SUBSCRIPTION AGREEMENT
This
SUBSCRIPTION AGREEMENT (this “Agreement”)
is
made as of August 2, 2006 by and among InSite Vision Incorporated, a Delaware
corporation (the “Company”),
and
each of the subscribers set forth on Schedule 1 hereto (each a “Subscriber”
and
collectively, the “Subscribers”).
W
I T N E
S S E T H:
WHEREAS,
Subject to the terms and conditions set forth in this Agreement and pursuant
to
Section 4(2) of the Securities Act (as defined below) and Rule 506 promulgated
thereunder, the Company desires to issue and sell and each Subscriber, severally
and not jointly, desires to purchase up to 5,500,000 shares (the “Shares”)
of
common stock of the Company, par value $0.01 per share (the “Common
Stock”),
subject to the terms and conditions as set forth below.
NOW,
THEREFORE, in consideration of the promis-es and the mutual representations
and
covenants hereinaf-ter set forth, the parties hereto do hereby agree as
follows:
I. PURCHASE
OF SHARES OF COMMON STOCK AND WARRANTS
1.1 The
Offering.
(a)
Subject to the terms and conditions set forth in this Agreement, at the Closing,
the Company shall issue and sell to each Subscriber, and each Subscriber shall,
severally and not jointly, purchase from the Company, such number of Shares
as
indicated below such Subscriber’s name on the signature page hereto, at a
purchase price of $1.31 per share.
(b) The
Company will also grant each Subscriber a warrant, the form of which is attached
hereto as Exhibit A (the “Warrants”),
to
purchase a number of shares of Common Stock equal to 20% of the Common Stock
purchased by each such Subscriber; provided, however, that the maximum number
of
shares of Common Stock issuable upon the exercise of the Warrants shall not
exceed 1,100,000 shares (subject to any stock splits, stock dividends or the
like).
1.2 Closing.
The
purchase and sale of the Common Stock hereunder shall take place at the offices
of O’Melveny & Xxxxx LLP, 0000 Xxxx Xxxx Xxxx, Xxxxx Xxxx, XX, 00000,
at 10:00 a.m., on the date hereof, or at such other time and place as the
Company and the Subscriber mutually agree upon orally or in writing (which
time
and place are designated as the “Closing”).
Prior
to the Closing, Subscriber must complete and return a duly executed, unaltered
copy of this Agreement (including the completed Confidential Subscriber
Questionnaire included in Article VIII hereof).
1.3 Delivery
of Certificates.
Within
five business days after the Closing, the Company shall deliver a facsimile
copy
of the Warrants and the certificates free and clear of all restrictive and
other
legends (except as expressly provided in Section 2.9 hereof), evidencing the
number of shares of Common Stock indicated below such Subscriber’s name on its
signature page hereto, registered in the name of such Subscriber or its
custodian as indicated on the Subscriber’s signature page hereto; provided,
however, that originals of the same are delivered to the Subscribers within
ten
business days after the Closing.
II. REPRESENTATIONS,
WARRANTIES AND COVENANTS OF SUBSCRIBER
Each
Subscriber hereby, for itself and no other Subscriber, represents, warrants
and
covenants to the Company as follows:
2.1 The
Subscrib-er recog-nizes and acknowledges that the purchase of the Common Stock
and the Warrants involves a high degree of risk including, but not limited
to,
the following: (i) an invest-ment in the Company- is highly specula-tive, and
only Subscribers who can afford the loss of their entire invest-ment should
consid-er investing in the Company and the Common Stock and the Warrants; (ii)
the Sub-xxxxxxx may not be able to liqui-date its invest-ment; (iii)
trans-fer-ability of the Common Stock and the Warrants is ex-tremely limit-ed;
(iv) in the event of a disposition of the Common Stock or the Warrants, the
Sub-xxxxxxx could sustain the loss of its entire investment; and (v) the Company
has not paid any dividends on its Common Stock since inception and does not
anticipate the payment of dividends in the foreseeable future.
2.2 The
Subscriber is an “accredited investor” as such term is defined in Rule 501 of
Regula-tion D promulgated under the Securities Act of 1933, as amended (the
“Securities
Act”),
as
indicated by the Subscriber’s re-sponses to the questions contained in Article
VIII here-of which responses are true and correct as of the date hereof, and
that the Subscriber is able to bear the economic risk of an invest-ment in
the
Company for an indefinite period of time, has no need for liquidity, and can
afford a complete loss of its investment in the Common Stock and the Warrants.
After giving effect to the purchase of the Common Stock and the Warrants
requested to be purchased by Subscriber hereunder, Subscriber represents and
warrants that Subscriber neither individually nor as a member of a group (except
as permitted by Rule 13d-5(b)(2) promulgated under the Securities Exchange
Act
of 1934, as amended (the “Exchange
Act”)),
shall own more than 19.9% of the Company’s outstanding Common Stock or voting
power. Such Subscriber is not a registered broker-dealer under Section 15 of
the
Exchange Act.
2.3 The
Subscriber hereby acknowledges and represents that (i) the Subscriber is
knowledgeable, sophisticated and has experience in making, and is qualified
to
make, decisions with respect to investments representing an investment decision
like that involved in the purchase of the Common Stock and has prior investment
experience, including in-vestment in -securities which are non-listed,
unregistered and/or not traded on the NASDAQ Global or Capital Market or listed
on the American Stock Exchange (“AMEX”); (ii) the Subscriber recog-nizes the
highly specu-lative nature of this invest-ment, that an investment in the Common
Stock and the Warrants involves a significant degree of risk, that the Company’s
financial condition has been and continues to be weak and the Company’s auditors
have included explanatory paragraphs in the Company’s audited financial
statements for the fiscal years ended December 31, 2004 and 2005 indicating
substantial doubt as to the Company’s ability to continue as a going concern;
(iii) Subscriber acknowledges that it has read and understands the disclosure
by
the Company in its Quarterly Report on Form 10-Q for the three months ended
March 31, 2006, filed with the Commission on May 17, 2006, that the Company
estimated that its cash on hand to continue operations would only last through
the middle of July 2006, and that the Company has informed the Subscribers
that
its current cash available for operations will last through the end July 2006;
(iv) Subscriber recognizes that the market price of the Company’s common stock
has been and continues to be extremely volatile and has in fact declined
substantially in recent weeks, and Subscriber has carefully evaluated the risks
of an investment in the Common Stock and the Warrants; and (v) the Sub-xxxxxxx
is able to bear the economic risk of an investment in the Common Stock and
the
potential loss of its entire investment, which risk the Subscrib-er hereby
as-sumes.
2
2.4 The
Subscriber hereby acknowledges that it has carefully reviewed this Agreement
and
the following documents filed by the Company with the Securities and Exchange
Commission (the “SEC”
or
the
“Commission”,
and
such documents, the “SEC
Reports”):
Annual Report on Form 10-K for the fiscal year ended December 31, 2005, filed
with the SEC on March 31, 2006 (the “2005
10-K”),
the
Quarterly Report for the three months ended March 31, 2006 (filed with the
SEC
on May 17, 2006) and the Current Reports on Form 8-K filed with the SEC on
January 6, 2006, January 18, 2006, March 30, 2006, May 1, 2006 and May 11,
2006
as well as any future filings that the Company makes with the SEC under the
Exchange Act prior to the Closing. The Subscriber further represents that the
Subscriber has been fur-nished by the Company during the course of this
transac-tion with all information regarding the Company which the Subscriber,
its investment advisor, attorney and/or accountant has requested or de-sired
to
know or which is otherwise relevant to an investment decision, has been
af-forded the oppor-tuni-ty to ask ques-tions of and receive answers from duly
autho-rized offi-cers or other represen-tatives of the Company- concern-ing
the
terms and condi-tions of the sale of Common Stock and Warrants as contemplated
by this Agreement, and has received any addi-tional infor-mation which the
Subscriber or its advisors or agents has requested.
2.5 (a) The
Subscriber has relied solely upon the information provided by the Company in
making the decision to invest in the Common Stock and the Warrants. The
Subscriber is familiar with and understands the rights to which Subscriber
is
entitled to under this Agreement. In evaluating the suitability of an investment
in the Company, the Subscriber has not relied upon any representation or other
information (whether oral or written) from the Company, or any agent, employee
or Affiliate (as defined below) of the Company other than as set forth in this
Agreement or resulting from Subscriber’s own independent investigation.
Subscriber understands and acknowledges that nothing in this Agreement or any
other materials provided to Subscriber in connection with the purchase of the
Common Stock and the Warrants constitutes investment, tax or legal advice.
To
the extent deemed necessary or advisable by Subscriber in his/her/its sole
discretion, the Subscriber has retained, at his/her/its sole expense, and relied
upon appropriate professional advice regarding the investment, tax and legal
merits and consequences of this Agreement and its purchase of the Common Stock
and the Warrants hereunder. “Affiliate” shall mean, with respect to any Person
(as defined below), any other Person controlling, controlled by or under direct
or indirect common control with such Person (for the purposes of this definition
“control,” when used with respect to any specified Person, shall mean the power
to direct the management and policies of such Person, directly or indirectly,
whether through ownership of voting securities, by contract or otherwise; and
the terms “controlling” and “controlled” shall have meanings correlative to the
foregoing).
3
(b) The
Subscriber represents that no Common Stock, Warrants or other securities of
the
Company were offered or sold to it by means of any form of general solicitation
or general advertising, and in connection therewith the Subscriber did not:
(A)
receive or review any advertisement, article, notice or other communication
published in a newspaper or magazine or similar media or broadcast over
television or radio whether closed circuit, or generally available; or (B)
attend any seminar meeting or industry or conference whose attendees were
invited by any general solicitation or general advertising.
2.6 The
Subscriber hereby acknowledges that the purchase and sale of the Common Stock
and the Warrants is intend-ed to be exempt from the registra-tion requirements
of Section 5 of the Securities Act pursu-ant to Regula-tion D. The Subscriber
shall- not sell or other-wise trans-fer the Common Stock, the Warrants and
the
shares of Common Stock issuable upon the exercise of the Warrants (collectively,
the “Securities”)
unless
such transfer is regis-tered under the Securities Act or unless an exemption
from such registra-tion is available. The Subscriber understands that if
required by the laws or regulations or any applicable jurisdiction, the offer
and sale of the Securities contemplated hereby will be submitted to the
appropriate authorities of such state(s) for registration or exemption therefrom
and will be specifically subject to the receipt of such registration or
exemption.
2.7 The
Subscriber understands and acknowledges that the Securities have not been
registered under the Securities Act in reliance upon a claimed exemption under
the provisions of the Securities Act which depends, in part, upon the
Subscriber’s investment intention and the truth and accuracy of, and
Subscriber’s compliance with, the representations, warranties, acknowledgments
and covenants of Subscriber set forth herein. In this connection, the Subscriber
hereby represents that the representations, warranties, acknowledgments and
covenants of Subscriber set forth herein are true and accurate, Subscriber
will
comply with the covenants set forth herein, and the Subscrib-er is purchasing
the Securities for the Subscriber’s own ac-count for in-vest-ment purposes only
and not with a view toward the resale or dis-tri-bu-tion to others and has
no
contract, undertaking, agreement or other arrangement, in existence or
contemplated, to sell, pledge, assign or otherwise transfer the Securities
to
any other individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other entity
of any kind (each, a “Person”).
The
Subscriber also represents that it was not formed for the purpose of purchasing
the Common Stock. The Subscriber has no current plans to effect a “change of
control” of the Company, as such term is understood in Rule 13d of the Exchange
Act.
2.8 The
Subscriber understands that the Securities will not be registered or available
for sale in the public markets except as specifically provided herein, and
Rule
144 promul-gated under the Securities Act (“Rule
144”)
requires, among other conditions, a one-year holding period of the Company
prior
to the resale (in limited amounts) of secu-rities acquired in a non-public
offering without having to satisfy the regis-tration requirements under the
Securities Act. The Sub-xxxxxxx understands and hereby acknowl-edges that the
Company is under no obli-ga-tion to register the Securities under the Securities
Act or any state secu-ri-ties or “blue sky” laws or assist the Subscriber in
obtaining an exemption from various registration requirements, other than as
set
forth in Article VI herein and shall comply with any sale or distribution
requirements applicable to each such Subscriber under the Securities Act or
any
applicable state securities or “blue sky” laws.
4
2.9 (a)
The
Subscriber consents to the placement of a legend on any certificate evidenc-ing
the Securities substantially as set forth below, that such Securities have
not
been regis-tered under the Securities Act or any state securities or “blue sky”
laws and setting forth or referring to the restrictions on transfer-ability
and
sale thereof contained in this Agree-ment. The Sub-xxxxxxx is aware that the
Company will make a notation in its appro-priate records and with its transfer
agent with respect to the restrictions on the transfer-ability of the
Securities.
THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT
OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR UNDER THE SECURITIES LAWS OF ANY
STATE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED OF
IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
THE
SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL
IN
FORM, SUBSTANCE AND SCOPE REASONABLY SATISFACTORY TO THE COMPANY, THAT
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER THE SECURITIES
ACT.
(b)
In
connection with the re-sale of the shares of Common Stock sold pursuant to
this
Agreement (and the shares of Common Stock issuable upon the exercise of the
Warrants) pursuant to an effective registration statement (as contemplated
by
Article VI hereof) where Subscriber is listed as a “selling stockholder”, upon
receipt of legal opinion in a form reasonably acceptable to the Company as
well
as required supporting documentation (appropriate broker’s and Seller’s
representation letter, etc.), the Company shall cause its transfer agent to
promptly remove the legend set forth above, but only with respect to the number
of shares actually being sold and any certificate issued for shares not sold
pursuant to such effective registration statement shall contain the legend
set
forth above.
2.10 The
Subscriber agrees to supply the Company, as soon as practical but in no event
later than five days after the Subscriber receives the request therefore from
the Company, with such additional information concerning the Subscriber as
the
Company reasonably deems necessary or advisable.
2.11 The
Subscriber hereby represents and warrants (i) that the address of the Subscriber
furnished by Subscriber on the signa-ture page hereof is the Subscriber’s
principal busi-ness address (ii) the Subscriber has full right, power, authority
and capacity (corporate, personal, statutory and other-wise) to execute,
deliver, and perform this Agreement and to purchase the Securities and has
taken
all action necessary to authorize the execution, delivery and performance of
this Agreement; and (iii) this Agreement constitutes the legal, valid and
binding obligation of the Subscriber, enforce-able against the Subscriber in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors’ and contracting parties’ rights generally and except as
enforceability may be subject to limitations of public policy, general
principals of equity (regardless of whether such enforceability is considered
at
law or equity).
5
2.12 If
the
Subscriber is a corporation, partnership, limited liability company, trust,
employee benefit plan, individual retire-ment account, Xxxxx Plan, or other
entity (a) it is authorized and qualified to become a Subscriber in the Company
and the Person signing this Agreement on behalf of such entity has been duly
authorized by such entity to do so and (b) it is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization.
2.13 The
Subscriber acknowledges that if it is a Registered Representa-tive of a National
Association of Securities Dealers, Inc. (“NASD”)
member
firm, it must give such firm the notice required by the NASD Rules of Fair
Practice, receipt of which must be acknowl-edged in accordance with such
rules.
2.14 The
Subscriber understands, acknowledges and agrees with the Company that, there
can
be no assurance that the Subscriber will be able to sell or dispose of the
Securities. It is understood that in order not to jeopardize the Offering’s
exempt status under Section 4(2) of the Securities Act and Regulation D, in
addition to any other restrictions on transfer set forth herein, the Company
may, at a minimum, require any transferee to fulfill the Subscriber suitability
requirements thereunder and make the representations, warranties and covenants
of Subscriber hereunder.
2.15
The
Subscriber understands, acknowledges and agrees with the Company that, except
as
otherwise set forth herein, the Subscription hereunder is irrevocable by the
Subscriber, that, except as required by law, the Subscriber is not entitled
to
cancel, terminate or revoke this Agreement or any agreements of the Subscriber
hereunder and that this Agreement and such other agreements shall be binding
upon and inure to the benefit of the parties and their heirs, executors,
administrators, successors, legal representatives and permitted assigns.
2.16
The
Subscriber agrees that during the period from the date that Subscriber was
first
contacted with respect to the sale of the Securities contemplated by this
Agreement (the “First
Date”)
through the effective date of the registration statement filed by the Company
pursuant to Section 6.2 hereof, the Subscriber will not directly or indirectly,
through related parties, affiliates or otherwise sell "short" or "short against
the box" (as those terms are generally understood) any equity security of the
Company or take any action with respect to any equity security of the Company
which would violate the Securities Act or the rules and regulations promulgated
thereunder and from the First Date through the Closing has not and will not
take
any action the intent or reasonably foreseeable effect of which is to reduce
the
trading price of the Common Stock.
6
2.17 Each
Subscriber represents and warrants that, except as otherwise disclosed on
Schedule 2.17 hereto, from the First Date up through the execution of this
Agreement, the Subscriber did not, directly or indirectly, execute and Short
Sales (as defined below) or engage in any other trading in the Common Stock
or
any derivative security thereof. The term “Short Sales” means all “short sales”
as defined in Rule 200 of Regulation SHO promulgated under the Exchange Act.
2.18 If
the
Subscriber is purchasing the Securities in a fiduciary capacity for another
Person or entity, including without limitation a corporation, partnership,
trust
or any other entity, the Subscriber has been duly authorized and empowered
to
execute this Agreement and all other subscription documents, and such other
Person or entity fulfills all the requirements for purchase of the shares as
such requirements are set forth herein, concurs in the purchase of the
Securities and agrees to be bound by the obligations, representations,
warranties and covenants contained herein. Upon request of the Company, the
Subscriber will provide true, complete and current copies of all relevant
documents creating the Subscriber, authorizing its investment in the Company
and/or evidencing the satisfaction of the foregoing.
2.19 No
authorization, approval, consent or license of any person is required to be
obtained for the purchase of the Securities
by
the
Subscriber, other than as have been obtained and are in full force and effect.
The execution and delivery of this Agreement does not, and the consummation
of
the transactions contemplated hereby will not, result in any violation of or
constitute a default under Subscriber’s charter, bylaws or other organizational
documents, as applicable, or material agreement or other instrument to which
the
Subscriber is a party or by which the Subscriber or any of its properties are
bound, or to the best of the Subscriber’s knowledge, any permit, franchise,
judgment, order, decree, statute, rule or regulation to which the Subscriber
or
any of its businesses or properties is subject.
2.20 The
representations, warranties and agreements of the Subscriber contained herein,
in the Confidential Subscriber Questionnaire and in any other writing delivered
in connection with the transactions contemplated hereby shall be true and
correct in all respects on and as of the Closing as if made on and as of such
date and shall survive the execution and delivery of this Agreement and the
purchase of the Securities. Subscriber agrees to notify the Company as promptly
as possible of any change in any of the foregoing information until such time
as
the Subscriber has sold all of its Securities.
2.21 The
Subscriber hereby covenants with the Company not to make any sale of the Common
Stock under the Registration Statement without causing the prospectus delivery
requirement under the Securities Act to be satisfied, and further agrees to
comply with reasonable requests of the Company or its transfer agent to provide
additional information and representations concerning such sale.
7
2.22 Subscriber
acknowledges the following disclosure, which is set forth herein as required
pursuant to Section 25102(a) of the California Corporate Securities Law of
1968:
“THE
SALE
OF THE COMMON STOCK THAT IS THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED
WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE
ISSUANCE OF THE COMMON STOCK OR THE PAYMENT OR RECEIPT OF ANY PART OF THE
CONSIDERATION THEREFOR PRIOR TO THE QUALIFICATION IS UNLAWFUL, UNLESS THE SALE
OF THE COMMON STOCK IS EXEMPT FROM THE QUALIFICATION BY SECTION 25100, 25102,
OR
25105 OF THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS
AGREEMENT ARE EXPRESSLY CONDITIONED UPON THE QUALIFICATION BEING OBTAINED,
UNLESS THE SALE IS SO EXEMPT.”
2.23 Neither
the Subscriber nor any of its Affiliates are an adverse party to the Company
in
any lawsuit involving the Company.
III. REPRESENTATIONS,
WARRANTIES AND COVENANTS BY AND OF THE COMPANY
The
Company hereby represents and warrants to each Subscriber,
except
as
set forth on a Schedule of Exceptions (the “Schedule
of Exceptions”)
furnished to Subscriber prior to execution hereof and attached hereto as Exhibit
A, that as of the Closing:
3.1 Organization,
Good Standing and Qualifica-tion; Subsidiaries.
(a) The
Company is a corporation duly incorporated, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has full
corporate power and authority to conduct its business as currently conducted.
The Company is not in violation of any of the provisions of its certificate
of
incorporation or bylaws, except to the extent that any such violation would
not
be reasonably likely to result in a Material Adverse Effect (as defined below).
The Company is duly qualified as a foreign corporation to do business and is
in
good standing in every jurisdiction in which the property owned or leased by
it
or the nature of the business conducted by it makes such qualification
necessary, except to the extent that the failure to be so qualified or in good
standing would not reasonably be expected to have, individually or in the
aggregate, (i) a material adverse effect on the legality, validity or
enforceability of this Agreement, (ii) a material adverse effect on the
Company’s ability to perform in any material respect on a timely basis its
obligations under this Agreement; or (iii) a material adverse effect on the
business, operations, condition (financial or otherwise), assets, or results
of
operations of the Company as a whole (any of (i), (ii) or (iii), a “Material
Adverse Effect”).
(b) The
Company has no direct or indirect Subsidiaries (as defined below) other than
those listed in the SEC Reports (as defined below). Except as disclosed in
the
SEC Reports and as disclosed on Schedule 3.1(b), the Company owns, directly
or
indirectly, all of the capital stock or comparable equity interests of each
Subsidiary free and clear of any and all Liens (as defined below), and all
the
issued and outstanding shares of capital stock or comparable equity interests
of
each Subsidiary are validly issued and are fully paid, non-assessable and free
of preemptive and similar rights. The term “Subsidiary”
means
any “significant Subsidiary” as defined in Rule 1-02(w) of the Regulation S-X
promulgated by the Commission under the Exchange Act.
8
3.2 Capitalization.
(a)
The
authorized capital stock of the Company consists of 120,000,000 shares of common
stock, of which 87,895,332 shares were issued and outstanding as of June 30,
2006, and 5,000,000 shares of preferred stock, none of which are issued or
outstanding. All of the securities issued by the Company have been issued in
accordance with all applicable federal and state securities laws. Except as
set
forth on Schedule 3.2 hereof, there are no other options, warrants, calls,
rights, commitments or agreements of any character to which the Company is
a
party or by which either the Company is bound or obligating the Company to
issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered,
sold, repurchased or redeemed, any shares of the capital stock of the Company
or
obligating the Company to grant, extend or enter into any such option, warrant,
call, right, commitment or agreement. Except as set forth on Schedule 3.2
hereof, there are no preemptive rights or rights of first refusal or similar
rights which are binding on the Company permitting any Person to subscribe
for
or purchase from the Company shares of its capital stock pursuant to any
provision of law, the Company’s Certificate of Incorporation as in effect on the
date hereof (the “Certificate
of Incorporation”)
or the
Company’s By-laws, as in effect on the date hereof (the “By-laws”)
or by
agreement or otherwise. Except as set forth on Schedule 3.2 hereof, there are
no
securities or instruments (including, without limitation, any warrants or
convertible debentures) containing anti-dilution or similar provisions that
will
be triggered by the issuance of the Common Stock as described in this Agreement.
(b)
The
Common Stock and Warrants to be issued at the Closing, and the Common Stock
issuable upon exercise of the Warrants issued at the Closing have been duly
authorized and, when issued, delivered and paid for in the manner set forth
in
this Agreement and the Warrants, will be duly authorized, validly issued, fully
paid and non-assessable and free and clear of all Liens (as defined below)
imposed by the Company other than restrictions on transfer provided for in
this
Agreement or by applicable law. For purposes hereof, “Liens”
shall
mean and include security interests, mortgages, liens, pledges, charges,
easements, reservations, restrictions, rights of way, servitudes, options,
rights of first refusal, community property interests, equitable interests,
restrictions of any kind and all other encumbrances, whether or not relating
to
the extension of credit or the borrowing of money.
3.3 Authorization;
Enforceability.
The
Company has all requisite corporate right, power and authority to enter into
this Agreement and to consummate the transactions contemplated hereby. All
corporate action on the part of the Company, its directors and stockholders
necessary for the authorization, execution, delivery and performance of this
Agreement by the Company, the authorization, sale, issuance and delivery of
the
Securities contemplated herein and the performance of the Company’s obligations
hereunder has been taken (other than filings as may be required to be made
with
the Commission, the NASD and AMEX and with any state or foreign blue sky or
securities regulatory authority, which filings will be made on or prior to
the
Closing or, for those filings which by their terms may be made post-Closing,
such filings will be made post-Closing within the time period prescribed for
such filings). This Agreement has been duly executed and delivered by the
Company and constitutes a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors’ and contracting
parties’ rights generally and except as enforceability may be subject to
limitations of public policy, general principals of equity (regardless of
whether such enforceability is considered at law or equity) and except as the
indemnification agreements of the Company in Section 6.7 hereof may be legally
unenforceable.
9
3.4 No
Conflict; Governmental and Other Consents.
(a) The
execution and delivery by the Company of this Agreement and the consumma-tion
of
the transactions contemplated hereby will not result in the violation of any
law, statute, rule, regulation, order, writ, injunction, judgment or decree
of
any court or governmental authority to or by which the Company or any Subsidiary
is bound, or of any provision of the Certificate of Incorporation or By-laws
of
the Company or any Subsidiary, and will not conflict with, or result in a breach
or violation of, any of the terms or provisions of, or constitute (with due
notice or lapse of time or both) a default under, any lease, loan agreement,
mortgage, security agreement, trust indenture or other agreement or instrument
to which the Company or any Subsidiary is a party or by which it is bound or
to
which any of its properties or assets is subject, nor result in the creation
or
imposition of any lien upon any of the properties or assets of the Company
or
any Subsidiary where such violation, breach, default or imposition is reasonably
likely to result in a Material Adverse Effect.
(b) Except
as
set forth on Schedule 3.4(b), no consent, approval, authorization or other
order
of any federal, state, local or other governmental authority or other
third-party is required to be obtained by the Company or any Subsidiary in
connection with the authorization, execution and delivery of this Agreement
or
with the authorization, issue and sale of the Securities, except such filings
as
may be required to be made with the Commission, the NASD and AMEX and with
any
state or foreign blue sky or securities regulatory authority, which filings
will
be made on or prior to the Closing or, for those filings which by their terms
are to be made post-Closing, such filings will be made post-Closing within
the
time period prescribed for such filings.
3.5 Litigation.
Other
than as disclosed in the SEC Reports, there is no pending or, to the actual
knowledge of the Company, threatened legal or governmental proceedings to which
the Company is a party which is reasonably expected to result in a Material
Adverse Effect or which would or might reasonably be expected to materially
adversely affect the Company’s ability to perform its obligations under this
Agreement. Neither the Company, nor any director or officer thereof, is or
has
been the subject of any Action involving a claim of violation of or liability
under federal or state securities laws or a claim of breach of fiduciary duty,
except as disclosed in the SEC Reports. There has not been, and to the knowledge
of the Company, there is not pending or contemplated, any official investigation
by the Commission involving the Company or any current director or officer
of
the Company. The Company has not received any stop order or other order
suspending the effectiveness of any registration statement filed by the Company
under the Exchange Act or the Securities Act.
10
3.6 SEC
Reports.
The
Company has filed all reports, schedules, forms, statements and other documents
required to be filed by it under the Securities Act and the Exchange Act,
including pursuant to Section 13(a) or 15(d) of the Exchange Act, for the
one-year period preceding the date hereof (or such shorter period as the Company
was required by law to file such material) (the foregoing materials, including
the exhibits thereto and documents incorporated by reference therein, being
collectively referred to herein as the “SEC Reports”) on a timely basis or has
received a valid extension of such time of filing and has filed any such SEC
Reports prior to the expiration of any such extension. Except to the extent
of
any subsequent correction filed prior to the date hereof (and a copy of which
has been heretofore provided to the Purchasers), as of their respective dates,
the SEC Reports complied in all material respects with the requirements of
the
Securities Act and the Exchange Act, as applicable, and the rules and
regulations of the Commission promulgated thereunder, and none of the SEC
Reports, when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary
in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of the Company included
in the SEC Reports, as subsequently amended and restated (provided such
amendments, if any, have been heretofore provided to the Subscribers), complied
in all material respects with applicable accounting requirements and the rules
and regulations of the Commission with respect thereto as in effect at the
time
of filing. Such financial statements have been prepared in accordance with
United States generally accepted accounting principles applied on a consistent
basis during the periods involved (“GAAP”),
except as may be otherwise specified in such financial statements or the notes
thereto and except that unaudited financial statements may not contain all
footnotes required by GAAP, and fairly present in all material respects the
financial position of the Company as of and for the dates thereof and the
results of operations and cash flows for the periods then ended, subject, in
the
case of unaudited statements, to normal, immaterial, year-end audit
adjustments.
3.7 Investment
Company.
The
Company is not, and will not after the consummation of the offering of the
Securities contemplated by this Agreement be, an “investment company” or an
Affiliate of an “investment company” within the meaning of such term under the
Investment Company Act of 1940, as amended.
3.8 Intellectual
Property.
Except
as set forth in the SEC Reports, the Company owns or possesses adequate and,
to
its knowledge, enforceable rights to use all material patents, patent
applications, trademarks, service marks, trade names, logos, corporate names,
copyrights, trade secrets, processes, mask works, licenses, inventions,
formulations, technology and know-how and other intangible property currently
used in the conduct of its business (the "Proprietary
Rights").
Except as set forth in the SEC Reports, the Company has taken commercially
reasonable measures to protect all of the Company’s Proprietary Rights. Except
as set forth in the SEC Reports, the Company has not received any notice of,
and
there are not any facts known to the Company which indi-cate the existence
of
(i) any infringe-ment or mis-appro-pria-tion by any third party of any of the
Proprietary Rights, which infringement or mis-appro-pria-tion would reasonably
be expected to have a Material Adverse Effect, (ii) any claim by a third party
contesting the validity of any of the Propriet-ary Right-s, other than claims
that would not reasonably be expected to have a Material Adverse Effect or
(iii)
any infringement, misappropriation or violation by the Company or any Subsidiary
or, to the Company’s knowledge, any of their employ-ees, of any Propriet-ary
Rights of third parties that would be reasonably expected to have a Material
Adverse Effect. Except as set forth in the SEC Reports, to the Company's
knowledge, no infringe-ment, illicit copying, misappropriation or xxxxx-tion
of
any intellectual property rights of any third party has occurred by the Company
with respect to any products currently being sold by the Company or with respect
to any products current-ly under develop-ment by the Company or with respect
to
the conduct of the business of the Company as currently conducted. Except as
set
forth in the SEC Reports, to the Company's knowledge, no infringe-ment, illicit
copying, misappropriation or xxxxx-tion of any intellectual property rights
of
any third party will occur by the Company as a result of the sale by the Company
of any products current-ly under develop-ment by the Company should such
products receive the applicable regulatory approval for commercial sale. Except
as set forth in the SEC Reports, the Company is not aware that any of its
employees are obligated under any contract (including licenses, cove-nants
or
commit-ments of any nature) or other agreement, or subject to any judg-ment,
decree or order of any court or adminis-trative agency, that the Company
believes would materially interfere with the use of the employee's best efforts
to promote the interests of the Company or that would conflict with the
busi-ness of the Company as currently conducted. To the Company's knowl-edge,
neither the execution and delivery of this Agree-ment, nor the carry-ing on
of
the business of the Company by the employ-ees of the Company, nor the conduct
of
the business of the Company, as currently conducted, will conflict with or
result in a breach of the terms, condi-tions or provisions of, or constitute
a
default under, any contract, covenant or instrument under which any such
employee is now obli-gated.
11
3.9 Private
Offering.
Neither
the Company nor any Person acting on the Company’s behalf has sold, offered to
sell or solicited any offer to buy the Securities by means of any form of
general solicitation or advertising. Neither the Company, any of its Affiliates
nor any Person acting on the Company's behalf has, directly or indirectly,
at
any time within the past six months, made any offer or sale of any security
or
solicitation of any offer to buy any security under circumstances that would
eliminate the availability of the exemption from registration under Regulation
D
under the Securities Act in connection with the offer and sale of the Securities
as contemplated hereby.
3.10 Transactions
With Officers and Directors.
Except
as set forth in the SEC Reports, none of the officers or directors of the
Company is presently a party to any transaction with the Company (other than
for
services as officers or directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by, providing for
rental of real or personal property to or from, or otherwise requiring payments
to or from any officer or director, or to the knowledge of the Company, any
entity in which any officer or director has a substantial interest or is an
officer, director, trustee or partner, in each case in excess of $60,000 other
than (i) for payment of salary or consulting fees for services rendered, (ii)
reimbursement for expenses incurred on behalf of the Company and (iii) for
other
employee benefits, including stock option agreements under any stock option
plan
of the Company.
12
3.11 Xxxxxxxx-Xxxxx;
Internal Accounting Controls.
The
Company is in compliance with all provisions of the Xxxxxxxx-Xxxxx Act of 2002
which are applicable to it as of the Closing Date except where the failure
to
comply would no be reasonably likely to result in a Material Adverse Effect.
The
Company has established disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and designed (or
caused to de designed) such disclosure controls and procedures to ensure that
material information relating to the Company was made known to the certifying
officers by others within those entities, during the period in which the
Company’s most recently filed periodic report under the Exchange Act was
prepared. The Company’s certifying officers have evaluated the effectiveness of
the Company’s disclosure controls and procedures as of the end of the period
covered by the Company’s most recently filed periodic report under the Exchange
Act (the “Evaluation
Date”).
The
Company disclosed in its most recently filed periodic report under the Exchange
Act the conclusions of the certifying officers about the effectiveness of the
disclosure controls and procedures based on their evaluations as of the
Evaluation Date. Since the Evaluation Date, there have been no significant
changes in the Company’s internal controls (as such term is defined in Item
307(b) of Regulation S-K under the Exchange Act).
3.12 Brokers,
Etc.
Neither
the Company nor any of its officers has retained any broker, financial advisor
or consultant, finder, placement agent, investment banker, bank or other Person
with respect to the transactions contemplated by this Agreement other than
RBC
Capital Markets (“RBC”);
provided, however, the Company is subject to the terms of that certain
engagement letter, dated as of December 16, 2005, by and between the Company
and
Paramount BioCapital.
3.13 Listing
Requirements.
The
Company’s Common Stock is registered pursuant to Section 12(g) of the Exchange
Act, and the Company has taken no action designed to, or which to its knowledge
is likely to have the effect of, terminating the registration of the Common
Stock under the Exchange Act nor has the Company received any notification
that
the Commission is contemplating terminating such registration. Except as set
forth on Schedule 3.13 hereof, the Company has not, in the 12 months preceding
the date hereof, received notice from the AMEX to the effect that the Company
is
not in compliance with the listing or maintenance requirements of the AMEX.
The
issuance and sale of the shares of Common Stock under this Agreement does not
contravene the rules and regulations of the AMEX, and no approval of the
shareholders of the Company thereunder is required for the Company to issue
and
deliver to the Subscribes the shares of Common Stock sold under this
Agreement.
3.14 Representations
Complete.
None of
the representations or warranties made by the Company in this Agreement (except
as modified by the SEC Reports taken as a whole and the Schedule Exceptions)
contains any untrue statement of a material fact, or omits to state any material
fact necessary in order to make the statements contained herein or therein,
in
the light of the circumstances under which made, not misleading. No event or
circumstance has occurred or information exists with respect to the Company
or
its business, properties, prospects, operations or financial conditions, which,
under applicable law, rule or regulation, requires public disclosure or
announcement by the Company but which has not been so publicly announced or
disclosed.
13
3.15 Material
Changes.
Since
March 31, 2006, except as disclosed in the SEC Reports and as set forth in
Section 3.15 of the Disclosure Schedule, (i) there has been no event, occurrence
or development that has had a Material Adverse Effect, (ii) the Company has
not
incurred any liabilities (contingent or otherwise) other than (A) trade payables
and accrued expenses incurred in the ordinary course of business, (B)
liabilities not required to be reflected in the Company’s financial statements
pursuant to GAAP or required to be disclosed in filings made with the Commission
and (C) expenses incurred in connection with the transactions contemplated
hereunder, (iii) the Company has not altered its method of accounting, (iv)
the
Company has not declared or made any dividend or distribution of cash or other
property to its stockholders or purchased, redeemed or made any agreements
to
purchase or redeem any shares of its capital stock (other than the repurchase
at
cost of shares of unvested or restricted stock as permitted under the Company’s
stock option or stock purchase plan upon termination of employment or service)
and (v) the Company has not issued any equity securities to any officer,
director or Affiliate, except pursuant to existing Company stock purchase or
stock option plans.
3.16 Form
S-3 Eligibility.
The
Company is eligible to register the Common Stock for resale by the Subscribers
using a registration statement on Form S-3 promulgated under the Securities
Act.
3.17 Reasonably
Equivalent Value.
The
Board of Directors has determined (after internal review and discussions with
its advisors) that the terms of the Shares offered hereunder represent the
reasonably equivalent value with respect to the sale of the Shares. This
Agreement and the transactions contemplated thereby were the result of arms'
length negotiations among the Company and each of the Subscribers.
3.18 Tax
Status.
Except
for matters that would not, individually or in the aggregate, reasonably be
likely to have a Material Adverse Effect, the Company has filed all necessary
federal, state and foreign income and franchise tax returns and has paid or
accrued all taxes shown as due thereon, and the Company has no knowledge of
a
material tax deficiency which has been asserted or threatened against the
Company.
3.19 Foreign
Corrupt Practices.
Neither
the Company, nor to the knowledge of the Company, any agent or other person
acting on behalf of the Company, has (i) directly or indirectly, used any funds
for unlawful contributions, gifts, entertainment or other unlawful expenses
related to foreign or domestic political activity, (ii) made any unlawful
payment to foreign or domestic government officials or employees or to any
foreign or domestic political parties or campaigns from corporate funds, (iii)
failed to disclose fully any contribution made by the Company (or made by any
person acting on its behalf of which the Company is aware) which is in violation
of law or (iv) violated in any material respect any provision of the Foreign
Corrupt Practices Act of 1977, as amended.
14
3.20 Certain
Registration Matters.
Assuming the accuracy of each of the Subscriber’s representations and
warranties, the offer and sale of the Securities by the Company to the
Subscribers under this Agreement is exempt from the registration requirements
of
the Securities Act. Except as described in Schedule 3.20, the Company has not
granted or agreed to grant to any Person any rights (including “piggy back”
registration rights) to have any securities of the Company that are currently
outstanding registered with the Commission or any other governmental authority
that have not been satisfied.
IV. TERMS
OF SUBSCRIPTION; CONDITIONS TO OBLIGATIONS OF THE COMPANY
4.1 The
Company’s obligation to complete the sale and issuance of the Common Stock and
the Warrants and deliver the Common Stock and the Warrants to the Subscriber
at
the Closing shall be subject to the following conditions, any one or more of
which may be waived in writing by the Company:
(a)
Receipt
of Purchase Price.
The
Company shall have received the full amount of the purchase price for the Common
Stock being purchased hereunder at the Closing the in United States dollars
and
in immediately available funds, by wire transfer to the account or accounts
designated by the Company for such purposes as set forth on Schedule I hereto.
(b) Representations
and Warranties Correct; Covenants.
The
representations, warranties, and acknowledgements made by the Subscriber in
this
Agreement shall be true and correct when made and shall be true and correct
on
and as of the Closing, and all undertakings, agreements and covenants of the
Subscriber required to be fulfilled prior to the Closing shall have been
performed or complied with.
(c) Questionnaire.
Each
Subscriber shall have completed, executed and delivered to the Company the
Confidential Subscriber Questionnaire set forth in Article VIII of this
Agreement, which Questionnaire shall be true and correct as of the Closing
and
shall be satisfactory to the Company in its sole discretion.
(d) No
Legal Order Pending.
There
shall not then be in effect any legal or other order enjoining or restraining
the transactions contemplated by this Agreement.
(e) No
Law
Prohibiting or Restricting Sale.
The
sale of the Common Stock and the Warrants shall not be prohibited or restricted
by any applicable law, regulation or governmental order.
V. CONDITIONS
TO OBLIGATIONS OF THE SUBSCRIBER
5.1 Subscriber’s
obligations to purchase the Common Stock and the Warrants at the Closing is
subject to the fulfillment on or prior to the Closing of the following
conditions, any or all of which conditions may be waived in writing by each
Subscriber to the extent permitted by law:
15
(a) Representations
and Warranties Correct; Survival.
The
representations and warranties made by the Company in Article III hereof shall
be true and correct in all material respects when made (except for such
representations and warranties that are qualified by their terms by a reference
to materiality, which representations and warranties as so qualified shall
be
true and correct in all respects and for any representation or warranty that
speaks as of a specific date, which shall be true and correct in all material
respects as of such date), and shall be true and correct in all material
respects on the Closing with the same force and effect as if they had been
made
on and as of the Closing (except for any representation or warranty that speaks
as of a specific date, which shall be true and correct in all material respects
as of such date). The representations and warranties made by the Company in
Article III hereof shall survive until the first anniversary of the
Closing.
(b) Covenants.
All
covenants, agreements and conditions contained in this Agreement to be performed
by the Company on or prior to the Closing shall have been performed or complied
with in all material respects.
(c) No
Legal Order Pending.
There
shall not then be in effect any legal or other order enjoining or restraining
the transactions contemplated by this Agreement.
(d) No
Law
Prohibiting or Restricting Sale.
There
shall not be in effect any law, rule or regulation prohibiting or restricting
such sale or requiring any consent or approval of any person which shall not
have been obtained to issue the Common Stock (except as otherwise provided
in
this Agreement).
(e) Legal
Opinion.
Counsel
for the Company, O’Melveny & Xxxxx LLP shall have furnished to the
Subscriber, an opinion, dated as of the date of the Closing, in the form
previously provided to RBC, addressed to each of the Subscribers and
RBC.
(f) Filing
of Listing Notice.
The
Company shall have filed the required notice with AMEX to sell the Securities
pursuant to this Agreement.
VI. REGISTRATION
RIGHTS
6.1 As
used
in this Agreement, the following terms shall have the following
meanings:
(a) “Business
Day”
shall
mean a day Monday through Friday on which banks are generally open for business
in New York, New York.
(b) “Holder”
shall
mean the Subscriber and any Person holding Registrable Securities or any person
to whom the rights under Article VI have been transferred in accordance with
Section 6.10 hereof.
16
(c) The
term
“Prospectus”
means
the prospectus included in a Registration Statement (including, without
limitation, a prospectus that includes any information previously omitted from
a
prospectus filed as part of an effective registration statement in reliance
upon
Rule 430A promulgated under the Securities Act), as amended or supplemented
by
any prospectus supplement, with respect to the terms of the offering of any
portion of the Registrable Securities covered by such Registration Statement,
and all other amendments and supplements to the Prospectus, including
post-effective amendments, and all material incorporated by reference or deemed
to be incorporated by reference in such Prospectus.
(d) The
terms
“register,”
“registered”
and
“registration”
refer
to the registration effected by preparing and filing a registration statement
in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
(e) “Registrable
Securities”
shall
mean the Common Stock sold pursuant to this Agreement and the shares of Common
Stock issuable upon the exercise of the Warrants; provided,
however,
that
such Common Stock shall only be treated as Registrable Securities if and only
for so long as they (A) have not been disposed of pursuant to a registration
statement declared effective by the Commission; (B) have not been sold in a
transaction exempt from the registration and prospectus delivery requirements
of
the Securities Act so that all transfer restrictions and restrictive legends
with respect thereto are removed upon the consummation of such sale; (C) are
held by a Holder or a permitted transferee pursuant to Section 6.10; or (D)
have not become eligible for sale pursuant to Rule 144(k) (or any successor
thereto) under the Securities Act.
(f) “Registration
Expenses”
shall
mean all expenses incurred by the Company in complying with Section 6.2
hereof, including, without limitation, all registration, qualification and
filing fees, printing expenses, escrow fees, fees and expenses of counsel for
the Company, blue sky fees and expenses and the expense of any special audits
incident to or required by any such registration, and the reasonable fees and
expenses of one legal counsel for all Holders in connection with the
Registration Statement, not to exceed $3,000.
(h) “Selling
Expenses”
shall
mean all underwriting discounts and selling commissions applicable to the sale
of Registrable Securities and all fees and expenses of legal counsel and other
advisors for any Holder, except for the fees and expenses of such legal counsel
of the Holders as is set forth in the definition of “Registration Expenses”
above.
6.2 Subject
to the terms herein, the Company will, as soon as practicable following the
Closing but not later than 60 days following the Closing (the “Filing
Date”),
(a)
subject to receipt of necessary information from, and reasonable cooperation
by,
the Holder, file a registration statement with the SEC (the “Registration
Statement”)
on the
appropriate form to allow the resale of the Registrable Securities, and use
its
reasonable best efforts, subject to receipt of necessary information from,
and
reasonable cooperation by, the Holder, to have such Registration Statement
declared effective by the SEC prior to the date which is 90 days after the
Filing Date; and (b) subject to Section 6.8 hereof, cause such Registration
Statement to remain effective (the “Registration
Period”)
until
the earlier of (i) such date as the holders of the Registrable Securities have
completed the distribution described in the Registration Statement and (ii)
at
such time that such Registrable Securities have become eligible for sale
pursuant to Rule 144(k) (or any successor thereto) under the Securities Act.
Thereafter, the Company shall be entitled to withdraw the Registration Statement
and the Holders shall have no further right to offer or sell any of the Common
Stock pursuant to the Registration Statement. To the extent permissible, such
Registration Statement also shall cover, to the extent allowable under the
Securities Act and the rules promulgated thereunder (including Rule 416 under
the Securities Act), such indeterminate number of additional shares of Common
Stock resulting from stock splits, stock dividends or similar transactions
with
respect to the Registrable Securities.
17
6.3 Should
(a) the Company fail to file the Registration Statement by the Filing Date
for
any reason, (b) the Registration Statement not be declared effective by the
SEC
within 90 days after the Filing Date for any reason, or (c) the Registration
Statement be filed and declared effective, but the effectiveness of such
Registration Statement be suspended for any reason for more than an aggregate
of
90 days (whether consecutive or non-consecutive) in the aggregate during any
12-month period during the Registration Period (each a “Registration Default”),
then the Company will issue each Subscriber (on a pro-rata basis), as liquidated
damages and not as a penalty, a warrant, with the same terms and conditions,
included exercise price, as the Warrants, to purchase a number of shares of
Common Stock equal to 1% of the shares of Common Stock issued to Subscribers
pursuant to this Agreement for each 30 day period during which a Registration
Default continues beyond the aforementioned periods up to a maximum in
liquidated damages of no more than 5% of such shares of Common Stock issued
to
Subscribers pursuant to this Agreement for all Registration Defaults in the
aggregate, and no further liquidated or other damages will be owed pursuant
to
this provision or pursuant to this Agreement; provided, however, that for
purposes of this Section 6.3, no day shall be counted for purposes of this
Section 6.3 on which performance of the Company is prevented by reason of
closure or other unavailability of the SEC or U.S. federal government due to
weather, attack, war or other act of God.
6.4 All
Registration Expenses incurred in connection with any registration,
qualification, exemption or compliance pursuant to Section 6.2 shall be borne
by
the Company. All Selling Expenses relating to the sale of the Common Stock
registered by or on behalf of the Holder shall be borne by such
Holder.
6.5 In
the
case of the registration, qualification, exemption or compliance effected by
the
Company pursuant to this Agreement, the Company shall, upon reasonable request,
inform each Holder as to the status of such registration, qualification,
exemption and compliance. At its expense the Company shall:
(a) Not
less
than four trading days prior to the filing of a Registration Statement or any
related prospectus or any amendment or supplement thereto, the Company shall
furnish to the Holders copies of the “Selling Stockholders” section of such
document, the “Plan of Distribution” and any risk factor contained in such
document that addresses the transactions contemplated by this Agreement or
the
Holders, as proposed to be filed which documents will be subject to the review
of such Holders. The Company shall not file a Registration Statement or any
such
prospectus or any amendments or supplements thereto that does not contain the
disclosure listing such Holder as a “Selling Stockholder” except to the extent
that any Holder has failed to provide all required information to the Company
within four trading days prior to such filing.
18
(b) subject
to Section 6.8 hereof, use its best efforts to keep such registration, and
any
qualification, exemption or compliance under state or federal securities laws
which the Company determines to obtain, continuously effective until the
termination of the Registration Period; and
(c) advise
the Holders as soon as practicable (and, in the case of the filing of any
registration statement or post-effective amendment thereto under (i)(A) below,
not less than three trading days prior to such filing) and (if requested by
any
such Person) confirm such notice in writing no later than one trading day
following the day:
(i) (A)
when
the Registration Statement or any amendment thereto has been filed with the
Commission and when the Registration Statement or any post-effective amendment
thereto has become effective when the Commission notifies the Company whether
there will be a “review” of such Registration Statement and whenever the
Commission comments in writing on such Registration Statement; and (B) with
respect to each Registration Statement or any post-effective amendment, when
the
same has become effective;
(ii) of
any
request by the Commission or any other federal or state governmental entity
for
amendments or supplements to the Registration Statement or the prospectus
included therein or for additional information;
(iii) of
the
issuance by the Commission of any stop order suspending the effectiveness of
the
Registration Statement or the initiation of any proceedings for such
purpose;
(iv) of
the
receipt by the Company of any notification with respect to the suspension of
the
qualification of the Registrable Securities included therein for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose; and
(v) of
the
happening of any event that requires the making of any changes in the
Registration Statement or the prospectus so that, as of such date, the
statements therein are not misleading and do not omit to state a material fact
required to be stated therein or necessary to make the statements therein (in
the case of the prospectus, in the light of the circumstances under which they
were made) not misleading;
(d) make
every reasonable effort to avoid the issuance of, or, if issued, obtain the
withdrawal of any order suspending the effectiveness of any Registration
Statement at the earliest possible time or any suspension of the qualification
(or exemption from qualification) of any of the Registrable Securities for
sale
in any jurisdiction, at the earliest practicable moment;
19
(e) at
each
Holder’s written request, furnish to each Holder, without charge, at least one
conformed copy of such Registration Statement and any post-effective amendment
thereto, including any financial statements and schedules, and, if the Holder
so
requests in writing, all exhibits (including those incorporated by reference)
in
the form filed with the Commission;
(f) during
the Registration Period, deliver to each Holder, without charge, as many copies
of the prospectus included in such Registration Statement and any amendment
or
supplement thereto as such Holder may reasonably request in writing in order
to
facilitate the public sale or other disposition of all or any of the Common
Stock by Holder; and the Company consents to the use, consistent with the
provisions hereof and applicable laws, rules or regulations, of the prospectus
or any amendment or supplement thereto by each of the selling Holders of
Registrable Securities in connection with the offering and sale of the
Registrable Securities covered by the prospectus or any amendment or supplement
thereto. In addition, upon the reasonable request of the Holder and subject
in
all cases to confidentiality protections reasonably acceptable to the Company,
the Company will meet with a Holder or a representative thereof at the Company’s
headquarters to discuss all information relevant for disclosure in the
Registration Statement covering the Registrable Securities, and will otherwise
cooperate with any Holder conducting an investigation for the purpose of
reducing or eliminating such Holder’s exposure to liability under the Securities
Act, including the reasonable production of information at the Company’s
headquarters;
(g) prior
to
any public offering of Registrable Securities pursuant to any registration
statement, register or qualify or obtain an exemption for offer and sale under
the securities or blue sky laws of such jurisdictions as any such Holders
reasonably request in writing and do any and all other reasonable acts or things
reasonably necessary or advisable to enable the offer and sale in such
jurisdictions of the Registrable Securities covered by such Registration
Statement, provided, however, that
the
Company shall not for any such purpose be required to (i) qualify to transact
business as a foreign corporation in any jurisdiction where it is not so
qualified; (ii) consent to general service of process in any such jurisdiction;
(iii) subject itself to taxation in any such jurisdiction; (iv) provide any
undertakings that cause material expense or burden to the Company; or (v) make
any change to its organizational documents which the Board of Directors of
the
Company determines to be contrary to the best interests of the Company and
its
stockholders;
(h) subject
to Section 6.8 hereof, upon the occurrence of any event contemplated by Section
6.5(b)(v) above, the Company shall promptly prepare a post-effective amendment
to the Registration Statement or a supplement to the related prospectus, or
file
any other required document so that, as thereafter promptly delivered to
purchasers of the Registrable Securities included therein, the prospectus will
not include any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and
20
(i) use
its
best efforts to comply with all applicable rules and regulations of the
Commission, and use its reasonable best efforts to make generally available
to
the Holders (which may be satisfied upon filing via XXXXX) not later than 45
days (or 90 days if the fiscal quarter is the fourth fiscal quarter) after
the
end of its fiscal quarter in which the first anniversary date of the effective
date of the Registration Statement occurs, an earnings statement satisfying
the
provisions of Section 11(a) of the Securities Act.
Notwithstanding
the foregoing, it shall be a condition precedent to the obligations of the
Company to take any action pursuant to paragraphs (a) through (i) of this
Section 6.5, that the Subscriber shall furnish to the Company such
information regarding itself, the Common Stock to be sold by the Subscriber,
and
the intended method of disposition of such Securities as shall be required
to
effect the registration of the Common Stock, all of which information shall
be
furnished to the Company in writing specifically for use in the Registration
Statement.
6.6 The
Holders shall have no right to take any action to restrain, enjoin or otherwise
delay any registration pursuant to Section 6.2 hereof as a result of any
controversy that may arise with respect to the interpretation or implementation
of this Agreement.
6.7 (a) The
Company shall, notwithstanding any termination of this Agreement, indemnify
and
hold harmless each Holder, the officers, directors, agents, investment advisors,
partners, members and employees of each of them, each Person who controls any
such Holder (within the meaning of Section 15 of the Securities Act or Section
20 of the Exchange Act) and the officers, directors, agents and employees of
each such controlling Person, to the fullest extent permitted by applicable
law,
from and against any and all damages, as incurred, arising out of or relating
to
any untrue or alleged untrue statement of a material fact contained in any
Registration Statement, any Prospectus or any form of prospectus or in any
amendment or supplement thereto or in any preliminary prospectus, or arising
out
of or relating to any omission or alleged omission of a material fact required
to be stated therein or necessary to make the statements therein (in the case
of
any Prospectus or form of prospectus or supplement thereto, in light of the
circumstances under which they were made) not misleading, except to the extent,
but only to the extent, that (1) such untrue statements or omissions are based
solely upon information regarding such Holder furnished in writing to the
Company by such Holder expressly for use therein, or to the extent that such
information relates to such Holder or such Holder’s proposed method of
distribution of Registrable Securities and was reviewed and expressly approved
in writing by such Holder expressly for use in the Registration Statement,
such
Prospectus or such form of Prospectus or in any amendment or supplement thereto
(it being understood that the Holder has approved Annex A hereto for this
purpose) or (2) in the case of an occurrence of an event of the type specified
in Section 6.5(c)(ii)-(v), the use by such Holder of an outdated or defective
Prospectus after the Company has notified such Holder in writing that the
Prospectus is outdated or defective and prior to the receipt by such Holder
of
the notice contemplated by Section 6.8(a) or an amended or supplemented
Prospectus, but only if and to the extent that following the receipt of the
notice contemplated by Section 6.8(a) or the amended or supplemented Prospectus
the misstatement or omission giving rise to such Loss would have been corrected.
The Company shall notify the Holders promptly of the institution, threat or
assertion of any Action (as defined below) of which the Company is aware in
connection with the transactions contemplated by this Agreement.
21
(b) Each
Holder will severally, and not jointly, in proportion to the respective number
of shares included by each such Holder, if Registrable Securities are included
in the securities as to which such registration, qualification or compliance
is
being effected, notwithstanding any termination of this Agreement, indemnify
and
hold harmless the Company, and each of its officers, directors, agents,
investment advisors, partners, members and employees to the fullest extent
permitted by applicable law, from and against any and all Losses, as incurred,
arising out of or relating to any untrue or alleged untrue statement of a
material fact contained in any Registration Statement, any Prospectus or any
form of prospectus or in any amendment or supplement thereto or in any
preliminary prospectus, or arising out of or relating to any omission or alleged
omission of a material fact required to be stated therein or necessary to make
the statements therein (in the case of any Prospectus or form of prospectus
or
supplement thereto, in light of the circumstances under which they were made)
not misleading, but only to the extent, that (1) such untrue statements or
omissions are based solely upon information regarding such Holder furnished
in
writing to the Company by such Holder expressly for use therein, or to the
extent that such information relates to such Holder or such Holder’s proposed
method of distribution of Registrable Securities and was reviewed and expressly
approved in writing by such Holder expressly for use in the Registration
Statement, such Prospectus or such form of Prospectus or in any amendment or
supplement thereto (it being understood that the Holder has approved Annex
A
hereto for this purpose) or (2) in the case of an occurrence of an event of
the
type specified in Section 6.5(c)(ii)-(v), the use by such Holder of an outdated
or defective Prospectus after the Company has notified such Holder in writing
that the Prospectus is outdated or defective and prior to the receipt by such
Holder of an Advice or an amended or supplemented Prospectus, but only if and
to
the extent that following the receipt of the Advice or the amended or
supplemented Prospectus the misstatement or omission giving rise to such Loss
would have been corrected. Notwithstanding anything in this Agreement to the
contrary, the liability of the Holder pursuant to this Section 6 shall not
exceed the dollar amount of the proceeds received by such Holder upon the sale
of Registrable Securities giving rise to such liability. Each Holder shall
notify the Company promptly of the institution, threat or assertion of any
Action of which the Holder is aware in connection with the transactions
contemplated by this Agreement.
22
(c) Each
party entitled to indemnification under this Section 6.7 (the “Indemnified
Party”)
shall
give notice to the party required to provide indemnification (the “Indemnifying
Party”)
promptly after such Indemnified Party has actual knowledge of any claim as
to
which indemnity may be sought, provided that the failure of any Indemnified
Party to give notice as provided herein shall not relieve the Indemnifying
Party
of its obligations under this Agreement, unless such failure is materially
prejudicial to the Indemnifying Party in defending such claim or litigation.
Subject to provisions hereinafter stated, in case any such action is brought
against any Indemnified Party and such Indemnified Party seeks or intends to
seek indemnity from an Indemnifying Party, the Indemnifying Party will be
entitled to participate in, and, to the extent that it may wish, jointly with
all other indemnifying parties similarly notified, to assume the defense thereof
with counsel reasonably satisfactory to such Indemnified Party; provided,
however, if the defendants in any such action include both the Indemnified
Party
and the Indemnifying Party, and the Indemnifying Party and the Indemnified
Party, based upon the advice of such Indemnified Party’s counsel, shall have
reasonably concluded that there may be a conflict of interest between the
positions of the Indemnifying Party and the Indemnified Party in conducting
the
defense of any such action or that there may be legal defenses available to
it
and/or other indemnified parties which are different from or additional to
those
available to the Indemnifying Party, the Indemnified Party or parties shall
have
the right to select separate counsel to assume such legal defenses and to
otherwise participate in the defense of such action on behalf of such
Indemnified Party or parties. Upon receipt of notice from the Indemnifying
Party
to such Indemnified Party of its election so to assume the defense of such
action and approval by the Indemnified Party of counsel, the Indemnifying Party
will not be liable to such Indemnified Party under this Section 6.7 for any
legal or other expenses subsequently incurred by such Indemnified Party in
connection with the defense thereof unless (i) the Indemnified Party shall
have employed such counsel in connection with the assumption of legal defenses
in accordance with the proviso to the preceding sentence (it being understood,
however, that the Indemnifying Party shall not be liable for the expenses of
more than one separate counsel, approved by such Indemnifying Party representing
the Indemnified Parties who are parties to such action, or (ii) the
Indemnifying Party shall not have employed counsel reasonably satisfactory
to
the Indemnified Party to represent the Indemnified Party within a reasonable
time after notice of commencement of action, in each of which cases the
reasonable fees and expenses of counsel shall be at the expense of the
Indemnifying Party. In no event shall any Indemnifying Party be liable in
respect of any amounts paid in settlement of any action unless the Indemnifying
Party shall have approved the terms of such settlement; provided
that such
approval shall not be unreasonably withheld.
(d) If
the
indemnification provided for in this Section 6.7 is held by a court of competent
jurisdiction to be unavailable to an Indemnified Party with respect to any
loss,
liability, claim, damage or expense referred to therein, then the Indemnifying
Party, in lieu of indemnifying such Indemnified Party thereunder, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such loss, liability, claim, damage or expense 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 in connection with the statements
or omissions or inaccuracies in the representations and warranties in this
Agreement which resulted in such loss, liability, claim, damage or expense
as
well as any other relevant equitable considerations. The relative fault of
the
Indemnifying Party and of the Indemnified Party shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission to state a material fact or the inaccurate
representation and/or warranty relates to information supplied by the
Indemnifying Party or by the Indemnified Party and the parties’ relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. Notwithstanding the foregoing, in no event shall a Holder
be liable for any such claims, losses, damages or liabilities pursuant to this
paragraph 6.7(b) in excess of the net proceeds received by such Holder in the
Offering, except in the event of fraud or intentional misrepresentation by
such
Holder.
23
6.8 (a) Notwithstanding
any other provision of this Agreement, each Holder agrees that, upon receipt
of
any notice from the Company of the happening of any event requiring the
preparation of a supplement or amendment to a prospectus relating to Registrable
Securities or the filing of an appropriate report with the SEC pursuant to
the
Exchange Act, so that, as thereafter delivered to the Holders, such prospectus
shall not contain an untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, each Holder will forthwith discontinue disposition
of
Registrable Securities pursuant to the registration statement contemplated
by
Section 6.2 until its receipt of copies of the supplemented or amended
prospectus from the Company or confirmation of the filing of such report with
the SEC by the Company, any such prospectus to be forwarded promptly to the
Subscriber by the Company, and, if so directed by the Company, each Holder
shall
deliver to the Company all copies, other than permanent file copies then in
such
Holder’s possession, of the prospectus covering such Registrable Securities
current at the time of receipt of such notice.
(b) Notwithstanding
any other provision of this Agreement, each Holder shall suspend, upon request
of the Company, any disposition of Registrable Securities pursuant to the
Registration Statement and prospectus contemplated by Section 6.2 during
any periods not to exceed 90 days in the aggregate within any one 12-month
period when the Company reasonably determines in good faith that offers and
sales pursuant thereto should not be made by reason of the presence of material
undisclosed circumstances or developments with respect to which the disclosure
that would be required in such a prospectus is premature, would have an adverse
effect on the Company or is otherwise inadvisable.
(c) As
a
condition to the inclusion of its Registrable Securities, each Holder shall
furnish to the Company such information regarding such Holder and the
distribution proposed by such Holder as the Company may reasonably request
in
writing or as shall be required in connection with any registration,
qualification or compliance referred to in this Article VI.
(d) Each
Holder hereby covenants with the Company not to make any sale of the Registrable
Securities without effectively causing the prospectus delivery requirements
under the Securities Act to be satisfied.
(e) Each
Holder acknowledges and agrees that the Registrable Securities sold pursuant
to
the Registration Statement described in this Section are not transferable on
the
books of the Company unless the stock certificate submitted to the transfer
agent evidencing such Registrable Securities is accompanied by a certificate
reasonably satisfactory to the Company to the effect that (i) the
Registrable Securities have been sold in accordance with such Registration
Statement and (ii) the requirement of delivering a current prospectus has
been satisfied.
(f) Each
Holder agrees not to take any action with respect to any distribution deemed
to
be made pursuant to such registration statement which would constitute a
violation of Regulation M under the Exchange Act or any other applicable rule,
regulation or law.
(g) At
the
end of the period during which the Company is obligated to keep the Registration
Statement current and effective as described above, the Holders of Registrable
Securities included in the Registration Statement shall discontinue sales of
shares pursuant to such Registration Statement upon receipt of notice from
the
Company of its intention to remove from registration the shares covered by
such
Registration Statement which remain unsold, and such Holders shall notify the
Company of the number of shares registered which remain unsold immediately
upon
receipt of such notice from the Company.
24
6.9 With
a
view to making available to the Holders the benefits of certain rules and
regulations of the Commission which at any time permit the sale of the
Registrable Securities to the public without registration, the Company shall
use
its reasonable best efforts to:
(a) make
and
keep public information available, as those terms are understood and defined
in
Rule 144 under the Securities Act, at all times;
(b) file
with
the Commission in a timely manner all reports and other documents required
of
the Company under the Exchange Act; and
(c) so
long
as a Holder owns any unregistered Registrable Securities, furnish to such
Holder, upon any reasonable written request, a written statement by the Company
as to its compliance with Rule 144 under the Securities Act, and of the
Exchange Act, a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents of the Company as such Holder
may
reasonably request in availing itself of any rule or regulation of the
Commission allowing a Holder to sell any such securities without
registration.
6.10 The
rights to cause the Company to register Registrable Securities granted to the
Holders by the Company under Section 6.2 may be assigned in full by a
Holder in connection with a transfer by such Holder of all of its Registrable
Securities, but only if: (i) such transfer may otherwise be effected in
accordance with applicable securities laws; (ii) such Holder gives prior
written notice of the proposed transfer to the Company including the name and
address of such transferee and a copy of the transfer documents and agreements;
(iii) such transferee agrees in writing with the Company to be bound by and
to
comply with the terms and provisions of this Agreement; (iv) the transferee
is
an “accredited investor” as that term is defined in Rule 501 of Regulation D;
and (v) such transfer is otherwise in compliance with this Agreement. Except
as
specifically permitted by this Section 6.10, the rights of a Holder with
respect to Registrable Securities as set forth herein shall not be transferable
to any other Person, the Company may impose stop transfer orders with respect
to
any such transfer or attempted transfer, and any such transfer or attempted
transfer shall be null and void.
6.11 The
Company shall use best efforts to cause all Registrable Securities covered
by a
Registration Statement to be listed on each securities exchange, interdealer
quotation system or other market on which similar securities issued by the
Company are then listed.
6.12 With
the
written consent of the Company and the Holders holding at least a majority
of
the Registrable Securities that are then outstanding, any provision of this
Article VI may be waived (either generally or in a particular instance, either
retroactively or prospectively and either for a specified period of time or
indefinitely) or amended and shall be effective against all Holders. Upon the
effectuation of each such waiver or amendment, the Company shall promptly give
written notice thereof to the Holders, if any, who have not previously received
notice thereof or consented thereto in writing.
25
6.13 If
at any
time during the Effectiveness Period there is not an effective Registration
Statement covering all of the Registrable Securities and the Company shall
determine to prepare and file with the Commission a registration statement
relating to an offering for its own account or the account of others under
the
Securities Act of any of its equity securities, other than on Form S-4 or Form
S-8 (each as promulgated under the Securities Act) or their then equivalents
relating to equity securities to be issued solely in connection with any
acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans, then the Company
shall send to each Holder written notice of such determination and, if within
fifteen days after receipt of such notice, any such Holder shall so request
in
writing, the Company shall include in such registration statement all or any
part of such Registrable Securities such holder requests to be registered,
subject to customary underwriter cutbacks applicable to all holders of
registration rights.
VII. MISCELLANEOUS
7.1 Any
notice or other communication given hereunder shall be deemed sufficient if
in
writing and sent by facsimile, with confirmation, by registered or certified
mail, return receipt requested, or delivered by hand against written receipt
therefore or sent by nationally recognized overnight express courier postage
prepaid, if to the Company: addressed to InSite Vision Incorporated, 000
Xxxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxxxx 00000, Attn: Chief Financial Officer,
Fax:
(000) 000-0000 and if to the Sub-scrib-er, at the Subscriber’s address or
facsimile number indi-cated on the signa-ture page of this Agree-ment. Notices
shall be deemed to have been given or delivered in the case of facsimile, upon
receipt of confirmation of transmission by the sender, registered or certified
mail, three days after so mailed, in the case of hand delivery, when so
delivered against written receipt therefore, and in the case of overnight
express courier, the day after mailing, except notices of change of address,
which shall be deemed to have been given or delivered when
received.
7.2 Except
as
otherwise provided above, this Agreement shall not be changed, modified or
amended except by a writing signed by the parties to be charged, and this
Agreement may not be discharged except by per-formance in accordance with its
terms or by a writing signed by the party to be charged.
7.3 This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and to their respective heirs, legal representatives, successors and assigns.
Neither the Company nor any Subscriber may assign any of their respective rights
or obligations hereunder without the prior written consent of the other party.
This Agreement sets forth the entire agreement and under-standing between the
parties as to the subject matter hereof and merges and supersedes all prior
dis-cussions, agreements and understandings of any and every nature among
them.
26
7.4 Upon
the
execution and delivery of this Agreement by the Subscriber, this Agreement
shall
become a binding obliga-tion of the Subscriber with respect to the purchase
of
the Common Stock as herein provided; subject, however, to the right hereby
reserved to the Company to enter into substantially similar agreements with
other subscribers and to add and/or delete other Persons as subscribers.
7.5 NOTWITHSTANDING
THE PLACE WHERE THIS AGREEMENT MAY BE EXECUTED BY ANY OF THE PARTIES HERETO,
THE
PARTIES EXPRESSLY AGREE THAT ALL THE TERMS AND PROVISIONS HEREOF SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. IN THE EVENT THAT A JUDICIAL
PROCEEDING IS NECESSARY, THE EXCLUSIVE FORUMS FOR RESOLVING DISPUTES ARISING
OUT
OF OR RELATING TO THIS AGREEMENT ARE EITHER THE SUPREME COURT OF THE STATE
OF
NEW YORK IN AND FOR THE COUNTY OF NEW YORK OR THE FEDERAL COURTS FOR SUCH STATE
AND COUNTY, AND ALL RELATED APPELLATE COURTS, THE PARTIES HEREBY IRREVOCABLY
CONSENT TO THE JURISDICTION OF SUCH COURTS AND AGREE TO SAID VENUE.
7.6 The
holding of any provision of this Agreement to be invalid or unenforce-able
by a
court of competent juris-diction shall not affect any other provi-sion of this
Agreement, which shall remain in full force and effect. If any provision of
this
Agreement shall be declared by a court of competent jurisdiction to be inval-id,
illegal or incapable of being enforced in whole or in part, such provision
shall
be interpreted so as to remain enforceable to the maximum extent permissible
consistent with applicable law and the remaining condi-tions and provisions
or
portions thereof shall neverthe-less remain in full force and effect and
enforceable to the extent they are valid, legal and en-forceable, and no
provisions shall be deemed dependent upon any other covenant or provision unless
so expressed herein.
7.7 It
is
agreed that a waiver by either party of a breach of any provision of this
Agreement shall not operate, or be construed, as a waiver of any subsequent
breach by that same party.
7.8 The
parties agree to execute and deliver all such further documents, agreements
and
instruments and take such other and further action as may be neces-sary or
appropriate to carry out the purposes and intent of this Agreement.
7.9 This
Agreement may be executed in two or more counter-parts each of which shall
be
deemed an origi-nal, but all of which shall together constitute one and the
same
instrument.
7.10 (a) The
Subscriber agrees not to issue any public statement with respect to its
investment or proposed investment in the Company or the terms of any agreement
or covenant between them and the Company without the Company’s prior written
consent, except such disclosures as may be required under applicable law or
under any applicable order, rule or regulation.
27
(b) The
Company agrees not to disclose the name, address or any other information about
the Subscriber, except as required by law and to satisfy its obligations under
Article VI.
7.11 The
Subscriber represents and warrants that it has not engaged, consented to nor
authorized any broker, finder or intermediary to act on its behalf, directly
or
indirectly, as a broker, finder or intermediary in connection with the
transactions contemplated by this Agreement. Subscriber hereby severally agrees
to indemnify and hold harmless the Company from and against all fees,
commissions or other payments owing to any such person or firm acting on behalf
of such Subscriber hereunder.
7.12 Each
Subscriber acknowledges that RBC is acting as a placement agent for the shares
of Common Stock being offered hereby and will be compensated by the Company
for
acting in such capacity. Each Subscriber further acknowledges that RBC has
acted
solely as agent of the Company in connection with the offering of the shares
of
Common Stock by the Company. Each Subscriber further acknowledges that the
provisions of this Section 7.12 are for the benefit of and may be enforced
by
RBC.
7.13 Nothing
in this Agreement shall create or be deemed to create any rights in any person
or entity not a party to this Agreement, except for the holders of Registrable
Securities and RBC with respect to Section 7.12.
7.14 The
Company acknowledges and agrees that irreparable damage would occur in the
event
that any of the provisions of Article VI of this Agreement were not performed
in
accordance with its specific terms or were otherwise breached and that such
damage would not be compensable in money damages and that it would be extremely
difficult or impracticable to measure the resultant damages. Accordingly, except
as otherwise specifically set forth herein, Subscriber shall be entitled to
an
injunction or injunctions with respect to the provisions of this Agreement
and
to enforce specifically the terms and provisions hereof, in addition to any
other remedy to which it may be entitled at law or in equity, and the Company
expressly waives any defense that a remedy in damages would be adequate and
expressly waives any requirement in an action for specific performance for
the
posting of a bond by the Subscriber bringing such action.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
28
VIII. CONFIDENTIAL
SUBSCRIBER QUESTIONNAIRE
The
Subscriber represents and warrants that it comes within one cate-gory marked
below, and that for any category marked it has truthfully set forth, where
applicable, the factual basis or reason the Subscriber comes within that
category. ALL INFORMATION IN RESPONSE TO THIS PARTS I-IV OF THIS QUESTIONNARE
WILL BE KEPT STRICTLY CONFIDEN-TIAL except as otherwise required by law or
as
necessary for inclusion in the Registration Statement. The undersigned agrees
to
furnish any additional information which the Company deems neces-sary in order
to verify the an-swers set forth below.
| Category A __ | The undersigned is an indi-vidual (not a part-ner-ship, corpora-tion, etc.) whose individual net worth, or joint net worth with his or her spouse, pres-ently ex-ceeds $1,000,000. | ||
| Explanation. In calculating net worth you may include equity in personal property and real es-xxxx, including your principal residence, cash, short-term in-vestments, stock and securi-ties. Equity in personal prop-erty and real estate should be based on the fair market value of such property less debt se-cured by such prop-erty. | |||
| Category B __ | The undersigned is an individual (not a part-ner-ship, corporation, etc.) who had an income in ex-cess of $200,000 in each of the two most recent years, or joint in-come with his or her spouse in excess of $300,000 in each of those years (in each case in-clud-ing foreign income, tax exempt income and full amount of capital gains and losses but excluding any in-come of other family members and any unreal-ized capital appre-cia-tion) and has a reasonable expec-tation of reaching the same in-come level in the current year. | ||
| Category C __ | The undersigned is a director or executive officer of the Compa-ny which is issuing and sell-ing the Securities. | ||
| Category D __ | The undersigned is a bank; a savings and loan associa-tion; insurance company; registered invest-ment compa-ny; registered business development company; licensed small business invest-ment company (“SBIC”); or em-ploy-ee benefit plan within the mean-ing of Title 1 of ERISA and (a) the investment decision is made by a plan fiducia-ry which is either a bank, savings and loan associ-ation, insurance company or registered invest-ment advisor, or (b) the plan has total assets in excess of $5,000,000 or (c) is a self directed plan with invest-ment decisions made solely by persons that are accred-ited investors. (describe entity) | ||
29
| Category E __ | The undersigned is a private business development company as defined in section 202(a)(22) of the Investment Advi-sors Act of 1940. (describe entity) | ||
| Category F __ | The undersigned is either a corpora-tion, part-ner-ship, Xxxxx-xxx-setts xxxx-xxxx trust, or non-profit organi-zation within the meaning of Section 501(c)(3) of the Internal Revenue Code, in each case not formed for the specif-ic purpose of acquiring the Common Stock and with total assets in excess of $5,000-,000. (describe entity) | ||
| Category G __ | The undersigned is a trust with total assets in excess of $5,000,-000, not formed for the spe-cific purpose of ac-xxxxxxx the Common Stock, where the purchase is di-rect-ed by a “sophisticated Subscriber-“ as defined in Regu-lation 506(b)(2-)(ii) under the Securities Act. | ||
| Category H __ | The undersigned is an entity (other than a trust) in which all of the equity owners are “accredited investors” within one or more of the above catego-xxxx. If relying upon this category alone, each equity owner must com-plete a sepa-rate copy of this Agre-ement. (describe entity) | ||
| Category I __ | The undersigned is not within any of the cate-go-xxxx above and is therefore not an accredited investor. | ||
The
undersigned agrees that the undersigned will notify the Company at any time
on
or prior to the Closing in the event that the representations and warranties
in
this Agreement shall cease to be true, accurate and complete.
Part
II
SUITABILITY
(please
answer each question)
(a)
For
an individual Subscriber, please describe your current employment, including
the
company by which you are employed and its principal business:
________________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________________________
30
(b)
For
an individual Subscriber, please describe any college or graduate degrees held
by you:
________________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________________________
(c)
For
all Subscribers, please state whether you have you participated in other
private
placements
before:
YES_______ NO_______
(d)
If
your answer to question (d) above was “YES”, please indicate frequency of such
prior participation in private
placements
of:
|
Public
Companies
|
Private
Companies
|
Public
or Private
Pharmaceutical Companies |
||||
| Frequently |
________
|
________
|
________
|
|||
| Occasionally |
________
|
________
|
________
|
|||
| Never |
________
|
________
|
________
|
(e)
For
trust, corporate, partnership and other institutional Subscribers, do you expect
your current level of income to significantly decrease in the foreseeable
future:
YES_______ NO_______
(f)
For
trust, corporate, partnership and other institutional Subscribers, do you expect
your total assets to significantly decrease in the foreseeable future:
YES_______ NO_______
(g)
For
all Subscribers, do you have any other investments or contingent liabilities
which you reasonably anticipate could cause you to need sudden cash requirements
in excess of cash readily available to you:
YES_______ NO_______
(h)
For
all Subscribers, are you familiar with the risk aspects and the non-liquidity
of
investments such as the securities for which you seek to subscribe?
YES_______ NO_______
31
(i)
For
all Subscribers, do you understand that there is no guarantee of financial
return on this investment, that an investment in the Securities is highly
speculative and risky and that you run the risk of losing your entire
investment?
YES_______ NO_______
(j)
For
all Subscribers, will you have sufficient readily available cash to fund your
obligation to purchase Securities at the Closing pursuant to your subscription
if and when the Closing occurs?
YES_______ NO_______
Part
III MANNER
IN WHICH TITLE IS TO BE HELD.
(circle
one)
(a) Individual
Ownership
(b) Community
Property
(c) Joint
Tenant with Right of Survivorship
(both par-ties must
sign)
(d) Partnership*
(e) Tenants
in Common
(f) Company*
(g) Trust*
(h) Other
*If
Securities are being subscribed for by an entity, the attached Certif-icate
of
Signatory must also be completed.
Part
IV NASD
AFFILIATION.
Are
you
affiliated or associated with an NASD member firm (please check
one):
Yes
_________ No
__________
If
Yes,
please describe:
_________________________________________________________
_________________________________________________________
_________________________________________________________
*If
Subscriber is a registered representative with an NASD member firm, have the
following acknowledgment signed by the appropriate party:
32
The
undersigned NASD member firm acknowledges receipt of the notice required by
Article III, Sections 28(a) and (b) of the Rules of Fair Practice.
_________________________________
Name
of
NASD Member Firm
By:
______________________________
Authorized
Officer
Date:
____________________________
Part
V
REGISTRATION
QUESTIONNAIRE
The
following questions in this Part V are specifically intended to provide
information to the Company for the Company's use in the preparation of the
Registration Statement contemplated by the Subscription Agreement and for
specific inclusion in such Registration Statement.
PLEASE
ANSWER EVERY QUESTION BELOW. If a question is inapplicable to you or your answer
is in the negative, please so state by inserting “N/A.” If you are in doubt
whether a particular question requires an affirmative response from you, please
furnish full particulars so that those persons responsible for preparing the
Registration Statement contemplated by the Subscription Agreement can determine
whether any disclosure based on your answer is required. Information requested
in this questionnaire is as of the date you complete the questionnaire, unless
otherwise indicated. Your furnishing such information does not necessarily
mean
that such information will be disclosed, although it may be disclosed.
You
are required to promptly provide the Company with any update to the information
if such information changes after the date hereof.
DEFINITIONS
Your
answers to this questionnaire should be made upon the basis of the following
definitions of terms used in this questionnaire:
The
term
“beneficial
owner”
of
a
security includes any person who, directly or indirectly, through any contract,
arrangement, understanding, relationship or otherwise has or shares
(1) voting
power,
which
includes the power to vote, or direct the voting of, such security or
(2) investment
power,
which
includes the power to dispose or direct the disposition of such security. A
person may be regarded as having voting power of a security which is owned
(i)
by his spouse or minor children or by any of his relatives or his spouse’s
relatives who share the same home with him, (ii) a partnership of
which he is a partner or (iii) a corporation of which he is a substantial
stockholder. A person is also deemed to be the beneficial owner of shares which
that person has the right to acquire within 60 days, including but not limited
to any right to acquire through the exercise of an option, through conversion
of
a security, pursuant to the power to revoke a trust or pursuant to the automatic
termination of a trust. Please also disclose any other rights which you have
to
acquire securities of the Company on or before August 6, 2006.
33
The
term
“material,”
when
used to qualify a requirement for the furnishings of information as to any
subject, limits the information required to those matters about which the
average prudent investor should reasonably be informed before buying or selling
the securities of the Company. If you are in doubt as to the materiality of
certain information, you should relate sufficient facts to enable the Company
and its advisors to reach a conclusion as to its materiality.
QUESTIONS
QUESTION
1:
State
your present position or positions with the Company (if any), including
membership on any audit, personnel, compensation or similar committee or
committees; any positions held by you during the previous three years; and
any
positions to which you have been elected or appointed but the duties of which
you have not yet assumed. For each position, list the term or expected term
of
office.
ANSWER:
QUESTION
2:
Other
than Securities that you will acquire in connection with the
Offering,
provide
below information regarding the equity securities of the Company of which you
are the “beneficial owner.” Please
refer to the definition of “beneficial owner,” above.
Under
the column “Nature of Ownership,” please indicate amounts of securities for
which you have (a) sole voting power, (b) shared voting power, (c) sole
investment power, or (d) shared investment power. If your response covers any
securities included because you have the right to acquire them on or before
August 6, 2006, please separately indicate the amount of such securities. Also,
if you hold more than 5% of the Company’s securities pursuant to a voting trust
or similar agreement, please separately state the amount of such securities
held
or to be held pursuant to the trust or agreement, the duration of the agreement
and the names and addresses of the voting trustees, outlining briefly their
voting rights and other powers under the trust or agreement.
ANSWER
(attach additional pages if necessary):
|
Number
of
Securities
|
Nature
of Ownership
|
Title
of
Securities
|
34
QUESTION
3:
If
you
plan to offer your shares of Common Stock through the selling efforts of brokers
or dealers, describe the terms (and attach copies) of any agreement,
arrangement, or understanding entered into with broker(s) or dealer(s),
including volume limitations on sales, parties to the agreement and the
conditions under which the agreement may be terminated. If known, identify
the
broker(s) or dealer(s), which will participate in the offering and state the
amount to be offered through each.
ANSWER:
QUESTION
4:
Describe
below any information known to you, and if none state “none,” pertaining to
underwriting compensation and arrangements or any dealings between any
underwriter or related person, member of the NASD or a person associated with
a
member of the NASD, and the Company or any controlling stockholder thereof
since
January 1, 2002.
ANSWER:
QUESTION
5:
State
below whether you or any of your associates are a member of NASD, a controlling
stockholder of a member, a person associated or affiliated with a member or
an
underwriter or related person with respect to the proposed offering. If you
responded “yes,” describe such relationship:
ANSWER:
QUESTION
6:
Are
you a
broker-dealer?
ANSWER:
Yes
______ No______
35
QUESTION
7:
If
you
are not a broker-dealer, are you affiliated with a broker-dealer?
ANSWER:
Yes
______ No______
QUESTION
8:
If
you
are affiliated with a broker-dealer, did you purchase the securities in the
ordinary course of business?
ANSWER:
Yes
______ No______
QUESTION
9:
If
you
are affiliated with a broker-dealer, did you have any agreements or
understandings, directly or indirectly, with any person to distribute the
securities at the time that you purchased the securities?
ANSWER:
Yes
______ No______
Please
note that the Commission takes the position that if you are a broker-dealer,
you
are to be identified in the Registration Statement as an underwriter. In the
“Plan of Distribution,” the Registration Statement will provide substantially as
follows:
“The
selling stockholders and any broker-dealers, agents or underwriters that
participate with the selling stockholders in the distribution of the issued
and
outstanding shares of common stock or the shares of stock issuable upon exercise
of warrants may be deemed to be "underwriters" within the meaning of the
Securities Act, in which event any commissions received by these broker-dealers,
agents or underwriters and any profits realized by the selling stockholders
on
the resales of the securities may be deemed to be underwriting commissions
or
discounts under the Securities Act. If the selling stockholders are deemed
to be
underwriters, the selling stockholders may be subject to certain statutory
and
regulatory liabilities, including liabilities imposed pursuant to Sections
11,
12 and 17 of the Securities Act and Rule 10b-5 under the Exchange Act.”
36
QUESTION
10:
Are
their
specific individuals who have voting or investment control over the
securities?
ANSWER:
Yes
______ No______
If
you
answered “yes”, please list the names of such individuals:
____________________________________________________________________________________________________
____________________________________________________________________________________________________
The
answers to the foregoing questions are true and correct to the best of the
undersigned’s knowledge, information and belief. The undersigned agrees to
promptly notify the Company in writing in care of Chief Financial Officer,
InSite Vision Incorporated, 000 Xxxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxxxx 00000
of
(a) any transfer by you of your Common Stock, (b) sales of common stock of
the
Company (giving the number of shares sold and the name of the broker-dealer
used) and (c) any other changes in the answers to this questionnaire that should
be made as a result of any material development occurring subsequent to the
date
hereof.
Dated:
August 1, 2006.
____________________________________
Signature
The
undersigned is informed of the signifi-cance to the Company of the forego-ing
representa-tions and answers contained in the Confidential Subscriber
Questionnaire contained in this Article VIII and such answers have been provided
under the assumption that the Company will rely on them.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
[SIGNATURE
PAGE TO FOLLOW]
37
IN
WITNESS WHEREOF, the parties have executed this Subscription Agreement as of
the
date first above written.
| INSITE VISION INCORPORATED | ||
| By: _____________________ | ||
| Name: X. Xxxxx Xxxxxxxxxxxxxx, Ph. D. | ||
| Title: President and Chief Executive Officer | ||
| [SUBSCRIBER] | ||
| By: _____________________ | ||
| Name:___________________ | ||
| Title:____________________ |
38
CERTIFICATE
OF SIGNATORY
I,____________________________,
am the____________________________ of ________________________________ (the
“Entity”).
I
certify
that I am empowered and duly autho-rized by the Entity to execute and carry
out
the terms of the Subscription Agreement and to purchase and hold the Common
Stock, and certify further that the Subscription Agree-ment has been duly and
validly executed on behalf of the Entity and consti-tutes a legal and binding
obligation of the Entity.
IN
WITNESS WHEREOF, I have set my hand this 1st day of August, 2006.
|
(Signature)
|
||
39
