CONSULTING AGREEMENT
Consulting Agreement ("Agreement") by and among XXXXXX-XXXX
PHARMACEUTICALS, INC., a Delaware corporation (the "Company"), XXXXXXX X. XXXXXX
and JACMAR/VIKING, L.L.C. ("Consultant") as of the 8th of March, 1999 (the
"Effective Date").
RECITALS
Whereas, the Company's Board of Directors has appointed Xxxxxx to fill a
vacancy on the Board of Directors and to serve as a Director of the Company;
WHEREAS, Xxxxxx desires to serve on the Company's Board of Directors;
WHEREAS, the Company desires to retain Consultant to make Xxxxxx available
to provide certain investor relations consulting service to the Company; and
WHEREAS, Consultant desires to provide certain investor relations
consulting service to the Company.
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
covenants hereinafter set forth, and for other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. TERMS.
1.1 DUTIES OF CONSULTANT. The Company hereby retains Consultant to provide
investor relations consulting services for and during the term hereof, subject
to the direction of the Chief Executive Officer of the Company and the terms and
conditions hereof. Specifically, Consultant shall cause Xxxxxx to introduce the
Company to, and act as the Company's liaison with, and provide the Company with
his opinions and recommendations with respect to, potential investors, strategic
partners and existing and potential investment bankers, broker-dealers,
analysts, market makers and underwriters, and taking other actions intended to
enhance stockholder value as reasonably requested by the Chief Executive Officer
of the Company. Consultant hereby accepts such retention under the terms and
conditions set forth in this Agreement. Consultant agrees to cause Xxxxxx to
devote part of his business time and services to the faithful performance of the
duties, responsibilities, and authorities which may be reasonably assigned to
Consultant hereunder. It is understood that Xxxxxx will not be providing his
services, through Consultant or otherwise, on a full-time basis.
1.2 BOARD MEMBERSHIP. Xxxxxx agrees to serve on the Board of Directors of
the Company during the term of this Agreement.
1.3 TERM. Unless sooner terminated as provided in Section 1.5 hereof, this
Agreement has become effective as of the date set forth above and shall continue
in force and effect until the third anniversary of the date hereof.
1.
1.4 COMPENSATION. As compensation for services rendered by Consultant, the
Company shall grant to Consultant a warrant to purchase 500,000 shares of the
Company's common stock at an exercise price of $20.50 per share. Such warrant
shall be transferable, shall not include a net exercise provision, shall contain
customary S-3 registration rights and shall expire on the third anniversary of
the date of this agreement. A form of such warrant is attached as Exhibit "A"
hereto. The Company may also grant such other stock options and other incentives
to Consultant for consulting services or to Xxxxxx for serving as a director as
the Company's Board of Directors may determine in its sole discretion.
1.5 TERMINATION. Notwithstanding any other provisions in this Agreement:
(A) DEATH. If Xxxxxx dies during the term of this Agreement, this
Agreement shall automatically terminate as of the date of his death; and
the Company shall have no further obligation to Consultant, Xxxxxx or
Xxxxxx'x estate, except to pay Consultant or Xxxxxx, as the case may be,
any accrued, but unpaid compensation under Section 1.4 hereof.
(B) VOLUNTARY TERMINATION BY CONSULTANT. In the event that during the
term hereof, Consultant shall voluntarily terminate this Agreement, or
Consultant shall refuse to perform the services required hereunder, then,
in such event, this Agreement shall automatically be terminated and
Consultant shall have the right to receive any unpaid compensation or
reimbursements to the date of termination, but no other compensation.
1.6 EXPENSE REIMBURSEMENT AND TRAVEL ADVANCES. Consultant or Xxxxxx, as the
case may be, shall be entitled to reimbursement for any and all reasonable
expenses, including travel and entertainment, incurred by Consultant or Xxxxxx,
as the case may be, in the performance of this Agreement. Consultant or Xxxxxx,
as the case may be, will take all actions necessary to maintain the tax
deductibility of any such expenses by the Company and shall submit vouchers
prior to reimbursement for expenses. All expense report vouchers of Consultant
or Xxxxxx, as the case may be, shall be approved by the Chief Executive Officer
of the Company. Expenses in excess of $1,000.00 per occurrence must be approved
in advance by the Chief Executive Officer of the Company.
1.7 PROTECTION FROM LIABILITY. The Company may provide Xxxxxx with
appropriate insurance coverage as necessary to protect Xxxxxx from any and all
personal liability incurred in the normal performance of Xxxxxx'x designated
duties. The Company agrees to indemnify Xxxxxx to the fullest extent permitted
by law for any liabilities in connection with the lawful performance of services
hereunder.
2. PROTECTIVE COVENANTS. Because (i) Consultant and Xxxxxx will become fully
familiar with all aspects of the Company's business during the period of this
Agreement with the Company, (ii) certain information of which Consultant and
Xxxxxx will gain knowledge during this Agreement is proprietary and confidential
information which is of special and peculiar value to the Company, (iii) if any
such proprietary and confidential information were imparted to or became known
by any persons, including Consultant and Xxxxxx, engaging in a business in
competition with that of the Company, hardship, loss and irreparable injury and
damage could result to the Company, the measurement of which would be difficult
if not impossible to ascertain, and (iv) it is necessary for the Company to
protect its business from such damage, the following covenants constitute a
reasonable and appropriate means, consistent with the best interests of
Consultant, Xxxxxx and the
2.
Company, to protect the Company against such damage and shall apply to and be
binding upon Consultant and Xxxxxx as provided herein:
2.1 NON-COMPETITION BY CONSULTANT. Consultant and Xxxxxx covenant that,
during the term of this Agreement and for a period of one year thereafter,
neither Consultant nor Xxxxxx will engage in or participate in any business
which is in competition with the business of the Company on the date of
termination and which continues during the period of non-competition.
Notwithstanding the foregoing, Consultant and/or Xxxxxx may make passive
investments in the aggregate of less than 5% of the outstanding equity
securities in any entity listed for trading on a national stock exchange or
quoted on any recognized automatic quotation system.
2.2 TRADE SECRETS, PROPRIETARY AND CONFIDENTIAL INFORMATION. Consultant and
Xxxxxx recognizes that their position with the Company is one of the highest
trust and confidence by reason of Consultant's and Xxxxxx'x access to and
contact with trade secrets and confidential and proprietary information of the
Company. Consultant and Xxxxxx shall use their best efforts and exercise utmost
diligence to protect and safeguard the trade secrets and confidential and
proprietary information of the Company. Consultant and Xxxxxx covenant that
during the term of this Agreement and thereafter, they will not disclose,
disseminate or distribute to another, nor induce any other person to disclose,
disseminate, or distribute, any trade secret or proprietary or confidential
information of the Company, directly or indirectly, for Consultant's or Xxxxxx'x
own benefit or for the benefit of another, whether or not acquired, learned,
obtained or developed by Consultant or Xxxxxx use or cause to be used, any trade
secret, proprietary or confidential information in any way except as is required
in the course of the services to the Company hereunder. The foregoing shall not
apply to information which becomes public or other than as a result of the
prohibited acts of Consultant or Xxxxxx. All confidential information relating
to the business of the Company, whether prepared by Consultant or Xxxxxx or
otherwise coming into its or his possession, shall remain the exclusive property
of the Company and shall not, except in the good faith furtherance of the
business of the Company, be removed from the premises of the Company under any
circumstances whatsoever without the prior written consent of the Company.
2.3 REMEDIES. In the event of breach or threatened breach by Consultant or
Xxxxxx of any provision of this Section 2, the Company shall be entitled to
apply for relief by temporary restraining order, temporary injunction, or
permanent injunction and to all other relief to which it may be entitled,
including any said breach, violation or threatened breach or violation. The
Company may pursue any remedy available to it concurrently or consecutively in
any order as to any breach, violation, and the pursuit of any one of such
remedies at any time will not be deemed an election of remedies or waiver of the
right to pursue any other of such remedies as to such breach, violation, or as
to any other breach, violation, or threatened breach or violation.
3. MISCELLANEOUS.
3.1 NOTICES. All notices, requests, consents and other communications under
this Agreement shall be in writing and shall be deemed to have been delivered
(i) on the date personally delivered or (ii) two days after the date deposited
in a receptacle maintained by the United States Postal Services for such
purpose, addressed as set forth below, or (iii) one day after properly sent by
Federal Express, addressed as set forth below:
3.
If to Consultant: JacMar/Viking, L.L.C.
0000 X. Xxxxxx Xxxxxxxxx
Xxxxxxxx, XX 00000
If to Xxxxxx: Xxxxxxx X. Xxxxxx
0000 X. Xxxxxx Xxxxxxxxx
Xxxxxxxx, XX 00000
with a copy to: Xxxxxx & Xxxxxxx
000 "X" Xxxxxx, Xxxxx 0000
Xxx Xxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxx, Esq.
If to the Company: Xxxxxx-Xxxx Pharmaceuticals, Inc.
0000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxx, XX 00000
Fax: (000) 000-0000
Attn: Chief Executive Officer
with a copy to: Xxxxxx Godward LLP
0000 Xxxxxxxxx Xxxxx, Xxxxx 0000
Xxx Xxxxx, XX 00000
Fax: (000) 000-0000
Attn: Xxxx X. Xxxxxxx, Esq.
Either party hereto may designate a different address by providing written
notice of such new address to the other party hereto as provided above.
3.2 SEVERABILITY. If any provision contained in this Agreement is
determined to be void, illegal or unenforceable, in whole or in part, then the
other provisions contained herein shall remain in full force and effect as if
the provision which was determined to be void, illegal, or unenforceable had not
been contained herein.
3.3 WAIVER, MODIFICATION AND INTEGRATION. The waiver by any party hereto of
a breach of any provision of this Agreement shall not operate or be construed as
a waiver of any subsequent breach of any party. This instrument, and the
documents referred to herein, contain the entire agreement of the parties and
supersede any and all other agreements either oral or in writing, between the
parties hereto with respect to services of Consultant and Xxxxxx to the Company
and contain all of the covenants and agreements between the parties with respect
to such services in any manner whatsoever. This Agreement may not be modified,
altered or amended except by written agreement of all parties hereto.
3.4 RELATIONSHIP. Consultant is an independent contractor and is
responsible for the withholding and payment of any applicable employment-related
taxes or unemployment compensation. This Agreement does not establish any
partnership, joint venture or other business association between the parties,
and Consultant shall have no interest in the management, business or property of
the Company, except as specifically provided herein.
3.5 GOVERNING LAW. This Agreement shall be governed by the internal laws of
the State of California, without regard to its conflicts of law principles.
4.
3.6 XXXXXX CONSENT. Xxxxxx hereby agrees to make his services available to
Consultant to the extent necessary for Consultant to perform its obligations
hereunder. The Company is an intended third-party beneficiary of the covenant
set forth in the preceding sentence.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
XXXXXX-XXXX PHARMACEUTICALS, INC.,
a Delaware corporation
By: /s/ XXXXXXX X. XXXXXX
------------------------------------
Xxxxxxx X. Xxxxxx, CEO
JACMAR/VIKING, L.L.C.
a Delaware limited liability company
By: THE JACMAR COMPANIES
a California corporation
Its: Managing Member
By: /s/ XXXXX X. XXX XXXXX
-------------------------------
Xxxxx X. Xxx Xxxxx,
President
By: /s/ XXXXXXX X. XXXXXX
-------------------------------
Xxxxxxx X. Xxxxxx
5.
No. W-99-5
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE
SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE
OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY APPLICABLE
STATE SECURITIES LAWS.
WARRANT TO PURCHASE 500,000 SHARES
OF COMMON STOCK OF
XXXXXX-XXXX PHARMACEUTICALS, INC.
(Void after March 7, 2002)
This certifies that Jacmar/Viking, L.L.C., or its assigns (the "Holder"),
for value received, is entitled to purchase from Xxxxxx-Xxxx Pharmaceuticals,
Inc., a Delaware corporation (the "Company"), having a place of business at 0000
Xxxxxxx Xxxxxx, Xxxxx 000, Xxx Xxxxx, Xxxxxxxxxx 00000, a maximum of 500,000
fully paid and nonassessable shares of the Company's Common Stock ("Common
Stock") for cash at a price of $20.50 per share (the "Stock Purchase Price") at
any time or from time to time up to and including 5:00 p.m. (Pacific time) on
March 7, 2002 (the "Expiration Date"), upon surrender to the Company at its
principal office (or at such other location as the Company may advise the Holder
in writing) of this Warrant properly endorsed with the Form of Subscription
attached hereto duly filled in and signed and, if applicable, upon payment in
cash or by check of the aggregate Stock Purchase Price for the number of shares
for which this Warrant is being exercised determined in accordance with the
provisions hereof. The Stock Purchase Price and the number of shares purchasable
hereunder are subject to adjustment as provided in Section 3 of this Warrant.
This Warrant is subject to the following terms and conditions:
1. EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES. This Warrant
is exercisable at the option of the holder of record hereof, at any time or from
time to time, up to the Expiration Date for all or any part of the shares of
Common Stock (but not for a fraction of a share) which may be purchased
hereunder. The Company agrees that the shares of Common Stock purchased under
this Warrant shall be and are deemed to be issued to the Holder hereof as the
record owner of such shares as of the close of business on the date on which
this Warrant shall have been surrendered, properly endorsed, the completed,
executed Form of Subscription delivered and payment made for such shares.
Certificates for the shares of Common Stock so purchased, together with any
other securities or property to which the Holder hereof is entitled upon such
exercise, shall be delivered to the Holder hereof by the Company at the
Company's expense within a reasonable time after the rights represented by this
Warrant have been so exercised. In case of a purchase of less than all the
shares which may be purchased under this Warrant, the Company shall cancel this
Warrant and execute and deliver a new Warrant or Warrants of like tenor for the
balance of the shares purchasable under the Warrant surrendered upon such
purchase to the Holder hereof within a reasonable time. Each stock certificate
so delivered shall be in such denominations of Common Stock as may be requested
by the Holder hereof and shall be registered in the name of such Holder.
1.
2. SHARES TO BE FULLY PAID; RESERVATION OF SHARES; LISTING OF SHARES. The
Company covenants and agrees that all shares of Common Stock which may be issued
upon the exercise of the rights represented by this Warrant will, upon issuance,
be duly authorized, validly issued, fully paid and nonassessable and free from
all preemptive rights of any stockholder and free of all taxes, liens and
charges with respect to the issue thereof. The Company further covenants and
agrees that, during the period within which the rights represented by this
Warrant may be exercised, the Company will at all times have authorized and
reserved, for the purpose of issue or transfer upon exercise of the subscription
rights evidenced by this Warrant, a sufficient number of shares of authorized
but unissued Common Stock, or other securities and property, when and as
required to provide for the exercise of the rights represented by this Warrant.
The Company will take all such action as may be necessary to assure that such
shares of Common Stock may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of any domestic securities
exchange upon which the Common Stock may be listed; provided, however, that
other than as set forth in Section 11 hereof, the Company shall not be required
to effect a registration under Federal or State securities laws with respect to
such exercise. As long as the Warrant shall be outstanding, the Company shall
use its best efforts to cause all shares of Common Stock issuable upon the
exercise of the Warrant to be listed (subject to official notice of issuance) on
all securities exchanges on which the Common Stock may then be listed and/or
quoted. The Company will not take any action which would result in any
adjustment of the Stock Purchase Price (as set forth in Section 3 hereof) if the
total number of shares of Common Stock issuable after such action upon exercise
of all outstanding options, warrants and convertible securities, together with
all shares of Common Stock then outstanding, would exceed the total number of
shares of Common Stock then authorized by the Company's Certificate of
Incorporation.
3. ADJUSTMENT OF STOCK PURCHASE PRICE AND NUMBER OF SHARES. The Stock
Purchase Price and the number of shares purchasable upon the exercise of this
Warrant shall be subject to adjustment from time to time upon the occurrence of
certain events described in this Section 3. Upon each adjustment of the Stock
Purchase Price, the Holder of this Warrant shall thereafter be entitled to
purchase, at the Stock Purchase Price resulting from such adjustment, the number
of shares obtained by multiplying the Stock Purchase Price in effect immediately
prior to such adjustment by the number of shares purchasable pursuant hereto
immediately prior to such adjustment, and dividing the product thereof by the
Stock Purchase Price resulting from such adjustment.
3.1 SUBDIVISION OR COMBINATION OF STOCK. In case the Company shall at any
time subdivide its outstanding shares of Common Stock into a greater number of
shares, the Stock Purchase Price in effect immediately prior to such subdivision
shall be proportionately reduced, and conversely, in case the outstanding shares
of Common Stock of the Company shall be combined into a smaller number of
shares, the Stock Purchase Price in effect immediately prior to such combination
shall be proportionately increased.
3.2 DIVIDENDS IN COMMON STOCK, OTHER STOCK, PROPERTY, RECLASSIFICATION. If
at any time or from time to time the Holders of Common Stock (or any shares of
stock or other securities at the time receivable upon the exercise of this
Warrant) shall have received or become entitled to receive, without payment
therefor,
2.
(a) Common Stock or any shares of stock or other securities which are
at any time directly or indirectly convertible into or exchangeable for Common
Stock, or any rights or options to subscribe for, purchase or otherwise acquire
any of the foregoing by way of dividend or other distribution, or
(b) Common Stock or additional stock or other securities or property
(including cash) by way of spinoff, split-up, reclassification, combination of
shares or similar corporate rearrangement, (other than shares of Common Stock
issued as a stock split or adjustments in respect of which shall be covered by
the terms of Section 3.1 above), then and in each such case, the Holder hereof
shall, upon the exercise of this Warrant, be entitled to receive, in addition to
the number of shares of Common Stock receivable thereupon, and without payment
of any additional consideration therefor, the amount of stock and other
securities and property (including cash in the cases referred to in clause (b)
above and this clause (c) which such Holder would hold on the date of such
exercise had he been the holder of record of such Common Stock as of the date on
which holders of Common Stock received or became entitled to receive such shares
or all other additional stock and other securities and property.
3.3 REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE. If
any recapitalization, reclassification or reorganization of the capital stock of
the Company, or any consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its assets or other
transaction shall be effected in such a way that holders of Common Stock shall
be entitled to receive stock, securities, or other assets or property (a
"Transaction"), then, as a condition of such Transaction, lawful and adequate
provisions shall be made by the Company whereby the Holder hereof shall
thereafter have the right to purchase and receive (in lieu of the shares of the
Common Stock of the Company immediately theretofore purchasable and receivable
upon the exercise of the rights represented hereby) such shares of stock,
securities or other assets or property as may be issued or payable with respect
to or in exchange for a number of outstanding shares of such Common Stock equal
to the number of shares of such stock immediately theretofore purchasable and
receivable upon the exercise of the rights represented hereby; provided,
however, that in the event the fair market value of the stock, securities or
other assets or property (determined in good faith by the Board of Directors of
the Company) issuable or payable with respect to one share of the Common Stock
of the Company immediately theretofore purchasable and receivable upon the
exercise of the rights represented hereby is in excess of the Stock Purchase
Price hereof effective at the time of a merger and securities received in such
reorganization, if any, are publicly traded, then this Warrant shall expire
unless exercised prior to such Transaction. In the event of any Transaction,
appropriate provision shall be made by the Company with respect to the rights
and interests of the Holder of this Warrant to the end that the provisions
hereof (including, without limitation, provisions for adjustments of the Stock
Purchase Price and of the number of shares purchasable and receivable upon the
exercise of this Warrant) shall thereafter be applicable, in relation to any
shares of stock, securities or assets thereafter deliverable upon the exercise
hereof. The Company will not effect any such consolidation, merger or sale
unless, prior to the consummation thereof, the successor corporation (if other
than the Company) resulting from such consolidation or the corporation
purchasing such assets shall assume by written instrument reasonably
satisfactory in form and substance to the Holders of a majority of the warrants
to purchase Common Stock then outstanding, executed and mailed or delivered to
the registered Holder hereof at the last address of such Holder appearing on the
books of the Company, the obligation to deliver to such Holder
3.
such shares of stock, securities or assets as, in accordance with the foregoing
provisions, such Holder may be entitled to purchase.
3.4 CERTAIN EVENTS. If any change in the outstanding Common Stock of the
Company or any other event occurs as to which the other provisions of this
Section 3 are not strictly applicable or if strictly applicable would not fairly
protect the purchase rights of the Holder of the Warrant in accordance with such
provisions, then the Board of Directors of the Company shall make an adjustment
in the number and class of shares available under the Warrant, the Stock
Purchase Price or the application of such provisions, so as to protect such
purchase rights as aforesaid. The adjustment shall be such as will give the
Holder of the Warrant upon exercise for the same aggregate Stock Purchase Price
the total number, class and kind of shares as he would have owned had the
Warrant been exercised prior to the event and had he continued to hold such
shares until after the event requiring adjustment.
3.5 NOTICES OF CHANGE.
(a) Within 30 days after any adjustment in the number or class of
shares subject to this Warrant and of the Stock Purchase Price, the Company
shall give written notice thereof to the Holder, setting forth in reasonable
detail and certifying the calculation of such adjustment.
(b) The Company shall also give written notice to the Holder at least
10 business days prior to the date on which a Transaction shall take place.
4. ISSUE TAX. The issuance of certificates for shares of Common Stock
upon the exercise of the Warrant shall be made without charge to the Holder of
the Warrant for any issue tax (other than any applicable income taxes) in
respect thereof; provided, however, that the Company shall not be required to
pay any tax which may be payable in respect of any transfer involved in the
issuance and delivery of any certificate in a name other than that of the then
Holder of the Warrant being exercised.
5. CLOSING OF BOOKS. The Company will at no time close its transfer books
against the transfer of any warrant or of any shares of Common Stock issued or
issuable upon the exercise of any warrant in any manner which interferes with
the timely exercise of this Warrant.
6. NO VOTING OR DIVIDEND RIGHTS; LIMITATION OF LIABILITY. Nothing
contained in this Warrant shall be construed as conferring upon the Holder
hereof the right to vote or to consent or to receive notice as a stockholder of
the Company or any other matters or any rights whatsoever as a stockholder of
the Company. No dividends or interest shall be payable or accrued in respect of
this Warrant or the interest represented hereby or the shares purchasable
hereunder until, and only to the extent that, this Warrant shall have been
exercised. No provisions hereof, in the absence of affirmative action by the
holder to purchase shares of Common Stock, and no mere enumeration herein of the
rights or privileges of the holder hereof, shall give rise to any liability of
such Holder for the Stock Purchase Price or as a stockholder of the Company,
whether such liability is asserted by the Company or by its creditors.
4.
7. REPRESENTATIONS AND WARRANTS OF THE HOLDER.
7.1 PURCHASE FOR OWN ACCOUNT. Holder represents that it is acquiring this
Warrant and the Common Stock issuable upon exercise of this Warrant
(collectively, the "Securities") solely for its own account and beneficial
interest for investment and not for sale or with a view to distribution of the
Securities or any part thereof, has no present intention of selling (in
connection with a distribution or otherwise), granting any participation in, or
otherwise distributing the same, and does not presently have reason to
anticipate a change in such intention.
7.2 INFORMATION AND SOPHISTICATION. Holder acknowledges that it has
received all the information it has requested from the Company and considers
necessary or appropriate for deciding whether to acquire this Warrant. Holder
represents that it has had an opportunity to ask questions and receive answers
from the Company regarding the terms and conditions of the offering of this
Warrant and to obtain any additional information necessary to verify the
accuracy of the information given the Holder. Holder further represents that it
has such knowledge and experience in financial and business matters that it is
capable of evaluating the merits and risk of this investment.
7.3 ABILITY TO BEAR ECONOMIC RISK. Holder acknowledges that investment in
this Warrant involves a high degree of risk, and represents that it is able,
without materially impairing its financial condition, to hold the Securities for
an indefinite period of time and to suffer a complete loss of its investment.
7.4 FURTHER LIMITATIONS ON DISPOSITION. Without in any way limiting the
representations set forth above, Holder further agrees not to make any
disposition of all or any portion of the Securities unless and until:
(a) There is then in effect a Registration Statement under the 1933
Act covering such proposed disposition and such disposition is made in
accordance with such Registration Statement; or
(b) (i) Holder shall have notified the Company of the proposed
disposition and shall have furnished the Company with a detailed statement of
the circumstances surrounding the proposed disposition, and (ii) if reasonably
requested by the Company, Holder shall have furnished the Company with an
opinion of counsel, reasonably satisfactory to the Company, that such
disposition will not require registration under the 1933 Act.
(c) Notwithstanding the provisions of paragraphs (a) and (b) above,
no such registration statement or opinion of counsel shall be necessary for a
transfer by Holder to a stockholder or partner (or retired partner) of such
Holder, or transfers by gift, will or intestate succession to any spouse or
lineal descendants or ancestors, if all transferees agree in writing to be
subject to the terms hereof to the same extent as if they were a Holder
hereunder.
8. WARRANTS TRANSFERABLE. Subject to compliance with applicable federal
and state securities laws, this Warrant and all rights hereunder are
transferable, in whole or in part, without charge to the holder hereof (except
for transfer taxes), upon surrender of this Warrant
5.
properly endorsed. Each taker and holder of this Warrant, by taking or holding
the same, consents and agrees that this Warrant, when endorsed in blank, shall
be deemed negotiable, and that the holder hereof, when this Warrant shall have
been so endorsed, may be treated by the Company, at the Company's option, and
all other persons dealing with this Warrant as the absolute owner hereof for any
purpose and as the person entitled to exercise the rights represented by this
Warrant, or to the transfer hereof on the books of the Company any notice to the
contrary notwithstanding; but until such transfer on such books, the Company may
treat the registered owner hereof as the owner for all purposes.
9. RIGHTS AND OBLIGATIONS SURVIVE EXERCISE OF WARRANT. The rights and
obligations of the Company, of the holder of this Warrant and of the holder of
shares of Common Stock issued upon exercise of this Warrant shall survive the
exercise of this Warrant.
10. MODIFICATION AND WAIVER. This Warrant and any provision hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
11. REGISTRATION RIGHTS.
11.1 Within one (1) year following the date of this Warrant (provided that
the parties may agree to file sooner to take advantage of the Company's
eligibility to use Form S-3), the Company will prepare and file with the SEC a
registration statement on Form S-3 (or such other form that the Company may be
eligible to use) relating to the sale of the shares of Common Stock issuable
upon exercise of this Warrant (the "Shares") by Holder from time to time (the
"Registration Statement"), and use its best efforts, subject to receipt of
necessary information from Holder, to cause such Registration Statement to be
declared effective by the Securities and Exchange Commission (the "SEC") as soon
as practicable after the SEC has completed its review process. The Company
agrees to use its best efforts to keep such Registration Statement effective
until the earlier of (i) the date on which all the Shares have been sold by
Holder and (ii) the date on which the Shares may be resold by Holder without
registration by reason of Rule 144(k) under the Act of 1933 or any other rule of
similar effect. The Company shall file all reports required to be filed by the
Company with the SEC in a timely manner and take all other necessary action so
as to maintain such eligibility for the use of Form S-3 (or its successor or
equivalent). Notwithstanding the foregoing, following the effectiveness of the
Registration Statement, the Company may, at any time, suspend the effectiveness
of the Registration Statement for up to no longer than 30 days, as appropriate
(a "Suspension Period"), by giving notice to the Holder, if the Company shall
have determined that the Company may be required to disclose any material
corporate development. The Company will use its best efforts to minimize the
length of any Suspension Period. Notwithstanding the foregoing, no more than two
Suspension Periods may occur in any twelve (12) month period. Holder agrees
that, upon receipt of any notice from the Company of a Suspension Period, Holder
will not sell any Shares pursuant to the Registration Statement until (i) Holder
is advised in writing by the Company that the use of the applicable prospectus
may be resumed, (ii) Holder has received copies of any additional or
supplemental or amended prospectus, if applicable, and (iii) Holder has received
copies of any additional or supplemental filings which are incorporated or
deemed to be incorporated by reference in such prospectus. Holder further
covenants to notify the Company promptly of the sale of all of its Shares.
6.
11.2 The Company shall furnish to Holder promptly after the Registration
Statement is prepared and publicly distributed, filed with the SEC, or received
by the Company, one copy of the Registration Statement and any amendment
thereto, each preliminary prospectus and prospectus and each amendment or
supplement thereto. The Company shall furnish to Holder such number of copies of
prospectuses and preliminary prospectuses in conformity with the requirements of
the Securities Act, in order to facilitate the public sale or other disposition
of all or any of the Shares by Holder; provided, however, that the obligation of
the Company to deliver copies of prospectuses or preliminary prospectuses to the
Holder shall be subject to the receipt by the Company of reasonable assurances
from the Holder that the Holder will comply with the applicable provisions of
the Securities Act and of such other securities or blue sky laws as may be
applicable in connection with any use of such prospectuses or preliminary
prospectuses. The Company shall bear all expenses incurred by the Company in
connection with the registration of the Shares pursuant to the Registration
Statement.
11.3 The Registration Statement (including any amendments or supplements
thereto and prospectuses contained therein and, as of the dates such documents
were filed, all documents incorporated by reference therein) shall not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein, or necessary to make the statements therein not
misleading.
11.4 INDEMNIFICATION. For the purpose of this Section 11:
(i) the term "Holder/Affiliate" shall include Holder and any
affiliate of Holder;
(ii) the term "Registration Statement" shall include any final
prospectus, exhibit, supplement or amendment included in or relating to the
Registration Statement referred to in Section 11.1.
(a) The Company agrees to indemnify and hold harmless Holder and
each person, if any, who controls Holder within the meaning of the Securities
Act, against any losses, claims, damages, liabilities or expenses to which
Holder or such controlling person may become subject, under the Securities Act,
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or any
other federal or state statutory law or regulation, or at common law or
otherwise (including in settlement of any litigation, if such settlement is
effected with the written consent of the Company), insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof as
contemplated below) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement, including the prospectus, financial statements and schedules, and all
other documents filed as a part thereof or incorporated by reference therein, as
amended at the time of effectiveness of the Registration Statement, including
any information deemed to be a part thereof as of the time of effectiveness
pursuant to paragraph (b) of Rule 430A, or pursuant to Rule 434, of the Rules
and Regulations, or the prospectus, in the form first filed with the SEC
pursuant to Rule 424(b) of the Regulations, or filed as part of the Registration
Statement at the time of effectiveness if no Rule 424(b) filing is required (the
"Prospectus"), or any amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state in any of them a material
fact required to be stated therein or necessary to make the statements in any of
them not misleading, and will reimburse Holder and each such controlling person
for any
7.
legal and other expenses as such expenses are reasonably incurred by Holder or
such controlling person in connection with investigating, defending, settling,
compromising or paying any such loss, claim, damage, liability, expense or
action; provided, however, that the Company will not be liable in any such case
to the extent that any such loss, claim, damage, liability or expense arises out
of or is based upon an untrue statement or alleged untrue statement or omission
or alleged omission made in the Registration Statement, the Prospectus or any
amendment or supplement thereto in reliance upon and in conformity with written
information furnished to the Company (i) by or on behalf of Holder expressly for
use therein or (ii) the failure of Holder to comply with the covenants and
agreements contained in this Warrant respecting the sale of the Shares, the
inaccuracy of any representations made by Holder herein or any statement or
omission in any Prospectus that is corrected in any subsequent Prospectus that
was delivered to Holder prior to the pertinent sale or sales by Holder. In
addition to its other obligations under this paragraph (a), the Company agrees
that, as an interim measure during the pendency of any claim, action,
investigation, inquiry or other proceeding arising out of or based upon any
statement or omission, or any alleged statement or omission, or any inaccuracy
in the representations and warranties of the Company in this Agreement or
failure to perform its obligations in this Agreement, all as described in this
paragraph (a), it will reimburse Holder on a quarterly basis for all reasonable
legal or other expenses incurred in connection with investigating or defending
any such claim, action, investigation, inquiry or other proceeding,
notwithstanding the absence of a judicial determination as to the propriety and
enforceability of the Company's obligation, to reimburse Holder for such
expenses and the possibility that such payments might later be held to have been
improper by a court of competent jurisdiction. To the extent that any such
interim reimbursement payment is so held to have been improper, Holder shall
promptly return it to the Company together with interest, compounded daily,
determined on the basis of the prime rate (or other commercial lending rate for
borrowers of the highest credit standing) announced from time to time by Bank of
America National Trust and Savings Association, San Francisco, California (the
"Prime Rate"). Any such interim reimbursement payments which are not made to a
Holder within 30 days of a request for reimbursement shall bear interest at the
Prime Rate from the date of such request. This indemnity agreement will be in
addition to any liability which the Company may otherwise have.
(b) Holder will indemnify and hold harmless the Company, each of its
directors, each of its officers who signed the Registration Statement and each
person, if any, who controls the Company within the meaning of the Securities
Act, against any losses, claims, damages, liabilities or expenses to which the
Company, each of its directors, each of its officers who signed the Registration
Statement or controlling person may become subject, under the Securities Act,
the Exchange Act, or any other federal or state statutory law or regulation, or
at common law or otherwise (including in settlement of any litigation, if such
settlement is effected with the written consent of Holder) insofar as such
losses, claims, damages, liabilities or expenses (or actions in respect thereof
as contemplated below) arise out of or are based upon any untrue or alleged
untrue statement of any material fact contained in the Registration Statement,
the Prospectus, or any amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was made
in the Registration Statement, the Prospectus, or any amendment or supplement
thereto, in reliance upon and in conformity with written information furnished
to the
8.
Company by or on behalf of Holder expressly for use therein, and will reimburse
the Company, each of its directors, each of its officers who signed the
Registration Statement or controlling person for any legal and other expense
reasonably incurred by the Company, each of its directors, each of its officers
who signed the Registration Statement or controlling person in connection with
investigating, defending, settling, compromising or paying any such loss, claim,
damage, liability, expense or action. In addition to its other obligations under
this paragraph (b), Holder agrees that, as an interim measure during the
pendency of any claim, action, investigation, inquiry or other proceeding
arising out of or based upon any failure to comply, statement or omission, or
any alleged failure to comply, statement or omission, described in this
paragraph (b) which relates to written information furnished to the Company by
or on behalf of Holder, it will reimburse the Company (and, to the extent
applicable, each officer, director or controlling person) on a quarterly basis
for all reasonable legal or other expenses incurred in connection with
investigating or defending any such claim, action, investigation, inquiry or
other proceeding, notwithstanding the absence of a judicial determination as to
the propriety and enforceability of Holder's obligations to reimburse the
Company (and, to the extent applicable, each officer, director or controlling
person) for such expenses and the possibility that such payments might later be
held to have been improper by a court of competent jurisdiction. To the extent
that any such interim reimbursement payment is so held to have been improper,
the Company (and, to the extent applicable, each officer, director or
controlling person) shall promptly return it to Holder together with interest,
compounded daily, determined on the basis of the Prime Rate. Any such interim
reimbursement payments which are not made to the Company within 30 days of a
request for reimbursement shall bear interest at the Prime Rate from the date of
such request. This indemnity agreement will be in addition to any liability
which Holder may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section 11.4 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against an indemnifying party
under this Section 11.4 notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party will
not relieve it from any liability which it may have to any indemnified party for
contribution or otherwise than under the indemnity agreement contained in this
Section 11.4 or to the extent it is not prejudiced as a proximate result of such
failure. In case any such action is brought against any indemnified party and
such indemnified party seeks or intends to seek indemnity from an indemnifying
party, the indemnifying party will be entitled to participate in, and, to the
extent that it may wish, jointly with all other indemnifying parties similarly
notified, to assume the defense thereof with counsel reasonably satisfactory to
such indemnified party; provided, however, if the defendants in any such action
include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be a conflict
between the positions of the indemnifying party and the indemnified party in
conducting the defense of any such action or that there may be legal defenses
available to it and/or other indemnified parties which are different from or
additional to those available to the indemnifying party, the indemnified party
or parties shall have the right to select separate counsel to assume such legal
defenses and to otherwise participate in the defense of such action on behalf of
such indemnified party or parties. Upon receipt of notice from the indemnifying
party to such indemnified party of its election so to assume the defense of such
action and approval by the indemnified party of counsel, the indemnifying party
will not be liable to such indemnified party under this Section 11.4 for any
legal or other expenses subsequently incurred
9.
by such indemnified party in connection with the defense thereof unless (i) the
indemnified party shall have employed such counsel in connection with the
assumption of legal defenses in accordance with the proviso to the preceding
sentence (it being understood, however, that the indemnifying party shall not be
liable for the expenses of more than one separate counsel, approved by such
indemnifying party in the case of paragraph (a), representing the indemnified
parties who are parties to such action) or (ii) the indemnified party shall not
have employed counsel reasonably satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after notice of
commencement of action, in each of which cases the fees and expenses of counsel
shall be at the expense of the indemnifying party.
(d) If the indemnification provided for in this Section 11.4 is
required by its terms but is for any reason held to be unavailable to or
otherwise insufficient to hold harmless an indemnified party under paragraphs
(a), (b) or (c) of this Section 11.4 in respect to any losses, claims, damages,
liabilities or expenses referred to herein, then each applicable indemnifying
party shall contribute to the amount paid or payable by such indemnified party
as a result of any losses, claims, damages, liabilities or expenses referred to
herein in such proportion as is appropriate to reflect the relative fault of the
Company and Holder in connection with the statements or omissions or
inaccuracies in the representations and warranties in this Warrant which
resulted in such losses, claims, damages, liabilities or expenses, as well as
any other relevant equitable considerations. The relative fault of the Company
and Holder shall be determined by reference to, among other things, whether the
untrue or alleged statement of a material fact or the omission or alleged
omission to state a material fact or the inaccurate or the alleged inaccurate
representation and/or warranty relates to information supplied by the Company or
by Holder and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The amount paid or
payable by a party as a result of the losses, claims, damages, liabilities and
expenses referred to above shall be deemed to include, subject to the
limitations set forth in paragraph (c) of this Section 11.4 any legal or other
fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim. The provisions set forth in
paragraph (c) of this Section 11.4 with respect to notice of commencement of any
action shall apply if a claim for contribution is to be made under this
paragraph (d); provided, however, that no additional notice shall be required
with respect to any action for which notice has been give under paragraph (c)
for purposes of indemnification. The Company and Holder agree that it would not
be just and equitable if contribution pursuant to this Section 11.4 were
determined solely by pro rata allocation (even if Holder were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in this paragraph.
Notwithstanding the provisions of this Section 11.4, the Holder shall not be
required to contribute any amount in excess of the amount by which the amount
paid by Holder paid for the Shares that were sold pursuant to the Registration
Statement and the amount received by Holder from such sale exceeds the amount of
any damages that Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
(e) It is agreed that any controversy arising out of the operation
of the interim reimbursement arrangements set forth in paragraphs (a) and (b) of
this Section 11.4,
10.
including the amounts of any requested reimbursement payments and the method of
determining such amounts, shall be settled by arbitration conducted under the
provisions of the Judicial Arbitration and Mediation Service (JAMS) and shall be
held in San Diego, California. Any such arbitration must be commenced by service
of a written demand for arbitration or a written notice of intention to
arbitrate, therein electing the arbitration tribunal. In the event the party
demanding arbitration does not make such designation of any arbitration tribunal
in such demand or notice, then the party responding to said demand or notice is
authorized to do so. Such an arbitration would be limited to the operation of
the interim reimbursement provisions contained in paragraphs (a) and (b) of this
Section 11.4 and would not resolve the ultimate propriety or enforceability of
the obligation to reimburse expenses which is created by the provisions of such
paragraphs (a) and (b).
12. NOTICES. Any notice, request or other document required or permitted
to be given or delivered to the holder hereof or the Company shall be delivered
or shall be sent by certified mail, postage prepaid, to each such holder at his
address as shown on the books of the Company or to the Company at the address
indicated therefor in the first paragraph of this Warrant or such other address
as either may from time to time provide to the other.
13. BINDING EFFECT ON SUCCESSORS. This Warrant shall be binding upon any
corporation succeeding the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets. All of the obligations of the
Company relating to the Common Stock issuable upon the exercise of this Warrant
shall survive the exercise and termination of this Warrant. All of the covenants
and agreements of the Company shall inure to the benefit of the successors and
assigns of the holder hereof.
14. DESCRIPTIVE HEADINGS AND GOVERNING LAW. The description headings of
the several sections and paragraphs of this Warrant are inserted for convenience
only and do not constitute a part of this Warrant. This Warrant shall be
construed and enforced in accordance with, and the rights of the parties shall
be governed by, the laws of the State of Delaware.
15. LOST WARRANTS. The Company represents and warrants to the Holder
hereof that upon receipt of evidence reasonably satisfactory to the Company of
the loss, theft, destruction, or mutilation of this Warrant and, in the case of
any such loss, theft or destruction, upon receipt of an indemnity reasonably
satisfactory to the Company, or in the case of any such mutilation upon
surrender and cancellation of such Warrant, the Company, at its expense, will
make and deliver a new Warrant, of like tenor, in lieu of the lost, stolen,
destroyed or mutilated Warrant.
16. FRACTIONAL SHARES. No fractional shares shall be issued upon exercise
of this Warrant. The Company shall, in lieu of issuing any fractional share, pay
the holder entitled to such fraction a sum in cash equal to such fraction
multiplied by the then effective Stock Purchase Price.
11.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by
its officers, thereunto duly authorized this 8th day of March, 1999.
XXXXXX-XXXX PHARMACEUTICALS, INC.
a Delaware corporation
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------------------------
Name: Xxxxxxx X. Xxxxxx
-----------------------------------------
Title: Chairman & Chief Executive Officer
----------------------------------------
12.
EXHIBIT A
SUBSCRIPTION FORM
Date: _________________, 19___
Xxxxxx-Xxxx Pharmaceuticals, Inc.
0000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxx, XX 00000
Attn: President
Ladies and Gentlemen:
The undersigned hereby elects to exercise the warrant issued to him by
Xxxxxx-Xxxx Pharmaceuticals, Inc. (the "Company") and dated ___________ _____,
1999 Warrant No. W-___ (the "Warrant") and to purchase thereunder
________________________________ shares of the Common Stock of the Company (the
"Shares") at a purchase price of ___________________________________________
Dollars ($__________) per Share or an aggregate purchase price of
__________________________________ Dollars ($__________) (the "Purchase Price").
Pursuant to the terms of the Warrant the undersigned has delivered the
Purchase Price herewith in full in cash or by certified check or wire transfer.
Very truly yours,
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By:
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Title:
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