of up to the Maximum Commitment Amount,
consisting of purchases based on Draw Downs in accordance with Article III
hereof.
Section 2.02 Closing. In consideration of and in express reliance upon
the representations, warranties, covenants, terms and conditions of this
Agreement, the Company agrees to issue and sell to the Investor, and the
Investor agrees to purchase from the Company, that number of the Shares to be
issued in connection with each Draw Down. The closing of the
5
execution and delivery of this Agreement (the "Closing") shall take place at the
offices of Xxxxxxxx Chance US LLP, 000 Xxxx Xxxxxx, Xxx Xxxx, XX 00000 at 4:00
p.m. local time on January 15th, 2004, or at such other time and place or on
such date as the Investor and the Company may agree upon (the "Closing Date").
Each party shall deliver all documents, instruments and writings required to be
delivered by such party pursuant to this Agreement at or prior to the Closing.
Section 2.03 Registration Statement and Prospectus. Promptly after the
Closing, the Company shall prepare and file with the Commission the Registration
Statement (including the Prospectus) in accordance with the provisions of the
Securities Act and the Registration Rights Agreement.
Section 2.04 Warrant. On the Closing Date, the Company shall issue and
deliver the Warrant to the Investor.
Section 2.05 Blackout Shares. The Company shall issue and deliver any
Blackout Shares, if any, to the Investor in accordance with Section 1(e) of the
Registration Rights Agreement.
ARTICLE III
DRAW DOWN TERMS
Subject to the satisfaction of the conditions hereinafter set forth in
this Agreement, the parties agree as follows:
Section 3.01 Draw Down Notice. The Company, may, in its sole
discretion, issue a Draw Down Notice with respect to a Draw Down up to a Draw
Down Amount equal to the Maximum Draw Down Amount (each, a "Draw Down") during
the Commitment Period, which Draw Down the Investor will be obligated to accept.
The Company shall inform the Investor via facsimile transmission, with a copy to
the Investor's counsel, as to the Draw Down Amount the Company wishes to
exercise before commencement of trading on the first Trading Day of any Draw
Down Pricing Period (the "Draw Down Notice"). In addition to the Draw Down
Amount, each Draw Down Notice shall specify the Threshold Price in respect of
the applicable Draw Down and shall designate the first Trading Day of the Draw
Down Pricing Period. In no event shall any Draw Down Amount exceed the Maximum
Draw Down Amount. Each Draw Down Notice shall be accompanied by a certificate,
signed by the Chief Executive Officer or Chief Financial Officer dated, as of
the date of such Draw Down Notice, in the form of Exhibit C hereof.
Section 3.02 Number of Shares. The number of Shares to be issued in
connection with each Draw Down shall be equal to the sum of the quotients (for
each Trading Day of the Draw Down Pricing Period for which the Draw Down
Discount Price equals or exceeds the Threshold Price) of one fifteenth (1/15th)
of the Draw Down Amount divided by the applicable Draw Down Discount Price.
Section 3.03 Limitation on Draw Downs. Only one Draw Down shall be
permitted for each Draw Down Pricing Period.
6
Section 3.04 Trading Cushion. Unless the parties agree in writing
otherwise, there shall be a minimum of three (3) Trading Days between the
expiration of any Draw Down Pricing Period and the beginning of the next
succeeding Draw Down Pricing Period.
Section 3.05 Expiration of Draw Downs. Each Draw Down will expire on
the last Trading Day of each Draw Down Pricing Period.
Section 3.06 Settlement. The number of Shares purchased by the Investor
with respect to each Draw Down shall be determined and settled on a periodic
basis in respect of the applicable Draw Down Pricing Period. Settlement in
respect of each determination shall be made no later than the third Trading Day
after the fifth, tenth and fifteenth Trading Day of the Draw Down Pricing
Period. Each date on which settlement of the purchase and sale of Shares occurs
hereunder being referred to as a "Settlement Date." The Investor shall provide
the Company with delivery instructions for the Shares to be issued at each
Settlement Date at least two Trading Days in advance of such Settlement Date
(except to the extent previously provided). The number of Shares actually issued
shall be rounded to the nearest whole number of Shares.
Section 3.07 Delivery of Shares; Payment of Draw Down Amount. On each
Settlement Date, the Company shall deliver the Shares purchased by the Investor
to the Investor or its designees via book-entry through the Depositary Trust
Company to an account designated by the Investor, and upon receipt of the
Shares, the Investor shall cause payment therefor to be made to the Company's
designated account by wire transfer of immediately available funds, if the
Shares are received by the Investor no later than 1:00 p.m. (Eastern Time), or
next day available funds, if the Shares are received thereafter.
Section 3.08 Threshold Price. For each Trading Day during a Draw Down
Pricing Period that the Draw Down Discount Price is less than the Threshold
Price, no Shares shall be purchased or sold on such Trading Day and the total
amount of the Draw Down Amount in respect of such Draw Down Pricing Period shall
be reduced by one fifteenth (1/15th). At no time shall the Threshold Price be
set below $1.25. If trading in the Company's Common Stock is suspended for any
reason for more than three (3) consecutive or non-consecutive hours during any
Trading Day during a Draw Down Pricing Period, the Draw Down Discount Price
shall be deemed to be less than the Threshold Price for that Trading Day.
Section 3.09 Other Issuances. If during any Draw Down Pricing Period
the Company shall (with the consent of the Investor pursuant to Section 6.07 or
6.08 hereof, if applicable) issue any shares of Common Stock to any Person other
than the Investor (other than shares of Common Stock issued in connection with a
Permitted Transaction), that the applicable Draw Down Notice shall be deemed
null and void and the Investor shall promptly return to the Company any and all
Shares transferred to the Investor in respect of any Settlement Date(s) during
such Draw Down Pricing Period and the Company shall promptly thereafter pay to
the Investor by wire transfer of immediately available funds to an account
designated by the Investor that portion of the applicable Draw Down Amount paid
to the Company in respect of such Settlement Date(s).
Section 3.10 Failure to Deliver Shares. If on any Settlement Date, the
Company fails to deliver the Shares to be purchased by the Investor, and such
failure is not cured within ten (10) Trading Days following the date on which
the Investor delivered payment for such Shares, the Company shall pay to the
Investor on demand in cash by wire transfer of immediately available funds to an
account designated by the Investor the "Make Whole Amount;" provided, however,
that in the event that the Company is prevented from delivering Shares in
respect of any such Settlement Date in a timely manner by any fact or
circumstance that is reasonably within the
7
control of, or directly attributable to, the Investor, then such ten (10)
Trading Day period shall be automatically extended until such time as such fact
or circumstance is cured. As used herein, the Make Whole Amount shall be an
amount equal to the sum of (i) the Draw Down Amount actually paid by the
Investor in respect of such Shares plus (ii) an amount equal to the actual loss
suffered by the Investor in respect of sales to subsequent purchasers, pursuant
to transactions entered into before the Settlement Date, of the Shares that were
required to be delivered by the Company, which shall be based upon documentation
reasonably satisfactory to the Company demonstrating the difference (if greater
than zero) between (A) the price per share paid by the Investor to purchase such
number of shares of Common Stock necessary for the Investor to meet its share
delivery obligations to such subsequent purchasers minus (B) the average Draw
Down Discount Price during the applicable Draw Down Pricing Period. In the event
that the Make Whole Amount is not paid within two (2) Trading Days following a
demand therefor from the Investor, the Make Whole Amount shall accrue interest
compounded daily at a rate of five percent (5%) per annum up to and including
the date on which the Make Whole Amount is actually paid. Notwithstanding
anything to the contrary set forth in this Agreement, in the event that the
Company pays the Make Whole Amount (plus interest, if applicable) in respect of
any Settlement Date in accordance with this Section 3.10, such payment shall be
the Investor's sole remedy in respect of the Company's failure to deliver Shares
in respect of such Settlement Date, and the Company shall not be obligated to
deliver such Shares.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby makes the following representations and warranties
to the Investor:
Section 4.01 Organization, Good Standing and Power. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of California and has all requisite power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted. Except as set forth in the Commission Documents (as defined below),
the Company does not own more than fifty percent (50%) of the outstanding
capital stock of or control any other business entity, other than any
wholly-owned subsidiary that is not "significant" within the meaning of
Regulation S-X promulgated by the Commission. The Company is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which the nature of the business conducted or property owned by it makes such
qualification necessary, other than those in which the failure so to qualify or
be in good standing would not have a Material Adverse Effect.
Section 4.02 Authorization; Enforcement. (i) The Company has the
requisite corporate power and authority to enter into and perform its
obligations under this Agreement, the Registration Rights Agreement and the
Warrant and to issue the Shares, the Warrant, the Warrant Shares and any
Blackout Shares (except to the extent that the number of Blackout Shares
required to be issued exceeds the number of authorized shares of Common Stock
under the Articles); (ii) the execution and delivery of this Agreement and the
Registration Rights Agreement, and the execution, issuance and delivery of the
Warrant, by the Company and the consummation by it of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action and no further consent or authorization of the Company or its
Board of Directors or stockholders is required (other than as contemplated by
Section 6.05); and (iii) each of this Agreement and the Registration Rights
Agreement has been duly executed and delivered, and the Warrant has been duly
executed, issued and delivered, by the Company and constitute the valid and
binding obligations of the Company enforceable against the Company in accordance
with
8
their respective terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, or similar laws relating to, or affecting
generally the enforcement of, creditors' rights and remedies or by other
equitable principles of general application.
Section 4.03 Capitalization. The authorized capital stock of the
Company and the shares thereof issued and outstanding as of December 31, 2003
are set forth on a Schedule previously delivered to the Investor. All of the
outstanding shares of the Common Stock have been duly and validly authorized and
issued, and are fully paid and non-assessable. Except as set forth in this
Agreement or as previously disclosed to the Investor in writing, as of the date
hereof no shares of Common Stock are entitled to preemptive rights or
registration rights and there are no outstanding options, warrants, scrip,
rights to subscribe to, call or commitments of any character whatsoever relating
to, or securities or rights convertible into or exchangeable for or giving any
right to subscribe for, any shares of capital stock of the Company. Except as
set forth in this Agreement or as previously disclosed to the Investor in
writing, as of the date hereof, there are no contracts, commitments,
understandings, or arrangements by which the Company is or may become bound to
issue additional shares of the capital stock of the Company or options,
securities or rights convertible into or exchangeable for or giving any right to
subscribe for any shares of capital stock of the Company. Except as previously
disclosed to the Investor in writing, as of the date hereof the Company is not a
party to any agreement granting registration rights to any Person with respect
to any of its equity or debt securities. Except as previously disclosed to the
Investor in writing, as of the date hereof the Company is not a party to, and it
has no Knowledge of, any agreement restricting the voting or transfer of any
shares of the capital stock of the Company. The offer and sale of all capital
stock, convertible securities, rights, warrants, or options of the Company
issued during the twenty-four month period immediately prior to the Closing
complied with all applicable federal and state securities laws, and no
stockholder has a right of rescission or damages with respect thereto that could
reasonably be expected to have a Material Adverse Effect. The Company has
furnished or made available to the Investor true and correct copies of the
Company's Amended and Restated Articles of Incorporation, as amended and in
effect on the date hereof (the "Articles"), and the Company's Bylaws, as amended
and in effect on the date hereof (the "Bylaws").
Section 4.04 Issuance of Shares. The Shares, the Warrant and the
Warrant Shares have been, and any Blackout Shares will be, duly authorized by
all necessary corporate action (except to the extent that the number of Blackout
Shares required to be issued exceeds the number of authorized shares of Common
Stock under the Articles) and, when issued and paid for in accordance with the
terms of this Agreement, the Registration Rights Agreement and the Warrant, the
Shares and the Warrant Shares shall be validly issued and outstanding, fully
paid and non-assessable, and the Investor shall be entitled to all rights
accorded to a holder of shares of Common Stock.
Section 4.05 No Conflicts. The execution, delivery and performance of
this Agreement, the Registration Rights Agreement, the Warrant and any other
document or instrument contemplated hereby or thereby, by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby
do not: (i) violate any provision of the Articles or Bylaws, (ii) conflict with,
or constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any material agreement, mortgage,
deed of trust, indenture, note, bond, license, lease agreement, instrument or
obligation to which the Company is a party, (iii) create or impose a lien,
charge or encumbrance on any property of the Company under any agreement or any
commitment to which the Company is a party or by which the Company is bound or
by which any of its respective properties or assets are bound, or \
9
(iv) result in a violation of any federal, state, local or foreign statute,
rule, regulation, order, judgment or decree (including federal and state
securities laws and regulations) applicable to the Company or any of its
subsidiaries or by which any property or asset of the Company or any of its
subsidiaries are bound or affected, except, in all cases, for such conflicts,
defaults, terminations, amendments, accelerations, cancellations and violations
as would not, individually or in the aggregate, have a Material Adverse Effect.
The Company is not required under federal, state or local law, rule or
regulation to obtain any consent, authorization or order of, or make any filing
or registration with, any court or governmental agency in order for it to
execute, deliver or perform any of its obligations under this Agreement, the
Registration Rights Agreement or the Warrant, or issue and sell the Shares, the
Warrant Shares or the Blackout Shares (except to the extent that the number of
Blackout Shares required to be issued exceeds the number of authorized shares of
Common Stock under the Articles) in accordance with the terms hereof and thereof
(other than any filings that may be required to be made by the Company with the
Commission, the NASD/Nasdaq or state securities commissions subsequent to the
Closing, and, any registration statement (including any amendment or supplement
thereto) which may be filed pursuant hereto); provided that, for purposes of the
representation made in this sentence, the Company is assuming and relying upon
the accuracy of the relevant representations and agreements of the Investor
herein.
Section 4.06 Commission Documents, Financial Statements. The Common
Stock is registered pursuant to Section 12(b) or 12(g) of the Exchange Act and
the Company has timely filed all reports, schedules, forms, statements and other
documents required to be filed by it with the Commission pursuant to the
reporting requirements of the Exchange Act, including material filed pursuant to
Section 13(a) or 15(d) of the Exchange Act (all of the foregoing, including
filings incorporated by reference therein, being referred to herein as the
"Commission Documents"). Except as previously disclosed to the Investor in
writing, the Company has maintained all requirements for the continued listing
or quotation of its Common Stock, and such Common Stock is currently listed or
quoted on the Nasdaq National Market. The Company has made available to the
Investor true and complete copies of the Commission Documents filed with the
Commission since December 31, 2002 and prior to the Closing Date. The Company
has not provided to the Investor any information which, according to applicable
law, rule or regulation, should have been disclosed publicly by the Company but
which has not been so disclosed, other than with respect to the transactions
contemplated by this Agreement. As of its date, the Company's Form 10-K for the
year ended December 31, 2002 complied in all material respects with the
requirements of the Exchange Act and the rules and regulations of the Commission
promulgated thereunder applicable to such document, and, as of its date, after
giving effect to the information disclosed and incorporated by reference
therein, such Form 10-K did not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. As of their respective dates, the financial
statements of the Company included in the Commission Documents filed with the
Commission since December 31, 2002 complied as to form and substance in all
material respects with applicable accounting requirements and the published
rules and regulations of the Commission or other applicable rules and
regulations with respect thereto. Such financial statements have been prepared
in accordance with generally accepted accounting principles ("GAAP") applied on
a consistent basis during the periods involved (except (i) as may be otherwise
indicated in such financial statements or the notes thereto or (ii) in the case
of unaudited interim statements, to the extent they may not include footnotes or
may be condensed or summary statements), and fairly present in all material
respects the financial position of the Company and its subsidiaries as of the
dates thereof and the results of operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments).
10
Section 4.07 No Material Adverse Change. Except as disclosed in the
Commission Documents, since December 31, 2002 no event or series of events has
or have occurred that would, individually or in the aggregate, have a Material
Adverse Effect on the Company.
Section 4.08 No Undisclosed Liabilities. Neither the Company nor any of
its subsidiaries has any liabilities, obligations, claims or losses (whether
liquidated or unliquidated, secured or unsecured, absolute, accrued, contingent
or otherwise) that would be required to be disclosed on a balance sheet of the
Company or any subsidiary (including the notes thereto) in conformity with GAAP
and are not disclosed in the Commission Documents, other than those incurred in
the ordinary course of the Company's or its subsidiaries respective businesses
since December 31, 2002 and which, individually or in the aggregate, do not or
would not have a Material Adverse Effect on the Company.
Section 4.09 No Undisclosed Events or Circumstances. No event or
circumstance has occurred or exists with respect to the Company or its
subsidiaries or their respective businesses, properties, operations or financial
condition, which, under applicable law, rule or regulation, requires public
disclosure or announcement by the Company but which has not been so publicly
announced or disclosed and which, individually or in the aggregate, do not or
would not have a Material Adverse Effect on the Company.
Section 4.10 Actions Pending. There is no action, suit, claim,
investigation or proceeding pending or, to the Knowledge of the Company,
threatened against the Company or any subsidiary which questions the validity of
this Agreement or the transactions contemplated hereby or any action taken or to
be taken pursuant hereto or thereto. Except as set forth in the Commission
Documents or on Schedule 4.10, there is no action, suit, claim, investigation or
proceeding pending or, to the Knowledge of the Company, threatened, against or
involving the Company, any subsidiary or any of their respective properties or
assets that could be reasonably expected to have a Material Adverse Effect on
the Company. Except as set forth in the Commission Documents or on Schedule
4.10, no judgment, order, writ, injunction or decree or award has been issued by
or, so far as is known by the Company, requested of any court, arbitrator or
governmental agency which might result in a Material Adverse Effect.
Section 4.11 Compliance with Law. The businesses of the Company and its
subsidiaries have been and are presently being conducted in accordance with all
applicable federal, state and local governmental laws, rules, regulations and
ordinances, except as set forth in the Commission Documents or such that would
not reasonably be expected to cause a Material Adverse Effect. Except as set
forth in the Commission Documents, the Company and each of its subsidiaries have
all franchises, permits, licenses, consents and other governmental or regulatory
authorizations and approvals necessary for the conduct of its business as now
being conducted by it, except for such franchises, permits, licenses, consents
and other governmental or regulatory authorizations and approvals, the failure
to possess which, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.
Section 4.12 Certain Fees. Except as expressly set forth in this
Agreement, no brokers, finders or financial advisory fees or commissions will be
payable by the Company or any of its subsidiaries in respect of the transactions
contemplated by this Agreement.
Section 4.13 Disclosure. To the best of the Company's Knowledge,
neither this Agreement nor the Schedules hereto nor any other documents,
certificates or instruments furnished to the Investor by or on behalf of the
Company or any subsidiary in connection with the transactions contemplated by
this Agreement contain any untrue statement of a material fact or
11
omit to state a material fact necessary in order to make the statements made
herein or therein, in the light of the circumstances under which they were made
herein or therein, not misleading.
Section 4.14 Material Non-Public Information. Except for this Agreement
and the transactions contemplated hereby, neither the Company nor its agents
have disclosed to the Investor, any material non-public information that,
according to applicable law, rule or regulation, should have been disclosed
publicly by the Company prior to the date hereof but which has not been so
disclosed.
Section 4.15 Exemption from Registration; Valid Issuances. The issuance
and sale of the Shares, the Warrant, the Warrant Shares and any Blackout Shares
in accordance with the terms and on the bases of the representations and
warranties set forth in this Agreement, may and shall be properly issued
pursuant to Section 4(2), Regulation D and/or any other applicable federal and
state securities laws. Neither the sales of the Shares, the Warrant, the Warrant
Shares or any Blackout Shares pursuant to, nor the Company's performance of its
obligations under, this Agreement, the Registration Rights Agreement, or the
Warrant shall (i) result in the creation or imposition of any liens, charges,
claims or other encumbrances upon the Shares, the Warrant Shares, any Blackout
Shares or any of the assets of the Company, or (ii) except as previously
disclosed to the Investor in writing, entitle the holders of any outstanding
shares of capital stock of the Company to preemptive or other rights to
subscribe to or acquire the shares of Common Stock or other securities of the
Company. The Shares, the Warrant Shares and any Blackout Shares shall not
subject the Investor to personal liability by reason of the ownership thereof.
Section 4.16 No General Solicitation or Advertising in Regard to this
Transaction. Neither the Company nor any of its affiliates or any person acting
on its or their behalf (i) has conducted any general solicitation (as that term
is used in Rule 502(c) of Regulation D) or general advertising with respect to
any of the Shares, the Warrant, the Warrant Shares or any Blackout Shares or
(ii) has made any offers or sales of any security or solicited any offers to buy
any security under any circumstances that would require registration of the
Shares under the Securities Act.
Section 4.17 No Integrated Offering. Neither the Company, nor any of
its affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, other than pursuant to this Agreement and employee benefit
plans, under circumstances that would require registration under the Securities
Act of shares of the Common Stock issuable hereunder with any other offers or
sales of securities of the Company.
Section 4.18 Acknowledgment Regarding Investor's Purchase of Shares.
The Company acknowledges and agrees that the Investor is acting solely in the
capacity of an arm's length Investor with respect to this Agreement and the
transactions contemplated hereunder. The Company further acknowledges that the
Investor is not acting as a financial advisor or fiduciary of the Company (or in
any similar capacity) with respect to this Agreement and the transactions
contemplated hereunder and any advice given by the Investor or any of its
representatives or agents in connection with this Agreement and the transactions
contemplated hereunder is merely incidental to the Investor's purchase of the
Shares.
12
ARTICLE V
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE INVESTOR
The Investor hereby makes the following representations, warranties and
covenants to the Company:
Section 5.01 Organization and Standing of the Investor. The Investor is
a company duly organized, validly existing and in good standing under the laws
of the British Virgin Islands.
Section 5.02 Authorization and Power. The Investor has the requisite
power and authority to enter into and perform its obligations under this
Agreement, the Registration Rights Agreement and the Warrant and to purchase the
Shares in accordance with the terms hereof. The execution, delivery and
performance of this Agreement by Investor and the consummation by it of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action, and no further consent or authorization of the Investor, its
Board of Directors or stockholders is required. This Agreement has been duly
executed and delivered by the Investor and constitutes a valid and binding
obligation of the Investor enforceable against the Investor in accordance with
its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation,
conservatorship, receivership, or similar laws relating to, or affecting
generally the enforcement of creditor's rights and remedies or by other
equitable principles of general application.
Section 5.03 No Conflicts. The execution, delivery and performance of
this Agreement, the Registration Rights Agreement, the Warrant and any other
document or instrument contemplated hereby, by the Investor and the consummation
of the transactions contemplated thereby do not (i) violate any provision of the
Investor's charter documents or bylaws, (ii) conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any material agreement, mortgage, deed of
trust, indenture, note, bond, license, lease agreement, instrument or obligation
to which the Investor is a party, (iii) create or impose a lien, charge or
encumbrance on any property of the Investor under any agreement or any
commitment to which the Investor is a party or by which the Investor is bound or
by which any of its respective properties or assets are bound or (iv) result in
a violation of any federal, state, local or foreign statute, rule, regulation,
order, judgment or decree (including federal and state securities laws and
regulations) applicable to the Investor or by which any property or asset of the
Investor are bound or affected, except in all cases, for such conflicts,
defaults, terminations, amendments, accelerations, cancellations and violations
as would not, individually or in the aggregate, prohibit or otherwise interfere
with the ability of the Investor to enter into and perform its obligations under
this Agreement in any material respect. The Investor is not required under
federal, state or local law, rule or regulation to obtain any consent,
authorization or order of, or make any filing or registration with, any court or
governmental agency in order for it to execute, deliver or perform any of its
obligations under this Agreement or to purchase the Shares in accordance with
the terms hereof, provided that, for purposes of the representation made in this
sentence, the Investor is assuming and relying upon the accuracy of the relevant
representations and agreements of the Company herein.
Section 5.04 Financial Capability The Investor has the financial
capability to perform all of its obligations under this Agreement, including the
capability to purchase the Shares in accordance with the terms hereof. The
Investor is an "accredited investor" as defined in Regulation D.
13
Section 5.05 Information. The Investor and its advisors, if any, have
been furnished with all materials relating to the business, finances and
operations of the Company and materials relating to the offer and sale of the
Shares which have been requested by the Investor. The Investor and its advisors,
if any, have been afforded the opportunity to ask questions of the Company. The
Investor has sought such accounting, legal and tax advice as it has considered
necessary to make an informed investment decision with respect to its
acquisition of the Shares. The Investor understands that it (and not the
Company) shall be responsible for its own tax liabilities that may arise as a
result of this investment or the transactions contemplated by this Agreement.
Section 5.06 Selling Restrictions. The Investor covenants that during
the Commitment Period, neither the Investor nor any of its affiliates nor any
entity managed by the Investor will ever (i) be in a short position with respect
to shares of the Common Stock in any accounts directly or indirectly managed by
the Investor or any affiliate of the Investor or any entity managed by the
Investor or (ii) engage in any transaction intended to reduce the economic risk
of ownership of shares of Common Stock (including, without limitation, the
purchase of any option or contract to sell) that would, directly or indirectly,
have an effect substantially equivalent to selling short such shares of Common
Stock that are subject to, underlie or may be deliverable in satisfaction of
such transaction or otherwise may be reasonably be expected to adversely affect
the market price of the Common Stock. Notwithstanding the foregoing, the
Investor shall have the right during any Draw Down Pricing Period to sell shares
of the Company's Common Stock equal in number to the aggregate number of the
Shares to be purchased pursuant to the applicable Draw Down Notice.
Section 5.07 Statutory Underwriter Status. The Investor acknowledges
and agrees that, pursuant to the Commission's current interpretations of the
Securities Act, the Investor will be disclosed as an "underwriter" within the
meaning of the Securities Act in the Registration Statement (and amendments
thereto) and in any Prospectus contained therein to the extent required by
applicable law.
ARTICLE VI
COVENANTS OF THE COMPANY
The Company covenants with the Investor as follows, which covenants are
for the benefit of the Investor and its permitted assignees (as defined herein):
Section 6.01 Securities. The Company shall notify the Commission and
the Principal Market, if and as applicable, in accordance with their rules and
regulations, of the transactions contemplated by this Agreement, and shall use
commercially reasonable efforts to take all other necessary action and
proceedings as may be required and permitted by applicable law, rule and
regulation, for the legal and valid issuance of the Shares, the Warrant Shares
and the Blackout Shares, if any, to the Investor.
Section 6.02 Reservation of Common Stock. As of the date hereof, the
Company has available and the Company shall reserve and keep available at all
times, free of preemptive rights and other similar contractual rights of
stockholders, shares of Common Stock for the purpose of enabling the Company to
satisfy any obligation to issue the Shares in connection with all Draw Downs
contemplated hereunder and the Warrant Shares. The number of shares so reserved
from time to time, as theretofore increased or reduced as hereinafter provided,
may be reduced by the number of shares actually delivered hereunder.
14
Section 6.03 Registration and Listing. During the Commitment Period,
the Company shall use commercially reasonable efforts: (i) to take all action
necessary to cause its Common Stock to continue to be registered under Section
12(b) or 12(g) of the Exchange Act, (ii) to comply in all respects with its
reporting and filing obligations under the Exchange Act, (iii) to prevent the
termination or suspension such registration, or the termination or suspension of
its reporting and filing obligations under the Exchange Act or Securities Act
(except as expressly permitted herein). The Company shall use commercially
reasonable efforts necessary to maintain the listing and trading of its Common
Stock and the listing of the Shares purchased by Investor hereunder on the
Principal Market (including, without limitation, maintaining sufficient net
tangible assets) and will comply in all material respects with the Company's
reporting, filing and other obligations under the bylaws or rules of the NASD
and the Principal Market.
Section 6.04 Registration Statement. Without the prior written consent
of the Investor, the Registration Statement shall be used solely in connection
with the transactions between the Company and the Investor contemplated hereby.
Section 6.05 Compliance with Laws.
(a) The Company shall comply, and cause each subsidiary to
comply, with all applicable laws, rules, regulations and orders, noncompliance
with which could reasonably be expected to have a Material Adverse Effect.
(b) Without the consent of its stockholders in accordance with
NASD rules, the Company will not be obligated to issue, and the Investor will
not be obligated to purchase, any Shares which would result in the issuance
under this Agreement of Shares representing more than the applicable percentage
under the rules of the NASD that would require stockholder approval of the
issuance thereof.
Section 6.06 Reporting Requirements. Upon reasonable written request of
the Investor during the Commitment Period, the Company shall furnish copies of
the following to the Investor within three Trading Days of such request (but not
sooner than filed with or submitted to the Commission):
(a) Quarterly Reports on Form 10-Q ;
(b) Annual Reports on Form 10-K;
(c) Periodic Reports on Form 8-K; and
(d) any other documents publicly furnished or submitted to the
Commission.
Section 6.07 Other Financing. The Company may, without the prior
written consent of the Investor, (i) establish stock option or award plans or
agreements (for directors, employees, consultants and/or advisors), and issue
securities thereunder, and amend such plans or agreements, including increasing
the number of shares available thereunder, (ii) use equity securities to
finance, or otherwise in connection with, the acquisition of one or more other
companies, equipment, technologies or lines of business, (iii) issue shares of
Common Stock and/or Preferred Stock in connection with the Company's option or
award plans, stock purchase plans, rights plans, warrants or options, (iv) issue
shares of Common Stock and/or Preferred Stock in connection with the acquisition
of products, licenses, equipment or other assets and strategic partnerships or
joint ventures (the primary purpose of which is not to raise equity
15
capital); (v) issue shares of Common and/or Preferred Stock to consultants
and/or advisors as consideration for services rendered, (vi) issue and sell
equity or debt securities in a public offering, (vii) issue and sell and equity
or debt securities in a private placement (other than in connection with any
Prohibited Transaction, (viii) issue equity securities to equipment lessors,
equipment vendors, banks or similar lending institutions in connection with
leases or loans, or in connection with strategic commercial or licensing
transactions, (ix) issue securities in connection with any stock split, stock
dividend, recapitalization, reclassification or similar event by the Company,
and (x) issue shares of Common Stock to the Investor under any other agreement
entered into between the Investor and the Company (each a "Permitted
Transaction"). The Company shall use commercially reasonable efforts to notify
the Investor in writing prior to the consummation of any material Permitted
transaction described in clauses (vi), (vii) or (ix) above.
Section 6.08 Prohibited Transactions. During the term of this
Agreement, the Company shall not enter into any Prohibited Transaction without
the prior written consent of the Investor, which consent may be withheld at the
sole discretion of the Investor. For the purposes of this Agreement, the term
"Prohibited Transaction" shall refer to the issuance by the Company of any
"future priced securities," which shall be deemed to mean the issuance of shares
of Common Stock or securities of any type whatsoever that are, or may become,
convertible or exchangeable into shares of Common Stock where the purchase,
conversion or exchange price for such Common Stock is determined using any
floating or otherwise adjustable discount to the market price of Common Stock,
including, without limitation, pursuant to any equity line or other financing
that is substantially similar to the financing provided for under this
Agreement.
Section 6.09 Corporate Existence. The Company shall take all steps
necessary to preserve and continue the corporate existence of the Company;
provided, however, that nothing in this Agreement shall be deemed to prohibit
the Company from engaging in any merger, consolidation, sale of all or
substantially all of its assets or similar transaction with another Person
pursuant to which such other Person is the surviving entity in the transaction.
Section 6.10 Non-Disclosure of Non-Public Information. None of the
Company, its officers, directors, employees nor agents shall disclose material
non-public information to the Investor, its advisors or representatives.
Section 6.11 Notice of Certain Events Affecting Registration;
Suspension of Right to Request a Draw Down. Notwithstanding the provisions of
Section 6.10, the Company shall immediately notify the Investor upon the
occurrence of any of the following events in respect of the Registration
Statement or the Prospectus related to the offer, issuance and sale of the
Shares and the Warrant Shares hereunder: (i) receipt of any request for
additional information by the Commission or any other federal or state
governmental authority during the period of effectiveness of the Registration
Statement for amendments or supplements to the Registration Statement or the
Prospectus; (ii) the issuance by the Commission or any other federal or state
governmental authority of any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceedings for that purpose;
and (iii) receipt 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. The Company shall not request a Draw Down during
the continuation of any of the foregoing events.
Section 6.12 Amendments to the Registration Statement. When the
Registration Statement is declared effective by the Commission, the Company
shall not (i) file any amendment to the Registration Statement or make any
amendment or supplement to the Prospectus of which
16
the Investor shall not previously have been advised or to which the Investor
shall reasonably object after being so advised or (ii) so long as, in the
reasonable opinion of counsel for the Investor, a Prospectus is required to be
delivered in connection with sales of the Shares by the Investor, file any
information, documents or reports pursuant to the Exchange Act without
delivering a copy of such information, documents or reports to the Investor
promptly following such filing.
Section 6.13 Prospectus Delivery. From time to time for such period as
in the opinion of counsel for the Investor a prospectus is required by the
Securities Act to be delivered in connection with sales by the Investor, the
Company will expeditiously deliver to the Investor, without charge, as many
copies of the Prospectus (and of any amendment or supplement thereto) as the
Investor may reasonably request. The Company consents to the use of the
Prospectus (and of any amendment or supplement thereto) in accordance with the
provisions of the Securities Act and state securities laws in connection with
the offering and sale of the Shares and the Warrant Shares and for such period
of time thereafter as the Prospectus is required by the Securities Act to be
delivered in connection with sales of the Shares and the Warrant Shares.
Section 6.14 Expectations Regarding Draw Downs. Within ten (10)
calendar days after the commencement of each calendar quarter occurring
subsequent to the date hereof, the Company shall notify the Investor as to its
reasonable expectations as to the dollar amount it intends to raise during such
calendar quarter, if any, through the issuance of Draw Down Notices. Such
notification shall constitute only the Company's good faith estimate with
respect to such calendar quarter and shall in no way obligate the Company to
raise such amount during such calendar quarter or otherwise limit its ability to
deliver Draw Down Notices during such calendar quarter. The failure by the
Company to comply with this provision can be cured by the Company's notifying
the Investor at any time as to its reasonable expectations with respect to the
current calendar quarter.
ARTICLE VII
CONDITIONS TO THE OBLIGATION OF THE INVESTOR TO ACCEPT A DRAW DOWN
The obligation of the Investor hereunder to accept a Draw Down Notice and to
acquire and pay for the Shares in accordance therewith is subject to the
satisfaction or waiver, at each Condition Satisfaction Date, of each of the
conditions set forth below. The conditions are for the Investor's sole benefit
and may be waived by the Investor at any time in its sole discretion. As used in
this Agreement, the term "Condition Satisfaction Date" shall mean, with respect
to each Draw Down, the date on which the applicable Draw Down Notice is
delivered to the Investor and each Settlement Date in respect of the applicable
Draw Down Pricing Period.
Section 7.01 Accuracy of the Company's Representations and Warranties.
Each of the representations and warranties of the Company shall be true and
correct in all material respects as of the date when made as though made at that
time except for representations and warranties that are expressly made as of a
particular date.
Section 7.02 Performance by the Company. The Company shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement, the Registration Rights
Agreement and the Warrant to be performed, satisfied or complied with by the
Company.
17
Section 7.03 Compliance with Law. The Company shall have complied in
all material respects with all applicable federal, state and local governmental
laws, rules, regulations and ordinances in connection with the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby.
Section 7.04 Effective Registration Statement. Upon the terms and
subject to the conditions as set forth in the Registration Rights Agreement, the
Registration Statement shall have previously become effective and shall remain
effective and (i) neither the Company nor the Investor shall have received
notice that the Commission has issued or intends to issue a stop order with
respect to the Registration Statement or that the Commission otherwise has
suspended or withdrawn the effectiveness of the Registration Statement, either
temporarily or permanently, or intends or has threatened to do so (unless the
Commission's concerns have been addressed and the Investor is reasonably
satisfied that the Commission no longer is considering or intends to take such
action), and (ii) no other suspension of the use or withdrawal of the
effectiveness of the Registration Statement or the Prospectus shall exist.
Section 7.05 No Knowledge. The Company shall have no Knowledge of any
event more likely than not to have the effect of causing the Registration
Statement with respect to the resale of the Registrable Securities by the
Investor to be suspended or otherwise ineffective (which event is more likely
than not to occur within fifteen Trading Days following the Trading Day on which
a Draw Down Notice is delivered).
Section 7.06 No Suspension. Trading in the Company's Common Stock shall
not have been suspended by the Commission, the Principal Market or the NASD and
trading in securities generally as reported on the Principal Market shall not
have been suspended or limited.
Section 7.07 No Injunction. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement.
Section 7.08 No Proceedings or Litigation. No action, suit or
proceeding before any arbitrator or any governmental authority shall have been
commenced, and no investigation by any governmental authority shall have been
threatened, against the Company or any subsidiary, or any of the officers,
directors or affiliates of the Company or any subsidiary seeking to enjoin,
prevent or change the transactions contemplated by this Agreement.
Section 7.09 Section 16 Limitation. On each Settlement Date, the number
of Shares then to be purchased by the Investor shall not exceed the number of
such shares that, when aggregated with all other Registrable Securities then
owned by the Investor beneficially or deemed beneficially owned by the Investor,
would result in the Investor owning more than 9.9% of all of such Common Stock
as would be outstanding on such Settlement Date, as determined in accordance
with Section 16 of the Exchange Act. For purposes of this Section 7.09, in the
event that the amount of Common Stock outstanding as determined in accordance
with Section 16 of the Exchange Act and the regulations promulgated thereunder
is greater on a Settlement Date than on the date upon which the Draw Down Notice
associated with such Settlement Date is given, the amount of Common Stock
outstanding on such Settlement Date shall govern for purposes of determining
whether the Investor, when aggregating all purchases of Common Stock made
pursuant to this Agreement and, if any, Warrant Shares and Blackout Shares,
would own more than 9.9% of the Common Stock following such Settlement Date.
18
Section 7.10 Sufficient Shares Registered for Resale. The Company shall
have sufficient Shares, calculated using the closing trade price of the Common
Stock as of the Trading Day immediately preceding such Draw Down Notice,
registered under the Registration Statement to issue and sell such Shares in
accordance with such Draw Down Notice.
Section 7.11 Warrant. The Warrant shall have been duly executed,
delivered and issued to the Investor, and the Company shall not be in default in
any material respect under any of the provisions thereof, provided that any
refusal by or failure of the Company to issue and deliver Warrant Shares in
respect of any exercise (in whole or in part) thereof shall be deemed to be
material for the purposes of this Section 7.11.
Section 7.12 Opinion of Counsel. The Investor shall have received an
opinion of counsel to the Company, dated as of the Effective Date, in form and
substance reasonably satisfactory to the Investor and its counsel.
ARTICLE VIII
LEGENDS
Section 8.01 Legends. Unless otherwise provided below, each certificate
representing Registrable Securities will bear the following legend (the
"Legend"):
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR ANY OTHER APPLICABLE SECURITIES LAWS
AND HAVE BEEN ISSUED IN RELIANCE UPON AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED, HYPOTHECATED OR OTHERWISE
DISPOSED OF, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO A TRANSACTION
THAT IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION. THE
HOLDER OF THIS CERTIFICATE IS THE BENEFICIARY OF CERTAIN
OBLIGATIONS OF THE COMPANY SET FORTH IN A COMMON STOCK PURCHASE
AGREEMENT BETWEEN CELLEGY PHARMACEUTICALS, INC. AND KINGSBRIDGE
CAPITAL LIMITED DATED AS OF JANUARY 16, 2004. A COPY OF THE
PORTION OF THE AFORESAID AGREEMENT EVIDENCING SUCH OBLIGATIONS
MAY BE OBTAINED FROM THE COMPANY'S EXECUTIVE OFFICES.
As soon as practicable after the execution and delivery hereof, but in any event
within five (5) Trading Days hereafter, the Company shall issue to the transfer
agent for its Common Stock (and to any substitute or replacement transfer agent
for its Common Stock upon the Company's appointment of any such substitute or
replacement transfer agent) instructions, with a copy to the Investor. Such
instructions shall be irrevocable by the Company from and after the date hereof
or from and after the issuance thereof to any such substitute or replacement
transfer agent, as the case may be, except as otherwise expressly provided in
the Registration Rights Agreement. It is the intent and purpose of such
instructions, as provided therein, to require the transfer agent for the Common
Stock from time to time upon transfer of Registrable Securities by the Investor
to
19
issue certificates evidencing such Registrable Securities free of the Legend
during the following periods and under the following circumstances and without
consultation by the transfer agent with the Company or its counsel and without
the need for any further advice or instruction or documentation to the transfer
agent by or from the Company or its counsel or the Investor, unless an opinion
of Investor's counsel is reasonably required by the transfer agent or the
Company:
(a) At any time after the Effective Date to the extent
accompanied by a notice requesting the issuance of certificates free of the
Legend; provided that (i) the Company is reasonably able to confirm to the
transfer agent that the Registration Statement shall then be effective and (ii)
if reasonably requested by the transfer agent the Investor confirms to the
transfer agent that the Investor has complied with the prospectus delivery
requirement under the Securities Act.
(b) At any time upon any surrender of one or more certificates
evidencing Registrable Securities that bear the Legend, to the extent
accompanied by a notice requesting the issuance of new certificates free of the
Legend to replace those surrendered and containing representations that (i) the
Investor is permitted to dispose of such Registrable Securities without
limitation as to amount or manner of sale pursuant to Rule 144(k) under the
Securities Act and there is no requirement for the Investor to deliver a
prospectus or (ii) the Investor has sold, pledged or otherwise transferred or
agreed to sell, pledge or otherwise transfer such Registrable Securities in a
manner other than pursuant to an effective registration statement, to a
transferee who shall upon such transfer be entitled to freely tradeable
securities.
Section 8.02 No Other Legend or Stock Transfer Restrictions. No legend
other than the one specified in Section 8.01 has been or shall be placed on the
share certificates representing the Common Stock issued to the Investor and no
instructions or "stop transfer orders," so called "stock transfer restrictions,"
or other restrictions have been or shall be given to the Company's transfer
agent with respect thereto other than as expressly set forth in this Article
VIII.
ARTICLE IX
TERMINATION
Section 9.01 Term. Unless otherwise terminated in accordance with
Section 9.02 below, this Agreement shall terminate upon the expiration of the
Commitment Period.
Section 9.02 Other Termination.
(a) The Investor may terminate this Agreement upon (x) one (1)
day's notice if the Company enters into any Prohibited Transaction as set forth
in Section 6.08 without the Investor's prior written consent, or (y) one (1)
day's notice within ten (10) Trading Days after the Investor obtains actual
knowledge that an event resulting in a Material Adverse Effect has occurred;
provided, however, that the Investor shall be deemed to possess such actual
knowledge within five (5) Trading Days after such event has been publicly
disclosed by the Company in accordance with its periodic reporting requirements
under the Exchange Act.
(b) The Investor may terminate this Agreement upon one (1)
day's notice to the Company at any time in the event that the Registration
Statement is not declared effective in accordance with the Registration Rights
Agreement.
20
(c) The Company may terminate this Agreement upon one (1)
day's notice; provided, however, that the Company shall not terminate this
Agreement pursuant to this Section 9.02(c) during any Draw Down Pricing Period;
provided further; that, in the event of any termination of this Agreement by the
Company hereunder, so long as the Investor owns Shares purchased hereunder
and/or Warrant Shares, unless all of such shares of Common Stock may be resold
by the Investor without registration and without any time, volume or manner
limitations pursuant to Rule 144(k) (or any similar provision then in effect)
under the Securities Act, the Company shall not suspend or withdraw the
Registration Statement or otherwise cause the Registration Statement to become
ineffective, or voluntarily delist the Common Stock from, the Principal Market
without listing the Common Stock on another Principal Market.
(d) Each of the parties hereto may terminate this Agreement
upon one (1) day's notice if the other party has breached a material
representation, warranty or covenant to this Agreement and such breach is not
remedied within ten (10) Trading Days after notice of such breach is delivered
to the breaching party.
(e) The obligation of the Investor to purchase shares of
Common Stock shall terminate permanently in the event that there shall occur any
stop order or suspension of effectiveness of the Registration Statement for an
aggregate of thirty (30) calendar days during the Commitment Period.
Section 9.03 Effect of Termination.
(a) In the event of termination by the Company or the Investor, written
notice thereof shall forthwith be given to the other party and the transactions
contemplated by this Agreement shall be terminated without further action by
either party. If this Agreement is terminated as provided in Section 9.01 or
9.02 herein, this Agreement shall become void and of no further force and
effect, except as provided in Section 11.13. Nothing in this Section 9.03 shall
be deemed to release the Company or the Investor from any liability for any
breach under this Agreement, or to impair the rights of the Company and the
Investor to compel specific performance by the other party of its obligations
under this Agreement.
(b) In the event that the Company fails to issue and sell Common Stock
to the Investor for an amount (in aggregate Draw Down Amounts) at least equal to
$2.5 million under this Agreement during the Commitment Period, on the first
Trading Day following the expiration of the Commitment Period, the Company shall
pay to Investor by wire transfer of immediately available funds to an account
designated by the Investor an amount equal to $250,000; provided, however, that
in the event that the New Market Cap is higher than the Old Market Cap as of the
date the Company files the Registration Statement with the Commission, each of
the $2.5 million and $250,000 amounts specified above shall be increased by a
multiple equal to the Market Cap Increase Quotient. The parties hereto
acknowledge and agree that the sum payable under this Section 9.03(b) shall
represent liquidated damages and not a penalty. The parties further acknowledge
that such amount (i) bears a reasonable relation to the commitment fee that the
Investor would have, in light of its reasonable investment expectations,
otherwise charged the Company in consideration for the Investor's commitment to
purchase Common Stock hereunder and (ii) is not plainly or grossly
disproportionate to the probable loss likely to be incurred by the Investor in
connection with the failure by the Company to issue and sell Common Stock to the
Investor for an amount (in aggregate Draw Down Amounts) at least equal to the
amount specified above under this Agreement during the Commitment Period.
21
ARTICLE X
INDEMNIFICATION
Section 10.01 Indemnification.
(a) Except as otherwise provided in this Article X, unless
disputed as set forth in Section 10.02, the Company agrees to indemnify, defend
and hold harmless the Investor and its affiliates and their respective officers,
directors, agents, employees, subsidiaries, partners, members and controlling
persons (each, an "Investor Indemnified Party"), to the fullest extent permitted
by law from and against any and all Damages directly resulting from or directly
arising out of any breach of any representation or warranty, covenant or
agreement by the Company in this Agreement, the Registration Rights Agreement or
the Warrant; provided, however, that the Company shall not be liable under this
Article X to an Investor Indemnified Party to the extent that such Damages
resulted or arose from the breach by an Investor Indemnified Party of any
representation, warranty, covenant or agreement of an Investor Indemnified Party
contained in this Agreement, the Registration Rights Agreement or the Warrant or
the gross negligence, recklessness, willful misconduct or bad faith of an
Investor Indemnified Party. The parties intend that any Damages subject to
indemnification pursuant to this Article X will be net of insurance proceeds
(which the Investor Indemnified Party agrees to use commercially reasonable
efforts to recover). Accordingly, the amount which the Company is required to
pay to any Investor Indemnified Party hereunder (a "Company Indemnity Payment")
will be reduced by any insurance proceeds actually recovered by or on behalf of
any Investor Indemnified Party in reduction of the related Damages. In addition,
if an Investor Indemnified Party receives a Company Indemnity Payment required
by this Article X in respect of any Damages and subsequently receives any such
insurance proceeds, then the Investor Indemnified Party will pay to the Company
an amount equal to the Company Indemnity Payment received less the amount of the
Company Indemnity Payment that would have been due if the insurance proceeds had
been received, realized or recovered before the Company Indemnity Payment was
made.
(b) Except as otherwise provided in this Article X, unless
disputed as set forth in Section 10.02, the Investor agrees to indemnify, defend
and hold harmless the Company and its affiliates and their respective officers,
directors, agents, employees, subsidiaries, partners, members and controlling
persons (each, a "Company Indemnified Party"), to the fullest extent permitted
by law from and against any and all Damages directly resulting from or directly
arising out of any breach of any representation or warranty, covenant or
agreement by the Investor in this Agreement, the Registration Right Agreement or
the Warrant; provided, however, that the Investor shall not be liable under this
Article X to a Company Indemnified Party to the extent that such Damages
resulted or arose from the breach by a Company Indemnified Party of any
representation, warranty, covenant or agreement of a Company Indemnified Party
contained in this Agreement, the Registration Right Agreement or the Warrant or
gross negligence, recklessness, willful misconduct or bad faith of a Company
Indemnified Party. The parties intend that any Damages subject to
indemnification pursuant to this Article X will be net of insurance proceeds
(which the Company agrees to use commercially reasonable efforts to recover).
Accordingly, the amount which the Investor is required to pay to any Company
Indemnified Party hereunder (an "Investor Indemnity Payment") will be reduced by
any insurance proceeds theretofore actually recovered by or on behalf of any
Company Indemnified Party in reduction of the related Damages. In addition, if a
Company Indemnified Party receives a Investor Indemnity Payment required by this
Article X in respect of any Damages and subsequently receives insurance such
proceeds, then the Company Indemnified Party will pay to the Investor an amount
equal to the Investor Indemnity Payment received less the amount of the Investor
Indemnity
22
Payment that would have been due if the insurance proceeds had been received,
realized or recovered before the Investor Indemnity Payment was made.
Section 10.02 Notification of Claims for Indemnification. Each party
entitled to indemnification under this Article X (an "Indemnified Party") shall,
promptly after the receipt of notice of the commencement of any claim against
such Indemnified Party in respect of which indemnity may be sought from the
party obligated to indemnify such Indemnified Party under this Article X (the
"Indemnifying Party"), notify the Indemnifying Party in writing of the
commencement thereof. Any such notice shall describe the claim in reasonable
detail. The failure of any Indemnified Party to so notify the Indemnifying Party
of any such action shall not relieve the Indemnifying Party from any liability
which it may have to such Indemnified Party (a) other than pursuant to this
Article X or (b) under this Article X unless, and only to the extent that, such
failure results in the Indemnifying Party's forfeiture of substantive rights or
defenses or the Indemnifying Party is prejudiced by such delay. The procedures
listed below shall govern the procedures for the handling of indemnification
claims.
(a) Any claim for indemnification for Damages that do not
result from a Third Party Claim as defined in the following paragraph, shall be
asserted by written notice given by the Indemnified Party to the Indemnifying
Party. Such Indemnifying Party shall have a period of thirty (30) days after the
receipt of such notice within which to respond thereto. If such Indemnifying
Party does not respond within such thirty (30) day period, such Indemnifying
Party shall be deemed to have refused to accept responsibility to make payment
as set forth in Section 10.01. If such Indemnifying Party does not respond
within such thirty (30) day period or rejects such claim in whole or in part,
the Indemnified Party shall be free to pursue such remedies as specified in this
Agreement, including the dispute resolution provisions set forth in Section
10.03 below.
(b) If an Indemnified Party shall receive notice or otherwise
learn of the assertion by a person or entity not a party to this Agreement of
any threatened legal action or claim (collectively a "Third Party Claim"), with
respect to which an Indemnifying Party may be obligated to provide
indemnification, the Indemnified Party shall give such Indemnifying Party
written notice thereof within twenty (20) days after becoming aware of such
Third Party Claim.
(c) An Indemnifying Party may elect to defend (and, unless the
Indemnifying Party has specified any reservations or exceptions, to seek to
settle or compromise) at such Indemnifying Party's own expense and by such
Indemnifying Party's own counsel, any Third Party Claim. Within thirty (30) days
after the receipt of notice from an Indemnified Party (or sooner if the nature
of such Third Party Claim so requires), the Indemnifying Party shall notify the
Indemnified Party whether the Indemnifying Party will assume responsibility for
defending such Third Party Claim, which election shall specify any reservations
or exceptions. If such Indemnifying Party does not respond within such thirty
(30) day period or rejects such claim in whole or in part, the Indemnified Party
shall be free to pursue such remedies as specified in this Agreement, including
the dispute resolution provisions set forth in Section 10.03 below. In case any
such Third Party Claim shall be brought against any Indemnified Party, and it
shall notify the Indemnifying Party of the commencement thereof, the
Indemnifying Party shall be entitled to assume the defense thereof at its own
expense, with counsel satisfactory to such Indemnified Party in its reasonable
judgment; provided, however, that any Indemnified Party may, at its own expense,
retain separate counsel to participate in such defense at its own expense.
Notwithstanding the foregoing, in any Third Party Claim in which both the
Indemnifying Party, on the one hand, and an Indemnified Party, on the other
hand, are, or are reasonably likely to become, a party, such Indemnified Party
shall have the right to employ separate counsel and to
23
control its own defense of such claim if, in the reasonable opinion of counsel
to such Indemnified Party, either (x) one or more significant defenses are
available to the Indemnified Party that are not available to the Indemnifying
Party or (y) a conflict or potential conflict exists between the Indemnifying
Party, on the one hand, and such Indemnified Party, on the other hand, that
would make such separate representation advisable; provided, however, that in
such circumstances the Indemnifying Party (i) shall not be liable for the fees
and expenses of more than one counsel to all Indemnified Parties and (ii) shall
reimburse the Indemnified Parties for such reasonable fees and expenses of such
counsel incurred in any such Third Party Claim, as such expenses are incurred,
provided that the Indemnified Parties agree to repay such amounts if it is
ultimately determined that the Indemnifying Party was not obligated to provide
indemnification under this Article X. The Indemnifying Party agrees that it will
not, without the prior written consent of the Indemnified Party, settle,
compromise or consent to the entry of any judgment in any pending or threatened
claim relating to the matters contemplated hereby (if any Indemnified Party is a
party thereto or has been actually threatened to be made a party thereto) unless
such settlement, compromise or consent includes an unconditional release of such
Indemnified Party from all liability arising or that may arise out of such
claim. The Indemnifying Party shall not be liable for any settlement of any
claim effected against an Indemnified Party without the Indemnifying Party's
written consent, which consent shall not be unreasonably withheld, conditioned
or delayed. The rights accorded to an Indemnified Party hereunder shall be in
addition to any rights that any Indemnified Party may have at common law, by
separate agreement or otherwise (subject, however, to the provisions of Section
10.03 below); provided, however, that notwithstanding the foregoing or anything
to the contrary contained in this Agreement, nothing in this Article X (other
than Section 10.03) shall restrict or limit any rights that any Indemnified
Party may have to seek equitable relief.
Section 10.03 Dispute Resolution. Any dispute under this Agreement, the
Registration Rights Agreement or the Warrant shall be submitted to arbitration
(including, without limitation, pursuant to this Article X) and shall be finally
and conclusively determined by the decision of a board of arbitration consisting
of three (3) members (the "Board of Arbitration") selected as hereinafter
provided. Each of the Indemnified Party and the Indemnifying Party shall select
one (1) member and the third member shall be selected by mutual agreement of the
other members, or if the other members fail to reach agreement on a third member
within twenty (20) days after their selection, such third member shall
thereafter be selected by the American Arbitration Association upon application
made to it for such purpose by the Indemnified Party. The Board of Arbitration
shall meet on consecutive business days in San Francisco, California or such
other place as a majority of the members of the Board of Arbitration determines
more appropriate, and shall reach and render a decision in writing (concurred in
by a majority of the members of the Board of Arbitration) with respect to the
amount, if any, which the Indemnifying Party is required to pay to the
Indemnified Party in respect of a claim filed by the Indemnified Party. In
connection with rendering its decisions, the Board of Arbitration shall adopt
and follow such rules and procedures as a majority of the members of the Board
of Arbitration deems necessary or appropriate. To the extent practical,
decisions of the Board of Arbitration shall be rendered no more than thirty (30)
calendar days following commencement of proceedings with respect thereto. The
Board of Arbitration shall cause its written decision to be delivered to the
Indemnified Party and the Indemnifying Party. Any decision made by the Board of
Arbitration (either prior to or after the expiration of such thirty (30)
calendar day period) shall be final, binding and conclusive on the Indemnified
Party and the Indemnifying Party and entitled to be enforced to the fullest
extent permitted by law and entered in any court of competent jurisdiction. Each
party to any arbitration shall bear its own expense in relation thereto,
including but not limited to such party's attorneys' fees, if any, and the
expenses and fees of the Board of Arbitration shall be paid initially one-half
by each of the Indemnifying Party and the Indemnified
24
Party, but then apportioned between the Indemnifying Party and the Indemnified
Party in the same proportion as the portion of the related claim determined by
the Board of Arbitration to be payable to the Indemnified Party bears to the
portion of such claim determined not to be so payable.
ARTICLE XI
MISCELLANEOUS
Section 11.01 Fees and Expenses. The Company shall be solely
responsible for (i) all reasonable attorneys fees and expenses incurred by the
Investor in connection with the preparation, negotiation, execution and delivery
of this Agreement, the Registration Rights Agreement and the Warrant, (ii) all
reasonable fees and expenses incurred by the Investor in connection with any
amendments, modifications or waivers of this Agreement or incurred in connection
with the Investor's enforcement of this Agreement, including, without
limitation, all reasonable attorneys fees and expenses, (iii) all reasonable due
diligence expenses incurred by the Investor during the term of this Agreement up
to aggregate maximum amount of $10,000 per calendar quarter, and (iv) all stamp
or other similar taxes and duties, if any, levied in connection with issuance of
the Shares pursuant hereto; provided, however, that in each of the above
instances the Investor shall provide customary supporting invoices or similar
documentation in reasonable detail describing such expenses. The Investor shall
reimburse all reasonable due diligence expenses incurred by the Company in
connection with this transaction prior to the date of this Agreement.
Section 11.02 Reporting Entity for the Common Stock. The reporting
entity relied upon for the determination of the trading price or trading volume
of the Common Stock on any given Trading Day for the purposes of this Agreement
shall be Bloomberg, L.P. or any successor thereto. The written mutual consent of
the Investor and the Company shall be required to employ any other reporting
entity.
Section 11.03 Brokerage. Each of the parties hereto represents that it
has had no dealings in connection with this transaction with any finder or
broker who will demand payment of any fee or commission from the other party.
The Company on the one hand, and the Investor, on the other hand, agree to
indemnify the other against and hold the other harmless from any and all
liabilities to any Persons claiming brokerage commissions or finder's fees on
account of services purported to have been rendered on behalf of the
indemnifying party in connection with this Agreement or the transactions
contemplated hereby.
Section 11.04 Notices. All notices, demands, requests, consents,
approvals, and other communications required or permitted hereunder shall be in
writing and, unless otherwise specified herein, shall be (i) personally served,
(ii) deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice given in accordance herewith. Any notice or
other communication required or permitted to be given hereunder shall be deemed
effective (a) upon hand delivery or delivery by facsimile, with accurate
confirmation generated by the transmitting facsimile machine, at the address or
number designated below (if delivered on a business day during normal business
hours where such notice is to be received), or the first business day following
such delivery (if delivered other than on a business day during normal business
hours where such notice is to be received) or (b) on the second business day
following the date of mailing by express courier service, fully
25
prepaid, addressed to such address, or upon actual receipt of such mailing,
whichever shall first occur. The addresses for such communications shall be:
If to the Company:
Cellegy Pharmaceuticals, Inc.
000 Xxxxxx Xxxxx Xxxxxxxxx.
Xxxxx 000
Xxxxx Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Chief Financial Officer
with a copy (which shall not constitute notice) to:
Weintraub Genshlea Chediak & Xxxxxx
000 Xxxxxxx Xxxx, Xxxxxxxx Xxxxx
Xxxxxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: C. Xxxxx Xxxxx, Esq.
if to the Investor:
Kingsbridge Capital Limited/ c/o Kingsbridge Corporate
Services Limited
Xxxx Xxxxxx
Xxxxxxxxx, Xxxxxx Xxxxxxx
Xxxxxxxx xx Xxxxxxx
Telephone: 000-000-00-000-000
Facsimile: 011-353-45-482-003
Attention: Xxxx Xxxxxx, Director
with a copy (which shall not constitute notice) to:
Xxxxx X. Xxxxxxxxxx, Esq.
Xxxxxxxx Chance US LLP
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Either party hereto may from time to time change its address or facsimile number
for notices under this Section by giving at least ten (10) days' prior written
notice of such changed address or facsimile number to the other party hereto.
Section 11.05 Assignment. Neither this Agreement nor any rights of the
Investor or the Company hereunder may be assigned by either party to any other
Person. Notwithstanding the foregoing, (a) the provisions of this Agreement
shall inure to the benefit of, and be enforceable by, any private transferee of
any of the Common Stock purchased or acquired by the Investor hereunder with
respect to the Common Stock held by such Person, (b) the Investor's interest in
this Agreement may be assigned at any time, in whole or in part, to any other
Person or entity (including any affiliate of the Investor) upon the prior
written consent of the Company, which consent shall not to be unreasonably
withheld, and (c) the Company may assign this Agreement at any time in
connection with a sale or acquisition of the Company, whether by merger,
consolidation, sale of all or substantially all of the Company's assets, or
similar transaction,
26
without the consent of the Investor; provided, however, that the successor or
acquiring Person agrees in writing to assume all of the Company's rights and
obligations under this Agreement.
Section 11.06 Amendment; No Waiver. No party shall be liable or bound
to any other party in any manner by any warranties, representations or covenants
except as specifically set forth in this Agreement or therein. Except as
expressly provided in this Agreement, neither this Agreement nor any term hereof
may be amended, waived, discharged or terminated other than by a written
instrument signed by both parties hereto. The failure of the either party to
insist on strict compliance with this Agreement, or to exercise any right or
remedy under this Agreement, shall not constitute a waiver of any rights
provided under this Agreement, nor estop the parties from thereafter demanding
full and complete compliance nor prevent the parties from exercising such a
right or remedy in the future.
Section 11.07 Entire Agreement. This Agreement, the Registration Rights
Agreement and the Warrant set forth the entire agreement and understanding of
the parties relating to the subject matter hereof and supersedes all prior and
contemporaneous agreements, negotiations and understandings between the parties,
both oral and written, relating to the subject matter hereof.
Section 11.08 Severability. In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full force and
effect without said provision; provided that, such severability shall be
ineffective if it materially changes the economic benefit of this Agreement to
any party.
Section 11.09 Title and Subtitles. The titles and subtitles used in
this Agreement are used for the convenience of reference and are not to be
considered in construing or interpreting this Agreement.
Section 11.10 Counterparts. This Agreement may be executed in multiple
counterparts, each of which may be executed by less than all of the parties and
shall be deemed to be an original instrument which shall be enforceable against
the parties actually executing such counterparts and all of which together shall
constitute one and the same instrument.
Section 11.11 Choice of Law. This Agreement shall be construed under
the laws of the State of New York.
Section 11.12 Specific Enforcement, Consent to Jurisdiction.
(a) The Company and the Investor acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent or cure breaches of the provisions of
this Agreement and to enforce specifically the terms and provisions hereof or
thereof, this being in addition to any other remedy to which any of them may be
entitled by law or equity.
(b) Subject to Section 10.03, each of the Company and the
Investor (i) hereby irrevocably submits to the jurisdiction of the United States
District Court and other courts of the United States sitting in the State of New
York for the purposes of any suit, action or proceeding arising out of or
relating to this Agreement and (ii) hereby waives, and agrees not to assert in
any such suit, action or proceeding, any claim that it is not personally subject
to the
27
jurisdiction of such court, that the suit, action or proceeding is brought in an
inconvenient forum or that the venue of the suit, action or proceeding is
improper. Each of the Company and the Investor consents to process being served
in any such suit, action or proceeding by mailing a copy thereof to such party
at the address in effect for notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing in this Section shall affect or limit any right to serve
process in any other manner permitted by law.
Section 11.13 Survival. The representations and warranties of the
Company and the Investor contained in Articles IV and V and the covenants
contained in Article V and Article VI shall survive the execution and delivery
hereof and the Closing until the termination of this Agreement, and the
agreements and covenants set forth in Article IX and Article X of this Agreement
shall survive the execution and delivery hereof and the Closing hereunder.
Section 11.14 Publicity. Prior to the Closing, neither the Company nor
the Investor shall issue any press release or otherwise make any public
statement or announcement with respect to this Agreement or the transactions
contemplated hereby or the existence of this Agreement. In the event the Company
is required by law, based upon an opinion of the Company's counsel, to issue a
press release or otherwise make a public statement or announcement with respect
to this Agreement prior to the Closing, the Company shall consult with the
Investor on the form and substance of such press release. Promptly after the
Closing, each party may issue a press release or otherwise make a public
statement or announcement with respect to this Agreement or the transactions
contemplated hereby or the existence of this Agreement; provided that, prior to
issuing any such press release, making any such public statement or
announcement, the party wishing to make such release, statement or announcement
consults and cooperates in good faith with the other party in order to formulate
such press release, public statement or announcement in form and substance
reasonably acceptable to both parties.
Section 11.15 Further Assurances. From and after the date of this
Agreement, upon the request of the Investor or the Company, each of the Company
and the Investor shall execute and deliver such instruments, documents and 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.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officer as of the
date first written.
KINGSBRIDGE CAPITAL LIMITED
By:
---------------------------------
Name: Valentine X'Xxxxxxxx
Title: Director
CELLEGY PHARMACEUTICALS, INC.
By:
---------------------------------
Name:
Title:
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Schedule 4.10
Litigation
Exhibit A
Form of Registration Rights Agreement
Exhibit B
Form of Warrant
Exhibit C
Officer's Certificate
I, [NAME OF OFFICER], do hereby certify to Kingsbridge Capital Limited
(the "Investor"), with respect to the common stock of Cellegy Pharmaceuticlas,
Inc. (the "Company") issuable in connection with the Draw Down Notice, dated
_____________ (the "Notice") attached hereto and delivered pursuant to Article
II of the Common Stock Purchase Agreement, dated January 16, 2004 (the
"Agreement"), by and between the Company and the Investor, as follows:
1. I am the duly elected [OFFICER] of the Company.
2. The representations and warranties of the Company set forth in
Article IV of the Agreement are true and correct in all material respects as
though made on and as of the date hereof (except for such representations and
warranties that are made as of a particular date).
3. The Company has performed in all material respects all
covenants and agreements to be performed by the Company on or prior to the date
hereof related to the Notice and has satisfied each of the conditions to the
obligation of the Investor set forth in Article VII of the Agreement.
The undersigned has executed this Certificate this ____ day of _______,
200[_].
------------------------------------------
Name:
Title:
