PURCHASE AGREEMENT
Exhibit 10.3
THIS PURCHASE AGREEMENT (this “Agreement”) is made as of June 7, 2011, between Somaxon
Pharmaceuticals, Inc., a corporation organized under the laws of the State of Delaware (the
“Company”), and Paladin Labs Inc., a corporation organized under the laws of Quebec (the
“Purchaser”).
WHEREAS, the parties desire that, upon the terms and subject to the conditions and limitations
set forth herein, the Company shall issue and sell to the Purchaser, as provided herein, and the
Purchaser shall purchase from the Company, the Shares (as defined below); and
WHEREAS, such issuances 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 issuances of the Shares to be made
hereunder; and
WHEREAS, the parties hereto are concurrently entering into a License Agreement (the
“License Agreement”) and a Supply Agreement (the “Supply Agreement”). Defined
terms used without definition in this Agreement shall have the meaning given them in the License
Agreement or the Supply Agreement, as applicable.
NOW, THEREFORE, IN CONSIDERATION of the mutual agreements and covenants contained in this
Agreement, the Company and the Purchaser agree as follows:
SECTION 1. Authorization of Sale of the Shares. Subject to the terms and conditions
of this Agreement, the Company has authorized the issuance and sale to the Purchaser of an
aggregate number of shares of the Company’s common stock, par value $0.0001 per share (“Common
Stock”) equal to the number obtained by dividing (a) US$5,000,000.00 by (b) the Purchase Price
(as defined below) (the shares of Common Stock to be sold under this Agreement shall be referred to
herein as the “Shares”).
SECTION 2. Agreement to Sell and Purchase the Shares. At the Closing (as defined in
Section 3), the Company will sell to the Purchaser, and the Purchaser will buy from the Company,
upon the terms and conditions hereinafter set forth, (a) the Shares at a price per share (the
“Purchase Price”) equal to the arithmetic mean of the daily closing price of the Common
Stock reported by the Nasdaq Stock Market (“Nasdaq”) beginning on May 27, 2011 and
continuing through and including June 7, 2011.
SECTION 3. Delivery of the Shares at the Closing.
3.1 Closing. The completion of the purchase and sale of the Shares (the
“Closing”) shall occur at the offices of Xxxxxx & Xxxxxxx LLP located at 00000 Xxxx Xxxxx
Xxxxx, Xxxxx 000, Xxx Xxxxx, Xxxxxxxxxx 00000, on the third business day following the date
hereof (the “Closing Date”) at 10:00 a.m. California time or at such other time as the
Company and the Purchaser agree. At the Closing, the Company shall deliver to the Purchaser (a) a
stock certificate registered in the name of the Purchaser representing the number of Shares set
forth in Section 1 above and bearing appropriate legends referring to the fact that the Shares were
sold in reliance upon an exemption from registration under the Securities Act and (b) an opinion of
Xxxxxx & Xxxxxxx LLP, special counsel to the Company, addressed to the Purchaser with respect to
the matters set forth on Exhibit A attached hereto. The Purchaser’s obligation to complete
the purchase and sale of the Shares at the Closing shall be subject to the following conditions,
any one or more of which may be waived by the Purchaser: (A) the Purchaser’s receipt of the stock
certificate and opinion referred to above; and (B) the Company’s fulfillment in all material
respects of all other representations, warranties and covenants and agreements of the Company to be
fulfilled as of or prior to the Closing under this Agreement. The Company’s obligation to complete
the purchase and sale of the Shares and deliver such stock certificate and opinion to the Purchaser
at the Closing shall be subject to the following conditions, any one or more of which may be waived
by the Company: (A) the Company’s receipt of same-day funds in the full amount of the purchase
price for the Shares being purchased hereunder; and (B) the Purchaser’s fulfillment in all material
respects of those undertakings of the Purchaser to be fulfilled prior to the Closing under this
Agreement.
3.2 Allocation of Purchase Price. The Company and the Purchaser, as a result of arm’s
length bargaining, agree that (a) neither the Purchaser nor any of its Affiliates have rendered
services to the Company in connection with this Agreement, and (b) except as otherwise required by
a final “determination” within the meaning of Section 1313(a)(1) of the Code, all tax returns and
other information returns of each party relative to this Agreement, the Shares issued pursuant
hereto shall consistently reflect the matters agreed to in clause (a) of this Section 3.2.
SECTION 4. Representations, Warranties and Covenants of the Company. The Company
hereby represents and warrants to, and covenants with, the Purchaser, as of the date hereof and as
of the Closing Date, as follows:
4.1 Organization and Qualification. The Company is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Delaware and has all requisite
corporate power and authority to carry on its business as now conducted and as proposed to be
conducted. The Company is qualified to do business as a foreign corporation in each jurisdiction
in which qualification is required, except where failure to so qualify would not be reasonably
expected to have a material adverse effect upon the business, condition (financial or otherwise),
properties or operations of the Company, taken as a whole (a “Material Adverse Effect”).
The Company has no subsidiaries.
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4.2 Due Execution, Delivery and Performance of this Agreement. The Company has
corporate power and authority (i) to enter into this Agreement and perform the transactions
contemplated hereby; (ii) to issue the Shares, in the manner and for the purpose contemplated by
this Agreement; and (iii) to execute, deliver and perform its obligations under all other
agreements and instruments executed and delivered by it pursuant to or in connection with this
Agreement. All corporate action on the part of the Company, its officers, directors and
stockholders necessary for the authorization, execution and delivery of this Agreement, the
performance of all obligations of the Company hereunder has been taken or will be taken prior to
the Closing. This Agreement have been duly authorized, executed and delivered by the Company. The
execution, delivery and performance of this Agreement by the Company and the consummation of the
transactions herein contemplated (i) will not conflict with, result in the breach or violation of,
or constitute, either by itself or upon notice or the passage of time or both, a default under, and
will not result in the creation of any lien, charge, security interest or encumbrance upon any
assets of the Company pursuant to the terms or provisions of (A) any material agreement, mortgage,
deed of trust, lease, franchise, license, indenture, permit or other instrument to which the
Company is a party or by which the Company or any of its properties may be bound or affected, or
(B) any law (including any common law), statute, ordinance, code, rule or regulation, or any
judgment, decree, order, rule or regulation of any court or any regulatory body, administrative
agency or other governmental body (including any self-regulatory organization) applicable to the
Company or any of its assets or properties (provided, however, that with respect to the sale of the
Shares hereunder being made in a transaction exempt from registration under the Securities Act, the
Company assumes the accuracy of the representations and warranties of the Purchaser in Section 5.2
of this Agreement), and (ii) will not violate any provision of the certificate of incorporation or
bylaws of the Company. No consent, approval, authorization or other order of any court, regulatory
body, administrative agency or other governmental body (including any self-regulatory organization)
is required for the execution and delivery of this Agreement or the consummation of the
transactions contemplated by this Agreement, except such as have been obtained under the federal or
state securities or Blue Sky laws or as shall be obtained following the Closing as permitted by and
pursuant to such laws. Upon the execution and delivery of this Agreement, and assuming the valid
execution of the Agreement by the Purchaser, this Agreement will constitute a valid and binding
obligation of the Company, enforceable in accordance with its terms, except as enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting enforcement of creditors’ rights generally and except as enforceability may be limited by
laws relating to the availability of specific performance, injunctive relief or other equitable
remedies.
4.3 Valid Issuance of Shares. The Shares, when issued and paid for in compliance with
the provisions of this Agreement, will be validly issued, fully paid and non-assessable. Assuming
the accuracy of the representations of Purchaser in this Agreement, the offer, issuance and sale of
the Shares pursuant to this Agreement will be in compliance with all applicable federal and state
securities laws and will be free of any liens or encumbrances; provided, however, that the
Shares may be subject to restrictions on transfer under state and/or federal securities laws as set
forth herein, and as may be required by future changes in such laws.
4.4 No Actions. Except as disclosed in the Company SEC Reports (as defined below),
there are no legal, arbitration, administrative or governmental claims, actions, suits or other
proceedings pending or, to the Company’s knowledge, threatened in writing involving the Company,
nor is there any injunction, order, judgment, ruling or decree imposed (or, to the knowledge of the
Company, threatened to be imposed) upon the Company or any of its assets by or before any
governmental body, in each case which, individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect or would reasonably be expected to
result in the issuance of an order restraining, enjoining or otherwise prohibiting or making
illegal the consummation of any of the transactions contemplated by this Agreement.
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4.5 SEC Reports and Financial Statements. Each form, report, schedule, registration
statement, definitive proxy statement and other document (together with all amendments thereof and
supplements thereto) filed by the Company with the SEC since January 1, 2010 (in the case of any
registration statement, as of its effective date, and with respect to all documents filed by the
Company with the SEC, as of their respective filing dates and thereafter as of the date such
documents have since the time of their filing been amended or supplemented, the “Company SEC
Reports”), which are all the documents (other than preliminary material) that the Company was
required to file with the SEC since such date, (i) complied in all material respects with the
requirements of the Securities Act, the Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder (the “Exchange Act”), and the Xxxxxxxx-Xxxxx Act, as
the case may be, (ii) 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, and (iii) were timely
filed with the SEC. The audited financial statements and unaudited interim financial statements
(including, in each case, the notes, if any, thereto) included in the Company SEC Reports (the
“Company Financial Statements”) complied as to form in all material respects with the
published rules and regulations of the SEC with respect thereto, were prepared in accordance with
GAAP applied on a consistent basis during the periods involved (except as may be indicated therein
or in the notes thereto and except with respect to unaudited statements as permitted by Form 10-Q
of the SEC) and fairly present (subject, in the case of the unaudited interim financial statements,
to normal, recurring year-end audit adjustments (which are not expected to be, individually or in
the aggregate, materially adverse to Company taken as a whole)) in all material respects the
financial position of Company as at the respective dates thereof and the results of operations and
cash flows for the respective periods then ended. As of the date of this Agreement, there are no
outstanding or unresolved comments received from the SEC staff with respect to the Company SEC
Reports. To the knowledge of the Company, none of the Company SEC Reports is the subject of any
ongoing SEC review or investigation.
4.6 Absence of Certain Changes or Events. Except as disclosed in the Company SEC
Reports, since December 31, 2010, there has not been any change, event or development that has had,
or that is likely to have, individually or in the aggregate, a Material Adverse Effect (excluding
any effect of this Agreement, the License Agreement or the Supply Agreement being entered into
concurrently with this Agreement).
4.7 Absence of Undisclosed Liabilities. Except for matters reflected or reserved
against in the balance sheet for the period ended December 31, 2010, and included in the Company
Financial Statements, the Company did not have at such date, nor has it incurred since that date,
any liabilities or obligations (whether absolute, accrued, contingent, fixed or otherwise, or
whether due or to become due) of any nature that would be required by GAAP to be reflected on a
balance sheet of the Company (including the notes thereto), except liabilities or obligations (i)
which were incurred in the ordinary course of business consistent with past practice, (ii) which
have been reported in the Company SEC Reports, or (iii) which have not had, and are not likely to
have, individually or in the aggregate, a Material Adverse Effect.
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4.8 Capitalization; Options and Warrants. The authorized capital stock of the Company
consists of 100,000,000 shares of Common Stock, par value $0.0001 per share, and 10,000,000 shares
of Preferred Stock, par value $0.0001 per share. As of May 31, 2011, 45,013,324 shares of the
Common Stock and no shares of Preferred Stock were issued and outstanding. Except for the
transactions contemplated hereby and except as set forth in the Company’s SEC Reports, since
December 31, 2010, the Company has not granted any option (except for stock options granted under
the Company’s stock option plans), warrants, rights (including conversion or preemptive rights,
except for stock purchased under the Company’s employee stock purchase plan), or similar rights to
any person or entity to purchase or acquire any rights with respect to any shares of capital stock
of the Company.
4.9 Nasdaq Capital Market Designation. The Common Stock is currently listed on the
Nasdaq Capital Market and the Company knows of no reason or set of facts which is likely to result
in the termination of listing of the Common Stock on Nasdaq or the inability of such stock to
continue to be listed on Nasdaq. Nothing in this Agreement shall be interpreted to preclude the
Company from listing its Common Stock on a national securities exchange in lieu of Nasdaq.
4.10 Compliance With Laws; Permits. The Company is (and since January 1, 2010 has
been) in compliance in all material respects with all material laws, (including common law),
statutes, ordinances, codes, rules, regulations, judgments, decrees and orders of any regulatory
body, administrative agency or other governmental body (including any self-regulatory organization)
(collectively, “Laws”) applicable to the Company, any of its properties or other assets or any of
its businesses or operations. The Company holds all material licenses, franchises, permits,
certificates, approvals and authorizations from each governmental body, or required by any
governmental body to be obtained, in each case necessary for the lawful conduct of its business and
operations as currently conducted (collectively, “Permits”). The Company is (and since January 1,
2010 has been) in compliance in all material respects with the terms of all Permits. Since January
1, 2010, the Company has not received written notice to the effect that a governmental body (a)
claimed or alleged that the Company was not in compliance with all Laws applicable to the Company,
any of its properties or other assets or any of its business or operations other than as previously
disclosed to Purchaser in writing or (b) was considering the amendment, termination, revocation or
cancellation of any Permit. The consummation of the transactions contemplated hereby, in and of
itself, will not cause the revocation or cancellation of any Permit.
4.11 Material Non-Public Information. Except for this Agreement, and the transactions
contemplated hereby and pursuant to the License Agreement and the Supply Agreement, neither the
Company nor its employees have disclosed to the Purchaser 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.
4.12 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 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.
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4.13 Accuracy of Representations and Warranties. No representation or warranty by the
Company contained in this Agreement, and no statement contained in any exhibit, schedule,
disclosure, certificate, list or other instrument delivered or to be delivered to the Purchaser
pursuant hereto contains any untrue statement of a material fact or omits to state any material
fact necessary to make the statements contained herein or therein not misleading.
4.14 Certificate. At the Closing, the Company will deliver to the Purchaser a
certificate executed by the President and the chief financial or accounting officer of the Company
(solely in their capacities as such), dated the Closing Date, in form and substance reasonably
satisfactory to the Purchaser, to the effect that the representations and warranties of the Company
set forth in this Section 4 are true and correct in all material respects as of the Closing Date,
and the Company has complied in all material respects with all the agreements and satisfied all the
conditions herein on its part to be performed or satisfied on or prior to the Closing Date.
SECTION 5. Representations, Warranties and Covenants of the Purchaser.
5.1 Authorization. The Purchaser represents and warrants to, and covenants with, the
Company that (i) the Purchaser has full right, power, authority and capacity to enter into this
Agreement and to consummate the transactions contemplated hereby and has taken all necessary action
to authorize the execution, delivery and performance of this Agreement, and (ii) upon the execution
and delivery of this Agreement, this Agreement shall constitute a legal, valid and binding
obligation of the Purchaser, enforceable in accordance with its terms, except as enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting enforcement of creditors’ and contracting parties’ rights generally and except as
enforceability may be limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies.
5.2 Representations Regarding Investment Background and Acknowledgments.
(a) The Purchaser represents and warrants to, and covenants with, the Company that: (i) the
Purchaser is knowledgeable, sophisticated and experienced in making, and is qualified to make,
decisions with respect to investments in shares representing an investment decision like that
involved in the purchase of the Shares; (ii) the Purchaser is acquiring the Shares for its own
account for investment only and with no present intention of distributing any of such Shares or any
arrangement or understanding with any other persons regarding the distribution of such Shares;
(iii) the Purchaser will not, directly or indirectly, offer, sell, pledge, sell short, transfer or
otherwise dispose of (or solicit any offers to buy, purchase or otherwise acquire or take a pledge
of) any of the Shares except in compliance with the Securities Act, the Exchange Act, and any
applicable state securities or blue sky laws; and (iv) the Purchaser is an “accredited investor”
within the meaning of Rule 501(a) of Regulation D promulgated under the Securities Act.
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(b) The Purchaser understands that the Shares are being offered and sold to it in reliance
upon specific exemptions from the registration requirements of the Securities Act, and state
securities laws and that the Company is relying upon the truth and accuracy of, and the Purchaser’s
compliance with, the representations, warranties, agreements, acknowledgments and understandings of
the Purchaser set forth herein in order to determine the availability of such exemptions and the
eligibility of the Purchaser to acquire the Shares.
(c) The Purchaser understands that its investment in the Shares involves a significant degree
of risk and that the market price of the Common Stock has been and continues to be volatile and
that no representation is being made as to the future value or trading volume of the Common Stock.
(d) The Purchaser understands that no United States federal or state agency or any other
government or governmental agency has passed upon or made any recommendation or endorsement of the
Shares.
(e) The Purchaser understands that, until such time as the resale of the the Shares is
registered or they may be sold pursuant to Rule 144 under the Securities Act without any
restriction as to the number of securities as of a particular date that can then be immediately
sold, the Shares may bear restrictive legends in substantially the following form (and a
stop-transfer order may be placed against transfer of the Shares):
“The securities represented by this certificate were issued in a transaction
that was not registered under the Securities Act of 1933, as amended (the
‘Securities Act’) or any state or other securities law. The securities may
not be sold, pledged, transferred or assigned in the absence of an effective
registration statement under the Securities Act, or an opinion of counsel,
in form, substance and scope reasonably acceptable to the Company, that
registration is not required under the Securities Act or unless sold
pursuant to Rule 144 under the Securities Act.”
5.3 Information. The Purchaser 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 Purchaser. The Purchaser has
reviewed or received copies of the Company SEC Reports. The Purchaser and its advisors, if any,
have been afforded the opportunity to ask questions of the Company. The Purchaser 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 Purchaser 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.
5.4 Trading Restrictions. The Purchaser covenants that neither the Purchaser nor any
of its affiliates nor any entity managed or controlled by the Purchaser will, or cause or assist
any Person to, enter into or execute any “short sale” (as such term is defined in Rule 200
of Regulation SHO, or any successor regulation, promulgated by the Commission under the
Exchange Act) of any securities of the Company, and that the Purchaser and its affiliates
shall comply with all other applicable laws.
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5.5 Not an Affiliate. The Purchaser is not an officer, director or “affiliate”
(as defined in Rule 405 of the Securities Act) of the Company.
5.6 Manner of Sale. At no time was Purchaser presented with or solicited by or through
any leaflet, public promotional meeting, television advertisement or any other form of general
solicitation or advertising, in each case, with respect to an offer or sale of the Shares.
5.7 Transfers of Shares in Compliance with Agreements and Law. The Purchaser hereby
covenants with the Company not to make any sale or other transfer of the Shares without complying
in all material respects with the provisions of this Agreement, and the Purchaser acknowledges and
agrees that such Shares are not transferable on the books of the Company unless the certificate
submitted to the transfer agent evidencing the Shares is accompanied by a separate certificate
executed by an officer of, or other authorized person expressly designated by, the Purchaser, to
the effect that the applicable Shares have been sold in accordance with this Agreement, the
Securities Act and any applicable state securities or blue sky laws.
SECTION 6. Stock Ownership Governance.
6.1 Standstill. Until 18 months after the Closing Date (the “Standstill
Term”), except (i) with the prior written consent of the Company or (ii) by way of stock
dividends or other distributions made to the Company’s stockholders generally, the Purchaser will
not, and will not encourage, direct, assist or cause any of its Affiliates, employees,
representatives or agents to, directly or indirectly, subject to Section 6.2:
(a) acquire or agree, offer, seek or propose to acquire ownership (including, but not
limited to, beneficial ownership as defined in Rule 13d-3 under the Exchange Act) of any
voting stock of the Company or securities convertible or exchangeable into or exercisable
for any voting stock of the Company if, as a result of such acquisition, the Purchaser in
the aggregate would own more than 19.9% of the issued and outstanding voting stock of the
Company at the time of such acquisition;
(b) cause to be acquired ownership (including, but not limited to, beneficial ownership
as defined in Rule 13d-3 under the Exchange Act) of any voting stock of the Company or
securities convertible or exchangeable into or exercisable for any voting stock of the
Company if, as a result of such acquisition, the Person acquiring ownership together with
the Purchaser and its Affiliates in the aggregate, would own more than 19.9% of the issued
and outstanding voting stock of the Company at the time of such acquisition;
(c) make, or in any way participate in, any “solicitation” of “proxies” (as such terms
are defined under Regulation 14A of the Exchange Act) to vote or seek to advise or influence
in any manner whatsoever any person with respect to voting stock of the Company;
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(d) form, join or in any way participate in a “group” (within the meaning of Section
13(d)(3) of the Exchange Act) with respect to any voting stock of the Company (other than a
group consisting solely of Purchaser and its Affiliates with respect to not more than 19.9%
of the issued and outstanding voting stock of the Company);
(e) arrange, or in any way participate in, any financing for the purchase of any voting
stock of the Company or securities convertible or exchangeable into or exercisable for any
voting stock of the Company (other than purchases by the Purchaser and its Affiliates with
respect to not more than 19.9% of the issued and outstanding voting stock of the Company);
(f) otherwise act, whether alone or in concert with others, to seek to propose under
Rule 14a-8 of the Exchange Act to the Company or any of its stockholders any merger,
business combination, restructuring, recapitalization or similar transaction to or with the
Company or induce or attempt to induce any other person to initiate any stockholder
proposal;
(g) call or seek to have called any meeting of the stockholders of the Company or,
unless requested by the Company in writing, execute any written consent in lieu of a meeting
of holders of voting stock of the Company;
(h) seek election or seek to place a representative on the Board of Directors of the
Company (the “Board of Directors”) or seek the removal of any member of the Board of
Directors; or
(i) enter into any discussions, negotiations, arrangements or understandings with or
assist any third party with respect to any of the foregoing.
The Company and the Purchaser acknowledge and agree that the acquisition by any employee benefit
plan of the Purchaser or its Affiliates in any diversified index, mutual or pension fund managed by
an independent investment advisor, which fund in turn holds, directly or indirectly, voting stock
of the Company shall not be deemed to be a breach of this Section 6.1. For clarity, the provisions
of Section 6.1 shall not be construed or interpreted to prohibit the Purchaser or an Affiliate in
any manner from making any bid or offer to license or acquire rights to any asset(s) of the Company
(other than substantially all of the assets of the Company) as opposed to acquiring securities of
the Company if such bid or offer is solicited from the Purchaser or an Affiliate by the Company.
The obligations in Section 6.1 will not prohibit the Purchaser or an Affiliate from confidentially
communicating to the Company’s Chief Executive Officer or Chairman of the Board of Directors a
non-public indication of the Purchaser’s interest in pursuing a potential transaction involving the
Company in such a manner that would not require the Company to make a public disclosure. In
addition, if the Purchaser or an Affiliate acquires securities of, or other ownership interest in,
a third party that directly or indirectly owns any voting stock of the Company, such acquisition
shall not be deemed to be a breach by the Purchaser of the obligations under Section 6.1.
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6.2 Exceptions to Section 6.1 Standstill Provisions. Notwithstanding the foregoing but
subject to the proviso set forth in clause (d) below, the obligations under Section 6.1 shall
terminate as to the Purchaser and its Affiliates in the event that:
(a) any third party commences an unsolicited tender or exchange offer which, if
successful, would result in such third party beneficially owning not less than 50% of all
outstanding voting stock (on a Common Stock equivalent basis), and such offer is not
withdrawn or terminated within 10 business days after its commencement;
(b) it is publicly disclosed that at least 50% of all outstanding voting stock (on a
Common Stock equivalent basis) has been acquired by any person or group that is unaffiliated
with the Purchaser and its Affiliates;
(c) the Company publicly announces a decision of the Board of Directors to conduct a
formal process to sell all or substantially all of the assets of the Company;
provided that the restrictions in Section 6.1 will automatically be reinstated and
be in full force and effect if and at such time as the Company publicly announces a
termination of such process;
(d) a third party commences a tender offer for more than 50% of the voting stock of the
Company, and the Company has publicly recommended acceptance of such tender offer;
provided, the obligations in Section 6.1 will automatically be reinstated in the
event such tender offer is terminated;
(e) the Company enters into any binding written agreement (i) to sell or dispose of
securities representing at least 50% of all outstanding voting stock (on a Common Stock
equivalent basis) to any person or group that is unaffiliated with the Purchaser and all of
its Affiliates or (ii) providing for a transaction that, if consummated, would result in (A)
the holders of the outstanding voting stock immediately prior to such transaction ceasing to
hold more than 50% of the combined voting power of the surviving, purchasing or continuing
entity immediately after such transaction or (B) the sale of all or substantially all of the
assets of the Company to a third party that does not control, is not controlled by and is
not under common control with the Company;
(f) upon the filing of a preliminary or final proxy statement by any third party with
respect to the commencement of a proxy or consent solicitation subject to Section 14 of the
Exchange Act to elect or remove a majority of the Board of Directors; or
(g) upon the adoption of a plan of liquidation or dissolution with respect to the
Company.
6.3 Additional Restrictions on Transfers of Shares. The Purchaser hereby covenants
with the Company that neither it nor any of its direct or indirect subsidiaries or parent entities
will offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise
transfer or dispose of, directly or indirectly, or enter into any swap or other arrangement that
transfers to another, in whole or in part, any of the economic consequences of ownership of any
of the Shares, except pursuant to sales of the Shares pursuant to Rule 144 or pursuant to a
registration statement or pursuant to any other transaction for which registration is not required
under the Securities Act.
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6.4 Notice of Market Sale. With respect to any sale of Shares by the Purchaser
pursuant to Rule 144 involving more than 100,000 Shares sold in such sale transaction, the
Purchaser will notify the Company within two (2) business days after the completion of such sale
transaction.
6.5 Remedies. Without prejudice to the rights and remedies otherwise available to the
parties, the Company shall be entitled to equitable relief by way of injunction if the Purchaser or
any permitted transferee breaches or threatens to breach any of the provisions of this Section 6.
SECTION 7. Additional Covenants of the Company.
7.1 Nasdaq Notice of Issuance. If required, the Company shall give Nasdaq timely
notice of the issuance of the Shares.
7.2 Additional Information. With a view to making available to the Purchaser the
benefits of Rule 144 and any other rule or regulation of the SEC that may at any time permit the
Purchaser to sell securities of the Company to the public without registration, the Company shall:
(a) make and keep available adequate current public information, as those terms are understood and
defined in Rule 144, at all times after the date hereof; (b) use commercially reasonable efforts
to file with the SEC in a timely manner all reports and other documents required of the Company
under the Exchange Act; and (c) so long as the Purchaser owns any Shares, furnish the Purchaser
forthwith upon request (i) to the extent accurate, a written statement by the Company that it has
complied with the reporting requirements of Rule 144, the Securities Act, and the Exchange Act; and
(ii) such other information as may be reasonably requested in availing the Purchaser of any rule or
regulation of the SEC that permits the selling of any such securities without registration.
SECTION 8. Notices. All notices, requests, consents and other communications
hereunder shall be in writing, shall be sent by nationally recognized overnight express courier
postage prepaid, and shall be deemed given upon receipt and shall be delivered as addressed as
follows:
| (a) | if to the Company, to: | ||
| Somaxon Pharmaceuticals, Inc. 0000 Xxxxxx Xxxxxxxx Xxxx, Xxxxx 000 Xxx Xxxxx, XX 00000 Attention: General Counsel Fax: (000) 000-0000 |
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| with a copy (which shall not constitute notice) to: | |||
| Xxxxxx & Xxxxxxx LLP 00000 Xxxx Xxxxx Xxxxx, Xxxxx 000 Xxx Xxxxx, XX 00000 Attention: Xxxx X. Xxxxxxx, Esq. Fax: (000) 000-0000 |
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| or to such other person at such other place as the Company shall designate to the Purchaser in writing; and | |||
| (b) | if to the Purchaser, to: | ||
| Paladin Labs Inc 0000 Xxxxxxxxxx Xxx. Xxxxx 000 Xxxxxxxx, Xxxxxx X0X 0X0 Attention: Vice President, Business Development Fax: (000) 000-0000 |
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| with a copy (which shall not constitute notice) to: | |||
| Davies Xxxx Xxxxxxxx & Xxxxxxxx LLP 0000 XxXxxx Xxxxxxx Xxxxxx Xxxxx 0000 Xxxxxxxx, Xxxxxx X0X 0X0 Attention: Xxxxxx X. Xxxxx Fax: (000) 000-0000 |
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| or to such other person at such other place as the Purchaser shall designate to the Company in writing. |
SECTION 9. Entire Agreement. This Agreement, the License Agreement (and the exhibits
thereto) and the Supply Agreement (and the exhibits thereto) contain the entire understanding of
the parties with respect to the specific matters covered herein and therein and, except as
specifically set forth herein or therein, neither the Company nor the Purchaser makes any
representation, warranty, covenant or undertaking with respect to such matters.
SECTION 10. Changes. This Agreement may not be modified or amended except pursuant to
an instrument in writing signed by the Company and the Purchaser.
SECTION 11. Waiver. Any term or condition of this Agreement may be waived at any time
by the party that is entitled to the benefit thereof, but no such waiver shall be effective unless
set forth in a written instrument duly executed by or on behalf of the party waiving such term or
condition. No waiver by any party of any term or condition of this Agreement, in any one or more
instances, shall be deemed to be or construed as a waiver of the same or any other term or
condition of this Agreement on any future occasion. All remedies,
either under this Agreement or by law or otherwise afforded, will be cumulative and not
alternative.
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SECTION 12. Assignment. Except as otherwise expressly provided herein, the
respective rights and obligations of either party under this Agreement shall not be assignable in
whole or in part by a party without the prior written consent of the other party, which consent
shall not be unreasonably withheld, delayed or conditioned. Notwithstanding the preceding sentence,
in connection with the merger, acquisition, transfer of all or substantially all of a party’s
assets to which the License Agreement relates or other change in control of such party, such party
may assign its rights and obligations under this Agreement in whole (but not in part) to such
party’s transferee or successor in interest without the prior written consent of the other Party.
This Agreement shall bind and inure to the benefit of parties and their permitted successors and
assigns.
SECTION 13. Severability. In case any provision contained in this Agreement should be
invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or impaired thereby.
SECTION 14. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York and the federal law of the United States of
America, without regard to principles of conflicts of law which would result in the application of
the laws of any other jurisdiction other than the laws of the State of New York and the federal law
of the United States of America.
SECTION 15. Counterparts. This Agreement may be executed in two counterparts, each of
which shall constitute an original, but all of which, when taken together, shall constitute but one
instrument, and shall become effective when one or more counterparts have been signed by each party
hereto and delivered to the other parties. Facsimile signatures shall be deemed original
signatures.
SECTION 16. Headings. The headings of the various sections of this Agreement have
been inserted for convenience of reference only and shall not be deemed to be part of this
Agreement.
SECTION 17. Survival of Warranties; Indemnification. The warranties, representations
and covenants of each party contained in or made pursuant to this Agreement shall survive the
execution and delivery of this Agreement and the Closing, and shall in no way be affected by any
investigation of the subject matter thereof made by or on behalf of the Purchaser or the Company.
Each party hereto shall indemnify and hold harmless the other party hereto for any and all losses
suffered by such other party as a result of, in connection with, or relating to, any breach by such
party of any representation, warranty and/or covenant of such party in this Agreement or in any
certificate, document or other writing delivered by such party to such other party pursuant to this
Agreement.
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SECTION 18. Finder’s Fee. Each party represents that it neither is nor will be
obligated for any finders’ fee or commission in connection with this transaction. Each party
agrees to indemnify and to hold harmless the other party from any liability for any commission
or compensation in the nature of a finders’ fee (and the costs and expenses of defending against
such liability or asserted liability) for which the indemnifying party or any of its officers,
partners, employees or representatives is responsible.
SECTION 19. Expenses. Irrespective of whether the Closing is effected, each party
shall pay all costs and expenses that it incurs with respect to the negotiation, execution,
delivery and performance of this Agreement. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to
reasonable attorney’s fees, costs and necessary disbursements in addition to any other relief to
which such party may be entitled.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly
authorized representatives as of the day and year first above written.
| SOMAXON PHARMACEUTICALS, INC. |
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| By: | /s/ Xxxxxxx X. Xxxxxx | |||
| Name: | Xxxxxxx X. Xxxxxx | |||
| Title: | President and Chief Executive Officer | |||
| PALADIN LABS INC. |
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| By: | /s/ Xxxx Xxxxxxx | |||
| Name: | Xxxx Xxxxxxx | |||
| Title: | VP Business & Corporate Development | |||
[SIGNATURE PAGE TO PURCHASE AGREEMENT]
Exhibit A to the Purchase Agreement
Opinions of Xxxxxx & Xxxxxxx LLP
1. The Company is a corporation duly incorporated under the Delaware General Corporation Law
(“DGCL”) with corporate power and authority to own its properties and to conduct its business as
currently conducted. With your consent, based solely on certificates from public officials as of a
recent date, we confirm that the Company is validly existing and in good standing under the laws of
the State of Delaware.
2. The Shares to be issued and sold by the Company pursuant to the Purchase Agreement have
been duly authorized by all necessary corporate action of the Company and, when issued to and paid
for by you in accordance with the terms of the Purchase Agreement, will be validly issued, fully
paid and nonassessable and free of preemptive rights, rights of first refusal or other similar
rights arising from the Governing Documents or the DGCL.
