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REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as
of February 26, 1997, by and among LIDAK PHARMACEUTICALS, a
California corporation, with headquarters located at 00000 Xxxxx
Xxxxxx Xxxxx Xxxx, Xx Xxxxx, Xxxxxxxxxx 00000 (the "Company"),
and the undersigned (together with its affiliates and any
assignee or transferee of all of its respective rights hereunder
as and to the extent permitted, the "Initial Investors").
WHEREAS:
A. In connection with the Note Purchase Agreement by and
among the parties hereto of even date herewith (the "Note
Purchase Agreement"), the Company has agreed, upon the terms and
subject to the conditions contained therein, to issue and sell to
the Initial Investor a Convertible Note in the original principal
amount of $6,000,000 (the "Note") that is convertible into units
consisting of (i) shares (the "Conversion Shares") of the
Company's Common Stock, no par value (the "Common Stock"), and
(ii) warrants (the "Warrants") to purchase a number of shares of
Common Stock (the "Warrant Shares") equal to one-half the number
of Conversion Shares issuable upon each conversion of the Note,
upon the terms and subject to the limitations and conditions set
forth in the Note; and
B. To induce the Initial Investor to execute and deliver
the Note Purchase Agreement, the Company has agreed to provide
certain registration rights under the Securities Act of 1933, as
amended, and the rules and regulations thereunder, or any similar
successor statute (collectively, the "1933 Act"), and applicable
state securities laws;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and the Initial Investor hereby agree
as follows:
1. DEFINITIONS.
a. As used in this Agreement, the following terms shall
have the following meanings:
(i) "Investors" means the Initial Investors and any
permitted transferee or assignee who agrees to become bound by
the provisions of this Agreement in accordance with Section 9
hereof.
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(ii) "register," "registered," and "registration" refer to a
registration effected by preparing and filing a Registration
Statement or Statements in compliance with the 1933 Act and
pursuant to Rule 415 under the 1933 Act or any successor rule
providing for offering securities on a continuous basis ("Rule
415"), and the declaration or ordering of effectiveness of such
Registration Statement by the United States Securities and
Exchange Commission (the "SEC").
(iii) "Registrable Securities" means the Conversion
Shares and the Warrant Shares issued or issuable and any shares
of capital stock issued or issuable in payment of interest on or
in exchange for or otherwise with respect to any of the
foregoing.
(iv) "Registration Statement" means a registration statement
of the Company under the 0000 Xxx.
b. Capitalized terms used herein and not otherwise defined
herein shall have the respective meanings set forth in the Note
Purchase Agreement.
2. REGISTRATION.
a. MANDATORY REGISTRATION. The Company shall prepare,
and, on or prior to the date which is thirty (30) business days
after the date of the closing under the Note Purchase Agreement
(the "Closing Date"), file with the SEC a Registration Statement
on Form S-3 (or, if Form S-3 is not then available, on such form
of Registration Statement as is then available to effect a
registration of the Registrable Securities, subject to the
consent of the Initial Investor, which consent will not be
unreasonably withheld) covering the resale of the Registrable
Securities underlying the Note and the Warrants, which
Registration Statement, to the extent allowable under the 1933
Act and the Rules promulgated thereunder (including Rule 416),
shall state that such Registration Statement also covers such
indeterminate number of additional shares of Common Stock as may
become issuable upon conversion of the Note and exercise of the
Warrants (i) to prevent dilution resulting from stock splits,
stock dividends or similar transactions or (ii) by reason of
changes in the Conversion Price of the Note or the Exercise Price
of the Warrants in accordance with the terms thereof. The number
of shares of Common Stock included in such Registration Statement
shall be no less than 150% (one hundred and fifty percent) of the
Maximum Share Amount set forth in Section 2.6 of the Note. If at
any time (i) the number of shares of Common Stock included in the
Registration Statement required to be filed as provided in the
first sentence of this Section 2(a) shall be insufficient to
cover the number of shares of Common Stock issuable on conversion
in full of the unconverted Note and exercise in full of the
unexercised Warrants and Warrants which may be issued upon
exercise of the unconverted Note (including any Prepayment
Warrants issued pursuant to the Note) and (ii) a New Maximum
Share Amount has been approved or the Company has otherwise
received approval from The Nasdaq Stock Market to issue a number
of shares greater than the Maximum Share Amount, then promptly,
but in no event later than 20 days after such insufficiency shall
occur, the Company shall file with the SEC as promptly as
practicable an additional Registration Statement on Form S-3
(which shall not constitute a post-effective amendment to the
Registration Statement filed pursuant to the first sentence of
this Section 2(a)) covering such additional number of shares of
Common Stock. For all purposes of this Agreement
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such additional Registration Statement shall be deemed to be the
Registration Statement required to be filed by the Company
pursuant to Section 2(a) of this Agreement, and the Company and
the Investors shall have the same rights and obligations with
respect to such additional Registration Statement as they shall
have with respect to the initial Registration Statement required
to be filed by the Company pursuant to this Section 2(a).
b. UNDERWRITTEN OFFERING. If any offering pursuant to a
Registration Statement pursuant to Section 2(a) hereof involves
an underwritten offering, the Investors who hold a majority in
interest of the Registrable Securities subject to such
underwritten offering, with the consent of the Initial Investor,
shall have the right to select one legal counsel and an
investment banker or bankers and manager or managers to
administer the offering, which investment banker or bankers or
manager or managers shall be reasonably satisfactory to the
Company. The Investors who hold the Registrable Securities to be
included in such underwriting shall pay all underwriting
discounts and commissions and other fees and expenses of such
investment banker or bankers and manager or managers so selected
in accordance with this Section 2(b) (other than fees and
expenses relating to registration of Registrable Securities under
federal or state securities laws, which are payable by the
Company pursuant to Section 5 hereof) with respect to their
Registrable Securities and the fees and expenses of such legal
counsel so selected by the Investors.
c. PAYMENTS BY THE COMPANY. The Company shall use its
best efforts to obtain effectiveness of the Registration
Statement as soon as practicable. If (i) the Registration
Statement(s) covering the Registrable Securities required to be
filed by the Company pursuant to Section 2(a) hereof is not
declared effective by the SEC within ninety (90) days after the
Closing Date (other than by reason of delay caused by (a) a
change in a relevant policy, procedure, interpretation, position,
practice or rule of the SEC announced after the Closing Date, or
(b) any act or failure to act by the Investors) or if, after the
Registration Statement has been declared effective by the SEC,
sales cannot be made pursuant to the Registration Statement (by
reason of stop order, or the Company's failure to update the
Registration Statement), or (ii) the Common Stock is not listed
or included for quotation on the NASDAQ National Market (the
"NASDAQ-NMS"), the NASDAQ Small Cap System ("NASDAQ Small Cap"),
the New York Stock Exchange (the "NYSE") or the American Stock
Exchange (the "AMEX") after being so listed or included for
quotation, then the Company will make payments to the Investors
in such amounts and at such times as shall be determined pursuant
to this Section 2(c) as partial relief for the damages to the
Investors by reason of any such delay in or reduction of their
ability to sell the Registrable Securities (which remedy shall
not be exclusive of any other remedies available at law or in
equity). The Company shall pay to each holder of Registerable
Securities an amount equal to the aggregate "Purchase Price" (as
defined below) of the Note or portions thereof held by such
Investors (including, without limitation, the Note or portion
thereof that has been converted into Conversion Shares and
Warrants (including Warrant Shares) then held by such Investors)
multiplied by the Applicable Percentage (as defined below) times
the sum of: (i) the number of 30-day periods (prorated for
periods of less than 30 days) after the end of such 90-day period
and prior to the date the Registration Statement is declared
effective by the SEC, provided, however, that there shall be
excluded from such period any delays which are solely
attributable to changes in the Registration Statement required by
the Investors with respect to information relating to the
Investors, including, without limitation, changes
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to the plan of distribution, or to the failure of the Investors
to conduct their review of the registration statement pursuant to
Section 3(i) below in a reasonably prompt manner; (ii) the number
of 30-day periods (prorated for periods of less than 30 days)
that sales cannot be made pursuant to the Registration Statement
after the Registration Statement has been declared effective; and
(iii) the number of 30-day periods (prorated for periods of less
than 30 days) that the Common Stock is not listed or included for
quotation on the NASDAQ-NMS, NASDAQ Small Cap, NYSE or AMEX after
the Registration Statement has been declared effective. (For
example, if the Registration Statement becomes effective 30 days
after the end of such 90-day period, the Company would pay
$30,000 for each $1,000,000 of Purchase Price; if thereafter,
sales could not be made pursuant to the Registration Statement
for an additional period of 30 days, the Company would pay an
additional $30,000 for each $1,000,000 of Purchase Price.) Such
amounts shall be paid in cash or, at each Investor's option, may
be convertible into Common Stock and Warrants at the "Conversion
Price" (as defined in the Note). Any shares of Common Stock
(including Common Stock underlying Warrants) issued upon
conversion of such amounts shall be Registrable Securities. If
the Investor desires to convert the amounts due hereunder into
Registrable Securities, it shall so notify the Company in writing
within two (2) business days after the date on which such amounts
are first payable in cash and such amounts shall be so
convertible (pursuant to the mechanics set forth under Article II
of the Note for conversion of the Note as if such amounts were
part of the Note), beginning on the last day upon which the cash
amount would otherwise be due in accordance with the following
sentence. Payments of cash pursuant hereto shall be made within
five (5) days after the end of each period that gives rise to
such obligation, provided that, if any such period extends for
more than thirty (30) days, interim payments shall be made for
each such thirty (30) day period. The term "Purchase Price"
means the purchase price paid by the Initial Investor for the
Note or the portion thereof held by an Investor. The term
"Applicable Percentage" means three one-hundredths (.030).
d. PIGGY-BACK REGISTRATIONS. If at any time prior to the
expiration of the Registration Period (as hereinafter defined)
the Company shall file with the SEC a Registration Statement
relating to an offering for its own account or the account of
others under the 1933 Act of any of its equity securities (other
than on Form S-4 or Form S-8 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), the Company shall send to each Investor who is
entitled to registration rights under this Section 2(d) written
notice of such determination and, if within fifteen (15) days
after the effective date of such notice, such Investor shall so
request in writing, the Company shall include in such
Registration Statement all or any part of the Registrable
Securities such Investor requests to be registered, except that
if, in connection with any underwritten public offering for the
account of the Company the managing underwriter(s) thereof shall
impose a limitation on the number of shares of Common Stock which
may be included in the Registration Statement because, in such
underwriter(s)' judgment, marketing or other factors dictate such
limitation is necessary to facilitate public distribution, then
the Company shall be obligated to include in such Registration
Statement only such limited portion of the Registrable Securities
with respect to which such Investor has requested inclusion
hereunder as the underwriter shall permit. Any exclusion of
Registrable Securities shall be made pro rata among the Investors
seeking to include Registrable Securities in proportion to the
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number of Registrable Securities sought to be included by such
Investors; PROVIDED, HOWEVER, that the Company shall not exclude
any Registrable Securities unless the Company has first excluded
all outstanding securities, the holders of which are not entitled
by right existing as of the date hereof to inclusion of such
securities in such Registration Statement or are not entitled to
pro rata inclusion with the Registrable Securities; and PROVIDED,
FURTHER, HOWEVER, that, after giving effect to the immediately
preceding proviso, any exclusion of Registrable Securities shall
be made pro rata with holders of other securities having the
right existing as of the date hereof to include such securities
in the Registration Statement other than holders of securities
entitled to inclusion of their securities in such Registration
Statement, based on the number of securities for which
registration is requested except to the extent such pro rata
exclusion of such other securities is prohibited under any
written agreement entered into by the Company with the holder of
such other securities prior to the date of this Agreement, in
which case such other securities shall be excluded, if at all, in
accordance with the terms of such agreement. No right to
registration of Registrable Securities under this Section 2(d)
shall be construed to limit any registration required under
Section 2(a) hereof. The obligations of the Company under this
Section 2(d) may be waived by Investors holding a majority in
interest of the Registrable Securities and shall expire after the
Company has afforded the opportunity for the Investors to
exercise registration rights under this Section 2(d) for two
registrations; PROVIDED, HOWEVER, that any Investor who shall
have had any Registrable Securities excluded from any
Registration Statement in accordance with this Section 2(d) shall
be entitled to include in an additional Registration Statement
filed by the Company the Registrable Securities so excluded.
Notwithstanding any other provision of this Agreement, if the
Registration Statement required to be filed pursuant to Section
2(a) of this Agreement shall have been ordered effective by the
SEC and the Company shall have maintained the effectiveness of
such Registration Statement as required by this Agreement and if
the Company shall otherwise have complied in all material
respects with its obligations under this Agreement, then the
Company shall not be obligated to register any Registrable
Securities on such Registration Statement referred to in this
Section 2(d) unless the Registration Statement referred to in
this Section 2(d) is an underwritten offering, in which case the
Company shall be obligated to comply with this Section 2(d).
e. ELIGIBILITY FOR FORM S-3. The Company represents and
warrants that it meets the requirements for the use of Form S-3
for registration of the sale by the Initial Investor and any
other Investor of the Registrable Securities and the Company
shall file all reports required to be filed by the Company with
the SEC in a timely manner so as to maintain such eligibility for
the use of Form S-3.
3. OBLIGATIONS OF THE COMPANY.
In connection with the registration of the Registrable
Securities, the Company shall have the following obligations:
a. The Company shall prepare promptly, and file with the
SEC not later than thirty (30) business days after the Closing
Date, a Registration Statement with respect to the number of
Registrable Securities provided in Section 2(a), and thereafter
use its best efforts to cause such Registration Statement
relating to Registrable Securities to become effective as soon as
possible
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after such filing, and keep the Registration Statement effective
pursuant to Rule 415 at all times until such date as is the
earlier of (i) the date on which all of the Registrable
Securities have been sold by the Investors and (ii) the date on
which the Registrable Securities (in the opinion of counsel to
the Initial Investor) may be immediately sold without
registration (the "Registration Period"), which Registration
Statement (including any amendments or supplements thereto and
prospectuses contained therein) shall not contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein, or necessary to make the
statements therein not misleading.
b. The Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements
to the Registration Statement and the prospectus used in
connection with the Registration Statement as may be necessary to
keep the Registration Statement effective at all times during the
Registration Period, and, during such period, comply with the
provisions of the 1933 Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration
Statement until such time as all of such Registrable Securities
have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth in the
Registration Statement. In the event the number of shares
available under a Registration Statement filed pursuant to this
Agreement is insufficient to cover all of the Registrable
Securities required to be registered pursuant to this Agreement,
the Company shall file a new Registration Statement (on the short
form available therefor, if applicable), so as to cover all of
the Registrable Securities, in each case, as soon as practicable,
but in any event within thirty (30) business days after the
necessity therefor arises (based on the market price of the
Common Stock and other relevant factors on which the Company
reasonably elects to rely). The Company shall use its best
efforts to cause such new Registration Statement to become
effective as soon as practicable following the filing thereof.
The provisions of Section 2(c) above shall be applicable with
respect to such obligation, with the ninety (90) days running
from the day after the date on which the Company reasonably first
determines (or reasonably should have determined) the need for
the registration of such additional Registrable Securities.
c. The Company shall furnish to each Investor whose
Registrable Securities are included in the Registration Statement
and its legal counsel (i) promptly after the same is prepared and
publicly distributed, filed with the SEC, or received by the
Company, one copy of the Registration Statement and any amendment
thereto, each preliminary prospectus and prospectus and each
amendment or supplement thereto, and, in the case of the
Registration Statement referred to in Section 2(a), each letter
written by or on behalf of the Company to the SEC or the staff of
the SEC, and each item of correspondence from the SEC or the
staff of the SEC, in each case relating to such Registration
Statement or the documents incorporated therein (other than any
portion of any thereof which contains information for which the
Company has sought confidential treatment), and (ii) such number
of copies of a prospectus, including a preliminary prospectus,
and all amendments and supplements thereto and such other
documents as such Investor may reasonably request in order to
facilitate the disposition of the Registrable Securities owned by
such Investor.
d. The Company shall use reasonable efforts to (i)
register and qualify the Registrable Securities covered by the
Registration Statement under such other securities or "blue sky"
laws of such jurisdictions in the United States as the Investors
who hold a majority in interest
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of the Registrable Securities being offered reasonably request,
(ii) prepare and file in those jurisdictions such amendments
(including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain
the effectiveness thereof during the Registration Period, (iii)
take such other actions as may be necessary to maintain such
registrations and qualifications in effect at all times during
the Registration Period, and (iv) take all other actions
reasonably necessary or advisable to qualify the Registrable
Securities for sale in such jurisdictions; PROVIDED, HOWEVER,
that the Company shall not be required in connection therewith or
as a condition thereto to (a) qualify to do business in any
jurisdiction where it would not otherwise be required to qualify
but for this Section 3(d), (b) subject itself to general taxation
in any such jurisdiction, (c) file a general consent to service
of process in any such jurisdiction, (d) provide any undertakings
that cause the Company undue expense or burden, or (e) make any
change in its charter or bylaws, which in each case the Board of
Directors of the Company determines to be contrary to the best
interests of the Company and its stockholders.
e. In the event that the Registrable Securities are being
offered in an underwritten offering, the Company shall enter into
and perform its obligations under an underwriting agreement, in
usual and customary form, including, without limitation,
customary indemnification and contribution obligations, with the
underwriters of such offering.
f. As promptly as practicable after becoming aware of such
event, the Company shall notify each Investor of the happening of
any event, of which the Company has knowledge, as a result of
which the prospectus included in the Registration Statement, as
then in effect, includes an untrue statement of a material fact
or omission to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading, and use its best efforts promptly to prepare a
supplement or amendment to the Registration Statement to correct
such untrue statement or omission, and deliver such number of
copies of such supplement or amendment to each Investor as such
Investor may reasonably request.
g. The Company shall use its best efforts to prevent the
issuance of any stop order or other suspension of effectiveness
of a Registration Statement, and, if such an order is issued, to
obtain the withdrawal of such order at the earliest possible
moment and to notify each Investor who holds Registrable
Securities being sold (or, in the event of an underwritten
offering, the managing underwriters) of the issuance of such
order and the resolution thereof.
h. The Company shall as promptly as practicable after
becoming aware of such event, notify each Investor who holds
Registrable Securities being sold (or, in the event of an
underwritten offering, the managing underwriters) of the issuance
by the SEC of any stop order or other suspension of effectiveness
of the Registration Statement at the earliest possible time.
i. The Company shall permit a single firm of counsel
designated by the Initial Investors to review the Registration
Statement and all amendments and supplements thereto (as well as
all requests for acceleration or effectiveness thereof) a
reasonable period of time prior to their filing with the SEC, and
not file any document in a form to which such counsel reasonably
objects.
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j. The Company shall make generally available to its
security holders as soon as practical, but not later than ninety
(90) days after the close of the period covered thereby, an
earnings statement (in form complying with the provisions of Rule
158 under the 0000 Xxx) covering a twelve-month period beginning
not later than the first day of the Company's fiscal quarter next
following the effective date of the Registration Statement.
k. At the request of any Investor, the Company shall
furnish, on the date that Registrable Securities are delivered to
an underwriter, if any, for sale in connection with the
Registration Statement or, if such securities are not being sold
by an underwriter, on the date of effectiveness thereof (i) an
opinion, dated as of such date, from counsel representing the
Company for purposes of such Registration Statement, in form,
scope and substance as is customarily given in an underwritten
public offering, addressed to the underwriters, if any, and the
Investors and (ii) a letter, dated such date, from the Company's
independent certified public accountants in form and substance as
is customarily given by independent certified public accountants
to underwriters in an underwritten public offering, addressed to
the underwriters, if any, and the Investors.
l. The Company shall make available for inspection by (i)
any Investor, (ii) any underwriter participating in any
disposition pursuant to the Registration Statement, (iii) one
firm of attorneys and one firm of accountants or other agents
retained by the Initial Investors, (iv) one firm of attorneys and
one firm of accountants or other agents retained by all other
Investors, and (v) one firm of attorneys retained by all such
underwriters (collectively, the "Inspectors") all pertinent
financial and other records, and pertinent corporate documents
and properties of the Company (collectively, the "Records"), as
shall be reasonably deemed necessary by each Inspector to enable
each Inspector to exercise its due diligence responsibility, and
cause the Company's officers, directors and employees to supply
all information which any Inspector may reasonably request for
purposes of such due diligence; PROVIDED, HOWEVER, that each
Inspector shall hold in confidence and shall not make any
disclosure (except to an Investor) of any Record or other
information which the Company determines in good faith to be
confidential, and of which determination the Inspectors are so
notified, unless (a) the disclosure of such Records is necessary
to avoid or correct a misstatement or omission in any
Registration Statement, (b) the release of such Records is
ordered pursuant to a subpoena or other order from a court or
government body of competent jurisdiction, or (c) the information
in such Records has been made generally available to the public
other than by disclosure in violation of this or any other
agreement. The Company shall not be required to disclose any
confidential information in such Records to any Inspector until
and unless such Inspector shall have entered into confidentiality
agreements (in form and substance satisfactory to the Company)
with the Company with respect thereto, substantially in the form
of this Section 3(k). Each Investor agrees that it shall, upon
learning that disclosure of such Records is sought in or by a
court or governmental body of competent jurisdiction or through
other means, give prompt notice to the Company and allow the
Company, at its expense, to undertake appropriate action to
prevent disclosure of, or to obtain a protective order for, the
Records deemed confidential. Nothing herein (or in the
Confidentiality Agreement between the Company and the Investor
dated January 28, 1997) shall be deemed to limit the Investor's
ability to sell Registrable Securities in a manner which is
otherwise consistent with applicable laws and regulations. The
Company shall hold in confidence and shall not make any
disclosure of information concerning an Investor provided to the
Company
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pursuant to Section 4(e) hereof unless (i) disclosure of such
information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is
necessary to avoid or correct a misstatement or omission in any
Registration Statement, (iii) the release of such information is
ordered pursuant to a subpoena or other order from a court or
governmental body of competent jurisdiction or (iv) such
information has been made generally available to the public other
than by disclosure in violation of this or any other agreement.
The Company agrees it shall, upon learning that disclosure of
such information concerning an Investor is sought in or by a
court or governmental body of competent jurisdiction or through
other means, give prompt notice to such Investor, at its expense,
to undertake appropriate action to prevent disclosure of, or to
obtain a protective order for, such information.
m. The Company shall use its best efforts either to (i)
cause all the Registrable Securities covered by the Registration
Statement to be listed on each national securities exchange on
which securities of the same class or series issued by the
Company are then listed, if any, if the listing of such
Registrable Securities is then permitted under the rules of such
exchange, or (ii) secure the designation and quotation, of all
the Registrable Securities covered by the Registration Statement
on the NASDAQ-NMS or, if not eligible for the NASDAQ-NMS on the
NASDAQ Small Cap.
n. The Company shall provide a transfer agent and
registrar, which may be a single entity, for the Registrable
Securities not later than the effective date of the Registration
Statement.
o. The Company shall cooperate with the Investors who hold
Registrable Securities being offered and the managing underwriter
or underwriters, if any, to facilitate the timely preparation and
delivery of certificates (not bearing any restrictive legends)
representing Registrable Securities to be offered pursuant to the
Registration Statement and enable such certificates to be in such
denominations or amounts, as the case may be, as the managing
underwriter or underwriters, if any, or the Investors may
reasonably request and registered in such names as the managing
underwriter or underwriters, if any, or the Investors may
request, and, within three (3) business days after a Registration
Statement which includes Registrable Securities is ordered
effective by the SEC, the Company shall deliver, and shall cause
legal counsel selected by the Company to deliver, to the transfer
agent for the Registrable Securities (with copies to the
Investors whose Registrable Securities are included in such
Registration Statement) an instruction in the form attached
hereto as Exhibit 1 to facilitate the public offering of such
securities and an opinion of such counsel in the form attached
hereto as Exhibit 2.
p. The Company shall take all other reasonable actions
necessary to expedite and facilitate disposition by the Investors
of Registrable Securities pursuant to the Registration Statement.
4. OBLIGATIONS OF THE INVESTORS.
In connection with the registration of the Registrable
Securities, the Investors shall have the following obligations:
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a. It shall be a condition precedent to the obligations of
the Company to complete the registration pursuant to this
Agreement with respect to the Registrable Securities of a
particular Investor that such Investor shall furnish to the
Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of
the Registrable Securities held by it as shall be reasonably
required to effect the registration of such Registrable
Securities and shall execute such documents in connection with
such registration as the Company may reasonably request. At
least three (3) business days prior to the first anticipated
filing date of the Registration Statement, the Company shall
notify each Investor of the information the Company requires from
each such Investor if such Investor.
b. Each Investor, by such Investor's acceptance of the
Registrable Securities, agrees to cooperate with the Company as
reasonably requested by the Company in connection with the
preparation and filing of the Registration Statement hereunder,
unless such Investor has notified the Company in writing of such
Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement.
c. In the event Investors holding a majority-in-interest
of the Registrable Securities being registered (with the approval
of the Initial Investor) determine to engage the services of an
underwriter, each Investor agrees to enter into and perform such
Investor's obligations under an underwriting agreement, in usual
and customary form, including, without limitation, customary
indemnification and contribution obligations, with the managing
underwriter of such offering and take such other actions as are
reasonably required in order to expedite or facilitate the
disposition of the Registrable Securities, unless such Investor
has notified the Company in writing of such Investor's election
to exclude all of such Investor's Registrable Securities from the
Registration Statement.
d. Each Investor agrees that, upon receipt of any notice
from the Company of the happening of any event of the kind
described in Section 3(f) or 3(g), such Investor will immediately
discontinue disposition of Registrable Securities pursuant to the
Registration Statement covering such Registrable Securities until
such Investor's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 3(f) or 3(g) and, if
so directed by the Company, such Investor shall deliver to the
Company (at the expense of the Company) or destroy (and deliver
to the Company a certificate of destruction) all copies in such
Investor's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such
notice.
e. No Investor may participate in any underwritten
registration hereunder unless such Investor (i) agrees to sell
such Investor's Registrable Securities on the basis provided in
any underwriting arrangements in usual and customary form entered
into by the Company, (ii) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the
terms of such underwriting arrangements, and (iii) agrees to pay
its pro rata share of all underwriting discounts and commissions
and any expenses in excess of those payable by the Company
pursuant to Section 5 below.
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5. EXPENSES OF REGISTRATION.
All reasonable expenses incurred in connection with
registrations, filings or qualifications pursuant to Sections 2
and 3, including, without limitation, all registration, listing
and qualifications fees, printers and accounting fees and the
fees and disbursements of counsel for the Company shall be borne
by the Company other than (i) the fees and disbursements of
counsel, accountants and other professional investors, selected
by the Initial Investor pursuant to Section 2(b) hereof and (ii)
underwriting discounts and commissions.
6. INDEMNIFICATION.
In the event any Registrable Securities are included in
a Registration Statement under this Agreement:
a. To the extent permitted by law, the Company will
indemnify, hold harmless and defend (i) each Investor who holds
such Registrable Securities, (ii) the directors, officers,
partners, employees, agents and each person who controls any
Investor within the meaning of the 1933 Act or the Securities
Exchange Act of 1934, as amended (the "1934 Act"), if any, and
(iii) any underwriter (as defined in the 0000 Xxx) for the
Investors; and the directors, officers, partners, employees and
each person who controls any such underwriter within the meaning
of the 1933 Act or the 1934 Act, if any, (each, an "Indemnified
Person"), against any joint or several losses, claims, damages,
liabilities or expenses (collectively, together with actions,
proceedings or inquiries by any regulatory or self-regulatory
organization, whether commenced or threatened, in respect
thereof, "Claims") to which any of them may become subject
insofar as such Claims arise out of or are based upon: (i) any
untrue statement or alleged untrue statement of a material fact
in a Registration Statement or the omission or alleged omission
to state therein a material fact required to be stated or
necessary to make the statements therein not misleading, (ii) any
untrue statement or alleged untrue statement of a material fact
contained in any preliminary prospectus if used prior to the
effective date of such Registration Statement, or contained in
the final prospectus (as amended or supplemented, if the Company
files any amendment thereof or supplement thereto with the SEC)
or the omission or alleged omission to state therein any material
fact necessary to make the statements made therein, in light of
the circumstances under which the statements therein were made,
not misleading, or (iii) any violation or alleged violation by
the Company of the 1933 Act, the 1934 Act, any other law,
including, without limitation, any state securities law, or any
rule or regulation thereunder relating to the offer or sale of
the Registrable Securities (the matters in the foregoing clauses
(i) through (iii) being, collectively, "Violations"). Subject to
the restrictions set forth in Section 6(c) with respect to the
number of legal counsel, the Company shall reimburse the
Investors and each such underwriter or controlling person,
promptly as such expenses are incurred and are due and payable,
for any reasonable legal fees or other reasonable expenses
incurred by them in connection with investigating or defending
any such Claim. Notwithstanding anything to the contrary
contained herein, the indemnification agreement contained in this
Section 6(a): (i) shall not apply to a Claim arising out of or
based upon a Violation which occurs in reliance upon and in
conformity with information furnished in writing to the Company
by any Indemnified Person or underwriter for such Indemnified
Person expressly for use in connection with the preparation of
the
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Registration Statement or any such amendment thereof or
supplement thereto, if such prospectus was timely made available
by the Company pursuant to Section 3(c) hereof; (ii) shall not
apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of the
Company, which consent shall not be unreasonably withheld; and
(iii) with respect to any preliminary prospectus, shall not inure
to the benefit of any Indemnified Person if the untrue statement
or omission of material fact contained in the preliminary
prospectus was corrected on a timely basis in the prospectus, as
then amended or supplemented, such corrected prospectus was
timely made available by the Company pursuant to Section 3(c)
hereof, and the Indemnified Person was promptly advised in
writing not to use the incorrect prospectus prior to the use
giving rise to a Violation and such Indemnified Person,
notwithstanding such advise, used it. Such indemnity shall
remain in full force and effect regardless of any investigation
made by or on behalf of the Indemnified Person and shall survive
the transfer of the Registrable Securities by the Investors
pursuant to Section 9.
b. In connection with any Registration Statement in which
an Investor is participating, each such Investor agrees severally
and not jointly to indemnify, hold harmless and defend, to the
same extent and in the same manner set forth in Section 6(a), the
Company, each of its directors, each of its officers who signs
the Registration Statement, each person, if any, who controls the
Company within the meaning of the 1933 Act or the 1934 Act, any
underwriter and any other stockholder selling securities pursuant
to the Registration Statement or any of its directors or officers
or any person who controls such stockholder or underwriter within
the meaning of the 1933 Act or the 1934 Act (collectively and
together with an Indemnified Person, an "Indemnified Party"),
against any Claim to which any of them may become subject, under
the 1933 Act, the 1934 Act or otherwise, insofar as such Claim
arises out of or is based upon any Violation, in each case to the
extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information
furnished to the Company by such Investor expressly for use in
connection with such Registration Statement; and subject to
Section 6(c) such Investor will reimburse any legal or other
expenses (promptly as such expenses are incurred and are due and
payable) reasonably incurred by them in connection with
investigating or defending any such Claim; PROVIDED, HOWEVER,
that the indemnity agreement contained in this Section 6(b) shall
not apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of such
Investor, which consent shall not be unreasonably withheld;
PROVIDED, FURTHER, HOWEVER, that the Investor shall be liable
under this Agreement (including this Section 6(b) and Section 7)
for only that amount as does not exceed the net proceeds to such
Investor as a result of the sale of Registrable Securities
pursuant to such Registration Statement. Such indemnity shall
remain in full force and effect regardless of any investigation
made by or on behalf of such Indemnified Party and shall survive
the transfer of the Registrable Securities by the Investors
pursuant to Section 9. Notwithstanding anything to the contrary
contained herein, the indemnification agreement contained in this
Section 6(b) with respect to any preliminary prospectus shall not
inure to the benefit of any Indemnified Party if the untrue
statement or omission of material fact contained in the
preliminary prospectus was corrected on a timely basis in the
prospectus, as then amended or supplemented.
c. Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the
commencement of any action (including any governmental action),
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such Indemnified Person or Indemnified Party shall, if a Claim in
respect thereof is to be made against any indemnifying party
under this Section 6, deliver to the indemnifying party a written
notice of the commencement thereof, and the indemnifying party
shall have the right to participate in, and, to the extent the
indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Person or the Indemnified
Party, as the case may be; PROVIDED, HOWEVER, that an Indemnified
Person or Indemnified Party shall have the right to retain its
own counsel with the fees and expenses to be paid by the
indemnifying party, if, in the reasonable opinion of counsel
retained by the indemnifying party, the representation by such
counsel of the Indemnified Person or Indemnified Party and the
indemnifying party would be inappropriate due to actual or
potential differing interests between such Indemnified Person or
Indemnified Party and any other party represented by such counsel
in such proceeding. The indemnifying party shall pay for only
one separate legal counsel for the Indemnified Persons or the
Indemnified Parties, as applicable, and such legal counsel shall
be selected by Investors holding a majority-in-interest of the
Registrable Securities included in the Registration Statement to
which the Claim relates (with the approval of a
majority-in-interest of the Initial Investors), if the Investors
are entitled to indemnification hereunder, or the Company, if the
Company is entitled to indemnification hereunder, as applicable.
The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action
shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 6,
except to the extent that the indemnifying party is actually
prejudiced in its ability to defend such action. The
indemnification required by this Section 6 shall be made by
periodic payments of the amount thereof during the course of the
investigation or defense, as such expense, loss, damage or
liability is incurred and is due and payable.
7. CONTRIBUTION.
To the extent any indemnification by an indemnifying
party is prohibited or limited by law, the indemnifying party
agrees to make the maximum contribution with respect to any
amounts for which it would otherwise be liable under Section 6 to
the fullest extent permitted by law; PROVIDED, HOWEVER, that (i)
no contribution shall be made under circumstances where the maker
would not have been liable for indemnification under the fault
standards set forth in Section 6, (ii) no seller of Registrable
Securities guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the 0000 Xxx) shall be entitled to
contribution from any seller of Registrable Securities who was
not guilty of such fraudulent misrepresentation, and (iii)
contribution (together with any indemnification or other
obligations under this Agreement) by any seller of Registrable
Securities shall be limited in amount to the net amount of
proceeds received by such seller from the sale of such
Registrable Securities.
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8. REPORTS UNDER THE 1934 ACT.
With a view to making available to the Investors the
benefits of Rule 144 promulgated under the 1933 Act or any other
similar rule or regulation of the SEC that may at any time permit
the investors to sell securities of the Company to the public
without registration ("Rule 144"), the Company agrees to:
a. make and keep public information available, as those
terms are understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and
other documents required of the Company under the 1933 Act and
the 1934 Act so long as the Company remains subject to such
requirements (it being understood that nothing herein shall limit
the Company's obligations under Section 4(c) of the Securities
Purchase Agreement) and the filing of such reports and other
documents is required for the applicable provisions of Rule 144;
and
c. furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written
statement by the Company that it has complied with the reporting
requirements of Rule 144, the 1933 Act and the 1934 Act, (ii) a
copy of the most recent annual or quarterly report of the Company
and such other reports and documents so filed by the Company, and
(iii) such other information as may be reasonably requested to
permit the Investors to sell such securities pursuant to Rule 144
without registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
The rights to have the Company register Registrable
Securities pursuant to this Agreement shall be automatically
assignable by the Investors to any transferee of all or any
portion of Registrable Securities if: (i) the Investor agrees in
writing with the transferee or assignee to assign such rights,
and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment, (ii) the Company is,
within a reasonable time after such transfer or assignment,
furnished with written notice of (a) the name and address of such
transferee or assignee, and (b) the securities with respect to
which such registration rights are being transferred or assigned,
(iii) following such transfer or assignment, the further
disposition of such securities by the transferee or assignee is
restricted under the 1933 Act and applicable state securities
laws, (iv) at or before the time the Company receives the written
notice contemplated by clause (ii) of this sentence, the
transferee or assignee agrees in writing with the Company to be
bound by all of the provisions contained herein, (v) such
transfer shall have been made in accordance with the applicable
requirements of the Securities Purchase Agreement, and (vi) such
transferee shall be an "accredited investor" as that term defined
in Rule 501 of Regulation D promulgated under the 1933 Act.
Nothing herein shall affect the assignment of rights to a bona
fide pledgee of the Registrable Securities.
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10. AMENDMENT OF REGISTRATION RIGHTS.
Provisions of this Agreement may be amended and the
observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively),
only with written consent of the Company, each of the Initial
Investors (to the extent such Initial Investor still owns
Registrable Securities) and Investors who hold a majority
interest of the Registrable Securities. Any amendment or waiver
effected in accordance with this Section 10 shall be binding upon
each Investor and the Company.
11. MISCELLANEOUS.
a. A person or entity is deemed to be a holder of
Registrable Securities whenever such person or entity owns of
record such Registrable Securities. If the Company receives
conflicting instructions, notices or elections from two or more
persons or entities with respect to the same Registrable
Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such
Registrable Securities.
b. Notices required or permitted to be given hereunder
shall be in writing and shall be deemed to be sufficiently given
when personally delivered (by hand, by courier, by telephone line
facsimile transmission or other means) or which receipt is
refused if delivered by hand or by courier or sent by certified
mail, return receipt requested, properly addressed and with
proper postage pre-paid,
if to the Company:
LIDAK Pharmaceuticals
00000 Xxxxx Xxxxxx Xxxxx
Xx Xxxxx, Xxxxxxxxxx 00000
Attention: Chief Financial Officer
Facsimile No.: (000) 000-0000
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With copy to:
Xxxxx & XxXxxxxx
The Xxxxx Fargo Plaza
000 Xxxx Xxxxxxxx
00xx Xxxxx
Xxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxx X. Xxxxxxxx, Esq.
Facsimile No.: (000) 000-0000
if to the Initial Investor:
c/o Xxxx Xxxx Capital Management, L.P.
000 X. Xxxxxxxxxx Xxxx
Xxxxx 0000
Xxxxx, Xxxxxxxxxxxx 00000
Attention: Xx. Xxxxx Xxxxx
Facsimile No.: (000) 000-0000
and if to any Investor, at such address as such Investor shall
have provided in writing to the Company, or at such other address
as each such party furnishes by notice given in accordance with
this Section 11(b), and shall be effective, when personally
delivered, upon receipt and, when so sent by certified or
registered mail (return receipt requested), five days after
deposit with the United States Postal Service.
c. Failure of any party to exercise any right or remedy
under this Agreement or otherwise, or delay by a party in
exercising such right or remedy, shall not operate as a waiver
thereof.
d. This Agreement shall be enforced, governed by and
construed in accordance with the laws of the State of California
applicable to agreements made and to be performed entirely within
such State. In the event that any provision of this Agreement is
invalid or unenforceable under any applicable statute or rule of
law, then such provision shall be deemed inoperative to the
extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law. Any
provision hereof which may prove invalid or unenforceable under
any law shall not affect the validity or enforceability of any
other provision hereof. The parties hereto hereby submit to the
exclusive jurisdiction of the United States Federal Courts
located in San Diego, California with respect to any dispute
arising under this Agreement or the transactions contemplated
hereby.
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e. This Agreement and the Note Purchase Agreement
(together with all annexes thereto) constitute the entire
agreement among the parties hereto with respect to the subject
matter hereof and thereof. There are no restrictions, promises,
warranties or undertakings, other than those set forth or
referred to herein and therein. This Agreement and the Note
Purchase Agreement supersede all prior agreements and
understandings among the parties hereto with respect to the
subject matter hereof and thereof.
f. Subject to the requirements of Section 9 hereof, this
Agreement shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties hereto.
g. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the
meaning hereof.
h. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all
of which shall constitute one and the same agreement. This
Agreement, once executed by a party, may be delivered to the
other party hereto by facsimile transmission of a copy of this
Agreement bearing the signature of the party so delivering this
Agreement.
i. Each party shall do and perform, or cause to be done
and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates,
instruments and documents, as the other party may reasonably
request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the
transactions contemplated hereby.
j. All consents and other determinations to be made by the
Investors pursuant to this Agreement shall be made by Investors
holding a majority of the Registrable Securities, determined as
if the outstanding balance of the Note and Warrants then
outstanding (including Warrants issuable upon conversion of the
outstanding balance of the Note) have been converted into or
exercised for Registrable Securities.
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IN WITNESS WHEREOF, the Company and the undersigned
Initial Investor have caused this Agreement to be duly executed
as of the date first above written
LIDAK PHARMACEUTICALS
By: /s/Xxxxx X. Xxxx
--------------------
Name: Xxxxx X. Xxxx, M.D.
Its: President and Chief Executive Officer
RGC INTERNATIONAL INVESTORS, LDC
By: Xxxx Xxxx Capital Management, L.P.
Investment Manager
By: RGC General Partner Corp.
By:./s/Xxxxx Xxxxx
----------------------------------------------------
Name: Xxxxx Xxxxx
Its: Managing Director
