EXHIBIT 4.1
ARADIGM CORPORATION
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "AGREEMENT") is made as of
December 17, 2004, by and among ARADIGM CORPORATION, a California corporation
(the "COMPANY") with its principal office at 0000 Xxxxx Xxxx Xxx, Xxxxxxx,
Xxxxxxxxxx 00000, and the persons listed on the Schedule of Purchasers attached
hereto as EXHIBIT A (the "PURCHASERS").
RECITALS
WHEREAS, the Company has authorized the sale and issuance of the Common
Shares and the Warrants (each as defined herein);
WHEREAS, the Company and the Purchasers are executing and delivering
this Agreement in reliance upon the exemption from securities registration
afforded by the provisions of Regulation D, as promulgated by the SEC (as
defined herein) under the Securities Act (as defined herein);
WHEREAS, at the Closing, the Company desires to sell, and each
Purchaser desires to purchase, the Shares and the Warrants, upon the terms and
conditions stated in this Agreement; and
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises, representations, warranties and covenants hereinafter set forth
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1
AUTHORIZATION AND SALE OF COMMON SHARES AND WARRANTS
1.1 AUTHORIZATION. The Company has authorized (a) the sale and issuance
of up to ten million (10,000,000) shares of its Common Stock (the "COMMON
SHARES") and (b) the sale and issuance of warrants, in the form attached hereto
as EXHIBIT B (the "WARRANTS"), to purchase up to two million five hundred
thousand (2,500,000) shares of the Company's Common Stock (the "COMMON STOCK")
pursuant to this Agreement.
1.2 SALE OF COMMON SHARES AND WARRANTS. At the Closing (as defined
herein), subject to the terms and conditions of this Agreement, the Company
agrees to issue and sell to each Purchaser and each Purchaser severally agrees
to purchase from the Company:
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(A) Common Shares in the amount and at the purchase price set
forth opposite such Purchaser's name on EXHIBIT A; and
(B) Warrants to purchase shares of the Common Stock in the
amount set forth opposite such Purchaser's name on EXHIBIT A at an exercise
price equal to $2.10 per share of Common Stock (the "WARRANT PRICE"). The shares
of Common Stock issuable upon exercise of or otherwise pursuant to the Warrants
are referred to herein as the "WARRANT SHARES." The Common Shares and the
Warrant Shares are collectively referred to herein as the "SHARES." The Shares
and the Warrants are collectively referred to herein as the "SECURITIES."
ARTICLE 2
CLOSING DATE; DELIVERY
2.1 CLOSING DATE. Subject to the satisfaction (or waiver) of the
conditions thereto set forth in Article 5 and Article 6 of this Agreement, the
closing of the purchase and sale of the Common Shares and Warrants hereunder
(the "CLOSING") shall be held at the offices of Xxxxxx Godward LLP ("XXXXXX
GODWARD"), Xxx Xxxxxxxx Xxxxx, 00xx Xxxxx, Xxx Xxxxxxxxx, Xxxxxxxxxx 00000, at
10:00 a.m. California time on Wednesday, December 22, 2004 or at such other time
and place upon which the Company and the Purchasers purchasing the majority of
the Common Shares shall agree. The date of the Closing is hereinafter referred
to as the "CLOSING DATE."
2.2 DELIVERY. At the Closing, the Company will deliver to each
Purchaser a duly executed Warrant and a certificate representing the number of
Common Shares to be purchased by such Purchaser, registered in the Purchaser's
name as shown on EXHIBIT A. Such delivery shall be against payment of the
purchase price therefor by wire transfer of immediately available funds to the
Company in accordance with the Company's written wiring instructions.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth on the Disclosure Schedule delivered by the Company
to the Purchasers herewith, the Company represents and warrants to the
Purchasers:
3.1 ORGANIZATION AND STANDING. The Company is a corporation duly
organized and validly existing under, and by virtue of, the laws of the State of
California and is in good standing as a domestic corporation under the laws of
said state.
3.2 CORPORATE POWER; AUTHORIZATION. The Company has all requisite legal
and corporate power and has taken all requisite
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corporate action to execute and deliver this Agreement, to sell and issue the
Common Shares and Warrants, to issue the Warrant Shares upon exercise of the
Warrants in accordance with the terms of such Warrants, and to carry out and
perform all of its obligations under this Agreement. This Agreement constitutes,
and upon execution and delivery by the Company of the Warrants, the Warrants
will constitute, legal, valid and binding obligations of the Company,
enforceable in accordance with their respective terms, except (a) as limited by
applicable bankruptcy, insolvency, reorganization or similar laws relating to or
affecting the enforcement of creditors' rights generally and (b) as limited by
equitable principles generally. The execution and delivery of this Agreement
does not, and the performance of this Agreement and the compliance with the
provisions hereof, the issuance, sale and delivery of the Common Shares and the
Warrants by the Company will not materially conflict with, or result in a
material breach or violation of the terms, conditions or provisions of, or
constitute a material default under, or result in the creation or imposition of
any material lien pursuant to the terms of, the Articles of Incorporation (the
"ARTICLES") or Bylaws of the Company or any statute, law, rule or regulation or
any state or federal order, judgment or decree or any indenture, mortgage, lease
or other material agreement or instrument to which the Company or any of its
properties is subject.
3.3 ISSUANCE AND DELIVERY OF THE SHARES. When issued in compliance with
the provisions of this Agreement and the Articles, the Common Shares will be
validly issued, fully paid and nonassessable. Upon exercise of the Warrants in
accordance with the terms thereof, the Warrant Shares will be validly issued,
fully paid and nonassessable. The issuance and delivery of the Common Shares and
the Warrants is not subject to preemptive or any other similar rights of the
shareholders of the Company or any liens or encumbrances.
3.4 SEC DOCUMENTS; FINANCIAL STATEMENTS. Each report or proxy statement
delivered to the Purchasers is a true and complete copy of such document as
filed by the Company with the Securities and Exchange Commission (the "SEC").
The Company has filed in a timely manner all documents that the Company was
required to file with the SEC under Sections 13, 14(a) and 15(d) of the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), during the
twelve (12) months preceding the date of this Agreement. As of their respective
filing dates, all documents filed by the Company with the SEC (the "SEC
DOCUMENTS") complied in all material respects with the requirements of the
Exchange Act or the Securities Act of 1933, as amended (the "SECURITIES ACT"),
as applicable. None of the SEC Documents as of their respective dates contained
any untrue statement of material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements made therein,
in light of the circumstances under which they were made, not misleading. The
financial statements of the Company included in the SEC Documents (the
"FINANCIAL STATEMENTS") comply as to form in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto. The Financial Statements have been prepared in
accordance with generally accepted accounting principles consistently applied
and fairly present the consolidated financial position of the Company and any
subsidiaries at the dates thereof and the consolidated results of their
operations and consolidated cash flows for the periods then ended (subject, in
the case of unaudited statements, to normal, recurring adjustments or to the
extent that such unaudited statements do not include footnotes).
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3.5 GOVERNMENTAL CONSENTS. No consent, approval, order or authorization
of, or registration, qualification, designation, declaration or filing with, any
federal, state, or local governmental authority on the part of the Company is
required in connection with the consummation of the transactions contemplated by
this Agreement except for (a) compliance with the securities and blue sky laws
in the states in which the Common Shares and Warrants are offered and/or sold,
which compliance will be effected in accordance with such laws, (b) the filing
of the Registration Statement (as defined herein) and all amendments thereto
with the SEC as contemplated by Section 7.2 of this Agreement and (c) the filing
of the Nasdaq National Market Notification Form with the Nasdaq National Market.
3.6 NO MATERIAL ADVERSE CHANGE. Except as otherwise disclosed herein or
in the SEC Documents, since September 30, 2004, there have not been any changes
in the assets, liabilities, financial condition, business prospects or
operations of the Company from that reflected in the Financial Statements except
changes in the ordinary course of business which have not been, either
individually or in the aggregate, materially adverse.
3.7 AUTHORIZED CAPITAL STOCK. The authorized capital stock of the
Company consists of (a) one hundred fifty million (150,000,000) shares of Common
Stock, no par value, of which, as of December 16, 2004, sixty-three million nine
hundred sixty-two thousand three hundred thirty-five (63,962,335) shares were
outstanding, and (b) five million (5,000,000) shares of Preferred Stock, no par
value, one million five hundred thousand (1,500,000) shares of which are
designated Series A Junior Participating Preferred Stock, none of which shares
is currently outstanding, and two million fifty thousand (2,050,000) of which
are designated Series A Convertible Preferred Stock, of which, as of December
16, 2004, one million five hundred thousand six hundred twenty-six (1,544,626)
shares are outstanding. Except as described on Schedule 3.7 of the Disclosure
Schedule, there are no outstanding warrants, options, convertible securities or
other rights, agreements or arrangements of any character under which the
Company is or may be obligated to issue any equity securities of any kind and
except as contemplated by this Agreement.
3.8 LITIGATION. Except as disclosed in the SEC Documents, there are no
actions, suits proceedings or investigations pending or, to the best of the
Company's knowledge, threatened against the Company or any of its properties
before or by any court or arbitrator or any governmental body, agency or
official in which there is a reasonable likelihood (in the judgment of the
Company) of an adverse decision that (a) could have a material adverse effect on
the Company's properties or assets or the business of the Company as currently
conducted or (b) could impair the ability of the Company to perform in any
material respect its obligations under this Agreement.
3.9 ELIGIBILITY TO USE FORM S-3. The Company is eligible to use Form
S-3 for the registration of its securities under the Securities Act which are
offered in transactions involving secondary offerings.
3.10 COMPANY NOT AN "INVESTMENT COMPANY." The Company has been advised
of the rules and requirements
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under the Investment Company Act of 1940, as amended (the "Investment Company
Act"). The Company is not, and immediately after receipt of payment for the
Shares will not be, an "investment company" or an entity "controlled" by an
"investment company" within the meaning of the Investment Company Act and shall
conduct its business in a manner so that it will not become subject to the
Investment Company Act.
3.11 NASDAQ COMPLIANCE. The Company's Common Stock is registered
pursuant to Section 12(g) of the Exchange Act and is listed on The Nasdaq Stock
Market, Inc. National Market (the "NASDAQ NATIONAL MARKET"), and the Company has
taken no action designed to, or likely to have the effect of, terminating the
registration of the Common Stock under the Exchange Act or de-listing the Common
Stock from the Nasdaq National Market, nor has the Company received any
notification that the SEC or the National Association of Securities Dealers,
Inc. is contemplating terminating such registration or listing.
3.12 USE OF PROCEEDS. The proceeds of the sale of the Common Shares and
the Warrants hereunder shall be used by the Company for working capital and
general corporate purposes.
3.13 BROKERS AND FINDERS. No person or entity will have, as a result of
the transactions contemplated by this Agreement, any valid right, interest or
claim against or upon the Company or a Purchaser for any commission, fee or
other compensation pursuant to any agreement, arrangement or understanding
entered into by or on behalf of the Company, other than XX Xxxxx & Co., LLC as
lead agent and Punk Xxxxxx as co-agent.
3.14 NO DIRECTED SELLING EFFORTS OR GENERAL SOLICITATION. Neither the
Company nor any person or entity acting on its behalf has conducted any general
solicitation or general advertising (as those terms are used in Regulation D) in
connection with the offer or sale of any of the Securities.
3.15 NO INTEGRATED OFFERING. Neither the Company nor any of its
Affiliates, nor any person or entity acting on its or their behalf has, directly
or indirectly, made any offers or sales of any Company security or solicited any
offers to buy any security, under circumstances that would adversely affect
reliance by the Company on Section 4(2) for the exemption from registration for
the transactions contemplated hereby or would require registration of the
Securities under the Securities Act.
3.16 PRIVATE PLACEMENT. The offer and sale of the Securities to the
Purchasers as contemplated hereby is exempt from the registration requirements
of the Securities Act.
3.17 INTELLECTUAL PROPERTY.
(A) "INTELLECTUAL PROPERTY" shall mean patents, trademarks,
service marks, trade names, copyrights, trade secrets, licenses, information and
other proprietary rights and processes.
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(B) Except as disclosed in the SEC Documents and to the
knowledge of the Company, the Company owns or has the valid right to use all of
the Intellectual Property that is necessary for the conduct of the Company's
business as currently conducted or as currently proposed to be conducted with
respect to products currently in clinical trials, free and clear of all material
liens and encumbrances.
(C) Except as disclosed in the SEC Documents, the conduct of
the Company's business as currently conducted does not infringe or otherwise
conflict with (collectively, "Infringe") any Intellectual Property rights of any
third party or any confidentiality obligation owed by the Company to a third
party, and, to the knowledge of the Company, the Intellectual Property and
confidential information of the Company are not being Infringed by any third
party.
(D) Each employee, consultant and contractor of the Company
who has had access to confidential information of the Company that is necessary
for the conduct of Company's business as currently conducted or as currently
proposed to be conducted has executed an agreement to maintain the
confidentiality of such confidential information and has executed appropriate
agreements that are substantially consistent with the Company's standard forms
thereof.
3.18 QUESTIONABLE PAYMENTS. Neither the Company nor, to the knowledge
of the Company, any of its current or former stockholders, directors, officers,
employees, agents or other persons acting on behalf of the Company, has on
behalf of the Company or in connection with its business: (a) used any corporate
funds for unlawful contributions, gifts, entertainment or other unlawful
expenses relating to political activity; (b) made any direct or indirect
unlawful payments to any governmental officials or employees from corporate
funds; (c) established or maintained any unlawful or unrecorded fund of
corporate monies or other assets; (d) made any false or fictitious entries on
the books and records of the Company; or (e) made any unlawful bribe, rebate,
payoff, influence payment, kickback or other unlawful payment of any nature.
3.19 TRANSACTIONS WITH AFFILIATES. Except as disclosed in the SEC
Documents and as contemplated pursuant to this Agreement, none of the officers
or directors of the Company and, to the knowledge of the Company, none of the
employees of the Company is presently a party to any transaction with the
Company or to a presently contemplated transaction (other than for services as
employees, officers and directors) that would be required to be disclosed
pursuant to Item 404 of Regulation S-K promulgated under the Securities Act.
3.20 DISCLOSURE. Except as disclosed on Schedule 3.20 of the Disclosure
Schedule, the information contained in the Exchange Act Documents as of the date
hereof and as of the Closing Date, did not and shall not contain an 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, in light of the
circumstances under which they were made, not misleading. For purposes herein,
"Exchange Act Documents" are the documents filed by the Company under the
Exchange Act, since the end of its most recently completed fiscal year through
the date hereof, including, without limitation, its most recent report on Form
10-K.
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ARTICLE 4
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASERS
Each Purchaser hereby severally represents and warrants to the Company:
4.1 AUTHORIZATION. Purchaser represents and warrants to the Company
that: (a) Purchaser has all requisite legal and corporate or other power and
capacity and has taken all requisite corporate or other action to execute and
deliver this Agreement, to purchase the Common Shares and the Warrants to be
purchased by it and to carry out and perform all of its obligations under this
Agreement; and (b) this Agreement constitutes the legal, valid and binding
obligation of such Purchaser, enforceable in accordance with its terms, except
(i) as limited by applicable bankruptcy, insolvency, reorganization or similar
laws relating to or affecting the enforcement of creditors' rights generally and
(ii) as limited by equitable principles generally.
4.2 INVESTMENT EXPERIENCE. Purchaser is an "accredited investor" as
defined in Rule 501(a) under the Securities Act. Purchaser is aware of the
Company's business affairs and financial condition and has had access to and has
acquired sufficient information about the Company to reach an informed and
knowledgeable decision to acquire the Common Shares and the Warrants. Purchaser
has such business and financial experience as is required to give it the
capacity to protect its own interests in connection with the purchase of the
Common Shares and Warrants.
4.3 INVESTMENT INTENT. Purchaser is purchasing the Common Shares and
the Warrants for its own account as principal, for investment purposes only, and
not with a present view to, or for, resale, distribution or fractionalization
thereof, in whole or in part, within the meaning of the Securities Act, other
than as contemplated by Article 7. Purchaser understands that its acquisition of
the Common Shares and the Warrants has not been registered under the Securities
Act or registered or qualified under any state securities law in reliance on
specific exemptions therefrom, which exemptions may depend upon, among other
things, the bona fide nature of Purchaser's investment intent as expressed
herein. Purchaser has completed or caused to be completed the Purchaser
Questionnaire attached hereto as EXHIBIT C for use in preparation of the
Registration Statement, and the responses provided therein shall be true and
correct as of the Closing Date and will be true and correct as of the effective
date of the Registration Statement. Purchaser, in connection with its decision
to purchase the Common Shares and the Warrants, has relied solely upon the SEC
Documents and the representations and warranties of the Company contained
herein. Purchaser will not, directly or indirectly, offer, sell, pledge,
transfer or otherwise dispose of (or solicit any offers to buy, purchase or
otherwise acquire or take a pledge of) any of the Securities except in
compliance with the Securities Act, and the rules and regulations promulgated
thereunder.
4.4 REGISTRATION OR EXEMPTION REQUIREMENTS. Purchaser further
acknowledges and understands that the
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Securities may not be resold or otherwise transferred except in a transaction
registered under the Securities Act or unless an exemption from such
registration is available.
4.5 DISPOSITIONS. Purchaser will not, prior to the earlier of the
effectiveness of the Registration Statement (as defined below) or the
Effectiveness Deadline Date (as defined below), if then prohibited by law or
regulation: (a) sell, offer to sell, solicit offers to buy, dispose of, loan,
pledge or grant any right with respect to (collectively, a "DISPOSITION") the
Securities; or (b) engage in any hedging or other transaction which is designed
or could reasonably be expected to lead to or result in a Disposition of
Securities by such Purchaser or any person or entity. In addition, Purchaser
agrees that for so long as it owns any Shares, it will not enter into any short
sale of Shares executed at a time when the Purchaser has no equivalent
offsetting long position in the Common Stock. For purposes of determining
whether the Purchaser has an equivalent offsetting long position in the Shares,
shares that the Purchaser is entitled to receive within sixty (60) days (whether
pursuant to contract or upon conversion or exercise of convertible securities)
will be included as if held long by the Purchaser.
4.6 NO LEGAL, TAX OR INVESTMENT ADVICE. Purchaser understands that
nothing in this Agreement or any other materials presented to Purchaser in
connection with the purchase and sale of the Common Shares and the Warrants
constitutes legal, tax or investment advice. Purchaser has consulted such legal,
tax and investment advisors as it, in its sole discretion, has deemed necessary
or appropriate in connection with its purchase of the Common Shares and the
Warrants.
4.7 CONFIDENTIALITY. Purchaser will hold in confidence all information
concerning this Agreement and the placement of the Securities hereunder until
the earlier of such time as (a) the Company has made a public announcement
concerning the Agreement and the placement of the Securities hereunder or (b)
this Agreement is terminated; provided, however, that the foregoing provision of
this Section 4.7 shall not apply if the Company does not issue a press release
concerning the Agreement and the placement of the Securities hereunder within
one (1) day of the date hereof.
4.8 RESIDENCY. Purchaser's principal executive offices are in the
jurisdiction set forth immediately below Purchaser's name on the Schedule of
Purchasers attached hereto as EXHIBIT A.
4.9 GOVERNMENTAL REVIEW. 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 or the
Warrants.
4.10 LEGEND. Purchaser understands that, until such time as the
Registration Statement has been declared effective or the Securities 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 Securities may bear a restrictive legend in substantially the following form
(and a stop transfer order may be placed against transfer of the certificates
for the Shares):
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"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES OR IN ANY OTHER JURISDICTION. THE SECURITIES
REPRESENTED HEREBY MAY NOT BE OFFERED, SOLD OR TRANSFERRED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER APPLICABLE SECURITIES LAWS UNLESS OFFERED,
SOLD OR TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THOSE LAWS."
If Rule 144(k) is available to a Purchaser, the Company shall, upon a
Purchaser's written request and delivery of appropriate documents reasonably
requested by the Company, promptly cause certificates evidencing the Securities
to be replaced with certificates which do not bear such restrictive legends, and
Warrant Shares subsequently issued upon due exercise of the Warrants shall not
bear such restrictive legends provided Rule 144(k) is available with respect to
such Warrant Shares.
4.11 FOREIGN INVESTORS. If Purchaser is not a United States person (as
defined by Section 7701(a)(30) of the Internal Revenue Code of 1986, as
amended), Purchaser hereby represents that it has satisfied itself as to the
full observance of the laws of its jurisdiction in connection with any
invitation to subscribe for the Common Shares and the Warrants or any use of
this Agreement, including (a) the legal requirements within its jurisdiction for
the purchase of the Common Shares and the Warrants, (b) any foreign exchange
restrictions applicable to such purchase or acquisition, (c) any government or
other consents that may need to be obtained, and (d) the income tax and other
tax consequences, if any, that may be relevant to the purchase, holding,
redemption, sale or transfer of the Securities. Purchaser's subscription and
payment for and continued beneficial ownership of the Securities will not
violate any applicable securities or other laws of Purchaser's jurisdiction.
ARTICLE 5
CONDITIONS TO CLOSING OBLIGATIONS OF PURCHASERS
Each Purchaser's obligation to purchase the Common Shares and the
Warrants at the Closing is, at the option of such Purchaser, subject to the
fulfillment or waiver as of the Closing Date of the following conditions:
5.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
made by the Company in Article 3 hereof qualified as to materiality shall be
true and correct at all times prior to and on the Closing Date, except to the
extent any such representation or warranty expressly speaks as of an earlier
date, in which case such representation or warranty shall be true and correct as
of such earlier date, and the representations and warranties made by the Company
in Article 3 hereof not qualified as to
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materiality shall be true and correct in all material respects at all times
prior to and on the Closing Date, except to the extent any such representation
or warranty expressly speaks as of an earlier date, in which case such
representation or warranty shall be true and correct in all material respects as
of such earlier date.
5.2 COVENANTS. All covenants, agreements and conditions contained in
this Agreement to be performed by the Company on or prior to the Closing Date
shall have been performed or complied with in all material respects.
5.3 CERTIFICATES. The Company shall have delivered to the Purchasers
duly executed certificates for the Common Shares and the Warrants (in such
denominations as set forth opposite each Purchaser's name on EXHIBIT A).
5.4 LEGAL OPINION. The Purchasers shall have received on the Closing
Date an opinion of Xxxxxx Godward, counsel for the Company, dated the Closing
Date, to the effect as set forth in EXHIBIT D.
5.5 LISTING. The Company shall have complied with all requirements with
respect to the listing of the Shares on the Nasdaq National Market, except for
such requirements not required until after the issuance of the Shares, such
requirements to be complied with promptly after Closing.
5.6 OFFICER'S CERTIFICATE. The Company shall have delivered a
Certificate, executed on behalf of the Company by its Chief Executive Officer or
its Chief Financial Officer, dated as of the Closing Date, certifying to the
fulfillment of the conditions specified in Sections 5.1 and 5.2.
5.7 JUDGMENTS. No judgment, writ, order, injunction, award or decree of
or by any court, or judge, justice or magistrate, including any bankruptcy court
or judge, or any order of or by any governmental authority, shall have been
issued, and no action or proceeding shall have been instituted by any
governmental authority, enjoining or preventing the consummation of the
transactions contemplated hereby.
5.8 SECRETARY'S CERTIFICATE. The Company shall have delivered a
Certificate, executed on behalf of the Company by its Secretary, dated as of the
Closing Date, certifying the resolutions adopted by the Board of Directors of
the Company approving the transactions contemplated by this Agreement and the
issuance of the Securities, certifying the current versions of the Articles and
Bylaws of the Company and certifying as to the signatures and authority of
persons signing this Agreement and related documents on behalf of the Company.
5.9 STOP ORDERS No stop order or suspension of trading shall have been
imposed by the Nasdaq National Market, the SEC or any other governmental
regulatory body with respect to public trading in the Common Stock.
5.10 MINIMUM AND MAXIMUM INVESTMENT. The Company shall receive a
minimum of $10,000,000 of aggregate purchase price and a maximum of $15,000,000
of aggregate purchase price in connection with the Closing.
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ARTICLE 6
CONDITIONS TO CLOSING OBLIGATIONS OF COMPANY
The Company's obligation to sell and issue the Common Shares and the
Warrants at the Closing is, at the option of the Company, subject to the
fulfillment or waiver of the following conditions:
6.1 RECEIPT OF PAYMENT. The Purchasers shall have delivered payment of
the purchase price to the Company for the Common Shares and the Warrants being
issued hereunder.
6.2 REPRESENTATIONS AND WARRANTIES. The representations and warranties
made by the Purchasers in Article 4 hereof qualified as to materiality shall be
true and correct at all times prior to and on the Closing Date, except to the
extent any such representation or warranty expressly speaks as of an earlier
date, in which case such representation or warranty shall be true and correct as
of such earlier date, and, the representations and warranties made by the
Purchasers in Article 4 hereof not qualified as to materiality shall be true and
correct in all material respects at all times prior to and on the Closing Date,
except to the extent any such representation or warranty expressly speaks as of
an earlier date, in which case such representation or warranty shall be true and
correct in all material respects as of such earlier date.
6.3 COVENANTS. All covenants, agreements and conditions contained in
this Agreement to be performed by the Purchasers on or prior to the Closing Date
shall have been performed or complied with in all material respects.
6.4 DELIVERY OF PURCHASER QUESTIONNAIRE. The Company shall have
received from each Purchaser a fully completed Purchaser Questionnaire in the
form attached hereto as EXHIBIT C prior to the Closing for the Company's use in
preparing the Registration Statement pursuant to Article 7 below.
ARTICLE 7
COVENANTS
7.1 DEFINITIONS. For the purpose of this Article 7:
(A) the term "REGISTRATION STATEMENT" shall mean any
registration statement required to be filed by Section 7.2 below, and shall
include any preliminary prospectus, final prospectus, exhibit or amendment
included in or relating to such registration statements; and
(B) the term "REGISTRABLE SHARES" shall mean all of the Common
Shares and the Warrant Shares.
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7.2 REGISTRATION PROCEDURES AND EXPENSES. The Company shall:
(A) use its best efforts to file a Registration Statement with
the SEC within thirty (30) days following the Closing Date to register the
Registrable Shares on Form S-3 under the Securities Act (providing for shelf
registration of such Registrable Shares under SEC Rule 415) or on such other
form which is appropriate to register such Registrable Shares for resale from
time to time by the Purchasers;
(B) use its best efforts, subject to receipt of necessary
information from the Purchasers, to cause any such Registration Statement filed
pursuant to Section 7.2(a) above to become effective as promptly after filing of
such Registration Statement as practicable but in any event by the date (the
"EFFECTIVENESS DEADLINE DATE") that is ninety (90) days following the Closing
Date; provided, however, that in the event that a Registration Statement is
reviewed by the SEC, then the Effectiveness Deadline Date shall mean, with
respect to any Registration Statement, the date that is one hundred twenty (120)
days following the Closing Date;
(C) prepare and file with the SEC such amendments and
supplements to such Registration Statement and the prospectus used in connection
therewith as may be necessary to keep such Registration Statement continuously
effective until termination of such obligation as provided in Section 7.6 below,
subject to the Company's right to suspend pursuant to Section 7.5;
(D) furnish to each Purchaser (and to each underwriter, if
any, of such Registrable Shares) such number of copies of prospectuses in
conformity with the requirements of the Securities Act and such other documents
as the Purchasers may reasonably request, in order to facilitate the public sale
or other disposition of all or any of the Registrable Shares by the Purchasers;
(E) file such documents as may be required of the Company for
normal securities law clearance for the resale of the Registrable Shares in such
states of the United States as may be reasonably requested by each Purchaser;
provided, however, that the Company shall not be required in connection with
this paragraph (e) to qualify as a foreign corporation or execute a general
consent to service of process in any jurisdiction;
(F) advise each Purchaser promptly:
(I) of the effectiveness of the Registration
Statement or any post-effective amendments thereto;
(II) of any request by the SEC for amendments to the
Registration Statement or amendments to the prospectus or for additional
information relating thereto;
(III) of the issuance by the SEC of any stop order
suspending the effectiveness of the Registration Statement under the Securities
Act or of the suspension by any state securities commission of the qualification
of the Registrable Shares for offering or sale in any jurisdiction, or the
initiation of any proceeding for any of the preceding purposes; and
12
(IV) of the existence of any fact and the happening
of any event that makes any statement of a material fact made in the
Registration Statement, the prospectus and amendment or supplement thereto, or
any document incorporated by reference therein, untrue, or that requires the
making of any additions to or changes in the Registration Statement or the
prospectus in order to make the statements therein not misleading;
(G) use its best efforts to cause all Registrable Shares to be
listed on each securities exchange, if any, on which equity securities by the
Company are then listed;
(H) bear all expenses in connection with the procedures in
paragraphs (a) through (g) of this Section 7.2 and the registration of the
Registrable Shares on such Registration Statement and the satisfaction of the
blue sky laws of such states; and
(I) otherwise use commercially reasonable efforts to make
available to its security holders no later than the Availability Date (as
defined below), an earnings statement covering a period of at least twelve (12)
months, beginning after the effective date of each Registration Statement, which
earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act, including Rule 158 promulgated thereunder (for the purpose of
this subsection 7.2(i), "Availability Date" means the 45th day following the end
of the fourth fiscal quarter after the fiscal quarter that includes the
effective date of such Registration Statement, except that, if such fourth
fiscal quarter is the last quarter of the Company's fiscal year, "Availability
Date" means the 90th day after the end of such fourth fiscal quarter).
7.3 DELAY IN EFFECTIVENESS. If the Registration Statement is not
declared effective by the SEC on or prior to the Effectiveness Deadline Date,
then for each thirty (30) day period following the Effectiveness Deadline Date,
until but excluding the date the Registration Statement is declared effective,
the Company shall, for such period, pay each Purchaser, as liquidated damages
and not as a penalty, an amount equal to one and one-half percent (1.5%) of the
purchase price of the Common Shares purchased by such Purchaser hereunder, for
such period (or prorated for any partial period); and for any such period, such
payment shall be made no later than the first business day of the calendar month
next succeeding the last month in which such period occurs. The parties hereto
agree that the liquidated damages provided for in this Section 7.3 constitute a
reasonable estimate of the damages that may be incurred by the Purchasers by
reason of the failure of the Registration Statement to be declared effective in
accordance with the provisions hereof.
7.4 INDEMNIFICATION.
(A) The Company agrees to indemnify and hold harmless each
Purchaser, the partners, members, officers and directors of each Purchaser and
each person, if any, who controls such Purchaser within the meaning of the
Securities Act or the Exchange Act, from and against any losses, claims, damages
or liabilities to which they may become subject (under the Securities Act or
otherwise) insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of, or are based upon, any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading or
13
arise out of any failure by the Company to fulfill any undertaking included in
the Registration Statement and the Company will, as incurred, reimburse such
Purchaser, partner, member, officer, director or controlling person for any
legal or other expenses reasonably incurred in investigating, defending or
preparing to defend any such action, proceeding or claim; provided, however,
that the Company shall not be liable in any such case to the extent that such
loss, claim, damage or liability (collectively, "LOSS") arises out of, or is
based upon, an untrue statement or omission or alleged untrue statement or
omission made in such Registration Statement in reliance upon and in conformity
with written information furnished to the Company by or on behalf of such
Purchaser, partner, member, officer, director or controlling person specifically
for use in preparation of the Registration Statement or any breach of this
Agreement by such Purchaser; and provided further, however, that the Company
shall not be liable to any Purchaser of Registrable Shares (or any partner,
member, officer, director or controlling person of such Purchaser) to the extent
that any such Loss is caused by an untrue statement or omission or alleged
untrue statement or omission made in any preliminary prospectus if either (i)(A)
such Purchaser failed to send or deliver a copy of the final prospectus with or
prior to the delivery of written confirmation of the sale by such Purchaser to
the person asserting the claim from which such Loss resulted and (B) the final
prospectus corrected such untrue statement or omission, (ii) (X) such untrue
statement or omission is corrected in an amendment or supplement to the
prospectus and (Y) having previously been furnished by or on behalf of the
Company with copies of the prospectus as so amended or supplemented, such
Purchaser thereafter fails to deliver such prospectus as so amended or
supplemented, with or prior to the delivery of written confirmation of the sale
of a Registrable Share to the person asserting the claim from which such Loss
resulted or (iii) such Purchaser sold Registrable Shares in violation of such
Purchaser's covenant contained in Section 7.5 of this Agreement.
(B) Each Purchaser, severally and not jointly, agrees to
indemnify and hold harmless the Company (and each person, if any, who controls
the Company within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act, each officer of the Company who signs the Registration
Statement and each director of the Company), from and against any losses,
claims, damages or liabilities to which the Company (or any such officer,
director or controlling person) may become subject (under the Securities Act or
otherwise), insofar as such losses, claims, damages or liabilities (or actions
or proceedings in respect thereof) arise out of, or are based upon, any breach
of this Agreement by such Purchaser or any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading in each case, on the
effective date thereof, if, and to the extent, such untrue statement or omission
or alleged untrue statement or omission was made in reliance upon and in
conformity with written information furnished by or on behalf of such Purchaser
specifically for use in preparation of the Registration Statement, and such
Purchaser will reimburse the Company (and each of its officers, directors or
controlling persons) for any legal or other expenses reasonably incurred in
investigating, defending or preparing to defend any such action, proceeding or
claim; provided, however, that in no event shall any indemnity under this
Section 7.4(b) be greater in amount than the dollar amount of the proceeds (net
of the amount of any damages such Purchaser has otherwise been required to pay
by reason of such untrue statement or omission or alleged untrue statement or
omission) received by such Purchaser upon
14
the sale of the Registrable Securities included in the Registration Statement
giving rise to such indemnification obligation.
(C) Promptly after receipt by any indemnified person of a
notice of a claim or the beginning of any action in respect of which indemnity
is to be sought against an indemnifying person pursuant to this Section 7.4,
such indemnified person shall notify the indemnifying person in writing of such
claim or of the commencement of such action, and, subject to the provisions
hereinafter stated, in case any such action shall be brought against an
indemnified person and such indemnifying person shall have been notified
thereof, such indemnifying person shall be entitled to participate therein, and,
to the extent that it shall wish, to assume the defense thereof, with counsel
reasonably satisfactory to such indemnified person. After notice from the
indemnifying person to such indemnified person of its election to assume the
defense thereof, such indemnifying person shall not be liable to such
indemnified person for any legal expenses subsequently incurred by such
indemnified person in connection with the defense thereof; provided, however,
that if there exists or shall exist a conflict of interest that would make it
inappropriate in the reasonable judgment of the indemnified person for the same
counsel to represent both the indemnified person and such indemnifying person or
any affiliate or associate thereof, the indemnified person shall be entitled to
retain its own counsel at the expense of such indemnifying person; provided,
further, that no indemnifying person shall be responsible for the fees and
expense of more than one separate counsel for all indemnified parties. The
indemnifying party shall not settle an action without the consent of the
indemnified party, which consent shall not be unreasonably withheld.
(D) If after proper notice of a claim or the commencement of
any action against the indemnified party, the indemnifying party does not choose
to participate, then the indemnified party shall assume the defense thereof and
upon written notice by the indemnified party requesting advance payment of a
stated amount for its reasonable defense costs and expenses, the indemnifying
party shall advance payment for such reasonable defense costs and expenses (the
"ADVANCE INDEMNIFICATION PAYMENT") to the indemnified party. In the event that
the indemnified party's actual defense costs and expenses exceed the amount of
the Advance Indemnification Payment, then upon written request by the
indemnified party, the indemnifying party shall reimburse the indemnified party
for such difference; in the event that the Advance Indemnification Payment
exceeds the indemnified party's actual costs and expenses, the indemnified party
shall promptly remit payment of such difference to the indemnifying party.
(E) If the indemnification provided for in this Section 7.4 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any losses, claims, damages or liabilities referred to
herein, the indemnifying party, in lieu of indemnifying such indemnified party
thereunder, shall to the extent permitted by applicable law contribute to the
amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the indemnified
party on the other, as well as any other relevant equitable considerations;
provided, that in no event shall any contribution by an indemnifying party
hereunder be greater in amount than the dollar amount of the proceeds (net of
the amount of any damages such indemnifying party has otherwise been required to
pay by reason of such untrue statement or omission or alleged untrue statement
or omission) received by such indemnifying
15
party upon the sale of the Registrable Securities included in the Registration
Statement giving rise to such indemnification obligation..
7.5 PROSPECTUS DELIVERY. Each Purchaser hereby covenants with the
Company not to make any sale of the Registrable Shares without complying with
Section 8.3. The Purchaser acknowledges that there may be times when the Company
must suspend the use of the prospectus forming a part of the Registration
Statement until such time as an amendment to the Registration Statement has been
filed by the Company and declared effective by the SEC, or until such time as
the Company has filed an appropriate report with the SEC pursuant to the
Exchange Act. The Purchaser hereby covenants that it will not sell any
Registrable Shares pursuant to said prospectus during the period commencing at
the time at which the Company gives the Purchaser notice of the suspension of
the use of said prospectus and ending at the time the Company gives the
Purchaser notice that the Purchaser may thereafter effect sales pursuant to said
prospectus; provided that such suspension periods shall in no event exceed
thirty (30) days in any twelve (12) month period and that, in the good faith
judgment of the Company's Board of Directors, the Company would, in the absence
of such delay or suspension hereunder, be required under state or federal
securities laws to disclose any corporate development, a potentially significant
transaction or event involving the Company, or any negotiations, discussions, or
proposals directly relating thereto, in either case the disclosure of which
would reasonably be expected to have a material adverse effect upon the Company
or its shareholders; provided further, that the Company may suspend the use of
the prospectus forming a part of the Registration Statement to the extent
necessary to file any post-effective amendment to the Registration Statement in
order to amend the table of selling stockholders within the Registration
Statement to reflect transfers of the Securities pursuant to Sections 8.3(a) and
8.3(b).
7.6 TERMINATION OF OBLIGATIONS. The obligations of the Company pursuant
to Section 7.2 hereof shall cease and terminate upon the earlier to occur of (a)
such time as all of the Registrable Shares have been resold, (b) such time as
all of the Registrable Shares may be resold in a three-month period pursuant to
Rule 144, or (c) the third anniversary of the Closing Date.
7.7 REPORTING REQUIREMENTS.
(A) With a view to making available the benefits of certain
rules and regulations of the SEC that may at any time permit the sale of the
Securities to the public without registration or pursuant to a registration
statement on Form S-3, the Company agrees to use its best efforts to:
(I) make and keep public information available, as
those terms are understood and defined in Rule 144 under the Securities Act;
(II) file with the SEC in a timely manner all reports
and other documents required of the Company under the Securities Act and the
Exchange Act; and
(III) so long as any of the Purchasers own
Registrable Shares, to furnish to such Purchaser upon request (A) a written
statement by the Company as to whether it is in
16
compliance with the reporting requirements of Rule 144, the Securities Act and
the Exchange Act, or whether it is qualified as a registrant whose securities
may be resold pursuant to SEC Form S-3, and (B) a copy of the most recent annual
or quarterly report of the Company and such other reports and documents so filed
by the Company.
7.8 BLUE SKY. The Company shall obtain and maintain all necessary blue
sky law permits and qualifications, or secured exemptions therefrom, required by
any state for the offer and sale of Securities.
ARTICLE 8
RESTRICTIONS ON TRANSFERABILITY OF SECURITIES;
COMPLIANCE WITH SECURITIES ACT
8.1 RESTRICTIONS ON TRANSFERABILITY. The Securities shall not be
transferable in the absence of a registration under the Securities Act or an
exemption therefrom. The Company shall be entitled to give stop transfer
instructions to its transfer agent with respect to the Securities in order to
enforce the foregoing restrictions.
8.2 INSTRUCTION SHEET. Each certificate representing Registrable Shares
shall bear the Instruction Sheet attached hereto as EXHIBIT E (in addition to
any legends required under applicable securities laws).
8.3 TRANSFER OF SECURITIES.
(A) Each Purchaser hereby covenants with the Company not to
make any sale of the Securities except:
(I) in accordance with the Registration Statement, in
which case Purchaser covenants to comply with the requirement of delivering a
current prospectus; or
(II) in accordance with Rule 144, in which case
Purchaser covenants to comply with Rule 144; or
(III) (A) If the transferee has agreed in writing to
be bound by the terms of this Agreement, (B) such Purchaser 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 (C) if reasonably requested by the Company, such Purchaser shall
have furnished the Company with an opinion of counsel, reasonably satisfactory
to the Company, that such disposition will not require registration of such
shares under the Securities Act.
(B) Notwithstanding the provisions of subsection (a) above, no
such restriction shall apply to a transfer by a Purchaser that is (i) a
partnership transferring to its partners or former partners in accordance with
partnership interests, (ii) a corporation transferring to a
17
wholly-owned subsidiary or a parent corporation that owns all of the capital
stock of the Purchaser, (iii) a limited liability company transferring to its
members or former members in accordance with their interest in the limited
liability company or (iv) an individual transferring to the Purchaser's family
member or trust for the benefit of an individual Purchaser; provided that in
each case the transferee will agree in writing to be subject to the terms of
this Agreement to the same extent as if he were an original Purchaser hereunder.
(C) Purchaser further acknowledges and agrees that, if a
Purchaser is selling the Securities using the prospectus forming a part of the
Registration Statement, such Securities are not transferable on the books of the
Company unless the certificate evidencing such Securities is submitted to the
Company's transfer agent and a separate certificate executed by an officer of,
or other person duly authorized by, the Purchaser in the form attached hereto as
EXHIBIT F is submitted to Xxxxxx Godward.
8.4 PURCHASER INFORMATION. Each Purchaser covenants that it will
promptly notify the Company of any changes in the information set forth in the
Registration Statement regarding such Purchaser or such Purchaser's "Plan of
Distribution."
ARTICLE 9
MISCELLANEOUS
9.1 TERMINATION.
(A) This Agreement may be terminated and the sale and purchase
of the Common Shares and the Warrants abandoned at any time prior to the
Closing, by written notice of any individual Purchaser if the Closing has not
occurred within five (5) business days of the date hereof (other than as a
result of the failure on the part of the party giving such notice of termination
to perform its covenants and obligations under this Agreement in all material
respects); provided, however, that the abandonment of the sale and purchase of
the Common Shares and the Warrants shall be applicable only to such Purchaser
providing such written notice.
(B) If this Agreement is terminated pursuant to this Section
9.1 all further obligations of the parties shall terminate; provided, however,
that (i) no party shall be relieved of any liability arising from any breach by
such party of any provision of this Agreement and (ii) the parties shall, in all
events, remain bound by and continue to be subject to the provisions set forth
in this Article 9.
9.2 WAIVERS AND AMENDMENTS. With the exception of Article 7 hereof, the
terms of this Agreement may be waived or amended with the written consent of the
Company and each Purchaser. With respect to Article 7 hereof, with the written
consent of the Company and the record holders of more than fifty percent (50%)
of the Registrable Shares then outstanding and held by Purchasers, the terms of
this Agreement
18
may be waived or amended and any such amendment or waiver shall be binding upon
the Company and all holders of Registrable Shares.
9.3 BROKER'S FEE. Each Purchaser acknowledges that the Company intends
to pay a fee in respect of the sale of the Securities to XX Xxxxx & Co., LLC as
lead agent and Punk Xxxxxx as co-agent. Each of the parties to this Agreement
represents that, on the basis of any actions and agreements by it, there are no
other brokers or finders entitled to compensation in connection with the sale of
Securities to the Purchasers.
9.4 GOVERNING LAW. This Agreement shall be governed in all respects by
and construed in accordance with the laws of the State of California without any
regard to conflicts of laws principles.
9.5 SURVIVAL. The representations, warranties, covenants and agreements
made in this Agreement shall survive any investigation made by the Company or
the Purchasers and the Closing.
9.6 SUCCESSORS AND ASSIGNS. The provisions hereof shall inure to the
benefit of, and be binding upon, the successors, assigns, heirs, executors and
administrators of the parties to this Agreement. Upon a permitted transfer of a
Purchaser's Securities on the books of the Company in accordance with the terms
of Sections 8.3(a)(iii) or 8.3(b), the Purchaser may assign this Agreement to
the permitted transferee upon prior written notice to the Company. Except as set
forth in the previous sentence, no Purchaser shall assign this Agreement without
the prior written consent of the Company.
9.7 ENTIRE AGREEMENT. This Agreement constitutes the full and entire
understanding and agreement between the parties with regard to the subjects
thereof.
9.8 NOTICES, ETC. All notices and other communications required or
permitted under this Agreement shall be in writing and may be delivered in
person, by telecopy, overnight delivery service or registered or certified
United States mail, addressed to the Company or the Purchasers, as the case may
be, at their respective addresses set forth at the beginning of this Agreement
or on EXHIBIT A, or at such other address as the Company or the Purchasers shall
have furnished to the other party in writing. All notices and other
communications shall be effective upon the earlier of actual receipt thereof by
the person to whom notice is directed or (a) in the case of notices and
communications sent by personal delivery or telecopy, one business day after
such notice or communication arrives at the applicable address or was
successfully sent to the applicable telecopy number, (b) in the case of notices
and communications sent by overnight delivery service, at noon (local time) on
the second business day following the day such notice or communication was sent,
and (c) in the case of notices and communications sent by United States mail,
seven days after such notice or communication shall have been deposited in the
United States mail.
9.9 SEVERABILITY OF THIS AGREEMENT. If any provision of this Agreement
shall be judicially determined to be invalid, illegal or
19
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
9.10 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
9.11 FURTHER ASSURANCES. Each party to this Agreement shall do and
perform or cause to be done and performed all such further acts and things and
shall execute and deliver all such other agreements, certificates, instruments
and documents as the other party hereto may reasonably request in order to carry
out the intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.
9.12 EXPENSES. The Company shall bear the expenses incurred on its
behalf with respect to this Agreement and the transactions contemplated hereby,
including fees of legal counsel. The Company agrees to reimburse counsels for
the Purchasers for their reasonable fees and expenses (in an amount not to
exceed twenty-five thousand dollars ($25,000) in the aggregate) incurred by them
with respect to this Agreement and the transactions contemplated hereby.
9.13 CURRENCY. All references to "dollars" or "$" in this Agreement
shall be deemed to refer to United States dollars.
9.14 WAIVER OF CONFLICTS. Each party to this Agreement acknowledges
that legal counsel for the Company, Xxxxxx Godward, has in the past and may
continue in the future to perform legal services for one or more of the
Purchasers or their affiliates in matters unrelated to the transactions
contemplated by this Agreement, including, but not limited to, the
representation of the Purchasers in matters of a similar nature to the
transactions contemplated herein. Each party to this Agreement hereby: (a)
acknowledges that they have had an opportunity to ask for and have obtained
information relevant to such representation, including disclosure of the
reasonably foreseeable adverse consequences of such representation; (b)
acknowledges that with respect to the transactions contemplated herein, Xxxxxx
Godward has represented the Company and not any individual Purchaser or any
individual shareholder, director or employee of the Company; and (c) gives its
informed consent to Xxxxxx Godward's representation of the Company in the
transactions contemplated by this Agreement.
20
The foregoing agreement is hereby executed as of the date first above
written.
ARADIGM CORPORATION, a California corporation
By: /S/ V. XXXXX XXXXXX
---------------------------------------
V. Xxxxx Xxxxxx, Chief Executive Officer
PURCHASERS:
URSUS CAPITAL, LP
By: /S/ XXXX XXXXXX
---------------------------------------
Xxxx Xxxxxx, General Partner
URSUS OFFSHORE LTD.
By: /S/ XXXX XXXXXX
---------------------------------------
Xxxx Xxxxxx, Managing Director
CATALYTIX, LDC
By: /S/ XXX XXXXXXXX, PH.D.
---------------------------------------
Xxx Xxxxxxxx, Ph. D., Director
CATALYTIX LIFE SCIENCE HEDGE
By: /S/ XXX XXXXXXXX, PH.D.
---------------------------------------
Xxx Xxxxxxxx, Ph. D., Director
SF CAPITAL PARTNERS LTD.
By: /S/ XXXXX X. XXXXXXXX
---------------------------------------
Xxxxx X. Xxxxxxxx, Authorized Signatory
PROMED PARTNERS II, L.P.
By: /S/ XXXXX XXXXXXXX
---------------------------------------
Xxxxx Xxxxxxxx, Managing Director
SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT
PROMED PARTNERS, L.P.
By: /S/ XXXXX XXXXXXXX
---------------------------------------
Xxxxx Xxxxxxxx, Managing Director
PROMED OFFSHORE FUND II, LTD.
By: /S/ XXXXX XXXXXXXX
---------------------------------------
Xxxxx Xxxxxxxx, Managing Director
PROMED OFFSHORE FUND, LTD.
By: /S/ XXXXX XXXXXXXX
---------------------------------------
Xxxxx Xxxxxxxx, Managing Director
SILVERBACK LIFE SCIENCES MASTER LIMITED
By: /S/ XXXXXX X. XXXXXX
---------------------------------------
Xxxxxx X. Xxxxxx, COO
Silverback Asset Mgmt. LLC
Investment Manager
PENN FOOTWEAR CO.
By: /S/ XXXX XXXXXXXXXX
---------------------------------------
Xxxx Xxxxxxxxxx, President
CASTLE CREEK HEALTHCARE PARTNERS LLC
By: /S/ XXXXXX X. XXXX
---------------------------------------
Xxxxxx X. Xxxx
Managing Director of the Investment Manager
CC LIFESCIENCE LTD.
By: /S/ XXXXXX XXXXXXX, MD, CFA
---------------------------------------
Xxxxxx Xxxxxxx, MD, CFA
Managing Member of the Investment Manager
SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT
BAYSTAR CAPITAL II LP
By: /S/ XXXXXX XXXXX
---------------------------------------
Xxxxxx Xxxxx, Managing Partner
Baystar Management LLC, its General Partner
BVF INVESTMENTS, LLC
By: /S/ XXXX X. XXXXXXX
---------------------------------------
Xxxx X. Xxxxxxx, President
BVF Inc., General Partner of BVF
Partners L.P., its Manager
BIOTECHNOLOGY VALUE FUND, L.P.
By: /S/ XXXX X. XXXXXXX
---------------------------------------
Xxxx X. Xxxxxxx, President
BIOTECHNOLOGY VALUE FUND, L.P.
By: /S/ XXXX X. XXXXXXX
---------------------------------------
Xxxx X. Xxxxxxx, President
INVESTMENT 10, LLC
By: /S/ XXXX X. XXXXXXX
---------------------------------------
Xxxx X. Xxxxxxx, President
XXXXXX PARTNERS, LP
By: /S/ XXXXXXXX XXXXXX
---------------------------------------
Xxxxxxxx Xxxxxx, Managing Principal
XXXXXX GEPT PARTNERS, LP
By: /S/ XXXXXXXX XXXXXX
---------------------------------------
Xxxxxxxx Xxxxxx, Managing Principal
SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT
UBS X'XXXXXX LLC F/B/O X'XXXXXX PIPES
CORPORATE STRATEGIES MASTER LIMITED
By: /S/ XXXXXX XXXXXXX
---------------------------------------
Xxxxxx Xxxxxxx, Managing Director
CAPITAL VENTURES INTERNATIONAL
By: /S/ XXXXXX XXXXXXXX
---------------------------------------
Xxxxxx Xxxxxxxx, Investment Manager
Heights Capital Management, Inc.,
its authorized signatory
XXXXXX XXXXX INTERNATIONAL FUND, LTD.
By: /S/ XXXX X. XXXXXX
---------------------------------------
Xxxx X. Xxxxxx, Member, WS Capital, L.L.C.,
General Partner of WS Capital Management, L.P.,
as agent and attorney-in-fact
XXXXXX XXXXX CAPITAL (QP), L.P.
By: /S/ XXXX X. XXXXXX
---------------------------------------
Xxxx X. Xxxxxx, Member, WS Capital, L.L.C.,
General Partner of WS Capital Management, L.P.,
its General Partner
XXXXXX XXXXX CAPITAL, L.P.
By: /S/ XXXX X. XXXXXX
---------------------------------------
Xxxx X. Xxxxxx, Member, WS Capital, L.L.C.,
General Partner of WS Capital Management, L.P.,
its General Partner
WS OPPORTUNITY FUND INTERNATIONAL, LTD.
By: /S/ XXXXXXX X. XXXXXX
---------------------------------------
Xxxxxxx X. Xxxxxx, Member,
WSV Management, L.L.C., General Partner of
WS Ventures Management, L.P.,
as agent and attorney-in-fact
SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT
WS OPPORTUNITY FUND (QP), L.P.
By: /S/ XXXXXXX X. XXXXXX
---------------------------------------
Xxxxxxx X. Xxxxxx, Member,
WSV Management, L.L.C., General Partner of
WS Ventures Management, L.P.,
its General Partner
WS OPPORTUNITY FUND, L.P.
By: /S/ XXXXXXX X. XXXXXX
---------------------------------------
Xxxxxxx X. Xxxxxx, Member,
WSV Management, L.L.C., General Partner of
WS Ventures Management, L.P.,
its General Partner
SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT
EXHIBIT A
SCHEDULE OF PURCHASERS
PURCHASER PURCHASE PRICE COMMON SHARES WARRANTS
TOTAL $12,500,092.50 8,333,395 2,083,347
A-1
EXHIBIT B
FORM OF WARRANT
THIS WARRANT AND THE UNDERLYING SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THEY MAY NOT BE SOLD, OFFERED
FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO SUCH SECURITIES UNDER THE ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
ARADIGM CORPORATION
WARRANT TO PURCHASE COMMON STOCK
DECEMBER 22, 2004
VOID AFTER DECEMBER 22, 2008
THIS CERTIFIES THAT, for value received, ((M_1)), or assigns (the
"Holder"), is entitled to subscribe for and purchase at the Exercise Price
(defined below) from Aradigm Corporation, a California corporation, with its
principal office at 0000 Xxxxx Xxxx Xxx, Xxxxxxx, XX 00000 (the "Company") up to
((M_2)) (((M_3))) shares of the Common Stock of the Company (the "Common
Stock").
1. DEFINITIONS. As used herein, the following terms shall have the
following respective meanings:
(A) "Exercise Period" shall mean the period commencing with
the date hereof and ending four (4) years from the date hereof, unless sooner
terminated as provided below.
(B) "Exercise Price" shall mean $2.10 per share, subject to
adjustment pursuant to Section 5 below.
(C) "Exercise Shares" shall mean the shares of the Company's
Common Stock issuable upon exercise of this Warrant.
2. EXERCISE OF WARRANT. The rights represented by this Warrant may be
exercised in whole or in part at any time during the Exercise Period, by
delivery of the following to the Company at its address set forth above (or at
such other address as it may designate by notice in writing to the Holder):
(A) An executed Notice of Exercise in the form attached
hereto;
(B) Payment of the Exercise Price either (i) in cash or by
check, or (ii) by cancellation of indebtedness; and
(C) This Warrant.
Upon the exercise of the rights represented by this Warrant, a
certificate or certificates for the Exercise Shares so purchased, registered in
the name of the Holder or persons affiliated with the Holder, if the Holder so
designates, shall be issued and delivered to the Holder within a reasonable time
after the rights represented by this Warrant shall have been so exercised.
1
The person in whose name any certificate or certificates for Exercise
Shares are to be issued upon exercise of this Warrant shall be deemed to have
become the holder of record of such shares on the date on which this Warrant was
surrendered and payment of the Exercise Price was made, irrespective of the date
of delivery of such certificate or certificates, except that, if the date of
such surrender and payment is a date when the stock transfer books of the
Company are closed, such person shall be deemed to have become the holder of
such shares at the close of business on the next succeeding date on which the
stock transfer books are open.
2.1 NET EXERCISE. Notwithstanding any provisions herein to the
contrary, after the Effectiveness Deadline Date (as defined in Section 7.2(b) of
the Securities Purchase Agreement dated December 17, 2004, (the "Purchase
Agreement") by and among the Company and the persons listed on the Schedule of
Purchasers attach thereto as Exhibit A), if (i) the Registration Statement (as
defined in the Purchase Agreement) has not been declared effective until such
time as the Registration Statement is declared effective or at any time a
Registration Statement is no longer effective and (ii) the fair market value of
one share of the Company's Common Stock is greater than the Exercise Price (at
the date of calculation as set forth below), in lieu of exercising this Warrant
by payment of cash, the Holder may elect to receive shares equal to the value
(as determined below) of this Warrant (or the portion thereof being canceled) by
surrender of this Warrant at the principal office of the Company together with
the properly endorsed Notice of Exercise in which event the Company shall issue
to the Holder a number of shares of Common Stock computed using the following
formula:
X = Y (A-B)
-----
A
Where X = the number of shares of Common Stock to be issued to
the Holder
Y = the number of shares of Common Stock purchasable
under the Warrant or, if only a portion of the
Warrant is being exercised, the portion of the
Warrant being canceled (at the date of such
calculation)
A = the fair market value of one share of the Company's
Common Stock (at the date of such calculation)
B = Exercise Price (as adjusted to the date of such
calculation)
For purposes of the above calculation, the "fair market value" of one
share of Common Stock shall mean (i) the average of the closing sales prices for
the shares of Common Stock on the Nasdaq National Market or other trading market
where such security is listed or traded as reported by Bloomberg Financial
Markets (or a comparable reporting service of national reputation selected by
the Company and reasonably acceptable to the holders if Bloomberg Financial
Markets is not then reporting sales prices of such security) (collectively,
"Bloomberg") for the ten (10) consecutive trading days immediately preceding
such date, or (ii) if the Nasdaq National Market is not the principal trading
market for the shares of Common Stock, the average of the reported sales prices
reported by Bloomberg on the principal trading market for the Common Stock
during the same period, or, if there is no sales price for such period, the last
sales price reported by Bloomberg for such period, or (iii) if neither of the
foregoing applies, the last sales price of such security in the over-the-counter
market on the pink sheets or bulletin board for such security as reported by
Bloomberg, or if no sales price is so reported for such security, the last bid
price of such security as reported by Bloomberg or (iv) if fair market value
cannot be calculated as of such date on any of the foregoing bases, the fair
market value shall be as determined by the Board of Directors of the Company in
the exercise of its good faith judgment.
2
3. COVENANTS OF THE COMPANY.
3.1 COVENANTS AS TO EXERCISE SHARES. The Company covenants and agrees
that all Exercise Shares that may be issued upon the exercise of the rights
represented by this Warrant will, upon issuance, be validly issued and
outstanding, fully paid and nonassessable, and free from all taxes, liens and
charges with respect to the issuance thereof. The Company further covenants and
agrees that the Company will at all times during the Exercise Period, have
authorized and reserved, free from preemptive rights, a sufficient number of
shares of its Common Stock to provide for the exercise of the rights represented
by this Warrant. If at any time during the Exercise Period the number of
authorized but unissued shares of Common Stock shall not be sufficient to permit
exercise of this Warrant, the Company will take such corporate action as may, in
the opinion of its counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purposes.
3.2 NO IMPAIRMENT. Except and to the extent as waived or consented to
by the Holder, the Company will not, by amendment of its Articles of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Company, but will at all times in good
faith assist in the carrying out of all the provisions of this Warrant and in
the taking of all such action as may be necessary or appropriate in order to
protect the exercise rights of the Holder against impairment.
3.3 NOTICES OF RECORD DATE. In the event of any taking by the Company
of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend (other
than a cash dividend which is the same as cash dividends paid in previous
quarters) or other distribution, the Company shall mail to the Holder, at least
ten (10) days prior to the date specified herein, a notice specifying the date
on which any such record is to be taken for the purpose of such dividend or
distribution.
4. REPRESENTATIONS OF HOLDER.
4.1 ACQUISITION OF WARRANT FOR PERSONAL ACCOUNT. The Holder represents
and warrants that it is acquiring the Warrant solely for its account for
investment and not with a view to or for sale or distribution of said Warrant or
any part thereof. The Holder also represents that the entire legal and
beneficial interests of the Warrant and Exercise Shares the Holder is acquiring
is being acquired for, and will be held for, its account only.
4.2 SECURITIES ARE NOT REGISTERED.
(A) The Holder understands that the Warrant and the Exercise
Shares have not been registered under the Securities Act of 1933, as amended
(the "Act") on the basis that no distribution or public offering of the stock of
the Company is to be effected. The Holder realizes that the basis for the
exemption may not be present if, notwithstanding its representations, the Holder
has a present intention of acquiring the securities for a fixed or determinable
period in the future, selling (in connection with a distribution or otherwise),
granting any participation in, or
3
otherwise distributing the securities. The Holder has no such present intention
except as set forth in Article 7 of the Purchase Agreement.
(B) The Holder recognizes that the Warrant and the Exercise
Shares must be held indefinitely unless they are subsequently registered under
the Act or an exemption from such registration is available. The Holder
recognizes that the Company will register the Exercise Shares pursuant to the
provisions of Section 7 of the Purchase Agreement.
(C) The Holder is aware that neither the Warrant nor the
Exercise Shares may be sold pursuant to Rule 144 adopted under the Act unless
certain conditions are met, including, among other things, the existence of a
public market for the shares, the availability of certain current public
information about the Company, the resale following the required holding period
under Rule 144 and the number of shares being sold during any three month period
not exceeding specified limitations.
4.3 DISPOSITION OF WARRANT AND EXERCISE SHARES.
(A) The Holder further agrees not to make any disposition of
all or any part of the Warrant or Exercise Shares in any event unless and until:
(I) The Company shall have received a letter secured
by the Holder from the Securities and Exchange Commission stating that no action
will be recommended to the Commission with respect to the proposed disposition;
or
(II) There is then in effect a registration statement
under the Act covering such proposed disposition and such disposition is made in
accordance with said registration statement; or
(III) The 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 if
reasonably requested by the Company, the Holder shall have furnished the Company
with an opinion of counsel, reasonably satisfactory to the Company, for the
Holder to the effect that such disposition will not require registration of such
Warrant or Exercise Shares under the Act or any applicable state securities
laws.
(B) The Holder understands and agrees that all certificates
evidencing the shares to be issued to the Holder may bear the following legend:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"). THEY MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THE SECURITIES UNDER THE ACT OR AN OPINION
OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED."
5. ADJUSTMENT OF EXERCISE PRICE AND SHARES.
(A) In the event of changes in the outstanding Common Stock of
the Company by reason of stock dividends, split-ups, recapitalizations,
reclassifications, combinations or exchanges of shares, separations,
reorganizations, liquidations, consolidation, acquisition of the Company
(whether through merger or acquisition of substantially all the assets or stock
of the Company), or the like, the number and class of shares available under the
Warrant in the aggregate and the Exercise Price shall be correspondingly
adjusted to give the Holder of the Warrant, on exercise for the same aggregate
Exercise Price, the total number, class, and kind of
4
shares or other property as the Holder would have owned had the Warrant been
exercised prior to the event and had the Holder continued to hold such shares
until the event requiring adjustment. The form of this Warrant need not be
changed because of any adjustment in the number of Exercise Shares subject to
this Warrant.
(B) If at any time or from time to time the holders of Common
Stock of the Company (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,
(I) 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 (other than a dividend or distribution covered in section 5(a)
above),
(II) any cash paid or payable otherwise than as a
cash dividend or
(III) 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 pursuant to Section 5(a) above),
then and in each such case, the Holder hereof will, 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 clauses (ii) and (iii) above) 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.
6. FRACTIONAL SHARES. No fractional shares shall be issued upon the
exercise of this Warrant as a consequence of any adjustment pursuant hereto. All
Exercise Shares (including fractions) issuable upon exercise of this Warrant may
be aggregated for purposes of determining whether the exercise would result in
the issuance of any fractional share. If, after aggregation, the exercise would
result in the issuance of a fractional share, the Company shall, in lieu of
issuance of any fractional share, pay the Holder otherwise entitled to such
fraction a sum in cash equal to the product resulting from multiplying the then
current fair market value of an Exercise Share by such fraction.
7. NO SHAREHOLDER RIGHTS. This Warrant in and of itself shall not
entitle the Holder to any voting rights or other rights as a shareholder of the
Company.
8. TRANSFER OF WARRANT. Subject to applicable laws and the restriction
on transfer set forth on the first page of this Warrant, this Warrant and all
rights hereunder are transferable, by the Holder in person or by duly authorized
attorney, upon delivery of this Warrant and the form of assignment attached
hereto to any transferee designated by Holder. The transferee shall sign an
investment letter in form and substance satisfactory to the Company.
9. LOST, STOLEN, MUTILATED OR DESTROYED WARRANT. If this Warrant is
lost, stolen, mutilated or destroyed, the Company may, on such terms as to
indemnity or otherwise as it may reasonably impose (which shall, in the case of
a mutilated Warrant, include the surrender thereof), issue a new Warrant of like
denomination and tenor as the Warrant so lost, stolen, mutilated or destroyed.
Any such new Warrant shall constitute an original contractual obligation
5
of the Company, whether or not the allegedly lost, stolen, mutilated or
destroyed Warrant shall be at any time enforceable by anyone.
10. NOTICES, ETC. All notices required or permitted hereunder shall be
in writing and shall be deemed effectively given: (a) upon personal delivery to
the party to be notified, (b) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient, if not, then on the next business
day, (c) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (d) one (1) day after deposit with
a nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the Company
at the address listed on the signature page and to Holder at:
((M_4))
or at such other address as the Company or Holder may designate by ten (10) days
advance written notice to the other parties hereto.
11. ACCEPTANCE. Receipt of this Warrant by the Holder shall constitute
acceptance of and agreement to all of the terms and conditions contained herein.
12. GOVERNING LAW. This Warrant and all rights, obligations and
liabilities hereunder shall be governed by the laws of the State of California.
6
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its duly authorized officer as of December 22, 2004.
ARADIGM CORPORATION
By:
-----------------------------------------
Name: Xxxxxx X. Xxxxxxxxxx
Title: Senior Vice President and
Chief Financial Officer
Address: 0000 Xxxxx Xxxx Xxx
Xxxxxxx, XX 00000
NOTICE OF EXERCISE
TO: ARADIGM CORPORATION
(1) [ ] The undersigned hereby elects to purchase ________ shares of
the Common Stock of ARADIGM CORPORATION (the "Company") pursuant to the terms of
the attached Warrant, and tenders herewith payment of the exercise price in
full, together with all applicable transfer taxes, if any.
[ ] The undersigned hereby elects to purchase ________ shares
of Common Stock of the Company pursuant to the terms of the net exercise
provisions set forth in Section 2.1 of the attached Warrant, and shall tender
payment of all applicable transfer taxes, if any.
(2) Please issue a certificate or certificates representing said shares
of Common Stock of the Company in the name of the undersigned or in such other
name as is specified below:
------------------------
(Name)
------------------------
------------------------
(Address)
(3) The undersigned represents that (i) the aforesaid shares of Common
Stock are being acquired for the account of the undersigned for investment and
not with a view to, or for resale in connection with, the distribution thereof
and that the undersigned has no present intention of distributing or reselling
such shares, other than as contemplated by Article 7 of the Securities Purchase
Agreement dated as of December 17, 2004 by and among the Company and the
purchasers named therein (the "Purchase Agreement"); (ii) the undersigned is
aware of the Company's business affairs and financial condition and has acquired
sufficient information about the Company to reach an informed and knowledgeable
decision regarding its investment in the Company; (iii) the undersigned is
experienced in making investments of this type and has such knowledge and
background in financial and business matters that the undersigned is capable of
evaluating the merits and risks of this investment and protecting the
undersigned's own interests; (iv) the undersigned understands that the shares of
Common Stock issuable upon exercise of this Warrant have not been registered
(except to the extent a registration statement pursuant to and as contemplated
by Article 7 of the Purchase Agreement is effective) under the Securities Act of
1933, as amended (the "Securities Act"), by reason of a specific exemption from
the registration provisions of the Securities Act, which exemption depends upon,
among other things, the bona fide nature of the investment intent as expressed
herein, and, because such securities have not been registered under the
Securities Act, they must be held indefinitely unless subsequently registered
under the Securities Act or an exemption from such registration is available;
(v) the undersigned is aware that the aforesaid shares of Common Stock may not
be sold pursuant to Rule 144 adopted under the Securities Act unless certain
conditions are met and until the undersigned has held the shares for the number
of years prescribed by Rule 144, that among the conditions for use of the Rule
is the availability of current information to the public about the Company; and
(vi) the undersigned agrees not to make any disposition of all or any part of
the aforesaid shares of Common Stock unless and until there is then in effect a
registration statement under the Securities Act covering such proposed
disposition and such disposition is made in
accordance with said registration statement, or the undersigned has provided the
Company with an opinion of counsel satisfactory to the Company, stating that
such registration is not required.
------------------------ -------------------------------
(Date) (Signature)
-------------------------------
(Print name)
2
ASSIGNMENT FORM
(To assign the foregoing Warrant, execute this form
and supply required information. Do not use this form
to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced
thereby are hereby assigned to
Name:
------------------------------------------------------------------------
(Please Print)
Address:
------------------------------------------------------------------------
(Please Print)
Dated: __________, 20__
Holder's
Signature:
-----------------------------------------
Holder's
Address:
-----------------------------------------
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatever. Officers of corporations and those acting in a fiduciary or
other representative capacity should file proper evidence of authority to assign
the foregoing Warrant.
3
EXHIBIT C
INSTRUCTION SHEET FOR PURCHASER
(TO BE READ IN CONJUNCTION WITH THE ENTIRE
SECURITIES PURCHASE AGREEMENT)
A. Complete the following items in the Securities Purchase Agreement:
1. Provide the information regarding the Purchaser requested on
the signature page. The Agreement must be executed by an
individual authorized to bind the Purchaser.
2. EXHIBIT C-1 - Stock Certificate Questionnaire:
Provide the information requested by the Stock Certificate
Questionnaire.
3. EXHIBIT C-2 - Registration Statement Questionnaire:
Provide the information requested by the Registration
Statement Questionnaire.
4. EXHIBIT C-3 - Purchaser Certificate:
Provide the information requested by the Certificate for
Individual Purchasers or the Certificate for Corporate,
Partnership, Trust, Foundation and Joint Purchasers, as
applicable.
5. Return the signed Securities Purchase Agreement to:
Xxxxx X. Xxxxxx, Esq.
Xxxxxx Godward LLP
Xxx Xxxxxxxx Xxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
B. Instructions regarding the transfer of funds for the purchase of
Securities will be telecopied to the Purchaser at a later date.
C. Upon the resale of the Registrable Shares by the Purchaser after the
Registration Statement covering the Registrable Shares is effective, as
described in the Securities Purchase Agreement, the Purchaser:
(I) must deliver a current prospectus, and annual and quarterly
reports of the Company to the buyer (prospectuses, and annual
and quarterly reports may be obtained from the Company at the
Purchaser's request); and
(II) must send a letter in the form of EXHIBIT F to the Securities
Purchase Agreement to the Company so that the Registrable
Shares may be properly transferred.
C-1
EXHIBIT C-1
ARADIGM CORPORATION
STOCK CERTIFICATE QUESTIONNAIRE
Pursuant to Section 4.3 of the Agreement, please provide us with the following
information:
1. The exact name that the Securities are to be
registered in (this is the name that will
appear on the stock certificate(s)). You may
use a nominee name if appropriate: _________________________
2. The relationship between the Purchaser of
the Securities and the Registered Holder
listed in response to item 1 above: _________________________
3. The mailing address of the Registered Holder
listed in response to item 1 above: _________________________
4. The Tax Identification Number of the
Registered Holder listed in response to item
1 above: _________________________
X-0-0
XXXXXXX X-0
XXXXXXX XXXXXXXXXXX
REGISTRATION STATEMENT QUESTIONNAIRE
In connection with the preparation of the Registration Statement,
please provide us with the following information regarding the Purchaser.
A. GENERAL INFORMATION
1. Please state your organization's name exactly as it should appear in
the Registration Statement:_________________________________
2. Have you or your organization had any position, office or other
material relationship within the past three years with the Company or its
affiliates other than as disclosed in the Prospectus included in the
Registration Statement?
[ ] Yes [ ] No
If yes, please indicate the nature of any such relationships below:
B. SECURITIES HOLDINGS
Please fill in all blanks in the following questions related to your
BENEFICIAL OWNERSHIP of the Company's capital stock. Generally, the term
"BENEFICIAL OWNERSHIP" refers to any direct or indirect interest in the
securities which entitles you to any of the rights or benefits of ownership,
even though you may not be the holder of record of the securities. For example,
securities held in "street name" over which you exercise voting or investment
power would be considered BENEFICIALLY OWNED by you. Other examples of indirect
ownership include ownership by a partnership in which you are a partner or by an
estate or trust of which you or any member of your IMMEDIATE FAMILY is a
beneficiary. Ownership of securities held in the names of your spouse, minor
children or other relatives who live in the same household may be attributed to
you.
PLEASE NOTE: IF YOU HAVE ANY REASON TO BELIEVE THAT ANY INTEREST IN
SECURITIES OF THE COMPANY WHICH YOU MAY HAVE, HOWEVER REMOTE, IS A BENEFICIAL
INTEREST, PLEASE DESCRIBE SUCH INTEREST. FOR PURPOSES OF RESPONDING TO THIS
QUESTIONNAIRE, IT IS PREFERABLE TO ERR ON THE SIDE OF INCLUSION RATHER THAN
EXCLUSION. WHERE THE SEC'S INTERPRETATION OF BENEFICIAL OWNERSHIP WOULD REQUIRE
DISCLOSURE OF YOUR INTEREST OR POSSIBLE INTEREST IN CERTAIN SECURITIES OF THE
COMPANY, AND YOU BELIEVE THAT YOU DO NOT ACTUALLY POSSESS THE ATTRIBUTES OF
BENEFICIAL OWNERSHIP, AN APPROPRIATE RESPONSE IS TO DISCLOSE THE INTEREST AND AT
THE SAME TIME DISCLAIM BENEFICIAL OWNERSHIP OF THE SECURITIES.
C-2-1
1. As of DECEMBER 15, 2004, I owned outright (including shares
registered in my name individually or jointly with others, shares held in the
name of a bank, broker, nominee, depository or in "street name" for my account),
the following number of shares of the Company's capital stock:
_________________.
2. In addition to the number of shares I own outright as indicated by
my answer to question B(1), as of DECEMBER 15, 2004, I had or shared voting
power or investment power, directly or indirectly, through a contract,
arrangement, understanding, relationship or otherwise, over the following number
of shares of the Company's capital stock: _________________.
If the answer to this question B(2) was not "zero," please complete the
following: with whom shared; and the nature of the relationship and any
underlying voting trust agreement, investment arrangement or the like:
SHARED VOTING POWER:
NUMBER OF SHARES WITH WHOM SHARED NATURE OF RELATIONSHIP
---------------- ---------------- ----------------------
SHARED INVESTMENT POWER:
NUMBER OF SHARES WITH WHOM SHARED NATURE OF RELATIONSHIP
---------------- ---------------- ----------------------
As of FEBRUARY 13, 2005, I will have the right to acquire ________
shares of the Company's capital stock pursuant to outstanding stock options
issued under the Company's stock option plans and ______ shares pursuant to the
exercise of outstanding warrants (none, indicated by "0" above).
OPTIONS AND WARRANTS
CLASS NUMBER OF SHARES
----- ----------------
C-2-2
(4) Please identify the natural person or persons who have voting
and/or investment control over the Company's securities that you own, and state
whether such person(s) disclaims beneficial ownership of the securities. For
example, if you are a general partnership, please identify the general partners
in the partnership.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
C-2-3
C. NASD QUESTIONS
1. Are you (i) a "member"(1) of the National Association of Securities
Dealers, Inc. (the "NASD"), (ii) an "affiliate"(2) of a member of the NASD,
(iii) a "person associated with a member" or an "associated person of a member"3
of the NASD or (iv) an immediate family member(4) of any of the foregoing
persons? IF YES, please identify the member and describe such relationship
(whether direct or indirect), and please respond to Question Number 2 below; IF
NO, please proceed directly to Question Number 3.
Yes _____ No _____
Description:
--------------------------
(1) NASD defines a "member" as any broker or dealer admitted to membership in
the NASD, or any officer or partner or branch manager of such a member, or any
person occupying a similar status or performing a similar function for such a
member.
(2) The term "affiliate" means a person that directly, or indirectly through one
or more intermediaries, controls, or is controlled by, or is in common control
with, the person specified. Persons who have acted or are acting on behalf of or
for the benefit of a person include, but are not necessarily limited to,
directors, officers, employees, agents, consultants and sales representatives.
The following should apply for purposes of the foregoing:
(i) a person should be presumed to control a Member if the person
beneficially owns 10 percent or more the outstanding voting securities of a
Member which is a corporation, or beneficially owns a partnership interest in 10
percent or more of the distributable profits or losses of a Member which is a
partnership;
(ii) a Member should be presumed to control a person if the Member and
Persons Associated With a Member beneficially own 10 percent or more of the
outstanding voting securities of a person which is a corporation, or
beneficially own a partnership interest in 10 percent or more of the
distributable profits or losses of a person which is a partnership;
(iii) a person should be presumed to be under common control with a
Member if:
(1) the same person controls both the Member and another
person by beneficially owning 10 percent or more of the outstanding
voting securities of a Member or person which is a corporation, or by
beneficially owning a partnership interest in 10 percent or more of the
distributable profits or losses of a Member or person which is a
partnership; or
(2) a person having the power to direct or cause the direction
of the management or policies of the Member or such person also has the
power to direct or cause the direction of the management or policies of
the other entity in question.
(3) The NASD defines a "person associated with a member" or an "associated
person of a member" as being every sole proprietor, partner, equity owner,
officer, director or branch manager of any member, or any natural person
occupying a similar status or performing similar functions, or any natural
person engaged in the investment banking or securities business who directly or
indirectly controls or is controlled by such member (for example, any employee),
whether or not any such person is registered or exempt from registration with
the NASD.
(4) Immediate family includes parents, mother-in-law, father-in-law, husband or
wife, brother or sister, brother-in-law or sister-in-law, son-in-law or
daughter-in-law, and children, or any other person who is supported, directly or
indirectly, to a material extent, by a person associated with a member of the
NASD or any other broker/dealer.
C-2-4
2. If you answered "yes" to Question Number 1, please furnish any
information as to whether any such member intends to participate in any capacity
in the public offering, including the details of such participation:
Description:
3. Are you or have you been an "underwriter or related person"5 or a
person associated with an underwriter or related person, including, without
limitation, with respect to the proposed public offering? If yes, please
identify the underwriter or related person and describe such relationship
(whether direct or indirect).
Yes _____ No _____
Description:
4. If known, please describe in detail any underwriting compensations,
arrangements or dealings entered into during the previous twelve months, or
proposed to be consummated in the next twelve months, between (i) any
underwriter or related person, member of the NASD, affiliate of a member of the
NASD, person associated with a member or associated person of a member of the
NASD or any immediate family member thereof, on the one hand, and (ii) the
Company, or any director, officer or shareholder thereof, on the other hand,
which provides for the receipt of any item of value and/or the transfer of any
warrants, options or other securities from the Company to any such person (other
than the information relating to the arrangements with any investment firm or
underwriting organization which may participate in the proposed public
offering).
Description:
5. Have you purchased the securities in the ordinary course of
business?
Yes _____ No _____
______________________
(5) The term "underwriter or related person" includes underwriters,
underwriters' counsel, financial consultants and advisors, finders, members of
the selling or distribution group, and any and all other persons associated with
or related to any of such persons, including members of the immediate family of
such persons.
C-2-5
The answers to the foregoing questions are correctly stated to the best of my
information and belief. I shall advise Xxxxx Xxxxxx at (000) 000-0000, the
Company's outside counsel, promptly of any changes in the foregoing information.
__________________________________________________________
(Print name of Selling Security Holder)
__________________________________________________________
(Signature)
By: __________________________________________
(Name and title of signatory, if stockholder is an entity)
__________________________________________________________
(Date)
C-2-6
EXHIBIT C-3
ARADIGM CORPORATION
CERTIFICATE FOR INDIVIDUAL PURCHASERS
If the investor is an individual Purchaser (or married couple) the
Purchaser must complete, date and sign this Certificate.
CERTIFICATE
I certify that the representations and responses below are true and
accurate:
In order for the Company to offer and sell the Securities in
conformance with state and federal securities laws, the following information
must be obtained regarding your investor status. Please INITIAL EACH CATEGORY
applicable to you as an investor in the Company.
_____ (1) A natural person whose net worth(1), either individually or
jointly with such person's spouse exceeds $1,000,000;
_____ (2) A natural person who had an income(2) in excess of $200,000,
or joint income with the person's spouse in excess of $300,000, in 2002 and
2003, and reasonably expects to have individual income reaching the same level
in 2004;
_____ (3) An executive officer or director of the Company.
Date: _______________________ _________________________________________
Name(s) of Purchaser
_________________________________________
Signature
_________________________________________
Signature
-------------------------
(1) For purposes of this Certificate, "net worth" means the excess of total
assets at fair market value over total liabilities, except that the principal
residence owned by a natural person shall be valued either (a) at cost,
including the cost of improvements, net of current encumbrances upon the
property, or (b) at the appraised value of the residence as determined upon a
written appraisal used by an institutional lender making a loan to the
individual secured by the property, including the cost of subsequent
improvements, net of current encumbrances upon the property. As used in the
preceding sentence, "institutional lender" means a bank, savings and loan
company, industrial loan company, credit union or personal property broker or a
company whose principal business is as a lender of loans secured by real
property and which has such loans receivable in the amount of $2,000,000 or
more.
(2) For purposes of this Certificate, "income" means adjusted gross income, as
reported for federal income tax purposes, increased by the following amounts:
(a) the amount of any tax exempt interest income received, (b) the amount of
losses claimed as a limited partner in a limited partnership, (c) any deduction
claimed for depletion, (d) amounts contributed to an XXX or Xxxxx retirement
plan, (e) alimony paid, and (f) any amounts by which income from long-term
capital gains has been reduced in arriving at adjusted gross income pursuant to
the provisions of Section 1202 of the Internal Revenue Code.
C-3-2
EXHIBIT C-3
ARADIGM CORPORATION
CERTIFICATE FOR CORPORATE, PARTNERSHIP,
TRUST, FOUNDATION, AND JOINT PURCHASERS
If the investor is a corporation, partnership, trust, pension plan,
foundation, joint purchaser (other than a married couple) or other entity, an
authorized officer, partner, or trustee must complete, date and sign this
Certificate.
CERTIFICATE
The undersigned certifies that the representations and responses below
are true and accurate:
(A) The investor has been duly formed and is validly existing and has
full power and authority to invest in the Company. The person signing on behalf
of the undersigned has the authority to execute and deliver the Securities
Purchase Agreement on behalf of the Purchaser and to take other actions with
respect thereto.
(B) Indicate the form of entity of the undersigned:
[ ] Limited Partnership
[ ] General Partnership
[ ] Corporation
[ ] Revocable Trust (identify each grantor and indicate under
what circumstances the trust is revocable by the grantor:
---------------------------------------------------------
---------------------------------------------------------
---------------------------------------------------------
---------------------------------------------------------
(Continue on a separate piece of paper, if necessary.)
[ ] Other Type of Trust (indicate type of trust and, for
trusts other than pension trusts, name the grantors and
beneficiaries:
---------------------------------------------------------
---------------------------------------------------------
---------------------------------------------------------
---------------------------------------------------------
(Continue on a separate piece of paper, if necessary.)
[ ] Other form of organization (indicate form of organization
(_________________).
C-3-3
(C) Indicate the approximate date the undersigned entity was formed: .
(D) In order for the Company to offer and sell the Securities in
conformance with state and federal securities laws, the following information
must be obtained regarding your investor status. Please INITIAL EACH CATEGORY
applicable to you as an investor in the Company.
_______ (1) A bank as defined in Section 3(a)(2) of the
Securities Act, or any savings and loan association or other
institution as defined in Section 3(a)(5)(A) of the Securities Act
whether acting in its individual or fiduciary capacity;
_______ (2) A broker or dealer registered pursuant to Section
15 of the Securities Exchange Act of 1934;
_______ (3) An insurance company as defined in Section 2(13)
of the Securities Act;
_______ (4) An investment company registered under the
Investment Company Act of 1940 or a business development company as
defined in Section 2(a)(48) of that Act;
_______ (5) A Small Business Investment Company licensed by
the U.S. Small Business Administration under Section 301(c) or (d) of
the Small Business Investment Act of 1958;
_______ (6) A plan established and maintained by a state, its
political subdivisions, or any agency or instrumentality of a state or
its political subdivisions, for the benefit of its employees, if such
plan has total assets in excess of $5,000,000;
_______ (7) An employee benefit plan within the meaning of the
Employee Retirement Income Security Act of 1974, if the investment
decision is made by a plan fiduciary, as defined in Section 3(21) of
such act, which is either a bank, savings and loan association,
insurance company, or registered investment adviser, or if the employee
benefit plan has total assets in excess of $5,000,000 or, if a
self-directed plan, with investment decisions made solely by persons
that are accredited investors;
_______ (8) A private business development company as defined
in Section 202(a)(22) of the Investment Advisers Act of 1940;
_______ (9) An organization described in Section 501(c)(3) of
the Internal Revenue Code, a corporation, Massachusetts or similar
business trust, or partnership, not formed for the specific purpose of
acquiring the Securities, with total assets in excess of $5,000,000;
_______ (10) A trust, with total assets in excess of
$5,000,000, not formed for the specific purpose of acquiring the
Securities, whose purchase is directed by a sophisticated person who
has such knowledge and experience in financial and business matters
that such person is capable of evaluating the merits and risks of
investing in the Company;
C-3-4
_______ (11) An entity in which all of the equity owners
qualify under any of the above subparagraphs. If the undersigned
belongs to this investor category only, list the equity owners of the
undersigned, and the investor category which each such equity owner
satisfies:
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
(Continue on a separate piece of paper, if necessary.)
Dated: ___________________________
__________________________________
Name of investor
__________________________________
Signature and title of authorized
officer, partner or trustee
C-3-5
EXHIBIT D
OPINION OF COMPANY COUNSEL
1. The Company has been duly incorporated and is a validly existing corporation
in good standing under the laws of the State of California.
2. The Company has the requisite corporate power to enter into and perform its
obligations under the Transaction Documents. The Company has the requisite
corporate power to own its properties and assets and to conduct its business as,
to the best of our knowledge, it is currently being conducted, and, to the best
of our knowledge, is not required to qualify as a foreign corporation to do
business in any other jurisdiction in the United States.
3. The Transaction Documents have been duly and validly authorized, executed and
delivered by the Company and constitute valid and binding agreements of the
Company enforceable against the Company in accordance with their respective
terms, except as rights to indemnity under Section 7.4 of the Agreement may be
limited by applicable laws and except as enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, arrangement, moratorium or
other similar laws affecting creditors' rights, and subject to general equity
principles and to limitations on availability of equitable relief, including
specific performance.
4. The Common Shares and the Warrants have been duly authorized, and upon
issuance and delivery against payment therefor in accordance with the terms of
the Agreement, the Common Shares and the Warrants will be duly authorized and
validly issued and the Common Shares will be fully paid and nonassessable. The
shares of Common Stock issuable upon exercise of the Warrants have been duly
authorized and reserved for issuance, and upon issuance and delivery upon
exercise of the Warrants in accordance with the terms of the Warrants, will be
validly issued, fully paid and nonassessable.
5. The execution and delivery of the Transaction Documents by the Company and
the offer, issuance and sale of the Common Shares and the Warrants pursuant to
the Agreement do not violate or contravene (a) any governmental statute, rule or
regulation applicable to the Company or (b) any order, writ, judgment,
injunction, decree, determination or award which has been entered against the
Company and of which we are aware, the violation or contravention of which would
materially and adversely affect the Company, its assets, financial condition or
operations.
6. All consents, approvals, authorizations or orders of, and filings,
registrations and qualifications with any regulatory authority or governmental
body in the United States required for the issuance of the Common Shares and the
Warrants have been made or obtained, except (a) for the filing of the
"Notification Form: Change in Number of Shares Outstanding" with the Nasdaq
National Market, (b) for the filing of the notice to be filed under California
Corporations Code Section 25102.1(d), (c) for the filing of a Form D pursuant to
Securities and Exchange Commission Regulation D and (d) other Blue Sky filings.
7. The offer and sale of the Common Shares and the Warrants are exempt from the
registration requirements of the Securities Act of 1933, as amended, subject to
the timely filing of a Form D pursuant to Securities and Exchange Commission
Regulation D.
D-1
EXHIBIT E
ARADIGM CORPORATION
IMPORTANT - DO NOT REMOVE THIS INSTRUCTION SHEET FROM THE ATTACHED SHARE
CERTIFICATE UNLESS AND UNTIL THE SHARES ARE SOLD AS FOLLOWS:
(1) THE SHARES ARE RESOLD PURSUANT TO THE REGISTRATION STATEMENT ON FORM S-3
(NO. [________________]), AND, IN CONNECTION WITH SUCH RESALE, THE HOLDER HAS
DELIVERED TO THE PURCHASER OF THE SHARES A CURRENT PROSPECTUS AND HAS PROVIDED
TO THE COMPANY OR TO THE TRANSFER AGENT FOR THE COMPANY'S STOCK A PURCHASER'S
CERTIFICATE OF SUBSEQUENT SALE; OR
(2) THE SHARES ARE RESOLD IN A TRANSACTION EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, PROVIDED THAT, PRIOR TO
SUCH RESALE, THE HOLDER HAS NOTIFIED THE COMPANY OF SUCH DISPOSITION AND
PROVIDED THE COMPANY WITH WRITTEN ASSURANCES, IN FORM AND SUBSTANCE SATISFACTORY
TO THE COMPANY OF COMPLIANCE WITH THE REQUIREMENTS OF SUCH EXEMPTION.
DO NOT REMOVE THIS INSTRUCTION SHEET FROM
THE ATTACHED SHARE CERTIFICATE
EXCEPT IN ACCORDANCE WITH
THE INSTRUCTIONS SET FORTH ABOVE.
E-1
EXHIBIT F
PURCHASER'S CERTIFICATE OF SUBSEQUENT SALE
TO: XXXXXX GODWARD LLP
ATTENTION: XXX XXXXXXX
The undersigned, the selling securityholder or an officer of, or other duly
authorized person, hereby certifies that _____________________________________
[FILL IN NAME OF SELLING SECURITYHOLDER]
represents that it has sold shares of the Common Stock of Aradigm Corporation
and that such shares were sold on _________________ either (i) in accordance
[DATE]
with the registration statement on Form S-3 with file number [____________],
in which case the selling securityholder certifies that the requirement of
delivering a current prospectus has been complied with or will be complied with
in connection with such sale, or (ii) in accordance with Rule 144 under the
Securities Act of 1933 ("RULE 144"), in which case the selling securityholder
certifies that it has complied with the requirements of Rule 144.
Print or type:
NUMBER OF SHARES SOLD (if sold on
multiple dates, please provide a
breakdown by date): ________________________________
NAME OF SELLING SECURITYHOLDER: ________________________________
NAME OF INDIVIDUAL REPRESENTING SELLING
SECURITYHOLDER (if an institution): ________________________________
TITLE OF INDIVIDUAL REPRESENTING SELLING
SECURITYHOLDER (if an institution): ________________________________
Signature by:
SELLING SECURITYHOLDER OR INDIVIDUAL
REPRESENTATIVE: ________________________________
F-1
